Adjustment of National Income and Final Consumption from Natural Capital Consumption in the System of National Accounts and the SEEA – draft slides – Jean-Louis Weber – 16 July 2009

The issue  Accounting norms on the G20’s agenda  fair calculation of results, performances, and risks  National accounts (UN SNA 2008) still don’t record natural capital consumption when calculating National Income (although it is defined as Gross National Product minus Capital Consumption) and when measuring Final Consumption (on the basis of direct purchasers’ prices, no consideration for indirect costs caused within the country or abroad via imports)  Consequences are very insufficient macro-economic indicators (little visibility of risks – see G20; little visibility of accumulated ecological debts; a high policy concern – see Beyond GDP Conference or work of the Stiglitz Commission; risk that the Green Economy will never happen)  It is time for introducing correctly nature into national accounts – even with coarse measurements; because of risks of “leakage” from well towards less protected countries, the adjustments have to be implemented worldwide  It is possible to start NOW calculating these adjustments on the basis of global monitoring and international statistics and improve the system in a second step alongside UN SEEA revision by 2012/2013. NEXT: Illustration of simplified methodology in the case of inland ecosystems

Key features of simplified ecosystem accounts / SEEA - SNA Natural assets accounts [in physical units only] Ecosystem assets (stocks and health, change in total ecological potential) Sub-soil assets (stocks and lifetime, physical depletion) Consumption of Natural Capital [in physical & monetary units] Ecosystem Capital Consumption (domestic) = ECC (domestic) Virtual Transfers of Ecosystem Capital concealed in imports = VTEC (imports) Depletion User Cost of Domestic Non Renewable Assets (El Serafy method) = DUC (domestic) Domestic Natural Capital Consumption = ECC (domestic) + DUC (domestic) Environmental Debts (or Liabilities) = ECC (domestic) + VTEC (imports) Full Cost of Goods and Services (FCGS) Full Cost of Goods and Services = Commodities at market price + ECC (domestic) + VTEC (imports) [NB.: depletion user costs being part of market price, no addition is needed] Adjusted Disposable National Income (ADNI) as SNA headline aggregate ADNI = conventional National Income – Natural Capital Consumption [conform to the Stiglitz/Sen/Fitoussi proposal] Adjusted Net Savings are derived automatically from ADNI (WB “Genuine Savings” with ecosystem capital consumption) Ecosystem services account [physical units and monetary valuation] Market and non market services in physical units [tons, volume, surface*people*time,...] Valuation according to ecosystem service types Likely to be limited to the most important ecosystem services / sectors Inclusive Final Consumption (IFC) Inclusive Final Consumption = conventional SNA Final Consumption + Ecosystem Capital Consumption (domestic) + Virtual Transfers of Ecosystem Capital concealed in imports – Ecosystem Capital Consumption in exports

Simplified Ecosystem Accounts & National Accounts Adjustment Consumption of Ecosystem Capital & Adjustments of National Accounts for “over-consumption” and/or “under-investment” AdjustedDisposableNationalIncome Full Cost of Goods &Services Depletion of Sub-soil Assets Virtual Consumption of Ecosystem Capital in Imports Consumption of Domestic Ecosystem Capital

TotalCurrentEcologicalPotential (terrestrial ecosystems) Total Ecological Potential Simplified Ecosystem Accounts & National Accounts Adjustment: A “Cubist” Approach to Ecosystem Capital [1/3] Catchments Exergy Loss (from water evaporation & pollution) Carbon, Biomass (productivity, biomass diverted from Nature, HANPP) Biodiversity Rarefaction (loss of adaptability) Ecosystem Dependency (land, soil, energy, water, N,P,K...) Landscape Ecological Potential (the landscape radiography) Healthy Populations (human and wildlife) Multi-criteria rating Georges Braque – Harbour in Normandy, 1909

TotalEcologicalPotential Time t+1 Simplified Ecosystem Accounts & National Accounts Adjustment: A “Cubist” Approach to Ecosystem Capital [2/3] Change in Total Ecological Potential, Maintenance & Restoration of Ecosystem Capital TotalEcologicalPotential (terrestrial ecosystems) Time t Annual Maintenance of Ecosystem Capital _ = Annual amortization of historical degradation + = Annual Consumption of Ecosystem Capital (physical index) AdditionalRestorationTargetEcologicalPotential t  t+n =

TotalEcologicalPotential Time t+1 Simplified Ecosystem Accounts & National Accounts Adjustment: A “Cubist” Approach to Ecosystem Capital [3/3] Change in Total Ecological Potential, Maintenance & Restoration of Ecosystem Capital TotalEcologicalPotential (terrestrial ecosystems) Time t Annual Maintenance of Ecosystem Capital _ = Annual amortization of historical degradation + = Annual Consumption of Ecosystem Capital (money) AdditionalRestorationTargetEcologicalPotential t  t+n = Valuation of maintenance / restoration costs

Example: making of Landscape Ecological Potential (1/6) Corine land cover map (derived from satellite images) Green Background Landscape Index (derived from CLC)‏ Naturilis (derived from Natura2000 & CDDA)‏ Effective Mesh Size (MEFF, derived from TeleAtlas and CLC)‏ Landscape Ecological Potential (LEP) 2000, by 1km² grid cell LEP 2000 by NUTS 2/3

Example: making of Landscape Ecological Potential (2/6) Corine land cover map (derived from satellite images)‏ Green Background Landscape Index (derived from CLC) ‏ Naturilis (derived from Natura2000 & CDDA)‏ Effective Mesh Size (MEFF, derived from TeleAtlas and CLC)‏ Landscape Ecological Potential (LEP) 2000, by 1km² grid cell LEP 2000 by NUTS 2/3

Example: making of Landscape Ecological Potential (3/6) Corine land cover map (derived from satellite images)‏ Green Background Landscape Index (derived from CLC)‏ Naturilis (derived from Natura2000 & CDDA) ‏ Effective Mesh Size (MEFF, derived from TeleAtlas and CLC)‏ Landscape Ecological Potential (LEP) 2000, by 1km² grid cell LEP 2000 by NUTS 2/3

Example: making of Landscape Ecological Potential (4/6) Corine land cover map (derived from satellite images)‏ Green Background Landscape Index (derived from CLC)‏ Naturilis (derived from Natura2000 & CDDA)‏ Effective Mesh Size (MEFF, derived from TeleAtlas and CLC) ‏ Landscape Ecological Potential (LEP) 2000, by 1km² grid cell LEP 2000 by NUTS 2/3

Example: making of Landscape Ecological Potential (5/6) Corine land cover map (derived from satellite images)‏ Green Background Landscape Index (derived from CLC)‏ Naturilis (derived from Natura2000 & CDDA)‏ Effective Mesh Size (MEFF, derived from TeleAtlas and CLC)‏ Landscape Ecological Potential (LEP) 2000, by 1km² grid cell LEP 2000 by NUTS 2/3

Example: making of Landscape Ecological Potential (6/6) Corine land cover map (derived from satellite images)‏ Green Background Landscape Index (derived from CLC)‏ Naturilis (derived from Natura2000 & CDDA)‏ Effective Mesh Size (MEFF, derived from TeleAtlas and CLC)‏ Landscape Ecological Potential (LEP) 2000, by 1km² grid cell LEP 2000 by NUTS 2/3

1990 Landscape Ecological Potential , 1km² grid (Source: Ecosystem Accounting for Mediterranean Wetlands, an EEA feasibility study for TEEB) In brown grades, first clues of “ecosystem capital consumption” Which will be validated with other “cube” indicators Change LEP, state and change

1990 Change LEP, state and change, local scale Natural Park of Camargue (France)‏ Landscape Ecological Potential , 1km² grid (Source: Ecosystem Accounting for Mediterranean Wetlands, an EEA feasibility study for TEEB) In brown grades, first clues of “ecosystem capital consumption” Which will be validated with other “cube” indicators

Service 1: e.g. timber Service 4: e.g. eco-tourism Service 3: e.g. water regulation Service 2: e.g. fish Service 5: e.g. nn Ecosystem Stocks & Flows Ecosystem Health Service 1 value Service nn value ???? Service 4 value Service 3 value Service 2 value Ecosystem services values vs. Ecosystem functions maintenance/restoration costs Ecosystem Services values Maintenance/restoration costs Top-Down, Collective preferences, Multi-criteria decision (economic benefits, costs, social values, long term targets…) Land cover Biomass/Carbon Soil Species/populations Water catchments Sea Atmosphere Vigour Organisation Resilience Autonomy Support to healthy populations Service nnn ???? Consumption of Ecosystem Capital Bottom-Up, Individual preferences, Market and Shadow prices, General equilibrium modelling

Ecosystem Stocks & Flows Ecosystem Health Land cover Biomass/Carbon Soil Species/populations Water catchments Sea Atmosphere Vigour Organisation Resilience Autonomy Support to healthy populations Maintenance/restoration costs Service 1 value Service nn value ???? Service 4 value Service 3 value Service 2 value Ecosystem services values vs. Ecosystem functions maintenance/restoration costs Top-Down, Collective preferences, Multi-criteria decision (economic benefits, costs, social values, long term targets…) Ecosystem Services values Bottom-Up, Individual preferences, Market and Shadow prices, General equilibrium modelling Service nnn ???? Ecological Tax or/and Value of offset certificates (fair use of ecosystems public good) Ecosystem public good protection Service 1: e.g. timber Service 4: e.g. eco-tourism Service 3: e.g. water regulation Service 2: e.g. fish Service 5: e.g. nn

Scales, accounts, governance Impacts assessments, costs & benefits Local government, Agencies assessment Corporate accounting results, rating, trade Markets of specific ecosystem services, PES Accounting guidelines, norms Action level: Local scale, management, Site level, case studies, Projects, Business Clearing house on [1] ES prices & [2] ecosystem mitigation costs Sector accounts Green taxes Beyond GDP Accounting SEEA 2012 Framework National & regional government: Environmental agencies, Ministries of economy, Statistical offices, Courts Global trade of ecosystem permits, IPES Programmes assessment (e.g. REDD) International financial standards (for loans…) Contribution to international organisations Simplified accounts Global scale: International Conventions monitoring Markets framing & regulation

Data needs for a quick start ! – and later on Inland ecosystems – … (e.g. GlobCorine) – … (e.g. Water assets monitoring) – … (e.g. Biodiversity data) – … (e.g. Soil/Forest carbon/biomass data) Sea/Oceans – … (e.g. Fisheries) – … (e.g. Coastal water/ spawning areas) – … (e.g. Carbon storage) Atmosphere – … (e.g. GHGs monitoring) – … (e.g. Climate monitoring) Socio-economic statistics – … (e.g. population, health, nutrition) – … (e.g. agriculture) – … (e.g. import/exports)