Out with the old and in with the new – extending the production boundary of GDP to account for ecosystem services

It is widely understood that GDP, as a measure of economic activity, fails to recognise the depletion or degradation of natural capital. A key feature of national accounting (which underpins GDP) is the recording of transactions between economic units, households, business and government. However, it does not recognise transactions between economic units and the environment. The environment provides services to economic units, often referred to as ecosystem services. Accounting for ecosystem services is required to bring measures of the depreciation and degradation of natural capital in line with measures of the deprecation of built capital that is already included in GDP.

While the generic concept of ecosystem services provides an excellent platform for discussion, the ongoing lack of clarity surrounding the definition, classification and measurement of ecosystem services, is a barrier to collaboration across disciplines and its inclusion in measures of GDP.

Our paper applies the principles of national accounting to bring additional rigour and consistency to the discussion on ecosystem services. The key outcome of the paper is a framework for describing the relationship between ecosystems and economic activity that can be used to consistently define, classify, measure and account for ecosystem services.

Mark Eigenraam & Carl Obst (2018) Extending the production boundary of the System of National Accounts (SNA) to classify and account for ecosystem services, Ecosystem Health and Sustainability, DOI: 10.1080/20964129.2018.1524718