Environmental Accounting and the EEA Jean-Louis Weber Special Adviser to Economic Environmental Accounting European Environmnent Agency Final IN-STREAM conference: Sustainability Indicators for Policy Making Brussels, September 2011

Recurrent demands for improved economic indicators and aggregates Historical pioneer green accounting projects: Norway, Canada, France, Philippines, Indonesia, the Netherlands, Spain… Rio1992, Agenda 21 UN SEEA1993 to adjust the UN System of National Accounts. SEEA revised in 2003 New SEEA revision by2012/13, including now a special volume on ecosystem accounts and valuation Recent initiatives: –Beyond GDP Conference 2008 –Potsdam 2008 G8+5 initiative and TEEB –Stiglitz/ Sen/ Fitoussi report on the measurement of economic performance 2009 –New CBD Aishi-Nagoya Strategy 2010: demand for the inclusion of biodiversity and ecosystem value into national accounts –World Banks new Global Partnership for Green Accounting and Ecosystem Valuation –References to environmental accounts for measuring progress in Green Economy, Green Growth, Resource Efficiency… In Europe, new Regulation on Environmental Accounts: Eurostat (the economy- environment interface) and the EEA (ecosystem capital accounts)

UN manual for environmental-economic accounting: SEEA2003 Enlargement of the System of National Accounts RM HASSAN - UN The System of Environmental and Economic Accounting (UN 2003) - RANESA Workshop June 12-16, 2005 Maputo Part 1 The SNA satellite accounts for the environment expenditure, taxes, hybrid accounts, physical flows, sub-soil, energy, water, land, economic assets depletion Part 2 Ecosystem capital accounts Ecosystem stocks and quality, ecosystem services, benefits and maintenance costs… Revision SEEA2012/13 Negative feedbacks of ecosystem degradation on production and wellbeing Impacts on ecosystem capacity of delivering services/benefits

Products & economic assets Fossil energy & materials Biomass/carbon Water Land functional services Economy performance Economic growth Trade Value-added, income, profit… Consumption Investment Wealth (non-financial and financial assets) Economic health (net savings, assets and debt quality, accountability, prices, well-being, knowledge) Ecosystem potential (capacity to deliver services) Ecosystem productivity Flows Accumulation Stocks Ecosystem health (biodiversity, integrity, resilience, interdependence) Capital maintenance (to remediate degradation) Accounting for the performance(s) of 2 co-evolving systems: resources, productivity and health Economic system Ecosystem Use of natural resources

Source: Gilbert Long, 1972 The narrative behind Ecosystem Capital Accounts: 1- ecosystems deliver altogether multiple services

The narrative behind Ecosystem Capital Accounts: 2- only a surplus is accessible for human use Ecoproduct (of cycling and reproductive systems/ capital) are produced by means of other ecoproducts. The ecosystem production function includes a surplus ecoproduct that can be used by the economy. (from Anthony Friend 2004) Economy Basic eco- product Non-basic eco- product Sources: Kling/U Michigan_2005 & Friend/ISEE_2004 Necessary for ecosystem reproduction (conservation of ecosystem health, integrity, functions & services) Surplus accessible for harvest/abstraction

The narrative behind Ecosystem Capital Accounts: 2- only a surplus is accessible for human use Basic eco- product Non-basic eco- product Sources: Kling/U Michigan_2005 & Friend/ISEE_2004 Possible compensation = artificial input (irrigation, energy, fertilizers, infrastructures…) Challenge = maximise yields while maintaining natural functions and biodiversity Necessary for ecosystem reproduction (conservation of ecosystem health, integrity, functions & services) Surplus accessible for harvest/abstraction Non-sustainable harvest/abstraction Economy

The narrative behind Ecosystem Capital Accounts: 3 – Ecosystem capital produces altogether 3 broad types of services between which there is no compensation or tradeoff: biomass/carbon AND freshwater AND functional services. Ecosystem capital potential (& degradation) can be measured by combining measurements of these 3 broad services. Accessible carbon surplus Accessible water surplus Accessible ecosystem functional services Total ecosystem capital potential & Ecosystem capital degradation

GDP Healthy ecosystem Ecosystem assets/capital The narrative behind Ecosystem Capital Accounts: 4 - Simplified ecosystem capital accounting circuit ES economic benefits () Ecosystem degraded by over-use ( ) Possible macro economic aggregates Adjusted capital consumption Final demand at full price Non-paid costs needed to remediate ecosystem degradation ( ) ES economic benefits () Economic natural assets/ resources & ecosystem services ( and )

From theory to statistics and accounts Theoretical background (very incomplete…): –Georgescu-Roegen (The Entropy Law and the Economic Process (1971), Odum (emergy), Hollin (panarchy,interaction between scales) –Co-evolving systems (Norgaard) –Ecosystem services: Long (1972), Costanza and De Groot, Millennium Ecosystem Assessment (2003) –Landscape ecology (UK) –Ecosystem units: socio-ecological systems (Gallopin, Carpenter, Rockström, Stockholm Resilience Centre, MA2003…) –Ecosystem health (D. Rapport), resilience (the Resilience Alliance) from economic-ecological theory to statistical practice and accounts : statistical units and classifications

Main relations between classifications & statistical units in the revised SEEA (from UNCEEA 2009 – EEA & FAO)

Ecosystem-Economy integrated accounts SEEA Part 2 SEEA Part 1

Simplified ecosystem capital accounts in Europe Make it feasible NOW – keep it simple Dont miss important issues: need a good checklist All ecosystems: land/sea/atmosphere, and for land: urban, agriculture, forest, other natural and soil. 6 accounts/indexes for 1 diagnosis: –1-Biomass-Carbon // 2-Water // 3-Land/landscape // 4-Biodiversity // 5- Dependency // 6-Disease prevalence –Diagnosis (instead of mere additions) and quantification: the ecosystem distress syndrome approach combined with basic balances of land, carbon, water… Physical accounts first, followed by valuation of selected flows and of ecosystem depreciation (on the basis of physical degradation and restoration costs – no valuation of stocks) For EU27, annual accounts to meet the policy agenda

t0 Total ecosystem capital potential & change t1 Improvement Degradation

Ecosystem physical degradation, sustainable benefits from ecosystem services and non-paid maintenance costs Consumption of ecosystem capital (non- paid costs) Sustainable benefits (income from key ecosystem services) Sustainable use coefficients Economic statistics & national accounts Mean restoration prices Improvement Degradation Sustainable benefits (Value Added from key ecosystem services)

Integration of resource efficiency indicators, ecosystem capital accounts & national accounts Total Material Input GDP Fossil energy Sand, gravel Biomass/ carbon Freshwater Land/ Landscape Biodiversity Atmosphere/ carbon assimilation Biomass/ carbon Sea/ carbon assimilation CO2 DMI Sand/ gravel DMI Water Metals,chemicals DMI other Conventional DMI/DMC 1st decoupling: from material/energy inputs 2 nd decoupling: from environmental impacts Sea/fisheries Inland Ecosystems DMI Carbon Integrated Carbon Accounts Water Integrated water accounts

Just 3 headline indicators ???? Intensity of use of the accessible carbon surplus (integrates resource efficiency and ecosystem) Degradation of the ecosystem capital potential (integrates carbon, water landscape and biodiversity) Final consumption at the full cost of commodities (in euros, integrates purchaser prices and non paid ecosystem capital degradation)

Thank you! Jean-Louis Weber