1. Beyond the Supply & Use Tables: Water Ecosystem Capital Accounts & the Use of Accounts in Water Economics Jean-Louis Weber Special Adviser Economic Environnemental Accounting European Environment Agency jean-louis.weber@eea.europa.eu

2. 17 Mio km2 22 Mio km2 Available cropland Resource efficiency = spare materials & energy (technology, consumption patterns) Resource efficiency = ecological management of land, soil & water, ecosystem capital maintenance GDP growth and the need to account for natural resource use and the ecosystem capital at the global scale 12.5 Mio km3 20 Mio km3 Use of accessible freshwater resource (today 54%)

3. GDP: Concerns about meaning and measurement 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.” Early “green GDP” adjustments: how to maintain national income when natural resource are depleting (“the weak sustainability”)? What are the “good” and “bad” components of GDP? (the first SEEA1993 – no implementation) More recently: Beyond GDP Conference, Brussels 2008: keep GDP but supplement it with indicators TEEB, 2008, GDP of the Poor Commission on the Measurement of Economic Performance and Social Progress (“Stiglitz report”), Paris 2009: National Income is more important than Gross domestic Product; Social distribution of Disposable Income still poorly addressed; “dual” issue of sustainability: overconsumption/ underinvestment Capital approaches: – Early attempts at the World Bank: “Genuine or Adjusted Net Savings” – Multi-capitals approaches of sustainable development: man-made, financial, natural, human, social – Ecosystem approaches: Green Accounting for Indian States Project, Simplified Ecosystem Capital Accounts (EEA), SEEA revision...

4. UN manual for environmental-economic accounting: SEEA2003 Enlargement of SNA1993 (now 2008) RM HASSAN - UN The System of Environmental and Economic Accounting (UN 2003) - RANESA Workshop June 12-16, 2005 Maputo Volume 1 The SNA satellite accounts for the environment expenditure, taxes, hybrid accounts, physical flows, sub-soil, energy, water land, economic assets depletion Volume 2 Ecosystem approach to accounting Ecosystem stocks and quality, valuation options… Revision  SEEA2012/13 Negative feedbacks of ecosystem degradation on production and wellbeing Impacts on ecosystem capacity of delivering services/benefits

5. Natural and Man-Made Capital(s) Production & Trade of Commodities & Assets Biodiversity Fossil energy and materials Natural Resources Land Water Biomass, carbon Fauna-Flora Functional Services ECOSYSTEM CAPITAL Inputs & Residuals NATURAL CAPITALMAN-MADE CAPITAL

6. Remark : Ecosystem Capital = inventories of resources + functional systems RESOURCES STOCKS, SUPPLY & USEFUNCTIONS & STRUCTURES, HEALTH

7. Weber, J.-L., 2010, adapted from Haines-Young, R. & Potschin, M. Ecosystem capital: structures, processes, functions & services Ecosystem biophysical structures & processes [landscapes, biodiversity, Net Primary Production...] Ecosystem biophysical structures & processes [landscapes, biodiversity, Net Primary Production...] Ecosystem functions [nutrient cycling, water regulation, habitats, biomass...] Ecosystem functions [nutrient cycling, water regulation, habitats, biomass...] Ecosystem services [provision, regulation, socio-cultural services]

8. Ecosystem Services: Draft Common International Classification of Ecosystem Services (CICES) Source, CICES proposal, Roy Haines-Young and Marion Potschin, eds, EEA, 2010

9. Weber, J.-L., 2010, adapted from Haines-Young, R. & Potschin, M. Ecosystem capital: systems & services, benefits & costs Primary benefits, externalities & rents (mostly private) Sustainable macro economic benefits (sector functional income) Non valued private and collective benefits (mostly public goods) Degradation Non-sustainable use of ES Maintenance & restoration costs non paid by the economy Physical flows Monetary benefits Monetary costs Ecosystem biophysical structures & processes [landscapes, biodiversity, Net Primary Production...] Ecosystem biophysical structures & processes [landscapes, biodiversity, Net Primary Production...] Ecosystem functions [nutrient cycling, water regulation, habitats, biomass...] Ecosystem functions [nutrient cycling, water regulation, habitats, biomass...] Ecosystem services [provision, regulation, socio-cultural services] Expenditures for environmental protection & resource management Non paid

10. Healthy ecosystems Ecosystem capital (  ) Use of natural resources, ecosystem services (  ) Economy ( € ) The ecosystem capital accounting circuit Sustainable use Non-sustainable use Additional cost needed to restore ecosystems from degradation (€)

11. Ecosystem capital accounts Physical accounts of ecosystem capital degradation – Data collection and assimilation: Earth Observation by satellite, in situ monitoring, socio-economic statistics – Targets identification: The accounting target: the same potential at the end of the year that at the beginning = capital maintenance The policy target: the stated objectives of regulations, conventions and laws – Integration of simplified accounts: International standards, classifications (SEEA...) Multi-criteria diagnosis and quantification Monetary accounts of ecosystem capital depreciation (consumption) – Mean prices of restoration and valuation of degradation – Ecosystem degradation embedded into international trade & concealed capital transfers – Adjustment of National Income to Real Net National Income and of Final Consumption (full cost) – Recording of ecological debts Monetary accounts of sustainable ecosystem-based macro-economic benefits – Generation of Value Added from sustainable ecosystems (agro-system, forest, fisheries, tourism…) – Distribution of VA between beneficiary sectors – Valuation at the macro scale of selected regulating services (carbon sequestration, flood regulation, pollution mitigation) – International transfers of sustainable benefits embedded into trade

12. SEEA: Water accounts cover many aspects, interconnected Ecosystem accounts Services & Natural assets accounts

13. Opening stocks by ecosystems/water bodies Precipitations Natural Inflows Withdrawals by activities Net transfers between ecosystems/water bodies Returns to the water system from activities Imports/Exports and return to the sea Storage in the user system Consumption/evaporation in the use system Real evapotranspiration Changes due to natural & multiple causes Natural outflows Final stocks by ecosystems/water bodies Withdrawals by activities Net transfers between ecosystems/water bodies Returns to the water system from activities Imports/Exports and return to the sea Storage in the user system Consumption/evaporation in the use system Returns of waste water Storage in dams Rainfed agriculture Evapotranspiration by irrigation Ecosystem Account Water basic balance In situ water usage Water Actual Transactions and Costs ( € ) Supply and purchase of water Taxes and subsidies Water Protection and Management Expenditures Water net availability Water bio-chemical quality Ecological quality of river basins Multicriteria diagnosis/ water Water ecosystem health accounts Sector Accounts Virtual water embedded into Import-Export, footprint Virtual water by products,  Water footprint by products, € Landscape ecological potential Carbon/Biomass productivity & storage Biodiversity Water Multicriteria diagnosis/ ecosystem degradation Linkage tables & integrated diagnosis Water Ecosystem Capital Accounts Supply & Use, MFA, NAMEA Additional Maintenance Costs/ water Consumption of ecosystem capital/ water Sustainability coefficients Sustainable benefits from ecosystem services/ water Input-Output analysis (“hypothetical extraction”)

14. Monetary accounts: Cost of water supply and environmental cost REMAINING RESOURCE COST (CRR) Cost of the hypothetical measures of restoration of the degradation that will be left in water bodies with respect to the natural state of reference (IN) once reached the objective of the WFD (EO). ENVIRONMENTAL COST (CA) Cost of partial restoration to meet the objective of the WFD in 2015 (EO) from the maximum state of deterioration (EE) generated by the human activities before applying any measures of mitigation. A part of the same one (EA-EE) corresponds to the cost of the measures applied until now. The rest (EO-EA) corresponds to the cost of the measures necessary to reach the objective of the WFD. COST OF WATER SUPPLY (CAA) Costs of resource procurement, distribution and return. The acquisition cost must be the optimal combination of resource generation and resource reassignment of the uses based on the quality required. Cost of services Integral cost of replacement CRRCAA CA EN EO EE EA CA Joan Escriù Water Agency of Catalunya

15. Example of full cost accounting : physical and monetary Environmental Cost of the WFD = CAR1 + CAR2 + CAR3 Cost of the “effective measures” for meeting the objetive of the WFD considered in the Programe of Measures of River Basin Management Plan Cost of measures for mitigating impacts of uses over the water bodies CAR1 Cost of measures of ecosystem restoration CAR2 Cost of measures for resource procurement CAR3 restoration DA1 DA3 DA2 PHYSICAL ACCOUNTSMONETARY ACCOUNTS Degradation of water quality Impacts on water use Impacts on ecosystems Physico-chemical objectives Biological & hydro-morphological objectives Joan Escriù Water Agency of Catalunya

16. The benefits side: first step of the calculation of „inclusive sustainable benefits“ from the services of an ecosystem (e.g. agro-systems, forests, fisheries...) Backward GVA/GDP effects by sector: Total quantity of Gross Value, which cannot be added by itself and by the product suppliers of sector j, if sector j reduces or ceases its production Forward GVA/GDP effects by sector: Total quantity of Gross Value, which cannot be added by itself and by the users of the products of sector i, if sector i reduces or ceases its production 02.06.2010 - EEA workshop Wuppertal Institut: José Acosta Fernández Interpretation of „Total GVA-Effect Matrix“ resulting of the linkage of the „Total Effects/Flows Matrix“ of hypothetical extraction with the national Gross Value Added

17. Water Accounts, Ecosystem Services & Human Wellbeing : Example of integrated water accounting by Artois-Picardie Basin Agency - France 20 000 Km2 4,7 Millions inhabitants GDP: 98 billions € GPD/inhabitant: 21 107 € GPD/inh France: 25 978 € Unemployment rate : 12,7% France: 9,9 % 96% of drinkable water come from groundwater Courtesy Arnaud Courtecuisse, Agence de l’Eau Artois-Picardie, France, 2006

18. Risk of not meeting WFD quality objectives by 2015 Courtesy Arnaud Courtecuisse, Agence de l’Eau Artois-Picardie, France, 2006

19. Comparison of water bill vis à vis household’s available income Mean Water bill (all services) / Mean available income per household Mean available income per household (A) Mean Water invoice per household (120m3/year) (B)B/A Aisne23 4994551,94% Nord24 314 3661,51% Pas de Calais23 1944281,85% Somme23 7963821,61% Courtesy Arnaud Courtecuisse, Agence de l’Eau Artois-Picardie, France, 2006

20. Water bill / mean available Income: social discrepancies Comparison with unemployment 2004 the commonly used value of annual consumption of 120 m3 per household hides important differences of mean consumption per region mean available income per municipality hides also various situations (and the real part of the population facing major difficulties to pay water bills) several groups of municipalities with ratio>3% (2-3% is a guidance value – see OCDE, EU, Académie de l’eau) these groups of municipalities combine high water price and low mean available income (and sometimes household’s expenses to buy bottled water are equivalent to the annual water bill) Courtesy Arnaud Courtecuisse, Agence de l’Eau Artois-Picardie, France, 2006

21. 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 ?? Green National Accounts & Ecosystem Services Valuation National Accounts = the macro-economic picture adjusted for natural capital depreciation Benefits & Costs Assessments = inclusive 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 Jean-Louis Weber, CBD Conférence, Libreville, 16 Septembre 2010

22. Simplified ecosystem capital accounts All ecosystems: land/sea/atmosphere, and for land: urban, agriculture, forest, inland water, other natural and soil. Focus on ecosystem degradation Feasible NOW – keep it simple Don’t miss important issues: need a good checklist 6 indexes for 1 diagnosis: – 1-Land // 2-Biomass // 3-Water // 4-Biodiversity // 5-Dependency // 6-Healthy populations – Diagnosis (instead of mere additions) and quantification: the “ecosystem distress syndrome” approach combined with basic accounts Physical accounts firstly, followed by valuation  The “fast tract implementation of ecosystem capital accounts” in Europe, based on land accounts. Jean-Louis Weber, CBD Conférence, Libreville, 16 Septembre 2010

23. Importance of accounting by relevant functional units (e.g. catchments) The total water resource of the country 10 lakes distributed over 2 catchments. The western catchment with 2 lakes is close to a scarcity threshold while water resource is abundant in the eastern catchment (8 lakes). Scenario A: 1 lake is lost in the east Scenario B: 1 lake is lost in the west. Resource loss of 1 lake in the eastern catchment (a)Aggregated national loss (without catchments): (10-9)% = 10% (b)National average of loss by catchments: (2-2)% + (9-8)% 2 = 5.5% Resource loss of 1 lake in the western catchment (a)Aggregated national loss (without catchments): (10-9)% = 10% (b)National aggregation of loss by catchments: (2-1)% + (9-9)% 2 = 25% West East

24. Need relevant time frame for monitoring impacts on ecosystems: e.g. water resource/demand Mean annual values may tell the same stories for very different conditions (e.g. no water shortage in this river in both cases)

25. Ex. FR, mid-1990,s, fast track computation river quality from maps (Source: Crouzet, Le Gall and Germain, IFEN) Quality matters as much as Quantity Other countries have similar maps ???

26. Europe in the Global Ecosystem Virtual water embedded into trade vs. water footprint (virtual water from non-sustainable origin) Source: José Manuel Naredo Pérez (Coordinador) et. al., El agua virtual y la huella hidrológica en la Comunidad de Madrid” © Canal de Isabel II - 2009 Evolution of the hydrological footprint per capita of the Community of Madrid (m3 per inhabitant per year)

27. Need for thematic integration of water accounts with land, bio-carbon & biodiversity Much of the increased NPP in semi-arid Spain is due to new irrigations (water taken from fossil reservoirs or directly taken from nature/rivers …) And so more NPP brings also some functional simplification of the ecosystem If such causal relations exist they should be reflected in some “biodiversity account” (but the species responses are usually delayed due to nature’s buffering capacity) (from Emil D. Ivanov, EEA- ETC LUSI) Example from southern Spain: NPP increase in dry region

28. Geographical integration of ecosystem accounts C W L Bdv Corine Land Cover

29. Thank you!