A giant leap towards measuring nature’s contributions to the economy

Nearly 600 experts have been working for almost a decade to find the best way to quantify the economic benefits that nature provides. This week marks the culmination of their efforts with the Ecosystem Accounting framework being adopted as an international standard by the UN Statistical Commission. This means that countries can now calculate the services that ecosystems provide – such as carbon storage and flood protection – and their contributions to the economy  in a standardized way and with the same confidence as they calculate GDP to measure their economic production.

This is a huge step towards seeing nature as an economic asset that needs to be managed and preserved to ensure sustainable growth. For example, the Government of Cambodia asked the World Bank to provide the economic rationale behind preserving 65% of the country’s forests as protected land. While some benefits were obvious, it did not have the economic analysis to fully justify such a  wide-ranging decision. Using ecosystem accounting, the World Bank team supported the Government of Cambodia in quantifying a suite of services that forests offer  –  water, agriculture and hydropower, ecotourism and carbon storage – for the Pursat River Basin in the Cardamom Mountains in Cambodia. The analysis revealed that economic gains from preserving the forests was five times higher than cutting them down for charcoal production or agriculture. It also found that the benefits to other economic sectors derived from forest ecosystems are 20 times higher than the cost of maintaining them.

Mainstreaming this kind of work into economic decisions will be much easier from now on and can be expected to become more widely adopted with the new System for Environmental-Economic Accounting – Ecosystem Accounting (SEEA-EA). Even before this framework was adopted, many countries had realized the importance of getting better biophysical data on the condition of their critical ecosystems, as well as valuing the contribution of ecosystems to power generation, agriculture, and to the overall well-being of their citizens. This is especially important for low-income countries that depend on natural capital for nearly 23% of their wealth. According to the United Nations Statistics Division, nearly 34 countries have implemented ecosystem accounting. 

The World-Bank led WAVES partnership and the Global Program on Sustainability (GPS) have supported 10 countries on ecosystem accounting to inform development policy. Supported by WAVES, the Philippines developed pilot ecosystem accounts as early as 2016, which helped decision makers to better understand and manage Laguna Lake, next to Manila, and its surrounding ecosystems. The lake is important for water supply and aquaculture but is under increasing pressure from pollution, erosion and saltwater intrusion. The ecosystem accounts contributed to revising user fees as well as developing new monitoring regimes like Environmental Compliance Certificates, which are issued to businesses situated around the lake to ensure no environmental damage is caused.

Addressing trade-offs between different policy objectives is another area where ecosystem accounts are helpful. For example, Indonesia is now evaluating alternative options to manage peatlands, to ensure that these unique ecosystems can contribute to socio-economic development while minimizing issues such as carbon emissions, flood risks, and health impacts from air pollution caused by peat fires. Ongoing GPS supported work can assist the country in assessing the merits of peat restoration programs which have the potential to reduce the negative impacts of environmental degradation, and boost income and employment , thereby contributing to the COVID-19 recovery.

Ecosystem accounts provide valuable information in countries experiencing rapid growth which often comes at the cost of degrading natural assets.  Rwanda, one of the WAVES partner countries, has experienced fast economic growth in the last few decades. At the same time, the country has committed to a sustainable growth path as enshrined in its national development plan. To this end, Rwanda developed ecosystem accounts that modeled and mapped ecosystem services at national scale for 1990-2015, which showed that these services have been declining, especially those related to climate regulation and water quality. This trend is mainly driven by the conversion of forests to cropland. The Government of Rwanda is now taking steps to address this in its new land-use masterplan as well as in designing the next long-term development plan by ensuring there are adequate provisions for protecting forests, especially affecting sediment flow to hydroelectric dams.

Ecosystem accounting can measure and build our understanding of nature’s ability to provide critical benefits that underpin human well-being.  This is particularly relevant as we are in the midst of multiple crises – a pandemic, climate change, and biodiversity loss. Elevating ecosystem accounting to an international standard, will help us meet our commitment to systematically recognize, measure and manage nature’s contributions to the planet and people.