1. Experimental ecosystem accounts – valuation of assets
London Group conference
October 2017
Emily Connors and Rocky Harris
ONS and Defra, UK

2. Ecosystem Asset Valuation
Net Present Value (NPV) of future flow of ecosystem services – as advocated in the SEEA
National level
Used in all publications, but especially important in our aggregate UK accounts
Source: ONS UK Natural Capital Accounts, £billion

3. Why we have developed asset accounts?
Demand from our independent Natural Capital Committee
Has the potential to tell us a lot about ecosystem health in one number
Popular with the media and public
Problems to be wary of:
The ‘one number’ can change greatly with revisions
Can take a lot of time
With limited knowledge about future flows, what do they really tell us?

4. What does NPV require?
A best estimate of the future or expected pattern of services flows ideally in both physical and monetary terms
A specified length of time
Appropriate discount rate
Each calculation requires consistent assumptions
- For each service
- For each type of asset

5. What does NPV require?
A best estimate of the future or expected pattern of services flows ideally in both physical and monetary terms 5 year average if no information about flows is available
A specified length of time -100 years
Appropriate discount rate - declining from 3.5%
Each calculation requires consistent assumptions
- For each service
- For each type of asset

6. Factors to take into account
The Technical Recommendations emphasise ecosystem condition as the key determinant of the future pattern of services
Although does go on to suggest other factors, such as future environmental condition (e.g. air pollution concentrations) may be relevant
What are the main changes we should be taking into account?
Some changes are reasonably certain at national level
Population growth, increase in urban extent
Some changes are expected but impact not certain
Climate change
Some changes may be implicit in Government projections
Income growth

7. The assumptions are important
Illustrative UK woodland asset values1
1. Using Social discount rate, which embodies an income growth assumption
The effect if different assumptions at national level
USD billion
2015 prices
Recreation services - constant 2015 flows
15.2
As above, with allowance for population growth
17.4
As above, with allowance for 2% income growth and 50% income elasticity
24.3
Air filtration services – constant 2015 flows
29.2
As above, with projected emissions reductions to 2030
16.4
18.5
As above, with allowance for 2% income growth
35.5

8. Asset valuation - questions for discussion
Is a default assumption of a 100 year asset life something that should be advocated in the revised SEEA?
What advice should the SEEA give about taking population change, climate change or other drivers of land cover change into account in projecting asset lives and future service flows?
To what extent can such assumptions and projections reasonably be applied at more detailed spatial levels?