E-learning tool Ecosystem Accounting

Applications of SEEA Ecosystem accounting

Monitoring the status of natural capital

• Is the use sustainable?

  Measuring sustainability is complex, and there are several sustainability paradigms (very weak, weak, strong, very strong) that imply a different level of substitutability between different types of (natural and other) capital. SEEA Ecosystem accounting does not imply a preference for a certain type of sustainability. Different sustainability indicators (such as biophysical indicators reflecting the condition of ecosystems, the area covered by different natural ecosystem types, or the aggregated monetary value of ecosystem assets, measured based on exchange values) are included in the Ecosystem accounts. The Ecosystem accounts also allow measuring indicators for the Sustainable Development Goals (SDGs). For further reading on how SEEA EA connects to the SDGs, see here: seea_and_sdgs_one.pdf (un.org)
  
• Where are the key threats to sustainable ecosystem management?

  The Ecosystem accounts, when produced for multiple years, show how ecosystem changes including:
  

  1. changes in the area covered by ecosystem (e.g., the accounts would show if specific, threatened ecosystem types decrease in area over time;
  2. changes in the condition of ecosystems (e.g., the accounts show if ecosystems degrade over time, for instance if average standing biomass in forests would decline, or if water quality would deteriorate) – of course, the comprehensiveness of the condition accounts determines how many indicators would be shown;
  3. changes in the supply of ecosystem services over time. The Ecosystem accounts show for which services supply increases, or decreases over time. Note that these changes may reflects two aspects:
     (a) increased or decreased intensity of use of ecosystems; and/or:
     (b) a decreased capacity of ecosystems to supply services. Such a decrease in capacity would show up through a deterioration of ecosystem condition in the Ecosystem condition account. For further reading see, Defining Ecosystem Assets for Natural Capital Accounting | PLOS ONE

Analysing dependency of the economy on ecosystems:

• Which sectors use natural capital?

  The Ecosystem services use account shows with sectors or economic activities use natural capital. Conform the SNA, the use is generally differentiated in final consumption by households, the government, or by different industries (e.g. primary industries such as the forestry sector) (economic activities are classified following the international ISIC classification, seriesm_4rev4e.pdf (un.org)
• How many jobs depend upon natural capital?.

  This information cannot be directly derived form the Ecosystem accounts, but since the accounts are linked to the System of National Accounts (see: url: System of National Accounts), such analysis can easily be done. However, it needs to be analysed what would happen with employment in a sector if the ecosystem service would be lost: would all jobs be lost? Or would there be substitutes for the ecosystem service? For instance, if forests in a country would lose their capacity to provide timber, this would mean that all jobs in the primary forestry sector would be lost. However, the furniture factories may be able to continue production with imported wood, depending upon the availability and price of the imported wood.
  
• What is the value of the contribution of natural capital to the economy?.

  This is a critical aspect of Ecosystem accounting: what do the monetary values in ecosystem accounting mean? They do NOT represent the economic value, or the welfare value of ecosystems. The full welfare value of all ecosystems on the planet is best approximated by infinity: without ecosystems people wouldn’t be able to breath, drink or eat. However, Ecosystem accounting uses marginal values for the establishment of exchange values (as do the national accounts). Furthermore, the accounts do not measure welfare but use the concept of exchange values. These exchange values represent the contribution of ecosystem services and assets to the economy, as measured with the current economic pricing system. To provide an example: if water resources are valued based on current water prices (and no alternative sources of water exist locally), the exchange value could severely underestimate the welfare value of water, i.e. the costs that would incur to society if water were to be lost. One way the Ecosystem accounts deal with this is by not using market prices but using the replacement cost valuation method, where a service is valued based on the costs it would need to replace it. However, market prices are preferentially used in ecosystem accounting (as in the national accounts) and the values in the ecosystem accounts do therefore not reflect the ‘true’ or welfare value of ecosystems and the service they provide.
• Where can the use of natural capital be increased, in a sustainable manner?

  For instance, the Netherlands ecosystem accounts show that only around one third of the mean annual increment in Dutch forests is harvested. It can be examined if there are possibilities to increase wood harvest without depleting the forest standing stock. Of course, this needs to consider that there are regional differences in mean annual increment and current harvest rates, that wood harvesting is not allowed in protected areas, and that not all increment (e.g. depending upon wood species) is equally suitable for wood harvest.

As a basis for policy scenario analysis

• What are priorities for new policies, from an ecosystem perspective?

  The ecosystem accounts will reveal which ecosystem types are under particular stress (in the Extent account: which ecosystem types show a fast decline in area, in either relative and/or absolute terms; in the Condition account: in which ecosystem types are several condition indicators showing degradation?); or which ecosystem services are being lost due to changes in the landscape (e.g., pollination, for instance due to change in hedgerow density (hedgerows provide a habitat to pollinators), or where do the Ecosystem services accounts show a decline in ecosystem service supply over time.
• What are the benefit and costs of new policies?

  The monetary ecosystem services and asset account are particularly relevant for policy makers, that can often (though not always!) relate easier to monetary rather than physical indicators. The ecosystem accounts inform on the value of ecosystem services provided in a given area, per year, or the net present value of this stream of ecosystem services. This can allow, for example, comparing impacts of development options on ecosystem services, or the monetary benefits of conserving ecosystems. It needs to be considered, though (!), that ecosystem accounts do not present the welfare value of ecosystems, just as GDP doesn’t say very much about welfare. For example, water is priced at the price charged by the drinking water company, not what we are willing to pay for water in case we are thirsty and water supplies run dry. Hence, the monetary values in the ecosystem accounts provide baseline data for valuation, but this information needs to be supplemented with additional data, in particular values related to the consumer surplus derived from transactions/the use of goods and services in order to better understand the welfare value of ecosystem management options. This is why it remains important to consider both the physical and, where available, the monetary numbers in the ecosystem accounts to support decision making.