Institute for Sustainable Innovation

Georgy Fomenko, Marina Fomenko,
Konstantin Loshadkin, Anastasia Mikhailova,
Elena Arabova

Environmental-Economic Accounting
in Sustainable Resource Use

Theory and Practice

Author Team:

Georgy Fomenko, Doctor of Geography, Professor (Preface, Glossary, Chapters 1, 3, 4, Conclusion);

Marina Fomenko, Doctoral Candidate in Geography, Associate Professor (Chapters 1, 2, 3, Sections 4.1, 4.2); 

Konstantin Loshadkin, Doctoral Candidate in Geography, Associate Professor (Sections 1.3, 1.4, 2.2); 

Anastasia Mikhailova, Doctoral Candidate in Geography, Associate Professor (Sections 3.2, 3.4, 3.6);

Elena Arabova (Glossary, Sections 1.2, 1.3, 2.1)

Reviewed by 

Sergei Bobylev, Doctor of Economics, Professor, Member of the Russian Academy of Economic Science 

(Professor, Department of Environmental Economics, Faculty of Economics,
Moscow State University)

Renat PereletDoctoral Candidate in Economics, Associate Professor, Honorary Member of the Rome Club

(Senior Researcher, Systems Analysis Institute of the Russian Academy of Sciences)

Environmental-Economic Accounting in Sustainable Use of Natural Resources. Theory and Practice / Scientific. Ed. Georgy Fomenko – Costa Rica: Institute for Sustainable Innovation, 2019.– 394 p. 

The monograph considers the development of the System of Environmental-Economic Accounting (SEEA) that enables analysis of the interaction between the economy and the environment at different levels of territorial organization. It provides the philosophical and methodological framework for the SEEA establishment and development; shows the essence of the SEEA, including its origins, its place and role compared to other information systems, its institutional and organizational specifics; describes the experience of implementing the SEEA provisions in Russia. The monograph also provides a number of examples demonstrating the effect that the results of assessment of environmental resources and ecosystem services have on addressing complex issues of resource management and strategic planning of territorial development and describes the SEEA development paths.

The book is aimed at professionals from a wide range of backgrounds interested in environmental management and environmental protection.

© Georgy Fomenko, Marina Fomenko, Konstantin Loshadkin, Anastasia 

Mikhailova, Elena Arabova., 2017, 2019. All rights reserved.

No part of this book may be reproduced in any written, electronic, recording, or 

photocopying without written permission of the publisher or author. The exception 

would be in the case of brief quotations embodied in the critical articles or reviews 

and pages where permission is specifically granted by the publisher or author. 

Although every precaution has been taken to verify the accuracy of the information contained 

herein, the author and publisher assume no responsibility for any errors or omissions. 

No liability is assumed for damages that may result from the use of information contained within.

Interior & Cover Design: Susana Cardona <susanacardona.es>

Cover photography: «Batshevs/Shutterstock»

Publisher: Institute for Sustainable Innovation, Costa Rica.

ISBN: 978-0-9985796-4-1

ACKNOWLEDGEMENTS

The creative process is of course the prerogative of the authors. However, the outcome of this process could not have been as complete and as thoughtful without the knowledge and experience of people whose invaluable contribution helped to make the process meaningful, exact and relevant to readers.  Our vision of the spatial development of the System of Environmental-Economic Accounting (SEEA) and the related synthesis of concepts and ideas has taken shape since the mid-1990s. Over these years we have had the good fortune to take part in discussions of crucial scientific approaches to the evolution of modern information systems in the relationship between Society and Nature together with authors and academics. We therefore believe that it is important to mention those who have contributed to creating this treatise and bringing it to readers. 

We would like to express special thanks to:

Anil MARKANDYA, one of the creators of the concept of the “green” economy. 20 years ago he helped us to master SEEA approaches and methods for applying findings to improve environmental management and regional sustainability. We continue to draw on his forward-looking ideas and to attempt to put them into practice.  

Nikolai  LUKIANCHIKOV, an outstanding economist in the field of environmental economics, the last Deputy Minister of Ecology and Environmental Management of the USSR, who contributed much to introducing the basic principles of integrated environmental-economic accounting in Russia. 

Budimir POYARKOV, who suggested the idea of integrated territorial cadasters of natural resources based on diligent attention to regional and local levels of management.

Henrietta PRIVALOVSKAYA, leader of environmental research in the field of economic geography in Russia who has contributed greatly to the development of our team. Her participation in profound and many-sided discussions helped to clarify and articulate the foundations of our understanding of the territorial synthesis of economic and environmental information.  

Konstantin GOFMAN, whose short but highly meaningful and unforgettable talks in the early 1990s on various issues of environmental economics extended our horizons and helped us to embrace various methodological aspects of monetary estimates of environmental resources.

Sergei BOBYLEV, who provided valuable advice on the measurement of sustainable development and economic growth and supported our research in every way.

Renat PERELET, who introduced us to the theory of sustainable development in the early 1990s. and whose friendly support through the last two decades has been of inestimable value.

Vladimir ZAKHAROV, with whom we have had valuable interchanges regarding environmental health and the importance of the Earth Charter.

Miriam LINSTER, who offered numerous timely and highly fruitful recommendations on creating and developing green economy and green growth indices, drawing on OECD expertise.

Vim COFINO for insightful discussions on philosophy and sustainability measurement.

Alexander DUMNOV for valuable consultations on the basic methodology of environmental statistics and specifics of environmental-economic accounting. 

Alexander LYUTY, whose “language of maps” helped us finalize the methodological basis for creating behavioral maps integrated with the SEEA and formulating map legends with a focus on sustainable resource use and environmental protection.

We are also grateful to Yuli Lipets, Valery Pulyarkin, Enrid Alayev, Luisa Nochevkina, Vladimir Streletsky, Andrei Treivish, Irina Volkova, Tatyana Runova, Hans-JürgenTaurit, Lev Knyazkov and many other colleagues for their sympathetic and deep discussion of numerous ideas in the course of informal meetings.  

At various stages of the work our research was supported by leading experts of the Russian Ministry of Natural Resources and Environmental Protection, the Federal Service for National Statistics, Federal Service for Supervision of Natural Resources, as well as regional and municipal administrations in Kaliningrad, Kaluga, Kemerovo, Kostroma, Nizhny Novgorod, Ryazan, Saratov, Tomsk, Yaroslavl, Kamchatka and Krasnoyarsk Regions, the Republics of Buryatia, Karelia and other subjects of the Russian Federation. 

Our understanding of the SEEA principles was greatly expanded by regular participation in meetings on environmental statistics and environmental-economic accounting held by UNECE (Lidia Bratanova, Tiina Luigi, etc.), the UN Department for Statistics and the OECD, where we have refined our views of statistical environmental systems over a period of nearly 10 years. 

Our special thanks to Andrey Tatarinov, Natalia Shashlova, Marina Klevakina, Galina Romashkina, Mikhail Gordonov, Alexander Averchenkov, Anatoliy Shevchuk, Olga Medvedeva, Arkady Tishkov, Alexander Adam, Alexander Golub, Alla Shvets, Vladimir Revezensky, Mikhail Buyanov, Elena Bondarchuk, Valery Panov, Margarita Tsibulnikova, Vladimir Morozov and many others for their expert assistance at various stages of the research, on which the conclusions of this book are based.  

ABBREVIATIONS

GDP – Gross Domestic Product

GRP – Gross Regional Product 

WTO – World Trade Organization 

CEA – Classification of Environmental Activities 

IAEA – International Atomic Energy Agency 

RVM – Residual Value Method

ISIC – International Standard Industrial Classification of all Economic Activities 

IEA – International Energy Agency

UN – United Nations  

SPA – Special Protection Area

OECD – Organization for Economic Cooperation and Development 

SNA – System of National Accounts

EPEA – Environmental Protection Expenditure Accounts  

SEEA – System of Environmental-Economic Accounting 

SEEA-W – System of Environmental-Economic Accounting for Water

SDG – Sustainable Development Goals

NDP – Net Domestic Product  

NPV – Net Present Value

SEIS – Shared Environmental Information System 

GLOSSARY

Asset is a store of value representing a benefit or series of benefits accruing to the economic owner by ownership or use of the asset over a period of time.  It is the means of transferring value from one accounting period to another (Central Framework for the SEEA. UN, 2012). 

Man-made (physical) capital includes man-made means of production, such as machines, buildings, production infrastructure, which are involved in the production process without being materialized in the final product (Renat Perelet. Systems Management of Transition to Sustainable Development, 2009).

Return on Produced Assets is the income from the use of produced assets in the process of production after deduction of the fixed capital consumed in this process (Central Framework for the SEEA, UN, 2012). 

Return on Environmental Assets is the income attributable to the use of environmental assets in the production process after deducing all costs of extraction including any costs of depletion of natural resources (Central Framework for the SEEA. UN, 2012). 

Living System is a multiple interconnected network whose components continually change, are transformed and are replaced by other components. The network is characterized by exceptional flexibility and fluidity, which enables the system to respond in a specific way to disturbances or “stimuli” coming from the environment (Capra, F. The Web of Life. A New Scientific Understanding of Living Systems. Moscow: Sofia Publishing House, 2003).

Green Economy is the economy, which serves to improve human well-being and social equity, while significantly reducing environmental risks and ecological scarcities.   The green economy is a system of economic activities related to the production, distribution and consumption of goods and services, which results in long-term improvement of human well-being without exposing future generations to significant environmental risks and ecological deficits; it is environmentally harmless, eco-friendly and socially fair   (Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication. UNEP, 2011).

Green Growth involves fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies. This is achieved by catalyzing investment and innovation to underpin sustained growth and create new economic opportunities (Towards Green Growth. A Summary for Policy Makers. OECD, 2011).

Inclusive Growth is a new approach to understanding economic growth, focused on improving living standards and achieving more equitable distribution among social groups of benefits from increased well-being (All on Board. Making Inclusive Growth Happen. OECD, 2014).

Institutional Unit is an economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in transactions and other economic activities with other entities (Central Framework for the SEEA. UN, 2012).

Use of Natural Resources is the exploitation of natural resources, their transfer to economic activity, including any way of affecting them in the process of economic or other activity (Federal Law of 10.01.2002 No. 7-FZ (as amended on 29.12.2015) “On Protection of the Environment”). 

Cultivated Biological Resources include animal resources yielding products on a regular basis, as well as timber, crop and plant resources yielding repeat products on a regular basis, whose natural growth and regeneration are under the direct control, responsibility and management of an institutional unit (Central Framework for the SEEA, UN, 2012) 

Best Available Technology is a technological process or technical method based on advanced scientific and technical achievements, which is aimed at reducing negative environmental impact of economic activities and has an established service life with due account for economic, technical, ecological and social factors (Amendment No.1 GOST P 521004-2003 Resource Saving Terms, Definitions approved by  Rosstandart Order of 30.11.2010 No.756-st)

Negative Environmental Impact is the effect of economic and other activities resulting in negative changes in the environment (Federal Law of 10.01.2002 No.7- FZ (as amended on 29.12.2015) “On Protection of the Environment”).

Non-Produced Assets are assets that have come into existence in ways other than through processes of production.  (Central Framework for the SEEA, UN, 2012). 

Environment is a complex of the components of the natural environment, natural, and part-natural, part-man-made objects as well as man-made objects (Federal Law of 10.01.2002 No. 7-FZ (as amended on 29.12.2015) “On Protection of the Environment”).

Fixed Assets are produced assets that are used repeatedly or continually in production processes over a period longer than one year. (Central Framework for the SEEA.   UN, 2012) 

Natural Resources are components of the natural environment, natural objects and part natural-part man-made objects which are used or can be used in economic or other activities as energy sources, production outputs and for consumption, and which have consumption value. (Federal Law of 10.01.2002 No.7-FZ (as amended on 29.12.2015 “On Protection of the Environment”).

Environmental Capital (in terms of the theory of economic growth) is the aggregate of natural resources, which can be used in production processes. Any environmental asset creating a flow of eco-services with economic value is environmental capital (Dictionary of Sustainable Development Terms, http://www.ustoichivo.ru)

Environmental Institutions are the “rules of the game” in a society, a certain framework of limitations that organize relations between individuals with due account for environmental factors. Such institutions are the products of collective effort; they generate incentives that induce people to comply with environmental restrictions and regulations. They reduce uncertainty by structuring everyday life or, in other words, they determine or limit the range of alternatives available to each individual in his or her relations with the natural environment. Environmental institutions make the behavior of people and communities in the environmental sphere more predictable, reducing the probability of destructive behavior and conflicts caused by it (Fomenko, G.A. Environmental Management: A Socio-Cultural Methodology. Institute for Sustainable Innovation, San Jose, 2017)

Produced Assets are assets that have come into existence as outputs of processes that fall within the production boundary of the SNA. (Central Framework for the SEEA. UN, 2012) 

System of National Accounts is an internationally coordinated standard set of recommendations to measure indicators of economic activities in accordance with strict rules of accounting and reporting at the macro level based on the principles of economic theory (System of National Accounts 2008. New-York, 2012 p. 64)

System of Environmental-Economic Accounting is a multipurpose conceptual framework for describing the interaction between the economy and the environment and the stocks and changes in stocks of environmental assets. (Central Framework for the SEEA. UN, 2012) 

Bifurcation Point is a critical state of the system when the system becomes unstable in respect of fluctuations and uncertainty arises whether the state of the system will become chaotic or whether it will ascend to a new, more differentiated and elevated level of regularity (Muzika, O.A. Bifurcation in Nature and Society: Natural-Science and Socio-Synergetic Aspect // Modern High Technologies 2011. №1 С. 87-91).

Sustainable Productivity is an excessive or surplus quantity of animals or plants, which can be absorbed from the population without affecting the capacity of this population for self-reproduction. (Central Framework for the SEEA. UN, 2012) 

Sustainable Development is development, which can meet the needs of the present generation without undermining the ability of future generations to meet their own needs (Our Common Future. Report of the International Committee on Environment and Development. 1987. Moscow: Progress, 1989)

Vulnerability of Environmental Systems is the inability of environmental systems (biological communities, landscapes, etc.) to withstand the impact of external forces (any forces, although man-made effects are of special significance). Vulnerable environmental systems can be easily disturbed; they can lose their structure and function, and may be rearranged in a harmful way (Malashevich Ye.V. Short Reference Dictionary on Environmental Protection. Minsk, 1987)

Environmental Assets are the naturally occurring living and non-living components of the Earth, together constituting the biophysical environment, which can provide benefits to humanity (Central Framework for the SEEA. UN, 2012) 

Environmental Risk is the probability of occurrence of an event having unfavorable consequences for the natural environment, caused by negative impact of economic or other activities, or by emergencies of an environmental or man-made character (Federal Law of 10.01.2002 No. 7-FZ (as amended on 29.12.2015) “On Environmental Protection”).

Ecosystems are geographical locations that host a dynamic complex of plant, animal and microorganism communities and their inorganic environment, interacting as a functional whole to generate environmental structures, processes and functions (the Central Framework for the SEEA.  UN, 2012) 

Ecosystem Services are the functions of ecosystems in providing benefits to the users of such services through the natural achievement of various kinds of regulating functions.  Users of the services may be at local level (individual enterprises), or at regional or global level, including entire countries and regions (Convention on Biological Diversity – International Agreement adopted in Rio de Janeiro on June 5, 1992).

FOREWORD

Unprecedented in terms of its historical importance, the adoption of universal global sustainable development goals (SDGs) has produced a corresponding demand for information and analytical support in achieving these goals. In instrumental terms, the comprehensive nature of SDGs requires a change in approaches to strategic environmental planning and program-oriented and goal-oriented management at all levels of territorial organization. In methodological terms, it means the enhancement of coverage and the goal-oriented shift of focus in addressing problems of territorial development at all stages of work with information resources, starting from data selection, generalization, analysis, interpretation and understanding, which, in fact, means a substantial change in approaches to creation and further development of information and analytical support. Alongside tackling data systematization and update challenges for the purposes of addressing management issues, a special emphasis should be placed on the goal-oriented synthesis of sustainable development and green economy indicators, environmental indicators and special socio-cultural measurements.

In our opinion, the nature of discussions around SDGs and how they can be achieved reflects the changes that are occurring in understanding of the use of natural resources and, more broadly, the very essence of nature, not only as a set of natural objects and resources but also in its system “integrity” (Cassirer, 2004). The importance of these discussions correlates with the fact that by the end of the 20th century, the “wholeness” of nature has been considerably rethought, primarily, in the context of phenomenological philosophy and sociology. Alfred Schütz submitted an important argument that a distinction must be drawn between nature as a discipline of natural sciences and nature as a “constructive element of the lifeworld” (Schutz, 2004). As a result, at the worldview level, it further justified the occurring changes in views on the reasonability of broad application, in the context of sustainable development, of the theory of utility and full economic value to natural resources and ecosystem services, which predetermined new information needs.

On the other hand, the adoption of the sustainable development goals (SDGs) itself has become possible due to the emergence and rapid development in the last years of instrumental methods for collecting and processing enormous amounts of empirical data (including those at the micro-level, including aggregation and disaggregation, various interpretations in accordance with the set objectives, etc.) accumulated by behavioral and social sciences and representing the characteristics of the described essences for the purpose of their identification, search, assessment and management (American Library Association, 1999). 

The key problem of environmental and economic measurements is that of measuring the sustainability of the use of natural resources (which, in fact, this book is addressing). We, the authors, proceed from the fact that the modern theory of sustainable development constitutes the most developed and acceptable methodological basis for maintaining Peace and preventing a global environmental disaster. Today, the System of Environmental-Economic Accounting (SEEA) provides the best way of measuring the key interactions between the economy and the environment.

As geographical scientists, we grew in the Russian cultural environment with its ambition for comprehensiveness and indivisibility of the world perception. These socio-cultural peculiarities of the vision (as well as the authors’ multifaceted work experience in management, production, design structures) allow perceiving naturally and to use the multidisciplinary approach to research that is quite productive in finding paths to sustainable development. It should be noted that our understanding of territorial planning and holistic accounting for natural resources and ecosystem services was formed by the Russian geographical school. It also must be mentioned that it was a good school of holistic territorial accounting for natural resources. However, behavioral specifics of communities, monetary relations, especially in the context of resource use preferences driven by socio-cultural factors, were significantly limited by the then dominating labor cost theory that hindered development of the behavioral economy and institutional geography.

In the early 1990s, it could be seen particularly well. The lack of monetary assessment of natural resources and the environment inherited from the state-planned and command system became one of the cornerstone problems of effective use of natural resources. In the new situation, when businesses no longer took into account the environmental and social requirements of territorial development of regions and settlements in locating their new manufacturing sites, the task of system accounting for natural resources to ensure multifaceted management and strategic planning of territorial development became more challenging.

Despite the economic difficulties in the Russian Federation, holistic environmental-economic accounting activities began in 1990s because information systems inherited from the state-planned and administrative system were set to collect information on key types natural resources and to address particular industrial issues. They did not allow conducting territorial analysis for comparing the real value of natural assets with income gained from their use, nor to conduct retrospective and forecasting research (including assessment of depletion of economically significant natural resources), nor to compare the value of various components of natural wealth (when planning investment). Moreover, the then existing information flows did not cover a wide range of natural resources; comparison of results was complicated due to the differences in collection, processing and visualization methods. Under such conditions, it is extremely difficult to justify and make effective management decisions on the multipurpose use, reproduction and protection of natural resources.

Our organization (Cadaster Institute), a scientific and production enterprise of cadasters of natural resources, was established by the Ministry of Environmental Protection and Natural Resources in the Russian Federation in 1992. Special attention in methodical and practical developments was paid to assessment of socially and environmentally dangerous exhaustibility due to extraction or quality deterioration of a resource as a result of economic activities (in physical and value, i.e. monetary, indicators); establishment of indicators of stocks and use of natural resources and ecosystem services not accounted in the existing statistical monitoring and departmental accounting systems; institutional aspects of the use of such indicators, including those driven by socio-cultural factors.

Today, we can identify the following stages of development of this area in the Russian Federation.

Stage One: the conduct of the federal experiment for improvement of accounting and socio-economic assessment of the natural resource potential (1993-1995). It was based on an attempt to develop and implement Integrated Territorial Natural Resources Inventories in environmental management practices. The experiment for developing Integrated Territorial Natural Resources Inventories was conducted under the guidance of the Ministry of Environmental Protection and Natural Resources of the Russian Federation in 35 constituent entities of the Russian Federation and was developing quite successfully. Two all-Russian meetings were conducted at the premises of Cadaster Institute in 1992 and 1994, where the experiment results were discussed.

Integrated Territorial Natural Resources Inventory was initially planned to contain data on natural resources in physical terms and could serve as a basis for their assessment in the structure of the regional and, ultimately, national system of environmental-economic accounting. Economic assessment was considered a necessary completing link in the system of holistic cadastral assessment of natural resources allowing inclusion of natural assets into assessment of economic activities. It was expected that such assessment would give an objective idea of the economic value of natural resources and allow justification of investment in their reproduction and protection and to select the most effective way of using such resources. In case of multipurpose use of natural resources, their monetary estimates could allow not only choosing how to use a particular resource (object) but also determining a strategy for sustainable use of the natural resource potential of the entire territory. Furthermore, they hoped that monetary estimates of natural resources could help optimize taxation of various types of natural resource use.

Stage Two: development of the regional environmental-economic accounting operations in accordance with the UN methodology (1996-2006)By that time, the flaws of the methodology of multipurpose territorial cadasters of natural resources had become apparent. They included the loss of the modern geographical science integrity: the unity of natural sciences and humanities in geography was split into many disciplines while physic-geographic and economic-geographic branches diverged substantially. Thus, in methodological terms, the very structure of measurements in the system Society-Nature that could allow creation of multifaceted geographical description within Integrated Territorial Natural Resources Inventory turned out to be weakly developed. During the development of Integrated Territorial Natural Resources Inventories, the static nature of most indicators reflected in them (stocks of natural resources, production, emissions and discharges, etc.) was discovered, which became an obstacle in analyzing the efficiency of regulation in natural resource use and environmental protection. The need has become obvious, not only in the system territorial approach allowing for economic comparison of natural resource use options but also in the dynamics — changes in raw material flows and ecosystem services, including in monetary terms.

Many other countries faced similar problems. It became possible to move forward owing to the System of National Accounts (SNA) and its satellite System of Environmental-Economic Accounting. The latter is a set of interrelated statistical indicators reflecting the state of natural capital (stocks, flows and other changes), allowing adequate determination of the value of natural resources and inclusion of it into the balance sheets of assets and liabilities within the framework of SNA. The System of Environmental-Economic Accounting is actively developing in many countries. A considerable contribution to establishment of the SEEA in the Russian Federation was made by the world-renowned scientist, Professor Markandya, one of creators of the very idea of “green economy” (Pearce, Markandya & Barbier, 1989); he personally consulted us during the initial stage of works in 1994-1999 (Fomenko, G., Fomenko, M., Markandya, & Perelet, 1997b). Development of the System of Environmental-Economic Accounting of the Yaroslavl Region should be deemed basic. As a result, based on the analysis of data on the availability and economic use of main natural resources (surface water, soil water collected from public water supply systems, ground water collected from wells, agricultural lands, timber and non-timber forest resources, recreational areas, hunting, fishing, mineral resources — sand and sand-gravel mix, bee resources), for the first time in Russia, the SEEA matrix was created, the amount of natural capital of the Yaroslavl Region was determined, the regional green GDP and NDP were calculated. As the research results has shown, the assessment of natural assets allows determination of the effectiveness of the current scenario of natural resource use (public water supply, forest, mineral resource complex, etc.) and to identify the most efficient areas of sustainable development.

Later, with the support of the Ministry of Natural Resources of the Russian Federation, the Federal Service for Supervision of Natural Resources Use and its territorial bodies as well as governmental and local self-regulation authorities of the Republic of North Ossetia-Alania, the Republic of Karelia, the Tomsk, Ryazan, Kaluga, Saratov, Kaliningrad and Kostroma Regions, the positive experience gained was used in other regions of the country. The emphasis was placed both on accounting for natural resources in physical terms and on economic assessment of natural resources. It was due to the extremely high role of the SNA/SEEA as a tool of analysis of socio-economic development in many countries.

Not only did the results of regional research confirm practical applicability of the UN methodological principles of environmental-economic accounting in Russia and demand for obtained results in environmental management but also detected gaps in statistical and departmental information. First of all, it was the lack of indicators characterizing stocks and flows of natural resources (quantitative and qualitative aspects). Ineffectiveness of the territorial analysis based only on the “top-down” approach has become apparent. In the course of the works, it was supplemented by the “bottom-up” approach implying clarification of regional indicators of availability and actual consumption of natural resources at the municipal district level (starting from local settlements and private households, with further aggregation of this data at higher levels of territorial organization).

Stage Three: work activation at the federal level based on the territorial approach (2007-2011). At this stage, we conducted a pilot study to assess the possibility of application of the SEEA basic methodology at the federal level. The study was conducted in accordance with the provisions of international methodological documents on accounting for the value of natural assets in national wealth. More than ten years of experience in monetary assessment of natural resources in accordance with the SNA/SEEA approaches enabled us to conduct in Russian regions the analysis of conceptual approaches to recording natural resources in the SNA as a part of financial assets and establishing a satellite system of environmental-economic accounting. The state statistical monitoring system in use of natural resources and environmental protection was analyzed in terms of compliance with the SNA principles, and the methodology for valuating natural resources was summarized in accordance with the SNA/SEEA requirements.

These studies allowed development of methodological principles of recording the monetary estimate of natural wealth in the statistical system. With the support of Rosstat (Federal State Statistics Service), the SEEA matrices were completed, for the first time, by constituent entities of the Russian Federation. In our opinion, for Russia, such disaggregation is crucial because timely identification of dangerous trends of natural capital depletion, in both monetary and physical terms, is especially important for regions. The results obtained visibly intensified activities of accounting for natural assets in national wealth within the framework of the Federal Target Program “Development of the State Statistics in 2007-2011.” This program envisaged improvement of statistical monitoring of the use and replenishment of natural resources and environmental protection based on the effective system of indicators and methodology of their establishment.

Stage Four: assessment of the country’s natural capital based on the industrial approach (2012 until present). The development of works in the Russian Federation was based on the following documents:

1) System of National Accounts, 2008, Central Framework of the System of Environmental-Economic Accounting, 2012, System of Environmental-Economic Accounting for Water, 2012;

2) Roadmap for Accession of the Russian Federation to the OECD Convention adopted at the 1163rd session of the OECD Council of November 30, 2007;

3) Decree of the Government of the Russian Federation (October 12, 2012 No.1911-r) on Making Amendments to the Federal Plan of Statistical Works Approved by the Government of the Russian Federation (May 6, 2008 No.671-р);

4) Action Plan to Perform Works Envisaged by the Decree of the Government of the Russian Federation (October 12, 2012 No.1911-r), in respect of the monetary estimates of natural resources and calculation of resource efficiency (Order of Rosstat of July 8, 2013 No.274).

Under the guidance of Rosstat, methodological recommendations were prepared on economic assessment of water, mineral resources, ground and water bio resources in the SNA. In this area, in 2014-2015, the Cadaster Institute developed “Methodological Recommendations for Economic Assessment of Forest and Hunting Resources (as Non-Cultivated Biological Resources),” covering the following:

1) key concepts of forest and hunting resources as non-cultivated biological resources in terms of their assessment as a part of natural capital in accordance with the SNA/SEEA principles;

2) the SNA/SEEA methodological approaches in relation to the general principles and peculiarities of assessment of these resources at the current market value in the institutional conditions and statistical reality of the Russian Federation;

3) procedure for conducting calculations in assessment of forest (timber and non-timber forest products) and hunting resources and calculation of the resource rent and discounted value of non-cultivated biological resources (Fomenko, G., Fomenko, M., Loshadkin & Arabova, 2016).

The work conducted is particularly topical due to the introduction of a range of statistical indicators of stocks of non-cultivated biological resources (timber and animals, in physical terms and current market prices as of the beginning and the end of the year), changes in non-cultivated biological resources starting from 2016 and indicators of the use of non-cultivated biological resources in the economy, in physical terms and current market prices, starting from 2019.

Our work on this book was designed to demonstrate our vision of ways and specific features of development of information systems in natural resource use and environmental protection using SEEA. For this purpose, we deemed necessary to provide the philosophical and methodological framework for establishing and developing the SEEA based on the theory of living self-organized systems; to show the essence of the SEEA, including its origins and development, its place and role compared to other information systems, its institutional and organizational peculiarities; to describe the experience of implementing the SEEA provisions in Russia; to demonstrate, on the example of a number of projects, the effect of the results of assessment of environmental resources and ecosystem service on addressing complex issues of natural resource management and strategic planning of territorial development; to describe the SEEA development paths. Our aim was to take into account the new requirements for SNA/SEEA development to the maximum extent possible, to present some of our conclusions and observations, to make the material useful for a wide circle of experts and practical specialists.

CHAPTER 1

METHODOLOGICAL PREMISES. SIGNIFICANCE AND BASIC PROVISIONS OF SNA/SEEA

In today’s dynamic world the concept of sustainability increasingly implies, not so much stability, as the ability of systems to survive, adapt and develop under the impact of unpredictable changes or even catastrophic events. In order to achieve sustainable development, i.e., to attain well-being within the limits of the planet’s environmental potential, there has to be a radical change in existing patterns of production and consumption, which are the root cause of hazardous impact on the environment and climate.  Such changes depend upon profound transformation of principal public institutions, practical approaches, technologies, politics, lifestyle and thinking.

The attainment of a new level of stability requires green innovation, quality forecasting and new effective partnership between corporations, governments, territorial communities and other stakeholders.  Sustainable control by government over environmental, social and economic development depends on obtaining and analyzing relevant scientifically based and officially substantiated information timely. The required information includes, in addition to environmental indicators, data on the stocks of various kinds of natural resources, which are essential components of the environmental capital of a region or country, on the manner and intensity of their use in the economy, the yields obtained, etc.

The declaration of global goals of sustainable development in 2015 will entail change in approaches to strategic environmental planning and management by objectives at every level of territorial organization. Methodologically, this means expansion of scope and shift of focus at all stages of information handling, starting from the choice of required data, their generalization, analysis and interpretation, entailing the need for a new approach to the provision of information and analysis. In turn, that provision depends on a goal-oriented synthesis of the indicators of sustainable development and the green economy, of environmental indicators and specific socio-cultural measurements. The key element of the new information synthesis is a definition and substantiation of the core platform, which is adequate to the needs of today. 

1.1.
Philosophical and methodological prerequisites for creating and developing an environmental-economic accounting system

Measurement has paramount importance in the theory of sustainable development. As early as the 15th century Nicholas of Cusa, who was a forerunner of the scientific perception of the world, believed that humans can cognize nature by means of their senses, imagination, reason and intellect. “Reason, from the moment that its nature admits speculation, perceives only the universal, the incorruptible and the unceasing.” In his treatise The Layman on Wisdom and the Mind he states the need to develop precise methods of measurement, particularly mathematical measurement (Nicholas of Cusa, 1979). Nicholas of Cusa believed correctly that the cognition of genuine essences is not possible, or can only be attained by more or less accurate conceptions. He advocated the concept of learned ignorance: even the deepest knowledge does not eliminate ignorance. 

Changing the World View.  The following points are important for an understanding of the nature of the changes now affecting information support for resource use and environmental protection.

First of all, at the start of the third millennium the world community is increasingly conscious of the global character of environmental problems and the real possibility of the occurrence of environmental crises (not just regional but also global), and also understands the responsibility of humankind for any such developments.  

Secondly, recognition of the threat of environmental catastrophe and the impossibility of preventing it by means of technology or economic mechanisms alone has led to a reconsideration of many conceptions, including those concerning the relationship between Society and Nature. Many outstanding thinkers and philosophers of the 20th century (Teilhard de Chardin, Vernadsky, Fromm, Jaspers, etc.) insisted that the development of society could not progress further without changes in the existing paradigm of the relationship between human and nature. It is no coincidence that the late 20th century saw the philosophy of environmental crisis develop into a separate branch of philosophical study. According to Hösle, “... the philosophy of environmental crisis must determine the place of this (environmental – Auth.) threat within the philosophy of the history of human culture.” 

Schelling’s subject-object approach, which introduces a perception of the essence of nature in its entirety and not just as a collection of natural objects and resources, is of particular importance for proper understanding of today’s world. We would note that nature as “wholeness” has been substantially reconsidered in phenomenological philosophy and the sociology of resource use.  Precisely the phenomenological view of nature, a new understanding of the basic difference between nature as a constituent element of the “world as experience” and as a store of resources had made it possible to methodologically substantiate the importance of evaluating natural resources and ecosystem services in their broadest sense. 

This perception of the world has been developed by the new systemic concept of life (Bogdanov, von Bertalanfi, Prigozhin, Maturana and Varela, Capra, Kuznetsov, Moiseev, etc.)  The new paradigm is often called holistic, which emphasizes its view of the world as an integrated whole. It focuses on the complexity of “systems” views and introduces new key concepts, such as self-organization, social communication networks, development as a systemic process.

In this concept the essential properties of an organism or a living system are properties related to the whole which are not inherent in any of its parts.  There has been a change in the conception of the relationship between parts and whole. In the systems approach, the properties of the parts can only be deduced from the organization of the whole. Accordingly, the systemic approach focuses on main principles of organization rather than on “building blocks.”  Capra noted that Systems Thinking is contextual thinking; and since to explain things in terms of their contexts is to explain them in terms of their environment, all systems thinking is a philosophy of the environment. Shifting focus from the parts to the whole can be seen as a transition from objects to relationships. According to the mechanistic world view, the world is a collection of objects. They inevitably interact with each other, hence there are relationships between them. However, the relationships here are secondary, as shown schematically in diagram A (Fig. 1.1). Systems thinking proceeds from the idea that objects themselves are networks of relationships included in bigger networks. For the systems thinker, relationships are primary. The boundaries of various patterns (“objects”) are secondary, as shown in diagram B (Fig. 1.1)  

From diagram to background: from objects to relationships

Fig. 1.1 From diagram to background: from objects to relationships

Source: Capra, 2003

By presenting the living world as a network of relationships, network thinking (more elegantly, in German, vernetztes Denken) has become another key aspect of systems thinking (Capra, 2004). Such a philosophical and methodological position does not permit the human being to be thought of as a creature who has accidentally “fallen out” of the natural world that surrounds him or even become its natural adversary.  

The adoption of the global goals of sustainable development assumes the description of future events as “must do,” setting radically new methodological problems for environmental work (in a broad sense) , based on the goal-oriented synthesis of natural, humanitarian and technical expertise. This enhances the role of environmental ethics which, according to Jonas, must gradually become “future-oriented ethics” (Zukunftethik): the current situation requires “far-sighted forecasts, broad responsibility (for the future of humankind) and large-scale vison (the whole future essence of human) as well as ... harnessing the power of technology to the greatest possible extent” (Jonas, 2004).

Here, the ethics of preserving life acquire an ontological sense, as described by Kant, Fichte, Hegel and, in particular, Schelling, and renounce the strict opposition of subject and object . On the one hand, the human being is produced by nature and thus is an integral part of nature. On the other hand, the human is the only living being capable of cognizing the principles of its own existence and evolution as well as those of nature.  This duality, according to Schelling, is the enigma that any theory of the human-nature relationship has to address. Schelling was described by Bulgakov (2009) as a “philosopher of nature and objective reality.” Two profound and vital ideas put forward by Schelling are of the utmost importance today for the theory of sustainability: 

1) identity of subject and the object in their dynamic development;

2) understanding of nature as a living, evolving organism, corresponding to the concept of “Gaia,” when the Earth was treated as a living being.

E. Laszlo (1997) was therefore correct in stating that the environmental ethics of anyone who strives to enhance biosphere potential for supporting human life are inevitably anthropocentric.   A human being should not, however, be unreasonably anthropocentric, because people as a biological species are endowed with the natural capability (and hence the natural right) to strive for collective survival. Individual and social behavior must be oriented to complying with the paramount requirement: to maintain favorable conditions in the biosphere by enhancing people’s responsibility for their actions that affect the natural world. Recognition that nature itself has rights means that people must eliminate intended and unintended negative consequences of their actions for the natural world and be liable for their actions.

Schelling’s subject-object natural philosophy, which endows the natural world with its own dignity irrespective of the human self-development process, is of great significance for sustainable development today.  In this perspective the natural world appears as something meaningful, combining the true, the good and the beautiful, worthy of honor and love from human beings as an image of the absolute rather than as something, which they have constructed.   Methodological engagement with the interaction of ethics and economics in respect of environmental work is furthered by the ethical economics developed by Kozlovsky. His work offers a deeper insight into the role of ethical codes and religions as guarantors of an ethical approach to nature. Also of importance for understanding the humanistic essence of sustainable development are the views of Bulgakov, while works by Jonas and Hesle are of great significance for the philosophy of environmental crisis, particularly for substantiating the imperative of “responsible behavior.”

Admitting a Multivariate Future. Any human practice, and particularly that relating to the environment, focuses on a transition from the past to the future that appears reasonable to decision-makers. Possible alternative futures are determined by the synthesis of socio-cultural traditions and trends and tendencies spurred by modernization processes.  One of the shrewdest typologies of future scenarios was suggested by Lutz in 1988 (Table 1.1).


 

Table 1.1 Brief characteristics of main future scenarios

Scenario 1.

Computopia

Scenario 2.

Space 

colonies

Scenario 3.

Ecotopia

Scenario 4.

Chinization

Scenario 5.

Findhorn

Scenario 6. 

Dallas

Scenario 7. 

Gaia

Who?

Nelson,

Norris,

McLuhan,

Toffler,

Glushkov 

O’Neill,

 Hubbard,

 Leary,

 von Puttkammer,

 Fedorov,

 Tsiolkovsky,

 Cellenbach, Schumacher, Lovins

Ehrlich,

Meier,

Platt

Caddy,

Ferguson,

Spranger

Kahn,

 Machiavelli,

Wiener

Lovelock,

 Brand,

 Meadows,

Vernadsky

 Moiseev

What?

Universal communication, computerization, communication and production systems.

Self-contained Space stations in low-earth orbit.

Small decentralized and self-organizing eco-settlements and regions.

Metropolises with multibillion populations, “melting pots” of races and nations.

Religiously (or rather, spiritually) oriented communities.

Imperialized economy, supremacy of the “western” system; market orientation. Monopolized economy, “customized system” of market orientation without government regulation.

Earth ecosystem as a self-organizing lifestyle.

Why?

Overestimation of the role of communications, democracy, teleworking, universal automation.

Overestimation of the potential offered by industrialization and unified energy saving; production is prioritized; efforts are made to protect the environment.

Absolute priority given to environmental considerations, adaptation of production to meet the needs of lower-level natural systems, achieving a way of life in harmony with the surrounding world.

Extrapolation of the demographic explosion, preoccupation with the polyplanetarization of peoples.

Priority given to the interior life for physical and spiritual growth.

Excessive role of hyper-professionalization and competition (social Darwinism). 

Understanding the need for new practice due to the interdependence of all living systems on Earth.

How?

Networking of existing systems and universal digitalization*. 

Space flight and construction of space colonies, step-by-step agenda for building space stations.

Complete decentralization and the creation of environmentally friendly forms of life and production.

Promotion of tolerance and ethnic mixture as opposed to ghettoization.

Religious (spiritual) discipline and reorientation by individuals to “global,” universal values.

Priority given to the economy, self-regulated “free market,” re-industrialization.

Global coordination of all environment-oriented activities.

Who favors the scenario?

Computer industry

Space industry, military-industrial complex, giant corporations.

Environmentalists and people who support sustainability.

Advocates of social integration and intercultural exchange.

“Post-materialists” and new sensualists.

Big corporations, banks, industry, the capitalist aristocracy.

Those committed to the interests of humankind as a whole (currently all “victim” nations).

Who against the scenario?

The poor South, catch-up industrial economies.

The third and fourth world, which are excluded in this development course.

Transnational conglomerates and those who do not choose to live in poverty.

Nationalists, separatists and “anchorites.”

Materialists and pragmatists who fetishize the role of cost and pricing.

Opponents of private property and idealists who reject any form of conflict.

Nationalists and specialized industrial sectors.

* Digitalization means the conversion of information into discrete forms and its subsequent use to generate numerical indicators

Source: Lutz, R. Sieben Zukunftszenarien: [Plane fur eine menschliche Zukunft. hrsg. von Rudiger Lutz. Mit Beitr. von Manon Andreas Grisebach...] Weinheim; Basel: Beltz, 1988. pp. 291-300, supplemented by G. Fomenko

Even looking at the main conceptual trends very generally, substantial differences between their proponents and opponents are evident as regards priority goals, approaches and methods. There is clearly a broad variety of views on environmental priorities, the efficiency of environmental institutions, information support, etc.  

It is impossible to predict which scenario will be realized since too many factors are at play and some of them are a matter of chance. It is only possible to identify the causes that have led to the realization of a certain scenario and to discover its logic in retrospect. All that one can do when making forecasts is to list a range of possibilities, identify more and less probable options and determine which of the probable scenarios are particularly hazardous for specific countries and nations, and for mankind as a whole.  

The fundamental right of people to choose their own future must be acknowledged unless their choice is evidently destructive for mankind as a whole. For this reason all contemporary definitions of sustainable development, starting from the definition given by Bruntlann , proceed by stating what has to be done in order to avoid the most undesirable future scenarios. In other words, a range of acceptable solutions for a country or nation is determined by applying global indicators for human impact on the environment. 

Responsible behavior capable of preserving the life of present and future generations must focus on preventing global environmental catastrophe, mitigating risks and preventing conflicts in the sphere of environmental management at minimum cost. Devising and implementing approaches to sustainable development depends on finding ways forward and limitations in the regulation of social, natural and systems, and means of purposeful impact on these systems in response to growing development risks in a production-oriented society.  

Since spatiality is one of the fundamental dimensions of human existence, structuring our world outlook and action, it makes sense to speak of a space of risks, including environmental risks, at all levels of territorial organization (both explicit and implicit).   This is, essentially, a geographical space treated in terms of riskology and distinguished by territorial characteristics, generating an aggregate of relationships between geographical objects in a specific territory evolving over time (Environmental Institutions, 2010).  In this approach the measurement of environmental risks and respective indicators must be included in any evaluation of the territory’s natural capital. 

Changing the concept of “sustainable resource use.” Contemporary philosophy tends to affirm multiple forms of rationality. According to the concept of the unity of rationalities, scientific, philosophical, religious and other rationalities are not alternatives but aspects of a single and multifaceted mind. It is therefore wrong to be skeptical about other forms of rationality that are characteristic of other civilizations and nations, or of other historical periods. In particular, the idea of transformation of the natural world and its harnessing to human needs has prevailed in western culture in all periods of its history up to the present. However, the same idea is virtually absent in traditional cultures where the relationship of people to the world around them has been understood and evaluated from completely different positions: an inherent conservatism, slow rates of evolution of human action, and the predominance of traditional means of environmental regulation have constrained the transforming power of human beings.  

The most acute value-based conflicts arise from differences in the understanding of “rational behavior” as regards environmental management and nature conservation. In our view, in order to ensure sustainability and prevent conflicts escalating to a critical level, emphasis has to be placed on people’s responsibility for their own future and the future of mankind as a whole. Jonas maintains that the concept of homo sapiens (“reasonable human being”) should be substituted by that of homo responsabilis (“responsible human being”), and traditional ethical systems should be substituted by a new ethics – the ethics of responsibility.  The imperative addressed to the new types of actors must, according to Jonas, be “Act so that the effects of your action are compatible with the permanence of human life” (Kane & Osantowski, 1981).  This idea is in tune with the views of Ladd who suggested that responsibility should be considered the essential feature of a human being: “People are beings who understand their actions and who are responsible for the consequences of their actions” (Ladd, 1975). A person who bears responsibility for achieving the sustainable development goals of mankind , or of his or her country and local community needs adequate information about the state of the Society-Nature system and real development trends. 

Main implications for the SEEA arising from the systems concept of life, recognition of a multivariate future and multiplicity of rationalities. Changes happening in the world today point to a number of new ways, in which information can be usefully employed to support sustainable resource use and protection of the environment. 

  1. Work to reform the information and statistical systems, which describe relationships in the complex non-linear Society-Nature system, must bear in mind that, in the systems approach, we must measure relationships rather than objects, and particularly relations between ecology and the economy at all levels of territorial organization. The SEEA can be described as an organizationally closed network, which is open to flows of energy and resources. It has a networked structure where the SEEAs of all levels of territorial organization (from global to local) are interconnected. According to Bateson , each individual SEEA can be regarded as a “metapattern,” which is a system-forming and structuring core for informational and territorial systems of resource use and environmental protection. 

    As a networked structure, the global SEEA (though as yet insufficiently structured) is gradually being assembled from similar but at the same time different (depending on broadly conceived geographical conditions) SEEAs from various levels of territorial organization (country, region, local territory). If the SEEA is viewed in terms of and through the tools of fractal geometry , one notices an amazing feature: in the development of environmental-economic accounting specific patterns are repeated over and again at descending levels, such that their parts at each level appear to be a whole. 

    The fundamental significance of an integrated approach, which is implied by the systems concept of Life, tends to elude the attention of researchers. This is seen, e.g., in the attempt to develop primarily industrial rather than territorial SEEAs. The former, despite their obvious topicality, fail to address the integrated development of territories and do not make it possible to select the best options for resource use (judged by environmental and economic criteria).

    Without an integrated territorial approach to the development of SEEAs, one cannot integrate them in the measurement of ecosystem service flows, the very concept of which, introduced in the report Ecosystem Evaluation on the Threshold of the Millennium (Millennium Ecosystem Assessment, 2005), substantially changed the tenor of ecological discussions, including discussions of biodiversity conservation. The evaluation of ecosystem services paves the way for implementation of a number of conceptual provisions that are critical for including the high economic value of specially protected areas (SPAs) in the natural capital of territories, so that the respective indicators can be accounted in the SEEA (Cadaster Institute, 2006b; 2011; 2012b; 2014; 2015a).  

    The understanding of the SEEA as a system-forming territorial core, a metapattern of information systems in the sphere of resource use and environmental protection, makes it methodologically untenable to assert that raising the quality of all indicators is a prior condition for the SEEA to be successful in any country. In reality, an attempt to raise the quality of indicators across the board leads to a lengthy and costly process of national statistics reform, postponing their systematic analysis. In our view, such an (essentially Cartesian) approach is at variance with the logic of the systems concept of Life and thus with the theory of sustainable development. So every country or region should, at the initial stage of work on an SEEA, systemically evaluate information sources as to the completeness, validity and accessibility of indicators. As practical experience has shown, the restricted character of traditional statistical systems makes it necessary to expand the range of data, which are handled, beyond official statistics, making use of administrative and expert data as well. It is particularly important to determine the trustworthiness of individual indicators and the system as a whole, identifying data gaps and finding ways to improve their quality (pilot field studies, calculations, adjustment of the available data, etc.) The process should begin with the preparation of basic territorial accounts (matrixes, which are the foundation of the SEEA), even if some indicators have to be accepted as expert assessments, and even if it is not possible to make a representative cost estimate. Completion of SEEA matrixes in physical terms provides useful information for comprehensive resource use and environmental management. 

    Our experience in multiple studies regarding the application of SEEA methodology at different government levels (federal, regional, municipal and micro-level) showed that the new systemic approach to obtaining and using indicators of natural capital and its components (even if the indicators were no more than expert assessments in some cases) broadens the potential for analyzing data on environmental resources and ecosystem services as a part of national, regional and even local wealth, and as an important factor for the sustainable development of territories. SEEA methodology can provide comprehensive information for appraising efficiency in the management of natural capital and efficiency of budgeting as applied to environmental management.  It also becomes possible to analyze dynamics of the environmental resource stock in a specific territory and measure to what extent the environmental capacity of the territory can meet the resource needs of its economy. 

  2. Having acknowledged the multiplicity of possible futures, we need to identify and assess the different scenarios and trends based on criteria of sustainable development and determine which of them represent a hazard for human beings and ecosystems. Acceptance of the need and expediency of certain restrictions in order to avoid negative trends entails special importance of indicators that measure environmental impact and green growth (describing processes between the environment and the economy). Therefore, when estimating the amount and structure of natural capital for purposes of the SEEA, indicators are needed, which identify the risk of dangerous depletion, in both its environmental and social aspects. This highlights dangers timely and helps to find ways of meeting budget and public income shortfalls, thereby preventing conflicts in environmental management before they can become critical. Depletion of intensively exploited natural resources (mainly non-cultivated resources, such as fish and game, forest resources or mineral and energy resources, as well as water resources) can lead to substantial loss of household incomes, exacerbating environmental problems and conflicts. Resolving this problem is of crucial importance for sustainable development and it is specifically mentioned in the WTO regulations, which do not preclude measures for “the prevention of natural resource depletion.” It should, however, be possible to avoid such measures from becoming a “covert limitation on international trade” or a “discriminatory” measure; they must be applied alongside limitations on domestic production or consumption (art.XX(g) WTO/GATT Agreement)

  3. Change in the concept of “sustainable resource use” by accepting its multifaceted character and, at the same time, the unity of forms of rationality expands our understanding of environmental-economic interrelationships as relations within an open, non-equilibrium system. Accepting the unity of rationalities makes it absolutely inappropriate to be skeptical about other forms of rationality (inherent to other civilizations and nations, or other historical periods), provided that such forms of rationality do not destroy the system of Life on Earth.  

    Adoption of the Sustainable Development Goals by the UN General Assembly 2015 should intensify the convergence of rationalities as regards environment management based on sustainability. This means that new system links are being formed, oriented to preserving Life on the Earth, which motivate and define how information systems can be created for sustainable resource use and environmental protection. 

    For many modern communities a change of tack towards sustainable development entails a shift in perception and transfer to systems thinking: from parts to the whole, from objects to relationships, from content to patterns. This evidently applies to the SEEA, which is an important element of sustainable development. At the same time, the importance of educating people about sustainable development becomes paramount, since implementation of the SDGs requires system changes in society, and that can only be achieved by nurturing a sense of responsibility among people and in communities. 

  4. When measuring relationships in the Society – Nature system, the SEEA proceeds from the multiplicity of interconnections within communities.  To respect the sustainability of communities is to respect these relationships. According to Capra (2003), reintegration into the life web depends on the establishment and maintenance of sustainable communities, in which we can satisfy our needs and wants without detriment for future generations.

    Clearly, the establishment and maintenance of sustainable communities requires changes to information systems and indicators. Today, an SEEA is what makes it possible to measure various processes in territorial environmental-economic system and to measure socio-cultural specifics of different nations, which restrict and regulate useful institutional changes. This can be done with the help of the SEEA, using ethnometrics and humanization of monetary estimates of environmental resources (Fomenko G., 2014; 2017). The flexibility of the SEEA enables new Society-Nature measurements to be included into the systems analysis. We believe that alignment of the SEEA with socio-cultural measurements should be a research priority.  

    The SEEA methodology for preparing accounts permits extension of physical reporting on the use of natural resources to the sphere of the non-observable economy (by generating so-called “shadow” accounts), while the methodology of economic valuation (based on the theory of full economic value) enables researchers to discover subjective assessments of specific environmental resources and behavioral aspects of resource use. The latter expands the scope of economic evaluation in accordance with the actual value of natural resources for users, taking account of socio-cultural, non-economic values and thus providing important information for making effective managerial decisions. 

  5. It is important, when developing an SEEA, to realize that the main conflict between the industrial economy and ecology stems from the fact that nature is cyclical while industrial systems are linear. According to the systems theory of Life, sustainable patterns of production and consumption must acquire a cyclical character, similar to that of natural processes (Capra & Luisi, 2014).  The European Environment – State and Outlook 2015 report discusses the problems of environmentally unbalanced systems of production and consumption and their long-term and often complex impact on the environment and on people’s health. The authors stress that society obtains many benefits but inflicts damage on the environment due to our linear economy based on the principle “buy – use – dispose,” our huge reliance on many natural resources, an “environmental footprint” that exceeds the planet’s capabilities, unfavorable impact on the environment of poorer countries and unequal distribution of the social and ecological benefits provided by globalization. It is clear that any long-term solution must be based on the transformation of major systems: transport, energy, utilities and food. 

    It has become clear that the achievement of sustainability depends almost completely on the creation of an economy of a special type, where growth of human well-being is combined with reduction of risks for the environment. Such an economy is called a “green” economy. The most common definition is the one given by UNEP: “the green economy is one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities.”   The concept of effective resource use is directly associated with this.

    The SEEA has to be developed in a way that makes it responsive to the processes involved in transition to the green economy.  Firstly, there has to be support for various structures and functions of ecosystems (ecosystem sustainability) and ways must be found of reducing the use of resources in production and consumption and of mitigating their impact on the environment (resource efficiency) (Fomenko G., 2011). 

  6. According to the systems theory, ecosystems and human communities are always at risk of destruction, should their fluctuations exceed the tolerable limits, so that the systems are unable to compensate. If, e.g., someone tries to maximize any individual or group variable, this will inevitably result in destruction of the system as a whole. Therefore, timely identification and warning of a dangerous state of the Society – Nature system is increasingly understood to be the crucial condition for the efficiency of information systems, including statistical systems. 

    Particular dangers arise if a bifurcation point  is passed, which is a critical state of the system, so that the system becomes unstable in its fluctuations and uncertainty arises whether the state of the system will turn chaotic or whether it will ascend to a new, more differentiated and elevated level of regularity.  Attention should be paid to the position of many leading experts whose opinion was voiced most coherently by Rotmans at the Green Growth and Sustainable Development Forum 2015 (Enabling the next industrial revolution: Systems innovation for green growth, OECD). In his report “Transition to a Low Carbon Economy: How to Accelerate the Transition?” Rotmans states that the transition to a new economy has today reached a critical point (Fig. 1.2) involving chaos, conflicts and the spread of hostilities in various regions

Features and Dynamics of Transition to New Economy Fig. 1.2 Features and Dynamics of Transition to New Economy

Source: Jan Rotmans Presentation at the OECD Forum in December 2015. Green Growth and Sustainable Development Forum 2015, “Enabling the next industrial revolution: Systems innovation for green growth.”

The bifurcation point cannot be successfully passed unless the system has sufficient flexibility. According to the systems Life theory, all observable ecosystem variables (population density, access to nutrients, weather patterns, etc.) always fluctuate, as do the conditions of society and production.  The Life web is a flexible fluctuating network. The more variables are involved in fluctuations, the more dynamic and flexible the system is and the greater its ability to adapt to changing external conditions. Low flexibility of a system is manifested by stress; notably, stress arises when one or more variables characterizing development sustainability approach their extreme values, heightening the level of rigidity and stress throughout the system. According to Capra (2004), prolonged stress is harmful and destructive for the system, while temporary stress is an indispensable feature of life.   Environmental fluctuations in the stable state do not go beyond permissible limits even though disturbances in the Society – Nature system occur all the time and the network responds to them by recurrent fluctuations.  In the stable state measurement of processes occurring between the economy and nature is effective and helps to reveal trends by the application of linear prediction methods.  

When the world is passing through a bifurcation point related to technology transition to a new economy, we observe a crisis in measurability: the existing statistics and industrial information systems, which have been used to measure development trends in the departing era, miss the new growth trends and fail to identify threats to sustainable development.   This makes new demands on the SEEA methodology and its implementation, particularly for greater sensitivity to new growth features. Important criteria of SEEA efficiency are: 

1) flexibility, i.e., ability to “see” emerging new development trends in the Society – Nature system and to measure them;

2) ability to obtain necessary and sufficient information to control environmental and economic safety criteria, non-observance of which leads to destruction of the system, and to search for optimal values of the system’s variables. 

1.2.
Basic SNA premises with regard to environmental resources

The System of National Accounts is an internationally coordinated standard set of recommendations to measure indicators of economic activities in accordance with strict rules of accounting and reporting at the macro level. The system is based on the principles of economic theory and in its general form is a detailed report on economic activities in a country and on the relationships between various economic actors and groups of actors in markets or outside markets. Those recommendations are worded as a system of concepts, classifications and rules of accounting, which make up an internationally coordinated standard for calculating gross domestic product (the most commonly used indicator of economic performance). The SNA methodology calculates and presents economic indicators in a format that is specially designed for the purposes of economic analysis, decision-making and the preparation of economic policies. The accounts contain a large amount of detailed information organized according to the principles of economic theory and approaches to functioning of the economy (SNA, 2012, chapter 1, paragraph 1.1).

The conceptual basis of the SNA consists of accounts that are:

  • inclusive of all kinds of activities and their consequences for all economic actors; 
  • mutually coordinated, since they use identical values and the same rules of accounting in order to establish the impact of one action on all parties involved in the economic process;
  • integrated, because all consequences of the action of one subject are necessarily reflected in the resulting accounts, including balance sheets which show the influence of the actions of subjects on wealth measurement (SNA, 2012, chapter 1, paragraph  1.1).

In this way, the SNA fulfills an important informative and analytical function, structuring blocks of statistical information and answering the generalized questions: what happened in the economy? what actors participated and for what purposes? The SNA focuses on the measurement of production of goods and services (SNA, 2012, chapter 1, paragraph 1.6) and this predetermined its basic conceptual elements: institutional units and sectors; transactions and other flows; assets and liabilities (or stocks); products and units that produce them; goals. 

Assets and liabilities are components of the balance sheet for the economy as a whole and for institutional sectors.  The balance sheet shows stocks of assets and liabilities owned at a certain time by an individual unit or sector or by the economy as a whole. Balance sheets are usually prepared at the beginning and end of the reporting period although they can be prepared at any time.  Stocks arise from accumulation of the outputs of previous transactions and other flows and they are also affected by subsequent transactions and other flows. So stocks and flows are closely interrelated (SNA, 2012, Chapter 2, paragraph 2.33).

Generally, an asset is an accumulated stock of value providing the owner with economic benefits or a number of economic benefits that arise from its ownership or use during a certain period.  It is a means for the transfer of value from one reporting period to another.  All assets in the SNA are economic. (SNA, 2012, chapter 10, paragraph 10.8). The relevant assets are those in some form of ownership and whose economic benefits are obtained by their owners through owning them or using them in economic activities as stipulated in the SNA. Accordingly, durable consumer goods, human capital and environmental resources, which cannot provide economic benefits to their owners, are not included in the scope of assets in the SNA. 

Classification of assets at the first level distinguishes non-financial and financial assets (Fig. 1.3). Non-financial assets are mainly represented by items, which can be used in economic activity and which are simultaneously stocks of value.  Financial assets are mainly stocks of value. 

There are two categories of non-financial assets: 

  • products created by production processes within the sphere of production defined in the SNA;
  • non-financial assets, which have come into being by other means than production processes. Non-produced assets consist of three categories: environmental resources; contracts, lease agreements and licenses; and acquired goodwill and marketing assets (SNA, 2012, Chapter 10, paragraph 10.14). Environmental assets are resources of natural origin, such as land, water resources, forests and mineral resources, which have economic value (SNA, 2012, Chapter 10, paragraph 10.15).

Detailed examination of the methodological premises of the SNA 2008 on environmental resources shows that not all of them can be classified as economic resources. 

General classification of assets in the SNA

Fig. 1.3 General classification of assets in the SNA

Source: SNA, 2012.

Firstly, the SNA only records assets owned by institutional units , i.e., only resources with established ownership rights, the observance of which is ensured, are qualified as economic assets. It is important, in this respect, to distinguish between legal and economic ownership. A legal owner of items, such as goods and services, environmental resources, financial assets and liabilities, is an institutional unit having a statutory right to claim economic benefits related to those items.   By contrast, an economic owner of items, such as goods and services, environmental resources, financial assets and liabilities, is an institutional unit having the right to claim economic benefits related to the use of the above items in the course of economic activity by assuming the associated risks (SNA, 2012, Chapter 10, paragraph 10.5).

Environmental resources, being non-financial non-produced assets, can be owned by private, public and other owners.   Some of them, being public goods, cannot be recorded in the SNA because it is impossible to establish the ownership rights attaching to them (e.g., atmospheric air, oceans, etc.). This is also true of resources that cannot be actually owned by any specific institutional unit, notably, resources whose existence is unknown or which are known but are so remote and inaccessible that they are not effectively controlled by any institutional units. Numerous institutional studies in the sphere of natural resources and ecosystem services have found that serious difficulties in defining boundaries and evaluating assets are mainly due to the fact that ownership rights to natural resources are historically uncertain and not embedded in people’s minds (Fomenko G., Fomenko M., Arabova, Ladygina, 2013; Fomenko G., 2014).  Therefore, situations related to the use of environmental resources require an analysis of interest groups.

Secondly, in order to be defined as economic assets, environmental resources have to provide economic benefits to their owners, taking account of technology, scientific expertise, economic infrastructure, available resources and market conditions. Therefore known stocks of resources (e.g., mineral deposits or food resources), the use of which will not be commercially viable in the foreseeable future, are not considered in the SNA to be economic assets. That is the case, despite the possibility that such stocks may later become commercially viable due to some unforeseen technology breakthroughs or material change of market prices. Biological resources that are classified as rare or threatened with extinction, and which are under government protection and generally excluded from economic exploitation are also not considered being economic assets. 

So the System of National Accounts treats environmental resources as physical non-produced assets. They are reflected in accounts when they are owned (legally and economically) by institutional units and used by their owners for economic benefit. Data concerning such resources are reflected only in monetary terms; indicators of their stocks and use in physical terms (cubic meters of water and timber, wildlife populations, etc.) are ancillary and are employed in the SNA solely for obtaining monetary values. This approach inevitably reduces opportunities for analyzing the stock and use of environmental resources in all their variety and wealth; in particular, it fails to discover risks of depletion and, generally, cannot meet the needs of sustainable environmental management.  

The first attempts to include data on consumption of natural resources in economic analysis were undertaken as early as the 1930s when accounts were created that embrace all indicators of economic activity,  based on the theoretical work of Marshall, Keynes, Clark, Stone and others.  Later, in the late 1960s, the results of research enabled the formulation of radically new approaches to the construction and the functioning of statistical systems by uniting accounts based on different kinds of capital (economic, environmental, human). This signaled a new understanding of the need to include environmental assets in national accounting systems, reflecting their major role in sustaining human life and the economy.  

The UN Summit on sustainable development in 1992 proposed development of a system of integrated economic and environmental satellite accounting (Agenda 21, 1992) in furtherance of these pioneering works and in order to provide a more detailed record of environmental factors in the SNA, thus providing an adequate picture of relationships between the economy and the environment, which could be used as a basis for accumulating data on the available stock of environmental resources and their depletion through use.   The first set of guidelines for environmental-economic accounts, published in 1993, contained basic principles for implementation of a supplementary system of integrated economic and environmental accounting, describing relations between the environment and the economy. The following years saw intensive efforts to improve methodology and practical approaches to formation of the SEEA as a critical and integral part of the SNA; guidelines for economic and environmental evaluation of fish, water, energy resources and ecosystem services were developed and approved (UN, 2012b; SEEA, 2015). In its present form the SEEA has solid methodological foundations, despite certain deficiencies of a theoretical and applied character (UN, 2014).

The SEEA, as a set of satellite accounts, ensures that national statistical systems are more oriented to reflecting processes and obtaining indicators that demonstrate whether processes, relations and interactions between the economy and nature harmonize with the principles of sustainable development.   As far as existing philosophical limitations permit, the SEEA accounts provide the most consistent and complete recording and evaluation of the use of environmental resources and ecosystem services. Most importantly, considered from a methodological viewpoint and based on the theory of full economic value, the SEEA expands the scope of economic evaluation of environmental resources and ecosystem services, thus offsetting “market failures.” 

SEEA implementation has greatly expanded the range of environmental resources captured by statistical observation.   Special attention is paid to estimates in physical terms, which, for example, help to estimate and record depletion/degradation of assets, enabling respective adjustment of macroeconomic indicators. It therefore becomes possible to analyze interrelations between the economy and the environment, including expenditures on environmental protection, and to carry out ecosystem services accounting (Table 1.2). This content of the SEEA avoids many uncertainties and inaccuracies in obtaining estimated figures on stocks and flows of environmental resources and ecosystem services (in physical and monetary terms), thus preventing their underestimation. 

In this way the SNA, supplemented by the system of satellite environmental-economic accounts, ensures greater credibility of information on environmental resources and ecosystem services in capital accounts and balance sheets for subsequent adjustment of economic macro-indicators. This provides more adequate evaluation of natural capital as a part of national wealth. 

Table 1.2 Comparative features of the System of National Accounts and the System of Environmental-Economic Accounting 


Criteria for accounting natural resources as assets 

Forms of accounting

Accounting of “over-exploitation” of resources and pollution of the environment

Issues to be addressed

SNA

Ownership rights

Actual economic income

Accounting in physical terms as a basis for monetary asset accounts

“Over-exploitation” is only recorded under “Other asset changes”

Recording of natural resources in capital accounts and the balance sheet  

SEEA

Ownership rights are not obligatory.

Potential opportunity to derive income 

Existence of non-economic benefits

Physical accounting is necessary for all assets The goal is to identify asset depletion and/or degradation processes

Macroeconomic indicators are reduced by the amount of asset depletion and/or degradation

Analysis of mutual relationships between the economy and the environment Accounting of ecosystem services  

Formation of indicators reflecting environmental activities 

1.3.
Methodological Premises of the System of Environmental-Economic Accounting (SEEA) for Recording Environmental Resources and Ecosystem Services

The SEEA satellite accounts supplement the main SNA accounts. They provide integrated accounts of environmental resources, which expand the scope of accounting of non-produced assets in the SNA without changing the boundaries of production processes. In this way, the accounts of stocks and flows of natural resources and ecosystem services in the SEEA are altered, but remain in agreement with SNA accounts. 

The decision on creating the SEEA was adopted by the UN (United Nations Organization, 1991, paragraph 154e; United Nations Organization, 1993, Resolution 1, Annex II, paragraph 8.42). The Handbook of National Accounting sets out the basic principles for preparing such accounts. These principles are widely used for the analysis of environmental management efficiency in a number of countries (Brazil, Canada, Costa Rica, France, Germany, the Netherlands and Norway; some efforts to develop integrated evaluation of natural capital have been made in Australia, Japan, India, Indonesia, Mexico, New Zealand, Papua New Guinea, Sweden, Great Britain, the USA, Zimbabwe and other countries). At present, management of natural resources through the system of integrated environmental-economic accounts is a highly important path for the development of environmental management in many countries (Insert 1.1) 

Insert 1.1

Two diametrically opposite positions can be distinguished among the many various approaches to development of accounting systems, which describe relationships between the environment and the economy. One of them presents statistical data on the state of the environment, which describe links between nature and the economy and their effect on the environment. Most of this statistical structure consists of descriptions of the natural environment, including, e.g., maps of specific regions (ecosystems or ecological zones). The information is usually presented in physical units. In the opposite approach attention in statistical sections is focused on the economy, while environmental-economic relations are only considered if they refer to specific economic transactions (e.g., expenditure on environmental protection or actual costs of accident response).

Source: Markandya, 1996a.

The Central Framework of the SEEA is a multipurpose conceptual basis for understanding relationships between the economy and the environment and for describing environmental assets. Based on agreed concepts, definitions, classifications and rules of accounting, the SEEA arranges information flows in an integrated and consistent form, thus providing interrelated indicators, which can be used for preparing statistical accounts and making reasonable decisions on a wide range of environmental management tasks (see Chapter 3). The SEEA thus provides information on a wide range of ecological and economic issues, including assessment of trends in use and availability of natural assets, scale of emissions and discharges to the environment caused by economic activities and the volume of economic activities intended to protect the environment. The Central Framework of the SEEA has a clear interdisciplinary character, uniting concepts and structures relating to the power engineering industry, subsoil management, forestry and water sectors, ecology, etc., and is closely linked to environmental and socio-economic statistics (Fig. 1.4).


 

 

 

 

 

Formation of environmental-economic indicators showing the state of natural resource supply and use in the economy

Fig. 1.4 Formation of environmental-economic indicators showing the state of natural resource supply and use in the economy

 Source: Presentation by Ivo Havinga, “Introduction to the System of Environmental-Economic Accounting” UNECE Workshop “Follow-up to Rio+20: Measuring Sustainable Development and Implementing the System of Environmental-Economic Accounting (SEEA)” June 12-13, 2013, Geneva.

The Central Framework of the SEEA was developed to accord with other international standards, recommendations and classifications, including: the System of National Accounts 2008; Guidelines for Balance of Payments and International Investment Position; International Standard for Industrial Classification of all Economic Activities; Central Product Classification; Framework for Development of Environmental Statistics (these can be supplemented, if necessary). 

The SEEA Central Framework uses a number of basic provisions to organize and integrate information on the state and changes in various stocks and flows in the economy and the environment.

Firstly, measurements are made by transforming inputs into accounts and tables in three directions: 

1) physical flows of materials and energy inputs in the economy and between the economy and the environment; 

2) environmental assets and changes in these assets; 

3) economic activities and transactions related to the environment. 

The concepts of “economy” and “environment” are of great importance in this respect.  

Secondly, it is accepted that the economy operates by producing and importing goods and services, which are, respectively:

1) consumed by enterprises, households or government institutions; 

2) exported to other countries;

3) stored for future consumption or use. 

The economy is presented in the form of stocks and flows to enable its measurement in the SEEA. Measurement of flows is focused on economic activities such as production, consumption and accumulation. It is important to establish the boundaries of the production sphere: all produced goods and services (products)  are deemed to be factually “inside” the economy. Accordingly, flows between the economy and the environment are understood to be flows, which cross the production boundary. 

Thirdly, stocks of economic assets are used as inputs to production processes and as a source of material benefits for economic units, including households. Economic assets are divided into produced assets (arising from economic activities, e.g., buildings, equipment, etc.) and non-produced (which are not results of production, e.g., land, mineral deposits, water resources, etc.). 

The economic value and quantity of stocks of assets (e.g., buildings, natural resources and bank deposits) changes over time. Those changes are reflected in flows and recorded in accounts either as transactions (e.g., acquisition of buildings and land plots) or as other flows. 

Fourthly, stocks and flows of environmental assets are considered being an integrated whole. As stocks, environmental assets include all living and non-living components of the Earth, together constituting the biophysical environment, including all kinds of natural resources and the ecosystems in which they are situated. As flows, environmental assets constitute the source of all economic inputs, including natural resources (minerals, timber, fish, water, etc.) and other natural resources absorbed by the economy (e.g., the energy obtained from sun and wind and the air used in combustion processes).

Fifth, when measuring physical flows, special attention is paid to recording the flows of materials and energy resources which go into and out of the economy and the flows of materials and energy resources within the economy. In a broad sense, flows from the environment to the economy are recorded as coming from natural sources; flows within the economy are recorded as flows of products; while flows from the economy to the environment are counted as residuals (e.g., solid waste, atmospheric emissions and return flows of water)  (Fig. 1.5) 

Main flows of natural inputs, products and residuals

Fig. 1.5 Main flows of natural inputs, products and residuals

Source: Modified version of the figure in System of Environmental–Economic Accounting 2012, above n 54. 

The boundary used to divide these flows is based on the production boundary.  From a geographical perspective, the measurement boundary corresponds to the economic territory of a country and economic activity is attributed based on the residence of economic units.

Six, the specifics of measurement of stocks are determined by the specific features of environmental assets which, in a most general form, are defined as naturally occurring living and non-living components of the Earth, together constituting the biosphere environment, and capable of providing benefits to human beings. 

Environmental assets are inevitably related to the economy: they are either engaged and transformed in the process of production activity or perform a supporting function, so they are to be viewed in two aspects. 

Firstly, environmental assets provide materials and space for all economic activities (e.g., mineral and energy resources, timber resources, water resources and land). This reflects material benefits from the direct use of environmental assets as natural inputs by enterprises and households. This does not take account of non-material benefits from the indirect use of environmental assets (e.g., ability of water to purify itself, to store carbon, etc.).  

Secondly, environmental assets are considered with focus on the interaction of individual assets within ecosystems and on the broad set of material and non-material benefits that accrue to the economy and other human activities from flows of services provided by ecosystems.    In this perspective, ecosystem accounts can be formed, which reflect the capacity of living components within their non-living environment to work together to generate flows known as ecosystem services. These services are defined as the contributions of ecosystems to benefits that are used in economic and other human activities. Despite their multifarious nature, ecosystem services can be divided into three groups:

- provisioning services (e.g., timber from forests);

- regulating services (provided, e.g., by forests when they act as carbon sinks);

- cultural services (such as the enjoyment provided to visitors to a national park) (see, e.g., Millennium Ecosystem Assessment, 2003). 

Degradation of ecosystems by economic and other human activity means that they may be not able to generate the same range, quantity or quality of ecosystem services on an ongoing basis. Therefore, the formation and maintenance of ecosystem accounts provides an information basis for analyzing the extent to which economic activity can reduce the ability of ecosystems to generate ecosystem services.

In addition to measuring the stock of environmental assets and flows between the environment and the economy the Central Framework SEEA 2012 records flows associated with economic activities related to the environment: expenditures on environmental protection and resource management, production of environmental goods and services (e.g., filters to reduce air pollution). So environmental-economic activity is distinguished and presented in the form of so-called functional accounts (e.g., accounts recording environmental protection expenditures). This ensures a more comprehensive view of environmental features of the economy in statistical systems. 

1.3.1. Main accounts of the Central Framework SEEA 2012 and their role in data generalization and formation of indicators showing the condition and changes in stocks of environmental assets and their use in the economy. 

The Central Framework SEEA 2012 organizes and integrates information on various stocks and flows in the economy and the environment in a series of tables and accounts and their combinations: 

- supply and use tables in physical and monetary terms showing flows of natural inputs, products and residuals; 

- asset accounts for individual environmental assets in physical and monetary terms showing the stock of environmental assets at the beginning and the end of each accounting period and changes in the stock; 

- a sequence of economic accounts highlighting depletion-adjusted economic aggregates; 

- functional accounts recording transactions and other information about economic activities undertaken for environmental purposes. 

In order to diversify the generalizations and get a more detailed picture of relations between environmental-economic features and processes in the social sphere, the analysis of data contained in the tables and accounts can be extended by linking the tables and accounts to relevant employment, demographic and other information.

The Central Framework SEEA 2012 does not require compilation of every table and account for all environmental assets or environmental elements. Instead, it can be modular, taking into account those aspects in the country’s environment that are most important for the specific territory. At the same time, the ultimate goal is to obtain full accounting of the environmental-economic structure of the country and to provide information on issues of global concern using a common measurement framework.

1.3.1.1. Supply and Use Tables

Monetary supply and use tables in the SEEA record all flows of products in an economy between economic units in monetary terms. Many of the product flows may relate to the use of natural inputs from the environment (e.g., the manufacture of products from wood) or to activities and expenditures associated with the environment (e.g., clean-up of effluents). Products enter (“are supplied to”) the economy (become its inputs) when they are produced by industries in the national economy (a flow known as output) or brought in from the rest of the world (a flow known as imports).

A product can be used in a number of ways. For instance, products can be: 

1) used by other industries to make different products (a flow known as intermediate production); 

2) consumed by households (a flow known as household expenditures on final consumption); 

3) consumed by the government (a flow known as government expenditures on final consumption);  

4) sold to the rest of the world (a flow known as exports); 

5) held as inventories for later use;

6) used as assets (e.g., machines) over a longer period to produce other products (such longer-term uses are known as gross capital formation). 

The monetary supply and use table is divided into two parts: a supply table and a use table (Table 1.3). The listed flows are classified by type of product in the rows and by type of economic unit (enterprises, households, government) and the rest of the world in the columns (it should be mentioned that accumulation flows are not recorded because, although they concern resources of the current accounting period, they are not used in the current period, but instead accumulate for future use or sale to economic units and the rest of the world in the form either of inventories or of fixed assets). Enterprises are classified by industry depending on their core activity. 

Table 1.3 Basic form of monetary resource and use table 

 

Industries 

Households

Government 

Accumulation

Rest of the world

Total

Supply table 

Products  

Output 

Imports

Total supply

Use table

Products 

Intermediate consumption

Household final consumption expenditure

Government final consumption  expenditure

Gross capital formation 

Exports

Total use

Value added 

Note: Gray cells are null by definition.

Source: UN, 2012a, p. 16.

According to the SEEA methodological approach, when products are withdrawn from inventories in subsequent accounting periods, they are effectively resupplied to the economy at that time; the change in inventories (additions to inventories less withdrawal) during an accounting period is recorded as use of products. Overall, the total supply of each product must equal the total use of each product. This equality between the total resource supply and total use of each product is known as supply and use identity. It is the fundamental identity in both monetary supply and use tables and in physical supply and use tables.

The row of the supply table shows that for each product total supply of resources is equal to output plus imports. The row of the use table shows that total use is equal to intermediate consumption plus final consumption expenditure of households plus final consumption expenditure of government plus gross capital formation plus exports. 

Physical supply and use tables are used to assess how the economy supplies and uses natural resources and materials as well as to examine changes in production and consumption patterns over time. Combination with data from monetary supply and use tables enables the study of changes in productivity and intensity of the use of natural resources and the release of residuals. The structure of the physical supply and use tables is similar to the monetary supply and use tables; extensions are made to incorporate a column for the environment and rows for natural inputs and residuals (Table 1.4)

Although the broad structure and underlying principles of the physical supply and use tables are the same regardless of whether the table is measuring flows of energy, water, residuals or materials, different rows and columns may be used for each of these subsystems of physical flows. For example, the physical supply and use table for flows of residuals (as a part of the supply table) comprises several columns (collection and treatment of waste and other residuals; residual flows from the environment; the rest of the world; total supply) as well as two rows (solid waste formation and products based on solid waste by type).

Table 1.4 Basic form of a physical supply and use table

Supply table

Production; residual generation

Accumulation

Flows from the rest of the world

Flows from the environment 

Total

Production; generation of residuals by industries (including production by households for their own consumption) by ISIC classification

Generation of residuals 

by households

Industries classified by ISIC 

Natural inputs

A. Flows from the environment 

(including natural 

resource residuals)

General resources

from environmental sources

Products

C. Output (including sale of recycled and reused products)

D. Imports

of products

Total product resources 

Residuals 

I1. Residuals generated 

by industry (including 

natural resource residuals)

I2. Residuals generated 

following treatment

J. Residuals 

generated by 

household final consumption

K1. Residuals from scrapping and 

demolition of produced 

assets

K2. Emissions from controlled landfill sites

L. Residuals

received 

from the rest of the world

M. Residuals recovered

from the environment

Total supply of residuals 

Total supply

Use table

Intermediate consumption

of products; use of  

natural inputs; collection of residuals

Final consumption

Accumulation

Flows to the rest of the world

Flows to the environment

Total

Industries classified by ISIC 

Households

Industries classified by ISIC 

Natural inputs

B. Extraction of natural inputs

B1. Extraction used 

in production

B2. Natural resource residuals

G. Gross capital formation

(including fixed assets and inventories)

Products

E. Intermediate consumption

(including purchase of recycled

and reused 

products)

F. Final consumption

(including purchase of recycled and reused

products)

O. Accumulation of waste in

Controlled 

landfill sites

H. Exports

of products

Total use

of products

Residuals 

N. Collection and treatment of residuals (excluding accumulation of waste

in controlled

landfill sites)

P. Residuals

sent to

the rest of the world

Q1. Direct from industry and

households (including natural resource residuals and 

landfill emissions)

Q2. Following treatment

Total use

of residuals 

Total use

Source: UN, 2012a, p. 17.


 

Within the tables, the supply and use identity that applies in monetary terms also applies in physical terms.  Thus, for each product measured in physical terms (e.g., cubic meters of timber), the quantity of output and imports (“Total supply of products”) must equal the quantity of intermediate consumption, household final consumption, gross capital formation and exports (“Total use of products”). The equality between supply and use also applies to the total supply and use of natural inputs and the total supply and use of residuals.

In addition to the supply and use identity, the physical supply and use table incorporates an additional identity concerning flows between the environment and the economy (input-output identity), which requires that the total flows into the economy, or into an enterprise or household, over an accounting period, are either returned to the environment or accumulate in the economy. For example, flows of energy to an enterprise in the form of electricity or petroleum products must be released to the environment after the energy has been used (as losses of residual heat) or stored (as inventories for future use) or incorporated in non-energy products (e.g., petroleum products used to manufacture plastics).

Both the supply and use identity and the input-output identity are based on the law of conservation of mass and energy, which states that the mass and energy of a closed system will remain constant.  The implication for accounting is that, in theory, mass and energy flows must balance across natural inputs, products and residuals.

Unlike monetary flows, which are measured in currency units, physical flows are generally measured in a variety of different units. While it is conceptually possible to compile a complete physical supply and use table for all material flows in an economy using a single measurement unit (e.g., tons), it is not the usual practice.

1.3.1.2. Asset accounts

Asset accounts are designed to record the opening and closing stock of environmental assets, primarily to assess whether the current patterns of economic activity are depleting and degrading the available environmental assets.  So they provide information for the efficient management of environmental assets. Also, monetary valuations of natural resources and land can be combined with valuations of produced assets and financial assets (in the SNA balance sheets) to provide broader estimates of national wealth. The structure of asset accounts starts with the opening stock of environmental assets and ends with the closing stock of environmental assets (Table 1.5)

Table 1.5 Basic format of asset account

Opening stock of environmental assets

Additions to stock

Growth in stock**

Discoveries of new stock**

Upward reappraisals**

Reclassification

Total additions to stock

Reductions of stock**

Extraction

Normal loss of stock

Catastrophic losses**

Downward reappraisals**

Reclassification

Total reductions of stock

Revaluation of stock*

Closing stock of environmental assets

* Only applicable for assets in monetary terms

** As applied to the research theme, growth in stocks may be due to the discovery of new deposits, natural increase in non-cultivated biological resources; discovery of new stocks can be due to the discovery of new deposits and assurance of their viability; upward and downward reappraisals occur due to price changes; catastrophic losses may be caused by natural or man-made crises; reduction of stocks may result from soil exhaustion. 

Source: UN, 2012a, p. 20. 

Changes between opening stock and closing stock in physical terms are recorded as either additions to stock or reductions of stock; the character of such addition or reduction is indicated, if possible. The same entries are included in monetary terms, with the addition of an entry to account for monetary revaluation of environmental assets. This entry shows changes in the value of assets over an accounting period, which are driven by movements in the current prices of those assets.

There are numerous and diverse reasons why the quantity and value of environmental assets change over an accounting period. Many of these changes are caused by interaction between the economy and the environment in the context, e.g., of extraction of minerals or the planting of timber resources. Other changes occur due to natural phenomena, e.g., natural increase of non-cultivated biological resources (forest and animals) or losses caused by catastrophic events, which may have natural or man-made causes. 

Some changes between the opening and closing stocks of a reporting period have more to do with the accounting practice, including changes caused by improved measurement (reappraisal) and those involving the assignment of assets to different categories (reclassification). Examples of reappraisal include the discovery of new mineral deposits, verification of their efficiency, and reappraisal of the size and quality of mineral reserves. Examples of reclassification would be entries recording changes in land use between agriculture and urban.

As a rule, asset accounts are compiled for individual types of environmental assets. In monetary terms, there may a need to aggregate the values of all environmental assets at the beginning and end of the accounting period. Such aggregates can be presented in the form of balance sheets, which can be combined with the value of other assets (e.g., produced assets and financial assets) and liabilities to obtain an overall measure of the net wealth of an economy.

There are close links between the supply and use tables and asset accounts, a fact which emphasizes the integrated nature of the Central Framework of the SEEA 2012 (Table 1.6). 

Table 1.6 Links between supply and use tables and asset accounts

 

Industries 

Households

Government organizations

Rest of the world

Asset accounts (in physical and monetary terms)

Produced assets 

Environmental assets 

Opening stock 

Monetary supply and use table 

Products – resources 

Output

Imports 

Products – use 

Intermediate consumption

Household final consumption expenditure 

Government final consumption expenditure 

Exports

Gross capital

Physical Supply and Use Table 

Natural inputs – supply 

Extracted natural resources 

Natural inputs – use 

Inputs of natural resources

 

 

 

 

 

Products – resources

Output

 

 

Imports 

 

 

Products – use 

Intermediate consumption

Household final consumption expenditure 

 

Exports

Gross capital formation

 

Residuals – supply

Residuals generated by industry

Residuals generated by household final consumption

 

Residuals received from the rest of the world

Residuals from scrapping and demolition of produced assets, emissions from controlled landfills

Residuals – use

Collection and treatment of waste and other residuals 

Residuals sent to the rest of the world

Accumulation of waste in controlled landfills  

Residuals flowing to the environment*

Other changes in volume of assets  

Revaluation

Closing stock

Note: Dark gray cells are null by definition.

*Although residual flows (e.g., emissions into the atmosphere) are not flows of environmental assets, they can affect the capacity of environmental assets to deliver benefits. Change in the potential of environmental assets can also be recorded in the cell labeled “Other changes in volume of assets.”

Source: UN, 2012a, p. 22.

The main change in Table 1.6 from the point of view of supply and use is that the flows entered in the columns “Accumulation” and “Environment” of the supply and use tables are transferred to the asset accounts (two right-hand columns). The opening and closing stocks for a given period appear at the top and bottom of the table, respectively. Some changes in the stocks are also recorded in the supply and use tables. For example, gross capital formation and natural inputs are included in both asset accounts and in supply and use tables. Some changes in stocks are not recorded in the supply and use tables, and they are grouped in the cell named “Other changes in volume of assets.” Examples of such changes include discoveries of mineral resources, losses of assets following catastrophic natural events and changes in the values of assets due to price changes (revaluation).  

Special attention should be paid to the row showing the use of residuals.

Neither the accumulation of residuals in controlled landfills nor the flow of residuals to the environment is recorded in asset accounts for individual environmental assets. However, more broadly, the accumulation of residuals in the economy does represent an increase in a stock, and the flow of residuals to the environment may affect the capacity of environmental assets to deliver benefits.

1.3.1.3. Sequence of economic accounts

In monetary terms, supply and use tables and asset accounts record much of the information used to assess interactions between the economy and the environment. However, a range of other monetary transactions and flows are also of interest (rent for the extraction of natural resources, environmental taxes and payments of environmental subsidies, grants from government units to other economic units to support environmental protection work, etc.). These flows are recorded in the sequence of economic accounts, which, understandably, are compiled only in monetary terms (these transactions do not have a direct underlying physical base). 

The sequence of economic accounts in the SEEA follows the broad structure of the sequence of accounts in the SNA. A particular feature of the sequence of accounts is the presentation of balancing items. Typically, there is not a balance between relevant inflows and outflows. That is why balancing items are introduced which, as well as being measures of economic activity in themselves, also help to align the whole sequence of accounts.  Derivation of depletion-adjusted balancing items and aggregates within the sequence of economic accounts is of particular importance. Depletion-adjusted measures are not part of the balancing items and aggregates measured in “net” terms in the SNA (i.e., after the deduction of fixed capital consumption) and they require additional calculation of the cost of exhausting natural resources. (Table 1.7) 

Table 1.7 Basic SEEA sequence of economic accounts

Production account (prepared in supply and use tables)

Main entries

Output, intermediate consumption, fixed capital consumption, natural resource depletion

Balancing items/

aggregates

Gross value added, gross domestic product, depletion-adjusted net value added, depletion-adjusted net domestic product

Distribution and use of income accounts

Main entries

Remuneration of employees, taxes, subsidies, interest, rent, final consumption expenditure, fixed capital consumption

Balancing items/

aggregates

Depletion-adjusted net operating surplus, depletion-adjusted net national income, depletion-adjusted net savings 

Capital account

Main entries

Acquisitions and disposals of produced and non-produced assets

Balancing item/

aggregate

Net lending / borrowing

Financial account

Main entries

Transactions in financial assets and liabilities

Balancing item/

aggregate

Net lending / borrowing

Source: UN, 2012a, p. 24.

The sequence of economic accounts starts from the production account, which is prepared using the output and intermediate consumption entries from the monetary supply and use table. The balancing item here is value added (output less intermediate consumption). At an economy-wide level, the main related aggregate from the production account is gross domestic product. Fixed capital consumption and depletion are deducted from gross value added and GDP to obtain measures of depletion-adjusted net value added and depletion-adjusted net domestic product.

The sequence continues with the distribution and use of income accounts, which contain information on how value added is allocated to economic units as either remuneration of employees or gross operating surplus, as well as information on flows of other income and related payments (flows of taxes, subsidies, interest and rent for the use of land or other environmental assets). The total amount of disposable income (all income received less all income paid) is available for final consumption expenditure. The balancing items for the income accounts are operating surplus (value added less compensation of employees and less taxes with deduction of subsidies) and savings (disposable income less final consumption expenditure). As in the production account, depletion of environmental resources can be deducted from the balancing items of net operating surplus and net savings. The key aggregates from these accounts in gross terms are gross national income and gross national savings, both of which can be adjusted for depletion and fixed capital consumption to form depletion-adjusted measures.

The next account to be considered is the capital account.  This account records how savings are used to acquire assets, including produced assets and environmental assets. It therefore includes the acquisition and disposal of environmental assets, and specifically transactions in land and cultivated biological resources such as plantations and livestock. If the expenditure on assets is less than the amount of savings, then an economy will have resources available to lend to the rest of the world. If the expenditure on assets is more than the amount of savings, then an economy will need to borrow from the rest of the world.  The balancing item for the capital account is therefore known as net lending/borrowing.

The sequence of accounts is completed by the financial account, which records transactions involved in lending and borrowing. The financial account shows all transactions with financial assets and liabilities (e.g., deposits, loans, shares and equities). The balance of these transactions is net lending/borrowing, as in the case of the capital account balancing item.

In the SEEA the sequence of economic accounts is oriented to the specific task of showing how incomes from the extraction of natural resources and the economy as a whole are impacted by the cost of depletion.   In particular, the SEEA provides depletion-adjusted estimates of operating surplus, value added and savings at both the economy-wide level and for institutional sectors.  Since there is only one amount of depletion for a given resource, it must be allocated between the relevant units in the accounting framework.  

The following accounting treatment is recommended for the SEEA:

a) Recording of the total cost of depletion in the production and generation of income accounts of the extractor as deductions from value added and operating surplus. This ensures that the analysis of extractive activity and economy-wide aggregates of operating surplus and value added fully account for the cost of depletion.  Further, since the government has no operating surplus in regard to extractive activity, not recording depletion in the production account of the government ensures that estimates of government output (which are calculated based on input costs) are not increased owing to depletion. 

b) Recording the payment of rent by the extractor to the government in the primary income allocation account. This entry is standard for the SNA. 

c) Recording an entry entitled “Depletion borne by government” in the primary income allocation account to reflect:

1) that the rent earned by the government included the government’s share of total depletion, which must be deducted to measure the depletion-adjusted savings of government;  

2) that the depletion-adjusted savings of the extractor would be understated if the total amount of depletion was deducted in the extractor’s accounts. Another way of viewing this entry is to consider that the rent earned by government must be recorded net of depletion (i.e., as depletion-adjusted rent) in the derivation of depletion-adjusted savings of the government. 

An example of such entries is given in Table 1.8. It is important to note that this form ensures that the sum of the institutional sector entries for depletion-adjusted aggregates is equal to the same aggregates calculated at the economy-wide level. 

The values of depletion shown for each unit should be consistent with the change in net worth of each unit in relation to environmental resources (assuming the sustainable character or absence of other changes in the stock of resources). Thus, if government collects a 40 percent share of the resource rent (through payment of rent by extractors), then the depletion costs borne by government will be 40 percent of the total measured depletion. In making this calculation, it is assumed that the government’s share of future resource rent remains constant. If this share is expected to change in the future, then the rent earned and depletion borne by government should be adjusted to reflect these changes.

Table 1.8  Entries for allocating income from nature resources and their depletion

Transaction

Government 

Extractor

Resources

Use

Resources

Use

Production account

Output – sales from extraction

100

Intermediate consumption

50

Gross value added 

50

Fixed capital consumption

-15

Net value added 

35

Depletion 

-6

Depletion-adjusted value added 

29

Generation of income account

Remuneration of employees

20

Gross operating surplus

30

Fixed capital consumption

-15

Net operating surplus

15

Depletion 

-6

Depletion-adjusted operating surplus 

9

Primary income distribution account

Depletion-adjusted operating surplus 

Rent

5

5

Depletion borne by government

3

3

Depletion-adjusted saving 

2

7

Source: UN, 2012a.

The associated balance-sheet entries may be made in different ways depending on the nature of the analysis and on the institutional arrangements in an administrative territory. In any presentation, the allocation of assets and the resulting estimates of institutional sector net worth should reflect the expected future income streams for each unit from the extraction of resources. 

1.3.1.4. Functional accounts

The conventional industry and product classifications used in compiling tables and accounts in the SEEA do not necessarily highlight environmental activities or products. It is therefore necessary to prepare functional accounts. The first step is to define the activities, goods and services that have an environmental purpose (i.e., whose main purpose is to reduce or eliminate pressures on the environment or to make more efficient use of natural resources).  In the second step, relevant information in the monetary supply and use tables and the sequence of economic accounts is reorganized to enable clear identification of transactions associated with environmental activities and environmental goods and services. 

Such identification of environmental activities and products helps to present information related to economic measures that respond to ecological challenges.  Flows reflecting output of environmental goods and services and expenditures on environmental protection and resource management are of particular interest as are flows of environmental taxes and subsidies.

1.3.2. Construction of basic SEEA accounts 

Supply and flow accounting is of key importance in the Central Framework of the SEEA 2012. Physical flows showing movement and use of materials, water and energy include natural inputs, products and residuals. 

Natural inputs are all physical inputs that are moved from their location in the environment as a part of economic processes or that are directly used in production.  They may be: 

- natural resource inputs (e.g., mineral and energy resources or timber resources); 

- inputs from renewable energy sources (e.g., solar energy captured by economic units); 

- other natural inputs such as inputs from the soil (e.g., soil nutrients) and inputs from the air (e.g., oxygen absorbed in combustion processes). 

In the extraction of some natural inputs, not all the extraction is retained in the economy (the discarded part of fishing catches, residues from timber felling).  The extraction that is not retained in the economy is considered having returned immediately to the environment and is called “natural resource residuals.”

Products are goods and services that result from a process of production in the economy. Generally, the existence of a product is evidenced by a transaction of positive monetary value between two economic units (e.g., the production of a car and its sale by a manufacturer to a purchaser). For accounting purposes, only flows of products between economic units are recorded and flows internal to the operation of an establishment are ignored. However, in analyzing flows of energy it may be relevant to record the energy generated by an establishment when it burns its own solid waste. 

Residuals (often suitably described as “waste”) are flows of solid, liquid or gaseous materials and energy that are discarded, discharged or emitted to the environment (e.g., emissions to the atmosphere) by establishments and households through processes of production, consumption or accumulation.  Residuals can also flow within the economy as is the case when, e.g., solid waste is collected as part of a waste collection scheme.

Physical flows are divided into three categories (subsystems): energy, water and materials. Materials themselves are often analyzed by the type of material or specific group of materials, e.g., flows of solid waste or carbon emissions.  Physical flows are recorded in asset accounts where they represent changes in the stocks of assets between one period and another. Depletion is an important flow in physical terms characterizing the state of environmental assets. It occurs when natural resources are used up through their extraction, collection and harvesting by economic units, leading to reduced availability of the resources in the future if current extraction rates are maintained. A distinction must be made between renewable and non-renewable resources.

Flows in monetary terms are recorded in the form of transactions and as other flows. A transaction is an economic flow, which is an interaction between economic units based on mutual agreement (sale of timber products, purchase of environmental protection services). Other flows related to changes in the value of assets and liabilities that do not result from transactions include: new discoveries of assets or losses of assets due to natural disasters and the effect of price changes on the value of assets and liabilities.

In physical terms, stocks are the total quantity of assets at a given point in time (tons of coal, cubic meters of timber, hectares of land). Individual environmental assets include mineral and energy resources, land, soil resources, timber resources, water bioresources, other biological resources and water resources. These assets are defined by their material content (e.g., the volume of timber or soil resources) without specific reference to their constituent elements (e.g., the carbon in timber and nutrients in soil resources). A distinction is made between produced (cultivated) and non-produced environmental resources.  It is accepted that the volume of water in oceans is not considered because this stock of water is too large. This does not in any way limit the measurement of ocean-related individual assets such as aquatic bioresources or mineral and energy resources on the ocean floor. On the whole the scope of measurement for each environmental asset includes all stocks that may provide benefits to humanity.

The measurement of stocks in monetary terms focuses on the value of individual environmental assets and on changes in those values over time. The valuation of these assets focuses on the benefits that accrue to economic owners of environmental assets. Not all the benefits that may accrue to current and future generations are given a monetary value in order to provide what might be regarded as a social valuation of environmental assets. There may be some stocks recorded in physical terms that have zero economic value: all the land in a country is included in the scope of a full analysis of changes in land use and land cover, but some land may be considered having zero value in monetary terms.

It is recommended to use market values for the valuation of environmental assets. However, in the case of many environmental assets, there are only a few markets that buy and sell them in their natural state; so determining an asset’s economic value can be difficult. A number of approaches to estimating market prices are possible if there are no observable market prices (these issues are discussed in more detail in Chapter 1.4) 

1.3.2.1 Supply and Use Tables (residual accounts)

Most of the indicators in supply and use tables represent the basis for compiling environmental asset accounts and are presented in the next subsection.   Therefore, only those modules are given below, which refer to physical flows of residuals between the economy and the environment Residual accounts are formed in accordance with the structure of the physical supply and use table and include accounts of atmospheric emissions, emissions to water bodies and solid waste.  

The atmospheric emission account (Table 1.9) records emissions from economic units by types of substance. 

Table 1.9 Atmospheric emissions account (tons)

Supply table for atmospheric emissions Use table for atmospheric emissions

Generation of emissions

Accumulation

Total

supply 

of emissions

Flows to the 

environment

Total

use 

of emissions

Industries 

Households

Emissions from landfills

Emissions to the

environment

Agriculture

Mining 

Manufacturing

Transport

Other 

Transport

Heating

Other 

Type of substance

Carbon dioxide

10,610.3

2,602.2

41,434.4

27,957.0

82,402.4

18,920.5

17,542.2

1,949.1

701.6

204,119.6

204,119.6

204,119.6

Methane

492.0

34.1

15.8

0.8

21.9

2.4

15.5

1.7

222.0

806.3

806.3

806.3

Dinitrogen oxides

23.7

3.5

0.8

2.6

1.0

0.2

0.1

0.1

32.0

32.0

32.0

Nitrous oxides 

69.4

6.0

37.9

259.5

89.0

38.0

12.1

1.3

0.3

513.6

513.6

513.6

Hydrofluorocarbons

0.3

0.4

0.7

0.7

0.7

Perfluorocarbons

Sulfur hexafluoride

Carbon monoxide

41.0

2.5

123.8

46.2

66.2

329.1

51.2

5.7

1.1

666.9

666.9

666.9

Non-methane volatile organic compounds

5.2

6.5

40.0

16.4

27.2

34.5

29.4

3.2

0.9

163.3

163.3

163.3

Sulfur dioxide 

2.7

0.4

28.0

62.4

8.1

0.4

0.4

0.1

0.0

102.5

102.5

102.5

Ammonia

107.9

1.7

0.2

0.9

2.3

11.4

1.2

0.2

125.9

125.9

125.9

Heavy metals

Persistent organic pollutants

Particles 

7.0

0.1

8.5

9.3

4.4

6.0

2.8

0.5

0.0

38.5

38.5

38.5

Source: UN, 2012a, p. 88.


 

The left-hand part of the table shows the generation of emissions from industries and households by types of substance. For accounting of carbon dioxide emissions it is recommended, where possible, that carbon dioxide emissions from the burning of fossil fuels should be distinguished from carbon dioxide emissions from biomass.  The column for accumulation shows the release of atmospheric emissions from controlled landfill sites, since they reflect the release of emissions from production, consumption and accumulation in earlier periods.  These emissions should be attributed to the waste management units that operate the landfill sites.

Atmospheric emissions by households are broken down by purpose (transport, heating, other). Additional purposes can be added depending on analytical requirements and available information. 

The right-hand part of the table presents the use table for emissions to the atmosphere. Atmospheric emission accounts for a particular country exclude emissions released within a national territory by non-residents (e.g., tourists or foreign transportation operations), whereas the emissions abroad of resident economic units are included.  Atmospheric emission accounts do not record capture or absorption of gases by the environment (e.g., carbon captured in forests and soil).  Emissions from natural processes such as unintended forest and grassland fires are not included.

Atmospheric emissions generated by industries and households are measured at the point of release, i.e., after they have passed through any relevant filtering or emission-reduction technology or process within the relevant establishment.  The physical flows of emissions should be classified using the same classifications used in the SNA in order to permit effective linking of physical flow data to monetary data.

Water discharge accounts Emissions of substances to water resources and sewerage systems are accounted in the SEEA framework (Fig. 1.6).  


Sewerage 

Environment (e.g., surface water, oceans and seas. etc.)

Industry (mining, manufacturing, etc.)

Households

Water discharge accounts

Fig. 1.6 Water discharge accounts

Source: UN, 2012a, p. 91.

Water discharge accounts provide information about economic units releasing wastewater, types and amounts of substances, and points of release. Water discharge accounts are an efficient tool for developing economic instruments, including new regulatory standards to reduce the amount of emissions to inland water bodies, seas and oceans. When examined in conjunction with existing technologies, the data in the accounts can be used to estimate the efficiency of available technologies for the reduction of pollutants in water. 

Water discharge accounts record the amount of substances added to water by industries and households over an accounting period. This amount is measured in kilograms or tons. Thus, water discharge accounts provide a description of the wastewater flows included in the physical supply and use table from the point of view of substances generated in the course of economic activity. 

Sources of water discharges are classified as point sources and non-point sources. Point-source water discharges are those for which geographical location of the discharge of the wastewater is clearly identified, e.g. water discharges and releases from sewerage facilities, power plants and other industrial establishments. Non-point (or diffuse) sources of water discharge and releases are sources without a single point of origin or a specific outlet into the receiving water body. Water discharges from non-point sources include substances carried off the land by urban run-off and releases of substances that result from a collection of individual and small-scale activities which, for practical reasons, cannot be treated as point sources. 

The SEEA account for water discharges (Table 1.10) is a reduced version of the general Physical Supply and Use Table format. 

Table 1.10 Water discharge accounts

Physical supply table for gross releases of substances to water  

 

Generation of gross releases 

to water

Accumulation

Flows from

the rest of 

the world

Flows from

the environment

Total

supply 

Sewerage industry

Other 

industries 

Households

Emissions from 

fixed assets

Emissions by type of substance

BOD/COD

5,594

11,998

2,712

20,304

Suspended solids

Heavy metals

Phosphorus

836

1,587

533

2,956

Nitrogen

15,139

30,463

45,602

Releases to other economic units

BOD/COD

Suspended solids

Heavy metals

Phosphorus

Nitrogen

Physical use table for gross releases of substances to water

Generation of gross releases 

to water

Flows to

the rest of 

the world

Flows to

the environment

Total

use

Sewerage industry

Other 

industries 

Households

Flows to the environment

BOD/COD

20,304

20,304

Suspended solids

Heavy metals

Phosphorus

2,956

2,956

Nitrogen

59,199

59,199

Collection by other economic units

BOD/COD

16,877

16,877

Suspended solids

Heavy metals

Phosphorus

7,600

7,600

Nitrogen

45,602

45,602

Note: Dark gray cells are null by definition.

Source: UN, 2012a, p. 93.

The top half of the table (the supply table) shows the generation of water discharges and leakages with a breakdown by industries and households and by type of substance, showing treatment of releases by sewerage systems. The bottom half of the table (the use table) shows releases of wastewater for treatment by sewerage services and releases to the environment. The level of industry detail in the table is dependent on data availability and analytical needs. Where the focus is on a particular type of substance, the rows of the table may be structured to reflect the destinations of discharges. Thus, for any particular industry or household, it is possible to show the quantity of emissions that flow directly to the environment and releases that flow to sewerage facilities. The environment column may also be disaggregated to show releases to inland water bodies or to the sea.

The exchange of relevant substances with the rest of the world (imports and exports) covers the exchanges of substances associated with the release of wastewater from one country to a sewerage facility in another country. Water discharge accounts do not include “imports” and “exports” of substances through natural flows of water resources.  So the quantity of respective substances in rivers crossing national borders and/or flowing to the open sea is not recorded in the water discharge accounts.

These accounts do include discharges of relevant substances from capital goods (such as vessels operating on a country’s waterways) due, for example, to corrosion or fuel leaks. These flows are recorded in the accumulation column. Finally, discharges due to activities undertaken in water bodies or seas (e.g., dredging of waterways and ports) are included and recorded against the relevant industry. 

Solid waste accounts are useful when organizing information on the generation of solid waste and the management of flows of solid waste to recycling facilities, to controlled landfills or directly to the environment. The construction of solid waste accounts allows these indicators being placed in a broader context with economic data in both physical and monetary terms.  Discarded materials sold as used products, for example, a second-hand car or furniture, should be treated as flows of products and not as solid waste. 

In practice, in many countries statistics on solid waste are based on legally regulated administrative lists of materials deemed to be solid waste. The structure of solid waste accounts (Table 1.11) follows the logic of the general Physical Supply and Use Table. For illustration, the table includes an indicative listing of types of solid waste based on the statistical version of the European Waste Catalogue (EWC-Stat) .

Table 1.11 Solid waste account (tons) 

Physical supply table for solid waste

 

Generation of solid waste

Rest of the world

Flows from the environment 

Total supply

Waste collection, treatment and disposal industry

Other industries

Households
 

Imports of solid waste 

Recovered residuals

Landfills

Incineration

Recycling 

and reuse

Other 

treatment

Total

Of which: Incineration to generate energy

Generation of solid waste

Chemical and health-care waste

160

1,830

20

140

2,150

Radioactive waste

5

5

Metallic waste

40

10

320

70

10

440

Non-metallic recyclables

30

2,720

2,100

130

4,980

Discarded equipment and vehicles

140

280

50

470

Animal and vegetal waste

10,330

1,700

80

12,110

Mixed residential and commercial waste

10

30

4,170

4,660

100

10

8,980

Mineral waste and soil

300

29,100

570

170

30,140

Combustion waste

4,050

2,000

1,550

240

5,840

Other waste

460

40

500

Generation of solid waste products

Chemical and health-care waste

160

160

Radioactive waste

Metallic waste

1,600

100

1,700

Non-metallic recyclables

1,030

2,940

3,970

Discarded equipment and vehicles

Animal and vegetal waste

5,310

8,460

13,770

Mixed residential and commercial waste

Mineral waste and soil

350

80

430

Combustion waste

378

286

220

50

648

Other waste

Note: Dark gray cells are null by definition.

Physical use table for solid waste

 

Intermediate consumption

Final consumption

Rest of the world

Flows to the environment

Total use

Waste collection, treatment and disposal industry

Other industries

Households

Exports of solid waste 

Landfills

Incineration

Recycling 

and reuse

Other 

treatment

Total

Of which: Incineration to generate energy

Collection and disposal of solid waste residuals

Chemical and health-care waste

290

570

910

380

1,290

Radioactive waste

5

5

Metallic waste

10

200

200

30

230

Non-metallic recyclables

550

500

2,930

1,340

160

3,090

Discarded equipment and vehicles

30

10

370

60

430

Animal and vegetal waste

30

830

630

8,310

150

2,180

610

9,070

Mixed residential and commercial waste

730

6,450

2,300

1,070

10

630

90

1,790

Mineral waste and soil

1,010

720

22,630

5,170

610

23,240

Combustion waste

50

400

5,190

200

600

Other waste

20

120

40

320

360

Use of solid waste products

Chemical and health-care waste

50

110

160

Radioactive waste

Metallic waste

30

150

1,520

1,550

Non-metallic recyclables

50

2,500

1,420

1,470

Discarded equipment and vehicles

Animal and vegetal waste

630

8,010

5,130

5,760

Mixed residential and commercial waste

Mineral waste and soil

70

200

160

230

Combustion waste

600

48

48

Other waste

Note: Dark gray cells are null by definition.

Source: UN, 2012a, p. 96-97.

 The upper half of the table is the supply table, the first part of which (“Generation of solid waste residuals”) shows the generation of solid waste with a breakdown by industries and households.  It also shows the supply of solid waste from the rest of the world (recorded as imports) as well as solid waste recovered from the environment (e.g., oil recovered following an offshore oil spill, debris collected following a natural disaster, or excavation of soil from locations where hazardous chemicals were used).

The bottom part of the table is the use table, the first part of which (“Collection and disposal of solid waste residuals”) shows the collection and disposal of solid waste through various activities included in the waste collection, treatment and disposal industry and through related activities in other industries. It also shows the flow of solid waste to the rest of the world as exports and the flow of solid waste direct to the environment.

The columns of the table highlight various activities in the waste collection, treatment and disposal industry: landfill operations, incineration of solid waste, recycling and reuse activities and other treatment of solid waste (e.g., use in physical-chemical processes, mechanical-biological processes, and the storage of radioactive waste).  More industry detail can be provided depending on analytical requirements and available information. Accumulation of waste in landfill sites is not presented in a distinct accumulation column as in the general Physical Supply and Use Table. This is because it is desirable to present all information on the waste collection, treatment and disposal industry as a single group.

The second part of the supply table (“Generation of solid waste products”) and the second part of the use table (“Use of solid waste products”) record flows of solid waste that are considered being products rather than residuals. The flows recorded here relate to instances where a solid waste product is identified at the time of disposal by the discarding unit. The flow is recorded in the second part of the supply table and is matched by use of solid waste products in the second part of the use table.  Sales of scrap metal are recorded in this way.  Sales of products manufactured from solid waste or simply obtained from waste collection are not included in this table.

1.3.2.2. Asset accounts

The general methodological approaches and techniques for summarizing data and deriving indicators on the state and changes in stocks and use of environmental resources in the economy, described in the Central Framework of SEEA 2012, have specific features for different environmental assets: water resources, mineral and energy resource and non-cultivated biological resources (forest and animal resources).

Water resources

The main elements of the SEEA for water resources are monetary estimates, a compilation of asset accounts and inclusion of the respective estimates in the standard calculation of basic macroeconomic indicators at national and regional levels.  Formation of these elements is based on various tables, primarily physical supply and use tables. These tables provide the basis for subsequent compilation and modification of asset accounts. 

Physical supply and use tables for water resources 

The inland water system includes surface water (rivers, lakes, artificial reservoirs, glaciers, etc.), ground water and water in soil within a specific territory.  

Surface water comprises all water that flows over or is stored on the Earth’s surface. Instances of surface water include: artificial reservoirs (purpose-built reservoirs used for storage, regulation and control of water resources); lakes (large bodies of standing water occupying a depression in the earth’s surface); rivers and streams (bodies of water flowing continuously or periodically in channels); snow and ice (including permanent and seasonal layers of snow and ice on the surface of the Earth); and glaciers (accumulations of snow of atmospheric origin, generally moving slowly on land over a long period).  Overland flows, i.e., flows of water over the ground before entering a channel (or a reservoir), are also part of surface water but the stock of these flows at any time is small and hence not separately recorded.  

Groundwater is water that collects in porous layers of underground formations known as aquifers.  An aquifer is a geological formation, a group of formations, or part of a formation that contains sufficient saturated permeable material to yield significant quantities of water to wells and springs. An aquifer may be unconfined, i.e., having a water table and an unsaturated zone, or may be confined when it is between two layers of impervious or almost impervious formations.

 Soil water consists of water suspended in the uppermost belt of soil, or in the zone of aeration near the ground surface. This water can be discharged into the atmosphere by evapotranspiration (the process whereby a quantity of water is transferred from the soil to the atmosphere by evaporation and plant transpiration), absorbed by plants, flow to groundwater or flow to rivers (run-off). Some part of transpiration and absorption of water by plants is used in production (e.g., the growing of crops).

All flows related to inland water are recorded in asset accounts for water, including flows from adjacent seas and oceans and flows to those seas and oceans (run-off). The Physical Supply and Use Table for water includes: uptake of water from inland water system and from seas and oceans by various economic units; supply and use of this water by different economic units; and return discharge of wastewater to the inland water system and to seas and oceans.  Flows such as evaporation from lakes and artificial reservoirs and flows (cross-flows) between water bodies are considered being flows inside the environment and are only recorded in asset accounts. Waste discharge to water bodies is accounted in a separate table. 

A typical supply and use table for water contains information about water supply and use and covers all water flows (Table 1.12).

Table 1.12 Physical supply and use table for water (illustrative example, m3)

Supply table

Uptake of water, use of water in production; generation (accumulation) of return flows

Flows from the rest of the world

Flows from the environment

Total supply 

Agriculture, forestry and fishing

Mining and quarrying, manufacturing and construction

Electricity, gas, steam and air conditioning supply

Water collection, treatment and supply

Sewerage

Other industries

Households

Imports 

I. Sources of water uptake

  Inland water bodies

  Surface water

440.6

440.6

  Groundwater

476.3

476.3

  Soil water

50.0

50.0

  Total

966.9

966.9

 Other water sources

  Precipitation

101.0

101.0

  Sea (ocean) water

101.1

101.1

  Total

202.1

202.1

 Total supply of water

1,169.0

1,169.0

II. Water uptake

378.2

  For distribution

378.2

  For own use

108.4

114.6

404.2

61.2

100.1

2.3

790.8

III. Wastewater and reused water

 Wastewater 

Wastewater for treatment

17.9

117.6

5.6

1.4

49.1

235.5

427.1

Own treatment of wastewater

Reused water produced  

  For distribution to third parties

42.7

42.7

  For own use

10.0

10.0

IV. Return flows of water

 To inland water resources

  Surface water

300.0

52.5

0.2

0.5

353.2

  Groundwater

65.0

23.5

47.3

175.0

0.5

4.1

315.4

  Soil water

  Total

65.0

23.5

300.0

47.3

227.5

0.7

4.6

668.6

 To other water bodies  

5.9

100.0

256.3

0.2

362.4

 Total return flows

65.0

29.4

400.0

47.3

483.8

0.7

4.8

1,031.0

V. Evaporation of  water uptake, transpiration and incorporation of water in products

  Evaporation of water uptake

7.2

43.2

2.5

1.8

0.7

3.6

10.0

138.0

  Transpiration 

 Water incorporated in products

Total supply 

267.5

314.8

812.3

489.9

627.3

55.7

250.3

1,169.0

3,986.8

Sub-table for use of water

Uptake of water; intermediate consumption; return flows

Final consumption

Accumulation

Flows to the rest of the world

Flows to the environment

Total use

Agriculture, forestry and fishing

Mining and quarrying, manufacturing and construction

Electricity, gas, steam and air conditioning supply

Water collection, treatment and supply

Sewerage

Other industries

Households

Exports

I. Sources of water uptake

  Inland water bodies

  Surface water

55.3

79.7

301.0

4. 5

0.1

440.6

  Groundwater

3.1

34.8

3.2

432.9

2.3

476.3

  Soil water

50.0

50.0

  Total

108.4

114.5

304.2

437.4

0.1

2.3

966.9

 Other water sources

  Precipitation

1.0

100.0

101.0

  Sea (ocean) water

100.0

1.1

101.0

  Total

0.0

0.0

100.0

2.1

100.0

0.0

202.1

Total use of water uptake

108.4

114.5

404.2

439.5

100.1

2.3

1,169.0

II. Water uptake

378.2

  For distribution

38.7

45.0

3.9

51.1

239.5

  For own use

108.4

114.6

404.2

50.4

100.1

2.3

10.8

790.8

III. Wastewater and reused water

 Wastewater 

Wastewater received from other units

427.1

427.1

  Own treatment

12.0

40.7

52.7

 Wastewater and reused water

Distributed reuse

  For own use

 Total

12.0

40.7

427.1

479.8

IV. Return flows of water

 Returns of water to the environment

  To inland water resources

668.6

668.6

To other water bodies 

362.4

362.4

 Total return flows

1,031.0

1,031.0

V. Evaporation of  water uptake, transpiration and incorporation of water in products

  Evaporation of water uptake

138.0

138.0

  Transpiration 

Water incorporated in products

Total use

267.5

314.8

812.3

489.9

627.3

55.7

250.3

1,169.0

3,986.8






















Note. Dark gray cells are null (no observable phenomena)

Source: UN, 2012a, p. 79-80.

The Physical Supply and Use Table comprises five sections which organize information on: uptake of water from the environment; distribution and use of water uptake across enterprises and households; flows of wastewater and reused water (between households and enterprises); return flows of water to the environment (discharged wastewater); water losses in the form of evaporation and transpiration during these uses and during incorporation of water into products. Table 1.12 is divided into two parts: supply table and use table. 

Section I of the supply table “Sources of water uptake” shows uptake of water from the environment. The same volume of water is recorded in Section I of the use table “Sources of water uptake” by industries that carry out the uptake. Water may be taken from artificial reservoirs, rivers, lakes, groundwater and soil water The capture of precipitation, e.g., the capture of water from the roofs of houses in water tanks, is recorded as precipitation,  However, precipitation direct to the inland water system is not recorded in the Physical Supply and Use Table, but in the asset account for water.

Water used for hydroelectric power generation is considered as uptake and is recorded as use of water by the party, which carries out such uptake. Water, which is taken but is not used in production (e.g., water obtained during dewatering of mines), is recorded as natural resource residuals. Water uptake is disaggregated by source and by industry.

Following the general treatment of household own-account activity, the uptake of water by households for own consumption should be recorded as part of the activity of the water collection, treatment and supply industry. In addition, there may a range of different modes of water supply; e.g., water supply to agricultural enterprises. Such a supply mode may be carried out quite differently from water supply to urban areas.  Accordingly, additional columns may be included in the supply table in order to highlight different types of water uptake in the general category of water supply. 

To record water supply consistently with the treatment of the asset accounts for water resources, water in artificial water bodies (e.g., reservoirs) is not considered having been produced. In other words, these resources are not considered having come into existence via a process of production. Consequently, uptake of water from artificial reservoirs is recorded as uptake from the environment. Flows of precipitation into artificial reservoirs and flows of evaporation from the reservoirs are not recorded in the Physical Supply and Use Table for water resources. As mentioned above, these flows are recorded in asset accounts for water resources as a part of the general system of macro-accounting for the change of the stock of water over an accounting period. 

Uptake of soil water refers to the absorption of water by plants. It is equal to the amount of water transpired by plants plus the amount of water that is contained in the harvested product . Most of soil water uptake is used in agricultural production and in cultivated timber resources. In theory, such use includes all soil water, which is taken up for use in production . According to the SEEA 2012, the amount of soil water, which is taken up, can be calculated on the basis of data about areas under cultivation using coefficients of water use. Different coefficients should be used for different crops. Other relevant factors should also be taken into consideration (e.g., soil types, geography and climate) (UN, 2014).

Water that has been taken up must either be used by the same economic units that take it (i.e., take water for their own use) or distributed (possibly after treatment) to other economic units for other applications. Most of the water for such distribution is recorded under ISIC classification as “Water collection, treatment and supply” However, there may be other industries that take and distribute water as their secondary activity.  

Part II of the supply sub-table entitled “Water uptake” shows the uptake of water by industries, differentiating between water taken for own use and for distribution.  This part of the supply sub-table also records imports of water from the rest of the world. The use of this water is shown in part II of the use sub-table.  In this part, the water available for use is recorded under intermediate consumption of respective industries and final consumption of households or exports to economic units in the rest of the world. 

Within the economy, water is often exchanged between water distributors before being delivered to specific (final) users. These water exchanges are referred to as intra-industry sales. An example is a situation where the distribution network of one distributor does not reach the water user, so that water must be sold to another distributor whose network reaches the said user and who can provide the required volumes of water to the user. In principle, all intra-industry sales must be recorded according to standard accounting principles. However, these transactions are not recorded in the Physical Supply and Use Table, as this would unreasonably increase the total flows recorded (i.e., considerable repeat accounting may occur).  So intra-industry sales are internal transactions, i.e., economic transactions with water resources in situ, i.e., the same physical flow of water occurs whether intra-industry sales take place or not. Meanwhile, depending on the volumes of water involved in distribution, sales and purchases, it may be useful to present these internal transactions (intra- and inter-industry flows) in a supplementary table. 

After statistical accounting for the distribution and use of water, flows of wastewater and effluents between economic units have to be considered. Wastewater is discarded water, which is no longer required by the owner or user. Wastewater can be discarded directly into the environment (in which case it is recorded as a return flow), supplied to a sewerage facility (recorded as wastewater to sewerage) or supplied to another economic unit for further use (recorded as reused water). Flows of wastewater can in principle include exchanges of wastewater between sewerage facilities in different economies, i.e., transfer of wastewater from sewerage systems of one country to similar systems of another country. These flows are recorded as imports or exports of wastewater.  

Part III of the supply sub-table, “Wastewater and reused water,” records wastewater flows to a treatment facility or supplied to another economic unit; the same flows are recorded in the respective section of the use sub-table.  Flows of wastewater are generally residual flows between economic units, since the flow of wastewater to a sewerage facility is generally accompanied by the payment of a service fee to the sewerage facility. In other words, sewerage facilities do not purchase wastewater discarded by an economic unit but rather provide paid services in wastewater disposal and treatment.

Reused water is wastewater supplied to a user for further use with or without prior treatment. This does not include the reuse (or recycling) of water within economic units themselves. Such reuse often occurs with wastewater from reclamation systems.  Reused water is considered being a product when payment is made by the receiving unit. Once wastewater is discharged into the environment (e.g., into a river), its re-uptake downstream is not considered being reuse of the water in the accounting sub-tables, but rather as a new uptake from the environment. 

Part IV of the supply table, “Return flows of water,” records all water that is returned to the environment as supplies to the environment. In some cases, these flows will comprise flows of wastewater direct to the environment from industries and households.  In other cases, these flows will comprise flows of water from treatment facilities following treatment. In the supply sub-table, such flows are shown as being supplied by the various industries and households either to the inland water system or to other sources, including the sea.  Corresponding volumes of water are recorded in part IV of the use sub-table as flows received by the environment.  

Some return flows of water to the environment are losses of water resources.   Such losses include flows of water that do not reach their intended destination or are lost (through evaporation, etc.) from storage. Losses during distribution occur between a point of uptake and a point of use or between points of use and reuse of water. These losses may be caused, e.g., by evaporation (when water is distributed through open channels) and leakages (when water leaks from pipes or from distribution channels during filtration). In practice, when losses during distribution are computed as a difference between the amount of water supplied and the amount received, problems may arise associated with accuracy in the measurement and evaluation of these volumes.  The reasons for this may include difficulties and accounting inconsistencies during water reception and transfer as well as illegal uptake of water and other factors. 

Urban run-off from surface water channels is that portion of precipitation on urban areas that does not naturally evaporate or sink into the ground. These volumes, as a rule, flow into overland flows, i.e., into water sources. That is to say, they are transported via pipes to a defined point of surface water channels or a constructed filtration facility (e.g., filtration fields).  Urban run-off that is collected by sewerage (storm-water drainage) or similar facilities is recorded as uptake of water from the environment (and, according to ISIC classification, is ascribed to the sewerage industry). The respective run-offs may then be treated before their return to the environment or may be treated and distributed as reused water. Urban run-off that is not collected by a sewerage system but flows directly to the inland water system is not recorded in the Physical Supply and Use Table. 

To fully account for the balance of flows of water entering an economy through uptake and returning to the environment as return flows of water, three additional physical flows need to be recorded: evaporation of water uptake, transpiration and water incorporated into products. 

Flows of evaporation are recorded when water is distributed between economic units after uptake, for instance, during distribution via open channels or while accumulating (collecting and storing) in open facilities and in various water storage tanks and reservoirs.  The transpiration of water occurs when soil water is absorbed by cultivated plants as they grow and is subsequently released into the atmosphere in the course of physiological processes taking place during vegetation. Amounts of water directly incorporated into products (e.g., water used in the manufacture of beverages) are shown as being supplied by the relevant industry, which is generally a manufacturing industry. 

The supply and use of water uptake that evaporates, is used in transpiration and is incorporated into products is recorded in Part V of the supply and use table.  

The results of the above macro-accounting of water resources provide a useful tool for improved water management. The relevant data can be coordinated with macroeconomic accounts in order to measure the intensity and productivity of water use. Generally, the SEEA envisages three main water aggregates that can be obtained on the basis of Physical Supply and Use Table data. 

1. Gross Water Input. This indicator reflects the total water that is taken up from the environment or imported. It characterizes the pressures placed on the environment of a specific country (or the environment of other countries) through the supply of water to the economy. Thus, in the Physical Supply and Use Table for water the said gross input is equal to the total water uptake plus imports of water resources. For analytical purposes, it may be useful to disaggregate gross water input by source (e.g., surface water, groundwater, soil water or other sources). Gross water input can also be grouped by types of economic activity. 

2. Net Domestic Water Use. This indicator focuses on accounting of the use of water by resident economic units. This aggregate excludes all flows of water between economic units (and hence is a net measure) and also deducts all exports of water. So the indicator is defined as the sum of all return flows of water to the environment plus evaporation, transpiration and water directly incorporated into products.  Net domestic water use can be presented as the sum of data on different industries and households. Where exports and imports of water are relatively small, there will be little difference between gross water input and net domestic water use at a national level. However, this difference may be of interest in compiling the aggregates at an industry level, e.g., for agriculture, or for water collection, treatment and distribution of water. In the same way, this difference may be important in analyzing water use at a regional level, since water “imports” and “exports” in different regions of a country may be significant

3. Final Water Use is generally referred to in macro statistics as water consumption. This aggregate is a key indicator of environmental pressure (i.e., scale and impact) with respect to water. This is explained by the fact that a large proportion of the water uptake is returned to the environment and may therefore be taken up once more. So the amount of final water use is equal to evaporation and transpiration plus water incorporated into products. That is to say, this aggregate shows the quantity of water uptake, which is no longer available for use.  

The above-mentioned aggregates and indicators based on the Physical Supply and Use Table do not cover all flows, kinds and forms of changes in water stock in inland water resources. They do not include, e.g., losses of water due to evaporation from artificial reservoirs. As mentioned above, these losses are recorded in the asset accounts for water resources.  

Asset accounts for water resources in monetary terms.

Measuring water stock in monetary terms is particularly difficult. The main problem is that, historically, water has often been made available free of charge as a public good supplied below the cost of production in order to support agricultural production or supplied at a flat charge because it has been perceived that water cannot be subject to scarcity. The monetary prices, therefore, have tended to be related to the fixed infrastructure costs of collecting and transporting water to specific destinations rather than to the actual volume of water used, which may vary significantly. 

Given this situation, the standard approaches to valuation of water assets, and in particular the net present value approach, are not appropriate because the resource rent that is derived following standard definitions is negative. Estimates of negative resource rent arise when the income earned from the sale of water uptake does not cover the costs of maintaining the produced assets required to distribute the water. Consequently, the value of the water resources themselves is considered being zero. 

There is a trend towards water pricing that reflects the full costs of managing, uptake and distribution of water resources. Consequently, there may be some instances where such approaches as net present value (NPV) are applicable . In these cases, these values should be incorporated as part of the overall monetary value of environmental assets and a part of the value of economic assets. 

Use of water to generate hydropower is a specific case where there is potential for applying NPV approaches efficiently for the valuation of water resources.  In this case future income streams from water resources (from the sale of energy) can be estimated following the standard NPV approaches. Where such valuation can be made, the resulting asset values should be attributed to water resources. 

Another approach to valuation of water resources is to consider the value of water access entitlements, which, in some countries, are traded on a special market. Often, the value of these entitlements is closely connected to the value of the associated land. Determining the relevant proportion of the total value of land that can be attributed to the access entitlements may be a means of determining the value of the associated water. These approaches to valuation are likely to be most relevant in agricultural contexts where access to water by farmers is a significant consideration.

Water statistics can provide data for water management at many geographical levels, ranging from local level and the level of river basins, to national and multinational levels. The choice of a spatial reference for compiling water accounts ultimately depends on the data needed by users and the resources available to data producers. The choice of spatial scale is important, as countries may experience significant geographical variation in the availability of water (e.g., areas of very high or very low rainfall). At the same time, national aggregates cannot accurately reflect the issues facing particular regions.  

It is recognized internationally that a river basin is the most appropriate spatial reference for integrated water resource management (see, e.g., Agenda 21 (United Nations, 1993) and the European Water Framework Directive (European Parliament and Council, 2000)). This is because the people and economic activities within a river basin have an impact on the quantity and quality of water in the basin, and conversely the water available in a basin affects the people and economic activities that rely on this water. However, in areas where groundwater is an important water source, aquifers may also be appropriate spatial references for compiling water statistics. 

Although data for specific spatial scales within a country are often appropriate for the analysis of water resources, integration of physical data on water at relevant spatial levels, (e.g., river basins) may not align with the available spatial detail for economic data (which is more commonly compiled based on administrative boundaries) In these situations, common areas of observation (accounting catchments) should be defined. 

When integrating or collecting water data, it is important that the reference periods for the different data items are aligned. In water and economic statistics, the recommended temporal reference is the calendar year. However, in practice, water and economic data may not be available in a breakdown by calendar years. For example, some countries use a financial year for national accounts, while they may use a hydrological year for water statistics. Financial and hydrological years may coincide with or differ from calendar years. It is also to be noted that in some cases high seasonal variability in the relationship between demand and supply of water may mean that annual data (for either a financial or hydrological year) are insufficient and sub-annual data are required. 

Mineral and energy resources 

Mineral and energy resources are a unique type of environmental asset in that they can be extracted and used in economic activity but cannot be renewed on any time-scale comparable with human lifetimes. For that reason, there is particular interest in understanding the rate at which these assets are extracted and depleted, the overall availability of these assets and the sustainability of the industries that exploit them.

Asset accounts for mineral and energy resources determine the general structure of the relevant information, including the quantities and values of stocks of the resources and the changes in these stocks over accounting periods. Flows of extraction, depletion and discoveries are central to the asset accounts and these, in turn, can provide valuable information regarding the availability of individual resources.

Valuing stocks and flows of mineral and energy resources allows important links being made to monetary estimates of the value added and operating surplus of the extractive industries, e.g., through the derivation of depletion-adjusted value-added measures. Such measures provide a view of extraction activity that recognizes a more complete set of production costs. Monetary estimates of these assets may also be of interest in the determination of government taxation and royalty settings, given that, in many cases, the government is the collective owner of these assets on behalf of society. 

Mineral and energy resources comprise known deposits of crude oil resources, natural gas resources, coal and peat resources, non-metallic and metallic minerals.  Since the resources are usually found underground (hence commonly referred to as subsoil assets), the quantity of resources that one might reasonably expect to be extracted is not known with any large degree of precision. Consequently, a key factor in the measurement of mineral and energy resources is the concentration and quality of the minerals and energy resources in the deposit, since this will influence the likelihood and the cost of extraction and the degree of confidence regarding the quantity that can be extracted in the future. 

The framework used to define the scope of known deposits is the United Nations Framework Classification for Fossil Energy and Mineral Reserves and Resources 2009  (UNFC-2009) (United Nations, Economic Commission for Europe, 2010), which is a generic, flexible scheme for classifying and evaluating quantities of fossil energy and mineral resources.  

Many countries have their own national classification systems based on, e.g., systems developed by the Society of Petroleum Engineers (SPE, 2007), the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) and the International Atomic Energy Agency/International Energy Agency (IAEA/IEA). It may therefore be necessary to apply conversion rates to facilitate international comparisons. 

The UNFC-2009 categorizes mineral and energy resources by determining whether, and to what extent, projects for the extraction and exploration of the resources have been confirmed, developed or planned (Table 1.13). The underlying resources are classified based on the maturity of the projects. UNFC-2009 is based on a breakdown of the resources according to three criteria affecting their extraction:

  • economic and social viability (E)
  • field project status and feasibility (F)
  • geological knowledge (G)

The first criterion (E) designates the extent to which economic and social conditions are favorable for establishing the commercial viability of the project. The second criterion (F) designates the maturity of studies and commitments necessary to implement mining plans or development projects, extending from early exploration efforts before a deposit or accumulation has been confirmed through to a project that is extracting and selling a product. The third criterion (G) designates the level of certainty of geological knowledge and potential recoverability of the respective quantities.

Table 1.13 Categories of mineral and energy resources 

Known fields

SEEA classes

Corresponding UNFC-2009 project categories

E.

F.

G.

Economic and social viability 

Status and feasibility of the field development project  

Geological knowledge 

Class A: Commercially recoverable resources

E1. Extraction and sale have been confirmed to be economically viable

F1. Feasibility of extraction in a specific development project or mining operation had been confirmed

Quantities of resource associated with the known deposit can be estimated with a high (G1), moderate (G2) or low (G3) level of confidence.

Class B: Potential commercially recoverable resources

E2.  Extraction and sale are expected to become economically viable in the foreseeable future

F2.1 Project work is ongoing to justify development in the foreseeable future or

F2.2 Project work is on hold and/or justification of commercial development may be subject to significant delay

Class C: Non-commercial and other known deposits

E3. Extraction and sale are not expected to become economically viable in the foreseeable future or evaluation is not sufficiently advanced to determine economic viability

F2.2 Project activities are on hold and/or justification of commercial development may be subject to significant delay or

F2.3 There are no current plans to develop or to acquire additional data at the present time due to limited potential or

F4.  There is no development project or planned mining operation 

Potential deposits (not included in the SEEA)

Exploration projects Additional quantities in place

E3. Extraction and sale are not expected to become economically viable in the foreseeable future or evaluation is not sufficiently advanced to determine economic viability

F3 Viability of extraction in a specific development project or mining operation cannot be evaluated due to lack of technical data or

F4.  There is no development project or planned mining operation 

Estimated quantities associated with a potential deposit, based on indirect evidence (G4)

 Source: UNFC-2009, diagrams 2 and 3.

Known deposits are categorized in three classes, each defined according to combinations of criteria derived from UNFC-2009. 

Class A: Commercially recoverable resources. This class includes deposits for projects in categories E1 and F1 and where the level of confidence regarding geological knowledge is high (G1), moderate (G2) or low (G3).

Class B: Potential commercially recoverable resources. This class includes deposits for projects in categories E2 (or possibly E1) and also in F2.1 or F2.2 and where the level of confidence regarding geological knowledge is high (G1), moderate (G2) or low (G3). 

Class C: Non-commercial and other known deposits. These are resources in projects in category E3 and for which feasibility is categorized as F2.2, F2.3 or F4 and where the level of confidence regarding geological knowledge is high (G1), moderate (G2) or low (G3). 

Known deposits exclude potential deposits where there is no expectation of the deposits becoming economically viable and the information necessary to determine the feasibility of extraction or provide confidence regarding geological knowledge is not available.  

There is a large variety of different types of mineral and energy resources, including crude oil, natural gas, coal and peat, non-metallic and metallic minerals.  However, there is no internationally agreed detailed classification of mineral and energy resources, which would be suitable for statistical purposes. 

Physical asset accounts for mineral and energy resources

Physical asset accounts for mineral and energy resources should be compiled by type of resource and should include estimates of the opening and closing stock of mineral and energy resources and changes in the stock over the accounting period. 

The measurement units used to compile and present the relevant information can vary by type of resource.  They are most likely to be in tons, cubic meters or barrels. For accounting purposes, the same measurement unit should be used, for a single resource, to record the opening and closing stocks and the changes in the stocks over an accounting period. 

It should be noted that a total for each class of deposit combining different resource types cannot be meaningfully estimated owing to the use of different measurement units for different resources.  

Ideally, opening and closing stocks of each mineral and energy resource should be classified by classes of resource, i.e., class A: Commercially recoverable resources; class B: Potential commercially recoverable resources; class C: Non-commercial and other known deposits, following the structure in Table 1.14.

Table 1.14 Stock of mineral and energy resources 

Type of mineral or energy resource

Class of known deposit

Class A: Commercially recoverable resources

Class B: Potential commercially recoverable resources

Class C: Non-commercial and other known deposits

Crude oil resources (thousands of barrels)

800

600

400

Natural gas resources (cubic meters)

1,200

1,000

1,500

Coal and peat resources (thousands of tons)

600

50

50

Non-metallic mineral resources (tons)

150

200

100

Metallic mineral resources (thousands of tons)

60

40

60

Note: Different physical units (e.g., tons, cubic meters and barrels) are used for different types of resources.

Source: UN, 2012a.

Compiling of totals for all classes of individual resource types is not recommended. Because each class has a different likelihood of extraction, simple summation of the available resources for a specific resource (e.g., coal) may produce a misleading estimate of total available resources.

In this framework, it is important to distinguish those resources, for which a monetary valuation is to be established. If this distinction is not made, a subsequent comparison between physical and monetary accounts for individual resources may provide a misleading indication of average prices and relative availability of individual resources.

The structure of a basic physical asset account for mineral and energy resources is provided in Table 1.15. 

Table 1.15 Physical asset account for mineral and energy resources 

Type of mineral or energy resource 

(Class A: Commercially recoverable resources)

Oil resources (thousands of barrels)

Natural gas resources (cubic meters)

Coal and peat resources (thousands of tons)

Non-metallic mineral resources (tons)

Metallic minerals (thousands of tons)

Opening stock of mineral and energy resources 

800

1,200

600

150

60

Additions to stock

Discoveries 

20

Upward reappraisals

200

40

Reclassifications

Total additions to stock

200

40

20

Reductions in stock

Extractions

40

50

60

10

4

Catastrophic losses

Downward reappraisals

60

Reclassifications

Total reductions in stock

40

50

120

10

4

Closing stock of mineral and energy resources 

760

1,350

480

180

76

Note: Different physical units (e.g., tons, cubic meters and barrels) are used for different types of resources.

Source: UN, 2012a.

The changes in stock in physical terms should include the following types of changes:

- Discoveries.  These include estimates of the quantity of new deposits found during an accounting period. To be recorded as a discovery, the new deposit must be a known deposit, i.e., refer to Class A, B or C. Discoveries should be recorded by type and class of resources.

- Reappraisals may be upward or downward. They should pertain only to known deposits. In general, reappraisals relate to either additions or reductions in the estimated available stock of a specific deposit or to changes in the categorization of specific deposits between Classes A, B or C, based on changes in geological information, technology, resource prices or a combination of these factors.

- Extraction. Estimates of extraction should reflect the quantity of the resources physically removed from the deposit. It should exclude mining overburden, i.e., the quantity of soil and other material moved in order to extract the resource. Further, the quantity of extraction should be estimated before any refining or processing of the resource is undertaken. Estimates of extraction should include estimates of illegal extraction, either by residents or non-residents, as these amounts reduce the availability of the resource. It should be noted that, for the extraction of natural gas, the measurement of the quantity extracted may be more difficult owing to the nature of the extraction process at some deposits. In cases where natural gas is found with crude oil, the oil (and some natural gas) is expelled from the oil well by the pressure, which is exerted by the gas. Some gas that is expelled may be flared rather than put to direct use while another part (especially after extraction has been continuing for some time) may be reinjected to increase the pressure on the remaining oil and thereby allow more oil being extracted. In such cases, if the natural gas associated with the oil is being measured, allowance must be made to reflect the gas, which is reinjected. 

- Catastrophic losses are rare. Flooding and collapse may occur, but the deposits continue to exist and can be recovered; the issue is one of economic viability of extraction rather than actual loss of the resource itself. An exception to this general principle concerns oil wells that can be destroyed by fire or become unstable for other reasons, leading to significant losses of oil resources. Losses of oil and related resources in this situation should be considered catastrophic losses. 

- Reclassifications may occur if certain deposits are opened or closed to mining operations owing to government decisions concerning access rights to a deposit. All other changes in the quantity of known deposits should be treated as reappraisals. Reclassifications may also be recorded if asset accounts for mineral and energy resources are being compiled by the institutional sector. 

Monetary asset accounts for mineral and energy resources

Asset accounts in monetary terms for mineral and energy resources are based on the availability of information on the physical stock of resources. The structure of the monetary asset accounts therefore largely parallels the structure of the physical asset account. The basic structure of such an account is shown in Table 1.16.

Table 1.16 Monetary asset accounts for mineral and energy resources (monetary units)

Type of mineral or energy resource 

(Class A: Commercially recoverable resources)

Crude oil resources 

Natural gas resources  

Coal and peat resources  

Non-metallic mineral resources  

Metallic minerals  

Opening stock of mineral and energy resources 

24,463

19,059

41,366

1,668

6,893

Additions to stock

Discoveries 

1,667

Upward reappraisals

3,100

391

Reclassifications

Total additions to stock

3,100

391

1,667

Reductions in stock

Extractions

1,234

775

4,467

98

333

Catastrophic losses

Downward reappraisals

4,467

Reclassifications

Total reductions in stock

1,234

775

8,934

98

333

Revaluations

412

-972

5,945

-442

-4,287

Closing stock of mineral and energy resources 

23,641

20,412

38,377

1,519

3,940

Source: UN, 2012a.

The additional entry in the monetary asset account relates to the recording of revaluations, which occur due to changes in resource prices over the accounting period or due to changes to assumptions underlying the Net Present Value (NPV) approaches that are typically used to value mineral and energy resources. 

While the measurement boundary extends to all known deposits in physical terms, it may not be possible to value these deposits in monetary terms owing to degrees of uncertainty regarding expected extraction profiles and incomes. Consequently, the resource rents for deposits in Classes B and C cannot be determined with confidence. It is therefore recommended that valuation be undertaken only for deposits in Class A (commercially recoverable resources). If valuation of deposits in Classes B and C is undertaken, the values for each class should be clearly distinguished. In valuing deposits in each class, it is important that the likelihood and timing of extraction be taken into account in determining expected patterns of extraction and resource rent. 

Because transactions with mineral and energy resources in situ are rare, the valuation of these assets requires the use of net present value approaches. The calculations should be undertaken at the level of an individual resource type, ideally for specific deposits of a resource, and then summed over the range of different resources in order to obtain the total value of mineral and energy resources. 

Application of NPV approaches in the valuation of mineral and energy resources requires a number of factors to be taken into account, mainly pertaining to the estimation of resource rent. 

Estimation of resource rent.In general, the resource rent is estimated based on information about income and operating costs in the extraction industry. The aim is to define a resource rent that is specific to a given resource type, for example, coal. Several factors should be borne in mind for this purpose. 

1. Scope of operations. Consistent with the definition of quantities extracted, the scope of the income and operating costs to be considered in the derivation of resource rent should be limited to the extraction process itself and should not include any additional income earned or costs incurred through further refining and processing of the extracted resource. The extraction process is considered including the activity of mineral exploration and evaluation. These costs should be deducted when deriving resource rent. 

In some cases, a single deposit may contain several types of resources. For example, an oil well often contains gas; and silver, lead and zinc are frequently extracted together.  In these situations, the resource rent used in the calculation of the value of the resources should be allocated by commodity. 

However, since data are usually available only for the extracting unit as a whole, the derivation of estimates of resource rent by type of resource based on known extraction costs for each type of resource may not be possible except by using detailed industry knowledge or general rules of thumb to allocate total extraction costs.  

2. Price fluctuations.  While operating costs for the extraction of resources may not fluctuate significantly, it is likely that income earned from sales of extracted resources will fluctuate.  Consequently, the resource rent (which is derived as the difference between income and costs) may entail a highly volatile time series.  In addition, the aggregate amount of resource rent in any one period may be affected by extraction rates that in turn may be affected by one-off events, e.g., mine collapse.  Since the objective is to define a resource rent that can be forecast, it is recommended: first, that unit resource rents be derived by dividing total resource rent for an individual resource by quantities extracted in a specific period; and, second, that, in the absence of other information on future resource prices, a proxy of unit resource rents (e.g., regression-based estimates and moving averages) may be used as the basis for estimation of future resource rents. To aid interpretation of this information, all assumptions regarding future expected prices and costs should be made clear. 

3. Treatment of mineral exploration and evaluation. Mineral exploration is undertaken in order to discover new deposits of minerals and energy resources, which could be commercially exploited. Such exploration may be undertaken by mining enterprises on their own account.  Alternatively, specialized enterprises may carry out exploration either for their own purposes or for payment. The information obtained from exploration and evaluation determines subsequent extraction work over a number of years. Hence, these expenditures are considered being one form of gross fixed capital formation serving as the basis for production of intellectual property, which is one type of produced asset. 

Mineral exploration and evaluation includes expenditures on exploration for crude oil and natural gas and for non-petroleum deposits and expenditures on subsequent evaluation of the discoveries made.

These expenditures include pre-license and acquisition costs, appraisal costs and costs of actual test drilling and boring, as well as the costs of aerial and other surveys, transportation costs, etc., incurred for purposes of the tests. Re-evaluation may be carried out after commercial exploitation of the resource has begun and the cost of such re-evaluation is also included in the expenditures just mentioned.

Fixed capital consumption should be calculated for a specific asset, using average service lives similar to those used by mining or oil corporations in their own accounts. When estimating resource rent, the user costs of the produced assets are to be deducted, including fixed capital consumption and a return on the produced asset. 

It is recognized that the outcome of mineral exploration is the discovery of mineral and energy resources, so the value of mineral and energy resources on the balance sheet may, in part, be considered being due to mineral exploration. However, following the SNA, the output of mineral exploration work is considered being an intellectual property product, not a natural resource. Deduction of the user costs of mineral exploration and evaluation in the derivation of resource rent ensures that the recorded value of the mineral and energy resources reflects only the value of the non-produced environmental resource.

4. Mine and rig decommissioning costs. Consistent with treatment in the 2008 SNA, it is recognized that, in many cases, costs are incurred by extractors at the end of the productive life of a deposit, generally for restoring the natural environment around the extraction site.  These costs, where they can be reasonably anticipated or estimated, should be considered reducing the resource rent earned by the extractor over the operating life of the extraction site, even though the actual expenditure is likely to take place at the end of operation of the assets. 

5. Aggregation of the same resource over different deposits. In the discussion so far, it has been implicitly assumed that the mineral and energy resources constitute a single deposit, so that any extractions and discoveries affect the resource life of all the resources of a country. In practice this is not the case: some oilfields will be exhausted in a relatively short time frame and extractors will move to other fields. 

Many reappraisals apply to established fields where extraction is already in progress. Upward revisions in estimates of stocks extend the life of the resources and the addition to value will reflect the change between the previous and new resource lives since without additional investments the extraction rate is likely to remain steady.  

The situation is somewhat different in the case of a completely new discovery. It may happen that a deposit is discovered, which has an expected life of20 years, and contains stocks equal to the country’s existing reserves. It is not realistic to assume that resources in the new deposit will necessarily be extracted in years 21 to 40.  Nor is it realistic, on the other hand, to assume that extraction will be completed in years 1 to 20, which would double the total national extraction in these years. It is desirable, therefore, to make projections of the impact of discoveries and reappraisals separately and, ideally, on a deposit-by-deposit basis. 

6. Extraction rate. Independently of assumptions about the resource rent, an assumption must be made about the pattern of extraction to be followed in the future. The assumption most often used is that the extraction rate will stay constant in physical terms, but there is no reason why this should necessarily be so.  As resources approach extinction, there may be a decline in output if there are no new deposits to take their place.  Alternatively, an enterprise could adjust the rate of extraction to give the same total income every year, or reduce the quantity extracted as the resource diminishes, assuming the price increases at the same time. There may be information available from government or from enterprises on projected levels of extraction, which could be used, although such information is often based on conservative projections of the likely level of new discoveries and reappraisals. 

In the absence of more precise information, a reasonable assumption is that the rate of extraction is kept constant in physical terms.  This amounts to an assumption that the extraction process remains steady and the stock of extraction-related produced assets remains steady in proportion to the available stock of the resource.

7. Resource life. At any point in time, the life of the resource is equal to the stock at that time divided by the expected extraction rate In the course of a year, the resource life will diminish by one year owing to extraction and will change by the quantity of discoveries and reappraisals during the period divided by the average extraction rate. 

The quantity of the stock used to calculate the resource life must be consistent with the quantity to be valued. Since only class A resources are to be valued, the resource life must be calculated based only on class A resources and not on total known deposits of the resource (i.e., including also class B and class C resources).

8. Value of discoveries, reappraisals, extractions, depletion and catastrophic losses. The value of additions and reductions in the stock should be calculated using the average prices of the resource in situ over the period multiplied by the quantity discovered, reappraised, extracted, depleted or lost. 

9. Acquisitions and disposals of mineral and energy resources. These transactions are likely to be rare, but when they do occur, they should be recorded. Estimates of the value of these transactions should take into account the costs of ownership transfer, which should be recorded as the purchase price of the produced asset. On the balance sheet this produced asset is considered being incorporated into the value of the underlying mineral and energy resources.

Non-cultivated biological resources (forests and animals)

While the vast majority of biological resources are cultivated, there is a range of natural (non-cultivated) biological resources that provide inputs to the economy and form an important part of local biodiversity. These resources include timber, wild berries, mushrooms, fungi, bacteria, fruit, medicinal plants and other plant resources that are harvested for sale or own consumption. They may also include wild animals, such as deer, boar or moose that are killed for sale or own consumption.

Natural biological resources are distinguished from cultivated biological resources because their natural growth and regeneration are not under the direct control, responsibility and management of an institutional unit. 

Because they are not under the direct control of institutional units, natural biological resources are not easily accounted for. Aside from natural aquatic and natural timber resources, most animals and plants that provide significant economic benefits are now cultivated.  Thus, while there is a wide range of harvested animal and plant resources that are not cultivated, it is typically the case that active measurement is only applied to animals, plants and other biota, for which access rights are controlled (e.g., through hunting licenses) or for which there are other management or conservation arrangements in place. Further, many animals and plants are harvested for own consumption or as part of subsistence farming. 

At the same time, in certain countries there are particular species that support quite sizable commercial operations, possibly illegal, and where there is significant extraction of animals and plants from the wild. Examples in this regard include the hunting of elephants for ivory (illegal) and hunting of kangaroos for meat (legal).  It may therefore be beneficial to organize data and other information on the quantity and value of the available resources, extraction rates and the possible extent of loss of animal or plant populations due to over-hunting.

We will now examine the structure and logic of accounting of non-cultivated biological resources, as exemplified by the most common cases: timber and animal resources.

Asset accounts for timber resources

Timber resources are important environmental assets for the construction and production of paper, furniture and other products, while also representing a source of fuel and an important carbon sink. The preparation of timber resource asset accounts is one measurement tool that provides information for use in assessing and managing changes in timber resources and the services they provide. For a complete assessment of timber resources it is also useful to construct asset accounts regarding the stock of land associated with timber resources, primarily forest and other wooded land. The changes in the stock of forest and other wooded land due to afforestation and deforestation may be of particular interest. 

Timber resources can be found in a wide variety of locations.  They may or may not be available to be felled and used as wood supply, i.e., to produce timber products or for fuel. Timber resources may not be available for wood supply due to the fact that the trees are in areas where logging operations are restricted or prohibited, in areas that are inaccessible or remote and where logging is therefore not economically viable, or because they do not belong to a commercially useful species due to biological features of the trees.  

While timber resources that are not available for wood supply do not possess an economic value, these timber resources remain in the scope of timber resources in the SEEA in physical terms, as they meet the definition of environmental assets and may provide benefits. However, since these resources do not have an economic value, they are not recorded in the asset accounts for timber resources in monetary terms. Consequently, the volume of these timber resources in physical terms should be clearly identified so that appropriate alignment can occur between asset accounts in physical terms and monetary terms. 

Timber resources are most commonly found in forests and on other wooded land, which can be regarded as basic territorial units for collecting and summarizing information inputs. These resources are also found in other areas such as orchards, rubber plantations, along roadsides and train tracks and in city parks.  Conceptually, timber resources in all of these areas are also within the measurement scope of the SEEA. In practice, the scope of measurement should be determined by the relative importance of the types of areas that provide timber resources (timber resources from different territories should be clearly differentiated).

The volume of these resources is often referred to as the volume of standing timber . This definition includes fallen trees; trees that have been felled but not removed from the area; and trees that have fallen from natural causes (e.g., disease or lightning strike) but are still useful for timber products or fuel. The volume of standing timber also includes dead trees that remain standing.

The volume of standing timber should be distinguished from the growing stock which relates to living trees and is the basis for calculation of the natural growth in timber resources over a period.

Physical asset accounts for timber resources 

The physical asset account for timber resources records the volume of timber resources at the beginning and end of the accounting period and the change in this stock over an accounting period. The analysis of natural growth of timber resources compared with their removal is of particular interest. 

The basic structure of a physical asset account for timber resources is presented in Table 1.17. The assets account should distinguish between the types of timber resources and, most importantly, between cultivated and natural timber resources.  For natural timber resources a distinction should be made between timber resources available for wood supply and those not available for wood supply, to ensure that the different scopes of the asset accounts in physical and monetary terms can be reconciled.  Accounts by tree species may be compiled depending on the purpose of analysis and available data.  

Table 1.17 Physical asset account for timber resources (thousands of cubic meters with bark)

Natural timber resources 

Available for wood supply

Not available for wood supply

Opening stock of timber resources 

8,000

1,600

Additions to stock

Natural growth

1,100

20

Reclassifications

150

Total additions to stock

1,250

20

Reductions in stock

Removals

1,000

Felling residues

120

Natural losses

30

20

Catastrophic losses

Reclassifications

150

Total reductions in stock

1,150

170

Closing stock of timber resources 

8,100

1,450

Supplementary information

Felling

1,050

Source: UN, 2012a.

The asset accounts presented in the SEEA focus on timber resources found in forest areas and on other wooded land. It may, however, be of interest to develop estimates of the volume of timber resources in other areas.  

Additions to stock. The stock of timber resources increases due to natural growth. This is measured in terms of the gross annual increment, i.e., the volume of increment over the reference period of all trees with no minimum diameter. The calculation of natural growth should be based on the timber resources available at the beginning of the accounting period. Increases in the area of forest land, other wooded land and other areas of land can lead to increases in the volume of available timber resources.  This is not considered being a natural growth and is recorded in reclassifications.  

Reclassifications may also occur as a result of changes in management practice that shift timber resources from cultivated to natural or vice versa.

Reductions in the stock. The stock of timber resources may decrease over an accounting period through removal and natural losses. Removals are estimated as the volume of timber resources removed from forest land and other wooded land during the accounting period. They include removals of trees felled in earlier periods and the removal of trees killed or damaged by natural causes. Removals can be recorded by type of product (e.g., industrial round wood or fuel wood) or by species of tree (e.g., coniferous or broad-leaved). Removals constitute the relevant variable for measuring the extraction of timber resources because the definition of the stock of timber resources includes trees that have been felled and are on the ground but have not yet been removed. 

Felling residues need to be deducted in order to fully account for the change in the volume of timber resources over an accounting period. These residues are associated with the fact that, at the time of felling, a certain volume of timber resources consists of trees that are rotten, damaged or exceed size requirements. Felling residues exclude small branches and other parts of the tree that are excluded from the scope of timber resources. Estimates of felling residues can provide important information on the nature of forestry practice.

Natural losses are the losses of growing stock (i.e., living, standing trees) during an accounting period due to mortality from causes other than felling: insect attack, fire, wind throw and other physical damage.  Natural losses only include losses that may be reasonably expected when considering timber resources as a whole.  They are recorded only when there is no possibility of removing timber. All timber removed should be recorded as removals 

Catastrophic losses occur and are recorded when there are exceptional and significant losses of timber due to natural causes. These losses can also occur when there is no possibility of removal.   All timber removed should be recorded as removals

Depletion. Depletion is related to the sustainable yield of timber resources from forest land and other wooded land. More precisely, the sustainable yield of timber resources is the quantity of timber that can be harvested at the same rate into the future while ensuring that productive potential is maintained. The sustainable yield will be a function of the structure of the growing stock and needs to take into account both the expected natural growth and the natural losses of trees. Various biological and forestry models will need to be taken into account in estimating sustainable yield. 

In physical terms, depletion of natural timber resources is equal to removals less sustainable yield. As a rule, some variation from year to year is to be expected in the relationship between estimates of sustainable yield and actual quantities of natural growth (less natural losses).  Hence, depletion should be recorded only when removals are beyond normal year-on-year variations in quantities of natural growth.

It should be noted that the concept of sustainable yield used to define depletions does not take into account ecological sustainability of the surrounding ecosystems, which may also be affected by the felling and removal of timber resources.

Felling. While the entries considered above fully account for the change in the volume of timber resources over an accounting period, there may be specific interest in the volume of trees felled during the period relative to the volume of timber resources removed.  Annual felling is equal to the volume of timber resources felled during an accounting period. Felling includes silvicultural and pre-commercial thinning and cleaning. Where available, estimates of the volume of felling may be included in the physical asset account as additional information. 

Timber resources as a source of energy Sources of energy provided by natural and cultivated timber resources are recorded in the physical supply and use table for energy (UN, 2012a, Section 3.4). The basis for recording is measurement of the total energy that is actually sourced from timber resources rather than measurement of the total energy that might be sourced from timber resources. Conceptually, the stock of timber measured in the asset accounts includes the volume and value of timber resources that may be used for energy purposes, but no separate estimates are made.  Where there is analytical interest and where data are available, it would be possible to construct asset accounts for timber resources, which are used for energy purposes. In this context, there could be a focus on resources that are considered being renewable sources of energy.

Monetary asset accounts for timber resources

Monetary asset accounts for timber resources consist in measuring the value of opening and closing stocks of timber and changes in the value of the stock over an accounting period. (Table 1.18)

Table 1.18 The structure of monetary asset accounts for timber resources (currency units)

Natural timber resource (available for wood supply)

Opening stock of timber resources 

82,428

Additions to stock

Natural growth

11,334

Reclassifications

1,546

Total additions to stock

12,879

Reductions in stock

Removals

10,303

Felling residues

1,236

Natural losses

309

Catastrophic losses

Reclassification

Total reductions in stock

11,849

Revaluations

16,692 

Closing stock of timber resources 

100,150

Source: UN, 2012a.

Most of the changes in the stock relate directly to changes recorded in the physical asset account.   But there are also entries relating to the revaluation of timber resources, which are recorded when prices for timber change during an accounting period. 

It may be that not all timber resources are available for harvest due to forest legislation and/or environmental and economic reasons. It is recommended that the volume of timber resources that cannot be harvested should be separately identified and should not be a part of overall calculations of the value of timber resources. 

Estimates are made for the value of natural growth and the value of removals. For cultivated timber resources natural growth is considered an increase in inventories and the removal is trees is treated as a decrease in inventories. Following the SNA, only the change in inventories is usually recorded, but entries are recorded on a gross basis in the SEEA.

For natural timber resources, natural growth is not considered being an increase in inventories, since the growth of trees is not considered being part of a production process.   The removal of timber resources represents the point at which timber resources enter the economy, and output is recorded at that point.

In line with its general definition (SEEA, 2012, section 5.4), resource rent can be derived as the gross operating surplus from the harvest of timber resources (after taking specific taxes and subsidies into account), less the value of the user cost of produced assets that are used in the harvesting process.  

Defined in this way, the resource rent will implicitly include a share that should be attributed to the land on which the timber stands. This reflects the composite nature of this asset taken as a whole (UN, 2012a, section 5.6). In many cases, owing to the location of the land or the quality of the soil, the return on the land may not be large compared to the return on the timber resource.  But where relevant (e.g., where the land may be potentially of value for other purposes), an estimate of the resource rent attributable to the land should be deducted for deriving an estimate of resource rent on timber resources.  

Resource rent can be estimated more directly by using estimates of the value of the growing stock (stumpage price), which is the amount paid per cubic meter of timber by the harvester to the owner of the timber resources (government). The stumpage price itself may also be derived by deducting various harvesting costs from the roadside pickup prices (also called wood-in-the-rough or raw wood prices). The harvesting costs should include felling costs as well as costs of thinning (net of any receipts), other management costs and rent on the land. For natural timber resources, these additional costs may be very low or even zero. When timber resources are sold prior to felling, relevant contract prices may also be used with appropriate adjustments for the scope and coverage of the prices to align them with the concept of resource rent. 

The stumpage prices can then be multiplied by estimates of the expected volume of standing timber per hectare at the expected harvesting age to yield estimates of future receipts. These future receipts are then discounted (over the time from the current period to the expected harvest period) in order to estimate a value per hectare for each age class. In turn, these values are multiplied by the total area of each age class and added to give the value of the total stock of standing timber.  This approach should provide separate accounting for the harvesting of mature trees.  A simplified approach is to use the current age structure and assume that each tree of a particular age grows to maturity and is harvested at maturity.

The primary difficulty in applying these NPV approaches is the extent to which information is available on the age structure of trees and how these trees will mature into the future. Where the necessary detail is available, these NPV approaches should be used, taking the modeling of future timber resources into account. 

If detailed information on the future age structure is not available, two methods are commonly applied. The stumpage value method multiplies the average stumpage price across all maturities of felling by an estimate of the current volume of timber resources. The consumption value method requires information on the current age structure of the timber resources and stumpage prices for different maturities of standing timber.

While these two methods are variants of basic NPV approaches, the assumptions underpinning then may be very restrictive, particularly in case of a changing age structure of timber resources due either to over-exploitation or to active afforestation. 

In general terms, the valuation of flows of timber resources (including removals, natural growth, depletion, etc.) should be undertaken using the same in situ resource prices, which underlie the valuation of the opening and closing stock of timber resources. The relevant approaches are described in Annex A5.1 of the SEEA 2012.

 With respect to catastrophic losses, due, for example, to wind throws or forest fire, the value of the wood that is salvaged should be taken into account. Prices may rise following the destruction of timber resources due to fire or they may fall if trees are killed but not destroyed in storms. The price changes will reflect changes in the pattern of timber available for supply.  Further, the stumpage value of the salvaged timber has to be accounted for in the value of the stock for the period until its removal from the forest, which, in some cases, may take a number of years.  

Other changes, which affect the value of stocks of standing timber as a resource for the logging industry, are changes in use or status (e.g., when forests are protected and logging is prohibited).  In this case, the value of the standing timber, in terms of income from the sale of timber resources, is reduced to zero. 

An increasingly important consideration is the assessment of carbon sequestration. As part of a broader accounting of carbon sequestration and other carbon stocks and flows, estimates of the amount of carbon bound in timber resources and the changes in this amount over an accounting period can be derived using information on the opening and closing volume of standing timber and changes in volume. Estimates can be derived by applying relevant average coefficients for both the relationship between the volume of standing timber and the total biomass (including above- and below-ground biomass) and the relationship between the biomass and quantities of carbon. These coefficients will vary with the species of the tree and other factors. 

A carbon account for timber resources can be developed based on the structure of physical asset accounts for timber resources (see Table 1.17)

It should be noted that references to reductions in the stock of carbon in timber resources (e.g., due to removals) do not imply that carbon has been released into the atmosphere. In general, carbon will remain bound in timber until the timber is burned or decomposes naturally, and these releases of carbon will not be recorded in a carbon account for timber resources. 

Asset accounts for animal resources

The structure and logic of accounting of animal resources is similar to timber resource accounts (Table 1.19). 

Table 1.19 Structure of a physical asset account for animal resources (thousands of individuals)

Animal resources (by species)

Opening stock of animal resources 

100

Additions to stock

Natural growth

15

Reclassification

-

Total additions to stock

15

Reductions in stock

Extractions

5

Natural losses

7

Catastrophic losses

2

Reclassification

-

Total reductions in stock

14

Closing stock of resources 

101

There are several types of processes that may lead to an increase or decrease in the amount of animal resources, and they generally correspond to positions in natural resource accounts, subject to some adjustment and specification.  

Additions to stock  These refer to increases in stock of game over an accounting period as a result of actual growth and spread of animals due to: `

1) natural factors, excluding any human involvement;

2) special biotechnology measures to promote natural regeneration. 

An increase in stock may result from the reclassification of game assets in situations where certain species acquire the status of game. Reclassification may also be related to changes in the assets due to improvements of game husbandry, game use technologies, etc.

Reductions in the stock. The stock of animal resources may decrease during an accounting period as a result of physical extraction (shooting, catch, harvesting), natural and catastrophic losses.   Physical extraction refers to the volume of the stock of animal resources removed from hunting areas and other territories during an accounting period  Physical extraction can be recorded by families (e.g., hoofed, upland game, fur game, etc.) or by species (e.g., moose, wood grouse, sable, etc.). 

Natural losses represent a decrease in the number of game due to natural aging and death, losses caused by predators and diseases, by forced migration and other factors. These processes do not include events of a mass, large-scale and one-off nature, resulting from disasters and/or catastrophic events. Systematic natural decline can usually be forecast based on information about real conditions and processes, as well as on experience gained, and long-term gathering and analysis of relevant data. 

Catastrophic losses occur as a result of phenomena that are large-scale, one-off, anomalous and unpredictable (though actually accounted for) and lead to the destruction (death) of a considerable volume of resources.   As regards game resources, such losses may include:

- epidemics that kill many animals;

- losses due to earthquakes, volcanic eruptions, mud flows and avalanches (in mountain forests), catastrophic floods, acute frosts or prolonged drought, etc.

- consistent with the SEEA 2012 approach, such losses can also be caused by various man-made factors, such as warfare, oil spills in the course of extraction or transportation, significant radioactive emissions.

Reductions in stock can occur due to reclassification of game assets after certain species have been transferred to the category of rare and endangered animals whose hunting is prohibited.

The most suitable basis for valuation of animal resource assets and liabilities is the price at which they could be purchased on the market at the moment of valuation. Ideally, the prices used should be prices, which are observed on the market or which can be estimated by observing market prices. 

1.3.2.3. Functional accounts (environmental activity accounts)

The record of transactions (in monetary terms) related to activities intended to preserve and protect the environment represents an important element in environmental-economic accounting. The goal of identifying the environmental component in key SNA aggregates is adequate justification for keeping such records.  Further, information on these transactions may be used, in combination with information on the changing pressures on the environment, to help assess whether economic resources are being used effectively to reduce pressures on the environment and to maintain the capacity of the environment to provide ecosystem services.

The scope of environmental activity comprises those economic activities whose primary purpose is to reduce or eliminate pressures on the environment or to make more efficient use of natural resources. Examples of such activities include the reclamation of polluted territories, preservation and management of resources, as well as investments in technologies to prevent or mitigate environmental pollution.

These various activities are grouped into two broad categories: environmental protection and resource management (resource use). Environmental protection activities have the primary purpose of preventing, reducing and eliminating pollution and other forms of degradation of the environment.   Resource management activities have the primary purpose of preserving and maintaining the stock of natural resources and hence safeguarding against depletion.  

The general structure of classification of environmental activities is presented in Table 1.20. 

Table 1.20 Classification of Environmental Activities 

Group

Classes

I. Environmental 

protection

1. Protection of ambient air and climate

2. Wastewater management

3. Waste management

4. Protection and remediation of soil, groundwater and surface water

5. Noise and vibration abatement (excluding workplace protection)

6. Protection of biodiversity and landscapes

7. Protection against radiation (excluding external safety)

8. Research and development for environmental protection

9. Other environmental protection activities 

II. Resource management

1. Management of mineral and energy resources

2. Management of timber resources

3. Management of aquatic resources

4. Management of other biological resources (excluding timber resources and aquatic resources) 

5. Management of water resources

6. Research and development work for resource management

7. Other resource management activities

Source: UN, 2012a, p. 106.

Environmental activity accounts include environmental protection expenditure accounts and resource management expenditure accounts. 

Environmental protection expenditure accounts (EPEAs) are functional accounts. Their purpose is to identify and measure society’s response to environmental concerns by estimating supply and demand for environmental protection services and by assessing production and consumption behavior, which prevents environmental degradation. EPEAs present information on the scope of environmental protection services across the economy and on the expenditure of resident units on all goods and services in this sphere.

There are four main, interlinked EPEA tables:

- production of environmental protection services;

- supply and use of these services;

- total amount of national expenditure on environmental protection;

- financing of national expenditure on environmental protection;

Information on provision of environmental protection services by resident producers is given in Table 1.21. These services are provided by economic units for sale or for their own use. Production of environmental protection services is presented with a breakdown between specialist producers, non-specialist producers and own-account producers. Government specialist producers are separately identified.

Table 1.21 Production of environmental protection services (monetary units)

 

Producers

Total

Specialist producers

Non-specialist producers

Own-account producers

Government specialist producers

Other specialist producers

Output of environmental protection services;

3,000

6,500

2,400

1,600

13,500

Intermediate consumption

2,000

3,000

600

400

6,000

Environmental protection services

 

1,800

1,500

500

300

4,100

Other goods and services

200

1,500

100

100

1,900

Gross value added 

1,000

3,500

1,800

1,200

7,500

Remuneration of employees

600

2,000

1,200

800

4,600

Taxes less subsidies on production

Consumption of fixed capital

400

1,000

600

400

2,400

Net operating surplus

500

500

Supplementary items

Labor input (hours worked)

4,000

10,000

4,500

4,000

22,500

Gross fixed capital formation

1,100

1,000

2,000

500

4,600

Acquisition less disposal of non-produced,

non-financial assets

200

Source: UN, 2012a, p. 111.

All amounts in Table 1.21 are measured in compliance with generally accepted SNA accounting practice. Consequently, aggregates such as gross value added and net operating surplus can be meaningfully compared with macroeconomic aggregates such as gross domestic product (GDP) as derived from the core national accounts framework. Inclusion of own-account production extends the range of entries compared with that of the core national accounts. So measures of output and intermediate consumption will be larger in the EPEA relative to the core accounts than they would be if this activity were not separately identified. 

The supply and use table for environmental protection services (Table 1.22) reflects the total supply of specific services by resident producers and the rest of the world and the use of environmental protection services by various economic units. The top half of the table (the supply table) shows the supply of specific services from the output of resident producers and from imports, and the link between the output of specific services valued at basic prices and the valuation of this output at purchasers’ prices. In the second half of this table (the use table), the total supply of specific services is shown as:

a) intermediate consumption by a specialist or other producers;

b) final consumption by households or governments;

c) gross fixed capital formation 

d) exports to the rest of the world.

All entries in the use table are in purchasers’ prices.

Table 1.22 Supply and use of environmental protection services (monetary units)

Supply table

Output at basic prices

Taxes less subsidies on products

Trade and transport margins

Output at purchasers’ prices

Imports 

Total supply

Environmental protection services

13,500

270

 

13,770

 

 

13,770

Use table

Intermediate consumption

Final consumption

Gross fixed capital formation

Exports

Total use

Specialist producers

Other producers

Households

Government 

Environmental protection services

{0}1,500

7,400

2,970

1,800

100

 

13,770

Source: UN, 2012a, p. 112.

The table of total national expenditure on environmental protection is important for the estimation of environmental protection spending. What is included is all expenditure on goods and services used for environmental protection as follows:

1) environmental protection services;

2) expenditure on connected products; 

3) expenditures on adapted goods.

The table also includes total fixed capital formation for environmental protection purposes by a specialist, non-specialist and own-account producers, and the respective transfers for environmental protection work.  Recording of these flows in the table ensures measurement of total spending in the economy for purposes that are reflected in the aggregate indicator of national expenditure on environmental protection. 

The following table which shows financing of environmental protection, is a continuation of the table on total national expenditure on environmental protection and is designed to show indicators for the financing of government expenditures on environmental protection.

Overall, the total amount of national expenditures on environmental protection is defined as follows: 

- final consumption, intermediate consumption and gross fixed capital formation for all environmental goods and services (specific services, connected products  and adapted goods), except intermediate consumption and gross fixed capital formation for typical activities;

- plus gross fixed capital formation (and acquisitions less disposal of non-produced non-financial assets) for typical environmental protection activities; 

- plus transfers by resident units that are connected with environmental protection and are not captured in the items above;

- plus transfers connected with environmental protection, which are paid to the rest of the world;

- minus transfers connected with environmental protection, which are received from the rest of the world. 

Resource management expenditure accounts include accounts covering supply of resource management services and use of resource management services, national expenditure on resource management and financing of national expenditure on resource management. It may be relevant to compile resource management expenditure accounts for a specific type of resource (e.g., timber resources or water resources) (UN, 2012a, Chapter 4).

1.3.2.4. Experimental ecosystem accounting

Experimental ecosystem accounting is an important element of the general system of environmental-economic accounting. Its basic methodological provisions are presented in the System of Environmental-Economic Accounting, 2012: Experimental Ecosystem Accounting.  Although experimental ecosystem accounts are not currently a statistical standard, they provide a consistent and coherent synthesis of current knowledge regarding an accounting approach to the measurement of ecosystems within a model that complements the SEEA 2012. The main purpose of developing an appropriate accounting system is to integrate information regarding the environment (including information on environmental protection) with economic information in order to weigh various options for taking management decisions.  Within this context, the more specific objectives in establishing an accounting structure are: 

  • organizing information on the environment from a spatial perspective, describing, in a coherent manner, linkages between ecosystems, economics and other human activities; 
  • applying a common, coherent and integrated set of concepts, classifications and terminology to enable coordinated work and consistent research;
  • enabling connections with environmental-economic information obtained during implementation of the SEEA 2012. Such linkages would help to understand and assess the contribution of ecosystem services to economic activities (production, consumption and accumulation), establishing the specific linkage of degradation, restoration and development (enhancement) of ecosystems to specific economic units.  This also includes a broader and more comprehensive evaluation of national wealth;  
  • identification of information gaps and key information requirements.

One of the main aspects of ecosystem accounting is a recognition of the fact that the ecosystem can provide a range of services that help to create the benefits that are used in the economy and other human activities. In some cases, ecosystem services can be enjoyed in combination and in harmony with other services, e.g., the preservation of wooded land also provides air filtration and opportunities for recreation and hiking. In other cases, ecosystem services can be of a competitive nature.  For instance, felling in a forest area accrues benefits in the form of a timber harvest. However, it also reduces opportunities for recreation. Ecosystem accounting allows these contradictions being examined in order to make efficient management decisions.

Experimental ecosystem accounting uses three interrelated categories (groups) of services

1. Provisioning services comprise material and energy contributions provided in or by ecosystems, e.g., fish resources or medicinal plants with pharmaceutical properties.  

2. Regulating services arise from the ability of ecosystems to influence climate regulation, hydrological and biochemical processes taking place on the earth, and various biological processes. Quite often, these services are territory specific.  For example, services for control (self-regulation) of floods, which are provided in wooded areas located upstream, are only significant for flood-prone areas located downstream from the wooded areas. 

3. Cultural services are shaped by physical features, location or a specific situation.  These factors produce intellectual and symbolic benefits that the population receives from ecosystems in the course of recreation, leisure and spiritual development. The benefits may also include actual visits to places that in some way support ecosystems (e.g., by showing films about nature) or help people to realize that ecosystems need to be preserved, since they contain important elements of biodiversity or cultural monuments. 

The SEEA experimental ecosystem accounts describe the measurement of ecosystems in physical terms and also in monetary terms to the extent that monetary measurement can be carried out in compliance with the principles of market value. Many of the structures for accounting of ecosystems are taken from the SEEA Central Framework and the SEEA 2012 accounting approaches are consistently applied. 

1.4.
Methodological basis of the system of environmental-economic accounting (SEEA) for deriving economic value of environmental resources and ecosystem services

In the SEEA approach for deriving estimates of economic value of environmental resources and ecosystem services, based on the concept of total economic value, the value of a good or service is used as an indicator of its utility and is determined by its scarcity. What is plentiful and available to everyone does not have any economic value, however desirable it may be from ethical, esthetic and other points of view. Sunshine or a beautiful landscape does not have any value for so long as it is free and available to everybody. If they cease to be freely available, they acquire potential economic value.  If beautiful landscapes are ruined by urban development or if clean air is polluted, these benefits become scarce. People are beginning to discover their preferences in respect of environment quality. In this context, the “quality of the environment” is similar to a good that has become scarce.  Its value hypothetically increases as its scarcity increases, and the value can be estimated on the basis of what people are willing to pay for restoration of its quality or for protecting themselves by various methods from its further deterioration.  

If there is a market for the good or service, their scarcity is measured by price. In a simplified, timeless world, all goods are traded in perfect markets and market prices are truly socially weighted prices, which directly determine the distribution of resources for their most beneficial use. In real life, there are no perfect markets. With regard to environmental resources and ecosystem services, this means that only some of their value is reflected in market prices, while the remainder (their costs and benefits) cannot be identified in market processes. Since certain costs and benefits related to the environment are not accounted for in markets, their economic value is frequently ignored in the assessment of development projects and decisions.  

It should be noted that even in a developed market, existing prices only partially reflect the value of environmental resources and ecosystem services. As a result, misconceptions arise about their scarcity; socio-cultural views of the value and expediency of use of any particular resource are ignored. In other words, the market system in its current form is unable to distribute resources effectively, i.e., to assign just economic value to their destructive use. This is referred to as market failures (Insert 1.2).

Insert 1.2

Causes of market failures

So-called market failures are caused by the following factors. First of all, they may be due to the absence of prices for many environmental resources and the absence of the respective markets (the Earth’s atmosphere, waterways, large ecosystems, landscapes, sound and electromagnetic spectra, etc.). For example, resources such as air and water have not traditionally had a price or their price has been hugely understated, leading to excessive use and deterioration of their quality.   The situation is complicated by the social character of many natural goods which cannot be owned privately and are accessible free of charge. Nevertheless, natural goods, although they are not goods in the usual sense and exist outside the market system, constitute a factor of production, i.e., they enter the system and generate net profit. In addition, the usual practice of economic analysis does not include externalities when assessing project costs and decision-making. Externalities refer to the external effects of the activity of one firm (or individual) upon other firms, groups or individuals who are not directly involved in the activity in question. For example, cutting down trees on a hillside increases deposits in a river, leading to problems and additional costs for farms downstream, which must carry out remedial action. So expenses incurred by one economic unit have to be recouped by other units. Serious problems may also arise from such factors as inevitable transaction costs (time and labor costs incurred in the process of executing agreements and covenants when sharing the use of natural resources, as well as expenses on negotiations and consultancy, obtaining information, etc.) and from uncertainty over the definition of property rights for environmental resources.  Finally, there is uncertainty due to lack of understanding of the consequences of economic activities, given the irreversible character of environmental processes, and this is compounded by short-term views of decision-makers in dealing with environmental issues (priority given to short-term results, ignoring long-term interests). All of this leads to the depletion of environmental resources, accumulation of waste and transfer of the burden of these problems to future generations.

According to the SEEA approach, current market estimates of the value of environmental resources should be adjusted to take account of all relevant value factors, thus neutralizing market failures and evaluating environmental resources and ecosystem services more adequately. This approach is based on the concept of total economic value of environmental resources in the context of links between the environment and the economy (Fig. 1.7).

Typology of values of environmental resources and ecosystem services

Fig. 1.7 Typology of values of environmental resources and ecosystem services

Source: OECD, 1989; Turner, Bateman & Pearce, 1993.

 The breakdown of total economic value and the respective terminology may differ, but in the framework of the concept the value of a good or service is considered comprising: 

1) direct use value;

2) indirect use value; 

3) option values;

4) non-use value. 

The first three components constitute the integrated concept of the “use value.”

Direct use values refer to ecosystem goods and services that are directly used by people.  They include the value of consumption use, such as timber harvesting for construction and for fuel, procurement of medicinal plants and hunting for use in food; and the value of non-consumption use, such as cultural appreciation and recreation activities, which do not imply the extraction of material benefits. Most commonly, benefits of direct use are enjoyed by people visiting or inhabiting the respective ecosystem. 

Indirect use values are derived from ecosystem services that provide benefits outside the ecosystem itself. Examples may include wetlands that have a water filtration function, which is often beneficial for people living further downstream; mango groves protecting coasts against storms, with positive effect for coastal assets and infrastructure; and carbon absorption, which is beneficial for people everywhere as it slows down climate changes. These functions often impact activities whose value can be measured, making it possible to evaluate them as such.

Option value is understood as the retention of possible future use of goods and ecosystem services, which cannot be used at present:  by someone now (option value per se) or by other people/successors (bequest value) . Provisioning services as well as regulating and cultural services may together form a part of option value if they are not used in the present, but might be used in the future.

Non-use value refers to utility derived by people from knowing that a certain resource exists even if they will never enjoy it directly.  This value is often referred to as existence value or value of passive utilization.

A number of approaches to the valuation of different types of utility of environmental resources and ecosystem services are applied in order to derive a monetary estimate of all components of economic value.

1.4.1. Basic methods of economic evaluation of environmental resources and ecosystem services following the SEEA 2012

The concept of total economic value of environmental resources is based on the idea that these resources can have utility for people regardless of whetherthey are brought into circulation in the economy.  Therefore, the methods of economic valuation of environmental resources and ecosystem services within the SEEA framework are based, firstly, on an in-depth analysis of links between the environment and the economy (human activity) in physical terms and, secondly, on monetary estimate of all aspects of the utility, which these links generate for people. These approaches enable the fullest possible account of the economic value of environmental resources and ecosystem services

It should be noted that since the first edition of the UN handbook on national accounting (Integrated Environmental and Economic Accounting (1993)) was published, work for improvement of the methods of environmental-economic accounting has been continuing worldwide, drawing on the experience accumulated by various government units, research organizations and expert communities 

The main documents summarizing findings in this sphere are: Handbook of National Accounting: Integrated Environmental and Economic Accounting, 1993; Handbook of National Accounting: Integrated Environmental and Economic Accounting, 2003; and Central Framework of the SEEA, 2012. 

The SEEA-1993 was published as a work in progress because it was recognized that further conceptual discussions and testing of methodology were required. Drawing on the experience and major achievements obtained in various countries, the revised SEEA handbook showed significant progress in the unification of terms and definitions. Nevertheless, in many cases the methodology still retained the form of a collection of alternative approaches to implementation of the SEEA principles and of the latest experience in the sphere.  Recognizing the urgent importance of integrated information on linkages between the economy and the environment and based on technological achievements in that sphere, the United Nations Statistical Commission approved (at its 38th Session in 2007) the start of work on a second revision of the handbook in order to upgrade the Central Framework of the SEEA into an international statistics standard. 

The Central Framework of the SEEA, 2012 is based on agreed accounting concepts, definitions, classifications and rules. As an accounting system it allows all information being arranged in the form of tables and accounts in a conceptually consistent manner. This information helps to derive coordinated indicators that can be used in compiling accounts and addressing a wide range of issues. The focus is on market valuation tools as being most consistent with approaches to asset valuation in the SNA, particularly with regard to their specification and practical application. However, the conceptual basis of physical and monetary accounting of environmental resources and ecosystem services within the SEEA has remained unchanged.

The framework for deriving estimates of total economic value of environmental resources and ecosystem services in the SEEA-1993 combines a number of sets of methods. In the present section these methods are treated in conformity with the UN (1994b) classification.  Three basic approaches to deriving estimates of economic value of environmental resources and ecosystem services are applied in the framework of the SEEA:

  • market valuation;
  • direct non-market valuation (including willingness to pay)
  • Indirect non-market valuation (including cost data on, for example, damage costs or costs incurred in meeting certain standards).

The general scheme for applying these methods in the valuation of specific environmental resources and ecosystem services is presented in Table 1.23.

Direct market valuation. Consistent with the guiding principles of the SEEA, the following approaches to market valuation of environmental resources can be distinguished:

  • Factual market prices of environmental resources This type of valuation can be applied if market transactions involving this resource are sufficiently representative. Factual market prices are particularly relevant for transactions with land plots that do not have any special conservation status. However, environmental resources usually cannot be traded in this way;
  • present (discounted) value of future net proceeds Future net proceeds are defined as the net operating surplus that could be associated with the use of environmental resources (less standard operating profit that could have been earned if the funds invested in the use of the assets concerned had been used for other activities that carry a similar degree of risk).  This approach can be used to determine the economic value of most environmental resources used in the economy (forest, water, etc.) 

There is some uncertainty regarding estimation of the standard profit element in net price, particularly when the operating surplus (before subtraction of standard operating profit) is already relatively small. In this case, the net price could become negative after the deduction of standard profit. However, it is important not to be misled by this result, as it may show that market prices of the resource are so low that even a standard return on invested capital cannot be achieved. The method of user cost is normally applied to evaluate depletion of mineral resources. This method avoids the application of negative net prices by dividing the actual operating surplus into two parts: user costs, which should be invested to achieve a constant flow of income in the future (even after the complete exhaustion of the resource), and a remaining true income element (Salah, 1989; 1991).

Table 1.23 Valuation and use of environmental resources

Type of valuation

Use of environmental resources

Biological

Land (including ecosystems)

Subsoil

Water 

Air

Market

direct

Market prices (produced biota)

Market valuation of net returns (wild biota)

Market prices

Market valuation (net return from exploitation)

Market prices (direct water use)

Market valuation of net returns (water uptake)

Direct non-market

Existence values of animals and plants

Esthetic, recreational value of landscape

Existence value of ecosystems

Evaluation of decrease in water quality (willingness to pay) 

Evaluation of the existence value of aquatic ecosystems

Evaluation of decrease in air quality (willingness to pay) 

Indirect non-market

Costs of balancing depletion and natural growth

Costs of preventing land degradation by pollution, agricultural or recreational use

Costs of providing alternative income sources

Costs of maintaining the average level of water bodies

Costs of preventing reduction of the quality of water by pollution

Actual damage costs caused by reduced

air quality

Costs of preventing a reduction of air quality due to pollution

Source: United Nations, 1994a.


 

If environmental resource use is not associated with market transactions, non-market direct or indirect valuation must be applied. 

Direct non-market valuation Direct non-market valuation techniques (contingent valuation) may be applied especially for qualitative (and quantitative) use of the natural environment as a good for public consumption (Johansson, 1990; Pearce, Markandia & Barbier, 1989; Salah, 1989). Examples are value of the use of water and air or the value or recreational services provided by natural resources. It is often impossible to evaluate environmental resources as a whole; only the economic value of reductions or additions to the respective environmental services can be evaluated. One example is valuation of a unique landscape. The public may be asked how much they would be willing to pay to prevent the deterioration of the landscape. With certain allowances, this amount can be viewed as the value of decrease in quality of the landscape. 

The most common approaches in direct non-market valuation are based on willingness to pay and receive compensation. Other methods apply hedonic property prices, wage risk studies and travel cost approaches.  It should be mentioned that these methods can be applied, not only for valuation of the different functions of environmental resources but also to value natural and cultural heritage sites (e.g., historical monuments), which  have no market value. 

Direct non-market valuation has its critics. Many economists doubt whether it is really possible to determine monetary values for preferences in the absence of markets (Huenting, 1980). The usual arguments refer to intractable conceptual problems and an inadequate database. On the other hand, these valuation methods frequently offer the sole means of approximating the value of a wide range of functions of the natural environment. These valuation techniques are especially important for the design of environmental protection procedures at local level, when willingness to pay is a vital tool for determining the level of local charges and their differentiation.

Indirect non-market valuation Indirect non-market valuation of environmental resources uses actual or hypothetical cost data.  Actual costs comprise expenditures incurred for maintaining the resources of the natural environment. Examples are environmental protection costs or expenditures for the mitigation of damage (e.g., to human health or materials) caused by worsening of environment quality. Expansion of environmental protection work for the prevention or repair of degradation may indicate that a reduction in the quality of environmental assets due to economic activities has been avoided or made good. The valuation based on avoidance or repair cost may not be adequate, since the environmental protection activities might not be sufficient to offset the negative impacts of economic activities on the environment. The actual damage costs incurred are thus in general only a lower limit for valuing the reduction of environment quality. People may be assumed to be willing to pay at least the amount of their factual expenditures for countering the effects of worsening air and water quality. So these expenditures could be interpreted as the (minimum) value of the reduction of environment quality

It should be noted that the design of various techniques for the economic valuation of environmental resources and ecosystem services is an ongoing process, which presupposes the appearance of new approaches. Each of the techniques should be assessed by its applicability to environmental-economic accounting and in comparison with other methods.

Valuation of specific items should be in accordance with current and potential trends in their use, taking account of environmental issues that arise in the process. It is desirable to apply various approaches to the valuation of specific items in order to obtain more adequate and comprehensive information, which can be used as the basis for decisions on environmental management.

The features of specific territories are of critical importance when selecting methods for the economic valuation of environmental resources and ecosystem services. These features include the nature of environmental issues, the social and economic situation, and socio-cultural peculiarities.

1.4.2. Basic approaches of the System of Environmental-Economic Accounting (SEEA) for deriving the economic value of environmental resources and ecosystem services 

Consistent with the SEEA 2012, the most adequate approach to valuation of environmental assets is the net present value method (UN, 2012a). There are five components of this method for valuing environmental resources: 

1. Measurement of returns on environmental assets; 

2. Determination of the expected pattern of resource rent based on expected extraction (exploitation) profiles and prices;

3. Estimate of the lifetime (service life) of environmental assets;

4. Selection of a rate of return on produced assets, which are deployed in extraction (exploitation) of the environmental resource;

5. Choice of discount rate. 

Measurement of returns on environmental assets

In the SEEA, returns are defined using the concept of economic rent. This rent is best defined as the surplus value accruing to the extractor or user of an asset, calculated after all costs and standard returns have been taken into account.

The surplus value, referred to in the context of environmental resources as a resource rent, can be taken to be the return attributable to the asset itself. The logic of environmental resource valuation requires assessment of the resource rent flows that are expected in the future, after which these resource rent flows are discounted back to the current accounting period. This provides an estimate of the value of the asset at the given point of time.

The measurement of resource rent provides a gross measure of the return on environmental assets. With regard to these assets, it is also relevant to consider the derivation of a net measure of the return by deducting depletion from resource rent, i.e., depletion-adjusted resource rent. For produced assets, the equivalent deduction is for depreciation. Depletion reflects the change in the value of an environmental asset that is due to extraction in excess of regeneration. Putting aside any changes in expectations for future returns or differences between expected and realized outcomes, the measure of depletion-adjusted resource rent corresponds   (in economic terms) to a net return on capital or net return on environmental assets.  

Resource rent and net return on environmental assets can be derived on the basis of the operating surplus earned by extracting enterprises. In this context, the operating surplus earned by an enterprise is considered comprising a return on investments in produced assets and a return on the environmental assets used in production. 

Table 1.24 presents the standard derivation of gross operating surplus based on the SNA and SEEA using measures of output, intermediate consumption, employee remuneration and other taxes on and subsidies for production. 

Table 1.24 Relations between different flows and income components

Output (sales of extracted environmental assets at basic prices, including all subsidies on products and excluding taxes on products)

Less Operating costs

- Intermediate consumption (input costs of goods and services at purchasers’ prices, including taxes on products)

- Employee remuneration (input costs for labor)

- Other taxes on production plus other production subsidies

Equals Gross operating surplus – on the SNA basis

Less Specific subsidies on resource extraction

Plus Specific taxes on resource extraction

Equals Gross operating surplus – for the derivation of resource rent 

Less User costs of produced assets =

= Consumption of fixed capital (depreciation) + return on produced assets

Equals Resource rent =

= Depletion + net return on environmental assets

Source: UN, 2012a, p. 167.

Before deriving measures of resource rent, account must be taken of any specific taxes relating to extraction. Specific taxes and subsidies are those that apply solely to extracting enterprises and are not generally applicable across the economy.  Examples include subsidies that are provided based on the quantity of resources sold and taxes levied on factors of production used in the extracting industries. The deduction of specific subsidies from and the addition of specific taxes to the standard national measures of gross operating surplus are such that the resulting measure of resource rent is neutral in respect of these flows: i.e., although these flows affect incomes of the extracting industries, they are effectively redistribution within the economy and should not influence the predicted return on the underlying environmental assets.

Thus, resource rent is derived from standard measures of gross operating surplus by deducting specific subsidies, adding back specific taxes and deducting the user costs of produced assets (which include consumption of fixed capital and return on produced assets). 

Estimation of resource rent and its expected dynamics

The SEEA 2012 framework offers three main approaches to estimating resource rent: the residual value method, the appropriation method and the access price method.  

The most commonly applied method is the residual value method.  Under this method, resource rent is estimated by deducting user cost of produced assets from gross operating surplus after adjusting for any specific subsidies and taxes.

Estimates of the values of gross operating surplus and specific subsidies and taxes can be obtained from national accounts data Estimates of the user costs of produced assets are not generally available and must be construed so that the resource rent for each period can be obtained. Estimates of the user costs of produced assets are composed of two variables: consumption of fixed capital of produced assets and standard return on produced assets. Both variables can be estimated within national account models designed to estimate the value of the fixed capital stock and related variables for various purposes, including productivity analysis. If such models have not been developed, each variable can be measured using assumptions about depreciation rates, asset lives and rates of return on produced assets. A full description of considerations and approaches relevant to the measurement of user costs is presented in Measuring Capital: OECD Manual – 2009.

A difficulty in estimating resource rents with this method is that it is only rarely possible, using the available source of information, to isolate the extraction or harvesting activities alone. In certain circumstances, multiple resources may be extracted and used at the same time, particularly in mining. Generally, data on gross operating surplus for industries that extract and harvest environmental assets will capture some downstream processing, refinement or other value-added activity also undertaken by the extractor before sale. Since all of these additional activities require inputs of labor and capital, partitioning a firm’s gross operating surplus into pure extraction activity relating to a single resource is not always straightforward. Nevertheless, every effort should be made to isolate the specific gross operating surplus for the extraction of individual resources in the underlying data. 

Besides, in situations of over-exploitation of resources the resulting gross operating surplus will generate a higher estimate of resource rent that can be sustained over the longer term. While this observation is correct, it does not invalidate the approach based on measurements of rent.   The aim of this approach is not to measure what might or should happen under ideal circumstances but to account for expected behavior in respect of a particular environmental asset. Thus, if over-exploitation continues, it should be reflected in a shorter remaining asset life and in a greater amount of depletion (as a component of the higher resource rent) than might otherwise be the case. 

The appropriation method estimates the resource rent using the actual payments made to the legal owner of environmental assets (government). As the legal owner of environmental assets, the government can collect the entire resource rent derived from extraction of the natural resources that it owns. This amount would in theory be equal to gross operating surplus less user costs of the produced assets of extractors. 

The collection of resource rent is generally undertaken by governments through mechanisms such as fees, taxes and royalties. In practice, the fees, taxes and royalties actually collected tend to understate total resource rent, as the rates may be set with other priorities in mind (apart from earning income), e.g., encouraging investment and employment in the extracting industries. These alternative motivations should be considered before use of the appropriation method. 

The access price method is based on the fact that access to resources may be controlled through the purchase of licenses and quotas as is commonly observed in the forestry and fishing industries. When these resource access rights are freely traded, it is possible to estimate the value of the relevant environmental asset from the market prices of the rights. The economic logic here parallels the residual value method, since it is expected that, in a free market, the value of the rights should be equivalent to the future returns on the environmental asset (after deducting all costs, including user costs of the produced assets). 

Where the resource access rights that are purchased provide very long or indefinite access to the assets, the market value of the rights should provide a direct estimate of the total value of the asset rather than simply an estimate of the resource rent. In this case, no discounting of future flows of resource rent is needed. If the rights are for a limited period (e.g., for one year in the case of entitlements), this can provide a direct estimate of the resource rent for that period. In practice, governments may give the access rights direct to extractors for free or at a price that is less than the true market value. 

While in theory, all of these methods will generate the same estimates of resource rent, it is the case that the application of the appropriation and access price methods are more heavily influenced by the institutional arrangements in a country. For these reasons, estimates of resource rent based on the residual value method should be compiled and, where possible, reconciled with estimates obtained using the other methods. 

The critical factor in the valuation of assets is not past or current returns, but expected future returns. An asset with no expected returns has no value in economic terms. Expected returns are, by definition, unobservable, so assumptions have to be made in respect of them. 

Resource rent is a function of quantities extracted, unit extraction costs and commodity prices. The starting point is generally estimates of resource rent in the current period or in the immediate past.  In the absence of additional information on expected price changes or changes in extraction rates, it is recommended that estimates of resource rent should be set based on current estimates of resource rent, assuming no price changes beyond the general level of inflation and a realistic rate of extraction.

In general, there is too much volatility in unit resource prices for meaningful assumptions about future resource price changes to be incorporated.  Also, in the absence of other information, it may be reasonable to assume that extraction will continue at the same rate as in the past, since this is the extraction rate at which an appropriate amount of produced assets can be acquired. However, if, for example, it is known that the greater part of the expected resource rent will be earned in years 5 to 10 over a total asset life of 30 years, this timing of expected returns should be taken into account. 

Special consideration is needed in situations where the extraction rates in any particular period might be considered abnormal, including where they fall to zero. In practice, this is possible in any given accounting period, e.g., if the change in economic circumstances is such that extraction is no longer cost-effective, natural disasters make the resource inaccessible or unharvestable, or access to resources is restricted to allow the recovery of stocks.

If changes occur in the expected extraction/use schedule, the resulting NPV estimates may produce results that are difficult to interpret. However, this only highlights the fact that, when the expected extraction schedule changes for any reason, including simply the receipt of additional information, the estimates must be redone, since they need to reflect a valuation based on all the information that is available at that point of time. 

Estimates of environmental asset life 

The asset life (or resource life) is the expected time during which an asset can be used in production or the expected time during which extraction of a natural asset can be continued. With respect to renewable resources, estimates of asset life/exploitation are based on the available physical stock of the asset and the assumed rates of its extraction and growth. In a very simple case, the asset life can be calculated by dividing the opening physical stock by the excess of expected annual extraction over expected annual growth. 

Estimates of the asset life provide the time frame, during which measurements are made. In practice, depending on the choice of discount rate, if the asset life is longer than about 20 years, estimates are relatively stable; that is, the values of the expected returns in later years are relatively small. The sensitivity of the NPV estimates to the choice of discount rate over varying asset lives is discussed in SEEA 2012.

Rate of return on produced assets

An expected rate of return on produced assets is required in order to estimate the user cost of the produced assets that are utilized in the extraction of the environmental asset. If this cost is not deducted, the resulting estimates of resource rates will be overstated.

Two approaches can be used to estimate rates of return on produced assets: endogenous and exogenous.  The endogenous approach sets a rate equal to the net operating surplus (gross operating surplus less consumption of fixed capital) divided by the value of the stock of produced assets. This approach implicitly assumes that there is no return attributable to non-produced assets, including environmental assets, and it is therefore not recommended.  It should, however, be used to obtain an upper bound of the estimated rate of return on produced assets.

The exogenous approach is recommended for calculations in the SEEA. It assumes that the expected rate of return of produced assets is equal to an exogenous (external) rate of return. Ideally, the expected rate of return should relate to activity-specific returns, thus taking into account the risks of investing in particular activities. 

However, in many cases, financial markets may not be sufficiently developed to provide robust estimates of these specific rates of return. Therefore, the most realistic result can be obtained by an approach that uses the rate of return across the economy, possibly based on the rates on government treasury bonds, if any.   In all cases, a real rate of return should be used. While exogenous (external) rates of return are unlikely to be perfect proxies for rates of return on individual produced assets, it is likely that they provide a reasonable reflection of standard return for the derivation of value estimates of an environmental asset. 

Choice of discount rate

In order to convert the expected stream of resource rent into a current-period estimate of the overall value, we need to use a discount rate, which expresses a time preference – the preference of the owner of the asset to receive income now rather than in the future. It also reflects the owner’s attitude to risk. In general, individuals and enterprises have higher rates of time preference than society; that is, individuals and enterprises tend to demand a quicker return from ownership of an asset than society as a whole. Higher levels of time preferences translate into higher discount rates.

The discount rate can be interpreted as an expected rate of return on non-produced assets. At an enterprise where all assets are identified and measured accurately and where conditions of perfect competition prevail, the discount rate and the rate of return should be equal. This is because the enterprise should only make investments if the rate of return on all assets is aligned to the time and risk preferences of the enterprise for receiving income. 

To ensure a valuation that is aligned to the general concept of market prices, it is recommended that market-based discount rates be used, which are equal to the assumed rate of return on produced assets. However, the use of social discount rates in the valuation of environmental assets also has its supporters. The rationale is that environmental assets have broad and long-term value for society as a whole and should be valued in that light rather than solely in relation to their value to a present-day extractor. 

One of the main arguments in favor of social discount rates is that they are generally lower than market-based discount rates and lower rates will place higher relative importance on income earned by future generations. That is to say, estimates that use market-based discount rates are believed to undervalue the interests of future generations, and the total values obtained are too small, since they do not give sufficient weight to these future incomes. 

Calculation of net present value

Estimates of the value of an environmental asset are obtained by the following procedure: 

a) obtaining estimates of gross operating surplus, specific subsidies and taxes on extraction, and the user cost of produced assets mobilized for the extractive activity (from relevant sources), and making assumptions about rates of return on produced assets; 

b) estimation of resource rent as gross operating surplus less specific subsidies plus specific taxes less the user costs of produced assets; 

c) estimation of asset life based on physical assessment of stock and projected rates of extraction and growth; 

d) forecast of resource rent over the life of the asset, taking account of any expected changes in the extraction schedule; 

e) applying the NPV formula to value the environmental asset using an appropriate discount rate.

If, after adjusting for specific taxes and subsidies, the derived expected rent is negative, then the value of the asset should be assumed to be zero. This conclusion should not be based on single observations of negative resource rents but should take account of the likely future patterns of operating surplus and specific taxes and subsidies. In some cases, extraction may continue because the level of specific subsidies is sufficient to ensure a suitable income for the extractor. However, in these situations, the income should not be linked to the underlying environmental asset but, instead, should be considered as a redistribution of incomes within the economy. 

If the use of environmental assets does not involve market transactions, direct or indirect non-market valuation should be applied. 

CHAPTER 2

SPECIFIC FEATURES IN THE APPLICATION OF SEEA APPROACHES IN RUSSIA

 Implementation of SEEA approaches in Russia is based on existing practice in the use of these approaches and the potential for collecting data and deriving estimates of the status and use of environmental resources for environmental-economic accounting purposes. The proposed analysis of how environmental statistics are supported by information resources has been carried out by correlating the available relevant information flows with the environmental-economic accounting methods, both in general terms and in respect of specific resources. 

This is followed by a presentation of the results of studies regarding the specifics of SEEA application in Russia to derive indicators for:

  • environmental asset accounts for water resources, mineral and energy resources and non-cultivated biological (forest and animal) resources;
  • physical flow accounts for air emissions, discharges to water resources and solid waste disposal; 
  • functional accounts for other environment-related transactions (economic activity for environmental purposes).
2.1.
Information base for implementation of SNA/SEEA approaches in the Russian Federation

Environmental statistics emerged as a separate branch of study in the Russian Federation in the early 1970s. Since then considerable work has been carried out to develop statistical instruments, methodology, and regulatory information; a large volume of data on environmental protection and resource use has been accumulated, including information on the supply and use of natural resources (water, timber, mineral and energy resources, land resources, hunting and aquatic resources), on special protected areas, pollution, environmental protection costs, fees for negative impact, violation of laws on the environment, etc.

The collection and aggregation of data about environmental protection and resource use is carried out at different levels (federal, sub-federal, regional and local) and is in the competence of federal executive authorities: the Ministry of Natural Resources and Environment (Federal Agency for Forestry (Rosleskhoz), Federal Agency for Subsoil Use (Rosnedra), Federal Agency for Water Resources (Rosvodresursy), Federal Service for Supervision of Natural Resources and Human Welfare (Rosprirodnadzor)); the Federal Service for National Statistics (Rosstat); the Ministry of Economic Development (Federal Service for State Registration, Cadaster and Cartography); the Federal Tax Service; executive authorities in the constituent regions of Russia, etc. The leading role is played by Rosstat. Primary statistics are collected according to the forms of federal statistical monitoring; uniform requirements are in place for filing primary statistics and administrative data as well as uniform requirements for the execution of statistical reports.

Mandatory statistical accounting is carried out under the federal plan  developed by Rosstat together with the reporting entities and adopted by the Government of the Russian Federation.  The federal plan contains lists of reporting entities and their responsibilities, which include: compiling official statistical information indicating the regularity of each task; the aggregation level of the official statistics (across the Russian Federation, at sub-federal and regional levels, and at local level); categorization of the data; and deadlines for its presentation (distribution) to users. Federal statistical monitoring is carried out in respect of the following respondents:

1) legal entities established in the Russian Federation (including small and medium entrepreneurs); government bodies and local self-government bodies; subsidiaries, affiliates and divisions of foreign organizations operating in the Russian Federation; 

2) unincorporated businesses in the Russian Federation. 

The body of information resources currently held in the Russian Federation and accepted for purposes of analysis includes primary official statistical data, administrative data and data from other available sources (Table 2.1).

Table 2.1 Sources of information to be used in environmental-economic accounting

Information status

Description of information

Information sources

Official statistical information

Aggregated documented information on the quantitative features of large-scale social, economic, environmental and other processes in the Russia, compiled by the reporting entities using official statistical methodology.

Forms of federal statistical monitoring

Administrative data

Documented information used in compilation of the official statistics received by the Russian federal public authorities, sub-federal public authorities, local government authorities and organizations in the course of their licensing, registration, supervision, control and other administrative functions. 

Administrative information of the Russian Ministry of Natural Resources and Environment, Federal Forestry Agency, Russian regional executive authorities, etc. 

Other available sources of information

Estimates (quantitative, qualitative) drawing on professional experience, and research studies of processes and phenomena that are not reflected in the systems or are not accounted for by direct, exact measurement

Expert opinions, scientific research, publications

Source: Federal Law of November 282, 2007, No. 23.07.2013-FZ (as amended on July 23, 2013), “On Official Statistical Reporting and the State Statistics System in the Russian Federation.”

Below are presented the results of studies of practical aggregation of primary statistics, administrative information and other available data, which have been carried out in order to apply the approaches of the SEEA Central Framework for deriving estimates to be used in:

  • environmental asset accounts for water resources, mineral and energy resources and non-cultivated biological resources (forest and animals);
  • physical flow accounts for air emissions, discharges into water bodies and solid waste disposal; 
  • functional accounts for other transactions related to the environment (economic activity for conservation purposes) 

2.1.1. Environmental asset accounts 

Environmental asset accounts are designed to record the opening and closing stock of environmental assets, primarily to assess whether current patterns of economic activity are depleting and degrading the available environmental assets.   These accounts provide information for efficient management of environmental assets. 

Water resources

Data on the status and changes in the stock of water resources as well as their use in economic activities is contained in the State Water Register and in the forms of federal statistical monitoring. This information is collected by Rosstat, Rosvodresursy, the Federal Service for the Protection of Consumer Rights (Rospotrebnadzor) and the Federal Tax Service (Table 2.2).  

Table 2.2 Main sources of information on the status and changes in the stock of water resources

Name of the form

Name of the Federal Agency

Respondents*

No.1-enterprise “General information on the activities of the organization”

Federal Service for National Statistics 

Legal entities (excluding small businesses, state-funded organizations, banks, insurance and other financial and lending organizations)

No.1-water supply “Information on water supply (the self-contained water supply network)” 

Federal Service for National Statistics 

 Local government authorities, legal entities delivering water to public or state-funded organizations (including organizations that lease facilities for  the provision of services)

No.1-sewerage “Information on sewerage (the self-contained sewerage network)”

Federal Service for National Statistics 

Local government authorities, legal entities engaged in wastewater management for public or state-funded organizations (including organizations that lease facilities for service provision)

4-os “Information on environmental protection expenditures and environmental fees”

Federal Service for National Statistics 

Legal entities, unincorporated businesses (sole traders) engaged in environmental work, and paying for negative impact on the environment.

18-ks “Information on investments in fixed capital for environmental protection and resource use”

Federal Service for National Statistics 

Legal entities (excluding small and micro-businesses) engaged in all kinds of economic activity. 

2-tp (water management) “Information on the use of water”

Federal Agency for Water Resources 

Legal entities, unincorporated businesses (sole traders) managing water supply facilities or using water from water supply systems  

State Water Register

The Register is maintained by the Federal Agency for Water Resources.

Information is provided free of charge by the Russian Ministry of Agriculture, Rosprirodnadzor, the Federal Agency for Maritime and River Transport, the Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet), sub-federal executive authorities, local government, etc. 

No. 18 “Information on sanitary conditions in the Russian constituent entity”

Rospotrebnadzor

Federal state-funded health care organizations (Centers for Hygiene and Epidemiology in Russian constituent entities, for railway transport, a similar center at Rospotrebnadzor);

 Rospotrebnadzor Directorates in  Russian constituent entities and for railway transport;

The Federal Medical and Biological Agency; departments of the Russian Defense Ministry, Ministry of Internal Affairs, Federal Security Service, etc.

1-NM “Report on assessment and receipt of taxes, duties and other statutory charges to the Russian budget”

Federal Tax Service 

Federal Tax Service Directorates in Russian constituent entities

*Rosstat Order of August 12, 2013, No. 323, “On Approval of Statistical Instruments for Federal Statistical Monitoring of Business Activities.”

*Rosstat Order of August 3, 2011, No. 343 (as amended on April 1, 2014),   “On Approval of Statistical Instruments for Federal Statistical Monitoring of Construction, Investments in Non-Financial Assets and Utilities”

Rosstat Order of August 06, 2013, No.309 (as amended on April 1, 2014 and August 29, 2014), “On Approval of Statistical Instruments for Federal Statistical Monitoring of Agriculture and the Environment.”

Rosstat Order of October 19, 2009, No.230 (as amended on November 28, 20114), “On Approval of Statistical Instruments for Engaging Rosvodresursy in Federal Statistical Monitoring of Water Use.”

Regulation of the Russian Government of April 28, 2007, No.253 (as amended on April 18, 2014), “On the Procedure for Maintaining the State Water Register.”

Rosstat Order of October 16, 2013, No.411, “On Approval of Statistical Instruments for Engaging the Federal Service for Consumer Rights Protection and Human Welfare in Statistical Monitoring of the Sanitary Condition of Territories, Occupational Diseases (Toxic Poisoning), and Exposure to Radiation.” 

Order issued by the Russian Federal tax Service dated December 13, 2012, No.MMB-7-1/951, “On Approval of Statistical Tax Reporting Forms of the Federal Tax Service for 2013.”

The State Water Register is a structured assembly of documented information on water bodies owned by the federal government, sub-federal, regional and local governments, individuals and legal entities, with a description of their use; and also on river basins and watershed districts.   The State Water Register registers water use contracts, decisions on water body entitlements, transfer of water body ownership rights and liabilities under water use contracts, and termination of water use contracts. Collection and safekeeping of documented information on underground water bodies is provided pursuant to  legislation  on subsoil resources.  

The Register is created and maintained to enable coordinated use of water bodies, their purposeful exploitation and protection, and for planning and designing measures to prevent negative impact due to water and to manage the consequences of such negative impact. The Register is maintained by the Federal Agency for Water Resources. The Register includes three sections: Water Bodies and Water Resources, Water Use and Water Body Infrastructure.  The Water Bodies and Water Resources section contains information concerning watershed districts and water bodies located within watershed districts, including information on the features of water use schedules, their physical, geographical, morphometric and other properties. 

The Water Use section provides information on: water management districts; water protection areas and protected shoreline belts, wetland areas and flooding; use of water bodies, including data on water consumption and wastewater discharge; decisions on provision of water rights; permits for dumping of material produced by dredging operations in inland sea areas and offshore territorial waters of the Russian Federation, etc.

The Water Body Infrastructure section contains information on water management systems and on hydro-technical and other installations located in and around water bodies . The format of the State Water Register is approved by the Order of the Russian Ministry of Natural Resources (May 29, 2007, No.138). The procedure and the composition of data to be provided by executive bodies are established by the respective regulations of the Ministry of Natural Resources .

 Use of water resources is subject to payment. Water tax is paid by organizations and individuals who use water for specific purposes in accordance with the laws of the Russian Federation. The following types of use of water bodies are taxable:

1) uptake of water from water bodies;

2) use of water bodies, except for timber floating and loose rafting;

3) use of water bodies for water uptake to the hydropower industry; 

4) use of water bodies for timber floating and loose rafting.

The tax period is a quarter. Tax rates are established for river basins, lake basins and sea basins and for economic districts by each type of taxable water use. 

Analysis of the reporting forms of the State Water Register and federal statistical monitoring to assess their efficiency in reflecting supply and use of water resources has shown that the existing reporting forms contain a considerable number of estimates characterizing water resources, with their subdivision into surface water and ground water.  The available data show the annual discharge module, average water consumption, water use in the economy for drinking and production needs, for regular irrigation and agricultural water supply, transportation losses, wastewater discharge flows (untreated, insufficiently treated, adequately treated), content of pollutants in wastewater as well as the sanitary condition of water bodies and sources of drinking water. Many forms of the State Water Register contain information on watershed districts and river basins, observation stations in and around water bodies, and hydrographic features, which show the level of knowledge of water resources and provide important inputs for their evaluation. Most of the data are physical in nature. Monetary estimates include: operating costs of wastewater collection and treatment; capital investments in protection and use of water resources; costs of fixed asset overhaul for water protection purposes; fees for permissible and excessive discharge of pollutants into water bodies; water tax, etc.  

The greater part of information on water reserves, water uptake and wastewater discharge as well as losses and content of pollutants in wastewater is obtained and analyzed by the Federal Agency for Water Resources. Information on operating and investment expenditures for protection and use of water resources is collected by Rosstat, while data on the sanitary condition of water bodies is the concern of Rospotrebnadzor. Because there are a number of different information flows regarding water resources in the Russian Federation, a mechanism is needed for data transfer and improvement of the linkage between the government structures, which compile sets of estimates for water resources at federal and regional levels.

Information on the state and use of water resources is, for the most part, publicly available and is published by the relevant executive bodies in hard copy and in electronic form. The data of the State Water Register are open, except for information regarded by Russian law as classified. The Federal Agency for Water Resources must provide information from the State Water Register within five days in response to an inquiry from a concerned party. Copies of requested documents are provided in return for a fee set by the Government of the Russian Federation.  

The information flows currently available are of a complex nature, frequently duplicating each other by fully or partially repeating estimates in different forms of reporting. For example, the entry “Total annual use” concerning types of water use, can be found in a reporting form 2.10 “Water body use.   Uptake of water from water bodies” (Federal Agency for Water Resources) and in Form 2-tp (water management) “Information on water use.” A similar situation is observed with estimates such as “transportation losses,” “wastewater discharged,” “contents of pollutants in wastewater.” This may lead to discrepancies between data referring to the same estimates, from either objective or subjective causes.  This should be taken into account when choosing estimates and advising on the technique of their derivation.

Monetary estimates of water resources using tariffs governed by current special taxes/charges for water use can, in general, be based on the existing information flows, which are controlled by the Russian Finance Ministry and Federal Tax Service (with respect to water tax). It should be mentioned that, in both cases, not only do the available data reflect uptake of water but they also provide materials describing fiscal flows for water use without an uptake of water from the environment, i.e., from water bodies. However, the figures obtained from these calculations will be significantly understated in comparison with the actual processes and phenomena. This is due to numerous fiscal allowances and tariff preferences granted to a wide range of activities of water users/water use elements. All these allowances and tariff preferences result in incomplete deduction of the water resource rent (i.e., leaving it with various water users), which in turn hinders adequate (full) estimation of this rent. It should also be noted that the aggregates obtained are becoming less complete. This can be seen on the example of reporting information concerning water use (Table 2.3).

Table 2.3 Changes in the number of water users subject to statistical monitoring according to Form No.2-tp (water management) “Information on water use”: 

Estimates

2005

2009

2010

2011

2012 

2013 

Number of water users (thousand units)

45.8

39.2

31.3

30.0

29.4

29.0

% to 2005

100

86

68

66

64

63

including “Agriculture, hunting and related services,” total (thousand units)

17.9

11.5

6.3

6.0

5.75

% to 2005

100

64

35

34

32

 

As it is apparent from Table 2.3, the number of water users who provide reporting decreased by nearly a third over eight years (from 2005 to 2013). In agriculture, this figure fell by two-thirds. This is probably the result of actual reduction in the number of water users and hence, of water use as such, but it is also caused by organizational factors, including relaxation of discipline in accounting.  

On the whole, the information base contains a range of estimates that are required for the standard SEEA for water resources as regards surface water (consistent with par. 1.15 SEEA-W – System of Environmental-Economic Accounting for Water, 2012). It includes such indicators as the use of water resources as an input for production, water reuse in economy, pressure exerted by the economy on the environment (water uptake and pollutant discharge), cost of wastewater collection and treatment, etc.

Mineral and energy resources 

Information on the current state and changes in the stock of mineral and energy resources as well as their use in economic activity is collected and analyzed by Rosstat, the Ministry of Natural Resources and other federal executive authorities (Table 2.4).

Table 2.4 Main sources of information on the state and changes in the stock of mineral and energy resources

Reporting form

Federal agency

Respondents

Reporting regularity

1-fuel and energy industry (crude oil) “Information on oil well operation”

Federal Service for National Statistics 

Legal entities (excluding small businesses) engaged in oil, associated gas and gas condensate extraction 

 on an annual basis

2-fuel and energy industry (gas) “Information on gas well operation”

Federal Service for National Statistics 

Legal entities (excluding small businesses) with gas wells on their balance sheet

on an annual basis

6-oil “Information on oil extraction and production cost of petroleum products”

Federal Service for National Statistics 

Legal entities (excluding small businesses) engaged in oil extraction and/or refining 

on quarterly basis

No.1-enterprise “General information on activities of the organization”

Federal Service for National Statistics 

Legal entities (excluding small businesses, state-funded organizations, banks, insurance and other financial and lending organizations)

on an annual basis

5-z “Information on the cost of production and sale of products (goods, work, services)”

Federal Service for National Statistics 

Legal entities of all forms that are commercial and non-commercial organizations engaged in the production of goods and services for sale to third parties (except for small businesses, which use the simplified taxation scheme, state-funded organizations, banks, insurance and other financial and lending organizations)

on quarterly basis

P-1 “Information on production and shipping of goods and services”

Federal Service for National Statistics 

Legal entities (excluding small businesses) employing over 15 people on average (including part-time workers and independent contractors)

on a monthly basis

P-3 “Information on financial standing of the organization”

Federal Service for National Statistics 

Legal entities (excluding small businesses, state-funded organizations, banks, insurance and other financial and lending organizations) employing over 15 people on average (including part-time workers and independent contractors)

on a monthly basis

01-gr “Information on geological prospecting and exploration”

Federal Service for National Statistics 

Legal entities engaged in geological prospecting and exploration

on an annual basis

P-2 (brief) “Information on investments in gross fixed capital”

Federal Service for National Statistics 

Legal entities (excluding small businesses and enterprises employing fewer than 15 people, which are not small businesses) and their separate divisions

on a monthly basis

5-gr “Information on the state and changes in the stock of solid mineral deposits”

Russian Ministry of Natural Resources 

(Rosnedra)

Legal entities and their divisions, which are subsoil users engaged in prospecting and exploration of deposits in the unallocated subsoil reserve fund

on an annual basis

6-gr “Information on the status and changes in the stocks of oil, gas, condensate, ethane, propane, butane, sulfur, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil”

Russian Ministry of Natural Resources 

(Rosnedra)

Entrepreneurs, including members of partnerships, legal entities engaged in subsoil study, prospecting and assessment of deposits, exploration and extraction of mineral resources (by categories of subsoil use)

on an annual basis

70-tp “Information on recovery of mineral resources in the process of extraction”

Russian Ministry of Natural Resources 

(Federal Subsoil Resource Management Agency (Rosnedra))

Legal entities and their divisions, which are subsoil users engaged in extraction of solid minerals (by subsoil areas) 

on an annual basis

1-NM “Report on assessment and receipt of taxes, duties and other statutory payments to the Russian budget”

Federal Tax Service 

Federal Tax Service Directorates in Russian constituent entities

on a monthly basis

The state cadaster of deposits and mineral occurrences is an important source of information. The cadaster is maintained in order to support the development of federal and regional geological prospecting programs, comprehensive use of mineral deposits, allocation of extracting enterprises, etc. The cadaster contains information on every deposit, describing the quantity and quality of the principal and co-occurring minerals, mining, technical, hydro-geological, environmental and other conditions for development of the deposit, its geological and economical evaluation as well as information on the discovered occurrences of minerals. 

For the purpose of accounting of available mineral resources, a balance sheet of mineral reserves is maintained as a part of national accounts, containing information on the quantity, quality and degree of geological certainty of the stock of every kind of commercially relevant mineral by deposit, location, degree of development, extraction, losses, etc.   The national balance sheet is compiled and maintained by the Federal Agency for Subsoil Use The balance sheet presents data on changes in the recoverable and currently unrecoverable stock of mineral resources over an accounting period due to: extraction operations; subsoil extraction losses for solid minerals; oil, gas and condensate extraction losses; additions or reductions in the course of exploration work; revaluations due to revision of the parameters used for reserve calculation; loss of economic value for technological or geological reasons; non-confirmation of reserves in the process of development or subsequent exploration; license reissue, etc.   The national balance sheet of mineral resources is of principal importance in assessment of the current state and prospects for industry development. 

The national cadaster of mineral deposits and occurrences and the national balance sheet of mineral resources are compiled on the basis of geological information presented to federal and territorial geological information funds by enterprises engaged in geological studies, and also on the basis of reports submitted by enterprises engaged in exploration and extraction. 

The stocks of mineral resources and commercial minerals contained therein, which are subject to government accounting, are divided into two main groups:

- recoverable (economically viable) reserves These include reserves whose development is cost-effective in the competitive market at the time of technical and economic evaluation, provided that extraction and processing methods and technology are used, which comply with provisions for subsoil use and environmental protection.

- unrecoverable (currently not economically viable, potential) reserves, which must be separately accounted for.  They include: 

1) reserves whose development at the time of technical and economic evaluation is not cost-effective (loss-making) in the competitive market due to low technical and economic characteristics, but which may be profitable when prices of minerals change, an appropriate market emerges or a new technology is developed;  

2) reserves that meet the requirements of in-place reserves but whose development is impossible at the time of the evaluation because they are situated within protected water areas, residential areas, industrial or farming facilities, nature reserves, or in the vicinity of natural, historical and cultural monuments.  

The analysis of reporting forms as to their efficiency in reflecting the supply and use of mineral resources has shown that the existing reporting forms contain many estimates regarding the supply and use of mineral and energy resources.  The estimates refer to different types of mineral resources: raw hydrocarbons, solid minerals and other fossil mineral resources (ethane, propane, butane, sulfur, nitrogen, carbon dioxide, etc.). The estimates are presented in physical and monetary terms. The physical estimates present information on the stock of mineral resources (recoverable and currently unrecoverable), changes of in-place resources due to extraction, losses sustained in extraction, exploration, revaluation, writing off of non-confirmed reserves, changes in technological boundaries or for other reasons, changes in the scope of geological exploration, etc. The available information flows can be used for environmental-economic accounting in order to derive estimates in physical terms. 

The monetary estimates include, primarily, taxes on extraction of raw hydrocarbons, taxes on extraction of commonly occurring mineral resources, taxes on extraction of natural diamonds and other mineral resources. In addition, there are monetary measures of the full cost of oil extraction, budgeted costs of exploration, capital investments in subsoil exploration and evaluation of mineral resources, etc., which can be used for deriving estimates of mineral and energy resources in monetary terms. 

It should be noted that the greater part of information on reserves (recoverable and unrecoverable) of solid mineral resources, oil, gas, condensate, ethane, propane, butane, and on changes in these reserves due to extraction, losses sustained in extraction, exploration, revaluation and for other reasons, is assembled by Rosnedra. Information on taxes on extraction of mineral resources is processed by the Federal Tax Service while the full oil extraction cost is derived by Rosstat. Because there are a number of different information flows regarding water resources in the Russian Federation, a mechanism is needed for data transfer and improvement of the linkage between the government structures, which compile sets of estimates for water resources at federal and regional levels. 

Geological data on subsoil resources held by the government are divided into public domain information and restricted information. The restricted information includes data on the amount of recoverable mineral resources in the country. Pursuant to Art. 16 and 17 of the Law of the Russian Federation, “On State Secrets,” information constituting a state secret can only be disclosed with the permission of the government body holding this information.

Overall, the information base contains a large number of estimates that are required for environmental-economic accounting of mineral and energy resources.  

Non-cultivated biological resources (forests and animals)

The analysis of information flows referring to the status and use of non-cultivated biological resources (forests and animals) has been carried out with respect to resources that, according to the SNA 2008, meet the definition of economic resources: timber, non-timber forest products (soft resin, non-timber forest resources, forest food resources, medicinal plants); game resources (hoofed animals, fur animals, bears, birds). Data on the above-mentioned resource categories are collected by Rosstat, the Russian Ministry of Natural Resources and executive bodies of Russia’s constituent entities (Table 2.5)

Table 2.5 Main sources of information on the status and changes in the stock of non-cultivated biological resources (forest and animals)

Reporting form

Federal agency

Respondents

Reporting regularity1-Rosleskhoz Information on forest regeneration and afforestation 

Federal Service for National Statistics 

Legal entities, unincorporated businesses (sole traders) engaged in forest regeneration and afforestation on the territory of the forest fund and other land categories.

on an annual basis

12-Rosleskhoz, “Information on forest protection”

Federal Service for National Statistics 

Legal entities, unincorporated businesses (sole traders) engaged in pest control in areas of the forest fund and other land categories.

on an annual basis

1-Rosleskhoz (Chernobyl), “Information on forest regeneration and afforestation in areas of nuclear contamination”

Federal Service for National Statistics 

Legal entities engaged in forest protection activities on the territory of the forest fund and other land categories in areas of nuclear contamination of forest resources

on an annual basis

2-tp (hunting) Information on Game Management

Federal Service for National Statistics 

Legal entities, unincorporated businesses (sole traders), which are parties to game use agreements or hold long-term licenses to use game resources

on an annual basis

4-os “Information on environmental protection expenditure and environmental fees”

Federal Service for National Statistics 

Legal entities, unincorporated businesses (sole traders) engaged in environmental activities and/or paying fees for negative impact on environment

on an annual basis

18-ks “Information on capital investments in environmental protection and resource use”

Federal Service for National Statistics 

Legal entities (excluding small businesses) engaged in all kinds of economic activity 

on an annual basis

State Forest Register

The Forest Register is maintained by sub-federal government authorities with respect to forests located in the respective regions. 

Rosleskhoz aggregates the information.

Documented information must be submitted by: 

1) persons engaged in the use, conservation, protection and regeneration of forests;

2) government authorities managing the use, conservation, protection and regeneration of forests

on an annual basis, except for Forms

2.3 State Forest Register 

2.4 State Forest Register

3.1 State Forest Register

3.5 State Forest Register

3.6 State Forest Register

3.7 State Forest Register

4.4 State Forest Register, which must be filed on a quarterly basis

State Register of Game Use

The Register is maintained by the executive authority of a Russian constituent entity, submitting information to the Ministry of Natural Resources.

Documented information with regard to hunting areas in use must be filed annually by legal entities and sole traders engaged in hunting

on an annual basis

Reporting forms of sub-federal government authorities on exercise of their delegated powers in respect of forestry 

Rosleskhoz

(data collection, processing and analysis)

Sub-federal government authorities exercising delegated powers in respect of forestry 

on a quarterly basis, except for Forms

8-OIP and 

11-OIP (annually),

10-OIP (semiannually),

17-OIP (monthly)

Reporting forms of sub-federal government authorities on exercise of delegated powers in respect of hunting and game resource preservation

Federal Service for Environmental Control (sections 1-6), Russian Ministry of Natural Resources and Environment (Table 7)

Sub-federal government authorities exercising delegated powers in respect of game resource preservation 

on quarterly basis

 

Timber resources Statistical units are:

  •  legal entities, unincorporated businesses (sole traders) engaged in forest pest control on the territory of the forest fund and other land categories (information collected by Rosstat)
  •  sub-federal government authorities exercising delegated powers in respect of forestry relations (information collected by Rosleskhoz);
  •  individuals, legal entities engaged in forest use, regeneration and/or afforestation (information collected by government and local government authorities entitled to exercise powers in respect of forest management).

Principal information on forest resources, their use, protection and regeneration is contained in the reporting forms of the State Forest Register. In addition, certain data are contained in forms of federal statistical monitoring, e.g., in respect of regeneration and afforestation, operating costs and capital investments in environmental protection and natural resource use. Data are also contained in the reporting forms of government authorities exercising delegated powers in respect of forestry. According to the federal plan for statistical monitoring, Rosleskhoz derives information on forests, forest fires, forest conservation, protection, use, regeneration, the use of subsidies from the federal budget for exercising certain powers of the Russian Federation in respect of forestry, actual expenditures from all sources of financing in present prices, etc. 

The State Forest Register is a structured corpus of documented information on: the composition of the forest fund and other categories of land that contains forests; forest districts, urban forests and their subdivisions; protective forests and their categories; exploitable and reserve forests; special protected forest areas, areas of special use; quantitative, qualitative and economic characteristics of forests and forest resources; forest use, conservation, protection and regeneration, including seed breeding; entitlement to use of forest areas . The State Forest Register is maintained by the Federal Agency for Forestry (Rosleskhoz), using the established forms ; they can be updated by government authorities and by local forest management authorities within the limits of their statutory power .  

The documented information contained in the State Forest Register is open, except for restricted information as established by federal laws  (restricted information). Information is provided in the form of excerpts upon written request filed by any person with the authorized government body or through public telecommunication networks, including the Russian Public Services Portal, or by other communication technology. The information is providing by giving access to the information resource containing the data of the State Forest Register. Excerpts from the State Forest Register are provided in return for a payment.

Individuals, including sole traders and legal entities, provide government authorities and local government bodies with the following information:

- report on forest use (on a monthly basis) including actual scope of the use, as a cumulative total from the beginning of the year to the end of the accounting period ;

- report on forest conservation and protection activities (on a quarterly basis) including the actual scope of conservation and protection measures, as a cumulative total from the beginning of the year to the end of the accounting period ;

- report on forest regeneration and afforestation (on a quarterly basis) providing information on actual measures for forest regeneration and afforestation, as a cumulative total from the beginning of the year to the end of the accounting period .

The analysis of the forms of federal statistical monitoring, the State Forest Register and reports of government authorities on exercise of the powers delegated to them in respect to forestry as regards maintenance of indicators on the status and use of forest resources (timber and non-timber forest products) has shown that the above documents contain estimates of the stock of forest resources (areas where forests are located, allocation of timber stock by prevailing species and age group, certain qualitative characteristics of forests, e.g., contamination density, etc.), on the economic use of forests (calculated felling rate by type of activity and designated purpose, use of forests by individuals and legal entities, e.g., harvesting of soft resin, non-timber forest resources, medicinal plants, etc., actual volume of timber harvested, etc.), on forest conservation and protection (information on forest fires, forest stock perished as a result of fires, damage incurred from insects and wild animals, human factors, measures taken for forest protection and conservation, etc.), and forest regeneration.  

The estimates are mainly physical in nature. Some estimates on the use of forest resources are presented in square measures (hectare), e.g., forest mortality by type of causes, growth of forest fruits, berries, medicinal plants, ornamental plants, etc. This impedes use of the data for evaluating forest resources in physical terms and at present market value as established by the SNA/SEEA approaches. Only approximate calculations and rough estimates are possible in this case, for purposes of including the required figures in reporting forms.  Estimates presented in monetary terms include: operating costs of forest regeneration and afforestation measures, forest protection work, capital investments in protection and use of forest resources, auction starting price, auction closing price, returns on the use of forests, etc.  

It should also be noted that pursuant to Art. 6 of the Russian Forest Code, forests are located in areas pertaining to the forest fund and in other land categories (areas designated for defense and security purposes, residential areas and special protected natural areas). The forms of forestry reporting developed by Rosleskhoz require information to be collected mainly in areas pertaining to the forest fund. The 1-Rosleskhoz and 12-Rosleskhoz forms of federal statistical monitoring collect and process data for all categories of land, and most of the estimates are impossible to differentiate. So problems arise in respect of data correlation due to differences in the classification and range of reporting entities subject to federal statistical monitoring and industry reporting. 

At the regional level, information on forest resources may also be presented in respective forest management plans. For example, the Governor of Yaroslavl Region approved the forest management plan for Yaroslavl Region (dated June 29, 2011, No.284), which contains information on the forest condition, designated purpose by forest districts and parks, on the forest structure by species and age group, on the main purposes of use of forest resources and their regeneration, as well as data regarding returns on forest use and expenditures on performance of the forest management plan. The standard form and composition of a regional forest management plan were approved by Order No.423 issued by Rosleskhoz, dated October 5, 2011. This document was prepared on the basis of forest management materials, forest stock-taking, the State Forest Register, reports on forest use, conservation, protection and regeneration, plans for social and economic development and other regional planning documents.  Regional forest management plans are prepared for a 10-year period. 

Game Resources Principal information on game resources is contained in the State Hunting Register, in reporting forms of federal statistical monitoring and in the reports of sub-federal government authorities on exercise of delegated powers in respect of hunting and game resource conservation. The State Hunting Register contains documented information on the following: 

1) quantitative, qualitative and economic characteristics of game resources; 

2) types, location, boundaries, ownership and condition of hunting districts; 

3) legal entities and sole traders engaged in hunting and organizations engaged in the procurement, production and sale of hunting products; 

4) use and conservation of game resources; 

5) hunting services; 

6) hunters, etc.

The State Hunting Register is maintained in a standard format and in accordance with the established procedure for information collection and safekeeping, ensuring its provision to interested parties in accordance with the principles of technological uniformity across the Russian Federation, public accessibility and regular updating, and correlation with data contained in other government information resources. The Register information is publicly available and is provided upon request. The Hunting Register is maintained by regional government bodies with subsequent submission of the data to the authorized federal government body. The Register is composed of 8 sections enabling systematization of the data. 

The contents, reporting forms and the procedure for reporting on the exercise of powers delegated by the Russian Federation in respect to hunting and conservation of game resources were approved by the Order of the Russian Ministry of Natural Resources, dated January 28, 2011, No.23. 

The analysis of the reporting forms of federal statistical monitoring, the State Hunting Register and reports of government authorities on the exercise of delegated powers in respect of hunting and game resource conservation for evaluation of the status and use of game resources has shown that government accounting, cadaster and monitoring of rare and endangered wildlife are kept in the Red Books of the Russian Federation and its constituent entities .  The physical estimates present information on the stock (population) of game resources (birds, mammals), on the use (extraction) of game resources (hoofed animals, fur animals, birds, wolves, bears) and on animal mortality caused by various factors (disease, road accidents, illegal hunting, etc.). The monetary estimates show costs incurred by different subgroups of the hunting sector, earnings from the sale of hunting products and services, cost of services provided in the hunting sphere, auction starting and closing prices, etc.  

In this way, data relating to timber resources and game resources are collected and processed by Rosstat and other federal executive bodies, particularly the Ministry of Natural Resources and Environment and its agencies, as well as by sub-federal government bodies. The fact that there are a number of different information flows makes it important to establish an efficient mechanism for communicating data and to improve the links between government institutions compiling sets of estimates referring to timber resources and game resources at federal and regional levels. Information on the state and use of non-cultivated biological resources is open and is published by the relevant government bodies in hard copy and electronically. 

At the present time, the above-mentioned flows and sets of information are of a complex and multi-layered character, having elements of duplication, full and/or partial repetition of indicators in different reports referring to timber resources. For example, estimates of forest regeneration are recorded in form 1-Rosleskhoz, “Information on forest regeneration and afforestation” (Rosstat) and in form 4.3 State Forest Register, “Forest regeneration measures envisaged and carried out under the regional forest management plan and forestry regulations” (Rosleskhoz). For objective or subjective reasons, this may lead to discrepancies between data referring to the same estimates.  This fact should be taken into account when choosing specific estimates and underlying data to be used for reflecting information on the status and use of non-cultivated biological resources.

Monetary estimates of timber resources are generally contained in reporting forms on the work of sub-federal government bodies in carrying out functions delegated to them with regard to timber resources. Data referring to game resources are recorded in the state statistical monitoring form 2-TP (hunting), “Information on hunting and hunting management” and in reporting forms on the work of sub-federal government bodies in carrying out functions delegated to them with regard to game resources. Overall, the existing information base contains many estimates required for environmental-economic accounting of timber and game resources. 

2.1.2. Physical flow accounts for air emissions, discharges to water bodies and solid waste disposal;

Environmental pollution consists mainly of pollutant emissions into the atmosphere, wastewater discharges into water bodies and the generation of production and consumer waste (solid waste residuals).  

Information on air emissions, discharges to water bodies, solid waste generation and recycling is collected and analyzed by Rosstat, the Ministry of Natural Resources and Rospotrebnadzor (Table 2.6)

Table 2.6 Main sources of information on air emissions, discharges to water bodies, solid waste generation and recycling 

Reporting form 

Federal agency

Respondents

Reporting regularity

2-TP (air) “Information on Air Protection”

Federal Service for National Statistics 

Legal entities, unincorporated entities (sole traders) operating stationary sources of air pollution

on an annual basis

1-KH “Information on Urban Improvement”

Federal Service for National Statistics 

Local government, legal entities: multisectoral production utilities, utilities and housing enterprises, urban improvement enterprises, landscaping, road and bridge engineering, road maintenance enterprises and directorates

on an annual basis

2-TP (water management) “Information on the use of water”

Federal Water Resources Agency 

Legal entities, unincorporated businesses (sole traders) managing water supply facilities or using water from water supply systems 

on an annual basis

The State Water Register

Federal Water Resources Agency

Information is provided free of charge by the Russian Ministry of Agriculture, Rosprirodnadzor, Federal Agency for Maritime and River Transport, Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet), sub-federal executive authorities, local government authorities, etc. 

on an annual basis

2-TP (waste residuals) “Information on generation, use, decontamination, transportation and disposal of production and consumption waste”

The Federal Supervisory Natural Resources Management Service (Rosprirodnadzor)

Legal entities, unincorporated businesses (sole traders) engaged in management of production and consumption waste 

on an annual basis

18 “Information on the sanitary situation in the Russian constituent entity”

Rospotrebnadzor

Federal state-funded health care organizations (Centers for Hygiene and Epidemiology in Russian Constituent Entities, similar centers for railway transport and at Rospotrebnadzor);

Rospotrebnadzor directorates in Russian constituent entities and for railway transport;

 Federal Medical and Biological Agency; departments of the Russian Defense Ministry, Ministry of Internal Affairs, Federal Security Service, 

etc.

on an annual basis

An important source of information is the state waste cadaster , which includes the federal waste classification catalog, state landfill facility register, and the waste and waste recycling technology data bank. It is designed to provide information support to government authorities, local government bodies, legal entities and unincorporated entities dealing with waste in their economic or other activities as well as legal entities and unincorporated entities operating landfill facilities. The information in the state waste cadaster is a government information resource and is open, except for information subject to restricted access under Russian law. It should be noted that the state waste cadaster has a methodological character and does not contain any numerical estimates of waste management activities. 

The analysis of reporting forms as regards the recording of information on air emissions, discharges to water bodies and solid waste has shown that they contain a considerable amount of data on negative impact on the environment.   With respect to air emissions, the reports provide information on stationary pollution sources, amounts of pollutants captured, recycled and discharged, etc.; account is taken of all pollutants contained in gases discharged by stationary pollution sources owned by economic actors and in air used from human respiration; there are no accounting data on carbon dioxide and ozone emissions. With respect to pollutants, the amount of pollutants in discharged wastewater is recorded. With respect to solid waste residuals, there is information on the generation, use, decontamination, transportation and disposal of production and consumption waste categorized by hazard class and type, etc. 

These data are in the public domain and are published in the respective statistical information packages in hard copy and electronically. Estimates of air emissions, discharges to water bodies and treatment of solid residuals are provided without undue repetition and treated unambiguously, which makes it easy to include them in the environmental-economic accounting system. However, the existing reporting system lacks a number of estimates recommended by the SEEA 2012 for account compilation: e.g., air emissions from households, from landfill sites, releases into the ground (leakages from pipelines, chemical spills), waste exports, etc.  

2.1.3. Functional accounts for other economic transactions having environmental protection purposes.

Environmental protection consists of the work of government authorities of the Russian Federation, sub-federal governments, local government bodies, legal entities and individuals, social and other non-commercial associations intended for the preservation and regeneration of the natural environment, use and replenishment of natural resources, prevention of negative impact of economic and other activities and management of their consequences. Principal information on expenditures on environmental protection is recorded in the federal statistical monitoring forms 4-OS, “Information on operating costs of environmental protection and environmental fees” and 18-KS, “Information on capital investments in environmental protection and resource use,” which are collected and processed by Rosstat (Table 2.7).

Table 2.7 The main sources of information on environmental expenditures collected and processed by the federal system of statistical monitoring, Rosstat. 

Reporting form 

Federal agency

Respondents

Reporting regularity4-os “Information on environmental protection expenditure and environmental fees”

Federal Service for National Statistics 

Legal entities, unincorporated businesses (sole traders) engaged in environmental activities and/or paying fees for negative impact on environment

on an annual basis

18-KS “Information on capital investments in environmental protection and resource use”

Federal Service for National Statistics 

Legal entities (excluding small businesses) engaged in all kinds of economic activity 

on an annual basis

The analysis of forms of statistical monitoring as to what they record regarding expenditures on environmental protection has shown that they record information on various environmental activities (atmospheric air protection, water, timber resource protection and use, subsoil protection and use of mineral resources, protection and regeneration of wildlife, etc.), types of expenditures (operating costs, capital expenditure and investments in environmental protection), and sectors of the economy (manufacturing, including specialized enterprises for environmental services, and the public sector). Various measures and events are referred to the category of environmental activities by the lists given in instructions for the completion of reporting forms for federal statistical monitoring and by the list of environmental activities and services approved by the Order of the Russian Environmental Agency (dated February 23, 2000, No.102). Nevertheless, the existing reporting forms do not give exhaustive and correct information.  For example, data referring to expenditures on environmental protection against noise, vibration and other kinds of physical impact are included in operating cost estimates (form 4-OS), but capital investments in this group of activities (form 18-KS) are not accounted for. The absence of a unified approved classification of environmental protection activities in Russia makes it difficult to refer particular expenditures to the category of environmental costs and thus hinders their comprehensive accounting, which is critical for the proper compilation of environmental-economic accounts.  

2.2.
Data collection and estimation of environmental resource supply and use for environmental-economic accounting

In order to formalize the sources of existing information flows, we will consider the possibilities and methods of collecting relevant input data in the functional spheres of various federal government bodies of the Russian Federation (Fig. 2.1). It should be noted that most of the information required for compiling supply and use tables and asset accounts is accumulated and processed by Rosstat. However, their composition, structure and presentation are oriented to the functional tasks of Rosstat and may not conform to the SEEA approaches.

Functional spheres of federal executive bodies in accumulating input information for environmental-economic accounting

Fig. 2.1 Functional spheres of federal executive bodies in accumulating input information for environmental-economic accounting 

To assess actual availability of inputs for SEEA estimates of the main types of environmental resources, it is worth considering the practical aggregation of primary statistical data and other existing information sources that can be used to derive the estimates included in:

  • environmental asset accounts for water resources, mineral and energy resources and non-cultivated biological resources (timber and animals);
  • physical flow accounts for air emissions, discharges to water bodies and solid waste disposal; 
  • the functional account for other transactions with environmental protection purposes.

2.2.1. Environmental asset accounts 

In physical terms, each environmental asset has considerable volume measures (area, quantity, etc.), including all the resources of that asset which are capable of providing benefits for humanity. In monetary terms, however, the measured scope of the environmental asset is limited to elements, which have economic value, as established by the SEEA approach to monetary valuation. 

So environmental asset accounts are designed to record the opening and closing stock of these assets, primarily in order to assess whether current patterns of economic activity are depleting and degrading the available environmental assets (thus providing information for efficient environmental management).  The structure of an asset account starts with the opening stock of environmental assets and ends with the closing stock of environmental assets (Tables 2.8 and 2.9).


 

Table 2.8 Conceptual format of an environmental asset account in physical terms

Accounting unit

Water resources

Mineral and energy resources 

Non-cultivated biological resources 

Forest

Animals

timber

non-timber products

Opening stock of resources  

Yes

Yes

Yes

Yes

Yes

Additions to the stock

 

 

 

Growth in stock

Precipitation

Return flows

N/A

Natural growth

Natural growth

Natural growth

Discoveries 

Yes*

Yes

N/A

N/A

Yes*

Upward reappraisals

Yes*

Yes

Yes*

Yes*

Yes

Reclassification

N/A

Yes

Yes

Yes

Yes

Total additions to the stock

 

 

 

Reductions in the stock

 

 

 

Extraction

Uptake of water

Extraction

Harvesting

Harvesting

Extraction

Standard reductions of the stock

Evaporation/

Evapotranspiration

N/A

Normal losses

Normal losses

Normal losses

Catastrophic losses

Yes*

Yes*

Yes

Yes

Yes

Downward reappraisals

Yes*

Yes

Yes*

Yes*

Yes

Reclassifications

N/A

Yes

Yes

Yes

Yes

Total reductions in stock

 

 

 

Closing stock of resources

Yes

Yes

Yes

Yes

Yes

Note: Yes – applicable, N/A – not applicable

*- the entry is not generally relevant for the resource or is not identified in input data In practice, not all the entries requiring completion need to be separately shown in published accounts for each type of resource 

Source: UN, 2012a.


 

Table 2.9 Conceptual format of an environmental asset account in monetary terms (millions of rubles)

Opening stock of resources 

Additions to the stock

Growth in stock

Discoveries 

Upward reappraisals

Reclassifications

Total additions to stock

Reductions in the stock

Extraction

Standard reduction in the stock

Catastrophic losses

Downward reappraisals

Reclassifications

Total reductions in stock

Revaluation 

Closing stock of resources

Source: UN, 2012a, p. 20.

Changes between opening stock and closing stock in physical terms are recorded as either additions to the stock or reductions of the stock; the character of such addition or reduction is indicated, if available. The same entries are included in monetary terms, with the addition of an entry to account for monetary revaluation of environmental assets. This entry shows changes in the value of assets over an accounting period, which are driven by movements of current prices for those assets.

We shall consider the specifics of compiling environmental asset accounts for water resources, mineral and energy resources, and non-cultivated biological resources (forest and animals), taking into account the availability of statistical, administrative and other primary information. 

Water resources

Water resources include surface and ground water in water bodies, which are or can be used for drinking and household purposes, as well as for wastewater discharge, power generation, water and air transport, timber floating, etc. The multipurpose use of water suggests a multidimensional approach to water valuation in environmental-economical accounting. 

Physical accounting

According to the System of Environmental-Economic Accounting (SEEA-W, 2012), the classification of water resources  has the following categories:

EA.13: water resources (cubic meters)

EA.131: surface water

EA.1311: artificial reservoirs

A.1312: lakes

EA.1313: rivers and streams

EA.1314: glaciers, snow and ice

EA.132: groundwater

EA.133: soil water

Table 2.10 presents a sample asset account for water resources in physical terms. The columns show types of water resources in accordance with the asset classification, while the rows present details of the stocks and their changes caused by economic activities and natural processes.  

Table 2.10 Sample standard water asset account in physical terms (millions of square meters)

Accounting unit

Surface water

Groundwater

Soil water

Total

Artificial reservoirs

Lakes

Rivers and streams

Glaciers, snow and ice

1

2

3

4

5

6

7

1. Opening stock

1,500

2,700

5,000

0

100,000

500

109,700

Additions to stock

2. Return water

300

0

53

315

0

669

3. Precipitation

124

246

50

23,015

23,435

4. Inflow:

1,054

339

20,137

437

0

21,967

 from other upstream areas

17,650

17,650

 from other resources within the territory

1,054

339

2,487

0

437

0

4,317

Reductions in the stock

5. Uptake of water

280

20

141

476

50

967

6. Evaporation/actual evapotranspiration

80

215

54

21,125

21,474

7. Outflow:

1,000

100

20,773

0

87

1,787

23,747

  to other downstream areas

9,430

9,430

  to seas

10,000

10,000

  to other resources within the territory

1,000

100

1,343

0

87

1,787

4,317

8. Other changes 

0

9. Closing stock

1,618

2,950

4,272

100,189

553

109,583

 null by definition.

Source: UN, 2012a, p. 204.

Stock of water 

According to the SEEA 2012 (UN, 2012b), “The concept of a stock of water is related to the quantity of water in a reference territory measured at a specific point in time (usually the beginning or end of the accounting period).” 

Surface water (ЕА.131)

In regard to artificial reservoirs (ЕА.1311), lakes (ЕА.1312), rivers and streams (ЕА.1313), this estimate reflects the volume of the reservoir (active channel of the river or stream) as determined by its area, profile and depth. Collection of the above data is not envisaged by the existing reporting forms of statistical monitoring and administrative reports. The existing practice of accounting only records the volume of surface river flows and water channels. Data on the stock of water in the biggest artificial reservoirs and lakes can be found in the materials of government departments and scientific research. 

This testifies to the lack of comprehensive accounting and fragmentary character of the data, which are available for deriving estimates of the surface water stock. A system needs to be developed for recording the relevant primary data and/or for adjusting the existing statistical and administrative reporting forms.

With regard to glaciers, snow and ice (ЕА.1314), the relevant indicator is the volume of seasonal snow and ice layers and long-term accumulation of ice (glaciers) on the Earth’s surface, converted into water equivalent. The situation as to availability of primary data is similar to that for the above categories of water assets.  Some scarce information on glaciers in the Russian Federation can be found in specialized research reports or publications. The question of how to formalize and use primary data on the volume of seasonal snow and ice layers and glaciers, obtained from existing monitoring services, in order to derive the relevant estimate is high on the agenda.

Groundwater (ЕА.132)

The indicator for this category of water resources is the volume of the stock available for use at a specific point in time.

 The commonly accepted Russian classification of groundwater resources for accounting purposes is as follows: “Groundwater stocks are calculated based on the potential rated capacity of geologically and economically feasible water uptake facilities (projected or operating, including those subject to reconstruction) at predetermined operating modes and conditions, using a criterion of water quality that meets specifications for the relevant operating purpose over the rated service life of the water uptake facilities, taking account of environmental requirements and restrictions.”  In calculating the water stock, the rated service life of a water uptake facility is normally taken to be up to 25 years.”

 In other words, the measure of the groundwater stock derived in the existing statistics reflects the technically and environmentally feasible uptake volume of a specific aquifer (deposit) rather than the capacity (resource amount) of the aquifer itself.  Since the measure of potential volume of water uptake is determined taking account of all factors affecting stock increase and decrease, it may be taken to include the figures in “Additions to stock” and “Reductions in the stock” (Table 2.10).  However, proper completion of column 5 of Table 2.10 will require formalization and separate numerical records of all relevant factors that are assessed in the determination of potential water uptake according to the Recommendations for classification of the stock and projected resources of drinking, service and mineral groundwater (with supplements, if necessary), including data on the reserves of the respective aquifer.

Soil water (ЕА.133)

Consistent with SEEA-W, 2012, (UN, 2012b, p. 200), soil water is defined as “water suspended in the uppermost belt of soil or the aeration zone near the ground surface, ... [which] can be discharged into the atmosphere by evapotranspiration.” The existing forms of statistical and administrative accounting do not record data on the supply and changes in soil water. Some expert information may be found in relevant research materials

Additions to stock

Water returns represent the volume of water that is returned to the environment by economic units during the accounting period (UN, 2012b, p. 200).

Surface water (ЕА.131)

For artificial reservoirs (ЕА.1311), lakes (ЕА.1312), rivers and streams (ЕА.1313), the estimate represents the volume of actually discharged wastewater of all kinds (treated, untreated, etc.) The indicator can be derived by using the data of the statistical monitoring reporting form, “Information on the use of water,” section 2. Wastewater removal   In compliance with the water resource categories under consideration, the data on sewerage facilities under code numbers 20, 21, 30, 31, 40, recorded in column 4 of section 2, are used. The data in column 11 is used to derive the indicator for water returns for these types of sewerage facilities.

The indicator is not derived for glaciers, snow and ice (ЕА.1314). 

Groundwater (ЕА.132)

The indicator can be derived by using the data of the statistical monitoring reporting form, “Information on the use of water,” section 2. Wastewater removal  In compliance with the water resource categories under consideration, the data on sewerage facilities under code numbers 60, 61, 81, 82, 83, recorded in column 4 of section 2, are used. In respect to these types of sewerage facilities, the total estimate of water returns is derived from the data of column 11, section 2.

Soil water (ЕА.133)

The indicator can be derived by using the data of the statistical monitoring reporting form, “Information on the use of water,” section 2 Wastewater.  In compliance with the water resource category under consideration, the data on sewerage facilities under code number 80, as recorded in column 4 of section 2, are used.  The estimate of water returns for these types of sewerage facilities is derived from the data of column 11.

Precipitation consists of the volume of atmospheric precipitation (rain, snow, hail, etc.) on the reference territory during the accounting period before evapotranspiration takes place.  The greater part of precipitation falls on soil and should be recorded as “soil water” in asset accounts. Some precipitation may also fall into other water resources, e.g., surface water bodies. It is assumed that water would reach aquifers after having passed through the soil or surface water (rivers and lakes); so no precipitation is shown in the asset accounts for groundwater. The infiltration of precipitation to groundwater is recorded in the accounts as an inflow from other water resources into groundwater.

The existing forms of statistical and administrative accounting do not record data on precipitation.  The materials provided by the Russian meteorological service (Roshydromet) on the environmental situation and/or pollution in the Russian Federation contain information on precipitation in relative measures (mm/month and % of normal precipitation).  Converting these data into absolute volumes of water and allocating them among specific categories of water resources will require special research efforts.  

Inflows represent the amount of water that flows into water resources during an accounting period. The inflows are disaggregated according to their origin: 

- inflows from other upstream territories;  

- inflows from other water resources in the territory. 

Inflows from other territories occur when water resources are shared. For example, in the case of a river that enters the reference territory, the inflow is the total volume of water that flows into the territory at its entry point during the accounting period If a river runs along the border of two countries without entering either of them, each country could claim a percentage of the flow to be attributed to its territory. If no formal convention exists, a practical solution is to attribute 50 percent to each country. Inflows from other resources include transfers, both natural and man-made, between the resources within the territory. They include, e.g., flows due to water infiltration and seepage and flows in artificial distribution channels (UN, 2012b, p. 100-101).

Surface water (ЕА.131)

 Estimates for artificial reservoirs (ЕА.1311) and lakes (ЕА.1312), can be made using the data of form 1.13-gvr “Water bodies.   Main hydrological characteristics of rivers.  Average and specific discharge,” regarding mean annual flows of rivers and streams of other territories flowing into water bodies on the reference territory at the point where they cross the border between these territories (countries, etc.) .

For rivers and streams (ЕА.1313), the indicator can be derived from the data of form 1.13-gvr on mean annual flows of the respective water body at the point where it crosses the border between the reference territory and other territories (countries, regions, etc.)

No data are available for this kind of estimate with respect to glaciers, snow and ice (ЕА.1314) and groundwater (ЕА.132).

Inflow from other water resources within the territory can occur from surface water bodies (including inflows through underground aquifers) and from glaciers, snow and ice. 

Surface water (ЕА.131)

For artificial reservoirs (ЕА.1311) and lakes (ЕА.1312), the indicator can be obtained using data in the State Water Register, form 1.13-gvr “Water bodies.” Main hydrological features of rivers. Average and specific discharge,” regarding mean annual flows of rivers and streams of the reference territory, which flow into water bodies of the relevant categories.

The indicator for rivers and streams (ЕА.1313) can be derived from the data of form 1.13-gvr on mean annual flows of rivers and streams in the reference territory flowing into the water body of the relevant category.  The indicator can also be derived from data on additions to surface water (ЕА.131) due to underground aquifers.  Currently, this kind of data can be found in specialized research materials and the results of monitoring.

No data are available for this kind of estimate with respect to glaciers, snow and ice (ЕА.1314), groundwater (ЕА.132) and soil water (EA.133).

Reductions in the stock

Uptake of water is the amount of water removed from any source, either permanently or temporarily, in a given period for consumption or production (UN, 2012b, p. 101).

Surface water (ЕА.131)

For artificial reservoirs (ЕА.1311), lakes (ЕА.1312), rivers and streams (ЕА.1313), the indicator shows the volume of water factually taken from natural water sources.  The indicator can be derived by using the data in statistical monitoring reporting form 2-tp (water management), “Information on the use of water,” section 1 (water taken from natural sources, received from suppliers, used, transferred and lost). Only data showing the volume of water uptake directly from water supply sources are used. The volume of water received from suppliers is not taken into account In compliance with the water resource categories under consideration, data on water supply sources under code numbers 20, 21, 30, 40, recorded in column 4 of section 1, are used. The total estimate of water uptake from these types of water sources is derived from the data of column 12, section 1.

The indicator is not derived for glaciers, snow and ice (ЕА.1314) due to the lack of data.

Groundwater (ЕА.132)

The indicator can be derived using the data in statistical monitoring reporting form 2-tp (water management), “Information on the use of water,” section 1 (water taken from natural sources, received from suppliers, used, transferred and lost). Only data showing the volume of water uptake directly from underground aquifers are used.  The volume of water received from suppliers is not taken into account In compliance with the water resource categories under consideration, data on water sources under code numbers 60, 61, 62, recorded in column 4 of section 1, are used The total estimate of water uptake from these types of water sources is derived from the data of column 12, section 1.

Soil water (ЕА.133)

No indicator is prepared, due to the lack of data.

Evaporation / actual evapotranspiration is the amount of evaporation and evapotranspiration occurring on the reference territory during an accounting period. Evaporation means the amount of water that evaporates from water bodies, such as rivers, lakes and artificial reservoirs. Evapotranspiration means the amount of water transferred from the soil to the atmosphere as a result of evaporation and plant transpiration. Evapotranspiration may be potential or actual depending on the soil and vegetation conditions. Potential evapotranspiration is the maximum quantity of water capable of being evaporated in a given climate from a continuous stretch of vegetation that covers the whole ground and is well supplied with water. 

Actual evapotranspiration refers to the amount of water that evaporates from the land surface and is transpired by the existing vegetation/plants when the ground is at its natural moisture content as determined by precipitation. It should be noted that actual evapotranspiration can only be estimated using models and will be an approximate amount. 

At present, the input data necessary for deriving the indicator under consideration are not recorded in statistical monitoring reporting forms and administrative accounting. Some data can be found in specialized research materials and monitoring results.

Outflows represent the amount of water that flows out of water resources during an accounting period. Outflows are accounted depending on the destination of the flow, namely: 

1. outflows to other territories/countries, being the total amount of water that flows out of the reference territory during an accounting period. Shared rivers are typical examples of water flowing out of the upstream country to the downstream country;

2. outflows to the sea/ocean, constituting the amount of water flowing into these water bodies; 

3. outflows to other water resources within the territory, representing the exchange of water resources within the territory. These include in particular water flowing out of a water body and reaching other water bodies within the given territory (UN, 2012b, p. 101).

Outflows to downstream territories

Surface water (ЕА.131)

The indicator for rivers and streams (ЕА.1313) can be derived from the data of form 1.13-gvr on mean annual flows of the respective water body at the point where it crosses the border between the reference territory and other territories (countries, etc.).

Outflows to the sea/ocean 

Surface water (ЕА.131)

The indicator for rivers and streams (ЕА.1313) can be derived from the data of form 1.13-gvr on mean annual flows of the respective water body at the point where it flows into the sea in the reference territory.

Outflows to other water resources within the territory

Surface water (ЕА.131)

 The indicator for artificial reservoirs (ЕА.1311) and lakes (ЕА.1312) can be calculated using the data of form 1.13-gvr on mean annual flows of artificial water courses of rivers and streams (ЕА.1313at the point of their outflow from water bodies in the reference territory ЕА.1311 and ЕА.1312. 

The indicator for rivers and streams (ЕА.1313) can be derived from the data of form 1.13-gvr on mean annual flows of the respective water body at the point where it flows into other water bodies of the reference territory (river, lake, artificial reservoir, etc., excluding the sea).

The indicator is not derived for glaciers, snow and ice (ЕА.1314).

Groundwater (ЕА.132)

The indicator can be derived from data on additions to surface water (ЕА.131) due to underground aquifers.  Currently, this kind of data can be found in specialized research materials and the results of monitoring. 

Soil water (ЕА.133)

No indicator is prepared, due to the lack of data. 

Other changes in the volume include all changes in the stock of water that are not classified by other positions in the table. This entry may include, e.g., the amount of water in aquifers discovered during the accounting period and disappearance or appearance of water due to natural disasters, etc. Other changes in the volume can be calculated directly or residually.

Thus, despite a considerable amount of statistics and administrative accounting forms, the data required for deriving SEEA estimates for water resources are not recorded specifically, but are included in more general estimates (e.g., evaporation volume is included in recording of water levels in  water bodies). 

The Inflow and Outflow indicators are only supported by statistical and administrative information with respect to surface water flows. The respective statistical data on standing water bodies is incomplete, and there is no information at all on groundwater and soil water (Table 2.11). 

Table 2.11 Aggregating primary data to establish a standard form of physical asset accounting for water resources, millions of rubles

ЗДЕСЬ НЕ ХВАТАЕТ ЦВЕТОВ В ТАБЛИЦЕ

Accounting unit

Surface water

Groundwater

Soil water

Total

Artificial reservoirs

Lakes

Rivers and streams

Glaciers, snow and ice

1

2

3

4

5

6

7

1. Opening stock

Additions to stock

2. Return water

3. Precipitation

4. Inflows:

  from other upstream territories

  from other resources within the territory

Reductions in the stock

5. Uptake of water

6. Evaporation/actual evapotranspiration

7. Outflows:

  to other downstream territories

  to the sea

  to other resources within the territory

8. Other changes 

9. Closing stock

Note:

-  null by definition.

 

 

Data availability for applying monetary valuation of resource rent:

 - complete statistical and administrative information is available; 

 - partial statistical and administrative information is available, but assumptions and data from other sources are required;

 - no statistical and administrative information is available, only data from other available sources can be used. 

The existing accounting and reporting forms do not contain physical measures of simultaneously observed surface and ground water stocks, absolute volume of precipitation and evaporation/evapotranspiration. Some information can be obtained from research materials or from publications and specialized sources, though it is quite fragmentary. For these reasons, in Russia, a territory’s water balance sheet to SEEA standards is inevitably incomplete, and is only based on the principal water use indicators.  

Monetary accounting

The main problem is that, historically, water has often been made available free of charge as a public good and supplied cheaper than the cost of production, in order to support agricultural production, or at a flat charge. The price of water has therefore tended to be associated with the fixed infrastructure costs of collecting and transporting it to where it is needed rather than with actual volume of water used, which may vary significantly depending on territory-specific conditions.

In this context, standard approaches to the valuation of water assets and, in particular, the net present value approach, cannot be applied because the resource rent that is derived by following the standard definitions is negative. Estimates of negative resource rent arise when the income earned from the sale of water uptake does not cover the costs of maintaining the produced assets required to operate pipe networks and facilities. Consequently, the value of the water resources themselves is considered being zero.

The existing international regulations on environmental-economic accounting of water resources do not provide any methodology for breaking this impasse, since they are focused mostly on methods of water valuation and their alignment with the valuation approaches used in the SEEA-2008, and only provide reviews of existing practices for the monetary valuation of water. The SEEA-W also fails to give any specific recommendations on the choice of valuation methods, since it lacks a unified approach to valuation methods and their inclusion in the environmental-economic accounting toolbox.   These questions can and must be solved on a case-by-case basis depending on the particular context of water resource use in a country.

Stock of water 

With respect to water resource stock, economic benefits are accounted in the form of: 

  • operating surplus (for the user) from the uptake and sale of water;  
  • water rent received (by government) for issuing permits to use or take water.

The service life of the stock and the period of resource rent are not limited.

Surface water (ЕА.131)

 For artificial reservoirs (ЕА.1311), lakes (ЕА.1312), rivers and streams (ЕА.1313), the indicator (unlike an analogous indicator in physical terms) is the sum total of future (usually annual) discounted receipt of water rent.   Calculation of resource rent (by the residual value method) is based on data from the following reporting forms: OKVED-41.0 (Russian Classification of Economic Activities) on collection, treatment and distribution of water from forms No.P-1, “Information on production and shipping of goods and services,” section 2, No.5-3, “Information on cost of production and sale of products (goods, work, services)” and No.P-3 “Information on financial standing of the company.” The resulting water rent often has negative value (except for hydropower generation, agricultural irrigation, bottled water production, etc.)

The use of an appropriation method provides a minimum value of the stock’s monetary estimate. The existing tariffs for water uptake from surface sources are, in general, socially motivated.  Data from the Federal Tax Service form No.5-VN, “Report on the tax base and assessment structure for water tax,” can be used as an input source for applying the appropriation method (the amount obtained in point 2 as the difference between lines 210 and 222 minus point 3: difference between lines 410 and 422). The value obtained is the annual amount of the part of water rent received by the government for granting the right to use water bodies, taking account of hidden subsidies for public water supply.

The indicator is not derived for glaciers, snow and ice (ЕА.1314).

Groundwater (ЕА.132)

The estimate for groundwater assets is derived in largely the same way as the estimate for surface water (ЕА.131). Data from the Federal Tax Service form No.5-VN, “Report on the tax base and assessment structure for water tax,” can be used as an input source for applying the appropriation method (the amount obtained in point 2 as the difference between line 222 and the amount from point 3: line 422). The value derived is the annual amount of the part of the water rent received by the government for granting the right to use groundwater, taking account of hidden subsidies for public water supply.

No indicator is derived for soil water (EA.133), due to the absence of input data.  

Changes in the stock

The figure for changes in the value of the stock of all water resources considered during an accounting period (except for revaluations) is calculated as the product of the specific water rent and the change in physical terms, with the appropriate sign, “+” or “-”.

Taking the above points into account, Table 2.12 presents different options for evaluating water rent and aggregating primary statistical and administrative data in order to derive indicators for monetary accounting of water resources in Russia today. As seen from Table 2.12, the best approach to water resource valuation in the current economic situation is the appropriation method. The methods of residual value and access price, which could potentially be used with the same scope, would require greater financial and labor costs. 


 

Table 2.12 Aggregating primary data to establish a standard form of monetary asset account for water resources, millions of rubles

Accounting unit

Surface water

Groundwater

Soil water

Total

Artificial reservoirs

Lakes

Rivers and streams

Glaciers, snow and ice

1

2

3

4

5

6

7

1. Opening stock

AM, RVM, APM 

AM, RVM, APM 

AM, RVM, APM 

Additions to stock

2. Return water

AMRVMAPM 

AMRVMAPM 

3. Precipitation

AM, RVM, APM 

4. Inflows:

AMRVMAPM 

AM, RVM, APM 

  4a. from other upstream territories

  4b. from other resources within the territory

Reductions in the stock

5. Uptake of water

AM, RVM, APM 

AM, RVM, APM 

6. Evaporation/actual evapotranspiration

AM, RVM, APM 

7. Outflows:

AM, RVM, APM 

AM, RVM, APM 

  7a. to other downstream territories

  7b. to the sea

  7c. to other resources within the territory

8. Other changes 

AM, RVM, APM 

AM, RVM, APM 

9. Revaluation 

10. Closing stock

AM, RVM, APM 

AM, RVM, APM 

Note:

 null by definition.

 

Data availability for applying monetary valuation of resource rent:

 - complete statistical and administrative information is available; 

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

 - no statistical and administrative information is available, only data from other available sources can be used. 

Possible methods for monetary valuation of resource rent in order to derive the indicator:

RVM - Residual value method (based on annual resource income to the user and annual resource payments to the budget);

AM - Appropriation method (based on annual resource payments to the budget);

APM - Access price method (based on declared readiness to pay for water supply).

Mineral and energy resources 

There are a number of different types of mineral and energy resources, such as crude oil, natural gas, coal and peat, non-metallic and metallic minerals.  However, no internationally agreed classification for fossil energy and mineral resources has been proposed that would be suitable for statistical purposes (UN, 2012a, p. 178). For convenience, the following classification of fossil energy and mineral resources is customary (based on the framework of the SEEA 2012)  

  • crude oil resources
  • natural gas resources 
  • coal and peat resources 
  • non-metallic mineral resources 
  • metallic mineral resources 

Physical accounting

Since mineral and energy resources are non-renewable natural resources, it is important that any extraction volume be recorded as physical depletion of the stock. With respect to mineral resources, the sample asset account in physical terms will have the following form (Table 2.13). 

Table 2.13 Sample physical asset account for mineral and energy resources

Accounting unit

Type of mineral and energy resource

(A, B and C1) resource categories 

Crude oil resources (thousands of barrels)

Natural gas resources (cubic meters)

Coal and peat resources (thousands of tons)

Non-metallic mineral resources (tons)

Metallic minerals (thousands of tons)

Opening stock of mineral and energy resources

800

1,200

600

150

60

Additions to stock

Discoveries 

20

Upward reappraisals

200

40

Reclassifications

Total additions to the stock

200

40

20

Reductions in stock

Extraction

40

50

60

10

4

Catastrophic losses

Downward reappraisals

60

Reclassifications

Total reductions in stock

40

50

120

10

4

Closing stock of mineral and energy resources

760

1,350

480

180

76

Source: UN, 2012a.

It is noted that, following the UN Classification of Fossil Energy and Mineral Reserves and Resources (UNFC-2009) (UN, 2012a, table 5.6), the SEEA categorizes known deposits into three classes: Class A includes commercially recoverable resources, Class B includes potentially commercially recoverable resources, and Class C includes non-commercial and other known deposits.  According to the classification used in Russia, Class A includes resources falling under categories A, B and C1, Class B corresponds to category C2, while Class C includes forecast resources.  Only in-place reserves are taken into account.  Accounting of the mineral resource stock and its dynamics is based on classes of resource (UN, 2012a, p. 179, par.  5.5.3). We will look more closely at the structure and content of the indicators used in physical asset accounts within the SEEA. 

Reserves 

Reserves are the quantity of mineral and energy resources of a certain type and class within the boundaries of the reference territory at a definite point of time (beginning and end of an accounting period). The indicator can be derived using data in federal statistical monitoring reporting forms:

- 5-gr “Information on the state and changes in reserves of solid mineral deposits,” values in columns 6 and 14;

- 6-gr “Information on the state and changes in reserves of oil, gas, condensate, ethane, propane, butane, sulfur, helium, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil,” values in columns 7, 12 and 13.

Additions to reserves

Discoveries, i.e., the quantity of mineral and energy resources discovered during the accounting period (UN, 2012a, p. 180). The indicator can be derived using data in federal statistical monitoring reporting forms: 

- 5-gr “Information on the status and changes in reserves of solid mineral deposits,” values in column 10 with a “+” sign;

- 6-gr “Information on the status and changes in reserves of oil, gas, condensate, ethane, propane, butane, sulfur, helium, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil,” values in column 9 with a “+” sign.

Upward reappraisals are additions to the available reserves of mineral and energy resources of specific deposits or changes to categorization of specific deposits between classes A, B or C based on changes in geological information, technology, resource price or a combination of these factors during an accounting period (UN, 2012a, p. 180). The indicator can be derived using data in federal statistical monitoring reporting forms:

- 5-gr “Information on the status and changes in reserves of solid mineral deposits,” values in column 11 with “+” sign;

- 6-gr “Information on the status and changes in the reserves of oil, gas, condensate, ethane, propane, butane, sulfur, helium, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil,” values in column 10 with “+” sign.

Reclassifications may occur if certain deposits are opened to mining operations owing to government decisions concerning access rights to a deposit during an accounting period (UN, 2012a, p. 181). The indicator can be derived using data in federal statistical monitoring reporting forms:

- 5-gr “Information on the status and changes in reserves of solid mineral deposits,” values in column 13 with “+” sign;

- 6-gr “Information on the status and changes in reserves of oil, gas, condensate, ethane, propane, butane, sulfur, helium, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil,” values in columns 14 and 15 with “+” sign.

Reductions in reserves

Extraction is the quantity of the resources physically removed from the deposit during an accounting period. It should exclude mining overburden, i.e., the quantity of soil and other material moved in order to extract the resource. Further, the quantity of extraction should be estimated before any refinement or processing of the resource is undertaken. Estimates of extraction should include estimates of illegal extraction, either by residents or non-residents, as these amounts reduce the availability of the resource (UN, 2012a, p.180). The indicator can be derived using data in federal statistical monitoring reporting forms:

- 5-gr “Information on the status and changes in reserves of solid mineral deposits,” values in columns 8 and 9;

- 6-gr “Information on the status and changes in reserves of oil, gas, condensate, ethane, propane, butane, sulfur, helium, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil,” values in column 8.

Catastrophic losses are rare in relation to most mineral and energy resources. Flooding and collapsing of mines do occur but the deposits continue to exist and can be recovered; the issue is one of economic viability of extraction rather than actual loss of the resource itself. An exception to this general principle concerns oil wells that can be destroyed by fire or become unstable for other reasons, leading to significant losses of oil resources. Losses of oil and related resources in this situation should be considered catastrophic losses (UN, 2012a, p. 181). The estimate can be derived by using data in the reporting form of federal statistical monitoring 5-gr “Information on the status and changes in reserves of solid mineral deposits,” values in column 13 with “-” sign.

Downward reappraisals are withdrawals from the available stock of mineral and energy resources of specific deposits or changes to categorization of specific deposits between class A, B or C based on changes in geological information, technology, resource price or a combination of these factors during an accounting period (UN, 2012a, p. 180). The indicator can be derived using data in federal statistical monitoring reporting forms:

- 5-gr “Information on the status and changes in reserves of solid mineral deposits,” values in column 11 with “-” sign;

- 6-gr “Information on the status and changes in reserves of oil, gas, condensate, ethane, propane, butane, sulfur, helium, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil,” values in column 10 with “-” sign.

Reclassifications may occur if certain deposits are closed to mining operations owing to government decisions concerning the access rights to a deposit during an accounting period (UN, 2012a, p. 181). The indicator can be derived using data in federal statistical monitoring reporting forms:

- 5-gr “Information on the status and changes in reserves of solid mineral deposits,” values in column 13 with “-” sign;

- 6-gr “Information on the status and changes in reserves of oil, gas, condensate, ethane, propane, butane, sulfur, helium, nitrogen, carbon dioxide, vanadium and nickel admixtures in oil,” values in columns 14 and 15 with “-” sign.

Having analyzed the available information, we assessed the possibility of accounting of mineral and energy resources in physical terms within the SEEA framework (Table 2.14). As shown in the table, the available information on mineral and energy resources is sufficient for compiling the respective physical asset accounts; the information is contained in the statistical reports drawn up within the framework of the Federal Agency for Subsoil Use.

Table 2.14 Aggregating primary data for compiling physical asset accounts for mineral and energy resources 

Accounting unit

Type of resource 

(A, B and C1) resource categories 

Oil resources (thousands of barrels)

Natural gas resources (cubic meters)

Coal and peat resources (thousands of tons)

Non-metallic mineral resources (tons)

Metallic mineral resources (thous. tons)

Opening stock of mineral and energy resources

Additions to reserves

Discoveries 

Upward reappraisals

Reclassifications

Total additions to the stock

Reductions in reserves

Extraction

Catastrophic losses

Downward reappraisals

Reclassifications

Total reductions in the stock

Closing stock of mineral and energy resources

 

Data availability for applying monetary valuation of resource rent:

 - complete statistical and administrative information is available; 

 - partial statistical and administrative information is available, assumptions and data from other sources are required;  

 

 

Monetary accounting

The monetary evaluation of mineral and energy resources should take account of a number of specific factors that refer mostly to the calculation of resource rent and forecasting the quantity of extraction and productive life of deposits. 

To estimate the mineral resource rent by the appropriation method, input data can be obtained from the Federal Tax Service reporting form 1-NM “Report on assessment and receipt of taxes, duties and other statutory charges to the Russian budget,” lines 1745, 1750, 1755, 1760, 1770, 1785 and 1788, depending on the type of the deposit being evaluated. The values obtained are the annual amounts of the part of the mineral resource rent accruing to the government as compensation for granting rights to mineral and energy resources.

Calculation of resource rent by the residual value method uses data from the following reporting forms: OKVED (Russian Classification of Economic Activities) – Section C Mineral resource extraction (only the items referring to extraction) from forms No.P-1 “Information on production and shipping of goods and services” (section 2), No.5-3 “Information on cost of production and sale of products (goods, work, services)” and No.P-3 “Information on financial standing of the company.” Estimation of mineral and energy resources by the access price method uses information on the price of exploration and production licenses, and the dates and quantity of relevant transactions as reported by the newsletter, Nedropolzovanie v Rossii /Use of Subsoil Resources in Russia/.   Aggregated primary data for compiling monetary asset accounts for mineral and energy resources are shown in Table 2.15.

Table 2.15 Aggregating primary data for compiling monetary asset accounts for mineral and energy resources

Accounting unit

Type of resource

(A, B and C1 resource categories) 

 

Crude oil resources (thousands of barrels)

Natural gas resources (cubic meters)

Coal and peat resources (thousands of tons)

Non-metallic mineral resources (tons)

Metallic mineral resources (thousands of tons)

 

Opening stock of mineral and energy resources

AM, APM, RVM 

 

Additions to reserves

 

Discoveries 

AM, RVM 

 

Upward reappraisals

AM, RVM

 

Reclassifications

AM, APM, RVM 

 

Reductions in reserves

AM, RVM 

 

Extraction

AM, RVM 

 

Catastrophic losses

AM, RVM 

 

Downward reappraisals

AM, RVM 

 

Reclassifications

AM, RVM 

 

Revaluations

 

Closing stock of mineral and energy resources

AM, RVM 

 

 

Data availability for monetary valuation of resource rent:

 - complete statistical and administrative information is available; 

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

Possible methods for monetary valuation of resource rent in order to derive the indicator:

RVM - Residual value method (based on annual resource income of the user and annual resource payments to the budget);

AM - Appropriation method (based on annual resource payments to the budget);

APM - Access price method (based on the initial lump sum payment)










Since the quantity of extraction of mineral and energy resources is estimated in the SEEA as resource depletion (in contrast to “Other asset changes” within the SNA), this value is important for calculating depletion-adjusted macroeconomic estimates in the production accounts and appropriation accounts. 

Non-cultivated biological resources (forests and animals)  

Aggregation of primary data for compiling estimates of physical and monetary accounting in the asset accounts for non-cultivated biological resources is considered with regard to timber, non-timber forest products and animals.

Timber

Timber resources are found in a wide variety of territories. They may exist in the form of felled or unfelled forest, and may or may not be available to be felled and used as wood supply, i.e., to produce timber products or as fuel wood. Timber resources may be unavailable for timber supply because the trees: 

1) are in areas where forest harvesting operations are restricted or prohibited; 

2) are in remote or inaccessible areas, i.e., where harvesting is not profitable;

3) are not included in the scope of commercially harvested wood species for biological reasons (UN, 2012a, p. 215). 

Based on these considerations, we will examine the task of compiling timber resource asset accounts in physical and monetary terms. 

Physical accounting

Only natural timber resources are accounted for in the framework of the SEEA (Table 2.16). 

Table 2.16 Sample physical asset account for timber resources, thousands of cubic meters

Accounting unit

Timber resource type

Natural timber resources 

Available for wood supply 

Not available for wood supply 

Opening stock of timber resources 

8,000

1,600

Additions to stock

Natural growth

1,100

20

Reclassifications

150

Total additions to stock

1,250

20

Reductions in the stock

Removals

1,000

Felling residues

120

Natural losses

30

20

Catastrophic losses

Reclassifications

150

Total reductions in stock

1,150

170

Closing stock of timber resources 

8,100

1,450

Supplementary information

Felling

1,050

Source: UN, 2012a.

While timber resources that are not available for wood supply do not possess an economic value, these timber resources remain in the scope of timber resources in the SEEA in physical terms, as they meet the definition of environmental assets and may provide benefits. However, since these resources do not have an economic value, they are not recorded in the asset accounts in monetary terms. Consequently, the volume of these timber resources in physical terms should be clearly identified so that appropriate alignment can occur between asset accounts in physical terms and monetary terms.

The volume of unavailable timber resources recorded in statistical sources in Russia can be identified with respect to the causes of their unavailability as follows:

1) timber in areas where forest harvesting operations are restricted or prohibited consists of timber resources in protective forests and special protective forests, forests in protected natural areas, forest preserves, protected shoreline belts, etc. (Russian Forest Code, pp. 102-107); 

2) timber in remote or inaccessible areas where harvesting is not profitable consists of the difference between the total timber stock in the reference territory and the exploitable volume

3) timber that is not included in the scope of commercially harvested wood species for biological reasons .

Stock of resources 

The stock of timber available and unavailable for supply is defined as the volume of timber within the boundaries of the reference territory at a given point in time (beginning or end of an accounting period). 

a) Timber resources available for supply. The estimate can be derived by using data in reporting forms of the State Forest Register:

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age group,” column 10, line “Total main forest forming species”; 

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age group,” column 10, each line of section “1. Main forest forming species”; 

a) Timber resources unavailable for supply. The estimate can be derived by using data in reporting forms of the State Forest Register:

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age group,” column 10, lines “Total of other forest forming species” and “Total brushwood”; 

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age group,” column 10, for each line of section “2. Other tree species” and “3. Brushwood.”

Additions to stock

Natural growth is measured in terms of gross annual increment, i.e., the volume of increment of all trees over the reference period. The estimate of natural growth should be based on the timber resources available at the beginning of the accounting period. Increases in the area of forest land, other wooded land and other land areas that lead to increases in the volume of available timber resources should not be considered as natural growth but should, instead, be recorded as “Reclassifications” (UN, 2012a, p. 217). 

a) Timber available for supply. The estimate can be derived by using data in reporting forms of the State Forest Register:

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age groups,” column 17, line “Total of main forest forming species”; 

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age groups,” column 17, each line of section “1. Main forest forming species.” 

b) Timber resources unavailable for supply. The estimate can be derived by using data in reporting forms of the State Forest Register:

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age groups,” column 17, lines “Total other forest forming species” and “Total brushwood”; 

- Form 1.8 State Forest Register “Allocation of forest areas and timber resources by prevailing species and age groups,” column 17, each line of section “2. Other tree species” and “3. Brushwood.”

Reclassification consists of increase in the volume of timber resources over the accounting period due to:

- increase in the area of forest land and other wooded land;

- changes in management practice that shift timber resources from cultivated to natural and vice versa. 

This estimate is not registered as a separate value in the reporting forms of statistical and administrative accounting. 

Reductions in the stock 

Removals are estimated as the volume of timber resources removed from forest and other wooded land during the accounting period. They include removals of trees felled in earlier periods and removal of trees killed or damaged by natural causes. Removals can be recorded by type of product (e.g., industrial round wood or fuel wood) or by species of tree (e.g., coniferous or broad-leaved). Since the reporting forms of statistical monitoring and administrative accounting do not register data on timber removals according to the above-mentioned SEEA categories, we have used the volume of harvesting (felling), which duplicates the “Timber harvesting” indicator below, to obtain an estimate for this parameter. 

The figure is only derived for natural resources available for supply. The estimate can be derived by using data in reporting forms of the State Forest Register:

- 2.3 State Forest Register “Use of forest by individuals and legal entities,” columns 12, 13, 14 and 15, lines “Total for forest district (forest park),” “including leaseholders”;

- 2.4 State Forest Register “Timber harvesting under forest sale and purchase agreements and contracts concluded for forest protection, conservation and regeneration services,” columns 11, 12, 16 and 17, final line.

Felling residues must be deducted in order to fully account for the change in the volume of timber resources over an accounting period. These residues arise because, at the time of felling, a certain volume of timber resources is rotten, damaged or excessive. Felling residues exclude small branches and other parts of the tree, which are excluded from the scope of timber resources. Estimates of felling residues may provide important information on the nature of forestry practice (UN, 2012a, p. 218). Currently, data on the volume of felling residues are not registered in reporting forms of statistical and administrative accounting as a separate item. 

Natural losses are losses of growing stock (i.e., living, standing trees) during an accounting period due to mortality from causes other than felling.  Examples include losses due to natural mortality, insect attack, fire, wind throw and other physical damage. Natural losses include only those losses that can be reasonably expected when considering timber resources as a whole.   These losses should only be recorded if there is no possibility that the timber resources can be removed. All timber removed should be recorded in removals.

Catastrophic losses should be recorded when there are exceptional and significant losses of timber resources due to natural causes and when there is no possibility that the timber resources can be removed

Since the current reporting forms of statistical and administrative accounting do not divide information on timber losses into natural and catastrophic losses, it appears expedient to record them as a consolidated estimate in the accounts. The estimate can be derived by using data in the following reporting forms:

- 3.1 State Forest Register “Information on forest fires,” column 23, line “Total for forest district (forest park)”;

- form 9-OIP “Forest losses due to forest fires,” column 1, line 31 “Forest products burned and damaged (value reduction), of which: timber harvested.”

Reclassification is reduction in the volume of timber resources over the accounting period due to:

- decrease in the area of forest land and other wooded land

- changes in management practice that shift a specific volume of timber resources from cultivated to natural and vice versa. 

This estimate is not registered as a separate value in the reporting forms of statistical and administrative accounting. 

Felling refers to the volume of timber resources that is felled during an accounting period (as distinct from the volume of timber removed). Annual felling is equal to the volume of timber resources felled during an accounting period. Felling includes silvicultural and pre-commercial thinning and cleaning. The figure is only derived for natural resources available for supply. The estimate can be derived by using data in reporting forms of the State Forest Register:

- 2.3 State Forest Register “Use of forest by individuals and legal entities,” columns 12, 13, 14 and 15, lines “Total for forest district (forest park),” “including leaseholders”;

- 2.4 State Forest Register “Timber harvesting under forest sale and purchase agreements and contracts concluded for forest protection, conservation and regeneration services,” columns 11, 12, 16 and 17, final line.

Availability of information support for physical timber accounts in the SEEA framework is given in Table 2.17. 

Table 2.17 Aggregates of primary data for compiling physical asset accounts for timber resources, thousands of cubic meters

Accounting unit

Timber resource type

Natural timber resources 

Available for wood supply 

Not available for wood supply 

Opening stock of timber resources 

Additions to stock

Natural growth

Reclassifications

Total additions to stock

Reductions in the stock

Removals

Felling residues

Natural losses

Catastrophic losses

Reclassifications

Total reductions in stock

Closing stock of timber resources 

Supplementary information

Felling

 

Data availability for monetary valuation of resource rent:

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

 - no statistical and administrative information is available, only data from other available sources can be used. 

Overall, we would stress the following main points: 

1. The existing systems of statistical monitoring and administrative accounting of timber resources do not distinguish between resources available for supply and those unavailable for supply.

2. The existing forms do not account for “Reclassifications,” so the value of Natural Growth cannot be unambiguously attributed to growth due only to natural causes.

3. The existing systems of statistical monitoring and administrative accounting of timber resources do not envisage differentiation of harvesting into felling and removals. 

4. Existing reporting forms need to be supplemented by separate accounting to distinguish between natural and catastrophic losses.

Monetary accounting

Resource rent from timber resources can be calculated by the residual value method as the gross operating surplus from the harvest of timber resources (after taking account of taxes and subsidies), less: 

1) harvesting expenditures, 

2) user cost of produced assets used in the course of harvesting, 

3) land rent.

Resource rent can be estimated more directly by the appropriation method, using estimates of the value of the growing stock (stumpage price), which is the amount paid per cubic meter of timber by the harvester to the owner of the timber resources (government). 

The common practice in the Russian Federation is the sale of standing timber under lease contracts for timber harvesting or under sale contracts for standing timber.  In either case the price per cubic meter of timber is determined by auction and can be used as a measure for deriving estimates of resource rent in timber asset accounts. 

Generally, when deriving the monetary estimate of timber assets, the resource life is taken to be unlimited.   The estimated felling rate can be used as the measure of allowable timber harvesting volumes.  Harvesting in excess of the calculated felling rate should be treated as timber depletion.  In any case, the question of whether timber resource life is limited or unlimited is decided primarily by examining trends and rates of reduction of mature timber assets.

In case of limited resource life, if the characteristics of forest plots by age and species are known, the specific timber rent can be multiplied by an estimate of the expected volume of standing timber per hectare, taking account of the expected proportion between timber of harvesting age and yield estimates in future periods.  These future receipts are then discounted (over the time from the current period to the expected harvest period) in order to estimate a value per hectare for each age class. In turn, these values are multiplied by the total area of each age class and added to give the value of the total stock of standing timber.  This approach should ensure that trees harvested after reaching maturity are separately accounted for. 

This approach can only be implemented in the Russian Federation piece-wise, since there is no reliable primary information and the scale of illegal harvesting is considerable. A simplified approach uses the current age structure and assumes that each tree of a particular age grows to maturity and is harvested at maturity. 

Taking these points into account, Table 2.18 presents available options for valuing timber resources and aggregating primary statistical and administrative data to derive monetary accounting of timber resources in Russia today. 

Table 2.18 Aggregating primary data for monetary asset accounts of timber resources, millions of rubles  

Accounting unit

Timber resource type

Natural timber resources 

Available for wood supply 

Not available for wood supply 

Opening stock of timber resources 

AMRVM 

Additions to stock

Natural growth

AMRVM 

Reclassifications

AMRVM 

Total additions to stock

Reductions in the stock

Removals

AMRVM 

Felling residues

AMRVM 

Natural losses

AMRVM 

Catastrophic losses

AMRVM 

Reclassifications

AMRVM 

Total reductions in stock

Revaluations

Closing stock of timber resources 

AMRVM 

Note:

 - zero by definition.

 

Data availability for monetary valuation of resource rent:

 - complete statistical and administrative information is available; 

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

Possible methods of monetary valuation of resource rent for deriving the indicator:

RVM - Residual value method (based on annual resource income of the user and annual resource payments to the budget);

AM - Appropriation method (based on annual resource payments to the budget as determined by auction).

Estimation of timber value by the residual value method is based on data from the following reporting forms: OKVED-02.01.1 (Russian Classification of Economic Activities) on logging operations from forms No.P-1 “Information on production and shipping of goods and services,” No.5-3 “Information on cost of production and sale of products (goods, work, services)” and No.P-3 “Information on financial standing of the company.”

The following sources of information can be used to estimate rent from timber harvesting by the appropriation method:

- form 13-OIP “Information on auction sale of rights to lease forest plots,” column 4 “timber harvesting,” the value from column 10;

- form 14-OIP “Information on forest plantation sale agreements,” column 10.

The figures obtained present the specific share (rubles/cubic meter) of timber rent accrued to the government in the accounting period based on the results of auctions for standing timber sale under forest leasing and sale agreements. 

Non-timber forest products

Unlike timber or mineral resources, the SEEA 2012 does not provide details regarding forms and algorithms for accounting non-timber forest products as a separate type of natural resources. Within the SEEA classification, non-timber forest products are included in “Other biological resources (other than timber and aquatic resources)” (UN, 2012a, p. 147).

While the vast majority of biological resources are cultivated, there is a range of natural (non-cultivated) biological resources that provide inputs to the economy and form an important part of local biodiversity. These resources may include wild berries, fungi, fruits and other plant resources that are harvested for sale or own consumption. 

Physical accounting

The structure of the asset account for non-timber forest products is presented in Table 2.19. 

Table 2.19  Sample of the physical asset account for non-timber forest products

Accounting unit

Natural resources of non-timber forest products

Available for harvesting 

Not available for harvesting

Opening stock of non-timber forest products

Additions to stock

Natural growth

Reclassification

Total additions to stock

Reductions in the stock

Harvesting

Natural losses

Catastrophic losses

Reclassification

Total reductions in stock

Closing stock of non-timber forest products

Source: UN, 2012a.

Stock of resources 

The stock of non-timber forest products, both available and unavailable for supply, is defined as the quantity of the products within the boundaries of the reference territory at a given point in time (beginning or end of an accounting period). 

The yield of various types of non-timber forest products is divided into gross and operational. Gross harvest is the biological harvest of non-timber forest products, while the operational harvest is the commercially feasible harvest taking into account transportation availability, funding, human resources and accessibility of the territory in terms of relief (Sudiev & Novikov, 1976). So the estimate of the stock of non-timber forest resources is composed of:

a) non-timber forest resources available for supply: the amount of the operational harvest, taken, as a rule, to be a certain percentage of the biological harvest in the reference territory; 

b) non-timber forest resources unavailable for supply: the difference between the biological and operational harvest in the reference territory.

This indicator is not currently recorded in reporting forms of statistical and administrative accounting. Some primary information on the stock of non-timber forest products can be found in specialized research publications.

Additions to stock

Natural growth is measured as the annual increase in the operational harvest of the product over an accounting period. It should be recorded as the positive value of the sum of the actually harvested non-timber forest products by species over the accounting period and the increase in their operational harvest in the same period for any natural reason (e.g., increased share of berrying grounds in the total area of the reference territory, etc.), excluding increases due to: land reclassification (e.g., transfer from protected natural area to exploitable forest, etc.), and changes in forest management practice entailing transfer of non-timber resources from natural resources to cultivated and vice versa. 

This indicator is not currently recorded in reporting forms of statistical and administrative accounting. Some primary information on natural additions to the stock of non-timber forest products can be found in specialized research publications.

Reclassification is the increase in the volume of timber resources over an accounting period due to:

- increase in the area of forest and other wooded land resulting from their transfer to other land categories;

- changes in forest management practice entailing transfer of non-timber resources from natural resources to cultivated and vice versa. 

This indicator is not currently recorded in reporting forms of statistical and administrative accounting. Some primary data on increase of the stock of non-timber forest products due to reclassification can be found in specialized research publications. 

Reductions in the stock

Harvesting is the volume of actually harvested non-timber forest resources by species over an accounting period. This indicator is registered in reporting forms of statistical and administrative accounting in area units (hectares), except for soft resin. For soft resin, the estimate can be derived using data in statistical reporting forms:

- 2.3 State Forest Register “Use of forests by individuals and legal entities,” column 16 “Harvesting of soft resin, tones.”

- 24-OIP “Information on the use of forest plots leased, granted in perpetuity, provided gratis, provided for a limited period,” column 4, lines: “Soft resin harvesting,” “Harvesting of non-timber forest resources,” “Harvesting of food forest resources and gathering of medicinal plants.”

Primary data on harvesting of non-timber forest resources using weight or volume units (kg, m3) can be found in the results of specialized research projects or in household economy surveys. 

Natural losses are losses of the non-timber forest product harvest during an accounting period due to mortality and causes other than harvesting.  Examples include mortality due to natural causes, insect attack, fire, etc. Natural losses only include those losses that can be reasonably expected when considering non-timber forest resources as a whole.  Catastrophic losses should be recorded when there are exceptional and significant losses of non-timber forest resources due to natural causes. 

This indicator is not currently recorded in reporting forms of statistical and administrative accounting. Some primary information on natural and catastrophic losses may be found in specialized research publications.

Reclassification is the reduction of the volume of the operational harvest over the accounting period due to:

- decrease in the area of forest and other wooded land resulting from their transfer to other land categories;

- changes in management practice that shift non-timber resources from natural to cultivated and vice versa. 

This indicator is not currently recorded in reporting forms of statistical and administrative accounting. Some primary data on reduction of the stock of non-timber forest products due to reclassification can be found in specialized research publications. 

So there is an acute overall shortage of primary data for physical asset accounting of non-timber forest products. Only partial data are available for this type of natural resources, notably data for harvesting of soft resin (tones/year). Harvesting of all other non-timber resources is recorded as a single estimate, i.e., the area of harvesting of all types of products (table 2.20). No physical indicators of other types of non-timber resources can be found in the existing forms. 

Table 2.20 Aggregating primary data for physical asset accounting of non-timber forest products

Accounting unit

Natural resources of non-timber forest products

Available for harvesting 

Not available for harvest 

Opening stock of non-timber forest products

Additions to stock

Natural growth

Reclassification

Total additions to stock

Reductions in the stock

Harvesting

Natural losses

Catastrophic losses

Reclassification

Total reductions in stock

Closing stock of non-timber forest products

 

Data availability for monetary valuation of resource rent:

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

 - no statistical and administrative information is available, only data from other available sources can be used. 

Whether and to what extent the existing information gaps are to be completed should be determined based on importance of the missing data for assessment of the state, sustainability and efficiency of use of the stock of specific types of non-timber forest products. 

Monetary accounting

Monetary valuation of non-timber forest resources assumes resource life to be unlimited (as in the case of timber resources). Otherwise, the limited or unlimited nature of resource life is decided primarily by examining certain perceived and specifically conditioned trends and rates of reduction of the stock of non-timber forest resources.   Aggregating of primary data for monetary asset accounting of non-timber forest products is shown in Table 2.21.

Table 2.21 Aggregating of primary data for monetary asset accounting of non-timber forest products, million rubles.

Accounting unit

Natural resources of non-timber forest products

Available for harvesting 

Not available for harvest 

Opening stock of non-timber forest products

RVM, AM

Additions to stock

Natural growth

RVM, AM

Reclassification

RVM, AM

Total additions to stock

Reductions in the stock

Harvesting

RVM, AM

Natural losses

RVM, AM

Catastrophic losses

RVM, AM

Reclassification

Total reductions in stock

Revaluations

Closing stock of non-timber forest products

RVM, AM

Note:

 - zero by definition.

 

Data availability for deriving monetary estimates of resource rent:

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

Possible methods of monetary valuation of resource rent for deriving the indicator:

RVM - Residual value method (based on annual resource income to the user and annual resource payments to the budget);

AM - Appropriation method (based on annual resource payments to the budget, as determined by auction);

Application of the residual value method is based on data from the following reporting forms: OKVED-02.01.2 (Russian Classification of Economic Activities) on harvesting wild and non-timber forest products from forms No.P-1 “Information on production and shipping of goods and services,” section 2, No.5-3 “Information on cost of production and sale of products (goods, work, services)” and No.P-3 “Information on financial standing of the company.”

The following statistical forms can be used in order to apply the appropriation method in respect of non-timber forest resources:  

- form 13-OIP “Information on auction sale of the right to lease forest plots,” column 4 “Harvesting soft resin,” “Harvesting and gathering non-timber forest resources,” “Harvesting food forest resources and gathering medicinal plants”: values from column 10 are to be multiplied by the respective values in column 6;  

- 16-OIP “Information on forestry income and its distribution among beneficiaries,” lines “Harvesting and gathering non-timber forest resources” and “Harvesting food forest resources and gathering medicinal plants,” column 7. 

The value derived is the annual amount of the share of non-timber forest resource rent accruing to the government in the accounting period following auction sale of non-timber forest products under forest leasing agreements.

Animals

At the present time, only hunting of animals and birds is covered by statistical monitoring and administrative accounting in the Russian Federation. This is explained by the stable demand for these resources, relative economic significance of these resources at local and regional level and the need for measures, by which government authorities can control, regulate and preserve their populations. So the accounting of hunting species is established and maintained for the purpose of sustainable environmental management in the reference territory.

The lack of demand for other types of fauna means that there is no immediate threat of critical reduction of their population due to hunting in the reference territory, so regular statistical accounting of their populations appears to be unnecessary. It would be advisable to develop a structure and system of forms for physical accounting of other animal resources (by species) for purposes of sustainable environmental management in the reference territory. This would be useful, e.g., in situations where there is high demand for information on: 

- sustainability of the population of hunting species in the reference territory (e.g., to record their population as food supply for predators, as infection carriers, etc.);

- the ecosystem of the reference territory (e.g., species populations as related to environmental pollution, etc.) 

In view of these points, we suggest the following arrangement and implementation of environmental-economic indicators for hunting resources. 

Physical accounting

The sample physical asset account for animal resources will have the form given in Table 2.22. 

Table 2.22 Sample form for the physical asset account for animal resources, individuals

Accounting unit

Natural animal resources

Hunting species

Other species

Opening stock of animal resources 

Additions to stock

Natural growth

Revaluations 

Reclassification

Total additions to stock

Reductions in the stock

Hunting

Natural losses

Catastrophic losses

Revaluations 

Reclassification

Total reductions in stock

Closing stock of animal resources

Source: UN, 2012a.

Stock of resources 

The stock of hunting resources is defined as the quantity of individuals of each species within the boundaries of the reference territory at a given point in time (beginning or end of an accounting period). The indicator can be derived using data in the following reporting forms:

- form 1.1. (Mammals) “Documented information on the quantity of hunting resources (mammals),” line “Total for the Russian constituent entity,” columns 3- 65;

- form 1.2. (Birds) “Documented information on the quantity of hunting resources (birds),” line “Total for the Russian constituent entity,” columns 3- 72;

- Table 3.3 “Information on take of hunting resources subject to a hunting quota,” column 2 (Order issued by the Russian Ministry of Natural Resources (January 28, 2011, No.23), “On Approval of Requirements for Contents, Reporting Forms and the Procedure for Submitting Reports on Exercise of Powers delegated by Government in the Sphere of Hunting and Hunting Resource Preservation”) (Registered by the Russian Ministry of Justice on March 17, 2011, No.20159);

- Table 3.4 “Information on take of hunting resources that are not subject to a hunting quota,” column 2 (Order issued by the Russian Ministry of Natural Resources (January 28, 2011, No.23), “On Approval of Requirements for Contents, Reporting Forms and the Procedure for Submitting Reports on Exercise of Powers delegated by Government in the Sphere of Hunting and Hunting Resource Preservation”) (Registered by the Russian Ministry of Justice on March 17, 2011, No.20159).

Additions to stock 

Natural growth of hunting resources is defined as the increase in the population of species by type in the boundaries of the reference territory due to natural causes, i.e., reproduction and migration, as of the end of the accounting period. Reproduction is taken to be equal (with the opposite sign) to the volume of actual take of hunting resources by species.

The scope of migration is not explicitly recorded in the existing reporting forms. It can be calculated as the positive difference between the quantity of hunting resources by species at the beginning and end of the accounting period, taking account of all other entries for positive and negative changes in the assets during the accounting period

Revaluation is the increase in the total stock of hunting resources during an accounting period due to changes in data on the quantity of the species obtained from additional field studies and/or the application of new accounting techniques. This estimate is not registered as a separate value in the reporting forms of statistical and administrative accounting. Some primary data on increase in the stock due to reclassification can be found in specialized research publications.  

Reclassification is the increase in the total quantity of hunting resources during an accounting period due to the reassignment of some species (including Red Book species) to the category of game animals.  At present, the indicator should be recorded in forms of statistical monitoring and administrative accounting that are used to derive estimates of the stock (see above).

Reductions in the stock 

The “take” of animals and birds is the quantity of individuals of the hunted species, which are killed by hunting during an accounting period. The indicator can be derived using data in the following reporting forms:

- form 4.1. (D-Hoofed) “Documented information on hunted hoofed animals categorized as hunting resources,” line “Total for the Russian constituent entity,” columns 9, 10-18;

- form 4.2. (D-Fur) “Documented information on hunted fur animals categorized as hunting resources,” line “Total for the Russian constituent entity,” columns 4 and 6;

- form 4.3. (D-Birds) “Documented information on hunted birds categorized as hunting resources,” line “Total for the Russian constituent entity,” column 10;

- form 4.4. (D-Wolf) “Documented information on hunted wolves,” line “Total for the Russian constituent entity,” columns 5, 6-11;

- form 4.5. (D-Bear) “Documented information on hunted bears,” line “Total for the Russian constituent entity,” column 4;

- form 5.3 (RCh) “Documented information on game population control,” columns 6, 7-10;

- Table 3.3 “Information on extraction of hunting resources subject to a hunting quota,” column 5 (Order issued by the Russian Ministry of Natural Resources (January 28, 2011, No.23), “On Approval of Requirements on the Contents, Reporting Forms and Procedure for Submitting Reports on Exercise of Powers Delegated by Government in the Sphere of Hunting and Hunting Resource Preservation”) (Filed with the Russian Ministry of Justice on March 17, 2011, No.20159);

- Table 3.4 “Information on extraction of hunting resources that are not subject to hunting quota,” column 3 (Order issued by the Russian Ministry of Natural Resources (of January 28, 2011, No.23) On Approval of the Requirements to the Contents, Reporting Forms and Procedure for Submitting Reports on Exercising the Powers of Russian Federation Delegated in the Sphere of Hunting and Hunting Resource Preservation”) (Filed with the Russian Ministry of Justice on March 17, 2011, No.20159).

Natural and catastrophic losses of hunting resources are defined as reduction in the population by species for natural causes (i.e., natural mortality, migration, etc.) within the boundaries of the reference territory as of the end of the accounting period. Since the current reporting forms of statistical and administrative accounting do not distinguish information on losses of hunting resources according to the above-mentioned SEEA criteria, it appears expedient to record them as a consolidated estimate in the accounts. The indicator can be derived from the data in reporting form 1.4 (RG), “Documented information on mortality of hunting resources”: 

- total: column 3;

- adult: column 4; 

- up to 12 months: column 5;

- from disease: columns 6-8;

- road accidents: columns 9-10;

- poaching: 12-14;

- other causes: 15-17.

Revaluation represents reduction in the total stock of hunting resources during an accounting period due to changes in data on the quantity of the species obtained from additional field studies and/or application of new accounting techniques. This estimate is not registered as a separate value in the reporting forms of statistical and administrative accounting. Some primary data on reduction in the stock due to reclassification can be found in specialized research publications. 

Reclassification is reduction in the total quantity of hunting resources during an accounting period due to the transfer of some species from the category of game animals to the Red Book.   At present, the indicator should be recorded in forms of statistical monitoring and administrative accounting that are used to derive the indicator of stocks.

To summarize, the most complete information on hunting resources are given by the indicators, “Stock of resources,” “Take” and “Reclassifications” (Table 2.23).

- Table 2.23 Aggregating primary data for physical asset accounting of hunting resources, individuals

Accounting unit

Natural animal resources

Hunting species

Other species

Opening stock of animal resources 

Additions to stock

Natural growth

Revaluations 

Reclassification

Total additions to stock

Reductions in the stock

Hunting

Natural losses

Catastrophic losses

Revaluations 

Reclassification

Total reductions in stock

Closing stock of animal resources


Data availability for monetary valuation of resource rent:

 - complete statistical and administrative information is available; 

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

Natural growth is not recorded as a separate estimate in the existing systems of statistical monitoring and administrative accounting. Its derivation by the balancing method (difference between receipts and expenditure) presupposes animal migration. Separate accounting for these estimates is required in the existing reporting forms to distinguish between natural and catastrophic losses. 

Monetary accounting

Resource rent from the take of hunting resources can be calculated by the residual value method using OKVED-01.5 Wildlife hunting and breeding, which includes the respective services, from reporting forms P-1, “Information on production and shipping of goods and services” (section 2), 5-3, “Information on the cost of production and sale of products (goods, work, services)” and No. P-3, “Information on financial standing of the company.” However, the results obtained will only partially cover activities in this sphere because most economic actors are sole traders or small businesses and are not recorded in the statistical reports mentioned above. Hunting costs and profits with respect to the above categories of hunters are derived from form No.2-TP (hunting), “Information on hunting and game management”: line 28 of section 4 less line 7 of section 2 (ignoring the values in line 14). In both cases the result obtained gives the total figure for resource rent of hunters without breakdown into hunted species, which reduces the analytical power of the accounting. 

A similar drawback is inherent in the calculation of hunting resource rent by the access price method.  It is based on the final price of auctions of rights to make contracts for the use of specific hunting grounds. Payment for the land where the hunting grounds are situated is not included in the auction lot. To apply this method, we need inputs from Table 6.1 Information on holding auctions for the right to enter into hunting contracts, column 3 (Order issued by the Russian Ministry of Natural Resources, dated January 28, 2011, No.23, “On Approval of Requirements on the Contents, Reporting Forms and Procedure for Submitting Reports on Exercise of Powers Delegated by Government in the Sphere of Hunting and Hunting Resource Preservation”).

Monetary valuation of the rent on specific types of hunting resources can be obtained by the appropriation method using the data of the Russian Tax Code (part two), dated August 5, 2000, No.117-FZ (as amended on July 21, 2014), Art.333.3 on the rates of duty for the use of wildlife. The asset account for animal resources in monetary terms is given in Table 2.24. 

 

Table 2.24 Aggregating primary data for monetary asset accounts of hunting resources, millions of rubles

Accounting unit

Natural animal resources

Hunting species

Other species

Opening stock of animal resources 

AM, APM, RVM 

Additions to stock

Natural growth

AM, APM, RVM 

Revaluations 

AM, APM, RVM 

Reclassification

AM, APM, RVM 

Total additions to stock

Reductions in the stock

Hunting

AM, APM, RVM 

Natural losses

AM, APM, RVM 

Catastrophic losses

AM, APM, RVM 

Revaluations 

AM, APM, RVM 

Reclassification

AM, APM, RVM 

Total reductions in stock

Revaluations

Closing stock of animal resources

AM, APM, RVM 

Note:

 - zero by definition.

 

Data availability for deriving monetary estimates of resource rent:

 - complete statistical and administrative information is available; 

 - partial statistical and administrative information is available, assumptions and data from other sources are required;

Available methods of monetary valuation of resource rent for deriving the indicator:

RVM - Residual value method (based on annual resource income to the user and annual resource payments to the budget);

AM - Appropriation method (based on annual resource payments to the budget, as determined by auction);

APM - Access price method (based on the final price at auction of rights to make hunting contracts).

The resource life of the stock of game animals is, as a rule, taken to be unlimited. The permissible take may be based on quotas for hunting of specific species in the reference territory. Take in excess of the hunting quota should be treated as depletion of resources. Whether the resource life of game stock is limited can be decided by examining trends and rates of reduction in the population of game species. 

2.2.2. Physical flow account for air emissions, discharges into water bodies and solid waste disposal

Air emissions, discharges into water bodies and solid waste disposal are defined in the SEEA 2012 as materials discharged by enterprises into the atmosphere, water or soil as a result of production, consumption and accumulation processes. Therefore, the focus in emissions accounting is not on the complete cycle of the particular pollutants through the economy, but on the flow from the economy to the environment. 

We will examine physical flow accounting for air emissions, discharges to water and solid waste disposal as regards the availability of statistical, administrative and other primary data. 

Air emissions account  

The air emissions account (Table 2.25) is compiled on the basis of primary data on the volume of emissions by economic units, by type of polluting substance. The left-hand part of the table shows the generation of emissions from industries and households by type of substance. 

To complete the left-hand part of the table, “Generation of gross releases,” we can use data from form No.2-TP, “Information on atmospheric air protection.” However, the information obtained from this form does not include emissions from personal transport (cars) and fails to give any idea of other possible air emissions from households. A similar situation obtains for emissions from landfills as regards the part of emissions from solid waste accumulation. These estimates can be obtained from other available sources of information (environmental monitoring, expert reports, etc.)

Table 2.25 Air emission account (tones)

Supply table for air emissions Use table for air emissions

Generation of emissions

Accumulation

Total

supply 

of emissions

Flows to 

environment

Total

use 

of emissions

Industries 

Households

Emissions from landfills

Emissions to 

environment

Agriculture

Mining 

extraction

Manufacturing 

industry

Transport

Other 

Transport

Heating

Other 

Type of substance

Carbon dioxide

10,610.3

2,602.2

41,434.4

27,957.0

82,402,4

18,920.5

17,542.2

1,949.1

701.6

204,119.6

204,119.6

204,119.6

Methane

492.0

34.1

15.8

0.8

21.9

2.4

15.5

1.7

222.0

806.3

806.3

806.3

Dinitrogen oxides

23.7

3.5

0.8

2.6

1.0

0.2

0.1

0.1

32.0

32.0

32.0

Nitrous oxides 

69.4

6.0

37.9

259.5

89.0

38.0

12.1

1.3

0.3

513.6

513.6

513.6

Hydrofluorocarbons

0.3

0.4

0.7

0.7

0.7

Perfluorocarbons

Sulfur hexafluoride

Carbon monoxide

41.0

2.5

123.8

46.2

66.2

329.1

51.2

5.7

1.1

666.9

666.9

666.9

Non-methane volatile organic compounds

5.2

6.5

40.0

16.4

27.2

34.5

29.4

3.2

0.9

163.3

163.3

163.3

Sulfur dioxide 

2.7

0.4

28.0

62.4

8.1

0.4

0.4

0.1

0.0

102.5

102.5

102.5

Ammonia

107.9

1.7

0.2

0.9

2.3

11.4

1.2

0.2

125.9

125.9

125.9

Heavy metals

Persistent organic pollutants

Particles 

7.0

0.1

8.5

9.3

4.4

6.0

2.8

0.5

0.0

38.5

38.5

38.5

 - estimates derived with the help of inputs from available supplementary sources (environmental monitoring, expert reports, etc.)

Source: UN, 2012a, p. 88.

Accounting of discharges into water bodies

The SEEA framework takes account both of direct releases of pollutants to water resources from economic units (establishments and households) and releases of pollutants to water resources via the sewerage system, where the releases are received, treated and cleaned. So the accounting system covers gross releases of pollutants by establishments and households to water resources and to the sewerage system (Table 2.26).  

Table 2.26 Structure of water emission accounts (tones)

Physical supply table for gross releases of substances to water

 

Generation of gross releases 

to water

Accumulation

Flows from

the rest of 

the world

Flows from

environment

Total

supply 

Sewerage 

Other 

Industries 

Households

Discharges from

fixed 

assets

Discharges by type of substance

BOD/COD

5,594

11,998

2,712

20,304

Suspended solids

Heavy metals

Phosphorus

836

1,587

533

2,956

Nitrogen

10,033

47,258

1,908

59,199

Releases to other economic units

BOD/COD

7,927

8,950

16,877

Suspended solids

Heavy metals

Phosphorus

814

6,786

7,600

Nitrogen

15,139

30,463

45,602

Physical use table for gross releases of substances to water

Generation of gross releases 

to water

Flows to the rest of the world

Flows to

environment

Total

use

Sewerage

Other 

Industries 

Households

Flows to the environment

BOD/COD

20,304

20,304

Suspended solids

Heavy metals

Phosphorus

2,956

2,956

Nitrogen

59,199

59,199

Collection by other economic units

BOD/COD

16,877

16,877

Suspended solids

Heavy metals

Phosphorus

7,600

7,600

Nitrogen

45,602

45,602

Note: Dark gray cells are null by definition.

 - estimates to be derived with the help of inputs from available supplementary information sources (environmental monitoring, expert reports, etc.)

Source: UN, 2012a, p. 93.

The table can be compiled using data in reporting form No.2-TP (water management), “Information on water use.” However, it should be noted that this reporting form does not record substances transferred with wastewater for treatment (“to the sewerage system” in the SEEA terminology), but only accounts for substances released directly to water bodies (with or without previous treatment). Also, according to the final paragraph of point 3.13. of the Guidelines for completion of forms of federal statistical monitoring No.2-TP (water management), “...in recording polluting substances, account is taken only of the amount of substances released to the water body as a result of using the water (the total quantity of substances contained in the releases is reduced by the quantity of substances contained in the water taken from the same water body).”

So the cells of the subsections “Discharges by type of substance” and “Discharges to environment” (except for “Households”) can be partially filled in using the data of reporting form No.2-TP (water management). Completion of the cells in the sections, “Releases to other economic units” and “Collection by other economic units” as well as all sections of the columns, “Households,” “Flows with the rest of the world” and “Flows to the rest of the world” will require reference to inputs from other available sources. 

Solid waste account  

Solid waste consists of discarded materials that are no longer required by the owner or user. Where the unit discarding the materials receives no payment for the materials, the flow is considered being a residual flow of solid waste. Where the unit discarding the materials receives a payment, but the actual residual value of the material is small (e.g., scrap metal sold to a recycling firm), this flow is considered being a product flow in the form of solid waste (UN, 2012a, p. 94). 

The structure of the solid waste account is presented in Table 2.27. Since there is no standard international classification of solid waste, the table includes, for illustrative purposes, an indicative listing of types of solid waste based on the statistical version of the European Waste Catalogue (EWC-Stat).

 

Table 2.27 The structure of the solid waste account (tones) 

Physical supply table for solid waste

 

Generation of solid waste

Rest of the world

Flows from the environment 

Total supply

Waste collection, treatment and disposal industry

Other industries

Households

Imports of solid waste 

Recovered residuals

Landfills

Incineration

Recycling 

and reuse

Other 

treatment

Total

Of which: Incineration to generate energy

Generation of solid waste

Chemical and health-care waste

160

1,830

20

140

2,150

Radioactive waste

5

5

Metallic waste

40

10

320

70

10

440

Non-metallic recyclables

30

2,720

2,100

130

4,980

Discarded equipment and vehicles

140

280

50

470

Animal and vegetal waste

10,330

1,700

80

12,110

Mixed residential and commercial waste

10

30

4,170

4,660

100

10

8,980

Mineral wastes and soil

300

29,100

570

170

30,140

Combustion waste

4,050

2,000

1,550

240

5,840

Other waste

460

40

500

Generation of solid waste products

Chemical and health-care waste

160

160

Radioactive waste

Metallic waste

1,600

100

1,700

Non-metallic recyclables

1,030

2,940

3,970

Discarded equipment and vehicles

Animal and vegetal waste

5,310

8,460

13,770

Mixed residential and commercial waste

Mineral waste and soil

350

80

430

Combustion waste

378

286

220

50

648

Other waste

Note: Dark gray cells are null by definition.

Physical use table for solid waste

 

Intermediate consumption

Final consumption

Rest of the world

Flows to the environment

Total use

Waste collection, treatment and disposal industry

Other industries

Households

Exports of solid waste 

Landfills

Incineration

Recycling 

and reuse

Other 

treatment

Total

Of which: Incineration to generate energy

Collection and disposal of solid waste residuals

Chemical and health-care waste

290

570

910

380

1,290

Radioactive waste

5

5

Metallic waste

10

200

200

30

230

Non-metallic recyclables

550

500

2,930

1,340

160

3,090

Discarded equipment and vehicles

30

10

370

60

430

Animal and vegetal waste

30

830

630

8,310

150

2,180

610

9,070

Mixed residential and commercial waste

730

6,450

2,300

1,070

10

630

90

1,790

Mineral waste and soil

1,010

720

22,630

5,170

610

23,240

Combustion waste

50

400

5,190

200

600

Other waste

20

120

40

320

360

Use of solid waste products

Chemical and health-care waste

50

110

160

Radioactive waste

Metallic waste

30

150

1,520

1,550

Non-metallic recyclables

50

2,500

1,420

1,470

Discarded equipment and vehicles

Animal and vegetal waste

630

8,010

5,130

5,760

Mixed residential and commercial waste

Mineral waste and soil

70

200

160

230

Combustion waste

600

48

48

Other waste

Note: Dark gray cells are null by definition.

 - estimates to be derived with the help of inputs from available supplementary information sources (environmental monitoring, expert reports, etc.)

Source: UN, 2012a, pp.96-97.


 

 The upper half of the table is the supply table whose first part, covering “Generation of solid waste residuals,” shows the generation of solid waste by industries and households.  It also shows the supply of solid waste from the rest of the world (recorded as imports) as well as solid waste recovered from the environment (e.g., oil recovered following an offshore oil spill, debris collected following a natural disaster; or excavation of soil from locations where hazardous chemicals were used).

The bottom half of the table is the use table, whose first part, covering “Collection and disposal of solid waste residuals,” shows the collection and disposal of solid waste by the waste collection, treatment and disposal industry and by related activities in other industries. It also shows the flow of solid waste to the rest of the world as exports and the flow of solid waste direct to the environment.

The second part of the supply table, “Generation of solid waste products.” and the second part of the use table, “Use of solid waste products,” record flows of solid waste that are considered being products rather than residuals. The flows recorded here relate to instances where a solid waste product is identified at the time of disposal by the discarding unit. The flow is recorded in the second part of the supply table and is matched by a use of solid waste products in the second part of the use table.  This ensures recording of the sale of scrap metal and other products, which have lost their consumption properties. 

Sales of products manufactured from solid waste or simply obtained from waste collection are not included in this table. For example, paper discarded by households, which is collected by a charity organization and subsequently sold in bulk to a paper recycling firm, is recorded in the solid waste account only in respect of the initial flow of solid waste from households to the charity organization.

 Practically all cells of Table 2.27 can be completed on the basis of data in reporting form No.2-TP (waste), “Information on generation, use, treatment, transportation and disposal of production and consumption waste.”  However, that does not include data required for completing the “Households” item.

* * *

The required primary statistical information is generally available for material flow accounts regarding atmospheric emissions, discharges into water bodies and solid waste residuals.  The account data are derived from the performance indicators of economic units by sector and by specific substance and type of waste. The most complete information among the physical flows related to environment pollution, which are considered above, is for the solid waste account. The common failing of all accounts is the absence of data related to household activities.  In this context expert information that can be used for deriving environmental-economic estimates acquires great importance.

2.2.3. Functional accounts for other environment-related transactions (economic activity for environmental purposes).

The SEEA envisages presentation of a wide variety of facts and phenomena regarding the activities of economic agents (various legal entities, unincorporated entities, households, etc.), government authorities and local government bodies for purposes of environmental protection and resource management. This necessitates the completion and maintenance of accounts reflecting environmental protection expenditure, performance of producers of environmental goods and services, resource management expenditure, etc. Such information provides a basis for efficient environmental management that promotes green growth and development of the green economy.

The SEEA defines environmental protection services as products that are typical of environmental activities. They include environmental protection services produced by economic units for sale or for their own use, e.g., services for the removal and recycling of solid waste residuals, wastewater removal and treatment. 

The environmental protection service accounts (EPEA) and the resource management expenditure accounts have a similar structure (table 2.28). Production of environmental protection services is presented with a breakdown between specialist producers, non-specialist producers and own-account producers. Government specialist producers are separately identified. 

Table 2.28Structure of accounts for environmental protection services and resource management expenditure accounts (monetary units)

Producers

Total

Specialist producers

Non-specialist producers

Own-account producers

Government producers

Other specialist producers

1

2

3

4

5

6

Output of environmental protection services and resource management expenditure accounts 

3,000

6,500

2,400

1,600

13,500

Intermediate consumption

2,000

3,000

600

400

6,000

Environmental protection services and resource management expenditure accounts

1,800

1,500

500

300

4,100

Other goods and services

200

1,500

100

100

1,900

Gross value added 

1,000

3,500

1,800

1,200

7,500

Remuneration to employees

600

2,000

1,200

800

4,600

Taxes less subsidies on production

Consumption of fixed capital

400

1,000

600

400

2,400

Net operating surplus

500

500

Supplementary items

Labor input (hours worked)

4,000

10,000

4,500

4,000

22,500

Gross fixed capital formation

1,100

1,000

2,000

500

4,600

Acquisition less disposals of non-produced,

non-financial assets

200

Source: UN, 2012a, p. 111.

Specialist producers in the EPEA are establishments whose primary activity is the production of environmental protection services. Non-specialist producers are those establishments that produce environmental protection services as secondary outputs, but have a different primary activity. 

Resource management expenditure accounts comprise accounts covering the supply and use of resource management services, national expenditure on resource management and financing of national expenditure on resource management. It may be relevant to compile resource management expenditure accounts for a specific type of resource (e.g., timber resources or water resources) (UN, 2012a, Chapter 4).

Russian statistics organize main environmental protection expenditure data in form No.4-OS, “Information on environmental protection expenditure and environmental fees.” However, the format of presentation of environmental protection expenditure in this reporting form differs from that of Table 2.28. For example, form No.4-OS does not contain information that would enable the breakdown of economic units into specialist and non-specialist producers of environmental services and does not identify own-account producers of such services. Therefore, compilation of environmental protection expenditure accounts in accordance with the above structure will require information from other available sources on environmental services and resource management expenditure in order to derive main economic indicators for these activities (Table 2.28, column 1) and main groups of producers (Table 2.28, columns 2-5).

Accounting of transactions that involve fixed assets used in economic activities related to the environment should be separately mentioned. There is often reason to be interested in fixed assets used to extract and harvest natural resources, and in the value of investments in fixed assets for environmental protection or resource management. For example, information on the amount of investments in equipment to capture energy from renewable energy sources may be of interest. The SEEA does not define aggregates for environment-related fixed assets. Rather, the measurement scope will depend on the economic activities, which are of interest. For example, fixed assets related to environmental protection expenditure will cover any specialized equipment purchased and also expenditure on more generic assets such as buildings, cars, computers, that are required by specialist producers of environmental protection services. In all cases, the accounting treatment of fixed assets should follow the treatments outlined in the SNA. These assets are included in the accounts for other environment-related transactions (economic activity for environmental purposes). 

In Russia, the respective estimates can be derived using data in reporting form 18-KS, “Information on capital investments in environment protection and resource use.” However, the format for collection and presentation of such data differs from the account structure and requires the use of other available information sources.

Thus, functional accounts for other transactions related to environmental-economic activities can be compiled using the data on environmental protection expenditure in forms No.4-OS, “Information on current environmental protection expenditure and environmental fees” and 18-KS, “Information on capital investments in environmental protection and resource use.” However, the format of the data presentation differs from that in the accounts for production of environmental protection services and resource management expenditure accounts, because the above reporting forms do not contain data that enable breakdown of the economic agents between specialist and non-specialist producers of environmental services and do not identify own-account producers. Also, there is no statistical accounting for expenditure on resource management and the environmental goods and services sector. To summarize, the framework of primary data on environmental management is not oriented to integrated accounting of these activities in the main indicators of accounts for production, distribution and use of income and therefore fails to assess the role of these activities in deriving the indicators of these accounts. 

CHAPTER 3

USE OF SEEA APPROACHES TO ADDRESS KEY TASKS OF ENVIRONMENTAL MANAGEMENT

 The SEEA methodology is a significant part of present-day statistics.  As the ideas of sustainable development gain ground, the system-forming role of the SEEA becomes more evident due to its treatment of environmental resources and ecosystem services from the viewpoint of their value for territories and the people who live there.  As noted above, the SEEA analyzes three main flows:  products (goods and services produced in the economy and used within it), natural resources (inputs) (mineral and energy resources, soil, water and biological resources) and residuals (unintended and undesirable outputs of the economy, which can be reused or returned to the environment, including solid waste, wastewater and gaseous emissions into the atmosphere) 

Flow accounts are compiled in the form of supply and use tables. The basic table is compiled in physical terms and characterizes the relative significance of different economic activities in the context of their impact on the environment. The benefit of this approach is the possibility of compiling integrated (“hybrid”) supply and use tables where monetary values are shown alongside their equivalents in physical terms, with a balancing item that expresses value added.  Hybrid tables have been used to study various ecological issues, such as the greenhouse effect or solid waste residuals.  Asset accounts are used to reflect the stocks and changes in the stocks of natural resources in both physical and monetary terms. The fact that physical asset accounts are also compiled for resources that are not evaluated in monetary terms and hence are not reflected as assets in the SNA, e.g., air, water, etc., is of critical importance. 

Drawing on our experience in research work and consultancy, we came to the conclusion that even at a time when Russia has not fully implemented the SNA and SEEA, many of their methodological approaches and techniques can be put to good use in solving the practical goals of resource use and environmental protection.  First of all, it is important to emphasize their versatility and the possibility of compiling “white” (based on official statistical and administrative data) and “gray” (including shadow-economy data) matrices of environmental-economic accounting, in accordance with the Handbook for the SEEA (UN, 1993b) where these issues are considered in great detail. This approach enables a comprehensive evaluation of the natural capital of a territory with a specific tolerance (so far as the input data permit). The results obtained are useful for: strategic planning (including adjustments in GDP and GRP); assessment of the efficiency of economic mechanisms for environmental regulation (taxes, fees, duties, etc.); assessment of investment projects (particularly external ones) for a region or a territory; calculation of damage compensation; validation of the efficiency of environmental plans and investment programs for environmental protection; and conflict management in the areas of resource use and environmental protection.

Another important feature of the SEEA is the establishment of uniform basic approaches to monetary evaluation of environmental resources and ecosystem services, which makes it possible to compare the results obtained. This solves one of the main problems in selecting the most economically beneficial option for environmental management in a specific territory, e.g., choosing between creation of a sand quarry or a beach; starting gold extraction or preserving a salmon breeding site, etc. Moreover, the SEEA allows application of the provisions of the theory of utility and total economic value. This is essential for implementation of the principles of sustainable development. 

First of all, it is known that a large part of resources is used by the government and the population, who do not obtain full return on the resource exploitation; this often testifies to market underestimation of returns on environmental resources and ecosystem services. Such undervaluation needs to be stopped. Secondly, there are various resources that provide services, which have never been evaluated. These resources need to undergo initial valuation. Thirdly, economic activities can damage the environment. The damage might affect current and future services provided by natural resources. Consequently, such activities should also be viewed negatively. The fact is that some resources are being depleted and hence lost for future generations, who will not have access to the same resource base. In these cases adjustment has to be made for depletion. Often the existence value of a resource needs to be taken into account. This is particularly true with respect to natural and cultural heritage sites and recreation sites. Existence value is not directly related to the value of the resource’s present use, but reflects its inherent value. 

It should be emphasized that widespread application of SEEA approaches reflects their ability to identify socially dangerous depletion of environmental resources by the use of statistical data. Instrumentally, this is connected with the rules and standards of the World Trade Organization for ensuring equal access to markets. Though the WTO/GATT documents in force (including annex 1A GATT-94 and annex 1B GATS) do not have any sp