Wednesday, 11 January 2017

Physical and monetary ecosystem service accounts for Europe: A case study for in-stream nitrogen retention

Ecosystem Services

Volume 23, February 2017, Pages 18–29
  • a European Commission - Joint Research Centre, Directorate D – Sustainable Resources, Via Enrico Fermi 2749, 21027 Ispra, VA, Italy
  • b Department of Economics and Statistics, University of Torino, Campus Luigi Einaudi, Lungo dora Siena 100, 10153 Torino, Italy
  • c CSIRO Land and Water Flagship, Waite Campus, 5064 Adelaide, South Australia, Australia


We present a case study of ecosystem accounting based on the SEEA-EEA framework.
Accounts for water purification are developed in physical and monetary terms.
Flow accounts include both actual and sustainable flows.
Capacity is assessed as Net Present Value of the sustainable flow.
Replacement cost is the exchange value technique used for the monetary valuation.


In this paper we present a case study of integrated ecosystem and economic accounting based on the System of Environmental Economic Accounting — Experimental Ecosystem Accounts (SEEA-EEA). We develop accounts, in physical and monetary terms, for the water purification ecosystem service in Europe over a 20-year time period (1985–2005). The estimation of nitrogen retention is based on the GREEN biophysical model, within which we impose a sustainability threshold to obtain the physical indicators of capacity – the ability of an ecosystem to sustainably supply ecosystem services. Key messages of our paper pertain the notion of capacity, operationalized in accounting terms with reference to individual ecosystem services rather than to the ecosystem as a whole, and intended as the stock that provides the sustainable flow of the service. The study clarifies the difference between sustainable flow and actual flow of the service, which should be calculated jointly so as to enable an assessment of the sustainability of current use of ecosystem services. Finally, by distinguishing the notion of ‘process’ (referred to the ecosystem) from that of ‘capacity’ (pertaining specific services) and proposing a methodology to calculate capacity and flow, we suggest an implementable way to operationalize the SEEA-EEA accounts.

JEL codes

  • Q56;
  • Q57;
  • Q25


  • Ecosystem accounting;
  • Ecosystem services;
  • Water purification;
  • Capacity;
  • Sustainable flow;
  • Actual flow

1. Introduction

Integrated assessments of economic, social and environmental impacts are key to supporting public and private sector decisions related to land and water resources. An essential part of integrated assessments is the identification of the links between ecosystem functions and processes and human wellbeing, a task to which theoretical frameworks, principles, definitions and classifications have been devoted by numerous studies (e.g. Millennium Ecosystem Assessment, 2005; The Economics of Ecosystems and Biodiversity, 2010; Daily et al., 2009; Diaz et al., 2015).
A number of policy initiatives have incorporated ecosystem service quantification and valuation. For example, the Europe 2020 strategy has the manifest intention of mainstreaming environmental issues into other policy areas ( European Commission, 2011a2011 and European Commission, 2011b) by preserving the resource base (defined as the capacity of ecosystems to provide services that, in turn, provide benefits to human beings) required to allow the economy and society to function (European Commission, 2011a). The EU Biodiversity Strategy to 2020 ( European Commission, 2011b) includes ecosystem services alongside with biodiversity, to highlight the key role of ecosystems in biodiversity protection. In particular Action 5 of the Strategy requires that ecosystem service assessment and valuation be integrated into accounting and reporting systems, so as to relate environmental assets to other statistics and data on environmental, economic and social characteristics already used by analysts and policy makers. At all levels, a fully integrated economic and environmental analysis is increasingly recognised as crucial for policy design and implementation.
To meet this call, national statistical offices and international agencies have been working on ways to make national accounting and reporting systems more inclusive of ecosystems.1 Traditional national economic accounts based on the System of National Accounts (SNA), developed 50 years ago when little thought was given to environmental damage, do not consider ecosystem assets and services. Although there have been some revisions,2 the SNA does not yet account for the degradation and depletion3 of natural resources. Over the last 40 years a number of efforts have been made to develop methods that integrate traditional macroeconomic indicators with environmental information (Hecht, 2007). In the early 1990s the statistical unit of the United Nations proposed a single System for Integrated Environmental and Economic Accounting (SEEA) (Bartelmus et al., 1991) as a way to standardize different frameworks and methods. The original 1993 SEEA handbook (UN, 1993) focused on the adjustment of existing macro-indicators. The subsequent SEEA 2003 framework comprised four categories of accounts, made up of several environmental accounting modules (UNSD, 2003). More recently, the SEEA Central Framework (SEEA-CF), which covers the main component of the physical environment (air, water and land), is being adopted as an international statistical standard (UN 2014a).
Natural resource accounts, however, only tell part of the story, because ecosystems are a lot more than just land and water. An ecosystem is an interconnected and interacting combination of abiotic (land, water) and biotic (biodiversity) components, and the depletion of its stock - the natural capital - may cause the loss of multiple services now and in the future. This is the reason why ecosystem accounts, aimed at monitoring the capacity of ecosystems to deliver services, are the focus of increasing attention within economic-environmental accounting (Schröter et al., 2014, Remme et al., 2014, Busch et al., 2012 and La Notte et al., 2011).
The Land and Ecosystem Accounting framework (LEAC) is an early attempt at ecosystem accounting (Weber, 2009; European Environmental Agency, 2011, European Environmental Agency, 2010 and European Environmental Agency, 2006). In LEAC the consumption of natural capital, considered as the asset, is measured as the restoration cost required after intensive exploitation and/or insufficient maintenance. However, the LEAC framework does not incorporate direct measurement of ecosystem services. A white cover version of the SEEA-Experimental Ecosystem Accounts (SEEA-EEA) was released in June 2013 and officially published in 2014 (UN, 2014b), developed and recommended by the United Nations, European Commission, World Bank, OECD and FAO. The SEEA-EEA is an experimental accounting framework to be reviewed in light of country experience and conceptual advances. The framework is intended for ‘multidisciplinary research and testing’ (UN, 2014b) and urgently calls for applications and case studies. SEEA-EEA Technical Guidelines were released in April 2015 and made available for global peer review in December 2015 to support national efforts at ecosystem accounting(UNEP et al. 2015).
The Technical Guidelines state that central in applying the SEEA-EEA framework to ‘support discussion of sustainability’ is the concept of capacity (ref. Section 7.44 UNEP, 2015). The notion of capacity is important to assess the integrity/degradation of the ecosystem in relation of how ecosystem services are used and managed. However, some aspects of the notion of capacity in the SEEA-EEA have not been tackled in a definitive way. Specifically: i) whether to attribute the notion of capacity to the ecosystem as a whole or to each individual ecosystem service, and ii) whether to consider ecosystem service supply independent of service demand. There is the need to address these questions because some assumptions regarding capacity are required in order to set up a complete and consistent accounting system.
Our paper investigates these two questions by applying the SEEA-EEA to the regulating ecosystem service of water purification in Europe, using in-stream nitrogen retention as a proxy for water purification. To our knowledge this is the first application of SEEA-EEA based approaches to ecosystem services measurement at a continental scale.

We begin with a brief introduction to the SEEA-EEA framework (Section 2.1), followed by the description of how the water purification ecosystem service is quantified here to be consistent with SEEA-EEA principles (Section 2.2). The results (Section 3) are expressed in terms of the SEEA-EEA procedure. The challenges raised by our case study and discussed in Section 4 aim at developing a notions of capacity able to link the accounting principles of stock and flows with ecosystem services, considering that the definition of capacity as join concept between ecology and economy is still a matter of debate