Tag: environmental accounts

From moonlight jewels to common browns: what do butterfly accounts say about biodiversity conservation?

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By Suzi Bond and Michael Vardon*

Biodiversity is important and butterflies are beautiful. But Australia’s biodiversity is in steep decline. Maybe environmental accounts can help here, and butterflies are a great example demonstrating how.

We have around 450 butterfly species in Australia, almost all of them native. Seven butterflies are listed as under the Environment Protection and Biodiversity Conservation Act (EPBC Act), although 19 more are thought to be eligible for listing. While some species are commonly observed and adaptable – such as the common brown – others, such as the moonlight jewel, are not. Accounting for these differences begins with understanding.

Moonlight jewels are ‘specialist’ butterflies. Specialists are more likely to be found intermittently, in few places, have particular habitat requirements, a limited number of food plants and are sometimes reliant on attendant ants. Specialists are not necessarily endangered but they are less common, more vulnerable to extinction and more likely to be an indicator of biodiversity conservation success and the state of the environment than ‘generalists’ like the common brown.

How do we know this? Through painstaking research, expert knowledge and long-term monitoring by trained volunteers, all summarised in biodiversity accounts for butterflies for the Australian Capital Territory. For other types of animals, for example birds and mammals, we have much research and knowledge but very little monitoring and no accounts, just a five-yearly State of the Environment Report with a story of woe.

To have any chance of successfully implementing the “Nature Positive Plan” announced by the Commonwealth Environment Minister Tanya Plibersek last December, then we are going to need more monitoring and reporting. This will be especially important for the planned “Nature Repair Markets”.

Biodiversity accounting

Biodiversity accounting provides a framework for integrating environmental and economic information. This accounting is part of the United Nation’s System of Environmental Economic Accounting, which has in theory been adopted by Australia’s governments, but has so far been under-resourced and provided underwhelming results.

Few countries have produced biodiversity accounts, partly a function of the newness of the accounts (the UN only adopted the SEEA Ecosystem Accounting in 2021) but also because of a lack of data. Without data you cannot make accounts. Because of this, the biodiversity accounts to date have used what data are available, which is on endangered species, rather than what is needed. Which means tallying the number of endangered species and putting this into a table. This does not tell you anything that you don’t already know. What we need to know is how, why, when and where things are changing. This requires monitoring and expert knowledge.

You would think that endangered species would be regularly monitored, and conservation actions recorded to figure out which conservation measures were giving the biggest conservation bang for the very limited conservation bucks. Sadly, this has not happened, as found in the Samuel Review.

Professor Graeme Samuel saw the potential for accounting, recommending accounts be produced and now the government has committed to their preparation in the Nature Positive Plan to “help us value nature”. The plan also commits to the “Better Use of Environment Data”. But it doesn’t commit to gathering more data: the focus is on artificial intelligence and remote sensing. Unfortunately, we cannot spot and identify butterflies from outer space, so we will have to keep the boots on the ground.

Butterfly values

Common browns, moonlight jewels, scarlet jezebels and golden ant-blues all conjure notions of value. They are of course all beautiful. Beyond this, they each occupy a different ecological niche and have different traits that make them more or less vulnerable to extinction.

As for value, we have already introduced the common brown and moonlight jewel.

The scarlet jezebel occasionally flies to the Australia Capital Territory and when it does it can be found in different places, but it does not breed. A heart breaker, but occurrence of this species probably tells us little about the state of the environment. This contrasts starkly with the golden ant-blue which is resident and breeds in the region, found only in a few places and is suspected to eat ant larvae. Like the moonlight jewel, a real treasure.

These butterflies and other breeding specialists can tell you a lot about the health of the ecosystems. This is because butterflies are excellent indicators of ecological condition as they respond quickly to change, are short lived, and many are specialists. They are also relatively easy to identify.

What about the economics?

If we follow Economics 101, the scarcer the commodity, the more valuable they become. Bad news for common browns. Worse, it would be possible for a specialist species like the moonlight jewel to increase in economic value due to declining abundance and listing as endangered. Not quite the outcome we want from biodiversity markets.

And how would we value the Bogong moth? This species is of great cultural significant to First Nations peoples. Once vast numbers flew by Canberra and the lights of Parliament House had to be switched off so as not to interfere with their migration to the Snowy Mountains. Their numbers crashed, but are beginning to recover, although no-one is sure why. They are culturally important and are internationally listed as endangered by the IUCN Red List, but not under Australian law. 

Accounting and accountability

For the Nature Positive Plan to work and for us to build a capacity to keep our precious species, we need to have information and hold governments accountable. Ecosystem accounting provides the numbers, but for accounting to be possible it needs biodiversity monitoring. At present we do not have this for most species, and the endangered species lists highlight our failure to protect biodiversity and are a poor reflection of value.

If we are to be ‘nature positive’ then we need accounts to reflect the different values and needs of common browns, moonlight jewels, scarlet jezebels and golden ant-blues and all of the other species that are not on the endangered species list, so that they stay off the list, and the success of any conservation policy or plan can be judged.

Banner image: The narcissus jewel (Hypochrysops narcissus), a thing of beauty currently sitting outside our economic values system. (Image by Suzi Bond.)

*Dr Suzi Bond works at the Australian Bureau of Statistics where she is a specialist in biodiversity accounting, and is also an honorary member of the Australian National Insect Collection at CSIRO, an honorary senior lecturer at the Fenner School of Environment and Society at ANU, and a butterfly moderator for citizen science platforms Canberra Nature Map and Butterflies Australia. Suzi published the first field guide to the butterflies of the ACT in 2016, was a co-author on the first book published on ACT moths in 2022 and leads an ongoing butterfly monitoring project in collaboration with citizen scientists.

*Michael Vardon is the Associate Professor of Environmental Accounting at the Fenner School of Environment and Society (Australian National University). He has assisted more than 30 countries with development and implementation of the System of Environmental-Economic Accounting and is the former Director of the Centre of Environment and Energy Statistics at the Australian Bureau of Statistics. He has been an advisor to the World Bank and United Nations on accounting https://researchers.anu.edu.au/researchers/vardon-mj

The golden ant-blue butterfly (Acrodipsas aurata) is resident and breeds in the Canberra region, found only in a few places and is suspected to eat ant larvae. (Image by Suzi Bond.)

Off the dial – Planet Earth is showing multiple instrument warnings

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But the dials don’t appear to connect to anything

By David Salt

You’re driving along and one of the dials on the dashboard suddenly shoots way over normal. The car, however, seems to be travelling fine so you decide its an instrument error and ignore it.

But what if several dials begin overshooting? Oil pressure is up, heat is going through the roof, warning lights are flashing all over the console. What do you do? You pull over as fast as possible and try to find out what’s wrong because ignoring this multitude of warnings will likely wreck your car and possibly risk your life.

Quick, stop the car!

Well, multiple serious warning lights are flashing at us from all over the globe.

An unprecedented sixth mass coral bleaching event is sweeping up and down the Great Barrier Reef – in a La Nina year!

We’re still trying to dry out after historic floods generated by a series of ‘rain bombs’ up and down Australia’s east coast (with the possibility of more to come).

The US Mid-West is gripped by unprecedented drought (with Lake Powell behind the Hoover Dam, the world’s first super dam, hitting a record low this week).

Death Valley in the US has just recorded its hottest March day on record with a sweltering 40°C (records date back to 1911). Keep in mind winter has just finished for this part of the world.

But possibly the most alarming weather events being experienced at this moment are heat waves striking both Antarctica and the North Pole – alarming because it has climatologists and meteorologists in a spin.

Parts of eastern Antarctica have seen temperatures hover 40 degrees Celsius above normal for three days and counting.

“This event is completely unprecedented and upended our expectations about the Antarctic climate system,” said Jonathan Wille, a researcher studying polar meteorology at Université Grenoble Alpes in France.

“Antarctic climatology has been rewritten,” tweeted Stefano Di Battista, another noted Antarctic researcher. He said that such temperature anomalies would have been considered “impossible” and “unthinkable” before they actually occurred.

Meanwhile, what is being described as a record-breaking ‘bomb cyclone’ that developed over the US East Coast a couple of weeks ago is bringing an exceptional insurgence of warm air to the Arctic. Temperatures around 28 degrees Celsius above normal could cover the North Pole this week, climbing to near the freezing mark. Keep in mind the North Pole is still in its ‘polar night’. It hasn’t seen the sun for nearly six months.

This is bonkers

This is all so far ‘outside of normal’ that the implications of these observations are not yet appreciated by the experts who study these things. Indeed, the solid peer-reviewed science we depend upon to understand what’s been happening will take months and possible years to generate.

However, if the dials on your car were giving you this feedback, even if you didn’t understand exactly what it meant, you’d likely be pulling over immediately for fear of a catastrophic failure.

If the heating we’ve been experiencing so far has been frying our coral reefs, incinerating our forest biomes and washing away our homes and human infrastructure, then these huge anomalies in our Artic and Antarctic weather are specters of coming climate catastrophes.

As a science writer working in the sustainability space, I’ve been keeping an eye on many of the ‘planetary dials’ for years if not decades. I’ve watched the remorseless rise in CO2 levels, methane levels and temperature. I’ve shed tears over the criminal decline in biodiversity, and noted the growing extent, ferocity and frequency of extreme weather (floods and wildfires).

Reading the dials

Keep in mind these ‘dials’ are not privileged or secret information. They’re available to anyone wanting to read them. They can be found in regular reports from international agencies and institutions like the UNEP, IPCC and IPBES (look them up if the acronyms are new to you).

Within nations there are multiple organisations monitoring and reporting on the environment. In Australia we have the BoM, ABS and CSIRO as well as dozens of universities and specialist organisations focusing on particular aspects of the environment (for example, the Great Barrier Reef has GBRMPA and AIMS).

The information is there; it’s all cross checked and peer reviewed. It’s reliable and solid; and it’s all pointing the same way: human activity is distorting the Earth system and it’s beginning to behave in unusual and dangerous ways.

The problem is, the dials don’t seem to connect to our decision making, the information they present is not linked to policy action. Worse, many vested interests (like the fossil fuel sector) actively work to discredit and ignore what the dials are telling us.

Our political representatives have funded (with your taxes) and announced the construction of these myriad dials – “today I announce the launch of this great new environmental monitoring ‘machine/invention/organisation/report/dial/whatever’; so rest assured, our environment is now saved!” But when it comes time to respond to what the dial then begins to tell us, the readings are discounted, denied or deleted. Acknowledging the information, it seems, comes with too high a political price.

What we need is a mechanism that connects the dials to the decision making. In concept, such a mechanism already exists. It’s called environmental accounting and while many have called for its widespread implementation (including Sustainability Bites), it’s yet to be adopted in a meaningful manner.

Let it rip

What we have instead, to continue with our car analogy, is a modern economy cruising along the highway of Planet Earth at an ever increasing speed (indeed, this metaphorical vehicle has been steadily accelerating since the 1950s). The way ahead is becoming uncertain and the road itself is turning very dangerous, full of pot holes and gaping cracks. Many are suggesting we should slow down, we can’t see what’s beyond the next curve, and we’re not sure if the vehicle is safe anymore.

Our political leaders, however, are in no doubt.

“She’ll be right, mate. The car is purring. Indeed, our policies, based on ‘jobs and growth’, guarantee stability and strength. No need for brakes. Indeed, we reckon the solution is actually a little more pedal to the metal. So, let’s see what happens if we let it rip!”

Governments around the world have been ignoring the dials for decades but Australia’s current government are world beaters when it comes to climate denial and inaction. In Australia we’re on the brink of a national election. Maybe it’s time to switch drivers.

Banner image: Why is that dial acting funny? (PublicDomainPictures  from Pixabay)

Could anything be ‘New’ About Capitalism and the Environment?

An opening for ‘environmental debt’

By Peter Burnett

Capitalism is a popular theme in Australian environmental policy at the moment, at least for Liberal governments.

Hardly surprising I suppose. The Liberal Party prides itself on being the natural home of free enterprise.

Addressing a business breakfast last month, Prime Minister Scott Morrison told his audience that ‘We believe climate can be ultimately solved by “can-do capitalism” not “don’t do governments” seeking to control peoples’ lives.

As a three word slogan, ‘can-do capitalism’ would not have rated a further mention in this blog if it were not for the fact that, shortly afterwards, Matt Kean, recently-appointed NSW Treasurer (who also remains, for the time being, Environment Minister) popped up in a media interview spruiking ‘New Capitalism’ as the solution to environmental and other problems.

At first blush, this seemed like nothing more than a bit of political jockeying between two Liberal politicians who have a bit of form in the needling department, as Mr Kean seemed to be taking aim at Morrison.

“I think it [New Capitalism] is very different [to Can-Co Capitalism],” Mr Kean told the Australian Financial Review. “I don’t want to make policies just for a news cycle, I want to make policies for a generation that will build a stronger and more prosperous nation for everyone,” Mr Kean said.

Kean’s ‘New Capitalism’

But there was more to it than that. Mr Kean went on to say that ‘I guess “New Capitalism” is looking at the environmental and social benefits of the decisions we take, not just the financial benefits.’

Still fairly ho hum and hardly new. This amounts to a very weak form of sustainability: ‘sustainable’ in a sense of requiring economic, social and environmental factors to be taken into account, but very weak because it does not require any particular weight to be given to social or environmental factors. Indeed, this formula doesn’t require any weight at all!

However, Kean continued, outlining “five pillars” of his economic portfolio, including “climate and sustainability”. A little more substance, but still just a topic and not really a policy.

Then it got interesting. Kean started talking about there being a once-in-a-generation opportunity to address the big structural issues in the economy. ‘There’s no point leaving our kids with a bucketful of money if we’ve left them with a mountain of environmental debt,’ he said.

What’s ‘environmental debt’?

Now you’re talking Matt. I’ve always thought ‘environmental debt’ was a useful concept, conveying clearly that we have borrowed someone else’s share of nature (the ‘someone else’ being future generations) and must pay it back.

But the term hasn’t been used much in our political discourse, perhaps because it is potentially so powerful and, to my mind, policy-specific.

In fact, the only serious mention of environmental debt I can recall in Australian political discourse comes from 30 years ago, when the Hawke government made reference to the importance of not saddling future generations with environmental debt, in the course of developing the now-long-forgotten National Strategy on Ecologically Sustainable Development.

But why does using up nature create a debt? Because Nature can only produce what each generation of humans needs if there is enough of each of its component ecosystems, its ‘natural capital’, to do so.

Call it ‘critical mass’ if you like. That’s just the way Nature works. Drop below critical mass in any ecosystem and you are in trouble.

This phenomenon has been explained by comparing Nature to an inheritance, coming in the form of a large fund that has been invested.

We can live off the natural ‘dividends’ or ‘ecosystem services’ forever, but if we draw down more than just the dividends, we start eating into the natural capital, condemning future generations to receiving fewer ‘dividends’ (and more trouble) from Nature than we have.

Unfortunately, this is exactly what we have done.

So, if we value our children and grandchildren as much as ourselves, we owe it to future generations to pay back our over-consumption. (As an aside, try arguing against that proposition: Groucho Marx is reported to have said ‘What has posterity ever done for me?’ But he was a comedian.)

And how do we pay back environmental debt? Through environmental restoration. Restoration can come from doing things that build Nature’ capacities (like planting trees) or from reducing things that harm Nature (like carbon emissions).

Don’t forget the accounts

And if Kean is serious about repaying environmental debt, there’s another implication: we need a way to measure it. Banks keep track of their loans by keeping accounts. As I’ve explained before, there is an now an internationally recognised way of keeping environmental accounts, the System of Environmental-Economic Accounts, or ‘SEEA’.

By recording the extent and condition of our ecosystems, and then identifying the minimum of such extent and condition (‘critical mass’) needed to produce the ecosystem services on which we all rely, we can then identify any shortfall as our accumulated ecological debt.

Environmental accounts could also be used to keep track of the gains achieved through environmental restoration, as we reduce the debt.

Going somewhere?

As you can see, that this is dangerous territory for a politician. Talk of environmental debt raises issues that are moral (always tricky), long-term (when most politics goes for the quick fix) and specific (raising the risk of being boxed in, to a potentially-unpopular policy).

But Matt Kean is a highly unusual politician, not only because he comes from the political Right but outdoes the environmental commitment of many on the political Left, but also because he’s been unusually successful in bringing his conservative colleagues along with his pro-environment policies.

In deploying the language of environmental debt, Kean may now be striking out further, into waters that, while not newly discovered, are rarely sailed.

Let’s hope his boldness pays off. Not only for ourselves, but for our children.

Image by geralt at Pixabay

The zero sum game – from biodiversity to emissions

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?

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

An ‘environmental accounting’ primer

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.

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