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History and Recent Progress of Green National Accounting

Learn about the origins and recent developments in green national accounting, including the demand for environmental-economic accounts and the activity of international organizations.

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History and Recent Progress of Green National Accounting

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  1. Session 1: History of “green national accounting and recent progress Jean-Louis Weber Special Adviser Economic Environmental Accounting European Environment Agency jean-louis.weber@eea.europa.eu jlweber45@gmail.com CENTRAL INSTITUTE FOR ECONOMIC MANAGEMENT Project " Green GDP Index: Research for Methodology Framework Development" Training on “Green” national accounting:development of environmental-economic accounts at the international level Monday 27 February 2012 Venue: CIEM, 68 Phan Dinh Phung - Hanoi, Vietnam

  2. Session 1: History and recent progress • Origins, first experiments, SEEA 1993 • Recent policy demand for environmental-economic accounts (GDP and Beyond, CBD Aichi-Nagoya Strategy, World Bank’s WAVES…) • SEEA2003 and its revision • Activity of international organisations Jean-Louis Weber, 27 February 2012

  3. Resource efficiency = spare materials & energy (technology, consumption patterns) Macro-economics: GDP growth and the need to account for natural resource use & ecosystem capital degradation 22 Mio km2 17 Mio km2 Available cropland Resource efficiency = ecological management of land & soil, ecosystem capital maintenance Without soil conservation (land use) and soil ecological management, technological/economic solutions are not likely to be effective... And reciprocally... Jean-Louis Weber, 27 February 2012

  4. Resource efficiency = sparing materials & energy (technology, consumption patterns) Macro-economics: GDP growth and the need to account for natural resource use & ecosystem capital degradation 12.5 Mio km3 4.7 Mio km3 Use of accessible freshwater resource (today 54%) Resource efficiency = ecological management of land, soil & water, ecosystem capital maintenance  Beyond GDP 2008  “Stiglitz-Sen-Fitoussi” report 2009  TEEB 2008-2010  WAVES/ WB Partnership 2011-2015  SEEA2003 / rev. 2012-13 Jean-Louis Weber, 27 February 2012

  5. GDP: Concerns about meaning and measurement (1) • Bertrand de Jouvenel 1968: “Because National Accounts are based on financial transactions, they account nothing for Nature, to which we don’t owe anything in terms of payments but to which we owe everything in terms of livelihood.” • Early “green GDP” adjustments: how to maintain national income when natural resource are depleting (“the weak sustainability”)? What are the “good” and “bad” components of GDP? (the first SEEA1993 – no implementation) • SEEA 1993 (System of Economic Environmental Accounts), propose adjustment of GDP from environmental damage • World Bank “Genuine Net Savings”: adjusted from resource depletion, CO2 emissions, urban air pollution Jean-Louis Weber, 27 February 2012

  6. Pioneer works in environmental accounting • Henry Peskin in Norway 1972, • Norway 1976, Natural Resource Accounts – not following Peskin and restricted to physical accounts, • Canada 1979 - Stress Response System [David Rapport & Tony Friend] • France 1979 – Natural Patrimony Accounting [systemic approach, priority to physical accounts in a first step (Robert Toulemon, Jacques Mayer, Jean-Louis weber, Andre Vanoli…)], followed by Spain in the mid 1980s [J. M. Naredo] • Netherlands, end of 1970s [Roofie Hueting, Environment as scarcity, assessment of distance to target] • Peskin, 1980s, ENRAP, Philippines [accounting for environmental services, not only degradation] • Robert Repetto, WRI, 1980s in Indonesia, Costa Rica [“net value” of forests, oil reserves…] • Christian Liepert [defensive expenditures] • OECD, mid 1980s: experiments with countries of physical accounts – leading to the MFA initiative in the 1990s [with Robert Ayres, Japan (Yuichi Moriguchi), Germany (Wuppertal Institute)...] • World Bank and UN Statistical Division (UNSD): Green accounting in parallel to the 1993 revision of the System of National Accounts [Ernst Lutz, Salah El Serafy, Peter Bartelmus, Jan Van Tongeren...]. Focus on adjusting GDP from “environmental degradation and depletion”. Degradation as loss of benefits (diseases resulting from air pollution…). SEEA 1993, not implemented except in a few sponsored countries. Many theoretical questions not clarified, opposition of the national accountants. Genuine Savings [WB] as a second best. • El Serafy for World Bank then freelance: User Cost of natural resources • Development of input-output accounting, physical and hybrid (NAMEA) [Germany, the Netherlands, Japan] • 1994: London Group created by Statistics Canada, Eurostat and the UNSD and hosted by the British Statistical Office. Includes voluntary countries plus UN, European Commission, WB, IMF, OECD. • Revision of the SEEA1993 steered by UNSD [Alessandra Alfieri], Statistics Canada [Rob Smith], OECD [Anne Harrison] and Eurostat [Anton Steurer]. Jean-Louis Weber, 27 February 2012

  7. GDP: Concerns about meaning and measurement (2) Recently: • Beyond GDP Conference, Brussels 2008: keep GDP but supplement it with indicators • TEEB, 2008, GDP of the Poor • Commission on the Measurement of Economic Performance and Social Progress (“Stiglitz report”), Paris 2009: National Income is more important than Gross domestic Product; Social distribution of Disposable Income still poorly addressed; “dual” issue of sustainability: overconsumption/ underinvestment • Capital approaches: • Early attempts at the World Bank: “Genuine or Adjusted Net Savings” • Multi-capitals approaches of sustainable development: man-made, financial, natural, human, social • Ecosystem capital approaches: Green Accounting for Indian States Project, Simplified Ecosystem Capital Accounts (Europe/EEA), SEEA revision, several countries (Australia, UK, Canada…) ... Jean-Louis Weber, 27 February 2012

  8. Costs of environmental protection… public and private expenditures Costs of environmental damages (to human health, to the economy) Genuine “savings”, total wealth measurements Economy’s resource efficiency: Decoupling from resource use (material and energy) & from waste generation Decoupling from impacts on ecosystems Benefits from the ecosystem capital, sustainability and losses: Local, private: economic rent (additional benefit, advantage) for the use of an ecosystem service Macro scale, national: sustainable income made possible by healthy ecosystems able at delivering their services. Maintenance of the ecosystem capital (capacity of delivering services): In case of ecosystem degradation, non paid restoration costs need to be internalised in prices, both at micro and macro levels. Ecosystem depreciation is in fact a debt to future generations which should to be added up to the private, public and social debts… Environmental accounts: expected responses to policy demands Jean-Louis Weber, 27 February 2012

  9. Activity of international organisations (and NGOs) • UN (+OECD, WB, IMF and the European Commission): the System of Environmental-Economic Accounts (SEEA) http://unstats.un.org/unsd/envaccounting/seea.asp • WB: Genuine savings, WAVES • FAO: SEEA AGRI • OECD and Eurostat: Material Flow Accounts • NGOs: the Ecological Footprint and Water Footprint « accounts » • UNEP: valuation of ecosystem services • Eurostat: MFA, Composite Input-Output analysis (NAMEA), Expenditure accounts • European Environment Agency: ecosystem capital accounts Jean-Louis Weber, 27 February 2012

  10. RM HASSAN - UN The System of Environmental and Economic Accounting (UN 2003) - RANESA Workshop June 12-16, 2005 Maputo UN manual for environmental-economic accounting: SEEA2003Enlargement of SNA1993 (now 2008) Revision  SEEA2012/13 Impacts on ecosystem capacity of delivering services/benefits Volume 1 The SNA satellite accounts for the environment expenditure, taxes, hybrid accounts, physical flows, sub-soil, energy, water land, economic assets depletion Volume 2 Ecosystem approach to accounting Ecosystem stocks and quality, valuation options… Negative feedbacks of ecosystem degradation on production and wellbeing Jean-Louis Weber, 27 February 2012

  11. More on the SEEA in Session 2… Jean-Louis Weber, 27 February 2012

  12. World Bank: Adjusted Net Saving (“Genuine Savings”) • Adjusted net saving – a proxy for sustainability • Adjusted net saving, (also known as genuine saving), is a sustainability indicator building on the concepts of green national accounts. Adjusted net savings measure the true rate of savings in an economy after taking into account investments in human capital, depletion of natural resources and damage caused by pollution. • Negative adjusted net saving rates imply that total wealth is in decline; policies leading to persistently negative adjusted net savings are policies for un-sustainability. • Adjusted Net Savings estimates are available for 140 countries for the period 1970-2008. Data for 2009 will be available in the Spring of 2011. • http://go.worldbank.org/3AWKN2ZOY0 Jean-Louis Weber, 27 February 2012

  13. Adjusted net savings are derived from standard national accounting measures of gross national savings by making four types of adjustments: • First, estimates of capital consumption of produced assets are deducted to obtain net national savings. • Then current expenditures on education are added to net domestic savings as an appropriate value of investments in human capital (in standard national accounting these expenditures are treated as consumption). • Next, estimates of the depletion of a variety of natural resources are deducted to reflect the decline in asset values associated with their extraction and harvest. Estimates of resource depletion are based on the calculation of resource rents. An economic rent represents the excess return to a given factor of production. Rents are derived by taking the difference between world prices and the average unit extraction or harvest costs (including a 'normal' return on capital). • Finally, pollution damages are deducted: • Many pollution damages are local in their effects, and therefore difficult to estimate without location-specific data. Here we estimate health damages due to urban air pollution. • As for global pollution damages, the estimates include damages from carbon dioxide emissions. Jean-Louis Weber, 27 February 2012

  14. Calculation of Adjusted Net Savings http://siteresources.worldbank.org/INTEEI/1105643-1115814965717/20486606/Savingsmanual2002.pdf Jean-Louis Weber, 27 February 2012

  15. Adjusted Net Saving 2008 (as a percentage of Gross National Income) http://go.worldbank.org/3AWKN2ZOY0 Jean-Louis Weber, 27 February 2012

  16. Adjusted Net Savings Time Series 2000 to 2008 - Vietnam Jean-Louis Weber, 27 February 2012

  17. WB 2010: The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium • In all countries, intangible capital is, by far, the largest share of wealth. However, for the poorest countries, natural capital is more important than produced capital. This suggests that properly managing natural resources must be a key part of development strategies, particularly since the poorest households in those countries are usually the most dependent on these resources. • Change in Wealth = Adjusted Net Savings • http://go.worldbank.org/RRCQLBZMX0 • http://data.worldbank.org/data-catalog/wealth-of-nations Jean-Louis Weber, 27 February 2012

  18. Discussion of Adjusted Net (“genuine”) Savings and Total Wealth Calculations in the Stiglitz-Sen-Fitoussi report of 2009 155 However, the current methodology underlying empirical calculations has well-known shortcomings: the relevance of the ANS approach crucially depends on what is counted (the different forms of capital passed on to future generations), namely, what is included in “extended wealth”, and on the price used to count and aggregate in a context of imperfect or indeed nonexistent valuation by markets. 156. Indeed, a major shortcoming of ANS estimates is that the adjustment for environmental degradation is only limited to a restricted set of pollutants, the most significant one being carbon dioxide emissions. The authors acknowledge that the calculations do not include other important sources of environmental degradation, such as underground water depletion, unsustainable fisheries, and soil degradation, and a fortiori biodiversity loss. 157. … Further, market prices for fossil energy sources and other minerals have tended, in recent years, to fluctuate widely, causing significant swings in measures of ANS based on current market prices and this has very strongly reduced the practical relevance of the ANS for concerned countries. Report by the Commission on the Measurement of Economic Performance and Social Progress , 2009, www.stiglitz-sen-fitoussi.fr Jean-Louis Weber, 27 February 2012

  19. World Bank 2010-2015: WAVES Wealth Assessment and Valuation of Ecosystem Services Objectives • Implement natural capital accounting based on the UN’s System of Environmental and Economic Accounting (SEEA) in 6-10 countries. • Incorporate the accounts into policy analysis and development planning. • Develop internationally accepted and standardized guidelines for the implementation of ecosystem accounting. • Promote widespread adoption of natural capital accounting beyond the pilot countries. • http://go.worldbank.org/1FM01NZUO0 Jean-Louis Weber, 27 February 2012

  20. WAVES Milestones • Oct. 2010 - Partnership launched at the Biodiversity COP in Nagoya • Oct. 2010 - Dec. 2011 - Preparation phase to set up the Partnership, establish a policy and Technical Experts Committee to develop methodology for ecosystem accounting, and to conduct feasibility and planning studies for pilot countries • 2012 - 2015 - Implementation phase • June 2012 - Propose an international program of action on ecosystem accounting at the “Rio+20” Earth Summit • 2015 - Results and recommendations disseminated at the 2015 Millennium Development Goals Summit Review. Jean-Louis Weber, 27 February 2012

  21. FAO’s SEEA-AGRI (Agriculture and Forestry and Fishery) • Subsystem of the SEEA: Standard satellite account for the integration of agriculture and environmental data; • Different from other SEEA subsystem => focuses on one broad activity rather than on one specific resource. • Agriculture + Forestry + Fishery • Based upon internationally agreed concepts, definitions, classifications and inter-related tables and accounts; • Relevant for both developed and developing countries; • Provides the conceptual framework for the Global Strategy to improve Agricultural and Rural statistics, (UNSC, Feb. 2010): • Foundation for integrating food and agricultural statistics into National Statistical System; • Establishing a core minimum set of statistical indicators; • Multidimensional information system that combines and harmonize data from various surveys and censuses. • Launched in September 2011 (From Pietro Gennari and Robert Mayo, FAO) Jean-Louis Weber, 27 February 2012

  22. 1.22 The SEEA-AGRI as SEEA subsystem SNA FAO agriculture and food accounting SEAFA SEEA EAA SEEA accounts SUA Forest Fishery Water SEEA-AGRI Energy Land and ecosystems Jean-Louis Weber, 27 February 2012

  23. OECD – Eurostat Material Flows Accounts Source: OECD 2008 - Measuring Material Flows And Resource Productivity http://www.oecd.org/dataoecd/46/48/40485853.pdf Jean-Louis Weber, 27 February 2012

  24. OECD – Eurostat Material Flows Accounts: Economy-wide Indicators Source: OECD 2008 - Measuring Material Flows And Resource Productivity http://www.oecd.org/dataoecd/46/48/40485853.pdf Jean-Louis Weber, 27 February 2012

  25. 1.24 NGOs: the GAISP, accounting for ecosystem services and assets The first phase of GAISP comprises the publication of the following eight Monographs: 1 The Value of Timber, Carbon, Fuelwood, and Non-Timber Forest Produce in India’s Forests 2 Estimating the Value of Agricultural Cropland and Pasture Land in India 3 The Value of India’s Sub-Soil Assets 4 Eco-tourism and Biodiversity Values in India 5 Estimating the Value of Educational Capital Formation in India 6 Investments in Health and Pollution Control and their Value to India 7 Accounting for the Ecological Services of Indian Forests: Soil Conservation, Water Augmentation, and Flood Prevention 8 Estimating the Value of Freshwater Resources in India In this monograph, three ecological services of forest ecosystems, namely, prevention of soil erosion, augmentation of groundwater, and reduction of flood damage have been considered. Their total value is equivalent to that of timber. Jean-Louis Weber, 27 February 2012

  26. 1.25 NGOs: the Ecological Footprint accounts • The Ecological Footprint accounts compare the « biocapacity » of countries and the Planet: capacity of land and sea to produce biomass for 1) human needs and 2) sequestration of CO2 • It records the Ecological Footprint embedded into international trade. • Strong communication tool. • Limited use as macro-economic tool. The World ecological footprint is subdivided by countries http://www.footprintnetwork.org/en/index.php/GFN/page/basics_introduction/ Jean-Louis Weber, 27 February 2012

  27. 1.26 NGOs: the Water Footprint « accounts » • Water Footprint : • Blue Water: abstracted • Green Water: embedded in agriculture and forestry products) • Grey water: waste water returned to the water system http://www.waterfootprint.org/?page=files/home Jean-Louis Weber, 27 February 2012

  28. EEA 2009: International Trade Statistics: Virtual land use & agriculture footprints of Europe 1.27 Trends in EU virtual land flows: EU agricultural land use through international trade between 1995-2005. Manel van der Sleen, EEA 2009; Van der Sleen and Koellner 2011 Jean-Louis Weber, 27 February 2012

  29. 1.28 Eurostat: NAMEA - National Accounting Matrix with Environmental Accounts Source: Eurostat1999, NAMEA -Air Jean-Louis Weber, 27 February 2012

  30. 1.29 Eurostat: Expenditure (including taxes and subsidies) • Characteristic activities for environmental protection (CEPA) and management (CRUMA) • production, financing and beneficiaries • includes taxes and subsidies Jean-Louis Weber, 27 February 2012

  31. 1.30 EEA: Land and ecosystem accounts need of ecosystem capital accounts to measure capital maintenance Source: Roy Haines-Young, in EEA report 11/2006 Jean-Louis Weber, 27 February 2012

  32. 1.31 Example of land cover account: sprawl of artificial areas in Europe 1990-2006 Jean-Louis Weber, 27 February 2012

  33. 1.32 Natural capital approach and GDP adjustment: the maintenance approach Natural capital depreciation, what National Accounts should record: adjustment of National Income and Final Consumption Gross Domestic Product (GDP) – or + Transfers with the Rest of World = Gross National Income (GNI) _ Consumption of Fixed Capital = National Income (NI or NNP) -- Depletion of subsoil assets -- Consumption of (domestic) ecosystem capital = Final Consumption at Purchaser’s Price Consumption of ecosystem capital embedded in Imports (minus in Exports) = + + Final Consumption at Full Cost of Commodities Adjusted Real Net National Income Jean-Louis Weber, 27 February 2012

  34. 1.33 Conclusions • Progress but slow progress… • Development of physical accounts in quantity • More progress needed in order to integrate qualitative aspects • Issues related to valuation: • Of what? Services? Wealth? Damages? Remediation costs? • Should we price the free services given by Nature? • With which methodologies? At which scales? (see session 3) • Capital approach is an option if economic capital and public goods are not confused Jean-Louis Weber, 27 February 2012

  35. Thank you! Jean-Louis Weber SpecialAdviseron EconomicEnvironmentalAccounting European Environment Agency jean-louis.weber@eea.europa.eu jlweber45@gmail.com Jean-Louis Weber, 27 February 2012

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