The zero sum game – from biodiversity to emissions

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A game for mugs or a magic pudding that just keeps giving?

By David Salt

Zero net emissions by 2050! It’s the goal proclaimed by many countries around the world*, and it’s aimed at stemming the tide of climate change.

Zero net emissions is the recipe for enabling business as usual (ie, strong economic growth) while supposedly dealing with the externalities resulting from business as usual (ie, civilisation-ending climate change).

And it’s a political winner because governments aren’t targeting specific economic sectors (ie, the fossil fuel industry). Indeed, this far away from 2050, they aren’t being pegged down by too many specifics on how it will be achieved. The generic solution, implicitly and explicitly rolled out everytime, is that technology will save the day.

The magic in the pudding

So where is the magic that drives this ‘zero-net’ proposition? It’s in the ‘net’ bit. This framing means you don’t have to be ‘zero’ in your emissions in any specific activity, like burning coal if that’s what tickles your fancy.

But you do have to be zero in your cumulative effort. If you produce carbon emissions in one area then you need to do something somewhere else that removes that carbon so the cumulative impact (the net effect) is zero.

How do you remove carbon from the atmosphere? The traditional way has been to plant trees or do existing activities in ways that emit less carbon, a good example being using renewable energy instead of fossil fuel energy.

It works as a political solution because it means you don’t have to explicitly say who is going to bear the burden of reducing their emissions. At some point, however, someone, somewhere is going to have to change their behaviour – after all, sustainability bites!

Experience so far with zero sum policy games suggests they are tricky to establish and easy to work around (ie, cheat).

Offset this

What, you weren’t aware of other zero-sum games? They’re actually quite popular and one place where it’s really taking off is in the arena of biodiversity conservation. The name of this specific game is called biodiversity offsetting.

When it comes to any economic activity with impacts on biodiversity there are many rules and regulations to prevent the loss of species and ecosystems.

To begin with, the proposer of a new economic development must demonstrate their proposal isn’t adversely impacting any native species or ecosystems. If it does, the developer is required to state what they will do about it to remove that impact.

Indeed, developers are expected to apply a mitigation hierarchy to their proposal (see the South Australian Government for an example) in which they need to show how they will first:
1. avoid the negative impacts of their development but doing it in a different way. But if there is still impact, they need to then demonstrate how they will
2. minimise the size of the impact of the development; and then
3. restore the area to make up for the impact.

However, if the developer can’t avoid, minimise or restore the impact they create, they can now offset the damage of the development by doing something good for the environment somewhere else. If you clear a stand of native trees over here for a shopping centre, you might offset this impact by planting the same species of tree somewhere nearby.

The aim is to achieve ‘no net loss of biodiversity’ over time. See, it’s a zero-sum policy game.

The trouble is, in many places it’s been seen by developers as a green light for development and has resulted in many perverse outcomes.

A green light for decline?

For starters, many developers don’t even bother with the mitigation hierarchy (because avoiding, minimising and restoring all cost considerable resources and regulators often don’t check to see whether the impact can be mitigated) and jump straight to some form of offset proposal. But proposing offsets for developments are usually quite complex and there’s a lot of research around to show they often don’t actually offset the impacts of the development (in space or time).

In some cases, the development impact is on something that is irreplaceable like the potential loss of threatened species. In these situations it’s impossible to offset the potential loss and the development should be blocked. Instead, the developer is sometimes asked to do something that might be ‘equivalent’ to a direct offset, like contributing money to an education awareness program that may help save the species. Such indirect offsets are not actually offsets at all but they do give cover for economic development to proceed.

The overall outcome is that while there is a goal of no net loss of biodiversity, biodiversity is lost anyway. Around the world we are seeing a mass extinction event taking place and biodiversity offsetting does not seem to be making any difference.

The devil is in the detail

The lesson here is that great care needs to be applied to the establishment of any zero sum policy game. It needs to be transparent, accountable and enforceable. And it cannot be applied merely as cover for business as usual to proceed without any checks and balances.

Economic activity that generates positive carbon emissions (ie, above zero) needs to be accountable for matching these emissions with activities elsewhere that generate negative carbon emissions (ie, activities that remove carbon).

Governments oversee this process and need to establish robust and transparent frameworks that keep track of these activities and their emissions, and report this tracking in a clear and simple way so everyone has faith in the system. To sustain this faith, the monitoring and measurement will need to be independent of government; something along the lines of what Zali Stegall recommended in her climate bill.

A lot of thought will need to go into how you trade emissions across time (eg, savings emissions today to pay for extra emissions in the future) and space (eg, buying emissions savings from another country for an emission heavy activity in our own backyard).

While the law surrounding such net zero policies will be enacted at the national level, it’s likely this game will involve the trading of positive and negative emissions between countries so the net zero frameworks will need to operate with agreed international norms.

The System of Environmental-Economic Accounts is one existing framework that might help with all of these issues.

Maybe net zero emissions is a policy pathway that might engage opposing political forces, something that efforts to date have failed to do. However, to transform the call for zero net emissions by 2050 into workable and effective policy, much effort will need to go into creating intuitions that will hold governments to account and prevent them from fudging the figures.

Image: the cover of the UN Emissions Gap Report for 2019

*According to the UN Emissions Gap Report for 2019, most emissions — 78%— come from the top 20 economies, the G20. Of these, only five had pledged to long-term zero net targets (and this did not include the three big emitters: China, the US and India). Around 70 countries worldwide have made pledges of being carbon neutral by 2050.

By all accounts, can we manage to save biodiversity?

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Environmental accounting could be the key to saving nature

By Peter Burnett

It’s 2020, and the world is again discussing targets to save biodiversity. The approach hasn’t been very successful in the past and many are throwing up their hands in despair in the face of a rapidly unfolding biodiversity catastrophe. Could environmental accounting be the missing link in our thinking?

In an earlier blog I described the short history of environmental accounting and highlighted its potential. This was more than just extending the traditional (economic) national accounts to cover the environment, which was the original idea (especially to make GDP a much more accurate measure of economic performance by subtracting losses of ‘natural capital’). Governments could also use environmental accounting to manage the environment.

In another blog I wrote about key meetings to be held this year in Kunming, China, under the Convention on Biological Diversity (CoP 15, CBD, and preparatory meetings). The aim is to develop a new 10-year international plan to replace the Aichi targets that have operated for the last decade.

Given the significance of 2020 internationally (and our extreme bushfires in Australia putting nature at the top of the agenda domestically) it seemed to me like a good time to come back to what role environmental accounting might play in saving biodiversity.

Aim for net positive outcomes

Conservation scientists have been questioning the value of biodiversity targets and the way they are applied for some time. Most recently, this call was made in Nature Ecology & Evolution by Joseph Bull and colleagues. They argue that policy must shift away from conservation targets that are based just on avoiding biodiversity losses, towards considering net outcomes for biodiversity.

This would involve tracking the cumulative net impact of both development and conservation, while aiming for an overarching objective such as ‘a positive outcome for nature’. It would be bringing things like restoration and offsets into the equation.

In effect, the argument is to take the mitigation hierarchy, the ‘avoid, mitigate, offset’ approach most often associated with individual development approvals, and apply it at a global level. Yet Bull et al go even further, arguing that this language of net outcomes raises an even wider aspiration for tackling biodiversity loss, climate change and human development together.

This latter argument is similar to the one made by Malgorzata Blicharska and colleagues, that biodiversity supports sustainable development and the 2030 Sustainable Development Goals (SDGs) in many ways (‘Biodiversity’s contributions to sustainable development‘).

Also in a similar vein, Charlie Gardner and colleagues have argued that attention to biodiversity loss has been eclipsed by the climate crisis, and that conservationists must capitalise on the opportunities presented by the climate crisis to establish the idea that keeping ecosystems intact is one of the most cost-effective defences against climate impacts (‘conservation must capitalise on climates moment‘).

These recent articles suggest to me that there’s a growing realisation that the coming decade is not just the last chance to halt climate change, but also the last chance to address the ‘sixth great extinction’, before they get away from us completely. Hitching the two together might increase the chances of at least some success.

Biodiversity and sustainability: the accounting connection

If we were to turn ‘avoid, mitigate, offset’ into an overarching approach, one of the challenges identified by Bull et al was that the resulting need to measure net outcomes would require a plurality of metrics for measuring losses and gains to biodiversity.

With several colleagues, I responded by pointing out that environmental accounting, standardised globally in the System of Environmental-Economic Accounts (SEEA), already does this well (our Nature Ecology & Evolution paper is titled ‘Measuring net-positive outcomes for nature using accounting’). All that is needed is for governments to make it happen.

A key but often misunderstood point is that although environmental accounts are often, like conventional accounts, kept in monetary terms, it is just as valid to keep them in physical terms such as population numbers and measures of condition. Environmental accounts could, for example, measure a variety of biodiversity-relevant attributes such as species occurrence, distribution, abundance and age-sex structure of populations.

In contrast to financial accounting, there is no need to consolidate these different accounts into a single ‘bottom line’ unless this would be both feasible and meaningful.

In other words, if you are counting echidnas and platypii, there is no need to aggregate these into a single ‘monotreme account’ unless this is a useful thing to do. While a single bottom line is always ideal (which prompts economists to push hard for it) it is by no means the only solution.

In an ecological context, it could be just as useful to take all the accounts relevant to a particular ecosystem, which might include our echidna and platypus accounts, and ask whether the bottom line of each and every account exceeds a predetermined measure of ecosystem health. If they do, then the collective ‘bottom line’ for the ecosystem is ‘in the black’. If only some do, the ones below the measure point to the management intervention needed.

Why accounts?

Why bother using accounts? Why not just do a census or a stocktake, or ongoing monitoring? The answer lies in the problem being solved. Environmental accounts are not kept by scientists for research, but by a new and specialised form of accountant for management purposes.

Importantly for governance, environmental accounts that comply with the SEEA are consistent and auditable. This facilitates transparency and, where appropriate, comparisons.

Further, because accounts don’t just contain entries but record transactions, they reveal something about when and why something occurred, and who it was connected with. For example, a reduction in a species population due to approved land clearing would reveal not only the quantum but the date and party undertaking the clearing.

In a comprehensive set of accounts this action would be reveal not only the loss of natural capital, but the corresponding loss of ecosystem services.

All of these attributes contribute to good decision-making. Environmental accounting may not have been invented as a management tool, but serendipity has delivered this as a bonus.

The capacity of environmental accounts to be used in environmental management has been demonstrated in some case studies but not in a general and ongoing manner. Ideally it would be nice to scale up slowly but we don’t have the luxury of time.

If we are to manage, by all accounts, to save biodiversity, it might be because environmental accounting was a key part of the decisions taken at Kunming.

Image by Terri Sharp from Pixabay

Will next year be a big one for biodiversity?

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The Post-2020 Biodiversity Framework: From Aichi 2010 to Kunming 2020

By Peter Burnett

Next year might be a big year for biodiversity. At least, I would like to think so. In February, almost every nation on the planet is meeting in Kunming, China, to discuss how well they are doing at conserving biodiversity. Which is just as well as earlier this year the UN issued its latest report suggesting we are witnessing an biodiversity catastrophe with a million species threatened with extinction.

The upcoming event in Kunming is a meeting of the nations (parties) which signed up to the Convention on Biological Diversity (CBD). That’s 196 nations, almost everyone except the USA*. The February meeting is in preparation for the 15th Conference of the Parties (or COP 15) to be held in October.

‘COP’ is an arcane diplomatic acronym that is, unfortunately, entering the mainstream as the annual climate COPs held under the Climate Change Convention become increasingly desperate for real progress as time runs out.

COP this for biodiversity

But I digress. For the CBD, the main task of COP 15 is to adopt a new ten-year strategic plan for biodiversity. The current ten year plan, known as the Strategic Plan for Biodiversity 2011-2020 and which includes a set of ‘Aichi Biodiversity Targets’, is about to expire. With 2020 looming it’s time for a new plan and targets. These have the working title of the ‘Post-2020 Biodiversity Framework’.

But let’s not be too hasty to move on. What were the Aichi Targets and will Australia meet them?

I’ve had a quick look at key targets and Australia’s progress. These are discussed below. Progress can be hard to gauge though. The usual scarcity of information is made even worse by the fact that Australia’s Sixth CBD National Report is nearly 12 months overdue, which in itself suggests this task is a low priority for the Australian Government.

Each of the 20 Aichi Targets falls under one of five strategic goals:

Goal A: Mainstreaming

Strategic goal A deals with the ‘mainstreaming’ of biodiversity. This term may sound contemporary, but it’s pretty much a rehash of the concept of ‘policy integration’ from the 1987 Brundtland report, which gave birth to the concept of sustainable development and to the 1992 Earth Summit in Rio, the meeting at which the CBD was born also.

Targets for mainstreaming include the insertion of biodiversity into national plans of various kinds. This includes Target 2, which talks of extending national accounting and reporting systems to address biodiversity.

Superficially, Australia’s environment ministers look to be on the ball in regards to this target. They have agreed on a national plan in 2018 to develop environmental-economic accounts. In reality, this is a small drop in the bucket and it comes more than 25 years after Australian government first agreed on the potential of ‘proper resource accounting’, and nearly 50 years after Barry Commoner proposed as the first law of ecology, that ‘everything is connected to everything else’.**

Accounting aside, we haven’t even attempted national baseline monitoring of biodiversity, decades after governments first committed to it, so even if we designed a good set of accounts we’d be short of data with which to populate them.

Goal B: Reducing pressures and promoting sustainable use

Goal B deals with reducing direct pressures and promoting sustainable use. Key targets under this goal include halving the rate of habitat loss; making farming and fishing sustainable; and minimising the pressures on coral reefs, to maintain their integrity and functioning.

In Australia we haven’t even reduced habitat loss, let alone halved it. And while fishing is one area where we score reasonably well, we haven’t done nearly so well with farming and our attempts to reduce pressures on the Great Barrier Reef have made no discernible impact. On the contrary, the authority responsible for the Reef has downgraded its outlook from ‘poor’ to ‘very poor’.

Goal C: Safeguarding biodiversity

This goal deals with safeguarding ecosystems, species and genetic diversity; traditionally, these three components are used to measure biodiversity. The targets contained in this goal include having 17% of terrestrial areas and 10% of marine areas in ecologically representative and well-connected protected areas (ie, 17% of Australia’s land within a protected area and 10% of our sea).

This goal also includes the highly ambitious aim of improving the conservation status of our threatened species (as well as halting their extinction).

When Australia gets around to submitting its Sixth National Report, we’ll no doubt blow our trumpet about meeting the percentage targets for protected areas, but we won’t have gone close to the ensuring that they are representative and well-connected, at least on land.

And we can’t even measure a turnaround in the conservation status of threatened species, except at the very coarse level of counting new and changed listings. Even at this coarse level, things have declined rather than improved.

Goal D: Enhancing benefits to people

The aim of Goal D is to enhance the benefits to people from biodiversity and ecosystem services, including by restoring and safeguarding ecosystems that provide essential services such as water.

A recent positive example from Australia is the Victorian Government’s decision to phase out logging of native forests. This decision was influenced in part by a 2017 study led by ANU academic Heather Keith and based on a specially-prepared set of environmental-economic accounts.

The study revealed that native forests would provide greater benefits through the ecosystem services of carbon sequestration, water yield, habitat provisioning and recreational amenity if harvesting for timber production ceased and forests were allowed to grow to older ages.

Goal E: Better planning, knowledge

Finally, Goal E is concerned with enhancing implementation through planning, knowledge management and capacity-building. The Aichi targets under this goal include showing respect for traditional knowledge and encouraging the full participation of Indigenous communities in biodiversity conservation and use.

I’m not aware of much progress in Australia in this area, but the emphasis given to Indigenous knowledge and participation in a recent discussion paper on the review of Australia’s national environmental law [link: https://epbcactreview.environment.gov.au ]did make me wonder whether the Government might have some appetite for improvement in this area.

A colleague in Indigenous studies commented that with the Government having appointed Australia’s first Indigenous minister for Indigenous Affairs, but not keen on implementing proposals to recognise Indigenous Australians in the nation’s Constitution (see the Uluru ‘Statement from the Heart’, they might be keen to deliver some reforms here to avoid leaving their minister with a thin record of achievement. I think he might be right.

Beyond Aichi: what can we expect from the ‘Yunnan Targets’?

So for Australia at least, the limited evidence suggests a weak record of achievement under the Aichi targets.

Chances are that many other countries will find themselves in a similar position. Yet experience also suggests that countries will also be too embarrassed to simply sideline biodiversity targets as too hard.

The path of least resistance would be to say ‘we’ll do better next time’ and adopt a set of ‘Yunnan Targets’*** for 2030. There is likely to also be some discussion on aligning the Yunnan Targets with the 2030 Sustainable Development Goals. In diplomacy, if you can’t win the war, the next best option is to simply declare victory and charge on …

* The USA isn’t a member because President George Bush (senior) wouldn’t sign and his successor, Bill Clinton, couldn’t get ratification through the US Senate.

** Barry Commoner, The Closing Circle (Random House, 1971).

*** Targets are normally named after the region in which they were drawn up. The Aichi Targets were drawn up in the Japanese city of Nagoya, which is in the province of Aichi. The Yunnan Targets will be drawn up in the city of Kunming, which lies in the Chinese province of Yunnan.

An ‘environmental accounting’ primer

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What is it? (and why should we use it?)

By Peter Burnett

‘Environmental accounting’ (or ‘environmental-economic accounting’ to use its full name) is, on first blush, a dry-as-dust topic. Yet the ideas behind it and the insights it unlocks are fundamental to good environmental governance and a meaningful shift towards sustainability. That’s in part why Australia’s governments adopted a national strategy, or at least a common national approach, to environmental accounting in 2018.

Recently I attended a workshop in Brisbane on environmental accounting* hosted by state and federal governments. The workshop was lively and well-attended, with many more participants asking to be part of the discussions than had been originally invited. Clearly the value of environmental accounting is beginning to be acknowledged across multiple sectors.

But the development of environmental accounting didn’t happen overnight. Its gestation took over half a century with some of its central concepts going back centuries. What’s more, a lot more needs to happen before its full potential is realised.

Origins

Environmental accounting can be traced back to the 1970s when several countries, including Norway and France, developed what was then described as ‘natural resource accounting’, or in the case of France, ‘patrimonial accounting’, as part of their response to the emergent major environmental concerns of that era. There were also fears associated with resource scarcity arising from the oil crisis of 1973. These accounts were kept in physical terms.

At about the same time, economists William Nordhaus and James Tobin (later to be Nobel laureates) wrote a seminal paper highlighting the shortcomings of GDP as an economic indicator. They argued for a ‘Measure of Economic Welfare’ (MEW) that subtracted consumption of capital, including ‘environmental capital’, from domestic product. This is because treating consumed capital as income creates an inflated sense of well-being in the short term but is unsustainable over the longer term. Implementing a MEW would require the inclusion in national accounts of figures for the consumption of environmental or ‘natural’ capital, expressed in monetary terms.

During the 1980s the United Nations Environment Program (UNEP) and the World Bank ran workshops aimed at linking environmental accounting to the System of National Accounts (SNA), an international standard maintained by the UN. This work may have influenced another well-known UN project, the Brundtland Report of 1987, famous for proposing a global goal of ‘sustainable development’.

Brundtland placed great emphasis on policy integration as essential to achieving sustainable development. Although Brundtland did not go on to recommend environmental accounting per se, it did couch some of its arguments in economic and accounting terms, referring for example to ‘overdrawn environmental resource accounts’ and the need to maintain the stock of ‘ecological capital’. Given the implicit connections made in Brundtland, it’s probably no coincidence that Agenda 21, the action plan adopted by the subsequent Rio Earth Summit of 1992, linked accounting and sustainability directly by including a commitment to develop integrated environmental and economic accounting as ‘a first step towards the integration of sustainability into economic management’.

With Agenda 21 providing a mandate, the UN soon published a handbook on integrated environmental and economic accounting in 1993. However, it took a further 20 years to develop the handbook into a full international accounting standard and even then the scope of the standard was confined to traditional natural resources, with ecosystem accounting relegated to a supporting ‘experimental’ framework. The UN is scheduled to consider adopting a revised version of this experimental framework as a full international accounting standard in 2021. I hope this indeed occurs, but it reflects how long these processes take. The gestation period for this work is nearly 30 years!

Delay aside, a key innovation of the resulting System of Environmental-Economic Accounts (SEEA) is the concept of ‘combined presentation’, the ability to produce accounts expressed in either physical or monetary terms, or both. This allows accounts to support two streams of work: 1. the integration of environmental consumption into national accounting and
2. the use of physical accounts to inform environmental management.

Why bother?

As national accounting informs economic decision-making, the rationale for environmental accounting in monetary terms is clear. But why bother with physical accounting, other than as an intermediate step to monetary accounts? The answer lies in two developments, one in the late 1960s and the other going back to medieval times.

Concerns about the extent of environmental decline had been growing steadily through the 1960s. In 1969** two resource economists, Robert Ayers and Allen Kneese made a profound observation concerning environmental ‘externalities’ (externalities are the costs or benefits affecting persons not party to an economic transaction). Their observation was that if environmental externalities could no longer be regarded as exceptions, but were more the norm, then good economic decision-making required a ‘materials balance’; that is, a full recording and accounting for environmental impacts, in physical terms. Implicitly, Ayers and Kneese had just made the case for environmental accounts.

The other development foundational to the case for environmental accounting is the concept of the ‘double entry’, which goes back at least to the medieval ‘Venetian method’ of book-keeping. Double entry recognises that almost all transactions involve both a gain and a loss. In purchasing equipment for example, a business gains the equipment but loses the money used to pay for it, so it records both the gain and the loss in separate ledgers, one for equipment and one for cash. Moreover, accounting links the two aspects of the transaction, showing that this purchase in the equipment ledger was paid for with this payment, and correspondingly that this payment was attributable to that equipment purchase.

Stocks and flows

Environmental accounting builds on the parallels between our interactions with each other in business and our interactions with the environment. Just as business accounting tracks the stocks of business assets and liabilities, and the flows of business receipts and expenditure, recording the net change in capital at year’s end, so environmental accounting tracks the stocks of environmental assets (and liabilities, eg pollutants) and the flows of ecosystem services (and expenditure on ecosystem maintenance), recording the net change in natural capital each year.

Moreover, environmental accounts record the transaction from both society’s end and the environment’s end, making it ‘quadruple entry’. As a result, environmental accounts can show for example that this flow of ecosystem services to society came from that environmental asset, depleting it by this much, but that the depletion was offset by that degree of natural replenishment and this much environmental maintenance. This capacity to link transactions so specifically to their causes and impacts is what makes accounting a powerful tool for environmental analysis and decision-making.

What next?

Environmental accounting is starting to build significant momentum in Australia. As this work is still in its infancy, despite its long gestation, the ongoing work under way nationally and internationally to develop accounting standards and protocols remains important. More important however is the need to pay extra attention to, pardon the pun, the other side of the ledger, the application of accounts for better decision-making. I will cover this in a future article.

* The Brisbane workshop on environmental accounting brought together a number of researchers to present their work on the development or application of accounts. For example, Victoria presented their work on using accounts to identify the ecosystem services provided by forests.

**1969 is big in the news at the moment with the 50th anniversary of the Moon landing. It seems strange to me that so much attention is paid to this triumph of technology; while so little attention has been given to 1969 as the dawn of modern environmental policy. Beyond the analytical insights of Robert Ayers and Allen Kneese, 1969 also marked the passage of the world’s first comprehensive environmental law the US National Environmental Policy Act (NEPA), thanks significantly to the efforts of Professor Lynton Caldwell.

Image by Free-Photos from Pixabay