Jean-Louis Weber Special Adviser to Economic Environmental Accounting European Environmnent Agency

1. MEGS Working Committee Meeting Statistics Canada RH Coats building 7, Ottawa 13 January 2012 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

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 5th meeting (June 2010) for UNSD, World Bank and EEA to report back with a broad outline and road map for ecosystem accounts • 6th 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 • Narrative: an ultra-short version by 3 Japanese students • Narrative: additional details • Practicalities: focus on statistical units

7. 1. Ultra-short story

8. The background of Ecosystem Capital Accounts: Ecosystem capital potential (& degradation) can be measured by combining measurements of 3 ecosystem services: biomass/carbon, freshwater and systemic services carbon 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. systemic services water The simplified ecosystem capital accounting circuit Ecosystem capital depreciation Ecological debts Calculating economic aggregate Healthy ecosystem benefit Adapted from Aoyama Yukiko, Oguro Michio, and Yano Tohru, Tohoku University, Sendai,Japan, November 2011 Ecosystem degradation

9. Land cover, landscape units, 1km2 grids and calculation of ecosystem capital Carbon surplus “+” 12 6 12 4 2 5 1 4 10 10 Water surplus 20 20 6 4 15 15 10 8 4 3 “+” Landscape integrity, biodiversity “=” Total ecosystem capital potential (or capacity)

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

11. 2. More detailed narrative • Accounting for the performance(s) of 2 co-evolving systems: resources, productivity and health • Ecosystems deliver altogether multiple services • Ecosystems deliver altogether services which are private, common and public goods • Only a surplus from ecosystem services is accessible for human use • 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). • Estimation of ecosystem capital depreciation can be derived from physical degradation • The integrated ecosystem capital framework • Ecosystem Capital should not be valued as a stock; ecosystem services can be valued one by one but are not fully additive (functional analysis) • To address multiple scales, ecosystem capital accounts need to integrate geographical information

12. The narrative behind Ecosystem Capital Accounts:a. Accounting for the performance(s) of 2 co-evolving systems: resources, productivity and health Economic system 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) Use of natural resources Products & economic assets Fossil energy & materials Biomass/carbon Water Land functional services Ecosystem Ecosystem potential (capacity to deliver services) Ecosystem productivity Flows Accumulation Stocks Ecosystem health (biodiversity, integrity, resilience, interdependence) Capital maintenance (to remediate degradation)

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. The narrative behind Ecosystem Capital Accounts: c. Ecosystems deliver altogether services which are private, common or public goods GDP, consumption, trade... Services valuation, payments for services 2 - Non valued services: mostly common goods, tradable, transferable rights 1 – ES incorporated into commodities & economic assets: mostly private goods, market prices Provisioning services Regulating services Recreating services Payments for restoring ecosystem potential 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 Jean-Louis Weber, CBD Conférence, Libreville, 16 Septembre 2010

15. Non-basic eco-product Surplus accessible for harvest/abstraction Basic eco-product Necessary for ecosystem reproduction (conservation of ecosystem health, integrity, functions & services) 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 Sources: Kling/U Michigan_2005 & Friend/ISEE_2004

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

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 stressNumber 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 Ecological debts in physical units Total Ecosystem Capital Potential/Capacity & Ecosystem Capital Improvement/Degradation Accessible ecosystem functional services Accessible water surplus Depreciation (money) & adjustments

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

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

23. 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) 1 2 3 4 5 n Ecosystem services valuation Bottom-up, individual preferences, market and shadow prices, Costs-Benefits Analysis, General Equilibrium model Service n value ?? Service n Service 5 value ? Service 5: e.g. existence Service 4 value Service 4: e.g. water regulation Service 3 value Service 3: e.g. eco-tourism Service 2 value Service 2: e.g. fish provision Service 1 value Service 1: e.g. timber provision Ecological Taxes, Subsidies, Tradable Offset Certificates / Depreciation... National Accounts = the macro-economic picture adjusted for natural capital depreciation Benefits & Costs Assessments = accounts for projects, sectors… Ecosystem capital 2 Stocks & flows Health Land cover Biomass/Carbon Soil Biodiversity Water catchments Sea Atmosphere Vigour Organisation Resilience Autonomy Healthy populations Operationcosts E.S n Operationcosts E.S 5 Operationcosts E.S 4 Operation costs E.S 3 Operation costs E.S 2 Service 2: e.g. fish provision Operation costs E.S 1 Ecosystem / public good protection (all services) Ecosystem restoration costs Top-Down, collective preferences, multi-criteria decision (economic & social values, long term targets…), Consumption of Ecosystem Capital

24. The narrative behind Ecosystem Capital Accounts:i. To address multiple scales, ecosystem capital accounts need to integrate geographical information Global scale: International Conventions Markets framing & regulation Simplified accounts Global trade of ecosystem permits, IPES Programmes assessment (e.g. REDD+) International financial standards (for loans…) Country contribution to international organisations National & regional government: Environmental agencies, Ministries of economy, Statistical offices, Courts SEEA 2013 Framework Beyond GDP Accounting Sector accounts Green taxes Clearing housemechanisms on [1] ES prices & [2] ecosystem mitigation costs Action level: Local scale, management, Site level, case studies, Projects, Business Accounting guidelines, norms, geographical data Impacts assessments, costs & benefits Local government, Agencies assessment Corporate accounting results, rating, trade Markets of specific ecosystem services, PES

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

26. An experimental framework for ecosystem capital accounting in EuropeEEA 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 units by economic sectors

29. The synthesis tables by ecosystem units by economic sectors

30. The monetary accounts by ecosystem units by 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

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

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

38. Land coverfunctionalunits & Socio-ecologicallandscapeunits (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 (S = 0) Stock t0 - Consumption of land land cover + Formation of land cover = Stock t1 Ecosystem landscape balance (S ≠ 0) Stock t0 - Decrease in LEP + Increase in LEP = Stock t1

46. Sprawl of artificial areas 1990-2000

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

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