Sustainability. Environment capital. Why measure it, for which policy? How to measure it? Where do we stand now? Can we move one step further?

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1 Sustainability Environment capital Why measure it, for which policy? How to measure it? Where do we stand now? Can we move one step further? Measuring Well-Being and Fostering the Progress of Societies - Guillaume Mordant Statistics and Observation Directorate June 2012 Ministry of Ecology, Sustainable Development and Energy

2 Questions & issues raised (in the session guide): the importance of environmental capital (EC) and its measurement The session guide assessments and questions, grouped in 3 themes will structure this presentation A- Which policy can be directly related to environmental capital (EC)? Need to maintain the integrity of ecosystems through the efficient management of natural resources Decouple environmental pressures from economic growth What are the main threats to environment sustainability? B- Which measure for these policies? Improve information for decision making How better measures of sustainability could inform better policy decisions? What indicators are most useful in identifying the environmental sustainability of a given development trajectory? C- How to measure and improve the measure? Which groups in the population are most exposed to environmental degradation? How can we capture the dangers of a loss of environmental capital to economic growth? How should environmental capital be measured? Do we need a monetary valuation? Address global environmental interdependence

3 A- Which policy can be directly related to environmental capital (EC)? 1/4 The sustainability issue Sustainability is about whether the levels of well-being can be sustained over time. It depends on whether stocks of capital that matter for our lives (natural, physical, human, social) are passed on to future generations. (Stiglitz-Sen-Fitoussi Commission report) 1- Environment seen from an economist point of view: maintaining good conditions for economy and possibly its growth. Need to maintain the integrity of ecosystems through the efficient management of natural resources: handling limitation in resources and even scarcity of resources Decoupling environmental pressures from economic growth: resource efficiency policy (relative decoupling) Towards absolute decoupling of economic activity and resources use: avoiding natural capital loss in both quantity and quality. 2- Beyond resources management for the economy: a more global vision of sustainability, integrating all three dimensions economic + social + environmental into our paradigm. Green growth, which is a path towards a green economy. From the economic perspective (resources management) To the social perspective: inclusive growth policies handle and reduce inequalities (economic, social and environmental inequalities) As well as the environmental perspective: environmental sustainability policies (next slide)

4 A- Which policy can be directly related to environmental capital (EC)? 2/4 The sustainability issue: focus on environmental sustainability Thus, the need to maintain the integrity of ecosystems goes beyond the pure economic aspect of efficient natural resources management. Ecosystems provide services that are not taken into account in the economy. These are positive externalities we need to preserve in order to guarantee to future generations the same potential of well-being, be it only economic well-being. Three examples of these services: Carbon sink climate change mitigation and adaptation policies Water filtration, soil regeneration reasoned farming, extensive farming, promotion of the bio food industry, landwater protection against pollution Biodiversity natural area protection policy ; urban sprawl management

5 A- Which policy can be directly related to environmental capital (EC)? 3/4 What are the main threats to environment sustainability? Carbon sink: deforestation, ocean acidification Soil: erosion, pollution of agricultural land Water: pollution accessible freshwater is worsening Food availability: urban sprawl, soil sealing (artificialisation of land) against agricultural land (and forestry) Biodiversity: species extinction reduction of the diversity, increasing risks (health risks, or lower adaptation capacity to a changing environment ) The Rockstrom planetary boundaries 5 threats of which 2 are very high Level 1 = nitrogen cycle and biodiversity loss Level 2 = climate change, to a lesser extent Level 3 = phosphorus cycle and ocean acidification, to a lower degree

6 A- Which policy can be directly related to environmental capital (EC)? 4/4 Frequent global policy responses: sustainable development strategies A specific global policy response: the French Grenelle of environment More than 260 commitments, consensually co-decided by representatives of all stakeholders in the civil society central government, local government, unions, businesses, environmental NGOs, non environmental NGOs, researchers and statisticians A quite complete coverage of most issues and policies: Housing, urban policy, transportation, energy, biodiversity, water, risks management, health, waste management, climate change, research in all these areas, governance for all these domains, exemplary government Commitments as far as possible associated with indicators and targets, Yearly public assessment of progress made and actions taken

7 Questions & issues raised (in the session guide): the importance of environmental capital (EC) and its measurement A- Which policy can be directly related to environmental capital (EC)? Need to maintain the integrity of ecosystems through the efficient management of natural resources Decouple environmental pressures from economic growth What are the main threats to environment sustainability? B- Which measure for these policies? Improve information for decision making How better measures of sustainability could inform better policy decisions? What indicators are most useful in identifying the environmental sustainability of a given development trajectory?

8 B- Which measures for these policies? 1/1 Improve information for decision making Example of the French initiative taken by the PR to foster timber production: increase the use of national forestry resource. But is it sustainable? How far can we go in this direction? What is the stock of trees, and in particular of exploitable forests? Well, it relies a lot on definitions and measurement techniques. A change in this respect on the French forestry inventory reduced by 20% the known level of stock How better measures of sustainability could inform better policy decisions? Presently, we know more flows than changes in stocks and stocks levels themselves. When it comes to aggregated information, we have more often quantitative information, but qualitative information is still missing. Environmental information is less timely that economic or social information. So this information is handicapped when racing for integration in assessments for policy making improve timeliness. What indicators are most useful in identifying the environmental sustainability of a given development trajectory? Stocks, or cumulated changes in stocks as a proxy (if we measure them well) Ratios of human pressure flow over the relevant natural stock (non renewable assets) or the regeneration flow of this natural resource (renewable asset) Thresholds, limits? Yes, but how can we measure them? A prerequisite to such measurement is a scientific assessment, hence a cooperation between scientific and statistical communities is needed.

9 Questions & issues raised (in the session guide): the importance of environmental capital (EC) and its measurement A- Which policy can be directly related to environmental capital (EC)? Need to maintain the integrity of ecosystems through the efficient management of natural resources Decouple environmental pressures from economic growth What are the main threats to environment sustainability? B- Which measure for these policies? Improve information for decision making How better measures of sustainability could inform better policy decisions? What indicators are most useful in identifying the environmental sustainability of a given development trajectory? C- How to measure and improve the measure? Which groups in the population are most exposed to environmental degradation? How can we capture the dangers of a loss of environmental capital to economic growth? How should environmental capital be measured? Do we need a monetary valuation? Address global environmental interdependence

10 C- How to measure and improve the measure? 1/5 Which groups in the population are most exposed to unfavourable environmental conditions? This is very challenging. It is about crossing information on the population and information on their environment. identifying population at risk, or exposed to unfavourable situations. Develop surveys on individual perception of their environment Identify population / households potentially exposed to hazardous events (e.g. floods), or presently exposed to unfavourable conditions (noise, air/water pollution, high radiofrequency emissions ) requires geo-referenced information. How can we capture the dangers of a loss of environmental capital to economic growth? Prerequisite: linking environmental information to economic information the role of environmental economic accounting How should environmental capital be measured? Do we need a monetary valuation? Measure both in physical and monetary terms to allow for comparisons, ratios Physical measure is well adapted to planetary boundaries that are by essence physical assets. Monetary measure is useful to link environment data with economic data. But in doing so, we should not use a price in the usual economic sense of this terminology because prices have a poor meaning here the basic economic assumptions are not met: no optimum in non perfect markets, if any market exist for these resources, not even an ownership of what is often a public good, no contract between nature and economic agents, no such economic agent as nature ) So the valuation of the physical quanta should use an underlying unit value: an implicit price, reflecting the implicit value of the natural asset for mankind (a value of existence, integrating the value of potential benefits for mankind including opportunities created or of risks avoidance ). More fundamentally, the currency unit should be considered here only as a comparison unit to weight different assets in terms of their relevance to the sustainability issue, notwithstanding the fact that by nature, these assets cannot be aggregated (similarly to the dimensions of quality of life). Address global environmental interdependence Developing environmental accounting, based on ecosystems approach is the ultimate goal, and a request expressed in Nagoya. Delimited surface areas contain several interconnected ecosystems which contain interrelated natural assets. They provide ecosystem services to mankind both directly, and indirectly.

11 Environmental economic accounting: towards a coherent framework - SEEA natural assets accounts Environmental Goods and Services Sector NAMEA matrixes Footprints e.g. demand-based indicators The situation in France with regard to SEEA implementation: Blue = well advanced / orange = preliminary work / red = long term target Plain = quite completely available / discontinued = partially covered Environmentally harmful taxes and subsidies Environmental Protection Expenditure accounts

12 Environmental economic accounting: towards a coherent framework - SEEA The design of a full set of environmental economic accounting system requires a mid/long term project management approach: to start with, a self-assessment is necessary. What are the available blocks, what is the available information that will be useful for the incoming blocks to be built. then, we will have to establish a strategy and roadmap in order to drive the resources towards future developments, block by block. and in this stepwise approach, each new module will have to be evaluated in a quality control and management process for possible improvements. Where do we stand today? Monetary environmental accounts: produced annually, labeled as a «satellite account» of the system of national accounts central framework, discussed within a national Commission on environmental economics gathering the main stakeholders of the civil society in this area. Physical and hybrid accounts on material and energy flows: already developed but subject to on-going permanent improvement actions: material flows accounts, different types of energy accounts, Namea and final demand footprints (demand-based indicators on carbon, water ) Natural assets: stocks and flows (land, water, forests ) the primary cornerstones of a future ecosystem accounting Other ongoing works: unpaid costs (depletion and damages costs), environmentallyharmful subsidies

13 C- How to measure and improve the measure? Environmental capital components 4/5 It is commonly acknowledged that environmental capital or natural capital is composed of: Land and soil (surface = land cover or land use, landscape, soil) Land cover or use reveal impacts of land use changes on agriculture (using agronomic criteria ) Soil information on erosion, and very partially on its biologic quality Subsoil assets (mineral resources, fossil fuels) from available flows to reasonably exploitable stocks of assets. This information is not yet in our hands at present, but it exists (research national agency on subsoil resources) Water (freshwater, groundwater) Abstraction of water is available, but the stocks remain unknown, and there is the issue of «ecological» threshold Oceans, atmosphere: essentially global public goods how can we cope with them Forest Available accounts (stocks and flows, both physical and monetary) Halieutic resources Fish catch, but only European information on stocks of halieutic resources Other biological resources (other species, other habitats) Indexes for some animals only Towards a Norwegian nature index type of indicator?...

14 C- How to measure and improve the measure? Future work 5/5 Develop environment economic accounts, respecting the international agenda: SEEA volume 1 implementation European regulation on EEEA: Today ( ): air emission accounts, Material Flow physical Accounts, Environmental taxes Tomorrow ( ): Environmental Protection Expenditure accounts, Goods and Services sectors statistics, Physical Energy Flow Accounts Explore now casting techniques to improve timeliness of some environmental information Consider ways to aggregate the multidimensional environmental sustainability information into indexes summarizing the information: alert signals, ambassador indicators. Promote/Follow in parallel the research work on: Unpaid costs (depletion of resources and damages to environment) in order to adjust macroeconomic aggregates Ecosystems accounting in physical terms Valuation of ecosystem services and of ecosystems, natural capital in a longer term perspective

15 Conclusion A lot of work ahead of us requiring priority setting and a stepwise approach given our limited resources. European requirements (DG Env, DG Eurostat) will be an input to this priority setting International plans (such as the implementation of the SEEA) will also pave the way forward. A very challenging situation: many measurement problems to be solved before we get to (almost final) destination. Requiring (requesting?) not only dialogues but also cooperation between The scientific and statistical communities taking benefit for statistical purposes of existing scientific measurements and information systems The statistical community and users/policy makers optimizing the statistical offer in regard to the policy makers use of the information: policy makers should explain what they want to do with statistics to statisticians and statisticians should explain policy makers what they can or cannot do with current information, as well as what they will be able to do with the new information when it will be available. And a quite promising future for decision makers in the environment policy area in the coming five to ten years. Rio+40 will not be Rio+20 in the area of environmental information availability. Evidence based decision making will be eased in this respect. Thank you for your attention