The System of Integrated Environmental and Economic Accounting

23.217    The conceptual model adopted by the ABS and the international statistical community for environmental accounts is the United Nations' System of Environmental-Economic Accounting (SEEA). SEEA was endorsed by the United Nations Statistical Commission as an international standard in February 2012. The structures, concepts and classifications used in the SEEA are consistent with those used in the SNA, meaning that accounts produced under the SEEA support the bringing together of environmental and economic information within a common framework. This allows for consistent analysis of the contribution of the environment to the economy, the impact of the economy on the environment, and the efficiency of the use of environmental resources within the economy.

23.218    The SEEA framework, like the SNA, utilises flow and stock accounts containing estimates expressed in both physical and monetary terms. More broadly, the SEEA utilises the following four types of accounts:

• Physical flow accounts record flows of natural inputs from the environment to the economy, flows of products within the economy and flows of residuals generated by the economy. These flows include water and energy used in production (e.g. of agricultural commodities) and waste flows to the environment (e.g. solid waste to landfill).
• Functional accounts for environmental transactions record the many transactions between different economic units (i.e. enterprises, households and governments) that concern the environment. Functional accounts may explicitly identify environmentally-related transactions contained within standard SNA accounts (such flows are not explicitly shown within typical SNA presentations). For example, Environmental Protection Expenditure (EPE) accounts disaggregate traditional national accounting flows to reveal those monetary transactions relevant to environmental protection.
• Asset accounts in physical and monetary terms measure the natural resources available and changes in the amount available. Asset accounts focus on the key individual components of the environment: mineral and energy resources; timber resources; fish/aquatic resources; other biological resources; soil resources; water resources; and land. They include measures of the stock of each environmental asset at the beginning and end of an accounting period and record the various changes in the stock due to extraction, natural growth, discovery, catastrophic loss or other reasons.

              The compilation of asset accounts in physical terms can provide valuable information on resource availability
              and may help in the assessment of sustainability. A particular feature of the SEEA asset accounts is the
              estimation of depletion of natural resources in physical and monetary terms. For non-renewable resources the
              quantity of depletion is equal to the quantity of resource extracted but for renewable resources the quantity of
              depletion must consider the underlying population, its size, rate of growth and associated sustainable yield.

• The SEEA Central Framework is complemented by two other publications: namely, SEEA Ecosystem Accounting (SEEA EA) and SEEA Applications and Extensions. In terms of the former, ecosystem accounts are a relatively new and developing field. The United Nations Statistical Commission, in March 2021, adopted chapters 1-7 of the System of Environmental-Economic Accounting—Ecosystem Accounting (SEEA EA) as an international statistical standard. In the same document, chapters 8-11 present internationally recognised statistical principles and recommendations for valuation of ecosystem services and assets.  The SEEA Ecosystem Accounting (SEEA EA) constitutes an integrated and comprehensive statistical framework for organising data about habitats and landscapes, measuring the ecosystem services, tracking changes in ecosystem assets, and linking this information to economic and other human activity.Ecosystems are areas containing a dynamic complex of plant, animal and micro-organism communities and their non-living environment interacting as a functional unit. Ecosystem accounts are structured to summarise information about these areas, their changing capacity to operate as a functional unit, and their delivery of benefits to humanity.
• The benefits received by humanity are known as ecosystem services. They are delivered in different forms and are grouped into three broad categories:

1. provisioning services – the benefits received from the natural inputs provided by the environment such as water, timber, fish and energy resources;
2. regulatory services – the benefits provided when an ecosystem operates as a sink for emissions and other residuals, when an ecosystem provides flood mitigation services or when an ecosystem provides pollination services to agriculture; and
3. cultural services – the benefits provided when an ecosystem such as a forest, provides recreational, spiritual or other benefits to people.

23.219    Each of the different types of accounts is connected within the SEEA framework but each one focuses on a different part of the interaction between the economy and the environment. Examples of the relationships between the different accounts include:

• Asset accounts and ecosystem accounts focus on the stock and changes in the stock of environmental assets, with asset accounts focusing on the individual components and ecosystem accounts focusing on the interactions within and between these components.
• Changes in the stock are often the result of economic activity which in turn is the focus of physical flow accounts. Measurement of flows of natural inputs in the physical supply and use tables is consistent with the measurement of extraction in the asset accounts and the measurement of provisioning services in ecosystem accounts.
• Measurement of flows of residuals to the environment as recorded in physical supply and use tables is an important consideration in the measurement of ecosystem services, particularly regulatory services.
• Measures of the flows of natural inputs and residuals can also be related to transactions recorded in functional accounts for environmental protection and resource management, including investment in cleaner technologies and flows of environmental taxes and subsidies. For example, payments for emission permits recorded in functional accounts can be related to the flows of emissions recorded in the physical supply and use tables and to the operating surplus of emitters and final expenditures by households.
• The effectiveness of the expenditure for environmental purposes may, ultimately, be assessed by changes in the capacity of ecosystems to continue their delivery of ecosystem services as recorded in ecosystem accounts.

23.220    These examples serve to highlight the many and varied relationships between the accounts, each taking a different perspective. These relationships are supported using common concepts, definitions and classifications throughout the SEEA.

23.221    One of the most challenging aspects of environmental-economic decision-making is obtaining appropriate information to inform trade-offs between the environmental assets that deliver a range of non-market goods and services, including ecosystem services, against development alternatives for which there are clearly defined economic values. The SNA and the SEEA Central Framework include the value of environmental assets that have direct economic values. For example, land, timber, minerals and energy resources are included in the national balance sheet in the Australian System of National Accounts. 

23.222    The preferred valuation in the SNA and the SEEA Central Framework is based on market transactions. Some environmental assets (and many ecosystem services) are not transacted in markets; in these instances, non-market valuation techniques must be used. For example, mineral deposits are owned by the Commonwealth and state governments in Australia, and are not sold on active markets; rather, they are extracted under a mining lease arrangement. Under these circumstances, it is recommended that the value of the mineral deposit be calculated as the net present value of future expected income resulting from the extraction of this mineral deposit.

23.223    In some cases, the value of certain ecosystem services may be included in the value of goods and services traded in markets. For example, the value of pollination is captured in the value of agricultural crop production, while tourism operators derive income from the people visiting natural attractions such as Uluru and the Great Barrier Reef.

23.224    The development of standardised methods for identifying and separately distinguishing the value of environmental assets and ecosystem services is an on-going area of work in the SEEA. The recognition of the value of these assets and services potentially provides important information to decision-makers; for example, in informing comparisons between various development alternatives.