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Policy Roundtable
Bishkek, September 2015
Session 2: System of
Environmental-Economic
Accounting
Presenter: David Bain
Environmental-economic
accounting
Outline – Session 2
◦ Part 1. Background – System of National
Accounts
◦ Part 2. System of Environmental-Economic
Accounting (SEEA)
◦ Part 3. Benefits of an accounting approach
“If you can’t measure it,
you can’t manage it”
Part 1. The System of National Accounts
The System of National Accounts (SNA) is the
internationally agreed standard set of
recommendations on how to compile
measures of economic activity in accordance
with strict accounting conventions based on
economic principles.
Developed in the 1930s, gross domestic
product (GDP) is the best known measure of
macro-economic activity. GDP has also come to
be regarded as a proxy indicator for overall
societal development and progress in general.
However, by design and purpose, it does not
measure environmental sustainability or social
inclusion.
System of National Accounts
SOCIETY (THE BIG PICTURE)
SNA:
Economic
production
Production boundary
But, economic production is only part of our overall interests
System of National Accounts
There are many important activities that
take place which are not economic (outside
the production boundary), at least as
defined by the SNA
Consider:
◦ Unpaid house work
◦ Unpaid care of family
◦ Leisure/exercise
System of National Accounts
Similarly, there are kinds of activities we
want information about that are not
regarded as industries in the SNA/ISIC
Consider
◦ Tourism
◦ Information technology
◦ Recreation
System of National Accounts
And, there are ‘assets’ we are concerned
about, but as they are not used in
production, they have no ‘economic value’
in the SNA
Consider:
◦ The air we breathe
◦ The ‘environment’
◦ Society
System of National Accounts
The SNA doesn’t directly address these
issues, but it does recommend ways to
categorize, measure, value and present
information that addresses these issues in a
comprehensive format that can be linked to
SNA concepts:
Satellite accounts
Satellite
account
Satellite accounts use the structures
and principles of the SNA to look at
a wider range of interests other
than purely economic
SNA
System of National Accounts
Broadly speaking, there are two types of
satellite accounts:
•One type involves some rearrangement of
central classifications and the possible
introduction of complementary elements.
• Such satellite accounts mostly cover accounts
specific to given fields such as education,
tourism and environmental protection
expenditures and may be seen as an
extension of the key sector accounts.
System of National Accounts
The second type of satellite analysis is mainly
based on concepts that are alternatives to
those of the SNA.
These include a different production
boundary, an enlarged concept of
consumption or capital formation, an
extension of the scope of assets, and so on.
A Satellite Account for the
Environment
The System of Economic-Environmental
Accounts (SEEA) combines aspects of both
types of satellite account, e.g.
1. Environment protection expenditure
2. Changes to production boundary
3. Enlarged scope of assets
1. Tourism
Satellite accounts are used to
examine a wide range of issues
SNA
2. Unpaid
work
1+2
Environment
Part 2: System of Environmental-Economic Accounting
(SEEA)
European Commission
Food and Agriculture Organization
International Monetary Fund
Organisation for Economic Cooperation and Development
United Nations
World Bank
2012
SEEA
“A country could exhaust its mineral
resources, cut down its forests, erode its
soils, pollute its aquifers, and hunt its
wildlife and fisheries to extinction but
measured income would not be affected
as these assets disappeared.“
Robert Repetto, Senior Fellow at the International Institute for Sustainable
Development and for the Energy and Climate programs at the United Nations
Foundation in Washington. He is one of the world’s leading environmental
economists.
SEEA Online Training Module
Overview, Page 6 / 11
Purpose of the SEEA
The effect of human activity on the
environment has emerged as one of the most
significant policy issues in environmental sustainability. There is growing concern
about the effect of economic activity upon the
environment and increasing recognition that
economic growth and human welfare are
dependent upon benefits obtained from the
environment:
•
The SEEA is the first international statistical
standard for environmental-economic
accounting.
•
It is a conceptual framework for
understanding the interactions between
the economy and the environment, and
for describing stocks and changes of
environmental assets.
Is GDP growth sustainable or are
we just living off our natural capital?
SEEA: Objectives
•SEEA provides information that supports
sustainable development
•The concept of sustainable development is difficult
to define…here is the UN definition:
“Development that meets the needs of the present
without compromising the ability of future
generations to meet their own needs”
SEEA Online Training Module
Integrated statistics
The SEEA was designed to be coherent and
complementary with other international
standards, recommendations and
classifications:
•
It's based on agreed-upon concepts,
definitions, classifications, and
accounting rules.
•
The SEEA provides a structure to
compare and contrast source data and
allows the development of aggregates,
indicators and trends across a broad
spectrum of environmental and economic
issues.
Overview, Page 8 / 11
Environmental statistics
Statistics - process of collecting, organising and
interpreting numerical data about the world
Environmental statistics are often compiled with a
legal or administrative purpose
Environmental statistics use a number of concepts,
methods and classifications
◦ often not well integrated with each another
In the past, environmental statistics have some
limitations in their ability to inform…
SEEA Online Training Module
Unit 1, Page 3 / 5
Information silos versus integrated data
Linking environmental and socio-economic data through an internationally agreed statistical
framework is essential for integrated policy making.
Information silos
SEEA integrated data
•
•
•
•
Developed to answer one particular question or
problem
Difficult to figure out if all information is included
Not always easy to see the whole picture, or how
it relates to other data
•
•
•
Enables analysis of the impact of economic policies
on the environment and vice versa
Identifies socio-economic drivers, pressures,
impacts and responses affecting the environment
Supports greater precision for environmental
regulations and resource management strategies
Supports relevant perspectives on economic
development, environmental sustainability and social
equity
The SEEA Central Framework
Until today, the links between
environmental sustainability and the
economy have been poorly explored. The
SEEA provides the framework for reversing
the historical ‘information silo’ approach to
statistics:
It provides international agreed concepts
and definitions on environmental
economic accounting that allows
integration of statistics on the
environment and the economy.
The concepts and definitions are
designed to be applicable across all
countries, regardless of their level of
economic and statistical development,
their economic structure, or the
composition of their environment.
SEEA places statistics on the environment
and its relationship to the economy at the
core of official statistics!
SEEA Online Training Module
Unit 2, Page 3 / 8
Stocks and flows of the SEEA
The Central Framework
integrates information on
the stocks and flows of
the economy and the
environment. In practice,
environmental-economic
accounting includes the
compilation of physical
supply and use tables,
functional accounts and
asset accounts for
natural resources.
Stock accounts for environmental
assets cover natural resources and land;
either in physical (e.g. tonnes of fish) and /
or monetary values (e.g. value of fish).
Combined physical and monetary
accounts bring together physical and
monetary information for the derivation
indicators, including depletion adjusted
aggregates.
Flow accounts are supply and
use tables for products, natural
inputs and residuals generated by
economic activities; either
physical (e.g. m3 of wastewater)
and / or monetary values (e.g. cost
of wastewater treatment).
Flow accounts are supply and use tables
for products, natural inputs and residuals
generated by economic activities; either
physical (e.g. m3 of wastewater) and / or
monetary values (e.g. cost of wastewater
treatment).
Activity / purpose accounts
explicitly identify environmental
transactions already existing in the
SNA, e.g. environmental
protection expenditure (EPE)
accounts, environmental taxes
and subsidies.
Flows
Stocks and flows
Part 3. Benefits of an accounting
approach
Why environmental accounts?
SNA = SEEA
They vary in form and content but have a number of
common features:
• Production boundary
•
•
Definition of products
Territory / residential approach
• Organising framework
• Defined concepts
• Defined data items
• Rules for recording data, and in particular agreeing on the
treatment of particular difficult issues
• Provide a platform for consistent collection, consolidation
and presentation of data (i.e. standard tables)
SEEA: Benefits of an accounting
approach
Accounts provide added value:
Integrates basic data and understanding of cause/effect
from different sources and links to other types of statistics
Improves data quality by guaranteeing consistency (checks
and balances)
Provides policy-makers with coherent time series of data,
indicators and descriptive statistics for scenario modeling
Implicitly defines ownership and hence responsibility for
environmental impacts
SEEA Online Training Module
Unit 3, Page 2 / 8
Links between SNA and SEEA
The SEEA applies the accounting concepts,
structures, rules and principles of the SNA to
environmental information. Because it uses
the same accounting conventions, the SEEA
is generally consistent with the SNA:
•
The measurement boundary to
distinguish between physical flows is
defined by the production boundary as
described in the SNA.
•
The definition of products aligns with the
SNA definition, i.e. those goods and
services created through a production
process and having economic value.
•
Also the measurement boundary for
physical and monetary flows aligns with
the economic territory of a country and
economic activity is attributed based on
the residence of economic units rather
than on the location.
SNA = SEEA
•
•
•
Production boundary
Definition of products
Territory / residential approach
SEEA Online Training Module
Unit 3, Page 5 / 8
Differences - Depletion adjustment
Depletion is the decrease of a natural resource due to extraction at a level greater than that of
regeneration. Measures of depletion in physical terms can be valued to estimate the cost of
using up natural resources with relation to economic activity.
Can you imagine how the SEEA and the SNA recognize the change in the value of natural
resources attributed to depletion?  Drag the headlines to the corresponding approach!
SEEA
………………..
•
•
•
Value of depletion is considered
to be a cost against income
In the sequence of economic
accounts, depletion adjusted
balancing items and aggregates
are defined
They deduct depletion from
the measures of value added,
income and saving
SNA
………………..
•
•
Value of depletion is not
recognised as a cost against the
income earned by enterprises
extracting natural resources
It is shown in other changes in the
volume of assets account alongside flows such as catastrophic
losses and uncompensated
seizures
SEEA Online Training Module
Unit 3, Page 6 / 8
Valuation in the SEEA
The SEEA adopts the same market price
valuation principles as the SNA and provides
guidance on the valuation of renewable and
non-renewable natural resources and land:
•
In monetary terms, the asset boundaries
of the SEEA and the SNA are the same.
Only assets - including natural resources
and land - that have an economic value
following the valuation principles of the
SNA are included in the SEEA.
•
In physical terms, the asset boundary of
the SEEA is broader and includes all
natural resources and areas of land that
may provide resources and space for use
in economic activity. Environmental assets
that have no economic value should be
clearly distinguished.
Monetary:
SNA = SEEA
Physical:
SNA < SEEA
Accounting approach: Why are
monetary values important?
A single measurement unit is needed to aggregate/compare different
benefits and costs
Monetary units are a commonly-used decision-making metric
What can valuation achieve?
1.
2.
3.
4.
5.
6.
raising awareness and mainstream their value into decision-making
undertake a full economic evaluation of land use decisions
design economic incentive instruments (e.g. payment for ecosystem
services)
derive total economic value of forests and its contribution to the economy
augment SNA estimates (e.g. depletion adjusted, green GDP)
calculate improved macro-economic sustainability indicators (e.g.
comprehensive wealth, genuine savings)
Valuing forests, for example
Forest land
Forest ecosystem
services
Forest benefits
benefits forests provide for humans = final goods and services that
generate utility and alter human welfare
values depends on who benefits where  variety of beneficiaries
◦ in different sectors
◦ forestry (e.g. logging, wood, etc)
◦ non-forestry (e.g. agriculture, energy, water, tourism, etc)
◦ across different scales
◦ local (e.g. forest land user, downstream municipality)
◦ national (e.g. industries, governments)
◦ global (e.g. international community)
Valuing forest services
Common International Classification of Ecosystem Services for the SEEA Experimental
Ecosystem Accounting
Valuing forest benefits
1.direct market benefits: final forest goods & services
that can be traded in markets
◦ goods produced for the market (e.g. timber,
firewood/charcoal, NTFP)
◦ goods produced for self-consumption/informal
exchange (e.g. timber, firewood/charcoal, NTFP)
◦ regulating services with a market price (e.g.
through carbon trading/tax, payments for
ecosystem services)
Valuing forest benefits
2.indirect market benefits contribute to production of
market goods and services by other economic
activities (agriculture, energy, water, tourism)
◦ non-forest market good (e.g. recreation,
information/knowledge)
◦ complementary input in non-forest production (e.g.
genetic material, grazing, pollination, water
flow/cycle regulation, soil retention)
◦ substitute-input in non-forest production (e.g.
grazing, pollination, water flow/cycle regulation,
soil retention)
Valuing forest benefits
3. non-market benefits: services that do not contribute
to market goods and services
◦ cultural benefits (e.g. cultural heritage, local
identities, spiritual or religious benefits)
◦ non-use benefits (bequest, altruist and existence
values)
SEEA Online Training Module
Summary, Page 3 / 5
Summary
The SEEA is the first international
statistical standard for environmentaleconomic accounting. It provides a
framework for organizing and linking data
so that they can be used to derive broader
measures of progress to complement
GDP:
•
•
Two other parts of the SEEA are not a
statistical standards (SEEA
Experimental Ecosystem Accounting,
SEEA Applications and Extentions).
•
The subsystems on water, energy and
agriculture maintain close links with the
concepts and terminology of the
subject areas.
•
The SEEA applies the accounting
concepts, structures, rules and
principles of the SNA to environmental
information. It is generally consistent
with the SNA.
•
Global implementation is following a
flexible and modular approach, aims at
establishing technical capacity and
recognizes differences in policy issues.
SEEA organizes physical and monetary
data into combined presentations.
•
The benefits to policy decision-making
are most broadly captured in relation to
sustainable development.
•
The SEEA is reversing the “information
silo” approach to statistics and provides
indicators that directly respond to the
demand of integrated policy-making.
Environmental-economic
accounting
Acknowledgement:
The information, slides and graphics in this presentation have been
developed by many people in many organisations. Principal
contributions have come from the:
United Nations Statistical Division
World Bank – Global Partnership on Wealth Accounting and Valuation of
Ecosystem Services (WAVES)
Australian Bureau of Statistics
Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ)
Discussion and questions
… and remember, “if you can’t measure it, you can’t
manage it”.
David Bain, Consultant
[email protected]