THE GLOBAL PARTNERSHIP ONWealth Accounting and the Valuation of Ecosystem Services

Technical Workshop on Tools and Measures to Inform

Inclusive Green Economy Approaches Beyond GDP Natural Capital Accounting for

Sustainable Development and Poverty Eradication

Measuring and Managing Natural Resources for Development

John M. MatuszakAgriculture and Environmental Services Department-SDN , World Bank

Sustainable Development and WealthWe don’t judge a company solely on the basis of its income

statement—look at both income and balance sheet.• Increasing assets (wealth) support long-term growth.• In the short term, income can appear to grow by

liquidating assets, but this undermines long-term growth.

Why do we assess country economic progress on the basis of national income, GDP alone? (J. Stiglitz, Nobel prize, economics)

The source of income and well-being is wealth, broadly defined to include– Manufactured capital, Natural capital, ‘Intangible’ capital (human

capital and social capital)

A cco u n ti n g fo r N atu ral C ap ital—A re N ati o n al Eco n o m ic A cco u n ts u p to th e Jo b ?

Key information about natural capital is missing or invisible in the System of National Accounts (GDP):• Depletion of natural capital – minerals, forests• Use of materials and energy not fully represented• Environmental degradation – air & water pollution, loss of soil

productivity• Ecosystem services – carbon storage, flood mitigation

Filling the information gap—SEEA, System of Environmental and Economic Accounting

Why do Natural Capital Accounting ?

Better indicators for monitoring sustainable development:

Wealth Accounting: is GDP growth sustainable or are we just “living off our natural capital?”Resource Productivity (water, energy, pollution)—improving over time?

Better tools for managing natural capital to promote growth and poverty reduction-- Detailed statistics to• Designing development strategies that optimize scarce resources• Weigh tradeoffs among competing users for water, forests, land use• Prioritize investments in natural capital like water resources, protected

areas• Impacts of resource pricing schemes; design sustainable financing

Where has Natural Capital Accounting been most useful?

1. Indicators for monitoring sustainable development2. Water accounting: managing a scarce resource3. Energy and air pollution: cleaner, more efficient

production4. Stocks of minerals & energy: fiscal rules, managing

mineral revenues for long term growth5. Land and ecosystems: balancing the needs of

tourism, commercial and subsistence agriculture, water supply, soil erosion, and other uses

Where has Natural Capital Accounting been most useful?

WAVES Implementation and FundingPartnership

• Core Implementing Country Partners: receiving substantial technical support from WAVES multi-donor Trust Fund (5 countries so far)

• Contributing Donor Partners: UK, Japan, Norway, France, the Netherlands, Germany, EC, Denmark, Switzerland

• Participating Partners: countries with other sources of funding who have endorsed the NCA communique, UN & international organizations, NGOs, private sector, academics and others

Governance• WAVES Secretariat and management in World Bank HQ • Global Steering Committee: UNEP, UNDP, UNSD-UNCEEA, donors, WAVES-supported partner

countries• Country work managed by National Steering Committees

2-phased approach• 1-year preparation phase through June 2012• 4-year implementation phase through 2016+

Funding• $22 million hybrid MDTF, additional funds being raised for the ’50/50’ NCA campaign launched on the

basis of the Gaborone Declaration May 2012

What to expect from WAVES as Participating Country Partners

• Regional training workshops to explain Natural Capital Accounting, how it can be used to support decision-making, and the SEEA

• Diagnostic to assess readiness and priorities, and short term technical support to assist countries implement the diagnostic paid for by WAVES Secretariat

• Training materials for Natural Capital Accounting including on-line resources and e-learning courses (in preparation)

• Assistance in identifying resources for additional technical support through WAVES Partnership, or programs of partners

• Join a global ‘community of practice’ to share experiences, report results, learn from each other, and receive training on specialized topics

Current WAVES countries

Botswana: • work plan approved for water, minerals &

energy, land & tourism, indicators of sustainability,

• first results on updated water accounts presented to President at high-level economic advisory council;

Madagascar:• work plan approved for minerals, forests &

protected areas, tourism, watershed pilot accounts, mangroves, indicators of sustainability,

• work underway, mineral accounts expected end of 2013, preliminary results for the rest of accounts in 2014

Philippines: • work plan approved for minerals,

mangroves, pilot land/ecosystem accounts for 2 sites

• TORs being drafted for implementation

Colombia: • work plan approved for watershed ecosystem

accounts for water, forests in 3 pilot watersheds,

• TORs being drafted for implementation

Costa Rica: • work plan for water and forests accounts

under final discussion• water accounts under construction

How did the process work in Botswana?

• National Steering Committee, chaired by Ministry of Finance and Development Planning

• 3 multi-stakeholder workshops on WAVES (July &Nov 2011, Jan 2012)

• Scoping out study commissioned, • Policy priorities based on NDP10, EDD, other documents• Review of data availability, gaps, lessons from earlier NRA

program• Work plan adopted by Steering Committee, March 2012• Presentation to BEAC (chaired by President), May 2012, endorsed

by BEAC• Updated Water Accounts presented to BEAC, Nov 2012• Country Coordinator hired, sits in MFDP

Botswana: achieving growth-diversification-poverty reduction

Optimizing natural resource use is the key……but the necessary economic information is often incomplete or missing.

NCA supports environmental accounting to fill that information gap and improve economic decision-making in 2 ways:

1. Information to Optimize use of Botswana’s Natural Capital

• Water accounts• Mineral and Energy accounts• Land/Ecosystem accounts & the role of tourism

2. New macroeconomic indicators: a new way of measuring economic growth—beyond GDP—that takes Natural Capital into account

Objective Description

1. Managing water resources

Contribute to integrated water resources management, water sector reforms, identify constraints to economic diversification strategies and ways to overcome them

2. Minerals & Energy

Contribute to development of a new fiscal rule for mineral revenues. Addressing electricity shortages and the development of coal resources

3. Land & ecosystems Contribute to dialogue on best use of land to support long term growth, balance competing land uses: tourism (increase local benefits), commercial agr, subsistence agr, other ecosystem services

4. Macro-economic indicators

New macro-economic indicators (ANS, ANNI and comprehensive wealth) to guide sustainable development and new fiscal rule for mineral revenues

5. Capacity Building Technical training built into all components, participation in WAVES regional & global training programmes

Botswana NCA Work plan

BOSTWANAAre scarce water resources allocated efficiently?

Agricu

lture

Mining

Manufac

turing

Wate

r + el

ectric

ity

Constructi

onTra

de

Hotels a

nd resta

urants

Transp

ort & co

mmunication

Insuran

ce, ban

king &

business

Socia

l &pers

onal ser

vices

Govern

ment

Household use

others0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

% share in GDP, employment & water use, 2011

% of GDP% of formal employment% of water consumption

Source: DWA

Resource-rich economies: managing rents from minerals and energy

• transform non-renewable resources into other forms of capital

Natural resource rents –a major source of income(% of GDP, 2012

World East Asia E. Europe and Central Asia Latin America Middle east/N. Africa South Asia Subsaharan Africa0

2

4

6

8

10

12

14

16

18

20

Perc

ent o

f GD

P

Indicators: Measuring country sustainability through changes in wealth—

• ANS measures gross saving adjusted for

• Depreciation of fixed capital• Human capital investment, • Resource depletion• Pollution damages

• Adjusted Net Savings

System of Environmental-Economic Accounting (SEEA)

• Agreed by the UN Statistical Commission 2012• The System of Environmental-Economic Accounting (SEEA) contains the

internationally agreed standard concepts, definitions, classifications, accounting rules and tables for producing internationally comparable statistics on the environment and its relationship with the economy.

• The SEEA framework follows a similar accounting structure as the System of National Accounts (SNA) and uses concepts, definitions and classifications consistent with the SNA in order to facilitate the integration of environmental and economic statistics.

• The revised SEEA consists of three parts:– the Central Framework, which was adopted by the UN Statistical Commission as the first

international standard for environmental-economic accounting; – Experimental Ecosystem Accounting and Applications and Extensions of the SEEA. – Subsystems of the SEEA framework elaborate on specific resources or sectors, including: Energy,

Water, Fisheries, Land and Ecosystems, and Agriculture.

What is SEEA-Water? • Analytical framework that provides information about the interactions

between the economy and water resources • SEEA-Water is a subsystem of the System of Environmental-Economic

Accounting (SEEA), coherent with System of National Accounts (SNA)• International Recommendations for Water Statistics (IRWS) designed to

assist countries in the implementation of SEEA-Water. Considered an Interim Statistical standard (2007)

• Provides key indicators to respond to different policy demands. They are comprehensive, consistent and comparable through time and space.

Structure of the accounts1. Physical water supply and use tables (Chapter 3)

– Information of volumes of water exchanges between economy and environment and within econony

– Improving water efficiency2. Emission accounts (Chapter 4)

– Information on amounts of pollutants added to waste water as result of economic activities

3. Hybrid supply and use tables (Chapter 5)– Information on the economy of water in monetary terms

4. Asset accounts (Chapter 6)– Information on physical stocks of water

What Do Policy-Makers Need from Water Accounts?

Economic information to make decisions:

• Allocation of water, water infrastructure among competing users:

• economic users and water productivity• ecological requirements• international requirements for shared water resources

• Water pricing and economic instruments: • Variation of water delivery costs/scarcity by region• Impact of water tariffs on different industries and different social groups,

especially the poor

• Managing water pollution: sources, costs & benefits of reducing pollution

• Coordinating policy in related sectors: agriculture, rural development, tourism, etc.

• Planning for future water requirements, water demand mgmt.

I. Improving water supply and sanitation

services

II. Managing water supply and demand

III. Improving the state of the environment and

water resources

Adapting to extreme hydro-meteorological

events

Water security

Water issues and policy objectives:A broad grouping

• Reduced quality and pollution

Allocating water among competing users: contribution to GDP, employment, social wellbeing

• Managing for increased floods/droughts

• Limited access• Unequal distribution

Policy objectives

NETHERLANDSWater issues

NETHERLANDS: Policy demands

• Main users: – Ministry of infrastructure and environment, – water boards, – water companies, – Eurostat, other etc.

• European Union Water Framework Directive

• Marine Strategy Framework Directive– Initial Assessment asks for ‘Economic analysis of marine waters’

• Climate change policies expenditure for climate change mitigation / adaptation

• Indicators for green growth

NETHERLANDSIs there decoupling between water use and economic growth ?

Volume change GDP, employment and tap water used for production

Source: CBS

NETHERLANDSWater Profiles: What are the most important users of water?Is their water productivity improving between 2003 and 2010?(liter/ euro of sector value-added)

Source: CBS

NETHERLANDS Are there regional differences in emission intensity ?

Emission-intensity per river basin (only producers)

0

10

20

30

40

50

60

70

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

Ems Meuse Rhine Central Rhine North Rhine East Rhine West Scheldt

nutrient equivalents per million euro

heavy metal equivalents per million euro

Emission of heavy metals (left axis) Emission of nutrients (right axis)Source: CBS

Water consumption

02000400060008000

100001200014000

ML

(1,

000

m3) 2004-05

2008-09

Percentage change 2004-05 to 2008-09

-30% -20% -10% 0% 10% 20% 30% 40%

Agriculture

Mining

Manufacturing

Electricity

Water supply

Other industry

Household

Australia: Increasing water efficiency by sector, 2004 & 2008

Source: ABS

AUSTRALIA: Who uses water and who pays for water?

Households

All other Industries

Manufacturing

Mining

Agriculture

0% 10% 20% 30% 40% 50% 60%

Monetary vs. physical use of distributed water in key sectors, 2008-9 (Australia)

Volume of waterWater tariff paid

Source: ABS

BOSTWANAAre scarce water resources allocated efficiently?

Agricu

lture

Mining

Manufac

turing

Wate

r + el

ectric

ity

Constructi

onTra

de

Hotels a

nd resta

urants

Transp

ort & co

mmunication

Insuran

ce, ban

king &

business

Socia

l &pers

onal ser

vices

Govern

ment

Household use

others0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

% share in GDP, employment & water use, 2011

% of GDP% of formal employment% of water consumption

Source: DWA

International Trade & Water UseAre water-scarce countries exporting water?

How does export promotion drive water demand in Namibia, Botswana and South Africa?

How much can ‘virtual water’ in imports reduce pressure on water demand?

Exports in these countries are dependent on primary & processed primary commodities especially agriculture, mining--water intensive products

Water intensity of trade (m3 per 1000 rands of imports or exports)

0

5

10

15

20

25

Botswana Namibia South Africa

m3

wat

er p

er 1

000

ran

ds

Exports

Imports

South Africa is net exporter not only because volume of exports > imports, but also because water intensity of exports > imports.

COLOMBIAIdentifying main water users

Meat and fish

milk products

Coffee products and threshing

Cocoa, chocolate and sugar confectionery

beverages

Yarn and thread, textile fabrics, woven, tufted

Knitted and crocheted fabrics, garments,

Products of wood, cork, straw and plaiting materials

Publishing, printing and the like

Chemicals and chemical products

Non-metallic mineral products

0 10 20 30 40 50 60 70 80

Water use by sector, 2009

Million m3

GUATEMALAIs water supply enough to population’s demands?

Water scarcity index, 2005 (rainy season)

Water scarcity index, 2005 (dry season)

Population density, 2005

Where to get started?

Policy

Data Institutions

• What are the main water issues?• What is the legal framework and

policies in place?• How can policy be better informed?

• What are the relevant components of water accounts?

• What are the data needs, availability and gaps?

• What are the users and producers?

• Who are the stakeholders and how can they interact?

• Who will lead the process?

Stakeholders• National statistical offices• Government agencies (at the national,

state/provincial or local levels) responsible for:– Water– Meteorology and hydrology– Agriculture– Environment (including environment protection

authorities)– Energy (especially where there is significant use of

hydropower)– Central planning– Finance (or central banks)– Geology or geological survey– Land use and land planning

• Water suppliers and sewerage service providers (government and non-government)

• Water research organizations (e.g., government agencies, universities)

• Non-governmental organizations (e.g., water industry associations, farmer associations)

Arrangements• Responsibilities for water management

and water statistics are often divided by economic activity (agriculture, energy, etc.)

• Official roles and responsibilities of the agencies involved in water management and the production of water statistics vary between countries

• The coordination mechanisms should include regular meetings of stakeholders.

• an agency needs to take the lead in water statistics.

• However, in some countries there may be no single lead agency but rather several agencies

• taking leadership in different areas of water statistics or at different times

Institutional arrangements

Data needs and issues• Sometimes agencies are unwilling to share data because they fear it will

reveal information that may be used unfairly against them, or that it will expose data gaps and deficiencies for which they could be criticized.

• Because of sensitivities about data confidentiality, arrangements need to be formalized, usually by data-sharing agreements. Data-sharing agreements should clearly define procedures for requesting, sharing and attributing data.

• Sharing data between agencies has many benefits. – For the collectors, cost may be eliminated or reduced compared to the cost of initiating

a new data collection, if the information can be obtained from existing data sources.– It eliminates the possibility of conflicting data being produced, and can reduce the

burden (i.e., data are collected only once and used by multiple agencies) of respondents, in this case the establishments or households that are reporting the data.

• Water statistics confidentiality can present a problem for the water supply and sewerage industries (ISIC, Rev. 4, divs. 36 and 37), because in some countries there are very few establishments engaged in these activities.

How to join WAVES, the ’50-50’ NCA Initiative

Ministerial-level communication (email) expressing interest in joining sent to:

World Bank Country Office

Glenn-Marie Lange (glange1@worldbank.org)

Yuvan Beejadhur (ybeejadhur@worldbank.org)

Thank you! http://www.wavespartnership.org/waves/