Measurement of natural capital

Natural capital accounting is a tool to measure the changes in the stock and condition of natural capital (ecosystems) at a variety of scales and to integrate the flow and value of ecosystem services into accounting and reporting systems in a standard way.

It is crucial to understand the value of natural capital, going beyond the framework of inclusive wealth. Natural capital accounting is a key focus for ONS, involving state of the art valuation methodologies and international collaboration with the United Nations Statistics Department, the World Bank and UNEP.

This ESCoE project aims to improve methodologies for the valuation of natural resources.

A key area of focus is measuring the contribution of water. Freshwater is vital to humans, both as direct consumers and for the production processes that support consumption more generally.  There are many key policy issues related to water, including the sustainability of supply, as well as quality and sewage issues. Water also plays a major part in other high-profile issues such as biodiversity, climate change and its contribution to physical and mental health.

However, traditional economic statistics cover only part of water’s contribution to the economy and society.

To analyse trends in sustainability, it is important to have reliable price indices and deflators for natural assets. We use exchange values, and other techniques appropriate for SEEA (System of Environmental Economic Accounting) guidelines to calculate water-related values when observable market prices are not available. Specifically, the valuation approaches explored are market prices, replacement cost, value transfer, resource rent and travel cost models.

Moreover, biophysical data are key for accurate compilation of SEEA EA accounts. The project explores different data source and uses GIS software for analysing available spatial data, highlighting the need for improved data availability, accessibility and organisation across different agencies. We also leverage the collaboration with CEH for integrating data related to both extent and condition accounts, ensuring a good spatial and temporal coverage.

• SEEA EA water accounts provide a structured framework for integrating hydrological, ecological, and economic information over time, enabling a more comprehensive understanding of water-related ecosystem assets and services.
• Existing river extent accounts expressed in terms of surface area do not fully capture variation in water availability. Volume-based estimates of water availability in Great Britain’s rivers offer a complementary measure that better reflects the physical characteristics of water assets.
• Ecosystem condition accounts can serve as quantitative indicators of environmental change, providing a means of tracking trends in ecosystem health and condition over time.
• Current ONS valuation methods for water provisioning and water-based recreation have methodological limitations. Alternative valuation approaches were identified for water provisioning, including replacement cost, value transfer, and market price methods, alongside refinements to the resource rent approach currently used by ONS.
• The value of water-based recreation is sensitive to ecosystem condition. A valuation approach was developed that enables recreational values to be estimated under different water quality and ecological condition scenarios.

Provision of more accurate, more comprehensive and more timely estimates of natural capital can be used on their own or as part of wider measures of effective national product, income and wealth.

Better measures of the development of natural assets will also underpin informed public discussion and to help effective policymaking and wider decision making. Furthermore, the valuation techniques and further research in water-related values will contribute to the current United National working groups working on the revision of the SEEA Central Framework guidelines. Finally, estimates will help to identify areas of data gathering, organisation and collection where further effort is needed as well as to product academic paper which focus on water accounting issues.

Grice, J., Ekins, P., Reas, V., Bartolini, A. and Ferrini, S. ‘The value of water. UK progress and challenges for water ecosystem accounts’ 39^th IARIW General Conference, 24-28 August 2026, Brussels, Belgium

Bartolini, A., Ferrini, S., Grice, J., and Ekins, P. ‘Travel cost models for UK Water Accounting’ 39th IARIW General Conference, Poster session, 24-28 August 2026, Brussels, Belgium

Bartolini, A., Grice, J., Ekins, P., Weale, M., and Ferrini, S. ‘Deflators and Ecosystem Services’ ESCoE Discussion Paper DP 2026-07, 16 June 2026

Bartolini, A., Grice, J., Ekins, P., Weale, M., and Ferrini, S. ‘Deflating natural capital: Measuring the real value of ecosystem services’ ESCoE Blog, 16 June 2026

Grice, J., Ekins, P., Reas, V., Bartolini, A. and Ferrini, S. ‘UK water ecosystem accounting for improved water management’ ESCoE Conference on Economic Measurement, King’s College London, 19-21 May 2026

Reas, V. “Water-related Ecosystem Services for accounting and policy making: a meta-analytic and value transfer perspective” 6th ESP Europe Conference 2026, 18-22 May 2026, Prague, Czechia

Grice, J., Ekins, P., Reas, V., Bartolini, A. and Ferrini, S. ‘UK water ecosystem accounting for improved water management’ 6^thESP Europe Conference 2026, 18-22 May 2026, Prague, Czechia

Grice, J., Ekins, P., Reas, V., Bartolini, A. and Ferrini, S. ‘UK water ecosystem accounting for improved water management’ Session 4: Nature in conversation with other policy areas, Applied Environmental Economics Conference envecon 2026, 20 March 2026, The Royal Society London

Grice, J., Ekins, P., Reas, V., Bartolini, A. and Ferrini, S. ‘Water condition accounts for England and policy implications’ submitted to Journal of Water Economics (in review)

Bartolini, A. “Travel cost models for water accounting in the UK” ESCoE PhD and Early Career Workshop, King’s College London, 7 November 2025

Reas, V. ‘Economic methods for Water Ecosystem Services for SEEA EA’ ESCoE PhD and Early Career Workshop, King’s College London, 7 November 2025

Bartolini, A. ‘Travel cost models of water accounting in the UK’ 31^st annual London Group on Environmental Accounting, Session 7 Monetary Ecosystem Services Accounts – SEEA EA, 22-25 September 2025, Tallinn

Reas, V. ‘Economic methods for water ecosystem services for SEEA EA’ 31^st annual London Group on Environmental Accounting, Session 7 Monetary Ecosystem Services Accounts – SEEA EA, 22-25 September 2025, Tallinn

‘From theory to practice: How can we measure ecosystem services’ ESCoE News story, 5 September 2025

ESCoE Workshop on Natural Capital Accounting, 18-19 August 2025, King’s College London

Reas, V. ‘Assessing data availability for Water-Related Ecosystem Services Accounts in the UK’ ESCoE Discussion Paper series, ESCoE DP 2025-08, 22 July 2025

Ferrini, S., Reas, V., Bartolini, A., Ekins, P. and Grice, J. ‘Economic Methods for Water Ecosystem Services for SEEA EA’ ESCoE Discussion Paper series, ESCoE DP 2025-06, 26 June 2025

Ferrini, S., Reas, V., Bartolini, A., Ekins, P. and Grice, J. ‘Putting a price on nature: Rethinking Water Ecosystem Accounting’ ESCoE Blog, 26 June 2025

Bartolini, A., Ferrini, S., Ekins, P. and Grice, J. ‘Travel Cost Models for Water Accounting in the UK’, Contributed session O: Net zero/climate/environment. ESCoE Conference on Economic Measurement, King’s College London, 21-23 May 2025

Grice, J., Ekins, P., Reas, V., Bartolini, A. and Ferrini, S. ‘Water Accounting in the UK: Methods and Initial Results’, Contributed session O: Net zero/climate/environment. ESCoE Conference on Economic Measurement, King’s College London, 21-23 May 2025

ESCoE Roundtable on Valuation methods for Natural Capital Accounting, 25 March 2025 (invite only event)

Reas, V., Bartolini, A., Ferrini, S., Ekins, P. and Grice, J. ‘Accounting Water Ecosystem Services for national and regional decision making in the GB’ Envecon 2025, UK Network for Environmental Economists, The Royal Society, 14 March 2025.

Ekins, P. Ferrini, S. and Grice, J. ‘Accounting for water and water ecosystem services in the UK’ ESCoE blog, 4 February 2025

Ekins, P., Grice, J. and Ferrini, S. ‘Accounting for water and water ecosystem services in the UK’ ESCoE Discussion Paper Series, ESCoE DP 2025-01, 4 February 2025

Grice, J. and Ekins. P. ‘Progress in compiling integrated National Accounts and Natural Capital Accounts for the UK’ Poster Session, 38th IARIW General Conference, King’s College London, 26-30 August 2024