Input-output models and ecosystem service feedbacks: Estimating the

Input-output models and ecosystem service feedbacks: Estimating the

Input-output models and ecosystem service feedbacks: Estimating the net GVA of economies Emily Stebbings I-O Workshop, Osnabrck 31st March 2017 1 Introduction 1st year PhD student at Plymouth Marine Laboratory and the University of Exeter. Supervisory team Eleni Papathanasopoulou (PML) Xiaoyu Yan (University of Exeter) Tara Hooper (PML) Mel Austen (PML) 2 Introduction

Ecosystem services and marine spatial planning Intended aims and impacts Developing the methodology Illustrative results Challenges 3 What are ecosystem services? Ecosystem services are the goods and benefits that people get from the natural environment. Provisioning - such as food, water and energy Cultural - such as recreational or spiritual benefit Regulation & maintenance such as gas exchange, disease control, climate regulation Defined end user products no double counting CICES V4.3 (Haines-Young & Potschin, 2010; 2013) 4 Why value the ecosystem? The first step towards sustainable management. The UK Marine Policy Statement indicates that ecosystem service approaches should be used for decision making, and wider socio-economic

impacts should be considered (HM Government, 2011). Move towards natural capital accounting in UK. Ecosystem contributes to economic performance (Anger et al. UK NEA WP2, 2014). 5 Why value the ecosystem? UK NEA Follow-on, 2014 Research to develop and test methods to assess links between economy and ecosystem should be a priority. I-O and Econometric I-O identified as a likely approach. 6 Aims and impacts Develop a model which incorporates ecosystem services into the macro-economy. Apply to offshore wind energy to assess net economic impact.

Inform decision making. Provide socio-economic evidence for UK Marine Management Organisations marine plans. 7 Marine spatial planning (Marine Management Organisation, 2014) Crown copyright 2013 8 Research questions 1. Can Input-Output analysis be applied in the marine environment to give an appropriate measure of net economic impact? 2. What effects do feedback loops of interconnected providers of ecosystem service have upon one another? 9 I-O models and the ecosystem

I-O research that has been influential; Impact study into development of offshore renewables (Fraser of Allander Institute, 2014). Biodiversity impacts on global forest ecosystems (Lenzen et al., 2012). Sustainable coastal zone management in France (Cordier et al., 2011; 2014). I-O application to oyster farming in Taiwan (Chen et al. 2013) 10 Model assumptions All the usual market assumptions pertaining to Leontief I-O tables apply. Additional assumptions; The GVA of the aggregate sectors to which each ecosystem service is a part will increase or decrease linearly. There is no product substitution effect. Effects are estimated in the short term, i.e. lag effects or sector growth are ignored. Non-market and government sectors are excluded. 11 UK Input-Output tables Intermediate demand

Agri. Prod. Const. Dist. Comm. Finan. Prop. Final demand Prof. serv. Govn't, H&E Other serv. Agriculture Production Construction Producers

Distribution Communications 10 x 10 dimension, market sectors only Financial Property Professional services Govn't, health & education Other services Nonmarket House hold (C) Govn't (G) GFCF (I)

Net Exports (X-M) Non-market: Non-market: Governmental Governmental and and NPISH NPISH (Non-profit (Non-profit institutions institutions serving serving households) households) e.g. e.g. Health Health services services Education Education Creative Creative arts

arts Museums Museums Value added Non-market Employees Business owners Government Value added through wages Value added through profit and capital consumption allowances GROSS DOMESTIC PRODUCT (Y) Y = C + I + G + (X M) Value added through taxes Produced using UK Input-Output Analytical Tables 2010 (ONS, 2011) 12 Input-Output = g ( ) ( ) Where;

is the demand vector, dimension 10x1. is the modified demand vector in 10x1. is the Leontief inverse matrix (the total direct and indirect input requirements for each industry) of dimension 10x10. is the row vector of GVA (from compensation to employees) from the matrix of coefficients, represented as a diagonal matrix of dimensions 10x10. 13 Wages as measure of Offshore wind energy = g ( ) ( ) 0.1707 0 0 0 0 0 0 0 0 0 0

0.1968 0 0 0 0 0 0 0 0 0 0 0.2247 0 0 0 0 0 0 0 0 0 0 0.3344 0 0

0 0 0 0 0 0 0 0 0.3326 0 0 0 0 0 0 0 0 0 0 0.2614 0 0 0 0

0 0 0 0 0 0 0.0524 0 0 0 0 0 0 0 0 0 0 0.3465 0 0 0 0 0 0 0

0 0 0 0.5359 0 0 0 0 0 0 0 0 0 0 0.3700 from wages is +94m in the short term. GVA Ratio - Compensation of employees 1.118 0.318 0.046 0.127

0.027 0.077 0.007 0.071 0.007 0.003 0.025 1.419 0.023 0.108 0.027 0.048 0.005 0.089 0.009 0.003 0.006 0.226 1.278 0.074 0.029 0.040 0.010 0.156 0.015

0.003 0.006 0.145 0.060 1.158 0.052 0.046 0.023 0.150 0.017 0.005 0.002 0.088 0.022 0.062 1.092 0.035 0.007 0.161 0.016 0.015 0.001 0.054 0.027

0.071 0.081 1.109 0.018 0.190 0.018 0.008 Leontief Inverse 0.001 0.045 0.108 0.029 0.030 0.225 1.008 0.086 0.027 0.003 0.002 0.073 0.016 0.052 0.057 0.044

0.006 1.270 0.035 0.009 0.002 0.087 0.018 0.042 0.026 0.025 0.007 0.070 1.083 0.010 0.002 0.070 0.017 0.039 0.054 0.035 0.007 0.150 0.015 1.058

10,062 283,631 111,717 360,101 75,643 112,802 195,369 75,613 41,521 43,056 Final Consumption (F) Sense Sense check check to to other other studies studies Fraser Fraser of of Allander Allander Institute Institute

ORE ORE 14 Industry split and disaggregation Percentage of Input-Output final demand contributed by selected ecosystem services to high level I-O product I-O Product Ecosystem service % of final demand Source Production Offshore wind energy 0.09% ONS detailed table (2011) Agriculture

Fisheries & aquaculture 8% ONS detailed table (2011) 5% ONS report for the MMO (2014) Other services Marine recreation Produced using UK Input-Output Analytical Tables 2010 (ONS, 2011) 15 Evidence for ecosystem effects Fisheries Large fishing vessels unable to access areas surrounding turbines. Change in fishers behaviour. Aquaculture Turbine structure provides favourable environment for shellfish such as

mussels. Aquaculture sector identified as a way to mitigate the loss of fishing opportunities. Recreation Aesthetic and recreational value reduced by presence of turbines. (Gray, Stromberg, & Rodmell, 2016; Andersson & hman, 2010; Papathanasopoulou et al., 2015) 16 Modified demand Percentage change in final demand caused by offshore wind sector to selected ecosystem services surrounding development Ecosystem service Sector change Offshore wind energy +100% Fisheries -5%

Aquaculture +8% Marine recreation -10% (Gray, Stromberg, & Rodmell, 2016; Andersson & hman, 2010; Papathanasopoulou et al., 2015) 17 Net economic effect 18 Challenges The model assumptions 1. If a market for the ecosystem service doesnt exist or cant be identified, can it be valued? 2. How should market growth be included, and what will be the longer term effects? 3. How should non-market economic sectors be treated? 4. Should a technical coefficients matrix be

included? 19 Challenges The use of economic data 5. How can the apportionment, suppression and disaggregation issues be overcome? Split geographically or by ecosystem, e.g. between those in the ocean and on land? Split economic products, e.g. renewable electricity or hydrocarbon energy sources Split industrial sectors, e.g. oceanic or freshwater recreational fishing? Report by ONS - suggest use of Annual Business Survey, and aGVA. Study to determine economic baseline has taken place. 20 Challenges The model application 6. How can the feedback coefficients for ecosystem services be calculated in order to compute the model? 7. Is GVA appropriate for this kind of analysis?

8. Should the Leontief Inverse be dynamic so that a sensitivity analysis can later be carried out? Potential solutions to many of these issues might be to use an econometric I-O. 21 Next steps Resolve the issues or address challenges Systematic review for ecological evidence Scenarios using UK NEA outlooks Causation or correlation magnitude of economic impacts 22 Questions? Thanks for listening! [email protected] @e_stebb 23 Acknowledgements With thanks to the NERC GW4+ DTP and the Marine Management Organisation.

This work was supported by the Natural Environment Research Council [NE/L002434/1]. All graphics authors own, except where stated. 24 Bibliography Andersson, M. H., & hman, M. C. (2010). Fish and sessile assemblages associated with wind-turbine constructions in the Baltic Sea. Marine and Freshwater Research, 61(6), 642650. Allan, G., Hanley, N. D., McGregor, P. G., Swales, J. K., & Turner, K. (2004). An extension and application of the Leontief pollution model for waste generation and disposal in Scotland (Discussion Papers In Economics No. 0405). Anger, A., Shmelev, S., Morris, J., Zenghelis, D., & Di Maria, C. (2014). Work Package Report 2: Macroeconomic implications of ecosystem service change and management: A scoping study. In UK National Ecosystem Assessment Follow-on. Cordier, M., Prez Agndez, J. A., Connor, M., Rochette, S., & Hecq, W. (2011). Quantification of interdependencies between economic systems and ecosystem services: An input-output model applied to the Seine estuary. Ecological Economics, 70(9), 16601671. Cordier, M., Prez Agndez, J. A., Hecq, W., & Hamaide, B. (2014). A guiding framework for ecosystem services monetization in ecological-economic modeling. Ecosystem Services, 8, 8696. Gray, M., Stromberg, P., & Rodmell, D. (2016). Changes to fishing practices around the UK as a result of the development of offshore windfarms Phase 1. Haines-Young, R., & Potschin, M. (2010). Proposal for a Common International Classification of Ecosystem Goods and Services (CICES). Haines-Young, R., & Potschin, M. (2013). CICES V4.3 (January 2013). Retrieved from

HM Government. (2011). The UK Marine Policy Statement. Retrieved from Lenzen, M., Moran, D., Kanemoto, K., Foran, B., Lobefaro, L., & Geschke, a. (2012). International trade drives biodiversity threats in developing nations. Nature, 486, 109112. Marine Management Organisation. (2014). East Inshore and East Offshore Marine Plans. Office for National Statistics. (2011). United Kingdom Input-Output Analytical Tables 2010. Papathanasopoulou, E., Beaumont, N., Hooper, T., Nunes, J., & Queirs, A. M. (2015). Energy systems and their impacts on marine ecosystem services. Renewable and Sustainable Energy Reviews, 52, 917926. Turner, K. (2009). The evaluation of National Accounting with Environmental Accounts as a methodology for carrying out a sustainability assessment of the Scottish food and drink sector. 25 UK NEA scenarios UK National Ecosystem Assessment Follow-on: Synthesis of the Key Findings (2014) 26 Hybrid I-O Model: Cordier et al. 27

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