A future task in good hands Methodological Aspects of Natural Capital Accounting Burkhard Schweppe-Kraft Unit I 2.1: Legal Affairs, Economics and Ecologically Sound Regional Development

Features of Natural Capital A delivers future benefits or avoids future costs or provides options for future benefits or options for the avoidance of future cost or maintenance of existence is part of individual preferences (there is a willingness to pay) Brestoration takes considerable time and/or „money“ Call or a considerable part of it is not man-made Note: Because of „B“ the -change from cropland to grassland is no change of natural capital, regarding the provisioning of agricultural products. -Urban or industrial land take, however, should be regarded as a loss What is Natural Capital Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

Different kinds of natural capital Valuation (of changes) in Examples CBAGDP Cap. Ac. delivers future benefits private bene- fits contributing to additional (amounts) of products consumer surplus + producer/land owner surplus/rent additional value added effects on price-level consumer rents excluded ? price of land (and stocks on it) ? land/soil for agr. production timber stock reducing cost of production none ? water resources (incl. quality) public benefits willingness to pay (stated and revealed) (if existing:) maintenance cost nonelandscape (beauty) none flood regulation by floodplains provides options for future benefits or avoidance of future cost changes in price if traded or tradable prices (if traded) ? genetic resources, e.g. bio- prospecting areas willingness to pay or to accept/sell (stated) (if existing:) maintenance cost none biodiversity (species, habitats, genetic diversity) maintenance of existence is part of individual preferences Monetary Valutation of Natural Capital and its Benefits in CBA, GDP and Capital Accounts Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

SNA – Rules for monetary accounting Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels Transactions must show that the prices are real Consumer surplus is not taken into account These are reasonable rules for the economy (cautiosness) But lead to shortcomings when accounting for national capital

Measuring Natural Capital: Extent and Condition versus Expected Flows of Services Two approaches for the measurement of ecosystem assets mentioned in SEEA / EEA: First, ecosystem assets are considered in terms of ecosystem condition and ecosystem extent. Second, ecosystem assets are considered as the estimated stock of (aggregated) expected ecosystem service flows. “There will not be a simple relationship between these two perspectives, rather the relationship is likely to be non-linear and variable over time.” Ecosystem.pdf Due to future changes in technology and demand very hard to assess 1 2 What to do with assets that are not yet used? What to do with assets of same capacity but in regions with different demand? Has an ecosystem one condition or different conditions for different services? 3 better use this approach? Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

Different Specific or One General Natural Capital ►Different specific capital accounts for different kinds of ecosystem services: contribution of ecosystems to:different criteria for good condition : e.g.:agricultural productionnatural soil fertility freshwater supply filtration rate, absence of pollutants in soils and geological layers, bufffering capacity against pollutants flood protection water retention capacity in alluvial floodplains recreation kind of land-use, diversity of land-uses, landscape elements biodiversity naturalness, contribution to the protection of endangered species Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

►One account for „one“ Natural Capital („Natural Capital“ regarded as one additional economic sector) two possible solutions AB aggregation of different criteria for condition for the above mentioned different „specific“ natural capitals one unifying criterion for condition e.g.reversibility resilience of ecosystem functions? of ecosystem services? with regard to welfare? naturalness absence of pollution / anthropogenic stress Different Specific or One General Natural Capital Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

Examples for Specific Natural Capitals: Natural Soil Fertility Agricultural yield potential according to Muencheberg Soil Quality Rating - raw data National physical indicator: Sum of area sizes multiplied by the value of fertility according to the SQR Possible monetary value: Sum of discounted future agricultural land rents on the basis of current prices Source: © Bundesanstalt für Geowissenschaften und Rohstoffe 2013 Geoinformation: DTK 1000; © Vermessungsverwaltungen der Länder und BKG 2004

Ground Water Chemical condition of groundwater sources Possible national physical indicator: Capacity of groundwater sources with a good chemical condition Possible monetary value for “degradation” /capital loss: Sum of discounted future additional cost for ground water purification Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels Reference: Wasserwirtschaft in Deutschland (Arle et al. 2013) Source: Umweltbundesamt, Daten der Bund/Länderarbeitsgemeinschaft Wasser (LAWA), Berichtsportal WasserBLIcK/BfG,

Flood Mitigation Surface of available, submersible floodplain, not separated by dams, outside of settlement areas Values in % of currently free submersible floodplain outside of settlement areas (absolute instead of % values are recommended) Possible national physical indicator: Floodable plains outside residential areas, not separated by dams Possible monetary value for “degradation”: Sum of discounted future additional damage cost Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels Source: Ifuplan / ETH-Zürich 2014

Biodiversity / Habitats (Biotope Values - example from Berlin) value class biotope value from - to Possible national physical indicator: Sum of area sizes multiplied with biotovalue Biotop values are used as exchange rates in offsetting schemes Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels Source: Senatsverwaltung für Stadtentwicklung und Umwelt, Berlin

„Capital stock“ of high-nature- value ecosystems in Germany High-Nature-Value Habitat / Ecosystem Area (ha) % of land- cover Euro / m 2 Value (Mio. €) Dwarf shrub heathlands83, , Natural and semi-natural dry grasslands99, , Molinea meadows14, , Riparian grasslands and tall herbaceous perennial vegetation of moist to wet sites 37, , Low intensively used meadows179, , and swamps free of woodland11, , Other types of agricultural grasslands with a high species diversity 447, , Arable land with threatened herbaceous vegetation communities 473, , Low intensively managed vineyards7, Traditionally managed orchards350, , Low intensively used ponds for fish farming3, , Copses, thickets, scrub, hedgerows and tree rows in agricultural used areas 750, , Natural woods and low intensively used species-rich forests 734, , Pasture woodland31, , Coppice and coppice with standard182, , Nature-like woodland edge communities3, Species-rich herbaceous forest fringe communities Raised bogs including less degraded restoreable forms67, , Transition mires and strongly degraded raised bogs78, , Nature-like running and standing surface waters246, , Total3,555, , Valuation Basis: Restoration costs and restoration time Method: Habitat Equivalency Analysis used in off schemes Result: 80% of the value of Germany´s productive capital / equipment Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels Source: Schweppe-Kraft, Natural Capital in Germany 2009

A Pragmatic Way for Considering Site Specific Demand for Site Specific Services Values in % of currently free submersible floodplain outside of settlement areas (absolute instead of % values are recommended) Possible pragmatic solution: Accounting of retention area separately for locations with influence on areas that are more or less threatened by flooding Accounting of recreation areas separately for locations with high or low demand for recreation Agricultural products and thus also the natural capital that contributes to agricultural production has (more or less) the same value regardless of where production takes place. With natural capital that prevents us e.g. from flood damages or for recreation areas, it is quite different. Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

A possible way towards one natural capital on the basis of an ecosystem ranking for different specific services CLC- Ecosystem ConditionWater retention Erosion control Pollination ∑ / Rank / Value Wood FFH high: █ (4)██ █ █ █(12) semi-natural high: █ (4)█▄ █ █ ▄(11) less intensive high: █ (4)█▄ █ █ ▄(11) intensive moderate: ▄ (3)▄▄ ▄ ▄ ▄(9) Grassland FFH low: ■ (2)■█ ■ ■ █(8) semi-natural low : ■ (2)■█ ■ ■ █(8) less intensive low: ■ (2)■■ ■ ■ ■(6) intensive low: ■(2)■▪ ■ ■ ▪(5) Cropland HNV very low: ▪ (1)▪■ ▪ ▪ ■(4) organic very low: ▪ (1)■■ ▪ ■ ■(5) Soil conserving very low: ▪ (1)■▪ ▪ ▪ ■(4) intensive very low: ▪ (1)▪▪ ▪ ▪ ▪(3) Ranking of the capacity of ecosystems for different services of Assumption: surrounding ecological and economic conditions being the same Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

Relevance of ecological and economic conditions of surrounding areas for the relevance of / demand for services CLC- Ecosystem surrounding conditions Erosion control Wood lowlands▪ highlands█ Grassland lowlands▪ highlands■ Cropland lowlands▪ highlands▪ ► The future value of services is highly dependent on where an ecosystem is situated ► The influence of place on the value of an ecosystem is much more relevant than the influence of the condition of the ecosystem on the service ► Neglecting the influence of place/location could lead to a misinterpretation of landuse changes ► Possible solution: Accounting for different types of locations CLC- Ecosystem surrounding conditions Pollination Wood wood, grassland ▪ insect pollinated crops, orchards ▄ Grassland Wood, grassland ▪ insect pollinated crops, orchards █ Cropland highlands ▪ insect pollinated crops, orchards ▪ Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

A possible way towards one natural capital on the basis of a naturalness/resilience ranking CLC- Ecosystem naturalness/ resilience compared with other CLC- types special sub-type naturalness within CLC-type ranking within all sub-types Woodhigh: █ (4) FFH high: █ (4)7 ? semi-natural high: █ (4)6 ? less intensive high: █ (4)4 ? intensive moderate: ▄ (3)3 ? Grasslandmoderate: ▄ (3) FFH low: ■ (2)6 ? semi-natural low : ■ (2)4 ? less intensive low: ■ (2)3 ? intensive low: ■(2)2 ? Croplandvery low: ▪ (1) HNV very low: ▪ (1)5 ? organic very low: ▪ (1)3 ? Soil conserving very low: ▪ (1)2 ? intensive very low: ▪ (1)1 ? Expert workshop on key issues in Natural Capital Accounting, 19 September 20014, IEEP, Brussels

Conclusions / Recommendations Arguments drawn from the first approach (specific natural capitals according to different ecosystem services) would likely deliver the most convincing arguments in practical political debates One overall indicator for natural capital, especially a kind of resilience indicator, would satisfy the ecologic community and may fit best for public communication as well as „high-level“ politics All three ways of accounting have their own specific opportunities, shortcomings and risks Try both ways!

A future task in good hands Many thanks for your kind attention