Report No: AUS0000126 . Philippines Phil-WAVES Guidebook on Ecosystem Accounting . April 2017 . ENV . . Document of the World Bank . © 2017 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. 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Guidebook on Ecosystem Accounting Wealth Accounting and the Valuation of Ecosystem Services www.wavespartnership,org April 2017 WAVES WAVES - Global Partnership for Wealth Accounting and the Valuation of Ecosystem Services Wealth Accounting and the Valuation of Ecosystem Services (WAVES), is a global partnership led by the World Bank, aims to promote sustainable development by mainstreaming natural capital in development planning and national economic accounting systems, based on the System of Environmental-Economic Accounting (SEEA). Toward this end, WAVES (www.wavespartnership.org) brings together a broad coalition of governments, United Nations agencies, nongovernmental organizations and academics. Its core implementing countries include developing ones — Botswana, Colombia, Costa Rica, Guatemala, Indonesia, Madagascar, the Philippines and Rwanda — all working to establish natural capital accounts. WAVES’ partner UN agencies, namely, UN Environment Programme, UN Development Programme, and the UN Statistical Commission, are helping to implement natural capital accounting. WAVES is funded by a multi-donor trust fund and is overseen by a steering committee. Donors include — Denmark, the European Commission, France, Germany, Japan, The Netherlands, Norway, Switzerland, and the United Kingdom. Table of Contents Page PREFACE 1 PART I Introduction to Natural Capital Accounting vis-a-vis Ecosystem 3 Accounting What is natural capital accounting (NCA)? 3 Why does natural capital matter to economic growth? 3 What is the status of Natural Capital Accounting in the Philippines? 4 What is an ecosystem? 5 What are ecosystem services? 5 What then is ecosystem accounting? 5 Why apply ecosystem accounting? 6 PART II Fundamental Concepts of Ecosystem Accounts 7 Key Concepts of Ecosystem Accounting 7 Overview of Constructing Ecosystem Accounts using SEEA-EEA 11 Framework Basic Concepts on Constructing Monetary Ecosystem Accounts and 18 Valuation in Ecosystem Accounting Tools and methodologies that can be used in ecosystem accounting 22 PART III Pilot Ecosystem Accounts in the Philippines 27 How to construct Land Accounts 27 How to construct Water Accounts 33 How to construct Ecosystem Condition Accounts 36 How to construct Ecosystem Service Use and Supply Accounts 44 How to construct Ecosystem Asset Accounts 58 PART IV Interpretation and Use of the Accounts 59 Use of the Accounts 59 References 62 Annex A 62 PREFACE This Guidebook on Ecosystem Accounting is intended as a practical guide for the development of ecosystem accounts as part of e ff orts to mainstream and institutionalize Natural Capital Accounting (NCA) in the Philippines. Ultimately, it aims to aid government agencies in decision-making on matters relating to sustainable development, including the wise and efficient use of natural resources, by providing evidence-based, scientifically grounded information. This Guidebook articulates the definitions, rationale, concepts, data sourcing methods, key steps, and policies needed to ensure the effective development of ecosystem accounts. It includes examples of ecosystem accounts that have been developed in pilot areas. As you read this guidebook and consider the examples, how to develop ecosystem accounts should become clearer. This is primarily intended for the technical working groups (TWGs) of various government offices involved in protecting and preserving natural resources. Yet it is also targeted at a wider audience comprising different sectors of society who will benefit from getting a better understanding of the principles and significance of natural capital- and ecosystem accounting. The guidebook is a product of the Philippines-Wealth Accounting and the Valuation of Ecosystem Services (Phil-WAVES) project which is jointly implemented by the National Economic and Development Authority, Philippine Statistics Authority, Department of Environment and Natural Resources, Palawan Council for Sustainable Development, and Laguna Lake Development Authority, with technical assistance from the World Bank. It applies the learning exercises comprising ecosystem accounting in the Philippines and is a supplement to the System of Environmental - Economic Accounting  (SEEA) framework and the Phil-WAVES Technical Reports on Pilot Ecosystem Accounts. This guidebook is in accordance with the SEEA-Experimental Ecosystem Accounting Technical Recommendations. Overview of this Guidebook The guidebook is organized into four parts. Part I introduces the concept of natural capital accounting in relation to ecosystem accounting and its significance. Part II explains some fundamental concepts relating to the development of ecosystem accounts. Part III expounds on ongoing efforts to develop pilot ecosystem accounts in the Philippines. Finally, Part IV tackles the uses and benefits of developing accounts in the country such as those involving policy making. 1 2 Part I Introduction to Natural Capital Accounting vis- à-vis Ecosystem Accounting What is natural capital accounting (NCA)? To define natural capital accounting, one must first know what natural capital is. Natural capital includes all of the resources that we easily recognize and measure, like minerals, energy, timber, agricultural land, fisheries, and water. It also includes the ecosystem services that are often “invisible” to most people, such as air and water filtration, flood protection, carbon storage, pollination of crops, and habitats for wildlife. These values are not readily captured in markets, so we do not really know how much they contribute to the economy. We often take these services for granted and do not know what it would cost to lose them. Natural capital accounting, therefore, is the process of taking stock of these resources. Why does natural capital matter to economic growth? Economic growth is currently measured in terms of Gross Domestic Product (GDP), which determines the value of the goods and services produced annually. This, however, is an incomplete assessment of a country’s total economic well-being because GDP only looks at output but tells us nothing about income in the long term. Natural capital accounting goes beyond that. For example, when a country exploits its minerals, it is actually using up its finite mineral wealth. A full picture of a country’s wealth, which can be obtained through a methodology called wealth accounting, includes all assets that contribute to our economic well-being. These range from buildings and factory machines to infrastructure, human capital, social capital, and natural capital. 3 Natural Capital Accounting in the Philippines The Philippines began using Natural Capital Accounting (NCA) in line with the implementation of the Environmental and Natural Resources Accounting Project (ENRAP) in the 1990s. The country’s objective was to take stock of and appraise its natural resources. During this period, the Philippines was among the few countries that used NCA as an economic indicator. (1991-2000) Environmental and Natural Resources Accounting Project (ENRAP) (2000s) Philippine Economic-Environmental and Natural Resources Accounting (PEENRA) (2014-Present) Philippines - Wealth Accounting and the Valuation of Ecosystem Services (Phil-WAVES) To date the Philippines has been able to complete two NCA projects — ENRAP (1991-2000) and the Philippine Economic-Environmental and Natural Resources Accounting (PEENRA) in the 2000s. Both globally and in the Philippines, past attempts to institutionalize the NCA had often failed due to lack of a clear policy link and clear mandate and coordination among concerned agencies, disagreements on methodology, and limited capacity and resources. Nonetheless, the application of NCA principles was continued by various government and non-government organizations that conducted site-specific Total Economic Valuation (TEV) studies on natural resources and environment services. The Palawan Council for Sustainable Development (PCSD), for example, conducted TEV studies on the Mantalingahan mountain range in Southern Palawan. Learning from the past, the implementation of the Wealth Accounting and the Valuation of Ecosystem Services (WAVES) Project in the Philippines is grounded on building the technical capacity of government institutions involved in the protection and preservation of natural resources as well as policy and development planning. 4 What is an ecosystem? An ecosystem is a dynamic complex of plant, animal and micro-organism communities that interact with their non-living environment as one functional unit1 . What are ecosystem services? In ecosystem accounting, ecosystem services are defined as contributions that ecosystems make to benefits used in economic and other human activity. It is therefore important to distinguish clearly between ecosystem services and benefits. Some ecosystem services are tangible, such as timber used for energy or for building houses. Others, on the other hand, are intangible, like water purification, water regulation, and flood control. Without these ecosystem services, our quality of life would be reduced. Ecosystem services are classified into three types: Provisioning services Regulating services Cultural services Refer to material and Result from the capacity Relate to the intellectual energy contributions of ecosystems to regulate and symbolic benefits generated by or within an climate, hydrological and that people obtain from ecosystem. The biochemical cycles, earth ecosystems through associated benefits may surface processes, and a recreation, knowledge be provided in variety of biological development, relaxation, agricultural systems, as processes. and spiritual reflection. well as within semi- natural and natural ecosystems. What then is ecosystem accounting? Ecosystem accounting is a coherent and integrated approach to assessing the environment by measuring ecosystems and the flows of services from ecosystems into economic and human activity. The scale of ecosystem accounting may vary according to land cover types such as forests, or based on larger integrated areas such as river basins. Ecosystem accounting also covers areas that may be considered relatively natural like those that may have been heavily influenced by human activity, such as agricultural sites. Ecosystem accounting takes into account both concrete and intangible benefits derived from ecosystems. By accounting for the value nature provides for us, we can manage these resources more sustainably and leave a healthier planet for future generations. 1 Convention on Biological Diversity (2003), Article 2, Use of Terms 5 Some of the key questions that may be answered using information obtained from ecosystem accounting include: ❖ Which ecosystems generate which ecosystem services? ❖ What is the extent of the contribution of ecosystem services to economic and other human activity? ❖ Which ecosystems are in the best condition and which are the most degraded? ❖ What changes have occurred over time and what have been their impact on the generation of ecosystem services? ❖ What monetary values might be attached to ecosystems? Why apply ecosystem accounting? Ecosystem accounting serves as a tool for compiling information on environmental changes, linked to economic and other human activities, and generating understanding of how these changes could lead to environmental degradation. Consequently, there is a reduced capacity for ecosystems to continue to provide the services on which economic and other human activity depends. 6 Part II Fundamental Concepts of Ecosystem Accounts Key Concepts of Ecosystem Accounting In the SEEA-EEA Technical Recommendations, ecosystem accounting complements, and builds on, the accounting for environmental assets as described in the SEEA Central Framework. In this framework, environmental assets are accounted for as individual resources such as minerals, timber, soil resources, and water resources. In ecosystem accounting based on the SEEA-EEA framework, the accounting approach recognizes the fact that these individual resources function together within a broader system. The SEEA-EEA shows that a prime motivation underlying ecosystem accounting is that a separate analysis of ecosystems and the economy does not adequately reflect the fundamental relationship between humans and the environment. In this context, the SEEA-EEA provides a platform for the integration of relevant information on ecosystem extent, ecosystem condition, ecosystem services and ecosystem capacity, with information on the associated beneficiaries (households, businesses, and governments). Broad Steps in Ecosystem Accounting The SEEA-EEA Technical Recommendations identify the following main steps in accounting for ecosystems in physical and monetary terms: STEPS IN PHYSICAL TERMS Ecosystem Ecosystem Ecosystem Ecosystem Extent Condition Services services (by ecosystem (by ecosystem Supply use and type) type) (by ecosystem benefits type) (by economic units) STEPS IN MONETARY TERMS Ecosystem services Ecosystem Integrated accounts Combine presentations supply and use asset values Extended supply & use table values (by ecosystem Sequence of sector accounts type) Balance sheets 7 Delineation of ecosystem assets is the first important step in ecosystem accounting. Information on the total area of different types of ecosystem 1 assets, often measured in hectares, is presented in an ecosystem extent account. In principle, these areas should cover the entirety of a country’s terrestrial area (including inland waters) and, as appropriate, relevant coastal and marine areas, possibly extending to a country’s exclusive economic zone (EEZ). In the Philippines, classifying the coverage of ecosystem asset can be done following the land cover classification being used by the National Mapping and Resource Information Authority (NAMRIA). Compilation of the ecosystem condition account is the next step. In this step, information on the various characteristics that reflect the condition 2 or state of an ecosystem, including trends in ecosystem degradation or enhancement and over time, should be recorded. The set of relevant characteristics will depend both on the type of ecosystem (i.e., indicators for forests will likely be different compared to indicators for coastal ecosystems) and the use of the ecosystem, since how an ecosystem is used will usually have a direct effect on how its condition changes. What follows is a measurement of ecosystem services in physical terms. This involves considering each ecosystem asset and determining the 3 relevant ecosystem services and appropriate indicators. This task should be conducted using a system of classification of ecosystem services, such as the Common International Classification of Ecosystem Services (CICES) (Haines-Young and Potschin, 2013). A classification can provide a checklist to ensure appropriate coverage. This step also involves the estimation of both the supply of ecosystem services from each ecosystem asset and the use of those services by various beneficiaries. Together, the information on supply and use is used to compile an ecosystem services supply and use table. Valuation of ecosystem services is a necessary step for certain types of integration with the standard national accounts and extended measures 4 of net wealth. Valuation of ecosystem services can be done by applying relevant prices to the physical flows of ecosystem services measured in Step 3, and by estimating the net present value (NPV) of the future flow of all ecosystem services from each ecosystem asset. A particularly important one is estimating the future flow of ecosystem services and the extent to which current ecosystem services supply can be maintained. This requires an assessment of ecosystem capacity, which reflects the connection between ecosystem condition and ecosystem services. The value of ecosystem degradation will be related to the change in the NPV of ecosystem assets. Opening and closing values for ecosystem assets and changes in those values over an accounting period are presented in an ecosystem monetary asset account. The final step involves the use of information on ecosystem services, ecosystem assets, and ecosystem degradation generated from the 5 accounts described above, to integrate environmental and economic data and augment the current standard national accounts. 8 Key Consideration in Compiling Ecosystem Accounts There are six considerations in ecosystem accounting (Technical Recommendations): FIRST It is a set of accounts, each of which contains specific information applicable to one part of the ecosystem accounting model. There is not one single “ecosystem account”. SECOND The accounts are designed to link together such that information can be readily compared across accounts. THIRD A specific design feature of the ecosystem accounts is that ultimately the information should be integrated with the standard national accounts that record economic activity. FOURTH The accounting structures presented should not be considered unchangeable with regard to the level of detail they contain. FIFTH The accounts present information corresponding to one accounting period, usually one year. The length of the accounting period determines the points chosen to measure the opening and closing stocks. Flows are measured in terms of observed changes between the opening and closing of the accounting period. SIXTH The structure of accounts generally represents a level of detail suitable for presentation and analysis of outputs from accounting. It represents a level of detail at which accounting relationships (e.g., supply and use, balancing end of period stocks and changes in stocks) are applied. However, it will generally be necessary for underlying information to be compiled at different, usually lower, levels of aggregation before entry into the account. 9 Ecosystem Stocks and Flows: The Basic Foundation of Ecosystems Accounting Ecosystem accounting is founded on the relationships between stocks and flows. The stocks are represented by spatial areas comprising an ecosystem asset. Each ecosystem asset has a range of ecosystem characteristics — such as land cover, biodiversity, soil type, altitude and slope, climate, etc. — which describe the location and functions of the ecosystem. The flows in ecosystem accounting are of two types. First, there are flows within and between ecosystem assets that reflect ongoing ecosystem processes referred to as intra-ecosystem flows and inter-ecosystem flows. The recognition of inter-ecosystem flows highlights the dependencies between different ecosystem assets. For instance, wetlands are dependent on flows of water from the upland forest ecosystem. There are also flows — collectively called ecosystem services — indicating that people, through economic activities, take advantage of the multitude of resources and processes that are generated by ecosystem assets. Ecosystem Accounting Units Ecosystem accounting requires integration of spatial units within a country such that there are no gaps or overlaps in the scope and coverage of the accounts, thus delineating types of ecosystems that supply specific services. The delineation of spatial units will involve the use of a range of spatial information relating to: ❖ Land cover and land use ❖ Topography of the country (coastline, digital elevation model (DEM), slopes, river basins, and drainage areas) ❖ Vegetation, habitats, and species composition ❖ Soil resources ❖ Meteorological data ❖ Bathymetry (for coastal areas) ❖ Administrative boundaries ❖ Population, built-up areas and settlements ❖ Transport and communication (roads, railways, power lines, pipelines) 10 Three types of ecosystem accounting spatial areas are as follows: Ecosystem Asset (EA) Ecosystem Type (ET) Ecosystem Accounting Area (EAA) • EA are individual, contiguous • ETs are aggregations of ecosystems (e.g., a specific ecosystem assets. ETs are • EAAs are larger areas forest ecosystem) that are areas with a comparable (geographical aggregation) considered assets for the ecology and ecosystem use, that correspond to the area purpose of accounting located within the area for for which an ecosystem • EAs are delineated based on which the account is produced. account is constructed and various characteristics including vegetation structure EAAs comprise a range of and type, species • An ET may be a type of ecosystem types. composition, ecological forest or grassland. processes, climate, • Within EAA, for a given sub- • Generally, across a country, hydrology, soil and there will be a number of national administrative area, topography. different areas of the same an ecosystem extent • Land cover based delineation ET. For example, there may account would show the of EAs can also be used as a be different areas of starting point which raises the mangrove forest in different changing total area of each practical question of which parts of a country. Each ET (e.g., forest, cropland). It land cover classes should be individual mangrove forest is would not show the considered and at what level considered a separate EA changing area of each of detail. but is classified to the same ET. individual EA. Overview of Constructing Ecosystem Accounts Using SEEA EEA Framework There are three main types of ecosystem accounts (SEEA-EEA Technical Recommendation): a) Accounts for ecosystem assets b) Accounts for ecosystem services c) Integrated accounts, which present ecosystem accounting information alongside standard economic and national accounts data Thematic accounts on themes such as land, biodiversity, carbon, and water provide important context and supporting information for ecosystem accounts, which follow the structure described in the SEEA Central Framework or have a similar asset account-based structure. Other potential thematic accounts include those for soil, nutrients, air, timber, and fish resources. 11 A. Accounting for Ecosystem Asset In accounting for ecosystem assets, spatial areas containing a combination of biotic and abiotic components and other characteristics that function together are mainly considered. Ecosystem assets are measured from two perspectives, that is, ecosystem assets are considered in terms of: • Ecosystem condition and ecosystem extent • Expected ecosystem service flows Ecosystem assets also focus on an assessment of the capacity of an ecosystem asset to generate an anticipated combination of provisioning, regulating, and cultural services generated by an ecosystem asset. The capacity of an ecosystem asset to generate such services can be understood as a function of the condition and extent of that ecosystem. General approaches to assessing ecosystem assets The assessment of ecosystem assets is covers three key concepts: 1. ecosystem condition 2. ecosystem extent 3. ecosystem monetary asset Accounts for ecosystem asset Ecosystem Ecosystem Ecosystem Condition Extent monetary asset Accounts Accounts account Ecosystem asset accounts are intended to organize information on the extent and condition of ecosystems, and ecosystem asset. The number of related concepts requires that a large amount of information be integrated while the suggestions made in this section for accounting tables are intended to provide a starting point for experimentation in compiling information rather than providing a definitive methodological guidance. 12 Key considerations on ecosystem assets accounting: Accounting for ecosystem • Defining the ecosystems of interest for accounting extent purposes is by no means straightforward and a balance between scale of analysis, available data, and policy questions is needed. It is appropriate to start this discussion by examining the most conceptually straightforward issue relating to the definition of ecosystem assets and the delineation of their extent. • Organization of information required to establish an ecosystem extent account is likely to be a good entry point for establishing a national spatial data infrastructure. • The structure of the ecosystem extent account, as shown below, gives a clear indication of the nature of accounting for assets in a SEEA context. • An ecosystem extent account provides a clear basis for the development of other ecosystem accounts. It yields important information such an assessment of ecosystem diversity at a national level. Commonly, higher-level extent accounts are based primarily on land cover information. Ideally, all countries should report in detail changes in ecosystem extent on a regular basis. • Information making up an ecosystem extent account is usefully presented in maps using different colors for different types of EU. This is to readily highlight issues of f ra g m e n t at i o n o f e co syste m t y p e s a n d p o ss i b l e connections between ecosystem types that are not apparent when the information is presented in a traditional table format 13 Accounting for • Ecosystem condition is the overall quality of an ecosystem ecosystem condition asset. The assessment of ecosystem condition involves distinct measurement of both quantitative and qualitative aspects of characteristics of the ecosystem assets. An ecosystem condition account is compiled in physical terms using a variety of indicators for selected characteristics • Measures of ecosystem condition are generally compiled in relation to key ecosystem characteristics (e.g., water, soil, carbon, vegetation, biodiversity) and the choice of characteristics generally varies depending on the type of ecosystem asset. • The selection of ecosystem characteristics should take into account current and expected future uses of the ecosystem, (e.g., for agriculture, forestry, carbon sequestration, recreation, etc.), since these uses are likely to have the most impact on certain characteristics and the overall condition and capacity of the ecosystem asset to generate alternative baskets of ecosystem services. • Generally, it is useful to compile these accounts by type of EU within a relevant geographical aggregation. Each type of EU (e.g., tree-covered areas, grasslands, mangroves, etc.) has distinct characteristics that should be taken into account in assessing ecosystem condition. • There is a range of measurement issues and challenges in the compilation of ecosystem condition accounts. Indeed, it is reasonable to conclude that there is still much to learn about the structure and compilation of these accounts. • Such issues include the selection of specific characteristics of different ecosystem types, the relevant indicators of different characteristics, the potential to aggregate data across different characteristics to derive an overall measure of the condition of a single EU, the aggregation of condition measures for multiple EUs of the same type, and the approach to recording changes in ecosystem condition over time. 14 Ecosystem asset • Ecosystem assets require integration of data on a range of accounts characteristics with different units of measure. • In the ecosystem monetary asset account, the opening and closing stocks of ecosystem assets are estimated using the net present value of the future stream of each ecosystem service – covering provisioning, regulating, and cultural services. It is assumed that the individual services are mutually exclusive and can be aggregated • Accounting for ecosystem assets in monetary terms may appear more tractable, since a single unit of currency is used. However, the complexities in accounting for the changes in assets remain. • Ecosystem asset tables are designed to give a broad picture of the potential of ecosystem accounting to organize information across a range of areas and from multiple perspectives. It may be useful to consider that these tables show a summary of information coming from a broader database containing more detailed data on ecosystem condition, changes in condition and extent, and expected ecosystem service flows. As a matter of compilation practice, it is recommended that focus be placed first on the description and measurement of the relevant characteristics before consideration of aggregation. In national accounting terms, the concept of ecosystem degradation has a specific role. It represents the capital cost that should be attributed to a user of an ecosystem asset in generating an income stream. Thus, degradation should not include changes in the value of the asset that arise for other reasons. In particular, reductions in asset value due to unforeseen events, which are not part of the use of the asset in production (e.g., due to natural disasters), are not considered part of degradation for accounting purposes. Further, it is possible that the value of an asset changes solely due to changes in prices. These are considered revaluations for accounting purposes and are separately recorded. Note: For the purposes of SEEA EEA, it is not necessary to build complete ecosystem models and measure every possible stock and flow. Rather, what is needed is to identify the most relevant aspects of ecosystem assets from the perspective of providing aggregated information for measuring trends and comparing ecosystem assets for policy and analytical purposes. 15 B. Accounting for Ecosystem Services The aim of accounting for ecosystem services is to organize information on the flows of ecosystem services by type of service, by ecosystem asset, and by economic units involved in generating and using such services. This section describes the supply of ecosystem services by ecosystem assets and the use of these services by economic units, including households as one of the most important aspects of ecosystem accounting. These are the flows that reflect the link between ecosystems and economic and human activity. The supply and use table records the actual flows of ecosystem services provided by ecosystem assets and used by economic units during an accounting period. The data relate to a given geographical aggregation and should be structured by type of ecosystem service. The table may be compiled in both physical and monetary terms. Accounts for Ecosystem Services Ecosystem services use and supply Ecosystem services use and supply – Physical terms – Monetary terms To interpret the supply and use table, it is important to distinguish between economic units and ecosystem assets in relation to the supply and use of ecosystem services. Following the ecosystem accounting model, only ecosystem assets can supply ecosystem services that are then received by economic units. An important difference between the supply and the use tables lies in the focus of the use table, which is on the link between ecosystem services and different types of beneficiaries, while the supply table focuses on the supply from types of EU. Ecosystem services supply table. A likely challenge in compiling the supply table is attributing the supply of ecosystem services to a specific EU. This may be an issue with provisioning services, but it may be so with regulating services and some cultural services in cases where the service is provided through a combination of ecosystem types. Therefore, it is recommended that, as a first step in accounting for ecosystem services, compilers create a table showing which ecosystem services are likely to be supplied from different EU types for their country or target geographical area. For this task, it is relevant to use a classification of ecosystem services such as CICES as a type of checklist. It is to be expected that some services, particularly regulating ones such as carbon sequestration, are supplied by more than one EU type. The supply of other ecosystem services may be a result of the combined production of neighboring EU types such as cultural services supplied in a mixed landscape setting. In these cases, some allocation between EU types are required. 16 The ecosystem services supply table can be compiled in monetary terms, usually by applying appropriate prices to the physical flows of each ecosystem service. Direct measurement of values may be possible for some provisioning services. Ecosystem services use table. The use table may be compiled in both physical and monetary terms. In physical terms, entries will be limited to measures of indicators for each ecosystem service. Note that since supply must equal use, the unit of measurement applied for each ecosystem service must be the same in both the supply and use table in order so a balance can be obtained. An important difference between the supply and the use tables is that the focus of the latter is on the link between ecosystem services and different types of beneficiaries, while the former focuses on the supply from certain types of EU. While the supply of ecosystem services can be directly linked to a spatial area (e.g., to an EU), there is no requirement that the location of the beneficiary be the same as the location of the area from which the ecosystem service is supplied. This is especially the case for regulating services, but also applies to some cultural services. C. Integrated accounts These accounts integrate ecosystem accounting information with standard economic and national accounts data. The discussion on the ecosystem services supply and use account highlights the potential for information on ecosystem services to be integrated with information presented in standard supply and use or input-output tables. However, the accounts described in the previous sections do not involve integration of information on ecosystem assets or services with the standard national accounts. Since one of the motivations for the development of ecosystem accounting is integration with the standard national accounts, this section shows how this step might be achieved. Combined presentations, extended supply and use table, Integrated accounts* sequence of accounts for institutional sectors, national and sector balance sheets 17 The integration of ecosystem asset values is a complex process with the following major challenges: 1. First, in a full System of National Accounts (SNA) and SEEA Central Framework balance sheet, there are values recorded for natural resources, such as timber and fish. Since the value of these resources is embedded in the value of ecosystem assets, it is necessary to appropriately ensure the removal of double counting of these resources. This also applies to various cultivated biological resources such as orchards and vineyards. 2. Second, in many countries, the value of land is recorded in the SNA balance sheet, which is based on its market price. Since there is a generally well- established land market value, balance sheet values may be obtained more directly than by using NPV techniques as applied in resource accounting. The market values of land, particularly agricultural land, may capture the value of some ecosystem services to some extent. However, they may not capture a full basket of ecosystem services, particularly those that have clear public good characteristics and longer-term benefits. Also, the land value may well reflect aspects that are not ecosystem services in nature such as location and the value of alternative uses. Basic Concepts in Constructing Monetary Ecosystem Accounts and Valuation in Ecosystem Accounting Accounting for ecosystems in monetary terms is critical in ecosystem accounting as it integrates information on ecosystems with measures of economic activity. This considers alignment of the spatial coverage of ecosystem data and measures of economic activity, possibly using information on land use or land ownership, such that flows of ecosystem services and changes in ecosystem assets can be linked directly to measures of output, employment, and value added in the same spatial areas. A number of motivations exist for the valuation of ecosystem services and ecosystem assets depending on the purpose of analysis and the context underlying the use of valuations in monetary terms. Different motivations point to different requirements in terms of concepts, methods, and assumptions. Often, valuation is dismissed or utilized without a more careful consideration of the relationship between the purpose of analysis and the choice of valuation concepts and methods. Key considerations: ❖ In ecosystem accounting, the primary purpose of valuation is the integration of ecosystem accounting information with information in the standard national accounts. For this purpose the valuation used in ecosystem accounting must be consistent with the valuation concept used in the national accounts ❖ SEEA-EEA recognizes that the term valuation can mean different things. Among accountants and economists, valuation is almost always used in the context of placing a monetary price (dollar value) on assets, goods, or services. In other contexts, valuation may refer to a more general notion of recognizing significance or importance. In SEEA-EEA, the focus is on valuation in monetary terms without discounting the role or importance of other concepts of value. ❖ Monetary valuation in the SEEA-EEA is applied to the valuation of ecosystem services and the valuation of ecosystem assets. There is a direct connection made 18 between these two distinct targets of valuation, whereby the value of ecosystem assets at any given time, usually the date to which the balance sheet relates, is equal to the NPV of the future flows of ecosystem services that are expected to occur. ❖ The application of the NPV technique is required since there are no markets for the buying and selling of ecosystem assets, where the value of all ecosystem services is captured. ❖ From a practical perspective, the need to apply NPV techniques to value ecosystem assets implies that the valuation of ecosystem assets cannot be determined directly. Instead, the asset value relies on the estimation of the value of ecosystem services. Thus, in an accounting context, the valuation of ecosystem services and the valuation of ecosystem assets are distinct but related tasks. ❖ It is important to note that the monetary value in the accounts is not equal to the welfare-based economic value. For example: • The value concept in accounting is based on exchange values, i.e. the price at which informed buyers and sellers are willing to exchange a good or service. Where ecosystem services or benefits derived from these services are not traded in a market, non-market valuation methods have to be applied that provide comparable value metrics. In particular, the consumer surplus element of value, which is excluded in an accounting approach to valuation, should be excluded from the value estimates for the ecosystem accounts. Consequently, the value recorded in the ecosystem account does not represent the full societal (economic) value of  ecosystem services supply or  an ecosystem asset. To analyze the societal value of (change in) ecosystem assets or services supply, (change in) consumer surplus needs to be included.  The accounts can provide the basis for such valuation (for instance based on the TEV principles) by providing the required physical information and part of the monetary information.  Generally, it should be noted that it is only practically feasible to analyze  changes in  the societal value using a TEV approach, for instance as a consequence of the implementation (or not) of a policy option.  The accounts, on the other hand, aim to record overall levels of and changes in natural capital, using accounting-conform monetary values. 19 SUMMARY OF VALUATION METHODS AND THEIR USE IN ECOSYSTEM ACCOUNTING (Technical Recommendations) To design a valuation approach for a specific ecosystem service, it is necessary to understand how the service leads to the generation of benefits, and the relation between these benefits and the recording of the related economic activity in SNA. Valuation Suitability for ecosystem Description Comments method accounting Unit Resource Prices determined by Estimates are affected by In principle this method is Rent deducting costs of labor, the property rights and appropriate but requires a produced assets and market structures consideration of market intermediate inputs from surrounding production. structures. the market price of For example, open access outputs (benefits) fisheries and markets for water supply often generate low or zero rents Production Prices obtained by In principle these are These are appropriate function, cost determining the analogous to resource rent provided the market-based function, and contribution of the but generally focused on price being decomposed profit function ecosystem to a market the valuation of regulating refers to a product rather than methods based price using an services. It may be difficult an asset – e.g., value of assumed production, cost to estimate the functions. housing services rather than or profit function. the value of a house. Payment for Prices are obtained from Estimates are affected by This is potentially adequate Ecosystem markets for specific the type of market depending on the nature of Services (PES) regulating services (e.g., in structures put in place for the market structures. schemes relation to carbon each PES (see SEEA EEA sequestration) 5.88-94) Hedonic pricing Prices are estimated by This is a data-intensive This is appropriate and heavily decomposing the value of approach and separating used in the pricing of an asset (e.g., a house the effects of different computers in the national block including the characteristics may be accounts. dwelling and the land) into difficult, unless there are its characteristics and large sample sizes. pricing each characteristic through regression analysis Replacement Prices reflect the This method requires an This is appropriate under the cost estimated cost of understanding of the assumptions (i) that the replacing a specific ecosystem function estimation of the costs ecosystem services using underpinning the supply of reflects the ecosystem produced assets and the service and an ability services being lost; (ii) that it associated inputs. to find a comparable is a least-cost treatment; and “produced” method of (iii) that society would replace supplying the same the service if it was removed. service. (Assumption (iii) may be tested using stated preference methods.) Damage cost Prices are estimated in It may be challenging to This is appropriate under the avoided terms of the value of determine the value of the assumptions (i) that the production losses or contribution/impact of an estimation of the damage damages that would occur individual ecosystem costs reflects the specific if the ecosystem services service. ecosystem services being lost; were reduced or lost due (ii) that the services continue to ecosystem changes to be demanded; and (iii) that (e.g., as a result of the estimated damage costs pollution of waterways). are lower than potential costs of abatement or replacement. 20 Averting Prices are estimated based Requires an understanding This is likely inappropriate behavior on individuals’ willingness of individual preferences since it relies on individuals to pay for improved or and may be difficult to link being aware of the impacts avoided health outcomes. the activity of the arising from environmental individual to a specific changes. ecosystem service. Restoration cost This refers to the The main issue here is that This is inappropriate since it estimated cost to restore the costs relate to a basket does not determine a price for an ecosystem asset to an of ecosystem services an individual ecosystem earlier, benchmark rather than a specific one. service. condition. This is often used as a It should be clearly means to estimate distinguished from the ecosystem degradation, replacement cost method. but there are issues in its application in this regard. Travel cost Estimates reflect the price The key challenge here is This is potentially appropriate that consumers are willing determining the actual depending on the actual to pay in relation to visits contribution of the estimation techniques and to recreational sites. ecosystem to the total whether the approach estimated willingness to provides an exchange value, pay. There are also many i.e., excludes consumer applications of this surplus. method with varying assumptions and techniques being used with a common objective of estimating consumer surplus. Finally, some travel cost methods include determining the value of time taken by the household, which is beyond the scope of the production boundary used for accounting purposes. Stated Prices reflect willingness to This approach is generally This is inappropriate since it preference pay based on contingent used to estimate consumer does not measure exchange valuation studies or choice surplus and welfare effects. values modelling. These are within the range of techniques used there can be potential biases that should be taken into account. Marginal values Prices are estimated by This method can use This is appropriate since this from revealed utilizing an appropriate demand functions method aims to directly demand demand function and estimated based on travel measure exchange values. functions setting the price as a point cost, state preference, or However, the creation of on that function using (i) averting behavior meaningful demand functions observed behavior to methods. The use of and estimating hypothetical reflect supply (e.g., visits supply functions has been markets may be challenging. to parks) or (ii) modelling termed the simulation a supply function. exchange method (Campos and Caparros, 2011) 21 Tools and methodologies that can be used in ecosystem accounting There are several ways to account for ecosystems, ranging from the use of mapping and remote sensing data to modelling and the conduct of survey/focus group discussions. This section cites some of the applicable tools in the construction of physical ecosystem accounts that could later serve estimating monetary accounts. Geographic Information System and Remote Sensing • The delineation of units should be undertaken in concert with the development of spatial databases in Geographic Information Systems (GIS). • These databases could contain information such as soil type and status, water tables, rainfall amount and pattern, temperatures, vegetation, biodiversity, slopes, altitude, etc., as well as, potentially, information on land management and use, population, and social and economic variables. Such information may also be used to assess flows of ecosystem services from given spatial areas to relevant beneficiaries. • Given the spatial diversity and heterogeneity of ecosystems, ecosystem asset accounts generally needs to be developed in a GIS context. Although the specific datasets should be determined on a country basis, a number of basic resource accounts are fundamental to ecosystem accounting and typically need to be developed in each country. Among others, these include: o land accounts (land cover change, Sedimentation) o water accounts (Water Balance, Fishery Zoning) o carbon accounts o soil and nutrient accounts o forest accounts o biodiversity accounts • Ecosystem services generally have a high spatial variability. For instance, both marine flood risk and the mitigation of flood risk by a protective ecosystem vary as a function of local topography and distance from the sea. The spatial aspect of regulating services means that the generation of regulation services is best measured in a GIS context. It should be noted that the lack of spatial overlap on how the services are provided and used (i.e., where are the beneficiaries) is a significant reason for using GIS. • In a GIS, the processes and/or components of the ecosystem that support the supply of ecosystem services need to be recorded, alongside the relevant features of the physical or socio-economic environment in which the service is generated. The required resolution depends on the specific ecosystem service. Spatial inputs may include: 1. Historical Remote Sensing/Satellite Imagery; 2. Topographic map; 3. Digital Elevation Model (DEM); 4. Landcover/Landuse/Vegetation Map 5. Soil type 6. River network map 22 Survey / Primary data gathering / Focus Group Discussion (FGD) • In instances where data are not available or not sufficient to undertake the valuation, actual field survey or primary data gathering may be conducted instead. Survey questionnaires can be generated for specific information needed. • FGD is a form of qualitative research in which a group of people are asked about their beliefs or opinions on certain issues or topics. o Questions are asked in an interactive group setting where participants are free to talk with other group members. o During this process, the researcher either takes notes or records the vital points raised during the FGD. Participants should be carefully selected to ensure effective and authoritative responses. Table analysis using MS Excel Pivot Table • To further analyze the generated table, use the Pivot Table tool incorporated in MS Excel. • For the land accounts, information on land cover can support environmental policy by providing information on the status of and trends in the land cover in a watershed. Bathymetric survey • Bathymetry is the study of underwater depth of lakes or ocean floors. It is the underwater equivalent of topography. • Use the bathymetry of the water body to support the Delft3D model Equipment needed: 1. Echo sounder 2. Boat 3. Geographic Positioning System (GPS) Sednet- Sediment Network Modelling • The SedNet model is used to quantify the sediment inputs and outputs (source and deposition) of the watershed in kilotons per year. It provides a summary budget containing all parameters generated from the model. Results are exportable and are then post-processed in GIS software. Spatial inputs include: 1. Digital Elevation Model (DEM) to define the stream and create sub- catchments 2. Soil Loss based on Rainfall Erosivity (R) Soil Erodibility (K) Slope Length (L), and Slope Steepness (S) factors based on the Revised Universal Soil Loss Equation (RUSLE) 3. Annual Average Rainfall, PET/Rainfall ratio 4. Streamflow for flow regionalization Note: Refer to the training booklet on SedNet prepared for WAVES 23 HYMOS- Hydrological Modelling System • HYMOS is an information system for storage, processing, and presentation of hydrological and environmental data. HYMOS combines an efficient database structure with powerful tools for data entry, validation, completion, analysis, retrieval, and reporting. • Currently, this model is being used for Laguna de Bay account only. Spatial inputs include the following GIS datasets (shapefile): 1. River network 2. Road network 3. Inland water 4. Water Quality Monitoring station 5. Hydro-meteorological Monitoring station 6. Landcover/Landuse/vegetation 7. Watershed delineation 8. Elevation Other inputs includes: 1. Historical Water Quality data 2. Historical Hydro- meteorological data (Rainfall, wind speed, wind direction, temperature) 3. Streamflow 24 Waste Load Model (WLM) • To estimate the actual and future discharge of waste loads to surface water and the effects of managerial strategies on the future discharges • The Waste Load Model WLM can be used in stand-alone applications, but most often it is integrated within the Decision Support System (DSS) for water quality analysis. Spatial inputs include the following GIS datasets (shapefile): 1. River network 2. Inland water 3. Landcover/Landuse/vegetation 4. Watershed delineation 5. Elevation Inputs include: 1. Historical data on industrial discharge; 2. Historical data on domestic discharge; 3. Historical data on agricultural discharge 4. Historical data on streamflow 5. Population/Inhabitants data 25 Delft3D (Hydrodynamics and Water Quality Modeling suite) • Delft3D (by DELTARES) is a powerful modelling suite that focuses primarily on application in the free surface water environment. • Delft3D simulates two-dimensional (in either the horizontal or a vertical plane) and three-dimensional flow, sediment transport and morphology, waves, water quality and ecology, and is capable of handling the interactions between these processes. • Delft3D is used to calculate the lake/water volume at different levels. Inputs include: 1. Bathymetry 2. Meteorological data a. (rainfall, wind speed/direction, evaporation) 3. Rainfall run-off 4. Historical lake/water level 5. Flow velocity Spatial inputs include the following GIS datasets: 1. Groundwater Resource 2. Shoreline delineation 3. Use/s of the water body 26 Part III Pilot Ecosystem Accounts in the Philippines How to construct Land Accounts Land accounts include information on land cover, land use and/or land titles. Land accounts are important to support strategic environmental policy by providing information on the status of and trends in the land cover and use watersheds, influencing both the quantity and quality of water and other ecosystem services within watersheds. Moreover, it can inform the debate on population settlement, agricultural productivity, health of environment, cost and benefits of economic activities, investment on environmental protection (e.g., biodiversity conservation, assessment of flood risk and erosion in watersheds). It is important to note that the land account differs from the ecosystem extent account. The former is less detailed and focuses on land cover whereas the latter also considers ecosystem/land uses. An understanding of the implications of changes in land cover and land use is a fundamental part of planning for sustainable development. On the one hand, the transformation of land cover and land use by human action can affect the integrity of natural resource systems and the output of ecosystem goods and services. On the other, by careful planning, the development of new patterns of land cover and use can enhance the well-being of communities (Millennium Ecosystem Assessment, 2005). Land accounts aim to present the implications of changes in land cover and land use and ecosystems of a particular watershed or focus area as a fundamental part of planning for sustainable development. The accounts can provide guidance on efforts at land conversion that may not be aligned with development plans or planning laws, enabling better enforcement of such regulations. There are four basic guidelines to follow in producing a Land Account: 1. Integrate existing environmental and economic information at the finest level possible. 2. Use GIS technology to integrate data and information. 3. Present results at various geographic levels (e.g., watershed, region, municipality, community, and other basic spatial unit) depending on the expected decision outcomes. 4. Present results for at least two time periods for comparison and preparation of land accounting matrices. 27 To d e v e l o p a l a n d a c c o u n t , f o u r m a j o r s t e p s a r e f o l l o w e d : Step 1. 1. Identification of objectives and end goal of land Data Scoping accounting. The concerned agency/or institution tasked to develop a land account shall identify the objectives of land accounting, delineate watershed or basic spatial unit/s to be analyzed or assessed, identify the sources of information (maps, GIS datasets, etc.) and the level of information to be included in land accounting. 2. Selection of parameters and aggregation level of information to be included in the account A. Parameters • Land cover classification derived from NAMRIA Land Cover (AGG12) Annual Crop Perennial Crop Built-up Open/Barren Shrubs Grassland Fishpond Marshland/Swamp Open Forest Closed Forest Mangrove Forest Inland Water • Extent of each land cover • Changes in land cover (i.e., addition and reduction) B. Disaggregation - national, regional, provincial, watershed, etc. The extent of accounts can be determined depending on the uses. Land cover accounts can be disaggregated/aggregated to national, regional, provincial, watershed, etc. 3. Conduct of data assessment to identify gaps Data quality. The spatio-temporal resolution and accuracy are vital for data and information assessment of a particular spatial unit. Consistent land cover classification and spatial resolution of land cover data in future years will maximize the comparability of the data over time, resulting in more accurate accounts that take less time to compile. 4. Consolidation of outputs on data assessment addressing the data gap. After finalizing the scope, selection of parameters, and conducting data assessment, there should be metadata (in Excel form), which consolidates all the outputs before the start of data collection. 28 Step 2. The next step is collecting data identified in the previous step. Data Collection GIS Datasets. Data sources for land accounts can be generated using secondary data from various sources, including government agencies, international organizations (e.g., NAMRIA, DENR-FMB, ESA, among others). Such data corresponds to these institutions’ mandates and may be acquired in close coordination with the said agencies. Data on land cover and land classifications including GIS datasets may be provided by NAMRIA, the mapping agency of the Philippines. On the GIS datasets under data collection, the pilot accounts basically rely on data provided by NAMRIA. Under this step there are three major activities conducted by NAMRIA a) Pre- processing and interpretation activities; b) field validation activities, and c) post-processing and final processing activities. For more details on data and map preparation the agency preparer/account preparer can coordinate with NAMRIA. The data requested from NAMRIA should cover at least two time periods to facilitate comparison. The following are the sub-activities in collecting the data needed for land accounting: 1. Identify the possible agency or organization that can provide the needed data based on the objectives of land accounting. 2. Coordinate with the concerned agency on how to secure the data needed for land accounting (e.g., this may be through a formal written request) 3. Schedule the collection of data. Disclaimer: It is understood that land cover classification can be compared with other thematic maps showing slope type, soil type, elevation category, other forms of land classification, among others. The methodology being used for this land accounting, however, focuses only on land cover classification per land cover units/basic spatial unit. 29 Step 3. This succeeding step includes the preparation and Development of development of maps and tables for the identified land cover maps and tables of units. Land Cover Classification and other units for comparison land cover units can be prepared using the applicable maps and GIS datasets from NAMRIA. The ensuing assessment or analysis covers two years. However, it is assumed that the concerned government agency/land account preparer has a GIS specialist to further reclassify, edit, process, and validate the data provided by NAMRIA using the GIS software. Preparation of maps using datasets provided by NAMRIA. Delineation of land cover classifications on the identified land cover units (watershed, region, forest zones, among others). The Land Classification provided by NAMRIA is based on the 21 categories patterned from FAO-Forest Resources Assessment standard classification. The coverage of land classification depends on the basic spatial unit being analyzed. Analysis of the generated maps per land classification category • Overlay of two periods in a GIS interface like ArcGIS, QGIS, Manifold or programming language like R and NetLogo. • Presentation of map outputs • Adjustments or refinement of map outputs based on the comments and recommendations Preparation of final maps Creation of tables of land cover classification per land cover units • Using MS Excel operation, specifically the use of Pivot Table, the tables on land cover types will be prepared for the target land cover units. • Analysis of the information generated from the tables will be prepared • Report writing/output preparation Preparation of Final Tables Presentation of outputs Final processing and editing of generated tables Preparation of land accounting table Report writing 30 Example: Land Cover Accounts matrix Note: Do not use decimals when presenting figures unless the values are very certain. Usually the figures in the land account are converted into hectares or square kilometers. Step 4. After constructing land accounting table and data, land cover Calculation of land change over time will be calculated by following this cover change over procedure: time Preparation of opening stock and closing stock relative to two years. The land cover matrix and physical accounts are prepared with the corresponding tables using pivot table in MS Excel. Example: Land cover change matrix - Laguna de Bay Region Finalization of summary land cover change matrix The land cover change matrix is summarized to show the changes in hectares and rate of land cover change. Below is a sample summary. Example: Land Cover Change, Laguna de Bay Watershed 31 Step 5. This includes analysis of the changes indicated in the land Analysis of land cover accounts for the accounting period, valuation of the cover change derived figures, and finalization of the matrix for reporting purposes. Analysis should focus on the critical figures and trends. Refer to Annex A for the detailed process of developing land accounts 32 How to construct Water Accounts The Water Account records the physical stocks and flows of water bodies in a given area. Its overall objective is to assess the water resources of a defined hydrologic boundary for a specific period of time. Data and information must be collected relative to a specified time period and spatial reference. Water balance shows the water volume during a certain period of time and the difference between total inflow and outflow changes of water storage within a defined area. It involves the hydrologic application of techniques denoting measurements of both stocks and flows of water. The quantification of water is an important issue in social and economic development, wherein water balance can indicate the distribution of water within a hydrologic regime such as a watershed area. Accounting for water balance is used to determine the availability of water and general condition of the quantity of water resources in a hydrological system of a water body (i.e., lake). The equation considers the entire amount of water inflows and outflows of the basin. Hence, the distribution water into the hydrologic component is distinguished from its various hydrologic components. T h e S E E A Wa t e r ( h t t p s : //u n s t a t s . u n . o r g /u n s d /e n v a c c o u n t i n g /s e e a w/ seeawaterwebversion.pdf ) provides a detailed guideline in the development of water accounts. In developing the water balance account, the following steps must be undertaken: Step 1. This covers the collection of maps with attributes of watershed Data Collection delineation, land cover, topography and soil characteristics, and records of the meteorological data and station location coordinates. The maps serve as inputs to the computer mapping software to generate layers of thematic maps showing watershed boundaries, land cover extents, soil type and locations of weather monitoring stations. Data on precipitation and evaporation are used as inputs to the hydrological model. 33 Step 2. The data collected is normally processed using a GIS program Data Processing to delineate the watershed boundaries from the available watershed boundary shapefile. It is overlaid over the land cover through Computer map to produce a thematic watershed-delineated land cover Mapping Software map. The same procedure applies to the production of watershed-delineated soil map. The weather stations is plotted through the location coordinates into the watershed-delineated land cover map using a GIS program. This should yield a thiessen polygons2 for the distribution of rainfall and evaporation over the watershed. Step 3. Data generated from GIS such as watershed boundary, land Hydrological cover types and soil characteristics serve as inputs to generate watershed-related information and characterization using a Computer hydrology software. The rainfall and evaporation data together Modelling with the setting of desired time period will be processed and simulation activities will be conducted using the software to determine the amount of streamflow generated by the watershed. Step 4. The flow of water in and out of a hydrologic system is Application of a described through a water balance equation. It shows the hydrologic cycle and renewal and loss of water quantity of an Water Balance area. The general equation of the balance is described below: Equation P + QI + G = Qo + E + Abstraction + ∆S where: P is precipitation, QI is inflow from surface run-off, G is the groundwater flow, Qo is the outflow of water, E is the release of water through evaporation, and ∆S is storage changes. Hence, the balance of inflow and outflow of water is described in the formula. Step 5. The simplest general form, water balance is expressed as inflow Preparation of = outflow ± change in volume. This is an important method to construct accurate estimates of water movement and Water Account distribution of water in a lake. Tables As inflow of water into the lake, the origin of water is from weather-driven precipitation (P), surface run-off (Q) from the catchment, and gradual release of groundwater flow (GW). These inflows constitute the total quantitative water condition of the lake. Based on the hydrologic system of the lake, the process of lake water stock, infiltration (I) and water uptake of vegetation make up the storage (S) in the lake’s hydrology. The outflow of the water into the hydrologic regime is in the form of evaporation (E) and river discharge (Q). Evaporation is a form of hydrologic loss and influenced by weather conditions. River discharge is the outflow of lake water into elevations lower than the lake’s topography. Human consumption of water should be factored into the computation of the quantity of water. 34 A summary of water balance is shown in the following table: Summary of parameter determined for every year and representation of water balance of a lake To standardize data generated from the computer models, use a SEEA-based framework to align the information from the simulation and data collection. SEEA provides internationally accepted standard concepts, definitions, classifications, accounting rules and tables for producing water asset account of the lake and its connection with the economy. Based on SEEA standards, the following table can be used to obtain consistent indicators and descriptive statistics to identify the relationship of the economy and the environment and the state of the environment. In the end, the information provided by the table can be used to improve the management of the lake. Here is an example of a summary table of various information arranged to SEEA standards. The values of the parameters can be arranged depending on the requirement of the table of SEEA. There are four hydrological regimes which are lakes, rivers, ground water and soil water. Each of the hydrological regimes is taken from the parameters of water balance. For example lake regime inflows from other resources in the territory are the combination of surface run-off from the watersheds and groundwater flow. On the other hand, outflow to other resources in the territory of the lake is the discharge of a river from the water balance. River inflow from other resources in the territory comprises surface run-off from the watersheds and river discharge while outflow to other resources in the territory show the amount of surface run-off from the watersheds. Based on the amount of water released from the ground, the decrease of stock is the result of groundwater flow from the land into the lake and rivers. Both soil water inflow and outflow are from the surface run- off from the watersheds. The net change is the difference between the increase and decrease of stock. 35 How to construct Ecosystem Condition Accounts In the SEEA-EEA framework, accounting for ecosystem condition can be done through an assessment of predetermined characteristics for which indicators have been carefully selected. The development of an Ecosystem Condition Account entails evaluation and assessment of terrestrial and aquatic ecosystems (i.e., upland, lowland, coastal, lake) using different parameters and indicators. Essentially, the ecosystem (ES) conditions are inputs in generating ES models. Here is a sample ecosystem condition account table showing variety of indicators for the selected characteristics. Type of ecosystem unit Ecosystem characteristics Vegetation Water Soil Biodiversity Air ! Note: NAMRIA land cover classification can be used as the type of ecosystem unit Terrestrial Ecosystem Condition Accounts Step 1. Identify the boundary of the ecosystem, scope and coverage, Identification of the and level of aggregation/disaggregation (i.e., national, regional, scope local). Each level has its own set of ecosystem units. Step 2. Selection of parameters Note: Soil loss under current land cover conditions can also be derived using the Revised Universal Soil Loss Equation (RUSLE). It is expressed in tons/hectare/year. Soil loss is also a primary input in modelling sedimentation for the watershed. 36 Step 3. To reflect the ecosystem components and functioning Assessment of the throughout the national, regional, and local scope, the ecosystem terrestrial condition account intends to register a number of condition key variables from these two condition indicator groups: These should be selected, in addition to land cover, as they are important in understanding the services provided by the uplands to terrestrial areas. Land cover change in the uplands (including loss of forest for plantation development and shifting cultivation plots) could lead to changes in hydrology and water availability. Step 4. Processing of data on ecosystem condition accounts for the Processing of data different types of ecosystem assets is done once and does not and reporting record changes in condition over time. It should be noted that issues and challenges in the compilation of ecosystem condition accounts are still evident, making it necessary to improve the structure and compilation of these accounts. Aquatic Ecosystem Condition Accounts Step 1. Identify the type (e.g., river, lake, coastal, and marine) and Identification, scope (i.e., national, regional, or local) of the ecosystem to be collection, and assessed. consolidation of data Step 2. The indicators and parameters should be significant in the Selection of evaluation of the ecosystem. This guidebook focuses only on indicators and the following aquatic condition indicators: parameters • Bathymetry • Water pollution loading • Water quality • Subsystem condition: coral reefs, mangroves and seagrasses Collect data from different government agencies or institutions, depending on the coverage of the ecosystem. 37 Step 3. Data and all other relevant information are processed for each Processing of data aquatic condition indicator. and assessment of the ecosystem Bathymetry condition • Identify an inland body of water within the target site to conduct a bathymetrical survey. • Conduct a reconnaissance survey prior to the actual bathymetrical survey to determine the condition of the target site. • Mount the eco-sounder/transducer on the outrigger of the boat and connect it to the monitor/data logger. Record the water depth and the corresponding GPS coordinates. • Form an imaginary grid across the surface of the lake and select arbitrary locations for recording of the water depth and GPS coordinates in order to establish the lake’s bottom configuration and depths. • Conduct photo documentation to provide digital visualization of the actual bathymetrical survey being undertaken. • Take note of the recorded lake water level on the day of the actual survey to facilitate adjustments during the mapping of the lake’s bottom configuration and depths. Water Pollution Loading To assess water pollution loading, calculate the biochemical oxygen demand (BOD) loadings per source. Different sources include: ❖ Industrial effluents ❖ Domestic effluents 38 Industrial effluents. For the BOD generation from industrial effluents, compute the BOD concentration in effluent and the effluent discharge rate. BOD loading = BOD conc. x Q x D X 0.001 where: BOD loading = pollution (BOD) loading in kilograms BOD conc. = average concentration of BOD in the effluent or wastewater discharged, mg/l or g/m3 Q = average daily volumetric flow rate of the final effluent of wastewater discharged, m3/day D = number of discharge days per year, days/yr 0.001 = conversion factor (ml to m3 and mg to kg) Note: For industries with more than one outfall, summation of BOD loading per outfall is obtained. Then get the average BOD loadings per industry category. Apply average BOD loadings per industry category to the industries without data and calculate the total annual BOD loadings in metric tons. Sample table: Domestic effluents. Calculate the BOD loadings from domestic effluents using the mass of BOD generated per individual multiplied by the given population. The population data from the Philippine Statistics Authority and the annual growth rate are used in the estimation of the population per year. Assume the waste load model report that grey water and use of toilets generate BOD at rates of 15 and 35 g/person/day, respectively. The equation from that potential scenario is: BOD1 = P (F1 + F2) [365 days/year/1,000,000 g/MT] where: BOD 1 = Generated from domestic activities P = Population F1 = BOD generation rate from grey water = 15 g/person/day F2 = BOD generation rate form toilets = 35 g/person/day 39 Septic tanks are assumed to remove 50% of BOD (LLDA waste load model report, 2004) while the local drains are believed to remove 20% of BOD from both gray water and toilet discharges (Capalungan with LLDA study team, 2009). It can be further assumed that about 90% of the population maintains septic tanks (PSA data as of May 2000). The BOD generated now represents BOD loading into sub-basins, computed using the following formula: BOD2 = P [F1 (1-D1/100) + F2 (1-(D2/100)(S/100))(1-D1/100)) [365 days/year/1000000 g/MT] where: BOD2 = BOD discharged to sub-basin D1 = BOD loss in local drains = 20% D2 = BOD loass in septic tanks = 50% S = percent of population with septic tanks = 90% As domestic effluent travels along the watercourses of the sub- basin, further BOD loss is assumed. Factors associated with BOD loss are BOD decay rate constant, distance of source from the bay water, and mean speed of stream water. The fraction of BOD remaining is computed as exp(-Kx/u). The equation is expressed as follows: BOD 3 = BOD2 * exp (-Kx/u) where: BOD3 = BOD loading in Laguna Lake K = decay rate constant by waste type K = K2 ⦵ (T-20); K2 = 0.7/day; ⦵ = 1.047; T=27 oC K = 0.97 x = average of the nearest and farthest stream distance of the municipality from the shoreline u = mean stream flowrate within distance x. x/u = mean travel time (in days) of effluent from discharge point to distance x. Generically, BOD loss, % = (1 - exp(=Kx/u)) x 100. On the average the BOD loss is computed at 48%. • Calculate the total BOD loadings and determine the % contribution of each source of pollution. • Analyze the results and compare them with the pollution loading rate of river/s within the concerned area (stream flow multiplied by the average BOD concentration of the river/s). 40 Agricultural and forest lands. BOD generation from agriculture is computed as the product of the agricultural land and unit BOD generated per area of the agricultural land, expressed as follows: BOD1 = A F1[1 MT/1000 kg] where: BOD1 = BOD generated, MT A = area of the agricultural land, ha F1 = BOD generation factor = 0.75 kg/ha/year for rice farming and 0.25 kg/ha/year (based on LLDA Waste Load Model) BOD loading in rivers and streams from agricultural land is calculated as follows: BOD2 = BOD1 [exp (-Kx/u)] where: BOD2 = BOD loading in rivers and streams K = decay rate constant at 27oC = 0.166/day x = average distance of the agricultural land from the shoreline = 1,000 m u = mean stream flowrate within distance x = 0.1 m/s x/u = mean travel time (in days) of effluent from discharge point to distance x. BOD loss, % = (1 - exp (-Kx/u)) x 100 BOD generation from forest land should be computed as the product of the forest land and unit BOD generated per area per year of the forestland, expressed as follows: BOD1 = A F1 [1 MT/1000 kg] where: BOD1 = BOD generated, MT A = area of the agricultural land, ha F1 = 50 kg/ha/year for forest land (based on LLDA Waste Load Model) BOD loading in rivers and streams from forest land is calculated in the same way as agricultural land. 41 Solid Wastes. The BOD generation from solid wastes should be computed using the following formula: BOD1 = P F1 F2 F3 [365 days/year x 1 MT/1000kg] where: BOD1 = BOD generated at source P = municipal population F1 = solid waste generation rate = 0.5 kg/person/day in urban areas or 0.3 kg/person/day in rural areas (World Bank, 2004) F2 = fraction of kitchen waste in solid waste = 45% (World Bank, 2004; MMDA, 2003) F3 = biodegradable to BOD conversion factor from field tests = 0.00285 BOD/wet waste; (based on Visvanathan, C, et al., 2002; Chiemchaisri, C. et al., 200) In estimating water pollution loading, compute the total BOD loadings and determine the % contribution of each source of pollution. Assemble the results into an accounting table based on the International Standard Industrial Classification (ISIC) of all economic activities Sample water account table: 42 Water Quality In assessing water quality, undertake the following: 1. Identify a year to be used for the analysis of the ecosystem condition accounting (e.g., 2003 and 2010) 2. Identify water quality parameter to be used for the water condition accounting (e.g., BOD) 3. Collect secondary GIS dataset from NAMRIA 4. Collect monthly water quality data within a specific year and coverage area (e.g., rivers, lakes, ground water). Water quality data can be obtained from relevant agencies like LLDA and DENR. 5. Process data using a spreadsheet, then calculate the average values for the assigned water quality parameter. 6. Assign water quality classification for the generated annual average values, based on the DENR Administrative Order 34. Note: To determine the effects of land cover change on water quality, use the GIS software with corresponding datasets and plot the GPS coordinates of corresponding to each water quality station and overlay the area on the same map/coverage area corresponding to the same year (e.g., change in built-up area vs BOD concentration, change in agricultural area vs nutrient concentration). 43 How to construct Ecosystem Service Use and Supply Accounts Carbon Accounts Carbon accounting and valuation is done to determine carbon stock, carbon sequestration, and the carbon value of a given ecosystem accounting unit in a given accounting period. It aims to measure in physical and monetary terms the changes that occur in a given year in a specified forest area using these variables. It shows the stocks and flows of carbon as an ecosystem service using the following framework: 2) Estimate forest capacity to • Use satellite sequester carbon imagery to • Convert mean • Calculate prepare a land annual growth mean carbon account increments stock • Calculate carbon into mean increment x stock per hectare carbon stock social cost of by forest cover increments carbon (SCC) 1) Determine 3) Value of extent and forest carbon condition sequestration Carbon accounting and valuation is conducted through the following steps: Step 1. The first step in the compilation of carbon account is to Data Scoping identify the area and the extent (type of forest-open, closed and mangrove). This includes determination of the accounting period for the opening and closing years and the methods applicable (e.g., Stem Volume Approach, Use of Allometric Equations). Step 2. Once the ecosystem accounting unit is already determined, Data Collection find out if there are available data that can support carbon accounting and valuation in the area. Relevant data include: Land cover maps corresponding to at least two time periods in the accounting period being considered, and Forest cover change data showing land cover transition from one land cover to another. Sources of data include NAMRIA. Global forest data that may contain information that may be calibrated at the country level may also be used. The next important data that carbon accounts developers should be looking for are forest inventory data that can serve as basis for computing carbon stocks in the various land cover classes present in the accounting unit. National, regional, provincial or project-level forest inventory data may also be useful. 44 Depending on the carbon quantification approach that will be used, carbon stock estimates can be generated through allometric equations or direct conversion from timber stock volume to tree carbon content. In this regard, biomass expansion factor, wood density, root-to-shoot ratio at various growth periods, and carbon fraction should also be collected. To determine the land cover’s capacity to sequester carbon, applicable timber growth rate data or mean annual growth increment should also be generated. A template for such data requirement is shown in this table: Assumptions and data for the development of the Carbon Account: Step 3. Carbon Stock Accounting for Carbon in Physical The first step in carbon stock accounting is to impute a specific Terms carbon stock to a specific land cover type, and multiply it by the extent of the various land cover in the accounting periods being observed. For the former, the tree carbon content per hectare of the land cover classes of interest can be done using the approach depicted below: Biomass and carbon accounting data can be derived from the established volume account of timber, divided into five parameters: Stem Biomass, Above Ground Biomass, Ground Biomass (BGB), Tree Biomass, and Tree Carbon Content. First, stem biomass is derived by multiplying the stem volume by the basic wood density. Second, ABG is obtained by multiplying 45 the stem biomass with a factor that reflects the stem biomass- total biomass ratio (total biomass also includes biomass in branches and leaves). Third, the BGB is derived by multiplying the computed ABG by the root-to-shoot ratio constant. The tree biomass could then be computed by summing up the AGB and BGB, expressed in tons of dry matter per hectare. To obtain the tree carbon content, multiply estimated tree biomass by the carbon fraction constant of 0.47 ton of carbon per ton of dry matter. Finally, the Carbon Dioxide Equivalent is estimated by multiplying the tree carbon content by a factor of 3.67, which converts the mass of carbon to the mass of carbon dioxide. Carbon Sequestration Forest carbon sequestration capacity can be derived from established timber volume growth rates per hectare of specific forest types, e.g., closed forest, open forest, mangrove forest, plantation forest in terms of mean annual volume increment. A straightforward approach is to convert these volume increments into carbon as depicted in the diagram on page 53 to arrive at the carbon sequestration rate for each of the forest or land cover type. Step 4. Valuation of carbon can make use as basis Market Price of Accounting for carbon of the Social Cost of Carbon (SCC) and multiplying this Carbon in Monetary by the sequestration capacity of the land cover types of Terms interest and multiplying the product by the area extent of land cover types. The market price of carbon can be based on current prices in existing markets while the social cost of carbon is based on yearly estimates published by the US Environmental Protection Agency. SCC estimates the value of economic damages associated with a small increase in CO2 emissions, conventionally 1 metric ton, in a given year. Conversely, this figure also represents the value of damages avoided for small emission reductions. Its is assumed to be US$32 or Php1,344 per ton CO2 at 3% discount rate while the SCC at 5% is estimated to be US$11 or PhP462 per ton CO2t based on EPA estimates. Step 5. Carbon Stock Presentation of The carbon account can be presented in a table or graphical Carbon Account form as shown below: The table should show physical and monetary estimates of carbon stock and carbon sequestration per forest ecosystem. 46 Carbon Sequestration and Carbon Sequestration Value The table below shows the physical and monetary estimates of carbon sequestration and carbon sequestration value per forest ecosystem. Accounting for Soil Erosion Control Service The ecosystem service ‘erosion control’ is defined as the amount of sedimentation avoided because of vegetation cover. This is calculated by comparing the erosion and sedimentation rates in the lake that would have taken place without vegetation cover with the actual erosion and sedimentation rates. Erosion control is important in maintaining the water retention capacity of the lake and reduce flood risks. Modelling facilitates identification of zones that are particularly important as a source of sediments and that are priority areas for ecosystem restoration. Erosion control is one of ecosystem’s contributions to the well-being of society. The volume of erosion avoided is based on the soil loss estimates under actual and bare (no- forest) scenarios. As expressed in kilograms per year, the generation of information on the rate of erosion on both scenarios is determined using GIS programs and computer software models such as SedNet. 47 Soil erosion control service is conducted through the following steps: Step 1. This covers identifying the area, extent, and time frame of the Data Scoping account to be developed. Data scoping is a critical and initial stage in accounting for erosion control as an ecosystem service. In this regard, identification of the spatial and temporal coverage is a vital component of accounting for ecosystem services. Data scoping is the initial step in identifying and analyzing the area and period covered. Such information shall be the basis for choosing the appropriate software such as SedNet and ArcGIS. This step also includes determination of the modelling software to be used if the following basic data are not readily available: 48 Step 2. The identification of data requirement and choice of Data Collection a p p ro p r i ate co m p u te r p ro g ra m s h o u l d l e a d to t h e identification of the types of data needed for simulation. Since the use of the right computer program facilitates the simulation of data, records of specific information are needed as inputs in the software to develop scenarios that portray the condition of the soil on the landscape. For example, soil characteristics and coverage of soil types pertaining to a specific landscape are inputs for the software in which the information shall be integrated and processed with other information such as slope and land cover area. Sample map: Extent of soil types is available on the website of Bureau of Soil and Water Management (www.bswm.da.gov.ph/). Sample map: Slope of the lake can be determined through the Digital Elevation Model of NAMRIA. Land cover characteristics and corresponding hectares can be derived from the shapefile of NAMRIA. 49 Step 3. There are parameters and corresponding measurements prior Pre-processing of to the simulation of erosion control ecosystem service. Such data for modelling data are relevant to the characteristics of the location such as weather and physical attributes. In the event of missing precipitation, Inverse Weighted Distance (IWD) is used to complete the entire period of rainfall events. On the other hand, potential evaporation is determined by using Kriging method. Furthermore, streamflow and erodibility information are known by means of GIS. Eventually, such information is used for the modelling stage. Step 4. The last stage in accounting for the soil erosion control Modeling of soil ecosystem service is the modelling of the data inputs. Software erosion control such as GIS and SedNet is used to process the data and yield information on the amount of sedimentation. This stage requires the simulation of two scenarios, namely, actual land cover area and bareland condition of the target location. Such scenarios show the importance of vegetation. Moreover, validation of the results is important to generate realistic values. This information can be achieved by comparing actual measurement to the simulation results. To determine the value substituting erosion control ecosystem service, the cost of erosion control material such as coco matt is used to value this service. The ability of this material to reduce soil loss as a useful substitute for the value of land cover to control soil erosion. The price of coco matting is based on market price. To obtain the value of erosion control ecosystem service, compute the following: 1. Quantity of erosion blankets required (sq m/year) = Erosion avoided (kg/year) / Trapping capacity of coco matting (kg/ sqm) 2. Replacement cost of erosion control ES (Php/year) Note that the use of replacement cost method is only appropriate if it can be inferred that society would choose to replace the service if it was lost. In this case, the cocomats would be placed if the erosion control service of the vegetation was indeed lost. Otherwise an alternative method, e.g. avoided damage costs, has to be used. Logically, a practical question can be raised: if the damage costs are lower than the replacement costs, why replace the service? 50 Step 5. The following table is used to achieve the presentation of Presentation or results of the SedNet model based on the existing land cover results (accounting and a bare land scenario. The sediment generation is the result tables) of SedNet modelling from the data inputs shown in Step 1. The unit of the sediment generation is kilotons in a year. On the other hand, sediment yield under bare land cover (KT/Yr) is achieved based on the assumption that all land covers such as closed and open forests, shrub areas, grasslands, and wooded grasslands would be converted to bare land. The results of the bare land scenario should be placed in the fourth column. In the end, the difference between the sediments generated under land cover and under bare land cover represents the avoided erosion. The avoided erosion is the amount of soil remaining intact through the existing land cover. Step 6. Finally, the results of the model is further analyzed using the Soil Erosion Control formula given below on valuing the service through the Ecosystem Service substitute of prices such as the cost of coco mat. Note that Value different valuation methods can be used (as described in the previous sections). For the purpose of this guidebook, the value of erosion control service is computed as follows: • To determine the value of substituting erosion control ecosystem service for certain variables, the cost of erosion control material such as coco matt is used for the valuation of this service. The ability of this material to arrest soil loss is a useful substitute for the value of land cover to control soil erosion. The price of coco matting is based on market price. • To obtain the value of erosion control ecosystem service, the following are computed: 1. Quantity of erosion blankets require (sq m/year) = Erosion avoided (kg/year) / trapping capacity of coco matting (kg/sq m) 2. Replacement cost of erosion control ES (Php/year) = Quantity of erosion blankets (sq m/year) * Price of coco matting (Php/sq m) 51 Accounting for Flood Control Service Flooding of houses and infrastructure is a significant economic issue. This guidebook will cover only accounting for the flood retention service of a lake ecosystem, or the capacity of the lake to store water that would otherwise lead to flooding of houses and infrastructure. The capacity to store water is defined as the water that can be stored in the zone between (a) the average water level in the beginning of the rainy season (July); and (b) the water level at which the first houses along the lake are flooded. In between these two levels, water can be stored without causing economic losses due to flooding. Note that the flood retention capacity is not related to the overall volume of water stored in the lake. The water level below the average beginning of the rainy season level is, on average, filled throughout the year and therefore not available as retention basin. Step 1. The following basic date are needed: Consolidation of data Step 2. Based on a given level of flood occurrence in an area, the Assessment of extent of flood shall be determined (i.e., flood zone). This step affected areas involves determining the number of houses per flood zone, the number of people per household, and the average house price of a basic house in the flood zone. 52 Step 3. To relate the annual flood level to damage costs, a simple Preparation of spreadsheet model should be prepared with the following simple spreadsheet sample calculations: model to estimate cost of flood Estimation of the amount of damage damages Based on inundation depth, flood duration, the construction type and materials used (wood, concrete, bricks, etc), and the flood control measures in place, the account preparer shall assess the amount of damage in the area. The analysis should consider damages to houses, infrastructure, crops, and other properties. Model calculations of damage cost which allow predicting flood damages as a consequence of flood levels in the future. Run spatial analysis to calculate damage cost/predict flood damages. Step 4. Maps and tables. A flood risk map can also be presented to Presentation of show the flood prone areas. Make an approximation of results ecosystem service “water retention” by comparing flood levels with and without the water storage volume of the catch basin. 53 Provisioning Crops Production Account The ecosystem services supply account records the flow of ecosystem services in physical and monetary terms. It shows the ecosystem’s contribution to crop production. The choice of specific accounts to develop is based on the importance of specific ecosystem services to crop production to the local economy and data availability. Considering the difficulty of quantifying the contribution of water infiltration, sediment retention, nutrient cycling, and water holding capacity of the ecosystem unit, the amount of crops produced or harvested in physical terms and monetary terms serves as proxy data for the provisioning service. Below are the procedures in development of the account on provisioning service for crop production: Step 1. • Gather secondary data from concerned government offices Data Collection like the Department of Agriculture and its attached agencies, PSA, among others, that provide relevant information for the development of the account. Table 1 shows the list of the data that need to be gathered. If the area or spatial unit has been identified, major crops could be determined from the PSA statistical reports posted on the agency’s website (www. psa.gov.ph), which covers regional or provincial data on crops. • Assessment and review of data to determine gaps. Prepare metadata that could serve as guide in supplementing data collection. • Collect the data based on the identified gaps • If necessary, conduct focus group discussions and/or key informant interviews to acquire primary data such as crop yields and cost of production. Following is a list of data needed in developing provisioning services for crop production. 54 Step 2. Acquire the latest land cover map from NAMRIA and use it as a Mapping base map and to come up with look-up tables. The modelling of provisioning services requires four steps: • delineation of the study area • the extraction of the land-use of interest • conversion of data formats • assigning EUs the average production (yields/ha) Step 3. • Calculate the number of hectares grown and harvest in Ecosystem Service terms of kg products per hectare per crop (and per Analysis year) for all crops. • Map the study area showing the delineation of crops selected for the ecosystem account to present findings Here is an example of an ecosystem services supply account for crop production Step 4. • Based on the data gathered, compute the cost and return of Valuation producing the crops identified in the area on a per hectare basis. • Compute the resource rent to be used as an indicator for the value provided by the ecosystem and present this in tabular form. The formula for the resource rent is as follows: RR = GS - CFC - UCFC - LC - II where: RR = Resource Rent GS = Gross Sales (Price x Catch) CFC = Consumption of Fixed Capital UCFC = User Cost of Fixed Capital (assumed to be 10% of Total Fixed Capital) CE = Labor Cost or compensation of employees II = Intermediate Input The table below shows sample monetary values of the provisioning services of crops. 55 Fisheries Account The fisheries account helps to ensure the equitable distribution of fisheries resources and to provide an assessment of an ecosystem both on physical and monetary terms. The societal benefits were expressed as the resource rent generated by the ecosystem in terms of supporting capture and aquaculture fisheries. Step 1. Consolidate the following data needed to account for fisheries: Preparation of data requirements Step 2. If the fisheries data/information are not readily available, Data collection conduct a fisheries survey to get primary data from fishermen and operators. Harmonization of survey instrument for fisheries evaluation. Seek clearance from the PSA and coordinate with Bureau of Fisheries and Aquatic Resources on the survey instrument and other documents required. Information covered by the survey questionnaires. The survey seeks to generate information needed in the development of the fisheries account, including the following: (a) stocking density per aquaculture structure (b) total harvest from aquaculture/capture fisheries (c) total harvest per fish species from aquaculture/capture fisheries (d) species composition of cultured/captured fishery (e) labor costs/expenditures incurred during the culture/ capture period (f) price of fish harvest/capture (gross sale) fishermen/ operators (g) cultured period/time consumed for cultured/capture fishery Survey Approach • Orient the enumerators on the survey questionnaires and the protocol to be observed in dealing with the respondents. • Execute the survey with the aid of enumerators who are not identified with the regulating agency so as not to intimidate respondents in answering the questionnaire. • Review and ensure the completeness of the survey questionnaire and determine if validation is needed. • Compile all filled-up survey questionnaires and encode the gathered data in tabular format using Excel. • The sampling design should cover: • Distribution of the targeted respondents for capture fishery • Proportion method or random sampling for aquaculture operators • Number of respondents and replicates for the survey 56 Step 3. The information on the area for fishery activity should show Evaluation of area which is more productive between aquaculture and capture fisheries. Data Unit of measurement Source Total surface area hectares Secondary data from LLDA, SEAFDEC, BFAR Area of open water hectares Primary from survey Area of aquaculture hectares Secondary data from LLDA, BFAR structure Total number of person Secondary data from BFAR and LLDA fishermen/operators • Determine the total surface area of the water body. • Determine the total area occupied by the open water/ capture fisheries. • Determine the total area occupied by aquaculture structure. • Determine the total number of fishermen/operators benefitting in the ecosystem. Step 4. • Analyze and determine the data necessary for the Calculation of computation of the resource rent. resource rent • Compute the resource rent using the formula: RR = GS - CFC - UCFC - LC - II where: RR = Resource Rent GS = Gross Sales (Price x Catch) CFC = Consumption of Fixed Capital UCFC = User Cost of Fixed Capital (assumed to be 10% of Total Fixed Capital) CE = Labor Cost or compensation of employees II = Intermediate Input Note: If there are available data on fish production, the resource rent can be computed right away. Step 5. Tables and maps highlight the findings of the accounts and Presentation of analyze the state of fisheries production in a certain area. results and reporting 57 How to construct Ecosystem Asset Accounts Ecosystem Asset: Crop Production An Ecosystem Asset account for crop measures the ability of ecosystems to generate ecosystem services under current ecosystem conditions and uses at the maximum level without causing degradation of the ecosystem The asset for crop production is expressed in physical terms as the hectares of crop land (from the Land Account) and the asset in monetary terms as the Net Present Value of the expected flow of ecosystem services, in this case the NPV of the resource rent generated from crop production. Here is an example of biophysical asset account for crops by year and spatial unit: Land Cover (area of crops in hectares) ACCOUNT TYPE Opening (_year___) Area (in hectares) Addition to stock Regeneration, natural(net of normal natural losses) Regeneration, through human activity Reclassification Total addition to stocks Reduction in stock Reductions due to ongoing human activity Catastrophic losses due to human activity Catastrophic losses due to natural events Reclassifications Total reductions in stocks Revaluations Closing stocks (__year____) Area Productive Non-Productive In monetary terms, the asset account is calculated in terms of NPV of the expected flow of ecosystem services per hectare (Table 2). Consistent with the UN definition (2015), the resource rent is used to indicate the value of the ecosystem service. In computing the NPV of each crop system, much consideration is given to determining the appropriate discount rate to be applied. Here is a sample monetary account for ecosystem asset for crops per year and spatial unit: Ecosystem units Area Resource Rent, Pulot Net Present Value at Discount Watershed Rates 10% 12% 15% (ha) (million (million (million (million Php) Php) Php) Php) Year Year 58 Part IV Interpretation and Use of the Accounts Use of the Accounts Both ecosystem accounting and economic and environmental assessment hold special relevance. The accounts are useful in the formulation of appropriate policy responses around economic activity and ecosystems. Here are some of the ways the accounts can support policy formulation and implementation: • Policy planning and programming. Inform policymakers of the status, uses and monetary values of ecosystems at the time a specific policy is being formulated. For instance, the account can indicate sensitive areas or areas that are particularly important in supplying ecosystem services. • Decision-making. The accounts can alert policymakers to trends in ecosystems and the services they supply. In some cases, these may already have affected the livelihood of the communities that depend on these ecosystems. • Forecasting. Information may be useful in forecasting potential future impacts. By monitoring trends in ecosystems over time, the accounts can also provide information on the effectiveness of specific policies. • Knowledge management and information dissemination. A particular feature of the accounts is that these make information available in an aggregated and coherent way. The accounts consolidate information that is usually dispersed in different agencies, hence leading to easier access to an integrated dataset and new insights resulting from bringing together these data. Below is an enumeration of potential accounts and their relevance to natural resource management and development: Land Account As part of planning for sustainable development, it is important to understand the implications of changes in land cover and land use. Land cover is extracted through the latest remote-sensing data that will be used as a reference to a more detailed and updated land accounts such as land cover, land use and/or land titles. Land accounts can help determine trends and the status of land cover, thus supporting strategic environmental policy and monitoring of land assets and efforts to assess their contribution to economic activities. Land accounts yield data on land cover, land use, and land divisions. Ecosystem services accounting helps harmonize these data. It must be noted that land cover can provide data on ecological functions while land divisions data are used to assess ecosystem assets and services. The accounts can guide efforts around land conversion to make sure they are aligned with, and could facilitate more efficient implementation of, development plans and appropriate laws. 59 Water Account Water accounting is the process of communicating water resource-related information and the services generated from consumptive use in a geographical domain of, among others, river basin, lake, and other water bodies. A water account shows the existing status of and potential trends in water availability in a lake over a specified period of time. In terms of beneficial use, the computation of water balance provides a comprehensive interpretation of the water flow system and water resources in the lake. Since water inflow is heavily influenced by the seasonal weather patterns throughout the year, water balance can show the differences between inflow and outflow of water in the basin, thus generating knowledge on the quantity of water that serves as natural asset for users of the water resources. This should lead to improve management of water resources. The investigation of water balance structure of a lake lays down the basis for the development and implementation of water- related projects utilization, regulation, and distribution of water resources over time. For a multiple-use water resource, such as a lake, the water account can be used by policymakers in determining allocation of water for various uses in terms of quantity and quality. For instance, they can set usage limits on account of water quality issues. Thus, even if a lake may contain a huge volume of water, it cannot be used for domestic purposes if it has e high level of toxic substances. On the other hand, a water resource with poor water quality can still be used for domestic purposes but this will require a costly treatment process that will affect the price of water for such use. The water account can guide resource managers and policy makers in deciding if a dominant use policy is necessary for a particular water resource. The output of other accounts such as on fisheries is a useful input in determining if the economic and social benefits far outweigh those of the other uses such as water supply, irrigation, transportation, etc. The water account can guide policymakers in determining how much water can be abstracted for various uses such as irrigation and water supply, and can provide the necessary input for water pricing. Assessment of the ecosystem conditions such as flooding is necessary in the formulation of policies on the use of shoreland, choice of locations for specific housing projects and relocation sites for displaced settlers, and identification of necessary infrastructure to mitigate flooding. Information on sedimentation is essential in land use planning as well as a necessary input in the assessment of the land account. Water account vis-a-vis Ecosystem Service Key question: • How much water should be retained in a lake at a given time to support ecosystem functions? 60 Ecosystem Service Supply This account records the flow of ecosystem services in both and Use Account physical and monetary terms. It interlinks the values derived from different services being provided by the environment such as carbon sequestration, water regulation, and the ecosystem’s contribution, for example, to crops and fisheries. The output derived from this account gives a clear picture, for instance, of how the ongoing conversion of forests in the uplands affects water regulation service and how forest degradation affects the agricultural potential of a specific area. It is therefore a useful guide in crafting or revising relevant policies. This takes into consideration ecosystem units and calculation of resource generation. Ecosystem Services Supply Account Carbon Sequestration. One of the data that can be generated through carbon accounting is the rate of carbon sequestration. This is the capture of carbon from the atmosphere by vegetation, in particular by different types of forests. It is acceptable to include carbon sequestration both in carbon account and ecosystem services accounts. Crop Production. Resource rent per hectare is used in assessing the monetary value derived from the crop production from the ecosystem. Water Regulation. Water supplied to irrigated rice paddies in the watershed can be accounted for through water regulation. Hydrological modelling is used to simulate inflow and outflow accounting parameters of water loss from rainfall to amount of water discharged from a dam. Fisheries. It is the assessment of fish capture from aquaculture with fish pens and fish cages. The account monitors the economic value of fisheries, seeks to improve fisheries management, and may estimate the costs and benefits of fisheries. The data gathered is used as reference for policy makers to address issues arising from the uses of lakes for fisheries, fish pens, and fish cages. 61 References: System of Environmental-Economic Accounting 2012— Experimental Ecosystem Accounting. 2014. https://unstats.un.org/unsd/envaccounting/seeaRev/eea_final_en.pdf SEEA Experimental Ecosystem Accounting Technical Recommendations. March 2017. https:// unstats.un.org/unsd/envaccounting/eea_project/TR_consultation/ SEEA_EEA_Tech_Rec_Consultation_Draft_II_v4.1_March2017.pdf Seminar note on SEEA-EEA. https://unstats.un.org/unsd/envaccounting/workshops/int_seminar/ note.pdf Technical Report on Pilot Ecosystem Accounts for Laguna de Bay. December 2016. https:// w w w. w a v e s p a r t n e r s h i p . o r g / s i t e s / w a v e s / fi l e s / k c / L d e B a y % 2 0 F I N A L % 2 0 L o w R e s %20Dec15%202016.pdf Technical Report on Pilot Ecosystem Accounts for Southern Palawan. November 2016. https:// www.wavespartnership.org/sites/waves/files/kc/WB_Southern%20Palawan%20Tech %20Report_FINAL_Nov%202016.pdf Wealth Accounting and the Valuation of Ecosystem Services. https://www.wavespartnership.org/ ANNEX A Topic: Developing Physical Land Asset Accounts from GIS-Analysis of Land Cover Change Matrix Data Needs and Sources: GIS layers used cover two periods. Objective: In this exercise, the shapefiles of classified land cover for 2010 and 2014 were interpreted and produced by NAMRIA from acquired satellite imagery. Description of the Data: Attributes data of shapefiles of land cover for at least two periods. In this exercise are land covers of 2010 and 2014 for the Pulot Watershed of Sofronio Espanola in Southern Palawan. The data can be generated from any GIS software. The pre-processed data is generated by intersecting the two shapefiles in GIS software. The resulting attribute table is exported as excel spreadsheet file with single column headers. Link to the Sample MS Excel Worksheet: https://drive.google.com/open?id=0B6ryv7mIA46WQklyUW9mczl0Xzg Tools for this Exercise: MS Office Excel spreadsheet software for transforming an attribute table into a land cover change matrix Objectives of the Exercise: (1) To learn and experience developing land accounts (2) To familiarize onseself with the steps in developing ecosystem accounts using primary or secondary data (3) To learn how to develop a physical land asset account derived from spatial information 62 Steps in Developing the Physical Land Asset Accounts: (1) Process the layers in GIS software to generate the intersect of a two-period land cover: Figure 1a. Land cover of 2010 generated by Figure 1b. Land cover of 2014 generated by NAMRIA NAMRIA (2) Export the attribute tables of the shapefile produced from intersecting 2010 and 2014 land cover data to MS Excel. Then review the output to ensure that no data was missed; Here is an example of an exported attribute table will appear as below: Figure 2. GIS-generated intersect layer attributes table exported to MS Excel 63 (3) Generate a land cover change matrix of 2010 and 2014 data by creating a pivot table in MS Excel as shown below: a. Create a Pivot Table: (Click INSERT, PIVOT TABLE, Pivot Table) Make sure that your cursor is inside the data table to ensure that Excel automatically selects all data in the spreadsheet. The output is a blank pivot table template with corresponding column headers for a database for which to select and place in the Column Labels, Row Labels, and Values boxes. 64 b. Drag the AGG14 (2010 Land Cover Classification) from the Field List to the Row Labels Box, then onto the AGG14_2014 (2014 Land Cover Classification) Column Labels box. Drag Hectares (area per land cover by land cover class) toward the Values box. The resulting output is a matrix of land cover change from 2010 to 2014: c. Move the slider of excel to view the whole table or click X to remove the field list. You can restore the Field List by clicking on the Field List icon at the top menu. (4) Prepare a Land Cover Change Matrix to facilitate the creation of Physical Land Asset Accounts, the steps of which are as follows: a. Copy the entire matrix (pivot table output) to another worksheet. Under the Paste menu, be sure to set the cursor to A1 in the new worksheet. Click on Paste, Paste Special, then Values as shown below: First, Click Paste, Paste Special Second, Click Values 65 The resulting spreadsheet should comprise plain numbers and text with no special formatting and filter marks. However, the matrix needs bit of restructuring to create an asset account structure. b. Restructure the matrix. Note that the column header labels do not have the same number as the row labels. This means that it is not a square matrix (with the same number of rows and columns). In the row column insert a row after Open Forest and type “Open/Barren,” then insert a row after Shrubs and type “Wooded Grassland.” Finally, Cut the Grand Total column (right-click on the L header on top and click Cut). Right-click on B header on top. Finally, click Insert Cut Cells. Here is how the final matrix looks. Note: The gray highlight shows where the changes are made. c. In the Grand Total row, highlight columns starting with Annual Crop to Wooded Grassland Column. Then click Copy and move the cursor to M2 (or the Annual Crop row and after Wooded Grassland column). Finally, click Paste, Paste Special, Value and Transpose. Note sample matrices below. 66 67 Here is an explanation of what the data in the matrix represent. (Refer to the succeeding table.) • The BLUE shaded cells are areas retained as existing land cover from Year 2010. • The rest of the data in each row corresponding to the land cover are REDUCTIONS to the existing stock, in hectares. • The rest of the data, corresponding to the land cover in each column are ADDITIONS to existing stock, also expressed in hectares. • Opening Stock (or Land Cover in 2010, in hectares) Plus Additions Minus Reductions equals Closing Stock (or Land Cover in 2014, in hectares. 68 (5) Prepare Physical Land Asset account for each land cover class. The account consist of an Opening Stock, Additions, Reductions, and Closing Stock as minimum components. a. Create table for the Asset Account, similar to the structure below, in a separate worksheet: b. Using the example of Annual Crops, do the following: • Under REDUCTIONS: Copy the values in the row corresponding to other land covers in the Annual Crops Row to the rows shown below (14 under Build Up Area, 4 under Inland Water, 153 under Perennial Crop, and 19 under Shrubs.) • Under ADDITIONS: Copy the column values corresponding to other land covers in the Annual Crop column to the rows shown below (13 under Build-Up, 6 under Inland Water, 226 under Perennial Crop, and 30 under Shrubs) 69 c. Do the same for all the rest of the land covers. A shortcut to the process is as follows: • For Addition: i. Highlight the cells from Annual Crops to Wooded Grassland (cells C5 to L14) ii. Do Copy then in the Physical Land Asset Account worksheet position the cursor at Cell C4 (that is, the row corresponding to Annual Crops, under Reductions) iii. Do Paste Special, and then Values then ENTER. • For Reduction: i. Highlight the cells from Annual Crops to Wooded Grassland (cells C5 to L14) ii. Perform the Copy function. Then in the Physical Land Asset Account worksheet place cursor in Cell C15 (that is row of Annual Crops, under Reductions) iii. Do Paste Special, click on Values and Transpose in the dialogue box, then press ENTER. iv. Remove the values in the diagonals, starting with Annual Crops down to Wooded Grassland. (6) The Closing Stock is simply Opening Stock + Addition in Stock – Reduction in Stock. The resulting summary table for the asset account looks as follows: (7) Evaluate the results and their implication on land management including policies. The next change in stock is simply Closing Stock – Opening Stock. A negative Net Change in Stock means a reduction in the asset between 2010 and 2014. 70 71 Phil-WAVES IMPLEMENTING AGENCIES: 72