1

System of Environmental-Economic Accounting for Agriculture, Forestry and Fisheries (SEEA AFF)

Draft for global consultation

Food and Agricultural Organization of the United Nations

United Nations Statistical Division

November 2014

2

SEEA Agriculture, Forestry and Fisheries

Table of contents Chapter 1: Introduction

1.1 What is the System of Environmental-Economic Accounting for Agriculture, Forestry and Fisheries (SEEA AFF)

1.2 The scope and approach of SEEA AFF

1.3 Background to the development of the SEEA AFF

1.4 Implementation of SEEA AFF

1.5 Structure of SEEA AFF

Chapter 2: Applications and uses of SEEA AFF 2.1 Introduction

2.2 Primary ways of applying of the SEEA AFF framework

2.3 Applications of SEEA AFF to policy

Chapter 3: The conceptual framework of the SEEA AFF 3.1 Introduction

3.2 Basic national accounting principles

3.3 SEEA AFF Base accounts

3.4 Specific accounting issues

3.5 SEEA AFF Combined presentations

3.6 Aggregates and agri-environmental indicators

Chapter 4: Definitions and methods for SEEA AFF Base accounts 4.1 Introduction

4.2 Physical flow account for Food crops

4.3 Physical flow account for Non-food crops

4.4 Physical flow accounts for Livestock products

4.5 Asset accounts for livestock

4.6 Physical flow accounts for timber products

4.7 Asset accounts for forests and timber resources

4.8 Physical flow account for fish and other aquatic products

4.9 Asset account for fish and other aquatic resources

4.10 Accounts for stocks and flows of water resources

4.11 Physical flow accounts for energy

4.12 Physical flow account for greenhouse gas emissions

4.13 Physical flow accounts for fertilizers and pesticides

4.14 Asset accounts for land

4.15 Accounting for soil resources

4.16 Base accounts for economic data for SEEA AFF

Chapter 5: Overview of implementation and compilation of SEEA AFF

3

Chapter 1: Introduction

1.1 What is the System of Environmental-Economic Accounting for Agriculture, Forestry and Fisheries?

1. The System of Environmental-Economic Accounting for Agriculture, Forestry and Fisheries (SEEA AFF) is a statistical framework for the organization of data that permits the description and analysis of the relationship between the environment and the economic activities of agriculture, forestry and fisheries. These primary activities are dependent upon the environment and the resources and services it provides and, at the same time, have impacts on the local and surrounding environment.

2. Understanding the relationship between these activities and the environment supports a broader knowledge of the nature and impact of the production of agricultural, forestry and fisheries products, and provides information for the analysis of food security; environmental condition and sustainability of food, fibre and material production; and issues related to rural incomes and employment.

3. Further, the integration of information on these three activities recognizes the need to consider the intersections between the often separately considered objectives of each of the activities and the related environmental factors. The broadening dialogue concerning the water / climate / food / energy nexus, particularly in the context of the post-2015 development agenda reflects the increasing importance of understanding inter-linkages and trade-offs. The SEEA AFF aims to assist in better understanding such issues.

4. The framework outlined by SEEA AFF is designed to be applicable across all countries, regardless of their level of economic or statistical development, their economic structure or the composition of their environment. At the same time, since the nature and structure of agricultural activities varies considerably across countries, the precise structure of some SEEA AFF accounts is likely to vary across countries and should take into account those activities and products of most importance.

5. The SEEA AFF is also relevant to a wide range of readers including both users of information and compilers of statistics and accounts. Although written from the perspective of national accounting, it aims to describe a framework in a manner that highlights the connections between the compilation of underlying statistics, the organization of those statistics via an accounting framework, and the use the information for analysis and policy. It is thus intended to complement both guidance on statistical collection and the development of analytical and decision making tools.

6. As explained in various places through the SEEA AFF, the basic framework may be extended in a variety of ways. Over time, it is hoped that extensions and refinements will be undertaken that add to the depth of the SEEA AFF as described at this point in time. In this sense, the SEEA AFF provides a starting point or platform for the incorporation of an accounting approach to the integration and use of agricultural, forestry and fisheries data across the economic and environmental domains.

7. From a data perspective, the information in the SEEA AFF framework should sit within a broader national statistical system whereby various data from various agencies are increasingly harmonized and aligned. These data should include traditional survey and census based information, as well as data from administrative sources and increasingly data from geospatial information systems. The SEEA AFF can provide one tool to support the process of harmonization and alignment.

4

1.1.1 Connections to the SEEA Central Framework

8. The SEEA AFF applies the environmental-economic structures and principles described in the System of Environmental-Economic Accounting 2012 Central Framework (SEEA Central Framework). The SEEA Central Framework was adopted as an international statistical standard by the United Nations Statistical Commission in 2012 and was jointly published by the United Nations, the European Commission, the FAO, the IMF, the OECD and the World Bank in 2014 (UN, et. al. 2014).

9. Broadly speaking, the SEEA Central Framework provides the framework to account for (a) physical flows of various natural inputs, products and residuals (e.g. water, energy, emissions, waste); (b) stocks and changes in stocks of individual environmental assets (e.g. timber resources, fish resources, water resources, soil resources, land); and (c) economic transactions that can be considered environmentally related (e.g. environmental taxes, subsidies and similar transfers, environmental protection expenditure, production of environmental goods and services). Information on each of these types of flows, assets and transactions is organized following standard national accounting principles and following the classifications and definitions used in the national accounts and economic statistics more generally.

10. The SEEA Central Framework focuses on accounting at an economy-wide, national level. The SEEA AFF, on the other hand, describes the way in which additional information pertaining to agricultural activities can be integrated within the general SEEA framework and encourages the development of accounting tables for the range of stocks and flows that are relevant.

11. By considering the environmental-economic accounting tables of the SEEA Central Framework from the perspective of specific economic activities, SEEA AFF demonstrates not only the usefulness of accounting for individual stocks and flows but also the potential to use accounting frameworks to integrate information across data domains to support a broader range of analysis.

12. The SEEA AFF is intended to complement the accounting structures and principles of the SEEA Central Framework. Hence any work on accounting for individual stocks and flows, for example in physical supply and use tables for water or land use asset accounts, can be directly utilized in developing a set of SEEA AFF accounts. Conversely, work undertaken to implement SEEA AFF accounts will support broader efforts to implement the SEEA Central Framework at national level.

1.2 The scope and approach of SEEA AFF

1.2.1 Summary

13. The scope of the SEEA AFF covers agricultural, forestry and fisheries activities. The purpose of this broad coverage is to facilitate understanding and analysis of the trade-offs and dependencies between these activities that should be considered as part of national and local level planning. Often, the available information sets for each of these activities are developed independently. Consequently comparison of the activities may not be undertaken or management of the relevant resources may not fully consider relevant alternatives.

14. In this broad agricultural context, the design logic of the SEEA AFF involves three stages. First, SEEA AFF base accounts are designed which bring data from ten primary data domains (see Table 1.1) into an accounting structure where the structure reflects the SEEA Central Framework and standard accounting approaches. It is in this first stage that the basic accounting identities (see Section 3.2) are applied and the benefits of applying an accounting approach are gained in terms of ensuring data

5

coherence and consistency. The SEEA AFF base accounts are described in detail in Chapter 4.

Table 1.1 Data domains of the SEEA AFF

1. Agricultural production

2. Forestry

3. Fisheries

4. Water resources

5. Energy

6 Greenhouse Gas (GHG) emissions

7. Fertilizers and pesticides

8. Land use and land cover

9. Soil resources

10. Economic data

15. Second, using information from the base accounts, data for selected variables are brought together into combined presentations. Combined presentations may take many forms since they do not need to conform to strict accounting identities and rather should organize information relevant for discussion of a particular question or policy theme. Nonetheless, as described in Chapter 3, SEEA AFF combined presentations should consider information from across the three broad economic activities agriculture, forestry and fisheries and from all data domains.

16. Third, using information from the combined presentations, indicators can be produced to show trends in the relationship between agricultural, forestry and fisheries activities and the environment. A particular focus of these indicators should be the intensity of the use of environmental assets and environmental flows relative to production. For example, it should be possible to develop indicators that describe the changing intensity of key commodities with respect to their underlying use of land, water, energy and fertilizers and their generation of greenhouse gas (GHG) emissions.

17. A particular feature of the SEEA AFF approach is that within the broad activities of agriculture, forestry and fisheries one focus is to structure information according to key or most important products. Thus, in addition to grouping information according to more generic activities such as cropping or livestock rearing, the intent is to articulate a relatively comprehensive set of economic and environmental inputs for the production of individual commodities such as wheat, rice, beef, timber and specific species of fish.

18. By providing a framework for integrating more macro level information with specific commodity level information it is anticipated that a more constructive understanding of the drivers for macro levels trends can be developed and a link to policy responses can be more effectively developed. For example, measuring production and associated environmental trends at the level of cropping, livestock, or fisheries does not provide a clear sense of what type of crops or animals or what types of production approach are being used. It is only by understanding the main contributors to production patterns and environmental trends that policy responses can focus appropriately.

19. Further, in using a key product approach the SEEA AFF aims to support more directly the analysis of agricultural economists, ecologists and others which, at

6

country level, will tend to focus on individual products that are significant in terms of their contribution to overall agricultural production, exports, food supply or in relation to environmental constraints such as land or water. It is further noted that the structure of individual product production functions (i.e. functions describing the relationships between inputs and outputs) are likely to vary considerably by product type particularly in relation to environmental inputs (such as water).

20. While a key product approach is an important perspective, it is also necessary to maintain a connection with broader aggregations, for example at the level of cropping activity. This is because there are likely to be linkages between commodity types and other more general pressures and constraints such as the availability of water and land - that need to be assessed.

21. Within agriculture, in concept it would be possible to extend the structure of SEEA AFF to a finer than product level and articulate production functions for different approaches to the production of specific products. For example, distinguishing between intensive and extensive production of livestock. In general this extension is not described in the SEEA AFF base accounts and combined presentations, with the exception of the distinction between capture fisheries and aquaculture.

22. Although the SEEA AFF targets a relatively fine level of detail, the approach taken ensures a connection to the organization of information at the macro industry and economy wide level. In large part the approach taken is to organize macro level data from the standard national accounts and other national level datasets and seek to integrate micro level perspectives. For example, using aggregate measures of the supply and use of fertilizers (including measures of production, imports and exports) as a starting point for the derivation of measures of fertilizer use for key products such as rice or wheat.

23. This approach should allow the important relationships established at the micro level to be appropriately scaled and their relative importance established. In effect, SEEA AFF aims to mainstream more detailed economic and scientific research on agricultural, forestry and fisheries production.

24. At this stage, the SEEA AFF framework has been designed to cater for national level analysis of agricultural, forestry and fisheries activities and products. Working at this level enables a more direct mainstreaming of environmental information into standard economic assessments of these activities and provides the broadest framing of information. At the same time, it is possible to develop extensions of the framework to the sub-national level across the various data domains. Such extensions may be relevant for particular policy issues, for example water use in specific catchment areas.

25. An important theme through the SEEA AFF is working from the outside in. The logic is that by starting from a national and broad activity perspective across the set of data domains it is possible to progressively allocate and partition the data using a variety of data and indicators such that product level information can be placed within a broader context. This approach is also known as multi-level analysis. The example above of the integration of fertilizer data from the national accounts and in relation to key products is relevant in this context.

26. By placing product level information in a broader context the SEEA AFF moves beyond measurement of the environmental-economic relationship that may be reflected in specific studies of, for example, wheat production in temperate agricultural zones. While such studies (which may be economic or ecological in focus) are likely to be very useful, they can be challenging to scale upwards to enable integrated analysis in the context of other economic activities.

7

1.2.2 Potential extensions of the SEEA AFF approach

27. The design of the SEEA AFF shows the potential to organize information that can assist the analysis of the relationship between the environment and the economy for agricultural activities. At the same time, it is worth noting a number of directions in which the SEEA AFF framework might be extended.

28. First, in line with the discussion in the SEEA 2012 Experimental Ecosystem Accounting, it would be possible to extend the articulation of the production functions for individual agricultural products to include inputs of ecosystem services. In the context of agricultural production, ecosystem services are the contributions made by the ecosystem to the production of agricultural products such as crops, livestock, timber, fish, etc. Examples of ecosystem services include pollination, soil retention, water provisioning, and nutrient flows. The relevant set of ecosystem services will vary for different agricultural products and for different production processes.

29. Such an extension to ecosystem accounting would consider the range of ecosystem services, the capacity of agricultural and surrounding ecosystems to continue to provide those services in a sustainable manner, and the potential for substitution and trade off between ecosystem services and produced goods and services (for example by using cultivated bees rather than natural pollinators).

30. In assessing the capacity of ecosystems and important aspect is the measurement of ecosystem condition i.e. the state of an ecosystem and how it is changing over time. While techniques to measure ecosystem condition on a comparable basis at national level are still developing, the general approach is to assess various characteristics of ecosystems since the direct measurement of ecosystems is not possible. Relevant characteristics will include factors such as water resources, soil type, climate and biodiversity.

31. An important aspect of ecosystem accounting is its use of a spatially explicit approach to measurement and hence its integration of increasingly available geo-spatial data, including for example remote sensing data.

32. While conceptually an extension of SEEA AFF to incorporate ecosystem accounting is possible, there remains important research and testing to be undertaken before a more definitive ecosystem accounting approach can be outlined. Such research and testing is underway and significant advances are expected in the short to medium term.

33. Second, the SEEA AFF might be extended to incorporate accounting for economic transactions related to agricultural activities that are considered to be environmentally related. Examples of such economic transactions include environmental protection expenditure by economic units involved in agricultural activities (agricultural units); environmental taxes and subsidies payable and receivable by agricultural units; and rents payable by agricultural units including payments for the use of land, payments for access to forest reserves (for example through stumpage fees), and payments in relation to fisheries quotas.

34. Since these are all standard economic transactions, the general accounting treatment of all of these transactions is outlined in the international standard for national accounts the System of National Accounts 2008 (SNA 2008). Further, the SEEA Central Framework provides additional guidance on identifying environmentally related transactions. Given these two primary conceptual sources, there is little additional guidance that might be provided in the SEEA AFF aside from noting the potential to identify those transactions relevant to agricultural, forestry and fisheries activities. As appropriate, such information may be drawn into combined presentations, but this potential is not elaborated in SEEA AFF.

8

35. Third, the SEEA AFF might be extended to integrate social information. Some social information has been incorporated in the SEEA AFF such as food consumption and nutrition and employment. However, extensions might be made to issues of rural incomes and poverty, access to water and energy in rural areas, age and gender that are of ongoing policy interest from an overall sustainable development perspective. This extension would require further discussion and co-ordination with related projects.

1.3 Background to the development of the SEEA AFF

1.3.1 Process for the development of SEEA AFF

36. The SEEA AFF has been developed within the broader body of work on the SEEA for the establishment of international statistical standards for environmental-economic accounting. In 2007 the United Nations Statistical Commission agreed, at its thirty-eighth session, to start a revision process to advance previous work on the SEEA namely the 1993 SEEA and the SEEA-2003. This process was managed under the auspices of the newly formed United Nations Committee of Experts on Environmental-Economic Accounting (UNCEEA).

37. Since 2007 the UNCEEA has managed the development of a range of environmental-economic accounting documents. Primary among them has been the SEEA 2012 Central Framework which was adopted as an international standard in 2012 by the Statistical Commission at its forty-third session.

38. Following a range of discussions, at its 2012 meeting, the UNCEEA endorsed the FAO led plan to develop a SEEA for Agriculture, Forestry and Fisheries. The work on SEEA AFF commenced in June 2013 with resourcing for the project from the FAO led Global Strategy to Improve Agricultural and Rural Statistics.

39. As the SEEA AFF sits within the broader SEEA family it has direct connection to the more general, economy wide SEEA Central Framework and also to the international standards for national accounts, the System of National Accounts 2008. At the same time, the SEEA AFF builds on earlier work on environmental-economic accounting for agriculture, forestry and fisheries most notably work by the FAO and Eurostat on Economic Accounts for Agriculture, work led by FAO on Integrated Environmental and Economic Accounting for Fisheries (SEEA Fisheries, 2004) and work by Eurostat on The European Framework for Integrated Environmental and Economic Accounting for Forests (IEEAF, 2002).

1.3.2 Related statistical documents and initiatives

40. The contributions of these earlier, activity specific, documents were important to the development of the SEEA Central Framework, particularly with respect to the development of standards for accounting for timber and aquatic resources. The SEEA AFF goes beyond the activity specific perspective and provides a cross-activity framework for the integration of information. In doing so it covers a wider range of data domains than envisaged in any of those documents.

41. Another important document is the System of Economic Accounts for Agriculture (SEAFA) developed by the FAO in 1996 building on initial work on a Handbook for Economic Accounts for Agriculture (EAA) released in 1974. A number of the motivations for the SEAFA work are the same as for SEEA AFF and there are distinct overlaps in terms of the types of economic and production data described in both systems.

9

42. The differences between SEEA AFF and SEAFA lie in three main areas. First, the SEEA AFF incorporates to a far greater extent physical data on economic and environmental domains reflecting the development since 1996 of the physical accounting aspects of the broader SEEA framework. Second, the SEEA AFF incorporates environmental and natural resource considerations far more extensively, thus supporting analysis of the sustainability of agricultural, forestry and fisheries production and consumption. Third, the SEAFA describes in detail the connections between agricultural, forestry and fisheries activity and related income allocations across economic sectors such as households. Since both approaches are based in the System of National Accounts, it is quite straightforward to reconcile the frameworks and the differences should be interpreted largely in terms of changes in the focus of analysis and policy over the past 20 years.

43. In covering so many data domains (see Table 1.1) the SEEA AFF has potential links to many initiatives. In practice these links need to be more fully elaborated and explored. SEEA AFF thus may represent an important catalyst for discussion on integration of these different projects. This sub-section highlights some of the statistical initiatives that are connected to the development of SEEA AFF at the country level.

Implementation of the Global Strategy to Improve Agricultural and Rural Statistics

44. The Global Strategy to Improve Agricultural and Rural Statistics (GS) is an ongoing statistical initiative commenced in 2011 in response to rising concerns about the quantity and quality of agricultural statistics for many countries of the world. These concerns reflected the understanding that there are important connections between improved information, improved agricultural performance and improved standards of living for millions of people living in poverty, often in rural areas.

45. The main focus of the work of the GS is the development and implementation of techniques and approaches to the collection and use of relevant statistics. The SEEA AFF thus sits at one edge within the broader development of agricultural statistics. In many ways there should be close complementarity between work to improve the coverage and quality of agricultural statistics and implementation of SEEA AFF. Implementation of the GS should provide more and better data and the SEEA AFF should provide a framework to consider the integration of various data sources and toe assess data gaps.

46. Of particular relevance in this regard is the intention in the GS to develop a master sampling frame which would form the basis for the collection of agricultural statistics within a country. The development of co-ordinated collection approaches in this way should support work to implement SEEA AFF.

47. There is a range of other statistical activities underway within the FAO that are also of relevance and should support implementation of the SEEA AFF. These include work on improving statistics for forestry and fisheries, work to measure agricultural greenhouse gas emissions for all countries, work on measurement of land cover and the Global Agro-Ecological Zones database, and the development of methods and guidance for the compilation of food balance sheets and estimates of the cost of production.

Implementation of the SEEA and SNA

48. The adoption of the SEEA Central Framework as an international statistical standard in 2012 places an expectation that countries will endeavor as resources and capacity allows, to implement the standard. Simultaneously it places a requirement on the

10

international statistical community to support the implementation of the SEEA Central Framework in countries. An implementation strategy for the SEEA Central Framework was endorsed by the United Nations Statistical Commission in 2013 and work continues to give effect to that strategy.

49. Given that the SEEA AFF represents the application of SEEA Central Framework structures and accounts to agricultural, forestry and fisheries activities there should be strong synergies between any implementation programs. Indeed, the SEEA AFF may provide a useful catalyst to implementation more broadly given its direct connections to many critical policy issues for many countries.

50. Similar implementation strategies exist or are being developed for other SEEA components such as SEEA Water and SEEA Energy. The recent legislation in the European Union requiring the development of six SEEA based accounts has also generated a range of guidance and training materials to support implementation at country level.

51. Since the SEEA AFF focuses on a specific set of economic activities, rather than focusing on specific environmental stocks or flows, there are also strong connections to the implementation of the 2008 SNA at national level. This is particularly the case for those countries where agriculture, forestry and fisheries constitutes a large share of GDP (e.g. >15%). The implementation of SEEA AFF should directly improve the estimates of value added for the industries concerned. Thus, any work underway on SNA improvement should be considered in the light of the SEEA AFF material.

Implementation of ecosystem accounting

52. An emerging area of accounting is ecosystem accounting. A description of the approach is provided in SEEA 2012 Experimental Ecosystem Accounting. The focus of ecosystem accounting is on the state and changing state of ecosystems (considered to be assets) and the associated flows from ecosystem known as ecosystem services. Given the direct link between agricultural, forestry and fisheries activities and ecosystems the development of ecosystem accounting is of direct relevance.

53. At this stage the SEEA AFF does not extend to consider ecosystem assets or ecosystem services. At the same time, as testing and development of ecosystem accounting advances, the information in the SEEA AFF will prove of direct relevance in estimating various components of the ecosystem accounting framework. This is particularly the case with measurement of forests, fisheries, soil resources, water resources and production/extraction activity.

Connections to other measurement activities

54. Alongside the initiatives described above which have direct connections to the implementation of the SEEA AFF, there are other activities underway to improve the quality of statistics. These include Paris 21, the implementation of the Framework for the Development of Environment Statistics (FDES) and, more generally, the process current underway to define and measure indicators as part of the Post-2015 development agenda. Depending on activities underway in a specific country, coordination with these other activities may be desirable.

55. In addition, as described in more detail in Chapter 2, there are a number of global indicator initiatives to which the framework described in SEEA AFF is of relevance. Primary among these is the discussion of the post-2015 development agenda and the articulation of a set of sustainable development goals (SDGs). A number of the proposed SDGs have close links to agricultural, forestry and fisheries activities and

11

hence the development of indicators for the SDGs and related targets may be able to be linked explicitly to the concepts and structures of the SEEA AFF.

1.4 Implementation of SEEA AFF

56. The SEEA AFF describes a framework for the organization and integration of information from multiple domains. Through careful design and using the accounting principles from the SEEA Central Framework and the SNA 2008, the SEEA AFF provides a structure within which compilation exercises may be undertaken.

57. As for the SEEA Central Framework, it is not expected that countries would be able to implement all aspects of the SEEA AFF in a single step. Rather a flexible and modular approach to implementation is envisaged where countries would look to implement the components of SEEA AFF incrementally, taking into consideration available resources and national requirements.

58. As with all areas of environmental-economic accounting, a mix of agencies and disciplines is required for implementation. Given this, a fundamental requirement for successful implementation is considered planning and co-ordination. Implementation of SEEA AFF should not be seen as a solely technical or statistical exercise. Significantly, for the efforts to be appropriately targeted it is important that producers and owners of information and users of information be involved from the outset. The draft SEEA Implementation Guide provides a description of the steps involved in establishing planning and co-ordination efforts to implement the SEEA.

59. The SEEA AFF itself does not provide detailed guidance on the compilation of data for specific domains. Rather, the focus is on describing a framework that provides a structure and rationale for the compilation of data that can be integrated. At the same time, to provide a starting point for work in this area a separate chapter, Chapter 5, has been included to summarise the most common data sources that are relevant to populating the base accounts described in the SEEA AFF. The chapter also provides links to available topic-specific methodological advice and thus gives a sense of areas in which those co-ordinating and planning SEEA AFF might focus their work.

1.5 Structure of SEEA AFF

60. To be drafted following initial round of consultation

12

Chapter 2: Applications and uses of SEEA AFF

2.1 Introduction

2.1.1 Introduction

1. The SEEA AFF provides a structure for the organization of data that are useful for policy and analytical work. With this objective in mind, the structure of the SEEA AFF must be informed by and be responsive to the needs of data users. This chapter outlines a range of areas and ways in which SEEA AFF data might usefully respond to those needs and encourage a ongoing discussion between data compilers and data users. The chapter highlights some potential applications and should not be seen as an exhaustive list. Through development and testing it is expected that the variety of applications will grow.

2. As with the SEEA generally, the main purpose of SEEA AFF is the integration of environmental and economic data with the aim of supporting the mainstreaming of environmental information in economic, planning and development policy analysis and monitoring. Too often, environmental and economic data are considered independently, based around the analytical frameworks that pertain to each field. Further, linkages to health, poverty and other social and demographic dimensions are not drawn. Consequently, much analysis does not take sufficient account of the broader set of factors that will influence an overall system and its outcomes.

3. This issue is very real in an agricultural, forestry and fisheries setting since the connections between economic units (businesses), the associated people and societies, and the environments and ecosystems in which they are located are fundamental. Farmers rely directly on the quality of the soil and the availability of water to grow crops and raise livestock. Foresters must balance the extraction of timber with the overall functioning of the forest taking into account soil stability and the management of pests and disease. Fishermen need to understand how their activity is impacting on the overall fish stock and how the local environment (freshwater or marine) supports healthy populations. And all of these economic actors must consider their own livelihoods and the situation of the communities in which they live.

4. At the same time a focus only on environmental and ecological factors involved in production and harvest ignores the reality that those involved in agricultural activities aim to sustain an income for themselves and their family and in this context face various costs of inputs, delivery and storage, consumer demand and other factors that drive economic decisions and the choices made with respect to use of the environment. It is in this challenging decision making space that requires balancing economic and environmental factors that the SEEA AFF information set aims to operate.

5. As expressed in the two previous paragraphs, SEEA AFF may be seen as relevant only to the analysis of individual, albeit extended, production functions. That is, the SEEA AFF brings together information to extend and improve the data available for analysis of, for example, the cultivation of rice, the rearing of livestock, and the management of forests and fish stocks. It is certainly the case that a SEEA AFF data set should assist in the co-ordination of information for these and other types of production functions but, it is likely that those directly involved in those specific areas of production already have a wide range of information and experience that enables decision making. While the SEEA AFF can support such analysis is not intended to replace such detailed product specific expertise.

13

6. Rather, the analytical benefits of the SEEA AFF stem from its application of the same framework across different products and activities. By utilizing a common framework comparisons between products and activities is facilitated since the concepts, definitions and classifications used are the same. That is, the production of wheat can be directly compared to the production of forest products or fish. Further, by using the concepts of the national accounts and the SEEA Central Framework, the agricultural products and activities can be compared to products from other industries such as manufacturing, retail and services.

7. Beyond direct structural comparisons between, for example, yield per hectare or energy use per tonne harvested, data that are in a common framework can be used to assess trade-offs between alternative scenarios using various modeling techniques.

8. A related feature is that the starting scope of the SEEA AFF is national level activity. In concept then the data in the SEEA AFF framework are not simply cases studies of stylized or exemplar production functions. Rather the relationships between inputs and outputs are based in aggregate measures of production, supply and demand. In this context the SEEA AFF may assist in scaling more detailed studies and thus permit mainstreaming of such technical data into macro level discussions. The logic of this micro macro connection is an underappreciated aspect of the standard economic accounts which facilitate combining detailed survey data on input-output relationships for specific industries with macroeconomic indicators of international trade, consumer demand, production and investment.

9. The integration of environmental and economic data is considered an important step towards mainstreaming the discussion of environmental factors in economic, planning and development policy. Information, in itself is however no guarantee of a particular outcome with respect to policy or decisions, but its availability may encourage a more informed approach to decision making. The chapter aims to outline the relevant connections between the SEEA AFF and more informed decision making.

2.1.2 Potential beneficiaries

10. Within this general ambition of mainstreaming environmental information into economic and related decision making there are a range of possible users and beneficiaries of the SEEA AFF framework and SEEA AFF based data sets. The following descriptions suggest some of the likely prominent users and beneficiaries. It should be noted that the beneficiaries may be either users of information or compilers of information.

11. Information agencies including national statistical offices: These agencies can benefit from the SEEA AFF through it provision of a structured framework in which to place multiple data sources in context. Further, the SEEA AFF encourages the use of consistent and non-overlapping concepts, data item definitions, classifications of activity and product, etc. The use of such feature may assist in streamlining data collection activity and assisting data confrontation and quality assessment.

12. National accounts compilation: In many countries agricultural, forestry and fisheries activity is a significant contributor to GDP. Commonly also, methods for the collection of data on this activity are hindered by the large numbers of producers and their spatial distribution, by the seasonal nature of the activity and by the prevalence of own account and subsistence production. Since the SEEA AFF is a framework with a basis in the SNA (the measurement standard for GDP), work to compile SEEA AFF based accounts will be directly relevant to the compilation of estimates for a countrys core national accounts and hence can contribute to the compilation of higher quality estimates of GDP.

14

13. Government departments and agencies (e.g. Departments of agriculture, forestry and fisheries; Departments of environment; Central macro-economic, development and planning institutions): Although departmental structures vary considerably around thr world most countries and many administrative regions will have departments with interests that span economic and environmental issues. Commonly, their core datasets are likely to be many and varied and not conducive to the joint consideration of environmental and economic factors. Data compiled following the SEEA AFF should assist these various departments to better understand and convey macro and micro level linkages and trade-offs between these factors.

14. Natural resource managers: In many respects the compilation of the SEEA AFF will require the input from natural resource managers such as foresters, fisheries experts, soil experts and hydrologists. The SEEA AFF is likely to provide little direct information to support better management of these individual natural resources but the use of a common framework may facilitate a greater appreciation of linkages between natural resources and between natural resources and economic drivers for their use.

15. Industry associations, individual economic units, including multi-national corporations: Often the focus of discussions on the use of the SEEA concerns its relevance for government and administrative decision making. However, a well established, broadly based information set on agricultural activities is also likely to be of particular interest to private sector economic actors including industry associations and businesses. Information from a SEEA AFF database may provide useful source of business intelligence and support the assessment of risks through the supply chain.

16. Academia and research institutes: The increasing focus on environmental-economic and other interdisciplinary linkages suggests that the availability of data sets to support analysis of this type should support research and independent monitoring in these areas. Further, the methodological challenges involved in bringing together environmental data in physical terms within an economic accounting framework will require ongoing investigation and thus provide important entry points for researchers.

17. International agencies: For international agencies the SEEA AFF framework may provide a number of important links. From a statistical perspective the SEEA AFF framework can support efforts to improve the quality of relevant statistics around the world, in particular through collaboration with the Global Strategy to Improve Agricultural and Rural Statistics. From a development perspective, given the relative significance of agricultural, forestry and fisheries activities (particularly in terms of employment), a greater understanding of the environmental linkages is important, as is the capacity to compare across countries using comparable metrics, including for example agri-environmental indicators.

18. There is also a wide range of global policy initiatives that have important links to agricultural, forestry and fisheries activities including the Post-2015 development agenda and its Sustainable Development Goals, UNDP/UNEP Poverty Environment Initiative, UNEP REDD+, CBD Aichi Biodiversity Targets and goals, UN Convention on Deforestation and Desertification, Sustainable Energy for All, and the UNFCCC.

2.1.3 Links to SEEA Applications and Extensions

19. Chapter 1 introduced the SEEA AFF as being based upon the concepts and definition of the SEEA Central Framework and the SNA. In many ways, therefore, the SEEA AFF may be considered an application of the SEEA Central Framework but with a specific focus on agricultural, forestry and fisheries activity. This connection is important since it means that, in general terms, the various applications, uses and

15

extensions of the SEEA Central Framework are also applicable in the case of SEEA AFF.

20. In this context, SEEA 2012 Applications and Extensions has been prepared as part of the SEEA Central Framework drafting process. It provides a broad overview of ways in which data, once organized following the design of the SEEA Central Framework, may provide indicators; be used in analysis; and support extensions to related thematic areas. Readers are encouraged to review the material in SEEA Applications and Extensions as another way of understanding the potential use of the SEEA approach.

21. A particular aspect of SEEA Applications and Extensions is its description of environmentally extended input-output tables and the ways in which such tables are able to support detailed modeling exercises, including input-output analysis, general and partial equilibrium analysis and other related approaches. A summary of possible approaches is provided in section 2.2.3 below.

22. Since the SEEA AFF follows the design of the SEEA Central Framework, data compiled following the SEEA AFF will, with the required attention to detail, also support this type of analysis. Indeed, it may be the case that detailed agricultural related environmental-economic modeling is underway within a country. This type of work would be very usefully supported by a data set compiled along the lines of SEEA AFF. Further, compilation of SEEA AFF is likely to be very usefully informed from collaboration with those involved in agricultural modeling.

2.2 Primary ways of applying the SEEA AFF framework

23. This section describes the different ways in which the SEEA AFF framework may be used. Some ways will be more relevant to some users than others but the variety of uses highlights the potential of the SEEA AFF, as with the SEEA more generally, to provide a common platform for engagement across disciplines.

2.2.1 Use in statistical and data co-ordination

24. With its strong connections to the SEEA Central Framework and the SNA, the SEEA AFF brings with it the many features these accounting based statistical frameworks provide to the organization of information and statistical activities. Important possibilities in this regard include the following.

25. Conceptual framework for a database and central point for organizing data. Through its use of consistent classifications (e.g. product, activity) and information structures (e.g. supply and use tables, asset accounts), the SEEA AFF provides a platform for considering how to bring together economic and environmental information into a common setting.

26. Data gap analysis and gap filling. The SEEA AFF is a broad framework designed on the information that would be most relevant rather than on the basis of the information that are currently available. Given its breadth, the SEEA AFF framework can be used to highlight and assess areas of missing or poor quality data and hence support the allocation and prioritization of resources to fill data gaps deemed of most importance.

27. Data collection and reporting. As a conceptual framework SEEA AFF is able to support and encourage the use of consistent data item definitions across different collections; to support and encourage the use of consistent classifications across collections (e.g. product classifications); and to facilitate the exchange of data between agencies, including at international level.

16

2.2.2 Uses in defining indicators

28. One of the important motivations for the SEEA is to assist in the derivation of indicators that reflect cross-domain comparisons such as yield per hectare and water use per tonne of crop produced. For these indicators to be most meaningful there needs to be a consistency in the definition of the information from all relevant datasets. Most commonly, different datasets apply slightly different scopes, definitions and classifications and as a result the quality of resulting indicators may be compromised.

29. The SEEA AFF meets this challenge by describing a common scope and classification for all datasets. This provides a basis for both the adjustments required to primary data to derive high quality cross-domain indicators and also giving a basis for developing the primary data sets themselves.

30. This section outlines some of the types of indicators that may be relevant from the perspective of environmental-economic links for agricultural activities. It builds on the introductory information on indicators in Chapter 6 of the SEEA Central Framework and the economy wide discussion on indicators in Chapter 2 of the SEEA Applications and Extensions.

31. Chapter 6 of the SEEA Central Framework describes three broad types of indicators: (i) descriptive statistics; (ii) environmental asset aggregates and indicators; and (iii) environmental ratio indicators. All three types of indicator are relevant in a SEEA AFF context.

32. Descriptive statistics cover measures of aggregates and totals such as the total fertilizer use by agriculture, total production of livestock products, etc where the totals emerge from aggregations within the accounting structure. Descriptive statistics also include structural statistics such as the proportion of irrigated water use attributable to food crops or the share of land used for forestry. In a SEEA AFF context, descriptive statistics will tend to be based on information from within a single base account or in relation to a single variable such as value added or employment (e.g. the share of employment in agriculture/forestry/fisheries).

33. Environmental asset aggregates and indicators cover measures of the stocks and changes in stocks of environmental assets in both physical and monetary terms. Measures of depletion and estimates of asset/resource life are included in these indicators. In physical terms environmental asset indicators will be derived from a single asset account. In monetary terms it is also possible to consider the derivation of indicators such as the share of national wealth (i.e. the sum of all national economic assets less liabilities to the rest of the world) attributable to individual environmental assets.

34. Environmental ratio indicators are of three main types. First, productivity and intensity indicators where the use of a resource or input (e.g. energy use) is related to a measure of output (e.g. value added, production). A productivity indicator uses the resource or input measure as the denominator, whereas an intensity indicator uses the resource or input measure as the numerator. The derivation of meaningful productivity and intensity indicators is perhaps the most significant application of the SEEA AFF framework. The intent is to develop these types of indicator across difference environmental variables (land use, water use, energy use, etc) and across individual products and activities.

35. Second, decoupling indicators which are similar in form to productivity indicators but tend to focus on residual flows (such as emissions) or flows considered potentially unsustainable (such as energy use) and also tend to focus at aggregate levels. A good

17

example of a decoupling indicator is the GHG emissions to GDP ratio where decreases in the ratio reflect a decoupling of GDP growth from GHG emissions. A similar ratio may be developed with a focus only on agricultural, forestry and fisheries activity.

36. Third, are polluter pays indicators which link estimates of physical flows of residuals, (e.g. GHG emissions, flows of waste), with the associated costs to business such as payment of relevant taxes or expenditures to treat or remediate the pollution. Extensions to the set of SEEA AFF accounts to incorporate information on environmentally related taxes and other payments would be needed to develop these indicators. The use of SEEA AFF in this way may assist in quantifying the costs of pollution.

37. Given this range of potential indicators and given the breadth of the SEEA AFF framework it would be possible to develop a set of SEEA AFF indicators. However, as explained in Section 3.5 it is not the intention of SEEA AFF to propose a specific set of agri-environmental indicators, sustainability metrics or similar. Rather it is considered that SEEA AFF can provide a framework within which the data used to derive indicators through participative processes is readily available and organized in a coherent fashion.

38. Examples of indicator sets include the indicators being developed to support the post-2015 Sustainable Development Goals, the FAO/OECD/Eurostat set of agri-environmental indicators and the indicators within the Sustainable Energy for All (SE4All) Global Tracking Framework. Many of the indicators within these indicators sets can be derived from a SEEA AFF based dataset and, in reverse, it would be relevant for the selection of indicators to consider the potential to derive indicators based on the SEEA AFF framework.

39. Once a set of indicators has been established there may be interest in developing a single, overarching indicator that combines the information in the various sub-indicators. A well-known composite indicator is the Human Development Index that combines indicators of life expectancy, knowledge and education and national income. The SEEA AFF offers no specific advice on the formation of so-called composite indicators and points to the considerations described in the OECD Handbook on Constructing Composite Indicators.1

40. The SEEA AFF does not define a concept of sustainability and nor does it suggest that direct measures of overall sustainable development may be derived from a SEEA AFF dataset. At the same time, the SEEA AFF does provide information that is relevant in assessing the sustainability of agricultural production and in the measurement of some of the many facets of sustainable development, particularly in relation to those in rural areas. The distinction between organizing relevant information and the direct measurement of sustainability is an important one to recall when considering the potential role of the SEEA AFF.

2.2.3 Uses for detailed analysis and modeling

41. The information in the SEEA AFF can also be used to support the compilation of environmentally extended input-output tables (EE-IOT). EE-IOT are introduced in Chapter 3 of the SEEA Applications and Extensions.

42. The general idea of EE-IOT is that standard input-output tables that focus only on flows of products within an economy measured in monetary units, are extended to

1 OECD, Joint Research Council European Commission (2008) Handbook on Constructing Composite Indicators: Methodology and User Guide, OECD, Paris

18

incorporate environmental flows, measured in physical units, such as GHG emissions, use of water and energy, and the like. The mathematics of input-output analysis have been adapted to suit this extension with the key being the organization of information on the additional environmental flows using the same product and industry classifications as used in the standard input-output table.

43. Since standard input-output tables are structured in a manner aligned with the SNA, environmental information that is organized following the SEEA, including agricultural, forestry and fisheries data, can be readily incorporated into an EE-IOT.

44. EE-IOT have been developed for individual countries and, increasingly, are being developed to cover multiple countries so called Multi-Regional Input-Output tables (MRIO). MRIO incorporate connections between countries in terms of the international trade in goods and services.

45. Once EE-IOT are established a range of different types of analysis may be supported. The following examples are described building on the descriptions in the SEEA Applications and Extensions. Readers are referred to that document for further information and related references.

46. Multipliers. Using the structural relationships between input and outputs that are reflected in EE-IOT, multipliers can be derived that provide a measure of direct and indirect impacts per unit of output by industry. So, for example, multipliers can provide a measure of the potential increase in emissions due to increases in production in one industry both for that industry (direct impacts) and for the economy as a whole (indirect impacts). Multipliers may also be considered in terms of backward linkages (i.e. the series (or chain) of inputs and outputs leading to the production of agricultural, forestry and fisheries outputs) and forward linkages (i.e. the series of inputs and outputs that commence with those outputs).

47. Footprints and related responsibility analysis. The derivations of footprints are similar to the logic of multipliers in using structural relationships between inputs and outputs. However, the focus is to attribute responsibility for the environmental flows either to producers or final consumers.

48. By working from a consumption perspective, one effect of a footprint approach is to incorporate the environmental inputs and impacts not only in the country in which the consumption takes place but also the inputs and impacts in other countries whose production is imported into the consuming country. Various assumptions are generally required in order to support such cross country analysis and the availability of detailed data such as contained in the SEEA AFF would be of direct relevance in better understanding the cross country connections.

49. Structural decomposition analysis. This type of analysis again based on the structural relationships within an EE-IOT enables understanding the drivers behind changes in specific variables. For example, the changes in total emissions may be attributable to changes in the intensity of production, changes in industry structure or changes in final demand. Because the detailed SEEA AFF data can be integrated within a broader data set for the whole economy, such decomposition can be supported.

50. Extended productivity analysis. Traditionally, measures of industry and activity level multi-factor productivity (MFP) estimated using growth accounting techniques have been limited to considering the factors of labour and produced economic assets. The extended data set of the SEEA AFF would enable consideration of additional factors of production, in particular the role of natural resources, and thus support measurement of extended or green estimates of MFP. A SEEA AFF dataset would also support productivity analysis using alternative techniques.

19

51. Modeling of international trade. For all countries, the international trade in agricultural, forestry and fisheries commodities is an important issue and is commonly a key focus of bilateral and multi-lateral trade discussions. Data based on the SEEA AFF framework could be used to inform modeling of the effects of trade agreements and, in particular, encourage consideration of environmental factors when assessing the various trade-offs involved. A particular consideration in this analysis is likely to be the varying levels of subsidy to agricultural, forestry and fisheries activity that are provided in different countries.

52. General and partial equilibrium analysis. General and partial equilibrium analysis is also based on EE-IOT but incorporates a more dynamic approach to assessing the structural relationships as distinct from the static approach that is used in input-output analysis (reflected in the types of analysis just described). In equilibrium analysis additional assumptions regarding the operation of the economy are introduced enabling resource constraints to be taken into account for example constraints in the availability of labour and natural capital. Further, the datasets used for this type of analysis often incorporate social extensions to IOT datasets in the form of Social Accounting Matrices (SAMs). Again, as for other EE-IOT based analysis, the SEEA AFF data can be used to support equilibrium analysis particularly where there is a focus on the analysis on agricultural activities and potential constraints around natural capital for example land and water resources.

53. A common alternative to input-output based approaches to analysis is life cycle analysis (LCA) in which connections between inputs and outputs in the supply chain for a product or group of products, generally working from the point of consumption, as for footprint analysis. While LCA cannot reflect the full integrated structure of production and consumption, its bottom up approach can provide a detailed consideration of the relevant factors and drivers, both environmental and economic. although

54. Data from SEEA AFF based approaches should support both types of analysis and there may be important synergies in considering both LCA and input-output based approaches. However, careful design is required to ensure that links through the supply chain can be appropriate tracked, for example in the selection of measurement units as livestock move from farm, to manufacturer to household.

2.3 Applications of SEEA AFF to policy

55. This section complements the previous two sections by describing different policy areas that might be supported by the availability of a well-populated SEEA AFF data set. In considering the different areas it should be recalled that one, general, motivation for the work on SEEA AFF and the SEEA overall, is to encourage and facilitate a discussion on connections between environmental and economic factors, particularly in economic, planning and development decisions. It is unlikely that statistical information alone will constitute the basis for decisions. In this sense the approach taken in the SEEA AFF to integrate and combine data in meaningful ways is just as important as the particular descriptions and definitions outlined here.

56. The term policy is used in a generic way. It covers the use of information to support the policy development process whereby alternative options and scenarios are considered. It covers the use of information for the analysis of policy outcomes and finally relates to the use of information to monitor progress in a policy for example through indicators or benchmarks. In addition, while often focused on government policy processes, the term policy is used here to also apply to the decision making frameworks of non-government units, including corporations and small businesses.

20

2.3.1 Primary policy themes

57. The design of the SEEA AFF framework supports discussion in four broad policy themes. This section provides a brief description of those themes and the potential links to specific policies. The four themes also provide a basis for the articulation of four SEEA AFF combined presentations that are described in section 3.5.

Theme 1: Activity and product specific inputs.

58. Under this theme the focus is on the analysis of the economic and environmental information about the most important products for a country and the associated trends in the use of environmental inputs and the generation of residual flows. Determining the most important products will depend on the criteria chosen which may include products most traded internationally, products that are most significant for nutrition, products that contribute most to production or products that have the largest use of land.

59. The policy connections for this theme relate to understanding the intensity of use of environmental flows and hence are of direct relevance in assessing the impact of changes in policies and incentives towards green growth and related objectives.

Theme 2: Food product consumption and waste.

60. Under this theme the focus is on the production and consumption of food products and in particular tracking the various sources of supply (domestic production or imports) and destinations of use (final consumption, intermediate consumption, changes in inventories and exports). In balancing supply and use there will always be an element of waste and loss of food and this must be recorded and attributed appropriately.

61. The main policy connections for this theme are two fold. First, there are important connections between food production and household consumption and hence to food security that must be tracked and understood. Second, the potential to improve outcomes with respect to food security by reducing the extent of food waste through the supply chain is an increasing area of policy focus.

Theme 3: Sustainable use of environmental assets (timber, fisheries, water, soil).

62. Under this theme the focus is on the extent to which the extraction and use of environmental assets by agricultural, forestry and fisheries activity is depleting the available resources and hence reducing the long term capacity for these activities to be supported.

63. The policy connections for this theme lie in supporting the management of natural resources and in understanding potential environmental constraints for particular activities.

Theme 4: Cross-industry and activity perspectives.

64. Under this theme the focus is on bringing together information that can be compared across the range of agricultural, forestry and fisheries activities. Of most relevance is information on production and value added, international trade, employment, land use, water and energy use and GHG emissions.

21

65. The policy connections for this theme are numerous. Of particular relevance are issues such as land use planning and the food/water/energy/climate nexus. In both of these areas a broad understanding of the trade-offs between different activities is required. This level of analysis is also likely to be most optimal for international comparisons and benchmarking.

2.3.2 Other relevant policy connections

66. The design of SEEA AFF may be extended in few directions to encompass a broader range of policy themes. Specific proposals on the extensions are described in Chapter 4 as they pertain to particular data domains.

67. One direction is developing a focus on rural incomes as distinct from total income from agricultural, forestry and fisheries production activity. A rural income focus may be supported by integration of information on farm size, the demographics (e.g. age, gender) of farm ownership and employment, and income distributions. The challenge in incorporating this view within the SEEA AFF framework is determining relevant environmental information (water use, fertilizer use, etc). This may be possible through understanding various production typologies (i.e. differences in production techniques between small holders and large scale farmers) but this is not yet developed formally within the SEEA AFF framework.

68. A second direction is to consider in more detail the connections between agricultural, forestry and fisheries activity on a domestic level with the reality of international trade in agricultural commodities and the related trade and distribution of food manufacturing, wholesale and retailing activities so-called global supply chains. While a number of international trade models have been developed (e.g. GTAP) and the structure of the SEEA AFF supports improved data quality for these models, ideally there would be the capacity to track flows relating to specific products and types of corporation. To do this may involve restructuring the standard input-output table and would also raise a number of statistical challenges. At this stage, these considerations are not developed within the SEEA AFF framework.

2.3.3 Applications at sub-national level

69. As noted above, the SEEA AFF is designed for integration of national level data sets. However, in many situations, interest will lie in the connections between environmental and economic factors at a sub-national level since environmental pressures and scarcities are often location specific in nature. For example, water scarcity within a particular river basin.

70. In principle, the framework for the SEEA AFF may be applied at a sub-national level. The challenge is then to find a suitable range of data at a sub-national level and also to determine the appropriate sub-national boundaries. The boundaries may be administrative which tends to suit the organization of socio-economic data or environmental e.g. by river basin or landscape/ecosystem type (forests, wetlands, etc). Selecting the best sub-national level is likely to require some degree of compromise that takes into consideration the type of information available, its capacity to be scaled up or down, and the type of question that is of interest.

71. Increasingly there are datasets being developed that seek to bring together data at fine spatial levels to enable detailed assessment of the capacity of the environment to sustain agricultural production. Such datasets use fine level geospatial techniques and various assumptions. One such dataset is the FAOs GAEZ Global Agri-Ecological Zones. The development of SEEA AFF, including at national level, should support the development of such datasets by providing coherent national level information on

22

the various environmental and economic factors of interest such that modeling at sub-national level can be appropriately benchmarked.

72. Another aspect of sub-national data is the existence of spatial areas for analysis which cross national boundaries. For example, assessment of the Mekong delta, the Nile, or Lake Victoria. The benefit of the SEEA AFF in this context is that each relevant country would be compiling national data on a comparable basis and hence the resulting sub-national estimates should be more comparable than might otherwise be the case.

73. An ongoing challenge in developing sub-national level data sets is determining the appropriate scale and related geographical classification. Often it will be the case that socio-economic data, for example population census data, are organized following one classification while environmental data are organized following different classifications for example by water catchment. Both classifications may be appropriate for the individual datasets but in a SEEA context in which integration of data is required then choices of scale and classification must be made. One way through this challenge is to downscale all information to very fine levels for example to

23

Chapter 3: The Conceptual Framework of the SEEA AFF 3.1 Introduction

1. The conceptual basis for the SEEA AFF lies in the SEEA Central Framework and the SNA. Together, these statistical standards provide a broad foundation for integrating environmental and economic data in both monetary and physical terms. This chapter summarizes the most relevant accounting structures and principles from those standards and gives a description of the main components of the SEEA AFF framework.

2. A useful way of considering the SEEA AFF framework is shown in Figure 3.1. The figure shows the way in which the four main components - basic data and statistics, base accounts, combined presentations and indicators - link together. It is important to recognize that the nature of the connections between each of the components should not be subject to strict rules. Thus, not all possible basic data will be utilized in the compilation of base accounts and precisely which data are used will depend on the level of detail and choice of methods applied in the base accounts.

Figure 3.1: SEEA AFF information pyramid

3. Further, combined presentations will not include all of the information present in base accounts and, indeed, may incorporate additional information, for example population data, that are not included in the base accounts. In addition, the content of combined presentations may change over time to reflect changing analytical and policy priorities, while the structure of the base accounts remains relatively stable. Finally, the derivation of indicators will largely take information available in combined presentations but it should not be constrained in this way.

4. Overall, the structure of the SEEA AFF provides a broad starting point for the integration of information and the support of analysis and discussion. It should not be interpreted as a one-size fits all approach and compilers and analysts are encouraged to adapt the framework to respond to the information needs of users while still applying basic accounting principles.

Basic sta s cs and data

Base accounts

Combined presenta ons

Indicators

Popula on & employment

AFF produc on and consump on

Inputs and residuals

Natural resources & environmental assets

Economic

24

3.2 Basic national accounting principles

3.2.1 Introduction

5. There are detailed descriptions of national accounting principles in the SNA 2008, particularly in Chapters 2 through 5. There is also a summary of the most relevant aspects for environmental-economic accounting in the SEEA Central Framework Chapter 2. Given this material, the following section only highlights the most relevant principles and directs the reader to appropriate sections of the SNA and the SEEA Central Framework.

6. Central to adopting an accounting approach is the measurement of stocks and flows. Accounting approaches aim to convey a comprehensive and internally consistent story regarding the stocks of assets (or capital), changes in those stocks over time, and flows of production, income, consumption and other transactions associated with the use of those assets. The internal consistency of the information is ensured through the application of accounting identities while the comprehensiveness of the story is determined by the choice of accounting boundaries such as the definition of assets, the definition of income and production and the choice of geographical scope.

7. With appropriate accounting boundaries and identities in place, the second key aspect of establishing accounts is the adoption of consistent classifications. Generally, data that are used for accounting will be sourced from a wide range of agencies and data collections. In each case the information has likely been collected and organized for purposes other than integration and accounting. In recent years, increasingly core macro economic statistics are being collected using standardized classifications of industries and products but the extension of such standardization to environmental and specific activity and product level information required for SEEA AFF compilation has not progressed as far. Consequently, in the actual practice of compiling accounts it is likely to be necessary to convert data from varying sources to a common classification to enable the application of accounting principles.

8. In all cases, the SEEA AFF applies the accounting boundaries and principles described in the SEEA Central Framework. Differences in SEEA AFF relate primarily to the structuring of the selected base accounts since it is here that the focus of SEEA AFF on agricultural activities must become apparent.

3.2.2 Types of accounts

9. The SEEA AFF base accounts comprise two types of accounts physical flow accounts (or supply and use tables) and asset accounts. These accounts are described in the SEEA Central Framework Section 2.3. Both types of accounts can be compiled in physical and monetary terms with slightly different structures.

10. Physical flow accounts / Supply and use tables. Monetary supply and use tables are generally used to record all flows of products in an economy between different economic units. As their name suggests, they are structured to record the total supply of products on the one hand and the total use of products on the other. The required balance between total supply and total use is the relevant accounting identity. The basic structure of a monetary supply and use table is shown in Table 3.1. A detailed description of monetary supply and use tables is presented in SNA 2008 Chapter 14.

25

Table 3.1 Basic form of a monetary supply and use table (Table 2.1 from SEEA CF)

11. Physical flow accounts or Physical supply and use tables are a central feature of the SEEA Central Framework. Their structure derives from monetary supply and use tables with extensions to enable the recording of flows to and from the environment. The extensions involve the addition of a new column Environment and the addition of two rows labeled Natural inputs and Residuals. The basic form of a physical flow account is shown in Table 3.2.

Table 3.2 Basic form of a physical flow account (Table 2.2 from SEEA CF)

12. Using these extensions it is possible to account comprehensively for flows of materials and energy where the flows are recorded in a common unit of measure. For example, flows of water from the environment, within the economy and back to the environment can be recorded in a physical flow account using a single measurement unit of cubic metres of water. Similarly, energy flows can be recorded in joules irrespective of the energy carrier (e.g. in coal, timber, electricity, heat, food, etc). A full description of different physical flow accounts is provided in the SEEA Central Framework Chapter 3.

13. For the purposes of the SEEA AFF the application of the monetary supply and use tables and physical flow accounts will usually be at the level of individual products e.g. tracing the total supply and use for wheat. This application of supply and use principles is not expanded upon in the SNA or the SEEA Central Framework, but it is nonetheless appropriate and can be completed in line with the general accounting principles and boundaries.

14. Asset accounts. Asset accounts facilitate the recording of information on the stocks of assets at the beginning and end of an accounting period and changes in those stocks

Industries Households Government Accumulation Rest of the world

Total

Supply tableProducts Output Imports Total supplyUse tableProducts Intermediate

consumptionHousehold final

consumption expenditure

Government final consumption expenditure

Gross capital formation (incl.

changes in inventories)

Exports Total use

Value added

Industries Households Accumulation Rest of the world

Environment Total

Supply tableNatural inputs Flows from the

environmentTotal supply of natural inputs

Products Output Imports Total supply of products

Residuals Residuals generated by

industry

Residuals generated by

final household consumption

Residuals from scrapping and demolition of

produced assets

Total supply of residuals

Use tableNatural inputs Extraction of

natural inputsTotal use of

natural inputsProducts Intermediate

consumptionHousehold final

consumptionGross capital

formationExports Total use of

products

Residuals Collection & treatment of waste and other residuals

Accumulation of waste in controlled

landfill sites

Residual flows direct to

environment

Total use of residuals

26

during the accounting period. Monetary and physical asset accounts follow the same structure, as shown in Table 3.3 below, with one difference being the inclusion of a row to record revaluations in assets in monetary asset accounts.

Table 3.3 Asset account (SEEA CF Table 2.3)

15. The internal consistency of asset accounts is defined by the identity that the opening stock plus additions to stock less reductions in stock must equal the closing stock. This identity enables various data on stocks and changes in stock to be reconciled and data gaps filled as appropriate.

16. Further, in cases where the use of an asset is an input to the production process, e.g. the logging of timber is an input to the production of wood products, the relevant reduction in stock recorded in the asset account is conceptually equivalent to the flow of natural inputs recorded in the physical flow accounts. Thus there are important connections between accounts that should be taken into consideration in the compilation process. This aspect of accounting may be of particular use when aiming to improve measurement of economic activity for agricultural activities. For example, where data on natural inputs are available, its quality may be assessed through its consistency with changes in the underlying stock of environmental assets.

17. Although asset accounts may be used to record stocks and changes in stocks of any type of asset, the focus in the SEEA Central Framework and in the SEEA AFF is recording information on environmental assets. Environmental assets are the naturally occurring living and non-living components of the Earth, together comprising the biophysical environment, which may provide benefits to humanity (SEEA Central Framework, 2.17).

18. As explained in the SEEA Central Framework, environmental assets may be measured either from a perspective of individual components (e.g. timber resources, water resources, mineral and energy resources) or from a perspective of ecosystems, i.e. spatial areas in which various individual components interact through ecological processes. The perspective taken in the SEEA AFF is on individual components noting the potential for incorporating an ecosystem perspective as outlined in Chapter 1.

Growth in stockDiscoveries of new stockUpward reappraisalsReclassificationsTotal additions of stock

ExtractionsNormal loss of stockCatastrophic lossesDownward reappraisalsReclassificationsTotal reductions in stock

Closing stock of environmental assets

Opening stock of environmental assetsAdditions to stock

Reductions of stock

Revaluation of the stock*

27

19. In the SEEA, environmental assets include both natural and cultivated assets, that is, the asset boundary is not limited to those biophysical components that may be considered outside human management. This issue is particularly relevant for SEEA AFF. Given this boundary the SEEA AFF asset accounts include measurement of livestock, plantation timber and stocks of fish in aquaculture facilities. This broad notion of environmental assets is useful in understanding the changing structure of production. A detailed description of accounting for environmental assets is provided in the SEEA Central Framework Chapter 5.

3.2.3 Main accounting boundaries and principles

20. To be drafted. This material will summarize relevant material in the SEEA Central Framework (primarily sections 2.5 2.7) and selected sections of the 2008 SNA. Key points will be:

Production boundary, asset boundary, geographic boundary Valuation concepts Economic units establishments, enterprises Classifications industry, sectors and products Double entry, time of recording, interpolation, length of accounting period,

3.3 SEEA AFF Base accounts

3.3.1 Data domains

21. The SEEA AFF base accounts have been formed around nine data domains. Each domain relates to a general data area that may include data on stocks and flows and for which data will be available from a relatively limited number of data sources. The objective of the base accounts in each domain is to organize the available information following accounting concepts and principles outlined in the previous section and thus provide a basis for the further integration of information across domains.

22. The nine data domains and their associated base accounts are shown in Table 3.4. Since the perspective taken in SEEA AFF is an activity one, rather than being defined by a specific type of asset or flow, there is no immediate restriction on the breadth of analysis or the number of data domains that might be incorporated. The selected domains and the associated accounts are considered the most relevant in terms of understanding the relationship between the environment and agricultural activity taking into consideration the nature of the production processes in physical and monetary terms and also the generally understood policy issues for agriculture, forestry and fisheries.

23. During the development and implementation of SEEA AFF at country level, if additional data domains are identified as relevant, then an extension of the set of SEEA AFF base accounts may well be appropriate.

24. Within each data domain there will be some data sources that are relatively commonly held across countries. For example, for agricultural production there will generally be regular agricultural surveys and censuses at country level. However, the preparation of base accounts does not require specific data collections and it is likely that a range of sources and methods will be used to estimate the relevant concepts and variables.

28

Table 3.4 : Data domains and base accounts

Data domains Base accounts Agricultural production Physical flow account for food crops Physical flow account for non-food crops Physical flow account for livestock products Asset account for livestock Forestry Physical flow account for timber products Asset account for forests Asset account for timber resources Fisheries Physical flow account for fish and aquatic products Asset account for fish and other aquatic resources Water resources Asset account for water resources Physical flow account for water abstraction Physical flow account for water distribution and use Energy Physical flow account for energy use GHG emissions Physical flow account for GHG emissions Fertilizers and pesticides Physical flow account for fertilizers Physical flow account for pesticides Land use and land cover Asset account for land use Asset account for land cover Soil account not yet defined Economic data Monetary supply and use table for agricultural products Extended production account for agricultural activity

25. Further, over time, there may be improvements made in the collection and analysis of data within a data domain that identify concerns and inconsistencies. Indeed, the application of an accounting framework may highlight such issues. In all cases the accounts should be compiled based on the best available evidence while at the same time ensuring as coherent a story of change over time as possible. Managing disruptions in a time series of source data is a key aspect of environmental-economic accounting.

26. Further discussion on potential data sources for each base account is presented in Chapter 5.

3.3.2 SEEA AFF Physical flow accounts

27. There are 11 physical flow accounts in the set of SEEA AFF base accounts. Their main purpose is to ensure that data within each of the relevant domains, for example production of food crops, is accounted for consistently across the various elements of supply and use. Thus, in each case the base account requires that the total supply of a product (i.e. domestic production plus imports) is equal to the total use of that product as intermediate consumption, final consumption, investment, changes in inventories or exports.

28. Beyond ensuring the consistency of data within a domain, the use of physical flow accounts puts in place a connection between the supply and demand sides of agricultural activity thus facilitating the analysis of demand factors that may drive agricultural production. Examples include rising population and increasing consumption of calories per person.

29. The SEEA AFF physical flow accounts are of two main varieties. Where the focus is agricultural production or on non-natural inputs to production, the physical flow accounts focus on recording the supply and use of individual products such as wheat, timber and fertilizer. These accounts largely mirror the structure of monetary supply and use tables since there are no flows of natural inputs or residuals that are recorded.

29

Thus, for example a column to reco