Measuring and Valuing Australia's Ecosystems

The National Ecosystem Accounts will build on other ecosystem accounting work completed both within Australia and internationally in recent years including:  

• National Ocean Account, Experimental Estimates, November 2022 | Australian Bureau of Statistics  
• Mitchell Catchment accounts 
• Experimental Environmental-Economic Accounts for the Great Barrier Reef, 2017 | Australian Bureau of Statistics   
• Regional Ecosystem Accounting Pilot for Murray-Darling Basin 
• Gunbower-Koondrook-Perricoota accounts 
• Ecosystem Asset Accounts for Rivers in South Africa . 

The first release of the accounts will showcase the potential use of extensive ecosystem accounts and provide a platform for future enhancement feedback to address policy needs, inform environmental and economic planning, and extend usability.  

The ABS and DCCEEW are partnering to develop a long-term Continuous Improvement Plan for the National Ecosystem Accounts. This appendix outlines areas that will be a focus beyond the first publication. Additional improvements will be considered based on feedback from the first release.

It is important that the accounts can be used to inform decisions. Therefore, a priority for developing the ongoing program of work is a thorough investigation of user needs to determine priority accounts and metrics that will be fit-for-purpose. Prioritisation is critical given the large number of ecosystem services across all realms. Environmental-economic accounts can serve many purposes and a broad set of potential uses for these accounts may emerge over time. 

To uncover this potential, user consultation will need to be a fundamental and ongoing part of future development. Clearly ascertaining user needs will then need to be balanced with practical implementation (e.g. data sources and methods).

The selection of appropriate metrics, in particular to measure the condition of Australia’s ecosystems, is complex and depends on the aims and uses of the accounts. No single indicator can fully represent ecosystem quality across the range of ecosystems.  

The ecosystem condition accounts are useful for providing insights into the characteristics and quality of ecosystems and how they change over time. Ecosystem condition is the quality of an ecosystem measured in terms of its abiotic and biotic characteristics (United Nations et al. 2021).

 “Ecosystem condition accounts record data on the state and functioning of (ecosystem assets) ... using a combination of relevant variables and indicators. The selected variables and indicators reflect changes over time in the key characteristics of each (ecosystem asset).”

A three-stage approach is used in the SEEA EA for the compilation of ecosystem condition accounts. Outputs at each stage are relevant for policy and decision-making.  

• Stage 1, key characteristics are selected and data on relevant variables are collated;
• Stage 2, a general reference condition is determined and for each variable a corresponding reference level is established that allows a condition indicator to be derived;
• Stage 3, condition indicators are normalised to support aggregation and the derivation of ecosystem condition indexes (Accounting for Ecosystem Condition). 

The SEEA EA also includes the Ecosystem Condition Typology (ECT), which is a hierarchical typology for organising data on ecosystem condition characteristics. It is designed to incorporate ecosystem condition measures that cover ecosystem structure, function and composition. Table 1 shows the SEEA EA ECT (United Nations et al. 2021, p. 90).

While a number of condition metrics will be included in the first release, future releases aim to extend the range of variables included to meet a wider range of uses. It is important, for example, that the metrics used align with jurisdictional approaches to measuring ecosystem condition across various Nature Positive initiatives. Similarly, Australia also needs to respond to international information requests related to the Global Biodiversity Framework and the Sustainability Development Goals. Thus, further work will be undertaken to refine and expand on the condition metrics used on an ongoing basis. Criteria to select condition variables will consider the relevance of the metric to the ecosystem it is measuring, the relevance of the metric for decision-making and the availability of data for ongoing reporting.

Ecosystem services are the contributions of ecosystems to the benefits used in economic and other human activity (United Nations et al. 2021, para. 6.9). Examples of ecosystem services include: 

• provisioning services, such as water provisioning 
• regulation and maintenance services, such as global climate regulation services through the retention and sequestration of carbon in ecosystems 
• cultural services, such as recreation-related services. 

Once identified these ecosystem services can be valued, which also provides a value to the underlying ecosystem asset. Further information on the approaches to valuation of ecosystem services is provided in Appendix 2 - Valuing the economic contributions of ecosystems. 

While there is an extensive list of ecosystem services that are provided by the environment, it is unrealistic to produce accounts that cover all these services. Instead, the accounts will focus on services that have particular relevance to policy and decision-makers. The selection of ecosystem services for inclusion in the first release will include agricultural biomass provisioning, water provisioning, coastal protection, wild fish provisioning and carbon sequestration and retention. The intention is to expand this list of ecosystem services in response to future needs.

Ecosystem accounting presents challenges in collating and harmonising environmental and economic data from a range of sources. Input data could be quantitative, qualitative, modelled, surveyed, time series, or spatial, and may vary in format, processing and scale. A framework to guide selection and harmonisation for the production of accounts is essential. It also provides guidance on when to acknowledge that the available data is not adequate, and therefore data gaps are identified. A framework allows us to: 

• identify the data or other forms of information needed for accounting purposes 
• encourage the development of common metadata standards 
• provide greater transparency in verifying data treatments and assumptions used in compiling accounts. 

The data selection framework will incorporate and expand on the ABS’s data quality framework (The ABS Data Quality Framework ) and align with DCCEEW’s draft National Data Standards (National Environmental Standards - DCCEEW). These standards include the following criteria: 

• Fit-for-purpose: data and information meet the specific needs of the decision being made. 
• Ethical: data and information are demonstrably compliant with relevant legislation protecting sensitive data and information, were obtained and are managed under appropriate ethics approvals, and were obtained and are managed in a transparent and inclusive manner for stakeholders. 
• Reliable: data and information have a demonstrably robust scientific foundation and/or were collected under a recognised and enduring survey protocol or traditional knowledge system. 
• Reusable: data and information have adequate metadata (on the data’s structure, lineage, sources, objectives and intended use) to ensure it is meaningful for decision-making. 
• Accessible: data and information are made available under the least restrictive conditions possible (preferably Creative-Commons-No-Rights-Reserved). 
• Discoverable: data and information are made available on an enduring, searchable and interoperable platform so they can be readily found when needed for a decision. 

Assessing the quality and appropriateness of data for inclusion in the accounts depends on a number of factors. Having a framework to guide input data selection will enhance the ability of the ABS to compile high quality accounts. 

The data selected for the initial release of the accounts is focused on data in a ready-to-use form, with the most important consideration being spatial coverage of the entire extent of the territory. As the accounts develop, there will be a need to look further than immediately usable data sources, so that inputs can be considered best-available and compatible with higher resolution datasets that exist for the various states and territories and other land management bodies around Australia. The development of the ongoing accounts program will include a systematic review of data sources around Australia and the construction of an objective framework, to assess datasets for suitability for the accounts, in order to provide a transparent approach to data selection.  

Acknowledging that a systematic review of data sources around Australia will produce many datasets that may meet many of the data quality criteria, but do not have the full spatial coverage needed - methods to modify and improve the usability of these datasets will greatly increase the ability to incorporate high quality data in the accounts. To incorporate best-possible data into the accounts, and ensure coherence with state environmental reporting, it will be important to integrate sub-national data into the national scale accounts. Considerations in developing these methods include:  

• the importance of good quality partial-coverage data that can be extended 
• the importance of acknowledging knowledge gaps where appropriate 
• the importance of on-ground measurements, observations and monitoring 
• the importance of remote-sensing datasets 
• the possibility of establishing national datasets by pursuing equivalence or compatibility between sub-national data 
• the possibility of a multiscale approach in accounts (e.g. using best-quality data where available, even without national coverage, and using coarser data where the high-resolution product is not available). 

Continuous improvement is an inherent element of an ongoing program of ecosystem accounts. The above information provides some detail around where improvements are needed - the assessment of user needs and the refinement of data selection and development will be a continuous process that is part of the account development. 

The development of any statistical product relies on the use of a range of statistical concepts, standards and frameworks. A discussion of these frameworks and classifications as they relate to ecosystem accounts is provided below. The integration of standards (which define the concepts we are working on), classifications (which categorise the observations we are collecting) and methods (how we manipulate data to fit into the classifications and thus into the standard) defines the process of account compilation. 

1.6.1 Standards and classifications overview

Standard classifications and definitions of statistical units and items underlie the compilation and presentation of statistics produced by national statistical offices, such as the ABS. The use of such standards ensure that statistics are harmonised across national and international boundaries, which ensures comparability and aggregation from various collections, for example, for national accounts purposes. 

Where possible established Australian and international standards should be used. Comprehensibility is also a key consideration - this is the ability to be understood, by users and by respondents. It involves clarity of definitions, realism in the sense of modelling the real world, and providing a logical and coherent structure for collecting and organising information. 

The widespread use of standards also provides an integrated statistical picture of Australian society and environment. They facilitate the process of drawing together all the data about a particular topic, variable or population, from the full range of statistical sources, in a meaningful and useful way. 

Classifications are an important part of any standard. They are used to collect and organise information into categories with other similar pieces of information. Classifications should be exhaustive and mutually exclusive. The application of classifications can be at any level of data and at any point in the account compilation process. For example, classifications that define the inputs into the accounts, for instance the association of ecosystem types to basic statistical unit, can be different to what is reported at the account level. While it is preferable that all classifications align from collection to indicators, this is rare as most accounts are built from a wide range of data collected for different purposes.

1.6.2 Ecosystem account classifications

Ecosystem classifications must describe the components of ecosystems that are currently available to society and how these components have changed over time.  

Recognised standards for SEEA ecosystem types and ecosystem services are: 

• International Union for Conservation of Nature (IUCN) Global Ecosystem Typology (GET) for ecosystem types 
• Common International Classification of Ecosystem Services (CICES) for ecosystem services (a shorter list is in the SEEA EA). 

Ecosystem extent (IUCN GET)

The IUCN Global Ecosystem Typology (IUCN GET) is the international statistical standard for classifying ecosystems and is recommended for use in SEEA ecosystem accounting. It is a comprehensive framework for Earth’s ecosystems that integrates their functional and compositional features.   

The National Ecosystem Accounts first release will use the IUCN GET levels 1 to 3 as its output ecosystem classification – 1. Realms, 2. Biomes and 3. Functional Groups. These are defined as (Typology - Global Ecosystem Typology (global-ecosystems.org):

1. Realm

   One of five major components of the biosphere that differ fundamentally in ecosystem organisation and function: terrestrial, freshwater, marine, subterranean, atmospheric, and combinations of these (transitional realms). Because variation in nature is continuous, we also include transitional realms, where the realms meet and have their own unique organisation and function.

2. Biome

   A component of a realm united by broad features of ecosystem structure and one or a few common major ecological drivers that regulate major ecological functions, derived from the top-down by subdivision of realms (level 1).

3. Ecosystem Functional Group

   A group of related ecosystems within a biome that share common ecological drivers, which in turn promote similar biotic traits that characterise the group. Derived from the top-down by subdivision of biomes.

Ecosystem assets will be reported by level 3 functional group, where possible. The use of the IUCN GET does not preclude the use of different classifications systems if they are hierarchically compatible, or already in use and associated with useful data. 

The accounts will adopt a more detailed ecosystem classification typology for Australia for subsequent releases when a national classification has been developed.

Ecosystem services (CICES)

Standardisation in the way ecosystem services are described is necessary for comparisons over time and between countries. It is especially important where the link to economic accounting is to be made. The CICES framework has been developed in consultation with the United Nations Statistical Division and the European Environment Agency in support of the SEEA Principles. The aim of CICES is to provide clarity on how ecosystem services are measured and analysed. CICES recognises three main categories of ecosystem outputs: provisioning, regulating and cultural services. Supporting, or indirect, ecosystem services are not explicitly expressed and are instead treated as part of the underlying structures, process and functions that characterise ecosystems. Final ecosystem services are described using a five-level hierarchical structure, with each level being progressively more detailed and specific. 

Ecosystems provide a range of benefits that may not be readily captured in market transactions, nor will their contribution always be recognised in economic activities or decision-making processes. Governments, businesses and communities will not be able to make informed decisions on resource use and allocation, including those arising from the natural world, if the benefits of ecosystems are not clearly defined.

In ecosystem accounting, monetary valuation enables comparisons of ecosystem services and assets that are consistent with standard measures of services and assets as recorded in the national accounts. The SEEA EA framework has a tiered approach to valuation that prefers the use of exchange values where possible – consistent with the international approach on national accounts (United Nations et al. 2021).

Valuation of ecosystem and cultural services remains a work in progress as the SEEA EA guidance on monetisation and valuation continues to evolve. The first iteration of the National Ecosystem Accounts will focus on valuing ecosystem services. Future iterations of the accounts will consider valuation of the underlying ecosystem assets.

The SNA does not attempt to determine the utility of the flows and stocks that are within its scope. Rather, it measures the current exchange values of the entries in the accounts in monetary terms; that is, the values at which goods, services, labour or assets are exchanged or could be exchanged for cash. The exchange values, which focus on transactions between owners of economic units, are captured within the SNA production boundary.

The SEEA EA extends the production boundary of the SNA by recognising that natural capital and ecosystem services contribute to economic activity and community wellbeing. The monetary accounts that accompany the Physical Supply and Use Tables (PSUT) of ecosystem assets and their services require consistency with SNA valuation principles to enable the integration and comparison of these accounts with the SNA. 

Ecosystem accounting is not about putting a value on everything in nature. Consistent with the SNA principles, it excludes the welfare values arising from ecosystem contributions and the intrinsic values of ecosystem assets (Figure 3, from Schenau et al. 2022).

The SEEA EA focuses on recording the supply and use of ecosystem services rather than the wellbeing or outcomes that eventuate (United Nations et al. 2021, para. 2.72). The distinction between economic value and exchange value is that economic value refers to the worth derived from the consumption of a product or service, whereas exchange value refers to the monetary price paid in acquiring or exchanging a product or service.   

In the example of climate regulation services, valuation of the ecosystem services should reflect the service – carbon sequestration and carbon retention – not the societal flow-on benefits. The exchange value of carbon retention and carbon sequestration services may be reflected in carbon prices, the marginal cost of abatement, or expenditure in maintaining the carbon stock from re-entering the atmosphere.  

The SEEA EA guidelines suggest using the social cost of carbon to reflect avoided damages to human health and the impact on economic activity and assets such as infrastructure and industries due to climate change. Whilst this is useful in informing climate policy more broadly, it may not be conceptually equivalent to valuing the ecosystem service itself in the context of the SEEA EA.

For most ecosystem services there are no observed transactions, meaning that exchange values must often be estimated. The lack of observable markets in nature is both historical and institutional. Governments worldwide often regulate the use, access to and trade of endangered fauna and flora to ensure their continued existence. The lack of ownership of endangered fauna and flora, and ecosystems more broadly, also limits transactions and market activity. For example, whilst no one owns the air, governments are responsible for maintaining good air quality and use regulation or market tools to manage polluting activities.   

Interest in markets for nature is growing, as witnessed by the worldwide growth in carbon markets and promotion of biodiversity markets. The growth of these markets worldwide provides an avenue to incorporate ‘exchange values’ in line with the SEEA EA. Progress in environmental-economic accounting can play a role in the longevity and uptake of markets for nature.  

Several techniques have been developed for placing a value on ecosystem services in the absence of exchange values, including:  

• observed market prices 
• replacement cost 
• avoided damage estimates 
• abatement cost estimates 
• various stated preference methods.

Following a similar framing to the SNA, the SEEA EA recommends that valuation methods for ecosystem services are applied in the order of preference in Figure 4 (United Nations et al. 2021, para. 9.23):  

Key challenges in valuing ecosystem services include:  

• Uncertainty related to the complexities of ecosystem functions and processes that inhibit consideration of ecosystem services that are related to human activity. 
• Ecosystem provisioning services such as water supply may be undervalued because it may be difficult to estimate the value to be attributed to the ecosystem and how much can be attributed to subsequent economic activity (such as irrigation and farming, in the case of irrigated water).   
• The potential use of values from literature and databases (such as the Environmental Valuation Reference Inventory) requires evaluation that they adequately reflect exchange values consistent with the SEEA EA framework.  

According to the SEEA EA (United Nations et al. 2021):

“The framing provided by ecosystem accounting is systematic and comprehensive with respect to ecosystem extent, ecosystem condition and ecosystem services and provides one perspective on monetary values of ecosystem services and ecosystem assets… However, policy and analysis about the environment and human connection to it can be framed in many ways. Often it requires considering specific environmental themes, such as biodiversity, climate change, oceans and urban areas, among many others.”

This appendix explores how environmental-economic accounts and other data can be combined with ecosystem accounts to provide more specific information for decision-makers. It also discusses additional thematic accounts such as biodiversity and carbon and how to address issues in compiling these accounts. 

While ecosystem accounts are designed to tell a story about environmental and economic interactions, a more complete picture can be painted by integrating ecosystems accounts with other environmental and economic data.

3.1.1 Environmental account integration

Over the past thirty years, the ABS has produced a range of individual environmental accounts, including accounts for water, energy, waste, land, fish, oceans, and environmental taxes, as well as national balance sheets estimates for minerals and forests. Integrated comparisons of these accounts across space and over time tells a more comprehensive picture of Australia’s environment, economy and society. It provides greater analytical power, and therefore an increased value for data users and policymakers. Below is a summary of environmental-economic accounts that the ABS produces on a regular basis. In the future, there is the potential to integrate information from these accounts into the National Ecosystem Accounts.

3.1.2 Economic data integration

As with all types of environmental-economic accounts, a key strength of ecosystem accounts is consistency with economic statistics, including GDP. An ecosystem account combined with economic statistics from the ABS can be used to understand the relationship between environmental change and the productivity of Australians, highlighting important interactions that are often hidden from decision-makers. This information may be used to better identify policies which separate or ‘decouple’ productivity from environmental harm. The combination of ecosystem and economic data supports a richer discussion of the connection between ecosystems and people. It underpins the development of indicators concerning this relationship, such as the contribution of ecosystem services to measures of economic production, and allows the derivation of adjusted national accounting aggregates such as degradation-adjusted measures of net domestic product (NDP).

Integrating ecosystems with the SNA

The SEEA EA suggests that one of the clearest means of examining the impact on the economy of consuming the environment is to integrate monetary valuation of degradation of ecosystems into an extended sequence of accounts based on the SNA. 

International interest in combining the economy and the environment is not new. The Convention on Biological Diversity established targets at the Aichi conference in 2011 to set out the first international efforts to integrate ecosystems and national accounting (Aichi Biodiversity Targets):  

“Target 2: By 2020, at the latest, biodiversity values have been integrated into national and local development and poverty reduction strategies and planning processes and are being incorporated into national accounting, as appropriate, and reporting systems.”

In 2025, the SNA will be updated to incorporate environmental measures, such as natural capital, to better understand our environmental assets. It will also look to improve the ability of a country to report on the money available to invest in the environment, and change some of the ways in which environmental products and services are measured.  

While developing SNA and ecosystem accounts in parallel is practical, there are also ways of incorporating ecosystem accounting into the SNA for a better understanding of our impact on nature. Including the cost of ecosystem degradation in economic statistics allows us to account for changes in the ecosystem’s capacity to absorb pollution and the extent of industrial use of ecosystems. This degradation makes it more difficult to rely on ecosystem services, often leading to higher costs. As a result, both the economic resources available to Australians and the benefits provided by these ecosystems are reduced. For example, if a forest that helps clean our water is degraded, communities must pay for water purification machines, or society bears the health costs of drinking contaminated water. This leads to fewer ecosystem services for the water industry to utilise, lower business profits, higher costs and thus less savings for the future.  

An extended sequence of accounts

Table 3 is derived from Table 12.4 from the SEEA EA, and demonstrates an approach where ecosystem services are incorporated into the SNA to form an extended sequence of accounts.

Notes to Table 3

• Table 3 demonstrates a number of indicators that can inform how ecosystems are being consumed or damaged.  
• Degradation adjusted net value added is the amount available based on what is produced in the economy, adjusted by the amount of ecosystem degradation after depreciation.  
• Degradation adjusted net operating surplus is the amount available to be distributed to the economy, after workers are paid, and adjusted for ecosystems degradation.  
• Degradation adjusted disposable income is the amount available to all sectors of the economy to purchase products. A negative value means reliance on savings or on the environment.  
• Degradation adjusted net saving is the amount remaining after purchases for the year, taking into account ecosystem degradation resulting from this activity. A negative value indicates drawing down on future generations’ access to the environment to sustain current activity.  
• Net lending/borrowing is the amount Australia needs to drive the economy. A negative number denotes a need for capital from other countries. A positive number indicates capital available to lend to other countries

Alternatives to integrating national ecosystem and economic accounts

An alternative to integration is that environmental-economic accounting should remain separate from, but in parallel with, the SNA. By producing these environmental-economic accounts on a similar basis to the SNA, analysis can be undertaken to understand the relationship between the two sets of accounts.  

The result would be two sets of data where analysis and tools provide the avenue to integrate the economic and environmental streams. The key is to ensure that the data are conceptually similar notwithstanding differences in scope.  

One advantage of this approach is that it does not require monetisation of all ecosystems, ecosystem services and their attributes, rather monetary and physical indicators can be analysed side-by-side. For instance, economic data from the SNA can be combined with ecological data from iconic ecosystems, such as the Great Barrier Reef, to better understand how employment and economic output are linked to that ecosystem, without monetising ecosystem services.    

Taking this alternative integration approach would build indicators and information to inform progress and raise awareness of our impacts on the environment.  

Biodiversity accounts are considered a thematic account as they sit outside the SEEA EA framework of extent, condition and service accounts. Included in the National Ecosystem Accounts first release will be a biodiversity ‘thematic’ account. This section provides an overview of what a biodiversity account is and why it will be included it in the release. 

3.2.1 Biodiversity

Biodiversity, or biological diversity, is defined as  

‘the variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are a part; this includes diversity within species, between species and of ecosystems’ (Convention on Biological Diversity (cbd.int)).

Biodiversity plays an essential role in supporting human wellbeing through maintaining functioning ecosystems that, in turn, deliver essential services such as food and the regulation of our climate, as well as other benefits such as the aesthetic enjoyment of natural landscapes. Biodiversity is especially important and valuable for Australia’s agriculture and tourism industries. 

3.2.2 What is biodiversity accounting and how does it fit into the SEEA EA?

Biodiversity accounting is a way of organising biodiversity information to align with ecosystem and other accounts that is useful for a range of users. Under the SEEA EA, biodiversity is expressed as a thematic account, which means it is a standalone account that organises data around a specific policy-relevant environmental theme. However, biodiversity accounting is complex and less advanced than other thematic accounts, such as carbon accounting. As such, while the SEEA EA offers guidance on the conceptual approach and the construction of biodiversity accounts, it remains flexible about interpretation of these guidelines.

3.2.3 Who is the intended audience of biodiversity accounts and what do they use the accounts for?

Biodiversity accounts provide biodiversity information in a way that enables detection of meaningful change across time and space, and to inform conservation management goals. They can also be linked to other relevant SEEA accounts, such as land or ecosystem accounts, to help understand how changes in natural assets correlate with changes in biodiversity. Biodiversity accounts can be used to answer questions such as: 

• How is biodiversity changing over time? 
• Which areas are experiencing the greatest gains or losses? 
• Which biodiversity features are changing the most? 
• What has been the consequence of past actions? 

There are different users for biodiversity accounts depending on the scale of the accounts. Account users at the national level include policymakers, federal government agencies, academics and the SEEA EA global community. Users at this level will find the biodiversity accounts help with Australia’s international reporting obligations and agreements, so the accounts must satisfy technical and non-technical users. At the sub-national level, account users include regional Natural Resource Management (NRM) bodies and local government, who need finer-scale accounts. Users may also include organisations relevant to the species groupings, such as tourism bodies, as well as the Australian community and media.

3.2.4 What is the scope of the biodiversity accounts?

The following aspects of national biodiversity accounts are fixed:  

• spatial scope - the accounts must have national coverage 
• time series - the data requires at least two points in time
• data quality
• geographic boundaries. 

The flexible aspects of the scope of the biodiversity accounts include the representation of biodiversity in terms of number of species or other taxonomic or functional grouping, and the user needs of the accounts. 

3.2.5 What are the challenges in biodiversity accounts?

Biodiversity accounting presents many challenges. It is not as developed as other ecosystem accounts so there is no standard approach for biodiversity accounts. For a country as large and biodiverse as Australia, there are many species with relatively little data; one species may occur in multiple ecosystem types, and species persistence often requires multiple connected areas of suitable habitat. 

3.2.6 What are the approaches to biodiversity account development, and how does this apply to the first release of the National Ecosystem Accounts?

The biodiversity accounts are highly experimental accounts and the guidelines in the SEEA EA are flexible. As a result, there have been varying approaches to the construction of biodiversity accounts so far. The ABS has pioneered Australian efforts in this space, with biodiversity featuring as part of the Experimental Environmental-Economic Accounts for the Great Barrier Reef, 2017 | Australian Bureau of Statistics ) and the discussion paper From Nature to the Table: Environmental-Economic Accounting for Agriculture, 2015–16, adopting a direct accounting approach. CSIRO has published the Experimental Ecosystem Accounts for the Gunbower-Koondrook-Perricoota Forest Icon site report and the Experimental Ecosystem Accounts for the Murray-Darling Basin, adopting a modelling approach that predicts habitat in hectares for biodiversity, rather than directly measuring and accounting for biodiversity. International efforts have adopted a range of approaches. 

It is proposed to present both direct and modelled biodiversity approaches in the first release. To ensure consistency across all outputs within the National Ecosystem Accounts, the same ecosystem classifications, geographies and reference periods will be adopted.  

Direct accounts will be based on observational data and include counts of species by taxonomic group (e.g. birds, fish, reptiles) in species groupings that are relevant to different users. 

Species groupings may include: 

• species which provide regulating ecosystem services, such as pollinators (links to ecosystem services, agriculture) 
• iconic and tourism species (links to tourism, recreational fishing) 
• species of conservation concern (links to policy, funding projects) 
• indicator species for ecosystem condition (links to ecosystem condition) 
• pest and weed species (links to ecosystem condition, agriculture) 
• migratory species covered by international agreements, such as the Japan Australia Migratory Bird Agreement (JAMBA). 

Data sources will be selected based on spatial coverage, resolution, time series, quality, availability and relevance. 

Modelled accounts are based on known historical locations of species combined with habitat condition modelling. This approach uses a habitat-based biodiversity assessment, utilising ecosystem condition (derived from remote-sensing), biodiversity patterns (derived from ecological data) and ecosystem accounting areas to derive a set of biodiversity accounts. Species habitat requirements are combined with land cover data to produce habitat condition, while the species potential extent of occurrence is combined with ecological data to produce biodiversity patterns. 

Modelled accounts are likely to include: 

• expected persistence of species by taxonomic group (birds, fish, reptiles, vascular plants, fungi) 
• potential threatened species habitat in species hectares, where ‘species hectares’ is the number of species multiplied by the area of effective habitat. 

Anticipated limitations in the biodiversity accounts include issues around accuracy in modelled data, data gaps in observational data, especially spatial and temporal gaps, and sourcing data from different sources. Proposals to overcome these issues might include identifying where data is not available and ensuring concordance between different data sources, while still allowing for the effective and accurate comparison of data.

3.2.7 Future directions

For the first release, the scope of the biodiversity accounts will be limited by data availability. The spatial coverage of the data will be Australia-wide where possible, and the coverage of species will aim to be as comprehensive as possible. 

Beyond the first release, the scope of the biodiversity accounts has the potential to be expanded, and feedback on the first release can be incorporated to further improve the biodiversity accounts in the Australian context. This might target filling known data gaps, finding new data sources, and identifying where the accounts can be expanded, with the aim of refining biodiversity accounts for improved usability and connection to other accounts. 

Carbon accounts are another thematic presentation of the SEEA EA accounting information. A full carbon account will account for stocks of carbon across the geosphere, biosphere, atmosphere, the oceans and the economy, and the flows between them. This type of account is broader in coverage than ecosystem accounts as it includes carbon stocks beyond ecosystems; it is, however, closely linked to the SEEA EA accounts. Carbon accounts can also provide information to support measures of the ecosystem services of carbon sequestration and carbon retention. The SEEA EA defines global climate regulation services as:  

"the ecosystem contributions to reducing concentrations of greenhouse gases (GHG) in the atmosphere through the removal (sequestration) of carbon from the atmosphere and the retention (storage) of carbon in ecosystems. These services support the regulation of the chemical composition of the atmosphere and oceans."

This section focuses on the development of ecosystem service accounts relating to carbon sequestration and retention. The SEEA EA considers two main components of global climate regulation services: carbon sequestration and carbon retention. Carbon sequestration refers to the ability of ecosystems to remove carbon from the atmosphere, while carbon retention is the ability of ecosystems to maintain carbon stocks, thereby avoiding emissions to the atmosphere. The total carbon stock in the environment is substantial and can vary significantly between ecosystems.  

Australia’s National Greenhouse Gas Accounts and National Inventory Reports (DCCEEW) focus on estimating GHG emissions to fulfil international reporting obligations and to track progress toward emission reduction targets. However, ecosystem accounts provide complementary insights by highlighting the role of ecosystems in stabilising the climate and mitigating climate change. 

3.3.1 Carbon in the SEEA EA

The SEEA EA outlines specific measurement boundaries for carbon retention. These include stocks limited to carbon stored in above-ground and below-ground living and dead biomass, as well as soil organic carbon. Inorganic carbon stored in freshwater, marine, and subterranean ecosystems is excluded from this scope. Additionally, carbon stored in fossil fuel deposits are not considered an ecosystem service, as these deposits are not a component of ecosystem assets.  

Carbon sequestration concerns only carbon that is expected to be stored for long periods of time, although this storage may be either within an ecosystem or in the economy. Carbon that is sequestered but not stored for long is excluded. 

Ecosystems store carbon in various forms including biomass (both above and below ground), debris, soil, and sediment. Rates of carbon retention and sequestration vary based on numerous factors, and ecosystems can also release greenhouse gases such as carbon dioxide, methane, and nitrous oxide. For ecosystem accounting under the SEEA EA, it is essential to account for both the removal of carbon from the atmosphere and the loss of carbon stocks. Accurately estimating carbon retention and sequestration on a national scale is complex, and comprehensive national datasets are currently lacking.

3.3.2 Data for carbon accounting

In the absence of a national dataset, the primary source for carbon retention data in Australia is the Full Carbon Accounting Model (FullCAM) produced by DCCEEW. FullCAM is used to estimate carbon stocks in managed and cultivated land and contributes to Australia’s National Greenhouse Gas Accounts for the land use, land use change and forestry sectors. It is also incorporated into the National Inventory Reports. FullCAM incorporates various models that consider factors such as microbial decomposition of organic matter, climatic conditions and soil data to estimate carbon retention. However, FullCAM is limited to managed ecosystems and does not account for carbon stocks in natural or unmanaged ecosystems. This limitation affects the model's accuracy for such ecosystems. 

For specific ecosystems like mangroves, which are highly relevant for carbon retention, FullCAM’s models are more appropriate due to their forested nature. Conversely, other ecosystems such as seagrass are modelled in FullCAM using different approaches, including a model designed for estimating emissions from seagrass habitat excavation due to capital dredging. This model may not fully align with the needs of carbon accounting. Ecosystems like saltmarsh, which store less carbon, are aggregated into broader categories, which may reduce the precision of carbon estimates but are unlikely to significantly impact overall estimates. 

Additional limitations with using FullCAM include discrepancies between FullCAM outputs and IUCN GET functional group classifications. 

In the experimental National Ocean Account, the Blue Carbon Accounting Model (BlueCAM) (Clean Energy Regulator) was used to estimate carbon sequestration in coastal ecosystems. BlueCAM uses Australian data to estimate abatement from carbon and greenhouse gas sources and sinks associated with coastal wetland restoration (e.g. tidal restoration) and adheres to the Intergovernmental Panel on Climate Change (IPCC) guidelines for national greenhouse gas inventories. BlueCAM includes carbon sequestered in soils and biomass and excludes emissions from alternative land uses. However, BlueCAM’s scope is limited to blue carbon coastal ecosystems and does not extend to terrestrial ecosystems. 

In the absence of national sequestration data, FullCAM may be used to estimate sequestration for certain ecosystems. Net sequestration can be estimated as the difference in carbon stocks between sequential years, measured in tonnes of CO2-equivalent (CO2e) per year. Since FullCAM only models anthropogenic changes, it does not capture stock changes in natural ecosystems, which is a significant limitation. 

Both BlueCAM and FullCAM offer potential for providing estimates that can be used to produce some of the inputs into National Ecosystem Accounts. Assessments are underway as to the best source of data to use, or how to integrate these different approaches to carbon modelling into a coherent set of accounts. An ongoing program of continuous improvement provides scope to modify the FullCAM model to make outputs more fit-for-purpose, and also to develop methods to integrate new datasets as they become available. 

While existing models like FullCAM and BlueCAM offer data critical for ecosystem accounting, there are inherent limitations and gaps. Further work is required to develop fit-for-purpose carbon estimates to produce ongoing carbon retention and sequestration accounts in Australia. 

To illustrate the format and information in the National Ecosystem Accounts, this appendix illustrates the National Ecosystem Accounts for rivers in Australia for 2010–11 to 2015–16.   

Rivers are one of the most recognised freshwater ecosystems in the Australian landscape. They are often the focus of our cities and towns, and their condition is ultimately entwined with the use of the landscapes that surround them. Rivers provide a number of services, including water filtration, recreation and food provisioning. In this example set of accounts, the focus is on the single ecosystem service of freshwater provisioning.

4.1.1 River extent

These ecosystems conform with the IUCN GET Rivers and Streams biome. River systems have been split into perennial (usually flowing) and non-perennial (sometimes flowing), based on the native source data classifications from Geofabric dataset v3.3. This division reflects current scientific appreciation of non-perennial systems as different from perennial rivers, but important as an area where the riverine ecosystems interact with upstream terrestrial ecosystems (Datry et al. 2023). The extent of the river ecosystem and the distribution of perennial and non-perennial rivers is taken from the Bureau of Meteorology (BoM) Geofabric dataset v3.3 © Commonwealth of Australia 2021. The Australian Hydrological Geospatial Fabric (AHGF) Mapped Stream layer was used and split using the attribute ‘Perennial’. 

The data sources available for this account provide a single set of extent numbers that are static over time, but which can be used to generate the condition accounts below. As a result, opening and closing stocks are the same for rivers - there is no change narrative associated with this account.

4.1.2 River condition

Freshwater ecological condition, especially that of rivers, is known to be influenced strongly by adjacent land use (Allan et al. 2004; Hynes, 1960). With this, the SEEA EA recognises the utility of recording environmental pressures as a surrogate for condition, providing this linkage is well documented:

“The measurement of environmental pressures is often considered as an indirect approach for measuring ecosystem condition (European Commission, 2016, p. 31). An environmental pressure is a human-induced process that alters the condition of ecosystems (Maes et al. 2018). If there are little data available on state, then measures of pressures on ecosystems can be considered a useful surrogate, as long as the relationship between the two is well understood and justified (Bland et al. 2018; United Nations et al. 2021, s5.105)."

In the recent Australia State of the Environment (SOE) report (DCCEEW, 2021), a ranking of land use was used that combined the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Australian Land Use and Management (ALUM) Classification into 4 classes of Land Use Intensity (LUI) - these are described in Table 4. 

These categories allow a simple measure of landscape condition to be mapped nationally. Land use data, collated by ABARES based on the ALUM classification, is supplied at five-year intervals and maps a complex of land uses across Australia. For the river condition account this land use intensity dataset has been mapped onto river ecosystems to generate a spatial layer of river condition for Australia. 

For these accounts the river lines (perennial and non-perennial) were intersected with the LUI maps for 2010–11 to 2015–16 to look at differences in the lengths of each river that fell within each of the four LUI categories between the two time periods. This shows changes in land use along rivers in the five years between the two LUI maps.

4.1.3 Water supply ecosystem service (physical measures)

Water provisioning services involve the use of water abstracted from the environment by economic units (businesses, households and government) for consumption or production processes. The physical supply and use tables (PSUT) show the volume of surface water supply and usage across states, territories, and nationally for the years 2010–11 and 2015–16. The PSUT were compiled using data on surface water from the Water Account, Australia (ABS) and associated input data sources. 

The surface water was extracted from an ecosystem classified under the Rivers and Streams biome level. In the absence of spatial data for water extraction, it was not possible to identify the sub-state location and types of ecosystems from which water was extracted for economic purposes at a resolution below the biome level. 

Water use is allocated to the economic unit where environmental extraction occurred. End use by other users is outside the scope of the ecosystem accounts and is typically covered under economic accounts.  

Three classifications of final water provisioning ecosystem services, according to the CICES, have been compiled. These are: 4.2.1.1 Surface water used for drinking, 4.2.1.2 Surface water used as a material, and 4.2.1.3 Surface water used as an energy source.

Surface water used for drinking

Surface water for drinking is the distribution of the volume of surface water (in megalitres), by water supply companies to households. These data were derived from the Water Account, Australia (ABS), based on data collected via an ABS census of all known water and wastewater suppliers and utilities across Australia. 

Surface water used as a material

Surface water used as a material input into production includes the volume of water that is distributed by water supply companies to other industries including the Agriculture, forestry and fishing industry, the Mining industry and the Manufacturing industry. Water is also self-extracted by these industries and this information is also sourced from the Water Account, Australia (ABS). 

Surface water used as an energy source

Freshwater used for generating hydroelectricity constitutes the majority of the surface water used in energy production. This high volume of water is a non-consumptive use as it is immediately returned to the environment, however, it is recorded as it provides an economic benefit. This data was published in the Water Account, Australia (ABS) as the volume of water used by the Electricity and gas supply industry.

4.1.4 Water supply ecosystem service (monetary measures)

Consistent with paragraph 8.13 in the SEEA EA guidelines (United Nations et al. 2021), water provisioning services are valued through exchange values that are estimated based on median market prices of tradable allocations within Australian surface water markets. 

The extensive use of tradable water allocations within Australia provides an opportunity to value water provisioning services at market prices (United Nations et al. 2021). Water allocations are “the specific volume of water allocated to water access entitlements in a given water accounting period” (Water Act 2007). Water access entitlements and allocations are typically tradable on open markets, separate from the land they adjoin. This allows the valuation of the water resource itself, through water access entitlements, and the allocations allow the market valuation of service flows from the water resource. 

Surface water allocation prices in Australian water markets are driven by a number of supply and demand factors. Annual water allocations affect the supply of water in the market. Annual allocations are dependent upon factors such as rainfall, water storage, and allocation carryover.  

Demand for allocations is driven by factors such as changes in agricultural demand for water due to investment and production changes, institutional arrangements, and climatic influences such as temperature and evaporation (BoM, 2023). Water allocation prices in the Murray-Darling Basin (MDB) in New South Wales, Victoria and South Australia are similar, reflecting the trading opportunities across the basin. The value of the water provisioning service as a material is based predominantly on trades in the MDB from the BoM (BoM, 2024). These allocation trades reflect prices of water allocations for use in agriculture, manufacturing, and drinking water.  

The number and size of water trades often reflects rainfall seasonality. For instance, in 2015–16, some areas of Victoria recorded the lowest percentile of rain on record, which resulted in lower water allocations and higher allocation prices (ABARES, 2017b). For other areas, southern MDB median prices gradually increased from their low in 2010–11 to reach their highest peak in 2015–16. 

Southern MDB allocation trades make up around 90% of national allocation trades (ABARES, 2017b). Given the prevalence of MDB water allocation trading in New South Wales, Victoria and South Australia, state level price estimates ($/ML) will align heavily with prices in the southern MDB network. Australian Capital Territory valuation will generally align with New South Wales’ prices.   

The data collected by BoM for surface water allocation trades includes many trades with no price reported. Such trades represent misreporting or sales which are not at “arm’s length” and have been excluded from the estimates (BoM, 2023). Likewise, trades with values in excess of $10,000 per ML have been excluded, as they are assumed to include values beyond the right to abstract the water (BoM, 2023). 

By aggregating median prices, national and state prices reflect catchments with a higher numbers of trades, specifically trades within the MDB, as these represent the most traded allocations. The number of allocation trades collected for Queensland, Western Australia and Tasmania is currently small, representing a “thin” market. At this stage, no monetary values have been produced for these states.

4.1.5 Data sources

Geofabric dataset v3.3 (BoM, 2021)

River lengths were sourced from Geofabric V3x All Products - Overview (bom.gov.au). These data are supplied as GDA94 (EPSG 4283) and were converted to the Australian Albers version (EPSG3577). 

Land Use of Australia (ABARES, 2022)

Land use intensity was determined from Land use of Australia 2010–11 to 2015–16, 250 m - DAFF (agriculture.gov.au), which is collated by ABARES according to the Australian Land Use and Management Classification version 8.

Australia State of the Environment 2021 (DCCEEW, 2021)

Groupings of land use intensity published in the Australia state of the environment 2021 (dcceew.gov.au) land chapter were applied to generate LUI classifications.

Water Account, Australia (ABS)

Data were collated from the ‘Physical Supply and Use Tables, by Water Type’ for each state and territory and nationally from the Water Account, Australia. The data in the 2016-17 publication of the Water Account, Australia, were used to compile the ecosystem account for 2010–11 (4610.0 - Water Account, Australia, 2016-17 (abs.gov.au)). The data for 2015–16 was from the Water Account, Australia, 2021-22 publication Water Account, Australia, 2021-22 financial year | Australian Bureau of Statistics (abs.gov.au). Where data were aggregated for 2010–11, information from the time series presented in the Water Account, Australia, 2021–22, were used to estimate these values.

Water Information Dashboard (BoM)

Data on surface water allocation trades has been sourced from the BoM (Water Information Dashboard: Water Information: Bureau of Meteorology), which constitutes reported data from a range of Commonwealth, state and private sector sources. In the valuation of monetary supply and use of water provisioning services, median surface water allocation trade prices have been aggregated to produce a median price nationally, and for New South Wales, Victoria, South Australia, and the Australian Capital Territory.

4.2.1 River extent

The lengths of the perennial and non-perennial rivers in each state and territory in Australia are shown in Table 5. There are roughly 25 times as much length of non-perennial than perennial rivers in Australia. New South Wales contains almost 60% of Australia’s perennial rivers, while Queensland is home to the greatest length (34%) of non-perennial rivers.

4.2.2 River condition

In the following commentary LUI 1 is the least intense land use (near natural), and LUI 4 is the most intense land use, including urban development and industrial areas. In 2015–16, 

• 29% of perennial rivers were located within relatively natural land use (LUI 1) 
• 25% were associated with extensive (low intensity) production land such as grazing native vegetation and native production forests (LUI 2)  
• Half of non-perennial rivers were located within low intensity production uses LUI 2, and 32% were relatively natural LUI 1.

Between 2010–11 to 2015–16, there was an observed increase in the intensity of land use adjacent to rivers and streams.

• The length of perennial rivers flowing through intensive production uses (LUI 3) increased 29.5% (5,657 km). This was driven by New South Wales, which increased by 41.9% (5,322 km).
• River length through urban and other intensive land uses increased by 11.7% (637 km).
• Over the same period, river length crossing less intensive land uses LUI 1 and LUI 2 decreased (867 km and 4,978 km respectively). 

At the state level:

• A similar intensification trend of decreasing LUI 1 and LUI 2 and increasing LUI 3 and LUI 4 was present in most states and territories and in both perennial and non-perennial rivers, although LUI 1 increased slightly (2.3%) in non-perennial rivers.
• All states and territories registered an increase in LUI 4, except for the Australian Capital Territory, which lost LUI 4 river length and gained small amounts in LUI 1.

4.2.3 Water supply ecosystem service (physical measures)

The bulk of surface water provisioning services was for use as an energy source (48,490 GL, 82.3% of total water provisioning services in 2015–16). This is dominated by hydroelectricity generation, where the water is not consumed but used to produce energy and is then immediately returned to the environment. 

Consumptive water provisioning services include surface water used as a material in production and for drinking.  In 2015–16, these amounted to 10,461 GL (17.7% of the national total):

• Water used as a material in production accounted for 8,961 GL, or 85.7% of consumptive surface water provisioning services.
• 1,500 GL of freshwater was extracted from rivers and streams for drinking (14.3% of consumptive use) - this was an increase of 7.4% from 2010–11.

Surface water for drinking

Drinking water is extracted by the Water supply, sewerage, and drainage services industry before being distributed to households. In 2015–16:

• New South Wales used the most surface water, 509 GL, distributed for drinking - this represents 34% of the surface water distributed to households in Australia.
• Victoria and Queensland are the second and third highest users of distributed drinking water, using 394 GL (26%) and 310 GL (21%) respectively.

Surface water used as a material

The Water supply, sewerage and drainage services industry extracts and redistributes water for use as a material in production to other industries including the Agricultural, Mining, and Manufacturing industries. These industries also self-extract water.

• The Water supply, sewerage and drainage services industry extracted 7,202 GL for use as a material in 2015–16, an increase of 1,408 GL (24.3%) from 2010–11.
• The Agriculture, forestry and fishing industry self-extracted the most surface water for use as a material in production (1219 GL in 2015–16, 13.6% of the national total).

Surface water used as an energy source

Surface water used for energy is dominated by Tasmania as it generates over half of Australia’s hydroelectricity (Australian Energy Statistics - Table O Electricity generation by fuel type 2016-17 and 2017 | energy.gov.au).

• During 2015–16, Tasmania used 30,854 GL, 63.6% of the national total water used for energy.
• Between 2010–11 and 2015–16, water used for energy fell 16.7% nationally due to lower rainfall and levels of water storage. This was evident in most states and territories.

4.2.4 Water supply ecosystem service (monetary measures)

In 2015–16:

• Australia’s rivers and streams provided $2.02b in water provisioning services for use as a material, based on an Australia-wide median water allocation price of $225/ML. 
• This was an increase of $1.77b from $244m in 2010–11, due to lower rainfall and reduced water allocations coupled with higher water demand. 
• New South Wales water provisioning services for use as a material were valued at $612m in 2015–16, a five-fold increase from $114m in 2010–11.
• In South Australia, the value of water used as a material increased to $95m, from $5m in 2010–11.
• Water used as a material in Victoria was valued at $48m in 2010–11. Valuation for 2015–16 in Victoria was not available.

2015–16 total state/territory values for Victoria and the Australian Capital Territory and 2010–11 total state/territory values for the Australian Capital Territory are not available due to data confidentiality. Values of water provisioning services for Queensland, Western Australia, Tasmania, and the Northern Territory have not been included due to data gaps and quality concerns. Values for surface water used for drinking or as an energy source (i.e. hydroelectricity) have not been estimated for this publication.