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Natural Capital Accounting

In a nutshell

The EU's economic prosperity and well-being is underpinned by its natural capital, i.e. its biodiversity, including ecosystems that provide essential goods and services, from fertile soil and multi-functional forests to productive land and seas, from good quality fresh water and clean air to pollination and climate regulation and protection against natural disasters. The first priority objective of the 7th Environment Action Programme (7th EAP) is to protect, conserve and enhance the Union’s natural capital. The 7th EAP highlights the need to integrate economic indicators with environmental and social indicators, including by means of natural capital accounting. The mid-term review of the EU biodiversity strategy adopted on 2 October 2015 also stresses that reaching 2020 objectives will require considering suitable approaches for protecting and enhancing our natural capital throughout the EU.

In practice

Natural Capital accounting is a tool to measure the changes in the stock of natural capital at a variety of scales and to integrate the value of ecosystem services into accounting and reporting systems at Union and national level. This will result in better management of the Union’s natural capital. An integrated natural accounting system for ecosystems and their services and associated data sets is being developed by the Knowledge Innovation Project (KIP INCA). This will aim to provide a multi-purpose tool that can be used decision making for a range of policies, at different stages of the policy cycle, and that national authorities and research centres can access. It can enable to explicitly account for the range of ecosystems and their services and demonstrate in monetary terms the benefits of investing in nature and the sustainable management of resources. KIP INCA involves: DG ENV, ESTAT, EEA, JRC, RTD, and links with MS activities and MAES.

NCA and the work of INCA can provide added value in a range of specific policy contexts including:

  1. Macro-economic policies at EU level, Growth and Jobs, and EU Annual Growth Surveys, Greening of the European Semester and Europe 2020 and its potential follow-up. Development of macro-indicators alongside GDP. Through NCA, the contribution of natural capital to economic development can be made explicit alongside produced or manufactured capital, and human capital, as well as links to social advancement, employment, and national wealth.
  2. EU Sectoral policies. NCA can contribute to the better understanding, articulation, and accounting of the range of services that ecosystems provide (provisioning, regulating and cultural). These services stand alongside those typically accounted for, such as the provision of timber or food, and need to be explicitly taken into account. Specific examples of policies to which NCA can add value to include environmental policies, agricultural and Regional polices: Provide a basis for future CAP reviews, Marine Common Fisheries Policies (MSFD, CFP): etc.
  1. In the context of the Union's promotion of environmentally responsible business practices, NCA has potential in providing a concrete basis for business performance reporting by explicitly mapping out impacts and/or dependencies on natural resources and placing a monetary value on them. Specific examples include: Business Accounting and Reporting, The disclosure of non-financial reporting and accounting Directives.
  2. Finally at international level, NCA can contribute to a globally consistent approach to account for ecosystems and their value. The EU contributes to the UN development of accounting standards such as the UN SNA, UNSEEA which includes environmental reporting and the UN SEEA EEA which is still in an experimental phase and includes ecosystem accounting. This ensures that the EU continues to play a lead role in international environmental affairs through its support for effective measures, international standards and accounting relating to natural capital.

Further information

Background Documents:

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