Natural Capital Accounting within the SNA2025 is still an emerging field.  The example of Canada will help illustrate this.

The Chief Science Advisor of Canada is explicit about some accounting challenges, even for the satellite (experimental) accounting (let alone for core accounting):

"... some important questions remain as to whether current natural capital accounting approaches adequately reflect the full range
of nature’s contributions to people and the economy. Certain physical stocks and flows may be underrepresented, and important cultural, social and non-market values of nature are not consistently captured in current approaches... For some natural capital assets, there are insufficient data and information to accurately track their size, condition and changes over time. This lack of high-quality data makes it difficult to produce reliable estimates of stocks and flows, and introduces significant uncertainty in mapping these assets over space and time. As a result, any estimates of the ecosystem services they provide, or the benefits derived from them, are also uncertain.
These data gaps are particularly evident for assets such as wetlands, grasslands, and coastal and marine ecosystems, where consistent national spatial coverage and long-term temporal data remain limited. In other cases, such as soil health, species composition or ecosystem resilience, data exist but are not yet systematically integrated into accounting frameworks."

Implications for the World Balance Sheet

The main feature to understand is that something only gets considered for inclusion in National Accounts balance sheets, or statements of flows, under SNA2025 (either as an ecosystem asset and related flows or as a natural resource asset and related flows) if it has a 'direct enough' human economic/financially valued benefit.  

This means that, ultimately, the Planetary CFO's World Balance Sheet, for which the stakeholders are all living beings on the planet, many more assets and flows will eventually need to be calculated and included than just what is in every country's National Accounts, even if they fully comply with the latest SNA guidelines (which many, of course, don't yet do).  That would require an expansion of the definition of Natural Capital currently in use, or the establishment of a wider-scoped terminology to encompass non-human-centric natural assets in addition to human-centric ones.

Without such accounting completeness, humanity's stewardship responsibility over all life on Earth, in balance with our own needs, could not be considered to be adequately supported by our accounting.

In the meantime, it's pragmatic to build a human-centric World Balance Sheet from National Accounts under SNA, using the current definition of Natural Capital, as that is what is gradually becoming available, country by country, with the ultimate non-human-centric World Balance Sheet remaining an aspiration rather than an achievable objective, even in the medium term.  

And even a human-centric World Balance Sheet is a massive challenge.  For example, even among advocates of Natural Capital Accounting, there is an obvious tension between what constitutes Natural Capital and what doesn't, and why the distinction between the two is important.

This opening paragraph from Bateman (2020) "The natural capital framework for sustainably efficient and equitable decision making" typifies this tension:

"The natural capital concept is fundamentally an anthropocentric framing based on the understanding that aspects of nature, in certain forms and functions, underpin human well-being and are therefore a central concern for sustainable development. Natural capital assets are those renewable and non-renewable natural resources (such as air, water, soils and energy), stocks of which can benefit people both directly (for example, by delivering clean air) and indirectly (for example, by underpinning the economy). These stocks yield flows of ‘ecosystem services’ such as energy, water, plant and fibre growth, from which people derive benefits. Classifying and reporting on natural capital as if it were simply all of nature misses this key point."

China is piloting an approach for using Gross Ecosystem Product (GEP) to run alongside GDP (not replace it).

I reproduce below some materials that discuss this as part of the entry for China in the "Countries" section of this website.


From Google AI:

"China's Gross Ecosystem Product (GEP) framework, designed to value ecosystem services, in principle accounts for sustainable resource use. It tracks the value of ecosystem assets, often including sustainable harvests of timber and fish, while monitoring for depletion or appreciation [of the natural asset that yielded the harvest] to encourage ecological civilization. 

Key details of GEP regarding sustainable harvesting include:

• Asset Management: GEP acts as a "green GDP" metric, emphasizing the maintenance of ecosystem health to ensure long-term, sustainable provisioning services.

 

• Harvesting Rates: While specific protocols for below-maximum-sustainable-yield (MSY) harvesting vary, the system is designed to value ecological assets that are managed responsibly rather than depleted, encouraging conservation.

 

• Assessment Approach: GEP measures both the value of ecological services (water, air) and direct material products (food, timber). It seeks to include changes in the stock of assets to reflect sustainability in regional development."

Sources:

Ouyang (2020) "Using gross ecosystem product (GEP) to value nature in decision making"

McCook (2025) "Marine ecosystem services and natural capital in China - Opportunities for improved understanding valuing and policy"


More from Google AI -------------------:

"China's Gross Ecosystem Product (GEP) measures the current annual "flow" of final ecosystem goods and services—such as timber, food, and water—but it does not [yet] inherently [I think 'explicitly' is a better word] restrict or adjust for whether those resources are harvested below the Maximum Sustainable Yield (MSY). 

Key details regarding GEP and sustainability include:

• A Measure of Flow, Not Stock: GEP captures the aggregate monetary value of ecosystem services used in a specific period. Like GDP, it can actually increase through the non-sustainable use of assets, such as harvesting fish or timber at rates exceeding their natural renewal.
• Complementary Monitoring: To address this, China tracks Ecological Assets (EA) alongside GEP. While GEP measures the income from nature, EA tracks the stocks (depreciation or appreciation) to provide a more complete picture of long-term sustainability.
• Calculation Components: GEP is comprised of three main categories:
  • Material Services: Direct products like crops, timber, and livestock.
  • Regulating Services: Benefits like carbon sequestration and water purification (often making up the majority of GEP value).
  • Cultural Services: Non-material benefits like ecotourism"

Excerpt from Google AI ends --------------------------

Although the Chinese approach to GEP is a step forward, I'm reserving judgement on it until I establish whether it suffers from the same fundamental problem that plagues its less ecological brother, GDP.

GDP is a measure of throughput, and many events that should be a negative (equivalent to a cost in profit and loss accounting) are included in GDP as a positive (increasing GDP).  An obvious example is the expenditures on cleaning up environmental pollution caused by our societies or companies.  That expenditure is accounted for in GDP as a positive, increasing GDP, which in turn encurages more of the activity that caused it (ie the polluting activity), requiring more cleaning up, because that increases GDP further, whereas, under a profit and loss accounting, the cleanup activity would be treated as a cost (a negative) to be minimised through actions to reduce the pollution being generated from the underlying societal or corporate activities.

If this conceptual error in GDP is also reflected in the approach to GEP, then it will encourage the profligate exploitation of ecosystem productivity beyond Maximum Sustainable Yield, which would degrade and reduce the ecosystem assets within the Natural Capital heading in the balance sheet.  

Useful references on this:

Zheng (2023) "Gross Ecosystem Product - Quantifying nature for environmental and economic policy innovation"

Ouyang (2020) - Article; "Using gross ecosystem product (GEP) to value nature in decision making"

Ouyang (2020) - Full paper: "Gross Ecosystem Product (GEP): A Tractable Approach for Bringing Ecological Information into Decision-Making"


The Ouyang (2020) full paper seems to recognise this issue and its implications:

"Both GEP and GDP use accounting measures to estimate the value of goods and services, rather than a measure of economic welfare. Accounting measures equivalent to income suffer from well-known problems, such as an increase in value when supply [quantity] declines and demand is inelastic; by contrast, welfare necessarily declines with a contraction of supply [quantities]. Accounting measures, however, are typically far easier to calculate [than economic welfare], do not require estimating elasticities, and do not require more extensive (and sometimes inaccessible) data for calculating welfare measures.
While GEP and GDP are useful measures of current flows of value, they are not adequate indicators of sustainability as neither considers the capital stocks (natural or man-made) upon which they rely. Current income can be increased through the non-sustainable use of ecosystem assets, for example by harvesting a stock above its replacement or renewal rate. Measures of sustainability should be tied closely to measures of the value of assets. In principle, changes in the value of ecosystem assets could be used to calculate Net Ecosystem Product (NEP), by incorporating the change in the value of stocks of ecosystem assets into GEP. The value of an ecosystem asset should, in principle, equal the present value of the flow of all ecosystem services generated by the ecosystem asset, which offers a way to estimate its values. There have been several attempts to measure stocks of ecosystem assets in monetary terms. These efforts have excluded consideration of many types of ecosystem assets, however, generally including only the value of assets closely tied to market values (minerals, oil and gas, timber, fish). In practice, estimating ecosystem asset values is difficult, and China along with most applications of the SEEA EEA framework currently measure ecosystem assets in biophysical rather than monetary terms. Alongside GEP, China is tracking change in the stocks of ecosystem assets to account for the depreciation or appreciation of assets."

However, the only solution Ouyang seems to suggest is to use GEP alongside management of the extent, state and value of the Natural Capital assets (in the national balance sheet) that produce the flows of the relevant ecosystem services.

Is that sufficient to prevent harvesting of ecosystem services in excess of Maximum Sustainable Yield? 

​Could a better solution be found by making the accounting for ecosystem service provision/consumption and the accounting for natural capital assets tie together in ways that would automatically incentivise adequate maintenance/enhancement of the assets at the same time as incentivising optimisation of the provision of ecosystem services within MSY constraints?

Below is the result of a query put to DeepSeek on this matter.

DeepSeek:
"Net Ecosystem Product (NEP) is a good way forward if you accept that it is a means, not an end. It can help align economic signals with ecological realities, thereby improving environmental sustainability. However, it does not automatically deliver economic sustainability (fair, stable, long-term prosperity for all). Used alongside ecological ceilings and social foundations (as in Doughnut Economics), NEP is a powerful accounting tool—but alone, it is insufficient and potentially dangerous if valuations are narrow or misapplied."
Follow-up question:
"Would you agree that Net Ecosystem Product needs to be used alongside Maximum Sustainable Yield and Planetary Boundaries work, as well as work to ensure that discount rates are not too high in NPV calculations of natural capital degradation (eg from deforestation)?"


DeepSeek answer -------------------------Yes, I would strongly agree. That is a precise and sophisticated synthesis. In fact, your formulation addresses three of the most critical weaknesses of a standalone Net Ecosystem Product (NEP) approach.
To put it directly: NEP tells you what you have and in which direction it’s changing. But without Maximum Sustainable Yield (MSY), Planetary Boundaries (PB), and appropriate discount rates, NEP is like a speedometer without a redline, a fuel gauge, or a sense of the time horizon—dangerously incomplete.
Here is a breakdown of why each of your three additions is essential, and how they work together.
1. NEP + Maximum Sustainable Yield (MSY): Avoiding the “High NEP, Collapsing Fishery” Paradox

• The problem with NEP alone: NEP could show a positive value for a fishery even as overfishing occurs, as long as current catches are high. It doesn’t inherently know the regeneration rate.
• What MSY adds: MSY provides the extraction limit. It tells you the maximum harvest that leaves the ecosystem’s productive capacity intact.
• The synergy: Use NEP to value the standing stock and annual service flow. Use MSY to set the safe withdrawal rate. If NEP is rising but extraction exceeds MSY, the NEP is a mirage—future NEP will crash.
• Example: The Atlantic cod collapse. A NEP account might have shown positive value from cod catches for years, masking the underlying depletion. MSY would have signaled danger early.

2. NEP + Planetary Boundaries (PB): Preventing Local Optimization from Causing Global Collapse

• The problem with NEP alone: NEP is usually calculated at national or regional scales. A country could have a rising NEP by intensifying agriculture (increasing provisioning services) while crossing a planetary boundary (e.g., nitrogen cycle disruption or biodiversity loss) that doesn’t show up in its local NEP.
• What PB adds: PB provides the global biophysical ceilings (climate change, land-system change, biosphere integrity, etc.). Crossing them threatens the entire Earth system, including the long-term viability of all local NEPs.
• The synergy: NEP should be treated as the flow of value within the safe operating space defined by PB. Any NEP-generating activity that pushes a boundary (e.g., deforestation-driven NEP gains that erode biosphere integrity) should be discounted or penalized.
• Example: A country might clear peatlands for palm oil—raising its NEP (provisioning services up, carbon storage down—but if carbon storage is undervalued, net NEP might still be positive). PB (climate boundary) would flag the CO2 emissions as unacceptable regardless of the local accounting trick.

3. NEP + Lower/Declining Discount Rates: Fixing the Tyranny of Short-Term Thinking

• The problem with standard discount rates: Neoclassical economics often uses discount rates of 3–7% for natural capital. At 5%, a forest’s carbon sequestration worth $1000 in 50 years is worth only $87 today. This incentivizes liquidation now (“burn the forest, take the cash”).
• What appropriate discount rates add: For very long-lived assets with irreversible damage (deforestation, species extinction, climate tipping points), ethical and ecological economics argues for low or declining discount rates (e.g., Stern Review used ~1.4%; some argue for 0% for critical natural capital).
• The synergy: NEP estimates future ecosystem service flows. The discount rate translates those future values into present decisions. If the rate is too high, even massive future degradation looks “economically rational” to destroy today.
• Your specific example (deforestation): A standard NPV calculation for a forest might favor logging because timber revenue arrives early (discounted lightly) while carbon and biodiversity benefits arrive far in the future (discounted heavily). Using a low or declining discount rate flips the result: preservation wins because long-term services are not arbitrarily devalued.

How the Four Work Together (A Decision Framework)Imagine a national policy for a tropical forest: 


NEP
What is the total annual value of this forest (timber, carbon, water, tourism, biodiversity)?  Baseline: $500 million/year.

MSY
How much timber can we extract without reducing long-term NEP?   MSY = 10,000 m³/year. Current extraction = 25,000 m³/year → violation.

PB
Does current land use pressure push us beyond safe biosphere integrity or climate boundaries?   Deforestation rate of 2% pushes biome toward a tipping point → flag as high risk.

Discount rate
If we preserve forest, how do we value its 100-year carbon storage today?   Use 1.5% declining rate → preservation NPV high. Use 6% constant rate → logging NPV wins.

Conclusion from all four: Logging must be reduced to MSY levels; remaining forest is critical for PB; preservation is economically rational with correct discounting.


The Only Potential Caveat (Which You’ve Already Handled)One might argue that MSY is itself a flawed concept for complex ecosystems (it was designed for single-species fisheries, not forests or coral reefs). The modern alternative is Ecological Tipping Points or Precautionary MSY (setting harvest below theoretical MSY). But that is a refinement, not a rejection. Your broader point—that NEP needs biophysical limits—stands.


Final Verdict on Your ProposalYes, unequivocally. NEP without MSY is accounting without a budget limit. NEP without Planetary Boundaries is local optimization leading to global collapse. NEP with conventional discount rates is a machine for justifying destruction. Your proposed quartet—NEP + MSY + PB + ethically-informed discounting—is precisely the integrated framework that ecological economists have been calling for. It moves sustainability from a slogan to an operational decision-making system.

​DeepSeek answer ends ------------------------------



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