First discussion document for MAES pilot study on natural capital accounting

Prepared by co-leads Jan-Erik Petersen, EEA, and Kremena Gocheva, Bulgaria

March, 2013

Introduction

This document is meant to provide background and initial ideas on the objectives and approach for the MAES pilot study on natural capital accounting. It has been put together after a first reflection at EU level and aims to serve as a basis for further discussions amongst all pilot study members. The following sections propose a set of key issues to be reviewed for the design of the pilot study.

Overview of key issues to be addressed in initial phase

The overall objective of the pilot is to explore the potential for valuation and natural capital accounting in the context of the EU 2020 Biodiversity Strategy in relation to other EU policies (see annex for detail).

It is suggested that the following issues are addressed in the initial discussions among pilot study members:

Focus of the pilot study

‘Natural Capital’ can be defined in a fairly comprehensive manner - see Figure 1 below. The link of the pilot study to the MAES process suggests that the work in the pilot should focus on ecosystem capital, looking at both ecosystem assets and ecosystem service flows. The chosen focus needs to be well defined, clearly delimited in scope and linked to follow-up activities to be done, and explained in the context of existing concepts of natural capital and current policy discussions. In this context, a relevant question is whether abiotic flows should be part of ecosystem accounts. The outcome of this work would then also be reflected in the output of the pilot study.

Within this focus on ecosystem capital, it needs to be determined whether it would be useful to choose certain components or certain ecosystem types for the pilot.

As described in the annex, the pilot would explore both the issue of valuation per se (potentially including methods for project impact assessment) and comprehensive (nation-wide) assessment of ecosystem capital, both in physical and monetary terms. It is currently proposed that the main focus lies on the assessment of national ecosystem capital.

Figure 1: Conceptual representation of the components of natural capital

Working method

Given the set-up of all pilot exercises this is foreseen to be a cooperative effort between Member State and EU-level representatives.

Resources and studies exist at EU level that can be drawn upon – an initial selection of these is included in the description of the pilot study in annex.

In addition, there are ongoing activities in various Member States - it is proposed that the most important ones are reviewed and used as input for the study (the use of a questionnaire could be considered).

Links with other pilots will also need to be considered, and possible overlaps/synergies explored (e.g. pilot on the use of article 17 data).

Finally, members of the pilot will need to agree on the main working methods – tackling and/or confirming the following points :

how many (virtual) meetings up to the September delivery

how much time can members invest and who drafts / provides material for final pilot study output: all members of the pilot are expected to be active. The pilot co-leads are expected to lead on the drafting.

what communication tools are preferred – it is expected that communication will be mostly electronic, but teleconferences could also be used, as well as meetings in the margins of scheduled conferences and meetings.

Outline of final output

Defining the final output at the beginning will help to develop a clear and shared understanding of what the pilot study aims at. Hence this is proposed as a primary focus of the initial phase of the work.

The following potential features of the final output need to be reviewed in that context:

Introductory section on concepts and approach

Section on type of stakeholder institutions in countries, country experience and/or use of country examples

Length of pilot study report (e.g. 10-20 pages, plus annexes)

Development of a framework/template that can be applied at national level, also considering relevant (adjacent) EU policies and commonly used concepts

A review of the type of data needed to populate the accounts

Explain the respective roles of physical and monetary accounting

Define the interfaces to other EU policies to be considered by MSs outside the pilot’s scope and provide sample list of information sources to deal with them

…

Annex: Initial description of MAES pilot study on natural capital accounting

This pilot study aims at exploring the potential for valuation and natural capital accounting in the context of the EU 2020 Biodiversity Strategy using latest developments on ecosystem accounts at EU level and concrete examples in Member States, and focusing in particular on the following issues:

To what extent can the information developed in the biophysical ecosystem assessments be calibrated to be integrated in a systematic way in ecosystem accounts, as outlined for example in the UN Statistics consultation draft on System of Environmental-Economic Accounting (SEEA) Experimental Ecosystem Accounting.

The potential for valuation in ecosystem assessments, including the various TEEB reports, the extent to which monetary values can be included in ecosystem accounts, and for what use.

Experience gained at the EEA from developing a framework for pilot ecosystem capital accounts and supporting the development of the UN proposal on SEEA Experimental Ecosystem Accounting can contribute to this task. The first question to explore will be how to define ‘natural capital accounting’ and to what degree it overlaps with ‘ecosystem accounting’. This links to the question of which natural capital assets and ecosystem service and natural resource flows to include in such accounts. Knowledge gained through the development of the Common International Classification of Ecosystem Services (CICES) and forthcoming work to be supported by the EEA can help in this regard.

The second block of work would look at the availability, suitability and use of different data sets for the foreseen analysis in the EU Member States and/or at EU (European) level. Which kind of data are ideally needed, what characteristics should they have, and what are the possibilities for utilising proxy data. A further question is how to organise such data sets in databases that are suitable for putting together integrated ecosystem/natural capital accounts. Experience gained at the EEA in developing European ecosystem capital accounts over the last few years can be exploited for this purpose.

The potential for monetary valuation in ecosystem assessments forms the third main theme under this pilot. Work at national, EU and international level can help in understanding the advantages and disadvantages of different valuation methods, the questions they help to address, and the type and quality of input data that they require. Connecting different methodological approaches to ‘real-life’ data, addressing their applicability and fitness for purpose, and finally policy debates on the management and protection of natural / ecosystem capital at Member State and EU level will be a crucial challenge under this block of work. The outputs of the soon to be finalised study on TEEB EU and associated recommendations will also be useful for this work, as well as on-going work at international level in the context of the World Bank's WAVES partnership and related work from Member States

The pilot will benefit from Eurostat's work to assess the value of certain natural assets, such as forests and wood stocks, in terms of physical and monetary data and EEA’s efforts to use such information in spatially explicit assessments (fast track accounts). Such work links satellite accounts to national accounts. It will be combined with existing socio-economic data to derive indicators, e.g. productivity indicators.

Wealth Accounting and the Valuation of Ecosystem Services www.wavespartnership.org/waves/natural-capital-accounting

For instance the recently developed guidelines from France on using equivalency methods for addressing biodiversity loss in the context of ELD, together with an application software.