1. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 A methodological proposal and European case study Jean-Louis Weber Project manager Spatial analysis, land and ecosystem accounting EEA jean-louis.weber@eea.europa.eu Stern-like Biodiversity Study Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Roy Haines-Young Centre for Environmental Management, School of Geography, University of Nottingham

2. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 GDP + Final use of ecosystem services IDP Inclusive Domestic Product Accounting for environmental benefits and costs Benefits: the Demand side Costs: the Supply side + Intermediate consumption + Maintenance of the resource + Restoration from ecosystem degradation FCP Full Cost of Products

3. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Economic-Environmental Accounts: International and European context SEEA 2003 (Integrated System of Environmental and Economic Accounting) Accounts in monetary AND in physical units Tested in Europe by Eurostat, EEA and most member countries; now: European Strategy (ESEA) 2003, revised 2007 2006, SEEA endorsed as an international standard by the UN Statistical Commission – revision by 2012 2006, SEEA Water – « interim standard » from 2007 Other implementation manuals cosnsidered: energy & minerals, land & ecosystems At the EEA: Land cover accounts for Europe 1990-2000 (2006), report and gridded database; “Implementation of land and ecosystem accounts at the EEA”(Journal of Ecological Economics – 2007)

4. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 SEEA: expansion of the System of National Accounts (UN1993) in order to include more environmental aspects RM HASSAN - UN The System of Environmental and Economic Accounting (UN 2003) - RANESA Workshop June 12-16, 2005 Maputo

5. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Economic Environmental Accounts: Flows and Assets EGS GDP Economic assets Ecosystem assets GDP: Gross domestic Product EGS: Ecosystem Goods and Services Intermediate use of EGS Final use of non-market EGS

6. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Economic system and ecosystem: co-evolving EGS GDP Economic assets Ecosystem assets GDP: Gross domestic Product EGS: Ecosystem Goods and Services Intermediate use of EGS Final use of non-market EGS

7. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Of the usefulness of environmental accounts They are integrated, physical and monetary, connected to the National Accounts (classifications, definitions…) They are based on sound rules (e.g. double-entry accounting) But –The world does not work according to the structure of accounts… –Accounts are human constructs A way or organising our thoughts and information They need to focus on –Needs of end users who make decisions –Values and views of people who depend on or make use of the services that nature offers otherwise they will not capture the real world

8. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Back to the logic underlying the Millennium Ecosystem Assessment… Biophysical structure or process (e.g. woodland habitat or net primary productivity ) Service (e.g. flood protection, or harvestable products) Service (e.g. flood protection, or harvestable products) Function (e.g. slow passage of water, or biomass) Function (e.g. slow passage of water, or biomass) Benefit (e.g. willingness to pay for woodland protection or for more woodland, or harvestable products) Benefit (e.g. willingness to pay for woodland protection or for more woodland, or harvestable products) Σ Pressures Limit pressures via policy action? Minimum levels of service (service limits)

9. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Demand and Supply of ecosystem goods and services Demand: –Market: EGS imbedded in the price of commodities (intermediate consumption of economic sectors) –Non-market end services: individual consumption of households, collective consumption of government, beneficiaries x willingness to pay Supply: –Market: full cost of products (physical and monetary, intermediate consumption of resource and indirect degradations); –Sustainability of intermediate consumption/use measured by the integrity/health of natural assets, in physical terms

10. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Demand side Key questions: –What are the services associated with this place or situation that matter for sustainability and how are they generated? –How important is each of these services, to who, and for what reasons? –What, if anything, could replace or substitute for each of the benefits, either here or elsewhere? –Do we expect to have enough of each of these services either here or elsewhere in the future?

11. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Inclusive Domestic Product Final EGS IDP GDP Final use of non-market EGS Inclusive Domestic Product GDP: Gross Domestic Product EGS: Ecosystem Goods and Services IDP: Inclusive Domestic Product Weak sustainability

12. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Supply side, environmental limits and policy action/inaction Time Undamaged Service output Damaged Target Limit Collapse Marginal losses Marginal gains What are the risks and vulnerabilities? Policy choices Enhanced Maintained Neglected Eroded or degraded Precautionary limit? Accounting Modelling

13. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Sustainable intermediate use Non-Sustainable intermediate use Economic assets Ecosystem assets EGS IDP GDP Final use of non-market EGS GDP: Gross domestic Product EGS: Ecosystem Goods and Services IDP: Inclusive Domestic Product Sustainable and non sustainable economic use

14. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Stocks Integrity/Health Sustainable intermediate use Non-Sustainable intermediate use Economic assets Ecosystem assets EGS IDP GDP Final use of non-market EGS GDP: Gross domestic Product EGS: Ecosystem Goods and Services IDP: Inclusive Domestic Product Ecosystem Assets and calculation of Full Cost of Products Alternative prices for resource use according to environmental objectives Observation of symptoms: Vigor Organisation Resilience Dependence Support to healthy populations

15. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 GDP: Gross domestic Product EGS: Ecosystem Goods and Services IDP: Inclusive Domestic Product LEP: Land Ecological Potential € : Monetary units : Physical units EGS IDP GDP Economic assets Ecosystem assets Intermediate use of EGS Final use of non-market EGS € & €€ Physical and monetary accounts € LEP

16. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Key points Non market ecosystem services: Final use is to be measured in physical units first; pricing will come in a second step The full cost of the products has to be calculated as : production/distribution cost + cost of restoration of the resource + costs of degradation of ecosystems (indirect use of services) + rents Assets accounts doesn't need to be valued in money in any cases; physical assets (incl. health, resilience) will tell about the sustainability of use of EGS

17. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 MARKET THEORY POLITICAL ECOLOGY DECISION THEORY SYSTEM ECOLOGY THERMODYNAMICS THERMODYNAMICS Market Analysis Cost Methods Cost Methods Hedonic Prices Contingent Valuation Contingent choice Emergy Synthesis Embodied energy MFA EFA HANPP Extended Exergy Accounting Multi-criteria Assessment VALUATION METHOD Cost Methods Weak Comparability Crematistic (money) Valuation Physical Valuation Multi-criteria Valuation VALUE CONCEPT Strong comparability CONCEPTUAL FRAMEWORK USE VALUE NON-USE VALUE ENERGY VALUE MULTIPLE VALUES BIOPHYSICAL VALUE ENERGY MEMORY EXERGY METABO LISM DIRECT USE INDIRECT USE OPTION VALUE HERITAGE EXISTENCE OBJECT OF VALUATION FRAMEWORK FOR VALUATION VALUE CONCEPT AND DERIVED APPROACHES ENVIRONMENTAL ECONOMICS ECOLOGICAL ECONOMICS Lomas et al. 2006

18. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Cost of water supply and environmental cost REMAINING RESOURCE COST (CRR) Cost of the hypothetical measures of restoration of the degradation that will be left in water bodies with respect to the natural state of reference (IN) once reached the objective of the WFD (EO). ENVIRONMENTAL COST (CA) Cost of partial restoration to meet the objective of the WFD in 2015 (EO) from the maximum state of deterioration (EE) generated by the human activities before applying any measures of mitigation. A part of the same one (EA-EE) corresponds to the cost of the measures applied until now. The rest (EO-EA) corresponds to the cost of the measures necessary to reach the objective of the WFD. COST OF WATER SUPPLY (CAA) Costs of resource procurement, distribution and return. The acquisition cost must be the optimal combination of resource generation and resource reassignment of the uses based on the quality required. Cost of services Integral cost of replacement CRRCAA CA EN EO EE EA CA Joan Escriù Water Agency of Catalunya

19. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Example of full cost accounting : physical and monetary Environmental Cost of the WFD = CAR1 + CAR2 + CAR3 Cost of the “effective measures” for meeting the objetive of the WFD considered in the Programe of Measures of River Basin Management Plan Cost of measures for mitigating impacts of uses over the water bodies CAR1 Cost of measures of ecosystem restoration CAR2 Cost of measures for resource procurement CAR3 restoration DA1 DA3 DA2 PHYSICAL ACCOUNTSMONETARY ACCOUNTS Degradation of water quality Impacts on water use Impacts on ecosystems Physico-chemical objectives Biological & hydro-morphological objectives Joan Escriù Water Agency of Catalunya

20. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Cálculo del coste ambiental Degradation of the water bodies Impacts on uses Impacts on the ecosystems Environmental Cost As cost of the measures of restoration of: Why this option?  The environment itself is not “monetisable” (“no entiende de dinero”, “no está en el mercado”).  Contingent valuation methods offer only a subjective value of the environment.  The cost of restoration measures tells us of the environmental costs, when these measures are effective and efficient (reference to targets) ANÁLISIS ECONÓMICO DEL AGUA EN CATALUÑA Joan Escriù Water Agency of Catalunya

21. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 GLOBAL REGIONAL LOCAL Ecosystem Functions Manufactured Capital  Buildings  Roads and infraestructures  Machines  Tools Financial Capital  Money (Change value) Human Capital  Workers  Wealth  Aptitudes  Education  Knowledge Social-cultural Capital  Institutions  Social networks  Trust  Ethic Gobernance Human-made Capital Natural Capital FRAMEWORK FOR VALUATION ECOSYSTEM SERVICES, FUNCTIONS AND NATURAL CAPITAL Conectivity with other ecosystems Functioning Primary Production Water Cycle Biogeochemical Cycles Structure Geotic Structures Biotic Structures Dynamism time ECOSYSTEMS time Ecological integrity Resilience Ecosystem services Martín-López et al. In press

22. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Wetlands, a first case study for Eureca!... … and for the assessment of biodiversity costs

23. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Accounting for ecosystems: Conceptual Model Spatial analysis DP S IR Driving forces (production, consumption) Pressures State of environment Impacts of state on society, economy and ecosystems Responses Causation FrameworkIndicators&Aggregates

24. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Approach based on LEAC (+ rivers…)

25. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 LEAC: from changes to flows of land cover LCF3 LCF1 LCF2 LCF5 LCF4 LCF7 LCF6 LCF8 Change Matrix (44x43=1932 possible changes) summarized into flows LCF9 1990 2000

26. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Framework of Ecosystem Accounts Natural assets accounts Natural capital structure, resilience & wealth (physical units, by sectors) Capital consumption & accumulation (physical units, €) Ecosystem assets wealth (€) Natural Capital Accounts/ living & cycling natural capital Functions & Services Land use function Natural function Supply & use of ecosystem goods and services (Use of resource by sectors, supply to consumption & residuals, accumulation, I-O analysis) Material/energy flows (focus on biomass, water, nutrients, residuals) Accounts of flows of ecosystem goods and services Counts of stocks integrity/health (by ecosystem types, focus on quality) Ecosystem Stocks & State Accounts Core accounts of stocks & flows (by ecosystem types, raw quantities) Land cover Water Biomass, C N, P Ecosystem types Economic sectors Spatial integration Economic integration

27. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Changes in Quantity Changes in Quality Opening stock Closing stock Land use functions X Services Land use functions X Services Minimum levels of service (service limits) Reflections on our efforts to build ecosystem accounts

28. Stern-like Biodiversity Study - Brainstorm on Approach DG ENV - Wednesday 27 June 2007 Partnership for case study on Mediterranean wetlands EEA, ETC-LUSI and ETC-BD ETCLUSI partners (UAB, Danube Delta, Andalusia) The Observatory of Mediterranean Wetlands (under creation, FP7) Voluntary partners: Tour du Valat (Camargue), EKBY (Greece), MEDWET Talks for coordination with the ESA GlobWetlands project Phase 2 (from 2008)