The “satellite system” option

11While the early 1970s brought intense scrutiny of the “limits to growth,” [18] it proved difficult to reach agreement on how to construct a distinct aggregate GDP that would allow well-being in the economic sense of the term (i.e., as welfare) to be measured. [19] This situation was reminiscent of the position of economic indicators half a century before, when the empirical verification of the various theories of the economic cycle were still rather basic. National accountants did however agree that, as a minimum, estimates of human capital could refer to a “satellite account” based on educational investment. [20] The Stockholm Conference of 1972 (effectively the first “Earth Summit”) highlighted the importance of environmental information, and the accumulation of environmental statistics at an international level fed a growing interest in developing environmental accounting. [21] While it was demonstrated that a deterioration of environmental functions could lead to “negative growth” in the economy, [22] and as the first experiments in natural resource accounting were carried out, [23] it was the drive to use a type of GDP with adjustments for the environment that continued to draw attention.

12In 1982, a special session of the UNEP marked ten years since the Stockholm Conference, with a call to draw up recommendations on environmental accounting and its use for development and planning policies. UN and World Bank experts hence organized a series of workshops on the greening of the SNA. [24] Bringing together the top national and international experts, these workshops focused on measuring “sustainable” income, which encompasses both so-called “defensive” spending—intended to repair damage brought about by production and consumption— and the degradation and depletion of natural resources. The fact that these aspects were not integrated into the SNA was unanimously considered as a “serious flaw” from an accounting point of view, and the calculation and aggregation methods were deemed controversial. Some called for physical indicators to be used in order to raise public awareness and to guide environmental policy, whereas others maintained that environmental accounting would only achieve results if the data were monetized. In concluding that further conceptual and empirical work was necessary to address these questions, the experts called for the setting up of “satellite accounts,” on which basis adjustments could be made. Two main arguments were put forward in support of this halfway solution: first, it had the benefit of not threatening the historical continuity of GDP; and secondly, it stood a good chance of being adopted as part of the next scheduled revision of the SNA.

13The Brundtland Report, released in the spring of 1987, offered the concept of sustainable development as a basis for the next international environment conference, and made little reference to the debates that had taken place. Around this time, some economists were warning of the “dangerous asymmetry” of a system that valued produced capital while ignoring the impact on natural resources. [25] The workshops launched by the UNEP continued, and a first draft of the satellite system was presented and debated at a special conference of the International Association for Research in Income and Wealth (IARIW) in Baden, Austria, in May 1991. [26] The proposal from the IARIW, developed under the guidance of three senior economists (Peter Bartelmus and Jan van Tongeren from the United Nations Statistics Division [UNSD], whose work had highlighted the “limitations of GDP” since the 1970s, and Carsten Stahmer from the Federal Statistical Office of Germany), [27] was to “integrate” the environmental dimension within an accounting structure that would retain the concepts and principles of the SNA as much as possible. This proposal, debated at the 1992 Rio Conference, first took solid political form in Agenda 21, albeit with a certain hesitation as to what status it should be granted:

14

The main objective is to expand existing systems of national economic accounts in order to integrate environment and social dimensions in the accounting framework [.. .]. The resulting systems of integrated environmental and economic accounting (IEEA) to be established in all member States at the earliest date should be seen as a complement to, rather than a substitute for, traditional national accounting practices for the foreseeable future. [28]

15Beyond this cautious approach, the main volume of the new version of the SNA, released in 1993, did not include the recommendations of environmental experts; these were instead presented in a supplementary volume produced by the UNSD as the “(satellite) system of integrated environmental and economic accounting (SEEA).” [29] The return to the concept of a “system,” with the adjective “satellite” attached, often in parentheses, described a measure that was ambitious but incomplete. Even in its first few pages, the document admitted that it had not been possible to achieve a global consensus to bring about a “fundamental change in the SNA”:

16

Considering the current state of knowledge on environmental accounting and the divergent views on a number of conceptual and practical issues, it has not been possible to reach an international consensus at this time for a fundamental change in the SNA. Nevertheless, there was agreement that the SNA would address the issue of its links to environmental concerns. [30]

17Hence, the experts presented their work as an “interim version.” Despite this admission of relative failure, however, the original notion of the “satellite account” did indeed become established. The SEEA was designed on the basis of “modules,” or “building blocks,” whose links with the SNA were integrated to different degrees. This brought a greater level of freedom in defining the concepts and methods for evaluating natural assets than conventional national accounting, enabling an environmentally adjusted net domestic product (eco domestic product, EDP) to be calculated. This goal of calculating a green GDP was indeed a feature of the project, as recalls Alessandra Alfieri, now in charge of environmental and economic accounting at the UNSD, where she started work as an assistant in 1993, the year when the first version of the SEEA was published:

18

The whole discussion started in the 1980s, when the environment was high up on the agenda [.. .]. It was discussed how GDP was not the right measurement because it failed to take externalities into account, and it had to be adjusted to make it a “greener” measurement. That’s why, if you look at SEEA 1993—the first SEEA—you can see how the objective was actually to calculate a “green GDP.” [31]

19The emphasis placed on this search for a macroeconomic aggregate illustrates how a monetary approach was still favored. In the end, the 1993 handbook was published as a set of international recommendations, rather than a global standard. Hence, no country was under obligation to follow the guidance. Essentially, the SEEA remained in draft form, which made its implementation uncertain:

20

When the SEEA was published in 1993 it got a lot of political attention—Rio had a role in that—and many countries were encouraged to develop a “green GDP.” However, when they started to do it, they saw it wasn’t an easy task, not something that official statisticians could do on their own, to get a measurement of quality. [32]

21This mixed assessment encouraged further reflection. In this light, Statistics Canada and Eurostat viewed the development of physical accounting as essential and suggested that a group of experts on environmental accounting be assembled. At the invitation of the United Kingdom’s Central Statistical Office, the group’s first meeting was held in London in 1994, and so the gathering was henceforth known as the London Group on Environmental Accounting, like other “city groups” that had been set up around that time by statistical bodies in order to examine particular issues. [33] Contrasting—even divergent—options were put forward, as was evident during the debates throughout the 1990s to determine what a “good indicator” was.

The obsession with indicators

22Given the consensus over what “traditional” national accounts should measure, reflected in the new 1993 version of SNA, there was no widely shared agreement regarding integrated environmental and economic accounting, either on the respective importance of physical accounting and monetary accounting or on what objectives to assign them. These divisions within the international organizations concerned came to a head around the development and choice of indicators to be used for this new type of accounting.

23Following a request made by the G7 in 1989, the Organisation for Economic Co-operation and Development (OECD) was relatively quick to launch a program on environmental indicators. [34] Its proposed method involved the drawing up of multiple indicators to meet the different needs of users. The aim may have been to establish ever more direct links with national accounting (especially for physical and expenditure accounts), but the resulting work failed to elucidate any specific implementation methodology.

24The World Bank, for its part, set about developing a new concept of wealth that focused on corrected aggregates from a monetary perspective, hence remaining faithful to neoclassical economics. Following its publication of assessments about the depletion of non-renewable natural resources (which used the El Serafy method), attempts to define whether a country was “rich” or “poor” in relation to a combination of different types of capital (produced, natural, and human) were presented as a new paradigm. For one of the proponents of this approach, Kirk Hamilton—an environmental economist at the World Bank who been instructed by David Pearce (who was himself considered to be a pioneer in environmental economics)—, because there was very little or no unanimity in the literature on green accounting, adopting a more formal modeling approach was preferable. [35] Hamilton reasoned that this made it more important to recognize saving than income, as “knowing your true level of saving.. . speaks directly to a range of policies concerning whether income can be sustained in the future.” [36] While this approach highlighted the different political leanings of developed countries where produced assets dominate, and of developing countries where the main wealth lies in natural assets, it was nonetheless severely criticized because it assumed that different types of capital could be substituted for each other (“weak sustainability” [37]).

25These efforts became more clearly defined with the establishment of the Indicators and Environmental Valuation Unit within the World Bank’s Environment Department. The unit’s work highlighted the importance of natural resources in building wealth. [38] “Genuine saving” was hence defined as the “true” national saving rate, taking into account the depreciation of produced assets, the exhaustion of natural resources, investment in human capital, and the costs of global damage caused by carbon emissions. These analyses, drawn up on the basis of original statistics, revealed that most countries that relied on natural resources (particularly those in Africa and central Asia) had a low or negative “net” saving rate, whereas the cost of damage linked to pollution was greater in those countries that had experienced rapid urbanization and industrialization (i.e., OECD members). The negative genuine saving rates were all interpreted as representing a loss of economic well-being. As such, the use of “greener” national accounts was expected to provide a framework that would quickly allow economy and finance ministries to deal with environmental problems. Rather than using technical records like those of the OECD, the World Bank favored “institutional arrangements” [39] to complement the implementation of green national accounting, via the quest for a synthetic indicator of wealth.

26The other organization that invested heavily in this respect was the EU. With “sustainable” economic growth as one of the new objectives of the Maastricht Treaty, the EU adopted a cautious approach when it came to choosing and building its metrics. In 1994, after various recommendations were made on how to extend traditional measures of growth, the European Commission issued a communication laying the groundwork for a strategy to integrate economic and environmental information systems. [40] To this end, the satellite accounting method was recommended. The same year, Eurostat, which had already taken the same path in the 1980s, published a manual to help statisticians draw up environmental protection expenditure accounts. [41] This “system” by no means provided a complete environmental information framework, nor did it produce an aggregate measure such as EDP. However, it was possible to rapidly implement the approach at a European level. Another feature was its national accounting matrix, which included accounts relating to the environment, drawing on the Dutch National Accounting Matrix including Environmental Accounts (NAMEA) system that had been developed using an indexing technique for measuring pressures on the environment.

27The resulting implementation of methods that ascribed monetary values to natural assets and to environmental degradation constituted a major project for the EU. The development of a green GDP offered a tempting solution in laying the foundations of the SEEA, but in reality it continued to cause problems, so the Commission initiated various research programs to look into the matter. The GREEned National STAtistical and Modelling Procedures (GREENSTAMP) project, which ran from 1994 to 1996, identified the benefits and limitations of establishing environmentally adjusted macroeconomic indicators. [42] Following this, the Environmental Valuation in Europe (EVE) program was launched, running from 1998 to 2000. EVE explored the challenges inherent in dealing with the complex nature of the subject: scientific uncertainty, a multitude of value systems, and the criteria for justification in society. [43] The experts and scholars carrying out this work made explicit reference to the contributions from ecological economics (particularly the work of Herman Daly), which adopt a holistic, transdisciplinary approach to the connections between nature and society—including different types of capital. Given that the values of natural capital are thus not merely directed toward production and consumption, they put forward the concept of a “monetization frontier,” whereby the ability to attribute monetary values to environmental, non-commercial functions and services, and the relevance of doing so, fall away as the scale of challenges (relating to the climate and biodiversity, for instance) increases, taking into account non-material values relating to existence, non-use, and ethical concerns. The establishment of this frontier enables some environmental assets to be treated as “critical” natural capital—that which cannot disappear or be replaced without breaching a threshold of irreversibility, and which can serve as a basis for setting sustainability standards. Two strategies for adjusting GDP with regard to the environment eventually emerged from the discussions under the EVE program: the first of these proposed a widening of the economic system’s “production boundary” to include all natural assets (a preferred option in the work carried out by the World Bank), while the second called for adjustments to the economy itself with respect to environmental standards. [44]

28What can be drawn from this initial series of developments? In seeking to develop a whole system that could credibly compute a green GDP, SEEA 1993 proved difficult to implement. In a wider sense, this objective made mainstreaming the environment into accounting complicated, in that it gave rise to theoretical developments that required economic modeling to play a significant role, despite this being limited under the SNA. [45] These changes were however deemed necessary by some economists, given that many biophysical phenomena do not operate via market-based mechanisms. And yet, this requirement was subject to contradictory trends, with some sets of accounting principles (such as evaluation versus description and prospective versus retrospective) giving rise to significant uncertainty during the SEEA revision process.

An uncertain revision

30From 1998, the UNSD called on the London Group, with their meetings drawing fifty or so experts from various national and international organizations, to gather (voluntarily) around a table at varying intervals and to issue recommendations on revising the SEEA. As was confirmed at the group’s meeting in Canberra, Australia, in 1999, this move rekindled debates between those who sought to maintain a monetarist approach and those who preferred to shift the focus toward physical accounting. In particular, it was the influence of its member organization Eurostat that allowed physical accounting to regain a certain degree of autonomy. [46] Over the years that followed—and despite a divergence of views at the theoretical and methodological levels (over the choice of metrics and the focus on certain natural assets including ecosystems)—the group’s experts managed to come up with recommendations that were more in step with practice. Following its deliberations, a new version of the SEEA was jointly published by the UN, the European Commission, the International Monetary Fund (IMF), the OECD, and the World Bank in 2003. [47] The new handbook, in a bid to be as “neutral” as possible, brought with it both the advantages and the disadvantages of the existing approaches, with its calculation of a “green GDP” in a way that favored physical units. This was still far from constituting a statistical standard, however:

31

This is what was called a “handbook of good practice,” in the sense that there were a lot of examples of countries, and besides, it was never officially released as a statistical standard. Above all, its aim was always to say: “You can do things this way or you can do them that way,” always leaving it really open. [48]

32SEEA 2003 recognized the impact that human activity was having on the environment on a global scale, as well as the fact that economic growth and personal well-being were dependent on “services” derived from the environment. In this respect, “mainstreaming” the environment always seemed a controversial issue. For some, the only true mainstreaming brought about by the SEEA was that which could be expressed in monetary terms, whereas for others, mainstreaming would be achieved once the SEEA’s concepts and principles were aligned with those of SNA. Despite these ongoing tensions, however, the alignment of practices could be considered as a longer-term consequence of the latest version of the SEEA, for at least two reasons: first, because this offered a clearer, more concrete consideration of environmental accounting than the previous version; and secondly, because it had come about thanks to the collective efforts of several national and international statistical agencies and organizations, whereas the first version had been the labor of just one restricted expert group. Some economists viewed the new SEEA document as an important step toward accounting harmonization, in the same way that the recommendations made from the 1950s onwards had constituted the first steps toward a comparable international system for economic statistics. [49]

33With a new version of the SNA in preparation, SEEA 2003 brought renewed impetus to a standardization process. In March 2005, taking inspiration from the revision process undertaken by the London Group, the United Nations Statistical Commission (UNSC) established the Committee of Experts on Environmental-Economic Accounting (UNCEEA), with three objectives: to integrate the available statistics into existing accounts, to grant the SEEA the status of international statistical standard by 2010, and to make progress on national implementation. In this context, the London Group became a technical agency for the UNCEEA, and hence lost its independence. [50] Initially chaired, from 2005 to 2008, by Walter Radermacher, former president of the Federal Statistical Office of Germany and contributor to the GREENSTAMP project, the UNCEEA did not reach agreement on initiating a standardization process before 2007. It quickly became apparent that certain aspects of SEEA 2003, especially when it came to measuring and evaluating the degradation of ecosystems, would not meet with approval. The UNSC therefore determined that, in the first instance, the revision should cover those issues where there was general consensus, before attempting to resolve those connected with ecosystem accounting, for which further research and discussion were required. The arrival of the European Environment Agency (EEA) within the London Group and then in the UNCEEA, alongside Eurostat, heralded the emergence of a common approach to the matter. [51] Radermacher’s departure from the UNCEEA to take over as head of Eurostat was a mark of the importance now being given to integrating economic and environmental information systems into the EU, as was already evidenced by the posting of national experts to the European agencies dealing with these matters.

34Following the publication of a report by the Millennium Ecosystem Assessment, commissioned by Kofi Annan, [52] calls for a coherent and consistent line of economic arguments on the topic appeared to be all the more justified. This was the aim of the initial reports resulting from The Economics of Ecosystems and Biodiversity (TEEB) initiative—the stated focus of which was on “making nature’s values visible.” These reports were produced in response to a request made by the G8 in Potsdam, encouraged by the German government and the European Commission. [53] Following the failure of the 2009 UN Climate Change Conference in Copenhagen, biodiversity and ecosystems, which had hitherto barely featured on the international political agenda, now seemed to offer an increasingly credible solution—albeit a debatable one—to the economic and financial crisis that had just arisen. [54] Thus, the environmental accounting movement was presented with a real window of opportunity at this time, [55] as symbolized by its inclusion in the Aichi Biodiversity Targets following the Tenth Meeting of the Conference of the Parties (COP 10) to the Convention on Biological Diversity (CBD) in Nagoya in October 2010:

35

By 2020, at the latest, biodiversity values have been integrated into national and local development and poverty reduction strategies and planning processes and are being incorporated into national accounting, as appropriate, and reporting systems. [56]

36With this intermediate sequence came a rapid appropriation of the SEEA as a policy instrument favoring “green growth,” [57] while experts were urged to clarify their positions as to the integration of ecosystems into accounting systems. While the SEEA editorial board that had been set up under the UNCEEA—now chaired by Peter Harper, an Australian—struggled to get going, the calls for recommendations to be made to local governments and to the business community, plus the need for a “GDP of the poor” for developing countries, provided increasingly strong incentives to develop ecosystem accounts. [58] The SEEA therefore had no shortage of political and statistical challenges to which its standardization process was required to respond.

From the environment to ecosystems

37The goal of aligning public policy to take into account the links between the environment and the economy was reaffirmed at the Rio+20 conference in 2012, when calls were made to develop even more “exhaustive” accounts. In this context, the revision of the SEEA was stepped up and became more political in nature. Following the contributions made over a period of nearly six years by more than 150 experts, the vast majority of whom had come through the London Group, the discussions led to a completely new standardization process:

38

At its forty-third session, the Statistical Commission adopted the SEEA-Central Framework as the initial international statistical standard for environmental-economic accounting, to be implemented in a flexible and modular approach. [59]

39The use of the term “central framework” to refer to the new system (SEEA-CF) was not without ambiguity: while the SEEA-CF was to maintain close links with the SNA, the former required a certain level of autonomy from the latter. Indeed, the adoption of this framework by the UNSC was no simple matter: China and the United States opposed the move, whereas the EU, Australia, Canada, and Brazil were ardent supporters of the principle, [60] hence the peculiar description of an “‘initial’ international statistical standard.” Having attended the discussions, the chief of the UNSD’s Environmental Economic Accounts Section noted:

40

The SEEA was adopted as an “initial statistical standard,” not a “statistical standard,” unlike the SNA. The SEEA was more about weakening the wording, as was noted in the Statistical Commission’s 2012 report, at the end of the foreword. After two hours of debates on the three lines of argument, we had to stop the meeting so that extra discussions could take place out in the corridor before agreement could be reached on the text.. .. It wasn’t an easy task. [61]

41One of the notable elements in favor of adopting the SEEA-CF was the drawing up of the Sustainable Development Goals (SDGs), launched at Rio+20. Intended to take over from the Millennium Development Goals in 2015, the SDGs promote an integrated approach to sustainable development, which requires statistics to be produced on an equivalent basis. [62] As a complement to the new 2008 version of the SNA, the SEEA-CF recognizes two types of economic activities: environmental protection and natural resource management. As such, it provides recommendations on the valuation of natural assets inside the SNA production boundary. At the same time, the effect of human activity on the environment is considered a major policy issue: Are resources being extracted too rapidly without any prospect of being replaced? Does economic activity generate a level of pollution that exceeds nature’s capacity to absorb it, to the point that it affects human health and well-being? The questions raised by this new accounting framework underscore the need to develop further supplementary elements.

42The other aspect of standardization deals with these questions by taking ecosystems into account. Moving ahead in this area would appear to be an urgent requirement, given the political and social need for statistics in this regard, in conjunction with economic growth, development, and well-being in the wider sense. Despite this demand, however, ecosystem accounting remains an emerging field. Although there is a considerable amount of scientific expertise in the fields of conservation and ecosystem economics, [63] their integration within one accounting approach is a novelty. Similarly, while considerable experience may be observed in related areas such as ground cover and land use statistics, the integration of these data into an accounting framework is in itself new. Experts from several disciplines, including economics, ecology, the physical sciences, geography, national accounting, and public statistics, have been involved in the standardization work coordinated by the UNCEEA. Having already helped to develop the SEEA-CF, members of the London Group are also involved, with the aim of maintaining links with what is now viewed as a new variant of the instrument.

43An extensive consultation was held in November 2012 on the last chapters to review before a final version was submitted to the UNSC in February 2013. Described as “experimental” in the document published under the joint auspices of the UN, the European Commission, the Food and Agriculture Organization (FAO), the OECD, and the World Bank, this experimental ecosystem accounting (SEEA-EEA) document is described as an “enhancement” to the SEEA-CF, although this implies the introduction of major changes:

44

In this context, the development of ecosystem accounting should be envisaged as an enhancement within the broad SEEA framework rather than as an alternative or competing approach to environmental-economic accounting. [64]

45Whereas the SEEA-CF continues to adopt an economic perspective when it comes to mainstreaming environmental information, the new form of experimental accounting takes ecosystems and their links with the economy and human activity as a starting point. With this in mind, the SEEA-EEA requires a reappraisal of the SNA’s production and asset boundaries, which only take into account human and economic processes. Even if, again, the document makes as “neutral” a presentation as possible, the selection of options involving a significant degree of economic modeling reflects the importance given to monetary approaches, such as that of “inclusive wealth” used by the UNEP as an extension of the World Bank’s work. [65] A further extension is required through focusing on both smaller and larger spatial units as well as those that are normally used in national accounting. Whereas the SNA refers to a country’s economic space, the area covered by ecosystem accounting may be broken up into spatial units that can be used just as well for local policy (managing watersheds, fisheries, protected areas, and agricultural areas, for example) as for international initiatives (such as evaluating ecological cycles and the global economic challenges associated with carbon and biodiversity). Along with the central framework, the SEEA-EEA recommends capturing and exploiting compromises between ecosystem services (the infamous trade-offs) at various levels of public policy.

46The standardization process undertaken by the UNCEEA has made it possible to envisage a complex differentiation mechanism within the SEEA, according to which it is no straightforward matter to draw a distinction between an adjustment of the SNA toward the environmental dimension and its reinterpretation, or even “extraversion,” in some form (see Table 1).

Table 1

A comparison of successive versions of the SEEA (1993–2012)

SEEA 1993 SEEA 2003 SEEA-CF (2012) SEEA-EEA (2012) Objectives Calculating environmentally adjusted net domestic product (EDP) Clarification of concepts, methodology, and recommendations for implementation Environmental protection and management of natural resources Trade-offs for ecosystem services Relationship with the SNA (Satellite) system Satellite system and accounts Additional to the SNA Enhancement of SEEA-CF Status International recommendation Handbook of good practice Initial international statistical standard Experimental International organizations UN UN, European Commission, IMF, OECD, World Bank UN, European Commission, FAO, IMF, OECD, World Bank UN, European Commission, FAO, OECD, World Bank Disciplines Statistics, accounting, economics Statistics, accounting, economics, biophysical sciences Statistics, accounting, economics Statistics, accounting, economics, biophysical sciences Production boundary Economics Economics, ecosystems Economics Ecosystems Scale National National, local to global National Local to global

A comparison of successive versions of the SEEA (1993–2012)

Integration policies

48An examination of the policies pursued by the World Bank and the EU highlights distinct institutionalization processes [66] in this regard. In both cases, the SEEA-CF paves the way for experimenting with ecosystem accounting while serving as a cornerstone for the implementation of a “more conventional” type of environmental accounting. In addition, there is a need for capacity building in those countries where expertise is in short supply.

49For the World Bank, dealing with these issues presented it with an opportunity to promote its concept of wealth at national and global/regional levels. [67] Launched in 2010 at COP 10 in Nagoya, the Wealth Accounting and the Valuation of Ecosystem Services (WAVES) program promoted the mainstreaming of natural capital into development planning and national accounting. The program’s implementation coincided with a favorable institutional and political context, as explained by its technical director, Glenn-Marie Lange, a leading contributor to the revision of the SEEA and widely experienced in the “World Bank approach,” who was asked by Kirk Hamilton to draft the chapter on environmental accounting in Where is the Wealth of Nations? following a set of pioneering experiments carried out in Africa:

50

I suppose there were two things. First of all, we had strong support from the president of the World Bank at the time [Robert Zoellick, 2007–2012], and we also wanted to secure the highest possible level for launching the initiative, and that was the CBD [COP 10, Nagoya] [.. .]. Our president went there to play a major role, and we sought to benefit from his support. [68]

51At Rio+20, over sixty countries signed a “communiqué” with three objectives: supporting the implementation of natural capital accounting within the SEEA framework; promoting methodologies for evaluating ecosystem services as an addition to GDP and business performance; and testing and demonstrating the contribution of these instruments to decision-making in support of integrated, broad approaches to sustainable development. [69] It was no accident that the expression “natural capital accounting” eclipsed that of “integrated environmental and economic accounting,” thus promoting asset portfolio management:

52

From our perspective, natural capital accounting goes back to the first principles that underpin wealth, in that development consists of building wealth and managing a portfolio of different assets where natural capital has been neglected. [70]

53In order to achieve this, the WAVES program consulted a diverse coalition of bodies including governments, UN agencies, NGOs, think tanks, and universities. There was also private sector participation, through support for the International Finance Corporation, a signatory to the Natural Capital Declaration. [71] The institutional and political scope of the program hence distinguished it from the work of the UN statistical agencies, which, although deemed important, was not yet adequate:

54

The SEEA was really important. The fact it had become a statistical standard in 2012 was absolutely essential for its implementation. But the problem is that they’re statisticians, and they only deal with statistical agencies. So, they really don’t have much influence [.. .]. A lot of effort was made in the past by statistical agencies—the UNSD and the UN’s regional agencies, but they always failed, because they weren’t guided by policy. [72]

55The World Bank, on the other hand, benefits from what is supposedly a politically superior level of authority: “They call that ‘convening power’ here: when the World Bank talks, people listen.” [73]

56The first countries that were selected to take part in the program (Colombia, the Philippines, Botswana, Costa Rica, and Madagascar), were chosen because of their economic relevance and the availability of statistical data on them. These countries set up and implemented action plans for drawing up resource accounts (for timber, water, and minerals) and to a lesser extent for ecosystem accounting (for drainage basins and mangroves). [74] The search for institutional arrangements through the enlistment of the actors concerned has become a preferred option in seeking to achieve these aims. One of the goals of WAVES was to help make international recommendations for ecosystem accounting. It did so with the assistance of a small multidisciplinary group of experts, the Policy and Technical Experts Committee, most of whom were members of the London Group. WAVES sought to test the latest progress on modeling tools for ecosystems and their services through various pilot projects in India, Peru, the Netherlands, Norway, and Indonesia. [75] Guatemala, Indonesia, and Rwanda joined the program in 2014; the following year, its deadline was extended to 2020, using the designation “WAVES+.” In partnership with the International Institute for Environment and Development, WAVES sought to step up its operations at a regional level as well as pursuing South-South cooperation through ad hoc training programs, including in Latin America and the Caribbean. [76] This marked a new key stage in implementing the program.

57Another avenue by which the integration of environmental accounting significantly helped to implement sustainable development policy involved the EU. The level of interest in Europe for pursuing green national accounting was heightened by the economic and financial crisis of 2007–08, which triggered fresh debate on the “limitations of GDP.” [77] The following year, the European Commission proposed a “road map” on the subject, which was included among the Rio+20 conclusions. [78] Following the adoption of SNA 2008, a new version of the ESA emerged in 2010, with more scope given to satellite accounts. In 2011, while Eurostat took up its work on expenditure accounts, the European Parliament and Council passed major regulations on three environmental economic accounts modules concerning air emissions, environmental taxes, and material flows. For its part, the EEA continued to work on ecosystem accounting, and devised the Common International Classification of Ecosystem Services. ESA 2010 was thus the subject of an unprecedented regulatory settlement, and became mandatory for all EU member states. A further step was taken in late 2013, with the launch of the seventh Environment Action Programme (EAP), [79] followed by the introduction of new modules reflecting EU priorities for green growth, including those on protection expenditure, environmental goods and services, and energy. [80] Given that member states were at different stages of development in environmental accounting, the updated regulations granted a temporary derogation, and provided for funding to carry out pilot studies, with the support of Eurostat. More broadly, the seventh EAP set out an original policy framework in which “Work to develop a system of environmental accounts, including physical and monetary accounts for natural capital and ecosystem services, will need to be stepped up.” [81]

58The EU Biodiversity Strategy, launched following COP 10 in Nagoya, is an essential tool in this regard, [82] with its multi-scale, multidimensional perspective (covering national accounting, sectoral policies, local management, and so on), as Laure Ledoux, head of the Biodiversity Unit in DG Environment, explains:

59

One big task is to include the values of natural capital in national accounts and satellite accounts, with the idea of incorporating them into economic decisions, [i.e.,] a better integration into sectoral policies, which for us is all about agricultural policy and so on—and that’s important. And then, perhaps at a more local level, there’s the management of ecosystems and the evaluation of the trade-offs between ecosystem services. So, what we’re trying to develop is a tool that can be used at several levels and that has multiple objectives. [83]

60On the statistical side, this target is reflected by the 2015 commitment to the ambitious Knowledge Innovation Project on an Integrated System for Natural Capital and Ecosystem Services Accounting in the EU (KIP-INCA), the initial objective of which is to combine the available geospatial databases (including Copernicus satellite data, LUCAS land use surveys, data on the Natura 2000 protected areas, and data on coastlines) with a specific approach to the evaluation and mapping of ecosystems. [84] The initiator of the project, Anton Steurer, who in the 1990s moved from the Austrian statistical office to Eurostat, where he was promoted to head of environmental statistics and accounts in 2014, having regularly contributed to the revision of the SEEA, recommends a pragmatic and progressive approach to implementation:

61

It’s about doing new things with existing data.. . Standardization is really, really difficult to do, so you start with the things that are possible at the European level.. . One idea is to propose a framework at the European scale, and a framework for countries. Those who engage with it can play with it—they can attach themselves to the framework. We were also maybe thinking about regions.. .. So, this is a European idea, but we don’t need to have all 28 member states on board at the beginning. [85]

62The restoration of these institutional dynamics highlights the flexible, yet modulable, way in which environmental accounting can be integrated in sustainable development policy: whereas the World Bank has favored an approach to natural capital accounting centered on monetary evaluation and institutional arrangements with a view to measuring the “extended wealth” of nations, the EU has backed a more multidimensional accounting concept through the use of satellite accounts and integrated information systems within a regulatory statistical framework. Aside from their differences, these two approaches—which illustrate the variety of uses of the SEEA—both offer specific responses to the SDGs as defined by the UN, to be achieved by 2030.

A tension between approaches

63The above analysis would not be complete without mentioning some of the other international ecosystem accounting programs, which provide a clearer picture of the dissent expressed within the UNCEEA.

64Among the various forms of the SEEA-EEA currently being tested, some start with an evaluation of ecosystem services, with the aim of calculating their economic value and the wealth that they represent. This is exemplified by the WAVES program, and also by the Valuation and Accounting of Natural Capital for Green Economy (VANTAGE) program set up by UNEP following Rio+20. VANTAGE specifically applies to small island developing states with significant natural capital and populations that directly depend on ecosystem services, with the aim of facilitating the transition of these small nations to a “green economy.” [86] While institutional arrangements are the preferred means of entry here, the program still needs to prove its worth in its implementation. In contrast, there are other methods that highlight the resilience of ecosystems and their capacity to deliver sustainable services (strictly speaking—i.e., through the non-substitutability of natural capital), which leads to an emphasis on accounting using physical units. In line with this approach are the recommendations produced by the CBD secretariat, on the implementation of goal A, target 2, of the Aichi Biodiversity Targets. [87] The values of biodiversity therefore do not solely refer to the monetary values that are implicitly included in market prices or calculated off-market through shadow prices; they also refer to functional and ethical values, implying the adoption of a different metrology. Despite the decision being postponed by the UNCEEA during preparatory discussions on the SEEA-EEA, a choice of non-monetary currency was advanced in order to measure the ecological value of ecosystems. One of the major reference criteria for the currency, which was named the “ecosystem unit,” concerned the sociopolitical objectives regarding the state of the environment, as set out in laws and regulations. [88]

65This original approach, despite being solely based on the statistical data of a single territory, opens the way to different perspectives, rather than just calculating a synthetic sustainable development indicator: it makes it possible to account for “ecological debt,” for instance, and the means of addressing it (such as fair-trade programs or funding environmentally responsible projects) (see Table 2). [89] The distinctive feature that is claimed for this approach—as opposed to those of “extended” or “inclusive” wealth—is a clear reflection of objectives that involve political choices as much as ideological ones and that, like other initiatives, invite wider debate. [90]

Table 2

A comparison of international ecosystem accounting initiatives

WAVES (2010) VANTAGE (2014) ENCA-QSP (2014) KIP-INCA (2015) Objectives Mainstream natural capital into development planning and national accounting Facilitate the transition toward a “green economy” Account for “ecological debt” and the means of addressing it Derive estimates of the value of ecosystems and their services International organizations World Bank UNEP CBD EU Type of approach Extended wealth Inclusive wealth Resilience and “capability” of ecosystems Multidimensional Experimental areas Africa, Latin America & Caribbean, Asia-Pacific, Europe Small island developing states Mauritius EU member states, EU regions (potentially) Means of implementation Institutional arrangements Institutional arrangements Laws and regulations Laws and regulations Sustainability design Weak Weak Strong Weak to strong

A comparison of international ecosystem accounting initiatives

66While traditional models of national accounting were constructed using a system of ex post measurement of (real) production, as embodied by GDP (historical costs), the new environmental accounting models proposed by the World Bank and the UNEP—such as those behind the SEEA-EEA— propose the adoption of a “present value” for the expected future returns on ecosystem assets. Some economists suggest that this goes in the same direction as applies to private accounting, with a gradual emergence of an actuarial ideology for measuring value. [91] However, this inversion of temporal perspectives now appears to present a major stumbling block between the desire to integrate ecosystems into national accounts and the quest for a synthetic indicator of wealth. The question remains as to whether the monetary estimates resulting from this type of approach are indeed consistent with the market values on which the SNA is based, with which the SEEA-CF strives to be consistent. [92] The political and financial stakes of such decisions are of primary importance, as testifies one expert who took part in the London Group’s discussions on the most recent revision of the SEEA:

67

Why has there been no progress on this issue of new indicators for thirty to forty years? Personally, I’ve sensed a certain amount of timidity. Because there are some proposals [.. .], but things get blocked in the decision-making process at the UN level because, I think, people don’t want to set up, or be there at the start of setting up, what I’d call “Jérôme Kerviel-style accounting,” meaning a type of accounting where adjustments are made that are not very clear, not very coherent. [93]