An experimental framework for ecosystem capital accounting in Europe


Courtesy of European Environment Agency (EEA)

Ecosystem accounts are being developed as part of the System of Environmental-Economic Accounts which aims at supplementing the UN System of National Accounts with information on the environment and natural capital. The purpose is to broaden the scope of the variables taken into account in policymaking in order to improve understanding of the interdependence and interactions between the economy and the environment. Ultimately, these ecosystem accounts will yield new indicators and aggregates expressed in physical and monetary units that will be made available to policymakers and analysts to assess the efficiency of natural resource use, the pattern of economic growth, the contribution of nature and its use within and outside the market, the short- and longer-term constraints resulting from the need to maintain living and other renewable capital, and the related benefits and costs.

At the end of 2009, the European Environment Agency launched an experimental project to implement simplified ecosystem capital accounts for Europe as a 'fast-track' initiative, based on the use of existing data and statistics. In addition to feasibility assessment, the project aims at framing ecosystem accounts and identifying which indicators and aggregates could be delivered and integrated into enlarged national accounts. Based on the project findings, an overall framework for ecosystem capital accounting has been designed. It highlights accounting balances and relationships between accounting tables and systems as well as key indicators and aggregates that describe economy‑ecosystem interactions.

The indicators and aggregates include: the ecosystem resource accessible surplus (which shows the level of resources that can be used without jeopardising ecosystem reproduction functions); the demand for (accessible) ecosystem services per capita, which is a measure of ecosystem contribution to well-being; the total ecosystem capital potential, defined as the biomass accessible under the constraints of maintaining accessibility to water, green landscape infrastructure and biodiversity (and measured in a 'numeraire' referred to as the Ecosystem Potential Unit Equivalent); the Ecosystem Capital Degradation (ECD) which describes domestic ecosystem overuse; Consumption of Ecosystem Capital (CEC, the ecosystem capital depreciation in SNA terminology), calculated as (physical) ECD valued by remediation costs; and the equivalent ECD embedded in imports and exports for commodities produced in unsustainable conditions. As a next stage it is proposed to use CEC to adjust National Accounts aggregates: CEC Adjusted Net Domestic Product or CEC Adjusted Net National Income, Final Consumption at Full Cost (including non‑paid CEC), Imports and Exports at Full Cost. Using this approach, two balance sheets of assets and liabilities are ultimately established, one in physical units, the other in terms of money. The balance sheets of financial liabilities allow, amongst other things, a record to be kept of the amount of ecological debt first in physical units regarding physical degradation and second in monetary units to balance the non-paid consumption of ecosystem capital. Last but not least, recording ecological debts makes it possible to keep the conventional GDP unchanged while supplementing it with appropriate adjusted aggregates.

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