Australian Regional Environmental Accounts Trial

Accounting for Nature Approach

The environmental asset approach to measuring degradation to the environment, as described by Accounting for Nature, is a practical way of describing, understanding and making better decisions in managing the environment.[i]

It is an accepted measure internationally (e.g. the System of Environmental Economic Accounts (SEEA) Central Framework[ii], the Convention on Biological Diversity[iii]), and nationally in Australia (e.g. regional natural resource management plans[iv],[v] national and state government investment programs,[vi],[vii] and state and national State of the Environment reports[viii]).

As part of the Trial, we define environmental assets as biophysical features in the landscape that are measurable in time and space,[ix] and condition as a scientific measure of the capacity of an environmental asset to continue to provide benefits to society.[x] It must incorporate elements of both the quantity of an asset (for example, the area of a forest) and the quality of that asset (for example, the diversity of plant and animal species that inhabit that forest).

An environmental asset can be an ecosystem such as a forest or a river or an estuary, it can be an individual species of mammal or bird, or it can be any other feature in nature, such as a fishery, agricultural soil, or a groundwater resource. This is consistent with the SEEA Central Framework which defines environmental assets as the naturally occurring living and non-living components of the Earth, together comprising the biophysical environment that may provide benefits to humanity.[xi]

The SEEA Central Framework provides methods for accounting for those environmental assets which produce market-based goods and services. It identifies the need to measure the quality of environmental assets to fully address degradation.[i]

The Accounting for Nature model is underpinned by two important concepts:

  1. Environmental asset condition needs to be measured both at scales where biophysical processes operate, and at scales where economic and policy decisions are made; and
  2. Asset condition accounts need to be constructed using a common unit of measure – a common currency – so that the relative condition of different assets can be compared: in different places, at different scales, at any time, and when using different indicators.

This common currency is called an Econd. An Econd is a scientific measure of the condition of an environmental asset. It does not imply a monetary value, nor does it describe a desired state.

An Econd describes the condition of an environmental asset against a scientific estimate of the condition of that asset in the absence of significant post-industrial human alteration (the reference benchmark. An Econd is a number between 0 and 100, where 100 indicates the asset is in the same condition as it was prior to significant post-industrial human alteration, and 0 indicates system function is absent.[ii]

The reference benchmark acts as a normalising factor by setting the upper boundary for the measurement of an environmental asset. Its purpose is to provide a reference point, or baseline, by which both past and future changes in the condition of any environmental asset can be measured and the relative condition of the asset can be compared with other assets across time and space.

This reference benchmark does not have to mean a pre-industrial date, although that is often the most convenient way to describe it. Another option is to measure an asset that is known to be in an undisturbed condition – what science calls a reference site. Another option is for science to estimate this biophysical condition using models. For more information on the science behind reference benchmarking see Cosier and McDonald (2010)[iii].

The benefit of using this reference benchmark method is that it creates a standardised numerical unit that is capable of comparison and aggregation, at any scale where policy and economic decisions that affect the environment are being made.

The Econd is calculated by combining a number of individual indicator condition scores (e.g. pH and salinity in rivers or organic carbon and erosion measures in soils) to produce a scientific measure of the condition of the asset as a whole.[iv]

The Econd is calculated for the categories within the asset (eg. for each subcatchment in the rivers asset, for each native vegetation type in the native vegetation asset, for each land management unit within the soils asset). These are then assembled to generate an overall Econd for each asset in a region (e.g. for rivers, for native vegetation, for soils).

Guidelines for constructing regional scale environmental asset condition accounts have been produced as part of the Trial.

How the concepts have been applied in the Regional Environmental Accounts Trial are discussed here.


[i] United Nations, European Commission, Food and Agriculture Organisation, International Monetary Fund, Organisation of Economic Co-operation and Development, World Bank (2012). System of Environmental-Economic Accounting: Central Framework. Reference to the extent and quality of the soil asset para 5.160 p147, and paras 5.332 and 5.341 (Table 5.7.1), p174.

[ii] Cosier P and J McDonald (2010). A Common Currency for Building Environmental (Ecosystem) Accounts.

[iii] Cosier P and J McDonald (2010). A Common Currency for Building Environmental (Ecosystem) Accounts.

[iv] NRM Regions Australia (2011). Australian Regional Environmental Accounts Trial 2011: Draft Guidelines for Constructing Regional Environmental Accounts.


[i] For a description of degradation see United Nations, European Commission, Food and Agriculture Organisation, International Monetary Fund, Organisation of Economic Co-operation and Development, World Bank (2012). System of Environmental-Economic Accounting: Central Framework section 5.4.2, para 5.90, 5.91 and 5.92, p137.

[ii] United Nations, European Commission, Food and Agriculture Organisation, International Monetary Fund, Organisation of Economic Co-operation and Development, World Bank (2012). System of Environmental-Economic Accounting: Central Framework.

[iii] Convention on Biological Diversity (2010). Strategic Plan 2011-2020. Prepared in response to decision X/2, the tenth meeting of the Conference of the Parties, held from 18 to 29 October 2010, in Nagoya, Aichi Prefecture, Japan. http://www.cbd.int/sp/.

[iv] GHD (2012). Review of Regional Natural Resource Management Plans. Final Report prepared for the National NRM Working Group.

[v] Murray–Darling Basin Authority (2011). Sustainable Rivers Audit 2: The ecological health of rivers in the Murray–Darling Basin at the end of the Millennium Drought (2008–2010). www.mdba.gov.au

[vi] For example, the Australian government’s Natural Heritage Trust, Caring for Our Country and National Landcare Programs.

[vii] Eigenraam, M., Chua, J. & Hasker, J. (2013). Environmental-Economic Accounting: Victorian Experimental Ecosystem Accounts, Version 1.0. Department of Sustainability and Environment, Victoria.

[viii] State of the Environment Committee (2011). Australia State of the Environment 2011.
Independent report to the Australian Government Minister for Sustainability, Environment, Water, Population and Communities. Canberra: DSEWPaC, 2011.

[ix] NRM Regions Australia (2011). Australian Regional Environmental Accounts Trial 2011: Draft Guidelines for Constructing Regional Environmental Accounts.

[x] Modified from NRM Regions Australia (2011) Australian Regional Environmental Accounts Trial 2011: Draft Guidelines for Constructing Regional Environmental Accounts for consistency with the SEEA Central Framework.

[xi] United Nations, European Commission, Food and Agriculture Organisation, International Monetary Fund, Organisation of Economic Co-operation and Development, World Bank (2012). System of Environmental-Economic Accounting: Central Framework. Section 2.2, para 2.17 p13.