Foundational Datasets for Climate Linked Economics: NOAA’s Role in Developing Natural Capital Accounts and the Pilot Offshore Oil and Gas Account

In January 2023, the White House released the National Strategy to Develop Statistics for Environmental-Economic Decisions, which charts a course for the development of a national system of Natural Capital Accounting (NCA). NCA incorporates the environment and ecosystem services, or natural capital, into traditional measures of socioeconomic prosperity such as GDP. Better understanding the links between the economy and environment provides insight into how to leverage natural capital to counteract the destabilizing risks to the environment and markets caused by climate change and nature loss. The United Nation’s System for Environmental Economic Accounting Central Framework provides internationally consistent guidelines. The goal of the framework is to provide a comprehensive view of the stocks and flows of environmental assets while following the structure of the equivalent economic account framework. The compatibility between the two guidelines allows easy integration between economic and environmental data; this will allow a greater understanding of the interconnections between the environment and economy, including for risk assessments and understanding infrastructure and societal investments.

The US NCA effort recommends a 15-year phased approach to reach the development of core statistical products. The National Oceanic and Atmospheric Administration (NOAA) is intimately involved in supporting the national strategy. The efforts include expanding existing ocean-related statistical accounts such as the Marine Economic Satellite Account to better incorporate natural capital. However, the agency is also charged with developing ocean-related natural capital accounts. The first phase marine natural capital accounts at NOAA, as proposed earlier in 2023, includes the development of three pilot accounts: offshore oil and gas, commercial fishing, and beach recreation (Wielgus et al., 2023). The pilots were chosen for the diversity in their type of commodity, data availability, and challenges they each present. The goal for each pilot account is to present, in both physical and monetary terms, the annual starting and ending natural capital stock while measuring additions and reductions.

This presentation will share the development of the pilot offshore oil and gas account. We will share preliminary physical and monetary accounts, aligned with the UN framework, for the years 2009-2019. The analysis will include a geospatial lens to provide an understanding of the location of natural capital and historical trends. We will discuss the pilot account’s approach, including data limitations, incorporating inner continental shelf data, as well as broadening the scope of the account to incorporate ecosystem accounts to understand the environmental impacts.

Using the pilot offshore oil and natural gas account as an example of the coming natural capital accounting products and statistical releases, the presentation will provide insight into a developing foundational environmental dataset that will provide value to macroeconomic and financial researchers and provide insights into the linkages between the environment and economy. This presentation seeks not only to inform AMS climate practitioners, but also to solicit feedback from them on datasets and approaches that might be useful in conducting natural capital accounting.

References:

Wielgus, J., Grasso, M., Colgan, C., Zhuang, J., Siegel, S.C., Conran, J. and Wodajo, T., 2023. Natural Capital Considerations for an Extension of the US Marine Economy Satellite Account (No. w31108). National Bureau of Economic Research.