Valuation for Accounting Seminar (Morning)

Practical Methods for
Ecosystems Accounting
Valuation: Commentary
Giles Atkinson
London School of Economics
Natural Capital Committee
Part 1
Overview of the Papers
The papers
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Towards a valuation strategy for natural capital accounting
(M. Pittini/ R Harris/ C Smith, Defra; J Khan/ ONS, J Harlow/
NCC Sect.)
An overview of valuation techniques for ecosystem
accounting (B. Day, UEA)
Accounting for the value of wetland services (A. Provins, eftec
ltd.)
Valuing regulating services in coastal habitats (‘blue carbon’)
(T Luisetti/ RK Turner, UEA; E Jackson, U. Reading)
Accounting for the value of pollination services (N Hanley/ C
Ellis, U. Stirling; T. Breeze, U. Reading)
Pittini et al.: “Towards a
valuation strategy”
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Context: Roadmap to 2020
Institutional context of SNA and
SEEA
– Production & asset boundaries
– Valuation ‘ground-rules’
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Sketch of valuation approaches
and accounting implications
– Top-down/ bottom-up accounts
– State of valuation
Day: “An overview of
valuation techniques”
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Valuing consumption of (non-market) goods
and services
Institutional basis for valuation: SNA and
(inclusion/ exclusion of) surplus
– … and parallels with valuation techniques relevant to
ecosystems
– 5 revealed & stated preference
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Broad consistency with accounting principles
… But some important caveats esp. in moving
from principles to practical
Provins: “Accounting for the
value of wetland services”
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Wetlands as natural asset: multiple
ecosystem services
– … with consumption and production values,
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‘State of the practice’: Evidence base
exists …
– Benefits transfer as short-cut (interim?) answer
– Meta-analysis: different supply/ demand
characteristics across wetland areas?
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Challenges for accounting: changes in
quality; scaling-up; costs & values
Luisetti et al.: “Valuing
coastal blue carbon”
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Regulating service of coastal
ecosystems in storing carbon
– But itself provides multiple values
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Valuing carbon: Social costs vs. own
damage
Distinction made between valuing stock
itself now & changes
– Balance sheet using this procedure?
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Accounting for (future) changes in
stock under different scenarios
Hanley et al.: “Accounting for the
value of pollination services”
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Regulating service: pollination services
(largely?) captured in (agricultural)
production
Insect pollinators as ‘asset’ providing this
service
– Mix of managed/ wild pollinators
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Valuing pollination services
– Scope for moving beyond simplicity? Knowledge of
ecological production
– Scale of benefits for (non-agricultural) pollination?
Part 2
Common Themes, Challenges
& Questions
Consistency of valuation
& national accounting
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Consistency with
national accounting
principles on two
fronts
– Finding values which
are marginal
prices
– Conformity with
SNA/ SEEA
boundaries
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Theory insights
(largely) reassuring
(BD)
Corresponding need
for practice and
empirical record to
be similarly
scrutinised
Is there a valuation
technique hierarchy
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Will distinct criteria lead to different
hierarchies?
– … and consistency considerations
– Provenance of values in empirical
record?
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And clarify role for cost approaches (AP)
– Replacement cost as part of valuation
hierarchy (BD, NH)
What’s in the accounts
already … and what is not?
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Valuation & accounts: reorganising and
extending
– … and quite a lot of the former (NH, BD)
– Important to reflect on what is really in the
accounts
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Answer depends on focus?
– Income/ product
– Wealth & changes in wealth
Valuing (Changes in)
Natural Assets
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Crucial element of natural capital
accounting
– But papers illustrate variety of complexities (NH,
RKT, AP)
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Can ad hoc procedures be used (AP)?
– But: takes us far from SEEA
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Importance of thresholds (e.g. BD, NH)
– But need for basic research?
– … and uncertainties surely will remain?
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Empirical insights are reachable in interim
Complexity and Accuracy
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How much inaccuracy can be lived with?
– What criteria to use here?
– Spatial detail vs. transfer approaches
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False sense of security with some valuations
– … or can be ‘happy’ so long as we understand
major fault lines? (RKT)
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Is (required) accuracy solely a technical
issue?
– Esp. where accounts provide controversial
headline messages
A Way Ahead …
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Papers illustrate there is significant/ realistic
progress to be made
– … as well as likely areas of further debate
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Keep talking: anxieties about
“inconsistency” remarkably persistent
– … but surely soluble
– Shape/ help evolve how SEEA guidelines on
ecosystem valuation applied (MP)