WAVES Policy Briefing May 2016 Policy Briefing Summary Using natural capital accounts to inform Natural capital marine and coastal ecosystems policy accounting can be used to help assess Marine and coastal ecosystems provide a range of critical the economic viability of marine and coastal ‘ecosystem services’, from biodiversity and culture to carbon management plans, storage and flood protection.1 Yet pollution, overfishing, climate potentially supporting change and habitat destruction2 are rapidly degrading these the development of more resilient ecosystems, putting cities and communities, water quality coastal economies. and livelihoods at risk. Using natural capital accounting (NCA) Putting natural capital to work out the full value provided by marine and coastal accounting into practice is in its early stages, ecosystems and the losses attributable to development but as governments build activities could inform policies for sustainable management. skills and experience, the methodology will develop. The main messages that emerge are: Background • Improved • Effective natural • To start using NCA This briefing was understanding of capital accounting as a tool, the most written by Essam Yassin marine and coastal and consequent policy pragmatic approach Mohammed from the ecosystems values decisions informed would be to tailor a International Institute and functions can by the NCA data can ‘quick-start’ guide for Environment and help in assessing contribute to healthy and gradually improve Development and the economic and resilient marine the methodology Ben Milligan from and environmental and coastal as accounts are University College London feasibility of ecosystems and constructed, starting with input from Mike Beck, lead marine scientist at development projects. build the resilience with a few ecosystem The Nature Conservancy. of the millions of services such as communities coastal protection, that rely on them. fish production and tourism. www.wavespartnership.org Wealth Accounting and the Valuation of Ecosystem Services Marine and coastal ecosystems and the goods and services they Restoring mangrove forests on coastal Bali. provide are being rapidly degraded as a result of pollution, Credit: Lawrence Hislop, overfishing, climate change and habitat destruction. www.grida.no/photolib Conventional approaches to For example, wetlands and measuring wealth and economic mangroves can provide valuable development, such as Gross Domestic flood protection, but 30 to 50 per cent Product (GDP), do not adequately of wetlands have already been lost take the values of these goods and and 19 per cent of mangroves were services or the degradation of these lost between 1980–2005. Coral reefs ecosystems into account. The United provide a vital habitat for many Nations System of National Accounts, marine species yet 75 per cent of the for example, does not fully capture world’s coral reefs are now threatened. the status and benefits of marine and These trends and the consequent coastal ecosystems. loss of a multitude of marine and coastal ecosystem services will Markets generally Markets generally value only a small value only a small continue unless the values of these subset of the many benefits of marine services are accounted for in policy subset of the and coastal ecosystems (that is, fish and management decisions.4 many benefits of harvests), with other benefits marine and coastal (eg flood protection and climate NCA calculates the value of ecosystems, with regulation) poorly understood and ecosystem services, and the UN undocumented. As a result, System of Environmental-Economic other benefits poorly government and other decision Accounting (SEEA) provides a understood and makers often do not have all the standardized framework for accounts. undocumented. information when deciding how to It is being used, experimentally, manage and develop these to value marine and coastal ecosystems. This has contributed to ecosystems in a growing number the over-exploitation of these of countries including Australia,5 resources, reducing the level and Belize,6 Madagascar,7 Namibia,8 quality of goods and services that South Africa,9 The Philippines10 and they provide.3 European Union member countries.11 Using natural capital accounts to inform marine and coastal ecosystems policy 2 In Australia, the Bureau of Statistics is In the Philippines, work is underway currently piloting accounts for the to develop accounts for mangrove Great Barrier Reef and its watershed. ecosystems and regional ecosystem These incorporate physical and accounts for the Laguna Lake monetary measures to capture the and Southern Palawan regions. ecosystem’s conditions and the Despite this considerable progress, associated flows of goods (eg fish) marine and coastal ecosystem and services (eg flood protection). accounting remains at an early In Belize, accounts for marine and stage of development. coastal ecosystems are progressively being incorporated into government statistics and have been used to develop a national Integrated Coastal Zone Management Plan. Using ecosystem accounts to manage a sustainable future for the Great Barrier Reef The Great Barrier Reef is a World Heritage site Although climate change and its direct and and is thought to provide a habitat for over indirect impacts (including tropical cyclones, 1,500 fish species, 133 varieties of sharks and coral predation by crown-of-thorns starfish rays, and more than 30 species of whales and and coral bleaching)12 represent the major dolphins. It is a significant magnet for international long-term threat to the reef, evidence shows tourism, contributing more than AUD 5 billion that more immediate damage is being caused to the Australian economy each year and by pollution from activities on the land, which generating about 68,000 jobs. However, the is creating run-off that is high in nitrogen and health of this global treasure is declining and sedimentation. reef managers have been searching for ways Calculating the costs to reef health associated to establish data monitoring systems to with declining habitats and biodiversity would enhance management effectiveness. help managers make decisions about the Australian statisticians are piloting ecosystem acceptability of human activities. It would accounts for the reef area. These accounts can also provide guidance to industries and local provide a snapshot of the economic value of communities when considering the economic some reef-based industries but can also estimate viability of a range of activities. some of the costs associated with human impacts. Data related to biodiversity, land cover, water pollution, coral health, sea grass and other areas is collected in a systematic and comparable manner, highlighting some of the connections between the drivers of degradation, reef health and the benefits derived from the reef. Adapted from Australia’s pilot ecosystem accounts benefit management of Great Barrier Reef, December 2014, www.wavespartnership.org Using natural capital accounts to inform marine and coastal ecosystems policy 3 How accounting can support marine and coastal policymaking Identify sustainable approaches to economic development NCA can support marine and Natural assets provide the goods coastal policymakers to identify and services that are essential for environmentally and socially human wellbeing and development, sustainable approaches to and represent the foundation on development. Coastal policy which other types of assets are built. and coastal zone management Historically, marine and coastal aims to balance three broad policymaking has not adequately categories of valuable assets: taken the value of these assets • Assets arising from economic into account. Conventional policy activities, including transport, frameworks for marine and coastal energy and communication development have tended to prioritize infrastructure, buildings, the conversion of marine and coastal equipment and machinery ecosystems into other forms of • Assets that contribute to societal wealth such as hotels for tourists wellbeing including education or aquaculture farms in place of and skills, health, and institutions mangrove forests. As a result, these and communities ecosystems have been damaged. • Natural assets or ‘natural capital’, Figure 1 illustrates how this approach is unsustainable because it results in including individual living and non-living components of the the net loss of the foundational natural environment, (eg air, water, stone asset base of marine and coastal and soil) and the way these economies and societies. different components interact as ecosystems. Figure 1. Unsustainable Assets arising from economic activities (undesired) development of oceans and coasts Assets contributing to societal wellbeing Natural assets Conversion Damage from & depletion human activity Using natural capital accounts to inform marine and coastal ecosystems policy 4 Figure 2. Sustainable Assets arising from economic activities (desired) development of oceans and coasts Assets contributing to societal wellbeing Natural assets Investment in Conversion Measurement of status and benefits conservation, or substitution using natural capital accounting restoration & without net loss enhancement In contrast, sustainable development Figure 2 shows how natural capital requires policies that find ways to accounting supports the sustainable preserve natural assets, converting development of oceans and coasts or substituting natural assets without by providing policymakers with net loss, and investing in efforts to information concerning the status conserve, restore and enhance the and benefits of relevant natural flows of goods and services that assets, and how these are being natural assets provide. affected by human activity. Specific policy and management applications Natural capital accounting also supports marine and coastal policymakers to maximize the benefits of specific policies and interventions. The approach can be useful in several ways: Assessing the economic viability of coastal development plans Traditional coastal development This means that the calculations projects often (if not always) ignore that underpin coastal development or underestimate the role played by decisions are often incomplete.13 coastal ecosystems. In other words, Consequently, valuable natural policymakers assessing development assets are being lost. projects fail to recognize the NCA offers an opportunity to opportunities lost when ecosystems reverse this trend by factoring are degraded. in the economic gains and losses of undervalued coastal ecosystems, mainstreaming them into national economic accounts. Calculating the full impact of a shrimp farm in Sri Lanka A conventional cost benefit analysis for a 42 hectare shrimp aquaculture development in the Rekawa Lagoon system, Sri Lanka, revealed that the benefits of the development were higher than the costs by a ratio of 1.5:1. However, when the wider environmental impacts were evaluated, the benefits were outstripped by the costs by a ratio of between 1:6 and 1:11.14 Using natural capital accounts to inform marine and coastal ecosystems policy 5 Informing marine and coastal Building resilience in coastal regions management plans Healthy or restored marine and One of the most critical questions that coastal ecosystems can provide a policymakers grapple with is what cost-effective, sustainable way of kind of marine and coastal resource helping reduce people’s vulnerability management delivers maximum to economic and economic, ecological and societal net environmental shocks. The benefits. A number of policy options negative effects of climate are available to protect marine change, including sea level ecosystems, such as creating marine rise, flooding and more protected areas or controlling fishing frequent coastal storms, will activities (eg by restricting boat size or continue to affect millions limiting the type or number of fish of people who live in caught). These options can be used in coastal regions and depend combination (eg restricting fish net on marine resources to size, and banning fishing for a specific survive. Simply restoring ecosystems Parrotfish, coral reef, species during a certain period) to such as mangroves, wetlands or coral Mu Ko Lanta National Park, achieve the desired effect. reefs, or complementing them with Thailand. Thailand’s reefs shoreline hardening and engineered support 4,000 species Ideally, policymakers would weigh of fish. defences such as dykes can provide the cost and benefits of each policy Credit: Peter Prokosch, valuable protection. A study15 that www.grida.no/photolib option, and so gain a better compared damage caused by understanding of the multiple typhoons before and after mangrove ecological, social and economic forest restoration programmes in benefits that may arise. Improving northern Vietnam found that damage understanding of the economic to dykes was reduced by up to values of marine and coastal US$295,000 per year — savings ecosystems and integrating that represent more than the costs for (or mainstreaming) these into mangrove planting. There were also national accounts also helps direct substantial overall savings investments towards conserving, (US$15 million) due to avoided restoring and enhancing these risks in the communities at large. resources. Hilsa fish stock restoration in Bangladesh In response to an abrupt decline in the fish catch of Overall, transfers to the DoF have increased from one of the most important fisheries in Bangladesh, Tk 270.79 million from the revenue budget and the government decided to fence off certain areas Tk 51.58 million from the development budget in as sanctuaries and provide compensation to local 1998–99 to Tk 1.6 billion and Tk 170.00 million fisheries for loss in earnings. The Ministry of respectively in 2013–14. Finance created two new financial lines (6605 and This is an example of a government recognising 5390) for hilsa production and conservation in the the importance of a natural resource to the national budget, and has started allocating money national economy and to the livelihoods of millions regularly through these new codes. of people and making significant investment to In 2014–15 the government allocated Tk 33.07 recover and conserve it. million to the Department of Fisheries (DoF) under As the case is made and capacity to use natural 6605 for mobile courts (to enforce fishing capital accounting increases worldwide, NCA data restrictions), awareness raising, capacity building, could be used to build an even stronger bid for and distribution of revenue for the hilsa alternative investment. income generation activities (AIGA) programme. Using natural capital accounts to inform marine and coastal ecosystems policy 6 Opportunities and the way forward There has been a common focus on the technical skills and Governments could institutional arrangements needed to implement natural capital seek to identify accounting (including the monitoring and data requirements) and fill technical among researchers and national governments alike. and institutional capacity gaps before Governments could seek to identify To start using NCA as a tool, the most implementing natural and fill technical and institutional pragmatic approach would be to tailor capital accounting, capacity gaps before implementing a ‘quick-start’ guide and gradually natural capital accounting, or they improve the methodology each time or they could work could work with what they currently accounts are constructed. Starting with what they have. This means mapping out where with a few ecosystem services such as currently have. skills and staff are in place and coastal protection, fish production recognizing where there are gaps and and tourism is also more manageable. then designing a system that works This should be accompanied by with the given capacity. support to national governments for building their institutional and technical capacities. Preparing for the day’s fishing in Zanzibar. Credit: Yannick Beadoin, www.grida.no/photolib Using natural capital accounts to inform marine and coastal ecosystems policy 7 Notes 1. Mohammed, EY (2012) Payments for coastal and marine ecosystem services: prospects and principles. http://pubs.iied.org/pdfs/17132IIED.pdf  illennium Ecosystem Assessment (2005) Ecosystems and Human Well-being: Synthesis. 2. M Island Press, Washington, DC. 3. See Note 1.  orld Bank (2016) Managing Coasts with Natural Solutions: Guidelines for Measuring and Valuing the Coastal 4. W Protection Services of Mangroves and Coral Reefs. MW Beck and G-M Lange, editors. Wealth Accounting and the Valuation of Ecosystem Services Partnership (WAVES), World Bank, Washington, DC. 5. Australian Bureau of Meteorology (BoM) (2013) Guide to environmental accounting in Australia.  ustralian Bureau of Statistics (ABS) (2015) Information Paper 4680.0.55.001, An Experimental Ecosystem Account A for the Great Barrier Reef Region. www.abs.gov.au/ausstats/abs@.nsf/mf/4680.0.55.001  ustralian Bureau of Statistics (ABS) (2015) Catalogue 4655.0, Australian Environmental-Economic Accounts, 2015. A www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4655.0Main+Features12015?OpenDocument 6.  Statistical Institute of Belize (2012) Abstract of Statistics 2012. www.sib.org.bz/publications/abstracts-of-statistics ; Invest scenarios case study. www.naturalcapitalproject.org/pubs/Belize_InVEST_scenarios_case_study.pdf 7. www.wavespartnership.org/sites/waves/files/images/Madagascar-fisheries-FINAL-1.pdf www.wavespartnership.org/sites/waves/files/images/Country%20Report%20Madagascar.pdf 8. http://unstats.un.org/unsd/envaccounting/ceea/archive/Fish/Fisheries_Acc_in_Namibia.PDF 9. http://unstats.un.org/unsd/envaccounting/ceea/archive/Fish/South%20Africa_Fish%20Accounts_2010.pdf 10. http://unstats.un.org/unsd/envaccounting/ceea/archive/Fish/Philippines.PDF  www.wavespartnership.org/sites/waves/files/images/Policy%20Brief_Philippines%20Southern%20Palawan.pdf 11. www.ons.gov.uk/ons/guide-method/user-guidance/natural-capital/index.html www.eea.europa.eu/soer-2015/europe/natural-capital-and-ecosystem-services 12.  De’ath et al. (2012) The 27–year decline of coral cover on the Great Barrier Reef and its causes. www.pnas.org/content/109/44/17995.short 13. IUCN (2007) http://cmsdata.iucn.org/downloads/coastal_ecosystems_newsletter_july2007.pdf 14.  Gunawardena and Rowan (2005) Economic Valuation of a Mangrove Ecosystem Threatened by Shrimp Aquaculture in Sri Lanka. http://link.springer.com/article/10.1007/s00267-003-0286-9 15.  FRC (2011) Mangrove plantation in Viet Nam: measuring impact and cost benefit. www.ifrc.org/Global/Publications/ disasters/reducing_risks/Case-study-Vietnam.pdf Download Policy Briefings at www.wavespartnership.org Wealth Accounting and the Valuation of Ecosystem Services (WAVES) is a global partnership led by the World Bank that aims to promote sustainable development by ensuring that natural resources are mainstreamed in development planning and national economic accounts.