System of Environmental-Economic Accounting Ecosystem Accounting ST/ESA/STAT/SER.F/124 Department of Economic and Social Affairs Statistics Division Statistical Papers Series F No. 124 System of Environmental- Economic Accounting – Ecosystem Accounting United Nations New York, 2024 The designations employed and the presentation of material in this information prod- uct do not imply the expression of any opinion whatsoever on the part of the United Nations, the European Union, Food and Agriculture Organization of the United Nations (FAO), International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations Environment Pro- gramme (UNEP) or the International Bank for Reconstruction and Development/The World Bank, (World Bank) concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its fron- tiers or boundaries. 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ST/ESA/STAT/SER.F/124 United Nations publication Sales No. E.22.XVII.1 ISBN: 978-92-1-259183-4 eISBN: 978-92-1-000093-2 ISBN: 978-92-68-19430-0 [European Union] Catalogue number: KS-02-24-643-EN-N [European Union] ISBN: 78-92-5-139334-5 [FAO] Copyright © 2024 United Nations European Union Food and Agriculture Organization of the United Nations International Monetary Fund Organisation for Economic Co-operation and Development The International Bank for Reconstruction and Development/The World Bank iii Preface There is growing recognition that our economies are embedded within and depend- ent on nature and that nature itself, as our natural capital, should be recognized as an asset to the economy. Further, as the economic and social impacts of the climate and biodiversity crises become more evident, policymakers are increasingly seeking robust measurement that goes beyond gross domestic product (GDP) and integrates envi- ronmental and economic data. The System of Environmental-Economic Accounting (SEEA) is an international statistical standard that supports integrated decision-mak- ing by measuring the interdependence of the economy and the environment. The System of Environmental-Economic Accounting – Ecosystem Accounting (SEEA EA) was adopted by the United Nations Statistical Commission in March 2021 as an international statistical standard for the ecosystem accounting framework and physical ecosystem accounts, and presents internationally recognized statistical prin- ciples and recommendations for the valuation of ecosystem services and assets. The adoption of SEEA EA is a historic step forward towards transforming how nature is viewed and valued. Importantly, environmental degradation will be reflected in bal- ance sheets and can be recognized as a cost in the measurement of economic growth. The new framework will inform national policies related to the environment- economy nexus, as well as provide crucial information to inform international initia- tives and global reporting frameworks, including the Sustainable Development Goals, the Kunming-Montreal Global Biodiversity Framework, the United Nations Decade on Ecosystem Restoration, Beyond GDP, the measurement of land degradation under the United Nations Convention to Combat Desertification, and the measurement of GHG emissions and removals by land use, land use change and forestry (LULUCF) under the United Nations Framework Convention on Climate Change and associ- ated Nationally Determined Contributions (NDC), just to name a few. It is worth not- ing that the monitoring framework for the Kunming-Montreal Global Biodiversity Framework draws directly on SEEA EA for several indicators, including the headline indicators under goals A and B. The road to SEEA EA SEEA EA is the culmination of a decade of work and builds upon the development of environmental accounting methodologies which have been undertaken in earnest since the 1990s. The first SEEA handbook was published as an interim report in 1993, in the wake of the 1992 United Nations Conference on Environment and Develop- ment, held in Rio de Janeiro, Brazil. A revised handbook with greatly expanded scope, based on a wide range of country experiences, was published in 2003. In 2012, the conceptual content of that handbook was standardized, and the Statistical Com- mission adopted the SEEA Central Framework, elevating it to an international statis- tical standard. The SEEA Central Framework constitutes an agreed statistical framework for measuring stocks and flows of environmental assets, such as energy and water, as iv System of Environmental-Economic Accounting – Ecosystem Accounting well as environmentally related transactions and activities, and monetary stocks of environmental assets. However, the scope of the SEEA Central Framework does not include ecosystem services nor does it take into account a range of valuation issues, such as the cost of degradation. In recent years, an important enabling factor towards the development of ecosystem accounting has been the technological advancement in the generation of Earth observation data, as well as in modelling of ecosystem services, made possible by increasing computational power and the move towards open data. The initial response from the statistical community to the growing policy demands for an integrated approach to measuring ecosystems was the System of Environmental-Economic Accounting 2012 – Experimental Ecosystem Account- ing (SEEA EEA), which was welcomed by the Statistical Commission in 2013 as an important first step in developing a statistical framework for ecosystem account- ing. SEEA EEA was conceived as a complementary framework to the SEEA Central Framework, which viewed the environment through the lens of eco- systems. Thus, the various biophysical components of the environment (includ- ing individual environmental assets recorded in the SEEA Central Framework) are seen as operating together as a functional unit. Following the endorsement of SEEA EEA, many countries began testing and experimentation at the national and subnational levels. This work led to the release of Technical Recommendations in support of the SEEA EEA, recognizing the advancement in thinking and statistical practice with regard to the measurement of ecosystems and their integration into an accounting framework, as well as the increased demand for practical recommen- dations on how to implement the ecosystem accounting framework described in SEEA EEA. Technical Recommendations was designed to serve as an intermediate step in the transition from SEEA EEA to a statistical standard. Between 2018 and 2021, SEEA EEA underwent a revision process. The revi- sion process was undertaken under the auspices of the United Nations Committee of Experts on Environmental-Economic Accounting (UNCEEA), as mandated by the Statistical Commission at its forty-eighth session in 2017. The revision was based on an open and inclusive approach, targeting not just the global statistical community but also the geospatial, scientific and environmental economics communities, from a wide range of countries, international organizations, academia and non-governmen- tal organizations. The revision was closely informed by country experimentation and testing of SEEA EEA through a range of national and international projects in many different countries. Together with the adoption of SEEA EA, the Statistical Commission recognized the need to resolve the outstanding methodological concerns related to chapters 8 to 11 on valuation, as well as the issues identified in the research agenda of SEEA EA. The SEEA EA research agenda identifies topics concerning conceptual issues and topics concerning methods and implementation issues. To ensure the ongoing relevance of SEEA EA and its application of best practice, the advancement of those topics will be undertaken under the auspices of the UNCEEA and with the involvement of experts in relevant substantive fields. Linking SEEA EA to the System of National Accounts SEEA EA adopts an accounting approach to organizing information on ecosystems to support coherence with economic information that is organized in accordance with the System of National Accounts (SNA). This approach supports the consistent evalu- ation of the impacts and dependencies of economic activities on ecosystems, the con- tribution of ecosystems to the economy and well-being, and the actions taken by the Preface v economy to restore and reduce impacts on ecosystems. Using an accounting approach necessitates the harmonization of environmental data from multiple sources, thereby creating integrated data that support the derivation of coherent and consistent indica- tors which are relevant to assessing the environment-economy nexus. Thus, SEEA EA provides a mechanism for mainstreaming data on ecosystems and ecosystem services into economic and national development planning. The con- sistency that SEEA EA brings to organizing information on ecosystems and ecosystem services is essential to delivering a planning approach that reflects economic, envi- ronmental and social dimensions of sustainable development in an integrated way. As such, it is a powerful tool for central and line ministries, especially those concerned with sustainable national development and delivering better outcomes for the envi- ronment and society. Implementation of SEEA EA At the time of the adoption of SEEA EA in March 2021, more than 34 countries were compiling ecosystem accounts on an experimental basis. With the adoption of SEEA EA as an international statistical standard, many more countries have begun imple- mentation and more are expected to commence, while it is of course recognized that a significant number of countries will require assistance and additional resources for statistical data collection. In March 2021, the Statistical Commission encouraged the implementation of SEEA EA in countries and requested UNCEEA to develop an implementation strategy that takes into account country priorities and data avail- ability. Moreover, as part of the 2021 United Nations Common Agenda, the United Nations Secretary-General urged all Member States to begin implementing SEEA EA. vii Acknowledgements Background The System of Environmental-Economic Accounting – Ecosystem Accounting (SEEA EA) is the outcome of a process notable for its transparency and the wide involvement of the international statistical community; economists; geographers; ecologists and other scientists; and policymakers. The process comprised five steps: (a) Identifying and securing agreement on the issues to be considered in the drafting of SEEA EA; (b) Research on those issues and presentation of proposals for addressing them; (c) Consideration of the issues and proposals by experts and agreement on a provisional draft text; (d) Consultation with countries and experts on specific issues as well as on the content of the completed chapters, incorporation of comments elic- ited through the consultation process, and preparation of a final draft of the text of SEEA EA; (e) Presentation of the draft to the United Nations Statistical Commission at its fifty-second session, held in March 2021. The revision process for the System of Environmental-Economic Accounting 2012 – Experimental Ecosystem Accounting (SEEA EEA) was launched officially in March 2018, at the forty-ninth session of the Statistical Commission. The process was cen- tred around four research issues identified as priority areas for the revision: spatial areas, ecosystem condition, ecosystem services, and valuation and accounting treat- ments. Five working groups were established to address those issues and each group drafted a set of discussion papers that were reviewed and assessed by a large group of experts. The revision of SEEA EEA was co-financed by the generous contributions of Australia, through the Australian Bureau of Statistics and the Department of the Environment and Energy; the United Kingdom of Great Britain and Northern Ireland, through the Office for National Statistics; the Department for Environment, Food and Rural Affairs; and the European Union, through Eurostat. The revision process was led and managed by the United Nations Committee of Experts on Environmental-Economic Accounting (UNCEEA) and its Technical Committee on SEEA EA. It involved experts from international, regional and non- governmental organizations; project staff; agencies of many countries responsible for compiling official statistics; city groups; other expert groups; and individual experts in the areas of economics, ecosystem science and related fields from various regions of the world. As was to be expected, the comprehensive and complex process in which those participants were engaged has yielded a product that incorporates a multiplicity of diverse contributions. viii System of Environmental-Economic Accounting – Ecosystem Accounting UNCEEA and its Bureau At its thirty-sixth session, in March 2005, the Statistical Commission endorsed the establishment of the Committee with a mandate that includes overseeing and manag- 1 See Official Records of the ing the revision of SEEA.1 The Committee is composed of senior representatives of Economic and Social Council, national statistical offices and international agencies. The Bureau of the Committee, 2005, Supplement No. 4 whose representatives are elected from among the Committee’s members, acts under (E/2005/24), chap. V, sect. A, para. 7. the authority delegated by the Committee. The Bureau coordinates and manages the activities of the Committee conducted between its regular sessions. During the revision of SEEA EEA, the Committee and its Bureau were chaired by Bert Kroese (Kingdom of the Netherlands), with secretariat services provided by the Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat. Members of the Committee of Experts, and other contributors, representing national institutions Amanda Clark and Jonathon Khoo (Australia); Norbu Ugyen (Bhutan); Rebecca Palis (Brazil); Carolyn Cahill and Greg Peterson (Canada); Shi Faqi and Zheng Xuegong (China); Paola Andrea Acevedo and Diego Andrés Cobaleda Martínez (Colombia); Kirsten Balling and Ole Pedersen (Denmark); Kaia Oras (Estonia); Jukka Muukkonen and Johanna Pakarinen (Finland); Françoise Nirascou (France); Sven Kaumanns (Germany); P. Bhanumati, Shailja Sharma and Pravin Srivastava (India); Etjih Tasriah (Indonesia); Aldo Femia and Angelica Tudini (Italy); Carol Coy (Jamaica); Asset Nakipbekov (Kazakhstan), Christine Magu, Hirum Mbatia and Mathew Collins Omondi (Kenya); Nazaria Baharudin and Siti Zakiah Muhamad Isa (Malaysia); Eduardo de la Torre, Enrique Ordaz and Graciela Marquez (Mexico); Ankhzaya Byamba and Erdenesan Eldevochir (Mongolia); Gerard Eding, Bert Kroese and Sjoerd Schenau (Kingdom of the Netherlands); Rachael Milichich and Stephen Oakley (New Zealand); TrineBraathu,PerArildGarnåsjordet,KristineGrimsrudandPederNaes(Norway);Vivian Ilarina (Philippines); Andrey Tatarinov (Russian Federation); Aliielua Salani (Samoa); Gerhardt Bouwer and Joe de Beer (South Africa); Nils Brown and Viveka Palm (Sweden); Samuel Echoku and Aliziki Kaudha Lubega (Uganda); Rocky Harris, Liz McKeown, Nicola Shearman and Neil Wilson (United Kingdom); and Dennis Fixler (United States). Representatives of international organizations Jillian Campbell and Markus Lehmann (secretariat of the Convention on Biological Diversity); Rikke Munk Hansen and Gemma Van Halderen (Economic and Social Commission for Asia and the Pacific); Wafa Aboul Hosn (Economic and Social Commission for Western Asia); Oliver Chinganya and Xiaoning Gong (Economic Commission for Africa); Michael Nagy (Economic Commission for Europe); Rayen Quiroga (Economic Commission for Latin America and the Caribbean); Caitriona Maguire, Jock Martin and Jan-Erik Petersen (European Environment Agency); Anton Steurer (Eurostat); Francesco Tubiello (Food and Agriculture Organization of the United Nations); Gabriel Quiros and Jim Tebrake (International Monetary Fund); Daniel Clarke, Myriam Linster and Peter van de Ven (Organisation for Economic Co-operation and Development); Midori Paxton, Massimiliano Riva and Tim Scott (United Nations Development Programme); Ludgarde Coppens, Pushpam Kumar, Salman Hussain and William Speller (United Nations Environment Programme); Sofia Ahlroth, Juan Pablo Castañeda, Raffaello Cervigni and Catherine Van Rompaey (World Bank); and Hernan Epstein, Leandry Moreno and Clara van der Pol (World Tourism Organization). Acknowledgements ix Members of the Bureau of the Committee of Experts Amanda Clark (Australia); Carolyn Cahill and Greg Peterson (Canada); Sven Kaumanns (Germany); P. Bhanumati (India); Eduardo de la Torre, Enrique Ordaz and Graciela Marquez (Mexico); Sjoerd Schenau (Kingdom of the Netherlands); Rachael Milichich (New Zealand); Vivian Ilarina (Philippines), Gerhardt Bouwer (South Africa); Liz McKeown and Neil Wilson (United Kingdom); Anton Steurer (Eurostat); Francesco Tubiello (Food and Agriculture Organization of the United Nations); Jim Tebrake (International Monetary Fund); Myriam Linster and Peter van de Ven (Organisation for Economic Co-operation and Development); and Sofia Ahl- roth and Raffaello Cervigni (World Bank). Staff of the Statistics Division (Environmental-Economic Accounts Section, Environmental Statistics and Geospatial Information Branch) providing secretariat services to the Committee and its Bureau Elsa Begne, Jessica Ying Chan, Julian Chow, Bram Edens and Marko Javorsek, among others, under the overall supervision of Alessandra Alfieri. Editorial board The Technical Committee on SEEA EA, whose membership was extended by the Committee of Experts at its fourteenth meeting, in June 2019, served as the editorial board for the revision of SEEA EEA and provided both technical guidance on the drafting of the text of SEEA EA and expert advice on the resolution of technical issues. The Technical Committee held 30 meetings between June 2018 and the publication of the white-cover text of SEEA EA in July 2021. The Technical Committee, chaired by Anton Steurer (Eurostat), was com- posed of the following members: Jonathon Khoo, Peter Meadows and Steven May (Australian Bureau of Statistics); François Soulard (Statistics Canada); P. Bhanumati (Ministry of Statistics and Programme Implementation, India); Sjoerd Schenau (Statistics Netherlands); Gerhardt Bouwer (Statistics South Africa); Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom); Rosimeiry Portela (Conservation International); Michael Bordt and Anthony Dvarskas (Economic and Social Commission for Asia and the Pacific; and Fisheries and Oceans Canada); Joachim Maes (European Commission, Joint Research Centre); Jan-Erik Petersen (European Environment Agency); Juha Siikamaki (International Union for Conservation of Nature); Francesco Tubiello (Food and Agriculture Organization of the United Nations); James Tebrake (International Monetary Fund); Peter van de Ven (Organisation for Economic Co-operation and Development); Alessandra Alfieri, Jessica Ying Chan, Julian Chow, Bram Edens, Elsa Begne and Marko Javorsek (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Carl Obst (consultant, Statistics Division of the Depart- ment of Economic and Social Affairs of the United Nations Secretariat); Lars Hein (Wageningen University, Kingdom of the Netherlands); and Raffaello Cervigni and Catherine Van Rompaey (World Bank). In his capacity as SEEA EA Editor, Carl Obst, under the guidance of the Technical Committee, undertook to synthesize the content of the discussion papers and draft the chapters of SEEA EA. x System of Environmental-Economic Accounting – Ecosystem Accounting SEEA EEA revision working groups The revision process was supported by five working groups. Listed below are the area 2 All of the papers and materi- leads and the experts who contributed to the work and outputs of the working groups.2 als related to the work of the working groups are available Working group 1 on spatial units at https://seea.un.org/content/ seea-eea-revision-research- Area lead: Sjoerd Schenau (Statistics Netherlands) areas. Experts: Daniel Juhn, Timothy (Max) Wright and Trond Larsen (Conservation International); David Keith (University of New South Wales, Australia); Doug Muchoney and Francesco Tubiello (Food and Agriculture Organization of the United Nations); Edwin Horlings and Patrick Bogaart (Statistics Netherlands); Emily Nicholson (Deakin University, Australia); François Soulard and Mark Henry (Statistics Canada); Jessica Ying Chan (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Keith Gaddis (National Aeronautics and Space Administration); Michael Bordt (Economic and Social Commission for Asia and the Pacific; and Fisheries and Oceans Canada); Roger Sayre (United States Geological Survey). Working group 2 on ecosystem condition Area lead: Joachim Maes (European Commission, Joint Research Centre) Experts: Amanda Driver (South African National Biodiversity Institute); Bálint Czúcz (European Commission, Joint Research Centre); Bethanna Jackson (Victoria University of Wellington, New Zealand); Emily Nicholson (Deakin University, Australia); Heather Keith (Australian National University and Griffith University, Australia); Marko Javorsek (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Octavio Pérez Maqueo (Instituto de Ecología, Mexico); Simon Jakobsson (Norwegian Institute for Nature Research). Working group 3 on ecosystem services Area lead: Lars Hein (Wageningen University, Kingdom of the Netherlands) Experts: Alessandra La Notte (European Commission, Joint Research Centre); Anthony Dvarskas (Stony Brook University and Economic and Social Commission for Asia and the Pacific); Becky Chaplin-Kramer (Stanford University, United States); Benjamin Burkhard (Leibniz Universität Hannover, Germany); Julian Chow and Bram Edens (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Charles Rhodes (United States Geological Survey); David Barton (Norwegian Institute for Nature Research); Dolf de Groot (Wageningen University, Kingdom of the Netherlands); Ilan Havinga (Wageningen University, Kindgom of the Netherlands); Jan-Erik Petersen (European Environment Agency); Luke Brander (Brander Environmental Economics); Mahbubul Alam, Maíra Ometto Bezerra and Rosimeiry Portela (Conservation International); Marc Russell (United States Environmental Protection Agency); Neville Crossman (University of Adelaide and Murray-Darling Basin Authority, Australia); Patricia Balvanera (Universidad Nacional Autónoma de México, Mexico); Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom); Roy Haines-Young (Fabis Consulting); Sander Jacobs (Research Institute for Nature and Forest (INBO), Belgium); Sjoerd Schenau (Statistics Netherlands); Steven King (United Nations Environment Programme World Conservation Monitoring Centre). Acknowledgements xi Working group 4 on individual ecosystem services Area lead: Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom) Lead authors: Alessandra La Notte (European Commission, Joint Research Centre); Anthony Dvarskas (Stony Brook University and Economic and Social Commission for Asia and the Pacific); Benjamin Burkhard (Leibniz Universität Hannover, Germany); Bram Edens (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Carl Obst (consultant, Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); David Barton (Norwegian Institute for Nature Research); Lars Hein (Wageningen Univer- sity, Kingdom of the Netherlands); Neville Crossman (University of Adelaide and Murray-Darling Basin Authority, Australia); Rosimeiry Portela (Conservation International); Steven King (United Nations Environment Programme World Conservation Monitoring Centre). Contributing authors: Alejandro Caparrós (Consejo Superior de Investiga- ciones Científicas, Spain); Simon Ferrier and Beth Fulton (Commonwealth Scientific and Industrial Research Organisation, Australia); Brett Day (University of Exeter, United Kingdom); Bruna Grizzetti and Grazia Zulian (European Commis- sion, Joint Research Centre); Brynhildur Davíðsdóttir (University of Iceland); Carlos A.Guerra (German Centre for Integrative Biodiversity Research (iDiv)); David Nowak (Forest Service, United States Department of Agriculture); Eli Fenichel (Yale University, United States); Emil Ivanov (University of Nottingham, United King- dom); Gem Castillo (Resource and Environmental Economics Foundation of the Philippines); Giles Atkinson (London School of Economics, United Kingdom); Ilan Havinga (Wageningen University, Kingdom of the Netherlands); Jane Turpie (University of Cape Town and Anchor Environmental Consultants, South Africa); Kashif Shaad (Conservation International); Kerry Turner (University of East Anglia, United Kingdom); Laurence Jones and Stefan Reis (United Kingdom Centre for Ecology and Hydrology, United Kingdom); Luke Brander (Vrije Universiteit Amsterdam, Kingdom of the Netherlands); Mahbubul Alam, Maíra Ometto Bezerra and Miroslav Honzák (Conservation International); Matthew Agarwala (Bennett Institute for Public Policy, University of Cambridge, United Kingdom); Onil Banerjee (Inter-American Development Bank); Payam Dadvand (ISGlobal, Spain); Peter Elsasser (Thünen Institute, Germany); Sergio Vallesi (Durham University, United Kingdom Silvia Cerilli (Food and Agriculture Organization of the United Nations); Silvia Ferrini (University of Siena, Italy; and University of East Anglia, United Kingdom); Stoyan Nedkov (Bulgarian Academy of Sciences, Bulgaria); Thomas Randrup (Swedish University of Agricultural Sciences); Timon McPhearson (The New School, United States); Tomas Badura (University of East Anglia, United Kingdom and CzechGlobe, Global Change Research Institute of the Czech Academy of Sciences, Czechia). Working group 5 on valuation and accounting treatments Area lead: Juha Siikamaki (International Union for Conservation of Nature) Experts: Alejandro Caparrós (Consejo Superior de Investigaciones Científicas, Spain); Anil Markandya (Basque Centre for Climate Change, Spain); Bram Edens, Ivo Havinga and Herman Smith (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Burkhard Schweppe-Kraft (Federal Agency for Nature Conservation, Germany); David Barton (Norwegian Institute for Nature Research); Dennis Fixler (Bureau of Economic Analysis, United States); Eli Fenichel (Yale University, United States); Jane Turpie (University of Cape Town xii System of Environmental-Economic Accounting – Ecosystem Accounting and Anchor Environmental Consultants, South Africa); Jim Tebrake (International Monetary Fund); Joe St. Lawrence (Statistics Canada); Matias Piaggio (Tropical Agricultural Research and Higher Education Center, Costa Rica); Nicholas Conner (New South Wales Office for the Environment and Heritage, Australia); Peter Harper (independent expert); Peter van de Ven (Organisation for Economic Co-operation and Development); Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom); William Speller (United Nations Environment Programme). Subgroup on Accounting for Biodiversity in SEEA EA Co-chairs: Rosimeiry Portela and Trond Larsen (Conservation International) Experts: Alessandra Alfieri and Marko Javorsek, Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Amanda Driver (South African National Biodiversity Institute), Anne-Sophie Pellier (Bird Life International); Carl Obst (consultant, Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Hedley Grantham (Wildlife Conservation Society); Jillian Campbell and Markus Lehman (secretariat of the Convention on Biological Diversity); Joel Houdet (University of Pretoria, South Africa); Juha Siikamaki and Thomas Brooks (International Union for Conservation of Nature); Ken Bagstad (United States Geological Survey); Neville Ash and Steven King (United Nations Environment Programme World Conservation Monitoring Centre); P. Bhanumati (Ministry of Statistics and Programme Implementation, India); Patrick Bogaart (Statistics Netherlands); Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom); Simon Ferrier (Commonwealth Scientific and Industrial Research Organisation, Australia). Working Group on SEEA EA Indicators Chair: P. Bhanumati (Ministry of Statistics and Programme Implementation, India) Experts: Alessandra Alfieri, Jessica Ying Chan, Julian Chow, Bram Edens and Marko Javorsek (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Anton Steurer (Eurostat); Carl Obst (consultant, Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); François Soulard (Statistics Canada); Gerhardt Bouwer (Statistics South Africa); Mike Gill and HyeJin Kim (Group on Earth Observations Biodiversity Observation Network (GEO BON) Secretariat); Jillian Campbell and Kieran Noonan Mooney (secretariat of the Convention on Biological Diversity); Juan Pablo Castañeda (World Bank); Juha Siikamaki (International Union for Conservation of Nature); Katia Karousakis and Myriam Linster (Organisation for Economic Co-operation and Development); Ken Bagstad (United States Geological Survey); Nic Bax and Simon Ferrier (Commonwealth Scientific and Industrial Research Organisation, Australia); Ouyang Zhiyun (Chinese Academy of Sciences, China); Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom); Shi Faqi (National Bureau of Statistics, China); Sjoerd Schenau (Statistics Netherlands). Other experts Experts that drafted text of chapter 13: Anthony Dvarskas, Rikke Munk Hansen and Gemma Van Halderen (Economic and Social Commission for Asia and the Pacific); Jordan Gacutan Coulson Lantz and Ben Milligan (University of New South Wales, Australia); David Barton (Norwegian Institute for Nature Research); François Soulard and Jennie Wang (Statistics Canada); Thomas Brooks and Juha Acknowledgements xiii Siikamaki (International Union for Conservation of Nature); Lars Hein (Wageningen University, Kingdom of the Netherlands); Michael Bordt (Economic and Social Commission for Asia and the Pacific; and Fisheries and Oceans Canada); Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom); Trond Larsen and Rosimeiry Portela (Conservation International); Simon Ferrier (Commonwealth Scientific and Industrial Research Organisation, Australia); Sjoerd Schenau (Statistics Netherlands); Steven King (United Nations Environment Programme World Conservation Monitoring Centre). Experts that drafted text of chapter 14: Mike Gill and HyeJin Kim (GEO BON) Secretariat); Jillian Campbell (secretariat of the Convention on Biological Diversity); Nic Bax (Commonwealth Scientific and Industrial Research Organisation, Australia); P. Bhanumati (Ministry of Statistics and Programme Implementation, India); Rocky Harris (Department for Environment, Food and Rural Affairs, United Kingdom). Designer of the figures in the publication: Katharine Strong (Statistics Canada). Other groups London Group on Environmental Accounting The London Group on Environmental Accounting discussed issues related to SEEA EA at its meetings held between October 2018 and 2020 and provided comments on the draft chapters of SEEA EA in special webinars held between March and August 2020. The London Group was chaired by Nancy Steinbach (Statistics Sweden) until October 2020 and by Sven Kaumanns (Federal Statistical Office of Germany) thereafter. The following experts prepared papers related to SEEA EA during the meetings of the London Group in 2018, 2019 and 2020: Aija Kosk (Estonian University of Life Sciences); Aldo Femia (Istat, Italy); Alessandra La Notte, Joachim Maes, Alexandra Marques, and Sara Vallecillo (European Commission, Joint Research Centre); Amanda Driver and Aimee Ginsburg (South African National Biodiversity Institute); Anton Steurer (Eurostat); Veiko Adermann, Kätlin Aun, Grete Luukas, Kaia Oras and Argo Ronk (Statistics Estonia); P. Bhanumati and Avneet Kaur (Ministry of Statistics and Programme Implementation, India); Ben Milligan (University of New South Wales, Australia); Heather Keith and Brendan Mackey (Griffith University, Australia); Carl Obst (IDEEA Group); Charles Rhodes (United States Environmental Protection Agency); David Barton, Zofie Cimburova and Megan Nowell (Norwegian Institute for Nature Research); David Keith (University of New South Wales, Australia); David Lindenmayer and Michael Vardon (Australian National Univer- sity, Australia); Patrick Bogaart, Edwin Horlings and Sjoerd Schenau (Statistics Netherlands); Silvia Cerilli and Francesco Tubiello (Food and Agriculture Organization of the United Nations); François Soulard (Statistics Canada); Gerhardt Bouwer (Statistics South Africa); Irene Alvarado Quesada (Central Bank of Costa Rica); Iulie Aslaksen, Per Arild Garnåsjordet and Margrete Steinnes (Statistics Norway); Jane Turpie (University of Cape Town; and Anchor Environmental Consultants, South Africa); Jan-Erik Petersen and Jana Tafi (European Environment Agency); Jessica Ying Chan (Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat); Suzi Bond Jonathon Khoo, Steve May and Peter Meadows (Australian Bureau of Statistics); Sofia Ahlroth and Juan Pablo Castañeda (World Bank); Kaja Lotman (Estonian Environmental Board); Üllas Ehrlich and Katrin Vaher (Tallinn University of Technology, Estonia); Ken Bagstad (United States Geological Service); Rocky Harris and Laurence Jones (Department for Environment, Food and Rural Affairs, United Kingdom); Luis Miguel Galindo xiv System of Environmental-Economic Accounting – Ecosystem Accounting Paliza (consultant, National Capital Accounting and Valuation of Ecosystem Services (NCAVES) project, Mexico); Masayuki Sato (Kobe University, Japan); Raúl Figueroa Díaz (National Institute of Statistics and Geography (INEGI), Mexico); Rikke Munk Hansen (Economic and Social Commission for Asia and the Pacific); Rintaro Yamaguchi (National Institute for Environmental Studies, Japan); Roger Sayre (United States Geological Survey); Steven King (United Nations Environment Programme World Conservation Monitoring Centre); Takashi Hayashi (Ministry of Agriculture, Forestry and Fisheries, Japan); Trond Larsen (Conservation International); Wafa Aboul Hosn (Economic and Social Commission for Western Asia). Regional commissions The regional commissions played an important role in facilitating engagement with countries. The following persons, in particular, provided support for the revision process: Anthony Dvarskas, Rikke Munk Hansen and Gemma Van Halderen (Eco- nomic and Social Commission for Asia and the Pacific); Rolando Ocampo and Rayen Quiroga (Economic Commission for Latin America and the Caribbean); Michael Nagy (Economic Commission for Europe), Wafa Abdul Hosn (Economic and Social Commission for Western Asia); Oliver Chinganya and Xiaoning Gong (Economic Commission for Africa). Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) Regular meetings with the values assessment experts associated with the IPBES were organized during the revision process. Engagement was secured mainly through the co-chairs of the IPBES values assessment, including Patricia Balvanera (Universidad Nacional Autónoma de México); Brigitte Baptiste (Universidad EAN, Colombia); Michael Christie (Aberystwyth University, United Kingdom); and Unai Pascual (Basque Centre for Climate Change, Spain). Natural Capital Accounting and Valuation of Ecosystem Services (NCAVES) project The following experts from the five countries participating in the NCAVES project provided support to the revision through their comments and testing of approaches: Anisha Dayaram, Amanda Driver, Aimee Ginsburg, Nancy Job, Nokuthula Mahlangu and Andrew Skowno (South African National Biodiversity Institute); Arturo Blancas, Amos Pérez, Eduardo de la Torre, Vincente Díaz Núñez, Raúl Figueroa, Federico González, Francisco Guillén, Paloma Merodio, José Luis Ornelas, Rodolfo Orozco and Carmen Reyes (INEGI, Mexico); Rob Anderson, Gerhardt Bouwer, Riaan Grobler, Brenda Mphakane and Robert Parry (Statistics South Africa); Sonia Arora, Saul Basurto, Jaqueline Coelho Visentin, Julian Equihua, Miquel Equihua, Luis Miguel Galindo, Melanie Kolb, Christianne Maroun, Octavio Pérez Maqueo, Salvador Sanchez Colón, Monica Sharma, Bruna Stein Ciasca and María Zorrilla (consultants to the United Nations); Georgina Alcantar and Cesar Rodriguez (Secretariat of Environment and Natural Resources (SEMARNAT), Mexico); Rebeca de La Rocque Palis, Leonardo Lima Bergamini, Ivone Lopes Batista, Therence Paoliello de Sarti, Fernando Peres Diaz, Maria Luisa Pimenta, Claudio Stenner and Michel Vieira Lapip (Brazilian Institute of Geography and Statistics (IBGE), Brazil); Han Mingchen (Guangxi Zhuang Autonomous Region Bureau of Statistics, China); Jane Turpie and Joshua Weiss (Anchor Environmental Consultants); Jeanne Nel (Wageningen Environmental Research, Kingdom of the Netherlands); P. Bhanumati, Sudeepta Ghosh, Krishna Kumar Tiwari, Rakesh Maurya, Ruchi Mishra and Kuwar Alok Singh Yadav Acknowledgements xv (Ministry of Statistics and Programme Implementation, India); Ouyang Zhiyun (Chinese Academy of Sciences); Qiu Qiong and Shi Faqi (National Bureau of Statistics, China). The following experts were consulted on specific methodological and meas- urement issues: Gretchen Daily (Stanford University, United States); Ian Bateman (University of Exeter, United Kingdom); Stephen Polasky (University of Minnesota, United States). Global consultations Two formal global consultations were organized during the revision process. The first, on individual chapters, was held between March and August 2020,3 and the 3 For details, see https://seea. second, on the completed draft of SEEA EA in its entirety, between October and un.org/content/global-consul- November 2020.4 tation-individual-chapters. The following countries and State participated in the global consultations: 4 Albania, Armenia, Australia, Azerbaijan, Belarus, Belgium, Bolivia (Plurinational For details, see https://seea. un.org/content/global-consul- State of), Botswana, Brazil, Bulgaria, Burundi, Cameroon, Canada, China, Colombia, tation-complete-draft. Croatia, Czechia, Denmark, Ecuador, Estonia, Ethiopia, Finland, France, Germany, Greece, Hungary, India, Indonesia, Iran (Islamic Republic of), Iraq, Ireland, Italy, Jordan, Kenya, Latvia, Lesotho, Lithuania, Malaysia, Mauritius, Mexico, Mongolia, Morocco, Mozambique, Myanmar, Nepal, Netherlands (Kingdom of the), New Zealand, Norway, Peru, Philippines, Poland, Qatar, Romania, Saudi Arabia, Senegal, Slovakia, Slovenia, South Africa, Spain, Sudan, Suriname, Sweden, Switzerland, Thailand, Tunisia, United Kingdom, United States, Uruguay, Venezuela (Bolivarian Republic of), Viet Nam, Zambia, Zimbabwe and State of Palestine. While in many cases, several national agencies contributed to the consolidated contribution or submitted separate contribu- tions, they all adhered to a common national position on the global consultation. The following organizations participated in the global consultations: Capitals Coalition; Conservation International; Convention on Biological Diversity secretar- iat; Ducks Unlimited Canada; Eastern Africa Statistical Training Centre; Ecological Accounting Chair (Chaire Comptabilité Écologique); Economic Commission for Latin America and the Caribbean; European Central Bank; European Commission (Directorate-General for Environment, Eurostat, Joint Research Centre); European Environment Agency; Food andAgriculture Organization of the United Nations; Gaborone Declaration for Sustainability in Africa; Global Footprint Network; GEO BON; Intemerate Working Group on Data, Statistics, and Valuation; International Monetary Fund; International Union for Conservation of Nature; Organisation for Economic Co-operation and Development; Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat; United Nations Development Programme; United Nations Environment Programme; United Nations Environment Programme World Conservation Monitoring Centre; World Bank; World Economic Forum Beijing Representative Office; World Tourism Organization. The following individual experts participated in the global consulta- tions: Adrien Comte (Centre international de recherche sur l’environnement et le développement (CIRED), France); Greti Lucaroni, Antonia Oriani, Karima Oustadi and Aldo Ravazzi Douvan (Sogesid TA – Ministry of Environment, Land and Sea of Italy – Technical Secretariat of the Italian Natural Capital Committee); Pablo Campos, Alejandro Caparrós and Jose L. Oviedo (Consejo Superior de Investiga- ciones Científicas, Spain); Alison Fairbrass and Paul Ekins (Institute for Sustain- able Resources, University College London, United Kingdom); Simon Ferrier, Beth Fulton, Richard Mount, Suzanne Prober, Anna Richards, Gabriela Scheufele and xvi System of Environmental-Economic Accounting – Ecosystem Accounting Becky Schmidt (Commonwealth Scientific and Industrial Research Organisation, Australia); Ben Milligan (University of New South Wales, Australia); Christopher Martin (White Horse Training, United Kingdom); David MacDonald (Chair, Expert Group on Resource Management, Economic Commission for Europe); Eli Fenichel (Yale University, United States); T. Badura, S. Ferrini, G. Grilli and R.K. Turner (University of East Anglia, United Kingdom); Heather Keith and Michael Vardon (Australian National University and Griffith University, Australia); Jana Tafi, environmental accounting and assessments expert; Jane Turpie (University of Cape Town and Anchor Environmental Consultants, South Africa); John Finisdore (Sustainable Flows, Australia and United States); Mark Eigenraam, John Finisdore and Reiss McLeod (IDEEA Group, Australia); John Maughan (Green Growth Knowledge Platform); Julian Hilton (Aleff Group, United Kingdom and Chair, Sustainable Development Goals Delivery Working Group, Expert Group on Resource Management, Economic Commission for Europe); Laurence Jones (United Kingdom Centre for Ecology and Hydrology); Leon Braat (Editor-in-Chief, Ecosystem Services, published by Elsevier); Louise Willemen (University of Twente, Kingdom of the Neth- erlands); Melanie Kolb (Institute of Geography, Universidad Nacional Autónoma de México); Robert Johnston (Clark University, United States); Sara Ortiz (Universi- dad Rafael Landívar, Guatemala); Solen Le Clec’h (Wageningen University, Kingdom of the Netherlands); Steven Broekx (Flemish Institute for Technological Research (VITO), Belgium); Thomas Ochuodho (University of Kentucky, United States); Wal- ter J. Radermacher (Sapienza University of Rome, Italy). Meetings and workshops The following meetings and workshops were held to encourage engagement, build on the expertise of different communities and allow for the detailed discussions on issues that were required to facilitate substantive progress on technical matters: • Expert Workshop on Valuation for Ecosystem Accounting, Bonn, 24–26 April 2018 • Forum of Experts on SEEA Experimental Ecosystem Accounting, Glen Cove, New York, 18–20 June 2018 • Thirteenth meeting of the United Nations Committee of Experts on Environmental-Economic Accounting, New York, 21 and 22 June 2018 • Twenty-fourth meeting of the London Group on Environmental Account- ing, Dublin, 1–4 October 2018 • Expert meeting on spatial areas and ecosystem condition, Paris, 28 and 29 November 2018 • Strategic meeting on accounting for biodiversity and ecosystems with International Union for Conservation of Nature (IUCN) and selected bio- diversity experts, Paris, 30 November 2018 • Expert meeting on advancing the measurement of ecosystem services for ecosystem accounting, New York, 22–24 January 2019 • Fourteenth meeting of the United Nations Committee of Experts on Environmental-Economic Accounting, New York, 24 and 25 June 2019 • Forum of Experts on SEEA Experimental Ecosystem Accounting, Glen Cove, New York, 26 and 27 June 2019 • Technical Expert Meeting on advancing SEEA EEA revision, Glen Cove, New York, 28 and 29 June 2019 Acknowledgements xvii • Thirteenth meeting of the Advisory Expert Group on National Accounts, Washington, D.C., 1–3 October 2019 • Twenty-fifth meeting of the London Group on Environmental Accounting, Melbourne, Australia, 7–10 October 2019 • Meeting of the Organisation for Economic Co-operation and Development (OECD) Working Parties on Financial Statistics and National Accounts, Paris, 4–8 November 2019 • Meeting of the London Group on the general context of the revision (virtual), 13 March 2020 • Technical Meeting on Valuation and Accounting for the Revised SEEA EEA (virtual), 16–18 March 2020 • Meeting of the London Group on Environmental Accounting on draft chapters 3–5 (virtual), 21 April 2020 • Presentation of the revision process and engagement to African countries as part of the Africa Natural Capital Accounting Community of Practice (virtual), 4 June 2020 • Meeting of the London Group on Environmental Accounting on draft chapters 8–11 (virtual), 18 June 2020 • Virtual Expert Forum on SEEA Experimental Ecosystem Accounting – session 1: Ecosystem extent and condition, 23 and 24 June 2020 • Fifteenth meeting of the United Nations Committee of Experts on Environmental-Economic Accounting (virtual), 6, 8 and 9 July 2020 • Virtual Expert Forum on SEEA Experimental Ecosystem Accounting – session 2: Valuation and accounting treatments (virtual), 14 and 15 July 2020 • Meeting of the London Group on Environmental Accounting on draft chapters 6 and 7 (virtual), 18 August 2020 • Virtual Expert Forum on SEEA Experimental Ecosystem Accounting – session 3: Ecosystem services, 24 and 25 August 2020 • Twenty-sixth meeting of the London Group on Environmental Account- ing (virtual), 5–8 and 12 October 2020 • Presentation of the revision process and engagement to Latin Ameri- can countries as part of the Latin America Natural Capital Accounting Community of Practice (virtual), 28 October 2020 • Virtual Expert Forum on SEEA Experimental Ecosystem Accounting – session 4: Thematic accounts and indicators, 9 and 10 November 2020 • Extraordinary Meeting of the United Nations Committee of Experts on Environmental-Economic Accounting (virtual), 16–18 November 2020 • High-level webinar on the finalization of the revision of SEEA EEA for Latin American and Caribbean countries, co-organized by the Economic Commission for Latin America and the Caribbean and the Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat, 4 February 2021 xix Abbreviations and acronyms AB abiotic flow BIOFIN Biodiversity Finance Initiative BOD biological oxygen demand BSU basic spatial unit CICES Common International Classification of Ecosystem Services COD chemical oxygen demand DIC dissolved inorganic carbon DPSIR driving forces-pressure-state-impact-response EAA ecosystem accounting area EBV essential biodiversity variable ECT ecosystem condition typology ECV essential climate variable EE-IOT environmentally extended input-output table EESV essential ecosystem services variable EEZ exclusive economic zone EFG ecosystem functional group (IUCN GET) EGSS environmental goods and services sector EOV essential ocean variable ET ecosystem type FDES Framework for the Development of Environment Statistics FTE full-time equivalent GDP gross domestic product GEO BON Group on Earth Observations Biodiversity Observation Network GEP gross ecosystem product GHG greenhouse gas GIS geographic information system GOOS Global Ocean Observing System GVA gross value added IPBES Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services IPCC Intergovernmental Panel on Climate Change IS tem service intermediate ecosys­ ISIC International Standard Industrial Classification of All Economic Activities IUCN International Union for Conservation of Nature xx System of Environmental-Economic Accounting – Ecosystem Accounting ICUN GET  International Union for Conservation of Nature Global Ecosystem Typology LDN land degradation neutrality LULUCF land use, land-use change and forestry MAES Mapping and Assessment of Ecosystems and their Services NCAVES National Capital Accounting and Valuation of Ecosystem Services NDP net domestic product NDVI normalized difference vegetation index NDWI normalized difference water index NESCS National Ecosystem Services Classification System (United States Environmental Protection Agency) NPV net present value NSO national statistical office PM particulate matter PSUT physical supply and use table SBA service benefiting area SEEA System of Environmental-Economic Accounting SEEA AFF System of Environmental-Economic Accounting for Agriculture, Forestry and Fisheries SEEA EA System of Environmental-Economic Accounting – Ecosystem Accounting SEEA EEA System of Environmental-Economic Accounting 2012 – Experimental Ecosystem Accounting SNA System of National Accounts SPA service providing area SUT supply and use table TEEB The Economics of Ecosystems and Biodiversity (initiative) UNCEEA United Nations Committee of Experts on Environmental-Economic Accounting UNEP United Nations Environment Programme UNEP-WCMC United Nations Environment Programme World Conservation Monitoring Centre WTA willingness to accept (a payment) WTP willingness (of a consumer) to pay xxi Contents page Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Abbreviations and acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix Section A: Introduction and overview Section overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.1 Context for SEEA EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.2 What is SEEA EA? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.2.2 Coverage and interpretation of SEEA EA . . . . . . . . . . . . . . . . . . . 6 1.2.3 Implementation of SEEA EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.3 Statistical context for ecosystem accounting . . . . . . . . . . . . . . . . . . . . . . . 7 1.3.1 Historical background of SEEA . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.3.2 Development of SEEA EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.4 Conceptual approach of SEEA EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.5 Connections to other measurement frameworks and initiatives . . . . . . 11 1.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.5.2 Connection to the SEEA Central Framework . . . . . . . . . . . . . . . 12 1.5.3 Connection to SNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.5.4 Connections to other statistical methodology outputs and guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.5.5 Relationship to other global environmental measurement and assessment initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.6 Measurement, implementation and application . . . . . . . . . . . . . . . . . . . 15 1.6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.6.2 Role of NSOs and other agencies . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.6.3 Approaches to the compilation of ecosystem accounts . . . . . . . 17 1.6.4 Uses and applications of ecosystem accounting . . . . . . . . . . . . . 17 1.7 Structure of SEEA EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Appendix A1.1 From SEEA EEA to SEEA EA: main conceptual changes . 21 Appendix A1.2 Linking SEEA EA and the SEEA Central Framework . . . . . 23 2. Principles of ecosystem accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.2 Overview of the ecosystem accounting framework . . . . . . . . . . . . . . . . . 29 2.2.1 An accounting approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.2.2 Measurement perspectives on ecosystems . . . . . . . . . . . . . . . . . . 29 xxii System of Environmental-Economic Accounting – Ecosystem Accounting page 2.2.3 Logic of the ecosystem accounting framework . . . . . . . . . . . . . . 31 2.2.4 Ecosystem accounting framework: ecological considerations . 32 2.2.5 Ecosystem accounting framework: economic considerations . 34 2.3 Set of ecosystem accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.3.1 Ecosystem accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.3.2 Related accounts and presentations . . . . . . . . . . . . . . . . . . . . . . . . 38 2.4 Framing of values in ecosystem accounting . . . . . . . . . . . . . . . . . . . . . . . 39 2.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.4.2 Summary of the multiple value perspectives on nature . . . . . . . 40 2.4.3 Linking the ecosystem accounts and multiple value perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 2.5 General national accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 2.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 2.5.2 Length of the accounting period and frequency of accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 2.5.3 Time of recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.5.4 Units of measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.5.5 Gross and net recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2.5.6 Scale of application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.5.7 Data quality and scientific accreditation . . . . . . . . . . . . . . . . . . . 45 2.5.8 Uncertainty in measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section B: Accounting for ecosystem extent and condition Section overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 3. Spatial units for ecosystem accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 3.2 Types of spatial units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 3.2.1 Ecosystem assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 3.2.2 Applying the conceptual boundary for ecosystem assets . . . . . . 56 3.2.3 EAAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3.3 Delineating ecosystem assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 3.3.1 General principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 3.3.2 Approaches to identifying specific features . . . . . . . . . . . . . . . . . 60 3.4 Classifying ecosystem assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 3.4.1 General principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 3.4.2 SEEA ecosystem type reference classification . . . . . . . . . . . . . . . 62 3.5 Considerations with respect to delineation of spatial units . . . . . . . . . . 65 3.5.1 Delineation of ecosystem assets in practice . . . . . . . . . . . . . . . . . 65 3.5.2 Use of data on characteristics of land . . . . . . . . . . . . . . . . . . . . . . 67 3.5.3 Organizing data on socioeconomic and other characteristics . 68 Appendix A3.1 Ecological concepts underpinning spatial units for ecosystem accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Contents xxiii page Appendix A3.2A International Union for Conservation of Nature Global Ecosystem Typology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 4. Accounting for ecosystem extent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 4.1 Purpose of accounting for ecosystem extent . . . . . . . . . . . . . . . . . . . . . . . 83 4.2 Ecosystem extent accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 4.2.1 Scope of extent accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 4.2.2 Structure of extent accounts and accounting entries . . . . . . . . . 84 4.2.3 Recording ecosystem conversions . . . . . . . . . . . . . . . . . . . . . . . . . 87 4.3 Complementary presentations of ecosystem extent data . . . . . . . . . . . . . 89 4.3.1 Mapping ecosystem extent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 4.3.2 Ecosystem type change matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 4.3.3 Extent accounts for linear features and subsurface ecosystems 92 4.3.4 Linking extent accounts and economic data . . . . . . . . . . . . . . . . 92 5. Accounting for ecosystem condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 5.1.1 Measurement focus in accounting for ecosystem condition . . . 95 5.1.2 Ecological concepts underpinning measurement of ecosystem condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 5.1.3 General approach to compiling ecosystem condition accounts 97 5.2 Defining and selecting ecosystem condition characteristics and variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 5.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 5.2.2 Ecosystem condition characteristics . . . . . . . . . . . . . . . . . . . . . . . 99 5.2.3 Ecosystem condition typology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 5.2.4 Ecosystem condition variables and their selection . . . . . . . . . . . 102 5.2.5 Ecosystem condition variable account . . . . . . . . . . . . . . . . . . . . . 103 5.3 Ecosystem condition indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 5.3.1 Deriving ecosystem condition indicators from variables . . . . . . 105 5.3.2 Reference levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 5.3.3 Reference condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 5.3.4 Ecosystem condition indicator account . . . . . . . . . . . . . . . . . . . . 108 5.4 Aggregate measures of ecosystem condition . . . . . . . . . . . . . . . . . . . . . . . 109 5.4.1 Ecosystem condition indices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 5.4.2 Potential aggregation functions and weights . . . . . . . . . . . . . . . . 111 5.4.3 Presentation of ecosystem condition indices . . . . . . . . . . . . . . . . 113 5.5 Considerations in the measurement of ecosystem condition . . . . . . . . . 114 5.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 5.5.2 Variables for selected ecosystem types . . . . . . . . . . . . . . . . . . . . . 114 5.5.3 Use of data on environmental pressures . . . . . . . . . . . . . . . . . . . . 118 5.5.4 Role of biodiversity in ecosystem condition accounts . . . . . . . . 119 5.5.5 Accounting for ecosystem conversions . . . . . . . . . . . . . . . . . . . . . 120 xxiv System of Environmental-Economic Accounting – Ecosystem Accounting page 5.5.6 Relationships among ecosystem condition, ecosystem capacity and ecosystem degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 5.6 Applications of ecosystem condition accounts . . . . . . . . . . . . . . . . . . . . . 122 Appendix A5.1 Selection criteria for ecosystem characteristics and their metrics (variables and indicators) . . . . . . . . . . . . . . . . . . . . . . 125 Appendix A5.2 Options for establishing reference conditions for natural and anthropogenic ecosystems . . . . . . . . . . . . . . . . . . . . . . . . 127 Section C: Accounting for ecosystem services Section overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 6. Ecosystem services concepts for accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 6.1 Purpose of accounting for ecosystem services . . . . . . . . . . . . . . . . . . . . . 135 6.2 Concepts and principles in accounting for ecosystem services . . . . . . . 136 6.2.1 Ecosystem services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 6.2.2 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 6.2.3 Final and intermediate services . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 6.2.4 Users and beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 6.2.5 Abiotic flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 6.2.6 Identifying flows of ecosystem services . . . . . . . . . . . . . . . . . . . . 142 6.3 Reference list of selected ecosystem services . . . . . . . . . . . . . . . . . . . . . . . 144 6.3.1 Principles underpinning the reference list of selected ecosystem services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 6.3.2 Presentation of the reference list of selected ecosystem services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 6.3.3 Links between biodiversity and ecosystem services . . . . . . . . . . 149 6.3.4 Treatment of non-use values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 6.3.5 Treatment of ecosystem disservices . . . . . . . . . . . . . . . . . . . . . . . . 152 6.4 Treatment of specific ecosystem services and other environmental flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 6.4.1 Treatment of biomass provisioning services . . . . . . . . . . . . . . . . 153 6.4.2 Treatment of water supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 6.4.3 Measurement of global climate regulation services . . . . . . . . . . 158 6.4.4 Identification of cultural services . . . . . . . . . . . . . . . . . . . . . . . . . 160 6.4.5 Treatment of abiotic and other environmental flows . . . . . . . . . 161 6.5 Ecosystem capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 6.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 6.5.2 Defining ecosystem capacity for accounting purposes . . . . . . . 164 6.5.3 Defining ecosystem capacity with respect to specific types of ecosystem services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Appendix A6.1 Initial logic chains for selected ecosystem services . . . . . . . 169 7. Accounting for ecosystem services in physical terms . . . . . . . . . . . . . . . . . . . . . . . . 173 7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 7.2 Ecosystem services flow accounts in physical terms . . . . . . . . . . . . . . . . 174 Contents xxv page 7.2.1 Overall structure of ecosystem services flow accounts . . . . . . . 174 7.2.2 Applying general supply and use principles in ecosystem accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 7.2.3 Ecosystem services and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 7.2.4 Recording intermediate services . . . . . . . . . . . . . . . . . . . . . . . . . . 183 7.2.5 Recording abiotic flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 7.2.6 Exports and imports of ecosystem services . . . . . . . . . . . . . . . . . 185 7.2.7 Recording cultural services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 7.2.8 Linking the supply of ecosystem services to economic units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 7.3 Considerations in accounting for ecosystem services in physical terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 7.3.1 Spatial allocation of ecosystem services supply and use . . . . . . 189 7.3.2 Determining ecosystem services measurement baselines . . . . . 191 Section D: Monetary valuation and integrated accounting for ecosystem services and assets Section overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 8. Principles of monetary valuation for ecosystem accounting . . . . . . . . . . . . . . . . . . 199 8.1 Purposes and focus of monetary valuation for ecosystem accounting . 199 8.1.1 Purposes of monetary valuation in ecosystem accounting . . . . 199 8.1.2 Focus of monetary valuation for ecosystem accounting . . . . . . 201 8.2 Valuation concepts and principles for accounting . . . . . . . . . . . . . . . . . . 202 8.2.1 Exchange values and market price concepts in national accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 8.2.2 Monetary valuation of ecosystem services . . . . . . . . . . . . . . . . . . 203 8.2.3 Monetary valuation of ecosystem assets . . . . . . . . . . . . . . . . . . . . 205 8.2.4 Volume and price measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 9. Accounting for ecosystem services in monetary terms . . . . . . . . . . . . . . . . . . . . . . 209 9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 9.2 Ecosystem services flow account in monetary terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 9.3 Techniques for valuing transactions in ecosystem services . . . . . . . . . . 216 9.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 9.3.2 Methods where prices are directly observable . . . . . . . . . . . . . . 218 9.3.3 Methods where prices are obtained from markets for similar goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 9.3.4 Methods where prices (and associated values) are embodied in market transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 9.3.5 Methods where prices are based on revealed expenditures in related goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 9.3.6 Methods where prices are based on expected expenditures or markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 9.3.7 Other valuation methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 xxvi System of Environmental-Economic Accounting – Ecosystem Accounting page 9.4 Valuation methods for different ecosystem services . . . . . . . . . . . . . . . . 225 9.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 9.4.2 Valuation of different types of services . . . . . . . . . . . . . . . . . . . . . 225 9.5 Spatial variation in values and value transfer for the purpose of ecosystem accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 9.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 9.5.2 Methods for incorporating spatial variation in prices . . . . . . . . 228 10. Accounting for ecosystem assets in monetary terms . . . . . . . . . . . . . . . . . . . . . . . . 233 10.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 10.2 Monetary ecosystem asset account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 10.2.1 Structure of the monetary ecosystem asset account . . . . . . . . . . 234 10.2.2 Ecosystem enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 10.2.3 Ecosystem degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 10.2.4 Ecosystem conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 10.2.5 Other changes in the volume of ecosystem assets . . . . . . . . . . . . 239 10.2.6 Revaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 10.3 Approaches to valuing ecosystem assets . . . . . . . . . . . . . . . . . . . . . . . . . . 240 10.3.1 General approach to valuing ecosystem assets . . . . . . . . . . . . . . 240 10.3.2 Scope and definition of returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 10.3.3 Valuation of returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 10.3.4 Future flows of services in physical terms . . . . . . . . . . . . . . . . . . 244 10.3.5 Ecosystem asset life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 10.3.6 Expected institutional arrangements . . . . . . . . . . . . . . . . . . . . . . 246 10.3.7 Discounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 10.3.8 Measuring changes in the present value of ecosystem assets over an accounting period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Appendix A10.1 Application of the NPV method for valuing ecosystem assets and changes in ecosystem assets . . . . . . . . . . . . . . . . . 249 11. Integrated and extended accounting for ecosystem services and assets . . . . . . . 261 11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 11.2 Extended SUTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 11.3 Extended balance sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 11.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 11.3.2 Structure of an extended balance sheet . . . . . . . . . . . . . . . . . . . . . 266 11.3.3 Aligning ecosystem asset values with the values of SNA assets 267 11.4 Assigning economic ownership and allocation of degradation and enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 11.4.1 Considerations in assigning economic ownership . . . . . . . . . . . 272 11.4.2 Institutional sector for ecosystem assets . . . . . . . . . . . . . . . . . . . . 272 11.4.3 Allocation of degradation and enhancement to economic units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 11.5 Integrated sequence of institutional sector accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 11.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 Contents xxvii page 11.5.2 Structure of the extended sequence of accounts . . . . . . . . . . . . . 275 11.5.3 Adjusted income aggregates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 Appendix A11.1 Example of an extended SUT . . . . . . . . . . . . . . . . . . . . . . . . . . 279 Section E: Applications and extensions of SEEA Section overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 12. Complementary approaches to valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 12.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 12.2 Building connections with welfare values . . . . . . . . . . . . . . . . . . . . . . . . . 285 12.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 12.2.2 Bridge table between accounting and welfare values . . . . . . . . . 286 12.2.3 Assessing externalities, ecosystem disservices and health outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 12.3 Alternative measures of income, wealth and degradation . . . . . . . . . . . 291 12.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 12.3.2 Restoration cost-based approaches to measuring degradation . 292 12.3.3 Polluter pays presentation of degradation . . . . . . . . . . . . . . . . . . 294 12.3.4 Defensive expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 12.3.5 Alternative measures of environmental income . . . . . . . . . . . . . 296 12.3.6 Alternative approaches to asset valuation . . . . . . . . . . . . . . . . . . . 296 12.3.7 Extended modelling/greened economy modelling . . . . . . . . . . . 297 12.4 Corporate natural capital assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 Appendix A12.1 Exchange and welfare values in an accounting context . . . . 299 13. Accounting for specific enviromental themes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 13.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 13.2 General principles of thematic accounting . . . . . . . . . . . . . . . . . . . . . . . . 305 13.3 Accounting for biodiversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 13.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 13.3.2 Biodiversity assessments and SEEA EA . . . . . . . . . . . . . . . . . . . . 308 13.3.3 Accounting for species . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 13.3.4 Accounting for habitats and spatial scale . . . . . . . . . . . . . . . . . . . 311 13.3.5 Accounting for the genetic level of biodiversity . . . . . . . . . . . . . . 312 13.3.6 Using accounting data to support decision-making on biodiversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313 13.4 Accounting for climate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 13.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 13.4.2 Applying SEEA EA to inform climate policies . . . . . . . . . . . . . . 316 13.4.3 Accounting for carbon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 13.4.4 Other climate change-related accounts and indicators . . . . . . . 319 13.5 Accounting for the ocean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 13.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 13.5.2 A set of ocean accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 13.5.3 Indicators derived from ocean accounts . . . . . . . . . . . . . . . . . . . . 324 13.6 Accounting for urban areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 xxviii System of Environmental-Economic Accounting – Ecosystem Accounting page 13.6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 13.6.2 A set of urban ecosystem accounts . . . . . . . . . . . . . . . . . . . . . . . . 326 13.6.3 Potential indicators for urban ecosystems . . . . . . . . . . . . . . . . . . 331 Appendix A13.1 SEEA Central Framework accounts for individual stocks and flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333 Appendix A13.2 Additional detail concerning accounting for carbon . . . . . . 335 Appendix A13.3 Variables and indicators from ocean accounts . . . . . . . . . . . 339 14. Indicators and combined presentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 14.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343 14.2 Indicators derived from SEEA EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 14.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 14.2.2 Roles and functions of SEEA EA indicators . . . . . . . . . . . . . . . . . 344 14.2.3 Indicators from ecosystem accounts . . . . . . . . . . . . . . . . . . . . . . . 346 14.2.4 Indicators from thematic accounts . . . . . . . . . . . . . . . . . . . . . . . . 349 14.3 Indicator frameworks and SEEA EA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 14.3.1 SEEA EA and global indicator monitoring frameworks . . . . . . 349 14.3.2 Other indicators and applications . . . . . . . . . . . . . . . . . . . . . . . . . 351 14.4 Combined presentations for ecosystem accounting . . . . . . . . . . . . . . . . . 356 14.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356 14.4.2 Information on environmental activities . . . . . . . . . . . . . . . . . . . 357 14.4.3 Economic dependence on ecosystems . . . . . . . . . . . . . . . . . . . . . . 358 14.4.4 Information on policy instruments . . . . . . . . . . . . . . . . . . . . . . . . 358 14.4.5 Using the DPSIR framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 Appendix A14.1 SEEA EA and the post-2020 global biodiversity framework 363 Annex I: SEEALand – a stylized example of ecosystem accounting . . . . . . . . . . . . . . . . . . 369 Annex II: Research and development agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Tables 2.1 Ecosystem accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.2 Stylized ecosystem extent account (area) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.3 Stylized ecosystem condition account (condition indices) . . . . . . . . . . . . . . . . . . 37 2.4 Stylized ecosystem services flow account (physical units or currency) . . . . . . . . 38 2.5 Stylized monetary ecosystem asset account (currency) . . . . . . . . . . . . . . . . . . . . . 39 3.1 Tabular presentation of spatial units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 3.2 SEEA ecosystem type reference classification based on IUCN GET . . . . . . . . . . 65 4.1 Ecosystem extent account (units of area) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 4.2 Ecosystem type change matrix (units of area) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 4.2 Ecosystem type change matrix (units of area) (continued) . . . . . . . . . . . . . . . . . . 91 4.3 Presentation of closing balances including both one-dimensional (1D) and two-dimensional (2D) ecosystem types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 4.4 Ecosystem extent by type of economic unit (units of area) . . . . . . . . . . . . . . . . . . 94 Contents xxix page 5.1 SEEA ECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 5.2 ECV account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 5.3 Ecosystem condition indicator account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 5.4 Ecosystem condition indices reported using rescaled indicator values (mean values approach) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 5.5 Ecosystem condition indices reported using discretized ranges (area (percentage)) in each range of condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 5.6 Ecosystem condition account (condition indices) for multiple ecosystem types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 5.7 Examples of ecosystem condition variables for selected ecosystem types . . . . . 116 A5.2.1 Assessment framework for selection of a reference condition . . . . . . . . . . . . . . 128 A5.2.2 Summary of methods for estimating possible reference condition for natural and managed ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 6.1 Framing of contributions to benefits from the environment . . . . . . . . . . . . . . . . 142 6.2 Generic logic chain using air filtration services as an example . . . . . . . . . . . . . . 142 6.3 Reference list of selected ecosystem services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 7.1a Ecosystem services supply and use account in physical terms – supply table . . 176 7.1b Ecosystem services supply and use account in physical terms – use . . . . . . . . . 178 7.2 Basic ecosystem services PSUT No. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 7.3 Basic ecosystem services PSUT No. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 7.4 Basic ecosystem services PSUT No. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 7.5 Basic ecosystem services PSUT No. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 7.6 Basic ecosystem services PSUT No. 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 7.7 Baselines for selected regulating and maintenance services . . . . . . . . . . . . . . . . . 192 9.1a Ecosystem services supply and use account in monetary terms – supply . . . . . 212 9.1b Ecosystem services supply and use account in monetary terms – use table . . . . 214 10.1 Monetary ecosystem asset account (currency units) . . . . . . . . . . . . . . . . . . . . . . . 235 A10.1.1 Input data and NPV calculations for three ecosystem services at time period t0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 A10.1.2 Input data and NPV calculations for three ecosystem services at time period t1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 A10.1.3 Results of the decomposition analysis for four ecosystem services (currency units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 A10.1.4 Ecosystem monetary asset account (currency units) . . . . . . . . . . . . . . . . . . . . . . 255 A10.1.5 Treatment of ecosystem services volume effects based on condition and demand changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 A10.1.6 Results of the decomposition analysis (three factors) (currency units) . . . . . . . 258 A10.1.7 Monetary ecosystem asset account (with conversions) (currency units) . . . . . 259 11.1a Extended SUT with ecosystem services – supply table . . . . . . . . . . . . . . . . . . . . . 264 11.1b Extended SUT with ecosystem services – use table . . . . . . . . . . . . . . . . . . . . . . . . 265 11.2 Structure of an extended balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 11.3 Models for including ecosystem services in the sequence of accounts (excluding financial account and change in balance sheet entries) (currency units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 A11.1.1 Stylized example of an extended SUT (currency units) . . . . . . . . . . . . . . . . . . . . 280 xxx System of Environmental-Economic Accounting – Ecosystem Accounting page 12.1 Bridge table between accounting and welfare values of ecosystem services (currency units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287 12.2 Complementary recording of an ecosystem disservice in the SUT (currency units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290 12.3 Complementary table with an externality in the SUT (currency units) . . . . . . . 291 12.4 Alternative recording of degradation costs in the sequence of accounts, excluding the financial account (currency units) . . . . . . . . . . . . . . . . . . . . . . . . . . 295 13.1 Species account for an EAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 13.2 Linking SEEA accounts to biodiversity at levels other than that of ecosystems 314 13.3 Carbon stock account structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 13.4 Examples of potential core ocean statistics for biogeochemical cycling . . . . . . 321 13.5 Example: extent account presentation using the landscape approach . . . . . . . . 329 13.6 Example: condition account presentation using the landscape approach . . . . . 330 13.7 Example: extent account presentation using the individual asset approach . . . 330 13.8 Example service account presentation using the landscape approach . . . . . . . . 331 14.1 Potential indicators on ecosystem extent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347 14.2 Potential indicators on ecosystem condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 14.3 Potential indicators on physical ecosystem services flows . . . . . . . . . . . . . . . . . . . 349 14.4 Potential indicators for monetary ecosystem services flow accounts and ecosystem asset accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 14.5 Possible SEEA-based driving forces indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359 14.6 Possible SEEA-based pressure indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359 14.7 Possible SEEA-based impact indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 14.8 Possible SEEA-based response indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 A14.1.1 Potential indicators for the 2050 goals (including links to related Sustainable Development Goal indicators) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365 A14.1.2 Connecting SEEA accounts to the 2030 targets . . . . . . . . . . . . . . . . . . . . . . . . . . 365 AI.1 List of ecosystem types for SEEALand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 AI.2 Ecosystem extent account, 2020 (hectares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372 AI.3 Ecosystem type change matrix, 2020 (hectares) . . . . . . . . . . . . . . . . . . . . . . . . . . . 372 AI.4a Ecosystem condition variable account for forests, 2020 . . . . . . . . . . . . . . . . . . . . . 373 AI.4b Ecosystem condition indicator account for forests, 2020 . . . . . . . . . . . . . . . . . . . . 374 AI.4c Ecosystem condition indices account for forests, 2020 . . . . . . . . . . . . . . . . . . . . . 374 AI.5 Ecosystem condition indices account by ecosystem type . . . . . . . . . . . . . . . . . . . 375 AI.6 Ecosystem services supply and use account in physical terms – supply table, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 AI.7 Ecosystem services supply and use account in physical terms – use table, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 AI.8 Ecosystem services supply and use account in monetary terms – supply table, 2020 (currency units, thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 AI.9 Ecosystem services supply and use account in monetary terms – use table, 2020 (currency units, thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 AI.10 Net present value (NPV) calculations for forest, 2020 . . . . . . . . . . . . . . . . . . . . . . 381 AI.11 Monetary ecosystem asset account, 2020 (currency units) . . . . . . . . . . . . . . . . . . 383 Contents xxxi page Figures 2.1 General ecosystem accounting framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2.2 Connections between ecosystem accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 3.1 Vertical structure of a terrestrial ecosystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 3.2 Vertical structure of marine ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 3.3 Relationships between spatial units in ecosystem accounting . . . . . . . . . . . . . . . 57 3.4 Application of a grid-based BSU to delineate ecosystem assets . . . . . . . . . . . . . . 67 5.1 Aggregation commutativity subsequent aggregation operations result in the same aggregated values, independent of the order of the operations . . . . . . . . . 111 6.1 Relationships between capacity to deliver ecosystem services and the ecosystem accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 A10.1.1 Extent at t0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 A10.1.2 Extent at t1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 A12.1.1 WTP, exchange values and consumer surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 300 A12.1.2 Static one-good market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301 13.1 Main components of the carbon cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 13.2 Coverage of the ocean accounts framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323 13.3 Applying the landscape approach for classifying urban ecosystems using the local climate zone classification of Stewart and Oke (2009) . . . . . . . . . . . . . . 327 13.4 High-resolution thematic focus mapping of urban tree canopy asset extent and height (condition) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 14.1 Information pyramid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 AI.1 Opening extent of ecosystem assets in SEEALand, 1 January 2020 . . . . . . . . . . . 371 AI.2 Closing extent of ecosystem assets in SEEALand, 31 December 2020 . . . . . . . . . 371 Section A Introduction and overview 3 Section overview The System of Environmental-Economic Accounting – Ecosystem Accounting (SEEA EA) is a spatially based, integrated statistical framework for organizing bio- physical information on ecosystems, measuring ecosystem services, tracking changes in ecosystem extent and condition, valuing ecosystem services and assets and linking this information to measures of economic and human activity. SEEA EA was devel- oped to respond to a range of policy demands and challenges, with a focus on making visible the contributions of nature to economic activities and people’s lives. At its fifty-second session, held from 1 to 3 and on 5 March 2021, the United Nations Statistical Commission adopted chapters 1 to 7 of SEEA EA, describ- ing the accounting framework and the physical accounts as an international statisti- cal standard; recognized that chapters 8 to 11 of SEEA EA describe internationally recognized statistical principles and recommendations for the valuation of ecosystem services and assets in a context that is coherent with the concepts of the System of National Accounts (SNA) for countries that are undertaking valuation of ecosystem services and/or assets; and noted that SEEA EA chapters 12 to 14 described the appli- cations and extensions of ecosystem accounting.5 5 See Official Records of the Economic and Social Council, The SEEA EA complement the measurement of the relationship between 2021, Supplement No. 4 the environment and the economy as described in the System of Environmental- (E/2021/24), chap. I, sect. B, Economic Accounting 2012 – Central Framework (SEEA Central Framework) (United decision 52/108, para. (c). Nations, European Commission, Food and Agriculture Organization of the United Nations, International Monetary Fund, Organisation for Economic Co-operation and Development and World Bank, 2014). SEEA, encompassing the SEEA Central Framework and SEEA EA, constitutes a system that complements SNA through the use of accounting principles to integrate physical and monetary measures related to the environment in such a way as to allow for comparison with data from national accounts. Chapter 1 provides an overview of SEEA EA, with a focus on the context for its development, its connections with other measurement frameworks and initiatives and considerations for implementation. Chapter 2 summarizes the ecosystem accounting framework, placing information on ecosystem extent, ecosystem condition, ecosystem services and monetary values of ecosystem services and assets in context. SEEA EA applies the accounting principles of the System of National Accounts 2008 (2008 SNA) (United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development and World Bank, 2009). In the context of monetary valuation, SEEA EA applies the SNA concept of exchange value. While estimates based on this value concept are useful in many con- texts, there are some limitations. For one thing, such estimates do not include the monetary value of the wider social benefits of ecosystems, including their non-use values, which some users may find relevant. More generally, monetary values will not fully reflect the importance of ecosys- tems for people and the economy. Assessing the importance of ecosystems therefore requires consideration of a wide range of information extending beyond data on their 4 System of Environmental-Economic Accounting – Ecosystem Accounting monetary value and their services, including data both on the biophysical characteris- tics of ecosystems and on the characteristics of the people, businesses and communi- ties that are dependent on them. SEEA EA is a system conceived and constructed as an integrated, internally consistent series of accounts. Its design is such that it can be implemented equally well in parts, that is to say, implementation can be flexible and modular. Indeed, the progressive, staged development of the range and detail of the ecosystem accounts is likely an appropriate implementation strategy. Generally, the compilation of ecosys- tem accounts in monetary terms requires the use of data in physical terms. It is there- fore recommended that when monetary accounts are released, the associated data in physical terms – for example, concerning changes in ecosystem extent and condition – be released concurrently. This will aid interpretation of the monetary data and their application in policy- and decision-making. The interpretation and analysis of ecosys- tem accounting data are also supported through the use of other types of information, such as data on environmental protection expenditure, industry value added, employ- ment and population. 5 Chapter 1 Introduction 1.1 Context for SEEA EA 1.1 It is well established that healthy ecosystems and biodiversity are fundamental to supporting and sustaining people’s well-being, their communities and their econo- mies. However, the environment is under pressure, and securing and improving live- lihoods require facing consequential risks. These challenges have been recognized at the local, national and global levels, and the needed global responses have been clearly articulated in the 2030 Agenda for Sustainable Development, including the Sustainable Development Goals,6 and other global instruments, such as the Paris Agreement.7 The 6 Adopted by the General Paris Agreement, which is aimed at strengthening the global response to the threat Assembly, at its seventieth of climate change, was adopted under the United Nations Framework Convention on session, on 25 September 2015. See Assembly resolution 70/1. Climate Change.8 It is expected that a post-2020 global biodiversity framework, designed 7 to bend the curve of biodiversity loss, will be finalized and adopted at the fifteenth Adopted by the Conference of the Parties to the United meeting of the Conference of the Parties to the Convention on Biological Diversity. Nations Framework Conven- 1.2 There has been growing recognition that the degradation of nature is not a purely tion on Climate Change at its environmental issue requiring environmental policy responses and that economic and twenty-first session, held in social policy responses are also needed. Decision makers across all sectors must there- Paris from 30 November to 13 December 2015. See https:// fore consider the particular environmental context in which decisions will be made undocs.org/FCCC/CP/2015/10/ and the associated dependencies and impacts. Establishing agreed ongoing measure- Add.1. ment of changes in the state of the environment and their relationship to economic 8 United Nations, Treaty Series, and other human activity is central to ensuring that ecosystems and biodiversity are vol. 1771, No. 30822. mainstreamed in decision-making processes, including those related to economic and financial systems. 1.2 What is SEEA EA? 1.2.1 Introduction 1.3 SEEA EA is a spatially based, integrated statistical framework for organizing biophysical information on ecosystems, measuring ecosystem services, tracking changes in ecosystem extent and condition, valuing ecosystem services and assets and linking this information to measures of economic and human activity. SEEA EA was developed by a multidisciplinary group of experts to respond to a range of policy demands and challenges, with a focus on making visible the contributions of nature to the economy and people and on better recording the impacts of economic and other human activity on the environment. To this end, ecosystem accounting incorporates a wider range of benefits that accrue to people than is captured in standard economic accounts and provides a structured approach to assessing the dependence and impacts of economic and human activity on the environment. 1.4 SEEA EA complements the measurement of the relationship between the envi- ronment and the economy described in the SEEA Central Framework. SEEA EA data on ecosystems can be combined with data on environmental pressures, individual resource stocks and environmental responses in the form of expenditures, taxes and 6 System of Environmental-Economic Accounting – Ecosystem Accounting subsidies, in the SEEA Central Framework accounts, to provide a comprehensive pic- ture of environmental-economic relationships. 1.5 Through application of the national accounting principles of the 2008 SNA, the statistical framework for the measurement of the economy, the SEEA EA framework allows for a unique integration of environmental and economic data in support of deci- sion-making. The harmonization of those data is intended to contribute both to main- streaming the use of environmental data on ecosystems in economic decision-making and to supporting the use of economic data in environmental decision-making. 1.6 The use of an accounting approach takes advantage of the inherent structure of accounts in which both stocks and flows are part of a single recording system. In this context, the basic accounting principles are applied to the organization of data in both physical and monetary terms to provide an integrated, coherent and consistent data set. Further, the adoption of an accounting approach facilitates comparable, regular and ongoing measurement. 1.2.2 Coverage and interpretation of SEEA EA 1.7 SEEA EA reflects the integration of the latest knowledge, methods and tech- niques in the measurement of ecosystems. Nonetheless, it is recognized that there are challenges in implementation and interpretation that will require ongoing attention. It is expected that the body of knowledge associated with ecosystem accounting, as well as the level of understanding of the data sources and methods used to compile ecosystem accounts, will evolve over time as a result of the widespread implementation of those accounts. Consequently, as is the case for all statistical methodological docu- ments, it will be necessary to refine and revise the content of SEEA EA in the future and to sustain the development of technical guidance and related material in support of implementation and interpretation. 1.8 SEEA EA is comprehensive in its coverage of ecosystems, encompassing all realms: terrestrial, freshwater, marine and subterranean ecosystem realms. Further, in describing the connections between ecosystems and economic and human activ- ity, it places focus on ecosystem services, which reflect the many uses – direct and indirect – of ecosystems. However, such coverage does not include all of those con- nections with ecosystems. Specifically, the measurement scope of SEEA EA does not directly address the importance of ecosystems arising from their very existence and captures only a portion of the significant cultural and spiritual relationships between people and the environment. 1.9 Within the context of monetary valuation, SEEA EA applies the concept of exchange values in line with standard economic accounting principles. This supports comparison with standard economic and financial data. While those values are use- ful in many contexts, they will not be equivalent to monetary values that incorporate the wider social benefits of ecosystems. Measurement of the economic value of these social benefits, while important, exceeds the scope of SEEA EA. Chapter 12 discusses some aspects of the links between monetary values in ecosystem accounting and other monetary values. 1.10 More generally, it is emphasized that monetary values from the accounts and the wider economic values just described will not fully reflect the importance of ecosys- tems for people and the economy. Assessing the importance of ecosystems therefore requires consideration of a wider range of information that extends beyond data on the monetary value of ecosystems and their services. This includes data both on the biophysical characteristics of ecosystems and on the characteristics of the people, busi- nesses and communities that are dependent on them. Introduction 7 1.11 While SEEA EA does not incorporate all the data that may be relevant in assess- ing the relationship between the environment and economic and human activity, it does provide a structured framework for organizing data that can support further analysis and place various perspectives in context. 1.2.3 Implementation of SEEA EA 1.12 SEEA EA is a system conceived and constructed as an integrated, internally con- sistent series of accounts. At the same time, its design is such that it can be imple- mented equally well as a whole or in parts, that is to say, implementation of the system can be flexible and modular. Indeed, the progressive, staged development of the range and detail of the ecosystem accounts is likely an appropriate implementation strat- egy. Depending on their specific environmental and economic context, countries may choose to implement only a selection of the accounts or to compile accounts only for selected regions. For example, a country may decide to compile accounts only in physi- cal – not monetary – terms. 1.13 Particularly as related to the compilation of accounts in monetary terms, some compilers may express concern that the data requirements and methodological assump- tions in this regard are too significant for the compilation of those accounts to be carried out within the context of official statistics. At the same time, there may be substantive demand for well-defined and comparable estimates in monetary terms for use in policy and analysis. Given these potentially competing considerations, it will be appropriate for work to be focused on compiling accounts that are highly relevant for decision-making and for which both suitable data and suitable estimation methods are available. 1.14 National statistical offices (NSOs) operate within different contexts and with different ranges of responsibility. Depending on the national context, there may be opportunities for collaborative approaches to compiling ecosystem accounts that take advantage of the strengths of NSOs together with the expertise of other agencies and research organizations. As ecosystem accounting is multidisciplinary in scope, multi- institutional approaches to implementation are appropriate. 1.15 In cases where accounts are being compiled in monetary terms, it is recom- mended that associated data in physical terms – for example, data related to changes in ecosystem extent and condition and flows of ecosystem services – be also released to facilitate the interpretation and application of the monetary data in policy- and deci- sion-making. Further, the interpretation and analysis of ecosystem accounting data can be supported through the use of other information, such as data on environmental protection expenditure, industry value added, employment and population. 1.16 A range of technical guidance is available on the SEEA website9 in support of 9 See https://seea.un.org/ the implementation, interpretation and application of the ecosystem accounts. This ecosystem-accounting. guidance will be expanded progressively in line with advancements of experience in compiling and using ecosystem accounts. 1.3 Statistical context for ecosystem accounting 1.3.1 Historical background of SEEA 1.17 Ecosystem accounting has arisen out of work on environmental accounting initiated by the international community of official statisticians under the direction of the Statistical Commission. Work on SEEA started in the 1980s in response to a demand for internalizing natural resource depletion and degradation into macro- economic accounting and culminated with the issuance of the Handbook of National Accounting: Integrated Environmental and Economic Accounting (SEEA 1993) 8 System of Environmental-Economic Accounting – Ecosystem Accounting (United Nations, 1993). The release of the publication responded to the policy demands of Agenda 21, the outcome document of the United Nations Conference on Environ- 10 Report of the United Nations ment and Development,10 which included a call for countries to implement national Conference on Environment systems of integrated environmental and economic accounting.11 and Development, Rio de Janeiro, 3–14 June 1992, vol. 1.18 On the basis of the experimentation of countries, SEEA 1993 was subsequently I, Resolutions Adopted by the updated in 2003 through a process of expert meetings and wide consultation led by Conference (United Nations the London Group on Environmental Accounting, one of several city groups estab- publication, Sales No. E.93.I.8 and corrigendum), resolution lished to advance methodologies and practices by the Statistical Commission.12 The 1, annex II. resulting Handbook of National Accounting: Integrated Environmental and Economic 11 Ibid., para. 8.41. Accounting 2003 (SEEA 2003) (United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development and 12 For further information, see World Bank, 2007) presented a variety of different methodological approaches and https://seea.un.org/content/ london-group-environmental- a range of examples demonstrating diverse country practices. While SEEA 2003 was accounting. not formally adopted as an internationally agreed statistical framework, it nonetheless provided a well-accepted and robust set of approaches for the compilation of various environmental-economic accounts. 1.19 Recognizing the critical importance of information on the environment and its relationship with the economy, the Statistical Commission established the United Nations Committee of Experts on Environmental-Economic Accounting (UNCEEA) in 2005 with the primary objective, the mainstreaming of environmental- economic accounting in official statistics. Subsequently, at its thirty-eighth session, held in 13 See Official Records of the February–March 2007, the Commission endorsed a second revision process,13 which Economic and Social Council, led to the development of the System of Environmental-Economic Accounting 2012 – 2007, Supplement No. 4 Central Framework (SEEA Central Framework). At its forty-third session, in March (E/2007/24), chap. I, sect. B, decision 38/107. 2012, the Commission adopted the SEEA Central Framework as the initial version of the international standard for environmental-economic accounts.14 The SEEA Central 14 Ibid., 2012, Supplement No. Framework lays out a standardized approach to accounting for a variety of physical 4 (E/2012/24), chap. I, sect. B, decision 43/105, para. (c). flows, physical and monetary measures of individual environmental assets and envi- ronmental transactions. 1.3.2 Development of SEEA EA 1.20 During the development of the SEEA Central Framework, a range of highly rel- evant topics were identified that called for further research or for further testing and experimentation in areas new to the statistical community. As accounting for eco- systems and their degradation was the primary focus of those topics, the Statistical Commission extended its support to the development of the System of Environmen- tal-Economic Accounting 2012 – Experimental Ecosystem Accounting (SEEA EEA) (United Nations, European Commission, Food and Agriculture Organization of the United Nations, Organisation for Economic Co-operation and Development and World Bank, 2014) as a complement to the SEEA Central Framework. 1.21 At its forty-fourth session, in March 2013, the Statistical Commission endorsed SEEA EEA as an important step in the development of an integrated statistical frame- work for organizing biophysical information, measuring ecosystem services, track- ing changes in ecosystem assets and linking this information to economic and other human activity; and encouraged its use by international and regional agencies and 15 Ibid., 2013, Supplement No. countries.15 At that time, SEEA EEA was not adopted as an internationally agreed sta- 4 (E/2013/24), chap. I, sect. tistical standard and was given the label “experimental” because of the novelty of the C, decision 44/104, decision conceptual framework from a statistical perspective and the lack of agreed measure- 44/104, para. (e). ment methods, including agreed methods of testing. Introduction 9 1.22 While the ecosystem accounting framework presented in SEEA EEA was novel, at the same time it reflected the integration of experience derived from many well- established areas of expertise, including statistics and national accounting, ecology and natural science, geography and geospatial measurement and environmental economics. By providing experts in those disciplines with a conceptual basis for the exchange and sharing of ideas, SEEA EEA facilitated a rapid growth in the devel- opment and testing of ecosystem accounting. In support of the activities being car- ried out at this level, in December 2017, the Statistics Division of the Department of Economic and Social Affairs of the United Nations Secretariat released the Technical Recommendations in support of the System of Environmental-Economic Accounting 2012 – Experimental Economic Accounting (United Nations, 2019b). That publication summarized the current state of knowledge and practice on ecosystem accounting and supported for further development and testing of methods. 1.23 In June 2017, at its twelfth meeting, UNCEEA determined, given the level of interest, testing and experimentation, that a revision of SEEA EEA was appropriate and that the project should include the goal of elevating as many facets of ecosystem accounting as possible to the status of an international statistical standard to be estab- lished by 2021. The revision process was endorsed by the Statistical Commission at its forty-ninth session, in March 2018.16 16 Ibid., 2018, Supplement No. 4 (E/2018/24), chap. I, sect. B, 1.24 The revision process was carried out under the auspices of the Committee of decision 49/110, para. (d). Experts with technical leadership provided by the SEEA Technical Committee on SEEA EEA. Four key areas of revision were established: (a) spatial units; (b) ecosystem condition; (c) ecosystem services; and (d) monetary valuation and accounting. Five working groups led research and discussion encompassing these research areas with activities commencing in early 2018. Twenty-three primary discussion papers, four background papers and numerous issue notes were drafted for review by various tech- nical experts across the disciplines listed in paragraph 1.22 above. On the basis of the content of these materials and the feedback that they generated, chapters were drafted for consideration by the SEEA Technical Committee. The chapters were released for two rounds of global consultation through 2020. A novelty of this process was the active engagement with many expert communities and global environmental and sus- tainability initiatives, and the hosting of various in-person and virtual forums on eco- system accounting. This breadth of engagement enriched the design and content of the ecosystem accounting framework and provided the basis for its ongoing development and implementation.17 17 The materials prepared and discussed over the course of the revision process are avail- 1.4 Conceptual approach of SEEA EA able at https://seea.un.org/ content/seea-experimental- 1.25 The general approach to ecosystem accounting in recording ecosystem stocks ecosystem-accounting- and flows has been described in a range of documents in various ways. SEEA-focused revision. research (see, for example, Vanoli, 1995) and research focused on extensions to the SNA (see, for example, Nordhaus and Kokkelenberg, eds., 1999) have considered the type of accounting described in SEEA EA. Of particular note are the advances in the work on wealth accounting carried out by both the World Bank (2018) and the United Nations Environment Programme (2018). While the major focus in this work has been the measurement of the wealth of natural resources, the extension designed 18 The wealth accounting to capture a wider range of benefits derived from the environment, including ecosys- literature has been enriched by tem services, is well established in the wealth accounting literature.18 more recent work in this field including that of Arrow and 1.26 In addition to being connected with these economic and accounting approaches, others (2012); Barbier (2013); the ecosystem accounting framework has adapted the concepts developed for ecosys- Dasgupta (2009); and Fenichel tem services measurement, such as the cascade model (Haines-Young and Potschin, and Abbott (2014). 10 System of Environmental-Economic Accounting – Ecosystem Accounting 2010) and the conceptual framework produced by the Intergovernmental Science- Policy Platform on Biodiversity and Ecosystem Services (IPBES) (Díaz and others, 2015), within which the core ecosystem accounting model can be situated. In its spatial approach to considering ecosystems, the ecosystem accounting framework builds on extensive work carried out on the classification, mapping and delineation of ecosys- 19 See, for example, Burkhard tems and their services.19 The measurement of ecosystem condition makes evident its and Maes, eds. (2017); David A. clear connections with long-standing ecological theory and measurement.20 Overall, Keith and others, eds. (2020); the underlying logic of, and conceptual basis for, ecosystem accounting should be con- and Sayre and others (2020). sidered to be well established. 20 See, for example, Andreasen 1.27 The essence of ecosystem accounting lies in its representation of the biophysical and others (2001); Holling environment in terms of distinct spatial areas, each representing a specific ecosystem (1973); Karr (1981); Leopold (1949); and Wheeler (2002). type. Ecosystem types include forests, grasslands, wetlands, cultivated areas, urban areas, rivers, coastal dunes, coral reefs and deep-sea floors. Each spatial area of a specific ecosystem type is, for accounting purposes, treated as an ecosystem asset. Each ecosystem asset is accounted for in a manner that is broadly analogous to the SNA treatment of produced assets, such as dwellings, for which there is an underly- ing stock of capital (e.g. a house with specific characteristics such as a number of bedrooms and of a given condition) and an associated flow of services (e.g. owner- occupied housing services). 1.28 In practice, therefore, ecosystem accounting entails the recording over an accounting period of (a) the stock and change in stock of each ecosystem asset (encom- passing entries for ecosystem enhancement and degradation); and (b) flows from that asset in the form of ecosystem services. The flows of ecosystem services in any accounting period are related to the ecosystem type, its size or extent and its condi- tion or health and to factors determining levels of use such as population. While there are conceptual and definitional issues that require explanation, this general framing remains applicable throughout SEEA EA. Chapter 2 provides a more detailed over- view of the ecosystem accounting framework. 1.29 The principles for recording stocks and flows that are applied in ecosystem accounting can be used to organize data expressed in both physical and monetary terms. The use of common principles encourages the combined use of physical and monetary data. For entries in monetary terms, SEEA EA applies the concept of exchange values under which ecosystem services and ecosystem assets are valued at the prices at which they are exchanged or would be exchanged if there were markets present. This approach supports comparison of ecosystem accounting monetary val- ues with those recorded in conventional economic and financial accounts. 1.30 However, there is a range of other approaches to economic valuation of the environment that, in general, provide larger monetary values and are well suited to addressing different analytical questions and to being applied in different policy con- texts. SEEA EA monetary values should therefore not be expected to provide, nor they are intended to provide an estimate of, a complete “value of nature”. Further, in many decision-making contexts, it is essential to use physical data, for example, on the changing condition of ecosystems, either directly or to support interpretation of monetary values. Physical data can also support discussion of non-monetary environ- mental values, which are significant in many contexts. 1.31 The ecosystem accounting framework is the basis for the compilation of vari- ous ecosystem accounts. Five types of ecosystem account are described: (a) ecosys- tem extent accounts; (b) ecosystem condition accounts; (c) ecosystem services flow accounts in physical terms; (d) ecosystem services flow accounts in monetary terms; and (e) monetary ecosystem asset accounts. There is also a range of related accounts, Introduction 11 complementary presentations and applications, including thematic accounts and indicators. All of these accounts and related outputs are introduced in chapter 2 and described in detail in the appropriate chapters. 1.32 The framework presented in SEEA EA refines the original conceptual frame- work for ecosystem accounting set out in SEEA EEA. In many areas, the revisions provide additional explanations and clarifications. In some areas, reinterpretation or reformulation of the original framework reflects the outcomes of ongoing discussions and conversations with a wider range of experts. This is evident particularly in the application of concepts specific to ecology and biodiversity and in the discussion on the monetary valuation of ecosystem services and assets. The main areas where con- ceptual improvements were introduced are described in appendix A1.1. 1.5 Connections to other measurement frameworks and initiatives 1.5.1 Introduction 1.33 Ecosystem accounting has a number of key features that allow it to support, complement and extend other measurement frameworks and initiatives. Ecosystem accounting, in particular: (a) Is designed to facilitate comparison and integration with the economic data prepared in accordance with the principles of the SNA. This leads to the adoption of certain measurement boundaries and valuation con- cepts that are not systematically applied in other forms of ecosystem measurement; (b) Encompasses accounting for ecosystem assets in terms of both eco- system extent and condition, and ecosystem services. Commonly, the measurement of ecosystem extent and condition is a wholly separate undertaking from the measurement of ecosystem services; (c) Enables coherent accounting in both physical terms (e.g. hectares or tons) and monetary terms. Through coherent recording in physical and monetary terms and coverage of stocks and flows, the ecosystem accounting framework is well suited to deriving a wide range of indica- tors from a single information base and to supporting integrated envi- ronmental-economic analyses; (d) Is designed to provide a broad, cross-cutting perspective on ecosys- tems at the country and/or the subnational level. Since many ecosys- tem measurements are carried out at a detailed local level, ecosystem accounting enables the utilization of granular data to produce a richly textured picture of the condition of ecosystems and the services they supply; (e) Supports the consistent and comparable recording of data over time and thus provides information on trends in condition indicators (e.g. for grasslands or lakes), trends in the composition of ecosystem types (as measured by, e.g. the rates of conversion from natural to intensively managed ecosystem types) and trends in relationships between changes in the stock of ecosystems and flows of ecosystem services. 12 System of Environmental-Economic Accounting – Ecosystem Accounting 1.5.2 Connection to the SEEA Central Framework 1.34 As noted in section 1.2, collectively, SEEA EA and the SEEA Central Framework constitute a rich comprehensive framework for the organization of data on the relationship between the environment and the economy. They have been designed to complement each other and both reflect the application of the accounting principles of the SNA. 1.35 The SEEA Central Framework provides the concepts, definitions and classifi- cations needed to support integrated accounting for physical flows (natural inputs from, and residual flows to, the environment including water, energy, air emissions and solid waste); environmental transactions and transfers (e.g. environmental taxes, environmental subsidies and environmental protection expenditure); and individual environmental assets (e.g. mineral and energy resources, timber, fish, land, soil and water). 1.36 Connections to ecosystem accounting can be identified in a number of areas covered by the Central Framework. In the context of accounting for physical flows, measures of natural inputs from the environment (e.g. uncultivated timber resources) will be aligned with measures of ecosystem services, while measures of residual flows (e.g. flows of particulate matter and excess nitrogen) will be related to flows of ecosys- tem services such as air filtration and water purification. Often, residual flows indicate environmental pressures that can be related to changes in ecosystem condition. Con- nections can also be identified among environmental taxes and subsidies, expendi- tures on environmental protection and change in ecosystem condition and between the monetary value of natural resources, such as timber resources and fish stocks, and the monetary value of ecosystem assets. 1.37 A long-standing ambition of environmental-economic accounting has been to derive adjusted measures of value added and wealth that take into account the cost of using up environmental assets. In ecosystem accounting, realization of that ambition is being achieved through measurement of ecosystem degradation so as to reflect the loss of future flows of ecosystem services. This complements the meas- urement of depletion as defined in the SEEA Central Framework, which focuses on the costs of using up stocks of natural resources. The range of connections among the accounts of the SEEA Central Framework and those of SEEA EA are described in more detail in appendix A1.2. 1.5.3 Connection to SNA 1.38 In broad terms, the connection between SEEA EA and the SNA lies in the appli- cation and adaptation of national accounting concepts and principles for the pur- pose of accounting for ecosystem assets and their services. A summary of the most relevant concepts and principles is provided in chapter 2. SEEA, encompassing the SEEA Central Framework and SEEA EA, constitutes a system that complements the SNA through the use of the same accounting principles to integrate environmental measures in physical and monetary terms and in such a way as to allow for comparison with data from the national accounts. 1.39 SEEA EA encompasses a broader asset boundary in physical terms than that of the SNA, reflecting the definition of environmental assets in paragraph 2.17 of the SEEA Central Framework. According to that definition, environmental assets are “the naturally occurring living and non-living components of the Earth, together constitut- ing the biophysical environment, which may provide benefits to humanity”. Another key difference between SEEA EA and the SNA lies in the treatment of ecosystem ser- Introduction 13 vices. In the SNA, these flows remain outside the production boundary that establishes the set of goods and services that are the focus of measures of output, value added and gross domestic product (GDP). Measurement of ecosystem services, in both physical and monetary terms, through ecosystem accounting complements the estimates of output based on the SNA production boundary. 1.40 Further, the consistency with SNA concepts and principles of the SEEA EA approach to valuing the contribution of ecosystems is such that the monetary values can be used to provide complementary aggregates, such as of value added and wealth, which take into account the supply and use of ecosystem services and are adjusted for ecosystem degradation and enhancement. 1.41 The derivation of complementary aggregates can be presented through the com- pilation of a sequence of institutional sector accounts and balance sheets that build on the similarly labelled accounts in the SNA. Chapter 11 describes how these deriva- tions can be undertaken. Two of their key features are: (a) the allocation of degrada- tion to the economic unit that suffers the loss of ecosystem services rather than to the economic unit that causes the degradation;21 and (b) the introduction of a non-SNA 21 Alternative presentations quasi-sector referred to as the ecosystem trustee that holds stewardship over the eco- that apply the “polluter pays” system services that do not directly benefit an individual or private economic actor. principle for the allocation of degradation are described in 1.42 Other connections to standard economic accounts can be developed includ- chapter 12. ing extended supply and use tables (SUTs). In this case, there is particular interest in recording the use of ecosystem services by different economic units to better reflect the contribution of environmental assets to production and consumption patterns. 1.43 Like all other statistical methodology frameworks, the SNA is subject to revision on a periodic basis. Given the aim of ensuring alignment between SEEA accounting principles and treatments and those of the SNA, it will be necessary for the treatments discussed in SEEA EA to be revisited from time to time. 1.5.4 Connections to other statistical methodology outputs and guidance 1.44 SEEA EA incorporates the findings presented in a range of technical outputs on ecosystem accounting, as developed in the period from 2013 to 2020,22 as well as those 22 These include Cropper and derived from a large number of projects and initiatives on the subject. Those materials, Khanna (2014); Maes and projects and initiatives, which were the products of different agencies in different con- others (2013); United Nations Environment Programme texts, played an important role in the testing of the framework rolled out in SEEA EEA (2014); and Weber (2014). (2012). That testing enabled the evaluation of technical and methodological options and an assessment of the relevance of a national accounting approach to ecosystem measurement for research, policy analysis and decision-making. A range of these find- ings were collected and incorporated in the Technical Recommendations in support of SEEA EEA. 1.45 In addition to research focused specifically on ecosystem accounting there are a number of statistical methodological -related publications, handbooks and technical guidance documents that are of relevance for both the organization of data for the compilation of ecosystem accounts and the application of ecosystem accounting to thematic accounting and the derivation of indicators, among other endeavours. These documents include: • SEEA methodological publications: System of Environmental-Economic Accounting for Agriculture, Forestry and Fisheries (Food and Agricul- ture Organization of the United Nations and United Nations, 2020); Sys- tem of Environmental-Economic Accounting for Energy (SEEA-Energy) 14 System of Environmental-Economic Accounting – Ecosystem Accounting (United Nations, 2019); and System of Environmental-Economic Accounting for Water (SEEA-Water) (United Nations, 2012), which provide guidance on accounting for stocks and flows in these areas • Framework for the Development of Environment Statistics (FDES 2013) (United Nations, 2017) including the Basic Set of Environment Statistics (annex A), which provides guidance on the collection and presentation of environmental statistics and covers, inter alia, a number of themes related to ecosystem accounting, including measures related to ecosys- tem condition • Global Statistical Geospatial Framework (United Nations, Department of Economic and Social Affairs, Statistics Division, 2019), which provides guidance from a statistical perspective on geospatial information-related concepts and terminology • “Measuring the Sustainability of Tourism” website under the World Tourism Organization (ww.unwto.org/tourism-statistics/measuring-sustainability- tourism), which provides guidance on linking ecosystem accounting to measures of tourism activity 23 See the background document • Ocean accounts,23 which provide a broad framework for connecting rel- entitled Technical Guidance evant elements of the SNA, the SEEA Central Framework and SEEA EA on Ocean Accounting for in order to harmonize priority ocean data covering economic, ecological, Sustainable Development, prepared by the Economic governance and social dimensions and Social Commission for • Exploring Approaches for Constructing Species Accounts in the Context of Asia and the Pacific for the SEEA EEA (United Nations Environment Programme World Conserva- fifty-first session of the Statisti- cal Commission, held from tion Monitoring Centre, 2016), which provides guidance on how to apply 3 to 6 March 2020. Available an accounting approach to the compilation of information on species of at https://unstats.un.org/ special concern, such as those species of social, economic or conservation unsd/statcom/51st-session/ importance documents/BG-item-3h-TG_ Ocean%20accounting_ESCAP- E.pdf. 1.5.5 Relationship to other global environmental measurement and assessment initiatives 1.46 In its broad coverage of all types of ecosystems, SEEA EA incorporates a wide range of ecological and biophysical data, including data on ecosystem extent and con- dition, as well as data on flows of ecosystem services that commonly need to be derived from hydrological or other biophysical models. In accordance with its aims, ecosystem accounting provides a robust framework and associated data in support of a variety of global environmental and sustainability initiatives involving comparable measure- ment and reporting activities carried out over time and across countries. In many cases, the information collected through the implementation of those initiatives can provide source data for the compilation of ecosystem accounts. 1.47 Some key initiatives are listed directly below, reflecting the wide range of pro- grammes of work being implemented at the global, regional and national levels and within the corporate, academic and environmental non-governmental organization communities. These initiatives may be connected to work on ecosystem accounting and on the System of Environmental-Economic Accounting more broadly. They include: • Monitoring of the Sustainable Development Goals and, in particular, mon- itoring of progress towards achieving Goals 6, 14 and 15 24 United Nations, Treaty Series, • Post-2020 global biodiversity framework under the Convention on vol. 1760, No. 30619. Biological Diversity24 and its monitoring framework Introduction 15 • Measurement of land degradation under the United Nations Convention to Combat Desertification 25 25 Ibid., vol. 1954, No. 33480. • Measurement of greenhouse gas (GHG) emissions and removals through activities in the land use, land-use chain and forestry (LULUCF) sector under the United Nations Framework Convention on Climate Change and associated nationally determined contributions • IPBES regional and global assessments, including the IPBES values assess- ment • Development of the area of wealth accounting, encompassing measures of the value of natural capital (United Nations Environment Programme and World Bank) • International Union for Conservation of Nature (IUCN) assessment frameworks, including the Red List of Threatened Species, the Red List of Ecosystems and A Global Standard for the Identification of Key Biodiversity Areas: Version 1.0 (Gland, Switzerland, 2016); and knowledge products such as the World Database on Protected Areas (a joint project of the IUCN and the United Nations Environment Programme, and managed by the World Conservation Monitoring Centre (UNEP-WCMC) • Group on Earth Observations Biodiversity Observation Network (GEO BON) programmes of work on biodiversity, including the listing of essen- tial biodiversity variables (EBVs) and essential ecosystem services variables (EESVs); and the Group on Earth Observations Earth Observations for Ecosystem Accounting (EO4EA) initiative 1.48 The relevant measurement and reporting frameworks across these initiatives are currently not aligned at the level of data items and definitions, although all reflect the commitment to achieving a common broad and ambitious goal, which is to ensure that environmental stocks and flows become a standard feature of decision- making. There is consequently an opportunity for the statistical community to sup- port improved alignment of data and indicators and to further enhance wider collabo- ration and engagement. 1.49 Given the range of environment-related measurement and reporting work under way, there is considerable opportunity for compilers of ecosystem accounts to assess the potential of the data derived from that work to be used or adapted for the pur- pose of compiling ecosystem accounts in their country. Based on the same rationale, consideration could be given to how data used in, for example, state of environment reports or environmental impact assessments might become sources of relevant infor- mation for accounting. 1.6 Measurement, implementation and application 1.6.1 Introduction 1.50 The roles of different agencies in the implementation of ecosystem accounting and the adoption of alternative compilation pathways are summarized in the present section. As users of the accounts will include policymakers and analysts, ecosystem and natural resource managers, private sector businesses, local communities and other stakeholders, implementation requires ongoing engagement with those users to ensure that the ecosystem accounts are fit for purpose. 16 System of Environmental-Economic Accounting – Ecosystem Accounting 1.6.2 Role of NSOs and other agencies 1.51 NSOs have traditionally focused on producing official statistics indepen- dently, often in relative isolation from other data producers. However, the role of NSOs began to change over the past several years, as new technologies have allowed for unparalleled levels of data collection from a variety of new sources and as offi- cial statistics have become one source of information among many. Increasingly, this has prompted NSOs to undertake the role of data stewards. In assuming that role, NSOs have shifted from functioning solely as statistics producers to acting also as service providers, which entails both facilitating a collaborative approach to data and statistics across different data and statistics communities and providing oversight and governance. 1.52 There is arguably no statistical domain that demonstrates the potential of NSOs to serve as data stewards more than ecosystem accounting. SEEA EA implementation has often been led by the official statistics community and NSOs, but given the high degree to which ecosystem accounting is cross-cutting and spatial in nature, imple- mentation necessitates a highly collaborative approach and the active participation of representatives of many different agencies and disciplines, including geography, ecol- ogy, economics and statistics. There is also a need in many countries for coordination with agencies and experts at subnational administrative levels. Work is needed to fulfil a key objective, namely, the appropriate institutionalization of the processes (including data sharing), roles and responsibilities underpinning the compilation of ecosystem accounts. 1.53 Of particular significance for the collaborative process of ecosystem account- ing is the role of environmental policy agencies and associated technical research agencies whose work focuses on managing data in the areas of, for example, geo- graphical and remote sensing data, climate, water resources, biodiversity and environmental monitoring. These agencies, together with associated networks of scientists and researchers, often play a critical role in collecting and validating local environmental data and knowledge. Since, traditionally, NSOs have less experience working with those types of environmental data, collaboration with environmental policy and associated technical research agencies in the development of ecosystem accounts should be expected. 1.54 To ensure trust and quality, NSOs, in collaboration with relevant agencies, should provide oversight and governance through provision of an independent and expert opinion on data. Given the widespread interest in ecosystem accounting shown by multiple stakeholder groups (e.g. academia, government, the private sector), the role of NSOs in promoting high-quality ecosystem accounts is especially important. Moreover, the voice of NSOs can be recognized as authoritative by virtue of their inde- pendence and their particular and unique role within government. 26 See https://seea.un.org/. 1.55 The SEEA website26 provides a range of materials designed to support implemen- tation, including general advice on the establishment of programmes of work, compila- 27 See https://seea.un.org/ tion guidance documents and a knowledge base containing examples of SEEA work.27 content/knowledge-base for Two publications of the Statistics Division, Guidelines on Biophysical Modelling for many examples of the applica- Ecosystem Accounting (United Nations, Department of Economic and Social Affairs, tion of ecosystem accounting in the SEEA knowledge base. Statistics Division, 2022a) and Monetary Valuation of Ecosystem Services and Assets for Ecosystem Accounting. Interim version (United Nations, Department of Economic and Social Affairs, Statistics Division, 2022b), provide advice specific to the implementation of ecosystem accounts. In addition, compilers of ecosystem accounts are encouraged to learn from experiences of other countries and regions. Introduction 17 1.6.3 Approaches to the compilation of ecosystem accounts 1.56 Ecosystem accounts are most informative when they are not compiled as one-off, irregular or short-term studies of specific areas or environmental themes. Generally, the data generated from such studies do not support ongoing long-term measurement of trends or, by extension, the design and monitoring of policy responses. Aligned with the expectations associated with the preparation of common socioeconomic data – including national accounts, employment and population census data – is the expec- tation that, progressively, long time series of ecosystem accounting data can be estab- lished. This would provide the opportunity to strengthen and improve institutional arrangements and measurement approaches over time and would contribute to the compilation of enduring data sets. Those data sets could, in turn, underpin further research and analysis, which would, ideally, generate a virtuous circle of improved data supply. 1.57 The several alternative approaches to the compilation of ecosystem accounts lie along a spectrum. At one end are “spatially explicit” approaches, which entail compre- hensive and detailed spatial measurement of ecosystem services and rigorous delinea- tion of ecosystem assets. At the other end are “minimum spatial” approaches, which seek to provide a broad overview of trends among key ecosystem types and services. While the content of accounts compiled using an approach located at one end of the spectrum will be aligned conceptually with the content of accounts compiled using the approach situated at the opposite end, there will still be differences in the level of detail shown in the accounts (as reflected, for example, by the number of ecosystem types included). Under the minimum spatial approach, there is limited capacity to dissemi- nate outputs in the form of maps (and other spatially referenced outputs) that display the location and configuration of ecosystem assets and the services supplied by those assets. 1.58 In practice, the approach to compilation of ecosystem accounts lies between these two ends of the spectrum, with implementation being dependent on (a) policy focus; (b) availability of source data; and (c) resources available for compilation. While increasing the level of spatial detail has the potential to increase the accounts’ robust- ness and possibly open up a wider range of applications, it generally also increases the level of complexity of the compilation process. In practice, it is likely that the spatial resolution of the accounts will increase over time as more and better data become available and as methods and technologies improve. 1.59 A common starting point for ecosystem accounting is the compilation of ecosys- tem extent accounts, which provide a statistical frame for ecosystem accounts. Where national-level data are not available, global data sets can serve as the basis for a suit- able first step. Beyond the extent account, depending on the data available and the issues that are of particular interest, efforts may be directed towards the compilation of ecosystem condition accounts for different ecosystem types and towards the quan- tification of ecosystem services flows. While not a mandatory component, monetary valuation, which commonly relies on the organization of a wide array of data in physi- cal terms, could be undertaken as the final part of a compilation process. 1.6.4 Uses and applications of ecosystem accounting 1.60 In support of ongoing reporting requirements and discussion of emerging issues, the ecosystem accounts provide information that is: • Comprehensive, that is, it encompasses accounting for all ecosystem types across the terrestrial, freshwater, marine and subterranean realms and for a wide range of ecosystem services 18 System of Environmental-Economic Accounting – Ecosystem Accounting • Structured, that is, it follows an internationally agreed accounting frame- work coherent with agreed rules aligned with those of the SNA • Consistent, that is, it presents data that are consistent over time and with respect to concepts and classifications • Coherent, that is, it integrates a broad range of data sets in order to provide information on ecosystem services and assets • Spatially referenced, that is, it links data spatially to the scale of ecosystems and enables the integration of data across different accounts • Adaptable, that is, it allows for the use of targeted measurement scopes, which are appropriate to the context and can be increased over time (e.g. in the case of ecosystem services and ecosystem types) 1.61 The range of features of the information that ecosystem accounts are capable of providing facilitates support of economic and environmental policy- and decision- making. Consequently, ecosystem accounting can be applied, inter alia, to high- lighting ecosystems and ecosystem services of particular concern to policymakers; supporting the design of policy responses and instruments; assisting in the ongoing management of ecosystems; monitoring the effectiveness of various policies through the use of performance indicators; providing detailed spatial information on ecosys- tem services supply; supporting assessments of biodiversity; and mainstreaming envi- ronmental data in economic and financial decision-making. 1.62 The features of the information organized according to SEEA EA are set out in a statistical methodology framework and data compiled and published under this framework have the potential to encourage increased use of common classifications and definitions. This should assist in reducing the costs associated with deriving and using data, widening opportunities for development of shared technologies and data management solutions and increasing the possibilities for sharing methods and undertaking collaborative research. 1.63 SEEA EA is intended primarily to support national-level decision-making, with a focus on connecting information on multiple ecosystem types and multiple ecosys- tem services to macro-level economic information (e.g. measures of national income, output, value added, consumption and wealth). At the same time, ecosystem account- ing theory and practice is applicable at subnational scales as well. For example, ecosys- tem accounts can be used to support decision-making at the level of both individual administrative areas such as provinces and urban areas and environmentally defined areas such as water catchments, protected areas, biodiversity priority areas and coastal zones. 1.64 The compilation of ecosystem accounts often entails the use of spatially explicit data to analyse differences across locations and regions within a country, which can lead to a richer understanding of national-level information. Moreover, the use of spatially explicit data within the ecosystem accounting framework can support the coordination of local- and national-scale policies by enabling the establishment of an agreed common set of data and a common framing of the relationship between the environment and economic and human activity. 1.65 Through the utilization of a set of coherent data, ecosystem accounts can sup- port the consistent application of a wide variety of approaches, including cost-benefit analysis, risk assessments, system-based modelling, scenario analysis and scenario- based forecasting, and trade-off analysis. The incorporation of available coherent envi- ronmental data into the decision-making processes carried out in the business and finance sectors complements the wide range of initiatives under way in those sectors, Introduction 19 which reflect their recognition of the importance of ecosystems and biodiversity.28 The 28 Such initiatives include the incorporation of ecosystem account data can be used in conjunction with other meth- work of the Capitals Coalition, ods and tools applied to policy- and decision-making. 29 the Global Reporting Initiative (GRI), the International Inte- 1.66 Ideally, accounts should be updated regularly (e.g. annually) on the basis of grated Reporting Council (IIRC), source data availability and user needs, so as to ensure that a structured, compre- the Sustainability Accounting hensive and up-to-date database is in place to allow for a quick response to demands Standards Board (SASB) and the World Business Council for specific policy-related information. Although an assessment of specific policies for Sustainable Development or investments would likely require information additional to that presented in the (WBCSD), among many other ecosystem accounts, data from the accounts should be capable of defining relevant organizations. structures and trends and, in many cases, will support the modelling of a wide range 29 For a summary of potential of environmental and economic impacts. Further, basing different assessments on a applications, see the reports common underlying data set can result in improved comparison of policy alternatives. associated with the sessions of the Policy Forum on Natural 1.67 Notwithstanding their many potential applications, ecosystem accounts do not Capital Accounting for Better provide exhaustive coverage of all relevant environmental data. Indeed, SEEA EA data Decision Making, available complement the data collated using the SEEA Central Framework, which, as described at www.wavespartnership. in appendix A1.2, contains a wide variety of other types of data on the links between org/en/policy-forum-natural- the environment and the economy, including data on flows of pollutants and residuals capital-accounting-better- decision-making; and the SEEA and measures of expenditure on environmental protection and restoration. Moreover, policy guides issued by the it is likely that the coverage of ecosystem accounts will not be complete, particularly Statistics Division, available at in the initial stages of implementation: they may be focused, for example, on specific https://seea.un.org/content/ subnational areas or on a limited set of ecosystem services. Further, as outlined in sec- enhanca-enhance-natural-cap- tion 1.2 above, within the context of monetary valuation, SEEA EA does not include ital-accounting-policy-uptake- all potential economic values, in particular consumer surplus and non-use values. and-relevance. Depending on user requirements, additional measurement and analysis may therefore be needed. 1.7 Structure of SEEA EA 1.68 SEEA EA comprises five sections A to E. Sections A to C comprise the interna- tional statistical standard describing the accounting framework and physical accounts. Section D describes internationally recognized statistical principles and recommenda- tions for the monetary valuation of ecosystem services and assets. Section E describes applications and extensions of ecosystem accounting.30 30 United Nations Statistical Commission, report on the 1.69 SEEA EA is introduced in chapter 1 of section A, and the overview of the ecosys- fifty-second session, E/2021/24, tem accounting framework and associated relevant national accounting principles are decision 8g, https://unstats. considered in chapter 2. Together, these chapters cover the background of and ration- un.org/unsd/statcom/52nd- ale for ecosystem accounting, placing this work within the broader context of work on session/documents/2021- the measurement of the relationship between the environment and the economy. The 30-FinalReport-E.pdf. various components of the ecosystem accounting framework introduced in chapter 2 are examined in greater depth in subsequent chapters. 1.70 Accounting for ecosystem extent and condition is covered in section B. The definition and delineation of spatial units for ecosystem accounting are the subject of chapter 3. Those units, referred to as ecosystem assets, serve as the building blocks of the accounting framework and provide the structure for the organization of data about ecosystems. Included in the chapter is a description of the International Union for Conservation of Nature Global Ecosystem Typology (IUCN GET), a reference clas- sification for ecosystem types. Chapter 4 outlines the process through which data on the size of an ecosystem asset, referred to as ecosystem extent and usually measured in terms of area, can be organized and presented in an ecosystem extent account. Chapter 5 presents a three-stage approach to accounting for the condition of ecosystem assets, where ecosystem condition is measured in relation to ecosystem integrity and where 20 System of Environmental-Economic Accounting – Ecosystem Accounting data on ecosystem characteristics are structured using the SEEA ecosystem condition typology (ECT) and are referenced to a condition appropriate for the ecosystem type. 1.71 Section C presents accounting for ecosystem services in physical terms. The focus of chapter 6 is on a wide range of conceptual issues including the link between ecosystem services and benefits, the defining characteristics of final and intermediate services, accounting treatments for selected ecosystem services and other flows, and the definition of ecosystem capacity. Also presented in the chapter is the SEEA ecosys- tem services reference list that provides descriptions for 33 ecosystem services. Build- ing on SUTs, chapter 7 displays accounting entries for the ecosystem services flow account in physical terms and discusses specific measurement issues, such as defining measurement baselines for the quantification of ecosystem services flows for account- ing purposes. 1.72 The monetary valuation of ecosystem services and ecosystem assets is considered in section D. Chapter 8 outlines the principles of monetary valuation for accounting purposes, highlighting the application of the concept of exchange value as described in the SNA. Chapter 9 outlines how accounting entries are obtained for the ecosystem services flow account in monetary terms, building on the same account in physical terms, and summarizes the appropriate valuation techniques for estimating flows of ecosystem services in monetary terms for accounting purposes. Chapter 10 describes the monetary ecosystem asset account, which incorporates entries for the opening and closing value of ecosystem assets and for changes in their value due to degradation, enhancement and other changes in value. Chapter 10 also describes the net present value (NPV) approach to the valuation of ecosystem assets. Chapter 11 demonstrates how the monetary values from the ecosystem services flow account in monetary terms and the monetary ecosystem asset account can be combined with the standard SNA accounts to compile extended economic accounts, including extended SUTs, extended balance sheets and extended sequence of institutional sector accounts. 1.73 Section E introduces a variety of applications and extensions of the ecosystem accounts. Chapter 12, recognizing the range of methods for valuation of ecosystems and related flows in monetary terms, considers complementary approaches to valua- tion, thereby placing ecosystem accounting values in a wider environmental-economic valuation context. Chapter 13 describes thematic accounting, that is, accounting devel- oped to support discussion and analysis of specific environmental themes, including the themes of biodiversity, climate change, oceans and urban areas as examples. Chap- ter 14 examines the links between ecosystem accounts and indicators and indicator frameworks, including those associated with the monitoring of global agreements, such as those proposed for Convention on Biological Diversity and the 2030 Agenda for Sustainable Development. 1.74 Several chapters, including the present one, include appendices containing clas- sifications, examples and other illustrative material designed to support the explana- tion of concepts and the compilation of accounts. Annex I to the publication presents a stylized example of accounting for a limited set of ecosystem types and ecosystem services. A research and development agenda is presented in annex II, which is fol- lowed by a glossary of key terms and a list of references. 21 Appendix A1.1 From SEEA EEA to SEEA EA: main conceptual changes A1.1 SEEA EEA presented initial efforts to define a measurement framework for inte- grating biophysical data, tracking changes in ecosystems and linking those changes to economic and other human activity. At its forty-fourth session, in 2013, the Statistical Commission welcomed SEEA EEA as an important step forward in the development of a statistical framework for ecosystem accounting. The definitions and accounting treatments provided in SEEA EA build on the measurement framework elaborated in SEEA EEA. A1.2 Research and testing of the concepts, definitions, classifications and treatments outlined in SEEA EEA have resulted in substantial refinement and clarification of the ecosystem accounting framework. The key areas of progress are noted in the present appendix. The endorsement of SEEA EEA led not only to technical advances but also to a substantial increase, as well in testing and experimentation of, awareness of, and involvement in, ecosystem accounting across many countries, disciplines and sectors. This broad engagement, particularly the engagement beyond the community of official statisticians, added considerable richness to the economic, ecological, geographical, accounting and statistical basis for ecosystem accounting. A1.3 There has been a steady refinement of the choice of labels for and description of the types of spatial units. In SEEA EEA, the relationship among the three types of units – basic spatial units (BSUs), land-cover/ecosystem functional units and ecosystem accounting units – was framed as a hierarchy. In SEEA EA, the land-cover/ecosystem functional unit, which has now been relabelled as an ecosystem asset, is the key concep- tual unit. While ecosystem accounting units (EAUs) have been relabelled as ecosystem accounting areas (EAAs), their role, as conceptualized within the ecosystem accounting framework, remains unchanged. BSUs have retained their place within SEEA EA but are now regarded as a means of implementing the ecosystem accounting approach rather than as elements in a nested hierarchy. A1.4 SEEA EA provides an agreed classification of ecosystem types based on IUCN GET. This represents a significant advance over the classification, comprising broad classes of land-cover/ecosystem functional units set out in SEEA EEA. Associated with the SEEA EA classification are principles for the delineation of ecosystem assets by ecosystem type. Those principles now support the delineation of spatial units for eco- system accounting based on the consistent application of data from various sources. Use of these principles has facilitated a more coherent description of accounting for ecosystem extent. A1.5 SEEA EEA provided a basic description of accounting for ecosystem condi- tion using a reference condition-based measurement approach. While SEEA EA has retained the use of that approach, it has considerably expanded the descrip- tion of measurement. In particular, SEEA EA has determined the focus of meas- urement to be ecosystem integrity. It covers SEEA ECT for the organization of 22 System of Environmental-Economic Accounting – Ecosystem Accounting characteristics, variables and indicators of condition and outlines a three-stage approach to accounting for ecosystem condition entailing selection of variables, referencing of indicators and derivation of aggregate ecosystem condition indices. SEEA EA also describes the application of the approach to natural and anthropogenic ecosystems and focuses on its linkages to both biodiversity assessment and use of indi- cators of environmental pressures. A1.6 The definition of ecosystem services in SEEA EA remains the same as that found in SEEA EEA and, in broad terms, the conceptual intent in the measurement of ecosystem services has not been changed. There have, however, been substantive improvements in the discussion of the links to benefits and well-being, the description of the boundary with abiotic flows and the definition of intermediate services, which were not defined explicitly in SEEA EEA. While a classification of ecosystem services has not been established, a comprehensive reference list of ecosystem services has been developed in consultation with the custodians of the leading international ecosystem services classifications and typologies. Moreover, the descriptions of accounting treat- ments for a number of ecosystem services, including biomass provisioning services, global climate regulation services and water supply-related services, have undergone significant refinement. Those refinements in the description of accounting treatments were reflected in the description of a complete SUT for ecosystem services in physical terms, which was introduced only in general terms in SEEA EEA. A1.7 SEEA EEA introduced the concept of ecosystem capacity but without providing a specific definition. While SEEA EA does provide a definition of ecosystem capacity as well as descriptions of associated concepts such as potential supply and ecosystem capability, it does not present an example of an ecosystem capacity account. A1.8 The challenges associated with the monetary valuation of ecosystem services and ecosystem assets are recognized in both SEEA EEA and SEEA EA. The use of the concept of exchange value has been retained, and an improved description has been provided on links to alternative valuation concepts, such as the concept of wel- fare value. Determining which valuation techniques can be applied to measurement of exchange values has been a focus of deliberation, and those techniques have been ranked in order of preference. The use of the NPV technique to value ecosystem assets in monetary terms has been retained, and discussion of its application in an ecosystem accounting context has been considerably expanded. Further, definitions of a range of entries in the monetary ecosystem asset account, including the terms ecosystem degra- dation and ecosystem enhancement, have been developed. A1.9 The design of extended monetary accounts in which data from the ecosystem accounts are combined with data from the standard SNA accounts has been clarified. In annex A6 of SEEA EEA, two potential models for the sequence of institutional sec- tor accounts had been presented. Research undertaken as part of the SEEA EA revi- sion process identified a third alternative entailing the introduction of an ecosystem trustee. This alternative, presented in chapter 11, has been agreed upon as the appro- priate approach for generating such a sequence of accounts. A1.10 Apart from an introduction to accounting for biodiversity and for carbon stocks, the content of SEEA EEA does not extend beyond the presentation of eco- system accounts and descriptions of their links to SNA sector accounts. In contrast, SEEA EA, in its last three chapters, covers a wide range of applications and exten- sions of ecosystem accounting, encompassing complementary approaches to valua- tion and derivation of indicators and design of combined presentations, as well as thematic accounting, which includes accounting for biodiversity and accounting for carbon stocks. 23 Appendix A1.2 Linking SEEA EA and the SEEA Central Framework Introduction A1.11 SEEA EA is designed to complement the SEEA Central Framework and thereby provide, together with the Central Framework, a complete description of the relation- ship between the environment and the economy through the application of the same accounting principles used by the SEEA Central Framework. The complementarity of the two frameworks can be considered both in the context of the definition of environ- mental assets and from the perspective of data coverage within a basic driving forces- pressure-state-impact-response (DPSIR) framework (European Environment Agency, 1999). A1.12 The definition of environmental assets provided in the SEEA Central Frame- work encompasses the measurement of individual environmental assets (such as land, soil, water and timber) and ecosystem assets. This definition supports accounting in both the SEEA Central Framework and SEEA EA. The asset boundary established by this definition is broader than the asset boundary of the SNA since, unlike the SNA definition, it establishes a physical boundary for assets and does not require that flows of benefits must accrue to owners of environmental assets. A1.13 Under the SEEA Central Framework, the focus of accounting within this broader asset boundary is on the types of individual resources such as minerals, tim- ber, water, land and soil that are the components of the environment and are used in economic activity. The focus of accounting for environmental assets in SEEA EA is not only ecosystems per se but also in many senses, how their individual components function together. Consequently, there are often strong connections between account- ing for individual environmental assets, as described in the SEEA Central Framework, and SEEA EA measures of ecosystem assets such as timber resources and forest eco- systems and measures of ecosystem services, for example, wood provisioning. A1.14 With its focus on individual resources, accounting under the SEEA Central Framework considers only the benefits accruing from the use of those resources in production as defined by the SNA production boundary. Thus, the monetary value of the resources is linked to the values of minerals, energy, timber, fish and other resources extracted or harvested from the environment. In SEEA EA, the set of ben- efits within scope is broadened to include a wide range of ecosystem services. This covers both contributions to production as defined under the SNA and other services, such as air filtration, water regulation and recreation-related activities. A1.15 The DPSIR framework is a common framing for measurement and analysis of the connection between the environment and the economy. The focus of SEEA EA is on the state and impact components of this framework. Thus, measures of changes in the mix of ecosystem types, changes in the condition of ecosystem assets and changes in the basket of ecosystem services provide a more complete picture of environmental 24 System of Environmental-Economic Accounting – Ecosystem Accounting state and the impacts of economic and human activity than that provided by the SEEA Central Framework accounts. A1.16 On the other hand, through the SEEA Central Framework – in particular the measurement of physical flows (associated, for example, with water use, energy use, air emissions and solid waste), as well as the derivation of data on the stocks and use of natural resources – a richly informative perspective on the pressure exerted by economic activity on the environment and ecosystems can be developed. Moreover, the SEEA Central Framework supports the organization of data on the response to environmental issues through establishment of accounts for environmental taxes and subsidies, environmental protection expenditure and activities of the environmental goods and services sector (EGSS). A1.17 While the potential exists for identifying features common to the measurement approach of the SEEA Central Framework and that of ecosystem accounting, a basic difference is that accounting under the Central Framework is focused on the national level, whereas ecosystem accounting has also a subnational-level focus, with measure- ment often entailing use of detailed spatial data and models. The integration of data from the SEEA Central Framework, for example, on pressures arising from residual flows, may require the spatial disaggregation of data on residual flows to locations within a country, so that the link between the residual flows and changes in ecosystem condition can be clearly established. A broad national-level comparison of residual flows and changes in condition is likely to miss important variations across locations within a country. A1.18 In the area of monetary valuation, both SEEA EA and the SEEA Central Framework apply the exchange value concept and use the NPV approach for the valu- ation of environmental assets. The range of the flows that are within scope of valuation is the factor responsible for the primary difference between the two frameworks with respect to estimates of the monetary value of environmental assets. As noted above, in the SEEA Central Framework, flows are limited to those within scope of the SNA and are associated primarily with natural resource extraction and harvest. In ecosys- tem accounting, the scope of valuation is extended to capture all relevant ecosystem services. The inclusion in SEEA EA of a broad range of ecosystem services leads to an expansion of the scope of wealth since the underlying environmental assets are recog- nized as providing a wider set of benefits. A1.19 These connections are addressed in greater detail below. While neither the Central Framework nor the SEEA EA framework on its own provides a complete body of information for analysing the relationship between the environment and the econ- omy, when combined, however, they present a rich and coherent data set. Recording environmental assets and related stocks A1.20 As noted above, the SEEA Central Framework focuses on individual assets, that is to say, without consideration of the broader context or system in which those assets, commonly natural resources, are located. The SEEA Central Framework focuses, for example, on timber resources, whereas the focus of SEEA EA is the forest, which sup- plies not only wood biomass but also a range of other ecosystem services. The same kind of comparison can be drawn within the context of fish resources and marine or freshwater ecosystems. A1.21 There should be coherence between recording of physical changes in the stock of ecosystem assets and related recording of changes in individual environmental assets. In other words, for the same accounting period and the same location, the changes in the stock of natural resources should correspond to the changes in the Appendix A1.2: Linking SEEA EA and the SEEA Central Framework 25 stock of ecosystem assets. For example, a change in ecosystem type from forest to cul- tivated land as recorded in the ecosystem accounts should be reflected in a reduction in timber resources as measured in the asset account for those resources. A1.22 The link between data on ecosystem extent and data on land cover and land use needs to be highlighted in this context. For terrestrial areas there should be a reason- able concordance between data on land cover and ecosystem extent since land cover is a key variable in the delineation of ecosystem types. Further, for cultivated areas, data on land use may be considered in delineating ecosystem types. A1.23 As a result of the coherence in the measurement of physical stocks, there are important advantages for ecosystem accounting in compilation since it becomes possible to use the range of materials, including documentation, that have been developed for the measurement of water resources, including SEEA-Water (United Nations, 2012), and for agriculture, forestry and fisheries, including the System of Environmental-Economic Accounting for Agriculture, Forestry and Fisheries (SEEA AFF) (Food and Agriculture Organization of the United Nations and United Nations, 2020). While these materials, generally speaking, have not been developed for ecosystem accounting purposes, they can support, especially in the context of methods and data sources, the development of relevant estimates and accounts. A1.24 SEEA EA considers two areas, namely, accounting for carbon and accounting for species populations, where the asset accounting approaches based on measure- ment of stocks and changes in stocks as described in the SEEA Central Framework are applied. Moreover, the range of measurement-related materials emerging in these two areas can be used to support the measurement of ecosystem assets and ecosystem services and should be coherent with the individual environmental asset accounts of the Central Framework. A1.25 The SEEA Central Framework defines the concept of natural resource deple- tion and introduces the concept of ecosystem degradation. These concepts are distin- guished on the basis primarily of scope of measurement, mirroring the distinction between a focus on individual environmental assets and a focus on ecosystem assets. That is to say, depletion is defined in relation to the using up of the stock of resources relative to rates of regeneration, while degradation is defined in relation to changes in condition and future flows of ecosystem services. A1.26 Since measurement of depletion centres on an individual resource with a single benefit stream, a direct connection can be made between changes in the stock of the resource and changes in future benefit streams. For degradation, the relationship is more complex since in this case a bundle of ecosystem services is generally supplied by a single ecosystem asset and the relationships between each service, and the changes in ecosystem condition will vary. Nonetheless, for a given ecosystem asset, there should be a reasonably close relationship between measures of depletion and measures of deg- radation as they pertain to provisioning services such as for wood or fish biomass. Environmental flows A1.27 The SEEA Central Framework discusses accounting for environmental flows – such as flows of water, energy, GHG emissions and solid waste – which are recorded in physical terms. The defining characteristics of three types of flows – natural inputs, products and residuals – are set out in detail. In the Central Framework, natural inputs are defined as “all physical inputs that are moved from their location in the environ- ment as a part of economic production processes or are directly used in production” (para. 3.45). In general terms, this definition encompasses the set of provisioning ser- 26 System of Environmental-Economic Accounting – Ecosystem Accounting vices that contribute to the production of agricultural, forestry, fisheries and similar outputs. A1.28 A number of differences in scope between the SEEA Central Framework and SEEA EA should be noted. As defined in the Central Framework: • Natural inputs include inputs of mineral and energy resources, inputs from soil resources (excavated) and energy inputs from renewable sources (e.g. solar, wind). These inputs are excluded from the scope of ecosystem ser- vices but may be recorded as abiotic flows within the SEEA EA framework. • Natural inputs include inputs of timber, aquatic resources (e.g. fish) and other biological resources but only in cases where the production process does not entail cultivation or is unmanaged since cultivated biological resources are produced within the economy. In SEEA EA, provisioning services are recorded in contexts both of cultivation and of non-cultivation. • Natural inputs include inputs of water resources. In SEEA EA, following the treatment presented in chapter 6, these flows may be recorded as a proxy for the ecosystem services underpinning the supply of water, such as water regulation and water purification but should otherwise be recorded as abiotic flows. • Natural inputs include inputs of nutrients and carbon, nitrogen and other elements. These flows are not commonly recorded in an ecosystem accounting context but may be relevant for measurement of some regu- lating and maintenance services, for example, in the context of recording global climate regulation services and water purification services. • Natural resource residuals represent those flows of natural resources that are extracted or harvested and immediately returned to the environ- ment. Examples include discarded catch in fishing and felling residues in forestry. In SEEA EA, flows of provisioning services are recorded in gross terms before natural resources residuals are recorded. Recording is thereby aligned with the gross recording of natural inputs used in the SEEA Central Framework. A1.29 Physical flows of products occur within the economy and are therefore not recorded within SEEA EA. Nonetheless, it should be possible, in concept, to link flows of final ecosystem services that contribute to SNA benefits to physical flows of prod- ucts. For example, biomass provisioning services could be linked to flows of food and other products to which they are inputs. This may be of particular relevance to the development of “footprints” and the understanding of the extent to which ecosystem services are embodied in traded goods and services. A1.30 As defined in the SEEA Central Framework, residuals are “flows of solid, liq- uid and gaseous materials, and energy that are discarded, discharged or emitted by establishments and households through processes of production, consumption or accumulation” (Central Framework, para. 3.73). In general, these physical flows are not recorded directly in the ecosystem accounts. Instead, they are reflected either in measures of environmental pressures that may be used as proxies in the assessment of ecosystem condition; or in measures of the flow of ecosystem services provided by the ecosystem assets that receive, store or process the relevant residual. For example, data concerning particulate matter less than 2.5 micrometres in diameter (PM2.5) absorbed by trees would be used in the measurement of air filtration services. A1.31 While SEEA EA is not directly aligned with the SEEA Central Framework with respect to recording of residual flows, the quantities of residual substances that are Appendix A1.2: Linking SEEA EA and the SEEA Central Framework 27 not broken down or absorbed are of particular interest in the context of ecosystem accounting. Indeed, since flows of residuals are likely to affect the capacity of ecosys- tem assets to supply ecosystem services, developing the potential to quantify this type of feedback loop is an important motivation for clarifying the links between ecosys- tem accounting and accounts under the Central Framework. Moreover, information on residual flows is relevant to the assessment and valuation of ecosystem disservices and externalities, a topic discussed in chapter 12 of the present publication. A1.32 The basic structure of the ecosystem services flow accounts is derived, with three main alterations described directly below, from the design of the physical supply and use tables (PSUTs) introduced in the SEEA Central Framework. First, unlike the PSUT, which contain just one column for the environment as a whole, the ecosystem services flow accounts contain multiple columns, each encompassing a different eco- system type. A1.33 As noted above, the PSUT covers three types of flows: natural inputs, products and residuals. While the concept of ecosystem services is in general linked to that of natural inputs as defined in the Central Framework, the Framework’s coverage of natural inputs is limited to provisioning services (as discussed above). Flows of regu- lating and maintenance services and cultural services are covered by SEEA EA but are not included in the SEEA Central Framework. A1.34 Lastly, the SEEA Central Framework does not consider the ways in which different stocks and flows may be connected spatially (i.e. it adopts an individual resource perspective) and rather than enable the location of ecosystems and their services to be reflected in the accounts, the Central Framework focuses on account- ing at national scale. In contrast, the ecosystem services flow account has the capac- ity to record intermediate services, which reflect the dependencies among ecosystem assets. Further, it has the added potential to present results from accounting in the form of maps. Environmental transactions A1.35 The focus of chapter IV of the SEEA Central Framework is the recording of environmental transactions, including environmental taxes and subsidies and other environment-related payments, as well as environmental activity accounts. Informa- tion on environmental activities, particularly those related to the restoration of ecosys- tems, may be of particular relevance for both the compilation of ecosystem accounts and the provision of a more comprehensive description of policy responses, for exam- ple, to changes in ecosystem condition. To support the assessment of the effective- ness of any ecosystem-related expenditure, measures of expenditure on, say, ecosystem restoration, for example, may be compared with changes in ecosystem condition and changes in flows of ecosystem services. A1.36 Of the greatest relevance in this regard are 4 of the 16 classes of environmental protection activities described under the Classification of Environmental Activities (SEEA Central Framework, annex I, sect. A): protection of ambient air and climate (class 1); protection of biodiversity and landscapes (class 6); management of other bio- logical resources (excluding timber and aquatic resources) (class 13); and management of water resources (class 14). A1.37 Environmental taxes and subsidies and other environment-related payments commonly reflect the direct connection between a specific activity and its effect on specific ecosystems and the services that they provide. For example, taxes may be imposed to reduce pollution, which, if unaddressed, would otherwise reduce the condition of river systems; and payments may be made to ecosystem managers 28 System of Environmental-Economic Accounting – Ecosystem Accounting for their efforts to conserve certain areas of land or to maintain the population of certain species (e.g. pollinator species). In this context, data on taxes and subsi- dies derived from accounting under the SEEA Central Framework, when available at a sufficient level of granularity, can be compared with the ecosystem changes recorded in the ecosystem accounts in order to support assessment of the effective- ness of policy instruments. 29 Chapter 2 Principles of ecosystem accounting 2.1 Introduction 2.1 The present chapter provides a summary of the ecosystem accounting frame- work, its core conceptual components, the main accounts and relevant national accounting principles. It demonstrates the nature of the connections between the dif- ferent accounts and explains the integration of ecological and economic approaches to describing the relationship between the environment and the economy. 2.2 Overview of the ecosystem accounting framework 2.2.1 An accounting approach 2.2 The essence of an accounting approach lies in the systematic recording of data on relevant stocks and flows. In corporate accounting, the focus of accounting is busi- ness units and in national accounting the focus is a range of different economic units31 31 Referred to in the SNA as insti- (including businesses, households, governments) located in a geographical area, which tutional units. is usually a country. Accounting can also be undertaken for an individual asset such as a house. 2.3 The focus of ecosystem accounting is ecosystems. Ecosystem accounting there- fore aims at recording data on the stocks and flows of selected ecosystems in a system- atic manner. While ecosystems are the initial focus, the accounting approach applied in SEEA EA also encompasses documenting the relationships among ecosystems, people and economic units. This provides a basis for analysing the role played by eco- systems in supporting economic and other human activity and for understanding the impact of economic and human activity on ecosystems. 2.4 Ecosystems can be attributed to specific locations. Indeed, the measurement of ecosystems is most commonly undertaken with an understanding of where different ecosystems are located, how they are arranged in relation to other ecosystems and how they are changing over time. Ecosystem accounting therefore focuses consider- able attention on recording data on stocks and flows in a spatially explicit manner. 2.5 The approach described in SEEA EA has two particular features. First, it presents accounting concepts and structures in both physical and monetary terms. Second, it applies the accounting principles for the national accounts described in the 2008 SNA. This facilitates comparison of data from ecosystem accounts with data from conven- tional economic accounts, for example, measures of GDP. 2.2.2 Measurement perspectives on ecosystems 2.6 As defined in the Convention on Biological Diversity, an ecosystem is a dynamic 32 See article 2 of the Convention, complex of plant, animal and microorganism communities and their non-living envi- entitled “Use of terms”, avail- ronment interacting as a functional unit.32 Ecosystems change as a result of natural able at www.cbd.int/conven- processes (e.g. succession, natural disturbances such as storms), wider environmental tion/articles/?a=cbd-02. 30 System of Environmental-Economic Accounting – Ecosystem Accounting dynamics such as climate change, and direct human actions involving deliberate man- agement or disturbance, such as conversion of ecosystems to other uses, extraction of natural resources, and restoration and conservation activity. 2.7 While ecosystems are the clear focus for accounting, the functional ecological unit that constitutes an ecosystem can be viewed in a number of different ways that are all relevant in different measurement contexts and for different purposes. The statistical framework of SEEA EA integrates these various perspectives. Five distinct measurement perspectives – spatial, ecological, societal benefit, asset value and insti- tutional ownership – are relevant: • Spatial: a comprehensive measurement base of statistical units is formed through use of the ecosystem concept to establish the number of occur- rences of ecosystems within a defined territory that can be classified in mutually exclusive ways. • Ecological: the ecosystem concept is the focus for measurement of ecosys- tem integrity, health and condition and serves to underpin concepts such as ecosystem resilience and the assessment of ecological thresholds. • Societal benefit: ecosystems are viewed as a source of benefits for people, the economy and society, potentially in terms of a relational connection or in the more economic sense of supplying services and benefits. • Asset value: ecosystems are viewed as assets that provide services and ben- efits into the future depending on their ecological status and the social demands for ecosystem services. Issues of ecosystem degradation and enhancement are considered from this perspective. • Institutional ownership: ecosystems are considered in relation both to existing economic and legal entities and to issues of stewardship and allo- cation of degradation costs. 2.8 While these perspectives involve different measurement considerations, they are all fundamentally interconnected, since they have the same underlying measurement focus, namely, the ecosystem. 2.9 Under each of these perspectives, various labels are used to reflect specific under- standings or interpretations of the ecosystem being measured. In SEEA EA, the label “ecosystem asset” is applied to avoid the confusion stemming from use of different labels under different perspectives within the ecosystem accounting framework and to support the integration of perspectives. The label “ecosystem asset” is therefore used to refer to the individual spatially defined statistical units that compose the set of eco- systems that determine the scope of the accounts (under the spatial perspective); to the ecological functional units that are the focus of biophysical measurement and assess- ment (under the ecological perspective); to the supply or producing units that deliver ecosystem services and associated benefits (under the societal benefit perspective); to the assets that are stores of future value (under the asset value perspective); and to the entities that have a status in their own right or may be linked to existing legal, social and institutional units (under the institutional ownership perspective). 2.10 A unique feature of ecosystem accounting is its use of the same statistical unit across all accounts, building on the measurement base established through the spatial perspective. While this may represent a measurement compromise for any single per- spective, it has the significant advantage of facilitating the coordination and integra- tion of data in a manner that supports informed discussion across perspectives. 2.11 It is the spatial perspective that supports the linkage of the components of the accounting framework and the definition of ecosystem assets. Thus, ecosystem assets Principles of ecosystem accounting 31 are contiguous spaces covered by a specific ecosystem type characterized by a distinct set of biotic and abiotic components and their interactions speaks directly to that perspective. This definition is a statistical representation of the scientific l concept of ecosystem as defined under the Convention on Biological Diversity. The definition is therefore not bound to other measurement perspectives and should not be regarded as being specifically linked to an ecological, economic or institutional interpretation of ecosystems. Defined in this way, ecosystem assets remain nested within the broader concept of environmental assets as defined in the SEEA Central Framework, in which are defined as components of the biophysical environment and are not linked to such considerations as ecological status, benefit flows or ownership. 2.2.3 Logic of the ecosystem accounting framework 2.12 The central logic of the ecosystem accounting framework builds from the defini- tion of an ecosystem asset. A set of ecosystem accounts encompasses those ecosystem assets within a defined EAA. The EAA is the geographical territory for which an eco- system account is compiled. An EAA may be defined by, for example, the boundary of a country, a subnational administrative area, a water catchment or a protected area. Within an EAA, the ecosystem assets reflect different ecosystem types, each with its own structure, function, composition and associated ecological processes. 2.13 Information on the ecosystem types will be reflected in measures of ecosystem extent and ecosystem condition. Ecosystem extent is the size of an ecosystem asset. It is most commonly measured in terms of spatial area. Ecosystem condition is the quality of an ecosystem measured in terms of its abiotic and biotic characteristics. 2.14 Ecosystem assets supply a bundle of ecosystem services that reflect various eco- system characteristics and processes as well as the ecosystem type; the extent, condi- tion and location of the asset; and the patterns of use by economic units (including households, businesses and governments). Ecosystem services are the contributions of ecosystems to the benefits that are used in economic and other human activity. In this definition, use incorporates direct physical consumption, passive enjoyment and indi- rect use. Further, economic and other human activity encompasses all forms of interac- tions between ecosystems and people, including both in situ and remote interactions. 2.15 Benefits are the goods and services that are ultimately used and enjoyed by peo- ple and society. The benefits to which ecosystem services contribute may be captured in current measures of production (e.g. food, water, energy, recreation) or may be out- side such measures (e.g. clean water, clean air, flood protection). 2.16 In an accounting context, flows of ecosystem services are observable interactions between economic units, people and ecosystems. While many of these interactions will not be reflected in exchanges in monetary terms, some of the value of those inter- actions can nonetheless be represented in those terms. 2.17 The relationships among these key components of ecosystem accounting are dis- played in figure 2.1. 2.18 The connection between the stock and flow components of the ecosystem account- ing framework can be embodied in the concept of ecosystem capacity, which, in broad terms, refers to the ability of an ecosystem asset to provide services into the future. Meas- ures of ecosystem capacity with respect to ecological limits are therefore relevant, and, in accounting terms, an ecosystem’s capacity will underpin a store of future value. 32 System of Environmental-Economic Accounting – Ecosystem Accounting Figure 2.1 General ecosystem accounting framework Environment Ecosystem assets Society Extent Condition Economy Final ecosystem Benefits services Characteristics 2.2.4 Ecosystem accounting framework: ecological considerations 2.19 Often ecosystems are perceived as more or less “natural” systems that are sub- ject to human influence to only a limited extent. However, a wider perspective is necessary based on the understanding that human activity is embedded within and influences ecosystems across the world. Different degrees of human influence can be observed. For instance, in a natural forest or wetland, ecosystem processes exert the dominant effect on the dynamics of the ecosystem and there are likely to be fewer impacts from human management of the ecosystem or from human distur- bances. At the other end of the spectrum – for example, in intensively cultivated fields or in ponds where there is intensive aquaculture – ecosystem processes are heavily influenced by human management. Ecosystems close to, or within, areas of human settlement may be significantly affected by human activity and distur- bances, such as pollution, but may nonetheless retain some characteristics of func- tioning ecosystems. Ecosystem accounting encompasses ecosystem types across this entire spectrum in line with the broad scope of environmental assets as defined in the SEEA Central Framework. 2.20 When ecosystems are assessed, their location and how they function should be considered. Key spatial properties of an ecosystem’s location are its extent, size or area; its spatial configuration (the way in which its various components are 33 A landscape or seascape arranged and organized); the landscape or seascape forms33 (e.g. mountain regions, (including those involving coastal areas) within which the ecosystem is situated; and climate and associated freshwater) is defined for seasonal patterns. Key properties of an ecosystem’s functioning are its abiotic com- accounting purposes as a group of contiguous, intercon- ponents (e.g. mineral soil, air, sunshine, water); its biotic components (e.g. flora, nected ecosystem assets rep- fauna, microorganisms); its structure (e.g. the trophic layers within the ecosystem); resenting a range of different its processes (e.g. photosynthesis, decomposition); and its functions (e.g. recycling ecosystem types. of nutrients, primary productivity). 2.21 Ecosystems can be identified at different spatial scales; for instance, a small pond and a tundra stretching over millions of hectares may both be considered an ecosystem. In addition, ecosystems are interconnected and are commonly nested and overlapping. They are also subject to processes that operate over varying timescales. Consequently, the scale of analysis will depend on whether the focus is on the internal interactions within ecosystems or, more broadly, on ecosystem types. Principles of ecosystem accounting 33 2.22 It is widely recognized that ecosystems are subject to complex dynamics. The propensity of ecosystems to withstand pressures to change, or to return to their initial condition following natural or human impact, is called ecosystem resilience. Ecosys- tem resilience is not a fixed, given property and may change over time, owing, for example, to ecosystem degradation (e.g. through removal of timber from a forest), ecosystem enhancement (e.g. through restoration of wetlands) or external effects (e.g. climate change). Other aspects of the complex dynamics of ecosystems are reflected in the presence of thresholds, tipping points and irreversibilities that are breached when ecosystem processes break down. 2.23 These complex dynamics and the associated non-linear relationships, which are evident over multiple and intersecting time frames, between the different ecosystem characteristics make the behaviour of ecosystems as a function of human and natural impacts difficult to predict, although there have been significant improvements in the understanding of those dynamics. The dynamics and relationships can be revealed through a time series of accounts that record measures of ecosystem extent and eco- system condition. Further, the ecosystem services flow account can record the effects of changes in ecosystem dynamics over time in terms of changes in the supply and use of ecosystem services. Expected future flows of ecosystem services will be affected by expected ecosystem dynamics, which should in turn affect assessments of ecosys- tem capacity and monetary values of ecosystem assets. 2.24 Understanding biodiversity is integral to assessment of the composition, struc- ture and function of ecosystems. According to the definition provided in the Con- vention on Biological Diversity, biodiversity is the variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within spe- cies, between species and of ecosystems.34 SEEA EA incorporates data on aspects of 34 See Convention on Biologi- ecosystem diversity and between-species diversity (commonly referred to as species cal Diversity, art. 2, entitled diversity). The effects of levels of, and changes in, within-species diversity (commonly “Use of terms”, available at www.cbd.int/convention/ referred to as genetic diversity) are implicit but not separately identified in ecosystem articles/?a=cbd-02. accounts. 2.25 While the processes contributing to changes in biodiversity are many and varied, some generic types of processes leading to such changes at the ecosystem and species levels can nonetheless be identified. At the ecosystem level, biodiver- sity loss is caused by the conversion, reduction or degradation of ecosystems (or habitats). Generally, as the level of human use of ecosystems increases or intensifies above critical thresholds, biodiversity loss increases and the capacity to maintain ecosystem function is reduced. The corollary is that increases in biodiversity, for example, through habitat restoration or natural succession, are shown to lead to improvements in maintaining function of ecosystems and increases in their resil- ience. The implications of these changes for flows of ecosystem services depend on the context and vary from service to service. 2.26 At the species level, biodiversity loss is characterized by a decrease in abun- dance of many endemic species existing in a particular area; at the same time, some species, in particular those that benefit from disturbed habitats, increase in abun- 35 This is the so-called intermedi- dance. The extinction of the endemic species is often the final step in a long process of ate disturbance diversity peak gradual reductions in abundance. In many cases, there is an initial increase in local (see Lockwood and McKinney (2001)). or national species richness (i.e. the total number of species, regardless of origin or abundance) because of the introduction or favouring of exotic species by humans.35 36 See Lockwood and McKinney However, owing to these changes, ecosystems lose their regional endemic species and (2001); and Millennium Ecosys- become more and more alike through a process described as homogenization.36 tem Assessment (2005). 34 System of Environmental-Economic Accounting – Ecosystem Accounting 2.2.5 Ecosystem accounting framework: economic considerations 2.27 Ecosystem services are supplied by ecosystem assets, either by a single ecosystem asset or by multiple ecosystem assets operating collectively. In this framing, ecosys- tem assets may be characterized as producing units. For accounting purposes, it is assumed to be possible to attribute the supply of each ecosystem service to a single ecosystem type (e.g. to attribute wild fish provisioning services to a lake) or, where the supply of a service involves a combination of different types of ecosystem assets (e.g. flood control services across a catchment), to estimate the contribution of each associ- ated ecosystem type to the total supply. 2.28 Ecosystem services encompass a wide range. They may be categorized as provi- sioning services (i.e. those related to the supply of food, fibre, fuel and water); regulat- ing and maintenance services (i.e. those related to filtration, purification, regulation and maintenance activities for air, water, soil, habitat and climate); and cultural ser- vices (i.e. experiential and non-material services reflecting the perceived or realized qualities of ecosystems whose existence and functioning enable individuals to derive a variety of cultural benefits). A reference list of ecosystem services designed for ecosys- tem accounting purposes is presented in chapter 6. 2.29 In many instances, the receipt of benefits by economic units entails a joint pro- duction process involving inputs from an ecosystem (i.e. ecosystem services) and human inputs including combinations of labour, produced assets, intermediate inputs (e.g. fuel or fertilizer) and individuals’ leisure time. For example, the contribution of an ecosystem (e.g. a lake) to the growth of wild fish, which is supplied by that ecosystem and used by an economic unit (e.g. a fisherman), must be distinguished from benefits that, in this case, are the fish sold by the fisherman to other economic units. Further, ecosystem accounting recognizes that the combination of inputs will vary. Thus, for example, where fish are sourced from aquaculture facilities, the ecosystem contribu- tion is significantly lower, since much of the ecosystem contribution will have been substituted by produced inputs. 2.30 All ecosystem services reflect underlying ecosystem characteristics and pro- cesses, such as nutrient cycling, photosynthesis and canopy cover, but SEEA EA does not undertake to systematically record those characteristics and processes. Rather, the focus of ecosystem accounting is on the resulting supply of ecosystem services to economic units, including businesses and households (for example, the supply of recreation-related services by local parks to households). The supply is recorded as transactions between ecosystem assets (the suppliers) and economic units (the users) and is treated as final ecosystem services since this represents the final output of an ecosystem before interaction with the economy. In order for a supply of final ecosys- tem services to be recorded, there must be a corresponding use by an economic unit. 2.31 The ecosystem accounting framework also supports the recording of flows of intermediate services, which are flows of services between and within ecosystem assets and, like all other ecosystem services, and reflect underlying ecosystem characteristics and processes. Recording these flows supports an understanding of the dependencies among ecosystem assets, for example, within a water catchment. 2.32 The definition of ecosystem services and the approach to their recording are designed to support integration of ecosystem accounting data with data on the pro- duction of goods and services that are currently recorded in the standard national accounts. In effect, ecosystem accounting recognizes a set of flows that are not recorded Principles of ecosystem accounting 35 within the current production boundary of the SNA. The approach taken provides the opportunity to compile broader measures of output, income and consumption. 2.33 Recognition of ecosystems as stores of value related to future flows of ecosystem services has three implications. First, it allows the connection to be made between the extent and condition of ecosystem assets and the potential of those assets to supply services and associated benefits into the future and for future generations. That con- nection can be embodied in the concept of ecosystem capacity and is also related to the concepts of option value and insurance value as applied to ecosystems. These topics are discussed in greater detail in chapter 6. 2.34 Second, recognition of ecosystems as a store of value serves to highlight the importance of investment in and management of ecosystem assets as a means of sup- porting the future supply of ecosystem services. There may be a wide range of motiva- tions for investment in ecosystem assets and there is a range of ways in which accounts can present data to demonstrate the connection between those assets and the eco- nomic units undertaking such an investment. 2.35 Third, recognition of ecosystems as a store of value facilitates a discussion on the scope of the value or values that should be considered in relation to ecosystems, based on the understanding that no single perspective is all-encompassing. Ecosys- tem accounting accommodates a perspective founded on accounting and economic principles, according to which ecosystem value is embodied in the expected future flows of services. While this perspective is useful in some contexts, it does not, and cannot, provide a complete representation of the value of an ecosystem to society. In section 2.4 on the framing of values for ecosystem accounting, this topic is discussed in greater depth. 2.3 Set of ecosystem accounts 2.3.1 Ecosystem accounts 2.36 SEEA EA presents a system of integrated ecosystem accounts. SEEA EA also describes related accounts and presentations, which provide for complementary pres- entations, connections to the SNA and the SEEA Central Framework, and accounting information for policy-relevant themes. These various accounts and presentations are summarized in the present section. 2.37 The five ecosystem accounts within the SEEA EA accounting system, listed in table 2.1, are strongly interconnected and provide a comprehensive and coherent view of ecosystems. There is no single, all-encompassing ecosystem account, and, while SEEA EA has been designed as a system of integrated accounts, each account has merit in its own right and is a source of valuable information. Table 2.1 Ecosystem accounts 1 Ecosystem extent account – physical terms 2 Ecosystem condition account – physical terms 3 Ecosystem services flow account – physical terms 4 Ecosystem services flow account – monetary terms 5 Monetary ecosystem asset account – monetary terms 36 System of Environmental-Economic Accounting – Ecosystem Accounting Figure 2.2 Connections between ecosystem accounts Stock accounts Flow accounts and change in stocks Ecosystem Ecosystem extent condition Ecosystem services flow Monetary ecosystem Ecosystem asset services flow Physical accounts Monetary accounts 2.38 The logic underpinning the connections between the various ecosystem accounts is articulated in figure 2.2. As regards compilation, there are particular connections (a) between the ecosystem extent account and the ecosystem condition account with respect to their focus on the description of ecosystem characteristics; (b) between those two accounts and the ecosystem services flow account in physical terms, since the characteristics of an ecosystem will influence the supply of ecosystem services; (c) between the ecosystem services flow accounts in physical and monetary terms stemming from the use of data on the prices of ecosystem services; and (d) between the ecosystem services flow account in monetary terms and the monetary ecosystem asset account since the latter requires estimation of future flows of ecosystem services. Given all of these connections, supporting the coherence of various ecological and economic data is understandably a core feature of ecosystem accounting. 2.39 Ecosystem extent accounts organize data on the extent or area of different eco- system types. Data from extent accounts can support the derivation of indicators of composition and change in ecosystem types and thereby provide a common basis for discussion among stakeholders, including discussions related to conversions between different ecosystem types within a country. Compilation of these accounts is also rel- evant in determining the set of ecosystem types appropriate for underpinning the structure of other accounts. Chapter 3 describes how ecosystem assets are delineated, Table 2.2 Stylized ecosystem extent account (area) Stylized ecosystem types Crop- Urban Wet- Accounting entries Forests Lakes land areas lands Seagrass Total Opening extent Additions to extent Reduction to extent Closing extent Principles of ecosystem accounting 37 including the classification of the various ecosystem types. Ecosystem extent accounts are discussed in chapter 4. A stylized ecosystem extent account is presented in table 2.2. 2.40 Ecosystem condition accounts. A central feature of ecosystem accounting is its organization of biophysical information on the condition of different ecosystem types. The ecosystem condition account organizes data on selected ecosystem characteristics in relation to a reference condition in order to provide insight into the integrity of ecosystems. It can also organize data relevant to the measurement of the capacity of an ecosystem to supply different ecosystem services. A stylized ecosystem condition account that records opening and closing condition indices for different ecosystem types and changes in those indices by type of condition characteristic is presented in table 2.3. The compilation of the ecosystem condition account and the derivation of indices are described in chapter 5. 2.41 Ecosystem services flow accounts – physical terms. The supply of final ecosystem services by ecosystem assets and the use of those services by economic units, including households, enterprises and government, constitute one of the central features of eco- system accounting. Using an SUT structure, the ecosystem service flow accounts record the flows of final ecosystem services supplied by ecosystem assets and used by economic units during an accounting period and also allow for the recording of intermediate ser- vices flows between ecosystem assets. Chapter 6 provides a discussion of the concepts related to ecosystem services and presents a reference list of ecosystem services. The ecosystem services flow account in physical terms is described in chapter 7. Table 2.3 Stylized ecosystem condition account (condition indices) Stylized ecosystem types Urban Accounting entries Forests Lakes Cropland areas Wetlands Seagrass Opening condition value Change in abiotic ecosystem characteristics (physical and chemical state) Change in biotic ecosystem characteristics (composition, structure and function) Change in landscape/seascape characteristics Net change in condition Closing condition value 2.42 Ecosystem services flow accounts – monetary terms. Estimates of ecosystem services in monetary terms are commonly based on estimations of prices for indi- vidual ecosystem services multiplied by the physical quantities recorded in the eco- system services flow account in physical terms. Concepts, definitions, treatments and measurement techniques for the monetary valuation of ecosystem services are dis- cussed in chapters 8 and 9. A stylized ecosystem services flow account structure is presented in table 2.4. 2.43 Monetary ecosystem asset accounts. Asset accounts are designed to record information on stocks and changes in stocks (additions and reductions) of assets. The ecosystem monetary asset account records this information in monetary terms for ecosystem assets based on the monetary valuation of ecosystem services and applica- 38 System of Environmental-Economic Accounting – Ecosystem Accounting tion of the NPV approach to obtain values in monetary terms for those assets at the beginning and end of each accounting period. The measurement of changes in asset values due, for example, to ecosystem enhancement, ecosystem degradation and eco- system conversion are also included in this account. Asset accounts are described in chapter 10. A stylized monetary ecosystem asset account is presented in table 2.5. Table 2.4 Stylized ecosystem services flow account (physical units or currency) Types of economic units Stylized ecosystem types Rest Indus- Govern- House- of the Urban Accounting entries tries ment holds world Forests Lakes Cropland areas Wetlands Seagrass Total Supply of ecosystem services Provisioning services Regulating and maintenance services Cultural services Use of ecosystem Final ecosystem services (used by economic Intermediate services (used by ecosystem assets) services units) Provisioning services Regulating and maintenance services Cultural services 2.3.2 Related accounts and presentations 2.44 The ecosystem accounts provide an integrated and comprehensive perspective on ecosystems in both physical and monetary terms. Nonetheless, for both compila- tion and analytical purposes, there are a number of related accounts and presenta- tions that may be appropriate for purposes of monitoring and analysis in different circumstances. These accounts and presentations are grouped broadly into four types: (a) extended economic accounts; (b) complementary valuations; (c) thematic accounts; and (d) combined presentations and indicators. 2.45 Extended economic accounts. Using national accounting principles, data from the ecosystem accounts can be used to complement the standard economic accounts of the SNA concerning measurement of economic production, generation of income, capital formation and wealth. Extended SUTs, extended balance sheets and extended sequence of institutional sector accounts can therefore all be compiled, including associated aggregate measures of income and wealth adjusted for the enhancement and degradation of ecosystem assets. These accounts are described in chapter 11. 2.46 Complementary valuations. In serving as the basis for the integration of ecosys- tem data with the accounts of the SNA, the ecosystem accounting framework incor- porates a range of measurement choices, particularly as regards the scope of ecosystem services, the use of the exchange value concept for monetary valuation and the attri- bution of degradation to the economic unit that suffers from the loss of ecosystem condition. It is possible to design complementary valuations using different valua- tion concepts, measurement scopes and assumptions (e.g. concerning institutional Principles of ecosystem accounting 39 arrangements) to support different policy and analytical purposes. Possible comple- mentary valuations are discussed in chapter 12. Table 2.5 Stylized monetary ecosystem asset account (currency) Stylized ecosystem types Urban Wet- Accounting entries Forests Lakes Cropland areas lands Seagrass Total Opening value Ecosystem enhancement Ecosystem degradation Ecosystem conversions Other changes Net change in value Closing value 2.47 Thematic accounts. These accounts organize data on themes of specific policy relevance. Examples of relevant themes include biodiversity, climate change, oceans and urban areas. In all of these areas, relevant data can be obtained from the ecosys- tem accounts. Further, additional data – for example, concerning GHG and resource management expenditure – can be sourced from the SEEA Central Framework and SNA accounts. Sometimes, data that have not been incorporated in accounts can also be used to support thematic accounting. For the themes of biodiversity and climate change, additional accounts – namely, species accounts and carbon accounts – are also relevant. The principles of thematic accounting and the design of thematic accounts are considered in chapter 13. 2.48 Combined presentations and indicators offer a way to collate and tabulate data on a selected set of variables from the ecosystem accounts or other sources so as to enable users to grasp relationships of analytical significance quickly. Within a stand- ard account structure, there are often only a relatively limited set of key measures, and these presentations supply a means of highlighting relevant variables, particularly for the derivation of indicators. Indicators can be designed and selected in many differ- ent ways and accounting frameworks provide a strong basis for their derivation and coherence. These topics are discussed in chapter 14. 2.4 Framing of values in ecosystem accounting 2.4.1 Introduction 2.49 The concepts and methods applied in SEEA EA reflect specific and well-defined objectives in recording values related to ecosystems and ecosystem services. The primary objective is to consider ecosystems and ecosystem services within the con- text of economic measures of production, consumption and accumulation (wealth). In monetary terms, SEEA EA records stocks and flows based on exchange values, which are narrower in scope than other monetary values for the environment that often encompass measures of consumer surplus and non-use values. 2.50 At the same time, integration of both physical and monetary data by SEEA EA allows it to provide data that are relevant in supporting assessments based on other value perspectives. Further, SEEA EA demonstrates how physical data, for example, on 40 System of Environmental-Economic Accounting – Ecosystem Accounting ecosystem extent and condition, can be used in macroeconomic policy- and decision- making. Thus, beyond the context associated with the primary objective noted above, data from the accounts are relevant in a range of other contexts such as sustainability and environmental reporting, spatial planning and environmental management, and assessment of financial risks, particularly where it concerns the integration of environ- mental and economic considerations. 2.51 It is recognized that the concepts and methods of ecosystem accounting cannot encompass all of the value perspectives concerning ecosystems. Hence, the data from ecosystem accounts should not be regarded as providing a holistic, complete or full soci- etal value of nature or as reflecting all of the multiple value perspectives on ecosystems. 2.52 The aim of the present section is not to provide a definitive summary of the lit- erature or to establish an SEEA EA values perspective but rather to place ecosystem accounting within a broader values context. This can support an understanding of the different ways in which ecosystems may be valued; support appropriate interpretation and application of ecosystem accounting data; and indicate the types of analysis that ecosystem accounting supports but does not incorporate, for example, cost-benefit analysis and assessment of non-use values. 2.4.2 Summary of the multiple value perspectives on nature 2.53 Section 2.2 described five measurement perspectives for ecosystems. Similarly, multiple perspectives exist on the value of ecosystems, with each perspective recog- nized as focusing on the same concept of what an ecosystem is. The purpose of value frameworks is to place the various perspectives in a common context and thereby ena- ble analysts and decision makers to determine how their views may align or differ. 2.54 Two continuums are commonly used to reflect value perspectives: (a) the contin- uum from anthropocentric to non-anthropocentric values; and (b) the continuum from instrumental to intrinsic and relational values. Definitions taken from Pascual and oth- ers (2017) are used to support the present discussion. According to those definitions: • Anthropocentric values are those that are centred on human beings • Non-anthropocentric values are those that are centred on the environ- ment • Instrumental value is the value attributed to something as a means of achieving a particular end • Intrinsic value signifies inherent value, that is, the value that an entity (e.g. an organism) possesses independent of any human experience or evalua- tion. Such a value is viewed as an inherent property of the entity and not ascribed or generated by external valuing agents (such as human beings) • Relational values are values relative to the meaningfulness of relationships, including the relationships between individuals or societies and other ani- mals and aspects of the living world, as well as those among individuals articulated by formal and informal institutions 2.55 Various researchers have posited different combinations of these values to describe various frameworks of values. Particular examples include the total eco- nomic value framework (Pearce and Turner, 1990; TEEB, 2010); the IPBES values framework (Díaz and others, 2015; Pascual and others, 2017); the life framework of values (O’Connor and Kenter, 2019; O’Neill, Holland and Light, 2008); the les- sons learned in valuing nature (Turner and others, 2003); and the framework for integrating economics and ecology (Polasky and Segerson, 2009). A comprehen- Principles of ecosystem accounting 41 sive assessment of these and other value frameworks and perspectives is being con- ducted by IPBES.37 37 For more information on the 2.56 Significantly, these different value perspectives are not in some manner addi- IPBES values assessment, see https://ipbes.net/values- tive, that is, it should not be concluded that through recognition of all types of assessment. value, an aggregate value of nature could be obtained. Rather, it is more appropriate to consider that, for a given ecosystem, each value perspective will provide a differ- ent value, in other words, there are multiple, potentially incommensurate values to be compared and contrasted in decision-making. Importantly, all of these values and associated frameworks recognize that the environment has value beyond mon- etary values. 2.57 Even though these value concepts are overlapping and nested, a statisti- cal framing of data on ecosystems could play an important role in incorporating at least some parts of these wider value perspectives on ecosystems as a regular component of decision-making. Indeed, an advantage of standardizing ecosystem accounting value concepts is that there is an agreed definition of measurement that is stable over time. This can, in turn, be used as a common basis for policy design and decision-making. 2.4.3 Linking the ecosystem accounts and multiple value perspectives 2.58 In broad terms, the commonly understood focus of SEEA EA is on values of anthropocentric origin, that is, values that are centred on human beings. Further, the measurement focus is commonly on instrumental or use values, in part because those values reflect interactions between people and the environment that are most readily observable and also because, from a monetary valuation perspective, these values are most readily reflected in monetary terms. The focus on anthropocentric instrumental values may also be considered of high relevance from a policy perspective, since these values are related to the types of human interactions with the environment that can place the most pressure on ecosystems. 2.59 Ecosystem accounting data in monetary terms are valued using the concept of exchange values. Under this concept, ecosystem services and ecosystem assets are val- ued at the prices at which they are, or would be, exchanged on a market. This approach to monetary valuation facilitates comparison with the monetary values recorded in the national accounts. Chapter 8 describes the exchange value concept in more detail. 2.60 The scope of the monetary values in ecosystem accounting is limited to the range of ecosystem services that are included in a given ecosystem account. As the use of exchange values does not provide a broader monetary value that incorporates the direct and indirect benefits received from ecosystems including their non-use values, monetary data from the ecosystem accounts, in line with the valuation basis used in the SNA, do not provide a comprehensive monetary value of well-being associated with ecosystems. Complementary approaches to monetary valuation are discussed in chapter 12, and the relationship between exchange values and other economic valua- tion concepts is described in appendix A12.1. 2.61 It is common for the discussion of values and valuation in accounting to place a particular focus on instrumental values expressed in monetary terms. However, since ecosystem accounting encompasses data in both physical and monetary terms and provides data that are spatially explicit, there is the potential for ecosystem accounting data to support discussion of a wider range of value perspectives. 2.62 Specifically, it is noted that data on ecosystem extent and ecosystem condition in physical terms support discussion of a number of the aspects of intrinsic and non- 42 System of Environmental-Economic Accounting – Ecosystem Accounting anthropocentric perspectives on the value of nature. Further, data on flows of ecosys- tem services in physical terms support discussion of instrumental values and some aspects of relational values. Data from accounts such as species accounts, carbon stock accounts and water resources accounts also support these discussions. 2.63 Lastly, the assessment of multiple values often requires consideration of local contexts and a wide variety of users. Generally, ecosystem accounts are described for relatively large areas with multiple ecosystem types and for broad categories of users, including households, businesses and governments. However, in principle, the appli- cation of ecosystem accounting concepts can be undertaken at smaller scales (using higher resolutions of data for local administrative areas) and/or for particular social groups. For example, measurement may focus on the use of specific ecosystem services in individual locations or may be elaborated to highlight the uses of ecosystem services by households at different income levels. The potential to undertake such measure- ment will necessarily be subject to the availability of data. 2.64 Overall, while the primary focus is on anthropocentric instrumental values, data from a set of ecosystem accounts would also be relevant in supporting assessments based on other value perspectives. 2.5 General national accounting principles 2.5.1 Introduction 2.65 Recording entries in the ecosystem accounts follows the general principles of national accounting as described in chapter 3 of the 2008 SNA. A summary of some of the rules and principles of most relevance to SEEA EA – double- and quadruple-entry accounting, time of recording, units of measurement and valuation rules and princi- ples – is provided in chapter II of the SEEA Central Framework. 2.66 The present section examines the accounting principles that require particular consideration within the context of ecosystem accounting but does not discuss valua- tion principles. Chapters 8 and 9 provide greater detail on the range of the non-market valuation considerations that arise in ecosystem accounting. 2.5.2 Length of the accounting period and frequency of accounts 2.67 In economic accounting, there are clear standards concerning the time at which transactions and other flows should be recorded and the length of the accounting period. The standard accounting period in economic accounts is one year. This length of time satisfies many analytical requirements although, often, quarterly accounts are also compiled. 2.68 While one year may be suitable for analysis of economic trends, analysis of trends in ecosystems may require information for varying lengths of time, depending on the processes being considered. Even in situations where ecosystem processes can be analysed on an annual basis, the beginning and end of the year may well differ from 38 For example, hydrological the beginning and end of the year that is used for economic analysis.38 years may not align with calen- dar or financial years. 2.69 Although considerable variation in the cycles of ecosystem processes exists, it is suggested that ecosystem accounting apply the standard economic accounting period length of one year. Most significantly, this aligns with the length of time for common analytical frameworks for economic and social data and the general integration of information is thus best supported through the use of this time frame. Principles of ecosystem accounting 43 2.70 Consequently, for the purposes of ecosystem accounting, it may be necessary to convert or adjust available environmental information so as to align it with a common annual basis using appropriate factors or assumptions (by applying interpolation or extrapolation techniques, for example), while recognizing that data may be collected irregularly over time intervals longer than one year. 2.71 Ideally, annual accounts would be compiled each year to provide a consistent time series of data. However, it is acknowledged that compiling ecosystem accounts with this level of regularity may not be possible during initial phases of implementa- tion. Nonetheless, the general ambition should remain for there to be regular report- ing of accounts, for example, every three to five years. A key factor that may limit the more frequent compilation of accounts is availability of source data, for example, con- cerning detailed maps of ecosystem types. In addition to considering the availability of alternative data sources, compilers may also consider the application of interpolation and extrapolation techniques that support infilling of accounting periods not covered in benchmark or baseline data sets. 2.5.3 Time of recording 2.72 The general national accounting requirement is that transactions and other flows must be recorded as occurring at the same point in time in the various accounts for both units involved. In respect of ecosystem services, this implies that the supply of ecosystem services must be recorded in the same accounting period as that in which the use of those services is recorded. It is to be noted that the timing of the transaction may be different from timing with respect to when an ultimate benefit is received. For example, the benefits of global climate regulation services occur well after the associ- ated carbon sequestration has itself taken place. In this regard, it should be recalled that the focus of ecosystem accounting is recording the supply and use of ecosystem services rather than the well-being or outcomes that eventuate. 2.73 Measures of ecosystem assets should be related to the opening and closing dates of the accounting period. If information available for the purposes of compiling accounts for ecosystem assets does not pertain directly to those dates, then adjustments to the available data may be required and in making such adjustments, an understanding of relevant shorter seasonal and longer natural cycles would be required. 2.5.4 Units of measurement 2.74 In the measurement of stocks, entries relate to a measurement unit (e.g. total area or total volume) at a point in time. In the measurement of flows, entries relate to a measurement unit per unit of time (e.g. cubic metres per year). The unit of time that is appropriate will depend on the selected length of the accounting period. 2.75 For accounts compiled in monetary terms, all entries in the accounts must be measured in currency units. 2.76 For accounts compiled in physical terms, the units of measurement will vary and will depend on the account and the relevant variable. In ecosystem extent accounts, a common unit of area, such as the hectare, is recommended to allow for assessment of the relative size and composition of ecosystem types within an EAA. Using a common unit of area also ensures that accounting balances and aggregations can be applied for the account. 2.77 In ecosystem condition accounts, the use of different measurement units for each characteristic and associated variable is likely. Through normalization using reference levels and reference conditions, the variables can be compared with each other. How- 44 System of Environmental-Economic Accounting – Ecosystem Accounting ever, there is no natural aggregation across characteristics without the use of appropri- ate weighting or aggregation approaches. 2.78 In ecosystem services flow accounts in physical terms, different ecosystem ser- vices are recorded in different measurement units. Given the structure of these flow accounts, it is possible to aggregate across columns for a single service to provide an estimate of total supply or total use of that service. However, it is not possible to aggregate across different ecosystem services, that is over rows, to present total supply or use of ecosystem services for an ecosystem type or type of economic unit. Depend- ing on the analytical purpose, this would be one motivation for the use of a standard money metric. 2.79 In measuring supply and use, it is fundamental that the same measurement unit be applied for both supply and use of a single ecosystem service in physical terms. Thus, if the supply of a service is measured in tons per year, then the use of that service must also be measured in tons per year. This permits the balancing of supply and use for individual ecosystem services and the related reconciliation. 2.5.5 Gross and net recording 2.80 The terms “gross” and “net” are used in a number of accounting situations. In ecosystem accounting, the recording of ecosystem services is undertaken so that all flows between ecosystem assets and economic units are identified explicitly, that is, the recording is in gross terms for both physical and monetary measures. For example, final ecosystem services are recorded as the output of ecosystem assets and as inputs to an economic unit (e.g. biomass provisioning services are recorded as inputs to agri- cultural units). In the case of SNA benefits, there is a related transaction between two economic units (e.g. sale of agricultural outputs from the agricultural unit to a manufacturer). No double counting is implied in this treatment since the recording of the final ecosystem service is offset by the recording of the input to the economic unit. For non-SNA benefits where there is no corresponding output, the recording entails showing a flow of final ecosystem services from an ecosystem asset (e.g. flows of air filtration services) and use by an economic unit. These recording principles can be demonstrated using SUT presentations, which are elaborated in chapter 7. 2.81 In the monetary valuation of ecosystem services, the relevant values should be calculated so that the costs incurred by economic units of using or accessing the eco- system services are deducted, that is, so that the values are “net” of costs. This issue arises when the valuation method being applied entails use of an observed market price and deducting these costs is therefore required to ensure that the monetary valu- ation is focused on the contribution of the ecosystem. These valuation issues are dis- cussed further in chapter 9. 2.82 In other situations, the term “gross” is used to indicate that an accounting aggre- gate (e.g. GDP) has not been adjusted for the costs of using capital, that is, to indicate that measures of depreciation, depletion and degradation have not been deducted. In these situations, the term “net” indicates that the aggregate has been adjusted for the costs of capital. Finally, there are situations in which the term “net” is used to refer to the difference between two accounting items (as in the case, for example, of net lend- ing, which is the difference between a sector’s transactions in financial assets and the incurrence of liabilities). Principles of ecosystem accounting 45 2.5.6 Scale of application 2.83 The ecosystem accounting framework and associated accounts have been designed with the intent of their being applied at national (or large subnational) scale, that is, in the context of multiple ecosystem assets (across the variety of ecosystem types within an EAA) and for multiple ecosystem services. This is analogous to the general application of the national accounts, which covers the activities of all indus- tries resident within an economic territory. 2.84 It is recognized, however, that the application of the ecosystem accounting framework may also have a more tailored focus. For example, the framework may be applied for measurement of: • A single ecosystem asset or ecosystem type (e.g. a wetland or wetlands) and/or a single ecosystem service (e.g. water regulation). For individual provisioning services, there may be a direct connection to natural resource accounting, as described in chapter V of the SEEA Central Framework. • A single ecosystem asset or ecosystem type and multiple ecosystem ser- vices. Accounting at this scale may be of interest in the management of specific ecosystems or ecosystem types (e.g. wetlands). • Multiple ecosystem types and a single ecosystem service. Accounting of this type may be of interest for monitoring and understanding the dynam- ics of the supply of a specific service across a broad spatial area (e.g. water regulation or global climate regulation). • Areas of land within a country that have common land-use or land man- agement arrangements or are the focus of integrated land management practices (e.g. watersheds, national parks) 2.85 The logic of the ecosystem accounting framework described above can be applied in all of these reduced or tailored cases, since the accounting principles themselves are scale- independent. Moreover, to the extent that individual projects focus on these more tailored accounts, it should be possible to integrate the findings within a broader project covering multiple ecosystem assets and services. The potential for integration is heavily dependent on the adoption of consistent measurement boundaries and clas- sifications, which would then become a prime motivation for application of a common ecosystem accounting framework. 2.5.7 Data quality and scientific accreditation 2.86 The concept of data quality for official statistics is a broad-ranging one, encom- passing factors of relevance, timeliness, accuracy, coherence, interpretability, accessi- bility and quality of the institutional environment in which the data are compiled. The development of statistical frameworks, such as the ecosystem accounting framework presented here, is designed to assist in the advancement of quality, particularly in the areas of relevance, coherence and interpretability. 2.87 In ecosystem accounting, it is likely that a reasonable proportion of the infor- mation used will be drawn from disparate data sources, possibly developed to pro- vide information for various scientific, research, management and administrative purposes rather than primarily for statistical purposes. Administrative data sets are often produced and analysed with a focus on smaller or borderline cases rather than on those cases that may be the most statistically significant. Some ecological data are treated similarly. For example, data on the quality of water may be col- lected for areas where there is a known pollution problem rather than to provide 46 System of Environmental-Economic Accounting – Ecosystem Accounting broad coverage and a representative sample of water quality. Care must therefore be taken to ensure that, as far as possible, the data used are representative of all contexts within the scope of accounting. 2.88 It is also likely that information for ecosystem accounting will be drawn from various independent studies in the biophysical sciences and economics literature. This being the case, appropriate review and validation of the data will be required, includ- ing, for example, consideration of the various measurement concepts and scopes that have been applied, to ensure that the data are suitable for the purposes of ecosystem accounting and that coherence across the accounts can be achieved. 2.89 Compilers are encouraged to work at national and international levels to develop relevant accreditation processes for scientific and other information relevant for eco- system accounting. In this context, it is noted that general statistical quality frame- works, such as the International Monetary Fund Data Quality Assessment Framework 39 See https://dsbb.imf.org/dqrs/ (DQAF),39 are applicable to biophysical data as well as socioeconomic data. These DQAF. frameworks are tools designed to assure that data are collected and compiled accord- ing to international standards and are subject to appropriate quality assessment procedures. 2.5.8 Uncertainty in measurement 2.90 There are a number of sources of uncertainty in ecosystem accounting. These can be grouped in four main categories: (a) uncertainty related to physical measure- ment of ecosystem services and ecosystem assets; (b) uncertainty in the valuation of ecosystem services and ecosystem assets; (c) uncertainty related to the dynamics of ecosystems and changes in flows of ecosystem services; and (d) uncertainty regarding future prices and values of ecosystem services. 2.91 Uncertainty related to physical measurement of ecosystem services and eco- system assets. It is clear that, given the scarcity of data for many ecosystem services, physical measurement of the flow of ecosystem services, in particular at aggregated levels, is prone to uncertainty. Most countries do not consistently measure flows of ecosystem services at an aggregated (national or even subnational) scale, and service flows often need to be estimated on the basis of point-based observations in combi- nation with spatial data layers and non-spatial statistics. At the same time, it is to be noted that aggregated information related to flows of provisioning services are gener- ally readily available. 2.92 Uncertainty in the valuation of ecosystem services and ecosystem assets. A second source of uncertainty is related to the monetary value of ecosystem services. For provisioning services, a key factor is that attributing a resource rent to ecosystems involves a number of assumptions regarding rent generated by other factors of pro- duction. For non-market ecosystem services, it is often difficult both to establish the demand for these services and to determine the supply of these services by ecosystems, in particular at an aggregated scale. 2.93 Uncertainty related to the dynamics of ecosystems and changes in flows of eco- system services. Establishing the value of ecosystem assets requires making assump- tions regarding the supply of ecosystem services over time, which in turn depends on the dynamics of the ecosystem. Changes in ecosystem assets are often reflected in a changed capacity to supply ecosystem services. It is now recognized that ecosystem changes are often sudden, involving thresholds at which rapid and sometimes irrevers- ible changes to a new ecosystem state occur. Predicting the threshold level at which such changes occur is a complex undertaking and prone to substantial uncertainty. Principles of ecosystem accounting 47 2.94 Uncertainty regarding future prices and values of ecosystem services. Pricing benefits and costs that may accrue in the future is a complex endeavour because it is extremely difficult to predict future circumstances. The implications of humanity’s continuing modification of the climate and ecosystems are uncertain, and those impli- cations are likely both to affect and to depend on how the future evolves. Uncertainties concerning values are even greater inasmuch as the methods of non-market valuation compound errors in estimation. 2.95 The strategies for dealing with the various sources of uncertainty will vary by country as a function of data availability and the relevant services selected for ecosys- tem accounting. The approaches to limiting uncertainties and maximizing the robust- ness of the data in ecosystem accounts will need to be further developed once more practical experience with ecosystem accounting has been acquired and evaluated. The experiences gathered at both national and subnational levels will be relevant in this context, and it is therefore important that all accounting work document the scope of measurement, the definitions applied, the methods used and the assumptions made. Section B Accounting for ecosystem extent and condition 51 Section overview Ecosystem assets are at the heart of the ecosystem accounting framework described in chapter 2. Section B of SEEA EA, encompassing chapters 3, 4 and 5, describes the framework’s approach to structuring data on ecosystem assets. In the first instance, this involves delineating ecosystem assets, which are represented as spatial units. This step allows accounting for the extent of ecosystems and for how their size and configu- ration are changing over time. In a second step, the condition of ecosystem assets is assessed through a focus on their integrity. Measurement of the extent and condition of ecosystems is a common focus of environmental data collection. Generally speaking, there is a wealth of data in this domain. Unfortunately, a common feature of those data is that they are not coordi- nated and are difficult to use to convey an integrated picture of changes, especially across multiple ecosystem types and at the national level. The intent in ecosystem accounting is to provide a common structure and approach for the integration of the relevant information on the size and condition of ecosystems. The approach to delineating ecosystem assets described in chapter 3 provides the underlying statistical basis for the organization of data on ecosystems in a com- prehensive and mutually exclusive manner. In this respect, the spatial units that are delineated are analogous to the economic units that are delineated for the purpose of compiling economic statistics, usually in the form of a business register. Much of the underlying data coordination work carried out in ecosystem accounting is focused on attributing data on different characteristics to ecosystem assets and ecosystem types. The coordination of data on ecological characteristics using statistical and accounting principles is an important extension of the wider SEEA approach, which recognizes the significance of non-monetary data in describing the relationship between the environment and the economy. While accounting for extent and condi- tion does support the measurement of ecosystems in monetary terms, as described in section D, data from the ecosystem extent and ecosystem condition accounts is of direct relevance, particularly in understanding the effects of human activities on eco- systems and in assessing distance from ecological thresholds. Further, data on ecosys- tem extent and condition are a means of considering the intrinsic value of ecosystems, since data on ecosystem extent and condition do not require consideration of the rela- tive importance of ecosystems to people. Taken together, these various facets indicate that ecosystem extent and condition accounts are a central feature of ecosystem accounting and should be a core compo- nent of SEEA EA implementation in all contexts. 53 Chapter 3 Spatial units for ecosystem accounting 3.1 Introduction 3.1 A key feature of ecosystem accounting is its ability to integrate spatially refer- enced data, that is, data on the location, size and condition of ecosystems within a given area, and how those characteristics are changing over time. Recording stocks of ecosystems and changes in stocks in a coherent and mutually exclusive manner sup- ports the derivation of indicators (for example, rate of change in forest or grassland areas relative to rate of change in cultivated areas). 3.2 For accounting purposes, different ecosystems are treated as spatial units. The delineation of ecosystems into spatial units requires careful consideration of various ecosystem characteristics across the various ecological realms, including terrestrial, freshwater, marine and subterranean ecosystems. The present chapter outlines the approach adopted in SEEA EA to define, classify and delineate spatial units. Section 3.2 describes the different types of spatial units used in ecosystem accounting and sec- tions 3.3 and 3.4 set out the general principles and identify practical considerations for the delineation and classification of those units for ecosystem accounting purposes. 3.3 The availability of spatial data to describe ecosystems and their economic uses and associated beneficiaries is an important consideration in the compilation of eco- system accounts. The spatial and thematic detail of those data, as well as their geospa- tial comparability and integration into a shared spatial data infrastructure, influences the richness of the ecosystem accounts that can be compiled. This topic is discussed in section 3.5. 3.4 Data on the size and changes in size of ecosystems are recorded in ecosystem extent accounts, and their location and configuration can be presented in maps. Understanding the size and location of ecosystems supports the measurement of eco- system condition and the measurement and valuation of many ecosystem services, the flows of which will vary from ecosystem to ecosystem. These matters are discussed in later chapters. 3.2 Types of spatial units 3.2.1 Ecosystem assets 3.5 The primary spatial units for ecosystem accounting are labelled ecosystem assets. Ecosystem assets are contiguous spaces of a specific ecosystem type characterized by a distinct set of biotic and abiotic components and their interactions. The definition of ecosystem assets is a statistical representation of the general definition of ecosystems found in the Convention on Biological Diversity (see para. 2.6). 3.6 Ecosystem assets play a key role in ecosystem accounting. They are the statistical units for ecosystem accounting, that is, the ecological entities about which informa- tion is sought and for which statistics are ultimately compiled. This includes informa- tion concerning their extent, condition, the ecosystem services they provide and their 54 System of Environmental-Economic Accounting – Ecosystem Accounting monetary value. Each ecosystem asset is classified to an ecosystem type. An ecosystem type reflects a distinct set of abiotic and biotic components and their interactions. Such components include, for example, the animals, plants, fungi, water, soil and min- erals present in ecosystems. Appendix A3.1 provides an introduction to a range of ecological concepts and terms, including ecosystem, habitat, biome and ecoregion, and the various general drivers and characteristics of ecosystems. 3.7 The statistical outputs from ecosystem accounting are most commonly pre- sented either in tabular form, where data on ecosystem assets are grouped according to their ecosystem type, or in the form of maps, where individual ecosystem assets are reflected and the configuration and location of different ecosystem types can be displayed. 3.8 The SEEA Central Framework defines environmental assets as the natu- rally occurring living and non-living components of the Earth, together constitut- ing the biophysical environment, which may provide benefits to humanity (Central Framework, para. 2.17). This definition encompasses ecosystems. Like environmental assets, ecosystem assets are considered assets on the basis of their biophysical exist- ence and their status as assets is not dependent on establishment of flows of benefits or 40 As discussed in chapter 11, ownership, which is a requirement for economic assets in the SNA.40 establishing the economic ownership of ecosystem assets 3.9 Conceptually, ecosystem assets are envisaged as three-dimensional spaces and the attribution of benefits (see figures 3.1 and 3.2). While many ecosystems in the terrestrial, freshwater and is required for the integra- marine realms are located close to the Earth’s surface, they all have three-dimensional tion of ecosystem accounting characteristics. data with economic accounts, although ecosystem accounts 3.10 For example, for terrestrial systems, the biotic components usually extend from can be compiled in the absence the roots of plants below the surface to the vegetation growing above the surface. The of that information. abiotic components – soil, surface water, soil water and air from the atmosphere – interact directly with those living components. Figure 3.1 Vertical structure of a terrestrial ecosystem macroclimate atmosphere biota atmospheric topoclimate boundary layer landform ecosystem soils surface water groundwater bedrock Source: Adapted from Bailey (1996). Spatial units for ecosystem accounting 55 Figure 3.2 Vertical structure of marine ecosystems macroclimate neritic oceanic photic 200 m epipelagic littoral 1,000 m sublittoral mesopelagic 4,000 m aphotic bathyal bathypelagic benthic abyssalpelagic abyssal 10,000 m hadal Source: Adapted from Kingsford (2018). 3.11 Marine ecosystems. Marine ecosystems are not concentrated near one sur- face (i.e. the air-land/water interface) but extend throughout the water column and include the underlying sediment and seabed, which provide a natural boundary for ecosystem assets (see figure 3.2). In concept, ecosystem assets for marine eco- systems could be delineated by taking into account various ecological differences with respect to, for example, salinity, temperature, nutrients and both location and depth within the water column, and distinguishing the seabed from the overlying water column. 3.12 However, since it may be difficult to delineate ecosystem assets in a vertically stratified manner, delineation based on surface area is likely the most practical meas- urement pathway for accounting purposes. In particular, for marine ecosystems within the continental shelf,41 it is recommended that ecosystem assets be delineated 41 The continental shelf is that based on the areas of the different ecosystem types associated with the seabed, for part of the continental margin example, seagrass meadows, subtidal sandy bottoms and coral reefs. that lies between the shoreline and the shelf break or, where 3.13 Atmospheric boundary. Several important ecological processes are based on there is no noticeable slope, interaction with the atmosphere, including respiration, nitrogen fixation and those between the shoreline and processes, such as air filtration, associated with the impact of air pollution on vegeta- the point where the depth of the superadjacent water is tion and fauna. To establish a clear boundary for accounting, the atmosphere directly approximately between 100 above and within an ecosystem is considered part of the ecosystem asset as one of the and 200 metres. abiotic components within the spatial unit. 3.14 The interaction between the Earth’s surface and its ecology, and the atmosphere is limited to the atmospheric boundary layer. For accounting purposes, this forms the natural upper boundary of ecosystem assets. The atmospheric boundary layer is defined as the bottom layer of the troposphere that is in contact with the surface of the Earth (American Meteorological Society, 2020). Parts of the atmosphere above this layer are not considered ecosystem assets. 56 System of Environmental-Economic Accounting – Ecosystem Accounting 3.15 While the atmosphere satisfies the general definition of an environmental asset as given in the SEEA Central Framework and flows of emissions to the atmosphere can be recorded in PSUTs, the volume of air in the atmosphere is not included in the measurement scope of environmental assets in the Central Framework (para. 5.16). Further discussion on a more complete accounting treatment for the atmosphere is part of the SEEA EA research and development agenda, including the considera- tion of the atmosphere as a separate environmental asset (see annex II to the present publication). 3.16 Subsoil boundary. The subsoil that is directly involved with ecosystem processes is considered part of the ecosystem asset. This holds for terrestrial (soil), freshwater and marine ecosystems (sediments). These ecosystem processes include water flows between soil layers and aquifers, bioturbation, carbon cycling, cycling of nutrients and other diagenetic processes. The precise subsoil boundary layer for an ecosystem asset is dependent on the structure of the soil, sediment and bedrock. 3.17 Aquifers. All aquifers, both confined and unconfined, contain some biotic com- ponents and are treated as ecosystems. Confined aquifers should be treated as ecosys- tem assets distinct from the ecosystem assets located above them. Depending on the context, unconfined aquifers may be treated as distinct or integrated with the surface ecosystem asset. 3.18 Subterranean ecosystems. There are a variety of subterranean ecosystems, including caves and underground streams. These ecosystems satisfy the general conceptual definition of an ecosystem asset in having a distinct set of biotic and abiotic components. 3.19 Subsoil abiotic resources. Resources located in the deeper substrate within the lithosphere, such as natural gas, oil, coal and mineral ores, that have no direct interaction with surrounding ecosystems are not considered ecosystem assets, but are included under the broader definition of environmental assets. 3.2.2 Applying the conceptual boundary for ecosystem assets 3.20 Although ecosystem assets are conceptually three-dimensional, they have a two- dimensional boundary or footprint. This footprint is defined by the intersection of the three-dimensional bounding envelope of the ecosystem asset with the Earth’s surface. The sides of this envelope are assumed to be vertical so that the resulting footprints of adjacent ecosystem assets do not overlap. In practice, therefore, for most accounting purposes, ecosystem assets are represented in two dimensions, that is, by their area. 3.21 It is also possible to define the footprint of those ecosystem assets that are located below surface-level terrestrial and freshwater ecosystems, such as subterranean eco- systems and aquifers, in two-dimensional terms. However, since these areas coex- ist with the areas of other ecosystem assets closer to the Earth’s surface, their extent should be accounted for separately, depending on analytical requirements. 3.2.3 EAAs 3.22 The second type of spatial unit for ecosystem accounting is the EAA. EAA is the geographical territory for which an ecosystem account is compiled. The EAA therefore determines which ecosystem assets are included in an ecosystem account. 3.23 An EAA is a two-dimensional construct providing an accounting boundary around a set of ecosystem assets represented by their two-dimensional footprints, such that the sum of the areas of the ecosystem assets is equal to the total area delin- eated by the EAA. Spatial units for ecosystem accounting 57 3.24 The relationships between the spatial units are presented in mapped form in fig- ure 3.3 within a stylized context. In this figure, a combination of six different ecosys- tem assets (EA1–EA6) are shown as located within an EAA. Each ecosystem asset is classified to a different ecosystem type (ET1–ET4). A single ecosystem asset can be assigned to only a single ecosystem type (ET) but there can be multiple occurrences of a single ET within an EAA. 3.25 The same relationships can also be presented in tabular form where, at a given point in time, the sum of the areas of different ETs will be equal to the total EAA. This is shown in table 3.1, which provides the basic entry point into accounting for ecosys- tem extent as discussed in chapter 4. 3.26 Common forms of EAAs include: (a) National jurisdictions and groups of countries (e.g. member countries of the European Union); (b) Subnational administrative areas (e.g. States, provinces); (c) Environmentally defined areas within a country (e.g. water catchments, ecoregions) or across countries (e.g. regions defined by river systems such as the Amazon, the Mekong and the Nile); (d) Other areas of policy or analytical interest such as protected areas; areas 42 owned by specific industries or sectors (e.g. government-owned land); These areas may be the focus of regional or international and areas outside national jurisdiction (e.g. open oceans and high seas).42 accounting work. Figure 3.3 Relationships between spatial units in ecosystem accounting Ecosystem accounting area (EAA) EA2 (ET2) EA3 (ET3) e.g. urban e.g. cropland area EA1 (ET1) e.g. forest EA4 (ET4) e.g. lake EA5 (ET2) e.g. urban area EA6 (ET3) e.g. cropland Table 3.1 Tabular presentation of spatial units Spatial unit Sizea Ecosystem type 1 (EA1) 12 Ecosystem type 2 (EA2 and EA5) 13 Ecosystem type 3 (EA3 and EA6) 15 a Any measurement unit for area Ecosystem type 4 (EA4) 14 may be used, for example, hec- EAA 54 tares or square kilometres. 58 System of Environmental-Economic Accounting – Ecosystem Accounting 3.27 Consistent with the scope of the SEEA Central Framework, the scope of national jurisdictions for ecosystem accounting should include all ecosystems across the ter- restrial, freshwater and marine realms to the boundary of the exclusive economic zone (EEZ). In practice, the initial scope may be more limited, for example, covering only terrestrial and freshwater ecosystems; but it is important that there be an aim to extend the coverage to incorporate all ecosystems under national jurisdiction. 3.28 Where countries share an administrative boundary, it is most common for a dis- tinct EAA to be applied, one for each country. Delineation of an EAA using an admin- istrative boundary may also imply that a contiguous area of the same ecosystem type is partitioned between two or more countries. Such partitioning is appropriate for the purposes of accounting within an individual EAA. However, in these contexts there may be advantages in (a) seeking alignment on the approach to defining and delin- eating the relevant ecosystem assets so as to ensure that all areas are accounted for and are classified consistently; and (b) considering the development of complementary accounts for transboundary areas that are of joint management interest. This may be appropriate in particular cases involving large river basins and associated ecosystems. 3.29 Generally, the measurement objective of SEEA EA is to provide information on the changes in ecosystem-related stocks and flows in relatively large and diverse areas encompassing different ecosystem types, as suggested through the EAA-related exam- ples provided above. Conceptually, it is possible to compile ecosystem accounts for an individual ecosystem asset such as a single forest, wetland or cultivated area, but this is not the focus of SEEA EA. 3.30 Usually, an EAA reflects contiguous areas, but this is not a requirement for accounting purposes. For example, accounts may be developed for all protected areas within a country or for a specific ecosystem type (e.g. all of a country’s natural grasslands). 3.31 Within an EAA, ecosystem assets are grouped into different ecosystem types (e.g. forests, wetlands and cultivated land). The resulting accounting structures are generally such that measures of ecosystem extent, ecosystem condition and ecosystem services are presented for aggregations of ecosystem assets, that is, by ecosystem types, based on data commonly compiled for ecosystem assets. For example, for a given EAA, an ecosystem extent account shows the changing total area of each ecosystem type (e.g. forest, wetland, coastal habitat or cultivated land), but does not present the chang- ing area of each individual ecosystem asset. However, the same underlying data can be mapped to show the changing size, configuration and distribution of individual ecosystem assets within an EAA. Approaches to accounting for ecosystem extent are discussed in chapter 4. 3.32 Since an EAA is a two-dimensional construct, the area of subterranean ecosys- tems cannot be incorporated in addition to those ecosystem assets that are closer to the Earth’s surface. Therefore, for the purposes of accounting for ecosystem extent in which the area of the EAA and the sum of the areas of individual ecosystem assets should be equivalent, the area of subterranean ecosystems should be excluded. Where relevant for policy and analysis, complementary extent accounts for subterranean eco- systems can be compiled (see sect. 4.3.3). 3.33 Complementary extent accounts for marine ecosystems beyond the continental shelf or EEZ that encompass the full range of relevant ecosystem assets, including those associated with pelagic ocean waters and deep-sea floors, can also be compiled. 3.34 Where complementary extent accounts are compiled, other data concerning, for example, the condition of those ecosystem assets and the supply and use of ecosystem Spatial units for ecosystem accounting 59 services can be incorporated alongside similar data for other ecosystem types, at least in tabular form. 3.3 Delineating ecosystem assets 3.3.1 General principles 3.35 In concept, an ecosystem asset is differentiated from neighbouring ecosystem assets on the basis of the extent to which the interactions between biotic and abiotic components within that ecosystem asset are stronger than the interactions with com- ponents outside the ecosystem asset. The differences will be reflected in variations in composition, structure and function. Hence, ecosystem assets should be delineated and classified to distinct ecosystem types, based on various ecosystem characteristics such as physical structure and type (including vegetation structure and type), species composition, ecological processes, climate, hydrology, soil characteristics, currents and topography. 3.36 It is expected that, allowing for a normal degree of natural variation, there will be a general persistence of the characteristics of an ecosystem asset. For example, the loss of vegetation as a result of disturbances such as fire and flood does not necessar- ily imply a change in ecosystem type. With respect to the delineation of an ecosystem asset, it is also expected that, based on the approach to the measurement of ecosys- tem condition described in chapter 5, the condition of that asset will be relatively homogeneous. 3.37 In delineating ecosystem assets for the purpose of ecosystem accounting, the following principles should apply: (a) Ecosystem assets should represent ecosystems. The spatial units should align with the definition of ecosystems under the Convention on Biological Diversity reflecting a consideration of organisms, their environmental setting and ecosystem processes. It is accepted that the delineations cannot be perfect representations of a complex ecological reality; (b) Ecosystem assets should be capable of being mapped. Since ecosystem accounting is commonly implemented using a spatially based approach, it is necessary for ecosystem assets to be capable of being identified and mapped in a specific location; (c) Ecosystem assets should be geographically and conceptually exhaus- tive across ecological realms. The “exhaustive” criterion is understood as reflecting comprehensiveness, both spatially and conceptually, including built environments. The set of ecosystem assets should allow for an EAA to be fully tessellated, that is, filled; (d) Ecosystem assets should be mutually exclusive, both conceptually and geographically. This means that ecosystem assets should not overlap, either conceptually or geographically and that any area on land or the sea floor, or any horizontal depth layer in the ocean, should be occupied by one and only one ecosystem asset. As long as ecosystem assets are mutually exclusive, there can be no double counting of the same space. This principle is applied within a single dimensionality, that is, within one, two or three dimensions. 3.38 The occurrence and extent of ecosystem assets delineated using these princi- ples can change over time. Indeed, the expectation is that, over time, through the use of consistent principles and classifications, different boundaries will be delineated to 60 System of Environmental-Economic Accounting – Ecosystem Accounting reflect the changing sizes and configuration of ecosystem assets (e.g. due to expan- sion of urban areas or restoration of wetlands). Recording these changes, labelled in SEEA EA as ecosystem conversions, is the focus of accounting for ecosystem extent described in chapter 4. 3.39 Where the boundary of an EAA, for example, a country’s national border, passes through a delineated ecosystem asset, only the area of the ecosystem asset inside the EAA boundary should be included in the account. While this effectively partitions the ecosystem asset, it ensures that the sum of the areas of all ecosystem assets is equal to the total area of the EAA. 3.40 An EAA will contain a range of ecosystem types. In broad terms, there exists a gradient extending from pristine natural areas to intensively managed ecosystems, including production plantation forests, croplands and meadows, and built environ- ments. While natural areas are governed mainly by natural ecological processes, intensively managed areas are defined primarily (and semi-natural areas partly) by land uses determined by human activity. However, since all of these types of areas may be within an EAA, all of its ecosystem types should be accounted for. 3.41 The composition of ecosystem types within an EAA are rarely reflected in neat boundaries between easily identified areas of, for example, croplands and wetlands. In reality, there is a mixture of different features and ecosystem types throughout an EAA. In this context, two specific factors influence delineation in practice. 3.42 One factor is the number of different ecosystem types for which delineation is undertaken. The greater the number of ecosystem types to be delineated, the more challenging the task, but, at the same time, the greater the richness of the picture that is drawn and the more homogeneous the ecosystem assets. 3.43 The other factor is the spatial scale at which delineation is undertaken. In cases where delineation is undertaken at a low resolution, for example, for 5 x 5 km grid cells, it is less likely that specific ecosystem assets, such as small wetlands, will be iden- tified. On the other hand, when delineation is undertaken at a high resolution, for example, for 30 x 30 m grid cells, many distinct ecosystem assets may be identified. 3.44 In practice, a balance must be struck between the resolution at which delineation is undertaken (and the related rules by which ecosystem types are identified) and the number of ecosystem types to be delineated. That balance will depend on data avail- ability and analytical requirements. The general recommendation is that, for a given ecosystem account, a single spatial resolution of analysis should be selected and, con- sequently, an ecosystem asset will not be delineated unless its area is sufficiently large to render it identifiable at that resolution. 3.3.2 Approaches to identifying specific features 3.45 In addition to considering the number of ecosystem types and the resolution at which delineation is to be undertaken, it is also necessary to assess whether there are specific features that need to be distinctly identified in the accounts. The present sec- tion considers two contexts in which specific guidance is particularly appropriate: the context of linear features and that of complex mosaics. 3.46 Linear features. In all EAAs, there are a variety of linear features. Typical exam- ples are streams, rivers and road verges. If the resolution of delineation is sufficiently high, those features may be readily identified, but they are commonly missed. For ecosystem accounting purposes, it is relevant to make a distinction between “narrow” linear features, whose width is small enough to be treated as zero when accounting for the total area of an EAA (which must be equal to the sum of the areas of individual Spatial units for ecosystem accounting 61 ecosystem assets), and “wide” linear features, whose width is large enough to warrant the separate recording of the associated area. 3.47 The recommended treatments, using the distinction between narrow and wide linear features and considering rivers and streams separately from other linear fea- tures, are described directly below: (a) For rivers and streams, width changes downstream along a river system, so that there is a transition from narrow upstream headwater reaches to wide downstream trunk rivers. Ideally, the area of sufficiently wide rivers and streams should be separately recorded. The treatment of this transition in the accounts would depend on the nature of the source data involved (e.g. on whether those data are raster data or vector data). If delineating the area of rivers is not possible, they may be delineated in terms of length; (b) For other linear features that are ecologically linked to the surround- ing landscape, such as ditches or hedgerows in a pasture landscape, it is recommended that they should not be separately identified, and any associated area should be attributed to the ecosystem type of the sur- rounding ecosystem; (c) For any linear features that are not ecologically linked to the surround- ing landscape, such as forest access roads, the choice is either to treat them as if they were streams and rivers if they are sufficiently wide (i.e. as a distinct ecosystem type with an associated area) or to include them with the surrounding ecosystem types (i.e. without an associated area). The choice should be guided by the added value that a separate ecosys- tem type would contribute to the account or its applications. 3.48 These treatments are applied in the context of compiling a standard two-dimen- sional extent account for an EAA. In some cases, there may be linear features that are of particular significance, economically, ecologically or culturally. To account for these features, it may be necessary to delineate ecosystem assets at higher resolutions so that the area of the relevant linear features can be separately identified alongside neigh- bouring ecosystem assets and so that the linear features can be separately accounted for, for example, in terms of condition and ecosystem service flows. Further, in some instances, there may be interest in a separate recording of linear features in terms of their length. A complementary set of one-dimensional extent accounts for such a pur- pose is described in chapter 4. 3.49 It is to be noted that where a linear feature is attributed to the surrounding eco- system, the condition of that ecosystem should take the presence of the linear fea- ture into account. Thus, changes in the extent of linear features, for example, through increases in the number of kilometres of hedgerows, should be reflected in changes in the measure of condition. Incorporating linear features may have positive or negative effects on a measure of condition depending on the context. 3.50 Complex mosaics. Some spatial areas are characterized by a complex mix of different ecosystem types. Examples include urban areas and cultivated areas with small farm holdings. In concept, all of the different ecosystem types can be delineated following the general principles discussed above provided that the resolution is appro- priately high. In a second step, distinct EAA boundaries can be determined where there is interest in specific spatial areas, for example, urban areas or cultivated areas. This process supports a consistency in delineation across wider EAAs, for example, across a country, notwithstanding that some of the ecosystem assets delineated, such 62 System of Environmental-Economic Accounting – Ecosystem Accounting as green and blue spaces in urban areas, may be small relative to similar ecosystem types outside the complex mosaics. 3.51 Where there is interest in accounting specifically for complex mosaics, applying complementary classifications of ecosystem types (e.g. types of urban areas such as parks, lawns and ponds and types of crops in cultivated areas) would be relevant in supporting analysis and decision-making. A discussion on the broader issues of delineation associ- ated with accounting for urban areas is presented in chapter 13 on thematic accounting. 3.4 Classifying ecosystem assets 3.4.1 General principles 3.52 Ecosystem assets are classified into ecosystem types. Given the variety of eco- system types and contexts around the world, there are many examples of ecosystem- related classifications. For SEEA EA purposes, any ecosystem classification to be used for ecosystem accounting should ideally satisfy the definition of an ecosystem type (i.e. as representing a distinct set of abiotic and biotic components and their interac- tions) and should enable application of the principles for delineating ecosystem assets listed in section 3.3.1. 3.53 Depending on the data available, the compilation of accounts at the national or subnational level may involve the use of a large number of ecosystem types so as to ensure that the accounts are suitable for the context. For the purpose of reporting and comparison among countries, a smaller number of higher-level classes is appropriate so as to facilitate the use of the ecosystem data by a wide range of users. 3.54 It is recommended that existing national ecosystem classification schemes be used for ecosystem accounting wherever possible. Generally, such classification schemes provide detailed descriptions and classes that incorporate specific local eco- logical knowledge. Cross-referencing of spatial units to the SEEA EA reference classi- fication, IUCN GET, enables national-level accounts to be scaled up and compared by countries (see sect. 3.4.2). Where specific national ecosystem types have been identified that do not translate directly into the SEEA EA reference classification, local ecological expertise should be applied to determine the most appropriate cross-referencing. 3.55 Where a national classification of ecosystems is not available, IUCN GET may be used to develop one through a scaling down to locally derived and locally relevant ecosystem types. 3.56 For the purposes of international reporting and comparison, the SEEA ecosys- tem type reference classification, reflecting IUCN GET ecosystem functional groups, (EFGs) should be applied. Generally, at this level of reporting there will be fewer classes than ideal for national-level account compilation and hence some aggregation of national classes will be required. 3.4.2 SEEA ecosystem type reference classification 3.57 The SEEA ecosystem type reference classification has been established to ensure that the compilation of ecosystem accounts in different locations can be compared against a commonly agreed set of ecosystem types that were established on the basis of agreed principles. There are a variety of ways in which ecosystems can be classified and compilers are encouraged to use classes relevant to their local context. The avail- ability of a reference classification that provides a common baseline, which can be used to evaluate the appropriateness of a given classification and to supply a structure for comparability of data and accounting methods, is therefore desirable. Spatial units for ecosystem accounting 63 3.58 The SEEA ecosystem type reference classification reflects IUCN GET, which was developed to support implementation of the IUCN Red List of Ecosystems. IUCN GET is a global typological framework that applies an ecosystem process-based approach to ecosystem classification for all ecosystems around the world. In this approach, ecological assembly theory is used to identify key properties that distin- guish functionally related ecosystems and to synthesize traditionally disparate classi- fication approaches across terrestrial, freshwater, subterranean and marine ecological realms. Application of a focus on functionally related ecosystems at the higher levels of the classification allows ecosystem types that are similar but different at the local level to be grouped in an ecologically meaningful way. This is particularly important for purposes of international comparison, a context where the variety of ecosystem types is very large. 3.59 IUCN GET has a structure comprising six levels. The three upper levels (1 to 3) differentiate the functional properties of ecosystems. Levels 4 to 6 offer finer levels of detail on ecosystem types that are relevant in national and subnational contexts. Existing national ecosystem type classes would be expected to be described at a level of detail corresponding conceptually to GET levels 5 or 6. David A. Keith and others, eds. (2020) provide a full description of IUCN GET and its approach to classification. 3.60 The SEEA ecosystem type reference classification corresponds to IUCN GET lev- els 1 to 3. The focus on these levels allows: (a) national variations in the description of local ecosystem types to be developed while recognizing the importance of locally rel- evant classes; and (b) ecologically meaningful groupings of locally relevant ecosystem types to be formed for the purposes of integrating national-level data from different sources (e.g. agriculture, environment, forestry and marine data). 3.61 The top level defines four realms: marine (M); freshwater (F); terrestrial (T); and subterranean (S). A realm is a major component of the biosphere that differs fundamentally in ecosystem organization and function. The subterranean realm is included in the reference classification with the understanding that for a standard two-dimensional extent account its ecosystem types will be out of scope. The top level also provides for the classification of atmospheric units to an atmospheric realm at a future date, which would provide complete coverage of the biosphere. As noted in section 3.2.1, that part of the atmosphere above the atmospheric boundary layer is not included in the scope of ecosystem assets. 3.62 The second level of the classification broadly follows the modern functional biome concept under which a biome is “a biotic community finding its expression at large geographic scales, shaped by climatic factors and characterized by physiognomy and functional aspects, rather than by species or life-form composition” (Mucina, 2019). IUCN GET defines 24 biomes: 4 exclusively in the marine realm; 3 exclusively in the freshwater realm; 7 exclusively in the terrestrial realm; 4 exclusively in the subter- ranean realm; and 6 in transitional areas between different realms. These transitional areas represent interfaces between various combinations of the marine, freshwater, subterranean and terrestrial realms. 3.63 Levels 1 and 2 of the SEEA ecosystem type reference classification are presented in table 3.2. Many of the ecosystem types described at level 2 are familiar as naturally occurring biomes, including tropical forests, shrublands, deserts, freshwater lakes and pelagic ocean waters. Six biomes are defined by anthropogenic processes,43 where 43 Also referred to as “anthromes” human activity is pivotal to ecosystem assembly and maintenance of ecosystem com- (see Ellis (2011); and Ellis and ponents and processes. others (2010)). 3.64 The third level of the classification describes EFGs. An EFG, which is a function- ally distinctive group of ecosystems within a biome, is defined in a manner consist- 64 System of Environmental-Economic Accounting – Ecosystem Accounting ent with the definition of ecosystems under the Convention on Biological Diversity, which underpins the SEEA EA concept of ecosystem assets. Ecosystem types within the same EFG share common ecological drivers that promote the convergence of the biotic traits that characterize the group. There are 100 EFGs in IUCN GET, although it would be highly unlikely for a country to have ecosystem assets representative of all EFGs. More commonly, less than 40 EFGs would be present in a single EAA. A full listing of the EFG classes is provided in appendi 3.2. 3.65 For the compilation of ecosystem accounts at the national or subnational level, it is expected that the delineation of ecosystem types would occur at fine levels of detail using national classifications. The compilation of ecosystem accounts may occur at this same fine level of classification. For the presentation of ecosystem accounting out- puts, either in tabular or in map format, it may be appropriate to combine fine-level classes. For example, there may be presentation at the equivalent of the EFG level. It is expected that for the purposes of international comparison, the reporting of data at the EFG level (level 3) would be appropriate. 3.66 Specific note should be taken at this point in the text of the six anthropogenic biomes: T7 (intensive land-use systems), which includes croplands, pastures, planta- tions and urban areas; F3 (artificial wetlands); M4 (anthropogenic marine ecosys- tems); S2 (anthropogenic subterranean voids); MT3 (anthropogenic shorelines); and SF2 (anthropogenic subterranean freshwaters); and their composite EFGs. For a range of ecosystem accounting purposes, there will be interest in accounting at a finer level of detail than that of the EFGs that are within these biomes. For example, urban eco- systems (T7.4) are often structurally complex and highly heterogeneous; and annual croplands (T7.1) consist of fields of varying crop types and fallow land. To delineate and report on spatial units within the above-mentioned anthropogenic biomes and their corresponding EFGs, various ecosystem subtypes may be identified. To define those spatial units, it is recommended that national land-use classes be used or, as needed, the classes of the SEEA Central Framework Classification of Land Use (Cen- tral Framework, annex I, sect. B) (at the three-digit level). 3.67 The use of IUCN GET as the reference classification of ecosystem types reflects the need for a globally applicable classification of ecosystem types covering all realms. There is a range of existing global classifications of ecosystem types, habitats, land cover and land use, as well as regional or realm-specific classifications of ecosys- tem types that may be used in other contexts. Examples include World Terrestrial Ecosystems (Sayre and others, 2020); the European Nature Information Sys- tem and Mapping and Assessment of Ecosystems and their Services (MAES); the Food and Agriculture Organization of the United Nations (FAO) Global Agro- Ecological Zones; the SEEA Central Framework Classification of Land Use and Land Cover Basic Rules and Classifications (annex I, sects. B and C); the Moderate Resolution Imaging Spectroradiometer (MODIS); and classifications used under global conventions such as the United Nations Framework Convention on Climate Change and the Convention on Wetlands of International Importance especially as Water- 44 United Nations, Treaty Series, fowl Habitat (Ramsar Convention).44 To support the integration of data and the com- vol. 996, No. 14583. pilation of accounts, correspondences among these classifications will be developed, building on work, for example, of Bordt and Saner (2019) and under the United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa (2017). Spatial units for ecosystem accounting 65 Table 3.2 SEEA ecosystem type reference classification based on IUCN GET Realms Biomes Terrestrial T1 Tropical – subtropical forests T2 Temperate – boreal forests and woodlands T3 Shrublands and shrubby woodlands T4 Savannas and grasslands T5 Deserts and semi-deserts T6 Polar-alpine T7 Intensive land-use systems Freshwater F1 Rivers and streams F2 Lakes F3 Artificial fresh waters Marine M1 Marine shelves M2 Pelagic ocean waters M3 Deep-sea floors M4 Anthropogenic marine systems Subterranean S1 Subterranean lithic S2 Anthropogenic subterranean voids Transitional TF1 Palustrine wetlands FM1 Semi-confined transitional waters MT1 Shoreline systems MT2 Supralittoral coastal systems MT3 Anthropogenic shorelines MFT1 Brackish tidal systems SF1 Subterranean freshwaters SF2 Anthropogenic subterranean freshwaters Source: David A. Keith and others, SM1 Subterranean tidal eds. (2020). 3.5 Considerations with respect to delineation of spatial units 3.5.1 Delineation of ecosystem assets in practice 3.68 The distinction between ecosystem assets of different types is ecological. This reflects an understanding of the differing composition, structure and function of the various biotic and abiotic components and their interactions. In principle, then, delin- eating the boundaries between ecosystem assets is statistically observable and can be undertaken through comprehensive and regular assessments by ecologists on the ground, including assessments of changes over time. 3.69 In practice, the high resource costs of ground assessments signify that the delin- eation of ecosystem assets would likely involve the mapping of different ecosystem types within an EAA using remote sensing data from satellites where possible. At the same time, it would be necessary to develop regular programmes of ground assess- ments to support the calibration of remote sensing data. 66 System of Environmental-Economic Accounting – Ecosystem Accounting 3.70 Irrespective of the data-collection approach, the data should be collated and ana- lysed by applying geographic information system (GIS) platforms and techniques. This offers the benefits of supporting the integration and manipulation of spatial data from various sources and unleashing the potential to organize and compare those data reliably and sustainably. While such work is specialized, there is nonetheless exten- sive practical and theoretical understanding of the use of GISs to support the delinea- tion of ecosystem assets for ecosystem accounting purposes. The use of GIS platforms and techniques is relevant in other areas of ecosystem accounting. Accompanying technical guidance on the use of GIS techniques and tools for ecosystem account- ing is outlined in the Guidelines on Biophysical Modelling for Ecosystem Accounting (United Nations, Department of Economic and Social Affairs, Statistics Division, 2022a). 3.71 While the use of GIS is standard, it becomes necessary to incorporate ecologi- cal expertise so as to ensure that the boundaries drawn between ecosystem assets are appropriate in ecological terms with regard to the ecosystem type classification that is adopted and that the changes through time are meaningful. In addition, where ground assessments are carried out, this information should be integrated appropri- ately to provide the most accurate measures or used as part of data validation work. 3.72 To operationalize the delineation of ecosystem assets within GISs, it may be appro- priate to use a BSU. A BSU is a geometrical construct representing a small spatial area. The purpose of BSUs is to provide a fine-level data framework within which data on a range of characteristics can be incorporated. A grid cell is one example of a BSU but other BSU shapes – for example, reflecting polygons – may be used. Figure 3.4 shows how a grid-based BSU can be overlaid on an EAA to assist in delineating the ecosystem assets included in the example presented in figure 3.3. 3.73 In the application of a BSU technique, each BSU is attributed with data on charac- teristics that are relevant in distinguishing between ecosystem assets of different types. One way of conceiving this is to imagine that over the entire EAA, data on each charac- teristic is mapped at the BSU level to establish a data layer for that characteristic. 3.74 As noted above, different ecosystem types can be distinguished through com- binations of a number of characteristics. At a basic level, it is necessary to combine data on land cover, climate (e.g. temperature regime, precipitation regime, potential evapotranspiration) and landforms (e.g. soil type, lithography, geomorphology). From this starting point, a range of other characteristics may be added, related, for example, to water, carbon or nutrients. 3.75 The extent to which it is possible to combine multiple data sets to delineate eco- system assets depends on data availability. Where available, existing maps that deline- ate ecosystem assets may be used. As a second option, ecosystem asset maps may be generated using national-level information on land cover, climate, landforms or other characteristics, as relevant, following the descriptions above. 3.76 Where national-level data on basic characteristics are not available, global data sets may be used. This approach has been applied in a number of contexts. An example is the map of World Terrestrial Ecosystems (Sayre and others, 2020), which was derived from the objective development and integration of global temperature domains, global moisture domains, global landforms and 2015 global vegetation and land-use data. As a final option, it may be necessary to use data on the single characteristic of land cover to provide an initial delineation of ecosystem assets. 3.77 For those biomes that are subject to direct human management (particularly biome T7: Intensive land-use systems), it is appropriate to incorporate data on land and ecosystem use in the delineation of ecosystem assets in addition to data on other vari- ables such as land cover. In this context, data on land and ecosystem use can provide Spatial units for ecosystem accounting 67 Figure 3.4 Application of a grid-based BSU to delineate ecosystem assets Ecosystem accounting area (EAA) Basic spatial unit (BSU) EA2 (ET2) EA3 (ET3) e.g. urban e.g. cropland area EA1 (ET1) e.g. forest EA4 (ET4) e.g. lake EA5 (ET2) e.g. urban areas EA6 (ET3) e.g. cropland an indicator of differing ecological composition, structure and function. The potential for identifying separate ecosystem assets within these biomes is discussed in section 3.4.2. 3.78 While the focus of the description in section 3.5.1 is on the use of spatial approaches to delineating ecosystem assets, data on the extent of ecosystem assets or of specific ecosystem types may be collected through other means, for example, sur- veys of landholders. For certain ecosystem types, for example, cultivated areas and forests, the collection of data through these other means will provide input into the accounts. However, data from these sources do not support the derivation of maps since the precise location and boundaries of the ecosystem assets will not be recorded. Consequently, alignment with data on other ecosystem types may be challenging and the risks are increased of double counting or missing areas of ecosystems. On the other hand, non-spatial data may be valuable in supporting data quality assurance and esti- mation of ecosystem condition and ecosystem services. 3.5.2 Use of data on characteristics of land 3.79 In ecosystem accounting, there is commonly an interest in accounting for terres- trial ecosystems and hence the use of data associated with the various characteristics of land is of immediate relevance and interest. Demonstrated rapid and significant changes in terrestrial ecosystems, for example, due to urban and agricultural expan- sion are one reason for this interest. As described above, while land-cover and land-use data are not sufficient to delineate ecosystem assets, they do provide much relevant information for the measurement of ecosystem extent of terrestrial ecosystem types. Those data may also be of direct use in the measurement of ecosystem service flows and in the monetary valuation of ecosystem services and ecosystem assets. 3.80 Both land-cover and land-use data should be organized following the concepts and definitions outlined in the SEEA Central Framework. Land cover refers to the observed physical and biological cover of the Earth’s surface and includes natural veg- etation and abiotic (non-living) surfaces. At its most basic level, land cover comprises 68 System of Environmental-Economic Accounting – Ecosystem Accounting all of the individual features that cover the area within a country. For the purposes of land-cover statistics, the relevant country area includes only land and inland waters. 3.81 Several international land-cover classifications, providing well-documented and tested metadata, may be used. The standard classification of land cover in the SEEA 45 For the FAO Land Cover Clas- Central Framework is based on the FAO Land Cover Classification System.45 sification System, see www. fao.org/land-water/land/land- 3.82 Land use reflects both (a) the activities undertaken and (b) the institutional governance/land-resources- arrangements put in place for a given area for the purposes of economic production, planning-toolbox/category/ or the maintenance and restoration of environmental functions. In effect, “use” of an details/en/c/1036361/. area implies the existence of some human intervention or management. Land in use therefore includes areas (e.g. protected areas) that are under the active management of institutional units of a country for the primary purpose of conserving biodiversity and other environmental values (SEEA Central Framework, para. 5.246). 3.83 Land management is the process of managing the use and development of land resources. There may be differences in the degree to which areas of land or water are managed by humans, ranging from more intensively (in the case, for example, of built- up areas and cropland) to less intensively (in the case, for example, of polar regions and oceans). The level of land management can have positive or negative effects on ecosys- tems and monitoring changes in the degree of management may be of interest in the context of monitoring the links among changes in ecosystem assets, their condition and land management policies and decisions. 3.84 Landownership is a key characteristic that constitutes a direct link between eco- systems, their management and economic statistics. Economic assets, including land, can be assigned and classified to institutional units (i.e. corporations, government, households, non-profit organizations) based on ownership. As not all ecosystems are owned (e.g. some remote natural areas and the high seas beyond the EEZ), various accounting conventions have been established. Moreover, in many countries there are communally owned areas, for example, areas used for the rearing of livestock. Rel- evant conventions for the allocation of ownership are discussed in chapter 11 in the context of integrating ecosystem accounts with the SNA sequence of accounts. Data on landownership for terrestrial ecosystems are available in many countries in the form of cadastres, which are registers of areas defined administratively and delineated on the basis of ownership. 3.85 Data on each of these characteristics of land – cover, use, management and own- ership – can be overlaid (where spatial data are available) or presented in conjunction with data on the extent of ecosystem assets and associated measures of condition and ecosystem services. For example, data derived from cadastres showing the sector of ownership or the nature of tenure can be linked to data on ecosystem assets and hence provide a basis for monitoring the effects of land management policies within a given region (e.g. a water catchment). 3.5.3 Organizing data on socioeconomic and other characteristics 3.86 The delineation of ecosystem assets generally requires the use of data besides land-related data, namely, a variety of data on several ecosystem characteristics, as noted above. The organization of those data may create the opportunity to establish a richer database of spatial information. This would include data on land management and landownership, as described above, as well as data on, for example, stocks and flows of water and carbon; the presence of particular species (either endemic or inva- sive); measures of soil and water quality; temperature, slope and elevation; pollution Spatial units for ecosystem accounting 69 and other residual flows; the production of agricultural, forestry and fisheries outputs; and indicators for recreational activities and cultural sites. 3.87 One motivation for organizing these additional data emerges from the particular needs of ecosystem accounting. While data on only certain characteristics are required for the delineation of ecosystem assets, there are many other characteristics that are relevant for accounting for ecosystem condition, estimating flows of ecosystem services and determining monetary values for ecosystem services and ecosystem assets. Data on ecosystem extent, condition and services may be further enriched by the integration of spatially detailed socioeconomic data, for example, demographic data. 3.88 In this regard, particular attention should be directed to the measurement of ecosystem services where both their supply and their use must be recorded. In the case of some services (e.g. biomass provisioning services), their supply and their use occurs in the same location in a single ecosystem asset. In the case of other services (e.g. air filtration services), the supply of the service may take place in a location different from the location of its use; and in the case of still other services (e.g. flood mitigation ser- vices), it is necessary to allocate the supply of the service to a combination of ecosystem assets. Spatial attribution of the supply and use of ecosystem services is therefore a task that is important for ensuring appropriate recognition of the role of different ecosys- tems and the mix of different users. These issues are discussed further in chapter 7. 3.89 Spatial data on additional characteristics should be attributed to ecosystem assets in order to support coherence in accounting terms. Operationally, this attribution may be applied using a BSU-based structure to align and integrate spatial data on different characteristics and hence account for varying spatial coverage, scales and projections. Since the extent and configuration of ecosystem assets change over time, the nature of the attribution of data also change. Thus, use of an agreed BSU structure, or master layer, would likely provide considerable computational advantages. 3.90 It is envisaged that, ideally, a country would use the principles of the Integrated Geospatial Information Framework46 to underpin the collation and organization of 46 See https://ggim.un.org/igif. spatial data. The organized data could in turn provide a coherent “one map” for a country, including its marine ecosystems, across many ecological, social and eco- nomic characteristics. Countries are therefore encouraged to use the implementation of ecosystem accounting as an opportunity to integrate spatial data and techniques. 71 Appendix A3.1 Ecological concepts underpinning spatial units for ecosystem accounting Introduction A3.1 The present appendix provides a short introduction to ecological concepts so that compilers of accounts with a non-ecological background can gain an apprecia- tion of some of the complexities associated with delineating and measuring ecosystem assets. By providing a basic framework for ecological concepts and a summary of key ecosystem characteristics, the discussion should support a more informed discussion with experts in ecology. Key ecological concepts A3.2 A range of different but related characteristics of areas are used in ecology, each reflecting different ecological concepts. The present section summarizes the key con- cepts of relevance in the context of ecosystem accounting. Ecosystems A3.3 The central concept of interest for ecosystem accounting and classification is that of the ecosystem itself. The most important element of this definition is the final phrase, “interacting as a functional unit”. The phrase signifies that, from an ecosystem functioning perspective, the abiotic environment (climate, lithology, hydrology, etc.) is relevant in relation to biota (if only in a one-directional way) rather than on its own. Ecosystem function concerns processes related to fluxes of resources such as energy and water; to photosynthesis; and to decomposition, which underpin the interactions among ecosystem components (Ågren and Andersson, 2011). A3.4 David A. Keith and others, eds. (2020), building upon assembly theory (which focuses on the selection of ecological communities through environmental filtering of available traits within a species pool (Keddy, 1992)), distinguish five groups of pro- cesses that govern ecosystem functioning. Those processes concern: • Resources (energy, nutrients, water, carbon, oxygen, etc.). One or more of these resources will often be limited, inducing an ecosystem functional response such as competition. • Ambient environmental conditions (temperature, salinity, geomorphol- ogy, etc.). These factors regulate the availability of and access to resources, as well as ecological processes (temperature controls biochemical reaction kinetics, geomorphology controls soil moisture conditions, etc.). • Disturbance regimes (fire, floods, mass movements, etc.). These factors episodically destroy existing ecosystem structures and/or introduce or release new resources and niches. • Biotic interactions (competition, predation, ecosystem engineering, etc.). While these are largely endogenous processes that shape ecosystem 72 System of Environmental-Economic Accounting – Ecosystem Accounting structure and function, they include organisms that act as mobile links between different ecosystems and regulate transfers of matter and energy among them. • Human activity. Anthropogenic processes are special kinds of biotic inter- actions that influence structure and function of ecosystems either directly (e.g. through land-cover change, movement of biota) or indirectly (e.g. through harvest of biomass and other forms of resource use, climate change) A3.5 Together, those processes, factors and conditions give rise to a variety of ecosys- tem traits, such as productivity, diversity, trophic structure, physiognomy, types of life forms and phenology. Assembly processes and ecosystem traits both influence stocks of assets and flows of services by shaping ecosystem structure and function. The same processes that determine the “identity” of an ecosystem also determine its integrity. Accordingly, variables that describe these processes and characterize the state of an ecosystem with respect to them are within the focus of ecosystem condition accounts (see chap. 5). Habitat and biotope A3.6 The concept of habitat is closely related but not identical to the concept of eco- system. Habitat is defined as “a location (area) in which a particular organism is able to conduct activities which contribute to survival and/or reproduction” (Stamps, 2019). Thus, the concept of habitat is organism-specific, focuses on both biotic and abiotic factors and has a geographical component. Habitats are therefore provided by ecosystems for individual species. For example, a closed cover of larix trees may define a taiga forest ecosystem that provides a habitat for woodpeckers. A3.7 While the term biotope is frequently used interchangeably with the term habi- tat, it is often assigned to the community concept and habitat to the species concept. Thus, a species has a certain habitat, but the group of species that share an ecosys- tem with that species in a geographical region share a biotope (Dimitrakopoulos and Troumbis, 2019). A biotope is a topographic unit and can be considered to be equiva- lent to an ecosystem asset. Realm A3.8 A realm is a major component of the biosphere that is fundamentally distinct in ecosystem organization and function. The four core realms are terrestrial, fresh- water, marine and subterranean. Each realm consists of different biomes (see directly below). There are also a number of transitional realms related to ecosystems that are found between the core realms, for example, the marine-terrestrial realm, which con- tains shoreline and coastal ecosystems. Biome A3.9 A biome is “a biotic community finding its expression at large geographic scales, shaped by climatic factors, and perhaps better characterized by physiognomy and functional aspects [of vegetation], rather than by species or life-form composi- tion. Biomes are frequently used as tools to provide large-scale (regional to global) backgrounds in a range of ecological and biogeographical studies” (Mucina, 2019). Biomes are the largest geographical biotic communities that are convenient to recog- nize. Most of them broadly correspond with climatic regions (zonobiomes), although other environmental factors are sometimes important, for example, soils (pedobi- omes) or topography (orobiomes). Appendix A3.1: Ecological concepts underpinning spatial units for ecosystem accounting 73 A3.10 There is no single authoritative list of biomes. While some biomes (e.g. tropi- cal rainforest, taiga) are recognized by all specialists in the field, many other different biomes are proposed for less well-defined ecosystems, especially those on ecotones, such as savannas and woodlands. Use of the IUCN GET list of biomes as a reference serves the purposes of SEEA EA. Ecoregions A3.11 An ecoregion is “a geographic group of landscape mosaics”, “resulting from large-scale predictable patterns of solar radiation and moisture, which in turn affect the kinds of local ecosystems and animals and plants found there” (Bailey, 2009; 2014). Individual ecosystems (i.e. ecosystem assets) within an ecoregion may have a strong functional relationship with each other (e.g. when upstream ecosystems regulate water and nutrient resources for downstream ecosystems) or they may be function- ally unconnected (e.g. when two ecosystem assets of the same ecosystem type, but in adjacent subcatchments, simply reflect the same abiotic conditions, such as soil, climate and topography). Ecoregions are often used within a mapping context and are described using a hierarchical structure. Terrestrial ecoregions are often grouped into different higher-order biogeographic regions, where the biogeographic regions (e.g. Nearctic for Northern America, Indomalaya for India and South-East Asia) reflect global differences in species distributions due to geographical separation and evolu- tionary history. On a smaller scale, ecoregions may be spatially contiguous units of a single biome or subdivisions thereof (e.g. West Siberian Taiga and East Siberian Taiga) (Olson and others, 2001). Ecotones A3.12 Ecotones are areas of transition between two ecosystems along a gradient of one or more resources or environmental controls. A typical example is the area of tran- sition from forest to grassland along a gradient of moisture availability. Determina- tion of the precise location of ecosystem types, and hence the location of the ecotones between them, is ultimately subjective. Where the gradients are very gentle, ecotones can occupy areas that are quite extensive. The translation of ecotone gradients into a basis for ecosystem classification will depend on the nature and “sharpness” of the transition and the scale of application. Key characteristics of ecosystems A3.13 In each of the three core environmental realms – terrestrial, freshwater and marine – ecosystems are commonly understood as occupying space and comprising an abiotic complex, a biotic complex and the interactions between the two complexes. The present section describes the key characteristics of terrestrial, freshwater and marine ecosystems. Those characteristics are linked to ecosystem structure and func- tioning and play a key role in the classification of ecosystems within each realm, as well as in the measurement of their condition. Reflecting the intention of the appendix as a whole, the present section does not offer an exhaustive listing of ecosystem character- istics. It is intended primarily to provide a sense of the level of richness of ecosystems, which should be considered in their delineation and measurement. Terrestrial ecosystems A3.14 Terrestrial ecosystems are found on land and are limited by the presence and availability of water and nutrients. The key drivers for the presence of different ecosys- 74 System of Environmental-Economic Accounting – Ecosystem Accounting tem types are climate, topography and geomorphology, lithology and human activi- ties. In summary: • Climate, pragmatically defined as the statistics of weather, is an impor- tant driver of many ecosystems, because of its strong links to resources (e.g. water, energy) and constraints (e.g. droughts). From an ecological point of view, the most relevant climatic parameters are (a) tempera- ture (mean annual temperature; seasonality; temperature of the coldest month; accumulated growing degree days); (b) precipitation (total annual precipitation; seasonality); and (c) potential evapotranspiration (annual total; seasonality). • Topography and geomorphology affect climate (on the global and local scales), moisture conditions (on the regional and local scales) and nutri- ent redistribution. Differences in topography and geomorphology are exemplified by (a) hillslopes and plains (hillslopes have improved drain- age compared with plains); (b) gentle and steep slopes (steeper slopes will have shallower soils, faster drainage and possibly more disturbances owing to mass movements); (c) low and high topography (adiabatic expansion of rising air results in a cooler and wetter (micro)climate on high plains and mountains); and (d) profile and planform convexity (topographic controls on hillslope hydrology promote relatively dry conditions on convex diver- gent hillslopes and relatively wet conditions in concave hollows and the convergent channel network). • Lithology determines the parent material for soil formation and conse- quently controls vegetation primarily through resource processes (espe- cially nutrient availability), through mineral composition and through the formation of weathering products, such as clay minerals. • Human activities can exert an impact on ecosystems either directly (e.g. through land-cover change, movement of biota) or indirectly (e.g. through resource use, climate change). A3.15 The key characteristics of terrestrial ecosystems are shaped by these driv- ers. The distribution, composition and significance of those characteristics will vary significantly over ranges extending, for example, from tropical rainforests to alpine ecosystems. Key abiotic characteristics of terrestrial ecosystems are soil and moisture regime. Key biotic characteristics include vegetation, animals and biota (such as fungi and bacteria). Collectively, the biotic characteristics are reflected in variations in the structure, composition and function of ecosystems. A3.16 Concerning key characteristics of soil and vegetation, the following points are relevant: • Soil controls vegetation primarily through a number of resource processes and is formed partially through local current processes and partially through past ecosystem processes. Relevant soil characteristics include: – Soil chemical properties such as cation exchange capacity, which deter- mine the capacity of the soil to retain nutrients – Soil physical properties, such as texture, porosity, drainage and perme- ability, which determine the characteristics and availability of moisture during dry periods – Soil organic matter, an important biota-controlled soil characteristic that contributes to the above-mentioned chemical and physical properties Appendix A3.1: Ecological concepts underpinning spatial units for ecosystem accounting 75 • Vegetation may be used as a proxy for all biota. While the terms vegetation and ecosystems are often used interchangeably (e.g. with respect to tropical rainforests), vegetation is a biotic element of an ecosystem and exists in a physical environmental context that defines it. For many ecosystems, and for terrestrial ecosystems in particular, vegetation is an important element of the classification and labelling process. Vegetation is generally charac- terized by species assemblages that have a strong spatial expression and whose occurrences are therefore recognizable on the landscape. Vegetation can also be characterized by a set of more generic plant functional traits (see, for example, Pérez-Harguindeguy and others (2013)), including: – Growth form, for example, trees, shrubs, grass and the corresponding canopy architecture – Raunkiær life form, for example, phanerophytes (woody, buds > 25 cm above the ground) and geophytes (buds in dry ground) – Life history, for example, annuals versus perennials – Leaf type and phenology, for example, broad-leaved, needle-leaved, deciduous, evergreen – Adaptation to moisture stress (xerophytes) or salt stress (halophytes) Freshwater ecosystems and wetlands A3.17 Freshwater ecosystems are characterized by the presence of surface waters whose surface extent can vary spatially over time and whose vegetation consists of largely aquatic species. The main distinction among freshwater ecosystems is between flowing water systems (e.g. rivers and streams) and low- or non-flowing systems (e.g. lakes, ponds and wetlands). Many of the drivers and characteristics are correlated with each other and vary quite predictably along a downstream gradient. A3.18 The key drivers and abiotic characteristics of rivers and streams include: • Morphology. By definition, rivers and streams are geomorphological fea- tures and can be distinguished in terms of (a) stream order, that is, position from source (lowest order) to outlet (highest order), as a proxy for classifi- cation of drainage area; (b) fluvial zone (erosional, transfer, depositional); (c) sediment size (bedrock, boulders, gravel, sand, clay) and mobility (bed- load, suspended); (d) channel pattern47 (straight, meandering, wandering, 47 It should be noted that channel braided, anastomosing); and (e) bedform (planar, ripples, pool-riffle, bars) pattern is strongly controlled by bank strength, which itself • Hydrology, which can be ephemeral, intermittent, perennial or interrupted is partly controlled by vegeta- tion. On longer timescales, • Chemistry involving, for example, oxygen and nutrient concentration channel pattern can therefore A3.19 The key drivers and abiotic characteristics of lakes and pools include: be regarded as an ecosystem characteristic, rather than a • Origin: for example, tectonic, volcanic, glacial, karstic, fluvial, artificial driver. • Stratification: for example, meromictic (never mixes), monomictic (mixes once a year), dimictic (mixes twice a year) and polymictic (often mixes) • Trophic status: oligotrophic (nutrient-poor) and eutrophic (nutrient-rich) • Salinity: freshwater lakes and salt lakes • Permanency: for example, episodic, seasonal and permanent lakes A3.20 The key biotic characteristics of rivers, streams, lakes and pools include fish, macroinvertebrates and vegetation. 76 System of Environmental-Economic Accounting – Ecosystem Accounting A3.21 Wetlands can be broadly defined as ecosystems that arise when inundation by water produces soils dominated by anaerobic processes, which, in turn, forces the biota, particularly rooted plants, to adapt to flooding (Keddy, 2010). A3.22 Some key drivers and abiotic characteristics of wetlands are: • Morphology: terrain-conforming versus self-emergent • Hydrological system: permanence/seasonality of water levels (water avail- ability); minerotrophic (groundwater, surface water) versus ombrotrophic (precipitation) • Trophic status: oligotrophic (nutrient-poor) versus eutrophic (nutrient- rich) • Landscape position: along streams (riverine), lakes (lacustrine), estuarine or disconnected/upstream (palustrine) A3.23 The key biotic characteristics of wetlands concern the dominant vegetation type. This may be bryophytes or graminoids (bog and fen or peatland); graminoids, shrubs, forbs or emergent plants (marsh); trees, shrubs or forbs (swamp); or submerged or floating aquatic plants (shallow water). A3.24 As for terrestrial ecosystems, human activities can be a significant driver of freshwater and wetland ecosystems, for example, through the fragmentation of river systems with dams and the draining of wetlands. Marine ecosystems A3.25 Marine ecosystems consist of all saltwater ecosystems that are directly con- nected to the world’s oceans. From a broader ocean perspective, this also includes coastal transitional and intertidal ecosystems (estuaries, deltas, coastal salt marshes and other shorelines). A3.26 Bathymetry is the marine equivalent of topography for terrestrial ecosystems. It is a measure of the depths and shapes of the marine environment when viewed at the transition from coastal landscapes to the deeper open ocean environment. In the context of this transition, benthic refers to those habitats or organisms associated with the ocean floor as it extends from the shoreline to increasing depths, while pelagic refers to habitats or organisms existing in the marine water column. A3.27 The key drivers of marine ecosystems are: • Bathymetric profile, which influences the characteristics of marine eco- systems since the depth from the water surface will determine exposure of the underlying water layer and/or ocean bottom to air/wind, precipi- tation, currents, light and nutrients. This driver can be considered in two primary ways. First, intertidal or littoral zones create requirements for biota using these areas that are different from the requirements cre- ated by open ocean zones. For example, as the intertidal zone is affected by tides and is above water for part of the day, biota living within this area will need to have strategies for adapting to potential exposure to air and precipitation. Second, zones are designated as photic (receiving light), disphotic (receiving insufficient light for photosynthesis) or apho- tic (receiving no light) based on the ability of light to penetrate the water column, which limits photosynthesis. For example, the continental shelf is relatively shallow and its photic zone is home to light-dependent ecosystems such as corals, seagrasses and kelp; the continental margin begins the slope towards deeper aphotic ecosystems on the abyssal plain where virtually no light penetrates. Appendix A3.1: Ecological concepts underpinning spatial units for ecosystem accounting 77 • Climate, which affects and is affected by the ocean. There are four key aspects to consider. First, wind generates surface currents, and waves support the ocean circulation system, which moves water, nutrients and biota globally. The strength of surface winds also plays an impor- tant role in the depth of the mixed layer and in upwelling of nutrient- rich deeper waters in coastal locations. Second, the pH (acidity) of the oceans, which currently averages on the somewhat basic or alkaline side of the pH scale (approximately 8), determines the types of biota that can survive in the marine ecosystem. Decreases of pH because of increases in atmospheric carbon dioxide (CO2), also known as ocean acidification, can negatively impact certain biota, such as corals and shellfish. Third, the temperature of the oceans depends on atmospheric warming and water temperature will determine the ability of aquatic biota to tolerate certain coastal and marine environments. This can result in changes in the distribution of marine biota. Changing global air temperatures can also exert an impact on the ocean ecosystem through inputs of freshwa- ter from melting glaciers. Fourth, precipitation exerts an impact on the flow of freshwater into coastal and marine systems, thereby influencing the salinity and density of the water layers. • Lithology (underlying rock material), which determines the substrate pre- sent on the ocean floor or sea bottom. This can consist of a variety of mate- rials of various origins, for example, rock, sand, mud or biogenic materials (corals, oyster/mussel beds), that shape marine ecosystems. • Ocean circulation patterns, which bring warmer water to cooler continents and vice versa, regulating the temperatures observed in different parts of the globe. The Earth’s climatic zones (arctic, temperate, tropical and Ant- arctic) are very much affected by these ocean processes. Currents and ther- mohaline circulation (which moves surface waters deep into the ocean) also move nutrients and oxygen globally, shaping coastal and marine ecosys- tems. Equatorial currents moving in opposite directions (clockwise north of the equator and counterclockwise south of the equator) create produc- tive areas with upwelling of nutrient-rich deeper waters. The local impact on deep ocean circulation by bathymetry, as occurs when nutrient-rich currents meet seamounts, creates highly productive upwelling areas for marine biota. • Salinity differences between estuarine (mix of salt- and freshwater) and open ocean (saltwater) environments, which determine the biota that thrive in these settings • Stratification of coastal and marine water layers based on temperature, salinity and density, as well as factors such as surface winds, which plays an important role in driving marine ecosystem structure and function. Strati- fication varies seasonally and by location on the globe. The surface mixed layer is the area of greatest turbulence and circulation of water because of its proximity to surface winds, which results in relatively uniform tem- perature and salinity. As a result of temperature and salinity differences between the surface and deeper waters, density differences create a bound- ary between the relatively nutrient-poor waters at the surface and the rela- tively nutrient-rich deeper waters. • Human activities, which exert an impact on marine ecosystems through both direct and indirect effects. Direct effects include harvesting of 78 System of Environmental-Economic Accounting – Ecosystem Accounting marine species, ecosystem modification, noise and release of nutrients, litter and invasive species into marine and coastal waters. Indirect effects include impacts on climate that then drive changes in marine ecosystem characteristics. A3.28 The key abiotic and biotic characteristics are: • Biota: biota in the sea column (pelagic biota) may actively propel them- selves through the water (nekton: including some bacteria, algae, inverte- brates, fishes, birds and mammals) or may be carried passively by currents and winds (plankton). Biota associated with the sea floor (benthic biota) – such as aphotic coral, sponges and bivalves, plants such as seagrasses and kelp, invertebrates and bacteria – can consist of complex three- dimensional structures formed by sessile (stationary) suspension feeders. • Sediment chemical and physical properties, which can indicate the poten- tial for sediments to support biota and associated biological and chemical processes as well as their status as a carbon sink • Water column characteristics, which are important in evaluating the con- dition of the marine ecosystem. Relevant characteristics include (a) water temperature, which influences the suitability of a marine ecosystem as habitat for biota; and (b) water quality, which is influenced by natural and anthropogenic inputs and processes, including contaminants, nutrients, litter (including plastics) and sediment and freshwater inputs from land. These inputs, as well as broader climatic drivers, can exert an impact on dissolved oxygen, salinity and turbidity (cloudiness) as well as the health of marine biota in the system. Water quality can be an important marker of marine ecosystem condition; for example, low dissolved oxygen levels may indicate an ecosystem impacted by excess anthropogenic nutrient inputs. • Vegetation: Coastal and marine vegetation, including mangroves, sea- grasses and seaweeds, are important elements of marine ecosystems. That vegetation provides a habitat and food for biota and plays a role in nutrient and gas cycling and coastal protection. Vegetation in marine systems takes various forms (as regards, for example, size or shape) and may be relatively fixed or immobile (e.g. mangroves) or may float along with ocean currents (e.g. sargassum). 79 Appendix A3.2 International Union for Conservation of Nature Global Ecosystem Typology A3.29 The upper three levels of IUCN GET (David A. Keith and others, eds., 2020) are set out below. The realms presented are the terrestrial (T), freshwater (F), marine (M) and subterranean (S) and six transitional realms. Realm Biome Ecosystem functional group Terrestrial T1 Tropical/subtropical forests T1.1 Tropical-subtropical lowland rainforests T1.2 Tropical-subtropical dry forests and thickets T1.3 Tropical-subtropical montane rainforests T1.4 Tropical heath forests T2 Temperate-boreal forests T2.1 Boreal and temperate montane forests and woodlands and woodlands T2.2 Deciduous temperate forests T2.3 Oceanic cool temperate rainforests T2.4 Warm temperate laurophyll forests T2.5 Temperate pyric humid forests T2.6 Temperate pyric sclerophyll forests and woodlands T3 Shrublands and shrubby T3.1 Seasonally dry tropical shrublands woodlands T3.2 Seasonally dry temperate heaths and shrublands T3.3 Cool temperate heathlands T3.4 Young rocky pavements, lava flows and screes T4 Savannas and grasslands T4.1 Trophic savannas T4.2 Pyric tussock savannas T4.3 Hummock savannas T4.4 Temperate woodlands T4.5 Temperate subhumid grasslands T5 Deserts and semi-deserts T5.1 Semi-desert steppes T5.2 Succulent or thorny deserts and semi-deserts T5.3 Sclerophyll hot deserts and semi-deserts T5.4 Cool deserts and semi-deserts T5.5 Hyper-arid deserts T6 Polar-alpine (cryogenic) T6.1 Ice sheets, glaciers and perennial snowfields T6.2 Polar-alpine cliffs, screes, outcrops and lava flows T6.3 Polar tundra and deserts T6.4 Temperate alpine grasslands and shrublands T6.5 Tropical alpine grasslands and herbfields 80 System of Environmental-Economic Accounting – Ecosystem Accounting (Continued ) Realm Biome Ecosystem functional group Terrestrial T7 Intensive land-use systems T7.1 Annual croplands (continued ) T7.2 Sown pastures and fields T7.3 Plantations T7.4 Urban and industrial ecosystems T7.5 Derived semi-natural pastures and old fields Freshwater F1 Rivers and streams F1.1 Permanent upland streams F1.2 Permanent lowland rivers F1.3 Freeze-thaw rivers and streams F1.4 Seasonal upland streams F1.5 Seasonal lowland rivers F1.6 Episodic arid rivers F1.7 Large lowland rivers F2 Lakes F2.1 Large permanent freshwater lakes F2.2 Small permanent freshwater lakes F2.3 Seasonal freshwater lakes F2.4 Freeze-thaw freshwater lakes F2.5 Ephemeral freshwater lakes F2.6 Permanent salt and soda lakes F2.7 Ephemeral salt lakes F2.8 Artesian springs and oases F2.9 Geothermal pools and wetlands F2.10 Subglacial lakes F3 Artificial wetlands F3.1 Large reservoirs F3.2 Constructed lacustrine wetlands F3.3 Rice paddies F3.4 Freshwater aquafarms F3.5 Canals, ditches and drains Terrestrial- TF1 Palustrine wetlands TF1.1 Tropical flooded forests and peat forests freshwater TF1.2 Subtropical/temperate forested wetlands TF1.3 Permanent marshes TF1.4 Seasonal floodplain marshes TF1.5 Episodic arid floodplains TF1.6 Boreal, temperate and montane peat bogs TF1.7 Boreal and temperate fens Freshwater- FM1 Semi-confined transitional FM1.1 Deepwater coastal inlets marine waters FM1.2 Permanently open riverine estuaries and bays FM1.3 Intermittently closed and open lakes and lagoons Marine M1 Marine shelves M1.1 Seagrass meadows M1.2 Kelp forests M1.3 Photic coral reefs M1.4 Shellfish beds and reefs M1.5 Photo-limited marine animal forests M1.6 Subtidal rocky reefs Appendix A3.2: International Union for Conservation of Nature Global Ecosystem Typology 81 (Continued ) Realm Biome Ecosystem functional group Marine M1 Marine shelves (continued ) M1.7 Subtidal sand beds (continued ) M1.8 Subtidal mud plains M1.9 Upwelling zones M1.10 Rhodolith/maërl beds M2 Pelagic ocean waters M2.1 Epipelagic ocean waters M2.2 Mesopelagic ocean waters M2.3 Bathypelagic ocean waters M2.4 Abyssopelagic ocean waters M2.5 Sea ice M3 Deep-sea floors M3.1 Continental and island slopes M3.2 Submarine canyons M3.3 Abyssal plains M3.4 Seamounts, ridges and plateaus M3.5 Deepwater biogenic beds M3.6 Hadal trenches and troughs M3.7 Chemosynthetic-based ecosystems M4 Anthropogenic marine M4.1 Submerged artificial structures systems M4.2 Marine aquafarms Marine- MT1 Shorelines MT 1.1 Rocky shorelines terrestrial MT 1.2 Muddy shorelines MT 1.3 Sandy shorelines MT 1.4 Boulder and cobble shores MT2 Supralittoral coastal MT 2.1 Coastal shrublands and grasslands MT 2.2 Large seabird and pinniped colonies MT3 Anthropogenic shorelines MT 3.1 Artificial shorelines Marine- MFT1 Brackish tidal MFT1.1 Coastal river deltas freshwater- MFT1.2 Intertidal forests and shrublands terrestrial MFT1.3 Coastal salt marshes and reed beds Subterranean S1 Subterranean lithic S1.1 Aerobic caves S1.2 Endolithic systems S2 Anthropogenic subterranean S2.1 Anthropogenic subterranean voids voids Subterranean- SF1 Subterranean freshwaters SF1.1 Underground streams and pools freshwater SF1.2 Groundwater ecosystems SF2 Anthropogenic subterra- SF2.1 Water pipes and subterranean canals nean freshwaters SF2.2 Flooded mines and other voids Subterranean- SM1 Subterranean tidal SM1.1 Anchialine caves marine SM1.2 Anchialine pools Source: David A. Keith and others, SM1.3 Sea caves eds. (2020). 83 Chapter 4 Accounting for ecosystem extent 4.1 Purpose of accounting for ecosystem extent 4.1 A common starting point for ecosystem accounting is the organization of infor- mation on the extent of different ecosystem types within a country or other EAA and how that extent is changing over time. Ecosystem extent is the size of an ecosystem asset. It is usually measured in terms of spatial area but may also be measured in terms of length or volume. Extent data are summarized in an ecosystem extent account. 4.2 Accounting for ecosystem extent is relevant for four reasons. First, an ecosys- tem extent account provides a common basis for discussion of the composition (mix/ combination) of and changes in ecosystem types within a country. This information supports (a) the derivation of coherent indicators of deforestation, desertification, agricultural conversion, urban expansion and other forms of ecosystem change; (b) the measurement of ecosystem diversity and the derivation of indicators of changes in biodiversity; and (c) an understanding, when information underpinning an extent account is mapped, of the locations and configuration of ecosystem types within an EAA and how this is changing over time (e.g. with respect to fragmentation of the landscape or proximity of cultivated areas to natural ecosystems). 4.3 Second, given that a core intent of ecosystem accounting is to mainstream eco- logical data in economic planning and decision-making, the organization of data on ecosystem extent provides both a straightforward and a meaningful entry point into the discussion of ecosystems for those less familiar with ecological concepts and data. In particular, extent accounts provide a common framing through which other data on ecosystems can be presented. For example, where relevant data are available, mapped data on ecosystem condition and ecosystem service flows can be tabulated using a common classification of ecosystem types. 4.4 Third, the structure of the ecosystem extent account, as set out below, dem- onstrates in a manner that is accessible and readily interpretable, the capability of accounting to provide a time-series narrative, in this case through the estimation of opening and closing balances over an accounting period. Recording a time series is particularly important for revealing the degree to which the extent and composition of ecosystem types have changed and the nature of conversions among ecosystem types. 4.5 Fourth, the spatial data most commonly used to compile an ecosystem extent account provide an underlying infrastructure for the measurement of ecosystem con- dition and for the measurement and modelling of many ecosystem services. In both cases, the relevant indicators of condition and services commonly vary by ecosystem type and depend on the location and configuration (spatial arrangement) of ecosystem types within an EAA. Further, the ecosystem extent account and the ecosystem condi- tion account provide the most information when viewed and interpreted jointly. 84 System of Environmental-Economic Accounting – Ecosystem Accounting 4.2 Ecosystem extent accounts 4.2.1 Scope of extent accounts 4.6 Following the principles described in chapter 3, an ecosystem extent account is compiled for the total area of an EAA. Thus, an ecosystem extent account records the areas and changes in areas of all of the ecosystem assets within an EAA, classified by ecosystem type, that is to say the areas of all ecosystem assets of the same ecosystem type are aggregated. Since input data are commonly spatial data available in the form of maps, mapped outputs, where all of the ecosystem assets of the same ecosystem type are coded equivalently, can also be produced. Further, in this case, extent accounts reflect tabulated outputs of the mapped input data. 4.7 In concept, at the national level, the EAA extends to cover all terrestrial, fresh- water and marine ecosystems with a boundary set by the country’s border with other 48 Subsurface ecosystems, such as countries and its EEZ.48 subterranean ecosystems and 4.8 Compilers may choose to use an EAA of smaller geographical scope, by focus- aquifers, are excluded from the primary extent account, ing, for example, on the terrestrial or marine realm or on a subnational region. Also, it as their area cannot be added is possible to compile accounts covering areas outside national jurisdiction, for exam- together with the area of ple, ocean areas including the high seas. These accounts could be compiled as part of ecosystems in other realms regional or international accounting efforts. without double counting. 4.9 Complementary extent accounts can be compiled for ecosystem types that are outside the scope of the standard two-dimensional extent account, such as subter- ranean ecosystems and aquifers. Complementary accounts can be compiled also for linear features reflecting a one-dimensional perspective, with the understanding that the area associated with linear features will be included in scope of the standard two- dimensional extent accounts following the treatments outlined in section 3.3. Poten- tial structures for complementary extent accounts are described in section 4.2.4. 4.2.2 Structure of extent accounts and accounting entries 4.10 The structure of an ecosystem extent account is presented in table 4.1. The struc- ture of the rows reflects the general logic of asset accounts as described in the SEEA Central Framework, with an opening extent, closing extent, and additions and reduc- tions in extent. Measurement units for entries are units of area appropriate for the scale of analysis, for example, hectares or square kilometres. 4.11 The column headings correspond to the classes under the selected ecosystem type classification. In table 4.1, these classes are examples of ecosystem types at the EFG level 3 of the SEEA ecosystem type reference classification based on IUCN GET, as described in chapter 3 and presented in appendix A3.2. Table 4.1 includes ecosys- tem types from the terrestrial, freshwater and marine realms. It may be appropriate to compile accounts separately for each of these realms, particularly if the available units of measurement are different. 4.12 At the national or subnational level, it will be most appropriate to compile accounts using an existing ecosystem type classification and to establish a correspond- ence to the SEEA ecosystem type reference classification for the purpose of interna- tional comparison. 4.13 From an accounting perspective, there is no specific limit placed on the num- ber of ecosystem types or the level of detail that is included. The choice will depend on the relevance of different ecosystem types and data availability. The overall con- straint is that the sum of the areas of all ecosystem types must be equal to the total area of the EAA. Table 4.1 Ecosystem extent account (units of area) Ecosystem types (based on the EFG level 3 of IUCN GET) Terrestrial Freshwater Marine T1 Tropical-subtropical T2 Temperate-boreal forests forests and woodlands … T7 F1 … FM1 M1 … MFT1 Tropical/subtropical lowland rainforests Tropical/subtropical dry forests and scrubs Tropical/subtropical mon- tane rainforests Tropical heath forests Boreal and temperate mon- tane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll forests and woodlands … … … Derived semi-natural pas- tures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoons Seagrass meadows … Coastal saltmarshes and reedbeds T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 TOTAL Opening extent Additions to extent Managed expansion Unmanaged expansion Reduction in extent Managed reductions Unmanaged reductions Net change in extent Closing extent Note:  The present table provides an indicative structure with respect to the set of ecosystem types. Compilation requires the use of nationally selected ecosystem types. Accounting for ecosystem extent 85 86 System of Environmental-Economic Accounting – Ecosystem Accounting 4.14 The accounting entries encompass opening and closing extent, additions to extent and reductions in extent. The definitions provided in paragraph 4.15 below should be applied, with the understanding that, depending on data availability, it may not be possible to record all accounting entries that distinguish the different types of additions and reductions. In this case, it is sufficient to record the opening and closing extents and the net change in different ecosystem types. This level of detail can still provide important information on trends in ecosystem extent. 4.15 Relevant accounting entries are: • Opening extent and closing extent, which represent the total area of eco- system assets for a given ecosystem type at the beginning and end of an accounting period, generally one year • Additions to extent, which represent increases in the area of an ecosystem type. Where possible, to support understanding of the nature of the addi- tions and possible policy responses, additions to extent should be separated into managed expansions and unmanaged expansions. Specifically: – Managed expansions represent an increase in the area of an ecosys- tem type due to direct human activity in the ecosystem, including the unplanned effects of such activity. Examples include the conversion of forests to cultivated land and land reclamation work in coastal areas. Human activity may also create new areas of more natural ecosystem types, for example, through the reforestation of cultivated areas – Unmanaged expansions represent an increase in area of an ecosys- tem type resulting from natural processes, including seeding, sprout- ing, suckering or layering. Unmanaged expansion can be influenced by human activity, for example, the expansion of deserts due to the effects of climate change, or can result from abandonment of land by people • Reductions in extent represent decreases in the area of an ecosystem type. Where possible, to support understanding of the nature of the reductions and possible policy responses, reductions in extent should be separated into managed reductions and unmanaged reductions. Specifically: – Managed reductions represent a decrease in the area of an ecosys- tem type due to direct human activity in the ecosystem, including the unplanned effects of such activity, or cases where the activity may be illegal. Examples include deforestation and increases in urban areas. – Unmanaged reductions represent a decrease in area of an ecosystem type associated with natural processes. Unmanaged reductions can be influenced by human activity, for example, the loss of coral reefs due to the effects of climate change, or can result from abandonment of land by people. 4.16 All additions and reductions in extent are considered ecosystem conversions and imply a change in ecosystem type. However, a change in the condition of an ecosys- tem is not sufficient grounds for declaring that an ecosystem conversion has occurred, since this does not necessarily entail a change in ecosystem type. In particular, it is to be noted that the effects of extreme events, for example, bushfires or hurricanes, where there may be considerable loss of vegetation, soil or other ecosystem components, need not imply a change of ecosystem type. Indeed, most commonly, these events are followed by a period of regeneration and, generally speaking, patterns of disturbance should be expected. Section 4.2.3 provides further discussion of ecosystem conversions. In practice, it may be useful to compile ecosystem type change matrices (see sect. 4.3.2) to support compilation of measures of managed and unmanaged changes. Accounting for ecosystem extent 87 4.17 The availability of updated input data and/or changed methods, for example, resulting from new or reinterpreted satellite imagery, may permit a reassessment of the size of the area of different ecosystem types. Where such changed data and/or methods are used, it will likely require the revision of previous estimates to ensure a continuity of time series. Time series may also be revised when updated classifica- tions are applied. No distinct entry for revisions is recorded in the accounts. Rather, the individual entries for opening and closing extent and additions and reductions are altered. For analytical and dissemination purposes, it may be appropriate to show the size of the revisions by calculating the difference between estimates from historical and revised accounts for the same accounting period. 4.18 Generally, additions to one ecosystem type will be matched by an entry for reductions in another ecosystem type, for example, an increase in cultivated land may be matched by a reduction in woodlands. If there is a change in the total area of the EAA, a matching entry is not recorded. 4.19 Changes in the total area of an EAA due to political factors (e.g. changes follow- ing a realignment of borders) should be recorded as managed expansions or reduc- tions for the relevant ecosystem types. These changes do not require revisions to past accounts although it may be of analytical interest to compile historical information pertaining to ecosystem assets within the changed boundaries. 4.20 The area of an EAA for a national jurisdiction including marine, terrestrial and freshwater realms is unlikely to change significantly over the period from the opening to the closing stock. Hence, the total area recorded in the right-hand column of table 4.1 will generally be the same for the opening and closing extents and total additions will therefore equal total reductions. 4.21 However, changes at the edges of the realms and associated transition areas, par- ticularly between the marine and terrestrial realms, are likely to occur, for example, through coastal erosion, sediment deposition and aggradation and sea level rise or owing to land reclamation work. The associated changes in ecosystem type need to be accounted for. 4.22 For the ecosystem extent account presented in table 4.1, there is no requirement that the areas recorded for each ecosystem type be contiguous. That is, the total area of, for example, trophic savannas (T4.1) is likely to be spread out across an EAA in distinct ecosystem assets. The locations of the ecosystem types will be apparent when extent data are presented in maps. 4.2.3 Recording ecosystem conversions 4.23 The ecosystem extent account records changes in ecosystem type. These changes are collectively referred to as ecosystem conversions. Ecosystem conversions are situ- ations in which, for a given location, there is a change in ecosystem type involving a distinct and persistent change in ecological structure, composition and function, which, in turn, is reflected in the supply of a different set of ecosystem services. 4.24 Ecosystem conversions are of particular relevance in understanding trends in and impacts on biodiversity and flows of ecosystem services. Identification of ecosys- tem conversions relies on determining the time at which the opening extent has been recorded and the length of the accounting period and on identification of the differ- ences between ecosystem types. These issues are discussed in the present section. 4.25 Generally, the length of the accounting period is one year, which is an appro- priate reporting period for recording managed expansions and reductions, since the change from one ecosystem type to another can be readily determined as having 88 System of Environmental-Economic Accounting – Ecosystem Accounting occurred during the accounting period. Time frames for unmanaged expansions and reductions may vary considerably, however, and determining the appropriate accounting period in which the conversion should be recorded may therefore be more difficult. 4.26 When extreme events occur and it is expected that the ecosystem will recover from the effects, it is appropriate to record no change in ecosystem type, that is, the change may be considered to be part of normal patterns of disturbance. In this case, changes in patterns of disturbance (e.g. greater frequency of fires) are likely to be better represented as changes in condition. A similar treatment should apply in the case of seasonal changes in extent (e.g. of sea ice), since those changes may be considered part of normal ecosystem dynamics. Where appropriate, seasonal changes may be recorded in subannual extent accounts. 4.27 Where changes are gradual and longer-term (for example, changes in coral reefs due to ocean acidification), initial changes may be most appropriately recorded as changes in the condition of the ecosystem asset. However, at some point in time, the ecosystem may be considered to have changed sufficiently in terms of its eco- logical structure, composition and function to be considered a different ecosystem type. Information collected in the measurement of ecosystem condition and rel- evant limits and thresholds may be considered in this assessment. Such changes in ecosystem type for a given location should be recorded as an expansion or reduc- tion in the extent account in the accounting period in which it is determined that the change took place. 4.28 Although determining the precise time at which an ecosystem conversion takes place may involve ecological uncertainty, through the adoption of an annual reporting approach, there will be a clear recording structure in place that ensures the considera- tion of changes on a regular basis and allows the changes to be recorded at appropriate points in time. 4.29 Owing to data and resource limitations, it may not be possible to compile annual extent accounts. This outcome should not be interpreted as meaning that changes in ecosystem extent over time are necessarily slow or are insignificant on an annual basis. While this may be the case in some instances, the significance of recording changes in the composition and configuration of ecosystem types in a timely fashion cannot be underestimated. It is to be noted as well that the increas- ing availability of remote sensing and similar data sets is reducing the barriers to regular compilation. These data may also support the use of benchmarking and interpolation techniques to provide up-to-date information on ecosystem extent for policy and analysis. 4.30 A common aim in ecosystem extent accounting is to record differences between 49 Proposals for classifying the current composition of ecosystem types and a reference or baseline compo- conversions are described in sition. Depending on the purpose of analysis, this may entail estimation over long United Nations Convention periods of time, for example, comparison of current measures of extent with a pre- to Combat Desertification in Industrial Revolution composition. Conceptually, it is straightforward to compile Those Countries Experienc- extent accounts to compare two or more points in time that are a considerable distance ing Serious Drought and/or Desertification, Particularly in apart. For instance, using the same structure as shown in table 4.1, the opening extent Africa (2017) in relation to the could be estimated for 1970 and the closing extent estimated for 2015. measurement of Sustainable 4.31 The structure of table 4.1 allows for recording changes that are managed and Development Goal indicator unmanaged. Depending on the availability of data and policy interest, an extension 15.3.1 concerning land degra- dation. Those proposals were to the ecosystem extent account may be developed to enable classification of eco- recently updated in Sims and system conversions by the reasons for change (e.g. urban expansion, salinization or others (2021). afforestation).49 Accounting for ecosystem extent 89 4.3 Complementary presentations of ecosystem extent data 4.3.1 Mapping ecosystem extent 4.32 Significant analytical benefits are likely to accrue from presenting maps of eco- system extent that display the configuration of ecosystem assets by different ecosystem types across an EAA. Analysis of a time series of extent maps also enables analysis of the location of changes in ecosystem types. In particular, mapping ecosystem extent can reveal patterns of changing fragmentation of ecosystem assets. These types of changes are not evident when data are presented in tabular form. 4.33 Spatially detailed data on the area of ecosystem assets can also be used to derive a range of supporting indicators, some of which may be relevant in assessing the condi- tion of ecosystems, in particular concerning characteristics related to their fragmenta- tion and connectivity. Example of such indicators include measures of the number of occurrences of an ecosystem type (number of patches), average patch size and edge length. 4.3.2 Ecosystem type change matrix 4.34 Through use of spatially detailed data and by comparing maps from two peri- ods to compile an ecosystem type change matrix, additional details on the nature of ecosystem conversions may be obtained. The ecosystem type change matrix set out in table 4.2 shows the area of different ecosystem types at the beginning of the account- ing period (opening extent); the increases and decreases in this area according to the ecosystem type it was converted from (in the case of increases) or the ecosystem type it was converted to (in the case of decreases); and, finally, the area covered by differ- ent ecosystem types at the end of the accounting period (closing extent). It is assumed here that the total area of the EAA is unchanged between the two points in time. Where the EAA has changed in size, a choice will need to be made regarding which point in time should be used to define the total area for comparison. The default option is to choose the EAA with the smaller area since only this EAA will include areas present in both time periods and will therefore provide complete data coverage for two points in time. 4.35 For example, the opening extent for ecosystem type T1.1 (Tropical-subtrop- ical lowland rainforests) is recorded in the right-hand column of the first row and the closing extent is recorded in the bottom row of the left-hand column. Where the ecosystem type in a particular location does not change (i.e. where there is no eco- system conversion), the total unchanged area is recorded along the diagonal from top left to bottom right. Where there is a change in ecosystem type (in other words, an ecosystem conversion), an entry is made at the intersection of the row related to the original ecosystem type (i.e. the ecosystem type whose area has decreased) and the column related to the new ecosystem type (i.e. the ecosystem type whose area has increased). The conversion of ecosystem type T1.1 to ecosystem type T7.5 (Derived semi-natural pastures and old fields) would be recorded in the cell at the intersection of the row for T1.1 and the column for T7.5. Recording in this way for each ecosystem type ensures that (a) the sum of all cell entries in a row will equal 50 An alternative presentation of a the opening extent (i.e. unchanged areas plus the reduction in area); and (b) the change matrix (for land cover) sum of all cell entries in a column will equal the closing extent (i.e. unchanged areas is provided in figure 5.14 of the plus the addition to area).50 SEEA Central Framework. Ecosystem types (based on the ecosystem functional group EFG level 3 of IUCN GET) Opening extent Table 4.2 Terrestrial T2 Temperate-boreal forests T1 Tropical-subtropical … and woodlands forests … … high montane forests woodlands rophyll forests and Temperate pyric scle- … forests Deciduous temperate and woodlands Boreal and temperate Tropical heath forests montane rainforests Tropical-subtropical dry forests and scrubs Tropical-subtropical lowland rainforests Tropical-subtropical … … … Ecosystem type change matrix (units of area) T1.1 T1.4 T2.1 T1.3 T1.2 T2.6 T2.2 Tropical/subtropical lowland T1.1 rainforests Tropical/subtropical dry forests T1.2 and scrubs forests Tropical/subtropical montane T1.3 rainforests T1 Tropical-subtropical Tropical heath forests T1.4 Boreal and temperate high mon- T2.1 tane forests and woodlands Deciduous temperate forests T2.2 Terrestrial … … Temperate pyric sclerophyll for- T2 Temperate-boreal T2.6 forests and woodlands ests and woodlands … … … … … Closing extent … … T7 Derived semi-natural pastures and T7.5 old fields F1 Permanent upland streams F1.1 Ecosystem types (based on the EFG level 3 of IUCN GET) … … … Freshwater Intermittently closed and open FM1 FM1.3 lakes and lagoons M1 Seagrass meadows M1.1 … … … Marine Coastal saltmarshes and reedbeds MFT1 MFT1.3 Opening System of Environmental-Economic Accounting – Ecosystem Accounting 90 Selected ecosystem types (based on the EFG) level 3 of IUCN GET) Opening extent Table 4.2 Marine Freshwater Terrestrial MFT1 … M1 FM1 … F1 T7 … … … fields streams lagoons and reedbeds pastures and old Permanent upland Seagrass meadows and open lakes and Coastal saltmarshes Intermittently closed Derived semi-natural … … … F1.1 T7.5 M1.1 FM1.3 MFT1.3 Closing Tropical/subtropical lowland T1.1 rainforests Ecosystem type change matrix (units of area) (continued ) Tropical/subtropical dry forests T1.2 and scrubs forests Tropical/subtropical montane T1.3 rainforests T1 Tropical-subtropical Tropical heath forests T1.4 Boreal and temperate high mon- T2.1 tane forests and woodlands Deciduous temperate forests T2.2 Terrestrial … … Temperate pyric sclerophyll for- T2 Temperate-boreal T2.6 forests and woodlands ests and woodlands … … … … … Closing extent … … T7 Derived semi-natural pastures and T7.5 old fields F1 Permanent upland streams F1.1 Ecosystem types (based on the EFG level 3 of IUCN GET) … … … Freshwater Intermittently closed and open FM1 FM1.3 lakes and lagoons M1 Seagrass meadows M1.1 … … … Marine Coastal saltmarshes and reedbeds MFT1 MFT1.3 Opening 91 Accounting for ecosystem extent 92 System of Environmental-Economic Accounting – Ecosystem Accounting 4.3.3 Extent accounts for linear features and subsurface ecosystems 4.36 Conceptually, most ecosystem assets have a two-dimensional footprint geom- etry, allowing their extent to be measured by their area. However, for some ecosystem assets this approach is not appropriate because their length far exceeds their width, with the result that their footprint geometry is effectively one-dimensional. Typical examples are streams, smaller rivers and road verges. Such assets are referred to as linear features. 4.37 A complementary extent account for linear features can be compiled by record- ing the length of each individual linear feature (with each being treated as an ecosys- tem asset). Each linear feature can also be assigned to an ecosystem type, allowing aggregation by linear feature type. It is of relevance to distinguish clearly between linear features dominated by produced assets (e.g. roads) and those that are more nat- ural in character (e.g. streams). Classification along the lines of IUCN GET would be appropriate in this regard. This type of accounting reflects the same logic that under- pins a two-dimensional extent account (as described above) but uses units of length instead of units of area. The resulting one-dimensional extent account can complement a two-dimensional extent account, with the understanding that total one-dimensional length cannot be aggregated with total two-dimensional area owing to the difference in dimensionality. 4.38 The presentation in table 4.3 exhibits the distinction between larger rivers, recorded as having both area and length, and smaller rivers and streams, recorded as having length only. The fact that narrow linear features have an assumed area of zero does not disqualify them from being ecosystem assets with an associated condition or from having the potential to supply ecosystem services. 4.39 Complementary extent accounts can also be compiled for subsurface ecosystem assets, including subterranean ecosystems and aquifers. Following the classification of ecosystem types, accounts could be compiled showing the number of occurrences, the area or footprint of these ecosystems and, potentially, their volume. As appropri- ate, these indicators of ecosystem extent may be complemented by data on ecosystem condition and ecosystem services. Table 4.3 Presentation of closing balances including both one-dimensional (1D) and two-dimen- sional (2D) ecosystem types Extent Ecosystem type Area (km2) Length (km) 2D Forest 345 Lakes 50 1D Rivers 5 50 Streams 200 Total 400 250 4.3.4 Linking extent accounts and economic data 4.40 There is a general ambition to link environmental data to measures of economic activity across all SEEA accounts. In the context of the ecosystem extent accounts, a primary means of achieving this aim is through linkage of data on ecosystem extent Accounting for ecosystem extent 93 by ecosystem type with data on the economic owners or managers of the ecosystem assets. Data on economic owners may be categorized by institutional sector following the classes in the 2008 SNA such as non-financial corporations, general government and households. Such a classification is most relevant for understanding the owner- ship and financing context. In some cases, there may be particular interest in iden- tifying ecosystem areas (and the different ecosystem types) that are under common ownership or under the control of indigenous peoples. 4.41 Data concerning economic managers or types of economic activity may be clas- sified by groupings under the International Standard Industrial Classification of All Economic Activities (ISIC), such as agriculture, forestry and water supply, and then aligned to the structure of SUTs. This classification of data is most relevant for under- standing the links between ecosystem types and economic activity and for understand- ing to which ecosystems those industries have rights of access and use. The distinction between ownership and type of activity is important since the same ecosystem type may be linked to a range of different ownership contexts and uses. 4.42 The set of ownership and type-of-activity classes that is developed will depend on the data available and the purpose of analysis. Tables that display the connection between ecosystem types and economic ownership and management can provide a range of information. For example, they may describe the mix of ecosystem types that are managed by government, as distinct from the household sector, or the various ecosystem types managed by the agricultural industry. 4.43 Table 4.4 presents a cross-classification of ecosystem assets. The columns dis- play data on ecosystem types (in this case EFG classes) and the rows display data on types of economic units for a single point in time, for example, the closing of the accounting period. The classes of economic units shown in the table reflect a produc- tion or management perspective and industrial categories are prominent. An alter- native set of categories reflecting economic ownership by institutional sector (e.g. non-financial corporations, financial corporations, general government, households) may also be developed. Extent data classified by economic use and ownership should be maintained as distinct data layers and cross-tabulated or mapped when required. 4.44 Information linking ecosystem extent to economic units is of particular impor- tance in the design and implementation of policy since the outcomes with respect to specific ecosystem types are likely to be highly influenced by the characteristics of the owning or managing economic units. It is likely that this type of analysis is of most relevance for terrestrial ecosystems, but types of ownership and access rights will be of relevance in certain other contexts as well, for example, that of marine spatial planning. 4.45 The structural information on the links between ecosystem assets and economic units such as presented in table 4.4 also provides the basis for creating links between economic units and data from other ecosystem accounts, in particular ecosystem ser- vices flow accounts. 94 Table 4.4 Ecosystem extent by type of economic unit (units of area) Ecosystem types (based on the EFG level 3 of IUCN GET) Terrestrial Freshwater Marine T1 Tropical-subtropical T2 Temperate-boreal forests forests and woodlands … T7 F1 … FM1 M1 … MFT1 Tropical/subtropical lowland rainforests Tropical/subtropical dry forests and scrubs Tropical/subtropical montane rainforests Tropical heath forests Boreal and temperate high montane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll forests and woodlands … … … Derived semi-natural pastures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoons Seagrass meadows … Coastal saltmarshes and reedbeds T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 TOTAL Closing extent by economic unit Agriculture, forestry and fishing ISIC A Agriculture Forestry Fishing Mining and quarrying ISIC B System of Environmental-Economic Accounting – Ecosystem Accounting Manufacturing ISIC C Electricity, gas, steam and air conditioning supply ISIC D Water supply, sewerage, waste management and remediation activities ISIC E Services Other industries Government Households TOTAL Abbreviations:  ISIC, International Standard Industrial Classification of All Economic Activities. 95 Chapter 5 Accounting for ecosystem condition 5.1 Introduction 5.1.1 Measurement focus in accounting for ecosystem condition 5.1 A central feature of ecosystem accounting is its organization of biophysical infor- mation on the condition of different ecosystem assets and ecosystem types within an EAA. Ecosystem condition accounts provide a structured approach to recording and aggregating data describing the characteristics of ecosystem assets and how they have changed. 5.2 Ecosystem condition is the quality of an ecosystem measured in terms of its abi- otic and biotic characteristics. Condition is assessed with respect to an ecosystem’s composition, structure and function, which, in turn, underpin the ecosystem integrity of the ecosystem, and support its capacity to supply ecosystem services on an ongoing basis. Measures of ecosystem condition may reflect multiple values and may be under- taken across a range of temporal and spatial scales. 5.3 Measurement of ecosystem condition is of significant interest within the context of supporting environmental policy and decision-making, which are often focused on identifying ecosystems of particular concern and protecting, maintaining and restor- ing their condition. Comprehensive and comparable measures of ecosystem condition that are compiled regularly are therefore of direct relevance. 5.4 Ecosystem condition accounts complement environmental monitoring systems by using data from those systems, focusing, for example, on biodiversity, water qual- ity or soil properties. The intention of the ecosystem condition account is therefore to build upon and synthesize, rather than replace, data from existing monitoring sys- tems. Further, as described in more detail in section 5.6, ecosystem condition accounts provide a means to mainstream a wide range of ecological concepts and data into eco- nomic and development planning processes and the regular production of ecosystem condition accounts may in turn help to systematize and strengthen existing monitor- ing systems. 5.5 Ecosystem condition accounts are not intended to directly assess climate pat- terns, although climate is a determining factor in the types of ecosystems that are observed. However, in some cases, climate-related variables, such as temperature and precipitation, are relevant in the assessment of the condition of local ecosystems; and other variables, such as species richness, may be affected by broader patterns of climate change. Consequently, analysis of climate patterns can support measurement of eco- system condition. 5.6 Although the recording of the condition of assets is not a standard output within economic accounts, measurement of and assumptions regarding asset condition are inherent in accounting for assets. For example, in estimating rates of deterioration in the measurement of depreciation of produced assets, it is generally assumed that the condition of an asset is embodied in its current market price. Since ecosystem assets do 96 System of Environmental-Economic Accounting – Ecosystem Accounting not usually have a market price, explicit recording of ecosystem condition in physical terms plays an important role in completing the accounting picture. 5.7 A primary benefit of compiling ecosystem condition accounts stems from the use of an approach to compiling data on different aspects of ecosystem condition that supports alignment with other data on ecosystems, for example, data on ecosystem extent and ecosystem services. This structured approach – based on a common under- standing of the size, composition, function, location and types of ecosystem assets – offers insight into changes that is more comprehensive than that provided by indi- vidual data sets. 5.1.2 Ecological concepts underpinning measurement of ecosystem condition 5.8 The concept of ecosystem condition used in SEEA EA is based on long-standing ecological knowledge and is related to several other terms that are used in the scien- tific literature or in legislation that aims towards assessing and protecting ecosystems (Heather Keith and others, 2020). Although these terms may appear different, the underlying concepts are overlapping, with differences reflecting the fact that they have been developed and used by different research communities for different ecosys- tem types. 5.9 Ecosystem condition is often defined by measuring a current ecosystem’s simi- larity to or distance from a reference state, such as one minimally impacted by people or a historical state (Costanza, 1992; Palmer and Febria, 2012). Ecosystem condition can be described through assessment of combinations of physical, chemical and bio- logical indicators and their changes over time, an approach commonly used by water managers to assess the state of wetlands, rivers and lakes and subsequently adapted to marine and terrestrial ecosystems. “Naturalness” and “intactness”, or the term hemeroby, which is opposite in meaning, are sometimes used to describe the distance of an ecosystem from an (undisturbed) reference. It must be recognized that humans have modified or replaced natural ecosystems over large parts of the globe and con- sequently the measurement of ecosystem condition needs to be suitable also for semi- natural and anthropogenic ecosystems. 5.10 In ecology, the description of ecosystem condition is strongly rooted in the con- cept of ecosystem integrity, which implies the state of being unimpaired, complete or undivided (Karr, 1993). Ecosystem integrity is defined as the ecosystem’s capacity to maintain its characteristic composition, structure, functioning and self-organization over time within a natural range of variability (Pimentel and Edwards, 2000). Ecosys- tems with high integrity or condition are typically more resilient, in other words, more able to recover from disturbances or to adapt to environmental changes (Holling, 1973). 5.11 Regardless of their condition, all ecosystems are not equally resilient. Shoreline systems or estuaries, for instance, are often exposed to a highly dynamic environment and have evolved so as to be able to absorb or recover from disturbances. In contrast, fragile ecosystems that are often subject to extreme resource limitations related to water, nutrients or temperature – for example, sphagnum bogs and alpine herb fields – can be in good condition but have a low level of resilience, as they may quickly collapse into a degraded state even under light pressure. 5.12 Biodiversity (diversity within and between species and of ecosystems), which contributes to the composition, structure and function of ecosystems, is integral in measuring ecosystem condition. For example, commonly used biodiversity metrics such as species abundance, species richness and species-based indices are often used Accounting for ecosystem condition 97 to measure aspects of ecosystem condition, in particular composition (Rendon and others, 2019). The functional diversity of species gives support to ecosystem function (Cadotte, Carscadden and Mirotchnick, 2011), while fine-scale diversity of ecological communities contributes to biodiversity within an ecosystem. 5.13 Ecosystem condition and ecosystem services are linked, but the relationship var- ies among different services and often it is not linear. The fact that ecosystems in better condition can support a greater quantity and better quality of many relevant ecosys- tem services (see Smith and others (2017) for a meta-analysis) provides an argument for sustainable ecosystem management. The relationship between ecosystem condi- tion and service provision is central to the concept of ecosystem capacity (see chap. 6). 5.14 Measures of ecosystem condition are more comprehensive and integrative than measures of the capacity to supply specific ecosystem services. The range of character- istics of ecosystem condition, and their associated measured variables and indicators, should include more than those relevant to provision of final ecosystem services used by humans. 5.15 These related concepts provide SEEA EA with a strong scientific and statisti- cal foundation for defining ecosystem condition and proposing practical methods for implementation of ecosystem condition accounts using commonly applied vari- ables and indicators. A key feature of the accounting approach described here is that it encompasses consideration of both ecosystem conservation and sustainable use of ecosystem services by humans. 5.1.3 General approach to compiling ecosystem condition accounts 5.16 SEEA EA uses a three-stage approach to accounting for ecosystem condition. The move from one stage to the next requires a progressive building of data and the use of additional assumptions.51 Outputs at each stage are relevant for policy- and 51 This description of the decision-making. approaches to accounting for ecosystem condition reflects 5.17 Outputs from stages one and two comprise the ecosystem condition accounts the body of research sum- and correspond to the presentation of data on condition variables and condition marized in Heather Keith and indicators, respectively. Overall measures of ecosystem condition for multiple eco- others (2020). system types and multiple indicators can be undertaken in the optional third stage through the derivation of composite indices and application of appropriate aggrega- tion approaches. 5.18 In ecosystem accounting, the condition of an ecosystem asset is interpreted as the ensemble of multiple relevant ecosystem characteristics, which are measured by sets of variables and indicators that are used in turn to compile the accounts. Variables and indicators are selected in relation to the context and purpose of assessment and different considerations will be relevant across natural and anthropogenic ecosystems. Individual indicators can be aggregated into composite indices that provide a synthe- sis of the integrity, health or naturalness of an ecosystem asset. 5.19 Ecosystem condition accounts record data on the state and functioning of eco- system assets within an EAA using a combination of relevant variables and indicators. The selected variables and indicators reflect changes over time in the key characteris- tics of each ecosystem asset. Ecosystem condition accounts are compiled in biophysical terms and the accounting structure provides the basis for organizing the data, aggre- gating across ecosystem assets of the same ecosystem type and measuring change over time between the opening and closing points of accounting periods. The accounting approach described here builds from the level of ecosystem assets and, as described, 98 System of Environmental-Economic Accounting – Ecosystem Accounting may imply the need for direct field measurements for every ecosystem asset. Since in practice, this is not possible, condition accounts are most commonly compiled using remote sensing, modelling and other techniques in combination with available direct field measures. 5.20 The precise structure of ecosystem condition accounts depends on the character- istics selected, data availability, uses of the accounts and policy applications. Ecosys- tem condition accounts are commonly compiled by ecosystem type because each type has distinct characteristics. For example, characteristics of forests may include tree density and age, while characteristics concerning water flow and quality are relevant for rivers. However, some characteristics may be common across a number of ecosys- tem types. For example, species richness or functional diversity is relevant across all ecosystems and other characteristics (e.g. diversity among different ecosystem types) 52 A landscape or seascape are relevant for a combination of ecosystem types within a landscape or seascape.52 (including those involving freshwater) is defined for 5.21 The approach to accounting for ecosystem condition is spatially explicit. Aggre- accounting purposes as a gate measures, for example, for an ecosystem type within an EAA, therefore reflect a group of contiguous, intercon- measure of the average condition of the constituent ecosystem assets. This is appropri- nected ecosystem assets rep- ate for a range of policy and analytical contexts. However, particularly with respect to resenting a range of different ecosystem types. aggregate measures of biodiversity, it is necessary to incorporate data on characteris- tics that are not attributable to individual ecosystem assets. For example, information on the total number of species across an EAA (a measure of gamma diversity), should be incorporated in an aggregate measure of biodiversity for an EAA. These issues are discussed further on in this chapter and in chapter 13 within the context of accounting for biodiversity. 5.22 A difference between scientific and policy aims in the development and use of condition indicators lies in the fact that scientists aim to understand the complexity of ecosystems and encapsulating that reality, whereas policymakers often need head- line indicators for ecosystems that can be readily evaluated together with indicators representing economic, social, political and other realities. Accounting aims towards demonstrating the connection between these perspectives, and individual variables, indicators and ecosystem condition indices therefore all have a role to play in applying ecosystem condition accounts in decision-making. 5.2 Defining and selecting ecosystem condition characteristics and variables 5.2.1 Introduction 5.23 The first stage of measurement of ecosystem condition involves setting the meas- urement focus and defining and selecting ecosystem characteristics and associated variables. This stage is important in underpinning compilation at the second stage, which involves ecosystem condition indicators, and derivation of aggregate measures of condition across multiple ecosystem types at the optional third stage. 5.24 The primary spatial units are ecosystem assets. It is expected that they will be delineated so as to be reasonably homogeneous with respect to their main character- istics (see chap. 3), a feature that would extend to their condition too. Subject to data availability, it is recommended that the condition variables be recorded, ideally, for each ecosystem asset so as to ensure the full reliability and transparency of the ecosys- tem condition accounts. Where data are available, measures of ecosystem condition may be mapped to highlight variations in condition across ecosystem assets. Accounting for ecosystem condition 99 5.25 Conceptually, it is possible to compile accounting tables for an individual ecosys- tem asset, such as a single wetland or cultivated area. Nevertheless, the measurement objective of SEEA EA is to provide information on the changes in ecosystem-related stocks and flows in relatively large and diverse areas and therefore there is no expecta- tion that all individual assets will be represented in tabular form in the accounts. 5.26 The accounts shown here include entries for opening and closing condition, that is, they pertain to observations on the state of the ecosystems at the beginning and end of an accounting period. If required, accounts can incorporate entries to show a more complete time series although in this case alternative configurations for the account tables would likely be required. Ecosystem condition accounts should also present important pieces of additional information (e.g. concerning measurement units and reference levels) that clearly document the transformation of information from raw data to high-level indices. 5.27 For clarity of presentation, the accounts shown here include entries only for a single ecosystem type. Extensions of the accounting structure to include additional ecosystem types (or the compilation of a separate account for each ecosystem type) should follow the same broad structure for each ecosystem type, with the understand- ing that there will be a need to record different variables and indicators. 5.2.2 Ecosystem condition characteristics 5.28 Ecosystem characteristics are the system properties of an ecosystem and its major abiotic and biotic components (water, soil, topography, vegetation, biomass, habitat and species). Examples of such characteristics include vegetation type, water quality and soil type. The term ecosystem characteristics is intended to encompass all of the perspectives required to describe the long-term, “typical” behaviour of an eco- system. Characteristics include the attributes of an ecosystem asset including compo- nents, structure, processes and functionality. Ecosystem characteristics may be stable in nature (e.g. soil type or topography) or dynamic and changing as a result of both natural processes and human activity (e.g. precipitation and temperature, water qual- ity or species abundance). 5.29 Ecosystems have many characteristics, and there is no requirement that all of them be integrated into condition accounts. Generally, the focus in assessing condi- tion will be on characteristics that can show a directional change over consecutive accounting periods in a scientifically sound manner. However, data on stable charac- teristics, which are often of direct relevance in the delineation of ecosystem assets and the modelling of flows of ecosystem services, should also be collected. The generic term for this type of data is ancillary data, which encompasses data that are used in the compilation of accounts but may not be directly reported in ecosystem accounts. In addition to data on stable ecosystem characteristics, ancillary data include data on demographics, emissions of pollutants, agricultural management practices such as fertilizer application and irrigation, types of natural resource management and expenditure on ecosystem restoration (Czúcz and others, 2021b). Appropriate selec- tion of the relevant characteristics and of ecosystem variables is discussed in more detail in section 5.2.4. 5.2.3 Ecosystem condition typology 5.30 The SEEA ecosystem contition typology (ECT) is a hierarchical typology for organizing data on ecosystem condition characteristics. Through its presentation of a meaningful ordering and coverage of characteristics, the ECT can be used as a tem- plate for variable and indicator selection and can provide a structure for aggregation. 100 System of Environmental-Economic Accounting – Ecosystem Accounting The typology also establishes a common language to support increased comparability among different ecosystem condition studies. 5.31 Ecosystems and their characteristics are highly complex, and the ECT strikes a balance between meeting statistical requirements and purposes and being ecologi- cally meaningful in the context of ecosystem structure, function and composition. Since different ecosystem types have different characteristics, which should in turn be described by different variables and indicators, the ECT is designed to be univer- sal. Indeed, it is expected to be relevant for all realms and biomes, while also sup- porting direct reference to ecosystem-specific metrics at lower levels. Section 5.5.2 provides an indicative set of ecosystem condition variables for biomes structured in accordance with the ECT. More detailed discussion on each ECT class and the relationship of the ECT to other relevant classification systems is provided in Czúcz and others (2021a). 5.32 The ECT has six classes, as listed in table 5.1. This typology can be applied for ecosystem characteristics, as well as for ecosystem condition variables and indicators, for which it is used to create a reporting and aggregation structure. Under the classifi- cation, a set of ecosystem condition groups and classes have been derived. The aim was for those groups and classes to be both exhaustive and mutually exclusive (each metric can be assigned to only one class). It must be recognized that composition, structure and, particularly, function are extremely broad concepts that may be interpreted in different ways. To avoid ambiguity and to ensure the mutual exclusivity of the classes, the following interpretations for each class should be applied. 5.33 Physical state characteristics (class A1) include the physical descriptors of the abiotic components of the ecosystem (soil, water, air). Physical stocks (e.g. water table level, impervious surfaces) that may be subject to degradation due to human pressures are relevant choices, as they are sensitive to change and relevant for policy interpreta- tion. This class thus also includes variables related to extreme temperature, rainfall or drought events linked to climate change. Table 5.1 SEEA ECT ECT groups and classes Group A: Abiotic ecosystem characteristics Class A1. Physical state characteristics: physical descriptors of the abiotic components of the eco- system (e.g. soil structure, water availability) Class A2. Chemical state characteristics: chemical composition of abiotic ecosystem compartments (e.g. soil nutrient levels, water quality, air pollutant concentrations) Group B: Biotic ecosystem characteristics Class B1. Compositional state characteristics: composition/diversity of ecological communities at a given location and time (e.g. presence/abundance of key species, diversity of relevant species groups) Class B2. Structural state characteristics: aggregate properties (e.g. mass, density) of the whole ecosystem or its main biotic components (e.g. total biomass, canopy coverage, annual maximum nor- malized difference vegetation index (NDVI)) Class B3. Functional state characteristics: summary statistics (e.g. frequency, intensity) on the bio- logical, chemical and physical interactions between the main ecosystem compartments (e.g. primary productivity, community age, disturbance frequency) Group C: Landscape-level characteristics Class C1. Landscape and seascape characteristics: metrics describing mosaics of ecosystem types at coarse (landscape, seascape) spatial scales (e.g. landscape diversity, connectivity, fragmentation) Accounting for ecosystem condition 101 5.34 Chemical state characteristics (class A2) include descriptors of the chemical composition of the abiotic ecosystem components. This typically involves a focus on the accumulated stocks of pollutants or nutrients in soil, water or air. Indicators should describe, similarly to indicators for physical state characteristics, state (“stocks” of pollutants) rather than flows (emission of pollutants), that is, stock variables should be sensitive to changes in flows. 5.35 Compositional state characteristics (class B1) include a broad range of “typical” biodiversity characteristics that describe the composition of ecological communities from a biotic perspective. These include characteristics such as presence/abundance of a species or taxonomic group and diversity of specific groups at a given location and time. From a location-based perspective (required for spatial consistency), the distri- bution of a species also reflects species composition (local presence). Compositional characteristics can therefore concern the presence/absence or abundance of individual species, taxonomic groups (birds, butterflies, provenance of a species) or non-taxo- nomic guilds (e.g. soil invertebrates, macro-zoobenthos). Characteristics that concern specific functional groups (e.g. pollinators, nitrogen fixers, predators, decomposers) should be considered functional state characteristics. Abundance characteristics of very large guilds (e.g. trees, phytoplankton) making up entire ecosystem compart- ments should be considered structural state characteristics (biomass, vegetation).53 53 It should not be inferred from use of biodiversity 5.36 Structural state characteristics (class B2) include characteristics focused pri- characteristics to describe the marily on the vegetation and biomass of ecosystems that reflect the amount of local composition of an ecosystem living and dead plant matter. This class includes all characteristics concerning vegeta- asset that this information tion density and cover, as related to either the whole ecosystem or just specific com- is sufficient to completely partments (e.g. canopy layer, belowground biomass, litter). For marine and freshwater describe species composition ecosystems, this class can include phytoplankton abundance or plant biomass (e.g. (a related concept), which requires additional information seagrasses). There is some overlap between compositional and structural state char- concerning the links between acteristics, particularly for ecosystem types based on individual foundation species, an individual species and wider such as mangroves, or where species groups and vegetation compartments coincide spatial scales. (e.g. trees on savannas, lichens on mountain rocks). Where overlap occurs, such cases should be registered in this class (structural). 5.37 Functional state characteristics (class B3) include characteristics related to rel- evant ecosystem processes (e.g. frequency, intensity) that are not already covered by other ECT classes. Information on the state of specific functional groups of species that perform ecosystem functions (e.g. producers, pollinators, nitrogen fixers, preda- tors, decomposers) could be included here. Ecosystem functions is a diverse umbrella concept, which is used differently by the various research communities (Pettorelli and others, 2018). Many of the characteristics that can be viewed as ecosystem func- tions can also be viewed as compositional state descriptors (e.g. species abundances), structural state descriptors (e.g. plant biomass) or abiotic state descriptors (e.g. surface albedo). It is good practice to avoid placing functional characteristics in this class if they can be readily included in another class. 5.38 Landscape and seascape characteristics (class C1) include characteristics of eco- system assets that are quantifiable at larger (landscape, seascape) spatial scales but have an influence on the local condition of ecosystems and can be attributed to indi- vidual ecosystem assets. Examples are metrics that quantify how an ecosystem asset is connected to other ecosystem assets of the same ecosystem type; how close ecosystem assets are situated to certain pressures, such as intensive agriculture; or how condition is influenced by other assets, for instance, through measurement of the condition of ecosystem assets that are part of a river network. In principle, there is no limit to the distance that should be considered when assessing landscape and seascape character- istics as long as that distance does not fall outside the EAA. 102 System of Environmental-Economic Accounting – Ecosystem Accounting 5.39 Metrics of connectivity and fragmentation focus on important landscape and seascape characteristics in the context of a specific ecosystem type (or group of eco- system types), for example, fragmentation of a forested area through agricultural activities. Landscape and seascape connectivity can be interpreted and measured very differently in terrestrial, freshwater and marine biomes. In the case of ecosystem assets that are themselves mosaics of various ecosystem types (e.g. cropland with nested semi-natural vegetation fragments), indicators of the abundance or the spatial pattern (connectivity) of the ecosystem types can also be hosted under this class. 5.40 Chapters 3 and 4 highlighted the important distinction between ecosystem types whose ecosystem processes are primarily naturally driven and those ecosystem types that are more directly influenced by intensive human activity and manage- ment (anthropogenic ecosystem types). This distinction is also important in connec- tion with the measurement of ecosystem condition. The ECT applies to all ecosystem types, but it is to be noted that there is likely more similarity among the characteris- tics selected for measuring the ecosystem condition of natural and semi-natural eco- system types than among those characteristics selected for assessing the condition of anthropogenic ecosystem types. 5.2.4 Ecosystem condition variables and their selection 5.41 Ecosystem condition variables are quantitative metrics describing individual characteristics of an ecosystem asset. A single characteristic can have several asso- ciated variables, which may be complementary or overlapping. Variables differ from characteristics (even if the same descriptor is applied to them) since they are clearly and unambiguously defined (through measurement instructions, formulae, etc.) and are associated with well-defined units of measurement of quantity or quality. Exam- ples of variables include number of bird species, tree coverage (percentage) and turbid- ity (measured in nephelometric turbidity units (NTUs)). 5.42 Generally, selection of variables should prioritize those that reflect a role in eco- system processes, and hence contribute to whole-ecosystem functioning, and their risk of change (Mace, 2019). Environmental variables should reflect stocks rather than connected flows, which are often more obvious and observed as pressures or degrada- tion processes. Examples of stocks that are appropriate as measured variables include thickness of the soil layer, concentration of pollutants or abundance of invasive spe- cies. These may be considered renewable or degradable stocks. Variables selected to reflect ecological processes can include the presence, abundance or diversity of spe- cies with specific biological attributes that reflect interactions within the ecosystem. Classifications of functionally equivalent species based on sets of traits, described in terms of their response to environmental factors, provide useful metrics of biodiver- sity and the relationship with ecosystem integrity (Cernansky, 2017; Lavorel and oth- ers, 1997). Examples of functional variables include fruit-eating species that disperse seeds, nectar-eating species that pollinate, decomposer organisms and canopy emer- gent species that provide habitat for epiphytes. 5.43 Variables used to measure ecosystem condition are those that are likely to change because of human interventions. However, as many ecological processes and their responses to human or environmental impacts are complex, response functions of variables may be non-linear. For example, excess nutrients running off from crop- land into a shallow lake can cause a sudden ecosystem response where the system flips from a stable clear state into a stable turbid state. The form of these responses can be quantified and interpreted based on understanding of the ecological processes. Accounting for ecosystem condition 103 5.44 Selection criteria should be used to guide the identification of variables (Czúcz and others, 2021b). Variables that are superior with respect to the selection criteria – for example, variables that are more sensitive to change – should be favoured for inclusion within an ecosystem condition account. The 12 criteria listed in appen- dix A5.1 provide a basis for selection. The first 10 criteria are decisive determinants of whether a specific variable (and/or the underlying characteristic) is eligible for inclu- sion in ecosystem condition accounts. The last two criteria ensure that the set of vari- ables will represent the state of the ecosystem in a meaningful way. 5.45 Altogether, condition accounts should cover as much relevant ecological infor- mation as possible, but parsimoniously, that is, using as few variables as possible. It is not expected that the measurement of condition would require the inclusion of a vast number of characteristics and variables. From an ecosystem accounting perspective, the aim is to provide a broad indication of the change in condition rather than to fully map the functions of every ecosystem asset. 5.46 The most appropriate breadth and level of detail for variables selected to char- acterize ecosystem condition are difficult to standardize given the range of ecosystem types and differences across countries. The ECT, together with the criteria for selec- tion of variables, supports adoption of a pragmatic structured approach that can be applied in all circumstances and can encompass measurement at a range of scales. Ideally, the compilation of ecosystem condition accounts should ensure that for each ecosystem type, at least one variable is selected for each of the six ECT classes. This rule of thumb aims towards ensuring a minimum level of comprehensiveness in the full set of condition variables. 5.47 Based on an evaluation of examples of existing ecosystem condition accounts, a set of about 6 to 10 well-selected indicators for a given ecosystem type should provide sufficient information to assess the overall condition of an ecosystem asset. In practice, it is important to incorporate knowledge of local ecosystems. The selection of vari- ables and metrics should be based on existing ecological knowledge and monitoring systems, with direct involvement of ecologists in the selection process. 5.2.5 Ecosystem condition variable account 5.48 The structure of the ecosystem condition variable account is presented in table 5.2, where opening and closing entries are recorded for selected variables for an eco- system type. The variables are grouped based on the ECT. Table 5.2 ECV account Variables Ecosystem type Measure- Opening Closing SEEA ECT class Descriptor ment unit value value Change Variable 1 Physical state Variable 2 Chemical state Variable 3 Variable 4 Compositional state Variable 5 Structural state Variable 6 Functional state Variable 7 Landscape/seascape Variable 8 characteristics 104 System of Environmental-Economic Accounting – Ecosystem Accounting 5.49 Through the initial focus on variables, a structured system is provided for recording data on ecosystem condition. In particular, the use of standard classes of ecosystem types allows clear connections to be drawn to measures of ecosystem extent and flows of ecosystem services that are organized using the same classes. 5.50 Particular emphasis should be placed on the definition and documentation of vari- ables and metrics included in the account since it is common for a single descriptor to be used for related but different variables. The documentation should contain enough information to enable scientific reproducibility and should be unambiguously linked to the short names used in the variable and indicator accounts. The content of the docu- mentation should be capable of being communicated effectively to users of the accounts. 5.51 Data in ecosystem condition variable accounts can provide useful information on the state of an ecosystem and its change over time. Soil pH, for example, is a vari- able that is sensitive to change due to human land management, and it is useful to report on the monitoring of this change, irrespective of a reference level, in a condi- tion account in order to demonstrate changes in soil properties resulting from human impacts or changing environmental factors. 5.52 Further, the condition variable account can be used to compare observed meas- urements of certain variables to information on critical ecosystem thresholds derived, for example, from scientific studies or fisheries management work. For example, fresh- water pH values indicate clearly whether biological life is feasible in a given water body, whether soil nutrient enrichment above a certain level will lead to the extinction of sensitive species and whether the age structure of a fish population can provide a good indication of whether it is being exploited at a sustainable yield level or beyond. The condition variable account can also be used for direct comparison with politically determined target values, related, for example, to species richness or (bathing) water quality. 5.53 The recording of variables in this account reflects an explicitly neutral approach since each entry is not compared with a baseline and there is no implied judgment on relative importance, for example, entries cannot be interpreted as being high, medium or low. Since there is no information incorporated in the account on interpreting the data, the focus in using the data in this account should be on monitoring and report- ing change in variables over time. The information would therefore support the prepa- ration of indicators that describe changes in ecosystem condition. 5.54 In an EAA, each ecosystem asset of a single ecosystem type (e.g. different patches of forest in an EAA) can have a different value for the same condition variable (e.g. different values for canopy cover). This spatial variation is caused by spatially explicit patterns of pressures on ecosystems, ecosystem management or characteristics that shape ecosystems such as slope and elevation. To take the spatially explicit character of ecosystem condition into account, the values recorded in an ecosystem condition vari- able account should be calculated as the area-weighted arithmetic mean of ecosystem assets belonging to the particular ecosystem type within the EAA. Other statistical moments (e.g. variance, median, minimum, maximum values or the number or area of ecosystem assets with a value above a certain threshold) can also be recorded if they are considered useful. Area-weighted averaging results in a condition variable account that describes the average values of variables for an ecosystem type within an EAA. It follows that if the variable values for one or more assets changes between accounting periods, the average value for the ecosystem type will also change. 5.55 Qualitative variables or measures such as species presence or water quality that are measured on an ordinal scale from low to high can be used as well. For these vari- Accounting for ecosystem condition 105 ables, the account records the relative share of one of the classes over the entire EAA (e.g. the percentage of ecosystem assets where a particular species is present). 5.56 The common temporal units for aggregation in accounting are years. How- ever, depending on the variable, data will not all pertain to the same point in time or period. In addition, data are collected at different temporal resolutions ranging from seconds or days (e.g. for air quality measurements) to weeks, months or seasons (e.g. for productivity measurements from Earth observation) or years or multiple years (e.g. for land-cover changes, species records). Converting these observations to a common temporal unit or a common reporting year can be achieved using various methods. Temporal aggregation entails summing or averaging values taken within a time period (for instance, one year). Linear interpolation can be used to calculate a value for a specific year for which no measurement data are available based on the values of the preceding and following years for which data are avail- able. Recording smoothed data in the condition account, for instance, by taking a moving average over several time periods, can be appropriate for tracking the trends of highly dynamic ecosystem variables and for comparing them with trends obtained for variables that are less dynamic. 5.57 Care should be taken when variables are added directly to the condition account at the ecosystem type or EAA level since measurement at these levels does not neces- sarily reflect the spatial variation of condition across different ecosystem assets. An example in this regard is the total number of species observed in an ecosystem type within an EAA (also known as gamma diversity). While species richness of an EAA is an important variable with respect to understanding the state of biodiversity, it might be less appropriate when quantifying the ecosystem condition of a specific ecosystem type. Thus, where species richness is used as an ecosystem condition variable, it is more appropriate to measure the local species richness of different ecosystem assets and report average species richness in the compilation of a condition account. 5.58 In practice, many data are available at an aggregated level for EAA, for instance, data based on the range or distribution of species or indices used globally such as the Living Planet Index or the Ocean Health Index.54 While those data may appear to be 54 See www.livingplanetindex. suited for direct inclusion in an ecosystem condition account, care is needed to ensure org and www.oceanhealth consistency between the spatial scale used in their measurement and the spatial scale index.org/. used for other variables. Ideally, all data should be capable of being attributed to the ecosystem asset level. 5.59 There is a wide array of potential data sources at global, national and local levels. From a statistical perspective, relevant data may be available within the context of the Framework for the Development of Environmental Statistics (United Nations, 2017) and the associated Basic Set of Environment Statistics (ibid., annex A). 5.3 Ecosystem condition indicators 5.3.1 Deriving ecosystem condition indicators from variables 5.60 Ecosystem condition indicators are rescaled versions of ecosystem condition variables. They are derived through setting condition variables against reference levels determined with respect to ecosystem integrity. Two steps are involved. First, data values for each variable are transformed into values along a common dimen- sionless scale, with the two end points of the scale (or a range along the scale) rep- resenting an upper-scale end point (1 or 100 per cent) and a lower-scale end point (0 or 0 per cent) for that variable. It is important to note that while the upper-scale end point (100 per cent) often corresponds to high values of the underlying condi- 106 System of Environmental-Economic Accounting – Ecosystem Accounting tion variable, the opposite is also possible, that is to say, low values for a variable (e.g. a variable that measures pollution levels) can reflect a high condition score. 5.61 Second, the transformed data are converted to ecosystem indicators. The sim- plest conversion uses two reference levels to reflect a high or low condition score. In this case, the indicator is calculated by applying a linear transformation, as shown in the following formula: I = (V – VL) / (VH – VL), where I is the value of the indicator, V is the value of the variable, VH is the upper (high) reference level (the value of the condition variable relating to the upper end point of the indicator scale) and VL is the lower reference level (i.e. the value of the variable at the lower scale end point). 5.62 Other types of rescaling functions can be used but they may not be appro- priate for all metrics, such as those including both positive and negative num- bers, and hence should be clearly documented and justified. For variables where an increase in variable value reflects a lower condition score, VH will be lower than VL . For example, the upper reference level of a pollutant may be equated to a vari- able value of zero since this represents a high level of condition. This way of rescal- ing ensures that higher indicator values are always associated with a state closer to the reference condition, even if this is the opposite of the original scale for the vari- able. In rare cases, the observed value of the variable might be out of the range of the two reference levels, for example, above the upper reference level. In such cases, it is recommended that the values of the indicator be truncated at 0 (0 per cent) or 1 (100 per cent) (Paracchini and others, 2011). 5.63 Applying a reference level converts the variable from a measure of trends in eco- system characteristics to a means of assessing ecosystem condition in relation to the reference. Such normalization adds value in the interpretation of trends and is also required by any later aggregation steps, which need commensurate metrics measured on the same scale using common units (Nardo and others, 2005). 5.64 A set of indicators for a condition account can include some common or global indicators in addition to indicators specific to an ecosystem type. Examples of indica- tors are presented in section 5.5.1. 5.3.2 Reference levels 5.65 A reference level is the value of a variable at the reference condition, against which it is meaningful to compare past, present or future measured values of the vari- able. The difference between the value of a variable and its upper reference level rep- resents the distance from the reference condition. Following the steps outlined above, the value of the reference level is used to rescale a variable to derive an individual con- dition indicator. Reference levels are defined in a structured and consistent manner across different variables within an ecosystem type and for the same variable across different ecosystem types. This ensures that the derived indicators are compatible and comparable and that their aggregation is ecologically meaningful. 5.66 Reference levels are usually set with upper and lower levels reflecting the lim- its or end points of the range of a condition variable that can be used in rescaling. Accordingly, the upper reference level should correspond to the value of the variable when the ecosystem is in a reference condition (e.g. the natural state), and the lower reference level should refer to the value of the variable when the ecosystem is in a degraded state (such as ecosystem collapse) where ecosystem processes are below a threshold for maintaining function (David A. Keith and others, 2013). One of the ref- Accounting for ecosystem condition 107 erence levels can often be replaced by the natural zero value of the variable, for exam- ple, zero abundance for a species (local extinction), or the lack of a specific pollutant. Reference levels applied to the same variables are likely to differ for different ecosys- tem types. For example, using the NDVI to measure the variable of biomass quantity requires different reference levels for forest, savanna and grassland ecosystems. 5.67 Individual reference levels can be set once a reference condition is selected. Different methods are available for establishing a reference condition and assigning values for the reference levels of ecosystem condition variables (see appendix A5.2 for strengths and weaknesses of these methods). 5.68 Different reference levels can be set depending on the purpose of an individ- ual indicator. As a result, different indicators may be derived from the same variable within the same ecosystem. The purpose of measurement of ecosystem condition in SEEA EA is to measure ecosystem integrity and for this purpose the reference level should be established in relation to a common reference condition, as described below. 5.3.3 Reference condition 5.69 A reference condition is the condition against which past, present and future ecosystem condition is compared in order to measure relative change over time. It is the condition of an ecosystem that is used for setting the upper reference levels of the variables that reflect high ecosystem integrity. Consequently, the reference condition corresponds to a state where all condition indicators have a (spatially averaged) value of 1 (100 per cent). The best way to ensure the consistency of reference levels for dif- ferent variables describing the same ecosystem asset is to start from a single reference condition. Using the concept of reference condition, the condition of an ecosystem asset is measured in terms of the distance between its current condition and its refer- ence condition. 5.70 For ecosystem accounting purposes, the reference condition is based on the prin- ciple of maintaining ecosystem integrity, stability and resilience (over ecological time frames).55 For many ecosystem types, it refers best to the natural state (i.e. the ecologi- 55 Many related meanings have cal state of a natural ecosystem) in terms of ecosystem characteristics at their natural been assigned to the term condition, while allowing for dynamic ranges. The metrics of condition represent the reference condition for differ- ent purposes related to varying distance from the natural condition irrespective of the characteristic, ecosystem type levels of human disturbance, or potential desired outcome from a human perspective. The reference condition of where each refers to specific an ecosystem corresponds to the condition where structure, composition and func- types of assessments. Appen- tion are dominated by natural ecological and evolutionary processes including food dix A5.2 provides an explana- chains, species populations, nutrient and hydrological cycles and self-regeneration, tion of the various alternative assessment frameworks for and involving dynamic equilibriums in response to natural disturbance regimes. An reference condition and associ- ecosystem at a natural reference condition exhibits an absence of major human modi- ated approaches to measure- fication. An ecosystem at its reference condition attains maximum ecosystem integrity ment. (Gibbons and others, 2008; Mackey and others, 2015; Palmer and Febria, 2012). 5.71 Using the natural state as the reference condition allows recognition of the char- acteristics of the natural state and change from the natural state to be reflected in ecosystem accounts. The natural state may not be related to supply of ecosystem ser- vices and may not be the target of current legislation, policy or ecosystem manage- ment objectives. However, measuring condition relative to the natural state provides an important means of understanding the degree of ecosystem change that has taken place, as well as supporting the assessment of many environmental policies and associ- ated objectives concerning conservation values. 5.72 Using the natural state as the reference condition is preferred and recommended. However, in many cases, it may not be possible to define a reference condition as natu- 108 System of Environmental-Economic Accounting – Ecosystem Accounting ral in absolute terms, since the environment may have changed owing to both human and natural processes. In cases where a natural state does not represent a meaningful reference for condition accounts – particularly for anthropogenic ecosystems under varying degrees of cultivation (such as cropland, pastures and managed forests) and urban ecosystems – alternative reference conditions, still characterized by integrity, stability and resilience, can be established and regarded as anthropogenically derived reference conditions. 5.73 Based on a common principle for defining reference conditions, a range of meth- odological options may be used for establishing reference conditions, given the dif- ferences in ecosystem types, disturbance regimes and data availability. Appendix 5.2 presents an assessment framework that can help to distinguish between natural and anthropogenic ecosystem states and summarizes the possible approaches to selecting a reference condition. It can be difficult to determine reference conditions and their associated reference levels appropriately and explicitly, and it is important to describe the rationale for their selection and their links to the purpose of the accounts. 5.74 Since both the timespan and extent of human influence have varied in different parts of the world, assigning a date in time as a reference condition is problematic. For example, there has been variation in the time of human settlement, development of agriculture, hunting, domestication of livestock, use of fire to influence vegetation structure and composition, major land clearing and intensive production. More gen- erally, using inconsistent reference conditions across ecosystem types prevents mean- ingful comparisons, and there may be considerable variability and inconsistency from one year to another owing to ecosystem dynamics. 5.75 Developing reference conditions to assess changes in ecosystem condition is important in supporting international conventions. The selection of a reference condition should be applied as consistently as possible across the different realms (terrestrial, freshwater, subterranean and marine), biomes and EFGs. Globally agreed reference conditions are useful in supporting global comparisons, for instance, for the purpose of evaluating commitments of individual countries to ecosystem mainte- nance and restoration (see, for example, Heather Keith and others (2020)). However, some of these reference conditions may incorporate policy target-related elements and hence may not fully reflect the conceptual basis of a reference condition for ecosystem accounting purposes. 5.3.4 Ecosystem condition indicator account 5.76 The structure of the ecosystem condition indicator account (see table 5.3) builds directly on the ecosystem condition variable account (see table 5.2) by relating each variable to a reference level. Each variable is rescaled to a uniform dimension- less scale [0, 1] using the variable’s reference level. The data in the indicator account allows descriptions of trends in condition to be interpreted relative to an agreed refer- ence condition based on ecosystem integrity. This allows for statements concerning whether, for a given variable, ecosystem condition can be considered high (close to the reference level) or low (distant from the reference level). The indicator account can be used to monitor and report change in values over time. 5.77 In the set of ecosystem accounts, the ecosystem condition indicator account is a key output. It organizes key ecological data in a structured manner that allows comprehensive reporting on the ecosystem integrity of the ecosystems within an EAA across a range of ecosystem characteristics. Regular reporting under an ecosystem condition indicator account that tracks trends using a number of relevant indicators is intended to support an extensive and ecologically informed discussion of both the Accounting for ecosystem condition 109 effectiveness of strategies aimed at improving ecosystem condition and the changing capacity of ecosystems to supply ecosystem services. There is not a direct linear rela- tionship between changes in ecosystem condition and changes in ecosystem capacity. Accounting for condition therefore provides a structured framework for collating the data needed to analyse this relationship in combination with data on flows of ecosys- tem services as described in chapter 6. Chapter 6 also defines the concept of ecosystem capacity and describes ways in which its measurement may be considered. Table 5.3 Ecosystem condition indicator account Ecosystem type Indicators Variable values Reference level values Indicator values (rescaled) Upper Lower SEEA ecosystem condi- Measure- Opening Closing level (e.g. level (e.g. Opening Closing Change in tion typology class Descriptor ment unit value value natural) collapse) value value indicator Physical state Indicator 1 Indicator 2 Chemical state Indicator 3 Indicator 4 Compositional state Indicator 5 Structural state Indicator 6 Functional state Indicator 7 Landscape/seascape Indicator 8 characteristics 5.78 Data from the ecosystem condition indicator account also underpin the deriva- tion of composite indices of ecosystem condition. Such indices may be of consider- able power in conveying general messages focused on changes in ecosystem condition. A number of different aggregations of indicators from a single ecosystem condition indicator account are possible following different approaches to aggregation. Those approaches and relevant assumptions are discussed in section 5.4. Irrespective of the approach to aggregation that is applied, it remains appropriate to compile an ecosys- tem condition indicator account so that the summary messages of the composite indi- ces can be appropriately interpreted and understood. 5.4 Aggregate measures of ecosystem condition 5.4.1 Ecosystem condition indices 5.79 The derivation of aggregate ecosystem condition indices is possible where there is interest in reporting on ecosystem condition at higher levels of aggregation than those presented in the ecosystem condition indicator account. The aggregation of eco- system condition indicators aims towards generating summarized information from a large number of data points. This can be useful in communicating general trends. At the same time, aggregation of a variety of indicators can conceal important infor- mation reflected in individual indicators. Hence, aggregate indices require careful interpretation, particularly where individual component indicators show opposite trends. Thus, within SEEA EA, the derivation of condition indices is optional, and 110 System of Environmental-Economic Accounting – Ecosystem Accounting where it is undertaken, a clear link should be established to information on move- ments in individual indicators as described in stage two. 5.80 The hierarchical approach to aggregation reflects the structure of the indicator classification typology. First, aggregated subindices are derived from the indicators and an aggregated index is then derived from the subindices. Further, hierarchical aggregation schemes should contain a description of how missing indicators or subin- dices are handled. The hierarchical structure signifies that indices should be scalable across spatial resolutions. 5.81 Ecosystem condition indices and subindices are composite indicators that are aggregated from the combination of individual ecosystem condition indicators recorded in the ecosystem condition indicator account. The aggregation process is underpinned by using compatible reference levels from a common reference condition. Thus, component indicators are scaled according to their reference levels, normalized to a common scale and direction of change and combined to form a composite index. The use of a typology for indicators and an appropriate aggregation scheme allows derivation of various subindices and overall condition indices. General guidance on the derivation of these measures can be found in, for example, Andreasen and oth- ers, (2001); Buckland and others (2005); Burgass and others (2017); Organisation for Economic Co-operation and Development (2008); and van Strien and others (2012). 5.82 The structure of ecosystem condition accounting described in this chapter allows for aggregation in several ways. For example, aggregation is possible across indica- tors within the same ECT class, across classes of characteristics in the ECT or across ecosystem types. Thus, subindices derived through aggregation can relate to specific typology classes (e.g. structural state of temperate woodlands) or ecosystem types (e.g. an ecosystem condition index for rivers). 5.83 One example in this context is the creation of an overall ecosystem condition index where aggregation can take the form of a condition index applied to each ecosys- tem type, weighted by the area of the ecosystem type within the EAA, then summed for all ecosystem types in the EAA to derive an overall ecosystem condition index (Brink, 2007; Czúcz and others, 2012). 5.84 Aggregation requires expert opinion in selecting groups of indicators and math- ematical methods based on an ecological understanding of ecosystems and a clearly defined purpose for the resultant index. Data for individual variables or indicators should be preserved in a disaggregated form and at as high a resolution as possi- ble within the information system. Consequently, aggregation is the last step in the analysis, and it should be possible to scale up and down and across at different scales depending on the purpose and form of analysis. 5.85 Aggregation has both thematic and spatial aspects. The basic thematic units are the ecosystem condition indicators, which are dimensionless and have a common scale. The indicators can be combined according to the ECT classes and groups. Within each ecosystem type, there is a different list of relevant indicators, but the typology classes and groups are the same for all ecosystem types. Accordingly, the relevant levels of thematic aggregation are subindices (condition of typology classes or groups within an ecosystem type); indices (condition of an ecosystem type in an EAA); and overall indices (overall condition of multiple ecosystem types in an EAA). 5.86 Thematic aggregation assumes that different indicators can compensate for each other, depending on the structure of the index. For example, number of forest bird species and amount of deadwood are forest condition indicators and increasing val- ues of both indicators are associated with increasing condition. Both indicators can, however, have different directions of change, for example, forest bird numbers may Accounting for ecosystem condition 111 be declining but quantities of deadwood may be increasing. In this case, thematic aggregation might lead to the conclusion that the forest condition remains stable and hence additional ecological interpretation is likely to be needed to confirm such an assessment. 5.87 Spatial aggregation involves aggregation across ecosystem types. Care is required in this kind of aggregation, as some ecosystem types are fundamentally different and so aggregation across them may not always be meaningful. Aggregation across eco- system types from different realms (e.g. marine and terrestrial) or with different refer- ence conditions (natural or anthropogenic) is not recommended. Aggregation should be confined to ecosystem types that have the same reference condition so that the increases and decreases in condition of each group can be identified. 5.88 The common temporal units for aggregation in accounting are years. However, temporal aggregation can be carried out at different periodicities depending on the purpose and other information to which it is related, for example, financial year for economic data or growing seasons for plants. 5.89 The approaches to spatial aggregation described here involve aggregation of vari- ables that are meaningful at the level of individual ecosystem assets. The resulting aggregate indicators are therefore average measures of condition reflecting the condi- tion of the constituent ecosystem assets. 5.90 Biotic ecosystem characteristics and their associated variables and indicators have metrics at a range of scales from local to global. Quantitative assessment of biodiversity across these scales is imperfectly nested and therefore cannot always be upscaled or aggregated simply. Several biodiversity indicators emerge only at broad (e.g. national or continental) spatial scales and cannot be produced as “sums” of smaller parts (e.g. beta diversity of large areas). Hence, for some purposes, in particular aggregate measures of biodiversity, it would be appropriate to also incorporate data on variables at a range of scales. Relevant considerations are further discussed in section 5.5.4. 5.4.2 Potential aggregation functions and weights 5.91 Aggregation functions and weights are used in various forms in each type of aggregation operation. Ideally, aggregation operations should be commutative, that is to say, subsequent operations should lead to the same result irrespective of the order in which those operations are performed (see figure 5.1). Figure 5.1 Aggregation commutativity subsequent aggregation operations result in the same aggregated values, independent of the order of the operations 1 index 6 subregions C SPA ATI T IA EM L TH 8 indicators 1 index 6 subregions 1 region C SPA T IA ATI EM L TH 8 indicators 1 region 112 System of Environmental-Economic Accounting – Ecosystem Accounting 5.92 In principle, there are several choices for aggregation functions for each type of aggregation operation that can be distinguished, depending on the purpose of the index. The range of types of functions used to calculate central tendency include arith- metic mean, geometric mean, harmonic mean, minimum and maximum operators, quantiles and median. The arithmetic mean is the most commonly used function, but the geometric and harmonic means have greater sensitivity to low values and to skewed distributions. Hence, the geometric mean is often used in environmental sci- ence for describing statistics associated with variables that tend to vary in space or vary by several orders of magnitude. Minimum or maximum operator or threshold detection approaches are often used to give consideration to the importance of the lowest values or poorest condition of an indicator or, alternatively, the highest values or best condition of an indicator. The “one-out, all-out” approach, where the condition index is based on the lowest-value indicator, represents a special case where the mini- 56 This approach has been mum function is used as the central tendency.56 applied in the derivation of 5.93 The selection of a weighting system depends on the relative importance of each Sustainable Development Goal indicator 15.3.1 on land indicator to an assessed overall condition of the ecosystem. The approach to weight- degradation. ing should have a scientific rationale and incorporate the input from ecologists with expertise related to specific ecosystem types. For spatial aggregation, area-weighted sums and means are a typically good choice. Equal weighting assumes equal impor- tance, and while this is the most common approach for thematic aggregation, equal importance may not necessarily be true across all indicators. Non-equal weighting may be appropriate if there is an imbalance in availability of indicators (e.g. some char- acteristics may be represented with more indicators than others) or when the different characteristics, measured by their respective indicators, play relatively different roles from an ecological perspective. Relationships between characteristics may be non- linear, and different thresholds may apply. 5.94 In the selection of methods for the aggregation of condition metrics derived for individual spatial units, the landscape context (e.g. configuration of ecosystem assets within a catchment) and the derivation of representative mean and range in condi- tion should be considered. In some cases of aggregation, a combination of approaches of functions and weightings are appropriate for different indicators associated with threshold effects or differing relative importance. Methods for weighting and normal- izing scores can be complex and can influence the outputs. Therefore, documentation and explanation of the assumptions are important and the applicability of aggregated 57 Examples of evaluation of indices across characteristics or ecosystem types should be tested.57 indices can be found, for exam- 5.95 Many of the options for aggregation are widely used in established environmen- ple, in Andreasen and others (2001); Buckland and others tal indicator frameworks. For example, the human development index applies arith- (2005); Fulton, Smith and Punt metic means for subindices, followed by a geometric mean for the overall index. A (2005); and Rowland and oth- “precautionary” one-out, all-out approach (where a single declining indicator signifies ers (2020). a decline in condition, whereas improvement is based on an ensemble of increasing indicators) is used in the assessment of the conservation status linked to the Euro- pean Union Birds and Habitats Directives, the IUCN Red List of Threatened Species and the IUCN Red List of Ecosystems. Nevertheless, neither the purpose nor the data types under these aggregation frameworks match those of the SEEA EA condition accounts. Further scientific studies should explore the advantages and disadvantages of particular aggregation strategies (i.e. combinations of aggregation functions and weighting schemes for the various aggregation dimensions), including consideration of the handling of uncertainties in measurement. Accounting for ecosystem condition 113 5.4.3 Presentation of ecosystem condition indices 5.96 As described above, and as required, it is possible to aggregate ecosystem condi- tion indicators to form subindices according to the ECT classes both within ecosystem types and across different ecosystem types. Aggregation of indicators requires scaling/ normalization of indicator values against a single reference condition for the ecosys- tem type, so that different variables and classes of characteristics can be compared. Aggregated subindices and indices have the same range and direction as indicators, for example [0 – 1]. An aggregated subindex is derived for each class in the ECT that provides a composite measure from the combination of indicators that describe the same class in the typology for a given ecosystem type. An ecosystem condition index is derived from a second aggregation step using the subindices for each ecosystem type (“mean values” approach). Table 5.4 presents the derivation of various condition indices using stylized indicator values. 5.97 An alternative method for presenting data of the aggregate indices is to record the areas of each ecosystem type that is covered by various ranges of ecosystem condi- tion relative to the reference condition. For example, an account for the ecosystem type forests could show the total area of forest divided into low, medium or high condition areas. Area values can be reported in absolute terms (e.g. hectares) or in relative terms (as a percentage of the total area). Different threshold scores can be used based on different methodologies to define the number of intervals and their range (“discre- tized ranges” approach). Using stylized indicator values and assumed areas, table 5.5 displays the derivation of condition indices reflecting discretized ranges. The mean values and the discretized ranges approaches have both been used in existing condi- tion accounts (Maes and others, 2020). Table 5.4 Ecosystem condition indices reported using rescaled indicator values (mean values approach) Ecosystem type Indicators Indicator value Index value Opening Closing Indicator Opening Closing SEEA ECT class Descriptor value value weight value value Physical state Indicator 1 0.5 0.25 0.05 0.025 0.013 Indicator 2 0.9 0.7 0.05 0.045 0.035 Subindex 0.07 0.048 Chemical state Indicator 3 0.625 0.5 0.1 0.063 0.05 Total abiotic characteristics 0.133 0.098 Compositional state Indicator 4 0.94 0.89 0.067 0.063 0.062 Indicator 5 0.75 0.50 0.033 0.025 0.017 Subindex 0.088 0.079 Structural state Indicator 6 0.5 0.25 0.12 0.06 0.03 Functional state Indicator 7 1 0.66 0.08 0.08 0.053 Total biotic characteristics 0.228 0.162 Landscape and seascape Indicator 8 0.5 0.2 0.5 0.25 0.1 characteristics Ecosystem condition index Index 1.0 0.611 0.360 114 System of Environmental-Economic Accounting – Ecosystem Accounting Table 5.5 Ecosystem condition indices reported using discretized ranges (area (percentage)) in each range of condition Indicators Ecosystem type Opening value Closing value Descriptor Indicator Medium Medium weight High High Low Low SEEA ECT class Physical state Indicator 1 0.05 10 80 10 5 45 50 Indicator 2 0.05 70 25 5 60 20 20 Subindex 40 52.5 7.5 32.5 32.5 35 Chemical state Indicator 3 0.1 30 40 30 20 50 30 Compositional Indicator 4 0.067 80 15 5 80 10 10 state Indicator 5 0.033 100 0 0 0 0 100 Subindex 86.6 10.1 3.4 53.6 6.7 39.7 Structural state Indicator 6 0.12 30 30 40 10 20 70 Functional state Indicator 7 0.08 100 0 0 50 30 20 Landscape Indicator 8 0.5 30 30 40 20 20 60 and seascape characteristics Ecosystem condi- Index 1.0 42.2 28.9 28.9 25.8 23.7 50.5 tion index 5.98 Tables 5.4 and 5.5 present the derivation of ecosystem condition indices for one ecosystem type. For presentational purposes, it may be appropriate to summarize the results for a number of ecosystem types in one table. Table 5.6 shows such a structure, allowing for the recording of opening and closing condition values and changes in those values due to changes in the component characteristics. A total index across eco- system types is not shown, as this would require aggregation across ecosystem types that apply different reference conditions, and this is not recommended. Further, owing to the use of different reference conditions for different ecosystem types, care should be taken in comparing condition scores across ecosystem types. 5.5 Considerations in the measurement of ecosystem condition 5.5.1 Introduction 5.99 The three-stage approach to accounting for ecosystem condition provides an appropriate structure for measurement. Nonetheless, there is a range of considerations and issues that affect measurement in practice. The present section discusses these issues. 5.5.2 Variables for selected ecosystem types 5.100 Following the approach described above, the measurement of ecosystem con- dition requires the selection of variables covering relevant ecosystem characteristics Accounting for ecosystem condition 115 for different ecosystem types. The general principles and criteria for the selection of variables have been outlined in section 5.2 and by Czúcz and others (2021b). In this section, a short summary is provided of considerations related to selection of variable for a number of key ecosystem types. As noted above, in practice, it is important that ecologists and related specialists with knowledge of the ecosystem types concerned be involved in the process of variable selection, as well as in the determination of refer- ence conditions and levels. Table 5.6 Ecosystem condition account (condition indices) for multiple ecosystem types Stylized ecosystem types Crop- Urban Wet- Sea- Accounting entries Forests Lakes land areas lands grass Opening condition value Change in abiotic ecosystem characteristics (physical and chemical state) Change in biotic ecosystem characteris tics (composition, structure and function) Change in landscape/seascape characteristics Net change in condition Closing condition value 5.101 An indicative selection of variables is presented in table 5.7, which shows pos- sible variables for selected biomes and functional groups (following IUCN GET) and according to the classes of the ECT. The physical state variables consider mostly changes in water content and soil for terrestrial ecosystems and water clarity for aquatic ecosystems. Chemical state variables include pH, soil organic carbon content and con- centrations of nutrients and pollutants. The compositional state can be measured using the diversity of various taxa such as tree species, birds, reptiles, fish or macroinverte- brates. Clearly, other species or taxa can be used as well to measure the condition of ecosystems. The structural state variables are often related to vegetation cover or spe- cific aspects thereof. Functional state variables express ecosystem characteristics such as productivity or decomposition processes. In a few cases, table 5.7 explicitly mentions these characteristics to clarify the relationship with the selected variable. 5.102 The selections shown are not exhaustive and are not intended to reflect defini- tive measurement guidance for the selection of variables. In the first instance, it is expected that local context would be considered in the selection of variables, in other words, that the measurement of ecosystem condition would be grounded in specific ecological knowledge and expertise. Of particular relevance in this regard is knowledge of the underlying EFGs and more detailed subtypes and their composi- tion within a country or region. In this regard, the table should provide the basis for a structured conversation between account compilers and local experts. 5.103 Second, the descriptors in the table refer to a mix of variables and data sources. These examples provide an indication of the potential for measurement. However, in practice, selection of variables and indicators requires careful consideration to ensure their appropriate interpretation, for example, concerning directionality. Additional guidance on the selection of variables and the collection of data will be developed. Table 5.7 116 Examples of ecosystem condition variables for selected ecosystem types A1 Physical state A2 Chemical state B1 Compositional state B2 Structural state B3 Functional state C1 Landscape/seascape T1 Tropical/sub- Soil water availability in Soil organic carbon Tree species richness; bird Tree cover density; domi- Dry matter productivity; Forest area density; tropical forests the driest quarter; wetness content; leaf and litter species richness nant tree height; number presence of seed dispers- landscape diversity; forest nitrogen concentration of canopy layers; dead- ing species (capacity for connectivity; ratio of edge wood volume; forest age regeneration); water stress distance to interior area of class distribution; density index forest patches of epiphytes T2 Temperate- Vegetation water content Soil organic carbon Tree species richness; Forest floor depth (soil Dry matter productivity; Forest area density; boreal forests (NDWI) content; air pollutant con- lichen species richness; layer thickness); tree density of trees with hol- landscape diversity; forest and woodlands centration; foliar and litter bird species richness cover density; deadwood lows for nesting; presence connectivity nitrogen concentration volume; forest age class of top predator species biome distribution (food web functionality); NDVI; water stress index T3 Shrublands Percentage burned area; Soil organic carbon Bird species richness Tree cover density Dry matter productivity; Landscape diver- and shrubby soil layer thickness content; soil phosphorus proportion of re-sprouting sity; shrubland/forest woodlands concentration species after fire (capacity connectivity for regeneration) T4 Savannas and Percentage bare ground Soil organic carbon con- Bird species richness; Presence/density of trees/ Dry matter productiv- Connectivity of trees; grasslands tent; soil pH butterfly species richness; shrubs ity abundance of termite grassland connectivity proportion of non-native mounds species T5 Deserts and Water availability; degree Soil pH Reptile species diversity or Vegetation cover Density of viable seeds Spatial distribution of semi-deserts of surface crusting abundance in soil (capacity for waterholes regeneration) T6 Polar-alpine Percentage bare ground; Pollutant concentrations Lichen species richness Vegetation cover; lichen Diversity of habitat types; (cryogenic) snow depth; extent of cover or abundance on connectivity of routes for sea ice rocks migratory species T7.1 Annual Water-holding capacity; Soil organic carbon Bird species richness Share of organic farming; Soil respiration rate Presence/share of croplands soil bulk density; NDWI content; soil nutrient crop diversity; share of (decomposition); gross semi-natural vegetation System of Environmental-Economic Accounting – Ecosystem Accounting availability time or area as fallow land primary production fragments (small woody features); landscape diver- sity (mosaic) T7.4 Urban and Imperviousness NO2 concentration Bird species richness Share of urban green Average distance of industrial space; vegetation or tree residents to urban green ecosystems cover space; landscape diversity (mosaic) TF1 Palustrine Wetness; surface water Nitrogen concentration; Bird species richness; Vegetation cover by native Biological oxygen demand Landscape diversity; wetlands area; water flow; water- phosphorus concentration dragonfly and damselfly macrophytes wetland/water connectiv- holding capacity; duration species richness ity; intensity of surround- of water inundation/ ing land use within a 50 m saturation buffer area Table 5.7 Examples of ecosystem condition variables for selected ecosystem type (continued ) A1 Physical state A2 Chemical state B1 Compositional state B2 Structural state B3 Functional state C1 Landscape/seascape F1 Rivers and River flow (relative to Nitrogen concentration; Macroinvertebrate species Area of riverbanks Biological oxygen demand Share of river flow con- streams ecological base flow); phosphorus concentration; richness vegetated trolled by barriers; pres- permanence of water flow; ence of anadromous fish; sediment load river system fragmentation F2 Lakes Water clarity; water regime Nitrogen concentration; Fish species richness Steepness of water Biological oxygen demand; Connectedness of ripar- (permanence); water flow; phosphorus concen- temperature depth profile ratio between productivity ian vegetation within sediment load tration; chlorophyll a (structure of vertical profile and biomass catchment; share of lake concentration of lake); shoreline covered with ratio between biomass of natural vegetation predatory fish and total fish biomass; ratio between zooplankton and phytoplankton F3 Artificial Water clarity Nitrogen concentration; Fish species richness Steepness of water Percentage area available wetlands phosphorus concentration temperature depth profile; as fish nursery frequency and extent of algal blooms M1 Marine shelf Water clarity (turbid- Chlorophyll a concentra- Coral species richness; fish Reef “bleachedness”; kelp/ Trophic composition num- Seagrass meadow cover ity); (micro)plastic tion; percentage anoxic species richness seagrass height, density or ber (food web functional- concentration area; oxygen concentra- cover; live coral cover ity); ratio between fishing tion; pH (or dissolved CO2 ) mortality and fishing at maximum sustainable yield; biological oxygen demand M2 Pelagic ocean (Micro)plastic concentra- Chlorophyll concentration; Fish species richness; Plankton concentration or Trophic composition num- waters tion; water clarity percentage anoxic area; plankton species richness abundance ber (food web functional- oxygen concentration ity); ratio between fishing mortality and fishing at maximum sustainable yield Accounting for ecosystem condition M3 Deep-sea floors Light intensity; sea floor Oxygen concentration Invertebrate species Habitat diversity sediment density richness Note:  The present table is indicative only and is not intended to provide definitive measurement guidance for the selection of variables (or characteristics) in any given context. Ecosys- tem types are based on IUCN GET (David A. Keith and others, eds., 2020). Variables are grouped following the SEEA ECT. In some cases, the associated ecosystem characteristic is added in parentheses. 117 118 System of Environmental-Economic Accounting – Ecosystem Accounting 5.104 It should not be assumed that all data used for account compilation are sourced from direct field observations. While this might be ideal, such an assumption is unre- alistic. In practice, many data are sourced from combining field observations with national environmental and statistical data and remote sensing, including satellite data. 5.5.3 Use of data on environmental pressures 5.105 The measurement of environmental pressures is often considered an indirect approach to measuring ecosystem condition (European Commission, 2016). An envi- ronmental pressure is a human-induced process that alters the condition of ecosystems (Maes and others, 2018). If there are few data available on state, then measures of pres- sures on ecosystems can be considered a useful surrogate, as long as the relationship between the two is well understood and justified (Bland and others, 2018). The ECT is sufficiently flexible to be able to host variables that report pressures on ecosystems as alternatives for variables that directly measure condition. For example, air emissions or pesticide use can be reported under chemical state; soil sealing or sea level rise can substitute physical state variables; and data on introductions of invasive alien species can be reported under compositional state. In some cases, there may be little difference between a state and a pressure indicator and, in other cases, where there is a consider- able lag between evidence of a pressure and a resultant change in state, a measure of pressure may provide relevant information. 5.106 For most local pressures (e.g. poor cultivation practices, pollution, invasive species), there is an underlying variable that reflects the ecosystem response to that pressure. This underlying variable can be considered an environmental stock (e.g. thickness of the soil layer, concentration(s) of substances or abundance of species) that is gradually affected by the pressure. Typically, indicators of such stocks can meet all of the selection criteria so that they can be highly appropriate for use in condi- tion accounting compared with indicators of the connected flows (e.g. degradation/ depletion rates, fluxes, flows or other indicators of flow intensity). 5.107 Use of indicators of environmental stocks as condition indicators yields mul- tiple further advantages. They can be used to formulate pertinent and very clear pol- icy messages on ecosystem degradation (involving a change in those environmental stocks); and through the degree of policy attention, those environmental stocks that are perceived to be the most valuable or the most endangered will be highlighted. 5.108 Identifying environmental stocks in a condition account is particularly rele- vant when ecosystem extent is measured using remote sensing. Remote sensing detects a stock loss due to a change in ecosystem type (e.g. through clearing of vegetation) but may not detect a stock loss due to a decline in condition (e.g. through loss of under- story or weed invasion). Thus, while there are distinct advantages in using indicators of environmental stocks, there may also be measurement challenges; hence, measure- ment of environmental pressures may be appropriate. 5.109 An important type of environmental pressure is overharvesting, which can fre- quently be linked to environmental stocks (e.g. timber stocks in forests or fish stocks in marine ecosystems). In this case, the associated ecosystem types can have a specific target ecosystem service (typically a provisioning service) and traditional ecosystem management is aimed at maximizing the flows of that service (de Groot and others, 2010). The intensity of these management activities has been shown to exert strong influences on the supply of a broad range of services, extending well beyond the origi- nal target ecosystem service (Santos-Martín and others, 2019). 5.110 Where the pressure relates to expansion of agricultural activity, the effects may be captured by changes in ecosystem extent, depending on the intensity of the agri- Accounting for ecosystem condition 119 cultural practices. The focus of condition measurement should then be on change in the state of the relevant ecosystem type but measures of pressures such as livestock per hectare or rates of fertilizer and pesticide use may provide important data that support policy and analysis, especially where the change in state occurs some time after the environmental pressure is observed. 5.111 Some environmental pressure indicators (e.g. measures of GHG emissions, demographic changes) provide a broad measure of potential effects on the condition of ecosystems but do not provide direct measures of condition for individual ecosystem assets and hence are not suitable for use in ecosystem condition accounts. Rather, the focus should be on assessing the effects of these broader pressures on local ecosystems. 5.112 Indicators of protection status (e.g. location, area or representativeness of pro- tected areas) are also frequently proposed as proxy measures for condition if no other information is available (see, for example, Maes and others (2016)). Protection could be thought of as a rough proxy for reduced pressures, especially for reduced overexploi- tation (i.e. indicating lower management intensities). However, indicators describing policy interventions performed in response to management or conservation objectives are not considered to be appropriate condition indicators. There is no inherent rela- tionship between protection status and other indicators of ecosystem condition, for example, an ecosystem could be protected and nevertheless be in poor condition. In order to avoid confusion and double counting, the use of indicators describing policy response categories should be avoided. The inclusion of such indicators would, among other issues, compromise the potential to use the accounts to assess the effects of pol- icy responses, for example, the effect on condition of establishing a new protected area. 5.5.4 Role of biodiversity in ecosystem condition accounts 5.113 Following the definitions under the Convention on Biological Diversity, bio- diversity is the variety of life within species (genetic diversity), between species and between ecosystems (article 2) and ecosystems are shaped by the interactions among species, and between species and the non-living environment (ibid.). As a consequence, there is overlap in how biodiversity and ecosystems are measured. 5.114 Biodiversity is integral to the maintenance of ecosystem integrity, which is the reference against which the condition of ecosystem assets is assessed. Thus, in the ECT (table 5.1), the overlap in measurement is evident mainly in biotic ecosystem charac- teristics. Variables that describe species composition, ecosystem structure and ecosys- tem processes are also used to characterize biodiversity and are therefore considered essential biodiversity variables.58 58 For further information, see https://geobon.org/ebvs/what- 5.115 While there is overlap, there is also a difference between measuring biodiver- are-ebvs/. sity and measuring ecosystem condition. Ecosystem condition accounts consider the physical and chemical quality of the ecosystem along with biotic health and often focus on species-related metrics to account for biodiversity. Variables that describe between- ecosystems diversity are generally less appropriate and are rarely used to measure the condition of a single ecosystem asset or ecosystem type. The relevant biodiversity met- rics for assessing an individual ecosystem asset’s condition include characteristics of composition, structure and function, as well as landscape characteristics where they can be attributed to the condition of an individual ecosystem asset. In particular, indi- cators of local species diversity are likely to be relevant. 5.116 Before selecting species-based metrics to assess the condition of ecosystems, it is important to realize that there are different spatial and temporal dynamics between individual species and ecosystems. Therefore, not all species or species-based biodiver- sity indicators are suitable for assessing condition at all scales. For instance, to meas- 120 System of Environmental-Economic Accounting – Ecosystem Accounting ure the long-term condition of a single ecosystem, monitoring non-mobile species that are sensitive to pollution, such as lichens, may be more appropriate and cost-effective, compared with observing an occasional visiting species that uses the ecosystem only to rest during its seasonal migration. However, observations of migrating species may be important for understanding the importance of that ecosystem for species conser- vation at a broader scale. 5.117 Consequently, some individual biodiversity metrics, such as diversity of eco- system types within an EAA, should not be attributed to individual ecosystem assets and should instead be considered emergent properties. As a result, these metrics will not be incorporated in aggregate measures of ecosystem condition based on the con- dition of individual ecosystem assets. The emergent properties can be incorporated in aggregate measures of biodiversity, for example, at ecosystem type and EAA scale, using aggregation approaches that appropriately consider the relevant process-related and pattern-related issues. The background paper entitled “Addressing spatial scale in deriving and aggregating biodiversity metrics for ecosystem accounting” (Larsen and others, 2021), which summarizes the relevant spatial aggregation issues and methodo- 59 See https://seea.un.org/sites/ logical approaches, provides appropriate guidance.59 seea.un.org/files/documents/ EEA/seea_ea_background_ paper_spatial_aggregation_ 5.5.5 Accounting for ecosystem conversions of_biodiversity-focused_met- 5.118 Ecosystem conversions occur when part or all of an ecosystem asset changes rics_final.pdf. from one ecosystem type to another between the beginning and the end of an account- ing period. Examples of ecosystem conversions include clearing of a natural forest for use by grazing animals; conversion of a natural grassland to cropland; draining a wetland and ploughing for agriculture; creation of a new hydropower reservoir; natu- ral encroachment following permafrost melt; and potential future flooding of coastal areas due to sea level rise. The identification and recording of ecosystem conversions, which should appear in the ecosystem extent account, are discussed in chapter 4. 5.119 Concerning the measurement of condition, four practical measurement chal- lenges emerge in the context of ecosystem conversions: (a) In some cases, thresholds for the condition indicators are required to identify the conversion from one ecosystem type to another. Those thresholds depend on how the ecosystem type is classified and deline- ated and the specific indicators applied. For example, in the conversion of a forest to a shrubland or grassland, the canopy cover threshold at which the ecosystem is no longer to be classified as a forest needs to be determined. Hence, rules or thresholds are required to determine changes in ecosystem type that result in reclassification; (b) To enable reclassification, rules are often required specifying a time period during which the change must remain present, so as to distin- guish permanent change from temporal variability; (c) Selection of the set of condition indicators used to describe the ecosys- tem types is important so that a change in the level of one or more indi- cators can signal a conversion to another ecosystem type. For example, canopy cover is a poor indicator for detecting the difference between a natural forest and a plantation but a good indicator of the difference between a forest and a grassland; (d) The spatial scale of assessment of condition indicators – that is, the level of aggregation of spatial units for reporting within an accounting area – is important. Metrics for condition indicators that may be used to assess Accounting for ecosystem condition 121 conversions likely occur at different scales, from point sources to emer- gent landscape scales. 5.120 These measurement challenges are confronted in the first instance in the com- pilation of the ecosystem extent accounts described in chapter 4. In those accounts, the change in the area of ecosystem types between the opening and closing of the account- ing period is recorded in gross terms, that is, both the additions and reductions in the area of ecosystem types are recorded. The characteristics and criteria for the deline- ation of ecosystem types underpin the recording of conversions. Maintaining a time series of ecosystem extent accounts supports understanding of the relative extent of different ecosystem types and also supports analysis of conversions from natural to anthropogenic ecosystem types. 5.121 From an ecosystem condition measurement perspective, ecosystem condi- tion for the converted area is measured with respect to the ecosystem type present at the end of the accounting period using the relevant characteristics and indica- tors. Where ecosystem conversions occur, this implies that for a converted area, the relevant set of characteristics and indicators and the associated reference levels are different from those used at the beginning of the period. Significant care should therefore be taken in interpreting the change in condition over time for the con- verted area, and it is recommended that, as a general approach, the converted areas be either excluded from the analysis of change or handled as a distinct type of area in any aggregations. 5.122 At the same time, there is often strong interest in understanding ecosystem conversions involving the change from natural to anthropogenic ecosystem types. To support analysis of those changes beyond measures of changes in extent, it may be appropriate to provide complementary measures of changes in ecosystem condition for all ecosystem types (i.e. both natural and anthropogenic ecosystems) relative to a natural reference condition. This analysis will be most relevant where changes have occurred relatively recently, for example, over the past 200 years. 5.5.6 Relationships among ecosystem condition, ecosystem capacity and ecosystem degradation 5.123 The ecosystem accounting framework encompasses the intention to record data on both stocks of ecosystem assets and flows of ecosystem services. The general conception is that the extent and condition of ecosystem assets exert an influence on the flows of ecosystem services both in the current period and in future periods. Also, in some cases, the supply and use of ecosystem services impact ecosystem condition. The connection between those stocks and flows is reflected in the con- cept of ecosystem capacity. Measurement of ecosystem capacity is related to but dif- ferent from the measurement of ecosystem condition. Section 6.5 provides a longer discussion of ecosystem capacity in the context of ecosystem accounting. 5.124 Ecosystem degradation is the decrease in the value of an ecosystem asset over an accounting period that is associated with a decline in the condition of the asset during that accounting period (see sect. 10.2). Since the value of an ecosystem asset will be related to future flows of ecosystem services, there are connections among the concepts of ecosystem condition, ecosystem capacity and ecosystem degradation. However, those concepts are not identical, and it need not be the case that declines in condition necessarily imply ecosystem degradation. Appendix A10.1 provides a dis- cussion on the links between measures of ecosystem condition and ecosystem degra- dation and other changes in the value of ecosystem assets. 122 System of Environmental-Economic Accounting – Ecosystem Accounting 5.6 Applications of ecosystem condition accounts 5.125 Ecosystem condition accounts can be compiled at regional, national and international scales for a wide range of applications. Data for different components of condition accounts, such as ecosystem variables, indicators, reference levels, refer- ence conditions and ecosystem condition indices, are used for different applications. Ensuring consistency in terms, definitions and metrics within the information system provided by the ecosystem accounts and any policies that refer to them helps to ensure effective application. 5.126 Condition accounts are used to synthesize information on changes in the state of ecosystem assets over time. This information can be used to inform policy- and deci- sion-making across a range of sectors that impact or depend on ecosystems and natural resources, including land-use planning, environmental impact assessment, agricultural planning and authorization processes, and programmes for ecosystem rehabilitation or restoration. Overall measures (such as an ecosystem condition index) can be used to inform strategic planning at the national level. Where accounts are compiled with spa- tially explicit detail and include information on particular characteristics of ecosystem assets, the accounts can also be used to inform landscape-level planning. 5.127 The use of variables, indicators or ancillary information to assess the capacity of ecosystems to supply ecosystem services is an important application that serves the purpose of informing policy on the future availability of ecosystem service flows from ecosystem assets. As described in chapter 10, information on future ecosystem service flows may be used for estimating the monetary value of ecosystem assets. Further, con- dition accounts can be used to analyse the impact that activities associated with sup- plying ecosystem services (e.g. timber harvesting) are having on ecosystem condition. 5.128 Several examples demonstrate the range of applications of ecosystem condition accounts in providing information. Quantification of indicators and reference levels can be used to operationalize the definitions of ecosystem degradation and enhance- ment (restoration). Further, indicators of ecosystem condition could be combined with information on ecological thresholds (e.g. concerning points of change in ecosystem type) to assess the risk of change or, alternatively, to assess the degree of resilience within ecosystems under conditions of change. This could allow condition accounts to inform the identification of threatened ecosystems (see, for example, David A. Keith and others (2013)). 5.129 Assessment of ecosystem capacity to supply ecosystem services depends on complex interrelationships of multiple indicators for determining threshold levels in defining sustainability. Connecting the critical levels of ecosystem capacity back to the ecosystem condition variables that have the highest level of influence on specific eco- system services is an important area of future research. Such research would support use of information in the ecosystem accounts to quantify the “critical natural capital” concept described in economics (Ayres, van den Bergh and Gowdy, 2001) or the “plan- etary boundaries” concept in ecology (Rockström and others, 2009). 5.130 The development of ecosystem condition accounts has the potential to make many key policy commitments measurable and thus more likely to be implemented at 60 See www.unccd.int/actions/ the national and international levels. The measurement may then, in turn, support the achieving-land-degradation- design and development of policy and associated targets. International policies where neutrality. the information from ecosystem condition accounts can be applied include measures of land degradation to support the goal of land degradation neutrality (LDN) under the United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa,60 the Sustainable Devel- Accounting for ecosystem condition 123 opment Goals61 and the Kunming-Montreal Global Biodiversity Framework.62 Further, 61 See www.un.org/sustaina- inclusion of the concept that ecosystem integrity must be promoted within the context of bledevelopment/sustainable- development-goals/. accounting for national emissions reductions in the Paris Agreement, adopted under the United Nations Framework Convention on Climate Change,63 demonstrates signifi- 63 See https://cop23.unfccc.int/ cant progress towards the adoption of a holistic approach to environmental issues. process-and-meetings/the- 62 This concept is developed further in a report describing specific mitigation actions See www.cbd.int/gbf. paris-agreement/what-is-the- (Dooley and others, 2018). paris-agreement. 125 Appendix A5.1 Selection criteria for ecosystem characteristics and their metrics (variables and indicators) Criterion Short description Conceptual criteria Intrinsic relevance Characteristics and metrics should reflect the existing scientific understanding of ecosystem integrity, supported by the ecological literature Instrumental relevance Characteristics and metrics should be related to the availability of ecosystem services (characteristics that exert the strongest influence on the highest priority services should be favoured) Directional meaning Characteristics and metrics need to have the potential for a consensual inter- pretation, in other words, it should be clear whether a change is favourable or unfavourable with respect to ecosystem integrity Sensitivity to human Characteristics and metrics should be responsive to known socioecological lever- influence age points (key pressures, management options) Framework conformity Characteristics and metrics should be differentiated from other components of the SEEA EA framework Practical criteria Validity Metrics need to represent the characteristics that they address in a credible and unbiased manner Reliability Metrics need to be accurate, reliable and reproducible, with potential sources of error explored and documented Availability Metrics covering the studied spatial and temporal extents with the required resolution need to be achievable in terms of the resources and time available Simplicity Metrics should be as simple as possible Compatibility The same characteristics should be measured with the same (compatible) metrics in the different ecosystem types and/or different EAAs (countries) Ensemble criteria (for the whole set of variables and indicators) Comprehensiveness The final set of metrics, as a whole, should cover all of the relevant characteristics of the ecosystem, providing a complementary set of measures Parsimony The final set of ecosystem condition metrics should be free of redundant (cor- related) variables Note: A detailed discussion of these selection criteria is presented in Czúcz and others (2021b). 127 Appendix A5.2 Options for establishing reference conditions for natural and anthropogenic ecosystems A5.1 Before selecting a reference condition against which to assess the condition of an ecosystem, it is essential to consider an appropriate assessment framework for selec- tion of a reference condition (see sect. 5.3.3). Table A5.2.1 presents such a framework, which distinguishes natural from anthropogenic ecosystem states and provides four possible reference conditions for each ecosystem state. The possible reference condition options for natural ecosystems are undisturbed or minimally disturbed, historical, least disturbed and contemporary (Jakobsson and others, 2020; McNellie and others, 2020; Stoddard and others, 2006). For anthropogenic ecosystems, possible reference condition options are historical, least disturbed, contemporary and best attainable (Kopf and others, 2015). For semi-natural or lightly managed ecosystems, any of the four options for anthropogenic ecosystems could be used. A5.2 The choice of an appropriate assessment framework depends on many factors and cannot be prescribed. In an accounting context, it is important that the reference condition be explicit and that the rationale for its selection be explained. For instance, European dry heathlands, which are rich in biodiversity, can be considered semi-natural ecosystems requiring light human management with minimal disturbance in order to maintain a semi-natural state and to prevent forest growth. In this case, a least disturbed or contemporary condition may be most appropriate. In contrast, heavily polluted and drained wetlands can be considered natural systems in poor ecological condition and assessed as such, relative to a reference condition of least disturbed or historical. A5.3 Cropland that was abandoned some time ago and is reverting to a natural state provides an example where the choice of reference condition may depend on the objec- tive of use. The ecosystem could be assessed relative to historical or best attainable condition for use as cropland or relative to undisturbed or minimally disturbed con- dition when the objective is restoration. Which of these reference conditions is more appropriate will be context-dependent. An intensively managed ecosystem such as active cropland or an urban park could be assessed relative to a reference condition of best attainable or contemporary. Methods for estimating the reference condition and reference levels for ecosystem condition variables A5.4 The following eight methods are potentially available for estimating the reference condition as a means of operationalizing the theoretical categories in table A5.2.2. Methods 1 to 4 represent approaches that should be considered first to describe and quantify the reference condition and, in particular, to establish the values for upper and lower reference levels of ecosystem condition variables. Methods 5 to 7 can be considered alternatives when methods 1 to 4 cannot be applied or when policy or leg- islative drivers dictate that methods 5 or 6 may be used. Method 7 may be particularly relevant in capturing indigenous knowledge and perspectives. Method 8 constitutes a combination of methods. 128 System of Environmental-Economic Accounting – Ecosystem Accounting Table A5.2.1 Assessment framework for selection of a reference condition Ecosystem Possible reference condition Natural: an ecosystem that is influenced predomi- Undisturbed or minimally disturbed: condition of nantly by natural ecological processes and character- an intact ecosystem with maximal ecosystem integrity ized by a stable ecological state maintaining ecosys- and with no or minimal disturbance tem integrity; ecosystem condition ranges within its Historical: condition of an ecosystem at some point natural variability. or period in its history (e.g. the pre-industrial period or Examples (with reference to table 3.2): primary and the period of pre-intensive agriculture) that is consid- old-growth forests (T1, T2), natural grasslands and ered to represent its stable natural state savannas (T4), natural lakes (F2), wetlands (TF1) Least disturbed: best ecosystem condition currently available Contemporary: condition of an ecosystem at a certain point or period in its recent history for which comparable data are available Anthropogenic: an ecosystem that is influenced pre- Historical: condition of an ecosystem at some point dominantly by human activities and for which a stable or period in its history (e.g. the pre-industrial period or natural ecological state is unattainable and future period of pre-intensive agriculture) that is considered socioeconomic interventions are required to maintain to represent a stable socioecological state a new stable state Least disturbed: best ecosystem condition currently Examples (with reference to table 3.2): urban green available spaces and croplands (T7), artificial waterbodies (F3), anthropogenic marine systems (M4) Contemporary: condition of an ecosystem at a certain point or period in its recent history for which comparable data are available Best attainable: expected condition of an ecosystem under best possible management practices and reflect- ing a stable socioecological state A5.5 1. Reference sites. If pristine or minimally disturbed sites are available, they can be used to establish a reliable measure of the mean and statistical distribution of condi- tion variables. Reference sites can be identified using expert or traditional knowledge as well as statistics and artificial intelligence if long-term time series with data describ- ing ecosystem disturbance are available. Monitoring reference sites is probably the most straightforward method for establishing reference conditions and for determin- ing the reference levels of condition variables. Seasonal or annual variability, as well as long-term or irreversible ecosystem changes due to climate change or invasive alien species, can be factored in when determining reference levels for ecosystem condition variables. Reference sites can thus be used to establish a dynamic reference condition (Hiers and others, 2012) that can be periodically updated. A5.6 2. Modelled reference conditions can be based on predictive empirical models or potential vegetation models. Models can be used to infer conditions in the absence of human disturbance where representative reference sites are not available. Potential vegetation can be modelled globally and can incorporate scenarios of environmental change. A weakness is that models usually do not involve all of the selected condi- tion variables of the condition account, and the variables in the model often differ from measured variables. To establish reference levels for condition variables, mod- els require use of assumptions related, for example, to scientific debate on the role of megafauna and early humans on potential natural vegetation. A5.7 3. Statistical approaches based on ambient distributions. Least disturbed or best attainable conditions can be estimated by observing the range of values from cur- rent ecosystem monitoring and by selecting a reference condition based, for instance, on fifth percentile values as criterion or by assuming that the reference condition is equal to a state with the highest species richness. Statistical approaches are data-driven Appendix A5.2: Options for establishing reference conditions for natural and anthropogenic ecosys. 129 and therefore pragmatic, accountants are familiar with them, and they are applicable if no reference sites are available. Methods can be applied consistently across variables, through, for example, normalization with the maximum values of available data. Pos- sible drawbacks are the arbitrary nature of the reference condition, spatial inconsisten- cies caused by use of current data sets, a strongly shifting baseline and a false sense of consistency. Solutions need to be proposed to scale condition variables at levels outside the range of the available data. Variables moving out of their established range (e.g. improving beyond the previous upper reference level) can cause serious complications. A5.8 4. Historical observations and paleo-environmental data. This method uses historical observations or palaeontological data to describe a historical reference con- dition (typically dating from before 1970 when routine environmental monitoring programmes started). The term “historical observations” refers to a description of a reference condition based on species collections in natural history museums, histori- cal manuscripts and books that describe fauna and flora, photo archives, paintings or other materials that can be used to draw inferences related to the presence of spe- cies or the prevalence of certain conditions during a certain period in time. Paleo- environmental data can be used to reconstruct the physical-chemical environment, climate, vegetation and fauna of a certain period in time using material that is buried in the soil. Those data are often collected during engagement in archaeological stud- ies. Examples of data collections relevant to defining a historical ecosystem condition include seed banks for reconstructing flora or remains of fish catches near medieval settlements used to reconstruct fish fauna or determine the presence of specific spe- cies. This method can deliver a common baseline for climate and biodiversity science, which is relevant to supporting more integrated climate-biodiversity policies. It can also reveal the magnitude of biodiversity loss. A weakness is that not all ecosystem condition variables can be easily inferred from historical data. A5.9 5. Contemporary data. This method uses contemporary data to describe a con- temporary reference condition (typically dating from after 1970 when routine envi- ronmental monitoring programmes started). For instance, under the Kyoto Protocol to the United Nations Framework Convention on Climate Change,64 global atmos- 64 United Nations, Treaty Series, pheric CO2 emissions recorded in 1990 have been used as a reference against which to vol. 2303, No. 30822. assess the changes in future GHG emissions. The Living Planet Index uses species data collected in 1970 as a reference for assessing changes. Provided that data are available, this is a straightforward approach to setting a reference condition, which is similar to statistical approaches that use ambient data distributions. However, there are several disadvantages. The choice of year may be considered arbitrary. The reliance on con- temporary data in evaluating changes can result in a shifting baseline. Appropriate dates differ for different indicators and ecosystem types. If different baseline dates are used in different regions, this creates inconsistencies. Difficulties arise with respect to scaling condition variables at levels that are higher than their reference level, for example, when variables move out of their established range. The method is subject to policy influence and contemporary baselines may diverge greatly from pre-industrial era baselines. A5.10 6. Prescribed levels of a set of ecosystem condition variables can be used to construct a bottom-up reference condition. Examples of these reference levels include zero values for emissions or pollutants, a specific number of species, established sustainability or threshold levels such as critical loads for eutrophication and acidi- fication, and target levels in terms of legislated quality measures (e.g. air and water quality). Prescribed levels of variables can have clear and straightforward manage- ment applications and provide a basis for direct policy response. This method can reflect preferences for a particular use of ecosystem accounting for social, economic or 130 System of Environmental-Economic Accounting – Ecosystem Accounting environmental purposes and can also describe a level quantifying an undesirable state required to define the zero end of the normalized scale, for example, where the ecosys- tem is no longer present or functioning. Prescribed levels, however, are not available for all variables, may be subject to policy influence and may change over time, and may not be developed consistently for all ecosystem types, variables or countries. A5.11 7. Expert opinion usually consists of a narrative statement of expected refer- ence condition. Although an expert’s opinion may be expressed semi-quantitatively, qualitative articulation is probably most common (European Commission, 2003). Several weaknesses are inherently associated with such an approach. Therefore, cau- tion should be exercised when using this approach as the sole means of establishing reference condition. A5.12 8. Combination of any of the above methods. Many of the above approaches may be used either singly or in concert for establishing and/or cross-validating refer- ence condition. In practice, it may not be possible to use a single method to describe or quantify reference levels of ecosystem condition variables under a reference condi- tion. For instance, the reference values of variables that describe a historical condition (e.g. the pre-industrial state of an ecosystem) can be determined by a combination of methods: modelling potential vegetation (method 2) based on paleoclimatic data (obtained through method 4). Statistical models and tools exist to combine methods, for example, Bayesian networks can combine statistical distributions (method 3) and expert opinion (method 7). Recent advancements in artificial intelligence will fur- ther improve the above-mentioned methods for inferring and describing a reference condition. Table A5.2.2 Summary of methods for estimating possible reference condition for natural and man- aged ecosystems Natural ecosystems Anthropogenic ecosystems Undisturbed or minimally Least Contem- Best Possible reference disturbed Historical disturbed porary attainable condition condition condition condition condition condition Methods for estimating reference conditions 1. Reference sites x x x x 2. Modelled reference x x x x conditions 3. Statistical approaches based on ambient x x distributions 4. Historical observations and paleo-environmental x data 5. Contemporary data x 6. Prescribed levels x 7. Expert opinion x x x Section C Accounting for ecosystem services 133 Section overview The broad ambition of SEEA is to comprehensively describe the relationship between the environment and the economy. In many respects, flows of ecosystem services that reflect the contributions that ecosystems make to benefits used in economic and other human activity are a central component of the description of that relationship. Section C of SEEA EA, encompassing chapters 6 and 7, presents the approach to accounting for ecosystem services within the ecosystem accounting framework, which was sum- marized in chapter 2. The focus in chapter 6 is on the definition of ecosystem services and associated concepts for accounting purposes. The concept of ecosystem services is relatively new, with a rapid increase in the volume of research and the accompanying literature and studies having occurred in the past 20 years. It is therefore important to clearly articu- late the approach to accounting for ecosystem services in SEEA EA. An important part of this articulation entails establishing the connection to the flow of produced goods and services that are recorded in the SNA. Thus, ecosystem services are defined so that, as appropriate, they can be readily recorded as inputs to production processes recorded in the SNA. At the same time, the measurement boundary for ecosystem ser- vices is extended to include the contribution of ecosystems to other, non-SNA benefits that people receive from the environment. In accounting for ecosystem services, the emphasis is placed on recording data on the use of ecosystems by economic units and people both directly and indirectly. Often, there are competing interests where use by some people – for example, for sup- plying wood biomass – competes with other uses such as global climate regulation. In other cases, the uses may be complementary. The intent in accounting terms is to record the flows that occur and hence support an understanding of the degree to which different uses may be competing or complementary and the extent to which some uses may have a greater effect on ecosystem condition and the continued supply of ecosystem services. There is a range of measurement boundary and treatment issues such as those concerning links to biodiversity, the treatment of non-use values and the treatment of imports and exports of ecosystem services. All of these matters are considered in chapter 6. Chapter 7 focuses on the appropriate recording of ecosystem services in physical terms using accounting principles. These chapters demonstrate the impor- tance of SEEA EA in establishing an agreed set of concepts, definitions and measure- ment classes for ecosystem services to support the effective exchange of experiences and the development of comparable reports and outputs. In many contexts, data on ecosystem service flows in physical terms will pro- vide the core information required to understand the connection between people and ecosystems, for example, with respect to the location of ecosystem supply, the types of users and beneficiaries and the magnitude of the flows. This is particularly relevant for measurement in monetary terms since the majority of ecosystem services are not traded on markets and values for ecosystem service flows must be estimated using various non-market valuation approaches as described in chapter 9. 135 Chapter 6 Ecosystem services concepts for accounting 6.1 Purpose of accounting for ecosystem services 6.1 In the ecosystem accounting framework, ecosystem services serve as the concept connecting ecosystem assets and the production and consumption activity of busi- nesses, households and governments. The measurement of ecosystem services is thus central to describing an integrated set of ecosystem accounts. 6.2 Since the release of Ecosystems and Human Well-being (Millennium Ecosystem Assessment, 2005), there has been a significant increase in the number of studies focused on ecosystem services. These studies, involving researchers from a range of disciplines and from all over the world, have considered many aspects of the defini- tion of and approaches to measurement, including at scales encompassing local eco- systems and communities as well as global assessments. The potential of applying an ecosystem services approach to foster an understanding of the relationship between humans and the environment has been further strengthened through work under var- ious frameworks including The Economics of Ecosystems and Biodiversity initiative (TEEB, 2010), the MAES initiative (Maes and others, 2013); the Natural Capital Project at Stanford University; the Integrated system for Natural Capital and ecosystem ser- vices Accounting (INCA) project (Vallecillo and others, 2019b); and IPBES (Díaz and others, 2015), among many others. The approach to accounting for ecosystem services presented here builds on all of this research and practice. 6.3 The measurement of ecosystem services is of particular interest in explaining the variety of contributions that ecosystems make to people and the economy. Such con- tributions extend well beyond marketed goods, such as timber and fish, and include services such as air filtration, water purification, global climate regulation and recrea- tion-related services. Commonly, those types of services are supplied to communities outside market institutions. The focus of accounting for ecosystem services is to pro- vide a clear description of the range of these services, the spatial heterogeneity of their delivery and their local-to-global beneficiaries, in order that this information may be readily associated with the different ecosystems that supply the services and compared across different ecosystem types. 6.4 An important feature of the rationale for accounting for ecosystem services is that while much economic production (for example, in agriculture, forestry and fisheries) uses inputs directly from ecosystems, those inputs (and any associated degradation) are not explicitly recorded in the national accounting framework. In ecosystem accounting, ecosystem services are clearly differentiated from the goods and services that are produced, that is to say, the ecosystem services are recorded as the contributions of ecosystem assets to the production of those goods and services. In effect, this approach extends supply chains and treats ecosystem assets as suppli- ers or producing units. 136 System of Environmental-Economic Accounting – Ecosystem Accounting 6.5 The explicit recording of the contribution of ecosystems to both current mar- keted production and wider benefits accruing to individuals and society encourages a wider understanding of the role of ecosystems and the possible effects of a change in their extent and condition (e.g. due to changes in land use, spatial planning and protected status). This focus can support an understanding in particular of those eco- system services that may be at risk of being lost or becoming scarce. 6.6 Accounting for ecosystem services does not provide a complete assessment of the entire relationship between ecosystems and people. While the conceptual scope of ecosystem services is broad, there are a range of other benefits that are not captured, for example, those involving relational and intrinsic values. Nonetheless, a focus on ecosystem services does yield important information describing use of and depend- ence on ecosystems. Further, based on such information, together with information on the extent and condition of ecosystem assets, data on expenditure on environmental protection and resource management and data on economic activity, a rich portrayal of that relationship can be achieved. In this respect, there is an important link to the data of the SEEA Central Framework and the SNA in respect of understanding rel- evant environmental pressures and policy responses. The subject of how these fac- tors impact on ecosystem assets and hence on the flows of ecosystem services has an important role to play in informing relevant aspects of policymaking. 6.7 The present chapter provides descriptions and definitions of the various con- cepts and principles that are applied in accounting for the supply and use of ecosystem services. Using these concepts and principles, the chapter outlines a reference list of selected ecosystem services and associated descriptions to support account compilation and comparison of methods and findings. This chapter also provides additional expla- nation on the treatment of specific services and associated environmental flows, thereby establishing the measurement scope that is appropriate for ecosystem accounting. 6.2 Concepts and principles in accounting for ecosystem services 6.2.1 Ecosystem services 6.8 The key concepts under the ecosystem accounting framework related to ecosys- tem services concern (a) supply of ecosystem services to users; and (b) contribution of ecosystem services to benefits (i.e. the goods and services ultimately used and enjoyed by people and society). Directly below, these concepts are placed in context for ecosys- tem accounting purposes. 6.9 Following the general framework of ecosystem accounting, each ecosystem asset supplies a set or bundle of ecosystem services. Following the framing described in chapter 2, ecosystem services are the contributions of ecosystems to the benefits that are used in economic and other human activity. Under this definition, use incorpo- rates direct physical consumption, passive enjoyment and indirect receipt of services. Further, ecosystem services encompass all forms of interaction between ecosystems and people, including both in situ and remote interactions. 6.10 In ecosystem accounting, ecosystem services are recorded as flows between ecosystem assets and economic units, where economic units encompass the various institutional types included in the national accounts, such as businesses, governments and households. Flows of ecosystem services are sometimes reflected in direct physical flows (when, for example, fish are removed from a marine ecosystem), but they may also be reflected in the indirect receipt of ecosystem services, such as flood control services. Ecosystem services concepts for accounting 137 6.11 Following the cascade model describing flows of ecosystem services,65 the supply 65 This framing reflects the gen- of an ecosystem service will be associated with an ecosystem structure or process or a eral framing of the well-recog- combination of ecosystem structures and processes that reflect the biological, chemical nized cascade model (Haines- Young and Potschin, 2012; and physical interactions among ecosystem components (Potschin and Haines-Young, Potschin and Haines-Young, 2017). Their characteristics can be aggregated into different groups of functional out- 2016) and the framing provid- comes (Schneiders and Müller, 2017). These processes and characteristics are observ- ed by Boyd and Banzhaf (2007). able and measurable but are not themselves flows of ecosystem services as defined in Central to these framings ecosystem accounting, since this requires a connection to be made to users. This align- is the view that ecosystem services are “contributions to ment between supply and use is a foundational accounting concept (see SEEA Central benefits” rather than being Framework, sect. 3.2) and applies in both physical and monetary terms. The recording “equivalent to benefits”, which of ecosystem services pertains to total flows over an accounting period (e.g. one year), was the framing applied in the and an entry will therefore reflect a total flow per unit of time. Millennium Ecosystem Assess- ment (2005). The language of 6.12 In much of the ecosystem services literature, the term “supply” refers to an eco- contributions is also present in system’s potential or capacity to supply services irrespective of use, while the term the IPBES approach (Díaz and “use” refers to the actual flow to people. In ecosystem accounting, following stand- others, 2015), which adopts ard accounting treatments, the measures of supply and use are equivalent and will be the term “nature’s contribu- tions to people”. The focus on equal to the actual flow between the ecosystem asset and people. At the same time, the contributions is directly suited concept of ecosystem capacity is highly relevant in this regard, and a discussion of this to the accounting approach of concept in the context of ecosystem accounting is provided in section 6.5. SEEA EA and the application of supply-use principles. 6.13 In many cases, ecosystem services contribute to benefits in combination with other inputs, such as labour and produced capital. These “joint production” contexts are an important feature of the relationship between ecosystem assets and economic and other human activity, and they highlight the need to differentiate between ecosys- tem services and benefits. The types of benefits are discussed further in section 6.2.2. 6.14 The relationship between the supply of ecosystem services and their use will not always entail a flow from one ecosystem asset to one economic unit or user. In some cases (e.g. that of flood control services involving a range of ecosystem types within a catchment), ecosystem services will be supplied through a combination of ecosystem assets. In other cases, one ecosystem service will be used by different economic units. For example, air filtration services contribute to benefits used by both households and businesses. The different types of benefits and the types of users to which they are linked are discussed in section 6.2.2. 6.15 In some cases, ecosystem services will be an indirect contribution to benefits. For example, the nursery population services supplied by seagrass meadows are an input to the supply of fish biomass provisioning services, which in turn contribute to the benefit of marketed fish. In this case, the nursery population service is treated as intermediate, while the biomass provisioning service is final. Final and intermediate ecosystem services are discussed further in section 6.2.3. 6.2.2 Benefits 6.16 Benefits are the goods and services that are ultimately used and enjoyed by people and society. The use of the term “benefit” in ecosystem accounting is derived from, but is applied more broadly than, the SNA definition of an economic benefit. In the 2008 SNA (para. 3.19), an economic benefit is defined as denoting “a gain or posi- tive utility arising from an action”, where an action or activity entails production, consumption or accumulation and utility concerns the satisfaction of a human need 66 The term “utility” is used here, or an improvement in well-being.66 As applied in ecosystem accounting, the term as in the SNA, to provide a con- “benefit” reflects a gain or positive contribution to well-being arising from the use of ceptual reference point rather ecosystem services. than a measurement objective. 138 System of Environmental-Economic Accounting – Ecosystem Accounting 6.17 Benefits are treated as either SNA benefits or non-SNA benefits. SNA benefits are goods and services that are included in the production boundary of the SNA. Exam- ples of SNA benefits include all food, water, energy, clothing, shelter and recreation services available for purchase. As contributions to SNA benefits, ecosystem services are readily seen as inputs into an existing production process, and consequently SNA benefits can be seen as resulting from a joint production process involving ecosystems and various other inputs including produced assets and labour. It may be useful to distinguish between inputs involved in the supply of ecosystem services (e.g. use of fertilizers in the growing of crops) and inputs involved in accessing or using ecosystem services (e.g. use of vehicles to drive to parks for recreation). In both contexts, the aim in ecosystem accounting is to isolate and record the ecosystem’s contribution to the benefits received. 6.18 Non-SNA benefits are goods and services that are not included in the produc- tion boundary of the SNA. Examples of non-SNA benefits include clean air and flood protection provided by ecosystems. In line with the definition of benefits, the scope of non-SNA benefits for ecosystem accounting purposes is limited to contributions to people and society. It therefore excludes contributions of ecosystems to their own longer-term condition and potential to supply ecosystem services in the future. While there may be benefits associated with maintenance of ecosystem condition, they are reflected in the ecosystem accounts either through the ecosystem condition account or in terms of changed flows of ecosystem services, which are recorded at the time they occur. 6.19 The measurement scope of ecosystem services is set so that flows of ecosystem services do not overlap with the flows of goods and services recorded in the SNA (i.e. SNA benefits). The measurement scope of goods and services recorded in the SNA is defined by the SNA production boundary. In ecosystem accounting, all ecosystem services are outside the SNA production boundary. 6.20 It is also relevant to consider the private and public nature of ecosystem services and the link to benefits in terms of the following three situations: (a) There are ecosystem services that contribute to benefits that are used by one user and it is feasible to exclude others from using those services (e.g. supply of fodder in rearing livestock on private landholdings). Such ecosystem services satisfy the economic definition of pure private goods as being rival and excludable; (b) There are ecosystem services that contribute to benefits that are used by one user but it is not feasible to exclude others from using those services (e.g. recreation-related services supplied by a public park). Such ecosys- tem services satisfy the economic definition of common pool resources as being rival and non-excludable; (c) There are ecosystem services that contribute to benefits that can be used simultaneously by multiple economic units, and it is not feasible to exclude others from using those services (e.g. global climate regula- tion services). Such ecosystem services satisfy the economic definition of pure public goods as being non-rival and non-excludable. 6.21 Through an application of these distinctions, those ecosystem services that con- tribute to public goods can be treated analogously to those services described in the SNA as collective consumption services. Such distinctions are relevant in the alloca- tion of ecosystem services to users (as discussed further in chap. 7) and in the integra- tion of ecosystem services and ecosystem assets in the extended sequence of sector accounts described in chapter 11. Ecosystem services concepts for accounting 139 6.22 As noted, there is a link between the definitions of benefits and well-being. In a wider economic framing, well-being is commonly described in terms of welfare and utility,67 which in turn may be linked to the consumption of goods and services68 and 67 Well-being may also be the receipt of benefits. In this context, the assessment of changes in welfare and well- expressed in terms of capabili- being considers both positive and negative effects on utility. ties (Sen, 1999). 68 6.23 From an accounting perspective, a distinction can be made between outputs and In this context, “consumption” includes both the transforma- outcomes (see Organisation for Economic Co-operation and Development, Working tion of materials (e.g. the use Party on National Accounts (2008)). For example, health outputs concern the pro- of timber to build houses or for duction of services supplied by doctors and hospitals, while health outcomes reflect energy) and the passive receipt a particular state or condition to which people attach utility. In this framing, outputs of non-material ecosystem ser- contribute to outcomes. There may be considerable analytical interest in estimating vices (e.g. the aesthetic enjoy- the value of health and other individual and social outcomes, but this is not the focus ment of viewing landscapes). of measurement in ecosystem accounting. 6.2.3 Final and intermediate services 6.24 The primary focus of ecosystem accounting is the measurement of final ecosys- tem services. Final ecosystem services are those ecosystem services in which the user of the service is an economic unit. Economic units include businesses, governments and households. Thus, every final ecosystem service represents a flow between an ecosys- tem asset and an economic unit. 6.25 A focus on accounting for final ecosystem services is appropriate where the focus of measurement is the direct connection between people and ecosystems. However, there is a range of connections among ecosystem assets involving an assortment of ecosystem structures and processes that are relevant in determining the supply of final ecosystem services. For example, populations of wild fish may be caught at sea while the associated nurseries are located in seagrass meadows closer to shore. Thus, while the overall contribution of ecosystems is embodied in the catch of wild fish (a final eco- system service), this recording does not reveal the indirect contribution of the seagrass meadows. 6.26 Conceptually, the ecosystem accounting framework allows the indirect contri- butions of ecosystem assets to be recorded as intermediate services. As is the case for final ecosystem services, intermediate services represent contributions to benefits. Thus, intermediate services are those ecosystem services in which the user of the eco- system services is an ecosystem asset and where there is a connection to the supply of final ecosystem services. 6.27 Since intermediate services are defined with respect to a sequence of inputs and outputs within the environment, they have the potential to be recorded both within and between ecosystem assets. For example, the nursery services provided by seagrass meadows may contribute to fish caught either in the same location or elsewhere. This treatment allows the recording of intermediate services, and therefore the various indirect contributions of ecosystems, to be undertaken irrespective of the size of the ecosystem assets. Chapter 7 elaborates further on the approach to recording interme- diate services in ecosystem accounting, particularly as it concerns recording ecosys- tem services related to the production of biomass, such as crops. 6.28 For ecosystem accounting purposes, the measurement of intermediate services should focus generally on cases where there are observable connections between eco- system assets that are of high analytical or policy interest (involving, for example, the role of wild pollinators in supporting the production of crop biomass or connections among trophic layers for fish species). 140 System of Environmental-Economic Accounting – Ecosystem Accounting 6.29 Potentially, highly complex interlinkages between different ecosystems can be recorded within a supply and use accounting structure. However, ecosystem account- ing should remain focused on recording final ecosystem services, and entries for inter- mediate services should concern only those flows that can be clearly connected to a final ecosystem service and that are of particular relevance for ecosystem manage- ment, as illustrated in the above examples. It is not the ambition of ecosystem account- ing to provide full documentation of all ecological processes or connections. 6.30 Recording intermediate services as exchanges among ecosystem assets is not equivalent to recording the wide array of biophysical flows within and between eco- systems that reflect ongoing ecological processes and associated characteristics. Such flows were referred to in SEEA EEA as intra- and inter-ecosystem flows. While these processes and associated characteristics are certainly fundamental to the supply of ecosystem services, a complete mapping of intra- and inter-ecosystem flows is beyond the scope of ecosystem accounting. Nonetheless, there may be interest in understand- ing the extent to which the various ecological processes are well functioning, for exam- ple, so as to understand the ability of an ecosystem to provide ecosystem services into the future. In ecosystem accounting, the maintenance of well-functioning ecosystems is considered in the measurement of ecosystem condition and ecosystem capacity. 6.2.4 Users and beneficiaries 6.31 In accounting, the supply and use of ecosystem services in the production of benefits can be considered, in many contexts, as the first step in a longer economic “supply” chain. For example, a water supply company’s use of water purification ser- vices will be an initial step in the abstraction and distribution of water to a wide range of economic units, including businesses, governments and households. For clarity of expression, all of these economic units may be referred to as beneficiaries of ecosystem services, but the economic unit that has the direct connection to the ecosystem, that is, the unit that is the counterparty in the interaction with the ecosystem, is labelled the user of the ecosystem service. In this example, the user of water purification services is the water supply company, while the other economic units are beneficiaries. The set of users should be considered a subset of the set of beneficiaries. 6.32 In recording flows of ecosystem services to various users and beneficiaries, it is relevant to consider the location of use relative to the location of the supplying eco- system. This would extend to consideration of imports and exports of ecosystem ser- vices and the associated benefits. The mapping of ecosystem services flows to users and beneficiaries and the recording of exports and imports of ecosystems services are discussed further in chapter 7. 6.2.5 Abiotic flows 6.33 The discussion and literature on ecosystem services have tended to focus on those flows that are primarily associated with an ecosystem’s biotic components and processes, that is, flows associated with living components such as plants and animals. However, since the definition of an ecosystem involves the interaction of biotic and abiotic components, a neat separation that treats ecosystem services as purely or pre- dominantly biotic is not appropriate. 6.34 Further, there are a range of benefits that people obtain from the environment that reflect contributions that appear to fall outside the scope of ecosystem services. Examples include extraction of fossil fuels and mineral ores, abstraction of water, energy obtained from wind and solar sources and benefits associated with the role of soils and bedrock in supporting buildings and transport infrastructure. Ecosystem services concepts for accounting 141 6.35 To support discussion of these various flows and appropriate and comparable recording with respect to ecosystem services, SEEA EA adopts a framing of contribu- tions from the environment that distinguishes (a) ecosystem services; (b) abiotic flows; and (c) spatial functions, as shown in table 6.1. In this framing, abiotic flows are con- tributions to benefits from the environment that are not underpinned by, or reliant on, ecological characteristics and processes. 6.36 This framing has the following key features: • Ecosystem services are distinct from abiotic flows, while both reflect con- tributions from the environment. • Ecosystem services are underpinned by various ecological characteristics and processes that involve both biotic and abiotic components to vary- ing degrees. Thus, ecosystem services encompass services that are both predominantly biotic (e.g. air filtration services provided by forests) and predominantly abiotic (e.g. coastal protection services provided by sand dunes). • Abiotic flows arise through the abstraction and extraction of resources, where a distinction is made between those flows related to geophysical sources (i.e. sources related to climate and the atmosphere) and those related to geological resources. Depending on the location of the resources and the point of abstraction or extraction, geological resources may be attributed as flows from ecosystem assets (e.g. sand and gravel) or from deep geological resources. • Spatial functions are treated neither as ecosystem services nor as abiotic flows. Two main types are identified: (a) use of the environment for trans- portation and movement on land or water or through the air or as a base for buildings and structures; and (b) use of the environment as a location in which pollutants and waste are deposited, that is, use of the environ- ment as a sink (excluding the remediation of such residuals by ecosystems, which is treated as an ecosystem service).69 69 While this could be extended potentially to include recording 6.37 Compilers are encouraged to record abiotic flows from geophysical sources of the use of the atmosphere as and from geological resources extracted from ecosystem assets together with ecosys- a sink for GHG emissions, such tem services, since analysis of environmental trends for spatial areas may be greatly a treatment is not developed in enhanced through joint consideration of those flows. This is particularly the case for SEEA EA. flows of water. Indeed, the treatment of water abstraction and supply is extremely important and is discussed explicitly in section 6.4. There is no expectation that com- pilers of ecosystem accounts will record abiotic flows from deep geological resources or flows related to spatial functions. Accounting for abiotic flows should be under- taken consistent with the advice provided in the SEEA Central Framework, for exam- ple, concerning flows of energy, water and mineral and energy resources. 6.38 Concerning flows of pollutants and waste, it is to be noted that there are related entries in the ecosystem services flow accounts concerning the mediation of these residuals, and the accounts of the SEEA Central Framework provide the opportunity to record aggregate flows of such pressures. The effect of those pressures on ecosystem condition should be recorded in the ecosystem condition account. 6.39 Flows related to the use of the environment as a location for transportation and movement and for buildings and structures are not recorded explicitly in the SEEA Central Framework or SEEA EA. Relevant information may be recorded in the Cen- tral Framework land-use accounts. 142 System of Environmental-Economic Accounting – Ecosystem Accounting Table 6.1 Framing of contributions to benefits from the environment Ecosystem servicesa Provisioning services Regulating and maintenance services Cultural services Abiotic flows Geophysical sources Flows related to geophysical processes including abstraction of water (including ground- water) and capture of wind, solar, tidal, geothermal and similar sources of energy a Following section 6.3.4, non-use Geological resources values are not treated as ecosys- Flows related to geological resources including extraction of fossil fuel, mineral ores, tem services, but data concern- sand and gravel ing them may be recorded under “ecosystem and species Spatial functions Flows related to the use of the environment as a location for transportation and move- appreciation” to recognize ment and for buildings and structures these types of connections to Flows related to the use of the environment as a sink for pollutants and waste (excluding the environment. the remediation of pollutants and wastes recorded as ecosystem services) 6.40 The monetary value of abiotic flows and spatial functions are captured generally in current SNA-based values, for example, in the value of resources extracted or in market values that reflect the use of land to support buildings and structures, with the main exception being flows related to use of the environment as a sink for pollutants and waste. 6.2.6 Identifying flows of ecosystem services 6.41 To support consistent application of the boundary between ecosystem services and benefits, a tool referred to as a logic chain is applied. The intent is to provide a standard framing for recording information relevant to the description and measure- ment of individual ecosystem services. A logic chain reflects a sequence in which an ecosystem asset supplies an ecosystem service to an economic unit that uses that eco- system service as an input to a production or consumption activity leading to an SNA or non-SNA benefit. Logic chains can be presented graphically as well as in a table (as shown in table 6.2). Table 6.2 Generic logic chain using air filtration services as an example Factors determining supply Potential phys- ical metrics, Ecosystem Common eco- Factors deter- as in appendix Main users and service system types Ecological Societal mining use A6.1 Benefits beneficiaries Air filtration Forest and Type and condi- Ecosystem Behavioural Tons of pollut- Reduced con- Households; services woodland tion of vegeta- management; responses; loca- ants absorbed, centrations of air businesses tion, especially location, type tion and number by type of pollutants result- (through functional state and volume of people pollutant (e.g. ing in improved reduced damage (e.g. leaf area of released air and buildings particulate mat- health outcomes to buildings) index) and pollutants affected by ter less than 10 and reduced chemical state pollution micrometres in damage to build- (e.g. ambi- diameter (PM10) ings (non-SNA ent pollutant or less than 2.5 benefit) concentration) micrometres in diameter (PM2.5) 6.42 As shown in table 6.2, each logic chain for a given ecosystem service has a num- ber of components: (a) the ecosystem service; (b) the common ecosystem type or types; (c) factors determining supply; (d) factors determining use; (e) potential physi- Ecosystem services concepts for accounting 143 cal metrics; (f) associated benefit or benefits; and (g) main users and beneficiaries. The following points are highlighted in respect of each component: • Ecosystem services. A logic chain should focus on a single ecosystem ser- vice, recognizing that it may contribute to a number of benefits. • Common ecosystem types. All ecosystem services are treated as being supplied by ecosystem assets, either individually (e.g. forest providing air filtration services to a neighbouring town) or in combination (e.g. ecosys- tems within a catchment providing water flow regulation services). • Factors determining supply. Both ecological and societal factors should be considered in describing factors determining supply. From an ecologi- cal perspective, particular ecosystem characteristics may be relevant to the supply of ecosystem services, for example, the presence of particular spe- cies or soil type; or aspects of ecosystem condition, such as pollutant con- centrations and soil organic carbon levels. Human factors can determine the supply of regulating services, for example, air filtration services require some release of air pollutants. Further, where there is joint production of benefits, for example, in the growing of crops, it would be relevant to rec- ognize human inputs such as labour, produced assets (e.g. tractors) and intermediate consumption of goods and services (e.g. fuel, fertilizer). • Factors determining use. It is relevant to describe not only the factors involved in supply but also how people and economic units engage with the ecosystem in order to use the ecosystem service. In the case of air filtration, the relevant factor concerning use is the number of people in proximity to the forest or other type of ecosystem involved. Without a description and quantification of use, no flow of an ecosystem service should be recorded. Where the logic chain concerns an intermediate service, the connection to people and economic units is indirect and there should be a focus on the way in which the receiving ecosystem asset uses the ecosystem service. • Potential physical metrics. A physical metric is needed that provides a clear focus for measurement. It should be recognized that this metric may be a proxy for the ecosystem service and will vary depending on data avail- ability. For example, a suitable metric for air filtration is tons of pollutant absorbed, by type of pollutant (e.g. PM2.5, PM10) • Benefits. While the focus of ecosystem accounting is on identifying the con- tribution of ecosystems as reflected in ecosystem services, it is commonly through the observation of benefits that the identification of the role of eco- systems can be described. From air filtration, the benefit of reduced con- centrations of air pollutants will accrue to households through improved health and to building owners through reduced damage to property. • Main users and beneficiaries. Different economic units use ecosystem ser- vices and in some cases, the same service may be used by different types of economic units. For example, air filtration services are used by households and businesses. 6.43 Following the design of the generic logic chain presented in table 6.2, indica- tive logic chains for a range of ecosystem services have been included in appendix A6.1 to support measurement and implementation. An online supplement is being developed that will outline logic chains for all of the ecosystem services included in the reference list. 144 System of Environmental-Economic Accounting – Ecosystem Accounting 6.3 Reference list of selected ecosystem services 6.3.1 Principles underpinning the reference list of selected ecosystem services 6.44 There is a wide range of ecosystem services that fall within the conceptual scope of the definition of ecosystem services. Notwithstanding significant advances in the development of classifications of ecosystem services, in particular the Common Inter- 70 See https://cices.eu/resources/. national Classification of Ecosystem Services (CICES)70 and the National Ecosystem 71 See www.epa.gov/eco- Services Classification System (NESCS Plus),71 an internationally agreed classifica- research/national-ecosystem- tion of ecosystem services has not been finalized. In its absence, a reference list of services-classification-system- selected ecosystem services has been developed for SEEA EA by combining the find- nescs-plus. ings derived from work related to CICES and NESCS; work under other initiatives on the typology and classification of ecosystem services (e.g. the Millennium Ecosystem Assessment, TEEB and the “nature’s contributions to people” approach of IPBES) and the outcomes of the consultation on the revision of SEEA EEA. The primary criterion for inclusion of an ecosystem service in the reference list of selected ecosystem ser- vices is that the service be regarded as constituting a relevant and important ecosys- tem service in many countries and contexts. 6.45 The reference list of selected ecosystem services provides labels and descriptions for a set of key ecosystem services relevant for ecosystem accounting. It is intended to provide clarity on measurement scope and focus for ecosystem services and should therefore support consistency of measurement. The reference list will thereby support discussion among compilers of ecosystem accounts, comparison of measurement and valuation techniques and comparison of accounting results. 6.46 The reference list is a pragmatic grouping of ecosystem services designed to support accounting rather than a full ecosystem services classification system. It is intended that a complete and internationally agreed classification of ecosystem ser- vices will be developed. To support that development and to allow those using existing classification systems to be linked to the reference list, correspondences to CICES and NESCS and other ecosystem services classifications and typologies have been made available as an online supplement to SEEA EA. 6.47 Since it contains selected ecosystem services, the reference list is not exhaustive. However, it does include categories for “other” ecosystem services to allow for services not included in the list to be recorded in the ecosystem accounts, subject to their satis- fying the definition of ecosystem services used in SEEA EA and associated treatments. Where additional ecosystem services are included in a set of ecosystem accounts, it is important that the description, labelling and measurement of those ecosystem ser- vices ensure that they do not overlap with other services included in the reference list. This will prevent double counting of ecosystem services and will facilitate compari- sons between accounts. 6.48 Each ecosystem service in the reference list is described so as to ensure that there is no double counting of the ecosystem contributions of individual ecosystem services in the reference list. The focus in applying this principle will vary by type of ecosystem service. For provisioning services, the mutual exclusivity is connected with use of a classification of biomass outputs such as of agricultural products. For regulating services, the focus is on distinguishing the roles of different ecological processes. For cultural services, the focus is on describing the types of interactions that individuals have with ecosystems, for example, whether they take place within or outside ecosystems. Ecosystem services concepts for accounting 145 6.49 Further, the reference list includes ecosystem services that can be either final ecosystem services (i.e. services used by economic units) or intermediate services (i.e. services used by ecosystem assets). Moreover, and particularly for regulating and maintenance services, a single ecosystem service may be final or intermediate, depending on the context. The distinction between a final and an intermediate service reflects the user of the service not the service itself. In concept, since each ecosystem service flow is recorded separately, a distinct treatment as either final or intermediate can be determined depending on the use context. Particularly in accounting for bio- mass provisioning services, care is needed to ensure that the appropriate combination of inputs and outputs of ecosystem services are recorded so that the net contribution of the ecosystem assets is identified. Chapter 7 provides further discussion on the appro- priate recording of ecosystem services following an SUT approach. 6.50 In accordance with the requirements of ecosystem accounting, the reference list does not incorporate a distinction based on the type of supplying ecosystem asset or a distinction based on the nature of the use of the ecosystem service (e.g. whether the service is for use by households or business, for nutrition or energy, etc.). The informa- tion on the supplying ecosystem assets and the using economic units is evident from the place in the SUT where the ecosystem service flow is recorded. The SUTs apply existing classifications of ecosystem types (e.g. IUCN GET or an equivalent national classification) and of economic units (e.g. ISIC or an equivalent national classification) to organize information on each ecosystem service flow. 6.3.2 Presentation of the reference list of selected ecosystem services 6.51 The reference list of selected ecosystem services with associated descriptions is presented in table 6.3. The structure of the list at the highest level encompasses three broad categories – provisioning services, regulating and maintenance services, and cultural services – which are defined as follows: • Provisioning services are those ecosystem services representing the contri- butions to benefits that are extracted or harvested from ecosystems. • Regulating and maintenance services are those ecosystem services result- ing from the ability of ecosystems to regulate biological processes and to influence climate, hydrological and biochemical cycles and thereby main- tain environmental conditions beneficial to individuals and society. • Cultural services72 are the experiential and intangible services related to 72 The label “cultural services” is a the perceived or actual qualities of ecosystems whose existence and func- pragmatic choice, reflecting its tioning contribute to a range of cultural benefits. long-standing use in the eco- system services measurement 6.52 Within each of these broad groups, a number of ecosystem service types are community. It is not meant to included along with some subtypes. Regulating and maintenance services are grouped imply that culture itself is a roughly under the headings of services related to climate, air, soil, water, habitat and service; rather it is a summary label and as such is intended to species. capture the variety of ways in 6.53 To ensure that the coverage of the ecosystem accounts is as comprehensive as which people connect to, and possible, compilers are encouraged to include as many types of ecosystem services as identify with, nature and the variety of motivations for those possible. A progressive expansion over time of the range of ecosystem services included connections. in the accounts may be appropriate, considering data and resource availability and the relative significance of the ecosystem services. 6.54 Notes are provided following table 6.3 to support understanding of the table and its application. Additional detail on some of these notes is provided in section 6.4 con- cerning the treatment of selected ecosystem services. 146 System of Environmental-Economic Accounting – Ecosystem Accounting Table 6.3 Reference list of selected ecosystem services ECOSYSTEM SERVICE DESCRIPTION Provisioning services Biomass provision- Crop provisioning Crop provisioning services are ecosystem contributions to the growth of cultivated plants that are harvested ing services services* by economic units for various uses, including food and fibre production, fodder and energy. These are final ecosystem services. Grazed biomass pro- Grazed biomass provisioning services are ecosystem contributions to the growth of grazed biomass that is an visioning services* input to the growth of cultivated livestock. These services exclude ecosystem contributions to the growth of crops used to produce fodder for livestock (e.g. hay, soybean meal). Those contributions are included under crop provisioning services. These are final ecosystem services but may be intermediate to livestock provision- ing services. Livestock provision- Livestock provisioning services are ecosystem contributions to the growth of cultivated livestock and livestock ing services* products (e.g. meat, milk, eggs, wool, leather) that are used by economic units for various purposes, primar- ily food production. These are final ecosystem services. No distinct livestock provisioning services are to be recorded if grazed biomass provisioning services are recorded as a final ecosystem service. Aquaculture provi- Aquaculture provisioning services are ecosystem contributions to the growth of animals and plants (e.g. fish, sioning services shellfish, seaweed) in aquaculture facilities that are harvested by economic units for various uses. These are final ecosystem services. Wood provisioning Wood provisioning services are ecosystem contributions to the growth of trees and other woody biomass services both in cultivated (plantation) and in uncultivated production contexts that are harvested by economic units for various uses including timber production and energy. These services, which exclude contributions to non- wood forest products, are final ecosystem services. Wild fish and other Wild fish and other natural aquatic biomass provisioning services are ecosystem contributions to the growth natural aquatic of fish and other aquatic biomass that are captured in uncultivated production contexts by economic units for biomass provision- various uses, primarily food production. These are final ecosystem services. ing services Wild animals, plants Wild animals, plants and other biomass provisioning services are ecosystem contributions to the growth of and other biomass wild animals, plants and other biomass that are captured and harvested in uncultivated production contexts provisioning by economic units for various uses. The scope includes non-wood forest products (NWFP) and services related services to hunting, trapping and bioprospecting activities; but it excludes wild fish and other natural aquatic biomass (included in the class directly above). These are final ecosystem services. Genetic material Genetic material services are ecosystem contributions from all biota (including seed, spore or gamete produc- services tion) that are used by economic units, for example, (a) to develop new animal and plant breeds; (b) in gene synthesis; or (c) in product development directly using genetic material. These are most commonly recorded as ecosystem services intermediate to biomass provisioning. Water supply* Water supply services reflect the combined ecosystem contributions of water flow regulation, water purifica- tion and other ecosystem services to the supply of water of appropriate quality to users for various purposes, including household consumption. These are final ecosystem services. Other provisioning services Regulating and maintenance services Global climate Global climate regulation services are ecosystem contributions to reducing concentrations of GHGs in the regulation services atmosphere through the removal (sequestration) of carbon from the atmosphere and the retention (storage) of carbon in ecosystems. These services, which support the regulation of the chemical composition of the atmosphere and oceans, are final ecosystem services. Rainfall pattern Rainfall pattern regulation services are ecosystem contributions of vegetation, in particular forests, to main- regulation services taining rainfall patterns through evapotranspiration at the subcontinental scale. Forests and other vegetation (at subcontinental recycle moisture back to the atmosphere where it is available for the generation of rainfall. Rainfall in interior scale) parts of continents fully depends upon this recycling. These may be final or intermediate ecosystem services. Local (micro and Local climate regulation services are ecosystem contributions to the regulation of ambient atmospheric condi- meso) climate tions (including micro- and mesoscale climates) through the presence of vegetation that improve people’s regulation services living conditions and support economic production. Examples include evaporative cooling provided by urban trees (“green space”), the contribution of urban water bodies (“blue space”) and the contribution of trees to providing shade for humans and livestock. These may be final or intermediate ecosystem services. Ecosystem services concepts for accounting 147 Table 6.3 Reference list of selected ecosystem services (continued ) ECOSYSTEM SERVICE DESCRIPTION Air filtration Air filtration services are ecosystem contributions to the filtering of airborne pollutants through the deposition, services uptake, fixing and storage of pollutants by ecosystem components, particularly plants, that mitigate the harm- ful effects of those pollutants. These are most commonly final ecosystem services Soil quality regula- Soil quality regulation services are ecosystem contributions to the decomposition of organic and inorganic tion services materials and to the fertility and characteristics of soils, e.g. for input to biomass production. These are most commonly recorded as intermediate ecosystem services Soil and sediment Soil erosion control Soil erosion control services are ecosystem contributions, particularly the stabilizing effects of vegetation, that retention services services reduce the loss of soil (and sediment) and support use of the environment (e.g. agricultural activity, water sup- ply). These may be recorded as final or intermediate ecosystem services. Landslide mitiga- Landslide mitigation services are ecosystem contributions, particularly the stabilizing effects of vegetation, tion services that mitigate or prevent potential damage to human health and safety and damaging effects to buildings and infrastructure that arise from the mass movement (wasting) of soil, rock and snow. These are final ecosystem services. Solid waste reme- Solid waste remediation services are ecosystem contributions to the transformation of organic or inorganic diation services substances, through the action of microorganisms, algae, plants and animals, that mitigate their harmful ef- fects. These may be recorded as final or intermediate ecosystem services. Water purification Retention and Water purification services are ecosystem contributions to the restoration and maintenance of the chemical services (water breakdown of condition of surface water and groundwater bodies through the breakdown or removal of nutrients and other quality regulation) nutrients pollutants by ecosystem components that mitigate the harmful effects of those pollutants on human use or health. These may be recorded as final or intermediate ecosystem services. Retention and breakdown of other pollutants Water flow regula- Baseline flow main- Water regulation services are ecosystem contributions to the regulation of river flows and groundwater and tion services tenance services lake water tables. They are derived from the ability of ecosystems to absorb and store water and gradually release it during dry seasons or periods through evapotranspiration and hence secure a regular flow of water. These may be recorded as final or intermediate ecosystem services. Peak flow mitigation Water regulation services are ecosystem contributions to the regulation of river flows and groundwater services and lake water tables. They are derived from the ability of ecosystems to absorb and store water and hence mitigate the effects of flood and other extreme water-related events. Peak flow mitigation services are sup- plied together with river flood mitigation services in providing the benefit of flood protection. These are final ecosystem services. Flood control Coastal protection Coastal protection services are ecosystem contributions of linear elements in the seascape (e.g. coral reefs, services services sand banks, dunes or mangrove ecosystems along the shore) to protecting the shore and thus mitigating the impacts of tidal surges or storms on local communities. These are final ecosystem services. River flood mitiga- River flood mitigation services are ecosystem contributions of riparian vegetation, which provides structure tion services and a physical barrier to high water levels and thus mitigates the impacts of floods on local communities. River flood mitigation services are supplied together with peak flow mitigation services in providing the benefit of flood protection. These are final ecosystem services. Storm mitigation Storm mitigation services are ecosystem contributions of vegetation, including linear elements, in mitigating services the impacts of windstorms, sandstorms and other types of storms (other than water-related events) on local communities. These are final ecosystem services. Noise attenuation Noise attenuation services are ecosystem contributions to reduction of the impact of noise on people that services mitigate its harmful or stressful effects. These are most commonly final ecosystem services. Pollination Pollination services are the ecosystem contributions of wild pollinators to the fertilization of crops that main- services tain or increase the abundance and/or diversity of other species that economic units use or enjoy. These may be recorded as final or intermediate services Biological control Pest control services Biological control services are ecosystem contributions to reductions in the incidence of species that may services prevent or reduce the effects of pests on biomass production processes or other economic and human activity. These may be recorded as final or intermediate services. Disease control Disease control services are ecosystem contributions to reductions in the incidence of species that may prevent services or reduce the effects of species on human health. These are most commonly final ecosystem services. Note: Further explanations related to ecosystem services marked with an asterisk (*) are provided below and in section 6.4. 148 System of Environmental-Economic Accounting – Ecosystem Accounting Table 6.3 Reference list of selected ecosystem services (continued ) ECOSYSTEM SERVICE DESCRIPTION Nursery popula- Nursery population and habitat maintenance services are ecosystem contributions necessary for sustaining tion and habitat populations of species that economic units ultimately use or enjoy, either through the maintenance of habitats maintenance (e.g. for nurseries or migration) or the protection of natural gene pools. These are intermediate services and services may be inputs to a number of different final ecosystem services including biomass provisioning and recreation- related services. Other regulating and maintenance services Cultural services Recreation-related Recreation-related services are contributions of ecosystems, in particular through their biophysical character- services istics and qualities, that enable people to use and enjoy the environment through direct, in situ, physical and experiential interactions with the environment. These include services both to locals and to non-locals (i.e. visitors, including tourists). Recreation-related services may also be supplied to those engaging in recreational fishing or hunting. These are final ecosystem services. Visual amenity Visual amenity services are ecosystem contributions to local living conditions, in particular through the services* biophysical characteristics and qualities of ecosystems, that provide sensory benefits, especially visual. These services combine with other ecosystem services, including recreation-related services and noise attenuation services, to underpin amenity values. These are final ecosystem services. Education, scien- Education, scientific and research services are ecosystem contributions, in particular through their biophysical tific and research characteristics and qualities, that enable people to use the environment through intellectual interactions with services it. These are final ecosystem services. Spiritual, artistic Spiritual, artistic and symbolic services are contributions of ecosystem, in particular through their biophysical and symbolic characteristics and qualities, that are recognized by people for their cultural, historical, aesthetic, sacred or services religious significance. These services may underpin people’s cultural identity and may inspire them to express themselves through various artistic media. These are final ecosystem services. Other cultural services Flows related to non-use values Ecosystem Ecosystem and species appreciation concerns the well-being that people derive from the existence and preser- and species vation of the environment for current and future generations, irrespective of any direct or indirect use. appreciation 6.55 Services related to biomass provisioning. As discussed further in section 6.4, the recording of ecosystem services in relation to cultivated production of crops, live- stock and other products can be undertaken in different ways. Cultivated production processes occur along a continuum, with the contribution of ecosystems ranging from high to low. In measuring ecosystem services associated with crops and wood, it is most common to measure the biomass that is harvested. The estimated ecosystem contribution (or share) should vary depending on the production context but, if this is not possible, a proxy measure may be used based on the gross biomass harvested. Alternatively, a range of specific ecosystem services, for example, pollination, local climate regulation and water flow regulation, may be measured that collectively reflect the ecosystem contribution to biomass growth. Under this second approach, the eco- system service of crop provisioning is not recorded. Where the harvested biomass is recorded as the final ecosystem service, the various specific ecosystem services may be recorded as intermediate services. Ecosystem services concepts for accounting 149 6.56 In measuring ecosystem services associated with livestock, estimation of the eco- system contribution should focus on the direct interaction between the livestock and ecosystems, primarily pastures. Thus, the key final ecosystem service will be grazed biomass, but other services, such as local climate regulation, may also be relevant since ecosystems will provide a bundle of services supporting livestock. Using this measure- ment approach, no estimates of livestock provisioning services should be recorded. However, if livestock provisioning services are recorded, for example, based on weight gain or outputs of milk and eggs, it is essential that an ecosystem contribution be measured since in rearing livestock, especially in intensive farming systems, there may be very little direct connection with ecosystems. 6.57 Services related to water supply. As discussed further in section 6.4, ecosystem services related to water supply, for example, water flow regulation and water purifica- tion, may be measured as distinct and separate final ecosystem services, or they may be measured as a combined ecosystem service, using water supply as a proxy measure to reflect the overall ecosystem contribution. 6.58 Services related to amenity. Amenity-related services arise in the context of ben- efits that people obtain from living or working in a specific location. They are most usually considered in relation to specific characteristics of a place of residence. In the ecosystem services reference list, a number of services are considered to contribute to a location’s amenity including visual amenity services, recreation-related services and noise attenuation services. Where possible, each of these should be measured as dis- tinct, but in practice, measurement of a combination of amenity-related services may be required. 6.59 Recording final and intermediate services. The descriptions in the reference list provide indications as to whether an ecosystem service would be expected to be recorded as final or intermediate, recognizing that in practice the specific context will be the determining factor. Generally, it is expected that, with the exception of the con- text of biomass provisioning, most ecosystem services will be recorded as final eco- system services. There may be some other contexts in which a connection between ecosystem services can be identified, for example, tourism areas where nursery and habitat maintenance services support recreation-related services, but it is not expected that many intermediate services would be recorded as a matter of standard practice. 6.3.3 Links between biodiversity and ecosystem services 6.60 SEEA EA has adopted the aforementioned definition of biodiversity under the Convention on Biological Diversity where ecosystem, species and genetic diversity are recognized as the broad components of biodiversity. Those components are not considered ecosystem services in themselves but there are distinct elements within them that can be directly linked to ecosystem services supply. For example, specific genes (DNA sequences) can serve as a provisioning service option for the pharma- ceutical industry; pollinator species can provide important pollinating services to the agricultural sector; certain plant species can support the development of medicines (a provisioning service); the presence of well-known species (e.g. lions and elephants) can underpin recreation-related services; and ecosystems such as forests and beaches can provide recreational areas. A diversity of genes, species and ecosystems thus pro- vides a greater range of ecosystem service options. 6.61 More broadly, the interactions between different components of biodiversity are essential for cycling energy, nutrients and other materials through the envi- ronment (Mori and others, 2013). This is fundamental for maintaining the vari- ous ecosystem processes and functions that underpin ecosystem services supply 150 System of Environmental-Economic Accounting – Ecosystem Accounting (Bolt and others, 2016). Further, as biodiversity is lost, these ecosystem processes may be impacted. For example, with the loss of different ecosystems, ecosystem processes are altered at landscape scale; and with the loss of species and their popu- lations from ecosystems, the different functional roles they perform (e.g. decom- posing, pollinating, dispersing seeds) are lost as well. Consequently, biodiversity loss directly threatens ecosystem processes and the supply of many ecosystem ser- vices across multiple scales. 6.62 Biodiversity also plays a fundamental role in maintaining the ability of eco- system assets to supply ecosystem services in the future. The presence of a diversity of organisms (e.g. multiple species including the genetic diversity within them) per- forming a given function within an ecosystem boosts the ability of that ecosystem asset to maintain functionality and supply ecosystem services, which results from the fact that different environmental changes or shocks will affect individual ele- ments of this diversity in different ways. This ability of ecosystems to tolerate shocks and disturbances while maintaining the same level of functioning is often referred to as ecosystem resilience (see, e.g. Mori and others, (2013), Thompson and oth- ers (2009) and Walker (2019)) and may be considered to have an “insurance value” (Baumgärtner, 2007). 6.63 Elements of biodiversity that do not provide ecosystem services at present may provide valuable ecosystem services in the future. For example, a tropical tree species might prove to be the only source of a drug capable of combating a major new human disease. This role of biodiversity can be linked to the concept of “option value” (Faith, 2018; Weitzman, 1992). 6.64 Further, the existence of biodiversity and the desire for its ongoing preserva- tion are also connected to non-use values that people assign to the environment and that include existence and bequest values. Non-use values are discussed in sec- tion 6.3.4. 6.65 The connections between biodiversity and human activity operate in two direc- tions: biodiversity supports the supply of ecosystem services and biodiversity itself is impacted by the type of ecosystem use, as a result, for example, of harvesting practices for timber and fish and the extent of tourism activity. Choices concerning restoration and protection activity will also have impacts on biodiversity. 6.66 There still remains considerable uncertainty with respect to the specifics of the relationships between biodiversity and ecosystem services supply (P.A. Harrison and others, 2014; Mace, Norris and Fitter, 2012), in particular regarding where “tipping points” and boundaries for biodiversity loss may lie in the context of ecosystem ser- vices supply (Mace and others, 2015). Such uncertainty should encourage a precau- tionary approach to the management of biodiversity for sustainable ecosystem services supply. This issue is relevant in the consideration of ecosystem capacity, which is dis- cussed in section 6.5. 6.67 More generally, it is not the case that increases in biodiversity is necessarily reflected in increases in flows of individual ecosystem services. For some ecosystem services (e.g. as related to biomass provisioning), it is likely that increasing ecosystem service flows will be correlated with declines in biodiversity. Since the relationship between biodiversity and individual ecosystem services varies, care should be taken in making assumptions regarding anticipated changes in the direction of ecosystem service flows associated with different levels of biodiversity. 6.68 The strong emphasis placed on biological “variability” or “diversity” is clearly reflected in the definition under the Convention on Biological Diversity. In the con- text of ecosystem accounting, biodiversity can then be viewed as an emergent prop- Ecosystem services concepts for accounting 151 erty of a set of ecosystem assets and the community assemblages within them. These ecosystems and communities interact and support multiple ecosystem processes that underpin the capacity for current and future ecosystem services supply. Given the link between biodiversity and ecosystem services supply, the roles played by diversity across all three of its components (ecosystems, species and genes) and across scales should be considered. 6.3.4 Treatment of non-use values 6.69 From an economic perspective, the relationship between people and the envi- ronment is commonly characterized as encompassing both use and non-use values, as described within the context of the total economic value framework (Pearce and Turner, 1990). The recording in an accounting framework of use values – that is, val- ues arising when the benefit to people is revealed through their direct, personal inter- action with the environment (e.g. when harvesting food, hiking in forests, benefiting from cleaner air) or through indirect use (e.g. regulation of water flows providing flood mitigation) – is relatively straightforward in concept and is the focus of meas- urement in SEEA EA. 6.70 The treatment of non-use values in an accounting setting requires additional considerations. In the context of the environment, non-use values are those values that people assign to ecosystems (including the associated biodiversity), irrespective of whether they use (directly or indirectly), or intend to use, those ecosystems. Two main types of non-use value are bequest value, where the value is based on ensuring that the ecosystem is available to future generations, and existence value, where the value is based on the knowledge that the ecosystem is currently present. In both cases, the ben- efit of the non-use value accrues to an individual in the present. Hence, for accounting purposes, the two values receive the same treatment. 6.71 An option value is another type of value that arises in the context of ecosys- tem services. From an accounting perspective, an option value is considered a type of use value to the extent that the underlying motivation for assigning these values is to ensure that ecosystems are able to provide ecosystem services in the future, including ecosystem services that may be currently unknown or that are not being used. Option values thus capture situations in which ecosystem services are not currently being used but such situations are different from situations in which the concept of non-use would apply. Conceptually, option values are associated with measures of ecosystem condition and biodiversity and measures of the expected future flows of ecosystem services incorporated in measures of the NPV of ecosystem services. 6.72 Unlike flows of ecosystem services, there is no direct or indirect interaction with the environment associated with non-use values. Consequently, while non-use val- ues require that ecosystems exist and may be associated with flows of environmental knowledge or information, from an accounting perspective, a transaction is not con- sidered to have taken place consistent with the framing used for recording ecosystem services in SEEA EA. 6.73 Nonetheless, as this type of connection to the environment is of considerable importance, a separate type of flow has been included in the ecosystem services refer- ence list: ecosystem and species appreciation. This is to allow compilers to record data that can be directly associated with non-use values. For example, it may be relevant to record data on the presence or abundance of iconic species. Further, estimates of non-use values in monetary terms may be of particular policy interest. As discussed in chapter 12, these values can be presented in complementary valuations. 152 System of Environmental-Economic Accounting – Ecosystem Accounting 6.3.5 Treatment of ecosystem disservices 6.74 Consistent with the accounting treatment of transactions, the recording of eco- system services includes positive exchanges between ecosystem assets and economic units in the sense that they contribute to benefits. This does not imply that outcomes arising from transactions are necessarily all positive (e.g. the purchase of cigarettes can lead to poor health outcomes) or that all transactions are similarly motivated (e.g. some purchases such as fire alarms are made to limit potential negative consequences). However, the transactions themselves all entail the exchange of positive quantities of a good or service. 6.75 There is a range of contexts in which the outcomes of interactions between eco- nomic units and ecosystem assets are negative from the perspective of the economic units. Examples include the effects of pests on crop production, increases in disease from environmental vectors such as mosquitoes or zoonotic episodes, and the pres- ence of flies at a social event. Collectively, these outcomes have been labelled ecosystem disservices. From an economic perspective, it appears natural to deduct these flows from positive ecosystem services to estimate the “net” connection between people and ecosystems. 6.76 However, from an accounting perspective, although it is possible to record rel- evant physical flows and quantities such as the number of pests or the number of peo- ple affected by malaria, none of these negative connections can be considered to reflect an exchange of positive quantities of a good or service and hence are not considered transactions for accounting purposes. Further, as regards the precise nature of the net connection at a societal level, it must be recognized that different people may have different values with respect to the same ecosystem asset (e.g. trees that provide shade may also obstruct some people’s view). 6.77 While these flows are not transactions, the negative effects of ecosystem disser- vices can be reflected in accounting entries and related to ecosystem assets. Two main contexts can be considered. First, the negative effects may be reflected in reduced flows of ecosystem services (e.g. reduction in biomass provisioning services because of inva- sive pests). In this case, the extent of the negative effect may be determined by using the accounts to compare two different scenarios (e.g. one with and one without pests). This constitutes an analytical step rather than an accounting entry. 6.78 Second, the impacts of disease and other effects on human health can, in broad accounting terms, be reflected in a loss of human capital, which in turn may be reflected in reduced production (e.g. days lost due to poor health). Again, analysis would be required to determine the extent of the contribution of the ecosystem dis- service relative to other factors. 6.79 Thus, while the accounting approach does not allow for direct recording of ecosystem disservices, it does provide a framework for the analysis of their effects. Further, the same approach can be applied in the context of analysis of negative envi- ronmental externalities, such as emissions from peatlands, where the flows, instead of being ecological in origin, are related to the activities of economic units. For example, the loss of ecosystem services – such as global climate regulation services, arising from peatland emissions – will be recorded in the accounts and there is potential for any health effects arising from the clearing of peatlands (e.g. effects linked to related forest fires and smoke) to be shown in a loss of human capital. 6.80 While the welfare effects themselves are not fully incorporated in accounting entries, the data from the accounts can underpin the assessment of their magnitude. This topic is discussed further in chapter 12, where complementary accounting tables Ecosystem services concepts for accounting 153 show how estimates of the monetary value of externalities can be presented in an SUT format for both ecosystem disservices and negative environmental externalities. 6.4 Treatment of specific ecosystem services and other environmental flows 6.4.1 Treatment of biomass provisioning services 6.81 There is clear recognition that people source and use biomass from ecosystems in a wide variety of ways and for different purposes, including for food, fibre and energy. Sometimes biomass is harvested directly by final consumers (e.g. those engaged in subsistence production, households picking berries in a forest), but the majority of biomass is grown, harvested or accessed by farmers, foresters and fishers (by economic units both small and large) that supply it to other economic units. Determining the appropriate treatment of the integral biomass provisioning services is complicated by the variety of biomass types and the range of ways in which people grow and harvest biomass from the environment. 6.82 Biomass provisioning services are ecosystem contributions to SNA benefits that take the form of food, feed, fibre and energy outputs produced and consumed by eco- nomic units. In line with treatments in the SNA, all biomass provisioning that is input to subsistence production of agriculture, forestry and fisheries should be included in the scope of ecosystem accounts. This includes, for example, the collection and harvest of non-wood forest products and the growing of vegetables in backyard gardens. 6.83 While all biomass harvested is considered an SNA benefit, the recording of these flows in the SNA entails a distinction between cultivated and natural (non-cultivated) production processes based on the extent to which an economic unit manages or con- trols the growth of the biomass. The range of natural and cultivated production pro- cesses recorded in SEEA EA aligns with the scope of activity recorded in the SNA. 6.84 In natural production processes, all of the biomass that is harvested is consid- ered the contribution of the ecosystem. Examples in this regard include harvesting of timber from natural forests, capture fishing from wild fish stocks and hunting and trapping of wild animals (including bush meat). The measurement of the ecosystem service should be aligned with the gross quantity of biomass that is harvested, that is, the gross natural resource input, following the SEEA Central Framework (sect. 3.2.2). This will be different from the total stock of biomass available for harvest and different from the biomass that is used in a subsequent production or consumption process. For example, felling residues and discarded catch should be considered part of the eco- system service flow. This treatment applies irrespective of (a) the length of time over which the biomass has been growing; and (b) the nature of the product (e.g. the gross biomass harvested, which includes honey from wild bees). Thus, the focus is solely on the quantity of the biomass that is harvested or accessed since this reflects the total use (or input) of the ecosystem’s resources. The services associated with the biomass from natural production processes are recorded during the accounting period in which it is harvested or accessed. 6.85 In cultivated production processes, joint production is considered to occur when the role of the ecosystem in supplying the biomass intersects with the activity (and associated human inputs, e.g. labour and produced assets) of people and economic units. The activities of economic units in this joint production process can be sepa- rated into those involving growth of the biomass (e.g. application of fertilizers and pes- ticides) and those involving harvest of the biomass. The contribution of the ecosystem occurs up to the point of harvest. 154 System of Environmental-Economic Accounting – Ecosystem Accounting 6.86 There is a very wide range of cultivated production contexts. Thus, the extent of human activity in the management of biomass growth can be very high (e.g. for hydroponically grown strawberries) or very low (e.g. for lightly managed native for- ests). Depending on the type of biomass and the related product, the timing and con- text of the growth and harvest can vary significantly. Further, within each production context there is a wide variety of management practices, and there may be more than one benefit that is generated. For example, the general activity of corn production may produce food as well as biomass for the production of energy, and cattle production can supply food as well as hides for leather and bones for fertilizer. 6.87 Although there is a diversity of cultivated production contexts, the conceptual intent for ecosystem accounting remains consistent, that is, measuring the ecosystem contribution, while accepting that in different production contexts the relative contri- bution of ecosystems will vary. The measurement of the ecosystem contribution in dif- ferent contexts can be considered in two distinct ways. One approach uses the biomass harvested as the measurement focus for identifying the overall ecosystem contribution and the other focuses on the various types of ecosystem contributions such as those involving nutrients, water, soil retention or pollination, which will be used in different combinations in different contexts. 6.88 Under the first measurement approach, particularly when cultivated production is of high intensity, there may be a significant difference between the ecosystem contri- bution and the gross biomass harvested (Cerilli and others, 2020). This difference may increase, owing to, for example, additional fertilizer, enhanced seed varieties or inten- sified management even while the extent of the ecosystem asset under use decreases (e.g. through conversion to settlements). Biotic elements that contribute positively to biomass growth (e.g. humus content) may also deteriorate. Compilers are thus encour- aged to estimate the ecosystem contribution to cultivated biomass production pro- 73 Methods have been developed cesses especially where these might be changing over time.73 for this purpose, including the use of input-output data sets 6.89 In practice, there is a considerable measurement challenge in either identifying and agronomic and agricul- all of the relevant individual ecosystem inputs or accurately measuring the ecosystem tural production functions contribution to the gross biomass that is harvested in a way that reflects the diversity and energy/energy-based of cultivated production contexts and covers all types of biomass. Consequently, where approaches. An example can be found in Vallecillo and oth- the relative contribution cannot be estimated, the gross biomass harvested may be ers (2019a), chapter 3, where an used as an adequate proxy measure for the flow of biomass provisioning services in energy-based ratio is applied cultivated production contexts, irrespective of the extent of human inputs and the to assess ecosystem contri- intensity of management. bution and separate it from human input. 6.90 Whether the ecosystem contribution is measured directly or not, it is recom- mended that additional information be provided on the cultivated production con- texts, including, for example, data on the gross biomass harvested in intensive and extensive production contexts or through organic farming. Further, measurement by biomass type and by relevant ecosystem characteristic (e.g. soil type, climatic zone) and data on variables such as soil fertility, soil-water availability and fertilizer use are likely to assist in facilitating a better understanding of the relative ecosystem contribu- tion. Such information may also be used to support estimation of the ecosystem con- tribution, for example, by comparing yield levels in intensive, extensive and organic farming systems. 6.91 Under the second measurement approach, each relevant ecosystem service is measured directly, with the intent to provide sufficient coverage of specific services so that the overall ecosystem contribution to the production of biomass is reflected appropriately. It is to be noted that these specific ecosystem services, such as pollina- Ecosystem services concepts for accounting 155 tion, may also be recorded under the first measurement approach, but they are shown as intermediate services. 6.92 In line with SNA time of recording treatments, ecosystem services in cultivated production contexts are recorded progressively over the life of the biomass. Thus, ser- vices associated with production of timber from plantation forests should be recorded progressively as the timber resources grow in line with the recording of the growth of this resource in the national accounts as a work in progress. Where multiple types of biomass are harvested from a single ecosystem asset over the course of an accounting period (e.g. through cultivation of summer and winter crops), all biomass harvested should be attributed to the same ecosystem asset. 6.93 The measurement of both the ecosystem contribution and the gross harvested biomass requires a clear measurement target. A different measurement target is used for plants and livestock. For cultivated plants, the ecosystem services are measured in relation to the quantity harvested, for example, quantities of corn, timber or apples. This flow is recorded as supplied by the relevant ecosystem and used by the economic unit managing the cultivation (e.g. the farmer).74 74 The subsequent sale of harvested outputs by the eco- 6.94 For cultivated livestock, the measurement target is the extent of the connec- nomic unit along the supply tion between the livestock and relevant ecosystem assets, primarily natural and culti- chain is recorded in the stand- vated pastures. Depending on the cultivation context, there may be some disconnect ard SNA production accounts. between ecosystems and the production of livestock and livestock products. Therefore, Double counting is avoided by where the livestock production process does not involve a direct connection with an ensuring that there are entries for both the supply and the use ecosystem (as occurs, for example, in some forms of intensive chicken, cattle and pig of the ecosystem service. The rearing), no ecosystem services should be recorded. In these cases, the associated eco- net effect with respect to the system services are limited to the ecosystem contribution to the production of feed farmer’s value added is thereby and supplements (e.g. hay, soybean meal, pellets), which would be recorded as crop left unchanged, but the con- provisioning services. tribution of the ecosystem is recognized. 6.95 To ensure a focus on the ecosystem contribution, it is recommended that the grazed biomass provisioning services be measured as the primary ecosystem contribu- tion. Other ecosystem contributions such as water supply and local climate regulation (through, for example, provision of shade by trees and protection of livestock from wind) may also be incorporated. These various contributions are recorded as final eco- system services, and no distinct livestock provisioning services should be recorded. It is also possible to measure livestock provisioning services reflecting the weight gain in livestock or the production of products such as milk and eggs. However, in these cases it is essential to estimate an ecosystem contribution since there rearing livestock may involve very little direct connection with ecosystems, especially in intensive farming systems as noted above. 6.96 The treatment of livestock applies by extension to other animals (mainly fish) raised in aquaculture facilities (both marine and freshwater) whose cultivation involves the provision of feed inputs, including fish meal. Thus, the gross biomass har- vested from aquaculture should not be used as a proxy for the ecosystem contribution. An exception arises where no feed or other inputs are provided (e.g. in the farming of oysters). In these cases, the ecosystem service can be appropriately measured using the gross biomass harvested. Where aquaculture is undertaken without a direct connec- tion to a surrounding ecosystem asset, no ecosystem services should be recorded. 6.97 To complete the description of the treatment of biomass provisioning services, the following four other commonly considered issues are noted: • Links to cultural services. There are many instances in which the har- vesting of biomass occurs in a recreational or cultural context. For example, people catch wild animals, especially fish, as part of their rec- 156 System of Environmental-Economic Accounting – Ecosystem Accounting reational activities, and there may be traditional harvests undertaken by indigenous groups. If the harvest is retained for subsequent consump- tion, then the quantity of the associated biomass should be included as part of biomass provisioning services. At the same time, there would be a connection to the measurement of cultural services. In these instances, flows of cultural services should be recorded in addition to biomass pro- visioning services. • Services related to wild fish provisioning services. For cultivated bio- mass provisioning services, it should be straightforward conceptually to attribute the service to a specific ecosystem asset since there will be a dis- tinct location where the biomass is grown and harvested. For uncultivated biomass provisioning, this may be more challenging, especially for fish biomass. In concept, for wild fish biomass, the relevant supply location is the place at which the interaction with the ecosystem occurs, that is, the place where the catch occurs. However, it is well recognized that there may be multiple ecosystems that are important for the growth of wild fish. To convey their relative importance, intermediate services can be recorded reflecting the connections between ecosystem assets. This would include, for example, recording nursery services from seagrass meadows for certain species. The extent to which this measurement is possible would depend on the data available and levels of ecological knowledge. • Trade in biomass products. Given the extent of international trade in agricultural, forestry and fisheries products, there is commonly a large spatial disconnect between the location of harvest (where the ecosys- tem service is recorded as having been provided), the location of subse- quent processing and manufacturing and the location of final household consumption. As further explained in chapter 7, following accounting principles, the location of harvest is recorded as the location of both the supply and the use of ecosystem services. Thus, there is no interna- tional trade in biomass provisioning services to be recorded. It is pos- sible using input-output techniques to trace the flow of associated or derivative products within the international economy, for example, to derive ecosystem service footprints. • Losses in biomass production. A feature common in the harvesting of biomass is that not all of the harvested biomass is retained and used in the subsequent production process. The inputs that are not retained are referred to in the SEEA Central Framework as natural resource residu- als and include felling residues, discarded catch and harvest losses. In the SNA, the focus is on the output ultimately sold by the producer and there- fore, in physical terms, the measure of output will be net of these losses. In the Central Framework (sect. 3.3.2), compilers are encouraged to record the flows in gross terms, since this reflects the actual flow of inputs from the environment. For ecosystem accounting, it is recommended that the principles of the Central Framework be applied so that the quantity of bio- mass provisioning services will be equal to the harvest in gross terms, that is, before harvest losses, felling residues and discarded catch are deducted. Even though, in terms of progression through the supply chain, there is no final use of residuals by economic units, they do represent contributions from the ecosystem to the production process. Ecosystem services concepts for accounting 157 6.4.2 Treatment of water supply 6.98 Treatment of the abstraction of water by economic units, including house- holds, for use in production processes (e.g. irrigation, cooling) or for consumption lies on the ecosystem services measurement boundary. There is no doubt that flows of water are highly relevant in both ecological and economic contexts, with the volume of water supply being determined largely by hydrological cycles. At the same time, the availability and quality of water in any given location are directly affected, to varying degrees, by ecosystem structures and processes. Consistent with the general definition of ecosystem services, it is the ecosystem contribution that is the primary focus of measurement in ecosystem accounting. 6.99 In ecological terms, there is a range of factors that contribute to the availability and quality of water. Two primary types of processes are (a) those related to the regu- lation of base flows of water including precipitation, run-off, infiltration and evapo- transpiration, leading to water absorption and release; and (b) those related to the purification of water. These and other relevant ecological processes are likely to involve multiple ecosystem assets of varying types within a catchment context, for example, forests, cropland, wetlands and rivers. These ecological processes can be considered inputs to water supply. 6.100 In compiling ecosystem accounts, there are a number of considerations in best reflecting the relevant ecosystem contribution. First, a distinction should be made between different purposes of water abstraction. In particular, a distinction should be made between abstraction that is less dependent on the quality of the water abstracted, for example, in cases where the water is used for cooling, hydroelectric power genera- tion or desalination, and abstraction in cases where water quality is an important fac- tor, for example, in domestic consumption. Making this distinction allows the relevant ecosystem contributions to be targeted appropriately (e.g. water purification services will not be relevant inputs for non-quality-dependent water abstraction). 6.101 Second, if the purpose of abstracting water from the environment does not require the water to be of suitable quality, the flow of water should be recorded as an abiotic flow, equal to the volume of water abstracted. This would include, for example, the collection of rainwater in tanks. 6.102 Third, if the purpose of abstracting water does require the water to be of suit- able quality and hence ecosystem contributions are involved, ideally, these contri- butions should be measured directly and recorded as final ecosystem services. For example, this may involve recording flows of water purification services and water flow regulation services. Where such direct measurement is possible, the actual flows of water abstracted should be recorded as abiotic flows, equal to the volume of water abstracted. 6.103 Finally, if the direct contributions to water supply cannot be separately recorded, it is appropriate to record the volume of water abstracted as a proxy for the ecosystem contributions. This flow should be recorded as a final ecosystem service. If such a measurement approach is adopted, there should be no entry for abiotic flows related to those volumes of water. 6.104 To support comparability across sets of accounts, irrespective of the meas- urement approach adopted, all flows of abstracted water should be recorded in the ecosystem accounts either as ecosystem services or as abiotic flows. Further, record- ing of flows of surface water and groundwater abstraction should align with defini- tions and treatments under the SEEA Central Framework (sect. 3.5: Physical flow accounts for water). 158 System of Environmental-Economic Accounting – Ecosystem Accounting 6.105 A significant volume of water is abstracted from groundwater sources from both deep and shallow aquifers. The treatments outlined above also apply to ground- water. Water abstracted from marine ecosystems, for example, for desalination or use as cooling water, should be treated as an abiotic flow, following the treatment outlined above. 6.106 In accordance with the SEEA Central Framework, water used for hydroelec- tric power generation is treated as abstracted, that is, it is considered to have been removed from the environment and to have entered into the economy, notwithstand- ing its immediate return and potential to affect water quality. Water abstracted for hydroelectric power generation is commonly treated as an abiotic flow, although in some contexts, surrounding landscapes may provide ecosystem services that support hydroelectric power generation, for example, through sediment retention. In these contexts, the treatment outlined above can be applied. 6.4.3 Measurement of global climate regulation services 6.107 The measurement and analysis of climate change commonly focus on the emis- sion of GHGs as a result of economic and human activity and the associated changes in concentration of those gases in the atmosphere. Ecosystem accounting places a complementary measurement focus on the role of ecosystems in mitigating climate change through their ability primarily to remove carbon from the atmosphere and to store carbon. Global climate regulation services thus reflect ecosystem contributions to reducing concentrations of GHGs in the atmosphere and stabilizing the climate and in turn avoiding damages that arise due to climate change. The measurement approach described here focuses on carbon since this is absorbed from the atmosphere by plants and sequestered in ecosystems. It is recognized that some types of ecosystems can also be a source of GHGs (CO2, methane (CH4) and nitrous oxide (N2O)), which is often, but not necessarily, related to ecosystem degradation. 6.108 The approaches to accounting for the role of ecosystems in global climate regu- lation described here are based on the comprehensive recording of stocks and changes in stocks of carbon (i.e. a physical carbon stock account). Ideally, this would encom- pass measurement of the opening and closing stocks of carbon stored in biomass (both above and below ground), in debris and in soil and sediment, across the full range 75 This scope is broader than of ecosystem types within an EAA, including marine ecosystems, as appropriate.75 required according to the Changes in the carbon stock reflect the removal of carbon from the atmosphere and reporting requirements under the loss of carbon from those stocks for a wide variety of reasons, including timber the United Nations Framework Convention on Climate Change, harvest, reforestation activity, conversion of peatlands to agricultural production, nat- which focus on anthropogenic ural decomposition of organic material and effects of wildfires. emissions (proxied by assess- 6.109 The measurement of global climate regulation services does not require meas- ing the emissions from man- aged lands). See also the 2006 urement of all stocks and changes in stocks of carbon, as the scope is restricted to Intergovernmental Panel on biocarbon. For example, data are not required concerning deposits of fossil fuels, emis- Climate Change (IPCC) Guide- sions of carbon through the consumption of fossil fuel or the accumulation of carbon lines for National Greenhouse in the atmosphere. Nonetheless, a complete accounting for all carbon stocks and flows Gas Inventories, available at is highly recommended as a means of supporting coherence in measurement and a www.ipcc-nggip.iges.or.jp/ wider discussion on climate change and associated policy issues. The role of account- public/2006gl/index.html; and the 2019 Refinement to ing for carbon in supporting the discussion of climate change is further considered in the 2006 Guidelines, available section 13.4 of chapter 13. at www.ipcc.ch/report/2019- 6.110 In SEEA EA, two components, carbon retention and carbon sequestration, refinement-to-the-2006-ipcc- guidelines-for-national-green- are considered in the measurement of global climate regulation services. The carbon house-gas-inventories/. retention component reflects the ability of ecosystems to accumulate and retain the stock of carbon, that is, ecosystems supply a service through the avoided emission of Ecosystem services concepts for accounting 159 carbon to the atmosphere. Thus, to the extent that the carbon stock held by ecosys- tems decreases (e.g. owing to ecosystem conversion from forest to cultivated land), the quantity of services provided will decrease. The reverse also holds, that is, increases in stock lead to a rise in carbon retention services over time. 6.111 The carbon retention component of the service is quantified by recording the stock of carbon retained in ecosystems at the beginning of the accounting period (i.e. the opening stock). This is a proxy indicator for the flow of the service, analogous to the quantification of the services supplied by a storage company in terms of the volume of goods stored. 6.112 The total stock of carbon is very large, especially in some ecosystem types such as peatlands. By convention, the measurement scope of the carbon stock for the deri- vation of the measure of carbon retention is limited to carbon stored above ground and below ground (including seabed), living and dead biomass in all ecosystems and soil organic carbon. In the case of peatlands and relevant organic carbon-rich soils, only the carbon stored to a maximum of two metres below the surface should be included. Inorganic carbon stored in freshwater, marine and subterranean ecosystems is excluded from scope. Within this measurement boundary, for a single ecosystem, the minimum service that can be supplied is zero when the stock of carbon (measured using the scope just described) is zero, that is, no carbon is retained. 6.113 The carbon stored in fossil fuel deposits should not be considered an ecosystem service since these deposits are not part of ecosystem assets. Similarly, the storage of carbon in harvested wood products should not be considered an ecosystem service since this carbon is no longer stored as part of an ecosystem asset but rather within products (e.g. houses, furniture) that are considered part of the economy. Moreo- ver, owing to its short rotation cycle, carbon stored in stocks of cultivated biological resources (e.g. crops, livestock) should not be included in the measurement of carbon retention. 6.114 The carbon sequestration component of the service reflects the ability of ecosystems to remove carbon from the atmosphere. In measuring this component, it is assumed that carbon sequestration concerns only carbon that is expected to be stored for long periods of time. This may involve storage within an ecosystem asset (e.g. a mangrove or wetland) or another form of storage (e.g. in the economy). Carbon that is sequestered but not expected to be stored (e.g. in crops) should be excluded from scope. An appropriate metric is the net ecosystem carbon balance. Where net carbon sequestration is zero or negative, the level of service supplied by an ecosystem is zero. There is a link between the measurement of carbon sequestration (reflecting an increase in the carbon stock) and carbon retention (reflecting the level of the stock). However, since in most cases sequestration in any single year accounts for a small frac- tion of the stock of carbon retained, carbon sequestration and retention are considered for accounting purposes to be related but distinct contributions to the global climate regulation service. 6.115 In principle, carbon retention and carbon sequestration components should be measured for all ecosystem assets. In practice, it is likely that different ecosystem assets will provide different contexts for measurement. In stable ecosystems, carbon retention is the primary component, while in those ecosystems where there is clear expansion in the stock of carbon, carbon sequestration may be the focus of measure- ment. Ecosystems whose stock of carbon is at risk of emission – for example, owing to land-use practices (e.g. draining of peatlands, deforestation) or extreme events (e.g. fires) – will be highly relevant. In these cases, there may be little carbon sequestration, and the focus of measurement should be placed on measuring carbon retention. 160 System of Environmental-Economic Accounting – Ecosystem Accounting 6.4.4 Identification of cultural services 6.116 There are important connections between people and ecosystems that are not provisioning or regulating in nature. The label “cultural services” is used to encompass many of these “experiential” and non-material connections. The use of this label is a pragmatic choice and reflects its long-standing use in the ecosystem services measure- ment community. The label is not meant to imply that culture itself is a service; rather it is a summary label and as such is intended to capture the variety of ways in which people connect to and identify with nature and the variety of motivations for these connections. 6.117 Two key considerations are associated with the identification of cultural ser- vices for ecosystem accounting purposes. First, it is necessary to determine the rel- evant set of benefits since these services can be defined only from a user perspective. Second, flows of cultural services, representing an ecosystem’s contribution to the ben- efits, reflect the characteristics and qualities of ecosystems. For many cultural services, recognition of the richness and functionality of the space provided by ecosystems, for example, to support recreation, is fundamental. 6.118 For ecosystem accounting, the cultural benefits to which cultural ecosystem services contribute comprise (a) benefits derived from undertaking activity (includ- ing recreation) within ecosystems (i.e. in situ) and (b) benefits derived from having a cultural, spiritual, artistic or similar relational connection to an ecosystem or the biodiversity it contains. The first type of cultural benefits, in which people experience nature directly, is considered to encompass a contribution from the ecosystem, with the understanding that there must also be human inputs of time and potentially of resources (e.g. equipment, travel). Both types of benefits will encompass associated benefits to people’s physical and mental health. 6.119 The second type of cultural benefits arises from a wide variety of motiva- tions and may reflect both use and non-use values. This type of benefits, which, as mentioned, includes cultural and spiritual connections, may commonly be a focus of economic transactions, such as donations to non-profit groups that are motivated to protect and conserve ecosystems. 6.120 For accounting purposes, cultural benefits arising from the remote experi- ence of ecosystems, including via various media (e.g. television, music, photos), are excluded from scope. Remaining within scope are a more limited set of benefits and associated services used by those who directly experience the characteristics and qual- ities of ecosystems (e.g. artists, movie producers) and who, in some instances, may be required to pay for access or similar rights to secure the benefits that are enjoyed by others remotely. 6.121 Given this scope of cultural benefits, cultural services are defined as the per- ceived or realized qualities of ecosystems whose existence and functioning enable the derivation of a range of cultural benefits. Under this definition, cultural ecosystem services (a) reflect the ecosystem contribution in terms of providing places and oppor- tunities for activity by people; (b) are linked to flows from ecosystems to people that may be considered experiential; and (c) are able to contribute to multiple benefits, that is, one ecosystem and its characteristics or qualities can contribute to different cultural benefits and can be linked to a variety of motivations of different users. 6.122 Based on this definition of cultural services, four types of cultural services are included in the reference list presented in table 6.3 above, namely, recreation-related services; visual amenity services; education, scientific and research services; and spir- itual, artistic and symbolic services. A separate class, ecosystem and species appre- Ecosystem services concepts for accounting 161 ciation, has also been included in the reference list to allow for recording of data on non-use values (see sect. 6.3.4). A description of these services is shown in table 6.3. In recording these services, there should be consideration of the potential connections among them, given that a single interaction (e.g. a visit to a park) could potentially be recorded as reflecting a range of different services. In such cases, attribution should be based on the primary purpose or motivation of the interaction. 6.123 Cultural ecosystem services contribute to processes involving different com- binations of ecosystem assets, produced assets (e.g. access roads, on-site facilities, walking trails, residential location) and human capital (including people’s time, expe- rience, knowledge, and physical and perceptive capabilities). Generally, human inputs encompass inputs required to use or access cultural benefits, but some human inputs (e.g. activities to restore or maintain ecosystem condition) are related to the supply of cultural benefits. 6.124 People undertake a range of activities in the environment for a range of pur- poses. Generally, the focus of cultural services is on activities whose purpose is rec- reational or personal. However, those people working outdoors – such as farmers, tour guides, landscapers and others who have a relatively direct connection with the environment through their jobs – likely derive some benefit from being outdoors that is similar to the benefit derived from a recreation-related service. The potential eco- system contributions to these benefits are not recorded explicitly in the ecosystem accounts but where they arise (which is not the case in all outdoor labouring contexts), estimates should be included in measures of visual amenity services. 6.125 Where payments are made by people to economic units that manage ecosys- tems (e.g. managers of national parks) for access to ecosystems or where payments are made to economic units that support activities in ecosystems (e.g. canoe rental busi- nesses), connections can be made to entries in the standard national accounts. 6.4.5 Treatment of abiotic and other environmental flows 6.126 As introduced in section 6.2.5, there is a range of flows between the environ- ment and the economy that may require discussion of whether there is a material eco- system contribution that should be recorded as an ecosystem service. In general terms, if there is a clear contribution of ecological characteristics and processes, then the flow can be treated as an ecosystem service. However, if there is no such distinct role, the flow is treated as an abiotic flow. In many cases, this distinction is clear-cut, but there are also a range of boundary cases. As indicated in section 6.2.5, there are a number of types of abiotic and other environmental flows, and it is useful to consider those vari- ous boundary cases. 6.127 The treatments described in the present section are intended to provide guid- ance to compilers on the appropriate treatment for supporting comparability of accounts. It is not possible, however, to envision all possible contexts. Thus, in princi- ple, compilers should return to the definition of ecosystem services (see para. 6.9) and ensure that the focus of measurement is on the ecosystem contribution to benefits. Further, the focus in identifying ecosystem services should be on the nature of eco- logical characteristics and processes rather than on whether the ecosystem is more or less dominated by biotic or abiotic components (for example, in this regard, it is recognized that deserts, with comparably little biota, and rainforests, with much biota, are both ecosystem types). Since, by definition, ecosystems are a combination of both biotic and abiotic components and involve interactions across various scales, this vari- ation in ecosystem types should not be a key factor in determining whether an ecosys- tem service is supplied and used. 162 System of Environmental-Economic Accounting – Ecosystem Accounting 6.128 Compilers are encouraged to record abiotic and other environmental flows where relevant to the analysis of ecosystem use since commonly there are trade-offs between ecosystem services and those flows. This is particularly the case for geophysi- cal services, including flows of water, wind and solar energy. In recording flows in bio- physical terms, there is no defined aggregate of ecosystem services, and consequently the inclusion of additional entries concerning abiotic flows in relevant tables does not impact on recorded aggregates. However, where monetary valuation is undertaken (following the advice in chaps. 8–10), abiotic flows should not be included in the meas- urement of the value of ecosystem assets. The value of abiotic and other environmental flows may commonly be measured using observed market prices and the NPV of these flows can be recorded alongside the value of ecosystem assets in the extended balance sheet described in chapter 11. 6.129 Flows related to abiotic components of ecosystems in the supply of regulating and maintenance services. Since ecosystems are a combination of biotic and abiotic components, the following are treated as ecosystem services, notwithstanding that abiotic components may have a dominant role in some ecosystem types: • Air filtration services (capture of air pollutants by abiotic components, such as bare and rocky surfaces): here pollutants are absorbed but not by active biotic components • Coastal protection services provided by unvegetated shingles or sand dunes: here the predominant role of abiotic components within the land- scape structure in providing those services is recognized • Water purification and regulation services from bare but unsealed soil: here water permeating the soil may be improved in quality through water purification services and may also provide a more continuous supply of water to groundwater sources 6.130 Flows related to the generation of energy. Flows of energy from non-renewable sources, such as fossil fuels and uranium, are considered to be abiotic flows from geo- logical resources. Where peat is used as an energy source, its extraction should be 76 It is to be noted that peatlands recorded as an abiotic flow.76 also supply other ecosystem services, such as global climate 6.131 Three types of flows of energy from renewable sources can be distinguished: regulation and water purifica- • Energy from biomass, including roundwood and brushwood, maize used tion services. for ethanol and so on. Here the flow involves an ecosystem contribution that should be captured as part of estimation of the flow of biomass provi- sioning services. • Energy from sources such as wind, solar, geothermal and tidal energy. Here the flows involve geophysical processes and hence are considered abi- otic flows from geophysical sources. • Energy from hydroelectric power generation. For ecosystem accounting, it is considered that the source of the energy is related most substantially to landscape structure and geomorphology (e.g. the fall in a river). Thus, while ecosystem services supplied by the surrounding landscape, such as water regulation of base flows and soil erosion control, are important final ecosystem services, which are to be recorded, the generation of hydro- electric power itself is considered an abiotic flow from geophysical sources. 6.132 Flows related to residuals from economic activity. There is a range of residuals that are released through or generated by economic activity, including emissions to air, soil and water and solid waste. In many cases, ecosystems act as sinks or receivers of these residuals. The following three cases are considered: Ecosystem services concepts for accounting 163 (a) The case where residuals are actively remediated, broken down or oth- erwise processed through ecological processes, for example, through air filtration and water purification. In this case, an ecosystem service is measured equivalent to the quantity of residual that is remediated up to the ecological limit or threshold for the given ecosystem asset; (b) The case where residuals are stored in specific areas, for example, in landfill or mining overburden. This is considered a case where the ecosystem’s location is used as a sink service and is treated as a spatial function of the environment; and no ecosystem service or abiotic flow should be recorded; (c) The case where residuals are passed through an ecosystem, for exam- ple, where contaminants from effluent flow into freshwater ecosystems and are subsequently deposited within the sediment or passed on to the marine environment, including in cases where the quantity of residuals released exceeds the ecological limit of the ecosystem’s ability to mediate or process them. In this case, the storage of pollutants is not considered to reflect an ecosystem contribution, but it may be considered a sink ser- vice. As in the case of (b), no ecosystem service or abiotic flow should be recorded unless some remediation occurs (as in the case of (a)). 6.133 In case (c), increasing concentrations of some residuals are a significant factor in the decline in condition of ecosystems (e.g. excess nitrogen leads to the eutrophica- tion of lakes and bays). These declines in condition should be recorded in the condition account and may be reflected in decreases in future flows of ecosystem services sup- plied by the affected ecosystems. However, the presence of residuals in an ecosystem is not, of itself, considered to imply the supply of an ecosystem service. 6.134 In the context of case (a) above, the ability of ecosystems to remediate, dilute and store pollutants (e.g. releases of nitrogen) may be regarded as providing a benefit to the polluter since they do not need to capture and store the residuals themselves or otherwise change their practices. Consistent with the guidance above, only the reme- diation role performed by an ecosystem asset is recorded as an ecosystem service for ecosystem accounting purposes. Benefits to the polluter that arise from the dilution or storage of pollutants are considered spatial functions of ecosystems. These flows may be recorded separately. 6.135 The use of the relevant ecosystem services (e.g. water purification) and any spa- tial functions (e.g. storage of pollutants) may be assigned to the polluter where there is a direct economic benefit to the polluter from that use of the ecosystem (generally a reduction in operating costs). However, in line with the treatments in the three cases outlined above, since the total quantity of the residuals released may exceed the eco- system’s ability to remediate them, only a portion of the direct economic benefit should be treated as an ecosystem service. Where the use of ecosystem services is recorded in this way, it is also possible to assign the use of the relevant ecosystem services (e.g. water purification) to other economic units that subsequently use the ecosystem and hence benefit from cleaner water, air and soil (e.g. water supply companies). 6.136 Flows related to the use of the environment for undertaking economic and other activities: spatial functions. These flows are related primarily to the fact that all activities take place in a location. Flows related to the use of the environment for those activities are treated as spatial functions within the broader framing of abiotic flows. While ecosystems are by definition present in those locations, there are no eco- logical processes providing a contribution to those activities that should be recorded as ecosystem services. This implies that the benefits derived from land in support- 164 System of Environmental-Economic Accounting – Ecosystem Accounting ing buildings, houses, roads, railways and other structures and the associated values related to location are not considered to incorporate ecosystem services. Further, there is no abstraction or extraction from the ecosystem that would require recording abi- otic flows. Navigation on rivers, where the flow of water supports transportation of people and goods, presents a unique case. In this case, there may be a contribution of ecosystem processes, primarily with respect to water flow regulation, which should be recorded as a final ecosystem service. 6.137 In many cases, there is a significant monetary value associated with these uses of the environment, including the value of land under houses. This value should be included in the value of land in the extended balance sheet described in chapter 11. 6.5 Ecosystem capacity 6.5.1 Introduction 6.138 General interest in the concept of ecosystem capacity stems from interest in understanding issues involving the balance of supply and use of ecosystem services. These issues include the extent to which the current pattern of use of an ecosystem is beyond current limits of regeneration and absorption, thereby affecting the well-being of current generations; the extent to which the actual or potential use of ecosystem ser- vices reflects the condition of the ecosystem asset; and the relative effects of alternative ecosystem management arrangements on the supply and use of ecosystem services. 6.139 Generally, the underlying concern is related to the potential loss of the quantity and quality of ecosystem assets and the subsequent impacts on the current and future flows of ecosystem services. In some cases, the focus is on local limits with respect to regeneration and overuse; in other cases, the limits concern tipping points, involving substantive changes in ecosystem type or breaches of other, broader systemic limits. 6.140 In an accounting context, the concept of ecosystem capacity has been envisaged most commonly as embodying a link between measures of ecosystem asset extent and condition, on the one hand, and measures of ecosystem services supply and use, on the other. Figure 6.1 highlights the nature of the general relationship that is the focus of ecosystem capacity in SEEA EA. It is to be noted that the accounts themselves, in particular the SUTs, do not require estimates of ecosystem capacity for their compila- tion, but assessment of capacity can directly support the interpretation and application of accounting entries. Indeed, accounting provides a relatively natural measurement platform for considering the inherent systemic linkages between the current and future patterns of supply and use of ecosystem services and the current and future state of ecosystem assets. The present section summarizes the relevant considerations. 6.5.2 Defining ecosystem capacity for accounting purposes 6.141 In the context of SEEA EA, ecosystem capacity is the ability of an ecosystem to generate an ecosystem service under current ecosystem condition, management and uses, at the highest yield or use level that does not negatively affect the future supply of the same or other ecosystem services from that ecosystem. 6.142 This definition reflects a variety of contributions to the discussion on ecosys- tem capacity in an ecosystem accounting framework, including, for example, the work of Hein and others (2016) and La Notte and others (2019). Given the variety of per- spectives on ecosystem capacity, consideration of the following points is required to facilitate an appropriate interpretation of the definition’s intention and meaning. The need for further research and discussion is also recognized, as attested by the fact that Ecosystem services concepts for accounting 165 ecosystem capacity constitutes a specific topic in the SEEA EA research and develop- ment agenda (annex II). Figure 6.1 Relationships between capacity to deliver ecosystem services and the ecosystem ac- counts Ecosystem extent account Ecosystem extent Capacity to deliver ecosystem Ecosystem services services (potential) Ecosystem condition Ecosystem services Capacity account (supply and analysis use tables) Ecosystem condition account Source:  Adapted from Maes and others (2018), figure 2.2. 6.143 First, while it is relatively common for the concept of ecosystem capacity to be framed in a way that speaks to the ability of an ecosystem asset to generate a bundle of ecosystem services, the focus of the definition here is on the capacity of an ecosystem asset to supply a single ecosystem service. In concept, considering a bundle of services would be ideal and would be linked directly to a range of material in the literature on ecosystems and biodiversity concerning, for example, maintenance of ecosystem func- tions (Mori and others, 2013) and option and insurance values of ecosystem assets (see the discussion in sect. 6.3.3 on the links between ecosystem services and biodiversity). 6.144 Further, a systemic approach to ecosystem capacity can be related to a discus- sion on the ecosystem characteristics and processes that underpin flows of ecosys- tem services and to the related conception that an ecosystem needs to supply services to itself in order to support its functioning. In SEEA EA, intermediate services are recorded only when they can be linked to final ecosystem services and should not be recorded solely in the context of maintaining ecosystem function. There may be interest in the recording of various physical flows within and between ecosystems that reflect ecosystem processes, but this is not a feature of ecosystem accounting per se (except when those flows relate to flows of ecosystem services or support the measure- ment of ecosystem condition). 6.145 Although using a broader and more systemic measurement approach to eco- system capacity would be ideal, individual ecosystem services are more measurable; and while a focus on individual ecosystem services is more limited, it can be of direct relevance in decision-making, for example, in setting policy and management targets. 166 System of Environmental-Economic Accounting – Ecosystem Accounting 6.146 While the focus in the above definition is on a single ecosystem service, the measurement of capacity requires consideration of the management of the ecosys- tem asset as a whole since, for an individual ecosystem, the capacities for each service within a bundle are connected. Generally, the concept of ecosystem capacity is most relevant for services that can be overused (e.g. provisioning services). With respect to services for which there is no equivalent concept of overuse (e.g. flood control or global climate regulation) and no sustainability threshold, capacity needs to be considered differently. La Notte and others (2019) discuss these differences related to the concept of ecosystem capacity by type of service. 6.147 Second, this definition can be applied using two main approaches. One approach is underpinned by the assumption that the current ecosystem asset con- text will not change into the future. This implies that no consideration is to be given to the potential effects of external drivers (e.g. population growth or climate change) on the ecological limits of an ecosystem with respect to a specific service or on the use of that service. This measurement approach is likely to be more viable, at least in the short term. 6.148 In an alternative approach, assumptions are made concerning future changes in the ecosystem asset itself and/or in the expected patterns of ecosystem service use. Also relevant here are assumptions regarding expected interactions (trade-offs and/ or synergies) within the ecosystem in the supply of different ecosystem services (e.g. between timber provisioning services and air filtration services). Making different assumptions regarding future changes and interactions will alter the measures of the appropriate ecological limits and consequently affect the measurement of capacity. Ideally, these types of considerations would be applicable in the monetary valuation of ecosystem assets using an NPV formulation as described in chapter 10. 6.149 The following observations are also relevant to the application of this definition: • In physical terms, the measure of capacity for generation of an individ- ual ecosystem service should be expressed in the same quantification or measurement units as those used for the actual flow of the ecosystem ser- vice. Thus, capacity would most commonly be expressed in units of rate per year. When considering measures over multiple ecosystem assets (e.g. for a single ecosystem type), it may also be relevant to present measures in terms of rates per spatial unit (e.g. hectares, volumes), with the under- standing that those rates will not be constant across an ecosystem asset or ecosystem type. • Under the first approach, it would be appropriate to take longer-term cycles of management or disturbance into account, for example, the long manage- ment cycles (40–100 years) of rotational harvesting of timber. Longer-term effects of patterns of disturbance, such as fire and flood, and ecosystems’ adaptation to those disturbances are also relevant considerations. Under the second approach, expectations regarding potential changes in longer- term cycles would be taken into consideration. • If the ecosystem service is used at current capacity and there is no use beyond the appropriate limit, the condition of the ecosystem asset should remain stable compared with its current level, all else being equal. Since relevant limits can change over time (e.g. owing to climate change), meas- ures of capacity should be regularly reassessed. • In monetary terms, capacity can be related to the NPV of ecosystem service flows at their sustainability thresholds, that is, by using the sustainable eco- system service flow, as determined by relevant regeneration and absorption Ecosystem services concepts for accounting 167 rates. These capacity-based values can be compared with the NPV of eco- system services based on the actual expected flows. An example illustrating the differences between sustainable and actual flows and their implications is provided in La Notte and others (2017). 6.150 In applying the above definition, no measure of capacity is recorded for ecosys- tem services that might potentially be supplied but are not within the current bundle of ecosystem services from an ecosystem asset. However, the same framework may be applied to estimate an ecosystem’s potential supply, which concerns the ecosystem’s ability to generate an ecosystem service, without the constraint of considering current patterns of use but while still requiring that the condition of the ecosystem be unaf- fected. Another variant, following Hein and (2016), is ecosystem capability, which con- cerns an ecosystem’s ability to generate an ecosystem service under current conditions and type of use but irrespective of the potential impacts of increasing the supply of that service on the supply of other ecosystem services. Data from the ecosystem accounts would likely be relevant in the derivation of these complementary measures, but it is to be noted that different assumptions would be required.77 77 Additional sources addressing this topic include Burkhard and 6.151 In terms of general interpretation, because of the link between measures of others (2014) and Villamagna, capacity and potential supply and the maintenance of ecosystem condition, a com- Angermeier and Bennett parison can be made between the actual flow of an ecosystem service recorded in (2013). the ecosystem accounts and the flow of that service at its capacity or threshold level, which can be regarded as a sustainable flow. Measures of ecosystem capability may not warrant such a conclusion, that is, a flow related to ecosystem capability may not be sustainable. 6.152 While there is an apparent logical connection between increases in ecosystem condition and increases in capacity, this may not apply for all ecosystem services. For example, in the case primarily of provisioning services, capacity may be higher at levels of condition that are somewhat below the reference condition level. Thus, the general observation that higher levels of condition are associated with higher measures of capacity does not hold in all circumstances. Further, the precise nature of the relationship between falls in condition and falls in capacity may be unclear, at least in the short term. 6.5.3 Defining ecosystem capacity with respect to specific types of ecosystem services 6.153 The description and measurement of ecosystem capacity vary across differ- ent types of ecosystem services (La Notte and others, 2019). For provisioning ser- vices, capacity is related to the rates of regeneration that are possible under current conditions. 6.154 For regulating and maintenance services, the underlying ecological assump- tion is that there are limits or thresholds related to the supply of those services. These limits may manifest themselves in various ways. For services where there is reme- diation of pollutants, such as water purification, the limit is related to the quantity of pollutant that can be remediated and processed. In this case, ecosystem capacity reflects that limit. For services that may be described as providing “buffers”, such as water flow regulation and flood control services, there are associated maximum rates of infiltration and related ecological boundaries that may be used to determine ecosystem capacity. 6.155 For cultural services, the issue of capacity arises only in the context of in situ use of the ecosystem. In those cases, capacity measures are related to the maximum 168 System of Environmental-Economic Accounting – Ecosystem Accounting number of persons able to visit or enjoy a particular site without causing a loss of eco- system condition. 6.156 In practice, it may not be necessary to measure ecosystem capacity for all eco- system services. An initial focus could be on those ecosystem services whose overuse is most likely to have negative effects on ecosystem condition. This might be appropri- ate from a risk management perspective, providing a sure basis for pri`oritization of ecosystem services with respect to measurement. 6.157 Further, as regards the issue of measurement focus, the concept of ecosystem capacity will be less relevant in cases where there is no – or very limited – use of an ecosystem service (e.g. use of air filtration services by forests in northern Canada). Measurement of ecosystem capacity in these contexts may suggest a level of available capacity that is not consistent with current and expected patterns of use. 6.158 In this context, it is to be noted that the reference in the above definition to cur- rent management and uses implies that the measurement of capacity must take into account restrictions on access to or use of ecosystems. For example, if a forest has been designated as a protected area and logging is therefore not possible, then the capacity to supply biomass provisioning services would be zero. Similarly, a beach to which no recreational access is allowed has zero capacity to supply recreation-related services. 6.159 It is expected that through the development of ecosystem accounting gen- erally and the compilation of the various ecosystem accounts, significant further advances can be made in accounting for ecosystem capacity. These include both measurement advances, such as determining best practices in setting thresholds for individual services and moving beyond individual ecosystem services to consider bundles of services from an ecosystem, and conceptual developments, such as the integration of the concept of ecosystem capacity into the definition of ecosystem enhancement and degradation. 169 Appendix A6.1 Initial logic chains for selected ecosystem services Factors determining supply Potential physical Common metrics for Main Ecosystem ecosystem Factors deter- the ecosystem users and service types Ecological Societal mining use services Benefits beneficiaries Crop provision- Cropland Soil fertility, especial- Farm management Demand for Gross tons Crop products Agricultural ing services ly chemical state (e.g. at different stages of biomass (e.g. of cultivated (e.g. harvested producers, soil organic carbon, production process; for food) plants (e.g. wheat (SNA including nutrients); climate; harvesting practices; wheat (proxy benefit)) household and water supply; pol- air pollution affect- measure)) subsistence lination; genetics ing soil quality production Grazed bio- Pastures Soil fertility; climate; Farm management Demand for Gross tons of Livestock and Agricultural mass provision- water supply; at different stages of biomass (e.g. grazed biomass livestock prod- producers, ing services genetics production process as food for live- ucts (e.g. meat, including stock); farming milk, eggs, household and practices wool (SNA subsistence benefits)) production; households Wood pro- Forests, Soil fertility; climate; Forest management Demand for Gross tons of Harvested Forestry pro- visioning woodland water supply; timber and harvesting timber wood (timber) timber (SNA ducers, includ- services stock biomass and practices biomass benefit) ing households composition; harvested genetics Wild fish and Mainly Stock biomass Stock management Demand Gross tons of Harvested Fishing other natural marine, and composition, practices; harvesting for aquatic aquatic prod- aquatic industry, aquatic bio- freshwater especially structural practice biomass ucts harvested products (SNA including direct mass provision- state (e.g. trophic benefit) household ing services composition number, consumption; ratio between fishing recreational mortality and fishing fishing at maximum sustain- able yield); chemical state (e.g. tempera- ture, pH, eutrophica- tion, salinity) Wild animals, Many Ecosystem extent Ecosystem Demand for Tons of biomass Harvested Households, plants and ecosystem and condition; bio- management “natural” harvested products (SNA businesses other biomass types mass stock; climate products or non-SNA provision- benefit) ing services (excludes aquatic and wood products) Water supply Freshwater, Quantity and quality Catchment manage- Demand for Cubic metres of Consumptive Water supply marine, of water stocks ment practices water by type water, by type use by the utilities, direct ground- of quality of quality economy and household con- water society (SNA sumption; other ecosystems benefit) users of water (e.g. farmers) 170 System of Environmental-Economic Accounting – Ecosystem Accounting (Continued ) Factors determining supply Potential physical Common metrics for Main Ecosystem ecosystem Factors deter- the ecosystem users and service types Ecological Societal mining use services Benefits beneficiaries Global climate Primar- Ecosystem type and Ecosystem Vulnerability to Tons of carbon Reduced Collectively regulation ily forest, condition, especially management; climate change and other concentrations consumed by services wood- structural state (e.g. GHG emissions (exposure, GHGs retained of GHGs in the government on land and tree cover density sensitivity (sequestered atmosphere behalf of soci- shrubland and forest age); at- and adaptive and stored) leading to less ety (individuals, ecosystems; mospheric carbon capacity) climate change households also grass- concentrations and fewer and businesses lands and adverse effects globally) cropland, (non-SNA wetlands, benefit) marine ecosystems Local (micro Mainly Ambient atmos- Ecosystem manage- Location of Number of Improved living Households; and meso) urban pheric conditions; ment; urban plan- people and ani- households conditions and businesses climate regula- ecosystems type and quantity of ning practices mals in relation with air economic pro- tion services (for people); vegetation; presence to vegetation temperature duction (non- pastures (for of water bodies and blue spaces reduced by SNA benefit) livestock) more than 5˚C on hot days Air filtration Mainly Type and condition Ecosystem Behavioural Tons of pollut- Reduced Households; services forest and of vegetation, espe- management; responses; and ants absorbed concentrations businesses woodland cially functional state location type and location and by type of of air pollutants (through re- (e.g. leaf area index) volume of released number of peo- pollutant (e.g. providing im- duced damage and chemical state air pollutants ple and build- PM10a; PM2.5 b) proved health to buildings) (e.g. ambient pollut- ings affected by outcomes and ant concentration) pollution reduced dam- age to build- ings (non-SNA benefit) Soil and sedi- Many Topology; geology Ecosystem Demand for Tons of soil re- Soil stabil- Households ment retention ecosystem and soil type; type management agricultural and tained; number ity: reduced and businesses services types and condition wood biomass; of properties sedimentation • Soil erosion of vegetation, location of with reduced downstream control especially structural managed risk of landslide (non-SNA ben- services state (e.g. vegetated water bodies efit); reduced • Landslide riverbanks); rainfall at risk from risk of landslide mitigation patterns sedimentation; (non-SNA services location of benefit) people and buildings at risk from landslides Solid waste Many Condition of soils, Ecosystem Type and quan- Tons of Reduced im- Businesses, remediation ecosystem especially as related management tity of solid solid waste pact of alterna- including types, to microorganisms waste released remediated tive methods of household and mainly disposal (non- subsistence cropland SNA benefit) production Appendix A6.1: Initial logic chains for selected ecosystem services 171 (Continued ) Factors determining supply Potential physical Common metrics for Main Ecosystem ecosystem Factors deter- the ecosystem users and service types Ecological Societal mining use services Benefits beneficiaries Water purifica- Many Ecosystem type Location type and Demand for Tons of pollut- Reduced Households tion services ecosystems, and condition; volume of released cleaner water ants remedi- concentrations and businesses primarily composition of water pollutants for different ated by type of of water pollut- freshwater microorganisms uses pollutant (nutri- ants providing and marine and algae; chemical ents and other improved ecosys- state (e.g. nitrogen pollutants) health out- tems and and phosphorus comes and/or associated concentrations) reduced water vegetation treatment costs (non-SNA benefit) Water flow Terres- Extent and condition Ecosystem Demand for Capacity of res- Reduced need Households regulation trial and of vegetation and management water supply at ervoirs or alter- for other forms and businesses services freshwater soils (e.g. water infil- different times native forms of of water stor- • Baseline ecosystems tration rate); rainfall of the year storage (cubic age for human flow main- within patterns (baseline flow metres) other- use or for flood tenance riparian and maintenance); wise needed to defence (non- services upstream extent of exist- provide same SNA benefit) • Peak flow zones ing produced service mitigation assets and loca- services tion of proper- ties (peak flow mitigation) Coastal protec- Shoreline Extent and condition Ecosystem Extent of exist- Number of Reduced Property tion services systems of vegetation and management ing produced properties in impact or fre- owners and of other features of assets (e.g. a lower risk quency of flood residents – coastal margins (e.g. flood barriers, category events (non- households, coral reefs, sand dykes); location SNA benefit) business, banks and dunes); of properties government ambient climate factors River flood Terres- Extent and condition Ecosystem Extent of exist- Number of Reduced Property mitigation trial and of riparian vegeta- management ing produced people and impact of flood owners and services freshwater tion; ambient climate assets (e.g. buildings in events (non- residents – ecosystems factors flood barriers, a lower risk SNA benefit) households, within ripar- dykes); location category businesses, ian zones of properties government Pollination Many Abundance and Ecosystem Location of Area of crops Reduced need Cropland services ecosystem location of wild management crops benefit- pollinated, by for alterna- ecosystems, types, pollinators ing from wild type of crop tive forms of ultimately mainly near pollination pollination, agricultural cropland including paid production areas, but pollinator including also urban services (SNA household and gardens benefit) subsistence production; households Nursery All Species-level Ecosystem Demand for Size of biomass Continuing All ecosystems; population ecosystems diversity, abundance; management biomass, which stocks depend- supply of ultimately and habitat condition of ecologi- depends upon ent upon nurs- ecosystem ser- all sectors of maintenance cal communities nursery and ery and habitat vices (non-SNA society services habitat services services benefit) 172 System of Environmental-Economic Accounting – Ecosystem Accounting (Continued ) Factors determining supply Potential physical Common metrics for Main Ecosystem ecosystem Factors deter- the ecosystem users and service types Ecological Societal mining use services Benefits beneficiaries Recreation- Many Extent and condition; Ecosystem manage- Accessibility of Number and Physical and Households; related services ecosystem presence of iconic ment including recreation sites; length (hours) mental health; tourism and types landmarks or species; facilities to support location of of visits enjoyment outdoor leisure structural state and access users; demand (non-SNA service sectors landscape/seascape for outdoor benefit) characteristics (e.g. recreation percentage of urban green space, distance to open green space) Visual amenity Many Landscape setting Landscape Location and Number of Higher values Households services ecosystem and condition (e.g. management design of properties with of dwellings types structural state and residential and views of natural (SNA benefit); landscape/seascape office buildings; landscapes or mental health, characteristics) demand for located near enjoyment housing in green or blue (non-SNA green and blue areas benefit) areas Education, Many Extent and condition; Access to ecological Education poli- Number of Intellectual Educational scientific ecosystem presence of iconic sites of interest cies, research visits for educa- development, and research and research types landmarks or species; priorities and tional, scientific advancement organizations services structural state and funding and research of knowledge landscape/seascape purposes and under- characteristics standing (non- SNA benefit) a Particulate matter less than 10 micrometres in diameter. b Particulate matter less than 2.5 micrometres in diameter. 173 Chapter 7 Accounting for ecosystem services in physical terms 7.1 Introduction 7.1 The aim of accounting for ecosystem services in physical terms is to record, in an accounting structure, the flows of ecosystem services over an accounting period in physical units such as cubic metres or tons. Physical quantification commonly focuses on measurement of ecosystem structures, processes and functions, that is, the supply side of flows of ecosystem services, but quantification of ecosystem contributions can also be carried out through a focus on the use of ecosystem services, for example, the number of visits to a national park. A key focus in accounting for ecosystem services is reconciliation of the supply and use of ecosystem services across multiple ecosystem assets and multiple users. 7.2 Flows of the ecosystem services included in the reference list presented in chapter 6 can be measured in physical, that is, quantitative, terms. Different ecosystem types supply different bundles of ecosystem services to different users. The aim in ecosystem accounting is to provide as comprehensive a coverage of the supply and use of different ecosystem services within an EAA as is practicable. The choice of which ecosystem services to include in a set of ecosystem accounts will depend in part on the data and resources available for the compilation of estimates. 7.3 Ecosystem services flow accounts in physical terms that record the supply and use of ecosystem services may be compiled for a range of reasons and purposes. These include recording and monitoring the different bundles of ecosystem services supplied by different ecosystem types, identifying the users of the services and assessing how these patterns of supply and use are changing over time. This information can under- pin analysis of the significance of particular ecosystems as ecosystem service suppliers, support analysis of trade-offs between different ecosystem services as part of spatial planning and land management and provide information to support delineation of areas for specific land uses, including conservation and environmental protection. While some of these applications are appropriate at larger, national scales, in many cases, the use of spatial data on ecosystem services supply and use opens up consider- able analytical opportunities at finer scales. Much work on accounting for ecosystem services has been conducted using spatial data and for some services, this is the likely entry point for measurement, particularly of regulating and maintenance services. 7.4 The information on ecosystem services in physical terms can also be used to demonstrate the nature of the connection to the SNA production boundary, which, in turn, can support engagement and discussion of the wider, non-private benefits of eco- systems extending beyond ecosystem contributions to marketed goods and services. Moreover, the data in physical terms can underpin monetary valuation of ecosystem services (see chap. 9). 174 System of Environmental-Economic Accounting – Ecosystem Accounting 7.2 Ecosystem services flow accounts in physical terms 7.2.1 Overall structure of ecosystem services flow accounts 7.5 The structure of the ecosystem services flow accounts in physical terms is dis- played in tables 7.1a and 7.1b. The structure of these tables follows that of the SUTs described in the SNA and the SEEA Central Framework. In an ecosystem account- ing context, SUTs are accounting tables structured to record flows of final ecosystem services between economic units and ecosystems and flows of intermediate services among ecosystems. Entries can be made in physical and monetary terms. 7.6 The list of ecosystem services provided in tables 7.1a and 7.1b corresponds to the reference list of selected ecosystem services in chapter 6. Conceptually, an SUT in physical terms would contain only entries recorded in the same measurement unit, for example, entries in energy SUTs are recorded in joules and entries in water SUTa in cubic metres. Where this is the case, it is possible to aggregate across the rows of a table. Selected ecosystem services are included in the presentation set out below, and each is recorded using its own measurement units. Consequently, it is not possible to aggregate down the rows in the tables to obtain meaningful aggregates. While indi- vidual SUTs for each ecosystem service could be presented, the conceptual considera- tions concerning the structure of the tables and associated accounting entries would be identical to those discussed here. 7.7 A key principle underpinning the SUT structure is that the supply of eco- system services must equal the use of those services during an accounting period. This is an application of the supply and use identity (SEEA Central Framework, para. 3.35). Thus, both the supply and the use of air filtration services, for example, should be recorded using the same measurement unit (e.g. tons of PM2.5 absorbed by vegetation). 7.8 The supply table presented in table 7.1a records the flows of different ecosys- tem services supplied by different ecosystem types. The total supply recorded should include both final ecosystem services and intermediate services. The use table pre- sented in table 7.1b records the use of different ecosystem services by economic units (final ecosystem services) and by other ecosystem assets (intermediate services). For each ecosystem service, the total supply recorded in table 7.1a must equal the total use recorded in table 7.1b. Detailed descriptions of recording principles and specific treat- ments are provided in the following sections. 7.9 The flows for each ecosystem service are recorded using a measurement unit that is appropriate for that ecosystem service. The column with the heading “Measurement units” would list the measurement unit appropriate for each type of service. Common measurement units include tons, cubic metres and number of visits. In practice, the measurement unit that is applied would depend on the data that are available and the measurement method that is used. There are no prescribed measurement units in SEEA EA but relevant technical guidance is outlined in the Guidelines on Biophysical Modelling for Ecosystem Accounting (United Nations, Department of Economic and Social Affairs, Statistics Division, 2022a). 7.10 The same units used to measure the supply of the service must be used to meas- ure its use. This applies also where an ecosystem service is supplied by multiple eco- system types and/or used by multiple economic units. Thus, across a single row (i.e. for a single ecosystem service), the same measurement unit should be applied. This enables a total supply and total use to be estimated for each individual ecosystem ser- vice. However, as noted above, since each ecosystem service is measured using a unit appropriate to it, it is not possible to aggregate in order to produce an estimate of the Accounting for ecosystem services in physical terms 175 total supply or use of multiple services in physical terms for an ecosystem type or eco- nomic unit. 7.11 Each ecosystem service is recorded as being supplied by an ecosystem type. For the purposes of demonstrating the design of a supply table, table 7.1a presents selected ecosystem types based on selected classes at the ecosystem functional group (EFG) level of IUCN GET (see chap. 3 for details). The set of classes shown is not exhaustive for that level. In practice, it is expected that countries will utilize a national or region- ally applicable classification of ecosystem types, which may show detail additional to that provided at the EFG level. 7.12 While many ecosystem services are supplied by an individual ecosystem type in a single location, some ecosystem services are supplied by a combination of ecosystem types (e.g. flood mitigation services supplied by a combination of ecosystems within a riparian zone). In these situations, an allocation of the total supply to the relevant ecosystem assets and ecosystem types is required. Section 7.3.1 discusses the spatial allocation of ecosystem services. 7.13 The use table presented in table 7.1b records the use of ecosystem services by economic units (final ecosystem services) and by ecosystem types (intermediate ser- vices). Economic units are classified following the general structure of the SNA. Nine industry classes are shown in table 7.1b. Selected industry classes may be more detailed to allow for national contexts. It is recommended that the structure used be aligned with ISIC. The columns for government and households reflect their consumption of ecosystem services, while the column for exports reflects the use of ecosystem services by non-residents (e.g. recreation-related services used by international visitors). For analytical purposes, under the column for households, the households category may be broken down (e.g. by income quintile or by rural/urban households) to distinguish different types of households and thereby provide further detail on the distribution of the use of ecosystem services. 7.14 In the use table, ecosystem types are shown for the three realms (of the four pre- sented in IUCN GET) that are within scope of ecosystem accounting. This higher-level presentation is used for demonstration purposes only and more detailed classes can be provided. The recording of intermediate services by ecosystem type is not applica- ble for provisioning or cultural services, that is, all of these types of services are final ecosystem services and hence cannot be used by an ecosystem type. Where there are intermediate services that appear to be provisioning services in nature, as reflected, for example, in the connections between trophic layers of fish or the consumption of water by animals, those services should be recorded as part of nursery population and habitat maintenance services. 7.15 In general, the measurement scope of a supply and use account is established on the basis of the ecosystem services supplied by all ecosystem types within an EAA. Ensuring a balance in the recording of supply and use entails the need to record the use of ecosystem services by non-resident economic units, that is, economic units that have a centre of economic interest outside the EAA. This may arise, for exam- ple, in the case of cultural services supplied to visitors living outside the EAA. A column at the centre of the use table allows these flows to be recorded as exports of ecosystem services. It is to be noted that the total use of final ecosystem services supplied by ecosystems within an EAA includes exports of final ecosystem services. Imports of ecosystem services supplied by ecosystem assets outside the EAA may also be recorded. Such entries are made in the final column of the supply table. Recording of imports and exports of ecosystem services is discussed further in section 7.2.6. SUPPLY services provi- sioning Table 7.1a services services Biomass (reference list) Ecosystem services Water supply Provisioning services services ing services provisioning provisioning Wild fish and other natural Genetic material services Wild animals, Global climate regulation Regulating and maintenance Rainfall pattern regulation biomass provi- Other provisioning services Livestock provi- Grazed biomass sioning services sioning services sioning services aquatic biomass plants and other Wood provision- Crop provisioning Aquaculture provi- UNIT MEA- MENT SURE- Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Industries Water supply; sewerage, waste management and remediation activities Services Economic units Other industries Total industry Government consumption Household consumption Total supply by resident economic units Supply by non-resident economic units – Imports Ecosystem services supply and use account in physical terms – supply table Total supply by economic units Tropical-subtropical lowland rainforests T1.1 Tropical-subtropical dry forests and scrubs T1.2 forests Tropical-subtropical montane rainforests T1.3 subtropical T1 Tropical- Tropical heath forests T1.4 Boreal and temperate high montane forests and T2.1 woodlands Deciduous temperate forests T2.2 … … Terrestrial woodlands T2 Temperate- boreal forests and Temperate pyric sclerophyll forests and woodlands T2.6 … … … … … … … T7 T7.5 Derived semi-natural pastures and old fields F1 Permanent upland streams F1.1 Ecosystem type (based on the EFG level 3 of IUCN GET) … … … Freshwater Intermittently closed and open lakes and lagoon FM1 FM1.3 M1 Seagrass meadows M1.1 … … … Marine Coastal saltmarshes and MFT1 reedbeds MFT1.3 Total supply by resident ecosystem assets Supply from non-resident ecosystem assets - Imports Total supply by ecosystem assets TOTAL SUPPLY System of Environmental-Economic Accounting – Ecosystem Accounting 176 Table 7.1a Ecosystem services supply and use account in physical terms – supply table (continued ) SUPPLY Economic units Ecosystem type (based on the EFG level 3 of IUCN GET) Industries Terrestrial Freshwater Marine T1 Tropical- T2 Temperate- subtropical boreal forests and forests woodlands … T7 F1 … FM1 M1 … MFT1 Tropical-subtropical lowland rainforests Tropical-subtropical dry forests and scrubs Tropical-subtropical montane rainforests Tropical heath forests Boreal and temperate high montane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll forests and woodlands … … … Derived semi-natural pastures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoon Seagrass meadows … Coastal saltmarshes and reedbeds MEA- SURE- remediation activities Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Water supply; sewerage, waste management and Services Other industries Government consumption Household consumption Supply by non-resident economic units – Imports Supply from non-resident ecosystem assets - Imports T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 Ecosystem services MENT Total industry Total supply by resident economic units Total supply by economic units Total supply by resident ecosystem assets Total supply by ecosystem assets TOTAL SUPPLY (reference list) UNIT Local (micro and meso) climate regulation services Air filtration services Soil quality regulation services Soil and sediment retention services Solid waste remediation services Water purification services Water flow regulation services Flood control services Storm mitigation services Noise attenuation services Accounting for ecosystem services in physical terms Pollination services Biological control services Nursery population and habi- tat maintenance services Other regulating and mainte- nance services Cultural services Recreation-related services Visual amenity services Education, scientific and research services Spiritual, artistic and symbolic 177 services Other cultural services Table 7.1b Ecosystem services supply and use account in physical terms – use table 178 USE Economic units Ecosystem type (based on the EFG level 3 of IUCN GET) Industries Terrestrial Freshwater Marine Table 7.1b T1 Tropical-subtropical T2 Temperate-boreal Ecosystem services supply and use account in physical terms – use table forests forests and woodlands … T7 F1 … FM1 M1 … MFT1 Tropical-subtropicalowland rainforests Tropical-subtropical dry forests and scrubs Tropical-subtropical montane rainforests Tropical heath forests Boreal and temperate high montane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll forests and woodlands … … … Derived semi-natural pastures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoons Seagrass meadows … Coastal saltmarshes and reedbeds MEASURE- Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Water supply; sewerage, waste management and remediation activities Services Other industries Government consumption Household consumption Exports - final ecosystem services Exports – intermediate services Ecosystem services T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 MENT Total industry Total use by resident economic units Total use by economic units Total use by resident ecosystem assets Total use by ecosystem assets TOTAL USE (reference list) UNIT Provisioning services Biomass Crop provisioning provi- sioning Grazed biomass provisioning Livestock provi- sioning services Aquaculture provisioning services Wood provision- ing services Wild fish and other natural System of Environmental-Economic Accounting – Ecosystem Accounting aquatic biomass provisioning services Wild animals, plants and other biomass provi- sioning services Genetic material services Water supply Other provisioning services Regulating and maintenance services Global climate regulation services Rainfall pattern regulation services Local (micro and meso) climate regulation services Table 7.1b Ecosystem services supply and use account in physical terms – use table (continued ) USE Economic units Ecosystem type (based on the EFG level 3 of IUCN GET) Industries Terrestrial Freshwater Marine T1 Tropical-subtropical T2 Temperate-boreal forests forests and woodlands … T7 F1 … FM1 M1 … MFT1 Tropical-subtropicalowland rainforests Tropical-subtropical dry forests and scrubs Tropical-subtropical montane rainforests Tropical heath forests Boreal and temperate high montane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll forests and woodlands … … … Derived semi-natural pastures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoons Seagrass meadows … Coastal saltmarshes and reedbeds MEASURE- Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Water supply; sewerage, waste management and remediation activities Services Other industries Government consumption Household consumption Exports - final ecosystem services Exports – intermediate services Ecosystem services T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 MENT Total industry Total use by resident economic units Total use by economic units Total use by resident ecosystem assets Total use by ecosystem assets TOTAL USE (reference list) UNIT Air filtration services Soil quality regulation services Soil and sediment retention services Solid waste remediation services Water purification services Water flow regulation services Flood control services Storm mitigation services Noise attenuation services Pollination services Accounting for ecosystem services in physical terms Biological control services Nursery population and habi- tat maintenance services Other regulating and mainte- nance services Cultural services Recreation-related services Visual amenity services Education, scientific and research services Spiritual, artistic and sym- bolic services 179 Other cultural services 180 System of Environmental-Economic Accounting – Ecosystem Accounting 7.16 A single supply and use table is compiled for one accounting period (usually one year), that is, the entries for supply and use show the total flows of each ecosys- tem service for that time period. Ideally, a time series of SUTs would be compiled to enable analysis of changes in the patterns of supply and use over time; however, it may be more practical initially to compile tables once every three or five years to allow for the development of methods and experience. Where a time series of SUTs is compiled, different presentations and arrangements of the components may be required to support the demonstration of time as an additional dimension. 7.17 There may also be considerable interest in the presentation of data on the sup- ply and use of ecosystem services in the form of maps. Overlaying maps for different ecosystem services can provide a ready source of information on places that might be considered ecosystem services “hotspots”. It is common for estimates of the supply and use of ecosystem services to be compiled using detailed spatial data so that the flows of ecosystem services can be attributed to specific locations and hence to associated ecosystem types. Where this compilation approach is used, the entries in the SUT that presents flows by ecosystem type will be an aggregation of data drawn from finer scales and the maps and tables will therefore be complementary outputs of the same underlying data. 7.18 Where more aggregate, economy-wide methods are used, for example, where ecosystem service flows are based on aggregate visits to national parks or total vol- umes of timber harvested for a country, the attribution to ecosystem type may be more generic or stylized, and there may be no accompanying mapped outputs. 7.19 In concept, where compilation of ecosystem services is undertaken using fine- level spatial data, it would be possible to present information on the supply and use of ecosystem services for each individual ecosystem asset. However, in practice, there is no requirement for reporting at this level of detail, especially for accounts covering a national scale or large areas within a country. Thus, the SUTs shown in tables 7.1a and 7.1b focus on recording at the level of ecosystem types regardless of their location. 7.2.2 Applying general supply and use principles in ecosystem accounting 7.20 In concept, in ecosystem accounting, it is considered that each ecosystem sup- plies or contributes to the supply of a set or bundle of ecosystem services. The fol- lowing discussion maintains the focus on explaining the principles and treatments of accounting for ecosystem services at the level of individual ecosystem assets. It is recognized that in practice, compilation may commonly be undertaken for ecosystem types and, as noted in the previous subsection, the data presented in an SUT are likely to concern ecosystem types. 7.21 As described in chapter 6, ecosystem services are defined as contributions to benefits and encompass a wide range of services provided to economic units (includ- ing households, businesses and governments) and to other ecosystem assets. Distin- guishing between services and benefits is meaningful because that distinction: • Facilitates distinguishing between final ecosystem services and flows of products (SNA benefits) currently recorded in the SNA • Recognizes the role of human inputs in the production process and that the contribution of ecosystem services to benefits may change over time (owing, for example, to changes in the methods of production) Accounting for ecosystem services in physical terms 181 • Identifies the appropriate target for monetary valuation since the value of final ecosystem services represents only a portion of the overall monetary value of the corresponding benefits 7.22 These features also allow clear articulation and attribution of flows between eco- system assets and economic units that are represented in accounting terms as supply- use pairs, that is, as transactions. 7.23 As described above, the ecosystem services flow account is structured to record the flows of ecosystem services supplied by ecosystem types and used by economic units during an accounting period. There is no accumulation of ecosystem services such that supply over an accounting period might be matched with an increase in accumulated ecosystem services available for use in future accounting periods. While measurement of the potential or sustainable level of supply that could be delivered by an ecosystem asset is highly relevant, this is not the focus of recording in the supply and use accounts. Section 6.5 provides a discussion on the related concept of ecosys- tem capacity. 7.24 Recording supply as equal to use means that, from an accounting perspective, ecosystem services are revealed transactions or exchanges. Since, in concept, each recorded exchange is observable, it follows that each ecosystem service is separable, even though the processes through which different ecosystem services are supplied are connected to each other. 7.25 In addition to the requirement of matched supply and use entries, the following key features of supply and use accounting are applied: • Supply is attributed to an ecosystem type. Where an ecosystem service is supplied jointly by a combination of ecosystems, it is assumed that, if required, the supply can be allocated to individual assets using spatial allo- cation methods or measurement conventions. This topic is discussed fur- ther in section 7.3. • Use of final ecosystem services is attributed to resident economic units (business, government, households) or non-resident economic units (exports). • Use of intermediate services is attributed to an ecosystem type. • For any single transaction of an ecosystem service (i.e. where there is a supply-use pair), the magnitude of the flow is the same for both supply and use in terms of quantity and monetary value. • Where there are multiple transactions of a single ecosystem service (i.e. where there are multiple supply-use pairs), the SUT allows supply from multiple ecosystem types and use by multiple users to be recorded. Where a total flow pertaining to multiple ecosystem types or multiple users is esti- mated, attribution to relevant ecosystem types and users would be required to best reflect the underlying transactions. 7.26 Using these principles allows the data recorded in the SUT to support the mon- etary valuation of ecosystem services (described in chap. 9) and to be considered in alignment with the economic data recorded in the SNA SUT (see 2008 SNA, chap. 14). 7.27 In some cases, the physical flows recorded in the ecosystem services flow account will be the same as those recorded in the PSUTs and asset accounts in the SEEA Cen- tral Framework (chaps. III and V). For example, the flow of timber resources harvested from non-cultivated forests will be the same in terms of the reduction in the stock of timber resources in the asset account and the flow of biomass provisioning ser- vices in the ecosystem services flow account. This does not represent double counting 182 System of Environmental-Economic Accounting – Ecosystem Accounting since each table is designed for a distinct purpose and the flow happens to be relevant in both cases. Compilers are encouraged to cross-check among the various tables to ensure that users are presented with a coherent set of data and to optimize the use of source data and the alignment of methods. 7.2.3 Ecosystem services and benefits 7.28 Where the flow of ecosystem services is an input to the production of an SNA benefit, a supply and use pair is recorded for the ecosystem service in the ecosystem services supply and use account and a separate supply and use pair is recorded in the standard economic supply and use accounts for the transaction in the associated eco- nomic good or service, that is, the SNA benefit. 7.29 For example, the supply of biomass provisioning services for rice from a crop- land is recorded in the ecosystem services supply and use account as a use of that ecosystem service by a farmer. Entries for these flows are shown in table 7.2. Table 7.2 Basic ecosystem services PSUT No. 1 Ecosystem assets Economic units (selected) (selected types) Meas- urement Agricul- Govern- House- Grass- units ture ment holds Forest Cropland land SUPPLY ES No. 1: Biomass provi- Tons 100 sioning services (rice) Abbreviation: ES, final ecosystem USE service. Note: A grey cell signifies “not ES No. 1: Biomass provi- Tons 100 sioning services (rice) applicable”. 7.30 This recording allows the supply and use of ecosystem services to be connected to entries for the supply and use of goods and services currently recorded in stand- ard economic SUTs. Thus, in this example, flows of biomass provisioning services can be linked to supply-use pairs for the harvested rice and other processed goods that are recorded in the economic supply and use tables reflecting a series of transactions between a farmer, manufacturers and households. It should be noted that the entries in the economic SUTs are in monetary terms. The compilation of extended SUTs build- ing on ecosystem services flow accounts in monetary terms is described in chapter 11. 7.31 Where the flow of ecosystem services is an input to the production of a non-SNA benefit, for example, the contribution of air filtration services to cleaner air, a supply and use pair is recorded for the ecosystem service in the SUT by adding a row. Entries representing flows for both air filtration and biomass provisioning services are shown in table 7.3. 7.32 For many ecosystem services that contribute to non-SNA benefits, the use of the ecosystem service is attributed to the receiver of the non-SNA benefit. In some cases (e.g. for recreation-related services), this is very direct. However, where the ecosystem service contributes to a non-SNA benefit that is considered “collective”, the use of the ecosystem service is attributed to the highest level of general government in the EAA, which is considered to use the service on behalf of society as a whole. According to the 2008 SNA (para. 9.4), “a collective consumption service is a service provided simulta- neously to all members of the community or to all members of a particular section of Accounting for ecosystem services in physical terms 183 the community, such as all households living in a particular region” and “[c]ollective services are the ‘public goods’ of economic theory”. Collective services will thus be both non-rival and non-excludable. The primary example of such an ecosystem ser- vice is global climate regulation, the benefits of which are enjoyed by all members of the community. Table 7.3 Basic ecosystem services PSUT No. 2 Ecosystem assets (selected Economic units (selected) types) Meas- urement Agricul- Govern- House- Grass- units ture ment holds Forest Cropland land SUPPLY ES No. 1: Biomass provi- Tons 100 sioning services (rice) ES No. 2: Air filtration Tons 50 services (PM2.5) USE Abbreviations: ES, final ecosystem service; PM2.5, particulate mat- ES No. 1: Biomass provi- Tons 100 ter less than 2.5 micrometres in sioning services (rice) diameter. ES No. 2: Air filtration Tons 50 Note: A grey cell signifies “not services (PM2.5) applicable”. 7.33 There are cases where a single ecosystem service (e.g. flood mitigation) is used by a number of economic units. In this context, the service will possess some of the characteristics of public goods, although specific beneficiaries can be identified. Ideally, the service should be recorded in the use table as received by multiple eco- nomic units, with a distinction being made, for example, between use by households and use by businesses. However, making such a use allocation may be difficult in prac- tice, and, in this case, it is recommended that the use of the service be allocated to general government on behalf of all users. 7.2.4 Recording intermediate services 7.34 Where there is a sequence of intermediate ecosystem services and final ecosys- tem services, recording the supply and use of each service ensures that the appropriate net effect is shown. Using an example involving the ecosystem services of pollina- tion and biomass provisioning (in this example, provisioning of melons), the supply of pollination services by one ecosystem (natural grassland, where the pollinators are assumed to live) for use in another ecosystem (cropland, where the melons are polli- nated) is recorded as supply and use of an intermediate service. Supply of the interme- diate service of pollination is attributed to grassland and use of the pollination service is attributed to cropland (as an input to its supply of final ecosystem services, that is, the supply of biomass provisioning). The relevant entries are shown in table 7.4. 7.35 By ensuring that a sequence of supply and use entries are recorded for each type of ecosystem service, the overall contribution of each ecosystem can be determined. For example, through consideration of the column for cropland, the output of bio- mass provisioning services can be seen to require the input of pollination services from grassland ecosystems. It is to be noted, however, that no aggregation across rows should be undertaken given that the entries reflect the use of different measurement units. Further, it should be noted that there is no double counting implied through the 184 System of Environmental-Economic Accounting – Ecosystem Accounting Table 7.4 Basic ecosystem services PSUT No. 3 Ecosystem assets (selected Economic units (selected) types) Meas- urement Agricul- Govern- House- Grass- units ture ment holds Forest Cropland land SUPPLY ES No. 1: Biomass provi- Tons 80 sioning services (melons) ES No. 2: Air filtration Tons 50 services (PM2.5) Abbreviations: ES, final ecosystem service; IS, intermediate ecosys- IS: Pollination services Number 2 000 tem service; PM2.5, particulate of visitsa matter less than 2.5 micrometres USE in diameter. ES No. 1: Biomass provi- Tons 80 Note: A grey cell signifies “not sioning services (melons) applicable”. a  ES No. 2: Air filtration Tons 50 Number of pollinator visits is services (PM2.5) one potential measure of the quantity of pollination services. IS: Pollination services Number 2 000 Other metrics may be used. of visitsa recording of intermediate services since the user of the intermediate service is different from the user of the associated final ecosystem service. 7.36 In the context of recording physical flows of ecosystem services for cultivated biomass production (see sect. 6.4.1), this approach to recording intermediate services can be applied irrespective of whether the relevant final ecosystem services are meas- ured using gross biomass harvested as a proxy or using a share of biomass harvested to represent the ecosystem contribution. In both of these approaches, the intermedi- ate service flows can be considered inputs to the final flows. However, where the final ecosystem services are measured using a range of individual ecosystem inputs, such as pollination, no measure of biomass harvested is recorded and each input is recorded as a final ecosystem service. It is to be noted that the SUT format is designed for record- ing multiple connections. However, before the entries are made, the logic of those con- nections needs to be well understood and to reflect a coherent and robust description of the relationship between ecosystems and human activity in biophysical terms. In the context of cultivated biomass production, this should entail consideration of type of biomass (e.g. crop type), location and method of cultivation. 7.2.5 Recording abiotic flows 7.37 Chapter 6 identified a range of environmental flows, for example, concerning the supply of energy, that do not meet the definition of ecosystem services and are considered abiotic flows. These abiotic flows may be relevant in the assessment of the use of specific ecosystems. For example, in the production of solar energy, it is common to install solar panels, which reduce the potential to use the same location for the generation of eco- system services. Thus, recording abiotic flows and attributing their supply to individual locations can help to provide a more comprehensive picture of the use of ecosystems. 7.38 Where recording abiotic flows is desired, additional rows may be added to the SUT (tables 7.1a and 7.1b). Each additional row in the supply table would display the supply of the abiotic flow from the relevant ecosystem type (e.g. electricity generated Accounting for ecosystem services in physical terms 185 from wind turbines on cropland). Each additional row in the use table would display the use of that abiotic flow by economic units (e.g. electricity generators). Table 7.5 shows how such flows can be incorporated in the supply and use framing through an example where an electricity generator uses wind turbines on cropland to generate electricity. 7.2.6 Exports and imports of ecosystem services 7.39 The measurement scope for ecosystem accounts is set by the EAA, for example, the economic territory of a country including its EEZ. As noted above, for ecosystem services flow accounts this entails a focus on the ecosystem services supplied by all eco- systems within the EAA. There is a range of situations in which the supply of ecosystem services is not used by economic units that are resident78 in the EAA, that is, situations 78 The concept of residency of involving exports of final ecosystem services; and cases where resident economic units economic units is applied use ecosystem services from outside the EAA, that is, cases involving imports of final based on the definitions and principles of the SNA and the ecosystem services. There are also situations where dependencies between ecosystem Balance of Payments and assets cross EAA boundaries, that is, situations involving flows of intermediate ser- International Investment Posi- vices. The present section discusses relevant treatments. tion Manual, 6th ed. (BMP6) (Washington, D.C., Internation- 7.40 In the following discussion, it is assumed that the EAA concerns a country. In al Monetary Fund, 2009). principle, the same considerations can be applied at a subnational level where the terms exports and imports are applied to flows between, for example, administrative regions. In practice, recording flows among subnational areas requires significant coordination of data although, given the increasing use of GIS techniques, this task may become more manageable. Table 7.5 Basic ecosystem services PSUT No. 4 Ecosystem assets (selected Economic units (selected) types) Meas- Elec- urement Agricul- tricity House- Grass- units ture supply holds Forest Cropland land SUPPLY ES No. 1: Biomass provi- Tons 80 sioning services (melons) ES No. 2: Air filtration Tons 50 services (PM2.5) IS: Pollination services Number 2 000 of visitsa AB: Energy from wind kWh 10 000 power Abbreviations: AB, abiotic flow; ES, final ecosystem service; IS, USE intermediate ecosystem service; ES No. 1: Biomass provi- Tons 80 kWh, kilowatt hours; PM2.5, sioning services (melons) particulate matter less than 2.5 micrometres in diameter. ES No. 2: Air filtration Tons 50 services (PM2.5) Note: A grey cell signifies “not applicable”. IS: Pollination services Number 2 000 a Number of pollinator visits is of visitsa one potential measure of the AB: Energy from wind kWh 10 000 quantity of pollination services. power Other metrics may be used. 186 System of Environmental-Economic Accounting – Ecosystem Accounting 7.41 Six cases need specific consideration. First, there are cases where people are visit- ing from outside an EAA, for example, tourists, who are commonly users of recreation- related services supplied by ecosystems within the EAA. In this case, measurement requires an allocation of the total supply of the service to that group of people as non- residents, that is, the services are recorded as exports. 7.42 Second, there are many cases of exports (and imports) of biomass and related products (e.g. rice, wheat, timber, fish) between countries. In ecosystem accounting, these flows of products are not considered flows of ecosystem services and therefore are not recorded as exports in the ecosystem services flow account. Instead, the eco- system services can be viewed as embodied in the products traded, with the flows of products recorded in the standard economic SUTs and related balance-of-payments statistics. Analysis of the extent to which traded products encompass embodied eco- system services can be undertaken, and this may represent an important contribution to the understanding of how consumption in one country may have impacts on the ecosystems of other countries. 7.43 Third, there are often situations, particularly involving regulating and main- tenance services, where the users of the ecosystem service are located outside the ecosystem supplying the service. For example, users of air filtration services provided by a forest usually do not live in the forest but in neighbouring communities. Further, the supply of water flow regulation services often involves a number of ecosystem assets across a catchment, with those communities that are being supplied located in just one part of the catchment. Where both the supplying ecosystem assets and the location of the users are in the same EAA, no specific treatment needs to be noted. However, where the location of use is outside the EAA, an export of a final ecosystem service should be recorded to ensure a balance between supply and use. Conversely, where the supply of the service is outside the EAA, an import of a final ecosystem service should be recorded. 7.44 Fourth, there is a subset of the ecosystem services considered in paragraph 7.43 that comprises collective services that are not attributable to individual house- holds or businesses but are treated instead as being used by general government on behalf of the community. The primary example of such services, as noted in paragraph 7.32 above, are global climate regulation services and, indeed, these ser- vices can be considered to be of benefit globally, to all people, rather than only in a more localized, ecosystem asset context. By convention, collective services are recorded as used by the government that has jurisdiction over the supplying ecosys- tem assets, that is, jurisdiction over the EAA, and no exports of collective services are recorded in the system. 7.45 Fifth, consistent with the treatments in the SNA and the SEEA Central Frame- work, the catching of fish by non-resident operators within a country’s EEZ is treated as production of the non-resident operator. In ecosystem accounting, the export of a biomass provisioning service should be recorded in the supply table, which recognizes the input of that country’s ecosystems to the production of other countries. A cor- responding import of an ecosystem service should be recorded in the accounts of the country in which the fishing operator is resident. 7.46 Sixth, conceptually, there may be flows of intermediate services between EAAs. Examples include provision of fish nursery services by a marine ecosystem in one EAA to biomass provisioning services provided in another EAA, and migration of species between countries, as supported by particular ecosystems, which underpins recreation-related services. However, these flows should be recorded only in specific circumstances of analytical interest, that is, either (a) where the flow of the intermedi- Accounting for ecosystem services in physical terms 187 ate service into an EAA (recorded as an import) can be clearly linked to a final ecosys- tem service supplied by an ecosystem asset within the EAA; or (b) where the flow of the intermediate service from an EAA (recorded as an export) can be clearly linked to a final ecosystem service supplied by an ecosystem asset outside the EAA. 7.47 Given that the measurement scope of an ecosystem services flow account is determined by the set of supplying ecosystem assets within an EAA, there is gener- ally less focus on imports of ecosystem services, which, by definition, are supplied by ecosystems outside the EAA. Indeed, this reality implies that there would likely be a larger measurement challenge in quantifying imports of ecosystem services. Thus, the measurement scope of imports should be determined through identification of flows of ecosystem services that are of particular interest, for instance, in establishing a more complete picture of the use of ecosystem services by resident economic units. For example, the use of recreation-related services by residents who visit locations out- side the EAA may be of such interest. Where imports of final ecosystem services are recorded, they are entered in the supply table, and a corresponding use is recorded by type of economic unit in the use table. 7.48 In all cases, appropriate allocation and recording of exports and imports of eco- system services require an understanding of the location of supply and use and the residency of the economic units involved. This is particularly relevant when an ecosys- tem service is supplied from a combination of ecosystems within a landscape context in which the ecosystems involved are located on different sides of an administrative boundary (e.g. where the administrative boundary is defined by a river). Further dis- cussion on the spatial allocation of the supply and use of ecosystem services is pro- vided in section 7.3. 7.2.7 Recording cultural services 7.49 Cultural services entail an interaction between people and ecosystems. Con- sequently, the quantification of those services generally reflects measurement of the type, number of occurrences and/or quality of the interaction. For example, recrea- tion-related services are commonly quantified using the number of visits to a specific natural location. While these measures are not a direct quantification of the ecosystem contribution, they are considered a suitable proxy that can be improved by taking into consideration, as far as possible, the number and length of time of interactions with specific features and characteristics of the ecosystems concerned. 7.50 At the same time, for many cultural services – but primarily for recreation- related services – there are businesses involved in facilitating and supporting interac- tions between people and ecosystems. Broadly, the types of businesses that are involved either (a) supply access to the ecosystem and/or facilitate activities/experiences within the ecosystem (e.g. covering entry fees, guides, tour operators); or (b) supply goods and services to visitors to support their travel to, and time at, an ecosystem (e.g. hotels, restaurants, transport companies, fuel suppliers). 7.51 To varying degrees, all of these businesses can be seen to have a connection to the ecosystem and may be considered to have included inputs of ecosystem services in their supply of goods and services to visitors. This interpretation is most appropriate in the context of the first type of business, for which it seems likely that, where pay- ments are made by visitors to those businesses (i.e. reflecting an economic transac- tion between the two parties), there is an implicit payment for an ecosystem service. For transactions involving the second type of business, any ecosystem contribution is likely to be much smaller. For accounting purposes, challenges lie in appropriately dis- tinguishing the ecosystem services within transactions already recorded in the stand- 188 System of Environmental-Economic Accounting – Ecosystem Accounting ard economic accounts and identifying the additional contribution of the ecosystem to the overall benefits that arise from people’s interactions with ecosystems. 7.52 The recommended treatment for the ecosystem services supply and use account in physical terms is to record a supply and corresponding use for each visitor interac- tion, showing the supply from the relevant ecosystem type and households as users of the service. This flow should be recorded irrespective of the degree to which there is involvement of businesses in facilitating or supporting an activity. 7.53 In addition, the connection between the ecosystem and relevant businesses should be recorded in a supplementary row. The addition of this row does not imply the need to record additional supply; rather, it enables complementary data on the use of ecosystem services to be provided. Both entries in the use table reflect final eco- system services. These entries are shown in table 7.6, using suppliers of recreational services as an example of types of business. 7.2.8 Linking the supply of ecosystem services to economic units 7.54 The supply and use tables described in this chapter allow for the recording of flows between ecosystem types as suppliers and economic units as users. There may be interest in a complementary presentation of the data in which the economic units that either own or manage the areas associated with the ecosystem types are shown as sup- pliers. For example, farmers may be shown as suppliers of biomass provisioning ser- vices, global climate regulation services and water flow regulation services reflecting a bundle of ecosystem services supplied by the ecosystem assets within the boundaries of the farms that they own or manage. 7.55 Presentation of data in this way must be handled with care since there is no necessary one-to-one link between ecosystem types and economic units. Most com- monly, there is a combination of ecosystem types within a single parcel of land that is owned or managed by an economic unit. In the first instance, then, the starting point for organization of data on the flows of ecosystem services should follow the approach described in chapter 4 in the presentation of ecosystem extent data with respect to economic units. Table 7.6 Basic ecosystem services PSUT No. 5 Economic units (selected) Ecosystem assets (selected types) Measure- ment Recreation House- units services holds Forest Cropland Grassland SUPPLY ES No. 3: Recreation- Number of 180 related services visits USE ES No. 3: Recreation- Number of 180 related services visits Abbreviation: ES, final ecosystem Supplementary data service. Note: A grey cell signifies “not Use of ES No. 3 by Number of 180 applicable”. business visits Accounting for ecosystem services in physical terms 189 7.56 Through use of information on the relationship between ecosystem types and economic units, an alternative supply table may be structured, building on table 7.1a, to show under each ecosystem type (e.g. forests), the range of different types of eco- nomic units grouped, for example, by industry. Another option would be to show for each type of economic unit (e.g. agriculture), the range of ecosystem types that it man- ages. Under either presentation, the total supply of a given ecosystem service from a specific ecosystem type should be the same as that recorded following the structure of the supply table shown in table 7.1a. It is also to be noted that the entries in the use table are unaffected by the alternative presentations of the supply table. 7.57 Besides presentation in tabular form, the presentation of this type of information in maps, by overlaying data on ownership and management by economic units, may be particularly useful for some types of policymaking and analysis. 7.3 Considerations in accounting for ecosystem services in physical terms 7.3.1 Spatial allocation of ecosystem services supply and use 7.58 A number of ecosystem services, particularly regulating and maintenance ser- vices but also some cultural services, are generated at landscape scale in the sense that this involves a range of ecosystem assets of different types. Examples include the contributions of different ecosystems to water flow regulation and soil erosion control services, which are commonly measured and modelled at a catchment scale rather than for individual ecosystem assets within the catchment. 7.59 For ecosystem accounting, it is appropriate for the measurement of the total sup- ply of an individual ecosystem service to be undertaken at a larger, multi-ecosystem scale in order to derive the best estimate of supply. However, the logic of ecosystem accounting further implies the allocation of total supply to the various ecosystem types involved and, conceptually, to individual ecosystem assets. This allocation can in turn support, for example, an understanding of the critical ecosystems within a catchment. 7.60 In addition to allocating supply to ecosystem types, there is a general interest in linking the supply and use of ecosystem services to the location of ecosystem assets, as reflected in the measurement of ecosystem extent. Such spatial allocation is conceptu- ally feasible since ecosystem services are spatial phenomena. 7.61 Generally, ecosystem services may be supplied from locations that are the same as, or different from, the locations in which they are used and where the benefits are received. Since ecosystem services have varying spatial characteristics and follow cer- tain flow paths (Bagstad and others, 2013; Costanza, 2008), linkages between supply and use can occur via several pathways: Specifically: • Some benefits from ecosystem services (in situ ecosystem services) are received in the same place in which they are supplied. Most provisioning services fall into this category. • Some benefits from ecosystem services (omnidirectional ecosystem ser- vices) are received in the surrounding landscape or beyond. Global climate regulation services are an example of this type of services, where the benefits are global but the ecological process concerned can occur in any ecosystem. • Some benefits from ecosystem services (directional ecosystem services) are received downstream or downslope from where they are supplied. For 190 System of Environmental-Economic Accounting – Ecosystem Accounting example, water may be purified upstream from where the consumption of water occurs. Directional ecosystem services can also depend on spatial proximity, that is, people may receive benefits by being near but not neces- sarily in the relevant ecosystem. 7.62 Building on this framing, the following considerations apply in allocating the supply and use of ecosystem services to ecosystem types and to economic units. Provisioning services are treated as supplied and used in the same ecosystem since, in accounting terms, the exchange between ecosystem and economic unit occurs at the point of harvest, which must take place in situ. Subsequent transactions involv- ing the processing, transportation and sale (including potential export) of harvested materials are the subject of standard economic accounting and are not the focus of ecosystem accounting. 7.63 Regulating and maintenance services are commonly supplied by ecosystems or combinations of ecosystems in one location and used by economic units in other loca- tions. Further, there is a range of cases where a single service is supplied to a range of different economic units that are present in a single area. Specific examples here con- cern the services of ecosystems used in mitigating the effects of extreme events. For accounting purposes, there remains a need to ensure that total supply and total use are balanced but, in concept, allocation across locations involving multiple ecosystem assets and multiple users can be readily recorded using SUTs. 7.64 Many cultural services are supplied and used in situ since they are based on direct interactions between people and ecosystems. Recreation-related services are the clearest example. At the same time, there are a range of cultural services involving indirect connections and therefore the locations of supply and use would be different. It is to be noted that the location of use of a service is not dependent on the location of residence of the user. Users of in situ ecosystem services may be resident in the ecosys- tem, near the ecosystem or in another country. In all cases, the location of use is the ecosystem, but the differences in residence are reflected in the classes of user that are identified, for example, through the recording of exports (see sect. 7.2.6). 7.65 For the purposes of compiling an SUT following the structure of tables 7.1a and 7.1b, it is necessary to allocate the supply of ecosystem services to ecosystem types, but it is not necessary to (a) allocate that supply to individual ecosystem assets in spe- cific locations; or (b) record the location of the economic units using the ecosystem services. However, for a range of purposes, especially to support spatial planning and assessment, attribution of ecosystem services supply and use to locations is likely to be of considerable significance. Further, for many ecosystem services, particularly regulating and maintenance services, compilation methods are likely to involve the use of detailed spatial data, in which case allocation to locations can be viewed as a by-product. 7.66 The process of allocating ecosystem services to locations is known as ecosystem services mapping. In this regard, key concepts of relevance for ecosystem accounting are the service providing area (SPA) and the service benefiting area (SBA). For each ecosystem service, the delineation of the SPA and the SBA provides the location and spatial boundary, which would reflect the location of supply and use, respectively. For accounting purposes, it is appropriate to link the SPA with maps of ecosystem extent classified by ecosystem type and to link the SBA with information on the location of different types of economic units (including businesses, government, households) using, for example, cadastral information, as well as with information on the location of users that are resident outside the EAA. Guidance on ecosystem services mapping is available in Burkhard and Maes, eds. (2017). Accounting for ecosystem services in physical terms 191 7.3.2 Determining ecosystem services measurement baselines 7.67 Entries in the ecosystem services flow accounts reflect a total flow over an accounting period, for example, total fish caught from marine areas during a year or total number of plants pollinated. This is different from measuring the change in flow associated with a particular action (e.g. change in pollination due to reductions in the number of pollinators) or measuring the flows relative to different ecosystem types (e.g. the relative contribution of forests and grasslands in water regulation). To ensure that all accounting entries in the ecosystem services flow accounts refer to a total flow and can be compared across different contexts, ecosystem services measurement baselines79 are used. 79 Other labels that may be applied include “reference 7.68 Ecosystem services measurement baselines are applied directly in the measure- level” and “counterfactual”. The ment of regulating and maintenance services but are implicit in the measurement of term “measurement baseline” all ecosystem services. Thus, for provisioning services and cultural services, where it is preferred for use in this is possible to observe a direct interaction between people and ecosystems, the implicit context. baseline is zero, that is, the quantification of the flow assumes implicitly the potential for no harvest or no interaction. The quantification of the ecosystem services is there- fore appropriately focused on measuring the quantity and type of biomass harvested or the number and type cultural interactions. 7.69 The identification of regulating and maintenance services entails a focus on the extent to which ecological processes contribute to environmental conditions that are beneficial to people and their activities. These processes may involve the remedia- tion or mitigation of a potentially negative impact. For example, air filtration services reduce ambient air pollution concentrations. The negative impacts (a) may be caused by human activities (e.g. most forms of air pollution, GHG emissions), (b) may result from natural events (e.g. storm surges) or (c) may result from natural events that have an increased likelihood of occurring because of human activities (e.g. landslides with a likelihood of occurring because of deforestation activity). However, not all regulating and maintenance services involve the remediation of a negative impact (e.g. pollina- tion involves transferring pollen to enable plant sexual reproduction). In these cases, the implicit measurement baseline is zero (i.e. in the case of pollination, there is no transfer of pollen). 7.70 The quantification of the supply of regulating and maintenance services gener- ally depends directly and significantly upon knowledge of the ecosystem type and its key characteristics, since the role of the ecosystem in supplying services will vary as type and characteristics change. Thus, in assessing the extent to which a particu- lar ecosystem provides regulating and maintenance services, it is normal to make an assumption regarding what services would be supplied if the ecosystem type or its characteristics were different. For example, forests are better than grasslands at cap- turing air pollutants, and wetlands with well-structured and diverse vegetation are better than wetlands with little vegetation at purifying water of pollutants. 7.71 The comparison of two different ecosystem contexts, one being the measurement baseline context, provides a basis for quantifying the role of the ecosystem in supply- ing a given service. Thus, an ecosystem service measurement baseline is the level of service supply with which a regulating or maintenance service provided by an ecosys- tem is compared in order to quantify the service. 7.72 For ecosystem accounting, the use of a common measurement baseline ensures comparability across ecosystem types and across different services. The default meas- urement baseline is zero, reflecting the assumption that the ecosystem does not supply a particular regulating service. In cases where a zero level of service supply cannot 192 System of Environmental-Economic Accounting – Ecosystem Accounting be modelled or meaningfully identified, the baseline should be the amount of service supplied by bare land (i.e. the amount of service supplied where the ecosystem has no vegetation cover) or an alternative worst-case ecosystem scenario. As shown in table 7.7, the application of this default baseline varies by type of service and specific cases are discussed below. 7.73 For air filtration, it is possible to define directly a “no” or “zero” air filtration level and it can be simply stated that the baseline corresponds to zero air filtration, i.e. zero capture of ambient air pollutant by an ecosystem. Thus, the supply of the ecosystem service is equal to the quantity of pollutant absorbed by the ecosystem. 7.74 In other cases, determining a baseline of no service supply independent of any land cover is difficult. For instance, the soil erosion control service is usually quanti- 80 For further information, see fied using the revised universal soil loss equation (RUSLE).80 This approach compares www.ars.usda.gov/midwest- actual erosion rates with those for bare land, where the erosion rate for bare land is the area/west-lafayette-in/ maximum potential erosion rate (a worst-case scenario) in a given ecosystem, allow- national-soil-erosion-research/ docs/rusle/. ing for soil type and erosivity, slope characteristics, rainfall characteristics and land management factors. In this case, service supply is therefore defined as the reduction in erosion rates compared with bare land. The baseline needs to be bare land since this represents the situation in which there is no ecosystem service supply. Table 7.7 Baselines for selected regulating and maintenance services Type of service Baseline Comments Global climate regulation No/zero carbon reten- services tion or sequestration Air filtration services No/zero air filtration Following the treatment described in section 6.4.5, capture of pollutants by bare and rocky surfaces is included as an ecosystem service. Water flow regulation Bare land Overland and groundwater flows cannot be zero, services and the ecosystem service can be quantified only by comparing a situation with vegetation with a situation where there is no vegetation (i.e. bare land). Flood mitigation services Bare land Flood risks are influenced by geomorphology and can be reduced by tree cover (e.g. riparian forests or man- groves) or dunes along a coast. There is no such thing as “no flood risk” in coastal areas and hence the ecosys- tem service can be quantified only by comparing the flood risk in a situation with vegetation with the flood risk in a situation without vegetation (i.e. bare land). Soil erosion control services Bare land The service can be quantified by comparing the ero- sion rate of the current vegetation cover with that for bare land, the difference being the amount of soil/ sediment retained. Water purification services No purification (i.e. no biological breakdown of water pollutants in the ecosystem) Pollination services No/zero pollination Rainfall pattern regulation Bare land It is not possible to model rainfall patterns without as- services suming some rainfall and evapotranspiration across all components of the landscape. The ecosystem service can be quantified only by comparing a situation with vegetation with a situation where there is no vegeta- tion (i.e. bare land). Note: A description of each service Nursery population and No/zero nursery is provided in table 6.3 habitat maintenance services services (see chap. 6). Accounting for ecosystem services in physical terms 193 7.75 For services where the focus is regulation of flows (e.g. of water or soil), it is gener- ally not possible to assess the service through comparison with a zero service baseline. This is because the flows occur regardless of whether a service is being provided. Fur- ther, while the biotic components of ecosystems modify and affect flows, the flows them- selves cannot be conceptualized or modelled without there being abiotic components over which those flows occur. In these cases, the baseline needs to be bare land. 7.76 Finally, in some cases, use of bare land as a baseline may not be considered a very strong decision from a conceptual perspective, or it may appear counter-intuitive, or it might be the case that use of bare land cannot be modelled in a meaningful way. The recommendation is therefore to differentiate, in a systematic manner, between services for which the baseline is bare land and services for which the baseline is zero service supply. Clear communication and clear explanations regarding the chosen methods are required. Section D Monetary valuation and integrated accounting for ecosystem services and assets 197 Section overview A number of motivations exist for estimating the monetary value of the environment’s contribution to the economy and to people. There is also interest in integrated assess- ments of the connection between the environment and the economy, in particular in understanding changes in broad measures of wealth resulting from human and natural causes, for example, climate change and biodiversity loss. At the same time, monetary valuation is not appropriate in all decision-making contexts, and in all cases it is relevant to use associated biophysical data on stocks and flows. Among statisticians, the use of monetary values of environmental stocks and flows in the measurement and assessment of the environment has long been a point of discussion and contention. The existence of multiple perspectives on this issue is well recognized. There are differences in points of view on (a) the underlying framing for valuation of environmental stocks and flows; (b) the potential of monetary valuation to support decision-making; (c) the ability to produce reliable estimates in monetary terms in practice; and (d) the role of national statistical offices (NSOs) in producing fit-for-purpose statistics in this area of measurement. While these different perspectives exist, there is a role for the exchange value- based approach to the monetary valuation of ecosystem services and ecosystem assets described in chapters 8 to 11. At its fifty-second session, in March 2021, the Statisti- cal Commission, in its decision 52/108, recognized that chapters 8 to 11 of SEEA EA describe internationally recognized statistical principles and recommendations for the valuation of ecosystem services and assets in a context that is coherent with the con- cepts of the SNA for countries that are undertaking valuation of ecosystem services and/or assets. In the same decision, the Commission requested the prompt resolution of outstanding methodological aspects in those chapters as identified in the research and development agenda. While the recommendations presented in chapters 8 to 11 on valuation reflect the latest knowledge, methods and techniques with respect to measuring and organ- izing information on ecosystems, it is expected that this knowledge, as well as the data sources and techniques used to compile the accounts, will evolve over time as a result of the ongoing implementation of those accounts. Consequently, as is the case for all statistical methodology documents, it will be necessary to refine and revise the recom- mendations in the future. SEEA EA recognizes that describing valuation based on exchange values pro- vides monetary values that exclude welfare measures that may be commonly included in monetary values of the environment used in other contexts. Chapter 12 was pre- pared to support an understanding of the connections among the various approaches to measurement and analysis in monetary terms. More generally, as highlighted in the opening chapters of SEEA EA, it is empha- sized that monetary values from the accounts and the wider economic values just described do not fully reflect the importance of ecosystems for people and the econ- omy. Assessing the importance of ecosystems therefore requires consideration of a wide range of information extending beyond data on the monetary value of ecosys- 198 System of Environmental-Economic Accounting – Ecosystem Accounting tems and their services, including data on their extent and condition and on the char- acteristics of the people, businesses and communities that are dependent on them. It is recognized that there are concerns regarding estimation of monetary val- ues in practice owing to data constraints and the application of valuation techniques. These factors require compilers to consider issues of data quality and uncertainty before compiling and disseminating accounts in monetary terms. It may be appro- priate in initial releases to label data in monetary ecosystem accounts as experimen- tal. A range of technical guidance is available to support the compilation, application and interpretation of monetary values and will be enhanced as part of the SEEA EA research and development agenda. 199 Chapter 8 Principles of monetary valuation for ecosystem accounting 8.1 Purposes and focus of monetary valuation for ecosystem accounting 8.1.1 Purposes of monetary valuation in ecosystem accounting 8.1 A number of motivations exists for the monetary valuation of ecosystem ser- vices and ecosystem assets depending on the purpose of analysis and the context for the use of valuations in monetary terms. The different motivations point to different requirements in terms of the concepts, methods and assumptions used for monetary valuation. 8.2 In ecosystem accounting, the primary motivation for monetary valuation using a common monetary unit or numeraire is to have the ability to make comparisons of different ecosystem services and ecosystem assets that are consistent with standard measures of products and assets as recorded in national accounts. This requires the use of exchange values, which in turn facilitates a core ambition of SEEA EA, namely, the description of an integrated system of prices and quantities for the economy and the environment. 8.3 Exchange value-based monetary valuations can support comparing the values of environmental assets (including ecosystems) with other asset types (e.g. produced assets) as part of extended measures of national wealth; highlighting the relevance of non-market ecosystem services (e.g. air filtration); assessing the contribution of eco- system inputs to production in specific industries and their supply chains; comparing the trade-offs between different ecosystem services through consideration of relative prices; deriving complementary aggregates such as degradation-adjusted measures of national income; evaluating trends in measures of income and wealth; improving accountability and transparency as related to public expenditures on the environment by recognizing expenditure as an investment rather than a cost; providing baseline data to support scenario modelling and broader economic modelling; assessing finan- cial risks associated with the environment; and calibrating the application of monetary environmental policy instruments such as environmental markets and environmental taxes and subsidies. 8.4 Within the space of environment-related monetary valuation more generally, it is common for valuation to focus on measurement of the impacts of changes in eco- system assets and services on economic and human welfare. For example, valuation may focus on measuring the impacts of improved parks and reduced pollution on human health or the impacts of reduced soil fertility on farm incomes. The valuation of impacts, both positive and negative, is an important requirement in the context of development of specific policy options and policy settings, project evaluation and incentive design. This may include, for example, detailed cost-benefit analysis and the 200 System of Environmental-Economic Accounting – Ecosystem Accounting assessment of compensation and damage claims. Such analysis can be complemented, but not replaced, by data from a set of ecosystem accounts based on exchange val- ues, recognizing that it is likely that more detailed and finer-scale data and valuations are required for impact analysis. More broadly, SEEA EA accounts provide a coher- ent framing for the collection and organization of relevant data and can support an understanding of micro-macro linkages and the assessment of changes over time. 8.5 The SEEA EA approach to monetary valuation, as presented in chapters 8 through 11, is introduced and described in chapter 2. This approach encompasses an awareness that monetary values cannot reflect a comprehensive or complete value of nature and that monetary values are not appropriate for use in all decision-making contexts. There are considerations of particular relevance in this regard, and it is to be noted that they apply to all monetary values, not only the values of ecosystem services and ecosystem assets described in chapters 8 to 11. These considerations make clear that: • There are multiple value perspectives, including intrinsic and instrumen- tal values, and the monetary values described in SEEA EA do not encom- pass all of those value perspectives with respect to ecosystem services and ecosystem assets. Further, for assessing some aspects of nature’s value (e.g. spiritual connections) an accounting framework might not be suitable. Nonetheless, data on the physical flows of ecosystem services and on the extent and condition of ecosystem assets may support assessment of some other value perspectives. • Monetary values are of greatest applicability in analysing changes that are marginal, that is, in analysing the effects of relatively small changes in stocks or flows of a particular asset, good or service (e.g. changes in agri- cultural production associated with changes in soil fertility). When there is a requirement to analyse large, non-marginal changes, such as perma- nent loss of a water resources, analysis should incorporate the assessment of physical changes in stocks in relation to appropriate thresholds. • Monetary values for ecosystem services that are not scarce or that are in excess supply may be low or even zero based on the exchange value con- cept. Although this is consistent with the exchange value concept, such values should be interpreted carefully and in conjunction with PSUTs, in particular because non-scarcity can be a result of regulatory policies or market structures, or may reflect the current relative abundance of the eco- system type supplying the service. • Monetary values for non-market goods and services – for example, govern- ment-provided health, education and defence services included in the SNA – cannot be based on directly observed market transactions and hence are valued using alternative methods that approximate the exchange value of the relevant goods and services. Since there is no explicit market, the result- ing values cannot reflect precisely the general equilibrium effects that would be expected if a market did exist. The extent to which the various valuation methods provide a good approximation varies, and it is to be noted that all methods reflect prices of a partial equilibrium. It is therefore relevant for as much specificity as possible regarding the location and context of the trans- action to be incorporated in the application of alternative methods. 8.6 Overall, while there are many contexts in which monetary values can support decision-making, there are also situations in which non-monetary data play a pri- mary role. In this regard, the integrated recording of physical and monetary data in SEEA EA should be of particular benefit. Principles of monetary valuation for ecosystem accounting 201 8.7 The present chapter outlines the core principles of monetary valuation used in ecosystem accounting in its application of national accounting concepts for valuation. These principles are articulated to provide a common basis for discussing and inter- preting monetary values in ecosystem accounting and to allow the available valuation techniques to be applied appropriately. 8.1.2 Focus of monetary valuation for ecosystem accounting 8.8 Monetary valuation depends on two factors in an accounting context, namely, (a) the definition and scope of goods, services and assets included; and (b) the valu- ation concept that is used. In ecosystem accounting, the valuation concept applied is the concept of exchange values. As this is the same valuation concept applied in the SNA, it is therefore a concept that supports comparison and integration with national accounts estimates and a range of analytical and indicator applications as noted above. 8.9 As also noted above, the major part of research and policy on environment-related monetary valuation has been conducted with a focus on measuring changes in welfare, for example, as part of cost-benefit analysis. The total economic value framework (Pearce and Turner, 1990) is commonly applied to assess the economic value of ecosystems. It describes the range of direct use values (e.g. biomass harvesting, recreation), indirect use values (e.g. air filtration, water regulation) and non-use values (e.g. existence values of specific species) that are relevant in providing a comprehensive assessment of changes in welfare. Within this range of use and non-use values, it is usual to apply monetary valuation techniques that assess values of changes in welfare most commonly approxi- mated using measures that include consumer and producer surplus. 8.10 Generally, where analysis is focused on the inputs of ecosystems to the produc- tion of marketed goods and services (SNA benefits), for example, agricultural produc- tion, there is a good alignment between monetary valuations used for accounting and for welfare analysis. However, since values recorded in the accounts exclude consumer surplus, monetary valuation undertaken for the purpose of accounting for ecosystem services that contribute to non-SNA benefits regularly differs from estimates of mon- etary values obtained in environmental-economic studies, potentially by significant amounts. Further, when considering a more aggregated value of an ecosystem, the monetary values obtained from ecosystem accounts are limited to the coverage of eco- system services and are lower owing to the exclusion of non-use values.81 It is there- 81 While non-use values are fore important that compilers of accounts document and explain the coverage and excluded from values of conceptual basis for the monetary values being released and that users recognize that ecosystem services in SEEA EA, transactions associ- not all monetary values are substitutable. In different analytical and decision-making ated with non-use values, such contexts, different monetary values are relevant. as donations to environmental 8.11 While there are differences between monetary valuations responding to differ- charities and payments for eco- friendly products, are recorded ent analytical purposes, there are theoretical and practical connections between val- in the standard economic ues recorded in the accounts and welfare values. These connections are summarized accounts. Separate identifica- in appendix A12.1 to support account compilers in their use of non-market valuation tion of these values is not methods for ecosystem services (as described in chap. 9) and to build a common lan- considered in SEEA EA. guage among accountants and environmental economists. 8.12 Further, it is likely that important information can be derived from an under- standing of the gap between accounting values and values obtained using alternative valuation concepts and assumptions. In this context, different monetary values can play complementary roles in supporting decision-making. With this in mind and to complement the exchange value-based approach to the monetary valuation of eco- system services and ecosystem assets described in chapters 8 to 11, a number of com- plementary approaches to deriving and presenting monetary values concerning the 202 System of Environmental-Economic Accounting – Ecosystem Accounting environment and links to the economy are introduced in chapter 12. These approaches include the analysis of externalities and the restoration cost-based approach to the valuation of ecosystem degradation. 8.2 Valuation concepts and principles for accounting 8.2.1 Exchange values and market price concepts in national accounting 8.13 In national accounting, the entries in the accounts in monetary terms reflect their exchange values as defined in the SNA. Exchange values are the values at which goods, services, labour or assets are in fact exchanged or else could be exchanged for cash (2008 SNA, para. 3.118). The present section outlines the related principles from a general national accounting perspective and the following sections describe the appli- cation of those principles for ecosystem accounting. 8.14 For the vast majority of entries in the national accounts, exchange values are measured using data from observed transactions involving market prices. Market prices are defined as amounts of money that willing buyers pay to acquire some- 82 The 2008 SNA notes a thing from willing sellers (2008 SNA, para. 3.119).82 The use of observed market prices number of cases where implies that the accounts embody information on the revealed preferences of the eco- actual exchange values do not nomic units involved. represent market prices (e.g. in situations involving transfer 8.15 The definition of market prices does not incorporate the expectation that the and concessional pricing (see markets in which exchanges take place satisfy specific institutional arrangements or paras. 3.131–3.134)). assumptions. The 2008 SNA (para. 3.119) observes that “a market price should not necessarily be construed as equivalent to a free market price; that is, a market transac- tion should not be interpreted as occurring exclusively in a purely competitive market situation. In fact, a market transaction could take place in a monopolistic, monopso- nistic, or any other market structure”. This being the case, the general interpretation in accounting is that market prices should reflect the current institutional context, that is, the current market structures and associated legal or regulatory arrangements. Consequently, from the perspective of economic theory, market prices used in national accounting likely reflect the presence of various market imperfections. 8.16 While the majority of transactions recorded in the national accounts are based on observed market prices, there are several (often large) transactions for which mar- ket prices are not observed and therefore need to be estimated. Thus, in the national accounts, where market price-based transactions are not observable, alternative meth- ods are used to estimate them and hence allow aggregation across market and non- 83 It is to be noted that the use market goods and services in the measurement of production and consumption.83 of these alternative methods 8.17 The SNA recommends various approaches, summarized below, and there has to estimate exchange values highlights that the estimation been much evolution in terms of practices. At the same time, in applying the SNA rec- of exchange values does not ommendations, compilers in different countries must consider their local context and require the actual exchange of institutional structures. For example, markets for the same good in different countries money (cash or the equivalent). may be loosely or heavily regulated, and hence different valuation approaches must be applied. However, notwithstanding the variation in institutional contexts and meth- ods, comparison of national accounts estimates across countries is still possible since the market price principle underpins the exchange values recorded in the accounts. 8.18 Two primary alternative methods are described in the SNA related to transac- tions in goods and services, namely, (a) adjustment of market prices of similar or analo- gous items for quality and other differences, as required (2008 SNA, para. 3.123); and (b) where no appropriate market exists, derivation of prices of some goods and services based on the amount that it would cost to produce them currently (ibid., para. 3.135). Principles of monetary valuation for ecosystem accounting 203 8.19 Cost-based techniques are commonly applied in estimating the value of gov- ernment-supplied services, including education, health and defence. Indeed, they are required in the context of measuring accounting entries for public goods. In these cases, it may be assumed that the amount of expenditure embodies information about the revealed preferences of a country or community. At the same time, it is accepted that these values for public goods will not reflect the full social benefit arising from the provision of those collectively enjoyed services. 8.20 Transactions in assets are valued using the same approaches outlined above, based on observed prices (e.g. sales of land) or using either of the two alternative meth- ods. Exchange values of assets are also required to underpin entries in asset accounts and balance sheets, that is, exchange values for each asset are required at the opening or closing of the accounting period. The ideal source of exchange values for assets at balance sheet dates are prices observed in markets (e.g. market prices at balance sheet date used to value share portfolios). Where there are no directly observable prices from markets, the SNA describes two approaches for estimating the exchange value of an asset. The first is the written-down replacement cost approach, which recognizes that at any given point in its life, the value of an existing asset (most commonly a produced asset such as a building or machinery) is equal to “the current acquisition price of an equivalent new asset less the accumulated depreciation” (2008 SNA, para. 13.23). The second approach entails using “the discounted present value of expected future returns” (ibid., para. 3.137). The second approach is of primary relevance for ecosystem accounting since there are no observable current acquisition prices of ecosystem assets that encompass the range of ecosystem service values supplied by an ecosystem asset. 8.21 As introduced above, entries in the accounts are usually an aggregate of multi- ple transactions of a specific good or service over an accounting period (e.g. all sales of bread in one year) or an aggregate of multiple assets of a specific type at a balance sheet date (e.g. all trucks registered at 31 December). Further, accounting entries are recorded progressively over multiple accounting periods and balance sheet dates. In this way, time series of accounting entries based on exchange values are compiled for various goods and services and types of assets. All accounting entries are recorded at the respective points in time at their nominal values, that is, the prices applying at the time of the transaction or balance sheet entry. 8.2.2 Monetary valuation of ecosystem services 8.22 Chapter 2 above described the general ecosystem accounting framing in which ecosystem services are supplied by ecosystem assets and where ecosystem assets are established as additional units in a wider accounting system, distinct from standard economic units such as households and businesses. From a national accounting per- 84 It is to be noted for the purpose spective, flows of ecosystem services from ecosystem assets can be conceptualized in of clarification that the output two ways. First, ecosystem assets may be considered complex and interacting, produc- associated with the use of eco- ing units that supply outputs of ecosystem services to various users, which reflects the system services (for example, societal benefit perspective described in chapter 2. Alternatively, flows of ecosystem rice production) is recorded services may be considered analogous to flows of capital services supplied by produced in the accounting system distinctly as the output of an and non-produced assets, as described in chapter 20 of the 2008 SNA (this reflects the economic unit. This economic asset value perspective described in chap. 2). These two perspectives are reconciled unit has intermediate, labour for the purposes of monetary valuation by treating the output of ecosystem assets as and capital costs that are producing units as consisting solely of capital services.84 deducted from output, result- ing in measures of gross value 8.23 Thus, in concept, ecosystem services should be valued for accounting purposes added and gross operating in a manner aligned with the valuation of capital services in the SNA. This value is surplus that are different from different from the rentals that would be charged following the definitions in the 2008 output. 204 System of Environmental-Economic Accounting – Ecosystem Accounting SNA (para. 6.245). By way of example, the rentals paid by a tenant to a landlord cover 85 These are commonly referred the capital services provided by the dwelling85 as well as the direct operating costs (e.g. to as “user costs” and include management and maintenance costs). Output is therefore measured in terms of the both the consumption of rentals charged to the tenant and the direct costs must be deducted in order to deter- fixed capital and the return on investment (opportunity cost) mine the value of the capital services and, equivalently, the gross operating surplus. of the relevant asset. 8.24 Analogously, in ecosystem accounting, ecosystem services are distinguished from the benefits to which they contribute, and consequently the focus of valuation is on the contribution of the ecosystem asset (i.e. the input of ecosystem services) and not 86 The selection of terms to on the valuation of the benefits.86 For example, in the valuation of ecosystem services convey the meaning of the associated with agricultural production, the direct operating and input costs associ- relevant concepts can be dif- ated with producing an agricultural output (e.g. rice), including fuel, fertilizer, labour ficult. Here, the term “benefits” is used to reflect the concept and produced assets, must be deducted from the value of the output to isolate the value of output (rentals) and it is not of the ecosystem services. intended for this term to be 8.25 For each final ecosystem service, a single capital service flow between an eco- considered within the context of a description of the out- system asset and an economic unit can be envisaged. Further, since there are multi- comes or well-being associated ple supply contexts (e.g. air filtration services may be supplied by different ecosystem with economic activity. assets) and different combinations of users (e.g. air filtration services may be used by both households and local building owners), it may be the case that a variety of differ- ent capital service flows would need to be recorded for the same type of ecosystem ser- vice. This would include, for example, the potential recording of imports and exports of ecosystem services. 8.26 More significantly, it is usual for a single ecosystem asset to supply a bundle of ecosystem services. Following the definitions and principles for measuring ecosys- tem services in physical terms set out in chapter 6, separate transactions should be recorded for each type of service supplied to each type of user. This approach therefore assumes the separability of ecosystem services. In practice, if bundles of services can- not be clearly separated, it is appropriate to value the bundle as a whole and then apply appropriate allocation methods, which would help to reduce the potential for double counting of services. 8.27 In applying national accounting principles to accounting for ecosystems, par- ticularly in the context of the monetary valuation of ecosystem services, it must be recognized that ecosystem services lie outside the production boundary that defines the scope of measured GDP. Undertaking the valuation of ecosystem services using national accounting valuation principles thus complements but does not replace cur- 87 It is to be noted that the pro- rent national accounting estimates.87 In this respect, the valuation of ecosystem ser- duction boundary of the SNA vices is analogous to the compilation of estimates of the value of unpaid household may change in the future. work where such estimates can be compared with but do not replace values from the standard national accounts. 8.28 Using a reference to the current production boundary of the SNA, two valuation contexts can be distinguished. First, in some cases, flows of ecosystem services are inputs to the production of goods and services within the SNA production boundary, 88 i.e. SNA benefits. In these cases, the values of ecosystem services are implicitly embod- In these contexts, the ecosystem contribution may ied within values of goods and services recorded in the national accounts. Examples encompass both final ecosys- include ecosystem services that contribute to agricultural output, such as biomass pro- tem services and intermediate visioning services and pollination by wild bees. Monetary valuation therefore involves services, while it is recognized partitioning the values of the goods and services recorded in the national accounts to that the values of intermedi- reveal the ecosystem contribution.88 The ecosystem service is then recorded as an out- ate services will themselves be embodied in the value of put of the ecosystem asset and an input of the economic unit that uses the ecosystem the associated final ecosystem service. In a system-wide context, value added is unaffected by the recording of this service. transaction, but both total outputs and total inputs are increased. Principles of monetary valuation for ecosystem accounting 205 8.29 Second, in other cases, ecosystem services contribute to benefits received by eco- nomic units, including households and governments that are not within the SNA pro- duction boundary, i.e. non-SNA benefits. For example, air filtration services of forests contribute to cleaner air whose value is not included in national accounts measures of output. In this case, estimating the accounting entries based on exchange values requires (a) determining the prices that would be charged on behalf of the ecosystem asset for the ecosystem services if a market existed; (b) estimating the costs of obtain- ing an ecosystem service that would need to be incurred by an economic unit to secure the benefits; or (c) assessing the loss of benefits to an economic unit that would be incurred if ecosystem services were lost. 8.30 In practice, the valuation methods used to estimate market prices in the national accounts, which were summarized in the previous section, can be applied to ecosystem services and assets. In particular, where there are links to SNA benefits, the market prices associated with those benefits provide a clear point of departure for valuation. For ecosystem services that contribute to non-SNA benefits, the market price equiva- lent and cost-based methods noted previously may also be used. Additional methods are available as well to address the range of ecosystem services and valuation contexts. Section 9.3 describes the appropriate valuation methods for estimating market price- based exchange values for the compilation of monetary ecosystem accounts. 8.31 Further, in the application of all valuation methods, it is necessary to consider the range of different contexts that may apply with respect to the supply and use of each ecosystem service across an EAA such as a country. Since market prices are unlikely to be estimated for all transactions in ecosystem services, it would be neces- sary to apply value transfer techniques that take into consideration variations across location, including institutional context and ecosystem type. Section 9.5 discusses the use of value transfer techniques for ecosystem accounting. 8.32 Since the monetary values of ecosystem services are estimated using the exchange value concept and are recorded in the same currency units, it is possible to sum across ecosystem services to derive aggregated measures. Such measures are described in sec- tion 9.2. 8.2.3 Monetary valuation of ecosystem assets 8.33 Ecosystem accounting also incorporates recording of entries for ecosystem assets based on their exchange values, together with associated changes in the value of ecosystem assets over an accounting period. These changes include ecosystem enhancement, ecosystem degradation and ecosystem conversions and revaluations. The present section provides a framing for the valuation of ecosystem assets in mon- etary terms for ecosystem accounting. Definitions of the terms for changes in eco- system assets, including ecosystem degradation, are presented in chapter 10 and the approach to the valuation of those changes is outlined in appendix A10.1. 8.34 The ecosystem assets that are the focus of monetary valuation are delineated following the guidance on spatial units and measurement of ecosystem extent as pro- vided in chapters 3 and 4, respectively. To explain the valuation of ecosystem assets, the initial focus is on a single ecosystem asset of a given ecosystem type (e.g. oceanic cool temperate rainforests (IUCN GET, class T2.3)). An ecosystem asset is considered to supply a number of ecosystem services (e.g. timber provisioning services, air filtra- tion services and recreation-related services) to different users (e.g. businesses, house- holds and government). Each ecosystem asset has its own distinct capacity to supply ecosystem services that is not only closely linked to its extent and condition but also linked to existing and expected patterns of ecosystem management and use, and to the influence of wider environmental factors such as climate change and extreme events. 206 System of Environmental-Economic Accounting – Ecosystem Accounting 8.35 An NPV approach to valuing ecosystem assets has been adopted for ecosys- tem accounting. NPV is the value of an asset determined by estimating the stream of income expected to be earned in the future and then discounting the future income back to the present accounting period (SEEA Central Framework, para. 5.110). In ecosystem accounting, this approach is applied by aggregating the NPV of expected future returns for each ecosystem service supplied by an ecosystem asset. The use of an NPV approach implies that the value of an ecosystem asset is related to its capacity to supply ecosystem services and how that capacity is expected to change in the future. Capacity and expected changes in capacity also provide information on the expected life of the ecosystem asset. If the use of ecosystem services derived from an ecosystem asset is considered sustainable (i.e. if there is no expected decline in condition), then the asset’s life will be infinite. 8.36 Application of the NPV approach requires measurement of the expected future returns for each ecosystem service and application of a discount rate so that those future returns can be expressed in current period values. The selection of a discount rate can have a large effect on estimated monetary values (see chap. 10 for a dedicated discussion on this topic). 8.37 There are a number of factors to be considered in measuring expected future returns, which are described in more detail in chapter 10. These include (a) scope of the returns (i.e. the number of ecosystem services to be included); (b) future patterns of flows in physical terms of each ecosystem service, taking into consideration expected degradation and patterns of demand; (c) expected future prices for each ecosystem service; (d) expected institutional arrangements; and (e) expected asset life. Together with the discount rate, all of these factors are combined to yield an estimated NPV for each ecosystem service at a given point in time. The NPV of the ecosystem asset is equal to the sum of those estimated ecosystem services NPVs. 8.38 Description of the NPV approach at the level of an individual ecosystem asset assumes that data are available that can attribute the supply of ecosystem services to this level of detail and hence that variations in context and location can be taken into account. In practice, it may not be possible to undertake valuation at this scale and valuation by ecosystem type may be undertaken instead. While the same theory and approach applies at more aggregated scales, it is necessary to ensure that variations between contexts and location are considered, including changes in institutional context. Those variations may impact the appropriateness of valuation methods and assumptions and on the way in which value transfer techniques can be applied. For example, where measurement is undertaken for all woodlands within a country, the value of recreation-related services provided by those woodlands should take into consideration the variations in distance from population centres. 8.39 Further, as in the case of monetary valuation of ecosystem services, this approach assumes that the expected future returns for each ecosystem service are separable. Nonetheless, it is recognized that since there is a bundle of services from a single eco- system asset, determining the expected future flows for each service requires con- sideration of the relationships among ecosystem services. Thus, factors influencing the future supply of one ecosystem service are linked to the future supply of other ecosystem services and expected patterns in the use of some ecosystem services will have direct implications for the potential availability of other ecosystem services. For example, regular use of a forest for harvesting timber will likely reduce the supply of global climate regulation services from the same forest. These considerations apply as well across ecosystem assets, which also have relationships with each other. Principles of monetary valuation for ecosystem accounting 207 8.40 The application of the NPV approach does not require any assumption con- cerning the economic ownership of the ecosystem asset itself. Such an assumption is required only when monetary values are being integrated into the standard sequence of institutional sector accounts, a step described in chapter 11. Nonetheless, there is often interest in understanding the relationship between ecosystem asset values and economic ownership of associated spatial areas, particularly land. This relationship can be analysed through utilization of data from the ecosystem extent account and associated data on landownership and land tenure. 8.41 For some ecosystem assets, primarily anthropogenic ecosystem types such as cropland and urban areas, there are active property markets that reveal prices for these areas. Generally, those prices will not incorporate all ecosystem services supplied from that property and therefore they should not be used directly to value an ecosystem asset. At the same time, it is likely that for certain ecosystem services, particularly pro- visioning services, there is a correlation between the market prices of properties (or the associated rental prices) and the prices of the associated ecosystem services. Valuation methods that utilize this type of market information are described in chapter 9. 8.42 Besides offering guidance on the valuation of ecosystem assets at balance sheet dates, chapter 10 provides recommendations on valuing other ecosystem accounting entries such as ecosystem enhancement, ecosystem degradation, ecosystem conver- sions, other changes in the volume of ecosystem assets (including catastrophic losses) and revaluations. 8.43 While there are complexities associated with the measurement of ecosystem asset values and changes in values in monetary terms, the underlying accounting logic is consistent with that used in the SNA and the SEEA Central Framework with respect to the valuation of natural resources such as timber and mineral and energy resources. The general principles are also aligned with those used in the measurement of the capi- tal stock of produced assets as described in the SNA. Consequently, compilers familiar with the valuation of natural resources and the implementation of perpetual inventory models should recognize many of the requirements in relation to the valuation of eco- system assets. 8.2.4 Volume and price measures 8.44 The analysis of nominal values (i.e. estimates expressed in prices of the account- ing period) can be of interest, for example, in understanding the relative structure of consumption or production, or in comparing levels of expenditure to budget and fiscal constraints. In addition, for many analytical purposes, it is standard practice to separate (or decompose) changes in accounting entries recorded at two points in 89 The term “volume” is used time into changes associated with price and those associated with changes in vol- in accounting since for many umes, reflecting both changes in quantity and quality.89 Following decomposition, a goods, services and assets, time series is derived that excludes the effects of price changes, that is, a time series changes may be due to of changes in volumes. These estimates are commonly referred to as constant price changes in quality, in addition to changes in quantity and measures.90 price. In accounting, volume 8.45 Since prices for most ecosystem services are not observable, standard practices reflects this combination of for estimating price and volume measures, which rely on the use of price indexes, can- quantity and quality. 90 not be applied. A particular consideration may involve the extent of spatial variation There is an extensive literature on the theory of index num- in prices for ecosystem services. While other techniques might be considered, at this bers and their application to stage, it is not recommended that compilers aim towards developing volume estimates accounting. The core elements of ecosystem services and ecosystem assets that can be aligned with estimates in the are described in chap. 15 of the national accounts. 2008 SNA. 208 System of Environmental-Economic Accounting – Ecosystem Accounting 8.46 At the same time, since much economic analysis is undertaken using data that exclude price effects, it may be relevant to adjust the aggregate nominal values of eco- system services and ecosystem assets using a general measure of economy-wide price change, such as the consumer price index or the GDP deflator. The resulting estimates are commonly referred to as “real measures” in the national accounting literature. 209 Chapter 9 Accounting for ecosystem services in monetary terms 9.1 Introduction 9.1 Recording monetary values for ecosystem services underpins the compilation of two of the ecosystem accounts: the ecosystem services flow account in monetary terms and the monetary ecosystem asset account. The present chapter describes the ecosystem services flow account in monetary terms as well as approaches to the valuation of ecosystem services for ecosystem accounting, applying the principles described in chapter 8. 9.2 The ecosystem services flow account in monetary terms records the monetary value of flows of ecosystem services based on their exchange values. The data from this account can be used to understand the relative economic significance of different ecosystem services (within the valuation framing of the national accounts); support aggregation of ecosystem services for the purpose of comparing the role of different ecosystem assets; understand changes in monetary value over time; underpin com- parison of the inputs of different ecosystem services to different users; and support understanding of the role of ecosystem services in different locations, for example, across countries. In addition, the use of exchange values in an accounting context requires drawing clear links between the supply of ecosystem services and the users of ecosystem services. Establishing these links can highlight both the economic costs arising from the loss of ecosystem services and the role of government as a provider of public goods. 9.3 While the monetary values described in this chapter can fulfil a range of ana- lytical needs, the valuation approach applied in ecosystem accounting does not provide a comprehensive measure of the value of nature. Further, the aggregate monetary values discussed here likely reflect a subset of all ecosystem services, since common practice is to commence work on valuation by compiling estimates for a limited number of ecosystem services. Further, as described in section 8.1.2, monetary values based on exchange values exclude measures of consumer surplus that may be of analytical interest in some contexts. Chapter 12 considers comple- mentary approaches to valuation. 9.4 Entries in the ecosystem services flow account in monetary terms are recorded in line with the definitions, treatments and measurement boundaries for ecosystem services in physical terms described in chapters 6 and 7. Key features of those treat- ments are discussed in section 9.2. As noted in chapter 8, the monetary valuation of ecosystem services requires the use of various valuation methods since, in many cases, prices for ecosystem services cannot be observed on markets. There is a wide range of environmental valuation methods that have been developed, but not all are suitable for application in an accounting context. Section 9.3 summarizes and prioritizes the methods that can be applied and section 9.4 introduces the ways in which different methods can be applied for different types of services. Section 9.5 introduces the topic 210 System of Environmental-Economic Accounting – Ecosystem Accounting of value transfer, which constitutes an important step in the compilation of monetary values for ecosystem services at larger scales, since it is unlikely that prices for all eco- system services in all locations can be estimated directly. 9.2 Ecosystem services flow account in monetary terms 9.5 Estimates of the monetary value of ecosystem services are recorded in the eco- system services flow account in monetary terms. This account follows the structure of an SUT and has the same underlying structure as the ecosystem services flow account in physical terms described in chapter 7. An SUT format is used to record flows of dif- ferent types of ecosystem services between ecosystem assets and economic units. The physical and the monetary accounts should exhibit consistency in terms of the struc- ture, classification and labelling of the various components (e.g. of ecosystem services and ecosystem assets). 9.6 The set of ecosystem services included in the monetary ecosystem services flow account should generally align with the set of ecosystem services included in the phys- ical ecosystem services flow account. However, as it is possible that some flows of eco- system services are considered more difficult to value in monetary terms, the number of ecosystem services included in monetary terms may be smaller. 9.7 It is important that compilers document the scope of the ecosystem services included in the accounts and highlight ecosystem services that have been excluded from the scope of measurement and valuation. This is required so that users of the accounts can readily understand and interpret the aggregate measures of the mon- etary value of ecosystem services. Further, such documentation also reinforces that data on ecosystem services in physical terms remain relevant for decision-making. 9.8 The basic framing of a monetary ecosystem services flow account is illustrated in tables 9.1a and 9.1b. The primary scope of the account is determined by the set of eco- system assets located within the EAA. Those assets are considered the suppliers of the ecosystem services. The set of users included in the account consists of different types of SNA economic units (i.e. businesses, governments, households) that are resident in the EAA. In addition, the use table allows for recording use by non-resident economic units 91 The definitions of “resident (i.e. those economic units that are resident outside the EAA);91 and use by other ecosys- economic units” and “non-res- tem assets (i.e. flows of intermediate services). This scope of users is required to ensure ident economic units” follow that the supply of ecosystem services by resident ecosystem assets can be fully allocated. the definition and treatments in the SNA and the Balance of 9.9 Flows of intermediate services must be recorded as part of a chain of flows Payments and International that results in a final ecosystem service, following the guidance provided in chapter Investment Position Manual, 7, namely, that intermediate services are inputs used by ecosystem assets to supply 6th ed. In broad terms, an economic unit is determined final ecosystem services. In monetary terms, the total supply of ecosystem services to have residency in a given (recorded in table 9.1a) is increased through recording of flows of intermediate ser- economic territory if it has a vices. This is offset by recording use of ecosystem services by ecosystem assets (in table centre of economic interest in 9.1b) as distinct from entries pertaining to final ecosystem services that are used by that territory. economic units. There is no double counting that results from recording intermediate services in this way. It is to be noted that, in a given chain of flows, the ecosystem type recorded as using the intermediate service should also be the ecosystem type recorded as supplying the related final ecosystem service. 9.10 The supply and use framework also allows for the recording of the use of ecosys- tem services by resident economic units in cases where those services are supplied by ecosystem assets that are located outside the EAA. For example, members of resident household units may travel to other countries and receive cultural ecosystem services Accounting for ecosystem services in monetary terms 211 in those countries, and resident economic units may receive regulating services such as flood control services that reflect contributions from ecosystem assets outside their EAA. These are recorded in table 9.1a in the column with the heading “Supply from non-resident ecosystem assets – imports”. Chapter 7 provides an extended discussion on treatments related to exports and imports of ecosystem services. 9.11 The entries recorded in the SUT should be based on the exchange value concept, apply a common currency unit and pertain to a single accounting period in which accounting entries are recorded in the prices of that period (i.e. nominal values). Sepa- rate SUTs can be compiled for different accounting periods for the purpose of record- ing a time series for ecosystem services flows. 9.12 Generally, entries recorded in the monetary ecosystem services flow account should correspond directly to those recorded in the physical ecosystem services flow account described in chapter 7. Thus: • The definition and measurement scope of each ecosystem service is the same as in the PSUT, including the treatment and recording of intermediate ser- vices, imports and exports of ecosystem services, subsistence production of agricultural and related products and abiotic flows. • The flow recorded in physical terms should be consistent with the entry in monetary terms; i.e. examination of the accounts in physical and monetary terms should support a coherent picture of supply and use of ecosystem services. • Allocation of ecosystem services supply to the various users of ecosystem services should be consistent with allocation in the PSUT. It is to be noted that the user should not be determined on the basis of choice of valuation method. • The accounting period should be the same as that for the PSUT. 9.13 Generally, accounting entries for each ecosystem service are obtained by mul- tiplying a measure of the service flow in physical terms by a price estimated using an appropriate method chosen from among those described in section 9.3 below. How- ever, since it is common for data not to be available for all transactions, it becomes necessary to estimate values for ecosystem services using value transfer techniques, which account for differences in environmental and socioeconomic contexts. The use of value transfer techniques involves a range of assumptions concerning the variation of prices of ecosystem services in different locations. Relevant issues concerning these techniques are discussed in section 9.5. 9.14 Where the accounting entry is measured directly rather than by using separate price and quantity estimates, an estimate of the corresponding flow in quantitative terms should still be included in the PSUT. This serves to maintain coherence in the accounting system and supports assessment of changes in the ecosystem asset, includ- ing, for example, ecosystem degradation. 9.15 Since entries in monetary terms are in a common currency and are measured using the common value concept of exchange values, it is possible to derive aggre- gate measures of ecosystem services, for example, for a bundle of ecosystem ser- vices supplied by an ecosystem type (e.g. all ecosystem services supplied by forests within an EAA) or for a bundle of ecosystem services used by an industry (e.g. eco- system services used by the fishing industry). It is to be noted that the total value of all final ecosystem services supplied by ecosystems within an EAA includes exports of those services. SUPPLY services provi- sioning Table 9.1a services services Biomass (reference list) Ecosystem services Water supply Provisioning services services Air filtration services Local (micro and meso) ing services provisioning provisioning Wild fish and other natural Genetic material services Wild animals, Global climate regulation Regulating and maintenance Rainfall pattern regulation biomass provi- climate regulation services Other provisioning services Livestock provi- Grazed biomass sioning services sioning services sioning services aquatic biomass plants and other Wood provision- Crop provisioning Aquaculture provi- Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Industries Water supply; sewerage, waste management and remediation activities Services Economic units Other industries Total industry Government consumption Household consumption Total supply by resident economic units Supply by non-resident economic units – Imports Total supply by economic units Tropical-subtropical lowland rainforests T1.1 Ecosystem services supply and use account in monetary terms – supply table Tropical-subtropical dry forests and scrubs T1.2 forests Tropical-subtropical montane rainforests T1.3 subtropical T1 Tropical- Tropical heath forests T1.4 Boreal and temperate high montane forests and T2.1 woodlands Deciduous temperate forests T2.2 … … Terrestrial woodlands T2 Temperate- boreal forests and Temperate pyric sclerophyll forests and woodlands T2.6 … … … … … … … T7 Derived semi-natural pastures and old fields T7.5 F1 F1.1 Permanent upland streams Ecosystem type (based on the EFG level 3 of IUCN GET) … … … Freshwater Intermittently closed and open lakes and lagoon FM1 FM1.3 M1 Seagrass meadows M1.1 … … … Marine Coastal saltmarshes and MFT1 reedbeds MFT1.3 Total supply by resident ecosystem assets Supply from non-resident ecosystem assets - Imports Total supply by ecosystem assets TOTAL SUPPLY System of Environmental-Economic Accounting – Ecosystem Accounting 212 Table 9.1a Ecosystem services supply and use account in monetary terms – supply table (continued ) SUPPLY Economic units Ecosystem type (based on the EFG level 3 of IUCN GET) Industries Terrestrial Freshwater Marine T1 Tropical- T2 Temperate- subtropical boreal forests and forests woodlands … T7 F1 … FM1 M1 … MFT1 Tropical-subtropical lowland rainforests Tropical-subtropical dry forests and scrubs Tropical-subtropical montane rainforests Tropical heath forests Boreal and temperate high montane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll forests and woodlands … … … Derived semi-natural pastures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoon Seagrass meadows … Coastal saltmarshes and reedbeds remediation activities Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Water supply; sewerage, waste management and Services Other industries Government consumption Household consumption Supply by non-resident economic units – Imports Supply from non-resident ecosystem assets - Imports T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 Ecosystem services Total industry Total supply by resident economic units Total supply by economic units Total supply by resident ecosystem assets Total supply by ecosystem assets TOTAL SUPPLY (reference list) Soil quality regulation services Soil and sediment retention services Solid waste remediation services Water purification services Water flow regulation services Flood control services Storm mitigation services Noise attenuation services Pollination services Biological control services Nursery population and habi- tat maintenance services Accounting for ecosystem services in monetary terms Other regulating and mainte- nance services Cultural services Recreation-related services Visual amenity services Education, scientific and research services Spiritual, artistic and symbolic services Other cultural services TOTAL SUPPLY 213 Note: The list of ecosystem services presented is indicative only. USE services provi- sioning Table 9.1b services services Biomass (reference list) Ecosystem services Water supply Provisioning services services services Local (micro and meso) ing services Aquaculture provisioning provisioning provisioning Wild fish and other natural Genetic material services Wild animals, Global climate regulation Regulating and maintenance Rainfall pattern regulation biomass provi- climate regulation services Other provisioning services Livestock provi- Grazed biomass sioning services sioning services aquatic biomass plants and other Wood provision- Crop provisioning Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Industries Water supply; sewerage, waste management and remediation activities Services Economic units Other industries Total industry Government consumption Household consumption Total use by resident economic units Exports - final ecosystem services Total use by economic units Ecosystem services supply and use account in monetary terms – use table Tropical-subtropicalowland rainforests T1.1 Tropical-subtropical dry forests and scrubs T1.2 forests Tropical-subtropical montane rainforests T1.3 T1 Tropical-subtropical Tropical heath forests T1.4 Boreal and temperate high montane forests and woodlands T2.1 Deciduous temperate forests T2.2 … … Terrestrial T2 Temperate-boreal forests and woodlands Temperate pyric sclerophyll forests and woodlands T2.6 … … … … … … … T7 Derived semi-natural pastures and old fields T7.5 F1 F1.1 Permanent upland streams Ecosystem type (based on the EFG level 3 of IUCN GET) … … … Freshwater Intermittently closed and open lakes and lagoons FM1 FM1.3 M1 Seagrass meadows M1.1 … … … Marine Coastal saltmarshes and reedbeds MFT1 MFT1.3 Total use by resident ecosystem assets Exports – intermediate services Total use by ecosystem assets TOTAL USE System of Environmental-Economic Accounting – Ecosystem Accounting 214 Table 9.1b Ecosystem services supply and use account in monetary terms – use table (continued ) USE Economic units Ecosystem type (based on the EFG level 3 of IUCN GET) Industries Terrestrial Freshwater Marine T1 Tropical-subtropical T2 Temperate-boreal forests forests and woodlands … T7 F1 … FM1 M1 … MFT1 Tropical-subtropicalowland rainforests Tropical-subtropical dry forests and scrubs Tropical-subtropical montane rainforests Tropical heath forests Boreal and temperate high montane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll forests and woodlands … … … Derived semi-natural pastures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoons Seagrass meadows … Coastal saltmarshes and reedbeds Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Water supply; sewerage, waste management and remediation activities Services Other industries Government consumption Household consumption Exports - final ecosystem services Exports – intermediate services Ecosystem services T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 Total industry Total use by resident economic units Total use by economic units Total use by resident ecosystem assets Total use by ecosystem assets TOTAL USE (reference list) Air filtration services Soil quality regulation services Soil and sediment retention services Solid waste remediation services Water purification services Water flow regulation services Flood control services Storm mitigation services Noise attenuation services Pollination services Accounting for ecosystem services in monetary terms Biological control services Nursery population and habi- tat maintenance services Other regulating and mainte- nance services Cultural services Recreation-related services Visual amenity services Education, scientific and research services Spiritual, artistic and sym- bolic services Other cultural services 215 TOTAL USE Note: The list of ecosystem services presented is indicative only. 216 System of Environmental-Economic Accounting – Ecosystem Accounting 9.16 The structure of table 9.1a suggests that the supply of each ecosystem service is presented by ecosystem type. Most commonly in practice, as discussed in chapter 6, flows of several ecosystem services are measured spatially using ecosystem modelling and geospatial data techniques, as introduced in chapter 7. Consequently, the presenta- tion in the supply table implies the attribution of ecosystem service flows to ecosystem type (e.g. by overlaying maps of individual ecosystem service supply with a map of extent by ecosystem type). Further, where a spatial approach is applied, it is possible to dis- seminate maps of different ecosystem services showing where they are supplied within an EAA as complementary outputs to the ecosystem services supply table. It should be noted that compilation of maps with data in monetary terms requires a clear articulation of the approach that is taken to estimating prices for ecosystem services across the EAA. 9.17 Aggregate measures of ecosystem services in monetary terms can be derived by summing across columns (i.e. to estimate total supply or use of a single service) and by summing downrows (i.e. to estimate total supply by an ecosystem type or total use by type of economic unit). Aggregate measures may be of particular interest when making comparisons to measures of output, intermediate consumption and value added in the standard national accounts, including at an industry level (e.g. for agriculture). 9.18 Using a focus on the total contribution of ecosystem assets within an EAA, such as a country, the aggregate measure gross ecosystem product (GEP) is equal to the sum of all final ecosystem services at their exchange value supplied by all ecosystem types located within an EAA over an accounting period less the net imports of intermedi- 92 This definition of GEP reflects ate services.92 In cases where net imports of intermediate services, that is, imports less a production-based approach exports of intermediate services (see sect. 7.2.6), are small, GEP may be assumed to be (i.e. outputs less inputs) to the sum of final ecosystem services supplied by the EAA. determining the contribution of the ecosystems of an EAA to 9.19 The scope of GEP covers ecosystem services, including provisioning, regulat- benefits and well-being. It is ing and maintenance and cultural services, and excludes the monetary value of abi- also to be noted that (a) supply of final ecosystem services otic flows, spatial functions and non-use values. More generally, the monetary value includes exports to non-resi- of abiotic flows and spatial functions should be excluded from monetary aggregates dent economic units; and (b) concerning ecosystem assets, for example, in the monetary ecosystem asset account. imports of final ecosystem While they are excluded from monetary aggregates, abiotic flows and spatial functions services are not included in can still be recorded in SUTs in both physical and monetary terms. this measure as they represent contributions by ecosystems 9.20 Completing the entries in the use table (table 9.1b) does not require recording located in other EAAs. The the location of the user, that is to say, it is sufficient to record the type of economic measure is “gross” in the sense that it does not deduct any unit, whether the unit is resident or non-resident, and the relevant class (e.g. type of associated ecosystem degrada- industry). Nonetheless, the location of users relative to the location of the supplying tion arising in the supply of ecosystem asset needs to be known so as to ensure that the estimation of prices is the services. Measurement of aligned with the spatial context. GEP has been actively pursued in China (see, for example, Ouyang and others (2020)). 9.3 Techniques for valuing transactions in ecosystem services 9.3.1 Introduction 9.21 Section 8.2 describes the conceptual basis for valuing ecosystem services for ecosystem accounting. Since prices for ecosystem services are not generally observed, a range of methods have been developed for estimating them. The present section describes methods that support the derivation of prices for ecosystem services that are consistent with exchange values and can therefore be used to provide estimates for entry into the accounts. Accounting for ecosystem services in monetary terms 217 9.22 This section describes those methods in order of preference, indicating those that are considered to align most closely to the target valuation concept of market prices. For accounting purposes, there is a strong preference for using methods that translate observable and revealed prices and costs (i.e. for related or similar goods and services) into the values required for accounting purposes. 9.23 The general advice of the SNA (chap. 3) is that where directly observed market prices are not available, they may be estimated by using prices from similar or related markets or by using costs of production. Following a similar framing, it is recom- mended that choice of the type of valuation methods to be applied be made according to the following order, from highest to lowest preference. (a) Methods where the price for the ecosystem service is directly observ- able; (b) Methods where the price for the ecosystem service is obtained from markets for similar goods and services; (c) Methods where the price for the ecosystem service is embodied in a market transaction; (d) Methods where the price for the ecosystem services is based on revealed expenditures (costs) for related goods and services; (e) Methods where the price for the ecosystem service is based on expected expenditures or expected markets. 9.24 The various methods across these five groups are described below. In addition, some other methods that have been applied in environmental valuation contexts are briefly summarized, but they are not recommended for use in an SEEA EA context without appropriate adjustment so as to align results with the exchange value concept. In all situations, the documentation of the data sources, methods and assumptions used should be made publicly available. 9.25 Some methods are more suited to the valuation of certain ecosystem services than others. For example, it is more likely that exchange values for provisioning ser- vices can be estimated based on observed market transactions. The matching of meth- ods to different types of ecosystem services is considered further in section 9.4 and discussed in more detail in the Monetary Valuation of Ecosystem Services and assets for Ecosystem Accounting (United Nations, Department of Economic and Social Affairs, Statistics Division, 2022b). 9.26 The valuation methods described in this section have been developed in the con- text of valuing final ecosystem services, that is, with a focus on the contribution of eco- systems to economic and human activity. Where intermediate services are recorded, the same valuation methods can be applied since the intent remains to measure the contribution of the ecosystem to economic and human activity. For example, where flows of pollination services are recorded as inputs to biomass provisioning services, both of these types of services can be valued in terms of their contribution to the asso- ciated agricultural output. 9.27 In an SEEA EA context, the aim is to record entries in the accounts for multiple ecosystem services across multiple ecosystem types. In principle, aggregation across ecosystem services and ecosystem types is possible even where different valuation methods are used, provided that the different methods are focused on applying the same target valuation concept. This principle is also applied in the national accounts to aggregate across market and non-market goods and services. 218 System of Environmental-Economic Accounting – Ecosystem Accounting 9.3.2 Methods where prices are directly observable 9.28 Directly observed values. The most direct method for measuring prices and estimating values for the accounts is based on the direct observation of exchanges in ecosystem services when they are available. For example, if a wetland provides services of water purification and the owners or managers of that wetland are able to charge the water company that abstracts the water for municipal uses, there occurs a transac- tion in ecosystem services provided by the ecosystem that can be recorded. Stumpage values charged to timber logging businesses are also an example of directly observed values. Land rental prices in agriculture where markets exist for renting land for crop production or grazing are another example of directly observed values. Those rental prices may be used to derive prices for accounting purposes for the relevant biomass provisioning services. In all of these examples, there is a direct link to SNA benefits. 9.29 While the use of directly observed values is the method that is most preferred, the resulting prices may provide accounting entries for the value of ecosystem services that might be considered low, i.e., where the monetary value of the contribution of the ecosystem is considered negligible. It is fundamental to recognize that this result is most likely a reflection of existing institutional arrangements and is a result that is well understood in the economic literature. For example, it is well documented that the resource rents for natural resources that are extracted in open-access contexts tend 93 An assumption made here is to zero (Hartwick and Olewiler, 1998).93 that there is an increasing scar- city of the underlying resource. 9.30 Nonetheless, provided that the prices reflect institutional arrangements that are Where there is no such scarcity, sufficiently mature and large, the resulting prices should still be applied in ecosystem a low or zero price would be accounting since the core intent is to show accounting entries that reflect the estab- appropriate. lished market context and hence support analysis of the prices relative to those of other services and assets. To the extent that the recorded values are considered low, there may then be an interest in estimating complementary values on the basis of alterna- tive institutional contexts and market settings. These hypothetical values should not be recorded in ecosystem accounts but may be presented in complementary accounts (see chap. 12). 9.31 Prices may also be observed in relation to non-SNA benefits. For example, pay- ments for ecosystem services may provide a direct measure of the value of those ser- vices. This is true in certain circumstances, and the payments made, for example, by a government agency to a land manager, would embody an appropriate price for a particular service for accounting purposes. However, most commonly, payments for ecosystem services and the associated institutional mechanisms are not designed to reveal prices for specific services. Instead, they are aimed at either supporting land managers in undertaking ecosystem restoration work or similar practices or imple- menting broader government social policies, for example, concerning income support. 94 Ideally, the observed price Generally, the advice is not to use data from payments for ecosystem services schemes from the emission trading system should be adjusted to in the estimation of prices for ecosystem services, unless there is clear evidence that take into account the impact the scheme targets a specific service. that inclusion of removals of 9.32 Specific markets are associated with observed prices from emission trading sys- carbon by the forestry sector tems, which may be used to estimate prices for global climate regulation services based would have on price. The depth and maturity of those markets on carbon retention. The number of countries with such trading systems is increasing, should also be considered in as is the quantity of carbon being traded, and therefore those markets may provide these contexts. suitable price data.94 If the trading system is considered to be insufficiently mature, an 95 alternative is to use data on the marginal costs of abatement, which are more widely As these costs vary by sector, the highest cost should be available,95 or data on the social cost of carbon when derived from models that are taken as the overall marginal consistent with the exchange value concept, that is, limited to assessment of the effects cost of abatement. on measures of output. Accounting for ecosystem services in monetary terms 219 9.33 It is to be noted that the SNA does not require that prices originate from com- petitive markets; for example, transactions based on prices from monopolistic or oligopolistic markets are recorded in the national accounts without adjustment. How- ever, where directly observed prices are considered not economically significant96 96 Consideration of the relative (such cases may arise in the context of fees paid to enter a national park, for example), significance of prices in the the observed price should not be used and alternative valuation methods should be 2008 SNA is reflected in the fol- lowing statement (para. 22.28): applied. Further, care should be taken to understand the size of markets and their “Economically significant prices maturity. The use of prices from small or immature markets may not be sufficiently are prices that have a sig- representative for use in ecosystem accounting. nificant effect on the amounts that producers are willing to supply and on the amounts 9.3.3 Methods where prices are obtained from markets for purchasers wish to buy.” similar goods and services 9.34 Prices from similar markets. When market prices for a specific ecosystem ser- vice are not observable, valuation according to market price equivalents may provide an approximation to market prices. Following the SNA (para. 3.123), “[g]enerally, market prices should be taken from the markets where the same or similar items are traded currently in sufficient numbers and in similar circumstances. If there is no appropri- ate market in which a particular good or service is currently traded, the valuation of a transaction involving that good or service may be derived from the market prices of similar goods and services by making adjustments for quality and other differences”. 9.35 For example, when non-wood forest products (e.g. mushrooms) from one forest are marketed but those from a similar forest are not, the prices observed in the former case can be used to value the non-wood forest products in the latter case, allowing for differences between products and other factors. In applying this method, the price of the marketed product would need to be adjusted for any costs incurred in supplying that product in order to ensure that the derived price corresponds to the ecosystem service. It is assumed implicitly that the flows of (non-marketed) ecosystem services (in this example, harvest of mushrooms) are not significant enough to alter the observed price of and demand for the good or service from the similar market. It is to be noted that prices from similar markets reflect prices within the existing institutional context in the same way that they do when the directly observed values method is applied. 9.3.4 Methods where prices (and associated values) are embodied in market transactions 9.36 Residual value and resource rent methods. The residual value and resource rent methods97 estimate a value for an ecosystem service by taking the gross value of the 97 While similar in intent, there final marketed good to which the ecosystem service provides an input and deduct- is a distinction to be made ing the cost of all other inputs, including labour, produced assets and intermediate between these methods. The resource rent method reflects inputs (see the formula below, taken from table 5.5 of the SEEA Central Framework). an aggregate value of rent in a Depending on the scope of the data (whether pertaining, for example, to a specific given circumstance, while the location or to the activities of an industry as a whole), the estimated residual value residual value method focuses provides a direct value that can be recorded in the accounts or used to derive a price on calculating the rental price, that may be applied in other contexts. The relevant considerations in deriving a price where the rent is determined in a market with a fixed supply are described in the Central Framework (appendix A5.1). and a competitive demand. 9.37 In practice, there can be a number of difficulties in applying these methods. First, as the residual may reflect a combination of other non-paid and indirect inputs, distin- guishing the ecosystem service contribution may be difficult. Second, the estimates are subject to errors that arise in calculating the value of all of the “paid” inputs. Third, the size of the residual is directly affected by the institutional arrangements surrounding 220 System of Environmental-Economic Accounting – Ecosystem Accounting Output less intermediate consumption less compensation of employees less other taxes on production plus other subsidies on production Equals gross operating surplus less consumption of fixed capital (depreciation) less return to produced assets less labour of self-employed persons Equals resource rent = depletion + net return to environmental assets the use of the ecosystem. Finally, it is to be noted that these methods are often most readily applied using broad, industry-level data and the resulting price estimates may lack the granularity required for developing location-specific monetary values. At the same time, since these methods are based on observed data, the values and prices estimated using these techniques will reflect the current institutional context and may provide a high-level framing for monetary values. 9.38 Productivity change method. In this method, the ecosystem service is consid- ered an input in the production function of a marketed good. Thus, changes in the service will lead to changes in the output of the marketed good, holding other things equal. The value of the service is derived in three stages. First, the marginal product (contribution) of the ecosystem service is estimated as the change in the value of pro- duction consequent upon a marginal change in the supply of the ecosystem service. Second, the marginal product is multiplied by the price of the marketed good to derive a marginal value product for the ecosystem services. Third, this marginal value prod- uct is multiplied by the physical quantity of the provided ecosystem service to obtain the value of the ecosystem service. The relationships should be estimated for a single accounting period, recognizing that they may change over time. 9.39 The productivity change method has been used to price the services provided by water and other inputs in agriculture, for example, pollination, across locations where detailed data are available to estimate production functions. It is particularly well suited for the valuation of ecosystem services that are inputs to existing SNA outputs. However, where there are multiple goods and ecosystem services involved, it may be difficult to specify the production function and marginal product of an individual ecosystem service, since there are a range of factors that need to be fac- tored in. Further, the method can be data-intensive and scaling up to a national level may be difficult. 9.40 Hedonic pricing method. The hedonic pricing method estimates the differential premium on property values or rental values (or other composite goods) that arises from the effect of an ecosystem characteristic (e.g. clean air, local parks) on those val- ues. This method is commonly used to measure services related to the amenity pro- vided to residents in particular locations. In order to obtain a measure of this effect, all other characteristics of the property (including size, number of rooms, central heating, garage space, etc.) are standardized and need to be included in the analysis. Considera- tion should also be given to the geographical, neighbourhood and ecosystem charac- teristics of the properties. Accounting for ecosystem services in monetary terms 221 9.41 In the context of ecosystem accounting, the decomposition of these values into two parts – the part explained by the ecosystem characteristic and the part explained by the remaining characteristics of the property – can be used to estimate a value for the relevant ecosystem service (e.g. air filtration services or recreation-related services) for a specific property. Where the hedonic pricing method is applied to property values rather than rental values, the resulting prices need to be converted so as to relate to an annual service flow using a suitable rate of return. 9.42 Estimated prices for the ecosystem service can be applied in other locations, for example, by deriving prices per hectare. This method may also be considered for use in other property or rental value contexts such as those involving agriculture land sales or rentals in the context of biomass provisioning services.98 98 Triplett (2006) may be con- sulted for guidance on the use 9.43 Hedonic pricing reveals a value for accounting purposes only in the case of a of hedonic pricing approaches fully informed and fluid market where buyers are able to find properties with sets of in a statistical context. characteristics that are an optimal fit with their preferences. 9.3.5 Methods where prices are based on revealed expenditures in related goods and services 9.44 Where prices for ecosystem services cannot be estimated using the methods described above, it is possible to adopt methods using data on revealed expenditures on related goods and services, commonly referred to as cost-based methods. 9.45 Averting behaviour method. The averting behaviour method assumes that indi- viduals and communities spend money on preventing or mitigating the negative effects and damages arising from adverse environmental impacts. The revealed expenditure demonstrates the value placed on the associated ecosystem services. This is the case, for example, with respect to the incurring of costs associated with extra filtration in order to purify polluted water and air conditioning to avoid air pollution. 9.46 The actual expenditures incurred are considered a lower-bound estimate of the benefits of mitigation, since it can be assumed that the benefits derived from avoiding damages are at least equal to the share of costs incurred to avoid them. An advantage of this method is that it is easier to estimate the expenses incurred than to estimate the avoided environmental damage. A disadvantage is that those expenditures may not be highly sensitive to the differences in environmental quality and so they may not be spatially sensitive in the way that damage functions could be. Also, care is needed (a) to align the expenditures to specific ecosystem services since they may reflect securing a bundle of services; and (b) to ensure that the expenditures reflect only the cost of avoiding environmental impacts rather than also reflecting taste and consumption preferences. 9.47 Travel cost method. The travel cost method is commonly used in economics to estimate the value of recreational areas based on the revealed preferences of visitors to a site. A demand function for recreation is estimated by observing the actual number of trips that take place at different costs of travelling to a recreational or cultural site and assuming that people hold similar preferences with respect to visiting the site. Data on costs of travelling include the expenditures incurred by households or indi- viduals to reach a recreational site and entrance fees and may also include the oppor- tunity cost of time spent travelling to and visiting the site. Travel cost data are ideally captured at a detailed level that considers the different features of the sites being visited and enjoyed. The area under the demand function provides a measure of the welfare value of the site, that is, including the consumer surplus. 222 System of Environmental-Economic Accounting – Ecosystem Accounting 9.48 For ecosystem accounting purposes, calculation is required of the exchange value of the associated ecosystem services, generally recreation-related services. An exchange value can be estimated on the basis of the demand function using the simu- lated exchange value method described below. In the absence of estimated demand functions, exchange values can be approximated based on aggregated travel cost data (e.g. data on fuel). Where travel cost data are not available, an alternative method for obtaining the exchange value of recreation-related services is to sum relevant con- sumption expenditures (e.g. using data from tourism satellite accounts). 9.3.6 Methods where prices are based on expected expenditures or markets 9.49 The final group of valuation methods that are available for accounting purposes are those based on estimating the expenditures that would be expected if the ecosys- tem service was no longer provided or was in fact sold on a market. Applying these methods is based on the following logic, namely, that a loss of ecosystem services would directly increase monetary costs (or reduce incomes) for economic units and that the presence of a market would reveal these effects. 9.50 Replacement cost method. The replacement cost method estimates the cost of replacing an ecosystem service by a substitute that provides the same contribution to benefits. It is also known as the substitute cost or alternative cost approach. The substitute can be either a consumption item (e.g. an air filtration unit for a household substituting for air filtration services of trees) or an input factor (e.g. sorghum substi- tuting for non-priced forage in the case of a rangeland grazing ecosystem service) or a capital factor (e.g. a water treatment plant). In all cases, if the substitute provides an identical contribution, the price of the ecosystem service is the cost of using the substi- tute to provide the same benefits as provided by a single quantity unit of the ecosystem service (e.g. price of a ton of forage). If applied in a single context (e.g. the context of a single farm), a direct accounting entry may be estimated based on the total cost of using the substitute in that context. 9.51 The validity of the replacement cost method depends upon three conditions being upheld: (a) the substitute can perform exactly the same function as the ecosys- tem service being substituted for; (b) the substitute used is the least-cost alternative; and (c) there would be a willingness to pay for the substitute if the ecosystem ser- vice was no longer supplied. Thus, in the example of non-priced forage noted above, it should be evident that the sorghum is a good substitute for rangeland fodder, that it is cheaper than other substitutes (e.g. moving livestock elsewhere, using other types of fodder) and that livestock operations would be continued if the rangeland grazing activity was curtailed. 9.52 Avoided damage costs method. The avoided damage costs method estimates the value of ecosystem services based on the costs of the damages that would occur due to the loss of those services. The focus, similar to that of replacement costs, is generally on services provided by ecosystems that would be lost if an ecosystem was not present or was in sufficiently poor condition to cause the services not to be available. To obtain values and prices for accounting purposes, damages should be estimated using prices that are consistent with the exchange value concept. The validity of the avoided dam- age cost method depends on similar conditions to those noted above with respect to the replacement cost method. The avoided damage method is particularly useful for regulating the following services: soil erosion control, flood control, air filtration and global climate regulation, among others. Accounting for ecosystem services in monetary terms 223 9.53 Estimation of avoided damage costs identifies certain economic units that are expected to avoid damage costs as a result of the supply of ecosystem services. For example, the value of air filtration services may be related to avoided health costs by governments. However, this should not be interpreted as meaning that those units are users of the services; rather estimation of avoided damage costs is solely a means of estimating the value of those services. 9.54 In some contexts, prices based on both replacement costs and avoided damage costs are capable of being estimated. If this is possible, the lower of the two estimated prices should be used. In most contexts, it is expected that this would be the prices based on the replacement costs method. 9.55 Simulated exchange value method.99 The simulated exchange value method 99 Based on Caparrós and others estimates the price and quantity that would prevail if the ecosystem service were to (2017). be traded in a hypothetical market. It thus provides a direct estimate of the value of the ecosystem service based on the required exchange value concept.100 This method 100 Where the simulated quan- is applied by using results from demand functions for the relevant ecosystem service tity differs from the observed (for example, as estimated using the travel cost method, discussed above, or stated quantity (e.g. in terms of the number of visits), the simulated preference methods, discussed below). These are used to calculate the price for the eco- price can be adjusted in a system service that would obtain if it were actually marketed. This requires combining subsequent step so that the the information on the demand function with a supply function and an appropriate simulated exchange value market structure (institutional context). Standard microeconomic methods are then remains unchanged. applied to produce the simulated price, which can be used to estimate the value of the ecosystem service. This method can be applied at various levels of complexity and using alternative market structures, but it has not been as widely applied as the meth- ods described above. 9.3.7 Other valuation methods 9.56 There is a range of other valuation methods that are found in the environmental economics and ecosystem services valuation literature. These methods should not be applied in preference to any of the types of methods described above. If data based on these other methods are considered for compilation purposes, then they should be checked for consistency with exchange value principles and adjusted as required before use in the accounts. 9.57 Shadow project cost method. This is a variant of the replacement cost method that focuses on the hypothetical costs of providing the same ecosystem service else- where. It is less suitable for the valuation of individual ecosystem services since it is not intended to capture individual flows. Possible alternatives to the design of a shadow project include asset reconstruction (e.g. providing an alternative habitat site for threatened wildlife); asset transplantation (e.g. moving the existing habitat to a new site); and asset restoration (e.g. enhancing an existing degraded habitat). The three conditions noted above for the replacement cost method also apply to this method, but it should be noted that the shadow project cost method is valid only if the shadow project is actually realized or planned to be realized. 9.58 This method is also linked to the restoration cost method, which may be applied to value ecosystem degradation by estimating the costs that would need to be incurred to restore an ecosystem to its condition at the beginning of the accounting period. The restoration cost method is discussed further in chapter 12. 9.59 Opportunity costs of alternative uses. This approach estimates values of eco- system services by measuring the forgone benefits of not using the same ecosystem asset for alternative uses. For example, the value of ecosystem services arising from not harvesting trees for timber (e.g. to supply global climate regulation services) can 224 System of Environmental-Economic Accounting – Ecosystem Accounting be measured by using the forgone income from selling timber. This approach there- fore measures what has to be given up for the sake of securing ecosystem services. The opportunity cost approach is most useful when considering the ecosystem services that can be linked to certain purposes such as protection of habitats or cultural or historical sites. The values obtained can be considered exchange values provided that (a) the valuation of the forgone benefits is based on exchange values; and (b) the insti- tutional context considered is sufficiently realistic to permit the alternative scenario to be analysed. A primary difficulty with the opportunity cost approach concerns deter- mining a realistic alternative use since, depending on the choice made, the value of the forgone benefits could vary substantially. 9.60 Stated preference methods. Stated preference methods do not utilize informa- tion on the behaviour of people in existing markets; rather they use information from questionnaires to elicit likely responses of people by asking them to state their prefer- ences in hypothetical situations. Stated preference methods do not reveal exchange values directly and hence require adjustment for use in accounting. These are the primary methods for estimating non-use values and hence may be relevant in some applications described in chapter 12. Stated preference methods fall into two broad 101 The pros and cons of different categories: contingent valuation and choice experiments.101 specifications of stated prefer- ence methods are discussed 9.61 The contingent valuation method is a survey-based stated preference technique in various publications; see, in that elicits information on people’s behaviour in constructed markets. In a contingent particular, Johnston and oth- valuation questionnaire, a hypothetical market is described where the good in ques- ers, (2017) for state-of-the-art tion can be traded. This contingent market defines the good itself, the institutional guidance on stated preference context in which it would be provided and the way in which it would be financed. methods. Respondents are asked about their willingness to pay for, or willingness to accept, a hypothetical change in the level of provision of the good, usually by asking them if they would accept a particular scenario. Respondents are assumed to behave as though they were in a real market (Atkinson and others, 2018). 9.62 In choice experiments, an individual is offered a set of alternative levels of supply of goods or services (typically two or three), for which the characteristics vary accord- ing to defined dimensions of quality and cost. By analysing preferences across these different bundles of characteristics, it is possible to obtain the value placed by the indi- vidual on each of the characteristics, provided (a) the bundles include a cost variable; and (b) a baseline bundle is included that represents the status quo. 9.63 The information obtained from application of contingent valuation methods and from choice experiments is on WTP for an ecosystem service or WTA payment for its loss. This information is then used to assess changes in consumer and producer surplus and, as such, does not provide an estimate of the exchange value required for accounting purposes. However, by combining information on the WTP or the WTA of a range of recipients of the service, it is possible to derive a demand function for the ecosystem service and such a demand function may subsequently be utilized to derive an exchange value by using a simulated exchange value approach. 9.64 Prices from economic modelling. Conceptually, it is possible to derive prices for ecosystem services from economic models that encompass relevant information on environmental and economic variables. For example, ecosystem services prices (e.g. for biomass provisioning services) may be elicited from computable general equi- librium models that take into consideration a wide range of factors and connections among economic sectors and which can be extended to include environmental factors. While these models have the potential to yield prices generated in more dynamic mar- ket contexts, the data requirements for applying them indicate that they are not likely to be suitable for use in ecosystem accounting. Accounting for ecosystem services in monetary terms 225 9.65 Qualitative methods. There is a range of qualitative methods, including delib- erative and group methods, that can be used in assessing the value of ecosystem ser- vices. However, since these methods are generally not designed for the derivation of monetary values, they are not considered appropriate for use in ecosystem accounting. 9.4 Valuation methods for different ecosystem services 9.4.1 Introduction 9.66 For the compilation of the ecosystem services flow account in monetary terms, the different valuation methods described in section 9.3 must be applied to individual ecosystem services. Compilers should be guided by the order of preference for valu- ation methods outlined in section 9.3.1 when determining which valuation method to apply for a given ecosystem service. In practice, the method that is applied often depends on data availability. The following subsection provides general guidance on the issues to be considered in undertaking monetary valuation of different services. More detailed technical guidance on the implementation of valuation methods for individual services is available in the interim report on the monetary valuation of eco- system services and assets for ecosystem accounting (United Nations, Department of Economic and Social Affairs, Statistics Division, 2022b). 9.4.2 Valuation of different types of services 9.67 Provisioning services include living resources harvested from systems ranging from unmanaged terrestrial and aquatic natural systems (uncultivated biomass) to highly managed plantations and aquaculture and livestock systems (cultivated bio- mass). The valuation of provisioning services should deal only with estimating the value related to the physical flows (e.g. fish) that are harvested for non-recreational, consumptive use, commonly as inputs to wider supply chains. The relevant measure- ment boundaries for provisioning services are described in chapter 6. 9.68 All biomass harvested is within scope of the production boundary of the SNA and hence exchange values for the relevant products are included in current measures of economic production. The valuation of ecosystem services is therefore focused on identifying the contribution of the ecosystem to the biomass product values, which are themselves based on data on quantities traded, market prices and input costs. 9.69 There may be significant flows of ecosystem services associated with subsistence agriculture, forestry and fisheries in a number of situations, that is, when the outputs from growing and harvesting activities are not sold on markets but directly consumed by households. A broad range of products may be relevant in this regard, including all types of non-timber forest products. Following the conceptual scope of the SNA, the production associated with these activities should be included in national accounts estimates of output, with exchange values estimated on the basis of the prices of simi- 102 The handbook on measuring lar goods sold on markets.102 There would then be an associated ecosystem services the non-observed economy (Organisation for Economic contribution to the recorded output. The methods described above for estimating the Co-operation and Develop- value of biomass provisioning services can be used for the valuation of the ecosystem ment, International Monetary services associated with subsistence production and consumption on the basis of the Fund, International Labour estimated market prices. Organization and Common- wealth of Independent States, 9.70 There is a wide range of regulating and maintenance services. In some cases, the 2002) provides guidance on contribution of these services is an input to SNA benefits. For example, the service of measurement approaches in soil erosion control may be an input to agricultural production. In other cases, ser- this area. 226 System of Environmental-Economic Accounting – Ecosystem Accounting vices (e.g. water purification services) are contributions to non-SNA benefits, related especially to improvements in human health. In all cases, there are few, if any, dis- tinct markets for these services and identifying their relative contribution within the context of existing market prices is likely to be challenging. Finally, most regulating and maintenance services exhibit considerable variation in their supply owing to their dependency on local contexts and, generally, the measurement of flows in biophysical terms requires biophysical modelling at relatively fine spatial scales. 9.71 Cost-based methods, such as the averting behaviour, replacement cost and avoided damages methods, are the methods most commonly used for monetary valu- ation of regulating and maintenance services. In some cases, those services can be valued based on observed market transactions, for example, through use of data from payments for ecosystem services schemes or emission trading schemes. However, depending on the institutional arrangements involved or the way in which services are quantified within the schemes (e.g. management actions are often used as a proxy for quantities), there will be limits with respect to where these methods can be used to estimate exchange values. 9.72 For some services, especially those related to mitigating the effects of extreme events, the flow of the service will depend on the likelihood of events, both natural events and those related to human activity. For example, in measuring coastal protec- tion services, there needs to be a likelihood greater than zero that events that cause damage (e.g. a tidal surge) may occur. The role of the ecosystem can then be assessed in terms of the extent to which it reduces the impact of such events. It is also necessary to consider the likelihood of damage. Thus, even if an event is likely, the ecosystem service flow will be lower if there is little damage expected. In the extreme case, if there is no expected damage, then there will be no user of the mitigation service and hence no flow of ecosystem services to be recorded. Overall, the likelihood of occurrence, the potential for damages and the extent to which the relevant ecosystems can reduce those damages will affect the value of the service. 9.73 For cultural services, it is generally necessary to consider their monetary valu- ation from a demand or consumption perspective. The most common methods used for recreation-related services are revealed preference methods based on the travel cost method, including payments for entry or related services. Methods for estimating the value of other cultural services include hedonic pricing where, for example, the value of visual amenity services (and also local recreation services) may be determined from the assessment of local house prices. 9.74 By using residual value approaches, it is possible to estimate the value of ecosys- tem services as inputs to the businesses involved in facilitating people’s interactions with nature, for example, island resorts or canoe hiring firms. In line with the recording in chapter 7, the flow of cultural ecosystem services is recorded as used by households and the values of any ecosystem services that may be a part of monetary payments to businesses are recorded as supplementary items in the SUT. 9.5 Spatial variation in values and value transfer for the purpose of ecosystem accounting 9.5.1 Introduction 9.75 Most commonly, the valuation of ecosystem services requires the recognition that there will be variation in their values depending on the location and context in which those services are supplied and used. The variation in ecosystem services values between locations occurs for a number of reasons. The physical level of service provi- Accounting for ecosystem services in monetary terms 227 sion may vary spatially, for example, when the global climate regulation service sup- plied by a forest through carbon sequestration varies from one side of a hill to another as solar energy varies with the aspect of that hill. Similarly, the recreation-related ser- vices supplied by a lake or river may vary depending on proximity to human popula- tions: for example, a lake located near a town may generate large recreational benefits, while an ecologically identical lake located in a remote area might never be visited from one year to the next. Indeed, “distance decay” in values over space is one of the most persistent and substantial determinants of ecosystem service valuation (Badura and others, 2020; Johnston, Besedin and Holland, 2019). In addition, there are likely to be differences in terms of access and property rights (institutional context) in different locations. Further, the value of an ecosystem service may vary owing to the underlying preference heterogeneity that occurs over space, that is to say, human populations in some areas may simply have preferences that are different from those of populations living in other areas. Overall, failure to account for the influence of location frequently leads to significant error (Bateman and others, 2006). 9.76 Generally, the discussion of monetary valuation for ecosystem accounting is focused on the compilation of estimates in monetary exchange value terms for large regions or countries, with the expectation that these values can support the develop- ment, implementation and/or monitoring of public policy. In contrast, much work on valuation has used economic welfare values and has focused on the valuation of eco- systems and ecosystem services for specific ecosystems; or in relation to the potential effects of policies and programmes (such as the introduction of a new tax or subsidy); or in relation to hypothetical events, for example, the damages caused by oil spills or the effects of ecosystem restoration. Consequently, much of the data on the monetary value of ecosystem services is fragmented, covering only specific services over a large area or multiple services in a more confined area or valuing changes in the flow of ecosystem services following a specific event. 9.77 Among the challenges for ecosystem accounting is how to reconcile and utilize the information from existing studies so as to obtain valid estimates of exchange value that may be applied consistently over large accounting areas and that account for the potential variations in ecosystem service values that occur over those areas. Indeed, while the consideration of larger areas might be thought of as reducing error, this is not necessarily a correct assumption if the averages estimated for such areas are calculated in ignorance of spatial variation. The extent to which spatial variation in values can be accounted for depends on data availability and the methodological considerations that have been introduced in the present publication. If spatial variation in values cannot be taken into consideration adequately, then some applications of accounting data may not be appropriate. 9.78 Beyond the need for supporting work on value transfer, there is a requirement for the ongoing expansion of work on estimating spatially explicit primary valuations to support the regular compilation of accounts. This requirement is especially important with respect to minimizing the use of primary data from other countries that have significantly different economic and institutional contexts. Although not discussed in this section, there is also a need to recognize that many primary valuations may not have been conducted with the intention of estimating exchange values as used in eco- system accounting. In using primary valuations, there is therefore a need to consider the differences in valuation techniques and the relevant assumptions described in sec- tion 9.3 so as to ensure that estimates are fit for accounting purposes. 9.79 The present section provides a brief overview of relevant considerations and potential measurement approaches for ecosystem accounting as related to spatial vari- ation in values. A key message is that there is an extensive body of research and applied 228 System of Environmental-Economic Accounting – Ecosystem Accounting practice that can be used. At the same time, consideration of the issues from an eco- system accounting perspective highlights areas in which further research is required, including concerning exchange values and marketed ecosystem services. A more detailed discussion of relevant methods is available in technical guidance on valuation for ecosystem accounting. 9.5.2 Methods for incorporating spatial variation in prices 9.80 A set of techniques, collectively referred to as value transfer or benefit transfer techniques, can be applied to enable utilization of data from specific locations in the 103 While much of the literature in estimation of monetary values in other locations.103 There are two main approaches this area uses the term “ben- among value transfer techniques: unit value transfers and value function transfers. efit transfer”, the term “value Value function transfers may be further disaggregated into subgroups, including transfer” is preferred in the present publication, reflecting “meta-analysis” function transfers and other types of value function transfers (John- a recognition of the focus on ston and others, eds., 2015, chap. 2). These techniques have been developed over many estimating exchange values decades in the environmental economics community. Reviews of the relevant litera- and the distinctive use of the ture are provided in Boyle and others (2010); Johnston, Rolfe and Zawojska (2018); term benefit in the ecosystem Johnston and others (2021); and Johnston and Rosenberger (2010). accounting framework (see chap. 6). 9.81 A unit value transfer takes a single estimate of the monetary value of an ecosys- tem service (expressed in terms of a common measurement unit (e.g. hectares, tons, visits) or a measure of central tendency (e.g. mean, median) of several value esti- mates from different studies) to estimate the value of an ecosystem service in other locations. The validity of a unit value transfer approach is limited when there is a range of differences between the value from the observed location and those from the other locations. Unit value transfers typically provide little or no internal capacity to account for the differences. Examples of factors that can cause values to differ across locations may include: • Physical characteristics of the sites that generate variation in the ecosystem services provided by the location, such as (in the case of a lake) differing opportunities for recreation in general and for angling in particular • Socioeconomic and demographic characteristics, including income, educational attainment and age, of the relevant populations in the dif- ferent locations • Variation in the preferences of populations across different locations • Variation in institutional context governing rights of access to, use of and duties towards biodiversity, ecosystems and their services • Distance between the user of the ecosystem service and the supplying eco- system asset, along with other geospatial differences that influence values in systematic ways (Glenk and others, 2020). It is to be noted that the effect of distance varies depending on the ecosystem service. For example, ben- efits of global climate regulation services emerge irrespective of distance, whereas benefits from water purification services accrue only to people located close to (or downstream of) the supplying ecosystem. • Variation in the availability of substitutes and complements. For example, in the case of recreational locations such as lakes, two otherwise identical lakes might be characterized by different levels of alternative recreational opportunities. Other things being equal (by assumption in this example), the value of preventing the lowering of water quality at a lake where there are few substitutes should be greater than the value of averting the same water quality loss at a lake where there is an abundance of recreational Accounting for ecosystem services in monetary terms 229 substitutes, the reason being that recreational opportunities are scarcer at the location of the former than at the location of the latter. • Differences across countries reflected in spatial and temporal variation in purchasing power. 9.82 Failure to adjust for location-specific conditions affecting exchange value signi- fies that applying the unit value transfer approach would work as a simple scaling factor for the changes recorded in the PSUT. Thus, an unadjusted unit value provides no additional information when reflected in a monetary SUT. While such linear mon- etary scaling may still be useful in compiling the monetary asset account for purposes that require only low accuracy, care should nevertheless be taken to identify generali- zation errors and confidence ranges. 9.83 Since differences between locations such as those just described do exist, adjustments are generally made in order to take differences between locations into account. In the first instance, adjustments may be made to account for income per capita and income elasticities in order to derive an adjusted unit value trans- fer. Meta-studies (see, for example, Organisation for Economic Co-operation and Development (2014)) indicate that adjusting for income per capita is a significant factor in enabling application of values from one location to others. This adjustment is likely to be of most significance in the context of using primary data from another country. While data from other countries may be used in compiling accounts, it is advisable, wherever possible, to use primary data from the country for which the accounts are being compiled. 9.84 A more sophisticated technique is value function transfer. Value function trans- fers can be categorized in different ways. They can be grouped, for example, into four primary categories based on how the value functions are estimated. The first type of value function transfer estimates a value function using meta-analysis of prior valua- tion studies. The second type estimates a function concerning the relationship between value and the ecosystem and economic context from a primary research study in one location and uses that function in other locations. The third type uses primary data from multiple locations across a region to generate an “umbrella” function that can be applied to other locations within the region (see, for example, Bateman and oth- ers (2013)). This approach has the advantage of using data sets that encompass the locations of both the primary data site or sites and the transfer site or sites, thereby preventing “out of sample” problems. This approach is also referred to as value gener- alization. The fourth type is known as structural value transfer (also called preference calibration). This type of transfer combines information from multiple prior primary studies using a utility theoretic structure that is assumed to apply to the prior studies. These different types of value function may encompass factors such as the physical features of the location, differences in changes in population age structure between sites and differences in population density. 9.85 When used for value function transfer, meta-analysis (see, for example, Bate- man and others (2000) and Boyle and Wooldridge (2018)) takes information from a range of existing primary studies and uses it to estimate a functional relationship that enables the values of ecosystem services to be predicted as a function of, inter alia, site and spatial characteristics, attributes and size of the population affected and the type of statistical methods used in the analysis of existing studies. The estimated functional relationship is then used in the new application through a procedure referred to as meta-regression value transfer, which gives a range of values for the new application, depending on the characteristics embedded in the meta-regression. 230 System of Environmental-Economic Accounting – Ecosystem Accounting 9.86 This approach is well suited to developing estimates for additional sites and can be used to provide estimates at larger scales, including at the national level (see, for exam- ple, Corona and others (2020) and Johnston, Besedin and Holland (2019)). Application of meta-analysis to the field of non-market valuation has expanded rapidly in recent years. Studies have been carried out on water quality, urban pollution, recreation, the ecological functions of wetlands, the values of statistical life, noise and congestion. 9.87 At the same time, as meta-analysis sometimes uses data from a variety of coun- tries, variations between countries need to be recognized. Moreover, it is necessary to identify and select appropriately the studies to be used in the meta-analysis so as to ensure, for example, welfare consistency and commodity consistency (Johnston, Rolfe and Zawojska, 2018). Guidelines for the selection and coding of studies for economic meta-analysis are available (see, for example, Stanley and others (2013)). In meta- analytic transfers using valuation studies from other countries outside the EAA, care should be taken to adjust for particular differences in national jurisdiction affecting access and use rights. 9.88 The extent to which different value transfer methods can capture spatial vari- ations in value and their general accuracy have constituted one area of extensive research. For discussions and a review of relevant work, see, for example, Bateman and others (2006); Johnston, Besedin and Holland (2019); Johnston, Besedin and Sta- pler (2017); and Schaafsma (2015). Further, guidelines are being developed to focus on improving more broadly the quality of estimates derived through the use of value transfer techniques (see Johnston and others (2020; 2021)). Fundamentally, the quality of value transfer approaches is influenced by the number, depth (in terms of number of data points) and quality of spatially explicit primary valuation studies, which in turn likely depend on the type of ecosystem and the type of ecosystem service being con- sidered. For example, while there are many studies of recreational use of ecosystems, there are not as many on the value of wetlands. Moreover, since different valuation studies are often based on different assumptions and different valuation concepts and use different methods, there is a strong case to be made for using the SEEA EA frame- work and applying it through the practice of official statistics to develop consistently measured values across a variety of ecosystem services and locations. In developing these studies, coordination with the organization of data in physical terms on ecosys- tem extent and condition and ecosystem services flows is highly recommended since these data in physical terms on ecosystem extent and condition and ecosystem ser- vices flows can assist in consistently differentiating and classifying data for estimates derived through the use of value transfer techniques spatially and in ensuring consist- ent understanding of the supply and use context for ecosystem services. 9.89 When considering the direct applicability of existing value transfer research and findings to environmental accounting, it is important to consider the extent to which the types of values considered within the value transfer literature are consistent with those used within accounting applications. For example, much (although not all) of the available material in the value transfer literature is based on stated preference meth- ods. Stated preference methods establish hypothetical markets to quantify welfare values of changes in non-marketed ecosystem condition and/or services. For account- ing purposes, it is necessary to simulate exchange values by combining these stated preference functions with ecosystem services supply/cost functions. Since institutional regimes are specific to ecosystems and resource characteristics (Ostrom, 2010), simu- lating exchange values requires the definition of credible institutional conditions for a market for the ecosystem in question (Barton and others, 2019). Accounting principles state that accounting-compatible prices should reflect current or feasible market insti- tutions. Compilers should therefore recognize that transferring or generalizing valua- Accounting for ecosystem services in monetary terms 231 tion estimates from actual or hypothetical markets to locations without markets may potentially contravene national accounting principles. In particular, care should be taken in cases where market simulation contradicts existing rights regimes. In these situations, simulated exchange values, and monetary accounts more generally, may be perceived as invalid by local rights holders. This is a particularly significant issue in ecosystems with open access or common property rights (e.g. community fisheries and forests, communal green spaces). 9.90 Location-based valuation of all ecosystem services is a clear-cut conceptual ideal. While implementing this concept has rarely been possible owing to resource constraints, rapid increases in the availability of spatial data and the ongoing advances in valuation methodologies will make this more of a possibility in the future. As intro- duced in this section, there are well-researched value transfer techniques available for use in ecosystem accounting that can utilize available primary valuation studies. Fur- ther testing and best practice guidelines on defining credible market exchange condi- tions for value transfers should be part of the SEEA EA research and development agenda. To support appropriate use and interpretation of monetary estimates and to provide a sound basis for further research and development of data, clear documenta- tion will be required of data sources and of the methods and assumptions applied in forming aggregate values to be entered into the accounts. 233 Chapter 10 Accounting for ecosystem assets in monetary terms 10.1 Introduction 10.1 The series of ecosystem accounts is completed with the monetary ecosystem asset account. This account records a monetary value of ecosystem assets in terms of the NPV of the ecosystem services supplied by the asset. The estimates of monetary value are compiled following the NPV principles described in chapter 8 and using the exchange value concept. The estimates provide a measure of exchange value related to the scope of ecosystem services recorded in the ecosystem services flow account and cannot be interpreted as reflecting a complete or universal measure of the value of nature. 10.2 The monetary ecosystem asset account also records the changes in the monetary value of ecosystem assets over an accounting period including changes due to ecosys- tem degradation, ecosystem enhancement, ecosystem conversions and revaluations. 10.3 Estimates of ecosystem assets in monetary terms can support discussion of the relative significance of different ecosystem assets and ecosystem types and the mon- etary value of ecosystem assets can be combined with the monetary valuations of other types of assets, for example, produced assets, to provide broader assessments of net wealth, such as in wealth accounting (see UNEP (2018); World Bank (2018)). Measures of ecosystem assets in monetary terms may also be related to general socioeconomic drivers of change such as changes in economic activity and demographic trends. Together with information about assets in physical terms (e.g. measures of ecosystem condition), they may be used as part of an assessment of the sustainability of the flows of ecosystem services. Further, because there is a focus on future flows of ecosystem services, measures of the value of ecosystem assets can support project design and monitoring requirements. 10.4 At the same time, as noted in chapter 8, measures in monetary terms on their own are not sufficient for the analysis of non-marginal changes in ecosystems or issues of sustainability that concern ecological thresholds and boundaries. Consequently, there is significant advantage in using the ecosystem accounting system, which provides a clear line of sight between physical data on ecosystem extent and condition, measures of ecosystem service flows and ecosystem capacity, and monetary values. More gener- ally, in analysing changes in value, there is a need to assess the effects of price change and to focus on the relevant changes in the volumes of assets and services. 10.5 Measures of ecosystem degradation in monetary terms are of particular inter- est in understanding changes in ecosystem assets relative to measures of economic activity such as industry value added. The derivation of degradation-adjusted income measures is explained in chapter 11, together with a description of extended balance sheets and extended institutional sector accounts. 234 System of Environmental-Economic Accounting – Ecosystem Accounting 10.6 Section 10.2 sets out the structure of the monetary ecosystem asset account and the associated accounting entries. Section 10.3 describes the key components in valuing ecosystem assets using the NPV approach, including the approach to valuing accounting entries for changes in ecosystem assets over an accounting period. 10.2 Monetary ecosystem asset account 10.2.1 Structure of the monetary ecosystem asset account 10.7 The monetary ecosystem asset account records the monetary values of all eco- system assets within an EAA at the beginning (opening) and end (closing) of each accounting period, as well as changes in the value of those assets over the accounting period. Changes in the monetary value of ecosystem assets are separated into five broad types: ecosystem enhancement, ecosystem degradation, ecosystem conversions, other changes in the volume of ecosystem assets, and revaluations as a result of price changes. 10.8 The description provided in the present section reflects a framing in which an individual ecosystem asset is able to be valued as a single entity reflecting the NPV of the set of ecosystem services that it supplies as recorded in the ecosystem services flow accounts. Thus, the concepts concerning change in value such as ecosystem degrada- tion and ecosystem enhancement are defined by viewing the ecosystem asset as a sin- gle entity in line with the framing for measurement of ecosystem extent and condition. 10.9 In practice, as explained in section 10.3, the value of an ecosystem asset is obtained by estimating the NPV of each ecosystem service supplied by the asset sepa- rately and taking into consideration key linkages among services and assets to the extent possible. The approach to reconciling ecosystem service-specific NPV esti- mates and changes in ecosystem asset values described in this section is explained in appendix A10.1. This reconciliation approach is pragmatic and suitable for accounting purposes. While improvements to the approach may be obtained through additional modelling that considers in greater depth the links between ecosystem condition, eco- system capacity and ecosystem service flows, the accounting structure described in this section remains unaffected. 10.10 The basic accounting structure for the monetary ecosystem asset account is shown in table 10.1. The table presents an account for an EAA classified by ecosystem type using selected EFGs from IUCN GET (see chap. 3). 10.11 The opening and closing values are derived using the NPV of ecosystem services for a given ecosystem type based on the concepts described in chapter 8 and using the approach to estimating NPVs described in section 10.3. Data on the monetary value of ecosystem services by ecosystem type come from the ecosystem services flow account in monetary terms described in chapter 9. The opening and closing values are the first estimates compiled in compiling the monetary ecosystem asset account. 10.12 Entries for ecosystem degradation and enhancement involve assessing the change in NPV and comparing this with the change in condition for the ecosystem type as recorded in the ecosystem condition account described in chapter 5 and apply- ing the definitions of ecosystem degradation and enhancement given below. Entries for ecosystem conversions will build on entries recorded in the ecosystem extent account (chap. 4). The additions and reductions shown in that account in physical terms align with the additions and reductions in monetary terms that are recorded under eco- system conversions. Entries for other changes in the volume of ecosystem assets and revaluations are based on specific information concerning those changes as described below. Appendix A10.1 provides a worked example of how each of these accounting entries can be estimated in order to compile a monetary ecosystem asset account. Table 10.1 Monetary ecosystem asset account (currency units) Ecosystem type (based on the EFG level 3 of IUCN GET) Terrestrial Freshwater Marine T1 Tropical-subtropical T2 Temperate-boreal forests forests and woodlands … T7 F1 … FM1 M1 … MFT1 Tropical-subtropical lowland rainforests Tropical-subtropical dry forests and scrubs Tropical-subtropical montane rainforests Tropical heath forests Boreal and temperate high mon- tane forests and woodlands Deciduous temperate forests … Temperate pyric sclerophyll for- ests and woodlands … … … Derived semi-natural pastures and old fields Permanent upland streams … Intermittently closed and open lakes and lagoons Seagrass meadows … Coastal saltmarshes and reedbeds T1.1 T1.2 T1.3 T1.4 T2.1 T2.2 … T2.6 … … … T7.5 F1.1 … FM1.3 M1.1 … MFT1.3 TOTAL Opening value Ecosystem enhancement Ecosystem degradation Ecosystem conversions Additions Reductions Other changes in volume of ecosystem assets Accounting for ecosystem assets in monetary terms Catastrophic losses Reappraisals Revaluations Net change in value Closing value 235 236 System of Environmental-Economic Accounting – Ecosystem Accounting 10.13 As required and where data are available, asset accounts showing the same accounting entries can be compiled for individual ecosystem assets (e.g. a specific grassland), for all ecosystem assets of a single ecosystem type (e.g. all trophic savan- nas (T4.1)) or for various types of EAA (e.g. a country, a large administrative area or a catchment) that include multiple ecosystem assets of different ecosystem types. 10.14 Depending on data availability, it may be necessary to combine some account- ing entries by netting the change in value. For example, net ecosystem conversions might be recorded rather than separately recorded additions and reductions. Further, in many contexts, there may be multiple potential entries over an accounting period reflecting a combination of enhancement, degradation and other types of changes. The present section outlines the conceptual ideal for distinguishing the various entries, recognizing that making such distinctions in practice commonly relies on the judg- ment of the compiler. At the same time, the measure of net change in ecosystem asset value should be well bounded by measures of the opening and closing values and the various changes can also be linked to measures in physical terms recorded in the eco- system extent and condition accounts. 10.2.2 Ecosystem enhancement 10.15 Ecosystem enhancement is the increase in the value of an ecosystem asset over an accounting period that is associated with an improvement in the condition of the asset during that accounting period. The increase in value is demonstrated by a rise in the NPV of expected future returns of the ecosystem services supplied by that asset. Ecosystem enhancement incorporates the effects of activities, including those related to a reduction in harmful activities, that have improved the condition of an ecosystem asset by extending beyond activities that may simply maintain an ecosystem asset’s condition. Ecosystem enhancement may also arise as the result of natural and unman- 104 In a SEEA Central Framework aged improvements in condition.104 There is not a linear relationship between changes context, this is related to the in condition and future flows of ecosystem services. concept of natural growth of biological resources. 10.16 Not all increases in value should be recorded as ecosystem enhancement. The focus should be on recording increases in asset value resulting from improvements in ecosystem condition that can be reasonably expected to increase the future flows of ecosystem services in physical terms based on current and expected patterns of eco- system management and use. Increases in value attributable to changes in the expected demand for ecosystem services should be recorded as upward reappraisals. Increases in value due solely to movements in the unit prices of ecosystem services should be recorded as revaluations. 10.17 Ecosystem enhancement is measured in relation to the extent of an ecosystem asset as recorded at the beginning of the accounting period. Where there are changes in the extent of an ecosystem asset – that is, where there is a change (conversion) from one ecosystem type to another during an accounting period, a separate recording of that change should be undertaken, and the change should be entered under the item “ecosystem conversions”. 105 Details are available at the website of the Land Degrada- 10.18 Three types of activities may be considered to be within the context of ecosys- tion Neutrality conceptual tem enhancement: restoration, rehabilitation and reclamation. Each of these types of framework under the United activities is expected to affect ecosystems to a different degree.105 Restoration occurs Nations Convention to Combat where the aim is to re-establish pre-existing structure and function, including biotic Desertification in Those integrity. Rehabilitation occurs where the aim is to reinstate ecosystem functionality Countries Experiencing Serious Drought and/or Desertification with a focus on supplying a range of ecosystem services. Both restoration and reha- (www.unccd.int/actions/ldn- bilitation activities may be achieved by reducing the degree of human impact, for target-setting-programme). example, by reducing stocking rates on grazing land, reducing the release of pollutants Accounting for ecosystem assets in monetary terms 237 or separating or rezoning areas that are the focus of restoration and rehabilitation. Reclamation occurs where the aim is to return degraded land (caused, e.g. by loss of topsoil due to poor land management practices) to a useful state (e.g. for agriculture). Where restoration, rehabilitation or reclamation activities result in a change in ecosys- tem type during the accounting period, increases in value due to such activities should be recorded under ecosystem conversions. 10.19 Measures of ecosystem enhancement are linked to activities undertaken in the landscape. Consequently, the recorded changes in ecosystem extent and condition and ecosystem asset value can be compared with estimates of expenditure and other meas- ures of human input (e.g. volunteer hours) associated with those activities. However, there should be no prior expectations regarding the results of such a comparison. For example, it should not be expected that the changes in NPV of an ecosystem asset would be the same as the levels of expenditure on environmental protection or res- toration activity. Hence, to support decision-making and analysis, data on ecosystem enhancement may be presented as a complement to measures of expenditure and may provide an indication of the broader future returns that may result from a given level of expenditure. 10.20 In this context, there is a connection to the measurement of land improvements as recorded as a component of gross fixed capital formation in the SNA and to the measurement of environmental protection and resource management expenditure as recorded in the SEEA Central Framework. There may also be interest in comparing changes in the value of ecosystem assets associated with these environmental activities with data on the ownership of ecosystem assets. 10.2.3 Ecosystem degradation 10.21 Ecosystem degradation is the decrease in the value of an ecosystem asset over an accounting period that is associated with a decline in the condition of the ecosys- tem asset during that accounting period. The decrease in value is demonstrated by a fall in the NPV of expected future returns of the ecosystem services supplied by that asset. Ecosystem degradation occurs as a result of both managed and unmanaged declines in condition. 10.22 Not all decreases in value should be recorded as ecosystem degradation. The focus should be on recording decreases in asset value resulting from declines in condition that can be reasonably expected to decrease the future flows of ecosystem services in physical terms, considering the current and expected patterns of ecosystem management and use and expected patterns of environmental variation. 10.23 Declines in condition may arise from a range of factors including extraction and harvest of natural resources and short- and long-term effects of pollution and emissions. Where there is harvesting or extraction of resources from an ecosystem (e.g. through grazing), the assessment of the decline in condition should be considered at an appropriate scale and over an appropriate time frame within which the level of harvesting or extraction can be assessed relative to a rate of regeneration of the resource. Only extraction at rates above the rates of regeneration should be regarded as contributing to degradation.106 106 This treatment is consistent with the definition of depletion 10.24 Decreases in value due to large-scale, discrete and recognizable events that provided in the SEEA Central cause a significant loss in the condition of an ecosystem asset should be recorded as Framework. catastrophic losses. Decreases in value attributable to changes in the expected demand for ecosystem services should be recorded as downward reappraisals. Decreases in value due solely to movements in the unit prices of ecosystem services should be recorded as revaluations. 238 System of Environmental-Economic Accounting – Ecosystem Accounting 10.25 Ecosystem degradation is measured in relation to the extent of an ecosystem asset recorded at the beginning of the accounting period. Where there are changes in the extent of an ecosystem asset – that is, where there is change (conversion) from one ecosystem type to another during an accounting period, a separate record- ing of that change should be undertaken and entered under the item “ecosystem conversions”. 10.26 In non-SEEA contexts, the scope of measures of ecosystem degradation may be broader than as defined here. For example, the effects of some conversions (e.g. from natural to cultivated ecosystem types) may be incorporated in measures of degradation. 10.27 The measurement of ecosystem degradation reveals the loss of future f lows of ecosystems services but does not capture wider economic and social impacts of declines in ecosystem condition that may also arise. For example, degradation of cultivated land may lead to losses of farm incomes and employ- ment opportunities in rural communities. Similar observations apply to entries concerning ecosystem enhancement, ecosystem conversion and catastrophic losses. The analysis of these wider impacts can be supported by data from the ecosystem accounts, together with other data from, for example, the national accounts and labour-force statistics. 10.28 The measurement of ecosystem degradation can be undertaken for an eco- system asset without specific regard to the legal or economic ownership of the asset. However, for some analytical purposes and for integration of ecosystem accounts into the general sequence of institutional sector accounts of the SNA, it is necessary to attribute the cost of ecosystem degradation to an economic unit and institutional sec- tor. Approaches to the attribution of ecosystem degradation to institutional sectors are discussed in chapters 11 and 12. 10.29 In section 5.4 of the SEEA Central Framework, depletion of natural resources, in physical terms, is defined as “the decrease in the quantity of the stock of a natural resource over an accounting period that is due to the extraction of the natural resource by economic units occurring at a level greater than that of regen- eration” (Central Framework, para. 5.76). This definition can be seen as embedded within the definition of ecosystem degradation to the extent that the quantity of a stock of a natural resource is considered part of the structure and composition of an ecosystem asset. The term depletion is retained to refer solely to the cost of using up natural resources. This measure is narrower in scope than ecosystem degradation since it is related only to the loss of future provisioning services. However, an econ- omy-wide measure of depletion is broader in scope to the extent that it includes declines due to extraction in the NPV of the stock of non-renewable resources, in particular mineral and energy resources, since those resources fall outside the scope of ecosystem assets. 10.2.4 Ecosystem conversions 10.30 Ecosystem conversions refer to situations in which, for a given location, there is a change in ecosystem type involving a distinct and persistent change in ecological structure, composition and function, which, in turn, is reflected in the supply of a dif- ferent set of ecosystem services and different expected future returns. 10.31 In physical terms, an ecosystem conversion that occurs during the account- ing period should be recorded as a change in ecosystem extent (e.g. a change from shrubland to cropland), following the guidance in chapter 4. In the ecosystem extent account, an increase in the area of one ecosystem type and a decrease in the Accounting for ecosystem assets in monetary terms 239 area of another ecosystem type at a given location nets to zero. It should also be noted that an ecosystem conversion may commonly apply only to part of an exist- ing ecosystem asset. 10.32 Consistent with the definition of ecosystem degradation, assessment of the change in ecosystem type should be undertaken at an appropriate scale and over an appropriate time frame to allow for assessing the effects of, for example, harvesting or extraction of natural resources or forest fires relative to rates of regeneration. More generally, it would be relevant to consider changes in ecosystem condition since those changes serve as an indicator of potential changes in ecosystem type. 10.33 In monetary terms, a decrease in value is recorded for the ecosystem type from which the area has been converted (e.g. shrubland) and an increase in value is recorded for the ecosystem type to which the area has been converted (e.g. cropland). Each of these entries should be recorded under the item “ecosystem conversions” either in the row for additions or the row for reductions. 10.34 However, across an EAA, there is no expectation that the value of expected future returns for additions and reductions will be offsetting. Thus, the net effect in monetary terms of ecosystem conversions may be positive or negative depending on the differences in the set of expected ecosystem services that are generated by the dif- ferent ecosystem types. 10.35 It may be of interest to present data, depending on their availability, on eco- system conversions according to the reason for the conversion, including agricultural expansion, increased urbanization, coastal mangrove destruction by hurricanes or reclamation of desert areas for use as grazing land. 10.2.5 Other changes in the volume of ecosystem assets 10.36 Other changes in volume is an SNA-defined accounting entry that provides the opportunity to record all other changes in the value of an asset between balance sheet dates that are not attributable to transactions or revaluations (see 2008 SNA, chap. 12). In the context of ecosystem accounting, other changes in the volume of ecosystem assets are changes in the value of an ecosystem asset, other than (a) those due to ecosystem enhancement, ecosystem degradation or ecosystem conversion and (b) those that are the result solely of changes in unit prices of ecosystem services. The two main types of other changes in the volume of ecosystem assets are catastrophic losses and reappraisals. 10.37 Decreases in the value of ecosystem assets due to catastrophic losses are identi- fied separately to provide scope for compilers to record decreases due to large-scale, discrete and recognizable events that cause a significant decline in the condition of an ecosystem asset, that is, significant losses in structure, function or composition, and hence affect the future flows of ecosystem services in physical terms. Examples include earthquakes, bushfires, cyclones and industrial disasters. While these events may be anticipated in general terms, the precise timing, location and magnitude cannot be foreseen in the same way that expectations may be formed about patterns of ecosystem use by people.107 The effects on future flows of ecosystem services may be temporary if 107 See also 2008 SNA, paras. 12.46 the ecosystem quickly regains its previous condition or permanent if the changes are and 12.47; and SEEA Central such that some ecosystem services can no longer be supplied or accessed (e.g. due to Framework, para. 5.49. changes in regulations). Where the effects of large-scale events are significant enough for the ecosystem to be considered to have changed its type, this should be recorded as an ecosystem conversion. 240 System of Environmental-Economic Accounting – Ecosystem Accounting 10.38 Reappraisals should be recorded when updated information emerges that per- mits a reassessment of the expected condition of the ecosystem assets or the future demand for ecosystem services, with the result that the expected pattern of future returns at the end of the accounting period is different from the pattern that had been expected at the start of the accounting period. For example, the effects of changes in demographic projections that affect the future demand for ecosystem services should be recorded as reappraisals, as well as effects of changes in the future flows of services due to rezoning of land or changes in the risk of extreme events. 10.39 Reappraisals concern changes in expectations and are materially different from the use of updated information to improve the quality of compiled estimates. The incorporation of new information concerning expectations does not lead to revisions in previous estimates. 10.40 Where source data are improved or revised (e.g. through the use of more detailed ecological information or biophysical modelling) or where revised methods and classifications are adopted, the changes should be applied consistently across all relevant accounting entries, and, as appropriate, revisions to past accounting entries should be made. A separate accounting entry to distinguish revisions due to changes in source data is not required but for data quality assessment purposes documenting all revisions to accounts is strongly recommended. 10.2.6 Revaluations 10.41 Revaluations are changes in the value of ecosystem assets over an account- ing period that are due solely to movements in the unit prices of ecosystem services that underpin the derivation of the NPV of those assets. Following the SEEA Central Framework (para. 5.61), a change in the value of an ecosystem asset in response to a change in the quantity or quality of future flows of ecosystem services is not consid- ered a revaluation and should be recorded, as appropriate, as ecosystem enhancement, ecosystem degradation or ecosystem conversion or under other changes in volume. 10.42 Revaluations reflect nominal holding gains over an accounting period and there may be analytical interest in decomposing these gains into neutral holding gains – equivalent to the nominal gains associated with the general rate of inflation – and real holding gains. Holding gains may be positive or negative since the nominal gains may be greater or less than the general rate of inflation. 10.43 Revaluations should also incorporate changes in the value of ecosystem assets due to changes in the assumptions made with respect to the parameters that are used to estimate NPVs, such as the discount rate, to the extent that these effects can be iso- lated. Changes in estimated values that are due to changes in methods are treated as revisions. 10.3 Approaches to valuing ecosystem assets 10.3.1 General approach to valuing ecosystem assets 10.44 The NPV approach to the valuation of ecosystem assets was introduced in chapter 8. In mathematical terms, the value of a single ecosystem asset at the end of an accounting period is written as: Accounting for ecosystem assets in monetary terms 241 i=s j=t+N Vt(EA) = ∑∑ i=1 j=t+1 EStij(EAt) (1 + rj)(j-t)’ where EStij is the value of ecosystem service i in year j as expected in period t (e.g. 2020) generated by a specific ecosystem asset EAt; S is the total number of ecosys- tem services; rj is the discount rate (in year j); and N is the lifetime of the asset, which may be infinite for some ecosystem assets if they are used sustainably.108 108 The assumption made is that the returns accrue at the end of 10.45 In ecosystem accounting, an ecosystem asset generates a bundle of ecosystem the accounting period, hence services, each valued separately. The NPV formula is applied at the level of individual the first future period’s flows ecosystem services and the resulting discounted values are aggregated to derive the are discounted. This assump- monetary value of the ecosystem asset. Where the ecosystem service values are based tion is used to simplify the on observed market prices for associated benefits (e.g. using the resource rent method), explanation and the associated notation but has no impact on the costs incurred in supplying the ecosystem services are excluded so that the values the underlying relationships used reflect only the contribution of the ecosystem. A discussion on the various com- described. ponents of the equation is presented below. 10.46 Each ecosystem service is considered separable given that (a) it can be meas- ured distinctly, that is, in a mutually exclusive manner; and (b) it represents a distinct flow between an ecosystem asset and a user. At the same time, in measuring the NPV for each ecosystem service, it is necessary to recognize that, while each ecosystem ser- vice is generated from an ecosystem asset, different characteristics of that ecosystem asset would be relevant in the generation of each service. Thus, in this formulation, while there is a common location, there is not a single distinct stock, as is evident when using the NPV approach to value mineral, energy or timber resources, as pre- sented in the SEEA Central Framework. 10.47 Consequently, while each ecosystem service flow and its associated NPV are considered separable, it is necessary for the inherent connections among ecosystem characteristics within an ecosystem asset in a given location to be considered jointly when the expected future returns of each ecosystem service are being determined. General proposals for providing a reasonable baseline for consistency in measure- ment are set out below, with the general aim of preventing contradictions within a set of accounts. This ambition provides a suitable basis for meaningful interpretation in monitoring and decision-making.109 109 It will likely be possible with advances in biophysical sci- 10.48 Assuming that the expected future returns for each service are estimated ence and associated economic based on the exchange value concept, the NPV for an ecosystem service provides an modelling to better estimate exchange value for the capitalized value of that service and the aggregate NPV will expected interactions within provide an exchange value for the ecosystem asset. In order to decompose the change ecosystems with respect to the in asset value from the beginning to the end of an accounting period, for example, in supply of ecosystem ser- vices. Indeed, advances in this order to record the value of ecosystem degradation, the changes in price and quantity direction are occurring, and of future returns for each ecosystem service are analysed. Appendix A10.1 provides a an important area of future description of the decomposition approach. research will involve applying 10.49 The general principles just outlined apply to the situation where ecosystem these advances to the task of improving the valuation services are attributable to individual ecosystem assets. Commonly, the measurement of ecosystem assets (see, for and valuation of ecosystem services are undertaken using detailed spatial data, which example, Fenichel, Abbott and in turn supports the potential to undertake measurement at this level of detail. The Yun (2018)). spatial attribution of ecosystem services to different ecosystem assets is discussed in chapter 7. Where ecosystem services are not attributed to a single ecosystem asset, it remains possible to estimate the NPV of each ecosystem service and aggregate to determine a total value of ecosystem assets for an EAA. Further, in practice, it may be necessary to undertake projections at a more aggregated scale (e.g. with respect 242 System of Environmental-Economic Accounting – Ecosystem Accounting to demography) rather than for individual ecosystem assets. Nonetheless, where pos- sible, estimation should be undertaken for smaller, sub-EAA spatial areas to assist in recognizing variations in local contexts, including differences in ecosystem character- istics and in institutional arrangements (see also sect. 10.3.6). 10.50 As introduced in section 8.2, the measurement of expected future returns involves consideration of five key factors: (a) scope and definition of returns; (b) valu- ation of returns; (c) future flows of ecosystem services in physical terms; (d) asset lives; and (e) expected institutional arrangements. Each of these factors is considered in more detail below. In practice, all factors are interconnected and an iterative process would be needed to establish a clear and agreed basis for estimating expected future returns across multiple ecosystem services. Importantly, the integrated approach used in ecosystem accounting, especially the use of consistent classes of ecosystem types to underpin the organization of relevant data, provides the structure within which all of the relevant factors can be addressed consistently. 10.51 In addition to estimating expected future returns, the second key component of the NPV formula is the discounting of these returns to their present value, which, entails a mathematically straightforward calculation. The selection of an appropriate discount rate is a matter of considerable importance since it can have a significant effect on the resulting asset value and on its interpretation. The selection of discount rates is discussed in section 10.3.7. 10.52 To support the interpretation of estimates and comparison of results from dif- ferent sets of accounts, it is necessary for all assumptions used to underpin the meas- ures of the value of ecosystem assets and changes in value to be clearly documented. 10.53 It is standard practice to record single point estimates in the accounts. How- ever, given the assumptions required to underpin valuation in monetary terms, it may be appropriate to provide a range of values that could be obtained under plausible alternative assumptions. For example, estimates of the value of ecosystem assets might be derived using different assumptions concerning the discount rate. 10.54 The description of the NPV approach in this chapter is aligned with the dis- cussion in the SNA and the SEEA Central Framework. The key difference in applica- tion concerns the need to aggregate multiple future returns for a single asset value. The alignment in approach supports the compilation of extended balance sheets that incorporate ecosystem assets alongside other asset classes (see chap. 11). Because the approach described here involves the aggregation of individual ecosystem services, it should be possible to directly integrate estimates from the Central Framework for natu- ral resources provided that they can be matched to the relevant provisioning service and ecosystem asset. This also means that alternative valuations for those services can be incorporated, potentially using directly observed data (for example, on land values) or variations on the NPV formulation presented above, such as the stumpage method 110 The SEEA Central Frame- for valuing timber resources.110 work describes alternative approaches to the valuation of 10.3.2 Scope and definition of returns timber resources (paras. 5.383 and 5.384), noting that they are 10.55 The scope of returns encompasses the set of ecosystem services that is included NPV formulations under simpli- in the valuation of any given ecosystem asset. In practice, the set of ecosystem ser- fying assumptions concerning vices included for asset valuation should align with the set of services recorded in the timber stock. the monetary ecosystem services flow account for each ecosystem type, as recorded in tables 9.1a and 9.1b, in turn building on the measurement of ecosystem services in physical terms as described in chapters 6 and 7. Compilers should include a compre- hensive range of ecosystem services in order to best reflect the monetary value of the asset and its changes over time. Accounting for ecosystem assets in monetary terms 243 10.56 The returns included in the NPV calculation refer to the ecosystem services expected to be supplied by an ecosystem asset. As described in chapter 8, ecosystem services are the contributions of ecosystem assets to benefits and hence ecosystem ser- vices and benefits must be clearly distinguished. By way of example, in the case of timber provisioning services, the ecosystem services refer to the contribution of the ecosystem (e.g. valued using a stumpage value or resource rent) and are distinct from the benefits, namely, the harvested timber, commonly in the form of logs, which is sold by the forester. 10.57 Following the treatments of ecosystem services described in chapter 6, the scope of ecosystem services included in the NPV calculation may include flows of intermediate services. Thus, in principle, in the estimation of returns for a given eco- system asset, the supply of intermediate services to other ecosystem assets should be included and the use of intermediate services from other ecosystem assets should be deducted. Intermediate services that are supplied and used within an ecosystem asset need not be included in the calculation since they will net out in the overall valuation. 10.58 With respect to marine ecosystems, attention should be paid to determining the appropriate measurement boundary for fish stocks and other aquatic resources since those stocks may migrate through or straddle the EAA boundary if it is defined following, for example, a country’s EEZ. The measurement boundary for fish stocks defined in the SEEA Central Framework (sect. 5.9) should be applied for the relevant provisioning services. 10.59 The monetary value of abiotic flows, spatial functions and non-use values, defined following the treatments in chapter 6, should not be included in the valuation of ecosystem assets. However, the NPV of those flows may be separately calculated, for example, for renewable energy sources, and included as part of other environmental assets in the extended balance sheet described in chapter 11. 10.3.3 Valuation of returns 10.60 Returns for each ecosystem service are valued based on exchange values con- sistent with the guidance provided in chapters 8 and 9. The value of ecosystem services is focused only on the contribution of the ecosystem following the methods described in chapter 9. Where ecosystem services values are based on observed market prices for associated benefits (e.g. using the resource rent method), the costs incurred in sup- plying the ecosystem services will be excluded so that the value used considers only the contribution of the ecosystem. All of the other methods described in chapter 9 estimate the ecosystem contribution directly and exclude costs of supply. 10.61 To determine the present value of future returns, assumptions are required concerning the future prices for each ecosystem service. When valuing individual environmental assets, such as mineral and energy resources, it is common, for national accounting purposes, to assume that the current period price (or an average of prices in recent accounting periods) will apply in future periods. This is also an appropriate default approach for ecosystem accounting purposes. 10.62 Nonetheless, in valuing future returns of ecosystem services, assuming con- stant prices may not be valid in some situations in view of the wider interconnec- tions and factors that influence an ecosystem asset and affect future returns. Therefore, future price changes should be taken into account when expected changes in markets are well understood and where sufficient information is available, such as on some aspects of climate change-related effects. 244 System of Environmental-Economic Accounting – Ecosystem Accounting 10.3.4 Future flows of services in physical terms 10.63 In estimating future flows of ecosystem services in an asset valuation context, it is necessary to allow for relationships among ecosystem services. While each ecosys- tem service is assumed to be measured separately from other ecosystem services and can be quantified separately in the current accounting period, estimation of future flows requires recognition that expectations regarding patterns of ecosystem manage- ment and wider environmental trends for a single ecosystem asset will affect different ecosystem services in different ways. Thus, for example, if global climate regulation services are estimated under the assumption that a forest can sequester carbon over an infinite time frame, while for the same ecosystem asset, rates of timber provision- ing are estimated under the assumption that the forest’s timber resources will be fully depleted within a limited time frame (e.g. 30 years) with no likelihood of regeneration, then the two estimates of expected service flows will be internally inconsistent. 10.64 More specifically, the future flow of services depends upon the condition and regeneration of the ecosystem and future demand for ecosystem services, it being understood that the supply and use of ecosystem services must align for accounting purposes. For example, the future flow of ecosystem services from a forest ecosystem in relation to air filtration services will depend in part on (a) the extent and condition of the forest; (b) the expected level of pollutants; and (c) the expected size and growth of the local population that benefits from air filtration services. There will be a set of factors to consider for each type of ecosystem service. It is to be noted that in estimat- ing the expected future flow of services, it cannot necessarily be assumed that the flow will be ecologically sustainable, i.e. will involve no loss of ecosystem condition. 10.65 It is not anticipated that compilers will develop comprehensive models of future demand and supply considerations. However, it is reasonable to consider that some factors may be identifiable and quantifiable in certain contexts, for example, the effects of increases in population or consequences of the adoption of specific legisla- tion that is expected to reduce pollution. In some cases there may be bioeconomic and similar models that can support the development of estimates. In these cases, such information should be considered in the estimation of future flows for a given ecosys- tem service. Over time, as a time series of ecosystem accounts is developed, insights should emerge with regard to the factors of most relevance. Indeed, a key application of the accounts is in the organization of past data to estimate future trends. Relevant considerations are outlined in the following points set out below. 10.66 Since ecosystem services require both the supply and use of services, the expected socioeconomic context must also be considered in estimating the future flows of ecosystem services. This context includes general socioeconomic factors (such as demography and incomes) and more specific factors, including those that are spa- tially relevant or relevant to individual ecosystem services. Examples include changes in the demand for recreation-related services following increases in accessibility of ecosystems; and changes to regulations that reduce the concentrations of pollutants and thus reduce the demand for air filtration services. 10.67 In considering both the future supply and demand of ecosystem services it is helpful to frame future flows in different ways depending on the type of service. Future flows of provisioning services are likely to be functions of natural resource and cultivated biological resource supply and demand considerations. On the other hand, future flows of regulating and maintenance services are more likely to be functions of changes in exposure to risks over time, for example, from pollution and emissions, floods and the effects of climate change. Cultural services are likely to be driven by demand considerations including demographic changes and specific factors such as Accounting for ecosystem assets in monetary terms 245 urban design and trends in tourism and recreation. The information provided in the logic chains for ecosystem services in appendix A6.1 may provide a useful starting point in framing the relevant factors by type of ecosystem service. 10.68 Chapter 8 provided an introduction to the interactions among and within eco- system assets that should be taken into account when considering the future flows of ecosystem services and their values. Assumptions concerning expected future deg- radation that would exert an impact on specific ecosystem services are of particular importance. For example, anticipated degradation of forests due to high levels of cur- rent ecosystem use would be expected to affect regeneration rates and consequently the flow of wood provisioning services would be expected to decline over time. In national accounting, similar assumptions are made when estimating the stock of pro- duced assets. 10.69 In addition, in order to avoid internal contradictions in the measurement of asset values, it should be recognized that some patterns of use, primarily overexploita- tion of natural resources such as timber, soil and fish, will have detrimental impacts on the supply of other ecosystem services. Those impacts may not be apparent immedi- ately, being subject to different environmental thresholds. The description of the meas- urement of ecosystem capacity contained in chapter 6 can provide valuable input to the consideration of these issues. 10.70 Moreover, it is relevant to consider wider environmental changes, such as expected changes in rainfall and temperature patterns or ocean acidification associ- ated with climate change. Ideally, information from climate change-related models may be applied. 10.71 There are some contexts in which economic activity, including household con- sumption, has indirect and potentially delayed impacts on ecosystem condition. In an NPV framing, the fact that the impacts on ecosystem condition (and hence ecosystem services flows) may arise well into the future is conceptually straightforward to man- age, if the timing and magnitude of the impacts are known and can be incorporated into the estimation process. However, under a common scenario, evidence of impacts might emerge gradually, with the result that expectations regarding future services flows change. From an accounting perspective, identifying such a change in expecta- tions is possible. It is recommended that the change in value associated with these new expectations be recorded as a reappraisal of ecosystem asset value. 10.3.5 Ecosystem asset life 10.72 Ecosystem asset life is the period over which an ecosystem asset is expected to generate ecosystem services. Estimates of asset life should be based on consideration of the condition of the ecosystem asset and its capacity to supply the set of ecosystem services being considered in the valuation of the asset. It is possible to assume an infi- nite asset life when it is expected that the ecosystem asset will be used long into the future. An alternative is to apply a maximum asset life of 100 years. Unless there is strong evidence to the contrary, it is recommended that estimates of asset life be based on patterns of ecosystem use that have occurred in the recent past rather than on the utilization of general assumptions regarding future sustainability or intended or opti- mal management practices. 10.73 For use of the NPV formula, it is necessary to apply the same asset life for all ecosystem services supplied by an individual ecosystem asset, that is, the concept of asset life should be applied in relation to the asset rather than the service. For ease of application of this requirement, it is most likely appropriate to assume a single asset life for all ecosystem assets and hence all ecosystem services. An infinite asset life 246 System of Environmental-Economic Accounting – Ecosystem Accounting might be most appropriate for this purpose. Then, if there are some services for which the expectation is that services will no longer be supplied or used after a particular point in time (e.g. after 30 years), entries for subsequent time periods can be filled in with zeros. 10.3.6 Expected institutional arrangements 10.74 The fifth factor associated with establishing expected future returns is for- mulation of expectations regarding future institutional arrangements. The starting assumption for accounting purposes is that the current institutional arrange- ments will continue to apply. However, in cases where it is strongly expected that those arrangements will change in the future and the nature of the changes can be clearly understood, the effects of future changes in institutional arrangements and the expected timing of the changes should be factored in when estimating the future returns of ecosystem services. Examples of relevant institutional arrange- ments include natural resource management regimes, taxation arrangements, gov- ernment environmental conservation programmes and markets for environmental services (e.g. carbon markets). 10.3.7 Discounting 10.75 A discounting process involving the selection of a discount rate is required to derive NPV estimates. Appendix 5.2 of the SEEA Central Framework (“Discount rates”) summarizes key issues involved in the choice of discount rates and describes the mathematical and analytical implications of the choice of discount rates. In particular, that appendix takes note of the distinction between individual/private discount rates and social discount rates and the logic behind whether those rates are determined descriptively or prescriptively. Descriptively determined discount rates are those based on the prices (and other measurable factors) facing either individuals or governments, while prescriptively determined discount rates incorporate assumptions regarding the preferences of individuals and societies, particularly in respect of equity between and 111 See, in this regard, the SEEA within generations.111 Central Framework, annex A5.2, para. A5.52. 10.76 For individual ecosystem assets such as mineral and energy resources, and timber resources, the SEEA Central Framework concludes that for the purpose of alignment with the concept of exchange values as defined in the SNA, it is necessary to use marginal, private, market-based discount rates. This reflects that the discount rates are being applied in the context of the preferences of economic units operat- ing from a private, market-based perspective. In SEEA EA, preferences relating to a wider range of economic units and goods and services need to be considered. 10.77 In this context, the following conceptual framing should be applied in selecting 112 Under this framing, which is a discount rate.112 Under this framing: consistent with the concept of “dual discounting” (Baumgärt- • Individual market-based discount rates should be applied in the valuation ner and others, 2015; Weikard of ecosystem services whose users are private economic units and Zhu, 2005), it is recognized that, ideally, this approach • Social discount rates should be applied in the valuation of ecosystem ser- would also take into consid- vices that contribute to collective benefits, that is, benefits received by eration substitution effects groups of people or society generally between types of services with different discount rates. These 10.78 The selection of a social discount rate for SEEA EA purposes should be based effects would generally be on rates as specified in relevant government guidelines; and further, rates should reflected in future prices. be in active use in government decision-making. Those rates are likely to embody some assumptions on preferences of individuals and societies. Where such rates are Accounting for ecosystem assets in monetary terms 247 not available, compilers may consider using long-term government bond rates. It is not expected that all countries will use the same discount rate, given variations in economic context and institutional arrangements. However, the consistent applica- tion of the conceptual framing outlined above would support comparability across countries. 10.79 In applying discount rates, it is recommended that compilers use a constant rate over the asset’s life. The primary alternative is to use declining discount rates includ- ing hyperbolic, gamma and geometrically declining rates. Declining rates may have some intuitive appeal in that they do not fix the relationship of preferences across gen- erations and hence allow the preferences of future generations to be considered more explicitly. Declining rates also allow for increasing uncertainty, especially concerning future income growth. However, there are a range of challenges, theoretical (e.g. time inconsistencies) and practical; those rates are therefore not recommended for use in ecosystem accounting. 10.80 Care should be taken to ensure that the discount rate applied is consistent with the assumptions made in projecting future returns of ecosystem services. Specifically, if future returns are estimated in nominal prices, then the discount rate should include an allowance for expected inflation. Most commonly, future returns would be esti- mated in real terms and thus the discount rate applied should also be in real terms. Since the essential function of a discount rate is to reflect the time value of money, the appropriate measure of expected inflation is likely to be one that is economy-wide in scope, for example, the GDP deflator. 10.81 Compilers are encouraged to undertake an assessment of the sensitivity of monetary valuations to different assumptions, in particular through the application of alternative discount rates. Such assessments can be published as part of the general documentation of the accounts. 10.3.8 Measuring changes in the present value of ecosystem assets over an accounting period 10.82 Accounting for the change in the value of assets over an accounting period is a core part of asset accounting. Like the assessment of the value of an asset at the beginning and the end of an accounting period, the valuation of changes in asset value, such as those due to ecosystem enhancement, degradation and conver- sions, is also dependent on the impact exerted by those changes on expected future returns. Further, since the changes are not usually evidenced by transactions in the assets themselves, their valuation requires the use of the NPV approach to ensure alignment between opening and closing valuations and valuations of the changes. 10.83 A complete accounting for NPV and changes in NPV is presented in appen- dix A10.1. The appendix highlights the relationships between changes in the quan- tities of expected flows of ecosystem services, changes in the condition and extent of the ecosystem asset and changes in the prices of ecosystem assets with respect to each ecosystem service. A key conclusion drawn in the appendix is that it is incor- rect to use the unit price of the ecosystem service in the current period to value the 113 This relationship is described in ecosystem assets and changes in those assets; rather the relevant asset prices are a connection with the valuation function of the NPV formula on which expected future returns and discounting of individual environmental will have an effect. The relationship between unit prices for ecosystem services and assets in appendix A5.1 of the ecosystem asset prices is also discussed in appendix A10.1.113 SEEA Central Framework. 249 Appendix A10.1 Application of the NPV method for valuing ecosystem assets and changes in ecosystem assets Introduction A10.1 The present appendix explains, in some detail, the steps involved in implement- ing an NPV approach for the valuation of ecosystem assets, with a view to deriving valuations of the opening and closing values of ecosystem assets and consistent meas- ures of ecosystem enhancement, degradation, conversions, other changes in volume and revaluations. The conceptual framing for the approach described here is explained in chapter 10, which provides definitions of the relevant accounting entries. A10.2 A simple stylized example is used to demonstrate the approach. It is recognized 114 Accounting periods are that the application of these principles will be more complex in practice and that some measured over time, where t1 variations in application will be needed for ecosystem services other than the ones is the end of the first account- ing period, t2 is the end of the used. A more complete stylized example is presented in annex I to the present pub- second accounting period lication. It involves a larger number of ecosystem types and ecosystem services and and so on. t0 is the start of the incorporates a full range of ecosystem accounts including extent accounts, condition first accounting period and accounts, ecosystem services flow accounts and monetary ecosystem asset accounts. reflects the initial character- At the same time, the accounting principles described in the present appendix are istics of the ecosystems and the initial expected prices also applied in that broader example. It is to be noted that there are some differences and quantities of ecosystem in terms of assumptions between appendix 10.1 and annex I; those differences are services. Accounting periods described in the appropriate sections below. are assumed to be years. To provide context, first account- Stylized example ing period year 1 could be 2020 (which would start at t0 and A10.3 In this simple example, the EAA covers 90 hectares (ha) consisting of two eco- end at t1) and year 2 could be system assets: forest and cropland. At t0,114 the forest (EA1 – green) covers 50 ha and 2021 (which would start at t1). the cropland (EA2 – yellow) covers 40 ha (see figure A10.1.1). It is assumed that the Further, it is to be noted that in extent of each ecosystem asset remains the same from t0 to t1; therefore, changes in this example t0 will also be the end of the accounting period ecosystem service flows are driven by changes in condition (degradation or enhance- for 2019. ment) or changes in prices. The situation within which ecosystem conversion occurs is 115 This example works with a discussed further on in the present appendix. moving asset life of five years A10.4 The forest is assumed to supply three types of ecosystem services: wood provi- (for illustrative purposes only), sioning services (ES1), global climate regulation services (ES2) and recreation-related instead of assuming a fixed services (ES3); and the cropland supplies one type of ecosystem services: crop provi- asset life end date, which sioning (ES4). It is also assumed that each of these services is supplied only from spe- has an effect on the results obtained. However, in more cific areas of each ecosystem asset so that the SPAs of each ecosystem service at time t realistic applications, the asset (denoted by at) coincide with the areas of the respective ecosystem assets. life would be multiple decades A10.5 As explained in section 10.3, the value Vt of each ecosystem asset is calculated (or infinite, as the examples utilizes renewable assets) and as the NPV of the future flows of each ecosystem service supplied by that ecosystem this effect would become mini- asset. In this example, as shown in table A10.1.1, it is assumed that unit prices p and mal. In the stylized example quantities of ecosystem services supplied Q are known and have been projected for in annex I, an asset life of 100 each ecosystem service for a future period of five years.115 years is assumed. 250 System of Environmental-Economic Accounting – Ecosystem Accounting Figure A10.1.1 Extent at t0 Ecosystem asset a0 EA1 - forest 50 ha EA2 - cropland 40 ha EA1 - forest EA2 - cropland A10.6 Table A10.1.1 depicts the set of unit prices and total quantities of ecosystem ser- vices supplied across the EAA as expected at t0 (covering years 1 to 5) and table 10.1.2 depicts the prices and quantities as expected at t1 (covering years 2 to 6). The expected prices and quantities shown in tables A10.1.1 and A10.1.2 for each of the four ecosys- tem services supplied across the EAA are different between t0 and t1, reflecting differ- ences in expectations at these two points in time. Further, in this example, the pattern of expected prices and quantities shows changes over the five-year life of the asset. In the stylized example in annex I, the expected prices and quantities are assumed to be constant over the entire asset life. A10.7 To simplify the presentation, the calculations are undertaken using discounted prices, assuming a 2 per cent discount rate. Discounted prices are obtained by multi- plying the unit price in year j with the applicable discount factor for year j (as shown in table A10.1.1), which yields the ecosystem service values in the prices of the base year. For example, the value of wood provisioning in the amount of 723 currency units in year 3 is calculated as the number of cubic metres of wood (12 m3) times the unit price (64 currency units per m3) times the discount factor (0.9412). Table A.10.1.1 shows the discount factors obtained using a 2 per cent discount rate, assuming that the flows in the first year are discounted. This approach allows variations in the pattern of expected prices and quantities to be accounted for. A10.8 For the derivation of the NPV using the equation provided in section 10.3, the value of the EAA, that is, the value of all ecosystem services across all ecosystem assets, can be expressed as p ij q ij Vt = ∑i=1 ∑j=t i= 4 j=5 t t +1 (1 + r )(j-t). (1) j A10.9 In equation (1), Vt refers to the value at the end of accounting period t and is based on expectations regarding future prices and quantities at that point in time; i denotes the ecosystem service and j the year. It should be noted that it is assumed the value of each ecosystem service is separable and hence the overall asset value of the EAA can be obtained by summing over all ecosystem services. A10.10 To explain the calculation for an individual ecosystem service, consider the global climate regulation service, ES2. In this case, quantities range from 140 to 148 tons per year over the five years from t0 and the unit prices increase each year, from Table A10.1.1 Input data and NPV calculations for three ecosystem services at time period t0 Measure- Average prices Variable Ecosystem services ment unit Year 1 Year 2 Year 3 Year 4 Year 5 Total flow (Q0) Total NPV (V0) (p0) ES quantity ES1 Wood provisioning m3 12 12 12 12 12 60 supplied (a) ES2 Global climate tCO2 140 142 144 146 148 720 regulation ES3 Recreation-related Visits 190 190 190 200 200 970 ES4 Crop provisioning t 5 6 6 7 7 31 Unit price (b) ES1 Wood provisioning $/m3 $60 $62 $64 $66 $70 ES2 Global climate $/tCO2 $25 $26 $27 $28 $29 regulation ES3 Recreation-related $/visit $5 $5 $6 $6 $6 ES4 Crop provisioning $/t $75 $75 $75 $75 $75 Exchange value ES1 Wood provisioning $ $720 $744 $ 768 $792 $840 (c) = (a) * (b) ES2 Global climate $ $3 500 $3 692 $3 888 $4 088 $4 292 regulation ES3 Recreation-related $ $950 $950 $1 140 $1 200 $1 200 ES4 Crop provisioning $ $375 $450 $450 $525 $525 Discount factor (d) 2 per cent discount rate 0.9800 0.9604 0.9412 0.9224 0.9039 Net present value ES1 Wood provisioning $ $706 $715 $723 $731 $759 $3 633 $61 (e) = (c) * (d) ES2 Global climate $ $3 430 $3 546 $3 659 $3 771 $3 880 $18 285 $25 regulation ES3 Recreation-related $ $931 $912 $1 073 $1 107 $1 085 $5 108 $5 Total forest $ $27 026 Appendix A10.1: Application of the NPV method for valuing ecosystem assets/changes in ecosys. assets ES4 Crop provisioning $ $368 $432 $424 $484 $475 $2 182 $70 Total cropland $ $2 182 Total EAA $ $29 208 Abbreviations: ES, ecosystem service; m3, cubic metres; tCO2, tons of CO2; t, tons. Note: The symbol “$” signifies currency units. 251 Table A10.1.2 252 Input data and NPV calculations for three ecosystem services at time period t1 Measure- Average prices Variable Ecosystem services ment unit Year 2 Year 3 Year 4 Year 5 Year 6 Total flow (Q1) Total NPV (V1) (p1) ES quantity ES1 Wood provisioning m3 10 10 10 10 10 50 supplied (a) ES2 Global climate tCO2 130 132 134 136 138 670 regulation ES3 Recreation-related Visits 190 200 200 210 210 1 010 ES4 Crop provisioning t 6 7 7 8 7 35 Unit price (b) ES1 Wood provisioning $/m3 $65 $65 $67 $70 $72 ES2 Global climate $/tCO2 $26 $27 $28 $29 $30 regulation ES3 Recreation-related $/visit $5 $6 $6 $6 $6 ES4 Crop provisioning $/t $75 $75 $75 $75 $75 Exchange value ES1 Wood provisioning $ $650 $650 $670 $700 $720 (c) = (a) * (b) ES2 Global climate $ $3 380 $3 564 $3 752 $3 944 $4 140 regulation ES3 Recreation-related $ $950 $1 200 $1 200 $1 260 $1 260 ES4 Crop provisioning $ $450 $525 $525 $600 $525 Discount factor (d) 2 per cent discount rate 0.9800 0.9604 0.9412 0.9224 0.9039 Net present value ES1 Wood provisioning $ $637 $624 $631 $646 $651 $3 188 $64 (e) = (c) * (d) ES2 Global climate $ $3 312 $3 423 $3 531 $3 638 $3 742 $17 647 $26 regulation ES3 Recreation-related $ $931 $1 152 $1 129 $1 162 $1 139 $5 514 $5 System of Environmental-Economic Accounting – Ecosystem Accounting Total forest $ $26 349 ES4 Crop provisioning $ $441 $504 $494 $553 $475 $2 467 $70 Total cropland $2 467 Total EAA $ $28 816 Change in EAA value $ -$392 Abbreviations: ES, ecosystem service; m3, cubic metres; tCO2, tons of CO2; t, tons. Note: The symbol “$” signifies currency units. Appendix A10.1: Application of the NPV method for valuing ecosystem assets/changes in ecosys. assets 253 25 to 29 currency units per ton of CO2 (e.g. as the marginal damages of carbon release increase). The NPV of this ecosystem service is derived by multiplying the quantity by the associated discounted unit price in each year (e.g. for t0, year 1, 140 tons of CO2 * 25 currency units per ton of CO2 * 0.98 = 3,430 currency units). Summing over the five-year asset life yields the NPV for climate regulation at t0 of 18,285 currency units. A10.11 Using this approach across all ecosystem services and for both ecosystem assets, a total opening value at t0 of 29,208 currency units is obtained. This decreases to 28,816 currency units, the value at t0, that is, at the end of the accounting period. The change in asset value is -392 currency units. It should be noted that in the calculations, the NPV for each ecosystem service and each ecosystem type is also obtained. Decomposition of the change in NPV A10.12 In order to compile the entries in the ecosystem monetary asset account that records changes in NPV between opening and closing values, it is necessary to distin- guish between changes due to prices and changes due to volumes (quantities). To dis- tinguish these different changes, Vti (the value of the ith ecosystem service) is defined as the product of (a) average (discounted) unit price over the asset life, denoted by p – i and t (b) total flow (cumulative quantity) of ecosystem services supplied over the asset life, denoted by Qti.116 116 The manner in which this – i and Q i for each ecosystem service. average discounted unit price A10.13 Table A10.1.1 details the various values of p t t is derived is similar to the – i To illustrate the derivation of p consider the global climate regulation service, ES2. t approach taken in the SEEA NPV at t0 is V 2 2 0 = 18,285 currency units and the cumulative quantity Q 0 over the five Central Framework (annex years from t0 is 720 tons of CO2. Dividing the NPV value by the total volume (V 2 2 0/Q 0) A5.1) to derive estimates of gives an average discounted unit price p– 2 for ES2 of 25.40 currency units per ton of depletion, where the asset 0 price in situ for a subsoil asset CO2. was defined as the ratio of A10.14 Using this framing, equation (1) can be re-expressed as: its NPV value V and the total stock S. 4 –i i Vt = ∑i=1 pt Qt (2) i i – V – V = p iQ i – p –i – p – i Q i = (p –iQ i – p – i )Q i + p –iQ i 1 0 1 1 0 0 1 0 1 0 1 0 0 –i – p – i )Q i + p – i (Q i – Q i ) (3) = (p1 0 1 0 1 0 Price effect Volume effect A10.15 Equation (3) reflects the decomposition of the change in NPV for each eco- system service i, into changes due to price (price effect) and changes due to volume/ quantity (volume effect). The change in price (p –i – p – i ) is given a weight of Q i and the 1 0 1 i i – i change in volume (Q 1 – Q 0) is given a weight of p0 . However, this weighting pattern (or decomposition form) is not unique and the change in value could have been decom- posed into (p – i) Q i + p –i – p –i(Q i – Q i). Thus, different weights for the price and volume 1 0 1 1 1 0 effects are derived. As in appendix A5.1 of the SEEA Central Framework, and follow- ing standard index number practice, the average of the two decomposition forms is used to generate the results shown below. A10.16 Using the various average unit prices p – i and total flows (Q i) for each eco- t t system service, the results using both decomposition forms can be calculated and averaged to derive average price and volume effects. Those average price and volume effects for each ecosystem service are shown in table A10.1.3. The key observation is that the total of both of the decomposition effects must equal the overall change in value (-392 currency units) shown in table A10.1.1 above. In other words, the decom- position is exact. 254 System of Environmental-Economic Accounting – Ecosystem Accounting A10.17 Table A10.1.3 shows that the total value change of -392 currency units reflects the combination of a positive price effect (1,027 currency units) and a negative volume effect (-1,419 currency units). The decomposition thus provides additional insight into the nature of the change in total value. This type of analysis can also be undertaken for individual services. For example, there is a large reduction in the value of global cli- mate regulation (-639 currency units), which is explainable mostly as a volume effect (Qt1 drops from 720 to 670 tons of CO2 (see tables A10.1.1 and A10.1.2)). At the same time, there is an upward price effect due to the increasing price path of the service. It is to be noted as well that there is a minimal price effect for crop provisioning services, reflecting the fact that its expected price path does not change. Ecosystem monetary asset account Table A10.1.3 Results of the decomposition analysis for four ecosystem services (currency units)   Price effect Volume effect Total ES1 Wood provisioning 177 -622 -444 ES2 Global climate 655 -1 293 -639 regulation ES3 Recreation-related 192 215 406 ES4 Crop provisioning 4 282 285 Total 1 027 -1 419 -392 A10.18 The various decomposition elements can now be used to compile the ecosys- tem monetary asset account, as presented in table A10.1.4. The account is structured to show the opening and closing values for each ecosystem asset (equal to the sum 117 In this example, the process of of the NPVs of the ecosystem services relevant for that ecosystem asset)117 and the estimation of the entries into various changes due to enhancement, degradation, conversions, revaluations or other the asset account categories changes. An explanation of the allocation of the accounting entries is provided in is made more straightforward table A10.1.5. since there is a one-to-one correspondence between the A10.19 The estimates for the opening and closing values for each ecosystem asset ecosystem assets and the areas can be readily obtained from tables A.10.1.1 and A.10.1.2. For forests, it is the sum providing ecosystem services. of the NPVs for ES1, ES2 and ES3; and for cropland, it is NPV for ES4. To complete In more complex settings, the value of the individual the other accounting entries, the first focus is estimation of the entry for revalua- ecosystem services would tions, which is equal to the price effect shown in table A.10.1.3. This equality applies need to be apportioned to the since the price effect measures the change in value that is due solely to the change underlying ecosystem assets in average (discounted) price (for each ecosystem service). The relationship between (i.e. when an ecosystem service unit prices of ecosystem services and asset prices is discussed towards the end of the is supplied over a combination of ecosystem assets). This may present appendix. be undertaken by prorating A10.20 The remaining change in value is associated with the volume effect, which the aggregate supply of the ecosystem service using the measures changes in the total quantity of expected future ecosystem services (for each share of areas of the relevant ecosystem service) due to changes that occur during the accounting period, excluding ecosystem assets, in which the effects of price changes. The volume effects can therefore be used to determine case there is an assumption of the relevant entries for ecosystem enhancement, degradation, reappraisals and cata- a homogeneous distribution strophic losses depending on the cause of the change, following the definitions pro- of the supply of the ecosystem service across the SPA. More vided in chapter 10. complex allocation methods A10.21 The process of establishing how a volume effect for a given ecosystem ser- might also be applied. vice is treated entails considering (a) whether the volume effect is positive or nega- tive; (b) change in ecosystem condition over the accounting period; and (c) change in Appendix A10.1: Application of the NPV method for valuing ecosystem assets/changes in ecosys. assets 255 demand for ecosystem services.118 Through consideration of the various combinations, 118 In projecting physical flows the appropriate treatment of the measured volume effect can be carried out following and unit prices ( p’s and Q’s in the guidance in table A.10.1.5. For example, if the change in volume is positive and the table A10.1.1), it is reasonable to assume that ecosystem change in condition is also positive, then the volume change is recorded as ecosystem condition (and expectations on enhancement. There are two combinations that are not possible: i.e. where condition how it will develop within the and demand move in the same direction (either up or down), the volume cannot move current management regime) in the opposite direction since this would imply that the future flow of ecosystem ser- and expected demand are vices in physical terms was not correlated with either the condition of the ecosystem taken into account. During the accounting period, many or the demand for services. changes occur (changes in demand but also changes in Table A10.1.4 actual condition), with the final Ecosystem monetary asset account (currency units) result being that at the end of the accounting period, there Forest Cropland Total will be updated expectations regarding physical flows and Opening stocks at t0 27 026 2 182 29 208 unit prices. Ecosystem enhancement 282 282 Ecosystem degradation -1 915 -1 915 Ecosystem conversions Additions 0 0 Reductions 0 0 Other changes in volume of ecosystem assets Catastrophic losses Reappraisals 215 215 Revaluation 1 023 4 1 027 Net change in value -677 285 -392 Closing stocks at t1 26 349 2 467 28 816 A10.22 In case of significant unexpected changes in quantities (e.g. due to uprooting of trees by a hurricane), negative changes in volume could be recorded as catastrophic losses rather than as degradation. In this way, all possible entries of the monetary asset account can be obtained in a manner that is aligned with and uses information from extent accounts, condition accounts and ecosystem service supply and use accounts. A10.23 To apply the guidance from table A10.1.5 in this example, it is assumed that the associated condition account indicates that the condition of the forest ecosystem asset has declined during the accounting period but that the condition of the cropland ecosystem asset has increased. Considering each ecosystem service in turn: • For wood provisioning services (ES1), table A10.1.3 shows a negative vol- ume effect (-622 currency units). Since the condition also declines, this volume effect is recorded as degradation • For global climate regulation services (ES2), table A10.1.3 shows a nega- tive volume effect (-1,293 currency units). Since the condition also declines, this volume effect is recorded as degradation • For recreation-related services (ES3), table A10.1.3 shows a positive vol- ume effect (215 currency units). Since the condition declines, this is best explained as being due to an increase in demand (reflected in a slight increase in total expected visitor numbers) and is therefore recorded as an upward reappraisal. 256 System of Environmental-Economic Accounting – Ecosystem Accounting • For crop provisioning services (ES4), table A10.1.3 shows a positive vol- ume effect (282 currency units). Although demand is assumed to decline slightly, since condition improves, this volume effect is recorded as ecosys- tem enhancement. Table A10.1.5 Treatment of ecosystem services volume effects based on condition and demand changes Volume change Condition change Demand change Accounting entry Up Up Up Enhancement Up Up Down Enhancement Up Down Up Upward reappraisal Up Down Down Not possible Down Up Up Not possible Down Up Down Downward reappraisal Down Down Up Degradation Down down down Degradation A10.24 The broader interpretation is that the overall value of the forest ecosystem asset has declined, while the cropland ecosystem asset has increased in value. The net effect, however, is a loss of 392 currency units in the value of this EAA. Decomposition of the change in NPV with ecosystem conversions A10.25 In the above example, the areas of each ecosystem asset remained the same over the projection period. Consequently, there was no consideration of ecosystem con- versions, that is, changes in ecosystem extent, where a particular location changes in ecosystem type during an accounting period. These changes are recorded in biophysi- cal terms in the ecosystem extent account. The appropriate calculations for record- ing the monetary effects of conversions in the monetary ecosystem asset account are explained below. A10.26 To demonstrate the relevant entries, the example is adapted so that forest extent during the accounting period is reduced by 2 ha, which are converted to crop- land (see figure A10.1.1). To retain the connection with the previous context and data, a simplifying assumption is made, according to which all other details of expected quantities and unit prices remain the same and consequently NPV for each ecosystem service and the total NPV for the EAA remain the same. A10.27 To indicate changes in the area of each ecosystem asset, the decomposition formula is altered so that the extent of the SPA of each ecosystem service, denoted by ati is incorporated. This incorporation is shown in equation (4), which is a reworking of equation (2): i – i Qt a i = p –i – Vti = p t qt a t . (4) i i t i t at A10.28 Total (expected) volume of ecosystem service i per hectare within the SPA is denoted by – qti . Using this expansion, the difference between the opening and closing values for each ecosystem service can be expressed as Appendix A10.1: Application of the NPV method for valuing ecosystem assets/changes in ecosys. assets 257 i i –i – i i – i – i i – i) – –i – p i i – i –i i – i – i i V1 – V0 = p1q1a1 – p0 q0 a 0 = ( p1 0 q1 a1 + p0 q1a1 – p0 q0 a 0 – i )– –i – p = (p i i – i –i – i i – i – i i – i – i i 1 0 q1a1 + p0 ( q1 – q0) a1 + p0 q0 a1 – p0 q0 a 0 – i )– –i – p = (p i i – i –i – i i – i – i i i 1 0 q1a1 + p0 ( q1 – q0) a1 + p0 q0 (a1 – a 0 ) (5) Price effect Volume effect Area effect Figure A10.1.2 Extent at t1 Ecosystem asset a1 EA1 - forest 48 ha EA2 - cropland 42 ha EA1 - forest EA2 - cropland A10.29 Formula (5) thus decomposes the change in NPV (of each ecosystem service i) into three effects: a price effect, a volume (intensity) effect and an area effect. As before, the price effect measures the change in average (discounted) unit prices that occurs during the accounting period. The volume (intensity) effect measures changes in the quantity of future ecosystem services per hectare to allow the effect of changes in area to be separately identified. The area effect measures changes in value due to changes in extent of assets. A10.30 As was the case for the earlier decomposition into price and volume effects (equation (3)), the decomposition form shown in equation (5) is exact but not unique. In fact, there are six alternative exact formulations of equation (5), compared with two alternative formulations of equation (3).119 The results shown below have been derived 119 This can be seen by noting that using a weighted average of each of the six forms of (a) the area effect, (b) the price in equation (3), the starting effect and (c) the volume (intensity) effect. To derive the actual effects the changes in point was ( p1-p0) but the start- ing point could also have been the relevant variable (e.g. area) are multiplied by these weights. In this example, the (q1-q0). In equation (5), this derivations of the three effects are expressed as follows: is extended to allow for con- sider starting with (a1-a0). See [– ¹ –i– –i– –i – –i – Dietzenbacher and Los (1998) ¹ 0 q0 + – ¹ 0 q1 + – 1q0 + – ¹ i i i i i i Area effect: ₃p ₆p ₆p ₃p 1q1] * a1 – a 0 for a more general proof. Price effect: [– ¹ ₃p–ia i + – ¹ ₆p–iai + –¹ ₆p–i a i + – ¹ ₃p –i – p –i a i] * p –i 0 0 0 1 1 0 1 1 1 0 i–i i –i i–i i –i Volume effect: [– ¹ ₃ a0 q0 + ¹ – ₆ a0 q1 + ¹ – ₆ a1 q0 + – ¹ ₃ a1 q1] *– q1i –i – q0 A10.31 The values of –q0i that are used to calculate this decomposition are obtained by dividing, for example, the total quantity of global climate regulation services at t0, i.e. Q2 2 –i 0 (720 tons of CO2) by the size of the SPA a 0 (50 ha), resulting in a q0 of 14.40 tons of 258 System of Environmental-Economic Accounting – Ecosystem Accounting CO2 per ha. Following the previous steps, but incorporating measurement of the area effect, the decomposition of the change in value can be calculated as shown in table A10.1.6. A10.32 Again, the decomposition is exact, as the sum of the changes due to area, vol- ume and price equals the total value change (of -392 currency units). As expected, the differences in NPV for each ecosystem service are the same (e.g. -444 currency units for ES1, as previously), but there are now three explanatory factors rather than two. Also as expected, the price effect is virtually the same as in the earlier decomposition, since the volume effect has essentially been split into a volume (intensity) effect and an area effect. The area effect can now be interpreted as providing the entries for ecosys- tem conversions (additions and reductions) in the ecosystem monetary asset account. It should be noted that the change in area used to derive the area effect is consistent 120 It is to be noted that there are with the information in the ecosystem extent account.120 some interactions between changes in volume and A10.33 The structure of the ecosystem monetary asset account remains unchanged changes in price in a general (see table A.10.1.7) but compared with the results shown in table A10.1.4, the entries equilibrium context but the for ecosystem conversions are now non-zero. The main change is that the previous effect of those interactions is entry for degradation of forests (-1,915 currency units) is reduced to -1,042 currency likely to be minimal. units. The difference is now recorded as a negative ecosystem conversion (-1,090 cur- rency units) and a higher value of reappraisals (431 currency units). A similar parti- tioning occurs with cropland, with the previous entry for ecosystem enhancement reduced to 168 currency units and a positive ecosystem conversion of 113 currency units recorded. By including an additional factor in the decomposition form, the change in value that occurred during the accounting period can be better explained. Unit prices and asset prices A10.34 With regard to interpretation of prices: in this valuation and decomposition, discounted unit prices have been used for each ecosystem service. By multiplying the discounted unit prices (ptij) by their expected quantities (qtij) and summing over the life of the asset, the NPV of each ecosystem service is obtained and the value of each ecosystem asset at each point in time can then be determined. A10.35 In this context, the NPV of the ecosystem asset (i.e. the sum over relevant ser- vices) is also the unit price of the asset. Thus, the basic measurement unit remains the individual ecosystem asset, characterized by its extent (which will generally be greater than 1 ha) and its condition. In this framing, the price of the ecosystem asset can be 121 Extent is just one among considered to reflect an average asset price over all hectares for that ecosystem asset. several options for assessing A10.36 It may also be of interest to calculate the marginal asset price, defined as the marginal price. It is also pos- sible, for example, to consider change in the NPV of the ecosystem asset with respect to a marginal change in extent ecosystem characteristics such of the asset (e.g. a change of 1 ha).121 In this framing, it may be reasonable to suppose as timber volume. intuitively for an asset that is large (in terms of extent) – say, a forest – that the mar- Table A10.1.6 Results of the decomposition analysis (three factors) (currency units)   Area effect Volume effect Price effect Total ES1 Wood provisioning -139 -482 177 -444 ES2 Global climate regulation -733 -560 654 -639 ES3 Recreation-related services -217 431 192 406 ES4 Crop provisioning 113 168 4 285 Total -976 -442 1 027 -392 Appendix A10.1: Application of the NPV method for valuing ecosystem assets/changes in ecosys. assets 259 Table A10.1.7 Monetary ecosystem asset account (with conversions) (currency units) Forest Cropland Total Opening stocks at t0 27 026 2 182 29 208 Ecosystem enhancement 168 168 Ecosystem degradation -1 042 -1 042 Ecosystem conversions Additions 113 113 Reductions -1 090 -1 090 Other changes in volume of ecosystem assets Catastrophic losses Reappraisals 431 431 Revaluation 1 023 4 1 027 Net change in value -677 285 -392 Closing stocks at t1 26 349 2 467 28 816 ginal price of a hectare at the edge of the forest is different from the marginal price of a hectare at its centre, that is to say, that there are different asset prices for different parts of an ecosystem asset and those asset prices might change as the overall size of the asset changes. Put differently, losing 1 hectare when the extent is 100 hectares may be less problematic than losing 1 hectare when the extent is 5 hectares. A10.37 In the example, it is assumed that the supply of ecosystem services is dis- tributed homogeneously across the ecosystem asset, which implies that the marginal and average asset prices can be assumed to coincide. This is how it was possible to normalize ecosystem services using the area over which they were supplied in order to separate out the area effect in the decomposition. A10.38 Of course, in practice, most ecosystem services are not supplied homogene- ously across the ecosystem asset and therefore a difference would arise between the marginal and average asset prices. In such instances, it would be theoretically pos- sible to break up the ecosystem asset into smaller units (e.g. units of one ha each) and, following the approach described in the present appendix, obtain for each an aver- age asset price. Provided that each resulting smaller unit was itself homogeneous, an alignment would emerge between the average and marginal asset prices at that smaller scale. A10.39 The example provided in the present appendix is framed in the context of individual ecosystem assets that provide ecosystem services. However, it is also pos- sible to apply the same approach at an aggregate scale to value ecosystem types based on the bundles of ecosystem services that they provide. 261 Chapter 11 Integrated and extended accounting for ecosystem services and assets 11.1 Introduction 11.1 The discussion on combining ecosystem accounting data with standard eco- nomic data is increasingly relevant as countries, both nationally and multination- ally, are recognizing the losses of some ecosystem services and are developing policy instruments to mitigate and reverse this trend. The combination of ecosystem and economic data supports a richer discussion of the connection between ecosystems and people; underpins the development of indicators concerning this relationship, such as the contribution of ecosystem services to measures of economic production; and allows the derivation of adjusted national accounting aggregates such as degradation- adjusted measures of net domestic product (NDP). 11.2 Building on the ecosystem accounts described in chapters 3 through 10, the present chapter describes principles and recommendations for the integration of eco- system accounting data and data from the standard SNA accounts. Integration is con- sidered with respect to the SUTs and the sequence of institutional sector accounts, including balance sheets. All of these accounts are labelled as extensions to the SNA accounts, which recognizes the intent to complement the data presented in the SNA. 11.3 Historically, approaches to more detailed integration of ecosystem-related infor- mation with the national accounts have focused on the valuation of degradation and the appropriate recording of this “cost of capital” in the accounts of different sectors. This is a characteristic of the previous approaches outlined by national accountants (see, for example, Nordhaus and Kokkelenberg, eds. (1999), A. Harrison (1993) and Vanoli (1995)). As explained in SEEA EEA and in some papers in the recent literature (e.g. Edens and Hein (2013) and Obst, Hein and Edens (2016)), the emergence and application of the concept of ecosystem services have enabled a reconceptualization of the integration of ecosystem-related data with the SNA. This basis for integration underpins much of the discussion in this chapter. 11.4 The monetary valuation of ecosystem services and ecosystem assets using exchange values is required for integration with the national accounts. However, as explained consistently through chapters 8 to 10, in many instances, data from the eco- system extent and condition accounts and data concerning the physical flows of eco- system services are required to better understand relevant ecological thresholds and limits. Also, coverage of the extended accounts is limited to the ecosystem services that are within scope of measurement. Finally, use of exchange values provides monetary values that are suitable for the compilation of extended accounts but in other contexts alternative valuation concepts and presentations may be more appropriate. Comple- mentary approaches to monetary valuation that are considered to reflect applications and extensions of the SEEA EA accounting framework are discussed in chapter 12. 262 System of Environmental-Economic Accounting – Ecosystem Accounting 11.5 Data from the ecosystem accounts also complement data from the SEEA Central Framework, especially on environmental pressures (e.g. emissions) and pol- icy responses (e.g. environmental protection expenditure, environmental taxes and subsidies). These types of data are needed for a complete assessment of the environ- mental-economic relationship. The potential to combine data from the SEEA Central Framework and SEEA EA is discussed in chapter 13 using selected policy themes as the entry point. 11.2 Extended SUTs 11.6 SUTs show the relationships between economic units (households, business, governments) in terms of flows of goods and services. Each type of good or service is recorded as supplied by an economic unit and used by another for final consumption, intermediate consumption, investment (capital formation) or export. Inherent in the design of an SUT is the ability to record supply chains through the economic system by showing gross outputs and intermediate inputs and how they are netted within each economic unit to derive measures of value added, i.e. income generated through the production of goods and services. SUT are commonly used to support the compi- lation of measures of GDP as SUT require a complete reconciliation between the sup- ply of and demand for goods and services and hence reconciliation among the three different measures of GDP. Importantly, the scope of goods and services included in a standard SUT is limited to the production boundary of the SNA. 11.7 Compiling extended SUT involves combining data from the ecosystem ser- vices flow account in monetary terms described in chapter 9 with the standard SUT from the SNA as described in the previous paragraph. Extended SUT thus require explicit consideration of the measurement boundaries between the economy and ecosystems to ensure that there is an appropriate structure for the accounts and that recorded data do not imply double counting. Extended SUT thus present the data on the supply and use of ecosystem services as extensions to the standard SUT compiled following the SNA. 11.8 The compilation of extended SUT can support a range of purposes: • To show the contribution of ecosystem services to the output and value added of different industries and the economy as a whole • To identify the share of economy-wide value added that is dependent on ecosystem services • To develop an understanding of the main users of ecosystem services and the relative contribution of ecosystem services to household and govern- ment final consumption expenditure 122 SUT need not be square • To describe ecosystem services as inputs to economic supply chains and matrices, where the number to develop an understanding of ecosystem services-dependent industries of goods and services is equal to the number of supplying • To integrate ecosystem services data into analytical and modelling tools industries. The standard input- – for example, input-output models and computable general equilibrium output (I-O) matrix algebra models – that use SUT as primary data sources that underpins input-output analysis has been adapted to 11.9 There are two key aspects to consider in extending the standard SUT to incor- allow non-square SUT data to porate ecosystem services. First, since ecosystem accounting implies an extension to be used in I-O analysis and this the standard production boundary, the set of goods and services within scope of the can be applied in the case of extended SUT. It is to be noted extended SUT is broader and in consequence the dimensions of the standard SUT that the resulting I-O tables are must increase. Usually, this would be carried out through the addition of new rows square matrices. (each additional row representing an additional ecosystem service).122 Integrated and extended accounting for ecosystem services and assets 263 11.10 The accounting requirement is to ensure that the ecosystem services are dis- tinguished clearly from the goods and services (products) that are already recorded within the standard SUT. For the products to which ecosystem services are direct inputs (i.e. SNA benefits), ecosystem services are recorded as the intermediate con- sumption of the associated user of the ecosystem service. For example, the ecosys- tem service of timber biomass provisioning is recorded as additional intermediate consumption by forestry units. 11.11 For ecosystem services that contribute to non-SNA benefits, there are no asso- ciated products with which the services can be connected and it is sufficient to record the supply of the relevant ecosystem service (e.g. air filtration services) and the use of that service by the relevant economic unit following the guidance in chapter 6. 11.12 It is possible to design an extended SUT that also incorporates intermediate services supplied by ecosystems. For example, where pollination services are of rel- evance, an additional row might be included to recognize these flows as inputs to the generation of associated final ecosystem services, e.g. biomass accumulation of crops. It should be noted that intermediate services must be recorded as used by ecosystem assets not as inputs to economic units. 11.13 The second key aspect of the extended SUT entails the requirement that col- umns be added to reflect the source of the supply of ecosystem services. Thus, eco- system assets (grouped by ecosystem type) are treated as additional producing units alongside the current set of industries (agriculture, manufacturing, etc.). A simple example is presented in appendix A11.1 to demonstrate the steps involved in produc- ing these extensions. 11.14 Tables 11.1a and 11.1b present an extended SUT incorporating a selected set of product groups and using the broad groups of ecosystem services listed in the mon- etary ecosystem services SUT found in chapter 9. It is to be noted that after including additional rows for ecosystem services and additional columns for ecosystem assets, the extended SUT is completed by incorporating the standard value added entries for industries and for ecosystem assets. Where ecosystem services are inputs to SNA benefits, this has the effect of partitioning the operating surplus of the using industry (e.g. agriculture or forestry) so that the contribution of ecosystem services is deducted from that industry and shown as the output and operating surplus of the supplying ecosystem asset. 11.15 Extended SUTs are different from environmentally extended input-output tables (EE-IOTs).123 Those EE-IOTs can readily incorporate flows of individual eco- 123 The connection between system services following the same methods that would be applied to incorporating EE-IOTs and the SEEA Cen- flows of, for example, GHG emissions, water use or solid waste. However, in an EE- tral Framework accounts is described in System of IOT there is no inherent change in or extension of the SNA production boundary as is Environmental-Economic applied in the extended SUT and as a result, there is no inherent extension of supply Accounting 2012 – Applica- chains that record the links between the economy and ecosystems. tions and Extensions (United Nations, European Commis- sion, Food and Agriculture 11.3 Extended balance sheets Organization of the United Nations, Organisation for 11.3.1 Introduction Economic Co-operation and Development and World Bank, 11.16 Ecosystem accounting data can be used to augment the economic accounts of 2017). the SNA through the compilation of extended balance sheets. Extended balance sheets allow the comparison and integration of the values of ecosystem assets with values of produced assets, financial assets (and liabilities) and other assets. SUPPLY Products TOTAL TOTAL Services products products products TOTAL SUPPLY Table 11.1a Water supply Manufacturing Other products Ecosystems services Cultural services tenance services Fishery products Electricity and gas Provisioning services Agricultural products Regulating and main- Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Industries Note: Dark grey cells are null by definition. Water supply; sewerage, waste management and remediation activities Services Economic units Other industries Total industry Extended SUT with ecosystem services – supply table Imports Total supply Tropical-subtropical lowland rainforests T1.1 Tropical-subtropical dry forests and scrubs T1.2 forests Tropical-subtropical montane rainforests T1.3 T1 Tropical-subtropical Tropical heath forests T1.4 Boreal and temperate high montane forests and woodlands T2.1 Deciduous temperate forests T2.2 Terrestrial … … T2 Temperate-boreal forests and woodlands Temperate pyric sclerophyll forests and woodlands T2.6 … … … … … … … T7 Derived semi-natural pastures and old fields T7.5 F1 F1.1 … Permanent upland streams … … Ecosystem type (based on the EFG level 3 of IUCN GET) Freshwater Intermittently closed and open lakes and lagoons FM1 FM1.3 M1 Seagrass meadows M1.1 … … … Marine Coastal saltmarshes and reedbeds MFT1 MFT1.3 Total supply by resident ecosystem assets Supply from non-resident ecosystem assets - Imports Total supply by ecosystem assets TOTAL SUPPLY System of Environmental-Economic Accounting – Ecosystem Accounting 264 USE capital Products TOTAL USE employees TOTAL TOTAL Services products products products Table 11.1b Net value added Compensation of Water supply Gross value added Manufacturing Other products Ecosystems services Cultural services tenance services Fishery products Consumption of fixed Electricity and gas Gross operating surplus Provisioning services Agricultural products Regulating and main- Agriculture Forestry Fisheries Mining and quarrying Manufacturing Electricity, gas, steam and air-conditioning supply Industries Note: Dark grey cells are null by definition. Water supply; sewerage, waste management and remediation activities Services Economic units Other industries Total industry Extended SUT with ecosystem services – use table Government consumption Household consumption Gross capital formation Exports Total use Tropical-subtropical forests T1.1 Tropical-subtropical dry forests and scrubs T1.2 forests Tropical-subtropical montane rainforests T1.3 T1 Tropical-subtropical Tropical heath forests T1.4 Boreal and temperate high montane forests and woodlands T2.1 Deciduous temperate forests T2.2 Terrestrial … … T2 Temperate-boreal forests and woodlands Temperate pyric sclerophyll forests and woodlands T2.6 … … … … … … … T7 Derived semi-natural pastures and old fields T7.5 F1 Permanent upland streams F1.1 … … … Ecosystem type (based on the EFG level 3 of IUCN GET) Freshwater Intermittently closed and open lakes and lagoons FM1 FM1.3 M1 Seagrass meadows M1.1 … … … Marine Coastal saltmarshes and reedbeds MFT1 MFT1.3 Total use resident by resident ecosystem assets Exports – ecosystem services Total use by ecosystem assets TOTAL USE 265 Integrated and extended accounting for ecosystem services and assets 266 System of Environmental-Economic Accounting – Ecosystem Accounting 11.17 The development of extended balance sheets aligns with the general intent in 124 A range of information on the the compilation of wealth accounts, as driven forward by the World Bank124 and the World Bank Changing Wealth United Nations Environment Programme.125 In general terms, there is a common of Nations project and related desire to extend the valuation of natural capital to incorporate a wide range of ecosys- outputs is available at. tem services beyond those that are incorporated in the valuation of natural resources 125 See the Inclusive Wealth according to the SNA. If the outputs of wealth accounting apply exchange value con- Report 2018 (United Nations cepts in the valuation of different types of capital, then the values from the monetary Environment Programme, ecosystem asset account are appropriate for inclusion in the extended balance sheet 2018). Available at www. described here. It is to be noted that wealth accounts may also include measures of unenvironment.org/resources/ report/inclusive-wealth- human capital (and, in some cases, social capital) in addition to produced and non- report-2018. produced (natural) capital and hence those accounts extend beyond the scope of both SEEA EA and the SNA. 11.18 Extended balance sheets encompassing monetary values of ecosystem assets can be applied in a number of contexts where the focus is, for example, on understand- ing the changing composition of wealth, identifying imbalances in stocks of wealth, analysing productivity and assessing returns on investment. 11.19 A concern regarding extensions made to balance sheets containing the mone- tary values of economic and ecosystem assets is that presentation of the different assets side by side may be interpreted as meaning that all assets are substitutable. In theory, estimates of all asset prices should take into account the extent to which there are developing shortages in the availability of certain “critical” resources, where the effect should be that asset prices reflected in the accounts rise over time and the relative value of these assets becomes much higher. However, in practice, since future trends in the availability of various assets and their interactions cannot be well anticipated, the extent to which shortages and imbalances are reflected in estimated asset prices will be more limited. 11.20 Compiling extended balance sheets involves complementing the opening and closing values of ecosystem assets as described in chapter 10 with SNA balance sheet values described in the 2008 SNA (chap. 13). In some cases, there may be an overlap between the scope of SNA asset values and the scope of ecosystem assets, for example, with regard to the values of biological resources and land. To avoid double counting of asset values, clear treatments of different assets are required. Those treatments are discussed in section 11.3.3. 11.3.2 Structure of an extended balance sheet 11.21 Conceptually, an extension of the SNA balance sheet requires that the values of ecosystem assets over and above those currently recorded in the SNA balance sheets be included. However, since the value of ecosystem assets commonly includes the value of natural resources (such as timber resources) and components of land values, there is a range of ways in which the additional values might be combined and presented. 11.22 The approach adopted here, as presented in table 11.2, is to first distinguish environmental assets from produced assets, other non-produced (non-environmental) assets and financial assets and liabilities and to then distinguish within environmental assets (a) ecosystem asset values linked to each of the ecosystem types at the level of the main realms (terrestrial, freshwater, marine and subterranean) and (b) values of other environmental assets including land, renewable energy resources, cultivated biological resources, water resources, mineral and energy resources and atmospheric systems. 11.23 Ecosystem asset values align with those included in the monetary ecosystem asset account (table 10.1). The values of other environmental assets generally align with the values in the SNA for the relevant classes, taking into account the treatments in Integrated and extended accounting for ecosystem services and assets 267 the SEEA Central Framework (chap. V). However, there may be some values of other environmental assets related to the values of abiotic flows and spatial functions – for example, values related to renewable energy resources – that may be outside the scope of SNA- and Central Framework-based valuations. These additional values should be recorded under other environmental assets, as appropriate. 11.24 For each ecosystem realm, the total monetary value including all ecosystem services is recorded, thus reflecting an aggregation of the monetary values compiled in the monetary ecosystem asset account. Following the advice in the SNA, values for other environmental assets will overlap in a number of cases with the values recorded against the various ecosystem types. For example, the value of cultivated land includes an ecosystem asset value. The relevant boundary cases are considered below, and con- ventions are described to support comparable measurement. 11.25 An extended balance sheet would most commonly be compiled at a national level, building from a country’s national balance sheet from the SNA. Thus, the geo- graphical scope of the extended balance sheet would be defined by the country’s eco- nomic territory, which, in geographical terms, is broadly limited to its land area and marine areas within the EEZ. Conceptually, it would be possible to define extended balance sheets for alternative geographical scopes, for example, encompassing a wider coverage of marine ecosystems or focusing on subnational areas. 11.3.3 Aligning ecosystem asset values with the values of SNA assets 11.26 As highlighted in section 11.3.3, there are a number of potential overlaps between the measurement scope of SEEA for ecosystem assets and that of the SNA for economic assets (here labelled “SNA assets”). The appropriate starting point for articulating the overlaps and the differences is the definition of assets in the SNA. The SEEA Central Framework (sect. 5.2.3) provides a useful overview from an environ- mental-economic accounting perspective. The following clarification is presented: “In the Central Framework, consistent with the SNA, the scope of valuation is limited to the benefits that accrue to economic owners. An economic owner is the institutional unit entitled to claim the benefits associated with the use of an asset in the course of an economic activity by virtue of accepting the asso- ciated risks. Further, following the SNA, an asset is a store of value represent- ing a benefit or series of benefits accruing to the economic owner by holding or using the entity over a period of time.” (Central Framework, para. 5.32). 11.27 At an aggregate level – for example, for a country, where the aim is to con- vey information on the total stock of assets and their monetary value – the inclusion of assets in an extended balance sheet is not straightforward. In effect, the aggregate measures assume attribution of the environmental assets to the country of reference, which in turn implies that establishing a total value for environmental assets requires, in the first instance, the identification of a set of benefits. The focus in aligning the scope of valuation for various asset classes is thus on aligning the extended set of bene- fits with the relevant asset classes. Issues concerning the ownership of ecosystem assets are considered in section 11.3.4. 11.28 The concept of benefits formulated in the SNA is potentially broad, since they are considered to denote “a gain or positive utility arising from economic production, consumption or accumulation” (2008 SNA, para. 3.19). However, in practice, the scope of the SNA with respect to benefits from environmental assets is limited to those 268 System of Environmental-Economic Accounting – Ecosystem Accounting “(i) in the form of operating surplus from the sale of natural resources and cultivated biological resources, (ii) in the form of rent earned on permit- ting the use or extraction of an environmental asset or (iii) in the form of net receipts (i.e. excluding transaction costs) when an environmental asset (e.g. land) is sold” (Central Framework, para. 5.33). Table 11.2 Structure of an extended balance sheet Monetary value Opening Closing Assets Produced assetsa Fixed assets • Dwellings • Other buildings and structures • Machinery and equipment • Weapons systems • Intellectual property products Inventoriesb Valuables Environmen- Terrestrial ecosystems (IUCN GET EFG T1-T7) tal assets (includes SNA value of natural timber resources and other non- – ecosystems produced biota) Freshwater ecosystems (IUCN GET EFG F1–FM1) (includes SNA value of natural aquatic resources and other non- produced biota) (excludes the value of water resources) Marine ecosystems (IUCN GET EFG M1-MFT1) (includes SNA value of natural aquatic resources and other non- produced biota) Subterranean ecosystems (IUCN GET S1-SM1) Environmental Cultivated biological resources assets – other • Fixed assets • Work in progress (inventories) Land (as provision of space) (includes SNA value of land under buildings) Renewable energy resourcesb Water resourcesb Mineral and energy resources Atmospheric systems (includes SNA value of the radio spectrum) Other non-pro- Contracts, leases and licencesc duced assets Goodwill and marketing assets Financial assets Financial liabilities Net worth Abbreviations: EFG, ecosystem functional group; IUCN GET, International Union for Conservation of Nature Global Ecosystem Typology. ª The scope of produced assets presented here is different from that of the SNA, as cultivated biologi- cal resources are included under other environmental assets. b These entries are boundary cases for which specific measurement conventions apply, as discussed in section 11.3.3. c The value of contracts, leases and licences concerning environmental assets that satisfy the require- ments of the SNA (chap. 17, part 5) for consideration as distinct assets is not distinguished in this balance sheet but is included instead in the value of the underlying environmental asset. Integrated and extended accounting for ecosystem services and assets 269 11.29 In ecosystem accounting, a broader set of benefits is included through the recognition of ecosystem services that contribute to non-SNA benefits. The inclu- sion of the monetary value of ecosystem services that contribute to non-SNA benefits increases the value of environmental assets relative to the SNA and thereby extends the balance sheet relative to the scope of the SNA. Nonetheless, the inclusion of these additional monetary values does not provide a measure that encompasses all aspects of value or wealth. 11.30 To clarify the nature of the extensions to the SNA balance sheets motivated by considerations regarding the scope of benefits, the treatment of a range of SNA assets with respect to incorporating ecosystem assets is described directly below. In practice, since relatively few countries compile full SNA balance sheets of non-produced assets, the following considerations, taken in conjunction with guidance and treatments in the SEEA Central Framework, will be relevant in developing such balance sheets in the first instance or in refining initial estimates. 11.31 Treatment of biological resources. The value of all natural (non-cultivated) bio- logical resources are in scope of both ecosystem assets and SNA non-produced assets. Thus, values of natural timber and aquatic and other biological resources (e.g. wild animals and non-wood forest products) are estimated in terms of the expected future rates of harvest and relevant prices for these provisioning services. In the extended bal- ance sheet, the value of these natural biological resources is included within the value of the relevant ecosystem asset, for example, the value of natural timber resources is included within the broader value of forest ecosystems. 11.32 For cultivated biological resources, related to agriculture, forestry and fisher- ies, there is a range of types to be considered, including annual crops, plantations (e.g. timber, orchards, vineyards), livestock for slaughter, breeding or ongoing production (e.g. dairy cows, sheep for wool) and aquaculture. These resources, considered to be produced assets, are classified as either inventories (work in progress)126 or fixed assets. 126 Work in progress on cultivated The SNA value for these resources is included in the scope of environmental assets as biological resources consists defined in the SEEA Central Framework. of output that is not yet suf- ficiently mature to be in a state 11.33 The values of cultivated biological resources included in the SNA relate only to in which it is normally supplied the stock of those resources that are present on the date of the balance sheet (e.g. they to other institutional units (2008 SNA, para. 10.140). relate to the number of cattle or volume of standing timber on 31 December). Two separate cases are to be noted. In the case of crops and livestock, their balance sheet value is separable from the value of any associated land. Since the value of ecosystem services reflects the contribution of land to the growth of crops or livestock, in the extended balance sheet the value of cultivated crops and livestock are recorded under “other environmental assets” separately from the value of the associated ecosystem asset (e.g. pastures, cultivated land), which encompasses the NPV of the expected bio- mass provisioning services. 11.34 In the case of cultivated timber, the SNA balance sheet value concerns the value of standing timber, which is estimated as the discounted “future proceeds of selling the timber at current prices after deducting the expenses of bringing the timber to maturity” (2008 SNA, para. 13.41). The expenses should also incorporate capital costs associated with the inputs of produced assets and forest land (see SEEA Central Framework, sect. 5.8). This value overlaps with the NPV of wood provisioning services although the latter value will be higher since it includes: (a) the value of the contri- bution of land; and (b) the value of future timber harvests beyond the current rota- tion. Consequently, to ensure alignment between the values recorded in the extended balance sheet and the values recorded in the monetary ecosystem asset account, the work-in-progress value of cultivated timber resources should not be recorded as part of other environmental assets. 270 System of Environmental-Economic Accounting – Ecosystem Accounting 11.35 Treatment of mineral and energy resources. These natural resources, which include shallow mineral resources such as sand and gravel, are defined in the SNA and the SEEA Central Framework but are not considered a part of ecosystem assets since the benefits they provide are not the result of current ecosystem processes. They are recorded in the extended balance sheet under other environmental assets. By conven- tion, this class excludes energy from renewable sources, as discussed directly below. 11.36 Special note should be taken of peat resources, which may be used as a form of fossil fuel. Peatlands are an important type of terrestrial ecosystem, supplying a range of ecosystem services, including global climate regulation and water purifica- tion services. In this balance sheet, the value of peatlands is partitioned, with the value of future flows of ecosystem services included as part of terrestrial ecosystems and the value associated with the use of peat as a fossil fuel resource included as part of mineral and energy resources. 11.37 Treatment of energy from renewable sources. Renewable sources of energy (such as wind and solar sources) cannot be exhausted in a manner akin to that which characterizes fossil energy resources and, unlike biological resources, they are not regenerated. Thus, in an accounting sense, there is no physical stock of renewable sources of energy that can be used up or sold. 11.38 The monetary value associated with the ongoing capture of energy from wind and solar sources can be considered to be embedded in the values of the associated area (e.g. land), reflecting the specific characteristics of the location in which the renewable energy is captured. In the extended balance sheet, by convention, the value of the loca- tion (including both terrestrial and marine locations) that is linked to the capture of, for example, wind and solar energy should be included in the value of land (as provi- sion of space). 11.39 For energy generated through hydroelectric power, the monetary value associ- ated with the capture of energy can be considered to be embedded in the values of the surrounding area that incorporates water resources and land formations. For energy generated from geothermal resources, relevant values should be included under deep geological systems. It is recommended that the value associated with energy from renewable sources be separately recorded in the extended balance sheet and calculated using the NPV of the associated abiotic flows. 11.40 Treatment of inland water resources (i.e. excluding marine ecosystems). The valuation of water resources is recognized in the SNA in cases where “surface and groundwater resources [are] used for extraction to the extent that their scarcity leads to the enforcement of ownership or use rights, market valuation and some measure of economic control” (2008 SNA, para. 10.184). It is recommended that this value should be recorded separately from the value of ecosystem services of freshwater ecosystems. 11.41 Water supply is treated as an abiotic flow, and its value is therefore recorded as part of other environmental assets, as water resources, rather than associated with the terrestrial or freshwater ecosystem asset to which it is most directly connected (e.g. based on the location of a bore or well). In this context, the value of water resources is limited to their use as input to economic activity and human consumption. It is to be noted that the valuation of water is an area of measurement that poses challenges and requires an alignment of methods and scope based on guidance derived from the SNA, the SEEA Central Framework and SEEA EA. 11.42 Treatment of land. A key function of land is to provide space. Land and the space it represents, define the locations within which economic and other activity is undertaken and within which assets are situated. This role of land is a fundamental input to economic activity and has significant value in many locations. Integrated and extended accounting for ecosystem services and assets 271 11.43 However, the provision of space is not considered an ecosystem service and consequently the value of ecosystem assets, particularly terrestrial ecosystems, excludes the value of the provision of space. Thus, depending on the location and ecosystem type, the total value of an area of land may be greater than the value of the aggregated ecosystem services. In this regard, particular note should be taken of urban ecosystems and cultivated land. For urban ecosystems, the value of the provi- sion of space may be the predominant component of the total value of environmental assets. For cultivated land, the distinction may be less evident, that is, the value of provisioning ecosystem services may be closer to the total market value of the land as recorded in the SNA. However, the value of the ecosystem asset as a whole may be larger than the SNA-based land value, through the inclusion of the value of non- provisioning services (e.g. water regulation), which are supplied by cultivated land but are not recognized in the market value of land. For areas of government-owned or public land, it is likely that no value is recorded following the SNA and in this case the value associated with the relevant ecosystem assets reflects the total value of the area for accounting purposes. 11.44 In the extended balance sheet, in recognition of the fact that values of land likely differ from the value of ecosystem assets, the approach taken, following the guidance in chapter 10, is to record the aggregated NPV of ecosystem services against the relevant ecosystem type and then, where relevant, to record the additional value of land in terms of the provision of space as a separate asset class under other environ- mental assets. In a number of cases, most notably for urban ecosystems and cultivated land, it would be necessary to partition the value of land as recorded in the SNA so as to extract that component of value that is attributable to ecosystem services (that is related, for example, to amenity services embodied in land values). 11.45 Treatment of the atmosphere and the high seas. The scope of ecosystem assets excludes the atmosphere and generally for national-level accounting purposes marine areas beyond the EEZ would also be outside the EAA that defines the scope of the extended balance sheet. The values of these environmental assets are therefore not captured in the value of ecosystem assets. SNA values relevant to these environmental assets include the radio spectrum and fish stocks on the high seas over which owner- ship rights may exist. The value of the radio spectrum (as defined in the SNA) should be included under atmospheric systems in table 11.2 and the value of fish stocks on the high seas that satisfy the definition of economic assets in the SNA should be included under marine ecosystems. 11.46 As noted in the previous section, an extended balance sheet could be compiled with an alternative scope that incorporates a wider range of ecosystem assets such as marine areas beyond the EEZ and the atmosphere. Such accounts could recognize the importance of these ecosystems, for example, the role of the ozone layer and the role of marine ecosystems in regulating global climate. 11.47 Treatment of permits and licences to use natural resources. In the SNA, the value of permits and licences associated with the use of natural resources – including, for example, resource leases and transferable quotas – is recorded separately from the value of the underlying resource. In recording this value separately, the total value of the natural resource is considered to be partitioned, with the value of the permit or licence reducing the value of the resource that is recorded as part of natural resources. In the extended balance sheet, by convention, the total value of the natural resource is recorded as part of environmental assets and, if required, the value of the associated permit or licence should be recorded as an “of which” item. 272 System of Environmental-Economic Accounting – Ecosystem Accounting 11.4 Assigning economic ownership and allocation of degradation and enhancement 11.4.1 Considerations in assigning economic ownership 11.48 The compilation of the ecosystem accounts in physical and monetary terms does not necessarily require a statement or assumption concerning the ownership of ecosystem assets. This is important since it highlights the fact that accounting for eco- system assets, their services and their links to the economy can be undertaken from a perspective that views ecosystems as distinct ecological entities. This neutrality with respect to ownership enables the set of ecosystem accounts to support a wide range of decision-making contexts. 11.49 This perspective on ecosystem assets is consistent with the wider definition of environmental assets found in the SEEA Central Framework (para. 2.17), in which environmental assets are defined as the components of the Earth that constitute the biophysical environment and with the potential to deliver benefits to humanity. 11.50 Nonetheless, understanding ecosystem assets in the context of legal and eco- nomic ownership is highly relevant to developing, enacting and monitoring policy on ecosystem management and use. Cross-classifying data from the ecosystem accounts with data on legal and economic ownership is therefore clearly policy-relevant. For example, data from ecosystem extent accounts may be cross-classified with data from cadastres to assess the connections between different ecosystem types and the types of economic units that manage them. The cross-classification of data on the supply of ecosystem services with data on economic ownership of land and other areas is similarly pertinent. Undertaking this type of work (i.e. cross-classification of data sets) using ecosystem accounting data expressed in spatial terms is likely to be of significant interest and benefit. 11.51 From a national accounting perspective, integration of the ecosystem accounts with the institutional sector accounts of the SNA requires the application of a treatment or appropriate convention that enables the relationship between ecosystem assets and economic units to be recorded consistently. A particular focus for SEEA EA is integra- tion of the ecosystem accounts with the income, distribution of income, capital and financial accounts of the SNA that are compiled for institutional sectors and subsectors, including corporations, households and general government. To support integration with those accounts and to facilitate derivation of degradation-adjusted measures of income and saving, ecosystem assets must be assigned to an institutional sector. 11.4.2 Institutional sector for ecosystem assets 127 A small exception applies to 11.52 The SNA discussion on determination of ownership distinguishes between the treatment of land and legal and economic ownership. The SNA defines the legal owner of entities (which buildings of foreign Govern- include goods and services, financial assets and natural resources) as “the institutional ments, such as embassies, unit entitled in law and sustainable under the law to claim the benefits associated with which are treated as lying the entities” (2008 SNA, para. 10.5) The economic owner is “the institutional unit enti- outside the economic territory of a country. As this matter is tled to claim the benefits associated with the use of the entity in question in the course not considered material to the of an economic activity by virtue of accepting the associated risks” (ibid.). development of integrated 11.53 Further, all buildings and structures and almost all land and marine areas environmental-economic within the economic territory of a country are deemed by convention to be owned by accounts, it is not considered further here. As required, 2008 economic units that are considered resident in that territory.127 Where a non-resident SNA treatments should be unit is the legal owner, a notional resident unit is created that is considered to own the applied. relevant asset, and the non-resident unit then holds a financial asset equal to the value Integrated and extended accounting for ecosystem services and assets 273 of the relevant assets owned by the notional resident unit. This treatment underpins the recording of flows between ecosystem assets and economic units that are resident in the rest of the world, including with respect to imports and exports of ecosystem services and the attribution of value in a balance sheet context. 11.54 In many cases, the legal and economic owners are the same but there are a range of situations in which there may be a lack of clarity. These include situations involving government ownership of entities such as public roads, national parks and natural resources; situations involving financial leases; and situations where assets are built under private finance initiatives. In these contexts, measurement approaches may be supported through use of the definitions under the Framework on Effective Land Administration.128 128 United Nations Committee of Experts on Global Geospatial 11.55 Using these national accounting principles of economic ownership, which are Information Management founded on the relationship between an institutional unit and the benefits from an (UN-GGIM), “Framework asset (or entity), and solely for the purpose of integrating ecosystem accounts data for Effective Land Admin- with the standard sector accounts of the SNA, it is considered appropriate to parti- istration” (E/C.20/2020/29/ tion the ownership of ecosystem assets using a focus on the users of different types of Add.2), May 2020. Available at https://ggim.un.org/meet- ecosystem services. In effect, this represents a partitioning of the benefits rather than a ings/GGIM-committee/10th- partitioning of the ecosystem asset in physical terms. Thus, where an ecosystem asset Session/documents/E-C.20- supplies ecosystem services that contribute to SNA benefits (i.e. primarily provision- 2020-29-Add_2-Framework- ing services), that part of the value of the asset is considered to be owned by the sector for-Effective-Land-Administra- that uses those ecosystem services. Most commonly, this is the legal and economic tion.pdf. owner of the land, which is using the ecosystem services as inputs to private returns (e.g. in agriculture or forestry). 11.56 At the same time, where an ecosystem asset supplies ecosystem services that contribute to non-SNA benefits (i.e. primarily regulating and maintenance services and cultural services), that part of the value of the asset is considered to be owned by a new subsector of general government entitled the “ecosystem trustee”. In this treat- ment, the ecosystem trustee operates analogously to other institutional units, both receiving benefits through the supply of ecosystem services and incurring costs in relation to the supply of those services. The ecosystem trustee is therefore a separate entity from the ecosystem asset. 11.57 In a situation where an ecosystem asset does not contribute to non-SNA ben- efits, the treatment is aligned with the assignment of ownership in the SNA. Where an ecosystem asset does not contribute to any SNA benefits, the ecosystem trustee is assigned complete ownership. This situation may arise in remote areas of a country. Commonly, there is some partitioning of ownership, reflecting recognition of the fact that many ecosystem assets contribute to both SNA and non-SNA benefits. It is to be noted that there are areas that are under common ownership (e.g. for grazing livestock) or under government or public sector ownership and which contribute to SNA benefits. In these cases, ownership is not assigned solely to the ecosystem trustee but also to the economic units deemed to own those benefits, following the approach just described. 11.58 This approach to the allocation of ownership allows the resulting institu- tional accounts to align most closely to the existing understanding of the economic and financial situation of the current SNA institutional sectors. The main differences between the SNA and the approach outlined here concern the recognition of the use of ecosystem services as inputs to the production of SNA benefits and recognition of any costs of ecosystem degradation associated with such a use of those services. 11.59 Two alternative ownership allocation assumptions might be applied, under which all ecosystem assets are assigned to (a) an ecosystem trustee or (b) relevant economic units. While accounting entries and sequences of accounts can be devel- 274 System of Environmental-Economic Accounting – Ecosystem Accounting oped under either of these assumptions, the partitioned asset approach aligns most closely to the accounting principles inherent in the SNA. Even if economy-wide measures of aggregates, such as gross value added (GVA) and degradation-adjusted value added, are unaffected by the approach taken to assigning ownership, differ- ent ownership assumptions will impact the relative sizes of those aggregates at the institutional sector level. The effects of different approaches are considered by La Notte and Marques (2019). 11.4.3 Allocation of degradation and enhancement to economic units 11.60 Chapter 10 described approaches to the valuation of ecosystem degradation and enhancement in the context of the monetary ecosystem asset account. In that account, the focus of measurement is on degradation and enhancement for individual ecosystem assets and ecosystem types within an EAA. 11.61 When integrating ecosystem accounts with economic accounts, the alloca- tion of ecosystem degradation and enhancement to economic units is required. For both degradation and enhancement, this allocation is directly related to the approach applied to assigning ownership, as explained above. Thus, ecosystem degradation and enhancement of an ecosystem asset are partitioned and recorded in the accounts of either the economic unit that receives the SNA benefits or the new ecosystem trustee in relation to contributions to non-SNA benefits. 11.62 For integrated economic accounting in SEEA, a costs-borne approach for recording ecosystem degradation is followed, meaning that the cost of capital is attrib- uted to the economic unit that is assigned ownership of the asset. This is consistent with general accounting practice. An alternative is to allocate degradation on the basis of costs caused (the polluter pays approach) by determining the appropriate “source”, that is, the economic unit that has caused the degradation. This may be challenging owing, for example, to factors of distance (i.e. cases where impacts of causing eco- nomic units are felt in distant ecosystems) and time (i.e. cases where impacts become evident well after the causing activity has occurred). Nonetheless, it is recognized that there is likely to be substantial policy interest in providing estimates of an allocation of degradation that is attributable to causing or polluting economic units. Chapter 12 includes a discussion of the presentation of such complementary estimates. It is to be noted that the aggregate measure of degradation recorded in the ecosystem accounts is not affected by the choice of allocation approach. 11.5 Integrated sequence of institutional sector accounts 11.5.1 Introduction 11.63 As introduced in the previous section, ecosystem accounting data can be used to augment the economic accounts of the SNA through the compilation of an extended sequence of accounts for institutional sectors. The extended sequence of accounts shows how entries for the values of ecosystem services and changes in ecosystem assets (including ecosystem degradation and enhancement) can be combined with standard measures of production, income and consumption, and associated accounting aggre- gates such as saving and net lending. 11.64 One of the main functions of the sequence of accounts is to demonstrate the linkages among incomes, investments and balance sheets. In this regard, a key feature Integrated and extended accounting for ecosystem services and assets 275 of the standard SNA sequence of accounts is the attribution of consumption of fixed capital (depreciation) to economic activities and institutional sectors as a cost against income. The equivalent outcome from an extended sequence of accounts is the attri- bution of ecosystem degradation as a cost against the income of institutional sectors. Thus, the extended sequence of accounts describes the relevant accounting entries for the derivation of adjusted measures of value added, domestic product, national income and net worth. Section 11.5.3 describes adjusted income measures. 11.5.2 Structure of the extended sequence of accounts 11.65 The design of an extended sequence of accounts reflects the ownership struc- ture described in section 11.4. The extension thus requires the inclusion of the ecosys- tem trustee as a new subsector within, or next to, the general government sector. 11.66 This extended sequence of accounts is presented in table 11.3 where a simple example is used to illustrate the different accounting entries. The example shows a simplified economy consisting of a farm that produces wheat (with an output value of 200 currency units). The wheat is purchased and consumed by households. The cropland used by the farmer provides a mix of ecosystem services amounting to gross ecosystem services supply of 110 currency units, of which 80 currency units are used by the farmer as input to wheat production (i.e. crop provisioning services as inputs to SNA benefits) and 30 currency units represent recreation-related services, which are inputs to the non-SNA benefit of physical and mental health. For simplicity, all production of the farmer (200 currency units) is recorded as final consumption of households and no other production, intermediate consumption or final consumption is recorded. Furthermore, it is assumed that compensation of employees amounts to 50 currency units and that the farmer’s consumption of the fixed capital of a tractor amounts to 10 currency units. 11.67 For the purpose of comparison, the accounting entries following the record- ing principles of the standard SNA are also shown. In this case, no transactions in ecosystem services are recorded, as such activity lies outside the production boundary. Following the SNA, the economy in this example has a value added (GDP) of 200 cur- rency units and the farmer has a net saving of 140 currency units. 11.68 Following the partitioned ownership approach described in section 11.4 above, the ecosystem asset is partitioned so that flows of ecosystem services are shown (a) as supplied by the farmer in the case of the crop provisioning services (thus increasing the measure of the farmer’s gross output); and (b) as supplied by the ecosystem trustee in the case of recreation-related services. The crop provisioning services are immedi- ately deducted in the farmer’s accounts as intermediate consumption. 11.69 The use of recreation-related services is shown in two steps. In the allocation/ use of income accounts, an ecosystem services transfer in kind is recorded as payable by the ecosystem trustee and receivable by the subsequent recipient. In this example, the final recipient of recreation-related services is the household sector but in other cases multiple recipients may be recorded. In a second step, the use of the ecosystem services is shown as final consumption of the household sector. 11.70 As noted in section 11.4.2, the ecosystem trustee is a subsector related to general government that is regarded as managing the flow of ecosystem services contributing to non-SNA benefits. While the ecosystem asset itself does not incur costs, there may be expenditure undertaken to manage the ecosystem asset in supplying those services. In the institutional sector accounts, these costs should be recorded as intermediate consumption or capital formation of the ecosystem trustee. This would involve real- locating expenditures from other institutional sectors. 276 System of Environmental-Economic Accounting – Ecosystem Accounting 11.5.3 Adjusted income aggregates 11.71 A key focus in the development of the extended sequence of accounts is the der- ivation of various measures of economic activity, including valued added, operating surplus, disposable income and net saving, which take into account the cost of ecosys- tem degradation. Table 11.3 shows how these measures are derived and the relation- ships between them. Importantly, to retain accounting consistency, it is necessary that, in addition to deducting measures of ecosystem degradation, the income measures themselves be extended to incorporate the generation and use of ecosystem services (i.e. the flows that are not captured within the standard SNA production boundary). 11.72 Similar considerations apply to incorporating the effects of changes in ecosys- tem asset values other than ecosystem degradation, such as ecosystem enhancement and ecosystem conversion. However, the accounting entries required for these other changes in the value of ecosystem assets require further investigation and will be con- sidered under the SEEA EA research and development agenda. 11.73 The discussion of adjusting measures of GDP and other SNA aggregates for environmental factors is much broader than the above description of degradation- adjusted measures. Some considerations on the theoretical relationship between national accounts and welfare are relevant, as discussed in appendix A12.1. There is also a range of approaches to measurement coverage and valuation that have led to the development of a variety of alternative and complementary measures of the envi- ronment-economy relationship. Chapter 12 provides an overview of those approaches and the relationship to the measures described in the ecosystem accounts and in the extended accounts presented in the present chapter. Integrated and extended accounting for ecosystem services and assets 277 Table 11.3 Models for including ecosystem services in the sequence of accounts (excluding financial account and change in balance sheet entries) (currency units) SNA treatment Extended sequence of accounts Sector Sector Agri- House- Agricul- House- Ecosystem culture hold Total ture hold trustee Total Production and generation of income account Output Products (wheat) 200 200 200 200 Ecosystem services 80 80 (crop provisioning) Ecosystem services 30 30 (recreation) Total output 200 200 280 30 310 Intermediate consumption Products 0 0 0 0 0 Ecosystem services 80 0 80 (crop provisioning) Gross value added 200 200 200 30 230 less Consumption of fixed capital (produced 10 10 10 0 10 assets) less Ecosystem degradation 10 5 15 Degradation-adjusted net value added 190 190 180 25 205 less Compensation of employees 50 50 50 0 50 Degradation-adjusted net operating surplus 140 140 130 25 155 Allocation/use of income accounts Degradation-adjusted net operating surplus 140 140 130 25 155 plus Compensation of employees 50 50 50 50 Ecosystem service transfer in kind payable 30 30 Ecosystem services transfer in kind receivable 30 30 Degradation-adjusted disposable income 140 50 190 130 80 -5 205 less Final consumption Products (wheat) 200 200 200 200 Ecosystem services 30 30 (recreation) Degradation-adjusted net saving 140 -150 -10 130 -150 -5 -25 Capital account Degradation-adjusted net saving 140 -150 -10 130 -150 -5 -25 plus Consumption of fixed capital (produced 10 10 10 10 assets) plus Ecosystem degradation 10 5 15 Net lending/borrowing 150 -150 0 150 -150 0 0 279 Appendix A11.1 Example of an extended SUT A11.1 Table A11.1.1 presents a small, stylized series of SUTs using timber produc- tion as an example. Part A of the table presents the standard SUT recording of timber production for furniture purchased by households, that is, no ecosystem services are recorded. It shows the output of logged timber by the forestry industry (50 currency units), the use of that timber by the manufacturing industry and the ultimate sale of the furniture in the amount of 80 currency units to households. The total value added of 80 currency units that is recorded is equal to both (a) the sum of value added for for- estry and value added for manufacturing and (b) total household final consumption expenditure.129 129 The recording presented here ignores all other inputs and A11.2 Part B extends this recording to include the flow of wood provisioning services potentially relevant flows (e.g. (30 currency units) from the ecosystem asset (a forest), which is recorded as an input labour costs, retail margins, to the forestry industry. There is thus an additional row and an additional column in taxes). the SUT relative to the standard SUT in part A. The main effect of this extension is to partition the value added of the forestry industry (previously 50 currency units) between the industry (value added now 20 currency units) and the ecosystem asset (value added now 30 currency units and equal to the supply of ecosystem services). Overall, value added through the inclusion of the ecosystem asset remains unchanged (at 80 currency units) even though the total supply has increased by 30 currency units. This reflects the extension of the production boundary. A11.3 Part C introduces a second ecosystem service, air filtration, which is supplied by the same ecosystem asset (i.e. the forest). In this case, a second additional row is required but no additional columns. Total supply is further increased (by 15 currency units) but in this case, total value added also rises (to 95 currency units) because the additional output is not an input to existing products; rather, supply of air filtration services is recorded as an increase in final consumption of households. A11.4 An important result of integrating the flows of ecosystem services in the extended SUT is that it becomes clear how the commonly discussed topic of double counting can be managed. Quite frequently, there is concern that integrating ecosys- tem services within the national accounts will result in double counting (in terms of the impacts on value added and GDP) if the final ecosystem services that contribute to SNA benefits are recorded. Recording on a gross basis (i.e. recording both supply and use of ecosystem services), which is applied in tables 11.1a, 11.1b and A11.1.1, is the most transparent means of dealing with double counting. 280 System of Environmental-Economic Accounting – Ecosystem Accounting Table A11.1.1 Stylized example of an extended SUT (currency units) Ecosystem Forestry Manufactur- Household asset (forest) industry ing industry final demand Total PART A: Standard SUT Supply Logged timber 50 50 Furniture 80 80 Use Logged timber 50 50 Furniture 80 80 Value added (supply less 50 30 80 use) PART B: Extended SUT (SNA benefits) Supply Ecosystem service: 30 30 wood provisioning Logged timber 50 50 Furniture 80 80 Use Ecosystem service: 30 30 wood provisioning Logged timber 50 50 Furniture 80 80 Value added (supply less 30 20 30 80 use) PART C: Extended SUT (non-SNA benefits) Supply Ecosystem service: 30 30 wood provisioning Ecosystem service: air 15 15 filtration Logged timber 50 50 Furniture 80 80 Use Ecosystem service: 30 30 wood provisioning Ecosystem service: air 15 15 filtration Logged timber 50 50 Furniture 80 80 Value added (supply less 45 20 30 95 use) Section E Applications and extensions of SEEA 283 Section overview Section E, comprising chapters 12 to 14, describes applications and extensions of SEEA EA. It has been prepared to underpin a shared understanding among compilers and users of how data from the various ecosystem accounts may be applied to support analysis and decision-making. Three different areas of application and extension are covered in the present sec- tion. Chapter 12 considers the area of complementary approaches to valuation. The measurement of monetary values based on exchange values as described in chapters 8 to 11 supports comparison with the accounting values of the national accounts and a range of other uses described in those chapters. However, there are limits to the range of economic values that can be included in such measures and there are a number of applications that exchange-based values cannot support directly. The discussion in chapter 12 recognizes that there are other approaches to monetary valuation and a number of other valuation concepts, such as welfare values and total economic values, which have been used extensively in decision-making for, inter alia, cost-benefit analy- sis, scenario assessments and the development of environmental markets. Describing these complementary approaches to valuation aims towards provid- ing support for account compilers in their efforts to understand the different ways in which valuation may be considered and how the compilation of ecosystem accounts relates to the complementary approaches. Further, for users of the accounts, this dis- cussion is intended to place various valuation approaches in context and hence clarify the potential of ecosystem accounts to support analysis and decision-making. A body of research on complementary approaches to accounting for the environment is also emerging, for example, in work on advancing the complementary accounts network (Turner, Badura and Ferrini, 2019). Developing and enriching the relationship among different measurement approaches will support the supply of coherent data and under- pin support for decision makers. More broadly, the compilation of ecosystem accounts is of merit only when the data can be used to support analysis and monitoring of policy- and decision-making. In this context, chapter 13 examines the second area covered in section E by describing the potential for using SEEA EA and other data, including data from accounts under the SEEA Central Framework and the SNA, to support discussion of individual policy themes. Four high-profile environmental themes are considered, namely, biodiversity, climate change, oceans and urban areas, but the approach can be applied in other contexts as well. The discussion in chapter 13 also highlights the fact that accounting approaches can be used to organize data on specific variables (e.g. species and carbon) both to support the compilation of ecosystem accounts and to better describe the rela- tionship between those variables and economic and human activity. The third area of application and extension covered in section E encompasses indicators and combined presentations. The most common approach to monitoring entails the use of indicators. Chapter 14 describes how accounting principles can be used to underpin the derivation of more coherent indicators, particularly where data are combined across the economic and environmental domains. There is a range of 284 System of Environmental-Economic Accounting – Ecosystem Accounting indicator-related initiatives at local, national and global scales and across various eco- system realms. Chapter 14 provides an introduction to the potential role of SEEA EA in supporting those initiatives, taking note in particular of the links to reporting on the 2030 Agenda for Sustainable Development and the Kunming-Montreal Global Biodiversity Framework. 285 Chapter 12 Complementary approaches to valuation 12.1 Introduction 12.1 The primary purpose of ecosystem accounting is to integrate information on ecosystems with measures of economic activity. To align with SNA principles, the ecosystem accounts in monetary terms, as described in chapters 8 to 11, record entries based on the exchange value concept. While this approach supports alignment with the accounting values of the national accounts and hence with macroeconomic pol- icy, there are other monetary approaches and valuation concepts involving welfare values, willingness to pay (WTP) and total economic values that have been exten- sively used in other decision-making contexts related, for example, to cost-benefit analysis and project appraisal. 12.2 SEEA EA alignment with SNA principles implies that the monetary values recorded in the ecosystem accounts reflect the current use of ecosystems, that is to say, that they are based on existing management regimes and institutional arrange- ments, regardless of the extent to which the associated patterns of use may be con- sidered sustainable or efficient. However, in many contexts, it is important to assess scenarios reflecting alternative management regimes or institutional arrangements for ecosystems. For example, it may be relevant to analyse how certain negative exter- nalities (e.g. pollution) might best be internalized in the decisions of economic units. The monetary values of the ecosystem accounts support, but do not incorporate, such alternative valuations. 12.3 In this context, the present chapter considers how the monetary ecosystem accounts presented in chapters 8 to 11 can be related to and support other approaches and applications in monetary terms. Section 12.2 describes a set of complementary tables that can be compiled when taking a welfare-based approach to valuation and explains the links between these approaches and ecosystem accounts. Section 12.3 describes alternative measures of income, wealth and degradation that can be derived when making different assumptions regarding the attribution of costs or the institu- tional arrangements underlying valuation. Section 12.4 describes linkages with corpo- rate assessments of natural capital. The appendix to the present chapter examines the conceptual connection between exchange and welfare values. 12.2 Building connections with welfare values 12.2.1 Introduction 12.4 The relationship between measures of national income and measures of social welfare has long been a discussion point among prominent economists.130 Some 130 See, for example, the sum- of them, for example, Pigou and Hicks, sought to relate observed market values to maries in Obst, Hein and Edens the framework of utility theory but this approach proved difficult (Hicks, 1975). (2016) and Vanoli (2005). An alternative approach, following Kuznets, considered the final objectives of eco- nomic activity and hence looked to adjusted measures of aggregate economic activity, 286 System of Environmental-Economic Accounting – Ecosystem Accounting most commonly GDP. This approach, pioneered by Nordhaus and Tobin (1972), was reflected in their macroeconomic welfare index. However, application of this approach has proved challenging owing to the difficulties of selecting and measuring the range of possible adjustments for all aspects of social welfare, as demonstrated by the range of alternative indicators that were proposed subsequently. 12.5 In light of these integration challenges, the 2008 SNA (para. 1.75) warns against a welfare-based interpretation of the accounts and notes that “GDP is often taken as a measure of welfare, but the SNA makes no claim that this is so and indeed there are several conventions in the SNA that argue against the welfare interpretation of the accounts”. Indeed, as stated, the main objective of the SNA is to “compile measures of economic activity in accordance with strict accounting conventions based on eco- nomic principles” (2008 SNA, para. 1.1). This is not to say, however, that connections do not exist between entries in the national accounts and measures of welfare (see appendix A12.1 for a more detailed discussion of the topic). 12.6 In the course of its development, the relationship of the System of Environmen- tal-Economic Accounting with welfare measures has frequently been touched upon, mostly in the context of assessing the cost of degradation, which, when estimated, would provide the means to adjust GDP and other national accounts measures of income and wealth along the lines initiated by Nordhaus and Tobin. For instance, the Handbook of National Accounting: Integrated Environmental and Economic Account- ing (1993 SEEA) (United Nations, 1993) contained various extensions, including one in which the costs associated with the repercussions of a deteriorated environment on households could be assessed using contingent valuation (chap. IV.D). The Handbook of National Accounting: Integrated Environmental and Economic Accounting 2003 (SEEA 2003) (United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development and World Bank, 2007) contained both cost-based and damage-based methods for assessing degradation, concluding that adjusting macro-aggregates for the latter “is the furthest removed from the normal SNA conventions and impinges on the realm of welfare measure- ment” (para. 1.96). 12.7 The approach taken in SEEA EA (as explained in chap. 8) is to align the ecosys- tem accounts with the valuation basis of the SNA. In the present section, complemen- tary tables that support welfare analysis are discussed, namely, a bridge table linking accounting values to welfare values and tables that make negative externalities and ecosystem disservices visible. 12.2.2 Bridge table between accounting and welfare values 12.8 Table 12.1, a bridge table, has been compiled to support understanding of the links between accounting and welfare values in the context of ecosystem services. The table lists the various additions/subtractions to be made in moving from one value concept to the other, for selected ecosystem services. It also serves to illustrate why accounting values are smaller than welfare-based values. 12.9 The example presented in table 12.1 is underpinned by the following details: • An area of land provides crop provisioning services (in the amount of 10 currency units) to a farmer engaged in the production of crops. This value is derived net of input costs such as labour and fuel. • The same land area also offers some recreational opportunities for people living nearby. While there is no charge for using the area, individuals must travel some distance to reach it. The valuation methods described in chap- Complementary approaches to valuation 287 ter 9 can be used to estimate the accounting value of the recreation-related services (5 currency units). However, the users of the recreation site obtain a consumer surplus, as they would be willing to pay more. The amount of the surplus is assumed to be 20 units. This results in a total welfare use value of 25 units for recreation-related services. • People who do not visit the site assign a non-use value to it (300 currency units). This value, which is not an individual ecosystem service, is attrib- uted to the ecosystem asset as a whole. • Asset values are the NPVs of the value of a constant flow of services over an indefinite future at an assumed discount rate of 5 per cent. No changes in prices of inputs or outputs are expected. The corresponding asset values are: (a) 300 currency units, based on accounting values (this is the value that would be included in the extended SNA balance sheet (chap. 11)); (b) 700 units, based on welfare use values; and (c) 1,000 units, based on use and non-use values. The last-mentioned amount is the value that would be included during compilation of wealth accounts on a welfare basis. Table 12.1 Bridge table between accounting and welfare values of ecosystem services (currency units) Crop pro- Recreation- visioning related   services services Total flow Asset 1. Accounting value 10 5 15 300 2. Consumer surplus 0 20     3. Welfare use value 10 25 35 700 4. Welfare non-use value       300 Total welfare value       1 000 12.10 The table highlights some differences between accounting values and welfare values. In addition, it is noted that welfare values are sometimes estimated for benefits rather than for the ecosystem contribution to the benefits. In this example, the benefit would be valued using the market price of the crop when sold by the farmer. 12.11 In certain applications, the difference in values between accounting and wel- fare-based valuations may provide relevant information on so-called unrealized val- ues. These may be obtained when comparing the current situation with a situation with changed economic institutions or management regimes for ecosystem assets. For instance, the current management of an ecosystem (e.g. an open access ecosystem) may result in low exchange values, whereas the welfare value (measured by people’s WTP for the same ecosystem services) may be very high. Large unrealized values may provide a rationale for policy intervention. 12.12 From a measurement perspective, in order to populate the table, it may be reasonable to assume, for the provisioning services and (most of) the regulating and maintenance services, that no consumer surplus exists, i.e. that the final consumer would be willing to pay only the final price (of, say, the crops) and nothing more. For cultural services, the non-market valuation techniques applied (as described in chap. 9) are commonly used to estimate welfare values. Non-use values (which can be highly significant) need to be assessed using stated preference approaches. 288 System of Environmental-Economic Accounting – Ecosystem Accounting 12.2.3 Assessing externalities, ecosystem disservices and health outcomes 12.13 Perhaps the most commonly discussed framing for examining the link between the environment and the economy involves externalities. Frequently, there is a call for frameworks and information that allow decision makers to “internalize environmen- tal externalities”. This is a general demand to ensure that the negative impacts of busi- ness, government and people on the environment are taken into account. 12.14 Externalities are impacts that “arise when the actions of an individual, firm or community affect the welfare of other individuals, firms or communities [and the] agent responsible for the action does not take full account of the effect” (Markandya and others, 2001). Externalities may be positive or negative, although much of the focus in environmental economics is on negative externalities, such as the effects of pollution or emissions. They are measured in terms of the social costs and benefits affecting other economic units. 12.15 Accounting approaches do not explicitly account for externalities, at least not directly. Accounting, as a transaction-based system, focuses on recording actual exchanges between units. In contrast, and as discussed in section 6.3.5, the measure- ment of externalities considers the magnitude of effects as a comparison between two alternative contexts, one in which the externality is present and the other in which the externality is absent. In this framing, accounting is designed to record trends in stocks and flows for the context in which the externality is present. Indeed, the estimates recorded in the accounts reveal any actual costs or changes in income that may be asso- ciated with externalities, such as increased costs incurred with respect to pollution. 12.16 A common focus in externality assessment is cost-benefit analysis, entailing the measurement of the expected effects, both positive and negative, of a particular project, activity or policy change. This type of analysis, when undertaken in the con- text of decision-making in the public sphere, requires a comparison of the wider social costs and benefits of a given project, activity, or policy. 12.17 From a measurement perspective, a key feature of assessment of externalities is assessing the effect on welfare arising from specific activities. In this analysis, welfare is generally measured in terms of effects on consumer and producer surplus. Thus, negative externalities have a negative effect on the total surplus of other economic units. As discussed in appendix A12.1, there are conceptual links between measures of welfare based on total surplus and the exchange values recorded in accounting but the concepts of value are not equivalent. 12.18 While both the analytical framing and the valuation concept are different in externality assessments compared with ecosystem accounting, data from the ecosys- tem accounts can provide inputs to such assessments through its recording of changes in ecosystem condition and changes in ecosystem services flows that arise as a result of a particular activity (e.g. impacts of the use of fertilizer and pesticides on water bodies and biodiversity). Thus, the accounts can provide baseline information for the deriva- tion of total surplus measures. 12.19 Positive externalities. With respect to positive externalities, there is a concep- tually simple extension to the ecosystem services flow account in monetary terms that entails valuing the flows of services in terms of their total surplus, i.e. producer plus consumer surplus, rather than using exchanges values as described in chapter 9. For example, the exchange value of pollination services can be identified through analysis of market values of pollinated agricultural outputs, while the full economic value of pollination, potentially measured in the context of a change in the pollinator popula- Complementary approaches to valuation 289 tion, can be measured in welfare terms. These complementary valuations may be pre- sented alongside estimates in exchange value terms. The bridge table presented in table 12.1 is an example of such an application. 12.20 Negative externalities and ecosystem disservices. While the accounts do not directly adjust or measure negative externalities as a distinct concept, the data in any set of accounts can track the effects of externalities over time, to the extent that those effects are within the prescribed accounting boundaries. Further, it is possible to record the effects, for example, on ecosystem condition and changes in flows of eco- system services for individual ecosystem assets. In addition, in the related economic accounts, additional costs incurred by affected economic units can be recorded and changed patterns of income of affected economic units can be assessed. Finally, the accounts can record the net effect of any mitigation action that is undertaken by the economic unit that generates the externality. Thus, if the mitigation action occurs, the effects on measures of ecosystem condition, services, costs and revenue will be offset to some degree. 12.21 By way of example, additional costs associated with water purification resulting from excess fertilizer use are recorded in the accounts of the water supply and distri- bution company; and degradation in soil quality through overcropping is reflected in reduced ecosystem condition and the affected farmer’s reduced output. 12.22 The primary differences between the estimates recorded in accounts and those measured using an externalities-based framing are that (a) the accounts themselves do not record the reason for the changes in ecosystem condition, value of output of the sectors or associated attribution of costs; and (b) the accounts do not aim towards measuring what might have happened under an alternative set of circumstances. At the same time, it is clear that the data from the accounts can underpin such assess- ments and, in particular, can be used to associate externalities to specific locations and affected ecosystem assets. 12.23 Ecosystem disservices fall into a category similar to that of negative externali- ties in that there are negative effects on people and economic units. A useful distin- guishing feature is that disservices may be characterized as caused by environmental factors (e.g. mosquitoes causing malaria), whereas negative externalities are caused by the activities of economic units (e.g. land clearing spreading zoonotic diseases). The appropriate framing of disservices from an accounting point of view, as described in section 6.3.5, is to capture the wider effects of ecosystem disservices implicitly as a reduction in the flows of ecosystem services (e.g. reduction of biomass provisioning services due to destruction of crops by pests; reduction of opportunities for recrea- tional activities related to lakes due to algal bloom). 12.24 The following tables demonstrate the potential to provide alternative record- ings (using an accounting structure) that highlight ecosystem disservices and negative externalities. Table 12.2 illustrates how a disservice can be recorded. It is supposed that there is an economy with two activities: agriculture (ISIC, sect. A); and manufacturing (ISIC, sect. C), producing two products, X (crops) and Y (canned goods), respectively. In addition, it is assumed that ecosystem service A is being provided to ISIC, sect. A. Further, it is supposed that disservice B is introduced (e.g. elephants’ trampling of agricultural produce and thus reducing the output of crops). 12.25 Table 12.2 recognizes both the ecosystem services of biomass provisioning and the disservice. The disservice effectively causes a reduction of 20 currency units in the value of the ecosystem service, which is why it is introduced as a negative. The net value of the crop provisioning service, which is used by ISIC A, then becomes 50. An income transfer is also recorded so that the same disposable income is recorded as in the situ- 290 System of Environmental-Economic Accounting – Ecosystem Accounting ation where there is not a recording of the disservice (as in the SNA). The advantage of this table compared with the extended SUT (tables 11.1a and 11.1b) is that the same out- puts are recorded but the value of the disservice is made explicit. This accounting treat- ment can be applied also where there is no offsetting ecosystem service; for instance, GHG emissions could be recorded as a negative output of an ecosystem and used by households, thereby reducing their final consumption. 12.26 Table 12.3 adjusts the example displaying the ecosystem disservice to show a recording of negative externalities. It is supposed that the farmer disposes of the agri- cultural wastes in a river, causing costs to downstream users (in this example, a water supply company (under ISIC, sect. E (water supply; sewerage, waste management and remediation activities)). The externality can be recorded as a negative output of the farmer (ISIC, sect. A) (-20 currency units), thereby reducing the farmer’s output (and value added). In the use table, the externality can be recorded as (negative) interme- diate consumption (-20 currency units) by the ecosystem, reflecting that in this situ- ation, the ecosystem suffers the externality. This has the effect of showing the value added of the ecosystem in the absence of the externality (i.e. 75 currency units) while still exhibiting the actual ecosystem services supplied (55 currency units) and used (25 units by ISIC, sect. A, and 30 units by ISIC, sect. E). The income transfer (75 currency units) ensures, as in the previous recording of disservices, that the eco- system has no disposable income and that the activities have the same value added as they would have without the ecosystem service and the externality. 12.27 In many situations, the discussion of negative externalities and ecosystem dis- services is related to the effects on human and population health. It has long been established that the national accounts do not place a direct value on health outcomes and that, instead, the focus is placed on measuring the inputs to human health, for example, outputs related to doctors and hospitals. Similarly, in ecosystem accounting, there is measurement of ecosystems’ contribution to health outcomes (e.g. through air filtration services) but not of the health outcomes themselves. Table 12.2 Complementary recording of an ecosystem disservice in the SUT (currency units) ISIC ISIC section C: Ecosystem section A: Manufac- assets Agriculture turing Households Total Supply Ecosystem service A 70 70 Ecosystem disservice B -20 -20 Product X: crops 200 200 Product Y: canned goods 80 80 Use Ecosystem service A 70 70 Ecosystem disservice 0 -20 -20 Product X: crops 25 175 200 Product Y: canned goods 80 80 Value added (supply less use) 50 150 55 255 Transfer -50 50 0 Disposable income 0 200 55 255 255 Complementary approaches to valuation 291 Table 12.3 Complementary table with an externality in the SUT (currency units) ISIC ISIC Ecosystem section A: section E: assets Agriculture Water supply Households Total Supply Ecosystem service A 55 75 Externality -20 -20 Product X: crops 200 200 Product Z: water 300 300 Use Ecosystem service A 25 30 70 Externality -20 -20 Product X: crops 200 200 Product Z: water 300 300 Value added (supply less 75 155 270 500 use) Transfer -75 45 30 0 Disposable income 0 200 300 500 12.28 Consequently, an important area of analysis extending beyond the ecosys- tem accounts lies in direct measurement of those outcomes. This work has been undertaken, for example, by the World Bank and the Organisation for Economic Co-operation and Development, among other organizations, under the generic heading of measuring the costs of environmental degradation.131 Such work 131 See, for example, the World involves some form of monetary valuation but may also involve the measurement Bank Changing Wealth of of dose-response functions that track the changes in population health in relation Nations reports; the OCED database on those costs; and to changes in, for example, ecosystem condition (e.g. involving measures of water Muller, Mendelsohn and Nord- quality). It should be apparent that the structure of ecosystem extent and condition haus (2011). accounts, together with the biophysical modelling required for measuring many ecosystem services, may be applied usefully to derivation of health-related metrics and the related analysis. 12.29 There are also a range of approaches within the private sector through which the monetary value of externalities is added or subtracted from an existing measure of financial income or profit. These approaches are commonly labelled as environmental profit and loss statements. In general, they seek to assess the overall (or net) cost or benefit that a company contributes to society, for example, by deducting the social cost of carbon associated with its emissions from its measure of financial profit. 12.3 Alternative measures of income, wealth and degradation 12.3.1 Introduction 12.30 Chapter 11 described the SEEA EA approach to the measurement of income and wealth, which is adjusted for ecosystem degradation. In summary, the approach involves measuring the value of degradation in terms of loss in future value of ecosys- tem services due to a decline in ecosystem condition and deducting this cost of capital 292 System of Environmental-Economic Accounting – Ecosystem Accounting from the relevant aggregate measure of income (e.g. GDP) or wealth. At an industry or institutional sector level, the cost of ecosystem degradation is attributed to the eco- nomic units that suffer the loss of future ecosystem services. 12.31 Other approaches to accounting for the effects of degradation on income and wealth have been developed. They vary in the ways in which they estimate the cost of ecosystem degradation and in their definitions of income and wealth. The general ambitions of these measures are similar, but there are conceptual and practical dif- ferences compared with the estimates derived using the SEEA EA approach. In most cases, the data contained in the ecosystem accounts or data from the SEEA Central Framework can be used to support the derivation of alternative measures, but usually additional assumptions and alternative valuation concepts are applied. 12.3.2 Restoration cost-based approaches to measuring degradation 12.32 Earlier iterations of SEEA focused not on valuing ecosystem (or environmen- tal) assets per se (in terms of the future value of ecosystem services) but rather on measuring the cost of degradation directly. This was carried out in the context of the environmental cost associated with recorded levels of economic activity. SEEA 1993 recommended use of the so-called restoration cost (or maintenance cost) approach to value degradation, i.e. an approach focused on the costs required to restore the envi- ronment to a previous or agreed condition. Further, as explained more fully in SEEA 2003 (chap. 9), the conceptual perspective assumed that environmental assets – air, water, soil – were effectively fixed in quantity and that the focus should therefore be placed either on the costs involved in combating declines in the quality of those assets (restoration costs) or on the damages incurred as a result of declines in quality. 12.33 In terms of monetary valuation, there are a number of considerations that emerge from this framing. First, in a situation where environmental quality meets or exceeds a suitable threshold – e.g. a situation where there is sufficient clean air – it is posited that there is no additional cost that needs to be considered in account- ing for degradation. 12.34 Second, the non-market benefits that people obtain from nature are not con- sidered exchanges with economic actors and therefore there is no rationale for extend- ing the production boundary to record ecosystem services as described in the SEEA EA framework. Indeed, the distinct focus of the restoration-cost approach is not on articulating the contribution that ecosystems make to well-being but on highlighting the direct costs of reducing ecosystem condition below acceptable thresholds. 12.35 Third, it is considered that there is no market or institutional mechanism through which the restoration costs are confronted with the benefits (reductions in damages) associated with the change in environmental quality. The consequence of this is that SEEA 2003 described both cost-based methods and damage-based meth- ods for estimating the monetary value of degradation. The damage-based methods described in SEEA 2003 have much in common with the measurement of welfare val- ues as applied in the measurement of negative externalities and they are not further discussed here. In an environmental accounting context, most of the focus has been kept on cost-based approaches. 12.36 Following SEEA 2003, costs in relation to environmental degradation can either be preventative (avoidance and abatement costs) or aim towards reversing the effects of degradation (restoration costs). In the context of accounting for the cost of degradation in any given period, as described in SEEA 2003 (chap. 10), the avoidance and abatement costs may have been incurred in which case the quantity of degrada- Complementary approaches to valuation 293 tion will have been reduced, ceteris paribus, and, further, they will have already been recorded in the accounts. (The framework for identifying these costs and recording them in environmental protection expenditure accounts is described in chapter IV of the SEEA Central Framework.) 12.37 Placing a value on the actual change in environmental quality must therefore focus on restoration costs, the expenditure required to return the environment to a given condition. This condition could be the condition in a previous (or sustainable) state or a condition defined as a societally desired state (e.g. as expressed in multilateral environmental agreements). This focus thus captures any degradation not included in measures of actual avoidance and abatement costs. 12.38 Measuring restoration costs may be challenging for two reasons. First, they are estimates of future expenditure, which require the use of appropriate assumptions concerning prices and quantities of necessary inputs. The core assumptions are that the estimate of costs will reflect the least cost and that there is broad agreement that the expenditures are justified. In some cases, highly extensive information on future restoration costs may be available, for example, mining companies may be required to estimate the cost of rehabilitating mine sites. However, it must be recognized that restoration may take up a considerable period of time. Measurement in this area is related to an issue emerging within the context of the SNA concerning the recording of provisions wherein liabilities may be recognized in relation to potential future costs. While provisions are a common feature of corporate accounting, they are not recorded in the national accounts.132 To the extent that some of those costs are actually incurred, 132 However, there is an area of an accounting-based data set may be maintained to support estimation of such costs active research in an SNA con- for future periods. text that reflects a recognition of the significance of potential 12.39 Second, it is necessary to assume an appropriate environmental quality to future costs. which the condition of the environment should be restored. Ideally, determining this level of quality should involve (a) an understanding of the benefits obtained from the ecosystem (e.g. ecosystem services, intrinsic values); (b) an understanding of relevant ecological thresholds and boundaries; (c) identification of the socially desired state; and (d) connections to relevant environmental regulations, standards and policy that can be used as indicators of social preferences. The determination should also entail recognition of the fact that in many cases ecosystems cannot be fully restored to a natural state. Based on the assumptions concerning the socially desired state, the estimated costs would reflect a social WTP for a specific level of environmental quality. 12.40 A simplifying assumption – that degradation is the estimated cost associated with restoring the ecosystem to its condition at the beginning of the accounting period – might be applied. In all cases, there is a clear-cut role for the ecosystem condition account in supporting the assessment of degradation and the associated restoration costs. It should be noted that, if those costs were actually paid during an accounting period, then, in theory, condition should be unchanged and no degradation should be recorded. Taking such a cost-based approach may therefore be better understood as an example of applying the accounts for scenario analysis. 12.41 In general, the estimate of the monetary value of degradation obtained using this approach could be integrated into the accounts as a macro adjustment. Recogniz- ing the nature of these costs, Vanoli (2015) proposed adding the monetary value of degradation of ecosystems to the final expenditure categories as “unpaid ecological costs”, through which final consumption and gross fixed capital formation would then be recorded on a “total costs” basis. Further, where the costs accrued remain unpaid in subsequent periods, they would be recorded as a negative with respect to saving and consequently recorded as an increase within a new liability category, namely, “eco- 294 System of Environmental-Economic Accounting – Ecosystem Accounting logical debt of the economy”. Table 12.4 below shows how unpaid ecological costs and ecological debt may be incorporated in a sequence of accounts. 12.42 As noted, this approach can provide a means to estimate cost of degradation but it cannot be easily combined with direct measures of the value of ecosystem ser- vices and associated values of ecosystem assets as presented in the ecosystem accounts, since there is no particular reason to expect that the estimated restoration costs will either align with the estimated loss of future flows of ecosystem services or reflect the social WTP for future ecosystem services. One option may be to apply this approach in cases (e.g. involving the atmosphere or fisheries on the high seas) where no underlying ecosystem asset is recognized. Restoration costs for these environmental assets could be recorded as unpaid ecological costs alongside measures of degradation for ecosys- tem assets as shown in the core ecosystem accounts. 12.3.3 Polluter pays presentation of degradation 12.43 Recording in SEEA EA is based on the cost-borne perspective in which the cost of degradation is allocated to the economic unit considered to own the ecosystem asset since this is the unit that suffers from the loss. An alternative perspective is to allocate the costs of degradation to the economic unit that is considered to have caused the degradation (e.g. costs may be assigned to a polluter) (La Notte and Marques, 2019). 12.44 To support this alternative presentation, table 12.4 illustrates how it is pos- sible to include both costs-caused and costs-borne presentations in the sequence of accounts, as compared with the sequence of accounts displayed in table 11.3. This is done by allocating degradation on the basis of costs caused in the production account and then transferring degradation costs between sectors in the allocation of income account by including two additional rows – for degradation transfer in kind payable and degradation transfer in kind receivable. The transfer ensures that degradation- adjusted disposable income is the same as that obtained in table 11.3. In table 12.4, it is assumed that the farmer is responsible for all of the degradation. 12.45 This presentation has the following advantages: (a) the ecosystem asset value underpinning the supply of services reflects the costs-borne perspective (i.e. it reflects the value of the asset to the economic owner); and (b) the entries for production and value added provide a measure of net value added, reflecting a costs-caused perspective. 12.46 These allocations to causing units may be difficult to assign in practice, for example, in cases where the effects of degradation arise at some distance from the cause; where there are multiple economic units contributing to the degradation; or when there is a significant time lag between the activities causing the degradation and the incurrence of costs by other economic units. 12.3.4 Defensive expenditures 12.47 Another long-standing framing in the economics literature entails adjusting aggregate measures of income for expenditures incurred to avoid bad or negative out- comes. This includes, for example, the purchase of equipment to filter polluted air. These so-called defensive expenditures add to measures of national income following the SNA (i.e. there is increased production and consumption of relevant goods and services) but may be considered to not enhance overall welfare. Thus, defensive expen- ditures may be deducted to provide a more appropriate measure of national income in terms of welfare. A challenge in adopting this approach is defining the measurement boundary for defensive expenditures. Complementary approaches to valuation 295 Table 12.4 Alternative recording of degradation costs in the sequence of accounts, excluding the financial account (currency units) Extended sequence of accounts Sector Ecosystem Agriculture Household trustee Total Production and generation of income account Output Products (wheat) 200 200 Ecosystem services (crop provisioning) 80 80 Ecosystem services (air filtration) 30 30 Total output 280 30 310 Intermediate consumption Products 0 0 0 Ecosystem services (crop provisioning) 80 0 80 Gross value added 200 30 230 less Consumption of fixed capital (produced assets) 10 0 10 less Ecosystem degradation (polluter pays) 15 0 15 Degradation-adjusted net value added 175 30 205 less Compensation of employees 50 0 50 Degradation-adjusted net operating surplus 125 30 155 Allocation /use of income accounts Degradation-adjusted net operating surplus 125 30 155 plus Compensation of employees 50 50 Ecosystem service transfer in kind payable 30 30 Ecosystem services transfer in kind receivable 30 30 Degradation transfer in kind payable 5 5 Degradation transfer in kind receivable 5 5 Degradation-adjusted disposable income 130 80 -5 205 less Final consumption Products (wheat) 200 200 Ecosystem services (air filtration) 30 30 Unpaid ecological costs 25 25 Degradation-adjusted net saving 130 -175 -5 -50 Capital account Degradation-adjusted net saving 130 -175 -5 -50 plus Consumption of fixed capital (produced 10 10 assets) plus Ecosystem degradation 10 5 15 Net lending/borrowing 150 -175 0 -25 Changes in balance sheet Changes in fixed capital (SNA) 10 10 Changes in ecosystem assets (non-SNA) 10 5 15 Changes in ecological debt (non-SNA) 25 25 Note: Cells changed/added in a polluter pays recording in which ecosystem degradation of 15 currency units is allocated to the polluter. Cells changed/added when including unpaid ecological costs, where those costs are assumed to be related to environmental assets outside the scope of the included sectors’ balance sheets (e.g. the atmosphere or fisheries on the high seas). The unpaid ecological costs are therefore additional to the recorded ecosystem degradation. 296 System of Environmental-Economic Accounting – Ecosystem Accounting 12.3.5 Alternative measures of environmental income 12.48 The ecosystem accounts involve treating the monetary value of flows of eco- system services as output and hence as income. Consequently, expectations of future income flows will affect the monetary value and changes in value of ecosystem assets. As described in chapter 10, there is a range of entries for recording the change in value of ecosystem assets including changes in value due to ecosystem enhancement, eco- system degradation, ecosystem conversions and other changes. These other changes in asset values are accounted for following national accounting treatments as either other changes in volume (resulting, for example, from catastrophic losses) or revalu- ations. Importantly, these entries are not considered part of income in a national accounting context. 133 See Caparrós, Campos and 12.49 An alternative framing133 entails defining income so that it includes all changes Montero (2003). in asset values, including other changes in volume and revaluations. Such an approach has many similarities to the ecosystem accounting approach described in SEEA EA. The primary difference lies in the use of a Hicksian measure of income that explicitly incorporates all changes in asset values in a manner that is not aligned with the SNA. However, all of the underlying accounting entries and valuations – including the use of the exchange value concept – are aligned. 12.3.6 Alternative approaches to asset valuation 12.50 The recording of the monetary value of ecosystem services and the consequen- tial extension of the monetary value of environmental assets relative to the SNA is consistent with the central logic of wealth accounting as described in, for example, Barbier (2013). At the same time, there are a range of assumptions, alternative to those associated with the treatments and boundaries of the ecosystem accounts, that can be applied in implementing the central logic of wealth accounting. The following consid- erations are particularly noteworthy: • For some biological resources, especially fish stocks, where there is lim- ited regulation and open access fishing is possible, the resource rent that reflects the price of the asset will fall to very low levels. In these contexts, it may be of interest to estimate the value of the fish stocks and the associated ecosystem asset using an alternative institutional context to evaluate the effects of making such a change. These values might be considered unreal- ized values • Also for biological resources – indeed, for all ecosystem services – it may be of interest to estimate the present value of future returns using alternative institutional arrangements, for example, assuming some optimal manage- ment of the resources. These values might also be considered unrealized values. A specific case would entail estimating values of assets under an assumption of long-term sustainable use of the ecosystem and those values might be considered sustainability-based values • Alternative valuation concepts may be applied whereby estimates of con- sumer surplus are included in the value of future flows of ecosystem ser- vices • When valuing individual ecosystem assets, there may be interest in deduct- ing the value of ecosystem disservices to the extent that those disservices are understood to have a negative overall effect on the value of the asset in terms of its contribution to society Complementary approaches to valuation 297 • When defining future income flows, alternative treatments and interpreta- tions of capital gains and depreciation (compared with standard national accounting principles) may be applied 12.51 In the context of these various assumptions and treatments for wealth account- ing, the values obtained from the ecosystem accounts can be considered one alterna- tive to asset valuation. In all contexts, it would be relevant to describe carefully the selected assumptions and treatments so that the differences between various wealth accounting estimates can be clearly understood. This documentation should also extend to including a clear articulation of the set of ecosystem services used to meas- ure natural capital in the wealth accounts, as well as information on, for example, the selected discount rate and asset lives. 12.3.7 Extended modelling/greened economy modelling 12.52 A general concern for all measures and aggregates in monetary terms when an extended income framing is used is that the values of the environmental variables reflect the current imperfect institutions and regulations for managing the environ- mental-economic system. In this context, one alternative approach is to undertake extended modelling to estimate an alternative GDP (and other income measures) under the assumption that alternative environmental constraints (e.g. restrictions on pollution) are in existence. Greened economy modelling thus derives a measure of income for an alternative economy rather than an alternative measure of income for the existing economy (SEEA 2003, sect. 11.F.4). 12.53 More generally, there are a range of possible applications of the accounts in scenario analysis, which are considered in a technical report Policy Scenario Analy- sis Using SEEA Ecosystem Accounting (United Nations, Department of Economic and Social Affairs, Statistics Division, and UNEP, 2021). 12.4 Corporate natural capital assessments 12.54 In parallel with the advances in environmental-economic accounting in the public sector, in recent years there have been strong advances in natural capital accounting in the corporate sector. In general, these approaches have tended to focus on considering the impact of corporate activities on the environment, with a particu- lar emphasis on GHG emissions and other pollutants, but there is an increasing shift towards efforts to understand dependencies on water and towards ecosystems and biodiversity.134 134 See https://seea.un.org/sites/ seea.un.org/files/background_ 12.55 This has been taken forward most commonly using an externalities-based paper_release_for_unseeafo- framing as described in the section above, particularly in the compilation of environ- rum.pdf. mental profit and loss accounts. These approaches have been used as well in a range of applications, which have included undertaking risk analysis, identifying operational efficiencies and securing access to sustainable finance. 135 See Eftec, RSPB and PwC 12.56 There are a number of approaches being used at the corporate level that reflect (2015); and the informa- the spatially based approach under the ecosystem accounting framework (e.g. cor- tion available at the British porate natural capital accounting, Biological Diversity Protocol, Natural Capital Standards Institute (BSI) Accounting for Organizations (United Kingdom)).135 However, there are also differ- website (www.bsigroup.com/ ences between these approaches and SEEA-based accounting. The differences arise en-GB/our-services/events/ webinars/2020/bs-8632/). The in particular with respect to the type of analytical questions posed. In a corporate Biological Diversity Protocol is context, those questions often reflect reporting requirements focused on business available at https://sustainable- impacts on society. Corporate approaches therefore tend to apply welfare-based rather flows.com/biological-diversity- than exchange value-based methods to valuation. There are also questions that arise protocol/. 298 System of Environmental-Economic Accounting – Ecosystem Accounting in this regard concerning the extent to which the data underpinning the compilation of SEEA-based accounts are sufficiently detailed for the purposes of corporate-scale measurement and analysis. 12.57 With respect to corporate sector engagement, and more broadly, given the potential for collating consistent and spatially detailed physical and monetary data using the ecosystem accounting approach, there is likely considerable potential for cross-fertilization of efforts in collating environmental data that support shared meas- urement of ecosystem extent and condition and ecosystem services flows. Shared measurement should encompass sharing of data, use of agreed classifications and application of coherent definitions. It is likely that issues of monetary valuation will continue to be an area of discussion, but this is equally true in the context of public sector accounting and analysis. Importantly, there needs to be further engagement regarding the development of accounting principles and their harmonization at the national and corporate levels, as well as regarding the potential for the development of rich data sets to underpin accounting at all scales. 299 Appendix A12.1 Exchange and welfare values in an accounting context A12.1 The present appendix provides a technical summary of the relationship between exchange value-based accounting and monetary values focused on the measurement of welfare. Monetary valuation of individual goods and services A12.2 To establish the concepts, the initial focus is on the valuation of a single mar- keted good and a single consumer and producer. The basis of monetary valuation in neoclassical economics is the assumption that people and businesses have preferences that can be represented in quantitative terms using money values as a common unit or numeraire. The preferences are based on individuals’ WTP for a given good or service or on individuals’, firms’ or resource owners’ WTA for giving up a good or service. 136 Economic theory distinguishes A12.3 The WTP for a good or service or the WTA for giving up a good or service can between the Hicksian and be represented by a demand curve for the good or service under consideration. In fig- Marshallian approaches to ure A12.1.1, quantities of the good are displayed along the horizontal axis and prices estimating demand curves, are displayed along the vertical axis. For most goods, an individual’s WTP decreases with the former approach with each additional unit obtained by that individual; or, conversely, the quantity aligning demand and prefer- demanded by an individual decreases as the price increases. Line AB is referred to as ence to the concept of utility and the latter aligning them to the individual’s demand curve because it illustrates the quantity demanded relative the concept of income. While, to price. The total WTP for quantity Q0 is represented by the area under the demand ideally, Hicksian demand curve. If the good or service was sold in a market at price P, the individual would pur- curves based on utility would chase quantity Q0, as that individual is willing to pay more than P for all quantity units be measured, in practice before Q0 but the WTP for an additional unit (Q0+1) is less than P, with the result that income is the more measura- the individual will not purchase another unit at that price. ble concept. Consumer surplus is thus an approximation to A12.4 In this case, the sum of money exchanged is represented by the yellow area the ideal. and is referred to as the accounting value, reflecting the value that is recorded in the accounts. The blue area represents the benefit that individuals who obtain the good or service enjoy over and above what is paid. This is called the consumer surplus (for further details on consumer surplus, WTP and WTA, see Markandya and others 137 For essential goods like water, (2002)).136 If the good is provided for free and there are no costs associated with sup- the consumer surplus can be plying the service, then the consumer surplus is equal to the whole area under the very high (arguably infinite) as demand curve (i.e. triangle AB0).137 a person´s WTP for the amount A12.5 To complete the picture of the market for a single good – again in terms of a needed for survival will be very large. (This state of affairs combination of prices and quantities – a supply curve (figure A12.1.2) can be incorpo- illustrates what is known as rated that reflects the preferences of the producer in providing the good for sale. Since the zero problem (Nordhaus, the producer will be willing to supply more of a good as prices rise, the supply curve will 2006).) This is one of the be upward sloping. The nature of the supply curve will be affected by the costs of supply, reasons why welfare analysis i.e. a producer will be willing to accept only a price for its goods that covers the costs. usually focuses on assessing changes in welfare, for exam- A12.6 The transactions in ordinary goods and services are based on prices, with ple, between q1 and q2 rather the price being determined by the point at which the marginal WTP is equal to the than between q1 and 0. 300 System of Environmental-Economic Accounting – Ecosystem Accounting Figure A12.1.1 WTP, exchange values and consumer surplus A W TP Price P 0 Q0 B Quantity marginal cost of producing the good or service. This is the point of intersection of the supply and demand curves, denoted in figure A12.1.2 by point A, which exhibits both the exchange price and the quantity of the good exchanged. Data concerning these transactions form the foundation of all SNA accounts. A12.7 Area Z reflects the costs of supply. The producer surplus (area Y) is the addi- tional benefit that a producer receives from selling quantity X0 at price P given costs Z. A12.8 The welfare value or total surplus, as understood in welfare economics, is equal to areas X + Y, i.e. the sum of consumer surplus and producer surplus. It repre- sents the total benefit accruing to consumers and producers in this one-good market from exchanging the quantity of the good at price P. If preferences, costs or incomes change, then the measured total surplus will change. Commonly, welfare analysis involves assessment of the change in total surplus that would arise within a different context, for example, as the result of a policy change (e.g. related to tax rates). A12.9 The relationships between areas X, Y and Z depend on the slopes of the sup- ply and demand curves. For example, if the demand curve is horizontal then the con- sumer surplus (X) will be zero and the total surplus will equal the producer surplus. If the supply curve is vertical, then costs (Z) will be zero and the accounting value will equal producer surplus (Y). While there are a range of different combinations that can be envisaged for the relationship between accounting values and total surplus, the nature of those combinations is not critical to the present discussion. A12.10 There are two key implications of figure A12.1.2 to be considered. The first concerns the link between price and accounting value. The price of a good is what is paid for it, and this needs to be multiplied by the quantity of the good to establish the accounting value. If there is no rationing involved, people will continue buying goods until their WTP equals the price at which the goods are offered. The price can there- fore also be referred to as the marginal value of the good. A similar logic can be applied reflecting the situation of the producer of the good, that is, the price reflects the good’s marginal cost to the producer. A12.11 Second, the discussion in the present section indicates that the welfare derived from a good or service is equal to the total WTP for that good or service, which includes the payment made and the consumer surplus. As is well understood in the Appendix A12.1: Exchange and welfare values in an accounting context 301 Figure A12.1.2 Static one-good market De ly m pp an Su d X A Price P Y Z (0,0) X0 Quantity national accounts literature, accounts do not include the consumer surplus but record accounting values instead. A link with welfare can nonetheless be posited because the price is also the marginal value of a unit, which is the welfare that that unit provides. Thus, a small increase in the availability of a good will generate a change in welfare approximately equal to the change in the accounting value. This insight is the basis of a formal proof in the literature demonstrating that variations in material well-being in society are reasonably well represented by changes in NDP (see Weitzman (1976)), which are measured as the change in GDP less any change in depreciation. A12.12 This conclusion depends on a restrictive set of assumptions. While the restrictiveness of those assumptions has been partially relaxed in subsequent studies (see Harberger (1971) for a previous, similar result and Löfgren (2010) for a survey of this literature and a discussion of the assumptions needed), the link between changes in GDP/NDP and changes in societal welfare still needs to be the subject of careful reflection. Of particular note is the fact that the result obtained assumes the absence of externalities and that all goods and services are provided through competitive mar- kets. Moreover, there are connections to wealth distribution and relative poverty that are important in determining individual well-being but that are not captured in aggre- gate measures. More broadly, making the connection between accounting values and well-being should include recognizing that accounting values reflect an instrumental perspective on value and that other value perspectives (introduced in sect. 2.4) should also be considered. A12.13 From an ecosystem accounting perspective, an important assumption associ- ated with Weitzman’s proof is that the products included in the income measure (i.e. GDP) all correlate positively with well-being. This in turn suggests the need for a focus on the scope of goods and services applied (i.e. the choice of production boundary) and on whether this scope includes some factors that have a negative link to well-being or whether there are goods and services that contribute positively to well-being that have been excluded. Indeed, one of the motivations for the development of ecosystem accounting is its potential for considering (a) some of the goods and services excluded from GDP; and (b) the effects of losing access to those goods and services as a result of ecosystem degradation. 302 System of Environmental-Economic Accounting – Ecosystem Accounting Extension to non-market values A12.14 The focus in the present appendix has been on supply and demand curves for a single consumer and producer. The demand curves for all individuals in a given market can be combined to construct a total demand or market demand curve. The summation is carried out horizontally in the case of a private good. Thus, for any given WTP, the quantity demanded by each individual based on that WTP is summed together to obtain the total quantity under the WTP for that good. For (quasi) public goods, such as recreation-related services, aggregate demand is obtained not through a horizontal summation (as in the case of private goods) but through a vertical one. That is, for any given quantity of a good, the WTP of each individual is summed together to obtain the total WTP. This applies to a situation where the supply is (relatively) inelastic. For example, in the case of a protected area supplying cultural services, it may take time to increase the supply of lodgings, parking or access roads in response to an increase in demand. A12.15 The average cost of producing a good or service is not directly related to its value to the consumer (for example, average cost will exclude measures of consumer surplus), although the more expensive it is to produce that good or service, the higher its price is likely to be, making the marginal value higher. In the SNA, a number of goods are valued at their cost of production because there is no market for them and hence no observed price. This is the case with public goods provided by the govern- ment and other authorities, such as defence or public health. However, the use of cost data in this context does not signify that levels of provision are unrelated to values: the link can be formed through the political process that determines the level of provision. Thus, a given level of spending on health, education or transport, for example, reflects society’s collective WTP for these services through taxes and user charges. That hav- ing been said, the relationship between public expenditure data and the true value of goods and services is subject to ongoing discussion. A12.16 A key characteristic of ecosystem services involves the frequent lack of an accompanying exchange of money that can be used to quantify the preferences for the services applying the same approach adopted for marketed goods, as described directly above. As a result (as discussed in chap. 9), to support the valuation of eco- system services and many other non-market goods and services, a wide range of valu- ation techniques have been developed for use in pricing ecosystem services in cases where market prices are not available. A12.17 While these techniques may commonly be applied to estimate changes in welfare values, they all involve the estimation of the marginal WTP for a good or ser- vice. Consequently, using the framing described above, these techniques can also be applied to estimating prices for accounting purposes, that is, an accounting value can be estimated by multiplying a marginal WTP by a revealed quantity exchanged. A12.18 An important issue related to understanding the potential to use marginal prices concerns assumptions regarding institutional arrangements or market struc- ture. Generally, with respect to ecosystem services, it is expected that prices will be estimated assuming that the current institutional arrangements are related to the transaction involving those services. Hence, prices used to estimate accounting values need not align with estimates of marginal WTP made utilizing theoretically preferred institutional arrangements or market structures, such as perfect competition. A12.19 Where there is a close connection of the ecosystem service to a marketed good or service, the potential to infer preferences and hence a marginal WTP will be relatively high. Further, in these cases, it is likely to be reasonable to assume that the institutional arrangements pertaining to the observed price of the related good or ser- Appendix A12.1: Exchange and welfare values in an accounting context 303 vice can be applied in estimating the marginal WTP (provided that the context (e.g. ecosystem type, location) is sufficiently similar). However, there are other situations where there is no close connection of the ecosystem service to a marketed good or service, in which case establishing preferences and determining the appropriate insti- tutional arrangements would be difficult. Different techniques have been developed to consider these different contexts, as discussed in chapter 9. 305 Chapter 13 Accounting for specific environmental themes 13.1 Introduction 13.1 The framing provided by ecosystem accounting is systematic and comprehen- sive with respect to ecosystem extent, ecosystem condition and ecosystem services and offers one perspective on monetary values of ecosystem services and ecosystem assets. Collectively, this data set allows for broad-scale measurement of trends in eco- systems and their services and supports the incorporation of ecosystem-related data into standard economic reporting and analysis. These applications emerge from the set of five ecosystem accounts, and the extended accounts and complementary valu- ations described in chapters 3 to 12. However, policy and analysis related to the envi- ronment and human connection to it can be framed in many ways. Often, it requires consideration of specific environmental themes, such as biodiversity, climate change, oceans and urban areas, among many others. 13.2 The present chapter introduces ways in which data from the ecosystem accounts, together with data from accounts of the SEEA Central Framework and the SNA, and data from other sources can be used to support discussion and analysis from a the- matic perspective, i.e. when considering specific themes. Use of accounts in this way is collectively referred to as thematic accounting. The benefit of thematic accounting is ensuring consistency with additional data sets that can then be used to underpin reporting and decision-making for a given theme. While securing this benefit may require additional spatial disaggregation of data (e.g. economic data) and the use of consistent classifications, these challenges are common in implementation of ecosys- tem accounting and SEEA generally. 13.3 Section 13.2 describes the general principles involved in combining accounts, including accounts of the SEEA Central Framework. Data from those accounts – for example, accounts for water and land138 – complement and support compilation of 138 This work is also comple- ecosystem accounts and thematic accounting. Sections 13.3 to 13.6 present examples mented by guidance from of four types of thematic accounting, for biodiversity, climate change, oceans and documents such as System of Environmental-Economic urban areas. Each of these themes has been of widespread policy interest. Using the Accounting for Water (SEEA- same general principles, thematic accounting may also be considered for other themes Water) (United Nations, 2012); such as protected areas, wetlands, mangroves and forests. System of Environmental- Economic Accounting for Agriculture, Forestry and 13.2 General principles of thematic accounting Fisheries (SEEA AFF ) (FAO and United Nations, 2020); and For- 13.4 All SEEA accounts build from the accounting principles described in the SNA. est Accounting Sourcebook: Much of the focus in thematic accounting is on the consistent approach to valuation Policy Applications and Basic concepts applied across these accounting frameworks. However, of greater importance Compilation (World Bank, in the organization and integration of data is the consistent application of rules and 2017). treatments concerning measurement boundaries and the use of consistent classifica- tions. Such rules and treatments allow accounts to be adapted to suit specific purposes 306 System of Environmental-Economic Accounting – Ecosystem Accounting and hence place relevant data in context. They further support the development of broad and coherent links with additional information systems for each theme. The present section describes the three types of rules and treatments that are of most rel- evance in thematic accounting. 13.5 First, there needs to be a clearly agreed geographical area. In ecosystem account- ing, it is referred to as the EAA. At a national level, this aligns closely with the SNA concept of economic territory. For thematic accounting, a focus on more targeted areas, (e.g. coastal and marine ecosystems in ocean accounting) may be appropriate. Delin- eating this area allows for the relevant set of ecosystem assets, economic units and other accounting entities to be appropriately delineated and also allows the measurement focus of the accounts to be clearly defined and aligned across different accounts. 13.6 Second, it is necessary to have a set of entities that are the focus of accounting. In ecosystem accounting, the focus is on ecosystems, in the SNA the focus is on eco- nomic units and in the SEEA Central Framework the focus is on individual stocks and flows. In thematic accounting, a number of different types of entities are inte- grated. Once the entities have been selected, it then becomes appropriate to choose relevant classifications. In ecosystem accounting, the relevant classifications concern ecosystem types and ecosystem services. In the SNA, the relevant classifications con- cern the classification of economic units by economic activity and institutional sector as well as the classification of products. In the Central Framework, the classifications are related to details of specific individual stocks and flows (e.g. land, soil, mineral and energy resources, and air pollutants). The selection of entities and their classi- fication enables accounts to be structured to organize and present the information relevant to the theme. 13.7 Third, in accounting for a single theme, multiple accounts are required. It is evident from the SEEA and SNA frameworks that multiple accounts are required to organize the relevant information, i.e. there is no single ecosystem account or eco- nomic account. The same consideration applies in thematic accounting. The number of accounts developed to support discussion of a given theme vary depending on the analytical questions to be addressed and data availability. While a number of accounts are required, each account has relevance and merit in its own right by reflecting rel- evant accounting principles. For example, asset accounts provide an opening and clos- ing position and a full description of changes in the relevant stock, and SUTs balance supply and use by entities. 13.8 Links between the various accounts for a theme are possible because of the use of a clearly delineated and consistently applied geographical boundary and consistent application of classifications for agreed entities. This allows the accounts for one theme to convey a coherent narrative. These features also allow for the derivation of consistent indicators and support the integration of data into models and other analytical tools. 13.9 For any given thematic accounting exercise, there is no a priori restriction on the geographical area, type of entity or classification that must be applied. However, it is likely to be advantageous to link the selection of geographical areas, defini- tion of entities and choice of classifications to existing data and decision-making processes. Thus, for example, a geographical scope that aligns with administra- tive boundaries may be most useful. This allows existing data to be more readily incorporated and, more importantly, facilitates the use of data from the accounts in decision-making. Further, common classifications that can be used for data from different sources (e.g. classifications of ecosystem types, economic units) would support (a) comparison of information across themes; and (b) improved and streamlined data collection and reuse. Accounting for specific environmental themes 307 13.10 Accounting principles are themselves equally applicable across different spatial scales and entities and are unaffected by the choice of classification. These choices should therefore be made with a focus on the use of the accounts, including the poten- tial to compare results over time and in different locations. 13.11 In practice, thematic accounting is most likely to be applied in one of the fol- lowing ways: • To extend or adapt an existing account from SEEA to provide additional detail or to use alternative classifications. For example, for the theme of forests it may be appropriate to compile adapted extent and condition accounts at the level of forest species and to make distinctions between dif- ferent types of land-use and management arrangements • To focus on a specific entity or group of entities and build associated accounts. For example, in accounting for the theme of climate change, the likely core focus would be on accounts for stocks and flows of carbon; and in accounting for the theme of biodiversity, it would likely be relevant to compile accounts for a target group of species or taxa • To focus on a type of area that has specific management and policy rel- evance. Examples include protected areas, urban areas and coastal and marine areas. Often, there is a link to specific ecosystem types but the framing of thematic accounting looks beyond the ecosystem accounts to consider the relevance of other SEEA and SNA accounts in supporting the design of a more comprehensive data set 13.12 Under each of these approaches, which may be combined, there remains a need to specify the relevant geographical area for the set of thematic accounts. Thus, the- matic accounts can be compiled at a national level, for large administrative regions within a country or at relatively detailed landscape and catchment scales. Further, for some themes (for example, climate change or assessment of environmental and eco- nomic outcomes on the high seas beyond national jurisdiction), compilation of global- scale accounts may be of relevance., Whatever geographical area and scale are chosen, accounting designs based on the principles of SEEA can be developed. 13.13 While the development of thematic accounting has emerged through the devel- opment of ecosystem accounts, there are many relevant accounts in the SEEA Central Framework that should be used in combination with ecosystem accounts to support accounting for any given theme. The relevant Central Framework accounts for the four themes selected for consideration in this chapter are described in the sections that fol- low. A more general introduction to the relevant Central Framework accounts is pro- vided in appendix A13.1. It is to be noted that, in some cases, the data from the Central Framework accounts provide input to the compilation of ecosystem accounts. For example, data from the water resources asset account and the carbon stock account can support the measurement of ecosystem service flows and the derivation of ecosys- tem condition indicators. 13.3 Accounting for biodiversity 13.3.1 Introduction 13.14 Biodiversity comprises three levels – ecosystems, species and genes – as reflected in the definition of biodiversity under the Convention on Biological Diversity. Accord- ing to that definition, biodiversity is “the variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and 308 System of Environmental-Economic Accounting – Ecosystem Accounting the ecological complexes of which they are part; this includes diversity within species, 139 See Convention on Biological between species and of ecosystems”.139 Diversity, article 2, entitled “Use of terms”, available at 13.15 The ecosystem accounts illustrate how accounting principles can be used to www.cbd.int/convention/ organize a wide range of data concerning ecosystems in a manner that supports an articles/?a=cbd-02. understanding of the connection between ecosystems and economic activity and human well-being. The present section describes the potential for using ecosystem accounts and other accounting data to support decision-making on biodiversity more broadly, with one particular aim being to mainstream the use of data on biodiversity in planning and decision-making. This use of accounting is referred to collectively as accounting for biodiversity. The ambition to support the mainstreaming of biodiver- sity into national policy and related decision-making is reflected in the IUCN World Conservation Congress resolution 057 (2020) entitled “Accounting for biodiversity: 140 See https://portals.iucn.org/ encompassing ecosystems, species and genetic diversity”.140 library/node/49196. 13.16 The purpose of accounting for biodiversity includes informing conservation actions and enhancing biodiversity as an environmental management objective in its own right, as well as facilitating discussion on securing ecosystem services supply and on the various policy responses that may be relevant, such as biodiversity finance. Accounting for biodiversity recognizes the definition of biodiversity under the Con- vention on Biological Diversity, the different components of biodiversity and the links between economic activity and changes in biodiversity. 13.17 This section summarizes the connections between biodiversity assessments and SEEA EA; describes one particular type of accounts, namely, species accounts, which complement the suite of ecosystem accounts; notes the relevance of measures concerning the genetic level of biodiversity; and lists the types of accounts that are relevant in accounting for biodiversity. The present discussion reflects the current state of play in accounting for biodiversity, recognizing that a broader and richer discussion is required on the coverage and application of accounting in relation to biodiversity. A future output of these discussions may be an SEEA for biodiversity. 13.3.2 Biodiversity assessments and SEEA EA 13.18 There is a wide array of primary data on ecosystems, species and genes that is used to support the measurement and assessment of biodiversity. The focus of biodi- versity assessments may be regional, national or global in scale or may consider indi- vidual species or ecosystem types. Work on assessing biodiversity is the focus of a range of global and national measurement initiatives and assessment frameworks, including the IUCN Red List of Threatened Species, the IUCN Red List of Ecosystems and the IUCN Global Standard for the Identification of Key Biodiversity Areas; the IPBES; the Biodiversity Indicators Partnership; and the Global Biodiversity Information Facility. The GEO BON approach to essential biodiversity variables, while not itself providing assessments or data, does provide an organizing framework for primary data. 13.19 Given this rich and long-standing body of information, accounting for bio- diversity is not intended to replace or duplicate existing initiatives in biodiversity assessment or to generate indicators of diversity at ecosystem, species or genetic levels. Further, there is no single “biodiversity account”. 13.20 In addition to these assessment frameworks, there are global monitoring initia- tives, principally under the Convention on Biological Diversity and the 2030 Agenda for Sustainable Development. The Kunming-Montreal Global Biodiversity Framework, for example, has five pillars. These represent the three levels of biodiversity – compris- ing ecosystems, species and genetic material – that are embodied in the Convention definition of biodiversity, and two levels of interactions with people and the economy, Accounting for specific environmental themes 309 through ecosystem services and biodiversity finance. Data and methods related to all of these pillars are relevant in supporting a complete monitoring of and support for biodiversity-related policy- and decision-making. 13.21 There are three main connections between SEEA EA and biodiversity assess- ment and monitoring frameworks. First, data collected for use in biodiversity assess- ments can also support the compilation of ecosystem condition accounts and may provide input to the measurement of ecosystem services. For example, data on species abundance and diversity for specific ecosystem types can support measurement of the composition, structure and function of those ecosystems. 13.22 Second, data from various SEEA EA accounts may constitute an input to these assessment frameworks and global monitoring initiatives (e.g. under the Convention on Biological Diversity) where the focus is on measures pertaining to ecosystems. For example, where data are needed concerning ecosystem extent, ecosystem condition or ecosystem services flows, output data from the ecosystem accounts can provide a relevant source of information. 13.23 Third, data from the ecosystem accounts particularly concerning ecosystem services and data from the SEEA Central Framework concerning environmental pro- tection expenditure and environmental taxes and subsidies can support discussion of the interactions between biodiversity, people and the economy. 13.24 The use of data from the ecosystem accounts for use in the monitoring of biodiversity does not imply that the accounts provide direct measures of ecosystem diversity. Rather, information on ecosystem extent and condition can be used to support an understanding of the status of and trends in biodiversity. The poten- tial of ecosystem accounts data to support the derivation of measures of ecosys- tem diversity is an area for research in the context of advancing accounting for biodiversity. 13.25 Given these various connections, advancing accounting for biodiversity requires developing coherence with existing national biodiversity objectives and associated international commitments. This being the case, ministries responsible for the development of national biodiversity strategies and action plans, multilateral environmental agreements and similar policies that deliver on various national and global biodiversity objectives, including commitments under the Convention on Bio- logical Diversity, should be involved at an early stage in work in the area of account- ing for biodiversity. 13.3.3 Accounting for species 13.26 Environmental-economic accounting has the potential to create a structured link between the environment and economic activity and human well-being. Con- sequently, it is relevant to consider the links between selected species and economic activity and human well-being. This motivation can advance the compilation of spe- cies accounts to support decision-making. 13.27 Species accounts measure changes in (a) species “status” in terms of extinc- tion risk over an accounting period; (b) species stocks (e.g. in terms of presence or abundance); and (c) species distribution.141 All species accounts have the same general 141 Species assemblages are a structure, comprising an opening and a closing entry and changes over the account- defining characteristic of eco- ing period. While data within a species account do not generate a measure of species systems and there is also a rela- tionship between species and diversity directly, those data may support the assessment of species diversity and may ecosystem extent accounts. provide input for indicators of species diversity. 310 System of Environmental-Economic Accounting – Ecosystem Accounting 13.28 For each type of account, species are selected as the focus of accounting. Four high-level groups for species accounting can be identified: (a) species of concern (e.g. threatened species); (b) species important for ecosystem services; (c) species of social or cultural significance; and (d) species important for maintaining ecosystem condi- tion (or functioning). A species account may focus on a single species within these groups or a selection of species or taxa relevant to the accounting’s purpose. 13.29 The rationale for accounting for the abundance and/or persistence of the spe- cies important for ecosystem services is well established in the context of provisioning services (as related, for example, to harvest of fish and timber) as attested in SEEA AFF (FAO and United Nations, 2020). For species to be harvested on a sustainable basis, their stocks need to be quantified and assessed in the context of supply and use of the services. Commercial fishery species are a relevant example here. There are also some regulating services where recording the stocks of particular species groups is impor- tant for understanding the sustainability of ecosystem services supply. Populations of pollinator species constitute an important example in this regard. 13.30 Species accounts may also organize data to support measurement of some cul- tural ecosystem services, for example, data on services involving relationships with sacred plants, iconic animals or other species linked to spiritual and symbolic services. Species accounts can also provide useful data on elements of biodiversity to whose existence people assign non-use value or bequest values (recorded using the label “eco- system and species appreciation”). 13.31 The compilation of species accounts is commonly based on existing data and monitoring programmes. Of particular note is the IUCN Red List of Threatened Spe- cies, which is underpinned by a comprehensive set of data on species for which Red List assessments have been undertaken. More generally, two approaches to measurement can be described, both of which are used in Red List assessments. The “direct observa- tion” approach may be informed by large sample surveys (such as national surveys), stock assessments for commercially valuable species or more focused efforts (e.g. cen- suses of protected areas and nature reserves). Where sampling densities are sufficient and spatially referenced, species accounts can be aligned to ecosystem types and, poten- tially, ecosystem assets and integrated with information in the ecosystem accounts. 13.32 Where direct observation data on species are limited, as is typically the case, inferred approaches may be used. One particular habitat-based inferred approach uses observations of changes in spatial extent (expressed in terms of area) and changes in configuration of habitat required by individual species or communities of spe- cies (UNEP-WCMC, 2016). Inferred approaches underlie a large proportion of Red List assessments. More sophisticated measures can also be applied to estimate spe- cies persistence or proportions of species expected to be retained in communities. Data compiled for ecosystem extent and condition accounts represent a potentially valuable source of information for assessing the spatial configuration and condition of remaining habitat for species. In this way, the relationship can be made explicit between changes in ecosystem extent and ecosystem condition and changes in the suitable habitat available for individual species or in species extinction risk. 13.33 The general structure for a species account is shown in table 13.1. The structure, which reflects that of a typical asset account, is similar to the ecosystem extent account. The scale at which the species account is compiled is flexible. However, in practice, it is likely that species accounts will be compiled at the scale of EAAs, either in aggregate or by ecosystem type. The columns in table 13.1 organize information on selected spe- cies (e.g. lions, elephants) or species groups (e.g. taxa, functional groups such as pol- linators). An opening measure and a closing measure for each column is recorded for the accounting period. Where possible, additions and reductions to those measures, Accounting for specific environmental themes 311 whether due to unmanaged or managed changes, are also recorded. Additions could be due, for example, to species population growth, reintroductions or translocations. 13.34 A range of species accounts have been developed following the general prin- ciples outlined here, including accounts for cycads and rhinoceros in South Africa (Statistics South Africa, 2021a; 2021b), accounts for butterflies in the Australian Capital Territory; and species accounts in the Kingdom of the Netherlands (Bogaart and others, 2020). 13.35 There are a range of possible species accounts and associated extensions and species accounts can be linked to other accounting data through the use of aligned geographical boundaries, classifications and accounting treatments. Species accounts can therefore readily complement that other information, especially concerning eco- nomic activity and human well-being, in accounting for biodiversity. 13.3.4 Accounting for habitats and spatial scale 13.36 As noted above, a common approach to the assessment of species in the absence of data on individual populations is to use data on the area and spatial configuration of the habitat for species. Given that a relationship exists between habitat and eco- system types, there is the potential to use data on ecosystem extent and ecosystem condition from the ecosystem accounts to support the derivation of habitat-based information both for individual species and in the context of assessing multi-species diversity. Examples of this type of work include accounting for chimpanzees and shea trees in Uganda (UNEP-WCMC and IDEEA, 2017) and accounting for multi-species plant, vertebrate and invertebrate diversity in the San Martin region of Peru (Alam and others, 2016). Further examination of the potential connection between SEEA EA 142 The background paper, enti- and habitat-based biodiversity assessment constitutes one area of research in account- tled “Addressing spatial scale ing for biodiversity. A background paper, already cited above, that discusses relevant in deriving and aggregating issues in this regard, in particular with respect to spatial scale in deriving and aggre- biodiversity metrics for ecosys- tem accounting”, is available at gating biodiversity metrics, provides an appropriate framing for this area of research https://seea.un.org/content/ (Larsen and others, 2021).142 accounting-biodiversity. Table 13.1 Species account for an EAA Species or species Species or species Species or species Species or species Species or species Species or species Species or species Species or species Species or species Species or species group 10 group 1 group 2 group 3 group 4 group 5 group 6 group 7 group 8 group 9 Measurement unit Opening measure Additions Unmanaged Managed Reductions Unmanaged Managed Net change Closing measure 312 System of Environmental-Economic Accounting – Ecosystem Accounting 13.37 In deriving complex measures of multi-species diversity, data on the abundance and trends of a selected species in individual locations are relevant, but for measuring species diversity it is also useful to understand species assemblages, i.e. where different local populations of multiple species exist and how they are connected to other local populations and to different ecosystem types. Different species and species assemblages perform different functional roles and have varying degrees of resilience to different pressures. Thus, understanding the complementarity of species assemblages must be recognized as a key long-term goal if ambitions for establishing resilient multifunc- tional landscapes are to be realized. This includes the maintenance of capacity for future ecosystem services delivery at landscape (rather than ecosystem asset) scale. 13.38 These types of considerations of spatial scale in providing such complex meas- ures of multi-species diversity are beyond the scope of ecosystem extent and condition accounts directly. In particular, since the focus of ecosystem accounts is on accounting for individual ecosystem assets, the information set would not capture to any degree the effects of spatial variation and complementarity in species composition across whole regions (i.e. beta and gamma diversity) or the effects of spatial configuration of habitat (e.g. connectivity) on biodiversity persistence. These aspects of biodiversity may be considered in accounting for biodiversity. An introduction to concepts and methods relevant to the relationship between ecosystem accounts and issues of spatial scale in the measurement of biodiversity is provided in the technical note by Larsen and others (2021) cited in paragraph 13.36. 13.3.5 Accounting for the genetic level of biodiversity 13.39 Genetic diversity concerns the variety of genes between and within species populations. Genetic diversity within species populations is linked to the condition of those populations. As meta-populations become fragmented and individual popu- lations become isolated, exchanges of genetic material within species are restricted. 143 Phylogenetic diversity reflects Further, as identified by IPBES, maintaining phylogenetic diversity143 is important for genetic differences between maintaining options concerning genetic diversity overall (i.e. gene pools). Maintaining species with different evolu- gene pools is also important for various commercial activities – for example, for the tionary histories. further development of crops or livestock that are well adapted to respond to differ- ent and changing conditions (e.g. climate change) – and with respect to biosafety and biosecurity. There are also option values linked to gene pools associated with future medical applications or other biomimicry technologies and their development. 13.40 The basic framing of a species account shown in table 13.1 could be adapted to support discussion of these issues by recording, for example, the extinction risk of phylogenetically diverse species or species groups. In addition, if the results can be presented with appropriate spatial detail, species accounts could be used to help to track translocations of selected species where meta-populations become isolated (e.g. transfers of iconic species between protected areas). 13.41 While recognizing the importance of genes and their diversity in underpin- ning ecosystem function and the flow of ecosystem services, there have not yet been advances in the development of accounts for the genetic level of biodiversity. However, as data on genetic material for selected species become more widely available, the use of accounting to frame the connection of genetic biodiversity to economic and human activity and well-being may be of relevance. Accounting for specific environmental themes 313 13.3.6 Using accounting data to support decision-making on biodiversity 13.42 SEEA EA supports discussion of the link between biodiversity and economic activity and human well-being by providing a description of the relationships between ecosystems, the species that compose them and the SNA and non-SNA benefits that ecosystems provide. Description of these relationships can be complemented by data from the SEEA Central Framework, where the focus is on tangible material and finan- cial flows about the environment and the economy (e.g. provisioning ecosystem ser- vices, pollutant emissions, environmental protection expenditure). Data on economic activity related to specific locations of interest may also be integrated using national accounting principles. Accordingly, across the suite of SEEA EA accounts, many aggre- gates and indicators are relevant to biodiversity at the ecosystem level, as well as to biodiversity at levels other than that of ecosystems. A non-exhaustive set of relevant indicators and aggregates are summarized in table 13.2. 13.43 Assuming that these various accounts can be compiled using aligned geo- graphical areas, classifications and accounting treatments, a wide variety of cross- cutting indicators and analyses can be derived from a coherent information set. For example, relationships between expenditure on biodiversity and changes in ecosystem condition might be analysed and changes in condition in relation to changes in land use and emissions might be assessed. 13.44 Accounts showing the extent of ecologically important areas that support sig- nificant biodiversity also provide useful information that can supplement the infor- mation presented in table 13.1. Such areas include those determined by, for example, policy designations (e.g. wetlands designated pursuant to the Convention on Wetlands of International Importance especially as Waterfowl Habitat (Ramsar Convention) or the areas established pursuant to Council of the European Union directive 92/43/EEC of 21 May 1992 (Habitats directive)); scientific determinations (e.g. Key Biodiversity Areas (KBAs) identified under the IUCN Global Standard, including Alliance for Zero Extinction sites); broad-scale regional prioritizations (e.g. of biodiversity hotspots identified by Conservation International); and national and subnational government prioritizations and regulations. Similarly, compiling accounts showing the extent of important ecosystems for biodiversity within and surrounding protected areas is a rel- atively straightforward step in identifying where biodiversity is most at risk and where the risk of biodiversity loss should be managed. Ecosystem condition accounts record changes in several biodiversity-related indicators that can also be used to understand trends in biodiversity. 13.45 The physical and monetary values presented in ecosystem services flow accounts can reveal to decision makers the importance of species and their diversity, particu- larly in relation to provisioning services,144 and of ecosystems to economic activity (e.g. 144 See, for example, FAO (2019). tourism) and well-being. Data on ecosystem services may therefore support the case for investment in biodiversity conservation and restoration. Publicly available infor- mation on the multiple ways in which ecosystems support well-being can inform more holistic planning approaches. Encouragement of nature-based solutions, which, for example, benefit multiple sectors can lead to delivery of better social outcomes and achievement of conservation objectives. 13.46 One approach to the presentation of these different types of data is to use com- bined presentations following the principles outlined in the SEEA Central Framework. Such presentations provide a means of bringing together information from various accounts to describe connections between the different components of biodiversity and 314 System of Environmental-Economic Accounting – Ecosystem Accounting wider economic and social statistics. In this way, those presentations can be a useful tool for mainstreaming discussion of biodiversity. In particular, detailing trends related to extent and condition of ecosystems of high biodiversity value and their economic con- text can assist in promoting informed decision-making for biodiversity conservation. For example, it may be useful to present the opportunity costs of conserving mangrove forests and their biodiversity in terms of the forgone income from establishing shrimp farms in those forests’ locations. Through these initiatives, multiple stakeholders in the domain of biodiversity can be mobilized and more cost-efficient solutions for delivering on economic and environmental objectives can be realized. Table 13.2 Linking SEEA accounts to biodiversity at levels other than that of ecosystems Framework Account Aggregate Relevance SEEA EA Extent Extent of Trends in the extent of ecosystems important for biodi- ecosystems versity can be used to infer implications for species and species loss. a They also provide an insight into habitat loss, a key driver of biodiversity loss SEEA EA Condition Biotic characteristics These characteristics can be used to distinguish ecosystem assets in which biodiversity is more intact, for example, to identify areas of grassland with high values for species-based indicators or patches of forest with “good” structural characteristics. They can also provide information on where biodiversity is threat- ened, based on trends of poor condition (e.g. invasive species abundance) SEEA EA Condition Abiotic These characteristics can track where pressures on bio- characteristics diversity may be manifesting themselves (e.g. where pollutant concentrations are increasing). They can help to highlight and quantify potential relationships between ecosystem degradation and species loss, in- cluding through the use of habitat-based biodiversity assessment techniques SEEA EA Services Physical supply Aggregates for provisioning services can identify and use where overexploitation of individual species is occur- ring (e.g. where sustainable yields are being exceeded). This can also include illegal use, such as poaching, where sustainable yield may be zero SEEA Central Land use and Areas of biodiversity Data on land use, land-use change and land cover al- Framework land cover impacting or en- low information on spatial biodiversity loss to be linked hancing activities to different sectors and economic activities SEEA Central Emissions Spatially disag- Emission flows can identify where pollutant pressures Framework gregated emission on biodiversity are likely to manifest themselves. These flows insights are enhanced by (potential) linkage to spatially disaggregated accounts SEEA Central Environmental Expenditure Where these financial transactions can be linked to Framework protection on biodiversity changes in ecosystem and species status or indica- expenditure conservation and tors of biodiversity at scale, they can have significant enhancement policy implications. In particular, they can be useful for understanding the ecological and economic benefits from public and private expenditure on the environ- ment and biodiversity SNA Production and Monetary transac- A number of monetary aggregates relevant to bio- consumption tions involving diversity exist in the SNA (e.g. provisioning services, biodiversity- related wildlife tourism, recreational activities in nature). These goods and services aggregates can be linked to the elements of biodiver- a  Even without ongoing species sity supporting their supply through SEEA EA. They can monitoring, the species-area also inform consideration of the opportunity costs for curve can reasonably estimate biodiversity conservation (e.g. revenues forgone) and species loss based only on monetary trade-offs/opportunity costs associated with different management approaches for biodiversity change in ecosystem extent. Accounting for specific environmental themes 315 13.47 Some aspects of biodiversity that are essential for development to proceed in balance with nature may not be well reflected in ecosystem services flow accounts. In general terms, those aspects concern the role that biodiversity plays in supporting the supply of ecosystem services, as discussed in section 6.3.3. Two particular aspects are related to insurance and option values. 13.48 Further, as noted in chapter 6, society places significant value on the continued existence of biodiversity for spiritual or religious reasons or reasons related to non-use values, including existence and bequest values. Thus, biophysical indicators need to be used to reflect changes in the elements of biodiversity relevant to these types of values (e.g. extent of natural ecosystems, recorded non-use flows concerning ecosystems and species appreciation). Indicators from the species accounts are also highly relevant. 13.4 Accounting for climate change 13.4.1 Introduction 13.49 Climate change is one of the major global challenges of our time. Ecosystem accounting can provide data through which to understand the key role that ecosys- tems play in GHG cycling on global, national and regional scales, which underpins the atmosphere’s carbon concentration. In addition, data from the ecosystem accounts can help to facilitate an understanding of the impact that climate change is having on ecosystems and biodiversity. This connection among ecosystems, climate change and biodiversity and the need to consider them jointly is recognized in decision 1/CP.25, entitled “Chile Madrid Time for Action”, adopted by the Conference of the Parties to the United Nations Framework Convention on Climate Change at its twenty- fifth session, held in Madrid from 2 to 15 December 2019, in which the Conference of the Parties underlined “the essential contribution of nature to addressing climate change and its impacts and the need to address biodiversity loss and climate change in an integrated manner” (para. 15).145 As an integrated statistical framework SEEA 145 See FCCC/CP/2019/13/Add.1, can therefore play an important role in supporting international and national policy available at https://unfccc.int/ discussions related to climate change. Furthermore, it can provide the underlying data sites/default/files/resource/ cp2019_13a01E.pdf. that link climate change to other environmental topics, for example, biodiversity and the circular economy. 13.50 SEEA EA accounts in combination with accounts from the SEEA Central Framework and the SNA can support various facets of climate change policy. These include carbon mitigation and adaptation policies, carbon markets and financing mechanisms, carbon stock assessment and management, linking of air emissions and economic activity, recording and modelling of climate change outcomes related to ecosystems, ecosystem services and economic activity, sector-based assessments (e.g. for agriculture), ecosystem-focused planning (e.g. for peatlands), co-benefits of carbon projects and policies, and impacts of mitigation responses. 13.51 Thematic accounting for climate change complements existing measurement approaches described in the Intergovernmental Panel on Climate Change (IPCC) Guidelines for National Greenhouse Gas Inventories (2006) in the following two ways. First, carbon emissions from terrestrial ecosystems result from two processes: human activities (management) and environmental change but the IPCC guidelines for GHG accounting have been developed to account for net emissions due to human activities, whereas SEEA EA is more comprehensive and includes both managed and unman- aged areas. Second, SEEA allows connection with economic activities to be made. 13.52 The present section introduces the subject of how accounting can provide information that supports decision-making related to climate change. Three areas are 316 System of Environmental-Economic Accounting – Ecosystem Accounting considered: (a) potential of data from the ecosystem accounts to inform decision-mak- ing; (b) accounting for stocks and changes in stocks of carbon; and (c) other account- ing connections and indicators. As for thematic accounting generally, the aim in this section is to introduce a range of connections that offer insight into the potential of accounting approaches. 13.4.2 Applying SEEA EA to inform climate policies 13.53 Several of the ecosystem accounts provide data that support monitoring and analysis of climate change policies. In general, this connection emerges because of the impact exerted by climate change on the extent and condition of ecosystem assets and flows of ecosystem services. That is, the ecosystem accounts are a framework for recording a range of climate change effects on the environment and exhibiting the links to economic and other human activity. Use of a common framework for record- ing those effects makes comparison of the effectiveness of different policies aimed at mitigation or adaptation to climate change a straightforward undertaking. 13.54 The extent account shows the managed and unmanaged conversions in ecosys- tem types that directly underpin changes in carbon removal by and carbon emission from ecosystems. Data from extent accounts can therefore be linked to the assess- ment of GHG emissions arising from land use, land-use change and forestry LULUCF as used in IPCC measurements. The link between accounting and land LULUCF is described in detail in SEEA AFF. 13.55 The condition account includes ecosystem characteristics and indicators that are highly relevant for climate change. Relevant physical state characteristics that are related to carbon stored in ecosystems include soil organic carbon and dry matter pro- ductivity. Carbon stock indicators for biomass provide a direct link to the carbon stock account described below. Condition indicators should also capture the local impacts of climate change on ecosystem condition. The effects, for example, on local tempera- tures and rainfall patterns will be relevant in assessing condition in some contexts. It should be noted, however, that ecosystem accounts do not incorporate direct meas- urement of climate per se, in terms of, for example, data on atmospheric and ocean concentrations of GHGs or comprehensive data on temperatures and rainfall. 13.56 The reference list of selected ecosystem services (table 6.3) includes several ecosystem services that are particularly relevant for climate change policies. Global climate regulation services are ecosystem contributions to the regulation of the con- centrations of gases in the atmosphere that exert an impact on global climate, primar- ily through the sequestration and retention of carbon in ecosystems. The physical and monetary ecosystem services flow accounts (chaps. 6, 7 and 9) show which ecosys- tem types play an important role in carbon sequestration and retention and how they change over time. Physical data on carbon retention and sequestration by ecosystem type are embodied in the carbon stock account described below. 13.57 Furthermore, there are several regulating ecosystem services that mitigate the effects of climate change. Local climate regulation services are the ecosystem contri- butions to the regulation of ambient atmospheric conditions. Examples include the evaporative cooling provided by urban trees and the contribution of trees to providing shade for livestock. Rainfall pattern regulation services are the ecosystem contribu- tions of vegetation at the subcontinental scale, in particular forests, in maintaining rainfall patterns through evapotranspiration. Flood mitigation services, including both tidal surge and river flood mitigation, are the ecosystem contributions that miti- gate the impacts of floods on local communities. Storm mitigation services are the ecosystem contributions of vegetation, especially linear elements in the landscape, to Accounting for specific environmental themes 317 mitigating the impacts of windstorms, sandstorms and other types of storms (other than water-related events) on local communities. The accounts indicate not only what ecosystem types are the main contributors to reducing the effects of climate change but also who are the main beneficiaries of these ecosystem services. 13.58 Finally, flows of several ecosystem services, including provisioning and cul- tural services (e.g. water supply, biomass provision and recreation-related services) are impacted by climate change, although isolating the precise contribution of climate change to the flows of ecosystem services is not an ambition of the accounts. 13.4.3 Accounting for carbon 13.59 Carbon has a central place in ecosystem and other environmental processes and hence accounting for carbon stocks and transfers between them is an important aspect of environmental-economic accounting. The carbon stock account provides comprehensive coverage of all relevant carbon stocks and changes in stocks across all stores of carbon at a national or subnational level covering both managed and unman- aged areas. 13.60 The fact that carbon plays an extensive role in the environment and the econ- omy calls for a comprehensive approach to its measurement. Accounting for carbon must therefore consider stocks and changes in stocks of carbon in the geosphere, the biosphere, the atmosphere, the oceans and the economy. Figure 13.1 presents the main components of the carbon cycle. It is these stocks and flows that provide the context for carbon accounting. The same principles can be applied to accounting for other GHGs, including NOx. Figure 13.1 Main components of the carbon cycle Exchange of CO2 between biosphere and oceans (e.g. Oceans absorption of carbon in CO2 dissolved water by phytoplankton) in oceans Biosphere Atmosphere Carbon in soil Photosynthesis (organic and inorganic), Carbon in various plants, animals and other gases (e.g. CO2) life forms (living Respiration, decomposition and dead) and combustion Fugitive emissions (e.g. from mining, Extractions of carbon Returns of carbon dissolving limestone) (e.g. peat, timber, (e.g. waste food and natural emissions wood, bre) and timber) (e.g. from volcanic Emissions (e.g. from activity) combustion of fossil fuel and biomass) Geosphere Accumulation Carbon in oil, gas, in the economy coal, limestone, dolomite, other carbon-bearing rocks, Carbon in products, methane clathrates and xed assets and marine sediments Extractions of carbon consumer durables (e.g. oil, gas and coal) 318 System of Environmental-Economic Accounting – Ecosystem Accounting 13.61 The structure of a carbon stock account is presented in table 13.3. It provides a complete and ecologically grounded articulation of carbon accounting based on the carbon cycle and, in particular, the differences in the nature of particular carbon res- ervoirs. Opening and closing stocks of carbon are recorded, with the various changes between the beginning and end of the accounting period recorded as either additions to or reductions in the stock. A more detailed description of the carbon account is provided in appendix A13.2. 13.62 Carbon stocks are disaggregated into geocarbon (carbon stored in the geo- sphere), biocarbon (carbon stored in the biosphere, in living and dead biomass), carbon in the oceans (carbon dissolved in seawater (carbon in sediments is part of biocarbon or geocarbon)), carbon in the atmosphere and carbon accumulated in the economy. 13.63 The row entries in the account follow the basic form of the asset account in the SEEA Central Framework: opening stock, additions, reductions and closing stock. Additions to and reductions in stock can be attributed between managed and unman- aged expansion and contraction. The net carbon balance equals addition to stock less reductions in stock. 13.64 All values in the carbon stock account should be in equivalent carbon weights (e.g. ton carbon). Accordingly, methane (CH4) and carbon dioxide (CO2) emissions should be expressed in ton carbon, not in actual mass of CH4 and CO2. Similarly, for products such as recycled plastic or paper, the equivalent carbon content should be determined using the average composition of these materials to determine the carbon content. For emissions to the atmosphere, a bridge table may be compiled both in ton carbon and in CO2 equivalents, as the latter are linked to the SEEA Central Frame- work air emission accounts. 13.65 The carbon stock account complements other SEEA accounts. Although broader in coverage through its inclusion of carbon stocks beyond ecosystems, carbon stock accounts are closely linked to SEEA EA accounts. Carbon accounts can provide information to support measures of the ecosystem services of carbon sequestration and carbon retention and are closely linked to accounts of the SEEA Central Frame- work (e.g. for physical assets of fossil fuels and minerals, carbon emissions to air, phys- ical product flows to and from the rest of the world). SEEA AFF provides a detailed description of the links between these economic activities and emissions of carbon, with a particular focus on the effects of emissions related to land, land-use change and forestry. 13.66 The measurement of stocks and flows of carbon can support discussion of many policy-relevant issues. These issues include analysis of GHG emissions, sources of energy, deforestation and land-use change, loss of productivity and biomass, and sources and sinks of carbon emissions. For example, carbon stock accounts can com- plement the existing flow inventories developed under the United Nations Framework Convention on Climate Change, including the Paris Agreement adopted under the Convention. Since carbon is also a common focus of policy response (as reflected in, for example, carbon taxes), its direct measurement is of high relevance. 13.67 Further, carbon stock accounts can provide consistent and comparable infor- mation for policies aimed at, for example, protecting and restoring natural ecosys- tems, that is, maintaining carbon stocks in the biosphere. Combined with measures of carbon carrying capacity and land-use history, biosphere carbon stock accounts can be used to: • Record the depletion of carbon stocks and the resulting CO2 emissions due to conversion of natural ecosystems to other land uses Accounting for specific environmental themes 319 • Prioritize use of land for restoration of biological carbon stocks through reforestation, afforestation, revegetation ecosystem restoration and improved land management, taking into account differing trade-offs in respect of ecosystem services, biodiversity, food, fibre and wood production • Identify land uses that result in carbon removal or retention Table 13.3 Carbon stock account structure Carbon Carbon in the Carbon in in the Geocarbon Biocarbon economy the oceans atmosphere Limestone and marl Fixed assets, con- Freshwaters and saline wetlands sumer durables Inventories Terrestrial Marine Waste Other Total Total Coal Gas Oil Total Opening stock Additions to stock Unmanaged expansion Managed expansion Discoveries Reclassifications Imports Reductions in stock Unmanaged contraction Managed contraction Reclassifications Exports Catastrophic losses Net carbon balance Closing stock 13.4.4 Other climate change-related accounts and indicators 13.68 Besides ecosystem accounts and carbon stock accounts, both of which provide relevant information, there are two other types of accounts that should be highlighted. The SEEA Central Framework air emission account records the generation of air emis- sions by resident economic units by type of substance. These include the GHGs, CO2, CH4 and N2O, and the fluorinated gases (F-gases). All emissions by establishments and households as a result of production, consumption and accumulation processes are included. 13.69 GHG emissions from economic activities, as recorded in SEEA, differ from the total emissions on a national territory or the emissions calculated according to the compilation guidelines of IPCC. This is because different concepts and calcula- tion methods underlie the different emissions data. For instance, SEEA air emission accounts include emissions due to international transport based on the residence of the 146 See, for example, tables 5.2.1 economic units involved. Bridge tables provide insight into the relationships between and 5.2.2 in Lof and others the different emission concepts.146 (2017). 320 System of Environmental-Economic Accounting – Ecosystem Accounting 13.70 As included in the scope of the SEEA Central Framework, air emission accounts are emissions from cultivated livestock resulting from digestion (primarily of meth- ane) and emissions from soil as a consequence of cultivation and other land-use prac- tices that affect soils or other soil disturbances such as those caused by construction or land clearance. Emissions stemming from natural processes such as unintended forest and grassland fires, emissions from peatland and emissions from human metabolic processes are excluded. However, emissions from these sources are included in the carbon stock accounts. 13.71 In order to permit effective linking of physical flow data to monetary data, the physical flows of emissions are classified using the same activity and industry clas- sifications used in the SNA. The emissions recorded for CO2 and CH4 in the SEEA Central Framework air emission account are directly linked to the removal (managed expansion) of carbon from the atmosphere and the emission (managed contraction) of carbon by the economy as recorded in the carbon stock account. 13.72 The SEEA Central Framework environmental activity accounts record transac- tions in monetary terms between economic units that may be considered environmen- tal. Generally, these transactions concern activity undertaken to preserve and protect the environment. Transactions in environmental activity accounts are classified under the Classification of Environmental Activities (Central Framework, annex I, sect. A). Two classes are particularly relevant for climate change: Environmental protection (1: Protection of ambient air and climate), which includes activities aimed at the con- trol of emissions of GHGs; and Resource management (10: Management of mineral and energy resources), which includes activities related to energy saving and renewa- ble energy production. Using data on these classes from the accounts supports analysis of the mitigation costs for climate change and the economic benefits that result from the energy transition with regard to labour and the contribution to GDP. 13.73 In addition, there are a range of transactions, as related, for example, to taxes and subsidies, that reflect efforts by Governments, on behalf of society, to influence the behaviour of producers and consumers with respect to the environment. Payments and financial transactions related to carbon taxes and emission permits are recorded in the SNA. 13.74 There is a wide range of indicators concerning climate change that may be derived from the various SEEA accounts. Examples include indicators of energy and emission intensity, indicators concerning carbon taxes and emission permits and indicators of expenditure on climate change-related responses. System of Environ- mental-Economic Accounting 2012 – Applications and Extensions (United Nations, European Commission, Food and Agriculture Organization of the United Nations, Organisation for Economic Co-operation and Development and World Bank (2017)) provides a range of guidance in this area, in particular concerning the potential to undertake relevant structural decomposition analysis and footprinting. This provides estimates of the emissions embodied in goods and services that are imported (and exported) from production and consumption perspectives. There is also the potential for data from the accounts to support climate change modelling focused on implica- tions of projected climate change scenarios on economic activity. 13.75 Various indicators can be derived directly from carbon stock accounts or in combination with other information, for example, on land cover, land use, popula- tion and industry value added. The suite of indicators can provide a rich information source for policymakers, researchers and the public. There are also links that can be established to support the measurement of Sustainable Development Goal 13: “Take urgent action to combat climate change and its impacts”. Accounting for specific environmental themes 321 13.76 One of the indicators that can be derived from the carbon stock account is net ecosystem carbon balance, which can be used as a metric for measuring carbon sequestration. This indicator is related to the change in the stock of carbon in selected reservoirs over an accounting period. Commonly, the focus of net carbon balance measures is on biocarbon but depending on the analysis, the scope of the measure may also include parts of geocarbon, carbon in the economy and carbon in other res- ervoirs. Also, in some contexts and subject to appropriate assumptions, carbon carry- ing capacities may be estimated to support land-use decision-making where there are significant competing uses of land for food and fibre.147 147 See, for example, Heather Keith and others (2010). 13.5 Accounting for the ocean 13.5.1 Introduction 13.77 The Earth’s coastal and marine areas are an essential source of resources that support economic and other human activity while also being critical for the climate and health of global ecosystems. However, demand for ocean space and resources and associated anthropogenic pressures on ocean systems are rapidly increasing. In recent years, a growing number of countries have established ambitious policies and programmes designed to accelerate both ocean-based development and conservation. Decision makers are thus increasingly confronted with complex challenges and pres- sures with respect to balancing the social, environmental and economic interests of present and future generations. In this context, an integrated and standardized set of accounts that record ocean-related measures of economic activity, social context and ecosystem condition can support balanced decisions for near-term policy and long- term sustainability. Table 13.4 Examples of potential core ocean statistics for biogeochemical cycling Ecosystem type Salt marshes Mangrove and estuar- (MFT1.2: ies (FM1: Sediment (M1: Coral reef intertidal semi-confined marine shelfs; Open ocean (M1.3: photic forests and Kelp forests transitional and M3: deep- (M2: pelagic coral reefs) shrublands) (M1.2) waters) sea floors) ocean waters) Nitrate Soil nitrogen Nitrate Sediment redox Nitrate Thermocline concentration concentration potential concentration Total alkalinity Turbidity Ammonium Hypersalinity Sulfate Pycnocline concentration concentration Offshore: Sediment Kelp growth rate Inundation Sediment redox Vertical profile: inshore dis- accumulation: depth potential oxygen solved inorganic sea level rise carbon (DIC) ratio ratio Aragonite satu- Particulate/dis- DIC C:N sediment Particulate/dis- Vertical profile: ration state solved organic ratios solved organic nitrate C:N C:N Dissolved Dissolved C13 stable Submerged Dissolved Vertical profile: oxygen oxygen isotopes plant growth oxygen pH form Abbreviations: C, carbon; DIC, dissolved inorganic carbon; N, pH (total scale) Soil and water N15 stable   pH (total scale) Vertical profile: pH isotopes DIC nitrogen. 322 System of Environmental-Economic Accounting – Ecosystem Accounting 13.78 At the global level, 2021 marked the beginning of the Decade of Ocean Science 148 See https://en.unesco.org/ for Sustainable Development (2021–2030),148 as proclaimed by the General Assembly ocean-decade. in its resolution 72/73 of 5 December 2017. In that resolution, the Assembly called upon the Intergovernmental Oceanographic Commission of the United Nations Edu- cational, Scientific and Cultural Organization (UNESCO) to prepare an implementa- tion plan for the Decade. Further, UN-Oceans is in the process of updating the First 149 See www.unenvironment.org/ Global Integrated Marine Assessment: World Ocean Assessment I;149 Organisation resources/report/first-global- for Economic Co-operation and Development (OECD) is continuing to support the integrated-marine-assessment- assessment of the ocean economy;150 and the High-level Panel for a Sustainable Ocean world-ocean-assessment-i. Economy151 has developed an action agenda, including ocean accounts, for transition- 150 See www.oecd.org/ocean/top- ing to a sustainable ocean economy. Moreover, IPCC has recently focused specifically ics/ocean-economy/. on oceans, releasing an assessment of the ocean and cryosphere in a changing climate (IPCC, 2019).152 All of these initiatives have in common the need to integrate frag- 151 See www.oceanpanel.org/ mented data and the objective of advising national Governments on sustainable use of about-the-panel the ocean. 152 “Cryosphere” refers to areas 13.79 Conceptually, areas of the ocean encompassing coastal and marine areas are of water that are frozen for included in the SNA, the SEEA Central Framework and SEEA EA. However, different at least part of the year. See measurement boundaries are applied across these frameworks. Further, data on the www.ipcc.ch/srocc/. ocean is more fragmented than data for terrestrial and freshwater ecosystems and the understanding of the ecological and economic connections among marine ecosystems, coastal ecosystems and other ecosystems is less advanced, although the relationship is expected to be highly non-linear. This requires a special focus to strengthen under- standing of ocean-related areas, governance of human activities that exert an impact on them and coordination of ocean data within and outside national territories. 13.80 The present section introduces the design of a set of ocean accounts that follows the general principles of thematic accounting in linking data from different accounts. It is assumed in this section that the various contributing accounts – for example, extent and condition accounts for coastal and marine ecosystems (following the prin- ciples in chap. 5) and accounts on the flows of ecosystem services (following the prin- ciples in chaps. 6, 7 and 9) – can be compiled in their own right. 13.5.2 A set of ocean accounts 13.81 A comprehensive set of ocean accounts enables decision makers to monitor several critical trends: (a) changes in ocean ecosystem extent and condition and in associated flows of ecosystem services; (b) changes in ocean wealth, including pro- duced assets (e.g. ports) and non-produced assets (e.g. mangroves, coral reefs); (c) ocean-related income and welfare for different groups of people (e.g. income from fisheries for local communities); (d) ocean-based economic production (e.g. GDP from sectors deemed to be ocean-related); (e) changes in how oceans are governed and managed (involving e.g. ocean zoning, regulatory rules and responsibilities, social circumstances). 13.82 These are important inputs into a range of ocean governance processes includ- ing marine spatial planning, integrated coastal zone management, development plan- ning for ocean sectors, and collaborative resource management. 13.83 Building on SEEA EA ecosystem extent, ecosystem condition and ecosystem services flow accounts, the ocean accounts framework (figure 13.2) adds accounts for natural resources and physical flows that place pressure on ocean condition from the SEEA Central Framework and accounts concerning the ocean economy as well as gov- ernance, management and technology. Accounting for specific environmental themes 323 Figure 13.2 Coverage of the ocean accounts framework Ocean accounting Ocean environment Pressures (residual flows, SEEA Central Framework) Ocean economy Assets Supply and use (extent and condition) Ecosystem services and abiotic flows Governance Management Technology 13.84 Ocean assets are recorded in a combination of accounts for individual envi- ronmental assets (minerals, energy and aquatic resources (e.g. fish stocks)) from the SEEA Central Framework and for ecosystem assets from SEEA EA. Spatially located individual environmental assets in the terrestrial realm are distinguished from those in the marine realm. In developing ocean accounts for these assets, a particular focus is needed on the treatment of migrating fish stocks and those assets beyond the EEZ whose management may not be captured in the accounts of the Central Framework or the SNA. 13.85 Coastal and marine ecosystems are treated in accordance with SEEA EA. Extent and condition accounts describe these ecosystems and for transitional ecosys- tems, such as estuaries and tidal flats, applying IUCN GET provides a link to terrestrial and freshwater ecosystem accounts. In developing ocean accounts for these various ecosystem assets, challenges may lie in appropriately reflecting the three dimensions of marine areas (i.e. depth in addition to area) and accurately capturing changes in condition. Commonly, it is beneficial to link measures of pressures on oceans (e.g. pollution) with direct measures of ecosystem condition. While data on pressures are important for understanding the connection to economic and human activity, direct monitoring of ocean condition is still required. 13.86 Ocean services include ecosystem services and abiotic flows (e.g. mineral extraction and energy capture). There are many ocean ecosystem services including provision of biomass (through wild fish and aquaculture), coastal protection and tidal surge mitigation, water purification, nursery population and habitat maintenance, rec- reation-related services and visual amenity services. These services supplied by coastal and marine ecosystems should be recorded in the ecosystem services flow accounts in physical and monetary terms. 13.87 The SEEA Central Framework provides guidance on measuring pressures on the ocean, particularly from air emissions, water emissions and solid wastes. For ocean accounts, these are spatially detailed by catchment area to estimate the quanti- ties flowing to the ocean. 324 System of Environmental-Economic Accounting – Ecosystem Accounting 13.88 The ocean economy is measured in terms of the contribution of the main ocean-related activities (e.g. marine transportation, coastal tourism, marine fishing, offshore mineral and gas extraction) to the national economy. Following SNA guid- ance, the ocean economy can be accounted for using satellite accounting principles. At the core of ocean economy satellite accounts is measurement of the contribution to GDP and GVA of the sectors already considered in the SNA. More detail is added from estimates of the contributions of activities (e.g. shipping, boatbuilding) that are partially related to the ocean. Potentially, the economic value of ecosystem services not counted in these sectors (e.g. coastal protection services) could be added following the supply and use principles described in chapters 7, 9 and 11. 13.89 The objective of the ocean governance accounts is to provide spatially explicit location-based information so that decision makers and planners can make the most effective decisions with respect to ensuring the sustainable use of the ocean. Govern- ance accounts include not only combined presentations of the elements mentioned above but also explicit consideration of institutional and legal frameworks such as zoning, rules and decision-making institutions, social circumstances of affected pop- ulations, and measures of ocean-related risks and resilience to them. One way in which these data may be combined is to overlay spatial data on different topics for a given marine or coastal area. This can show, for example, which ecosystem types are under which types of ocean management. 13.90 Much of the information required to compile ocean accounts is common to other communities of practice including those for marine spatial planning, disaster risk and climate change. One objective of the ocean accounting community of prac- 153 See https://stat-confluence. tice153 is to ensure that these common data are standardized and shared. escap.un.org/display/RPOES/ Regional+Ocean+Accounts+P 13.91 Terrestrial and freshwater ecosystems are largely within national jurisdictions. latform. However, the ocean is mostly an area beyond national jurisdiction (ABNJ). This intro- duces the opportunity to compile global ocean accounts, where much of the data are already collected by international agencies. A Global Ocean Data Inventory154 com- piled by the Economic and Social Commission for Asia and the Pacific is organized 154 See https://stat-confluence. using the components of the ocean accounts framework. It shows that substantial data escap.un.org/display/RPOES/ for compiling ecosystem extent and condition accounts are available on areas beyond Regional+Ocean+Accounts+P national jurisdiction, but data on pressures, services and beneficiaries are underrep- latform. resented and hence additional data and monitoring are required. Adjacent coastal countries may also compile comparable ocean accounts to better understand trans- boundary impacts, including flows to and from areas beyond national jurisdiction. 13.92 The ocean accounts framework has proved effective in supporting several pilot studies, each of which has aimed towards answering policy-relevant questions. The pilot studies in Samoa, Thailand and Viet Nam, which were centred on sustainable tourism, linked tourism income, natural resources use, land-based pollution and eco- system impacts. China’s pilot focused on developing harmonized mangrove maps as well as improving the understanding of environmental assets of the mangrove eco- systems in Beihai Bay, one of China’s important marine ecological sites. Malaysia examined food security risk (i.e. concerning fish) along the Straits of Malacca under expected future climate variability. All pilots depended on available data that were 155 Pilot study reports can be often limited.155 One important function of the ocean accounts framework has been to found at https://stat- guide the search for and integration of data. confluence.escap.un.org/ display/RPOES/ Regional+Ocean 13.5.3 Indicators derived from ocean accounts +Accounts+Platform. 13.93 Beyond sets of accounts, input to decision-making may be best facilitated through the derivation of indicators. While this general topic is discussed at length Accounting for specific environmental themes 325 in chapter 14, a summary of relevant considerations from an ocean perspective is pro- vided directly below. 13.94 In the context of ecosystems, the ocean may be viewed as a set of marine, coastal and transitional ecosystem types and any indictors derivable from SEEA EA can also be derived from the ocean accounts. Nonetheless, with their specific focus, ocean accounts can provide specific indicators for ocean conditions such as acidifica- tion and concentrations of marine debris, as well as indicators for ocean-related ben- eficiaries, (e.g. on income of small-scale fishers). 13.95 Linkage to the SEEA Central Framework allows for inclusion of indicators of subnational sources of pressures (such as solid waste supply and use by catchment area), separate accounts for individual environmental assets for the ocean (such as marine fish and offshore oil and gas) and accounts tracking environmental protection and other expenditures on the ocean. 13.96 The ocean economy satellite accounting component provides means of calcu- lating the contribution of ocean-related sectors to national economies. Moreover, the focus on governance results in the addition of indicators on actors/institutions, norms and behavioural relationships. For example, through knowing the location of ocean assets, the extent to which they are used and the designated use of the area concerned, useful information for the management of that area can be obtained. A list of indica- tors derived from ocean accounts is presented in appendix A13.3. 13.97 Scientifically supported statistics of ocean ecosystem condition are of relevance in ecosystem accounting. Relevant characteristics are measured using different metrics in different ecosystems for such categories as biodiversity, ecosystem fitness, biogeo- chemical cycling, physiochemical quality and GHG retention (table 13.4). The Global Ocean Accounts Partnership has been working with several ocean-related communi- ties of practice, including oceanographers and ocean ecologists, to produce a draft set of core ocean statistics. The Global Ocean Observing System (GOOS) is developing essential ocean variables (EOVs) for biology, including biodiversity, and from which a number of essential biodiversity variables could be derived for several groups of organ- isms and habitats (including those listed in table 13.4). Examples of such variables can be found in Moltmann and others (2019) and Muller-Karger and others (2018). 13.6 Accounting for urban areas 13.6.1 Introduction 13.98 Urban areas can be found in most terrestrial settings, whether highland or low- land, in forest, grassland, desert, tropical or tundra regions. They are defined chiefly by the presence of people and by their alteration of the underlying environment. They consist of a wide array of heterogeneous materials. Combinations of buildings (e.g. low-rise/high-rise buildings), impervious surface covers (e.g. roads, parking lots), vegetation (e.g. parks, sports fields), bare soil (e.g. empty lots, unattended garden plots) and water (e.g. wetlands, streams) are fundamental components of the urban ecosystem. 13.99 Accounting for ecosystem assets and services in urban areas is of increasing importance considering the large and growing proportion of the world population living in cities. Further, the high density of economic actors with varying perspec- tives on the use of the environment can create significant local challenges for decision makers. In this context, the regular and integrated information organized within the SEEA framework provides the basis for a transparent approach to informing the type 326 System of Environmental-Economic Accounting – Ecosystem Accounting of green urban development that delivers better outcomes for people and improves the ecological quality of urban environments. 13.100 Depending on the scale of underlying data sets and the aggregation level at which the accounts are compiled, urban ecosystem accounts can support various fac- ets of international, national, subnational and municipal-level policy on urban areas such as strategic planning and policy-setting; communication and awareness-raising; economic accounting; and urban planning including peri-urban and coastal develop- ment. The application of accounting could extend further to include consideration of management of water resources, water treatment, regulating and maintenance ser- vices (e.g. local climate regulation, air filtration, flood mitigation), renewable energy sources and management of recreational opportunities. 13.101 Different motivations exist for accounting at different scales. For example, accounts covering all urban areas across a country focus on drawing out common features and ecosystem service flows, while accounts for a single urban area may focus on specific local issues and perhaps also encompass complementary valuations. A gen- eral benefit of applying accounting principles, particularly at local scale, results from the intent to integrate data on a consistent basis over time. This can help to bring together the data that are commonly available in various one-off reports to better sup- port decision-making. 13.102 Urban ecosystem accounts with sufficient spatial detail (potentially extend- ing down to property-level resolutions) can provide data to support trade-off analysis or benefit-cost analysis for spatial planning and design of policy instruments such as ecosystem services user charges. If ecosystem asset and condition mapping have suf- ficient resolution (e.g. to capture individual tree canopy size and height), ecosystem accounts can also provide support for compliance monitoring and litigation of envi- ronmental damages (e.g. resulting from illegal tree felling). 13.103 The present section introduces the subject of development of urban accounts building on the general framing of ecosystem accounts and taking into consideration some specific factors of relevance to the measurement of urban areas. 13.6.2 A set of urban ecosystem accounts 13.104 Urban ecosystem accounts could encompass measures of extent and include data on associated condition variables and indicators (e.g. urban tree canopy cover, urban air quality) and related ecosystem services (e.g. local climate regulation, water regulation, recreation-related services). 13.105 While urban ecosystems constitute an ecosystem type included in the SEEA EA ecosystem type classification, the compilation of urban ecosystem accounts provides the opportunity for a more detailed accounting for urban area subtypes, including, for example, highlighting of urban green and blue spaces, within the broader framing provided by IUCN GET, which defines a broad EFG covering urban and industrial ecosystems (class T7.4). Further, different boundaries and spatial reso- lutions of basic statistical and reporting units could also be considered with a view to addressing different concerns. 13.106 There are several approaches for defining the EAA for urban ecosystem accounts. Accounts can be compiled for cities based on administrative boundaries (i.e. a local government boundary), functional boundaries (e.g. based on commuting flows as defined by census data) or morphological criteria, such as the extent of the built-up area plus a buffer zone. Selection of criteria would depend on the anticipated purpose and the anticipated users of the urban accounts being compiled. Accounting for specific environmental themes 327 13.107 Urban areas often follow a gradient from less developed or even rural periph- eral areas into a more developed urban core. Even areas with a higher degree of built- up area may contain significant areas of urban green cover, such as yards, parks, cemeteries, areas of street trees and green roofs. The two main approaches for the classification of urban areas according to subtypes are (a) the landscape approach; and (b) the individual asset approach. 13.108 Landscape approach. Under this approach, the entire urban area is disag- gregated and larger patches with common characteristics are classified in different urban subtype categories. For example, a classification of urban subtypes could break down the variety of built-up and semi-natural types within the city into contiguous areas with common shared characteristics (e.g. compact high-rise, compact low-rise, open low-rise, sparsely built, paved, as illustrated in figures 13.3 and 13.4). Following the landscape approach, information on condition characteristics (e.g. percentage of impervious/pervious surfaces, soil contaminant concentrations) could be included in the condition accounts as measures of landscape-level characteristics in these sub- classes. A landscape approach tends to support municipal planning and zoning inte- gration across sector concerns. Figure 13.3 Applying the landscape approach for classifying urban ecosystems using the local climate zone classification of Stewart and Oke (2009) Source: Grenier and others (2020). 328 System of Environmental-Economic Accounting – Ecosystem Accounting 13.109 Individual asset approach. This approach tracks various individual asset types at as fine a scale as possible (e.g. lines of street trees, playgrounds, allotment gardens, green roofs, drainage and storage systems) based on available very high resolution (10 metres or less) satellite imagery or other spatial data sets. In this case, ecosystem assets in urban accounts can be defined as areas of green and blue infra- structure that provide ecosystem services. This approach also permits reporting on the condition of these green and blue assets in the associated condition accounts. An asset approach tends to support thematic and sector policies specific to municipal sector agencies, such as urban forestry, urban agriculture, stormwater management. Figure 13.4 High-resolution thematic focus mapping of urban tree canopy asset extent and height (condition) Source: Urban Nature Atlas Oslo (Norwegian Institute for Nature Research (NINA) (2021)). 13.110 The classification approach and level of aggregation determine the distinc- tion between extent accounts and condition accounts. Condition indicators that are predictors of urban ecosystem services should be selected. This does not prevent users from compiling thematic environmental quality and biodiversity indicators for other purposes. Extent table and condition table options following the landscape approach are presented in tables 13.5 and 13.6, while table 13.7 provides an example of the indi- vidual asset approach. 13.111 In some contexts, it may be appropriate to distinguish the urban airshed as a 156 An airshed is a geographical separate asset.156 This may support a distinct recording of air quality data as an overall area within which the air is condition indicator. Generally, however, it is most appropriate to allocate measures of frequently confined or chan- air quality to locations and areas within the wider urban area and therefore a separate nelled, with all parts of that area thus being subject to asset would not be required. Allocation to ecosystem assets within the urban area can similar conditions of air quality. also support measurement and modelling of flows of ecosystem services (e.g. recrea- tion-related and amenity-related services). 13.112 Urban ecosystem services supply and use accounts may focus on a different basket of ecosystem services, given the differing functions and conditions of urban ecosystems as the physical place where people live and work. Some key ecosystem services that would likely be considered include water regulation, local climate regu- lation, air filtration and noise attenuation, as well as recreation-related services and visual amenity services (table 13.8). Accounting for specific environmental themes 329 13.113 There are a range of issues and limitations that should be considered in the measurement of urban ecosystem services that differ from issues associated with eco- system services involving other ecosystem types. For example, accurate detection of change at the small spatial scales inherent in urban areas are particularly important given that the scale for areas of change can be finer than the level of precision of the land cover classification used as input to ecosystem services models. Possibilities of substitution between ecosystem and man-made services are more apparent in urban areas. Moreover, spatial patterns in urban ecosystem services supply are driven by biophysical variation in ecosystem conditions, while spatial variation in demand (e.g. due to changes in the location and movement of the population) may not be detect- able at the same resolution. Heterogeneous use factors – related to population density and socioeconomic and cultural diversity in cities, as well as substitution possibili- ties, qualitative values and non-linear distance decay of benefits – can result in varia- tions in respect of beneficiaries and valuation results, particularly for recreational and amenity services. 13.114 For applications at municipal levels, urban ecosystem accounts need to align closely with the manner in which the municipal environmental administration is organized in order to address both integrated and sector-specific municipal policy and planning needs. For this reason, a combined landscape and asset approach is often required. 13.115 In some situations, for example, cost-benefit analysis of zoning and user charges, monetary valuation of ecosystem services supply and use by landscape types and calculation of asset values are undertaken. Monetary accounts compiled using exchange values may also provide support for municipal budget allocation to asset investment and maintenance, for example in relation to green and blue infrastructure and nature-based solutions. In addition, it may be necessary to consider the applica- tion of complementary values in providing a wider assessment of social benefits aris- ing from different policies. 13.116 Where monetary valuation is undertaken for municipal-level applications, higher temporal and spatial resolutions and improved change detection, compared with the requirements for national-level accounts, are required. This may be addressed using different methods, for example, by pooling data across a large number of deci- sion-making units. In this context, monetary urban ecosystem accounts therefore often need to be thematic and policy purpose-specific (Gómez-Baggethun and Barton, 2013). Table 13.5 Example: extent account presentation using the landscape approach Example of ecosystem types in urban areas Urban/built-up types and example sub-classes Natural and semi-natural types Shrubland Grassland Cropland high-rise high-rise Compact Compact Sparsely Wetland low-rise low-rise Barren Inland Forest Paved water Open Open Total built EEA Opening extent (km2) Additions to extent Reductions in extent Net change in extent Closing extent (km2) Table 13.6 330 Example: condition account presentation using the landscape approach Example of ecosystem types in urban areas Compact Open Compact Open Sparsely Grass- Shrub- Inland Example condition variables high-rise high-rise low-rise low-rise built Paved Cropland land land Forest Barren Wetland water Measurement Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Opening stock Closing stock Variables unit Water quality g/l Air pollutant ppm concentrations Soil contaminant g/kg concentrations Soil sealing/ % imperviousness Greenness % Canopy cover m2 Street trees km Abbreviations: g/l, grams per litre; ppm, parts per million; g/kg, grams per kilogram; m2, square metres; km, kilometres. Table 13.7 Example: extent account presentation using the individual asset approach Example of ecosystem types and assets in urban areas Example of urban ecosystem assets Natural and semi-natural types System of Environmental-Economic Accounting – Ecosystem Accounting Allotment garden Street trees Sports field Playground Cemetery or reli- gious grounds Public park or garden Green roof Private green space (e.g. yards) Beach Cropland Grassland Shrubland Forest Barren Wetland Inland water Total Total EEA Opening extent (km2) Additions to extent Reductions in extent Net change in extent Closing extent (km2) Accounting for specific environmental themes 331 Table 13.8 Example service account presentation using the landscape approach Urban/built-up types and example sub-classes Natural and semi-natural types Shrubland Grassland Cropland high-rise high-rise Compact Compact Sparsely Wetland low-rise low-rise Barren Inland Forest Paved water Open Open Examples of Measure- Total built services ment unit EEA Provisioning services Crops Regulating services Water regulation Climate regulation Air filtration Noise regulation Cultural services Recreation Amenity services 13.6.3 Potential indicators for urban ecosystems 13.117 Certain indicators can provide useful summary-level information on the state and condition of urban areas. For example, change in extent of areas converted from natural or semi-natural ecosystem types to residential areas with associated infrastructures, tracked over time, provides a snapshot of urban expansion and loss of natural and semi-natural areas. Other related indicators could focus on the concept of land degradation (e.g. percentage of contaminated or brownfield areas and reclaimed areas). Indicators drawn from these accounts can also track the role that urban green and blue spaces play in providing ecosystem services, including by moderating air and water pollution and mitigating heat islands, and can support the measurement of accessibility to green and blue spaces. 13.118 Urban ecosystem accounts therefore provide information that is relevant at many levels, including for reporting internationally, nationally and at subnational levels. For example, the change in extent and condition of lands converted to resi- dential areas with associated infrastructure is relevant for Sustainable Development Goal indicator 15.3.1: Proportion of land that is degraded over total land area. Further, ecosystem accounting for urban areas is particularly relevant for Sustainable Develop- ment Goal 11: Make cities and human settlements inclusive, safe, resilient and sustain- able, including for the following indicators:157 157 See United Nations Human Settlements Programme (UN-Habitat) (n.d.); and United Nations, Department of Economic and Social Affairs, Statistics Division, and United Nations Environment Pro- gramme World Conservation Monitoring Centre (UNEP- WCMC) (2019). 332 System of Environmental-Economic Accounting – Ecosystem Accounting • Indicator 11.3.1: Ratio of land consumption rate to population growth rate • Indicator 11.4.1: Total per capita expenditure on the preservation, protec- tion and conservation of all cultural and natural heritage, by source of funding (public, private), type of heritage (cultural, natural) and level of government (national, regional and local/municipal) • Indicator 11.6.2: Annual mean levels of fine particulate matter (e.g. PM2.5 and PM10) in cities (population-weighted) • Indicator 11.7.1: Average share of the built-up area of cities that is open space for public use for all, by sex, age and persons with disabilities  13.119 The use of ecosystem accounts extends beyond the broad indicator framework for the Sustainable Development Goals and targets to encompass support for munici- pal planning and policy analysis, for example, as related to the equitable distribution of municipal (ecosystem) services. This requires disaggregation of statistics to different administrative areas such as districts, councils, boroughs and census tracts. 333 Appendix A13.1 SEEA Central Framework accounts for individual stocks and flows Introduction A13.1 The SEEA Central Framework describes a range of different accounts for recording individual stocks and flows. There are two main types of account structures that are used: physical flow accounts (in the form of SUTs) and asset accounts, both of which may be compiled in physical and monetary terms. The present appendix pro- vides a brief summary of these accounts and describes how they can be adapted to support compilation of ecosystem accounts and thematic accounts. Physical flow accounts A13.2 The general principles underpinning physical flow accounts are described in chapter III of the SEEA Central Framework. Account structures for five physical flows are provided: water, energy, air emissions, emissions to water and solid waste. Depend- ing on the type of substance, these accounts describe flows from the environment to the economy, within the economy and from the economy to the environment. They are pri- marily designed to record the connections between each type of substance and various economic units and hence are well aligned with objectives such as footprinting, where the use of specific substances can be traced through economic activities and products. A13.3 In concept, the principles of physical flow accounting can be used to record flows for all elements, substances and materials. Examples include flows of nitrogen, phosphorus, heavy metals and carbon at an elemental level, and economy-wide mate- rial flows (all measured in mass) at a macro scale. The main requirement in applying accounting principles is that the same measurement unit (e.g. tons, cubic metres) be applied within a single account. A13.4 For SEEA Central Framework purposes, the description focuses on measur- ing flows for each substance at a national level and thus on integrating with national- level measures of economic activity. Macro indicators concerning issues such as water use in agriculture, energy use in manufacturing and air emissions from the transport industry are therefore readily derivable. A13.5 For their use in ecosystem and thematic accounting, there is a need for the scope of the accounts described in the SEEA Central Framework to align with requirements related to geographical area, spatial detail and economic units. For example, if there is interest in ocean accounting for understanding emissions to marine areas, an adjusted flow account would follow the same general framing as that of the physical flow account for emissions to water but would also be required to provide additional detail concerning the location of those emissions, i.e. a break- down of the Central Framework entry for flows to the environment by location, for example, by catchment (see Central Framework, table 3.8). Additional detail might be incorporated on the industries generating the release of emissions to water and on the types of those emissions. 334 System of Environmental-Economic Accounting – Ecosystem Accounting Asset accounts A13.6 Asset accounts are described in chapter V of the SEEA Central Framework. They are presented for land use and land cover and for a range of natural resources including mineral and energy resources, soil resources, timber resources, fish and other aquatic resources and water resources. The general logic is to record, in physical or monetary terms, the opening and closing stocks of the relevant individual resource and then the various additions and reductions in stock, including from regeneration and depletion. Under the relevant accounting identity, the opening stock plus addi- tions less reductions must be equal to the closing stock. A13.7 For thematic accounting, the principles of asset accounting were applied in the preceding description of species accounts and carbon accounts. The same princi- ples can be applied to any individual stock to support both thematic and core ecosys- tem accounting. For example, an asset account for key fish species by location might be used to support compilation of ecosystem services flow accounts. A13.8 As for the physical flow accounts, once a single type of stock has been selected, the key requirement in applying asset accounting principles is to establish the geo- graphical area to which the account is related. Whether the area is small or large, it needs to be clearly defined so that the focus of measurement is clear and linkages can be made to other data. It may be relevant to cross-classify data on the opening and closing stocks by types of area within the wider accounting area. Stocks of carbon, for example, might be cross-classified by ecosystem type. A13.9 Along with carbon and species accounts, the asset account for water resources, which is described in section 5.11 of the SEEA Central Framework, is the most relevant for ecosystem accounting purposes. This account records the opening and closing stocks of water for various types of inland water bodies including lakes, rivers and streams and groundwater and goes on to record additions to the stock of water through precipitation, inflows and transfers between other water bodies and returns from the economy and reductions in stock due to abstraction by economic units, evaporation and outflows (e.g. to the sea) and transfers to other water bodies. A13.10 The stocks and flows recorded in the water resources asset account compre- hensively document the hydrological cycle as it pertains to inland water resources. Flows related to wastewater are also captured. Since stocks and flows of water are items of importance for understanding ecosystem condition and ecosystem services, com- pilation of water resources asset accounts is likely to be of significant relevance in sup- porting the compilation of ecosystem accounts. A13.11 Compilation of data at a relatively high level of spatial detail for ecosystem accounting presents a measurement challenge that needs to be overcome. This is pos- sible through standard hydrological modelling, which is commonly used to underpin the measurement of a range of ecosystem services, including water regulation, flood mitigation and soil erosion control. The task is therefore to adapt the framing pro- vided in the SEEA Central Framework to accommodate a higher level of spatial detail, including, in particular, the incorporation of more detail on transfers of water between different parts of a catchment or water body. Ecosystem account compilers are encour- aged to work with hydrological modellers on compiling detailed water resources asset accounts, in part because the accounts can be a useful tool in ensuring coherence in water modelling between opening and closing stock positions. 335 Appendix A13.2 Additional detail concerning accounting for carbon A13.12 The rationale for carbon stock accounting in the context of ecosystem account- ing was discussed in section 13.4. The present appendix provides some additional details on the structure and accounting entries related to the carbon stock account as presented in table 13.3. The carbon stock account presented in that table provides a complete and ecologically grounded articulation of carbon accounting based on the carbon cycle and, in particular, the differences in the nature of specific carbon reser- voirs. Opening and closing stocks of carbon are recorded, together with the various changes – additions to or reductions in stock – occurring between the beginning and the end of the accounting period.158 158 For examples of carbon stock accounts, see, for example, A13.13 Carbon stocks are disaggregated into geocarbon, biocarbon, carbon accu- Heather Keith and others (2021) mulated in the economy, carbon in the oceans (inorganic only) and carbon in the and Lof and others (2017). atmosphere. A13.14 All of the carbon stored in the Earth’s lithosphere, excluding all organic car- bon stored in dead biomass, is considered geocarbon (or geological carbon, i.e. carbon that is present in the Earth’s bedrock and sediments, derived primarily from marine sediment deposits).159 Carbon originally formed in the Earth’s biosphere millions 159 Geocarbon is further disag- of years ago – which, after geological metamorphosis resulting from high pressure gregated into oil, gas, coal and temperatures in the Earth’s crust, was transformed into, for example, oil and gas resources, rocks (primarily limestone and marls) and min- (organic geocarbon) – is also considered geocarbon. Organic carbon in soils and in erals, e.g. carbonate rocks used peat deposits is included in the category of biocarbon.160 Where the information gen- in cement production, meth- erated from the accounts is policy-focused, the priority should be given to reporting ane clathrates and inorganic those stocks that are being impacted by human activity (e.g. involving fossil fuels). carbon in marine sediments. 160 Soil is the layer of fine material A13.15 Biocarbon includes all of the organic carbon in the biosphere, i.e. carbon in living biomass (plants and animals) and dead biomass (soil organic matter and sedi- covering the Earth’s land sur- face impacted by and impact- mentary organic matter).161 Further, biocarbon includes the biomass in crops and in ing plants and soil organisms. grass in meadows, which is consequently not considered to be part of carbon accumu- 161 With respect to biocarbon in lated in the economy. Carbon stored in livestock, however, is considered to be part of soils, for practical reasons, only carbon in the economy, as is carbon stored in timber products, including timber used the top 30 centimetres are for construction. considered in this study. This A13.16 Biocarbon is classified by type of ecosystem according to the three main results in a significant underes- timation, in particular for peat realms at the highest level of IUCN GET (marine, freshwater and saline wetlands, ter- and peaty soils, of the total restrial). These high-level classes can be further broken down applying the EFG level 3 stock of biocarbon in soils. This of GET. It is recommended that carbon in agricultural and other anthropogenic sys- limitation in the current mod- tems be separately recorded to enable the distinction to be made between natural and els may also affect measure- semi-natural ecosystems and anthropogenic ecosystems with regard to carbon removal ment of carbon flows in cases and emissions. where there are changes in the water table below this depth. A13.17 The stability of the carbon stocks in the biosphere depends significantly on ecosystem characteristics. In natural ecosystems, biodiversity underpins the stability of carbon stocks by bestowing resilience and the capacity to adapt and self-regenerate 336 System of Environmental-Economic Accounting – Ecosystem Accounting (Thompson and others, 2009). Stability confers longevity and by extension the capac- ity for natural ecosystems to accumulate large amounts of carbon over periods ranging from centuries to millenniums in, for example, the woody stems of old trees and soil. As semi-modified and highly modified ecosystems are generally less resilient and less stable (ibid.), those ecosystems accumulate smaller carbon stocks, particularly if the land is used for agricultural activity where the plants are harvested or grazed regularly. A13.18 The atmosphere contains carbon, in the form mainly of CO2, and methane. The atmosphere is a receiving environment for carbon from the primary reservoirs of geocarbon and biocarbon, as well as for carbon emissions from the economy, while carbon removal from the atmosphere may occur through carbon sequestration in bio- carbon. As CO2 and methane act as GHGs in the atmosphere, accounting for these flows is highly policy-relevant. A13.19 The oceans are receiving environments for carbon released from primary reservoirs and carbon released from its accumulations in the economy. Carbon in oceans includes only inorganic carbon, i.e. carbonates dissolved in seawater. Living and non-living organic carbon in oceans is part of biocarbon. Carbonate particulates (e.g. shells) in sediments are part of geocarbon. A13.20 Accumulations in the economy, which are the stocks of carbon in anthro- pogenic products, are further disaggregated into the following SNA components: fixed assets (e.g. concrete in buildings, bitumen in roads, livestock); inventories (e.g. petroleum products in storage, excluding those included in cultivated ecosystems); consumer durables (e.g. wood and plastic products); and waste. These main asset cat- egories can in turn be further disaggregated into biobased (i.e. derived from plants or animals) and non-biobased (i.e. fossil fuels, mineral (inorganic) products and syn- thetic materials (plastics)). Accounting for waste follows the conventions of the SEEA Central Framework, where waste products (e.g. disposed plastic and wood and paper products) stored in controlled landfill sites are treated as part of the economy. A13.21 The flows of carbon that occur within the economy are highly significant and essential for understanding the interaction between the economy and the environ- ment. The level at which geocarbon and biocarbon stock changes can be linked to the economy determines the policy usefulness of the carbon stock account. This is par- ticularly relevant in cases where raw materials can be extracted from different ecosys- tem types (e.g. biomass fuel from natural or cultivated ecosystems) or from geocarbon reservoirs with different carbon contents and emissions profiles. A13.22 Carbon stored through geo-sequestration (i.e. the managed injecting of gas- eous CO2 into the surface of the Earth) is treated similarly, i.e., as a flow within the economy (resulting in an increase in accumulations). Any subsequent release of car- bon to the environment is treated as a residual flow with a reduction in accumulations in the economy matched by a corresponding increase in carbon in the atmosphere. A13.23 The presentation of the row entries in the account follows the basic form of the asset account in the SEEA Central Framework, the entries being opening stock, additions, reductions and closing stock. Additions to and reductions in stock are split between managed and unmanaged expansion and contraction. Additional rows for imports and exports have been included, thus making the table a stock account, as distinct from an asset account. A13.24 There are five types of additions in the carbon stock account: • Unmanaged expansion, which reflects increases in the stock of carbon over an accounting period due to natural growth or the indirect effects of human activities. Effectively, this is recorded only for biocarbon and may arise from Appendix A13.2: Additional detail concerning accounting for carbon 337 climatic variation, ecological factors such as reduction in grazing pressure, and indirect human impacts such as the CO2 fertilization effect (where higher atmospheric CO2 concentrations cause faster plant growth). • Managed expansion, which reflects increases in the stock of carbon over an accounting period due to direct human activities. This is recorded for biocarbon in ecosystems and accumulations in the economy and in inven- tories, consumer durables, fixed assets and waste stored in controlled landfill sites. Also included are GHGs injected into the Earth. Basically, these reflect all increases in carbon stock due to carbon input flows from other reservoirs that are directly related to human activities. All emissions related to land use, LULUCF are included here (or in managed contrac- tions, depending on the carbon stock). • Discoveries of new stock, encompassing the emergence of new resources added to a stock, which commonly arise through exploration and evalua- tion. This applies exclusively to geocarbon. • Reclassifications of carbon stocks, which generally occur in situations where an ecosystem asset is used for a purpose that is different from a pre- vious one. For example, increases in carbon in semi-natural ecosystems following the establishment of a national park on an area previously used for agriculture would be offset by an equivalent decrease in cultivated eco- systems. In this case, it is only the particular land use that has changed, that is, reclassifications may have no impact on the total physical quantity of carbon during the period in which they occur. • Imports recorded to enable accounting for imports of produced goods (e.g. petroleum products) that contain carbon. A13.25 There are five types of reductions recorded in the carbon stock account: • Unmanaged contractions, which reflect natural losses of stock during the course of an accounting period. They may be due to changing dis- tribution of ecosystems (e.g. a contraction of natural ecosystems) or bio- carbon losses that might reasonably be expected to occur based on past experience. Unmanaged contraction includes losses from episodic events including drought, some types of fires and floods, and pest attacks and disease outbreaks, as well as losses due to volcanic eruptions, tidal waves and hurricanes. • Managed contractions, which are reductions in stock due to direct human activities and include the removal or harvest of carbon through a process of production. This includes mining of fossil fuels and felling of timber. Extraction from ecosystems includes (a) those quantities that continue to flow through the economy as products (including waste products) and (b) those quantities of stock that are immediately returned to the environment after extraction because they are unwanted, for example, felling residues. Managed contraction also includes losses as a result of war, riots or other political events and technological accidents such as major toxic releases. All emissions related to LULUCF are included here (or in managed expan- sions, depending on the carbon stock). • Reclassifications of carbon stocks, which generally occur in situations where an ecosystem asset is used for a different purpose. For example, decreases in carbon in cultivated ecosystems following the establishment of a national park on an area used for agriculture would be offset by an 338 System of Environmental-Economic Accounting – Ecosystem Accounting equivalent increase in semi-natural ecosystems. In this case, it is only the particular land use that has changed, that is, reclassifications have no impact on the total physical quantity of carbon during the period in which they occur. • Exports recorded to enable accounting for exports of produced goods (e.g. petroleum products) that contain carbon. • Catastrophic losses, which are not shown as a single entry but are allocated between managed contraction and unmanaged contraction. Catastrophic losses in managed contraction would include fires deliberately lit to reduce the risk of uncontrolled fires. For the purposes of accounting, reduc- tions due to human accidents, such as rupture of oil wells, would also be included under managed contraction. However, catastrophic losses could be separately identified. 339 Appendix A13.3 Variables and indicators from ocean accounts Ocean-related biomesh FM1 Transitional waters biome (Freshwater-Marine) M4 Anthropogenic marine systems biome MT2 Supralittoral coastal systems biome MT3 Anthropogenic shorelines biome M2 Pelagic ocean waters biome SM1 Subterranean tidal biome MFT1 Brackish tidal biome M3 Deep-sea floors biome M1 Marine shelfs biome MT1 Shorelines biome Total Physical ocean assets                       Ecosystem assets                       Area (ha) Change in area from previous accounting period (%)                       Individual environmental assets                       Minerals (tons)                       Energy (PJ)                       Fish (tons)                       Timber (e.g. mangrove) (m3)                       Other flora available for harvesting (e.g. seaweed) (tons dry weight)                       Monetary ocean assets (NPV of expected flow of services)                       (currency units) Ecosystem assets                       Value (currency units) Change in value from previous accounting period (%)                       Individual environmental assets                       Minerals                       Energy                       Fish                       Timber (e.g. mangrove)                       Other flora available for harvesting (e.g. seaweed)                       Condition of ocean assetsa                       For marine and coastal ecosystems                       Acidification (pH)                       Eutrophication (BOD, COD, chlorophyll a concentrations)                       Temperature (°C)                       340 System of Environmental-Economic Accounting – Ecosystem Accounting (Continued ) Ocean-related biomesh FM1 Transitional waters biome (Freshwater-Marine) M4 Anthropogenic marine systems biome MT2 Supralittoral coastal systems biome MT3 Anthropogenic shorelines biome M2 Pelagic ocean waters biome SM1 Subterranean tidal biome MFT1 Brackish tidal biome M3 Deep-sea floors biome M1 Marine shelfs biome MT1 Shorelines biome Total Plastics density (g/m3)                       Biodiversity (Shannon index)                       Health (index)                       For individual environmental assets                       Minerals (quality, accessibility)                       Energy (quality, accessibility)                       Fish (quality in terms of size, age, health)                       Timber (e.g. mangrove) (quality, accessibility)                       Other flora available for harvesting (e.g. seaweed) (quality, health)                       Physical ocean services                       Ocean ecosystem services                       As in SEEA EA ecosystem services list (specific units)                       Other ocean services (examples)                       Seawater for cooling (m3)                       Sand (tons)                       Petroleum (megalitres, PJ)                       Monetary ocean services                       Ocean ecosystem services                       As in SEEA EA ecosystem services list (appropriate valuation techniques)                       Other ocean services (examples)                       Seawater for cooling (market or equivalent value)                       Sand (market or equivalent value)                       Petroleum (market or equivalent value)                       Pressures (flows to the environment)b                       Water emissions flows to the ocean                       BOD/COD (tons)                       Suspended solids (tons)                       Bilge (m3)                       Heavy metals (tons)                       Solid waste flows to the ocean                       Chemical and health-care waste (tons)                       Appendix A13.3: Variables and indicators from ocean accounts 341 (Continued ) Ocean-related biomesh FM1 Transitional waters biome (Freshwater-Marine) M4 Anthropogenic marine systems biome MT2 Supralittoral coastal systems biome MT3 Anthropogenic shorelines biome M2 Pelagic ocean waters biome SM1 Subterranean tidal biome MFT1 Brackish tidal biome M3 Deep-sea floors biome M1 Marine shelfs biome MT1 Shorelines biome Total Metallic waste (tons)                       Mineral waste and soil (tons)                       Mixed residential and commercial waste (tons)                       Plastics (tons)                       Radioactive waste (tons)                       Other waste (tons)                       Wastewater flows to the ocean (m3)                       Air emissions flows to the ocean (examples)c                       CO2 (tons)                       Methane (tons)                       Ocean economy                       Contribution of ocean sectors to national economy (GVA, % GDP)d                       By sector (fishing/aquaculture, offshore oil and gas, boat- and shipbuild-                       ing, etc.) Contribution of ocean sectors to national employment (FTE, %)                       By sector (fishing/aquaculture, offshore oil and gas, boat- and shipbuild-                       ing, etc.) Ocean governance                       Zoning                       Jurisdictional zone: internal waters, territorial sea, EEZ (area)                       Management or planning zone: protected area, private property, use                       designation (area)e Rules- and decision-making institutions                       By activity: fishing, wind farm development, marine spatial planning                       (institution) Social circumstances of resident populations (examples)f                       Health (index), economic equity (GINI), poverty (% below low income)                       Risk and resilience (examples)                       Flood/storm surge, sea level rise, coastal storm risk (vulnerability,                       occurrence) Resilience: disaster plan in place, adequate supplies and facilities (yes/no)                       Environmental protection expenditures ($)                       342 System of Environmental-Economic Accounting – Ecosystem Accounting (Continued ) Ocean-related biomesh FM1 Transitional waters biome (Freshwater-Marine) M4 Anthropogenic marine systems biome MT2 Supralittoral coastal systems biome MT3 Anthropogenic shorelines biome M2 Pelagic ocean waters biome SM1 Subterranean tidal biome MFT1 Brackish tidal biome M3 Deep-sea floors biome M1 Marine shelfs biome MT1 Shorelines biome Total Value of environmental goods and services sector ($) (see “Ocean                       economy” above)g Environmental taxes less subsidies ($)                       Abbreviations: BOD, biological oxygen demand; COD, chemical oxygen demand; EEZ, exclusive economic zone; FTE, full-time equivalent; g, gram; GDP, gross domestic product; GVA, gross value added; ha, hectare; m3, cubic metre; NPV, net present value; PJ, petajoule. a Specific condition indicators for each ecosystem type are provided in Technical Guidance on Ocean Accounting for Sustainable Develop- ment, a background document prepared by the Economic and Social Commission for Asia and the Pacific for the fifty-first session of the Statistical Commission, held from 3 to 6 March 2020. Available at https://unstats.un.org/unsd/statcom/51st-session/documents/BG-item- 3h-TG_Ocean%20accounting_ESCAP-E.pdf. b Flows should include (a) those generated by terrestrial catchment areas, (b) those from marine sources, (c) inflows from other territories and (d) outflows to other territories (including international waters). c Air emissions should be estimates of quantities deposited in the ocean, distinguishing between national and international territory. d The ocean accounts framework provides a comprehensive list of ocean-related sectors. The location of economic activities could be classi- fied by ecosystem type. e Other examples of use designation include aquaculture, energy development, submarine cable corridor, locally managed marine area. f Resident population includes those dependent on the ocean economy and those living near the ocean. g The environmental goods and services sector may be embedded in the ocean economy as ocean-dependent sectors. h Indicators may be presented for larger groupings or in more detail by ocean-related EFGs. It is to be noted that there may be vertical overlap of some of the biomes (e.g. subterranean tidal biomes with shoreline systems biomes). In this case, ideally, indicators would be presented separately for the intersection of those biomes (e.g. subterranean below shoreline). 343 Chapter 14 Indicators and combined presentations 14.1 Introduction 14.1 Indicators are used to summarize data and convey trends on topics of specific pol- icy relevance. Examples of indicators include GDP, the human development index and water use. Indicators provide the most common entry point into accounting data since they summarize the detail that is present in accounts. There is a large and increasing demand for indicators on topics related to environment and sustainability. In response, there is a wide array of indicators that, in most cases, are not based on data that have been filtered through an accounting framework. This, in turn, has led to challenges concerning comparability and consistency, which affect the potential of indicators to be regularly incorporated in decision-making processes. Indeed, an indicator can be only as robust as its underlying data. Since a feature of accounting frameworks is their organization of data from multiple sources, SEEA EA has the potential to support the derivation of indicators that are more coherent and consistent. 14.2 Moreover, given the variety of analytical and policy contexts that exist world- wide, it is to be expected that people would consider combining accounts in differ- ent ways or, more commonly, focus on combining a subset of accounts that are most relevant for their specific needs. This is perfectly appropriate and such combinations of accounting information for different applications or policy framings should not be labelled as inferior to others or as irrelevant. In all cases, there is a need to ensure fit- ness for purpose in terms of both accounting integration and the quality of the data required. Further, the development of indicators is commonly a dynamic process involving multiple stakeholders and responses to emerging policy issues. This having been said, the discussion in the present chapter must therefore be viewed as reflecting an ongoing evolution encompassing both the development of indicator-related pro- cesses and advances in measurement of ecosystem accounts. 14.3 The present chapter describes a range of ways in which data from the ecosys- tem accounts can be used to derive indicators and can be combined with other envi- ronmental-economic accounting and national accounting data to demonstrate the links between the economy and the environment and to compare trends over time. Section 14.2 summarizes the roles and functions of SEEA EA-based indicators and gives examples of those indicators. Section 14.3 focuses on links of SEEA to reporting on progress towards various global environmental goals. Section 14.4 provides a gen- eral introduction to the development of combined presentations in which data from different accounts are presented alongside each other. These presentations may be par- ticularly relevant to the derivation of indicators. 14.4 The discussion on indicators and combined presentations in this chapter complements the discussion found in chapter VI of the SEEA Central Framework, which summarizes a range of approaches to integrating and presenting accounting data. Additional insight on the types of indicators and analysis that can be sup- ported by accounts is contained in System of Environmental-Economic Accounting 344 System of Environmental-Economic Accounting – Ecosystem Accounting 2012 – Applications and Extensions (United Nations, European Commission, Food and Agriculture Organization of the United Nations, Organisation for Economic Co-operation and Development and World Bank (2017). 14.2 Indicators derived from SEEA EA 14.2.1 Introduction 14.5 A clear understanding of the environment-economy nexus is critical in respond- ing to a wide range of policy questions, often with regard to informing synergies and trade-offs in policy formulation. At a global policy level, relevant initiatives include the 2030 Agenda for Sustainable Development, the Kunming-Montreal Global Biodiversity Framework, the Paris Agreement adopted under the United Nations Framework Convention on Climate Change and the United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa. Further, current policy questions require an understanding of the relationship between the environment and the economy that goes beyond provision of information on individual environmental assets (e.g. timber, energy). Increasingly, policymakers are defining sustainability in ways that also incor- porate ecosystems and the services that they provide to humanity. 14.6 The discussion below describes how information from ecosystem accounts can be organized and integrated to provide policy-relevant indicators and aggregates. The dis- cussion focuses initially on the roles and functions of indicators with respect to account- ing frameworks before providing examples of indicators derived from SEEA EA. 14.2.2 Roles and functions of SEEA EA indicators 14.7 An indicator is the representation of data for a specified time, place or any other relevant characteristic, corrected for at least one dimension (usually size) so as to allow for meaningful comparisons. It is a summary measure related to a key issue or phe- nomenon and derived from a series of observed facts. 14.8 The following three main types of indicators are considered: • Aggregates, which are statistics that are grouped together or aggregated in order to provide a broader picture. Thus, an aggregate involves the combi- nation of related categories, usually within a common branch of a hierar- chy, for the purpose of providing information at a broader level than that at which detailed observations are taken. In accounting, aggregation is usually completed through simple addition, for example, by summing the areas of ecosystem types across an EAA • Composite indices, which are those in which different variables are com- bined using a weighting pattern or aggregation rule to communicate an overall movement or trend. An example of a composite index in SEEA EA is the measure of ecosystem condition that involves weighting together rel- evant ecosystem condition indicators • Ratio indicators, which are derived by combining data from different accounts, for example, data on flows of ecosystem services per hectare from different ecosystem types 14.9 Indicators can be used to reveal relative positions or show positive or nega- tive change over a regular interval and are usually a direct input into national and global policies. In strategic policy fields, indicators are important for setting targets and monitoring their achievement. While indicators by themselves do not necessarily Indicators and combined presentations 345 encompass all aspects of development or change, they greatly contribute to explain- ing those processes. If a consistent methodology is employed, indicators allow com- parisons over time and between, for instance, countries and regions and in this way they assist in gathering “evidence” for decision-making. Indicators can also be used to aggregate fine-level geospatial data to exhibit trends at subnational or national scale. 14.10 Indicators can serve many purposes, depending on the scale at which they are applied, the target audience and the quality of the underlying data. Indicators derived from SEEA EA are useful tools for tracking progress with regard to ecosystems and biodiversity and for mainstreaming the relevant issues into public policy. Applied in this manner, those indicators can help to promote the sustainable use of ecosystems and ecosystem services. More broadly, indicators can play an important role in sup- porting the communication of narratives regarding the environment and its connec- tion to the economy and to people. 14.11 The target audience for SEEA EA indicators usually comprises decision mak- ers and policy- makers in business and government, non-governmental organizations, environmental economists, ecologists, academia and the general public. The benefit of deriving indicators from SEEA EA is that they are consistent and coherent and syn- thesize accurately the underlying data. Moreover, they can be understood by and can be meaningful to non-statisticians. SEEA EA indicators are therefore capable of being statistically accurate as well as straightforward and user-friendly. They should con- sequently be viewed as summary measures which are fit for purpose and embedded within larger information systems (e.g. accounting frameworks, databases, monitor- ing systems, models) following consistent methodologies and workflows. 14.12 The relationship between different types of information within the context of SEEA EA is illustrated by the pyramid in figure 14.1. The base of the pyramid repre- sents various sources of a full range of basic statistics and data including surveys, sci- entific measurements, geospatial data, administrative data and censuses. Generally, as these data are collected for various purposes, they utilize different scopes, frequencies, definitions and classifications. Figure 14.1 Information pyramid Indicators Accounts: Assets, condition, services Frameworks: Measurement, process, quality Basic data: Environmental, economic, social statistics Source: United Nations, European Commission, FAO, OECD and World Bank (2017), figure 2.1. 14.13 The role of SEEA EA is to integrate those data so as to enable a coherent and uni- fied understanding of ecosystems and their relationship to the economy. This means that compilers of SEEA EA accounts must reconcile and merge data from disparate sources, taking into account differences in scope, frequency, definition and classifica- 346 System of Environmental-Economic Accounting – Ecosystem Accounting tion, as appropriate. Once the data have been integrated within a single framework, indicators can be derived that provide insights into changes in composition or struc- ture of the specific concept of interest, changes in relationships between ecosystem stocks and flows and other features, while taking advantage of underlying relation- ships between the accounts. 14.14 Just as a myriad of indicators such as GDP, national saving and national wealth emerge from a single national accounts framework so, too, can a wide range of indica- tors be derived from SEEA EA. Moreover, the use of an accounting framework such as SEEA EA produces significant benefits in the derivation of the resulting indicators. These benefits include: • Provision of a stable conceptual framework that allows for new indica- tors to be developed, using a coherent source, to respond to new policy demands while allowing for improvements in data collection and methods • Provision of a broad framework enabling different indicators to be seen in context; and, as necessary, summary information conveyed by the indica- tor can be disaggregated to enable a better understanding of the reasons for change • Enabling analysis, including forecasting and projections, to build from the same coherent source data that were used for derivation of the indicators • Support for the derivation of early estimates using various assumptions based on benchmark data from the accounting system 14.15 While indicators can be sourced directly from basic statistics, using an account- ing framework necessitates reconciling and harmonizing the underlying data, which results in the derivation of coherent and consistent indicators. This has the potential to better clarify demand and priority needs for data and by extension to better link policy needs to data generation and thereby to decision structure. Further, the alignment of SEEA EA with the SNA facilitates a consistency between economic and environmen- tal information that ensures the wider relevance of the indicators sourced from the accounts. 14.2.3 Indicators from ecosystem accounts 14.16 Information from ecosystem accounts can be organized and integrated to pro- vide policy-relevant indicators. The present section provides an overview of indicators that can be derived from the ecosystem accounts. 14.17 The majority of the indicators presented in this section are output indicators that can be generated directly from SEEA EA accounts for tracking national and global progress. Also presented are indicators that have been developed and implemented by the scientific community but which nevertheless can be derived from ecosystem or thematic accounts using additional compilation and analysis. 14.18 Considering the underpinning spatial framework of SEEA EA and its integra- tion with the SNA, indicators from each ecosystem account have the potential to be crosswalked with data from other accounts and socioeconomic measures. This could then provide integrated measures on interconnectedness and linkages for a range of topics, such as adjusted macroeconomic measures, costs of restoration and ecosystem capacity. Indicators from SEEA EA could also be designed to address distributional and environmental justice issues, for example, through aggregation and disaggrega- tion to administrative units. 14.19 Indicators from ecosystem extent accounts. The ecosystem extent account describes the extent of the various ecosystem types presented in an accounting area Indicators and combined presentations 347 and how the extent changes within an accounting period. The ecosystem types are based on IUCN GET, which provides a top level of four realms, a second level of 24 biomes and a third level of 98 EFGs. Depending on the application, alternative aggre- gations may be developed to align with the reporting requirements at national and international levels. In other contexts, it would be necessary to provide detail below the IUCN GET level to identify compositional differences at finer scales, for example, within urban areas, that may affect the interpretation of aggregate-level data. 14.20 Table 14.1 provides a selection of potential indicators that may be derived from the ecosystem extent account. Another possibility is to include an indicator of changes in the area of natural ecosystems compared with changes in anthropogenic and semi- natural ecosystems. Derivation of this indicator requires further definition of natural and semi-natural ecosystems in the context of IUCN GET (or other classifications of ecosystem types). It is also possible to establish a reference extent that reflects the com- position of ecosystem types in a country at a given point in time and thus provides a common baseline for the assessment of change. 14.21 Indicators from ecosystem condition accounts. The ecosystem condition account records data on the state and functioning of ecosystem assets within an EAA using a combination of relevant variables and indicators. The selected variables and indicators reflect changes over time in the key characteristics of each ecosystem asset. Ecosystem condition accounts are compiled in physical terms. Ecosystem condition indexes and subindexes (as shown in table 14.2) are composite indicators that are aggregated from ecosystem condition indicators. The use of compatible reference lev- els (e.g. through a common reference condition) underpins the aggregation process. Many condition indicators that are developed and implemented by scientific commu- nities can be integrated into SEEA EA condition accounts for further aggregation. Table 14.1 Potential indicators on ecosystem extent Extent indicators Spatial unit Disaggregation Measurement unit EAA covered by specific types or areas of interest including: Urban areas (IUCN GET T7.4) Cultivated areas (IUCN GET T7.1, T7.2, T7.3) Hectares; % of total Forests (IUCN GET T1, T2) EAA Ecosystem type EAA; % of opening Wetlands (IUCN GET F1, F2, TF1, FM1, MFT1) Coastal areas (IUCN GET M1, MT1, MT2, MT3, MFT1) Change of area covered by specific ecosystem types or areas of interest during an accounting period including: Urban areas (IUCN GET T7.4) Cultivated areas (IUCN GET T7.1, T7.2, T7.3) Forests (IUCN GET T1, T2) EAA Ecosystem type % of opening Wetlands (IUCN GET F1, F2, TF1, FM1, MFT1) Coastal areas (IUCN GET M1, MT1, MT2, MT3, MFT1) Percentage of area unchanged (opening stock – reduction) EAA Ecosystem type % of opening 14.22 Indicators from the physical ecosystem services flow account. The physical ecosystem services flow accounts describe the ecosystem services generated by an eco- system asset in volume terms. Ecosystem services are grouped under provisioning, regulating and maintenance, and cultural services. Indicators from the accounts, such as those shown in table 14.3, commonly focus on the ecological supply side of ecosys- 348 System of Environmental-Economic Accounting – Ecosystem Accounting tem service flows in physical units such as cubic metres and tons but indicators linked to ecosystem contributions for human benefit can also focus on the use of ecosys- tem services. Where measures of ecosystem services are available by detailed type of user, for example, by level of household income, it is possible to consider the relative dependence of different groups of people on ecosystem services. Many of these indi- cators may also be expressed in monetary terms where valuation is also undertaken, or may be linked to other, related economic data, such as data on value added and employment of relevant industries. Table 14.2 Potential indicators on ecosystem condition Ecosystem condition indicators Further description Spatial unit Disaggregation Measurement unit Overall ecosystem   Ecosystem type, ecosys- condition index EAA tem condition classes Index Physical state indicator Overall physical state characteristics of an ecosystem asset (including soil structure, water Ecosystem condition availability, ocean temperature) Ecosystem type subclasses Index Chemical state indicator Overall chemical state characteristics of an ecosystem asset (including soil nutrient levels, water quality, biogeochemistry, air pollutant Ecosystem condition concentrations) Ecosystem type subclasses Index Compositional state Overall compositional state characteristics of Ecosystem condition indicator an ecosystem asset (including species diversity) Ecosystem type subclasses Index Structural state Overall structural state characteristics of an indicator ecosystem asset (including vegetation (and Ecosystem condition biotic structure), biomass, food chains) Ecosystem type subclasses Index Functional state Overall functional state characteristics of an indicator ecosystem asset (including ecosystem process, Ecosystem condition disturbances regimes) Ecosystem type subclasses Index Landscape/ seascape Overall characteristics of landscape/seascape indicator (including landscape diversity, connectivity fragmentation, embedded semi-natural ele- Ecosystem condition ments in farmland, coastal engineering) Ecosystem type subclasses Index 14.23 Indicators from the monetary ecosystem services flow account and the eco- system asset account. The monetary ecosystem services flow accounts describe the ecosystem services generated by an ecosystem asset in monetary terms. The monetary ecosystem asset account describes the opening and closing exchange value of ecosys- tem assets over an accounting period based on the NPV of the bundles of ecosystem services under their current use/institutional regime. When compiled for multiple years, the asset account records the cost of degradation and/or enhancement (e.g. res- toration) of ecosystem assets that can be identified by exchange value. 14.24 Many SEEA EA indicators in monetary terms are aggregates derived from adding and subtracting relevant entries in individual monetary accounts such as the ecosystem services flow account and the monetary ecosystem asset account. Aggre- gates can be defined in different ways by determining different types of inclusions and exclusions. Other monetary indicators can be derived by comparing aggregates with other economic data such as total value of other assets, expected ecosystem restoration costs or value added of industries dependent on ecosystem services or at risk if ecosys- tem services are lost. Indicators and combined presentations 349 Table 14.3 Potential indicators on physical ecosystem services flows Measure- Physical ecosystem services flow indicators Further description Spatial unit Disaggregation ment unit Amount of biomass harvested, including crops, Biomass provisioning services EAA Ecosystem type; Tons grazed biomass, livestock, wood, non-wood forest type of biomass products and fish Water abstracted for use by households and Water supply services EAA Ecosystem type Cubic industry (proxy measure) metres Quantity of carbon retained (captured and stored/ Global climate regulation services EAA Ecosystem type Tons trend in carbon sequestered) Quantity of airborne pollutants captured (e.g. Air filtration services EAA Ecosystem type; Tons PM10; PM2.5) type of pollutant Quantity of waterborne pollutants removed (e.g. Water purification services EAA Ecosystem type; Tons chemical oxygen demand) from wastewater type of pollutant Number of properties/km of coast/shoreline/ri- Flood mitigation services EAA Ecosystem type Count/km parian zone protected; change in degree of risk Number of tourist/recreational visits Recreation-related services EAA Ecosystem type Count 14.25 Finally, because the data on different ecosystem services and ecosystem types are expressed using a common metric (i.e. currency units), comparisons and ratios can be estimated, for example, showing the relative shares of provisioning, regulating and maintenance, and cultural services. Table 14.4 includes a subset of possible mon- etary aggregates and other indicators. It is relevant to analyse indicators in monetary terms in combination with data in physical terms, for example, in relation to flows of ecosystem services in physical terms or in relation to extent and condition of different ecosystem types. 14.2.4 Indicators from thematic accounts 14.26 In chapter 13, a range of thematic accounts was introduced covering biodiver- sity, climate change, oceans and urban areas. For each of these themes, various data are brought together under an accounting umbrella, demonstrating the potential of the suite of SEEA accounts, including those of the SEEA Central Framework, to pro- vide a broad range of data, which, together with data from other sources including the SNA, can support discussion of these and other themes. Indicators for each theme can be derived based on the considerations outlined in the present chapter. 14.3 Indicator frameworks and SEEA EA 14.3.1 SEEA EA and global indicator monitoring frameworks 14.27 SEEA enables countries to adopt a holistic and integrated approach to develop- ing sets of indicators to support implementation, monitoring and reporting related 162 See Official Records of the to the 2030 Agenda for Sustainable Development and the Kunming-Montreal Global Economic and Social Council, Biodiversity Framework. At its fifty-first session, in March 2020, the Statistical Com- 2020, Supplement No. 4 mission “welcomed the background document on interlinkages…and stressed the (E/2020/24), chap. I, sect. C, decision 51/101, para. (g). Avail- importance of the System of Environmental-Economic Accounting for monitoring able at https://unstats.un.org/ the [Sustainable Development] Goals”.162 At its fifty-second session, in March 2021, unsd/statcom/51st-session/ the Commission “welcomed the progress of the Committee [of Experts on Environ- documents/2020-37-Final- mental-Economic Accounting] in mainstreaming the use of SEEA in policy, includ- Report-E.pdf. 350 System of Environmental-Economic Accounting – Ecosystem Accounting 163 Ibid., 2021, Supplement No. ing climate change, circular economy, sustainable finance and biodiversity policy, and 4 (E/2021/24), chap. I, sect. particularly encouraged the Committee to engage in the monitoring framework of B, decision 52/108, para. (g). the post-2020 global biodiversity agenda and participate in the proposed expert group Available at https://unstats. un.org/unsd/statcom/52nd- under the auspices of the secretariat of the Convention on Biological Diversity to pro- session/documents/2021- vide the connection between the biodiversity and official statistical communities”.163 30-FinalReport-E.pdf. Table 14.4 Potential indicators for monetary ecosystem services flow accounts and ecosystem asset accounts Measure- Monetary indicators Further description Spatial unit Disaggregation ment unit Gross ecosystem product (GEP) GEP is equal to the sum of all ES at their exchange value supplied by all ecosystem types located within an EAA over an account- ing period less the net imports of intermediate Ecosystem type; services (for additional details, see para. 9.18 ecosystem services Local above) EAA classes currency Industry value added linked to Value added of industries with direct inputs of ecosystem services ecosystem services reflecting extent to which economic activities are dependent on ecosys- Local tem services EAA Ecosystem type currency Monetary ecosystem asset value End-of-year monetary ecosystem asset value Local EAA Ecosystem type currency Cost of degradation Reduction in monetary ecosystem asset value EAA Ecosystem type per Local attributable to ecosystem degradation capita for administra- currency tive areas, planning areas 14.28 SEEA provides two general advantages in relation to indicator monitoring frameworks. First, broad coverage by SEEA of environmental and economic topics, inherent connections between stocks and flows and use of physical and monetary data enables those designing and selecting indicators to place different indicators in con- text. Thus, SEEA can allow connections between indicators to be made evident in the development of monitoring frameworks and can be used to support appropriate cov- erage of indicators across relevant themes. Second, SEEA enables countries to use a single, coherent database for reporting to multiple monitoring frameworks. This has the potential to streamline data collection and organization and build more robust and consistent indicator derivations across reporting commitments. 14.29 In discussing the potential of SEEA to support the design and derivation of indicators in different contexts, it must be understood that monitoring frameworks continue to evolve in response to emerging policy demands and as a reflection of wider engagement processes. The present discussion therefore points to potential relation- ships and applications of SEEA. Specific guidance on the links between SEEA and individual monitoring frameworks is being developed progressively. 14.30 Kunming-Montreal Global Biodiversity Framework. The Kunming-Montreal Global Biodiversity Framework builds on the Strategic Plan for Biodiversity 2011– 164 United Nations Environment 2020164 and sets out an ambitious plan for implementing broad-based action to bring Programme, document UNEP/ about a transformation in society’s relationship with biodiversity and to ensure that, CBD/COP/10/27, annex, deci- by 2050, the shared vision of living in harmony with nature is fulfilled. The framework sion X/2, annex. has four long-term goals for 2050 related to the 2050 Vision for Biodiversity and each of those goals has an associated outcome for 2030. The framework also has 21 action- oriented targets for 2030 that will contribute to the achievement of the outcome- Indicators and combined presentations 351 oriented goals for 2030 and 2050. Under each goal and target, there is a set of compo- nents and elements to be monitored in assessing progress towards the achievement of those goals and targets. 14.31 SEEA can support the Kunming-Montreal Global Biodiversity Framework where it concerns measuring ecosystems’ extent, condition and services while also helping to make the case for protecting and conserving biodiversity by providing a full picture of its connection to the economy. In particular, the information gener- ated by SEEA can be used to inform biodiversity policies in an integrated and holistic manner and develop indicators for monitoring progress towards the achievement of biodiversity goals and targets. As described in section 13.3, this can include the use of data from ecosystem extent and condition accounts as inputs into derivation of habitat-based indicators of change in species-level biodiversity. SEEA can also play an important role in streamlining the reporting requirements of countries through the adoption of a common framework. This can in turn facilitate better integration of national and global target tracking. 14.32 Appendix A14.1 contains the 2050 goals and 2030 targets of the Kunming- Montreal Global Biodiversity Framework. SEEA-based accounts can be used to sup- port the monitoring of the framework and to inform policy. 14.33 Sustainable Development Goals. In its resolution 70/1 of 25 September 2015, the General Assembly adopted the 2030 Agenda for Sustainable Develop- ment, in which Heads of State and Government of all of the States Members of the United Nations set out 17 Sustainable Development Goals with 169 associated tar- gets. Those Goals and targets underpin an ambitious plan for achieving sustainable development and serve as the basis for the shaping by countries of their national poli- cies and priorities. At the heart of the 2030 Agenda is the recognition that true devel- opment must combine economic growth and poverty alleviation with strategies that improve health and education and reduce inequality, while also addressing climate change and protecting nature. The interlinked nature of the Sustainable Development Goals calls for an integrated approach to decision-making on policy. As the inter- national statistical standard for describing the relationship between the environment and the economy, SEEA is well positioned to support integrated policies based on a better understanding of the interactions, trade-offs and co-benefits that emerge in evaluating the link between the environment and the economy. 14.3.2 Other indicators and applications 14.34 National indicator initiatives. In addition to supporting global indicator ini- tiatives, SEEA EA enables countries to adopt a holistic and integrated approach to developing sets of indicators that can support reporting on progress towards imple- menting national commitments, policies or strategy. The spatially explicit information generated using SEEA EA enables the effective targeting of policy efforts at both the national and the subnational levels and across terrestrial, freshwater and marine areas. This flexible modular approach allows countries to compile SEEA EA indicators on the basis of national priorities and data availability. 14.35 The connectivity and coherence of information sourced from accounts under the SEEA EA framework and its flexible approach are particularly important when those indicators are designed to support national policies related to sustainable devel- opment and the conservation of ecosystems and biodiversity. 14.36 National indicators that benefit most from having their foundation in SEEA EA include those related to: 352 System of Environmental-Economic Accounting – Ecosystem Accounting • Contribution of ecosystems and their services to the economy, social well- being, jobs and livelihoods • Changes in the condition and health of ecosystems and biodiversity over time and the main locations of degradation and enhancement • Management of natural resources and ecosystems to ensure continued ser- vices and benefits such as energy, food supply, water supply, flood control, carbon storage and recreational opportunities • Progress in efforts towards targeted conservation • Expenditures and the development of economic instruments for conserva- tion of nature • Estimation of a nation’s wealth, including natural capital and economic potential, once the state of nature is considered • Assessment of government performance on sustainable development 14.37 The design and implementation of SEEA EA indicators to support national policy require strategic planning and the establishment of appropriate institutional mechanisms and arrangements for the ongoing compilation of accounts and subse- quent calculation of indicators. Ultimately, the implementation of SEEA EA should support a coordinated long-term national programme of work involving a range of users of the accounts and a number of different source data agencies. The national statistical office (NSO) has a fundamental role to play in coordinating this process. 14.38 Land degradation neutrality (LDN). The structure of SEEA EA, with its emphasis on spatial analysis of ecosystems in terms of their extent and condition and ecosystem services, accords well with data requirements for monitoring LDN. The three global LDN indicators (land cover, land productivity and carbon stocks) that are used to derive Sustainable Development Goal indicator 15.3.1 (proportion of land that is degraded over total land area) can all be derived from existing core SEEA accounts, namely: • SEEA land accounts, which present detailed spatial data on land cover • SEEA ecosystem condition accounts, which measure the overall quality of an ecosystem asset with a range of variables including soil organic carbon, annual net primary productivity and changes in above- and belowground carbon stores • SEEA ecosystem services accounts, which measure the global climate reg- ulation services provided by an ecosystem 14.39 The United Nations Convention to Combat Desertification encourages coun- tries to supplement their monitoring with additional indicators for ecosystem services and social outcomes that address their national or subnational priorities. SEEA align- ment with the SNA means that data organized under the SEEA framework can be integrated and used with existing economic accounts relatively easily. The principle of neutrality usually involves offsetting degradation in some areas with improvements in others, and in this regard information is provided under the comprehensive SEEA framework that can help to identify key trade-offs and to facilitate the spatial targeting of restoration efforts. 14.40 IPBES. The overall objective of the IPBES is to provide policy-relevant knowl- edge on biodiversity and ecosystem services to inform decision-making through four agreed functions: assessment, development of policy support tools, capacity- building and knowledge development. A conceptual framework has been developed to support the analytical work of the Platform; to guide the development, implemen- Indicators and combined presentations 353 tation and evolution of its work programme; and to catalyse a positive transforma- tion of the elements and interlinkages that are the causes of detrimental changes in biodiversity and ecosystems and subsequent loss of their benefits to present and future generations. The conceptual framework includes six interlinked elements constituting a social-ecological system that operates at various scales in time and space. As the SEEA EA ecosystem accounting framework captures many of the ele- ments of the IPBES framework, the potential exists for SEEA EA-based indicators to inform IPBES assessments and related work. 14.41 Convention on Wetlands of International Importance especially as Water- fowl Habitat (Ramsar Convention). At its ninth meeting, held in Kampala from 8 to 15 November 2005, the Conference of the Parties to the Convention on Wetlands adopted resolution IX.1, in which it welcomed an initial set of eight ecological out- come-oriented indicators for assessing the effectiveness of aspects of the Convention’s implementation (presented in annex D to that resolution). The eight indicators, which were available during the 2006–2008 triennium, covered wetland resource status and threats; Ramsar sites – status; Ramsar sites – threats; water quality and quantity status; wetland management; species/biogeographic population status; threatened species; and Ramsar site designation progress. An additional two subindicators were devel- oped to further examine the status of wetlands: status and trends in ecosystem extent, and trends in conservation status. 14.42 A total of 19 targets are specified across the four strategic goals of the Ramsar Convention in the Fourth Strategic Plan of the Convention for the period 2016–2024. In order to track progress towards achievement of the strategic targets of the Conven- tion, a series of indicator-related questions are posed to countries in section 3 of the national report template for the Ramsar Convention, which should be completed for each conference of the contracting parties. A number of indicators have been identi- fied as capable of being supported by SEEA-based accounts: • Change in the extent of wetland ecosystems • Trend in wetland condition • Number of households linked to sewage system • Percentage of sewerage coverage in the country • Number of wastewater treatment plants 14.43 Group on Earth Observations Biodiversity Observation Network (GEO BON). GEO BON is a global network working to improve the acquisition, coordination and delivery of biodiversity observations for decision-making. In representing key biodiver- sity data providers operating at local, national, regional and global scales and through its efforts to design and implement structured and interoperable national biodiversity observation networks, the GEO BON network is of direct utility for the implementa- tion of the SEEA EA process as a whole, in particular with regard to the production of natural capital accounts and related indicators. 14.44 Of particular relevance is the establishment of a scalable and interoperable framework for biodiversity observations, using the concept of essential biodiversity variables (EBVs). The EBVs cover the key dimensions of biodiversity spanning six classes (species populations, species traits, genetic composition, community com- position, ecosystem structure and ecosystem function). EBVs optimize the use of in situ and remote sensing data, predictive models and repeated measures at the same locations for trend detection and attribution of ecosystem change. In addition, a new framework is being developed for essential ecosystem services variables (EESVs) that provides a flexible means of measuring change in a wide range of material, non-mate- 354 System of Environmental-Economic Accounting – Ecosystem Accounting rial and cultural services provided by biodiversity and ecosystems. The interactions and dynamics within and across biodiversity, ecosystem functions and ecosystem services – involving ecological as well as socioecological feedbacks – can be assessed using relevant sets of EBVs and EESVs. 14.45 The EBVs and EESVs are being implemented through structured and repeat- able workflows that can be applied at multiple scales that connect primary observa- tion data to multiple biodiversity information products. Those workflows are being utilized to develop a new suite of time-series indicators for tracking status of and trends in key dimensions of biodiversity change and patterns. Therefore, both the EBVs themselves and their integrated outputs (e.g. indicators) are of direct relevance to many of the indicators associated with the SEEA EA indicators initiative. Through the SEEA EA framework, which supports open, standardized and interoperable indi- cator development, EBVs and EESVs can provide underlying data products to inform a wide range of policy frameworks, including the Convention on Biological Diversity, the Sustainable Development Goals and multilateral environmental agreements. Continuous interactions and exchange between biodiversity data developers and a range of statistics authorities, extending from the national to the global level, will be instrumental in generating demand-driven, science-based and timely SEEA EA indicators in a coherent and consistent manner across scales and sectors. Kim and others (forthcoming) provide a detailed assessment of the potential connections between SEEA EA and GEO BON. 14.46 Global Ocean Observing System. The Global Ocean Observing System (GOOS) was established in 1991 by States members of the Intergovernmental Oceano- graphic Commission (United Nations Educational, Scientific and Cultural Organi- zation (UNESCO)). It is co-sponsored by the World Meteorological Organization, the United Nations Environment Programme (UNEP) and the International Science Council. The GOOS community and its partners have coordinated development of global ocean climate observing and information products. Over the last decade, GOOS has been developing an integrated global observing system incorporating biol- ogy, ecosystems and ocean health. 14.47 GOOS is responsible for developing and expanding the set of essential ocean variables (EOVs) and the marine essential climate variables (ECVs). The physical and biogeochemical EOVs measure the physical and chemical condition of marine eco- systems and can support potential indicators on the condition of marine and coastal ecosystems following table 14.2. Biological EOVs measure the extent and condition of marine ecosystems of particular relevance to countries reporting to global environ- mental conventions. Both EOVs and ECVs can align to classifications under IUCN GET. They support global carbon modelling, investments in blue carbon and selection of natural ecosystems for derivation of headline indicators for the Kunming-Montreal Global Biodiversity Framework. They can also serve as potential indicators on ecosys- tem extent and condition and ecosystem services flows for SEEA EA (tables 14.1, 14.2 and 14.3). GOOS works closely with the Marine Biodiversity Observation Network of GEO BON, as biological EOVs provide the underlying data from which marine EBVs will be computed. 14.48 Biodiversity Finance Initiative (BIOFIN). BIOFIN has adopted an innovative approach that enables countries to measure their current biodiversity expenditures, assess their financial needs in the medium term and identify the most suitable finance solutions for bridging their national biodiversity finance gaps. BIOFIN, which is cur- rently active in 30 countries, has produced intermediate guidance on the categoriza- tion of biodiversity expenditures based on nine categories. Indicators and combined presentations 355 14.49 Work is under way to harmonize the classification system for biodiversity expenditures between BIOFIN, the Environmental Expenditure Accounts of the SEEA Central Framework and the Sustainable Development Goal indicators related to expenditure on conservation and sustainable use of biodiversity and ecosystems. 14.50 Inclusive wealth. The inclusive wealth index is a sustainability index that meas- ures wealth using countries’ natural, manufactured, human and social capital. This can be used to complement existing national accounts including measures of GDP. The inclusive wealth index incorporates natural capital, human capital (e.g. educa- tion, wealth) and produced capital (e.g. equipment, machineries, roads), while also recognizing changing factors such as carbon damage, oil capital gains and total factor productivity. These factors are measured within countries and therefore show rates at national levels. The monetary value of ecosystem assets derived from the SEEA EA monetary ecosystem asset account can support measures of the natural capital com- ponent of inclusive wealth, reflecting the recognition that monetary values based on shadow prices may be appropriate depending on the analytical context (see chap. 12). 14.51 Biophysical modelling. Modelling for SEEA EA is important, as there are sev- eral challenges in assembling ecosystem accounts in order to derive indicators. First, the data needed to assemble ecosystem accounts are not typically captured in data sources that are relied on by statistical offices, such as surveys, administrative data and censuses. The second challenge is that SEEA EA is a spatially explicit framework, which ultimately requires mapping of both ecosystems and ecosystem services. Conse- quently, even measurements of ecosystem services that are regularly collected through household or agricultural surveys need to be spatially explicit. Finally, reporting envi- ronmental data in a way that can be integrated into accounting frameworks without oversimplifying complex ecological and socioeconomic processes underpinning eco- system services presents a challenge. SEEA EA represents an attempt to merge disci- plinary perspectives from ecology, economics and accounting by providing a spatially explicit accounting framework for ecosystem services, while at the same time avoiding double counting of the economic contributions of ecosystem benefits. 14.52 Biophysical modelling can fill gaps where information is not readily available, as well as spatially allocate data that are not regularly spatially explicit. Diverse models and tools for estimating the physical supply of ecosystem services have proliferated over the past decade and are quickly evolving, which means compilation of ecosys- tem accounts by statistical agencies is becoming increasingly feasible. While most bio- physical models were not developed specifically for accounting, many models produce results that can be used directly in SEEA EA or modified for use in SEEA EA. Identify- ing which tools and modelling platforms produce results that align with SEEA EA can facilitate faster adoption of ecosystem accounts. 14.53 Scenario analysis. SEEA EA can be deployed in the application of scenario analysis to support policymaking. The increasing interconnectedness among the natural environment, human societies and their economies implies new challenges and opportunities for policymakers. To take adequate account of such complexities, policymakers require new sources of data and indicators, based on coherent statistical frameworks, that can be transformed into decision-relevant information through the application of innovative, sophisticated modelling techniques. 14.54 The creation and quantification of various scenarios with mathematical simu- lation models allow for the creation of quantitative estimates under those scenarios (e.g. for implementing or not implementing a proposed policy) that can be used to inform the policymaking process. This type of exercise is known as policy scenario analysis, which is aimed at informing decision-making by utilizing scenarios to assess 356 System of Environmental-Economic Accounting – Ecosystem Accounting the outcomes and effectiveness of various policy intervention options. A technical report on Policy Scenario Analysis Using SEEA Ecosystem Accounting (United Nations, Department of Economic and Social Affairs, Statistics Division, and United Nations 165 See https://seea.un.org/ Environment Programme, 2021)165 and an IPBES report on scenario analysis (2016) content/policy-scenario-anal- are sources of further details on this area of work. ysis-using-seea-ecosystem- accounting. 14.55 By providing a standardized approach using consistent and coherent data and by targeting policy relevance and the involvement of local stakeholders in policy analysis, SEEA EA can support use of accounts, further development of modelling approaches and creation of new models, all with the ultimate goal of informing policy decisions. This can be achieved through: • Creation of new knowledge regarding ecosystems and how through their extent and quality they provide services that benefit communities and human well-being. This allows for the incorporation of ecosystems in social and economic assessments • Creation of coherent and harmonized accounts, allowing for the develop- ment of new models that can make use of such a data framework • Promotion of the use of a systemic approach that assesses (a) the impact of human activity on ecosystems and (b) models that determine the extent to which ecosystems influence human health and human activity • Application of standard approaches to valuation of ecosystem services and ecosystem assets based on exchange values • Improvement in the analysis performed with sectoral models by introduc- ing physical indicators on ecosystem extent and condition and ecosystem services • Generation of knowledge on how existing models could be interconnected so as to better represent the relations between society, the economy and the environment • Use of simulations extending the analysis provided by SEEA through fore- casting or back-casting scenarios • Making explicit the importance of site-specific drivers of change, system responses and impacts, using a spatially explicit analysis that allows users to determine the value of ecosystem services based on the location at which they are used and thereby assess more explicitly demand and supply 14.4 Combined presentations for ecosystem accounting 14.4.1 Introduction 14.56 The presentation of data in a format that combines both physical and mone- tary data is one of the strongest features of SEEA. In chapter VI of the SEEA Central Framework, combined presentations are introduced as a means of summarizing data from various accounts and linking those data to other relevant data, for exam- ple, on population or employment. In the context of SEEA EA, combined presenta- tions are intended to show changes in stocks and flows of ecosystems in terms of standard measures of economic activity, without necessarily undertaking the valu- ation of ecosystem services and ecosystem assets in monetary terms. Further, there is room for considerable flexibility in the design of combined presentations. The descriptions given below focus on common areas of interest rather than on provid- ing an exhaustive list. Indicators and combined presentations 357 14.57 While they do not encompass a full integration of information in account- ing terms, combined presentations can support a more informed discussion of the relationship between ecosystems and economic activity in a manner that takes into account spatial and environmental contexts. Further, they may help to support the presentation of indicators for monitoring trends in ecosystem-related outcomes. 14.58 In the present section, specific topics are introduced that might be the focus of a combined presentation. In selecting the relevant variables to be included in a combined presentation, it is necessary to keep in mind a specific question or focus of analysis such that the variables selected can be shown to be contributing to a broader narrative, which thereby contextualizes those variables. For this purpose, it may be relevant to apply indicator frameworks such as the long-standing driving forces-pressure-state- impact-response (DPSIR) framework (European Environment Agency, 1999) or more recently developed frameworks, such as the environmental sustainability gap frame- work or the natural capital indicator framework. The links between the DPSIR frame- work and SEEA are considered in this section to provide examples of the possibilities for applying an indicator framework. It should be noted that SEEA does not advocate for any specific indicator framework. 14.4.2 Information on environmental activities 14.59 There may be particular interest in combining information on ecosystem ser- vices and ecosystem assets with information on expenditure on environmental protec- tion or resource management. If the information on relevant activities is organized so as to refer to the same spatial areas and/or ecosystem types, this would facilitate the monitoring of the effect of expenditures on changes in ecosystems.166 For example, 166 It may be difficult to allo- information showing expenditure to restore coastal wetlands may be combined with cate survey data collected information on associated changes in ecosystem condition and in associated ecosys- at national level to specific ecosystem assets. Therefore, it tem services linked to improved ecosystem condition. may be necessary to con- sider alternative approaches 14.60 As defined in the SEEA Central Framework, environmental activities are to collecting information on economic activities that have as their primary purpose either environmental pro- site-specific expenditures, for tection (prevention, reduction and elimination of pollution and other forms of example, through administra- tive sources. degradation) or resource management (preserving and maintaining the stock of natural resources).167 167 For further details, see chap. IV 14.61 Information gathered on actual expenditure on restoring ecosystem assets of the SEEA Central Framework. might be complemented over time by information on flows of ecosystem services, through which a more complete picture of the relationships between ecosystem con- dition and ecosystem services could emerge. Further, links may be established with analysis of positive and negative externalities, ecosystem disservices and the extent to which expenditures and other policy responses reduce any negative effects. Indeed, one of the key roles of the ecosystem accounting model is to facilitate the organization of these types of data and thereby furnish support for more detailed analyses. 14.62 The compilation of targeted statistics on the production of ecosystem-related environmental goods and services, using the framework of environmental goods and services sector (EGSS), may also be of interest. These statistics would provide infor- mation, for example, on the share of overall value added contributed to the economy through the production of goods and services related to ecosystems and biodiversity (sometimes referred to as the biodiversity economy). 358 System of Environmental-Economic Accounting – Ecosystem Accounting 14.4.3 Economic dependence on ecosystems 14.63 Although the focus of ecosystem accounting is on the services provided by eco- systems, there is also interest in understanding the significance of the relationship between ecosystems and standard measures of economic activity, such as GDP. For example, it may be of interest to understand the dependency of current measures of agricultural production on ecosystem services such as pollination. While such depend- ency measures could be focused on direct impact (e.g. GDP “at risk” in the absence of the pollination service), they might also take indirect (or supply chain) effects into account by measuring multiplier effects within the economy, using the extended SUT described in chapter 11. In situations where the total contribution of ecosystem ser- vices (expressed as percentage of GDP) is low, it is possible that economic dependency could still be very high. 14.64 It should be accepted that the allocation of economic activity to subnational spatial areas (such as administrative regions or catchments) can involve conceptual difficulties. Therefore, it may be most useful to commence with identification of meas- ures of economic activity for those industries and activities – for example, agricul- ture, forestry, fishing and tourism – for which a clear link can be established between an ecosystem and the location of production. Further economic connections may be identified by tracing supply chains. 14.4.4 Information on policy instruments 14.65 Where links between economic units and particular ecosystems can be estab- lished, it is possible to consider integrating information on a range of other transac- tions that may occur in relation to economic activity. For example, data on payments of certain environmental taxes, payments of rent on natural resources, payments of environmental subsidies and similar transfers may be presented alongside standard economic indicators and indicators of ecosystem services and assets to provide a more complete picture of the relationships between a given ecosystem and the economy. From a general environmental management perspective, a comparison of environ- mental expenditures and environmentally related revenues may also be of interest. 14.4.5 Using the DPSIR framework 14.66 A number of indicators for the analysis of various topics can be described using the DPSIR framework (European Environment Agency, 1999), which describes a step- wise causal chain linking economic activity and impacts on nature. The DPSIR indica- tors that are most improved as a result of being derived from SEEA EA accounts are for the most part those indicators characterized as state or impact indicators in the DPSIR framework. By extending the scope of analysis and by integrating statistics and indi- cators from the SEEA Central Framework and other socioeconomic dimensions with SEEA EA, SEEA lends itself to the derivation of a wide range of important indicators that are considered to be policy-relevant and that can also be communicated using the DPSIR framework. 14.67 Driving forces indicators. Driving forces are anthropogenic activities that exert pressure on ecosystems. Indicators for driving forces describe social, demo- graphic and economic developments in societies and the corresponding changes in consumption and production patterns. Primary driving forces are population growth and developments in the demand and consumption/production activities of economic agents. Such changes exert pressure on ecosystems. Examples of indica- tors of driving forces acting on ecosystems within the general context of SEEA are presented in table 14.5. Indicators and combined presentations 359 Table 14.5 Possible SEEA-based driving forces indicators Related SEEA accounts, and statistics from other Type Indicators Spatial unit dimensions Combined Population per hectare of ecosys- Ecosystem type Ecosystem extent account; presentation tem type population statistics disaggre- gated by ecosystem type Combined Resource intensity in an EAA EAA Ecosystem extent account; SEEA presentation (i.e. ratio of natural resources such Central Framework physi- as water used to an economic cal flow accounts; economic variable such as output, income or statistics value added) 14.68 Pressure indicators. Pressures are direct stresses to ecosystems arising from anthropogenic activities such as emissions to air, water and waste and the release of excessive nutrients. The pressures exerted by the driving forces are transformed in a variety of biophysical and ecological processes so as to manifest themselves in changes in ecosystem conditions. Example of indicators for pressure exerted on ecosystems within the general context of SEEA are presented in table 14.6. 14.69 State indicators. State indicators give a description of the quantity and qual- ity of physical, biological or chemical phenomena in a certain area. In the context of SEEA EA, they refer to the state of ecosystems in terms of extent, condition and capac- ity to provide services to humanity and conditions in the environment. Indicators derived from the ecosystem extent and condition accounts of SEEA EA are considered state indicators. Table 14.6 Possible SEEA-based pressure indicators Related SEEA accounts, and statistics from other Type Indicators Spatial unit dimensions Combined Hazardous waste generated per Ecosystem type Ecosystem extent account; SEEA presentation industry sector solid waste accounts Combined GHG emission per industry sector Ecosystem type Ecosystem extent account; SEEA presentation CF air emission account Combined Water emission (biological oxygen Ecosystem type Ecosystem extent account; SEEA presentation demand/chemical oxygen demand, CF water emission account phosphorus, nitrogen, etc.) per industry sector 14.70 Impact indicators. Changes in the state of environment due to natural changes, pressures on the environment or human intervention have impacts on the social and economic functions of the environment. Impact indicators from SEEA EA include measures of changes in ecosystems and human systems, for example, with respect 360 System of Environmental-Economic Accounting – Ecosystem Accounting to provision of ecosystem services and degradation of ecosystems. Indicators derived from the physical and monetary ecosystem services flow account as well as the mon- etary ecosystem asset account of SEEA EA are considered impact indicators. Some examples are shown in table 14.7. Other types of impact indicators within the general context of SEEA include: • Indicators derived from integrated and extended accounting (chap. 11 of SEEA EA) • Indicators derived from the combination of physical and monetary accounts • Indicators measuring economic dependence on ecosystems • Indicators derived from analytical models using SEEA data for the analysis of consumption and production pattern (e.g. footprint-type indicators) 14.71 Response indicators. Responses are management actions aimed at addressing environmental problems in order to prevent, compensate for, ameliorate or adapt to changes in the state of the environment. Possible SEEA-based response indicators are presented in table 14.8. Types of potential response indicators within the SEEA context would cover the following areas: • Environmental activities and EGSS • Tax and expenditure, encompassing, for example, environmental protec- tion and resource management expenditures and environmental taxes • Policy instruments designed to safeguard ecosystem condition Table 14.7 Possible SEEA-based impact indicators Related SEEA accounts, and statistics from other Type Indicators Spatial unit dimensions Integrated NDP adjusted for cost of EAA Extended sequence of accounts and extended degradation accounting Combined Area of ecosystem that has seen an Ecosystem type Ecosystem extent account; presentation increase in condition ecosystem condition account Combined GEP per hectare of ecosystem type Ecosystem type Ecosystem extent account; presentation monetary ecosystem services flow account Combined Ratio of ecosystem asset value to Ecosystem type Monetary ecosystem services presentation service value flow account; monetary ecosys- tem asset account; Economic Economic activity dependent on EAA Monetary ecosystem services dependence on nature (e.g. value of ecosystem flow accounts; SNA; industrial ecosystem services linked to industry value statistics added) Environmen- Ecosystem footprints (e.g. flows of EAA Monetary ecosystem services tally extended carbon, water or ecosystem services flow accounts; Input-output multi-regional embodied in a country’s imports analysis input-output and exports of goods and services) analysis Indicators and combined presentations 361 Table 14.8 Possible SEEA-based response indicators Related SEEA accounts, and statistics from other Type Indicators Spatial unit dimensions Environmental Value added and employment Ecosystem type EGSS; SNA; economic activities generation by the EGSS per eco- statistics system type Tax and Return on biodiversity expendi- EAA Ecosystem condition expenditure ture (change in ecosystem condi- account; environmental tion index per dollar spent) protection and expenditure account Tax and Biodiversity-related environmen- EAA Accounting for environmen- expenditure tal tax tal taxes Policy Integration of biodiversity into instrument national accounting and reporting systems, defined as implementa- tion of SEEA 363 Appendix A14.1 SEEA EA and the post-2020 global biodiversity framework 168 168 The present appendix is based on a possible set of headline indicators as of July 2021, which are still under consid- eration by the Conference of the Parties to the Convention A14.1 The role of the official statistical community and the value of SEEA in moni- on Biological Diversity. The toring the post-2020 global biodiversity framework and mainstreaming biodiversity post-2020 global biodiver- in national statistical systems are recognized at a political level. At its twenty-fourth sity framework was formerly meeting, the Subsidiary Body on Scientific, Technical and Technological Advice under known as the Kunming-Mon- the Convention on Biological Diversity reviewed the following documents: “Post- treal Global Biodiversity Framework. 2020 global biodiversity framework: scientific and technical information to support the review of the updated goals and targets, and related indicators and baselines” (CBD/SBSTTA/24/3)169 and “Proposed indicators and monitoring approach for the 169 Available at www.cbd. post-2020 global biodiversity framework” (CBD/SBSTTA/24/3/Add.1).170 Document int/doc/c/705d/6b4b/ CBD/SBSTTA/24/3 included a recommendation that, at its fifteenth meeting, the a1a463c1b19392bde6fa08f3/ sbstta-24-03-en.pdf. Conference of the Parties to the Convention adopt a decision in which it would: 170 Available at www.cbd. • Adopt the monitoring framework for the post-2020 global biodiversity int/doc/c/ddf4/06ce/ framework f004afa32d48740b6c21ab98/ sbstta-24-03-add1-en.pdf. • Welcome the work of the Statistics Division of the United Nations Secre- tariat on developing statistical standards for measuring biodiversity, the environment and their relationship with socioeconomic development, as well as its support to NSOs engaging in the process for monitoring biodi- versity • Invite the United Nations Statistical Commission to support the opera- tionalization of the monitoring framework for the post-2020 global biodi- versity framework • Recognize the value of aligning national monitoring with the United Nations System of Environmental-Economic Accounting statistical standard in order to mainstream biodiversity in national statistical sys- tems and to strengthen national monitoring systems and reporting A14.2 A monitoring framework composed of the following three groups of indicators is proposed for monitoring the implementation of the post-2020 global biodiversity framework: • Group 1: headline indicators. A minimum set of high-level indicators that capture the overall scope of the goals and targets of the post-2020 global biodiversity framework to be used for tracking national progress as well as regional and global progress. These indicators could also be used for com- munication purposes. In addition, some countries may wish to use a subset of these indicators or only the goal-level headline indicators for high-level communication and outreach • Group 2: component indicators. A set of indicators for monitoring each component of each goal and target of the post-2020 global biodiversity 364 System of Environmental-Economic Accounting – Ecosystem Accounting framework at the national level as well as for tracking regional and global progress • Group 3: complementary indicators. A set of indicators for thematic or in-depth analysis of each goal and target and which are less relevant for a majority of countries; have significant methodological or data-collection gaps; are highly specific and do not cover the scope of a goal or target com- ponent; or can be applied only at the global and regional levels A14.3 Within these three groups, different types of indicators are proposed for the goals and targets of the post-2020 global biodiversity framework. The indicators pro- posed for the goals focus on the status and trends in biodiversity, including the ben- efits provided by biodiversity to people and the conditions necessary for achieving the framework. The indicators proposed for the targets aim towards monitoring the 171 See the note by the Executive actions taken to reach those targets and their impacts. Secretary of the Conven- tion on Biological Diversity A14.4 With regard to the selection of headline indicators, priority has been given to entitled “Proposed headline indicators that have been agreed through an established scientific or intergovernmen- indicators of the monitoring tal process and where there is an existing body that will continue to review the indi- framework for the ost-2020 cator. An effort was made to align with the intergovernmental processes under the global biodiversity framework” United Nations Statistical Commission, including the Sustainable Development Goals (CBD/WG2020/3/3/Add.1). Available at www.cbd.int/ or SEEA.171 doc/c/ d716/da69/5e81c8e0fac A14.5 The discussion on the headline indicators for the post-2020 global biodiversity a1db1dd145a59/wg2020-03- 03-add1-en.pdf. framework is ongoing. It is to be noted that SEEA is recognized as the methodologi- cal basis for the headline indicators on at least six goals and targets in the monitoring framework (goals A and B; and targets 9, 11, 14 and 19). Selected proposed headline 172 Ibid. indicators that can be derived from SEEA accounts are listed directly below:172 • Extent of selected natural and modified ecosystem (i.e. forest, savannas and grasslands, wetlands, mangroves, salt marshes, coral reefs, seagrass, macroalgae and intertidal habitats) • National environmental-economic accounts of ecosystem services • National GHG inventories from land use and land-use change • National environmental-economic accounts of benefits from use of wild species • National environmental-economic accounts of regulation of air quality, quality and quantity of water, and protection from hazards and extreme events for all people, from ecosystems • Average share of the built-up area of cities that is green/blue space for pub- lic use for all • Integration of biodiversity into national accounting and reporting systems, defined as implementation of SEEA • Material footprint per capita • Public expenditure and private expenditure on conservation and sustain- able use of biodiversity and ecosystems A14.6 Building on this discussion, tables A14.1.1 and A14.1.2 list, respectively, the 2050 goals and 2030 targets under the post-2020 global biodiversity framework that may be informed by the use of SEEA-based accounts. Appendix A14.1: SEEA EA and the post-2020 global biodiversity framework 365 Table A14.1.1 Potential indicators for the 2050 goals (including links to related Sustainable Development Goal indicators) Goal Relevant SEEA accounts A. The integrity, connectivity and resilience of all ecosystems are Goal A, which monitors the size of natural ecosystems and condition of ecosystems in maintained, enhanced, or restored, substantially increasing the terms of their connectivity and integrity as well as the status and trends of threatened area of natural ecosystems by 2050; species, can be informed by indicators from ecosystem extent accounts, ecosystem Human induced extinction of known threatened species is condition accounts and species accounts of SEEA EA halted, and, by 2050, the extinction rate and risk of all species are reduced tenfold and the abundance of native wild species is increased to healthy and resilient levels; The genetic diversity within populations of wild and domes- ticated species, is maintained, safeguarding their adaptive potential. B. Biodiversity is sustainably used and managed and nature’s Goal B, which monitors nature’s contribution to people and benefits from ecosystems contributions to people, including ecosystem functions and and biodiversity and their sustainable use, can be informed by indicators from physi- services, are valued, maintained and enhanced, with those cur- cal and monetary ecosystem services flow accounts of SEEA EA rently in decline being restored, supporting the achievement of sustainable development for the benefit of present and future generations by 2050. D. Adequate means of implementation, including financial Goal D, which monitors the means of implementation for the post-2020 framework, resources, capacity-building, technical and scientific coopera- can be informed by indicators from the environmental protection expenditure ac- tion, and access to and transfer of technology to fully imple- counts of the SEEA Central Framework ment the Kunming-Montreal Global Biodiversity Framework are secured and equitably accessible to all Parties, especially developing country Parties, in particular the least developed countries and small island developing States, as well as coun- tries with economies in transition, progressively closing the biodiversity finance gap of $700 billion per year, and aligning financial flows with the Kunming-Montreal Global Biodiversity Framework and the 2050 Vision for biodiversity. Table A14.1.2 Connecting SEEA accounts to the 2030 targets Target Relevant SEEA accounts 2. Ensure that by 2030 at least 30 per cent of areas of degraded terrestrial, Target 2, which monitors the area of degraded ecosystems under ecosystem inland water, and marine and coastal ecosystems are under effective restoration, can be informed by indicators deriving from a combination of restoration, in order to enhance biodiversity and ecosystem functions ecosystem extent accounts and ecosystem condition accounts of SEEA EA and services, ecological integrity and connectivity. 3. Ensure and enable that by 2030 at least 30 per cent of terrestrial and Target 3, which monitors the extent and condition of protected areas, can be inland water areas, and of marine and coastal areas, especially areas informed by indicators from protected area accounts based on SEEA EA of particular importance for biodiversity and ecosystem functions and services, are effectively conserved and managed through ecologically representative, well-connected and equitably governed systems of protected areas and other effective area-based conservation measures, recognizing indigenous and traditional territories, where applicable, and integrated into wider landscapes, seascapes and the ocean, while ensuring that any sustainable use, where appropriate in such areas, is fully consistent with conservation outcomes, recognizing and respecting the rights of indigenous peoples and local communities, including over their traditional territories. 4. Ensure urgent management actions to halt human induced extinction Target 4, which monitors management actions for the recovery and conser- of known threatened species and for the recovery and conservation of vation of wild species of fauna and flora, can be informed by indicators from species, in particular threatened species, to significantly reduce extinction the species accounts of SEEA EA. Indicators that measure the status and risk, as well as to maintain and restore the genetic diversity within and be- trend of species can also be integrated into ecosystem condition accounts of tween populations of native, wild and domesticated species to maintain SEEA EA to derive broader measures of sustainability their adaptive potential, including through in situ and ex situ conservation and sustainable management practices, and effectively manage human- wildlife interactions to minimize human-wildlife conflict for coexistence. 366 System of Environmental-Economic Accounting – Ecosystem Accounting Table A14.1.2 Connecting SEEA accounts to the 2030 targets (Continued ) Target Relevant SEEA accounts 5. Ensure that the use, harvesting and trade of wild species is sustainable, Target 5, which monitors the sustainable and safe harvesting and use of wild safe and legal, preventing overexploitation, minimizing impacts on species of fauna, can be informed by indicators from physical ecosystem non-target species and ecosystems, and reducing the risk of pathogen services flow account of SEEA EA spillover, applying the ecosystem approach, while respecting and protecting customary sustainable use by indigenous peoples and local communities. 6. Eliminate, minimize, reduce and or mitigate the impacts of invasive Target 6, which monitors the rate of introduction of invasive alien species alien species on biodiversity and ecosystem services by identifying and can be integrated into the ecosystem condition accounts of SEEA EA to managing pathways of the introduction of alien species, preventing derive broader measures of sustainability the introduction and establishment of priority invasive alien species, reducing the rates of introduction and establishment of other known or potential invasive alien species by at least 50 per cent by 2030, and eradicating or controlling invasive alien species, especially in priority sites, such as islands. 7. Reduce pollution risks and the negative impact of pollution from all Target 7, which monitors the effects of levels of pollution on ecosystems and sources by 2030, to levels that are not harmful to biodiversity and eco- biodiversity, can be informed by indicators deriving from a combination of system functions and services, considering cumulative effects, including: ecosystem condition accounts of SEEA EA and residual flow accounts of the (a) by reducing excess nutrients lost to the environment by at least SEEA Central Framework half, including through more efficient nutrient cycling and use; (b) by reducing the overall risk from pesticides and highly hazardous chemicals by at least half, including through integrated pest management, based on science, taking into account food security and livelihoods; and (c) by preventing, reducing, and working towards eliminating plastic pollution. 8. Minimize the impact of climate change and ocean acidification on Target 8, which monitors climate change mitigation and adaptation through biodiversity and increase its resilience through mitigation, adaptation, nature-based solutions and ecosystems-based approaches, can be informed and disaster risk reduction actions, including through nature-based so- by indicators from physical ecosystem services flow accounts of SEEA EA lutions and/or ecosystem-based approaches, while minimizing negative and fostering positive impacts of climate action on biodiversity. 9. Ensure that the management and use of wild species are sustainable, Target 9, which monitors the benefits from ecosystem and biodiversity for thereby providing social, economic and environmental benefits for peo- people, can be informed by indicators from a combination of physical and ple, especially those in vulnerable situations and those most dependent monetary ecosystem services flow accounts for SEEA EA and socioeconomic on biodiversity, including through sustainable biodiversity-based activi- statistics ties, products and services that enhance biodiversity, and protecting and encouraging customary sustainable use by indigenous peoples and local communities. 10. Ensure that areas under agriculture, aquaculture, fisheries and forestry Target 10, which monitors the productivity, sustainability and resilience of are managed sustainably, in particular through the sustainable use of ecosystems and biodiversity in agricultural and other managed ecosystems, biodiversity, including through a substantial increase of the application can be informed by indicators from a combination of ecosystem condition of biodiversity friendly practices, such as sustainable intensification, and physical and monetary ecosystem services flow accounts for cultivated/ agroecological and other innovative approaches, contributing to the managed ecosystems of SEEA EA resilience and long-term efficiency and productivity of these production systems, and to food security, conserving and restoring biodiversity and maintaining nature’s contributions to people, including ecosystem func- tions and services. 11. Restore, maintain and enhance nature’s contributions to people, includ- Target 11, which monitors the regulation of air and water flows and the ing ecosystem functions and services, such as the regulation of air, water mitigation of extreme events by ecosystems, can be informed by indicators and climate, soil health, pollination and reduction of disease risk, as well from physical ecosystem services flow accounts of SEEA EA as protection from natural hazards and disasters, through nature-based solutions and/or ecosystem-based approaches for the benefit of all people and nature. 12. Significantly increase the area and quality, and connectivity of, access Target 12, which monitors the benefits from biodiversity and green/blue to, and benefits from green and blue spaces in urban and densely spaces for human health and well-being, can be informed by a combination populated areas sustainably, by mainstreaming the conservation and of urban accounts, ecosystem condition accounts and physical ecosystem sustainable use of biodiversity, and ensure biodiversity-inclusive urban services flow accounts of SEEA EA planning, enhancing native biodiversity, ecological connectivity and integrity, and improving human health and well-being and connection to nature, and contributing to inclusive and sustainable urbanization and to the provision of ecosystem functions and services. Appendix A14.1: SEEA EA and the post-2020 global biodiversity framework 367 Table A14.1.2 Connecting SEEA accounts to the 2030 targets (Continued ) Target Relevant SEEA accounts 14. Ensure the full integration of biodiversity and its multiple values into Target 14, which monitors the status of integration and mainstreaming of policies, regulations, planningand development processes, poverty biodiversity, can be informed by the global assessment of SEEA that meas- eradication strategies, strategic environmental assessments, environ- ures the integration of biodiversity into national accounting and reporting mental impact assessments and, as appropriate, national accounting, systems, defined as implementation of SEEA within and across all levelsof government and across all sectors, in particular those with significant impacts on biodiversity, progressively aligning all relevant public and private activities, and fiscal and financial flows with the goals and targetsof this framework. 16. Ensure that people are encouraged and enabled to make sustainable Target 16, which monitors unsustainable consumption patterns, can be consumption choices, including by establishing supportive policy, informed by footprint indicators deriving from environmentally extended legislative or regulatory frameworks, improving education and access to input-output analysis using indicators from SEEA as the input data relevant and accurate information and alternatives, and by 2030, reduce the global footprint of consumption in an equitable manner, including through halving global food waste, significantly reducing overconsump- tion and substantially reducing waste generation, in order for all people to live well in harmony with Mother Earth. 19. Substantially and progressively increase the level of financial resources Target 19, which monitors financial resources for the implementation of the from all sources, in an effective, timely and easily accessible manner, post-2020 framework, can be informed by indicators from the environmen- including domestic, international, public and private resources, in tal protection expenditure accounts of the SEEA Central Framework accordance with Article 20 of the Convention, to implement national biodiversity strategies and action plans, mobilizing at least $200 billion per year by 2030, including by: (a) Increasing total biodiversity related international financial re- sources from developed countries, including official development assistance, and from countries that voluntarily assume obligations of developed country Parties, to developing countries, in particular the least developed countries and small island developing States, as well as countries with economies in transition, to at least $20 billion per year by 2025, and to at least $30 billion per year by 2030; (b) Significantly increasing domestic resource mobilization, facilitated by the preparation and implementation of national biodiversity finance plans or similar instruments according to national needs, priorities and circumstances; (c) Leveraging private finance, promoting blended finance, imple- menting strategies for raising new and additional resources, and encouraging the private sector to invest in biodiversity, including through impact funds and other instruments; (d) Stimulating innovative schemes such as payment for ecosystem services, green bonds, biodiversity offsets and credits, and benefit- sharing mechanisms, with environmental and social safeguards; (e) Optimizing co-benefits and synergies of finance targeting the biodiversity and climate crises; (f) Enhancing the role of collective actions, including by indigenous peoples and local communities, Mother Earth centric actions[1] and non-market-based approaches including community based natural resource management and civil society cooperation and solidarity aimed at the conservation of biodiversity; (g) Enhancing the effectiveness, efficiency and transparency of re- source provision and use. 369 Annex I SEEALand – a stylized example of ecosystem accounting Background The stylized example described in the present annex is intended to support the under- standing and interpretation of the concepts described in System of Environmental- Economic Accounting – Ecosystem Accounting (SEEA EA). Since there are a wide variety of combinations of ecosystem types and ecosystem services that are present in different locations, there is no attempt in this annex to provide an example that might be considered universally applicable. Consequently, this example demonstrates accounting for a limited set of ecosystem types and ecosystem services. It is expected, however, that the principles underpinning this limited example can be generalized to apply to more complex situations at the national level or to other EAAs. In addition to the example provided here, there is a complementary online spreadsheet available, together with the present publication, on the SEEA website.a a See https://seea.un.org/ecosys- The spreadsheet demonstrates the accounting relationships and relevant calculations tem-accounting. more explicitly. It is expected that over time this spreadsheet will be further developed to encompass a wider range of accounting contexts. With respect to the estimates provided for the accounts in this example, there is no direct or implied connection made to specific data sources, that is, it is assumed in the presentation that account-ready data are available for incorporation into the accounts. Of course, generally, this will not be the case in practice and significant work is likely to be needed in collecting and organizing relevant data for use in accounting, some of which is outlined in the Guidelines on Biophysical Modelling for Ecosystem Accounting (United Nations, Department of Economic and Social Affairs, Statistics Division, 2022a) and the Monetary Valuation of Ecosystem Services and Ecosystem Assets for Ecosystem Accounting. Interim Report (United Nations, Department of Economic and Social Affairs, Statistics Division, 2022b). Finally, this example does not extend to the description of the range of accounts that could be compiled to complement the five main ecosystem accounts. For example, thematic accounts, such as those for carbon, water or species, are not included. The development of such accounts to complement these ecosystem accounts may be devel- oped in the online spreadsheet at a later stage. General context and assumptions for the stylized example The following ecosystem accounts have been compiled for the EAA of “SEEALand ”. The opening of the accounting period for the accounts is 1 January 2020 and the clos- ing of the accounting period is 31 December 2020. There are six ecosystem types in SEEALand that are classified following the International Union for Conservation of Nature Global Ecosystem Typology (IUCN GET) biomes and ecosystem functional groups (EFGs). For ease of explanation, short labels for each ecosystem type have been assigned, as shown in table AI.1 below. 370 System of Environmental-Economic Accounting – Ecosystem Accounting Table AI.1 List of ecosystem types for SEEALand Reference Short label used number IUCN GET biome/EFG in this example 1 T2 Temperate-boreal forests and woodlands/T2.2 Deciduous temperate Forest forests 2 F2 Lakes/F2.1 Large permanent freshwater lakes Lake 3 T7 Intensive land use/T7.1 Annual croplands Cropland 4 T7 Intensive land use/T7.4 Urban and industrial ecosystems Urban area 5 TF1 Palustrine wetlands/TF1.3 Permanent marshes Wetland 6 M1 Marine shelf/M1.1 Seagrass meadows Seagrass In terms of the changing ecological context, it is assumed that in SEEALand, natural ecosystems have experienced increasing pressures reflected in (managed) con- versions from forest to cropland and general intensification of ecosystem use. This has had a negative impact on condition of forest and wetland, for example, because of edge effects impacting on the ecological functioning of the forest. Further, policies to improve the condition of cropland have had mixed outcomes and urban intensifica- tion is driving a loss of urban green spaces. In contrast, long-term efforts to improve lake’s water quality have resulted in improvement in its condition. Finally, sewerage overflow from urban area has negatively influenced the condition of seagrass beds. These changes in condition also exert an impact on changes in the future expected flows of ecosystem services and in consequence on recorded measures of ecosystem degradation, ecosystem enhancement and reappraisals. Changes in future prices are also expected for some ecosystem services. For wood and wild fish provisioning ser- vices, increases in prices are driven by both increased demand and increased regula- tion of the sustainability of those industries, which has resulted in a decreased supply of ecosystem services. It is also expected that the price of global climate regulation services will increase, reflecting increases in the marginal damages incurred through carbon release. Ecosystem extent At the opening of the accounting period, there are six distinct ecosystem assets. The configuration of those ecosystem assets is shown in figure AI.1. The total area of b In practice, data on ecosystem SEEALand is 250 hectares (each grid cell represents 10 hectares).b extent are likely to be calcu- Over the accounting period, there is one change in the extent of the ecosystem lated for a period of time (e.g. for the year 2020) rather than assets. It entails the replacement of two hectares of forest by two hectares of cropland. for specific days at the begin- This ecosystem conversion is considered a managed expansion of cropland and a man- ning and end of the accounting aged reduction in forest. period. Given this situation, it is necessary to select the point in The following ecosystem extent account can be compiled based on the informa- time to which the data should tion in figures AI.1 and AI.2. Entries concerning expansions and reductions are based relate. For example, extent on the changes in the maps of ecosystem extent and the context for those changes. data for 2020 may be assumed Where there is no information available for determining whether a change is managed to reflect the opening extent or unmanaged, it is appropriate to record only the total expansion or reduction. for the accounts of 2020 and extent data for 2021 may be An ecosystem extent change matrix can also be compiled, as presented in table assumed to reflect the closing AI.3. It is designed to record which ecosystem types have been converted to which extent for the accounts of 2020 other ecosystem types. The matrix is compiled in four steps. In step 1, the opening (and the opening extent for the extent for each ecosystem type is recorded in the right-hand column. In step 2, the accounts of 2021). closing extent for each ecosystem type is recorded in the bottom row. In step 3, the Annex I: SEEALand – a stylized example of ecosystem accounting 371 Figure AI.1 Opening extent of ecosystem assets in SEEALand, 1 January 2020 Forest Wetlands Urban area Seagrass Cropland Lake areas of an ecosystem type that have not been converted to another ecosystem type over the accounting period are recorded along the diagonal. In this example, only one ecosystem type, namely, forest, has had a reduction in area; for all of the other ecosys- tem types, the unchanged extent is equal to the opening extent. In step 4, entries are made for changes in extent, with one entry being made for each change. The entries are made by considering the closing extent (i.e. the column) of the ecosystem type that increased in area. In this example, since the area of crop- land increased by 2 hectares, an entry is made in the cropland column corresponding to the ecosystem type that changed, in this case forest. With regard to this conver- sion, the interpretation is that for forests (reading along the first row) 38 hectares are unchanged but 2 hectares are now cropland. Also, for cropland (reading down the fourth column), 60 hectares are unchanged and an additional 2 hectares have been added that were formerly forest Figure AI.2 Closing extent of ecosystem assets in SEEALand, 31 December 2020 Forest Wetlands Urban area Seagrass Cropland Lake 372 System of Environmental-Economic Accounting – Ecosystem Accounting Table AI.2 Ecosystem extent account, 2020 (hectares) Ecosystem types Crop- Urban Accounting entries Forest Lake land area Wetland Seagrass Total Opening extent 40 30 60 50 20 50 250 Additions to extent Managed expansions 2 2 Unmanaged expansions Reductions to extent Managed reductions 2 2 Unmanaged reductions Net change in extent -2 0 +2 0 0 0 0 Closing extent 38 30 62 50 20 50 250 Ecosystem condition To measure the condition of each ecosystem asset, the ecosystem condition typol- ogy (ECT) is used to structure the relevant characteristics and variables, following the approach described in chapter 5. The intent in the selection of characteristics and variables is to measure each ecosystem’s integrity, which is carried out by identify- ing relevant abiotic, biotic and landscape/seascape characteristics. These characteris- tics encompass information on biodiversity and are linked as well to the ecosystem’s capacity to supply ecosystem services. Abiotic characteristics of forest, for example, are assessed using three variables: vegetation water content, soil organic carbon stock and foliar nitrogen concentration, each of which describes the physical and chemical state of the ecosystem. The biotic characteristics of the forest are assessed using the following variables: trees species richness, tree cover and the normalized difference vegetation index (NDVI), each of which describes the composition, structure and function of the ecosystem. Forest area density is used to assess landscape characteristics. Collectively, these seven variables provide a good assessment of forest ecosystem integrity. Table AI.3 Ecosystem type change matrix, 2020 (hectares) Ecosystem types – closing Urban Opening Forest Lake Cropland areas Wetland Seagrass extent Forest 38 2 40 Ecosystem types Lake 30 30 – Opening Cropland 60 60 Urban areas 50 50 Wetland 20 20 Seagrass 50 50 Closing extent 38 30 62 50 20 50 250 Annex I: SEEALand – a stylized example of ecosystem accounting 373 The characteristics are structured following the SEEA ECT and following the selection criteria described in appendix A5.1. Relevant condition characteristics, vari- ables, indicators and reference levels for each ecosystem type and associated stylized values are presented in the “Condition accounts by ecosystem type” sheet of the com- plementary spreadsheet, including a short discussion on the selection of characteris- tics and indicators in the context of this stylized example. As an example, tables AI.4a, AI.4b and AI.4c present the three ecosystem con- dition accounts for forest, namely, the ecosystem condition variable account (table AI.4a), the ecosystem condition indicator account (table AI.4b) and the ecosystem condition indices account (table AI.4c). Columns 1 and 2 of each account exhibit the structure of the SEEA ECT, which is the same for all ecosystem types. Column 3 in each account shows the selected variables for each ECT class. One or more variables may be included for each class following the general advice provided in chapter 5. Column 4 in the variable and indicator accounts shows the measurement unit for each selected variable. In the ecosystem variable account, columns 5 and 6 record the observed vari- able values at the opening and closing of the accounting period. Column 7 shows the change over the accounting period. Table AI.4a Ecosystem condition variable account for forests, 2020 Variable values (observed) Variable Measurement SEEA ECT class descriptor unit Opening Closing Change (1) (2) (3) (4) (5) (6) (7) Abiotic Physical state Vegetation water Index (-1 to 1) 0.31 0.29 -0.02 characteristics content (NDWI) Chemical state Soil organic carbon tC/ha 100 95 -5 stock Foliar or litter nitro- mg N/g dry 18 17 -1 gen concentration weight Biotic Compositional Tree species Number 6 5 -1 characteristics state richness Structural state Tree cover % 81 75 -6 Abbreviations: NDWI, normal- Functional state Vegetation index Index (-1 to 1) 0.65 0.63 -0.02 ized difference water index; NDVI, (NDVI) normalized difference vegetation index; tC/ha, tons of carbon per Landscape/seascape Forest area density % 74 59 -15 hectare; N, nitrogen; mg, mil- characteristics ligrams; g, grams. In the ecosystem indicator account, columns 5 and 6 show the variable values from the ecosystem variable account and columns 7 and 8 record the lower and upper reference-level values for each variable, which are determined on the basis of the agreed reference condition (see appendix A5.2). In this example, forest, lake, wetland and sea- grass are assessed in relation to natural reference conditions, while cropland and urban area are assessed in relation to anthropogenic reference conditions. The entries in col- umns 9 and 10 are the opening and closing values for the condition indicators derived after normalizing variable values based on the reference levels. Column 11 shows the change in indicator value between opening and closing of the accounting period. 374 System of Environmental-Economic Accounting – Ecosystem Accounting Table AI.4b Ecosystem condition indicator account for forests, 2020 Variable values Reference-level (observed) values Indicator values (rescaled) Variable Measurement Lower Upper SEEA ECT class descriptor unit Opening Closing level level Opening Closing Change (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Abiotic Physical state Vegetation water character- content (NDWI) Index (-1 to 1) 0.31 0.29 -1 1 0.66 0.65 -0.01 istics Chemical state Soil organic carbon stock tC/ha 100 95 0 250 0.40 0.38 -0.02 Foliar or litter nitro- mg N/g dry gen concentration weight 18 17 4 40 0.39 0.36 -0.03 Biotic char- Compositional Tree species acteristics state richness Number 6 5 0 10 0.60 0.50 -0.10 Structural state Tree cover % 81 75 0 100 0.81 0.75 -0.06 Functional state Vegetation index (NDVI) Index (-1 to 1) 0.65 0.63 -1 1 0.83 0.82 -0.01 Landscape/seascape characteristics Forest area density % 74 59 0 100 0.74 0.59 -0.15 Abbreviations: NDWI, normal- ized difference water index; NDVI, normalized difference vegetation index; tC/ha, tons of carbon per hectare; N, nitrogen; mg, mil- Table AI.4c ligrams; g, grams. Ecosystem condition indices account for forests, 2020 Indicator values (0 - 1) Index values SEEA ecosystem condi- Variable Indicator tion typology class descriptor Opening Closing weight Opening Closing Changea (1) (2) (3) (9) (10) (12) (13) (14) (15) Physical state Vegetation 0.66 0.65 0.17 0.11 0.11 0.00 water con- Abiotic characteristics tent (NDWI) Chemical state Soil organic 0.40 0.38 0.08 0.03 0.03 0.00 carbon stock Foliar or lit- 0.39 0.36 0.08 0.03 0.03 0.00 ter nitrogen concentra- tion Total abiotic 0.33 0.17 0.17 -0.01 Abbreviations: NDWI, normal- Compositional Tree species 0.60 0.50 0.17 0.10 0.08 -0.02 characteristics ized difference water index; NDVI, state richness normalized difference vegetation Structural state Tree cover 0.81 0.75 0.17 0.14 0.13 -0.01 Biotic index. Functional state Vegetation 0.83 0.82 0.17 0.14 0.14 0.00 a Changes in index values are de- index (NDVI) rived as the difference between Total biotic 0.50 0.37 0.34 -0.03 opening and closing index values. Owing to rounding, the Forest area 0.74 0.59 0.17 0.12 0.10 -0.03 characteristics density Landscape/ results may differ from those seascape obtained through weighting Total 0.12 0.10 -0.03 the change in indicator values landscape/ to rounding, this may differ seascape from the result obtained from weighting the change in indica- Total 1.00 0.67 0.16 -0.06 tor values. Annex I: SEEALand – a stylized example of ecosystem accounting 375 In the ecosystem index account, columns 9 and 10 exhibit indicator values from the ecosystem indicator account. Column 12 records the weight for each indicator in the overall index for the ecosystem. In this example, derivation of the overall condition index is based on equal weighting of each of the ECT classes used to compile the index.c c Section 5.4.2 provides a discus- Usually, six ECT classes are measured and the weight for each class is therefore 0.17. sion on potential aggregation Where there is more than one variable in an ECT class, each variable is equally weighted functions and weights. It is to within that class to derive the subindex. Thus, for forest, the subindex for chemical state be noted that an area-weight- is derived using equal weights of the two component variables. Columns 13 and 14 record ed approach has been used the derived opening and closing index values for each characteristic and the associated here, meaning that the overall index is invariant with respect subindices and for the total index. Column 15 records the changes in index values. to whether the data are col- The complementary spreadsheet shows how these three condition accounts can lated at finer resolutions (e.g. be combined into a single table. This alternative presentation may be useful in some pixels) or at larger resolutions contexts. (e.g. for the ecosystem asset). Table AI.5 shows the ecosystem condition indices and subindices for each of the six ecosystem types in this example, using the opening and closing index values and associated changes in those values as derived in the spreadsheet. An average measure of ecosystem condition across all ecosystem types has not been derived, as this would imply aggregation across different reference conditions, which is not recommended. As noted above, additional detail for each of the condition accounts is provided in the complementary spreadsheet. The spreadsheet also provides a short discussion on the selection of characteristics for each ecosystem type. In summary, and within the general ecological context for SEEALand introduced above, changes in condition for each ET recorded in table AI.5 reflect the following: • Forest: a substantial area of forest has been cleared previously for cropland and there has been a further small conversion in this accounting period. This results in a large decrease in forest area density, a proxy for forest con- nectivity. Tree cover has declined as well. Other condition variables exhibit smaller changes. • Lake: a long-term action plan on nutrient management leads to a further improvement in lake condition, starting from what is already good quality. • Wetland: sewerage overflow from urban wastewater treatment plants and intensive land use continue to affect wetland water quality. • Cropland: cropland is slowly degrading through intensive use although there is a policy aimed at increasing organic farming practices. • Urban ecosystem: as shown in the account, there has been a slight decline in condition of urban ecosystem over the accounting period related to a loss of urban green area • Seagrass: seagrass beds are under pressure from sewerage overflow from urban area and the associated organic pollution Table AI.5 Ecosystem condition indices account by ecosystem type Ecosystem types Crop- Urban Wet- Sea- Accounting entries Forest Lake land area land grass Opening condition value 0.67 0.63 0.47 0.50 0.59 0.45 Change in abiotic ecosystem characteristics -0.01 0.02 0.00 0.01 -0.02 -0.03 Change in biotic ecosystem characteristics -0.03 0.03 0.01 -0.02 0.00 -0.03 Change in landscape-level characteristics -0.03 0.00 0.00 -0.01 -0.01 -0.02 Net change in condition -0.06 0.05 0.00 -0.02 -0.04 -0.08 Closing condition value 0.61 0.67 0.47 0.49 0.56 0.37 376 System of Environmental-Economic Accounting – Ecosystem Accounting In this example, there has been one conversion during the accounting period, from forest to cropland. Following the guidance provided in chapter 5, the measure- ment of condition at the opening and closing of the accounting period should relate to the area of the ecosystem at that point in time. Consequently, in this example, the measure of closing condition for forest will relate to a smaller area of forest than the area related to the measure of opening condition. The opposite is true for cropland. Accepting that conversions will occur, an approach is needed to accommo- date the effect of the change in extent and to make the opening and closing meas- ures of condition comparable. The general approach (and the approach applied in this example) when (a) accounting at relatively large scales (e.g. at catchment scale or larger) and (b) conversions are relatively small (e.g. < 5 per cent of total area), is to incorporate characteristics for the measurement of condition that are sensitive to changes in extent, for example, tree cover and share of lake shoreline covered by natural vegetation. At the same time, where there are significant conversions among ecosystem types during an accounting period or where accounting is undertaken for small areas, it is likely to be necessary to explicitly distinguish changes in ecosystem extent and to assess changes in ecosystem condition more carefully. Where data are available, a useful approach is to measure the condition of the area of the ET that has remained unchanged over the accounting period separately from the condition of the area that has been converted. This approach may be most readily applied when data are used that are mapped to individual pixels, enabling the condition of unconverted areas to be distinguished from the condition of converted areas. Ecosystem services The ecosystem services supplied by the various ecosystem types are shown in table AI.6. The corresponding use of these ecosystem services is shown in table AI.7. All flows are treated as final ecosystem services, that is to say, they are recorded as flow- ing from ecosystem assets directly to economic units. There are no imports or exports of services to be recorded or intermediate services flowing between ecosystem assets to be recorded. Ecosystem services flows in monetary terms are estimated by multiplying the physical flow of the service recorded in tables AI.6 and AI.7 by the relevant price for each service reflecting their exchange values. The estimates are recorded in tables AI.8 and AI.9, which present SUTs in monetary terms. The following prices have been assumed in deriving the monetary supply and use entries: Wood provisioning 60 currency units/m3 Crop provisioning 75 currency units/ton Wild fish biomass provisioning 350 currency units/ton Global climate regulation 25 currency units/ton of CO2 Water purification 100 currency units/ton of nitrogen removed Recreation-related 5 currency units/visit Table AI.6 Ecosystem services supply and use account in physical terms – supply table, 2020 SUPPLY Supply from non-resident ecosystem assets - Imports Inter- medi- Agriculture Forestry Fisheries Electricity, gas, steam and air-conditioning supply Household consumption Supply from non-resident economic units - imports Forest Lake Cropland Urban area Wetland Seagrass Government consumption Total Industry Total supply by resident economic units Total supply by economic units Total supply resident ecosystem assets TOTAL SUPPLY UNITS Final ate Selected ecosystem services Provisioning services Biomass Crop provisioning Tons 150 150 0 0 150 provisioning Wood provisioning m3 140 140 0 0 140 services Wild fish and Tons 3 6 9 0 0 9 other natural aquatic biomass provisioning services Regulating and maintenance services Global climate regulation services Tons CO2 150 5 20 250 425 0 0 425 Water purification services Tons N 7 7 0 0 7 removed Cultural services Annex I: SEEALand – a stylized example of ecosystem accounting Recreation-related services Number of 1 500 5 000 2 500 800 9 800 0 0 9 800 visits Abbreviations: N, nitrogen; m3, cubic metres. Note: Resident ecosystem assets are those ecosystem assets that are located within the EAA, while non-resident ecosystem assets are those located outside the ecosystem EAA. 377 378 Table AI.7 Ecosystem services supply and use account in physical terms – use table, 2020 USE Agriculture Forestry Fisheries Electricity, gas, steam and air-conditioning supply Government consumption Household consumption Exports - final ecosystem services Forest Lake Cropland Urban area Wetland Seagrass Exports - intermediate services Total industry Total use by resident economic units Total use by economic units Total use resident ecosystem assets Total use by ecosystem assets TOTAL USE UNITS Selected ecosystem services Provisioning services Biomass Crop provisioning Tons 150 150 150 150 0 0 0 150 provisioning Wood provisioning m3 140 140 140 140 0 0 0 140 services Wild fish and other Tons 9 9 9 9 0 0 0 9 System of Environmental-Economic Accounting – Ecosystem Accounting natural aquatic biomass provision- ing services Regulating and maintenance services Global climate regulation services Tons CO2 0 425 425 425 0 0 0 425 Water purification services Tons N 7 7 7 7 0 0 0 7 removed Cultural services Recreation-related services Number of 0 9 800 0 0 0 0 9 800 visits Abbreviations: N, nitrogen; m3, cubic metres. Note: Resident ecosystem assets are those ecosystem assets that are located within the EAA, while non-resident ecosystem assets are those located outside the EAA. Table AI.8 Ecosystem services supply and use account in monetary terms – supply table, 2020 (currency units, thousands) SUPPLY Supply from non-resident ecosystem assets - Imports Inter- medi- Agriculture Forestry Fisheries Electricity, gas, steam and air-conditioning supply Household consumption Exports - final ecosystem services Forest Lake Cropland Urban area Wetland Seagrass Government consumption Total Industry Total use by resident economic units Total use by economic units Total supply resident ecosystem assets TOTAL SUPPLY Final ate Selected ecosystem services Provisioning services Biomass Crop provisioning 11.25 11.25 0 0 11.25 provisioning Wood provisioning 8.4 8.4 0 0 8.4 services Wild fish and other 1.05 2.1 3.15 0 0 3.15 natural aquatic biomass provision- ing services Regulating and maintenance services Global climate regulation services 3.75 0.125 0.5 6.25 10.625 0 0 10.625 Water purification services 0.7 0.7 0 0 0.7 Cultural services Annex I: SEEALand – a stylized example of ecosystem accounting Recreation-related services 7.5 25 12.5 4 49 0 0 49 TOTAL SUPPLY 19.65 26.05 11.25 12.625 1.2 12.35 83.125 0 0 83.125 379 380 Table AI.9 Ecosystem services supply and use account in monetary terms – use table, 2020 (currency units, thousands) USE Agriculture Forestry Fisheries Electricity, gas, steam and air-conditioning supply Government consumption Household consumption Exports - final ecosystem services Forest Lake Cropland Urban area Wetland Seagrass Exports - intermediate services Total industry Total use by resident economic units Total use by economic units Total use resident ecosystem assets Total use by ecosystem assets TOTAL USE Selected ecosystem services Provisioning services Biomass Crop provisioning 11.25 11.25 11.25 11.25 0 0 0 11.25 provisioning Wood provisioning services 8.4 8.4 8.4 8.4 0 0 0 8.4 Wild fish and other natural aquatic 3.15 3.15 3.15 3.15 0 0 0 3.15 biomass provisioning services System of Environmental-Economic Accounting – Ecosystem Accounting Regulating and maintenance services Global climate regulation services 10.625 10.625 10.625 0 0 0 10.625 Water purification services 0.7 0.7 0.7 0.7 700 0 0 0 0.7 Cultural services Recreation-related services 49 49 49 0 0 0 49 TOTAL SUPPLY 11.5 8.4 3.15 0.7 23.5 10.625 49 83.125 83.125 0 0 0 83.125 Annex I: SEEALand – a stylized example of ecosystem accounting 381 Commonly, prices for wood, crop and wild fish provisioning services would be derived using directly observed values (e.g. stumpage values for wood, land rental prices) or residual value and resource rent methods. Global climate regulation services are more commonly estimated using data from carbon trading schemes or data on the social cost of carbon (under appropriate assumptions). Water purification services may be estimated using replacement cost techniques and recreation-related services may be estimated using data derived from the application of travel cost methods. These vari- ous techniques are described in chapter 9. Gross ecosystem product (GEP) is equal to the sum of the values of all final eco- system services less net imports of intermediate services. Since there are no intermedi- ate services in this example, GEP is equal to 83,125 currency units. The entries for ecosystem services in the physical and monetary ecosystem ser- vices flow accounts shown above concern actual ecosystem services flows supplied and used during the accounting period. For the compilation of the monetary ecosystem asset account, it is necessary to estimate expected ecosystem services flows at the open- ing and closing of the accounting period. At the opening of the accounting period, expected flows are usually estimated based on knowledge available at that point in time concerning past ecosystem services flows, current levels of ecosystem condition and likely future changes in ecosystem condition. At the closing of the accounting period, the actual flows during the accounting period are taken into consideration as well as changes in condition that would affect the capacity to supply services. Table AI.10 Net present value (NPV) calculations for forest, 2020 Opening value Closing value (1 January 2020) (31 December 2020) Expected physi- Wood provisioning (m3) 150 120 cal flows Global climate regulation (tons CO2) 160 125 Recreation-related (number of visits) 1 600 1 450 Currency units Expected prices Wood provisioning 60 65 Global climate regulation 25 26 Recreation-related 5 5 Expected ex- Wood provisioning 9 000 7 800 change values Global climate regulation 4 000 3 250 Recreation-related 8 000 7 250 Total 21 000 18 300 NPV Wood provisioning 387 885 336 167 Global climate regulation 172 393 140 070 Recreation-related 344 787 312 463 Total 905 065 788 700 Change in NPV     -116 366 382 System of Environmental-Economic Accounting – Ecosystem Accounting Assuming changes in condition are relatively gradual and other potential driv- ers (such as changes in population) are steady, measures of expected flows would not change significantly over an accounting period and may be quite closely aligned with the actual ecosystem services flows during the accounting period. For SEEALand, the expected physical flows and expected prices at the opening and closing of the accounting period are shown in the complementary spreadsheet. In summary, there are a range of small differences between the expected flows at the opening of the accounting period and the actual flows recorded during the period. At the closing of the accounting period, the expected flows are lower for wood provision- ing, global climate regulation and recreation-related services for forests, reflecting the ecosystem conversion that took place. An increase in crop provisioning services is also expected. A small decline in global climate regulation services from wetland, reflect- ing its decline in condition, is expected, as is a small rise in ecosystem services from lake, reflecting its improvement in condition. Recreation-related services for urban area are expected to increase owing to larger populations but decrease for seagrass due to decline in condition. With respect to prices, they are expected to remain the same for crop provision- ing, water purification and recreation-related services and to increase for wood and wild fish provisioning, driven by both increased demand and increased regulation of the sustainability of those industries. It is also expected that the price of global cli- mate regulation services will increase, reflecting increases in the marginal damages incurred through carbon release. Monetary ecosystem asset account Estimates of opening and closing asset values are estimated for each ecosystem type covering all relevant ecosystem services. As explained at various points throughout SEEA EA, the monetary values recorded in the monetary ecosystem asset account can- not be interpreted as reflecting a complete or universal measure of the value of nature, since they exclude a range of values, such as intrinsic values, that may be ascribed to ecosystems but may not be quantified in monetary terms. In deriving the estimate of NPV, the following assumptions are made: • An asset life of 100 years • A constant flow of ecosystem services and constant price of ecosystem ser- vices over asset life (as noted above, some changes in expected physical flows and prices have been incorporated reflecting a change in expecta- tions between the opening and closing of the accounting period, as a result in part of ecosystem conversions) • No further ecosystem conversions to the closing extent on 31 December 2020 • Discount rate of 2 per cent in real terms for all ecosystem services • Income earned at the end of the accounting period The detailed calculations for each ecosystem type in terms of future ecosystem flows and prices and resultant NPV are shown in the “NPV by ET” sheet of the spread- sheet. Table AI.10 directly below displays the structure of information used to compile NPV for forest. The entries in the monetary ecosystem asset account (table AI.11) are derived following the principles described in chapter 10 and the steps described in appendix A10.1 for the decomposition of the change in asset values. The following key observa- tions can be drawn from the monetary ecosystem asset account regarding SEEALand: Annex I: SEEALand – a stylized example of ecosystem accounting 383 • The asset value of lake is the highest among the six ecosystem types • Ecosystem degradation has been recorded for forest, wetland and seagrass, reflecting their decline in condition and the associated decline in expected ecosystem services flows • Ecosystem conversion from forest to cropland has a net negative effect on asset values • Revaluations reflecting changes in expected prices for ecosystem services can be seen to affect all ecosystem types (except cropland, where prices for the only ecosystem service, that is, crop provisioning, did not change) Table AI.11 Monetary ecosystem asset account, 2020 (currency units) TOTAL Forest Urban Crop- grass Lake Wet- land land area Sea- Opening value 905 065 1 078 321 484 856 522 568 51 718 529 679 3 572 207 Ecosystem 0 15 300 0 0 0 0 15 300 enhancement Ecosystem degradation -108 111 0 0 0 -1 099 -163 946 -273 156 Ecosystem conversions Additions 0 0 16 944 0 0 0 16 944 Reductions -43 435 0 0 0 0 0 -43 435 Other changes in volume of ecosystem assets Catastrophic losses Upward reappraisals 0 0 47 704 43 098 0 0 90 802 Downward 0 0 0 0 0 0 0 reappraisals Revaluations 35 180 47 624 0 215 840 160 929 244 789 Net change in value -116 366 62 924 64 648 43 314 -259 -3 017 51 244 Closing value 788 700 1 141 244 549 504 565 881 51 459 526 662 3 623 451 385 Annex II Research and development agenda SEEA EA provides a consistent accounting framework for delineating and measuring ecosystems. Data compiled using SEEA EA are invaluable inputs for the evaluation of policy and analysis of environmental and economic issues. As environmental and economic contexts change, as understanding of the links between the environment and the economy develops and as policy and analytical requirements evolve, SEEA EA must be reviewed to ensure its ongoing relevance. In addition, as implementation of SEEA EA is carried out increasingly across the world, the range of experience gained will offer new insights into the measurement of ecosystem assets and services that should be considered in the conceptualization of environmental and economic accounts. As the accounting basis for SEEA EA is the System of National Accounts (SNA), developments in accounting within the context of that international stand- ard will also need to be considered. The research agenda for the SNA is presented in annex 4 of the 2008 SNA (United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development and World Bank, 2009) and a new programme of work is under consideration. Of par- ticular relevance in this regard is the expanding range of new economic instru- ments that are being created and implemented as part of policies for managing the environment. The research agendas of SEEA EA, the SEEA Central Framework and the SNA need to reflect these developments. The process for reviewing and updating SEEA EA will follow standard processes that have developed for the review of international standards. Thus, there will be con- sideration within the United Nations statistical system of (a) the relative importance of updating the standard to ensure its ongoing relevance; (b) the consequences of making any changes and the potential impact on implementation; and (c) the extent to which research into an area of proposed change has been completed. The pro- cess for selecting topics for investigation and determining the appropriate changes to SEEA EA will entail widespread consultation and will involve both compilers and users of ecosystem accounts. Since SEEA EA is an integrated accounting system with links among different accounts, changes in individual areas in response to specific concerns is likely to have broader ramifications. As SEEA EA has strong links as well to other emerging areas of statistics beyond accounting, such as geospatial statistics, updating the standard must be completed in a coordinated and integrated fashion. Described below are the major topics identified during the revision of SEEA EEA as being the ones that would benefit from further consideration within the interna- tional statistical community. These topics concern both conceptual issues and issues related to methods and implementation. They are categorized broadly and will need to be detailed and refined through further discussion before the commencement of research work. Additional topics may be proposed in due course. 386 System of Environmental-Economic Accounting – Ecosystem Accounting Topics concerning conceptual issues Description and measurement of ecosystem capacity Classification of ecosystem services Treatment of the atmosphere Connections to complementary valuations of ecosystem services and eco- system assets Ongoing alignment with the SNA Topics concerning methods and implementation Further adapting measurement techniques to support implementation Data standards and availability Applications and indicators Research and development in some of these areas might be usefully combined with work on the research agenda of the SEEA Central Framework. Specifically, research work on accounting for soil resources, valuation of water resources and devel- opment of land-cover and land-use classifications could be considered jointly. A regular review of the research and development agenda, including for setting work priorities, will be undertaken by the United Nations Committee of Experts on Environmental-Economic Accounting (UNCEEA). An important facet of advancing this work will be the coordination of research and testing, including a recognition of the differences between countries in terms of resources, data and the complexity of their environmental, social and economic contexts. Advancement of the research and development agenda will be undertaken under the auspices of the Committee of Experts but it is expected that it will involve substan- tive collaboration with experts and stakeholders extending well beyond the statistical community, in keeping with the spirit of development of SEEA EA itself. It is also expected that beyond work within the national and international public sectors, there will be active participation by the academic community and organizations focused on environment and sustainability. Further, collaboration in the context of advances under way in accounting for natural capital in the corporate sector should be pursued. The outputs of work on the topics discussed below may emerge in a number of forms including published research papers, technical guidance and notes and training materials. Ultimately, a revision of SEEA EA would be considered at an appropriate time in the same way that all statistical standards are considered for updating in order to reflect current best practice. Topics on conceptual issues Description and measurement of ecosystem capacity SEEA EA provides a definition of ecosystem capacity in terms of the ability of ecosys- tem assets to supply individual ecosystem services without reducing ecosystem condi- tion. This is a meaningful and implementable definition. Nonetheless, the discussion of ecosystem capacity highlights a general conceptual preference for a more systemic approach that takes into consideration relationships among ecosystem services and among ecosystem assets. Further research on this topic is appropriate, building on the initial discussion of a systemic approach to the definition and measurement of ecosystem capacity. That research should in particular consider the links between the concept of ecosystem capacity and that of ecosystem condition; examine the implications of a systemic defi- Annex II: Research and development agenda 387 nition of ecosystem capacity for the definition and measurement of ecosystem degra- dation, ecosystem enhancement and other changes in the value of ecosystem assets; and assess the potential of a systemic definition of ecosystem capacity to better artic- ulate the ways in which ecosystem accounting can support discussion of ecosystem resilience, maintenance of ecosystem function and measurement of ecological thresh- olds and limits. Classification of ecosystem services SEEA EA provides a reference list of ecosystem services including 33 main ecosystem services and agreed labels and descriptions. This reference list supports development of methods, sharing of knowledge and experience and comparison of estimates of eco- system services. It was developed in collaboration with experts who have been lead- ers in the development of a range of ecosystem service classifications and typologies including the Common International Classification of Ecosystem Services (CICES), the National Ecosystem Services Classification System (NESCS Plus), The Economics of Ecosystems and Biodiversity (TEEB) approach and the “nature’s contribution to people” approach under the Intergovernmental Science-Policy Platform on Biodiver- sity and Ecosystem Services (IPBES). It was not possible, however, during the revi- sion process to establish an agreed classification of ecosystem services for ecosystem accounting purposes that satisfied general principles for a statistical classification. Correspondences between the reference list and the existing range of classifica- tions and typologies have been developed and are available in the form of an online annex to SEEA EA. They can serve as the basis for advancement of work towards an internationally agreed classification of ecosystem services for statistical purposes. Treatment of the atmosphere Both SEEA EA and the SEEA Central Framework exclude measurement of the atmos- phere from the scope of environmental assets. In the case of SEEA EA, this reflects a focus on the biosphere; in the case of the Central Framework, this has reflected a lack of potential for quantifying the atmosphere in a meaningful way for accounting pur- poses. At the same time, both documents recognize the significance of the atmosphere as part of the environment, for example, in terms of the importance of air quality and the atmosphere’s role as a sink for GHG emissions. Further work is needed to articulate how the atmosphere and its functions may be appropriately characterized in accounting terms. This work should consider how the atmosphere might be partitioned into relevant spatial units; how the condition of the atmosphere might be assessed; whether there are ecosystem services provided by the atmosphere; and how transactions related to the atmosphere, for example, trans- actions associated with reducing GHG emissions, are most appropriately recorded. Research on this topic must be linked to related work within the context of the SEEA Central Framework and the SNA. Connections to complementary valuations of ecosystem services and ecosystem assets SEEA EA provides a clear valuation concept (i.e. exchange values) and a clear meas- urement boundary related to ecosystem services, which support a consistent approach to the monetary valuation of ecosystem services and ecosystem assets for account- ing purposes. While the concept of exchange values is well established in national accounting, it has been less commonly applied in environmental valuation, where alternative economic valuation concepts are applied. 388 System of Environmental-Economic Accounting – Ecosystem Accounting Further discussion is appropriate, based on the concepts described in SEEA EA and the complementary valuation measures described in chapter 12, with regard to further refining and communicating the connections between exchange value-based estimates from the ecosystem accounts and other approaches to valuation of the environment. A particular focus should be on ensuring appropriate application and interpretation of different valuation concepts in different decision-making contexts. This work may entail consideration of complementary valuations such as measurement of consumer surplus and changes in welfare; assessment of ecosystem disservices and negative externalities; treatment of non-use values; wealth accounting based on shadow prices; and restoration cost-based approaches to the measurement of ecosystem degradation. Work on this topic should be undertaken in consultation with SNA experts. Ongoing alignment with the SNA One motivation in the conceptual design of SEEA EA has been to utilize the potential to compare and align estimates from the ecosystem accounts with measures of income and wealth from the SNA. As economic and environmental contexts change, all sta- tistical standards are subject to reconsideration. In this regard, a number of emerging asset boundary issues deserve ongoing and joint consideration by relevant experts to ensure the ongoing alignment between SEEA EA and the SNA. In a number of cases, those issues are emerging because of ongoing changes in institutional arrangements and markets structures in response to the effects of climate change and other environ- mental challenges. The issues include treatment of stranded assets such as fossil fuel reserves; valuation of water resources; valuation of renewable resources; treatment of payments for ecosystem services and transactions in environmental markets; and rec- ognition of liabilities in the context of environmental damage. In addition, further engagement with national accounts experts would be benefi- cial in the area of treatment of public goods and recording of relevant transactions, for example, concerning collective consumption and social transfers in kind. These topics are of relevance in the context of allocation of the use of some ecosystem services and design of the sequence of institutional sector accounts. The update of the 2008 SNA provides an excellent opportunity to address some of the above-mentioned issues. Topics on methods and implementation Further adapting measurement techniques to support implementation There are many components to be measured across the conceptual framework of the ecosystem accounts. There are also well-established measurement approaches for those components covering the delineation of ecosystem types, the measurement of d In particular the Guidelines ecosystem condition and the measurement of ecosystem services flows. At the same on Biophysical Modelling time, adapting these approaches to the requirements of ecosystem accounting is rela- for Ecosystem Accounting tively recent, and it is expected that there will be further testing and development of (United Nations, Department measurement techniques in all areas of ecosystem accounting as part of the wider of Economic and Social Affairs, Statistics Division, 2022a) and implementation process. the Monetary Valuation of Ecosystem Services and Assets Work in this area should build on technical guidance on ecosystem accounting.d for Ecosystem Accounting. Specific areas of focus in the testing and developments of methods for accounting in Interim report (United Nations, physical terms concern: Department of Economic and Social Affairs, Statistics Divi- • Delineation of ecosystem assets, especially in relation to measurement of sion, 2022b). change over time and identification of ecosystem conversions Annex II: Research and development agenda 389 • Selection of a minimum set of ecosystem condition variables and deter- mination of reference levels and conditions for different ecosystem types along a gradient from natural to anthropogenic • Articulation of relationships between ecosystem condition variables, eco- system characteristics and processes and ecosystem services • Spatial modelling of ecosystem services, especially with respect to use of ecosystem services and relative to ecosystem capacity • Methods to account for specific ecosystem types, for example, oceans, urban areas and wetlands Areas of focus in the testing and development of methods for accounting in monetary terms concern: • Collection of data on ecosystem services by ecosystem type and taking into account the location of users and variations in institutional arrangements • Application of value transfer techniques for accounting purposes, in par- ticular in the context of alignment with exchange value concepts, consist- ency with data collected in physical terms on extent, condition and services flows and advancement of the potential of value generalization techniques • Approach to the measurement of future flows and prices of ecosystem ser- vices as input to the calculation of NPVs for ecosystem assets • Interpretation of data from ecosystem accounts in monetary terms Data standards and availability The compilation of ecosystem accounts involves the collation and integration of a wide variety of types of data, many of which may be unfamiliar to statistical offices. Estab- lishing a platform for the development of shared data tools, frameworks for assessing data quality and expectations on quality would be a significant part of the implemen- tation process. Areas of focus in the context of this work include: • Principles and practices for the development of infrastructure for spatial data to support ecosystem accounting • Determination of a minimum set (tier 1) of account-ready data • Principles and practices for accessing and sharing data, including tools to support the interoperability of data and systems • Bridge tables and crosswalks from SEEA EA reference classifications and lists for ecosystem types and ecosystem services to other, related classifica- tions, lists and typologies • Development of spatial sampling methods and strategies • Articulation of data quality assessment frameworks, tools and processes, especially concerning spatial data Applications and indicators Section E of SEEA EA provides an introduction to a range of complementary pres- entations, thematic accounts and indicators that demonstrate the potential for using ecosystem accounts data to support decision-making. Advancement of applications and indicators building on ecosystem accounting can be continued as part of a wider implementation programme. Specific areas of focus include: • Development of guidance for SEEA-based thematic accounts for biodiver- sity, climate change, oceans and urban areas 390 System of Environmental-Economic Accounting – Ecosystem Accounting • Design of global accounts that incorporate data within and beyond national jurisdictions, for example, concerning oceans and the atmosphere • Description of aggregates and indicators based on SEEA EA and related data to support environmental monitoring and reporting. This includes the development of aggregate indices of ecosystem condition; indicators link- ing ecosystem accounting data to data on economic production, employ- ment and restoration expenditure; and indicators designed to support global environmental conventions including the Convention on Biologi- cal Diversity; the United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa; and the United Nations Framework Convention on Climate Change 391 Glossary A Abiotic flows: contributions to benefits from the environment that are not underpinned by, or reliant on, ecological characteristics and processes. (para. 6.35) Anthropogenic ecosystems: ecosystems that is influenced predominantly by human activities and for which a stable natural ecological state is unattainable and future socioeconomic interventions are required to maintain a new stable state. (table A5.2.1) B Balance sheet: a statement drawn up in respect of a particular point in time, of the values of assets owned and of the liabilities owed by an institutional unit or group of units. (2008 SNA, para. 13.2) Basic spatial unit (BSU): a geometrical construct representing a small spatial area. (para. 3.72) Benefits: goods and services that are ultimately used and enjoyed by people and society. (para. 2.15) Biodiversity: the variability among living organisms from all sources including, inter alia, ter- restrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems. (Convention on Biological Diversity, art. 2, entitled “Use of terms”) Biome: “a biotic community finding its expression at large geographic scales, shaped by climatic factors and characterized by physiognomy and functional aspects, rather than by spe- cies or life-form composition” (Mucina, 2019). (para. 3.62) C Catastrophic losses: reductions in assets due to catastrophic and exceptional events. (SEEA Central Framework, para. 5.49) Cultural services:* experiential and intangible services related to the perceived or actual quali- * The label “cultural services” is a ties of ecosystems whose existence and functioning contribute to a range of cultural pragmatic choice and reflects benefits. (para. 6.51) its long-standing use in the ecosystem services measure- ment community. It is not D meant to imply that culture itself is a service; rather it is Depletion: in physical terms, the decrease in the quantity of the stock of a natural resource over a summary label and as such an accounting period that is due to the extraction of the natural resource by economic is intended to capture the units occurring at a level greater than that of regeneration. (SEEA Central Framework, variety of ways in which people para. 5.76) connect to, and identify with, nature and the variety of moti- Discount rate: rate of interest used to adjust the value of a stream of future flows of revenue, vations for those connections. costs or income to account for time preferences and attitudes to risk. (SEEA Central Framework, para. 5.145) 392 System of Environmental-Economic Accounting – Ecosystem Accounting E Economic owner: the institutional unit entitled to claim the benefits associated with the use of an asset in the course of an economic activity by virtue of accepting the associated risks. (2008 SNA, para. 10.5) Ecosystem: “a dynamic complex of plant, animal and microorganism communities and their non-living environment interacting as a functional unit” (Convention on Biological Diversity, art. 2, entitled “Use of terms”). Ecosystem accounting area (EAA): the geographical territory for which an ecosystem account is compiled. (para. 2.12) Ecosystem asset life: the period over which an ecosystem asset is expected to generate ecosys- tem services. (para. 10.72) Ecosystem assets: contiguous spaces covered by a specific ecosystem type characterized by a distinct set of biotic and abiotic components and their interactions. (para. 2.11) Ecosystem capability: concerns an ecosystem’s ability to generate an ecosystem service under current conditions and type of use, irrespective of the potential impacts of increasing the supply of that service on the supply of other ecosystem services. (para. 6.150) Ecosystem capacity: ability of an ecosystem to generate an ecosystem service under current ecosystem condition, management and uses, at the highest yield or use level that does not negatively affect the future supply of the same or other ecosystem services from that ecosystem. (para. 6.141) Ecosystem characteristics: system properties of an ecosystem and its major abiotic and biotic components (water, soil, topography, vegetation, biomass, habitat and species). Exam- ples of such characteristics include vegetation type, water quality and soil type. (para. 5.28) Ecosystem condition: quality of an ecosystem measured in terms of its abiotic and biotic char- acteristics. (para. 2.13) Ecosystem condition indicators: rescaled versions of ecosystem condition variables. (para. 5.60) Ecosystem condition indices (and subindices): composite indicators that are aggregated from the combination of individual ecosystem condition indicators recorded in the ecosys- tem condition indicator account. (para. 5.81) Ecosystem condition typology (ECT): a hierarchical typology for organizing data on ecosys- tem condition characteristics. (para. 5.30) Ecosystem condition variables (ECV): quantitative metrics describing individual characteris- tics of an ecosystem asset. (para. 5.41) Ecosystem conversions: situations in which, for a given location, there is a change in ecosystem type involving a distinct and persistent change in ecological structure, composition and function, which, in turn, is reflected in the supply of a different set of ecosystem services. (para. 4.23) Ecosystem degradation: the decrease in the value of an ecosystem asset over an accounting period that is associated with a decline in the condition of the ecosystem asset during that accounting period. (para. 10.21) Ecosystem disservices: arise in contexts in which the outcomes of interactions between eco- nomic units and ecosystem assets are negative from the perspective of the economic units. (para. 6.75) Ecosystem enhancement: the increase in the value of an ecosystem asset over an accounting period that is associated with an improvement in the condition of the asset during that accounting period. (para. 10.15) Ecosystem extent: size of an ecosystem asset. (para. 2.13) Glossary 393 Ecosystem functional groups (EFGs): functionally distinctive groups of ecosystems within a biome that are defined in a manner consistent with the definition of ecosystems under the Convention on Biological Diversity and that make up the third level of the Inter- national Union for Conservation of Nature Global Ecosystem Typology (IUCN GET) classification. (para. 3.64) Ecosystem integrity: an ecosystem’s capacity to maintain its characteristic composition, struc- ture, functioning and self-organization over time within a natural range of variability (Pimentel and Edwards, 2000). (para. 5.10) Ecosystem service measurement baseline: the level of service supply with which a regulating or maintenance service provided by an ecosystem is compared in order to quantify the service. (para. 7.71) Ecosystem services: the contributions of ecosystems to the benefits that are used in economic and other human activity. (para. 2.14) Ecosystem services mapping: the process of allocating the supply and use of ecosystem services to locations. (para. 7.66) Ecosystem type (ET): reflects a distinct set of abiotic and biotic components and their interac- tions. (para. 2.11) Environmental assets: the naturally occurring living and non-living components of the Earth, together constituting the biophysical environment, which may provide benefits to humanity. (SEEA Central Framework, para. 2.17) Environmental pressure: a human-induced process that alters the condition of ecosystems. (Maes and others, 2018). (para. 5.105) Exchange values: the values at which goods, services, labour or assets are in fact exchanged or else could be exchanged for cash. (2008 SNA, para. 3.118) Exclusive economic zone (EEZ): (of a country): the area extending up to 200 nautical miles from a country’s normal baselines as defined in the United Nations Convention on the Law of the Sea. (SEEA Central Framework, para. 5.248 and related footnote) Externalities: impacts that “arise when the actions of an individual, firm or community affect the welfare of other individuals, firms or communities [and the] agent responsible for the action does not take full account of the effect” (Markandya and others, 2001). (para. 12.14) F Final ecosystem services: those ecosystem services in which the user of the service is an eco- nomic unit (e.g. business, government or household). (para. 6.24) G Gross ecosystem product (GEP): is equal to the sum of all final ecosystem services at their exchange value supplied by all ecosystem types located within an ecosystem accounting area over an accounting period less the net imports of intermediate services. (para. 9.18) I Intermediate services: those ecosystem services in which the user of the ecosystem services is an ecosystem asset and where there is a connection to the supply of final ecosystem services. (para. 6.26) International Union for Conservation of Nature Global Ecosystem Typology (IUCN GET): a global typological framework that applies an ecosystem process-based approach to ecosystem classification for all ecosystems around the world. The SEEA ecosystem type reference classification reflects IUCN GET. (para. 3.58) 394 System of Environmental-Economic Accounting – Ecosystem Accounting L Land cover: the observed physical and biological cover of the Earth’s surface and includes natu- ral vegetation and abiotic (non-living) surfaces. (SEEA Central Framework, para. 5.257) Land management: the process of managing the use and development of land resources. There may be differences in the degree to which areas of land or water are managed by humans, ranging from more intensively (in the case, for example, of built-up areas and cropland) to less intensively (in the case, for example, of polar regions and oceans). (para. 3.83) Landownership: a key characteristic that constitutes a direct link between ecosystems, their management and economic statistics. (para. 3.84) Landscapes (including those involving freshwater): (as defined for accounting purposes) groups of contiguous, interconnected ecosystem assets representing a range of different eco- system types. (para. 2.20 with footnote) Land use: reflects both (a) the activities undertaken and (b) the institutional arrangements put in place for a given area for the purposes of economic production, or the maintenance and restoration of environmental functions. (SEEA Central Framework, para. 5.246) Legal owner: the institutional unit entitled in law and sustainable under the law to claim the benefits associated with the entities. (2008 SNA, para. 10.5) M Managed expansions: represent an increase in the area of an ecosystem type due to direct human activity in the ecosystem, including the unplanned effects of such activity. (para. 4.15) Managed reductions: represent a decrease in the area of an ecosystem type due to direct human activity in the ecosystem, including the unplanned effects of such activity, or to cases where the activity may be illegal. (para. 4.15) Market prices: amounts of money that willing buyers pay to acquire something from willing sellers. (2008 SNA, para. 3.119) N Natural ecosystems: ecosystems that influenced predominantly by natural ecological processes and characterized by a stable ecological state maintaining ecosystem integrity; ecosys- tem condition ranges within its natural variability. (table A5.2.1) Natural inputs: all physical inputs that are moved from their location in the environment as part of economic production processes or are directly used in production. (SEEA Cen- tral Framework, para. 3.45) Natural resource residuals: natural resource inputs that do not subsequently become incorpo- rated into production processes and, instead, immediately return to the environment. (SEEA Central Framework, para. 3.98) Natural resources: include all natural biological resources (including timber and aquatic resources), mineral and energy resources, soil resources and water resources. (SEEA Central Framework, paras. 2.101 and 5.18) Net present value (NPV): the value of an asset determined by estimating the stream of income expected to be earned in the future and then discounting the future income back to the present accounting period. (SEEA Central Framework, para. 5.110) Non-SNA benefits: goods and services that are not included in the production boundary of the System of National Accounts (SNA). (para. 6.18) Non-use values: values that people assign to ecosystems irrespective of whether they use or intend to use those ecosystems. (para. 6.70) Glossary 395 O Other changes in the volume of ecosystem assets: changes in the value of an ecosystem asset, other than (a) those due to ecosystem enhancement, ecosystem degradation or eco- system conversion and (b) those that are the result solely of changes in unit prices of ecosystem services. (para. 10.36) P Potential supply: concerns the ecosystem’s ability to generate an ecosystem service, without the constraint of considering current patterns of use but while still requiring that the condition of the ecosystem be unaffected. (para. 6.150) Provisioning services: those ecosystem services representing the contributions to benefits that are extracted or harvested from ecosystems. (para. 6.51) R Realm: a major component of the biosphere that differs fundamentally in ecosystem organiza- tion and function. (para. 3.61) Reference condition: the condition against which past, present and future ecosystem condition is compared in order to measure relative change over time. (para. 5.69) Reference level: the value of a variable at the reference condition, against which it is meaningful to compare past, present or future measured values of the variable. (para. 5.65) Regulating and maintenance services: those ecosystem services resulting from the ability of ecosystems to regulate biological processes and to influence climate, hydrological and biochemical cycles and thereby maintain environmental conditions beneficial to indi- viduals and society. (para. 6.51) Residuals: flows of solid, liquid and gaseous materials, and energy that are discarded, dis- charged or emitted by establishments and households through processes of production, consumption or accumulation. (SEEA Central Framework, para. 3.73) Resource rent: the economic rent that accrues in relation to environmental assets, including natural resources. (SEEA Central Framework, para. 5.114) Revaluations: changes in the value of ecosystem assets over an accounting period that are due solely to movements in the unit prices of ecosystem services that underpin the deriva- tion of the net present value of those assets. (para. 10.41) S Seascapes (including those involving freshwater): (as defined for accounting purposes) groups of contiguous, interconnected ecosystem assets representing a range of different eco- system types. (para. 2.20 with footnote) SNA benefits: goods and services that are included in the production boundary of the SNA. (para. 6.17) Spatial functions: (a) flows related to the use of the environment as a location for transportation and movement, and for buildings and structures; and (b) flows related to the use of the environment as a sink for pollutants and waste. (table 6.1 and para. 6.36) Supply and use tables (SUTs): accounting tables structured to record flows of final ecosystem services between economic units and ecosystems and flows of intermediate services among ecosystems. Entries can be made in physical and monetary terms. (para. 7.5) U Unmanaged expansions: represent an increase in area of an ecosystem type resulting from natural processes, including seeding, sprouting, suckering or layering. (para. 4.15) 396 System of Environmental-Economic Accounting – Ecosystem Accounting Unmanaged reductions: represent a decrease in area of an ecosystem type associated with natural processes. (para. 4.15) Use values: values arising when the benefit to people is revealed through their direct, personal interaction with the environment or through indirect use. 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