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Natural Capital Accounting

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Accounting for ecosystems and their services in the European Union INCA 2021 edition. This report summarises key results of the INCA project. INCA delivered an integrated system of ecosystem accounts for the EU. The report provides an introduction to ecosystem accounting and presents ecosystem extent accounts, initial ecosystem condition accounts and ecosystem services accounts for EU28, before the withdrawal of the UK. The report shows practical examples of possible uses of ecosystem services accounts and existing policy applications. The report is intended for a broad audience policy makers, researchers, compilers of ecosystem accounts and other expert and non-expert users who wish to learn how ecosystems and their services support our society, what changes in ecosystems and ecosystem services took place in the EU in the past couple of decades and how all this can be measured in a standardised and comparable way.

The EUs economic prosperity and well-being is underpinned by its natural capital, i.e. its biodiversity, including ecosystems that provide essential goods and services, from fertile soil and multi-functional forests to productive land and seas, from good quality fresh water and clean air to pollination and climate regulation and protection against natural disasters. In the context of the European Green Deal, the EU Biodiversity Strategy for 2030 is calling for the establishment of an international natural capital accounting initiative.

On 11 March 2021, the United Nations adopted anew statistical frameworkto better account for biodiversity and ecosystems in national economic planning and policy decision-making, allowing countries to use a common set of rules and methods to track changes in ecosystems and their services. The new framework goes beyond the commonly used statistic of gross domestic product (GDP) and ensures that natural capital accountsthe contributions of forests, oceans and other ecosystemscomplements existing economic accounts.

The European Commission supported the UN in the development of this framework with contributions from scientists, statisticians and policymakers. TheKnowledge Innovation Project on Integrated Natural Capital Accounting, a project of the Commission and the European Environment Agency, produced EU statistics and trends on the extent of different ecosystems, their condition and ecosystem services, which are compliant with the new framework for natural capital accounting.

The Commission is going to propose the revision of the Regulation on European Environmental Economic Accounts (EEEA) to expand its coverage to include a new module on natural capital accounting, fully consistent with the UN framework. This is in line with therecommendationof the European Court of Auditors and the recent mid-term review of European Strategy for environmental accounts (ESEA) 2019-2023. The EU could then become the global front-runner as being the first continent in the world reporting on changes in ecosystems and their services.

Natural Capital accounting is a tool to measure the changes in the stock of natural capital at a variety of scales and to integrate the value of ecosystem services into accounting and reporting systems at international, Union and national level. This will result in better management of the Unions natural capital. An integrated natural accounting system for ecosystems and their services and associated data sets is being developed by the Knowledge Innovation Project (KIP INCA). This will aim to provide a multi-purpose tool that can be used decision making for a range of policies, at different stages of the policy cycle, and that national authorities and research centres can access. It can enable to explicitly account for the range of ecosystems and their services and demonstrate in monetary terms the benefits of investing in nature and the sustainable management of resources. KIP INCA involves: DG ENV, ESTAT, EEA, JRC, RTD, and links with MS activities andMAES.

NCA and the work of INCA can provide added value in a range of specific policy contexts including:

Macro-economic policies at EU level, Growth and Jobs, and EU Annual Growth Surveys, Greening of the European Semester and Resilience and Recovery Plans and Facility. Development of macro-indicators alongside GDP. Through NCA, the contribution of natural capital to economic development can be made explicit alongside produced or manufactured capital, and human capital, as well as links to social advancement, employment, and national wealth.

EU Sectoral policies. NCA can contribute to the better understanding, articulation, and accounting of the range of services that ecosystems provide (provisioning, regulating and cultural). These services stand alongside those typically accounted for, such as the provision of timber or food, and need to be explicitly taken into account. Specific examples of policies to which NCA can add value to include environmental policies, agricultural and Regional polices: Provide a basis for future CAP reviews, Marine Common Fisheries Policies (MSFD, CFP): etc.

In the context of the Unions promotion of environmentally responsible business practices, NCA has potential in providing a concrete basis for business performance reporting by explicitly mapping out impacts and/or dependencies on natural resources and placing a monetary value on them. Specific examples include: Business Accounting and Reporting, The disclosure of non-financial reporting and accounting Directives.

Finally at international level, NCA has actively contributed to a globally consistent approach to account for ecosystems and their value through the UN development of accounting standards such as the UN System of National Accounts (SNA), UN System of Environmental-Economic Accounting (SEEA) which includes environmental reporting and the Ecosystem Accounting (UN SEEA EEA) which includes ecosystem accounting. This ensures that the EU continues to play a lead role in international environmental affairs through its support for effective measures, international standards and accounting relating to natural capital.

Natural Capital Accounting on the Biodiversity Information System for Europe (BISE)

At international level the European Commission contributes to theWAVESproject and theNCA partnership Instrument

JRC report-Implementation of ecosystem services accounts at EU level

Science for Environment Policy Taking stock: progress in natural capital accounting

JRC report - Ecosystem services accounting: Part I - Outdoor recreation and crop pollination accounts

Natural Capital Accounting: Overview and Progress in the European Union

Valuation for Natural Capital and Ecosystem Accounting

Review of ecosystem service valuation progress and approaches in EU Member States

How valuation (both monetary and non-monetary) and NCAs can inform policy process