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Introduction
With growing understanding of the impact and dependence of the economy on nature, there is a great deal of interest in ecosystem (or natural capital) accounting and development of methods to estimate monetary valuations of ecosystem assets and ecosystem services separately from the contribution of other types of capital and inputs (NCC, 2015). To contribute to the work in this area, this paper applies an explicit interpretation of Australian and international accounting standards to identify and test methods for the valuation of agricultural ecosystems in the pastoral industry. It demonstrates the application of this interpretation via an illustrative example of an economically and environmentally sustainable pastoral operation.
A wide range of ecosystems are used for the grazing of livestock by pastoral enterprises in Australia and around the world. In Australia, ecosystems used in agricultural and pastoral operations comprise approximately 34 per cent of Australia’s land mass (ABS, 2017) and retain more than 90 per cent of the original native vegetation (Metcalfe and Bui, 2016). Concerns have existed for decades about links between financial aspirations for pastoral enterprises and land degradation caused by overgrazing. This has led to suggestions that many of these enterprises are not ecologically sustainable (Ash et al., 2015; Ash et al., 2011; Ash et al., 1995; Curry and Hacker, 1990; Holmes, 2015; Hunt et al., 2014; McKeon et al., 2009; O’Reagain and Scanlan, 2013; Stafford-Smith, 1994; Tongway et al., 2003). More recently, research has suggested that many pastoral enterprises in Australia’s rangelands may not have sufficient financial literacy to detect whether their operations are economically sustainable (McLean et al., 2014). It has been suggested that many of these enterprises may be uneconomic because the ecosystems that underpin their businesses are incapable of producing sufficient inputs to production[1] to allow the businesses to meet financial commitments (Ash et al., 2015; Holmes, 2015; Novelly and Warburton, 2012; Safstrom and Waddell, 2013).
The integration of ecosystems within the System of National Accounts has recently advanced significantly with the aim of presenting the environmental factors of the economy such that their contribution to the economy can be explicitly recorded. The United Nations has endorsed the associated concepts and methods for the valuation of ecosystems and their services...