1. Development and Implementation of Simplified Ecosystem Capital Accounts by the European Environment Agency Jean-Louis Weber Special Adviser to Economic Environmental Accounting European Environmnent Agency jean-louis.weber@eea.europa.eu MEGS Working Committee Meeting Statistics Canada RH Coats building 7, Ottawa 13 January 2012

2. Background Europe: –European Strategy for Environmental Accounting 2003/2008 includes ecosystem accounts (under EEA responsibility) –EEA-MB/ Eurostat-DIMESA Seminar, Luxembourg, 24 November 2009: Fast Track Implementation of Simplified Ecosystem Capital Accounts –Demand by the European Parliament for further inclusion of ecosystems in the new environmental accounting regulation Request from UNCEEA at its 5 th meeting (June 2010) for UNSD, World Bank and EEA to report back with a broad outline and road map for ecosystem accounts 6 th UNCEEA meeting: endorsement of the outline and roadmap of SEEA part 2 on experimental ecosystem accounts to be presented at UNSC 2013

3. Policy Demand Europe: –GDP and Beyond process –Resource Efficiency Flagship Initiative 2020 –Water Framework Directive –Environment Liability Directive of 2004 –Forthcoming ecosystem assessment 2014 International (as expressed at the UNCEEA meeting of 15-17 June 2011) –Wide range of emerging measurement/monitoring initiatives require an ecosystems perspective of sustainability and information on the links between ecosystems and human well-being –Millennium Ecosystem Assessment (MA) 2015 under preparation; –World Bank’s WAVES partnership –At the UNCEEA, demands by UNEP (Green Economy), OECD, CBD (Aichi- Nagoya Strategy), FAO (SEEA Agri), the UN Coordinator of the Rio+20 Conference... EEA asked to deliver first (physical) accounts by MAY 2012

4. Simplified ecosystem capital accounts Make it feasible NOW – keep it simple Don’t miss important issues: needs a good narrative and checklist All ecosystems need to be addressed: land/sea/atmosphere, and for land: urban, agriculture, forest, other natural and soil. Basic accounts of biomass/carbon, water and landscape/biodiversity combined with diagnoses (instead of mere additions): ref. to the “ecosystem distress syndrome” approach of David J. Rapport integrated into an accounting framework Physical accounts first (2012), stocks, flows (natural flows and economic use), accessible surplus and integration; ecosystem capital potential/ capacity and degradation measured with a composite equivalent-unit. Physical accounts followed by valuation of selected ecosystem services and of ecosystem restoration costs. No valuation of ecosystem stocks.  The “fast tract implementation of ecosystem capital accounts” in Europe, based on land accounts.  Nov. 2011: publication of an experimental framework based on the EEA experience in land accounting, assessments and valuation (in particular in the context of TEEB) and the tests carried out in 2010-2011.

5. Characteristics of ecosystem capital accounts Top-down approach Compiled at the European scale; member countries involved progressively on a voluntary basis Geo-referenced approach to 1) detect issues and hotspots and 2) connect global/EU to national to local scales –1km2 EU standard grid to integrate multiple dimensions –Small analytical functional units: “Land cover functional units”, “Socio-ecological systems” or “socio-ecological production landscapes” or proxies… –Reporting units: countries, regions/provinces, catchments… Meet the policy demand: annual updates for t – 1; first time serie for 2000-2010 Deep rooted in the best available datasets: –Socio-economic statistics –Monitoring by satellites (land use, biomass, climate variables…) –Best available in situ monitoring data Necessary additional estimations transparent and reproducible Relevance matter more than accuracy Measure ecosystem capital degradation

6. Ecosystem capital approach: narrative and practicalities 1.Narrative: an ultra-short version by 3 Japanese students 2.Narrative: additional details 3.Practicalities: focus on statistical units

7. 1. Ultra-short story

8.  Ecosystem capital potential (& degradation) can be measured by combining measurements of 3 ecosystem services: biomass/carbon, freshwater and systemic services  The simplified ecosystem capital accounting circuit there is little or no compensation or tradeoff between them; the use of one should not reduce the use of the others biomass/carbon, freshwater are based on conventional balances systemic services (regulating, socio-cultural…) are measured indirectly in relation to ecosystem integrity. carbon water systemic services The background of Ecosystem Capital Accounts: Healthy ecosystem benefit Calculating economic aggregate Ecosystem degradation Ecosystem capital depreciation Ecological debts Adapted from Aoyama Yukiko, Oguro Michio, and Yano Tohru, Tohoku University, Sendai, Japan, November 2011

9. Land cover, landscape units, 1km 2 grids and calculation of ecosystem capital 4 4 1 1 6 6 4 4 2 2 4 4 4 4 3 3 6 6 5 5 10 8 8 12 10 20 15 Carbon surplus Water surplus Landscape integrity, biodiversity “+” “=” “+” Total ecosystem capital potential (or capacity) 12 10 20 15

10. -3 +1 -3 -8 Capital1 – Capital2 = Change in capital Time 1 Time 2 = Capital1 Capital2 Improvement Degradation 12 10 20 15 9 9 11 12 _ Adapted from Aoyama Yukiko, Oguro Michio, and Yano Tohru Tohoku University, Sendai, Japan, November 2011

11. 2. More detailed narrative a.Accounting for the performance(s) of 2 co-evolving systems: resources, productivity and health b.Ecosystems deliver altogether multiple services c.Ecosystems deliver altogether services which are private, common and public goods d.Only a surplus from ecosystem services is accessible for human use e.Ecosystem capital produces altogether 3 broad types of services between which there is little or no tradeoff: biomass/carbon AND freshwater AND functional services. Ecosystem capital potential (& degradation) can be measured by combining measurements of these 3 broad services (accessible resources). f.Estimation of ecosystem capital depreciation can be derived from physical degradation g.The integrated ecosystem capital framework h.Ecosystem Capital should not be valued as a stock; ecosystem services can be valued one by one but are not fully additive (functional analysis) i.To address multiple scales, ecosystem capital accounts need to integrate geographical information

12. 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) The narrative behind Ecosystem Capital Accounts: a. Accounting for the performance(s) of 2 co-evolving systems: resources, productivity and health Economic system Ecosystem Use of natural resources

13. The narrative behind Ecosystem Capital Accounts: b. Ecosystems deliver altogether multiple services Source: Gilbert Long, 1972 A propos du diagnostic écologique appliqué au milieu de vie de l'homme. Options Méditerranéennes, 13, CHIEAM, Montpellier, Juin 1972

14. 3 – Ecosystem good state: health, sustainable capacity of delivering services, life-support functions, Public Good: non- rival, non-exclusive use, non-transferable rights, taxes or lease with covenants are possible 1 – ES incorporated into commodities & economic assets: mostly private goods, market prices Payments for restoring ecosystem potential Regulating services Recreating services Provisioning services 2 - Non valued services: mostly common goods, tradable, transferable rights Services valuation, payments for services GDP, consumption, trade... Jean-Louis Weber, CBD Conférence, Libreville, 16 Septembre 2010 The narrative behind Ecosystem Capital Accounts: c. Ecosystems deliver altogether services which are private, common or public goods

15. The narrative behind Ecosystem Capital Accounts: d - Only a surplus from ecosystem services 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

16. The narrative behind Ecosystem Capital Accounts: d - Only a surplus from ecosystem services 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/abstractio n Economy

17. Natural resource: availability, appropriation, accessibility Available resource: the total resource (actual stocks and flows) which can be used in principle (but should to be shared between economy and nature…). Appropriated resource: the share of the total potential resource flows (flows which would be available in an ecosystem in the absence of human activities or flows from managed ecosystems) which is used (abstracted, harvested or destroyed during harvest). N.B.: Once used, the resource is considered as appropriated in total, even though one part is returned to the ecosystem. Accessible resource: the surplus (actual stocks and flows) which can be used considering 1) physical constraints (timeliness and location, cyclical risks, bio- chemical quality) & 2) the amount to be left to nature for ecosystem reproduction. N.B.: When returned to the ecosystem (leftovers in agriculture or forestry, water returns…) the resource destroyed or modified during the production process becomes accessible again. Ecosystem capital accounts refer to accessible resource and intensity of use.

18. Accessible resource: carbon/biomass, freshwater, systemic services Accessible resource = Stocks (soil, forests, aquifers, reservoirs, landscapes…) Plus/minus change in stocks (from the previous year) Minus inaccessible stocks Physical inaccessibility (deep aquifers …) Inappropriate quality (salted or polluted water, non arable land…) Plus flows (NPP, effective rainfall…) Minus inaccessible flows Physical inaccessibility (most of flood water, distance, non transportable resource, timeliness issues, water evaporated by irrigation…) Inappropriate quality (polluted water) Maintenance of stocks (soil carbon, forests, aquifer level, dilution of pollutants in rivers…) Plus/minus adjustment for stress, risk

19. Example of accessible water adjustment: occurrence of soil water stress Number of days when no water was available for plants in 2001, 1 km^2 grid Source: Blaz Kurnik, EEA, 2011

20. The narrative behind Ecosystem Capital Accounts: e. Ecosystem capital produces altogether 3 broad types of services between which there is no compensation or tradeoff: biomass/carbon AND freshwater AND systemic services. Ecosystem capital potential (& degradation) can be measured by combining measurements of these 3 broad services (accessible resources). Accessible carbon surplus Accessible water surplus Accessible ecosystem functional services Total Ecosystem Capital Potential/Capacity & Ecosystem Capital Improvement/Degradation Ecological debts in physical units Depreciation (money) & adjustments

21. Estimation of ecosystem capital depreciation… Physical accounts of E-services  t1  t2 ()()  t2  t1 Degradation of ecosystem capital …based on remediation costs …based on assets values   & addition € t2  t1 € Valuation of E-services € € € Assessment of remediation costs by issues Assets  Flows ()() The narrative behind Ecosystem Capital Accounts: f. Estimation of ecosystem capital depreciation can be derived from physical degradation NPV & addition € € Assets €  Calculation of unit costs Account of pressures responsible of degradation Jean-Louis WeberEEA Scientific Committee Workshop 5 October 2011

22. GDP, National Income, Final Consumption at Purchasers’ price Healthy ecosystem deliver services to the economy & to the public well-being Ecosystem assets/capital (  ) The narrative behind Ecosystem Capital Accounts: g. The integrated ecosystem capital accounting framework Adjusted macro economic aggregates  Adjusted capital consumption  Final demand at full price  Adjusted net domestic product (or net national income)  ES based economic benefits (€)   Ecosystem degraded by over-use (  ) Non-paid costs needed to remediate ecosystem degradation ( € ) Economic system (including natural assets & ecosystem services (   and € ) Jean-Louis Weber Ecological debts

23. Stocks & flowsHealth Land cover Biomass/Carbon Soil Biodiversity Water catchments Sea Atmosphere Vigour Organisation Resilience Autonomy Healthy populations Ecosystem / public good protection (all services) Service 1: e.g. timber provision Service 3: e.g. eco-tourism Service 4: e.g. water regulation Service 2: e.g. fish provision Service 5: e.g. existence Service n Operation costs E.S n Operation costs E.S 5 Operation costs E.S 4 Operation costs E.S 3 Operation costs E.S 2 Operation costs E.S 1 Service 1 value Service 4 value Service 3 value Service 2 value Service 5 value ? Service n value ?? The narrative behind Ecosystem Capital Accounts: h.Ecosystem Capital should not be valued; ecosystem services can be valued one by one but are not fully additive (functional analysis) National Accounts = the macro-economic picture adjusted for natural capital depreciation Benefits & Costs Assessments = accounts for projects, sectors… Ecological Taxes, Subsidies, Tradable Offset Certificates / Depreciation... Ecosystem services valuation Bottom-up, individual preferences, market and shadow prices, Costs-Benefits Analysis, General Equilibrium model Top-Down, collective preferences, multi-criteria decision (economic & social values, long term targets…), Consumption of Ecosystem Capital Ecosystem restoration costs Ecosystem capital 1 3 2 45n Service 2: e.g. fish provision 2

24. Impacts assessments, costs & benefits Local government, Agencies assessment Corporate accounting results, rating, trade Markets of specific ecosystem services, PES Accounting guidelines, norms, geographical data Action level: Local scale, management, Site level, case studies, Projects, Business Beyond GDP Accounting Sector accounts Green taxes Clearing house mechanisms on [1] ES prices & [2] ecosystem mitigation costs SEEA 2013 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…) Country contribution to international organisations Simplified accounts Global scale: International Conventions Markets framing & regulation The narrative behind Ecosystem Capital Accounts: i. To address multiple scales, ecosystem capital accounts need to integrate geographical information

25. 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)

26. An experimental framework for ecosystem capital accounting in Europe EEA Technical report No 13/2011 http://www.eea.europa.eu/publications/an-experimental- framework-for-ecosystem

27. The draft framework Basic accounts Synthesis tables in physical units Monetary accounts

28. The basic accounts by ecosystem unitsby economic sectors

29. The synthesis tables by ecosystem unitsby economic sectors

30. The monetary accounts by ecosystem unitsby economic sectors

31. From economic-ecological theory to statistical practice and accounts statistical units & classifications Source: Joel de Rosnay, The Macroscope http://pespmc1.vub.ac.be/MACRBOOK.html http://pespmc1.vub.ac.be/MACRBOOK.html

32. From theory to statistics and accounts Theoretical background (very incomplete…): –Georgescu-Roegen (The Entropy Law and the Economic Process (1971), –Odum (emergy) –Resource depletion: Hotelling, El Serafy –System approach : Joel de Rosnay (The macroscope, 1975) –Dissipative structures: Prigogine (The New Alliance, 1986) –L'économique et le vivant: René Passet (1977) –Natural resource economy: Naredo (1987) –Urban metabolism: Duvignaud –Global biotic regulation: Gorshkov –Co-evolving systems: Norgaard –Ecosystem services: Long (1972), Costanza and De Groot, Millennium Ecosystem Assessment (2003) – Interaction between scales: Hollin (“panarchy”) –Landscape ecology (UK) –Ecosystem units: socio-ecological systems (Gallopin, Carpenter, Rockström, MA2003…) –Ecosystem health (D. J. Rapport), resilience (the Resilience Alliance)  from economic-ecological theory to statistical practice and accounts : statistical units and classifications

33. 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

34. Main relations between classifications & accounting units (from UNCEEA 2009 – EEA & FAO)

35. Ecosystem accounting and statistical units SNA statistical units don’t record ecosystem degradation  need for other units… Theoretical units vs. observation units (proxies for collecting data) Theoretical units: characteristic systems into which natural and socioeconomic elements interact to transform ecosystem functions into goods and services: –Functional units producing elementary services –“Socio-ecological systems”, “socio ecosystems” or “Socio-ecological production landscapes” (the Japanese satoyama and satoumi)  Observation units: –For which we can collect data in a systematic way –Mostly surface units: “geo-systems”, land cover units, functional administrative units, ownership units… Japan Satoyama Satoumi Assessment, 2010. Satoyama-Satoumi Ecosystems and Human Well-being: Socio-ecological Production Landscapes of Japan – Summary for Decision Makers. United Nations University, Tokyo, Japan.

36. Theoretical units vs. observation units SES / SEPL Theoretical analytical unit Candidate observation units Modeled SES/ SEPL Administrative or cadastral unit Basic land cover systems ? Topographic unit (eg. catchment)

37. Land cover functional units: example of Europe Land cover units are homogenous considering production of ecosystem services: crops, timber, water…

38. Land cover functional units & Socio-ecological landscape units (SELU)

39. Dominant land cover types (more than 50% criteria) In grey are areas where no land cover type is dominant

40. Relief and river basins limits

41. The SELU map/database

42. SELU classified by landscape types

43. ZOOM: SELU in Central Europe

44. ZOOM: Land cover functional units by SELU

45. The land/ landscape account Land cover balance, by land cover types (  = 0) Stock t0 - Consumption of land land cover + Formation of land cover = Stock t1 Ecosystem landscape balance (  ≠ 0 ) Stock t0 - Decrease in LEP + Increase in LEP = Stock t1

46. Sprawl of artificial areas 1990-2000

47. Corine land cover map (CLC is derived from satellite images) Green Landscape Index (derived from CLC) Nature Value (Naturilis, derived from Natura2000 designated areas) Fragmentation (Effective Mesh Size (MEFF) derived from TeleAtlas Roads and CLC) Landscape Ecological Potential (LEP) 2000, by 1km² grid cell LEP 2000 by NUTS 2/3 From Land Cover to Landscape Ecological Potential (LEP)  and

48. Land cover flows 1990-2006 and mean Landscape Ecosystem Potential (LEP) by ecosystem landscape unit Land cover flows are measured according to the EEA LEAC methodology based on Corine land cover (J-L Weber and E. Ivanov, 2011)

49. Landscape Ecological Potential change 1990-2006, by ecosystem landscape unit (J-L Weber and E. Ivanov, 2011)

50. GDP Fossil energy Sand, gravel Water Biomass/ Carbon Metal Chemicals Landscape Water Biodiversity Atmosphere/ Climate Biomass/ Carbon Sea TEP Air TEP Sea DMC Carbon TEP Land Biomass/carbon acccounts (agriculture, forestry, …) CO2 DMC Sand/ gravel DMC Water DMC other Water accounts Conventional DMC Total Ecosystem Potential Total material Input Import-Export Decoupling (1) from material/energy inputs Decoupling (2) from environmental impacts Resource efficiency: TMI/DMC-Carbon & TEP Land

51. Conclusion: biodiversity & finance, a few questions… Back to the first quotation by Bertrand de Jouvenel, 1968: “Because National Accounts are based on financial transactions, they account nothing for Nature, to which we don’t owe anything in terms of payments but to which we owe everything in terms of livelihood.” We certainly owe nothing to Nature, but by degrading biodiversity and ecosystem don’t we create debts to future generations? These ecological debts don’t they come in addition to conventional debt, private and public - which will have to be repaid one day, one way or another? Should not the international financial and monetary system take into account(s) ecological debts, in addition to conventional debt? Can ecosystem capital accounts contribute to this endeavour? Jean-Louis Weber, CBD Conférence, Libreville, 16 Septembre 2010