National Accounting and the Valuation of Ecosystem Assets and Their Services

Abstract

There has long been interest in integrating the value of environmental stocks and flows into standard measures of economic activity and wealth, in particular through the development of adjusted measures of GDP and extended measures of national wealth. This paper examines how the valuation of ecosystem services and ecosystem assets can be undertaken in an integrated national accounting setting. We clarify the relevant valuation principles, most significantly the need to apply the concept of exchange values, and explain why the integration of ecosystem services necessitates an extension of the standard production boundary used in economic measurement. The main implications of an accounting approach are discussed including the need to distinguish benefits from services, the need for valuation methods that exclude consumer surplus, and the importance of aligning measures of income and degradation. Remaining challenges include the treatment of low or negative rents, accounting for ecosystem disservices, and the derivation of values for ecosystem assets. Meeting these challenges and advancing work in this area should be the joint focus of economists, ecologists and accountants.

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Fig. 1

Notes

  1. 1.

    Interestingly though, at the time, these debates on welfare were not overly concerned with the state of the environment. For instance, Nordhaus and Tobin (1972) state: “If we had estimates of the value of environmental capital, we could add them to the national wealth estimates \(\ldots \,\) and modify our calculations of MEW [measure of economic welfare] net investment accordingly. We have not been able to make this, adjustment, but given the size of the other components of wealth, we do not believe it would be significant.”

  2. 2.

    For a catalogue of examples of environmental–economic accounting see the on-line library held by the United Nations Statistics Division at http://unstats.un.org/unsd/envaccounting/ceea/archive/.

  3. 3.

    While this concept is clear, its application in the case of the use of environmental assets is challenging. See the discussion on the distinction between natural and cultivated resources in SEEA Central Framework 5.24–5.29.

  4. 4.

    Nordhaus (2005) describes these as near market goods and services. He notes that “Near market goods and services obey the “third party rule” which states that a third party could produce the good or service just as well as the party that produces the item.” (Nordhaus 2005, p. 5).

  5. 5.

    Unlike the SEEA 2012 Central Framework which was recognized as a statistical standard by the United Nations Statistical Commission, SEEA Experimental Ecosystem Accounting does not represent a standard for measurement. Nonetheless it is hoped that it can provide an integrated framework and baseline for discussion on ecosystem accounting research, and facilitate the transition of this research into broader economic accounting systems and related decision making tools.

  6. 6.

    There are many challenges in defining a set of mutually exclusive areas. For discussion see SEEA EEA Sect. 2.3.

  7. 7.

    Similar terms are used for the same model in other cases. For example, the UK NEA and Bateman et al. (2011) use ecosystem services in the same way but apply the term “goods” rather than “benefits”. Other approaches may skip the step of benefits (as defined here) and rather consider a direct link between ecosystem services and human well-being. The “extra” step is considered important for national accounting purposes such that integration with (and extension beyond) standard economic measures can be more easily facilitated.

Abbreviations

CICES:

Common International Classification of Ecosystem Services

EC:

European Commission

GDP:

Gross domestic product

MA:

Millennium Ecosystem Assessment

NEA:

National Ecosystem Assessment

SEEA:

System of Environmental–Economic Accounting

SEEA EEA:

System of Environmental–Economic Accounting 2012 Experimental Ecosystem Accounting

SNA:

System of National Accounts

TEEB:

The Economics of Ecosystems and Biodiversity

UN:

United Nations

UK:

United Kingdom of Great Britain and Northern Ireland

WCED:

World Commission on Environment and Development

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Acknowledgments

This paper reflects and builds on the outcomes of technical discussions held in the context of the development of the SEEA Experimental Ecosystem Accounting. The three authors were members of the editorial board established by the United Nations Committee of Experts on Environmental–Economic Accounting to oversight that technical work and acknowledge the contributions of other technical experts involved. We also thank two anonymous reviewers for their valuable comments.

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Correspondence to Carl Obst.

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Obst, C., Hein, L. & Edens, B. National Accounting and the Valuation of Ecosystem Assets and Their Services. Environ Resource Econ 64, 1–23 (2016). https://doi.org/10.1007/s10640-015-9921-1

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Keywords

  • Ecosystem accounting
  • National accounts
  • Ecosystem services
  • Degradation
  • Valuation
  • Green accounting