Jean-Louis Weber – 16 July 2009

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 aggregateADNI = 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 typesLikely 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 CapitalConsumption of Ecosystem Capital & Adjustments of National Accounts & Adjustments of National Accounts

for “over-consumption” and/or “under-investment”for “over-consumption” and/or “under-investment”

AdjustedAdjusted

DisposableDisposable

NationalNational

IncomeIncome

Full CostFull Cost

of Goodsof Goods

& &

ServicesServices

Depletion of

Sub-soilAssets

Virtual Consumption

of Ecosystem Capital

inImports

Consumptionof DomesticEcosystem

Capital

(-)

(-)

(-)

(+)

(+)

Total Total CurrentCurrent

Ecological Ecological Potential Potential (terrestrial

ecosystems)

Total Ecological PotentialTotal Ecological Potential

Simplified Ecosystem Accounts & National Accounts Adjustment: A “Cubist” Approach to Ecosystem Capital [1/3]

CatchmentsExergy

Loss(from water evaporation & pollution)

Carbon, Biomass

(productivity, biomass

diverted fromNature, HANPP)

BiodiversityRarefaction

(loss of adaptability)

Ecosystem Dependency

(land, soil, energy,water, N,P,K...)

Landscape Ecological Potential

(the landscaperadiography)

HealthyPopulations

(human and wildlife)

Multi-criteriarating

Ge

org

es B

raqu

e –

Har

bou

r in

Nor

ma

ndy,

19

09

Total Total Ecological Ecological Potential Potential

Time t+1


Change in Total Ecological Potential,Change in Total Ecological Potential, Maintenance & Restoration of Ecosystem CapitalMaintenance & Restoration of Ecosystem Capital

Total Total Ecological Ecological Potential Potential (terrestrial

ecosystems)

Time t Annual Maintenance


_

=

Annual amortization of

historical degradation

+ =

Annual Consumption of

Ecosystem Capital

(physical index)Additional Additional RestorationRestoration

Target Target Ecological Ecological Potential Potential

t t+n

=

Total Total Ecological Ecological Potential Potential

Time t+1


Change in Total Ecological Potential,Change in Total Ecological Potential, Maintenance & Restoration of Ecosystem CapitalMaintenance & Restoration of Ecosystem Capital

Total Total Ecological Ecological Potential Potential (terrestrial

ecosystems)

Time t Annual Maintenance


_

=

Annual amortization of

historical degradation

+ =

Annual Consumption of

Ecosystem Capital

(money)Additional Additional RestorationRestoration

Target Target Ecological Ecological Potential Potential

t t+n

=

Valuation of maintenanc

e / 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

CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations



Corine land cover map (derived from satellite images)

Green Background Landscape Index (derived from CLC)





CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations


1990

Landscape Ecological Potential 1990-2000, 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 1990-2000

LEP, state and change

CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations


1990Change 1990-2000

LEP, state and change, local scale

Legend

Camargue Regional Park, France

Change in net LEP 1990 to 2000

1 km² grid, range : -100 to +100

Improvement/ Highest : 47

Degradation/ Lowest : -33

Natural Park of Camargue (France)Natural Park of Camargue (France)

CatchmentsExergy


Carbon, Biomass









HealthyPopulations


CatchmentsExergy


Carbon, Biomass









CatchmentsExergy


Carbon, Biomass









HealthyPopulations


HealthyPopulations


Landscape Ecological Potential 1990-2000, 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 costsTop-Down, Collective preferences, Multi-criteria decision

(economic benefits, costs, social values, long term targets…)

Land coverBiomass/CarbonSoilSpecies/populationsWater catchmentsSeaAtmosphere

VigourOrganisationResilienceAutonomySupport to healthy populations

Service nnn Service nnn ????????

Consumption of Ecosystem Capital

Bottom-Up, Individual preferences, Market and Shadow prices, General equilibrium modelling

Ecosystem Stocks & Flows

Ecosystem Health

Land coverBiomass/CarbonSoilSpecies/populationsWater catchmentsSeaAtmosphere

VigourOrganisationResilienceAutonomySupport 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 Service nnn ????????

Ecological TaxEcological Tax

or/andor/and

Value of offset Value of offset certificates (fair use of certificates (fair use of

ecosystems public ecosystems public good) good)

Ecosystem public good protectionEcosystem 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 2012SEEA 2012

FrameworkFramework

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 accountsGlobal scale:

International Conventionsmonitoring

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)

Documents

Jean-Louis Weber – 16 July 2009