The System of Environmental-Economic Accounng (SEEA) Experimental Ecosystem Accounng

1 Introducon support informaon needs and research agendas of aca- demic instuons, non-governmental organizaons, busi- Purpose of this briefing note... nesses and the general public. Increasingly, these stake- The purpose of this briefing note is to describe the emerging holders are confronted with the need to understand how field of ecosystem accounng and its role as a measurement ecosystems are changing and the potenal impacts of those framework for integrang biophysical data, tracking changes changes. in ecosystems and linking those changes to economic and SEEA-Central Framework and SEEA-Experimental Ecosys- other human acvity. The development of ecosystem ac- tem Accounng... counng is a response to a wide range of demands for in- This note summarizes ecosystem accounng as described in tegrated informaon related to analycal and policy frame- detail in the System of Environmental-Economic Account- works on environmental sustainability, human well being, ing 2012 (SEEA) Experimental Ecosystem Accounng. SEEA- and economic growth and development. Experimental Ecosystem Accounng presents a complemen- Policy relevance of ecosystem accounng... tary perspecve on environmental-economic accounng to Increasingly, policies are being considered in a more inte- that contained in the SEEA-Central Framework - the inter- grated, mul-disciplinary fashion with economic, social and naonal stascal standard for environmental-economic ac- environmental factors being assessed in determining appro- counng. priate policy responses. In this regard the integrated struc- Both the SEEA-Central Framework and SEEA-Experimental ture of the ecosystem accounts is of parcular relevance. Ecosystem Accounng use the accounng concepts, struc- Ecosystem accounng can provide a new perspecve that tures and principles of the System of Naonal Accounts can be used to support decisions on the most effecve use of (SNA). Furthermore, both documents extend the account- ecosystems in support of individual and societal well-being. ing approach described in the SNA to account for stocks and Some of the key quesons that may be answered with the flows in physical terms. informaon obtained from ecosystem accounng include: The SEEA-Central Framework starts from the perspecve of • Which ecosystems generate which ecosystem ser- the economy and its economic units (including households) vices? and incorporates relevant environmental informaon con- • What is the extent of the contribuon of ecosystem cerning natural inputs, residual flows and associated envi- services to economic and other human acvity? ronmental assets. In contrast, SEEA-Experimental Ecosys- • Which ecosystems are in the best condion and which tem Accounng starts from the perspecve of ecosystems are the most degraded? and links ecosystems to economic and other human acv- • What changes have occurred over me and what has ity. Together, the approaches provide the potenal to de- been the impact on the generaon of ecosystem ser- scribe in a complete manner the relaonship between the vices? environment, and economic and other human acvity. • What monetary values might be aached to ecosys- Aim of SEEA-Experimental Ecosystem Accounng... tems? SEEA-Experimental Ecosystem Accounng reflects a synthe- sis of the current knowledge in this area and can provide a Along with the data compiled, a number of indicators (e.g. starng point for the development of ecosystem accounng biomass index, species richness, net carbon balance etc.) at naonal or sub-naonal levels. While SEEA-Experimental can be derived from the accounng structure described in Ecosystem Accounng does not give precise instrucons on this briefing note. Potenal users of the indicators and as- how to compile ecosystem accounts, it represents a strong sociated data include ministries of environment, natural re- and clear convergence across the disciplines of ecology, eco- sources, water, agriculture, health, transport, public safety, nomics and stascs on many core aspects related to the industry and finance, as well as regional and local gov- measurement of ecosystems. Thus there is a strong base on ernment decision-makers. Ecosystem accounng may also which further research and development can build.

1 Box 1: Case Study of ecoMarkets in Victoria, Australia

EcoMarkets is a term used to describe a range of market based approaches that the Victorian Government in Australia uses to address landscape decline and improve the health of the environment. The ecoMarkets program supports wetland, river, coastal, woodland, grassland and mulple outcome conservaon aucons all across Victoria. In the last five years over 5,000 privately-owned ecosystem assets have been assessed and over AUD 20 million has been invested in works to maintain and increase the supply of ecosystem services. To ensure that environmental investments are based on the best available data and modelling, EnSym (Environmental Systems Modelling Plaorm) is used by the ecoMarkets team. EnSym employs landscape modelling techniques to idenfy important assets and the ecosystem services they can provide. This detailed knowledge (100m by 100m grid over Victoria) of the unique aspects of any parcular locaon in the landscape allows predicon of both the catchment and paddock scale impacts of any land management acon or group of acons. EnSym provides an integrated plaorm to assess changes in the stock of ecosystem assets and changes in ecosystem services being provided by those assets. This enables environmental accounts to be constructed for Victoria, providing decision makers with informaon required to develop effecve policy and assess tradeoffs between the supply of alter- nave ecosystem services. EnSym’s ecosystem accounng funconality makes it possible for environmental managers to report on ecosystem asset coverage and the changes in ecosystem services that are expected to occur or that have occurred as a result of environ- mental investments. For example, the table below presents the expected outcomes of the West Gippsland EcoTender that result from AUD 2.5 million of landholder payments, measured using the ecoMarkets Environmental Benefits Index. The table shows there will be an 11% increase in terrestrial ecosystem services, 17% increase in river ecosystem services and 10% increase in wetland ecosystem services as a result of acons undertaken by landholders on the ecosystem assets included in EcoTender. The ecoMarkets program will connue to trial ecosystem accounts that are consistent with internaonal systems. It will establish clear standards for reporng on the quality and value of ecosystem assets and for recording and explaining changes over me. Importantly, this work will improve the links between environmental policy and the manner in which resources are allocated to environmental acvies.

Change in Environmental Benefits Index (EBI) for parcipang sites in the West Gippsland EcoTender Terrestrial ecosystems River ecosystems Wetland ecosystems Opening EBI 61,769.5 22,919.7 2,381.6 Addions to EBI-Growth in ecosystem services 7,130.1 3,837.6 241.2 Reducon in EBI-Unmanaged natural degradaon -141.4 -51.7 -0.0 Closing EBI 68,785.2 26,705.6 2,622.6 % change 11% 17% 10%

Source: Department of Sustainability and Environment, Government of Victoria, Australia

Those with a need or an interest in advancing this work of carbon, water and nutrients through living and non-living are encouraged to use SEEA-Experimental Ecosystem Ac- components of the system. Biodiversity, the variety of ge- counng as a starng point to engage in inter-agency discus- nec material, species, and ecosystems, is an important sions, to assemble a team of experts, to idenfy priories, characterisc that influences and reflects ecosystem oper- and to compile key informaon. It is ancipated that much aon, condion and resilience. progress can result from the use of common concepts and Ecosystems produce the food we eat, the wood we build terms; collaboraon on exisng acvies; the compilaon with and they help purify the water we drink and the air we of coherent data on ecosystems; and the development of breathe. These ecosystem services and many others are of- key indicators. ten considered “free” but measuring changes in the ability of ecosystems to provide them is an important part of under- standing whether our acvies are damaging the capacity of 2 What are ecosystems? ecosystems to provide these services into the future. That is, will future generaons have access to the same levels of Definion of an ecosystem... services that we do? “Ecosystems are a dynamic complex of plant, animal and micro-organism communies and their non-living environ- What cause changes in ecosystems? ment interacng as a funconal unit.”¹ They are systems Ecosystems change as a result of natural processes and be- of interdependent relaonships including such processes as cause of human acons. Key natural processes include the the flow of energy through the food chain and the cycling capture of light, energy and carbon through photosynthesis, ¹Convenon on Biological Diversity (2003)

2 Box 2: Ecosystem Accounng in Europe Simplified ecosystem capital accounts are currently being implemented in Europe by the European Environment Agency in cooperaon with Eurostat as one of the responses to recurrent policy demands in Europe for going “beyond GDP”, accounng for ecosystems and biodiversity (TEEB) or measuring Europe’s resource efficiency. Preliminary results are expected by end 2012. The objecve is to measure the ecosystem resources that are accessible without degradaon, the actual intensity of use of these resources, ecosystems’ capability to deliver services over me, and esmate consumpon of ecosystem capital and the value of parcular ecosystem services.

In the simplified model, ecosystem capital analycal and reporng units at whatever scale are described with 3 accounts for biomass/carbon, water and landscapes (and similarly rivers and seascapes). In physical accounts, measurements are firstly made in basic units (tons, joules, m3 or ha) and then converted to a special composite currency-equivalent called ‘Ecosystem Capability Unit’. The price of one physical unit (e.g. 1 ton of biomass) in this currency-equivalent expresses at the same me the intensity of basic resource use (below or above the maximum sustainable yield) and direct and indirect impacts on ecosystem condion (e.g. contaminaon, fragmentaon or biodiversity loss). Loss of ecosystem capability is a measurement of ecological debts, and gains of ecological credits. To territorial debts are added the non-paid consumpon of ecosystem capital embedded into internaonal transacons. Ecological debts in Ecosystem Capability Unit’ (and symmetrically credits when enhancements are verified) could be incorporated into porolios of financial instruments. http://www.eea.europa.eu/publications/an-experimental-framework-for-ecosystem

Ecosystem capital accounts are compiled on currently available data from Earth observaon by satellite and in situ monitoring and on socioeconomic stascs. They cover all ecosystems types (forests, wetlands, agricultural and urban systems, sea ...) of the European Union 27 countries. The results are reported by watersheds or administrave regions, but most data are collected or disaggregated according to the European standard grid of 1 km x 1 km. This geographic detail is necessary on the one hand to detect ecosystem degradaon areas within reporng regions and understand the processes at work and, on the other hand to arculate programs of naonal, regional or local iniave with the European level assessment. In a second step, physical accounts of ecosystem assets will be extended to the monetary esmaon of consumpon ecosystem capital based on remediaon costs. Selected ecosystem services will be valued on an ad hoc basis.

Source: European Environment Agency the transfer of carbon and energy through food webs, and • its funcons (e.g. recycling of nutrients in an ecosys- the release of nutrients and carbon through decomposion. tem, primary producvity). More widespread natural changes also occur such as re- Key characteriscs of its locaon are: covery aer major disturbances including for example fire, floods and storms. • its extent; • its configuraon (i.e. the way in which the various Tradionally, ecosystems have been associated with more or components are arranged and organised within the less ‘natural’ systems, i.e. systems with, at most, a limited ecosystem); degree of human influence. However, human acvies in- • the landscape forms (e.g. mountain regions, coastal fluence every ecosystem in the world, either through direct areas) within which the ecosystem is located; and management (agriculture, forestry, urbanizaon, construc- • the climate and associated seasonal paerns. on of transportaon and energy corridors) or indirectly by releasing pollutants, overharvesng and introducing inva- Ecosystem characteriscs also relate strongly to biodiversity sive species. For this reason, ecosystem accounng encom- at a number of levels. In addion, ecosystems are intercon- passes all ecosystems including managed areas such as agri- nected and are subject to processes that operate over vary- cultural land which are ecosystems providing parcular ser- ing me scales. vices (e.g. crop producon, carbon sequestraon, support- ing tourism and recreaon). Ecosystem characteriscs... 3 Ecosystem accounng Assessment of ecosystems should consider key characteris- Why apply accounng approach to ecosystems? cs. Key characteriscs of the operaon of an ecosystem Accounng approaches are designed to integrate informa- are: on on stocks, changes in stocks and related flows of ser- • its structure (e.g. the food web within the ecosystem); vices and benefits to provide a coherent picture of trends • its composion, including living (e.g. flora and fauna) in systems. The standard economic accounts provide an in- and non-living (e.g. soil, water) components; tegrated and coherent set of informaon on the economic system. Ecosystem accounng provides a picture of trends • its processes (e.g. photosynthesis, decomposion); in ecosystems through integraon of informaon on stocks and

3 and changes in stocks of ecosystem assets, and informa- • Idenfy key informaon requirements and informa- on on flows of ecosystem services. Through applicaon of on gaps. consistent principles and convenons, ecosystem account- ing provide a tool for compiling informaon on environmen- To support this integraon, ecosystem accounng involves tal changes and linking these changes to economic and other the merging of informaon from the physical sciences with human acvity. informaon on the economy and other human acvity Ecosystem accounng integraon... within accounng structures. The informaon requirements The connecon between ecosystem assets and ecosystem for ecosystem accounng are necessarily mul-disciplinary services lies in the concept that ecosystem services are gen- and build on a number of areas such as ecology, economics, erated from ecosystem assets and that the potenal for geomacs, geography, social science and stascs. An ac- ecosystem services to be generated into the future is linked counng approach with its concepts, rules and classifica- to changes in the condion and extent of ecosystem as- ons provides an appropriate way of integrang such di- sets. The strength of applying such an accounng structure verse informaon. is that the informaon on stocks and flows can be integrated Relevance of ecosystem accounng... with informaon contained in economic accounts. This is re- The general movaon for the development of SEEA- flected in the ability of ecosystem accounng approaches to: Experimental Ecosystem Accounng is the understanding • Organize informaon on ecosystems in a coherent that economic and other human acvity are contribung to manner by developing conceptual linkages between the degradaon of ecosystems. Consequently, there is a re- ecosystem assets and services; duced capacity for ecosystems to connue to provide the • Consistently apply a common set of concepts, termi- services upon which economic and other human acvity de- nology, standards and classificaons; pends. • Enable connecons to be made to environmen- In this context ecosystem accounng responds to a wide tal/economic informaon compiled following the range of evolving demands for integrang informaon re- SEEA-Central Framework; lated to environmental sustainability and human well-being. • Permit integraon with the standard naonal ac- Ecosystem accounng aims to support analysis for policy in counts (as described in the System of Naonal Ac- the broad area of sustainable development, and also in ar- counts) to aid the measurement of the producon and eas such as landscape management, resource efficiency and consumpon of ecosystem services, the aribuon of energy use, water supply and use, conservaon and bio- the degradaon of ecosystems to economic acvity diversity, environmental technologies, waste management, and the recording of expenditure by economic units climate change, health and security (in terms of protecon on the maintenance and restoraon of ecosystems; from natural hazards or connued supply). and

Box 3: Canada’s MEGS (Measuring Ecosystem Goods and Services) Project In 2011, Stascs Canada received federal funding to develop prototype ecosystem accounts with the specific objecve of filling policy needs related to the valuaon of ecosystem goods and services. The project, MEGS, is developing the stascal infrastructure, consolidang exisng data and building knowledge across the partner federal departments and agencies: Environment Canada, Natural Resources Canada, Agriculture and Agri-food Canada, Fisheries and Oceans Canada and Parks Canada. Stascs Canada also serves as the hub for a government-wide virtual community of pracce and as the link with the internaonal stascal community on ecosystem accounng.

The results from the MEGS project will be published by Stascs Canada in fall 2013. The publicaon will focus on ecosystem accounng concepts, on examples of naonal ecosystem accounts, as well as on the results of the case studies. The publicaon will include: • Naonal-level land cover maps and land cover change matrix; • Experimental naonal indicators of ecosystem quality (net landscape ecological potenal); • Naonal wetlands indicators (such as populaon contribung to phosphorous loads and populaon receiving ben- efits from wetland services); • Naonal coastal ecumene; • Case studies on wetlands, protected areas and coastal zones. The publicaon will demonstrate the results of the praccal applicaon of ecosystem accounng principles to a large country, and evaluate the extent, quality and value of ecosystem goods and services, and other ecosystem accounng principles, by looking at local case studies.

Source: Stascs Canada

4 Box 4: UK’s experience of ecosystem accounng The UK Government has made a commitment to fully include the value of natural capital and ecosystems into the UK Environmental Accounts by 2020, building on the results of the recent Naonal Ecosystem Assessment. As part of the process, the UK published a consultaon paper in July 2012 which set out the raonale for the accounts, provided a tentave outline metable of development work, and sought views on the scope of the accounts and relave priories for their development.

The consultaon, which was completed in September 2012, was followed up by a stakeholder workshop in October to discuss the priories and scope of a roadmap which will provide a more detailed metable for the development of the accounts. The roadmap is to be published in December 2012. The workshop confirmed the importance of parcular ecosystems and ecosystem services, endorsed the proposal to develop an overarching “top-down” esmate of the value of the naon’s environmental capital, and idenfied the potenal value of cross-cung accounts such as those for carbon and water.

In addion to consulng on the roadmap, the UK has made the following progress in this area:

• Established good links with the Natural Capital Commiee, which advises the government on the state of natural capital in England; • Commissioned new research through the Naonal Ecosystems Assessment follow-up; • Started work on a pilot woodlands ecosystem account; • Draed an issues paper on the development of an account for enclosed farmland; • Started planning work on the “top-down” esmates of natural capital.

Source: Office of Naonal Stascs, United Kingdom. Consultaon paper can be downloaded at: http://www.ons.gov.uk/ons/about-ons/user-engagement/consultations-and-surveys/ archived-consultations/2012/accounting-for-the-value-of-nature-in-the-uk/index.html

The structural links between ecosystem accounng and the Each BSU is a mutually exclusive area that can be aributed standard economic accounts of the SNA make it possible to with a basic set of informaon, at a minimum the loca- evaluate the extent to which ecosystems are impacted by on of the unit and its land cover. Addional informaon economic acvity and assess the potenal for alternave can be added depending on the purpose of the account paerns of consumpon and producon, alternave uses being compiled. This may include soil type, groundwater of energy and the extent of decoupling of growth, the effec- resources, elevaon and topography, climate and rainfall, veness of resources spent to restore the environment, and species present and their abundance, the degree of connec- the trade-offs between alternave uses of the environment. on to related areas, current or past land uses, land owner- ship, locaon relave to human selement, and the degree of accessibility to the area by people. A naonal set of BSUs, 4 Key concepts therefore, provides the basis for an ecosystem register, akin to a business register used for economic stascs. Stascal units for ecosystem accounng... While ecosystems can be thought of as areas of forest, tun- Land cover/ecosystem funconal units (LCEU)... dra, lake, stream, grassland, wetland or agricultural land, for An LCEU is defined by areas that sasfy a pre-determined ecosystem accounng purposes, more precise, mutually ex- set of factors relang to the characteriscs and operaon clusive, delineaons of ecosystems in terms of spaal areas of an ecosystem. Examples of these factors include land are required. To this end, SEEA-Experimental Ecosystem Ac- cover type, water resources, climate, altude and soil type. counng proposes a units model, based around spaal ar- A parcular feature is that an LCEU should be able to be eas, to provide a focus for measurement and compilaon. consistently differenated from neighboring LCEUs based The units model consists of three different types of units: on ecosystem characteriscs. Thus, ecological interacons basic spaal units (BSU), land cover/ecosystem funconal within an LCEU should be stronger than between neighbor- units (LCEU) and ecosystem accounng units (EAU). ing LCEUs. Basic spaal units (BSU)... LCEUs would commonly be considered as ecosystems or A BSU is formed by paroning the area of interest (for ex- biomes and will vary in size depending on the situaon in ample a region or country), typically by overlaying a grid on a given country. Thus not all countries will have all types a map of the relevant territory. The BSU should be as small of LCEUs. For the purposes of naonal level ecosystem ac- as possible with the scale being chosen based on available counng it is appropriate to consider only a limited set of informaon and the degree of diversity in the landscape. A LCEU classes. Various studies and reports have used dif- grid, for example, may be the best resoluon of recent satel- ferent classificaons but with commonly understood terms lite imagery for the country, including its freshwater and (e.g. forests, wetlands, grasslands, coastal areas). SEEA- coastal areas. Experimental Ecosystem Accounng proposes a provisional

5 Box 5: The status of environmental and ecosystem accounng in Australia There is considerable acvity in the development of environmental and ecosystem accounng in Australia. The work is building on the exisng research programs in an effort to become operaonal, with some successes in place. The established accounts are characterised by strong cross-agency and research sector engagement. The following are some snapshots of the work and progress to date. Compleng the Picture The background work and, ulmately, the adopon of the SEEA-Central Framework as an in- ternaonal standard was a catalyst for the Australian Bureau of Stascs to produce the Compleng the Picture pub- licaon. It presents a series of issues and maps them to a set of environmental accounts for water, energy, land cover, CO2 emissions, biodiversity and the value of natural resources to show how accounts can be used for decision- making and policy development in Australia. A reduced version of this will be produced as an annual publicaon. http://www.abs.gov.au/ausstats/[email protected]/mf/4628.0.55.001 Water accounts An asset account, called the Water Account is produced annually by the Bureau of Meteorology. It provides informaon on water stores and flows, water rights and water availability in selected major catchments across Australia. The supply and use of water by industry and households in Australia is also produced annually by the Australian Bureau of Stascs. http://www.bom.gov.au/water/nwa/ and http://www.abs.gov.au/ausstats/[email protected]/mf/4610.0 Naonal Greenhouse Accounts The Department of Climate Change and Energy Efficiency is producing greenhouse gas emission accounts for greenhouse gases to meet Australia’s reporng commitments under the United Naons Framework Convenon on Climate Change (UNFCCC) and track progress against Australia’s target under the Kyoto Protocol as well as inform policy makers and the public. http://www.climatechange.gov.au/en/climate-change/emissions.aspx Regional Environmental Accounng Trials The Wentworth Group of Concerned Sciensts, in collaboraon with ten nat- ural resource management regions, are conducng regional environmental accounng trials to assess contribuons to improved environmental outcomes. The trials are tesng an approach to assessing ecosystem asset condion using an innovave common currency approach that depends on scienfic accreditaon. http://www.wentworthgroup.org/recent-papers Experimental Land and Ecosystem Accounts The Australian Bureau of Stascs with assistance from the Queensland Government has produced accounts for the catchments draining in to the Great Barrier Reef. The Australian Bureau of Stascs with assistance from the Victoria Government is preparing a set of accounts for Victoria. http://www.abs.gov.au/ausstats/[email protected]/mf/4609.0.55.001

An Australian Environmental Accounng Framework The Australian Government has commissioned the development of a conceptual framework to guide the implementaon of environmental and ecosystem accounng into the future. Drawing strongly on the SEEA-Central Framework and Experimental Ecosystem Accounts the Framework is in dra form and undergoing extensive mul-disciplinary and mul-agency expert review. The Framework and the associated Joint Perspecves Model is expected to be released for public comment in early 2013. http://www.bom.gov.au/environment/activities/accounts.shtml Ecosystem services Work on this is advancing at naonal and regional levels. Naonally the Department of Agriculture, Fisheries and Forestry has a discussion paper, while at the regional level work is being advanced in the South East Queens- land Catchment Management Authority. http://www.daff.gov.au/__data/assets/pdf_file/0020/2210591/ecosystem-final-full.pdf Source: Australian Bureau of Meteorology set of LCEU classes based on the FAO Land Cover Classifica- ave homogeneity of the landscape, the size of the region on System (LCCS v3) that is used in the SEEA-Central Frame- or country, and other related factors. Generally, an EAU will work. contain a number of different types of LCEU. Different EAU may be aggregated into larger units, with the largest EAU Ecosystem accounng units (EAU)... being the country level. An EAU should represent a relavely stable area that is rel- evant for analysis and reporng purposes. In delineang an The development of stascal units should be undertaken EAU, consideraon should be given to administrave bound- in concert with the development of Geographic Informaon aries, environmental management areas, large scale natu- Systems (GIS) databases containing ecological informaon ral features (e.g. river basins) and other factors relevant such as soil type and status, water tables, rainfall amount to defining areas for reporng purposes. Overall, EAU are and paern, temperatures, vegetaon, biodiversity, slopes, likely to be large areas about which there is interest in un- altude, etc., as well as, potenally, informaon on land derstanding and managing change over me. management and use, populaon, and social and economic The size of EAU may vary substanally depending on the rel- variables. This informaon will be relevant to the assess-

6 ment of flows of ecosystem services and the condion of at individual and societal well-being, the chain recognizes ecosystem assets. that well-being is influenced by the receipt of benefits. In the context of ecosystem accounng, benefits comprise: • The products produced by economic units (e.g. food, 5 General model of stocks and flows water, clothing, shelter, recreaon, etc). These are re- ferred to as material (or SNA) benefits with the mea- As with all accounng systems, ecosystem accounng is surement boundary defined by the producon bound- founded on relaonships between stocks and flows. In ary used to measure GDP. This includes benefits pro- SEEA-Experimental Ecosystem Accounng, the stocks are duced by households for their own consumpon; represented by spaal areas each comprising an ecosystem asset. Each ecosystem asset has a range of characteriscs • The benefits that accrue to individuals that are not – such as land cover, biodiversity, soil type, altude and produced by economic units (e.g. clean air and wa- slope, etc – which describe the operaon and locaon of ter). These benefits are referred to as non-material (or the ecosystem. non-SNA) benefits reflecng that the receipt of these benefits by individuals is not the result of an eco- Types of flows... nomic producon process defined within the SNA. A The flows in SEEA-Experimental Ecosystem Accounng are disnguishing characterisc between these two types of two types. First, there are flows within and between of benefits is that, in general, material benefits can ecosystem assets that reflect ongoing ecosystem processes be bought and sold on markets whereas non-material – these are referred to as intra-ecosystem flows and inter- benefits cannot. ecosystem flows. The recognion of inter-ecosystem flows highlights the dependencies between different ecosystem assets (e.g. wetlands are dependent on flows of water from Ecosystem services... further up the river basin). Ecosystem services are the contribuons of ecosystems to benefits used in economic and other human acvity. This Second, there are flows reflecng that people, through eco- definion excludes some flows that are oen considered nomic and other human acvity, take advantage of the ecosystem services in other contexts, in parcular intra- and multude of resources and processes that are generated inter- ecosystem flows that relate to ongoing ecosystem pro- by ecosystem assets – collecvely these flows are known cesses, commonly referred to as supporng services. While as ecosystem services. Ecosystem services are generated these flows are not considered ecosystem services, they are from the combinaon of ecosystem characteriscs, intra- considered as part of the measurement of ecosystem assets. ecosystem flows and inter-ecosystem flows. Figure 1 depicts The focus in SEEA-Experimental Ecosystem Accounng is on a general model of the relaonships between the stocks and “final” ecosystem services, that is those resources and pro- flows described in ecosystem accounng. cesses of an ecosystem that contribute directly to benefits. Ecosystem benefits... It is these final services that have a direct link to the econ- The model shown in Figure 1 can be seen as a “chain” linking omy and other human acvity since they are oen bought individual and societal well-being, benefits, ecosystem ser- and sold on the market: food crops, mber, fish and clean vices, ecosystem processes and ecosystem assets. Starng water, or they are consumed directly by people.

Figure 1: General model of flows related to ecosystem services

7 A classificaon of ecosystem services is important for organ- range of different baskets of ecosystem services depending ising and comparing informaon on ecosystems. A Common on choices made in the course of economic and other hu- Internaonal Classificaon of Ecosystem Services (CICES) is man acvity. At the same me, depending on the ecosys- under development to provide consistent categories for use tem condion and extent, an ecosystem asset may not have in ecosystem accounng. At the highest level, the proposed the same capacity to generate different baskets, i.e. some CICES hierarchical structure recognizes three broad cate- baskets of ecosystem services may be generated over longer gories: me periods than others.

• Provisioning services (water, materials, energy and The relaonship between these two perspecves is not sim- other provisioning services); ple; rather it is likely to be non-linear and variable over me. • Regulang services (remediaon and regulaon of Consequently, a variety of measures of ecosystem assets is biophysical environment, flow regulaon, regulaon needed for a complete assessment. of physico-chemical environment, regulaon of bioc environment); and Ecosystem condion... • Cultural services (physical or experienal use of Ecosystem condion reflects the overall quality of an ecosys- ecosystems, intellectual representaons of ecosys- tem asset. The assessment of ecosystem condion involves tems). two disnct stages of measurement with reference to both Ecosystem assets... the quanty and quality aspects of the characteriscs of the Ecosystem assets are spaal areas containing a combinaon ecosystem asset. In the first stage, scienfic research should of bioc and abioc components and other characteriscs guide the selecon of characteriscs and associated indica- that funcon together. Ecosystem assets are measured from tors of change that permit assessment of the ongoing func- two perspecves. First, ecosystem assets are considered in onality and integrity of the ecosystem asset. The selecon terms of ecosystem condion and ecosystem extent. Sec- of characteriscs and indicators should be made on scien- ond, ecosystem assets are considered in terms of ecosystem fic basis such that there is assessment of the ongoing func- services. A parcular combinaon or ”basket” of ecosystem onality and integrity of the ecosystem asset. services will be generated at a parcular point in me from Measures of ecosystem condion are generally compiled in a specific ecosystem asset. The aggregaon of all future relaon to key ecosystem characteriscs (e.g. water, soil, ecosystem services for a given basket provides, at a point carbon, vegetaon, biodiversity) and the choice of charac- in me, an esmated stock of expected ecosystem service teriscs will generally vary depending on the type of ecosys- flows. tem asset. Further, the selecon of characteriscs should In general terms, the capacity of an ecosystem asset to gen- take into account current and expected future uses of the erate a basket of ecosystem services can be understood as a ecosystem, (e.g. for agriculture, forestry, carbon sequestra- funcon of the condion and the extent of that ecosystem. on, recreaon, etc) since these uses are likely to impact An ecosystem asset may have the potenal to generate a most directly on certain characteriscs and hence on the

Table 1: CICES for the SEEA-Experimental Ecosystem Accounts Secon(1-digit) Division(2-digit) Group(3-digit) Water Water Unculvated terrestrial plants and animals for food Unculvated freshwater plants and animals for food Unculvated marine plants, algae and animals for food Materials Nutrients and natural feed for culvated biological resources Provisioning Plant and animal fibres and structures Chemicals from plants and animals Genec materials Energy Biomass based energy Other provisioning services Other provisioning services, n.e.c. Bioremediaon Remediaon and regulaon of biophysical environment Diluon, filtraon and sequestraon of pollutants Air flow regulaon Flow regulaon Water flow regulaon Mass flow regulaon Regulang Atmospheric regulaon Water cycle regulaon Regulaon of physico-chemical environment Pedogenesis and soil cycle regulaon Noise regulaon Lifecycle maintenance, habitat and gene pool protecon Regulaon of bioc environment Pest and disease control (incl. invasive alien species) Physical or experienal use of ecosystems Non-extracve recreaon [environmental seng] Informaon and knowledge Cultural Intellectual representaons of ecosystems Spiritual and symbolic [of environmental sengs] Non-use

8 Box 6: The Wageningen University ‘Ecospace’ Project in Indonesia, Netherlands and Norway The objecve of this project is to test and develop new spaal methods for the physical and monetary analysis of ecosys- tem service flows and assets, on a provincial scale. The project follows the overall principles of ecosystem accounng and is implemented in three provinces in Indonesia, the Netherlands and Norway, with collaborang partners in both Norway and Indonesia. The project started on 1 November 2010 and will lead to a series of publicaons in 2013 and 2014. The project is funded by the European Research Council (G. Ag. 263027). The project has tested and applied several spaal tools for mapping ecosystem services including Look-up tables, Geostascs (including kriging), Maxent and various spaal regression models. Ecosystem services were analysed with different datasets and methods in order to beer understand the reliability of different mapping approaches.

In Indonesia, Ecospace is implemented in the province of Central Kalimantan (around 154,000 km2), analyzing the services of mber producon, rice producon, raan producon, palm oil producon, carbon sequestraon, carbon storage, eco-tourism, and orangutan habitat. Project collaborators include a number of local and naonal stakeholders including Palangka Raya University, the Provincial and District authories, the Provincial Forest and Planning Agencies, research organisaons and NGOs. Data are collected from a wide range of sources including scienfic literature and informaon from the various stakeholders, and results of the project are frequently shared with these stakeholders.

Currently, services have been analysed in physical terms (see fig. below for example). The highest carbon values are found in the peatlands. Based on collected data, ecosystem asset maps and monetary value maps are being prepared. Timber producon (le panel) and Carbon Storage (including above and below ground, and soil carbon; right panel)

Source: The Wageningen University ‘Ecospace’ Project overall condion and capacity of the ecosystem asset to gen- based on an expected basket of provisioning, regulang and erate alternave baskets of ecosystem services. Usually, cultural services from an ecosystem asset. Generally, for ac- there will not be a single indicator for assessing the quality counng purposes the basket of ecosystem services would of a single characterisc. be based on current paerns of use.

In the second stage, the indicators are related to a common Because the generaon of some ecosystem services involves reference condion. There are a number of conceptual al- the extracon and harvest of resources, and since ecosys- ternaves to determine a reference condion. The use of tems have the potenal to regenerate, it is necessary to form a common reference condion for all indicators within an expectaons on the amount of extracon and the amount of ecosystem may allow an overall assessment of the condion regeneraon that will take place, and on the overall sustain- of the ecosystem asset. ability of human acvity in the ecosystem. To form these ex- Ecosystem extent... pectaons informaon concerning likely changes in ecosys- Ecosystem extent reflects the size of an ecosystem as- tem condion is required. set, generally considered in terms of area, e.g. hectares. Measuring degradaon and enhancement... Changes in the mix of different land cover within a de- Measures of ecosystem condion and extent, and measures fined spaal area may be important indicators of changes of expected ecosystem services flows are all stock measures in ecosystem assets. at a point of me. In accounng, they are most commonly Expected ecosystem service flows... measured at the beginning and end of the accounng pe- Expected ecosystem service flow is a measure of all future riod. Oen however, there is greater interest in measuring ecosystem service flows from an ecosystem asset for a given changes in ecosystem assets, parcularly ecosystem degra- basket of ecosystem services. The expected flows must be daon and ecosystem enhancement.

9 Box 7: Mean species abundance as a generic metric of biodiversity in the SEEA-Experimental Ecosystem Accounng Biodiversity is a broad and complex concept that oen leads to misunderstandings. According to the Convenon on Biological Diversity (CBD), biodiversity encompasses the overall variety found in the living world and includes the variaon in genes, species and ecosystems. For the purpose of SEEA Experimental Ecosystem Accounng the focus is on species, considering the variety of plant and animal species in a certain area and their populaon sizes. Populaon size is the number of individuals per species, generally expressed as the abundance of a species or briefly “species abundance”.

The various nature types or “biomes” in the world vary greatly in the number of species, their species composion and their species abundance. A tropical rain forest is different from a tundra or dal mudflat. The current loss of biodiversity is one of the unintended consequences of increased human acvity. The process of biodiversity loss is generally characterised by the decrease in abundance of many original species and the increase in abundance of a few other opportunisc species.

The decrease in abundance for a species might lead to exncons which is just the last step in a long degradaon process. Countless local exncons (“exrpaons”) precede the potenally final global exncon. As a result, many different ecosystem types are becoming more and more alike, the so-called homogenisaon process. Decreasing populaons are as much a signal of biodiversity loss as highly expanding species, which may somemes even become plagues in terms of invasions and infestaons (figure below shows this process from le to right).

Process of biodiversity homogenisaon expressed by the MSA indicator

Note: The change in the abundance of original species (a-z) compared to the baseline state (as %) in an undisturbed ecosystem (le), intermediate (middle) and highly disturbed ecosystem (right). As a result, the mean species abundance decreases from 100% to 80% and 30%, respecvely.

Unl recently, it was difficult to measure the process of biodiversity loss. “Species richness” appeared to be an insufficient indicator. First, it is hard to monitor the number of species in an area, but more important it may somemes increase as original species are gradually replaced by new human-favoured species, the so called ‘intermediate disturbance diversity peak’. Consequently the CBD (VII/30) has chosen a limited set of indicators for use, including the “change in abundance and distribuon of selected species”, to track this degradaon process. This indicator can be measured and modeled with relave ease, and is applicable on every scale and for every ecosystem.

The state and trends in biodiversity can be calculated in terms of the mean species abundance of the original species (MSA) compared to the natural or low-impacted state. If the indicator is 100%, the species populaons have a similar size as the natural or low-impacted state. If the indicator is 50%, the average abundance of the original species is 50% of the natural or low-impacted state and so on. To avoid masking, significant increased populaons of original species are truncated at 100%, although they should actually have a negave score. Exoc or invasive species are not part of the indicator, but their impact is represented by the decrease in the abundance of the original species they replace. The mean species abundance (MSA) of a country is the area weighted mean of the MSA values of the underlying constuent ecosystem types, in which each square kilometer is equally weighted. (Connues on the next page)

10 Box 7: Mean species abundance as a generic metric of biodiversity in the SEEA Experimental Ecosystem Accounng (cont.) MSA can be calculated for any scale: basic spaal unit, ecosystem accounng unit, a biome, country or the whole world. It can be monitored, but in case of lack of monitoring data it can be simply and cheaply modeled instead. MSA has been applied in various countries and various regional and global assessments such as those from UNEP, OECD and the CBD (more details can be found at www.globio.info). The Living Planet Index, Biodiversity Intactness Index, the Natural Capital Index and the Nature Index are basically the same. Photographic impression of mean species abundance indicator

Note: Visual impression of the mean species abundance scale for forest and grassland in different stages of disturbance (100% - 0%).

Source: PBL Netherlands Environmental Assessment Agency

A key indicator of change in ecosystem assets is ecosystem 6 Physical and monetary measures degradaon which is the decline in an ecosystem asset over an accounng period. Generally it will be reflected in de- The accounng framework described in SEEA-Experimental clines in ecosystem condion and/or declines in expected Ecosystem Accounng provides means of organizing infor- ecosystem service flows. Ecosystem enhancement is the im- maon in both physical and monetary terms. Informaon provement in an ecosystem asset that is due to economic in physical terms includes data recorded in physical units of and other human acvity and reflects acvies to restore measure (hectares, kilograms, liters, parts per million, etc.) or remediate an ecosystem asset beyond acvies that may as well as data relang to experienal services (e.g. num- simply maintain an ecosystem asset. Following the logic ber of visitors to a cultural site). In this regard the expres- of the asset accounts described in the SEEA-Central Frame- sion “physical terms” is used to refer to informaon that is work, accounng entries may be defined which reflect the recorded in non-monetary terms. different changes to ecosystem assets over the course of an accounng period. Physical measures... The scope of informaon that may be included in physi- Human intervenon in ecosystems can have small or large cal terms is very broad. While the accounng approach is impacts on ecosystem assets. Minor changes may occur, for suitable to organize this informaon, because the separate example, if trees are selecvely harvested from a forest. Hu- pieces of informaon are in different measurement units, man intervenon may also lead to an ecosystem changing the aggregaon of informaon is a challenging exercise. A completely (e.g. from forest to agricultural land as a result number of approaches to aggregaon have been developed, of land clearing). On the other hand, human intervenon including the use of common ”currencies” (e.g. hectares) may improve ecosystem assets by restoring ecosystem func- and composite indexes, but all require the use of assump- ons through conservaon and protecon acvity. These ons concerning the relave importance of different indi- different changes should be disnguished within an ecosys- cators. Further research is needed to develop and test the tem asset account. relevant methods and assumpons.

11 Monetary measures... • For ecologists, this requires creang clear disnc- SEEA-Experimental Ecosystem Accounng also discusses the ons between ecosystem assets and ecosystem ser- esmaon of accounng measures in monetary terms. This vice flows and to differenate between those aspects requires the valuaon of ecosystem services and ecosys- of ecosystems that provide direct benefits to eco- tem assets. Since ecosystem services and ecosystem assets nomic and other human acvity and those aspects of are not typically traded on markets, observed prices cannot ecosystems that, effecvely, support the provision of be used to measure these assets and services as in stan- these benefits. dard economic accounng. This is true even where there • For economists, it is necessary to consider their con- are monetary transacons associated with the benefits ob- ceptual models concerning the links between ecosys- tained from the use of ecosystem services. For example, the tems and the economy in a strict accounng sense, value of sales of landed fish cannot be used directly to es- and to consider the complexies of integrang new mate the value of ecosystem services since it incorporates measures of ecosystem assets and services with tra- the contribuons (as input costs) of labour and produced dional economic measures. assets of the fishing acvies, in addion to the contribu- • For naonal accountants, it is necessary to consider on of the ecosystem services such as primary producon, the set of goods and services produced and con- habitat availability and the growth of the fish themselves. sumed in the context of the set of benefits provided by Valuaon... ecosystems and also to see the ecosystem as a com- Ecosystem accounng therefore requires the use of various plex, self-regulang system that, while influenced by approaches to valuing non-monetary transacons. Many economic acvity, also operates outside of tradional such approaches have been developed. However, oen the economic management regimes. use of these approaches does not recognise the disncon Central to the successful advancement of ecosystem ac- between welfare values (which are relevant in the context of counng is the involvement of a wide range of professional assessing public policy opons) and exchange values (that communies, since a single agency or organizaon cannot are required for accounng purposes). Since the focus of effecvely cover all of the informaon requirements for a ecosystem accounng is generally on integraon with the set of ecosystem accounts. This is parcularly the case for standard economic accounts, it is important that the valua- the range of biophysical informaon which may be localized on approaches that are used reflect exchange values. in specific instuons. Generally, it is necessary to be specific about the purpose Consequently, the development and tesng of ecosystem and scope of valuaon. There are also important consid- accounng will require the involvement of mulple dis- eraons regarding the valuaon of ecosystem services and ciplines across agencies. The types of agencies that are ecosystem assets that should be recognised before devel- likely to be involved include naonal stascal offices (NSO); oping ecosystem accounng in monetary terms. For exam- government scienfic and meteorological agencies; depart- ple, the valuaon of different ecosystem services may re- ments of environment, agriculture, forestry and fishing; and quire the use of different approaches; it may be difficult to government geographical and geo-spaal informaon agen- aggregate from site specific values to ecosystem wide es- cies. The establishment of appropriate instuonal co- mates; and there are likely to be various uncertaines con- ordinaon and management arrangements is essenal if the cerning the dynamics of ecosystems and future flows. How work is to be rounely implemented. Further, given the to value ecosystem assets and ecosystem services in a robust emerging presence of ecosystem accounng, there is strong way that is consistent with naonal accounng valuaons is potenal to harness the research capability of academia to a significant issue for future research in ecosystem account- develop and test aspects of proposed ecosystem accounng ing. framework. Combined presentaons... Parcular note is made of the potenal role of NSOs in sup- One approach to considering informaon on ecosystems porng efforts in ecosystem accounng. Their tradional in physical terms and economic informaon in monetary skills in organizing large, diverse and complex data sets, us- terms is the development of combined presentaons. These ing standard definions and classificaons, providing coher- presentaons use consistent approaches to classificaon to ent naonal-level pictures, and applying data quality stan- show informaon in physical and monetary terms at the dards, are all significant, complementary skills that are rele- same me. An example of a combined presentaon is vant in ecosystem accounng. one comparing expenditures on environmental protecon in monetary terms and changes in ecosystem condion in Sciensts, economists and stascians will connue to physical terms. improve their understanding of how ecosystems funcon and how analycal and measurement techniques may be 7 The way forward adapted. The synthesis of current knowledge presented in SEEA Experimental Ecosystem Accounng aims to support Instuonal arrangements... the ongoing improvement in understanding and contribute Placing ecosystems in an accounng context that can be in- to the integraon of informaon on ecosystems into deci- tegrated with economic accounts requires the central dis- sion making processes. ciplines – ecology, economics and naonal accounng – to consider measurement in new ways. For further informaon on this note, contact [email protected].

12