Environmental multipliers from a system of physical resource accounting

Structural Change and Economic Dynamics, vol. 2, no. 2, 1991

ENVIRONMENTAL MULTIPLIERS FROM S Y S T E M OF P H Y S I C A L R E S O U R C E ACCOUNTING MARTIN

WEALE

A

1

It is not necessary to value environmental changes in order to incorporate them into a framework of economic statistics. A system of physical resource accounts can be integrated into the System of National Accounts and used as the basis for setting up an extended input-output model which shows the effects of changes in economic activity on the environment. This is demonstrated with reference to Indonesia. The effects of changes in different types of exogenous demand on land degradation, deforestation, and depletion of oil reserves are calculated. 1. INTRODUCTION

The basis of national income accounting was laid down by M e a d e and Stone (1941). The f r a m e w o r k which they described was intended to show, in broad terms, how the m a r k e t transactions of an e c o n o m y inter-relate. It was also intended to allow the construction of simple economic models and to help with wartime planning problems. Since then the accounting f r a m e w o r k has been extended to the detailed scheme set out in the System of National Accounts (SNA; United Nations, 1968). The revision to the SNA which is now in progress is intended to clarify various problems which have arisen since 1968. It does not suggest any fundamental change to the 1968 practices, but suggestions are likely to be made for the construction of satellite accounts bringing together economic statistics concerning fields such as education or health. This will provide a format for close analysis of such areas, while at the same time linking such data to the main body of the national accounts. H o w e v e r , the implication of this is that the problem of environmental statistics can be safely discussed in the f r a m e w o r k of the 1968 SNA; this will not be rendered obsolete by the revision (Harrison, 1989). There are two separate, but related issues which are raised by the renewed concern for environmental problems and the implications of resource extraction. One concerns the question of whether G D P / G N P , as defined by the S N A , is a sensible indicator of national income gross of depreciation, or whether there are adjustments which ought to be made, so as to provide a better indicator. Such a question is important if the goal of the national accountant is to produce statistics simply for the purpose of ex post analysis of growth rates, or so as to allow i Department of Applied Economics, University of Cambridge, Cambridge CB3 9DE, UK.

(~ Oxford University Press 1991

297

298

M. W E A L E

international comparisons. However, while the calculation of an adjustment to G N P / G D P is of undoubted interest in its own right, such an aggregate cannot form a basis for any sort of analysis of sustainable development. Nor can it allow economists to make any attempt at modelling the environmental and natural resource implications of particular policy changes. For such purposes a more general accounting framework is required. A particular problem which arises with attempts to redefine G D P is that valuations have to be placed on non-market transactions (e.g. the damage caused by atmospheric pollution). There must inevitably be a margin of uncertainty attached to such valuations. It therefore seems helpful to explore what can be accomplished by a system of physical resource accounts which avoids the need for such valuations. This paper therefore shows how a system of physical resource accounts can be incorporated into the general SNA scheme. A possible means of using such a statistical framework for the basis of economic analysis is then discussed. This is then illustrated with particular reference to Indonesia; fix-price multipliers are calculated, showing estimates of the environmental impact of a change in exogenous demand. 2. A F R A M E W O R K F O R P H Y S I C A L E N V I R O N M E N T A L A C C O U N T S

The aim of this section is to show how a system of physical environmental accounts can be integrated with the structure of the SNA (United Nations, 1968). This is not done with the aim of providing any new definitions of G D P , but rather with the intention of setting out the detailed framework necessary so as to allow the economist to model environmental consequences of economic activity and the administrator to monitor the state of the environment. If valuations can be made, environmental accounts can be set out in either money values or in physical terms. A system set out in money values has the advantage that it can be inserted directly into the standard SNA. However, there are some important environmental effects on which it is difficult to place a monetary value (Johansson, 1987; Greffe, 1990). We are now becoming concerned about the greenhouse effect. It is possible to think of a framework by which a value might be placed on greenhouse gas emissions, such as the cost, with present technology, of limiting gas discharge to the rate at which natural processes can remove the greenhouse gases. However, such exercises are highly speculative and they are in any case not necessary to keep track of man's effect on the environment. A system of physical accounts is perfectly adequate. These physical accounts should be linked into the SNA/natural resource framework so as to provide an overall data system showing the effects of economic activity on the environment. Such a physical system of accounts cannot be expected to fit neatly into the conventional accounting system, but there is no obstacle to the combination of physical data and monetary values in the same accounting table, provided one does not expect row totals and column totals to balance (see, e.g. Stone and

ENVIRONMETAL MULTIPLIERS

299

Weale, 1986). This section therefore describes a system of physical natural resource accounts within the context of the SNA. The basic structure is given in section 2 of the SNA manual. The underlying idea is that accounts are represented by rows and columns. Each row represents sales by the account to other accounts, while each column shows the purchases by the account from other accounts. For example, ~.5 shows purchases of commodities by industries; these are industrial inputs into the production process. Since monetary accounts have to balance, the row totals and the column totals are equal. The point about natural resource accounts is that they should show what happens to each resource of interest. The modified SNA must be able to do this. Table 1 presents the schematic form of the SNA as set out in the United Nations handbook, and shows how it can be modified to track the stocks and flows of natural resources. The numbered accounts are those of the standard system. The lettered accounts, A - E , are used to identify physical flows of natural resources and pollutants. The accounts marked with letters in Table 1 provide a means of keeping track of non-monetary transactions between the economy and the environment. Each account has a separate row/column for each physical topic of interest, be it a particular type of pollutant, the number of grizzly bears or the stock of uncultivable and, therefore, 'free' land. There are five separate accounts and the matrix shows the interactions of items in these accounts with the economic activities shown in the conventional social accounting matrix. Account A measures opening stocks of natural resources and pollutants. Account B shows the consumption of natural resources and their natural regeneration. Account C shows output of pollutants and natural cleaning processes. The consumption of natural resources or the output of pollutants are cross-classified to the economic activities which give rise to them, while the natural regeneration/cleaning processes are brought together in account D. Finally account E brings together the changes in resource stocks or pollutants from the various sources and cumulates the closing stocks. Account A shows in matrix T23.A, the opening stock of each physical good of interest, classified by institutional sector of ownership (households, companies, government). There are some physical goods, such as clean air, and more particularly physical bads such as greenhouse gases, which nobody owns. An additional institutional sector must be created for these. TA.E shows where these opening stocks are credited to the closing balance. In account B we see the physical inputs, both costly and free, which may be absorbed into the economic process. These may be absorbed in the production processes, TB.5, TB.6, and TB.7; and as complements to the various types of domestic final demand, TB.8, TB.17, TH.18, and TB.19. Account B shows resources consumed, and therefore natural reproduction of renewable resources is shown with a negative sign in TB.D. The net balance is shown in TB.E, also with a negative sign, so that the row totals for each physical input in account B are zero. Account C shows the pollutants generated in economic activity. This can

300

M.

WEALE T A B L E 1. N a t u r a l R e s o u r c e s in t h e S N A 1

Financial assets Net tangible assets Physical stocks Commodities Commodity taxes Industries Production of government services Private services Household goods & services Government purposes Private N-P bodies Value added Physical resources consumption Output of pollutants Institution sector of origin Form of income Institution sector receipt Industries Production of government services Industries Production of government services Production of private services Industrial capital form Capital transfer Financial assets Institution sectors Rest of the world Financial assets Net tangible assets Financial assets Net tangible assets Regeneration and discovery Closing physical stocks

2

A

1 2 A 3 4 5 6 7 8 9 10 11 B C 12 13 14 15 16 17 18 19 20 21 22 23 T23.1 tT23.2 T23.A 24 T24.1 T24.2 25 26 27 28 D E

3

4

5

Framework

6

7

8

9

10

B

11

C

~., E.6 ~.7 ~.s ~.~ ~.~ ~.~ ~.~ Ts. 3 Ts. 4

~.C

~.~.~ ~.~ ~.,o

T6.3 T7.3

~.~ ~.c T8.c

~1.3 ~1.4 ~1.5 ~1.6 ~1.7 rB5 rn.6 TB.7

T•z..

T,4.~ TI7.C rlS.C T~.c

T24.3

~4.~

~4.~

happen either in production (matrices 7"5.o T6.o and T7.c) or in final demand (Ts.0 T17.c, T18.0 and T19.c). For example, the carbon dioxide produced in the burning of fossil fuel for domestic space heating would be shown in T8.c. Matrix Tc.5 shows the amounts of any pollutants which may be identified as absorbed by what have come to be known as defensive industries. In TC.D natural recovery from pollution is shown, just as TB.D showed the natural reproduction of renewable resources. Account D shows the natural reproductive and cleansing process of the environment. As noted, in TB.D and Tc.o, it shows the regeneration of natural resources or the natural cleaning of pollutants. In T0.23 these are attributed to institutional sectors where possible; the natural growth of a forest would be shown here. Finally, account E brings the components of the closing stocks together. The column of account E shows the contributions made to the closing stock from (1) the opening stock, (2) resource depletion net of natural regeneration, and (3)

ENVIRONMETAL MULTIPLIERS

301

TABLE 1. (Continued) 12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

D

E

T1.23 T1.24

%23 T3.15 T3.16 T3.17 T3.18 T3.19 T4.15 14.16 T4.17 T4.18 T4.19

T~.E T3.24 T4.24

T~.24 T8.14 T9,14 Tlo.14

T,l.~ T~.~ T~.I~T..~ W13.12

T..D T. ~ T~.D T~.~

T13.14

TI3.24

T14.13 T15.2o T16.23 T17.2o T18.23 T19.23 T2o.23 T22.23 T22.24 T24.13

T23.21 T23.22 T24.21 T24.22

T23.25 T23.26 T23.27 T23.28 T23.D T23.E T2.... T24.25 T24.26 T24.27 T24.28

T~.... r~.~4 T28,23

~23

pollution net of natural cleansing and the activities of any defensive industries. TE.23 allocates this closing stock across the institutional sectors. Just as the monetary accounts balance, in that for each account each row total equals each column total, so too do the physical accounts. However, the two systems are independent, and it makes no sense to add together the monetary and physical entries in any row or column. There is one final point concerning the physical accounts. They are of paramount importance for showing those environmental consequences of economic activity on which no sensible monetary valuation can be imputed. However, the general point of i n p u t - o u t p u t analysis remains valid. Provided one does not wish to give any economic meaning to the column totals in a table of industrial purchases of commodities, or the column totals in a table of commodities produced by industries, the i n p u t - o u t p u t table can be cast perfectly well in physical units. The implication of this is that there is no obstacle to including the physical counterparts of those monetary flows which are already shown in the

302

M. W E A L E

system of national accounts. Indeed many countries find it useful to monitor physical as well as monetary flows of goods such as fuel products, and countries such as France (INSEE, 1986) and Norway (Statistisk Sentralbyra, 1987) already collect and publish much of the other information which would be needed to cast this system of physical accounts. Having set out the formal structure of environmental accounts, and shown how they can be linked with conventional social accounts, we now proceed to show how environmental information can, in practice, be combined with social accounts so as to form the basis for a simple economic model. The social and environmental accounts are not as comprehensive as those in Table 1. However, there is enough information to make a start at showing the effect of changes in demand on the environment.

3. E N V I R O N M E N T A L M U L T I P L I E R S FOR I N D O N E S I A

The purpose of this section is to demonstrate how, even though there may not be enough information to set up the comprehensive accounting system of the previous section, some attempt can be made to quantify and model the environmental effects of demand changes in Indonesia. The approach adopted is that of extended i n p u t - o u t p u t modelling as described by Pyatt and Round (1979). That is, it is assumed that relative prices are fixed while quantities are in elastic supply. This assumption, while convenient for the solution of a simple model, is by no means essential, and the same sort of approach could be adopted for the solution of a computable general equilibrium model. The model is constructed from two secondary data sources. Khan and Thorbecke (1988) present a social accounting matrix for Indonesia for 1975, while Repetto et al. (1989) offer estimates of the effects of economic activity on three natural resources: crude oil, forests, and agricultural land. I have linked the environmental data to the various industries and activities in the social accounting matrix. This forms the basis for my model. 3.1. A Social Accounting Matrix

The social accounting matrix is a consolidated form of the general schematic form of Table 1. It does not distinguish industries from commodities, but labels both as production activities. Transfers are not distinguished by type, but only by originating and receiving sector and the capital accounts are much abbreviated. On the basis of the environmental data, there are four areas in which economic transactions have a quantified effect on the environment. This is, to say the least, an understatement, but the purpose of this section is to show how some effects can be quantified even if all possible interactions are not identified. First of all, the environmental data tell us that food production, valued at Rph 2688.32bn in 1975, resulted in the degradation of agricultural land which

ENVIRONMETAL MULTIPLIERS 303 reduced the capitalized future yield by Rph 142.2bn. 2 Secondly, forestry led tO the harvesting of 16.3mn m 3 and logging damage connected with the harvesting destroyed trees worth another 32.2mn m 3. Third, oil extraction depleted the stock of crude oil by 477mn barrels. Finally the gross capital account is affected in that land clearance led to the destruction of forests, losing l l 0 m n m 3 of timber. The process of deforestation presumably leads to a gain in agricultural land which should be credited, which is presumably worth more than the value of the trees destroyed in deforestation; its absence makes the accounts incomplete but such an omission does not invalidate the subsequent calculations. The accounting matrix is a simplification of the S N A matrix of Section 2. It has the structure shown in Table 2. The cells in this matrix show the transactions identified by Khan and Thorbecke (1988), so that A13 shows payments to factors of production by industries and A14 shows payments by the exogenous accounts, government, the consolidated capital account, net indirect taxes, and the rest of the world. A21 shows the sales of factors of production by institutional sectors. A22 shows transfers and A24 shows the payments by the government to the institutions.3 A32 shows the purchases of consumption goods by the institutional sectors. A33 shows the inter-industry transactions and A34 shows sales of goods to exogenous demand, i.e. to government, to capital formation, and for export. A41 shows payments by factors of production to the government or the rest of the world and thus shows the profit on capital owned by the government or owned by foreign enterprises. A42 shows payments by the institutions to the government (direct taxation), to the capital account (saving) or to the rest of the world (imported consumption goods). A43 shows payments by production of indirect taxes and for imports used in the production process. Finally A44 shows payments by one exogenous account to another one. For example, indirect taxes are credited to the government, and both government saving and saving from the rest

TABLE 2. A Social Accounting Matrix showing Linkages to the Environment Factors

Factors Institutions Production Exogenous

Total Environment

A21

Institutions

A41

A22 A32 A42

T1

T2

Production

Exogenous

Total

A 13

A 1,*

7"1

A33 A43

A24 A34 A44

T2 T3 T4

T3 E3

T4 E4

2 Note that in this case our data source (Repeno et al., 1989) places a monetary value on physical land degradation. This is not important for our calculations and some indicator of the reduction in future yield could have been used instead. However, since the aim of this paper is to show how environmental multipliers can be calculated from available information, it seems best to stick to the available measure. As the application demonstrates, this does not conflict with the aim of presenting physical multipliers. ° These are in fact payments for labour and might be treated more satisfactorily as payments for factors of production.

304 M. WEALE of the world are shown as credits to the capital account. The latter is of course equal to the balance of payments deficit. The elements in the A matrices are perfectly standard social accounting matrix entries. The matrix is not in the exact form of the SNA: many areas have been consolidated, but it is a social accounting matrix. However, the new accounts are those marked E3 and E4. These show interactions between the economy and the environment. Once again, the full detail of the schematic extended SNA in Table 1 is not shown and there are probably many environmental effects which are ignored. Nevertheless there is enough information to enable us to calculate environmental multipliers. Three types of environmental-resource linkages are identified. First of all, the effect of land degradation is shown as an input into food production. 4 The entry here shows the capitalized value of the land lost as a consequence of food production in 1975. Secondly deforestation is shown. This arises from two types of economic activity. Forestry inevitably results in trees being harvested, and the entry shows the loss of timber, measured in million cubic metres including the effects of logging damage. Deforestation also arises from the investment activity of clearing land for agriculture. This is shown in E4 as an exogenous capital account effect. Finally the depletion of oil reserves is shown as the millions of barrels extracted by the petroleum industry. These environmental effects are quantified in the three additional rows ( E l . . . E3) of the matrix which is shown in Appendix 1. 3.2. F r o m S o c i a l A c c o u n t s to a M o d e l The illustrative model presented here is built on the assumption that average and marginal propensities are equal. As Pyatt and R o u n d (1979) show, the approach used can accommodate situations in which the two are different, but since this model is purely illustrative, the simplest possible approach is maintained. The accounts of Table 2 are converted into propensities by dividing by the row totals, T1-T4. This yields a matrix of 'propensities to spend' by each account. For example, if T1 is used to denote a matrix whose leading diagonal is the vector T~, and whose other elements are all zero, then Azl(T1) - I shows the shares of 1 unit of income of each factor of production paid out to particular institutional sectors. For example, the factor 'unincorporated capital rural' pays out to various institutional sectors; the cell entries in the matrix Azl(T1) -1 represent the shares of each of these sectors. The coefficients in the matrix A33(T3) -1 represent the coefficients in a conventional input-output table. These observations are quite standard. However, the novelty of this model lies in the fact that we also work out environmental linkages. The matrix E3(T3) -1 shows the environmental impact of 1 unit of production of a particular type, and thus records the land degradation per unit of agricultural output, the change in the stock of trees arising from 1 unit of forestry output or the change in the value 4 The whole of land degradation is attributed to food rather than non-food production, since it seems that Repetto et al. have only identified degradation arising from food production.

ENVIRONMETAL MULTIPLIERS

305

of oil reserves generated by 1 unit of petroleum output. The idea is then thatconventional techniques are used to work out the effects of changes in gross output arising from shifts in exogeneous demand. Their environmental impact is then calculated by means of these coefficients. The distinction between exogenous accounts (as shown in Table 2) and endogenous accounts (everything else) is absolutely crucial in the construction of a simple model. Payments into exogenous accounts are leakages from the system, while exogenous demand is taken as given. The model is solved by adjusting the values of column totals so that, given values of exogenous demand, propensities to spend on the endogenous accounts and leakage propensities into the exogenous accounts, the row and column totals are equated so that supply and demand are brought into balance. In the simple example considered here, this is achieved entirely by adjustments to quantities. There is no basic obstacle to moving closer to something like a computable general equilibrium model in which the adjustments are borne partly by price changes, but this would obscure the simple way in which environmental linkages can be incorporated into a model of this type. If we now denote Bij =Aij(Tj) -1, then the propensities to spend from one endogenous account into another endogenous account are shown as B=

L0 0 031 B21

B22

0

B3z

B33_]

The vector of row/column totals may be written t = (T,, T2, T3)' and, if c denotes the row sums of the entries in the columns of exogenous accounts, then the model will satisfy the following relation t=Bt+c

or

At=(I-B)-1Ac.

The matrix (I - B) -1 is a multiplier matrix which shows the effects of changes in exogenous demand on the total level of output. If we now denote the matrix of environmental coefficients as e = (0, 0, E3(T3) -1) then the environmental impact of a change in the exogenous accounts is given as AE = F(I - B)-IAc

and the matrix F ( I - B ) -1 is the matrix of environmental multipliers for the economy, showing environmental effects of a unit change in any item in the exogenous account. This calculation is quite general but, for a country like Indonesia it is probably not quite complete. For, even if we accept the implication of the model, that factors of production are in elastic supply s o that the necessary quantity adjustments can take place, there is one area in which some departure from the standard model should be made. An exogenous increase in demand implies that imports will be increased. They are, after all, one of the leakages. But a more

306 M. WEALE sensible way of looking at the effect of a change in d e m a n d is to assume that Indonesia increases its oil exports so as to maintain the ex ante balance of payments. This has obvious implications for the change in the stock of unextracted oil which this model should pick up. I denote by m the vector of leakages to the rest of the world, m is therefore a vector ~vith cells equal to the elements of one row (in fact the fourth row) of the matrix of propensities to leak, (B41

B42

B43)

and the total value of imports arising from the change in exogenous demand, Ac, is equal to m ' ( l - B) -1 Ac. There is now an increase in the export d e m a n d for p e t r o l e u m equal to z m ' ( I - B) -1, where z is a vector consisting of zero everywhere, but 1 for the petroleum industry. This triggers a further increase in output equal to ( I B ) - l z m ' ( I - B ) -1. I m p o r t s increase by m ' ( l - B ) - l z m ' ( l - B ) -1 and exports have to be increased by a further z m ' ( l - B ) - l z m ' ( l - B ) -1. The process continues. T h e r e is a total increase in exogenous d e m a n d / e x p o r t sales equal to Ac* = {I + z m ' ( l - B) -1 + [ z m ' ( l - B ) - I ] 2 + . . . }

Ac.

The sum of this geometric progression to infinity is Ac* = [I - z m ' ( I - B)-1] -1 Ac. The increase in gross output is therefore At = (I - B ) - I I I -

zm'(I

-

B ) - I ] - l Ac

and the environmental effects are given as Ae = F(! - B ) - I [ I - z m ' ( l - B ) -11 1 A c .

3.3. Environmental Multipliers for Indonesia Table 3 shows environmental multipliers for Indonesia. It identifies the effects of 1 unit of exogenous d e m a n d in each of the production categories on the environment in the three areas identified by R e p e t t o et al. (1989), land degradation, timber harvesting, and crude oil depletion. No deforestation for the purpose of extending agricultural land is shown because this is in the nature of a capital good. 5 Multipliers are shown both on the assumption that the balance of payments is allowed to vary and on the assumption that crude oil output is adjusted to compensate for this. Table 3 presents the multiplier table, transposed for the sake of convenience. Thus, in the first column we see the effect on land degradation of a p a y m e n t of Rph l b n to each of the factors and institutions. In the top left cell we see that 5 There is in fact an asymmetry here. An increase in agricultural output would imply further deforestation, but a contraction would not imply immediate reforestation.

ENVIRONMETAL TABLE 3.

MULTIPLIERS

Environmental Multipliers for Indonesia Balance Land Degradation (Rph an) 0.0488 0.0442 0.0459 0.0450 0.0464 0.0359 0.0458 0.0349 0.0456 0.0328 0.0457 0.0344 0.0428 0.0301 0.0447 0.0329 0.0431 0.0395 0.0466 0.0341 0.0053 0.0051 0.0035

of P a y m e n t s

Changes Timber Stock (mn m') 0.0020 0.0018 0.0018 0.0018 0.0019 0.0014 0.0019 0.0014 0.0019 0.0013 0.0019 0.0014 0.0018 0.0013 0.0018 0.0013 0.0017 0.0016 0.0019 0.0014 0.0002 0.0002 0.0001

Balance

of P a y m e n t s

Constant Crude Land Timber Stock Oil DegradReserves ation (an bls) (Rph an) (ran m') 0.0057 0.0510 0.0021 0.0057 0.0464 0.0019 0.0052 0.0479 0.0019 0.0053 0.0470 0.0019 0.0059 0.0487 0.0020 0.0058 0.0382 0.0016 0.0057 0.0481 0.0020 0.0057 0.0372 0.0015 0.0058 0.0479 0.0020 0.0056 0.0351 0.0015 0.0057 0.0480 0.0020 0.0057 0.0367 0.0015 0.0056 0.0451 0.0019 0.0054 0.0323 0.0014 0.0057 0.0470 0.0019 0.0056 0.0351 0.0015 0.0050 0.0450 0.0018 0.0056 0.0417 0.0017 0.0057 0.0488 0.0020 0.0057 0.0364 0.0015 0.0009 0.0058 0.0002 0.0009 0.0056 0.0002 0.0006 0.0060 0.0003

Crude Oil Reserves (an bls) 0.1115 0.1120 0.1013 0.1030 0.1165 0.1163 0.1130 0.1148 0.1155 0.1135 0.1143 0.1148 0.1136 0.1103 0.1140 0.1134 0.0971 0.1112 0.1126 0.1152 0.0247 0.0237 0.1216

1 2 3 4 5 6 7 8 9 10 ii 12 13 14 15 16 17 18 19 20 21 22 23

Ag P a i d R u r a l Ag P a i d U r b a n Ag U n p a i d R u r a l Ag U n p a i d U r b a n Prod Paid Rural Prod Paid Urban Prod Unpaid Rural Prod Unpaid Urban Cler Paid Rural Cler Paid Urban Cler Unpaid Rural Clef Unpaid Urban Prof Paid Rural Prof Paid Urban Prof Unpaid Rural Prof Unpaid Urban Uninc Capital Land Unlnc Capital Housing Unlnc Capital Rural Unlnc Capital Urban Inc C a p i t a l D o m e s t i c Inc C a p i t a l G o v e r n m e n t Inc C a p i t a l F o r e i g n

24 25 26 27 28 29 30 31 32 33 34

Ag E m p l o y e e s Farm Size 1 Farm Size 2 Farm Size 3 Rural Lower Rural Middle Rural Higher Urban Lower Urban Middle Urban Higher Companies

0.0494 0.0507 0.0468 0.0391 0.0463 0.0444 0.0408 0.0359 0.0364 0.0297 0.0053

0.0020 0.0020 0.0019 0.0015 0.0019 0.0020 0.0017 0.0014 0.0015 0.0012 0.0002

0.0057 0.0056 0.0054 0.0045 0.0060 0.0062 0.0056 0.0059 0.0063 0.0054 0.0009

0.0517 0.0528 0.0488 0.0408 0.0487 0.0468 0.0431 0.0382 0.0390 0.0319 0.0058

0.0021 0.0021 0.0020 0.0015 0.0020 0.0021 0.0018 0.0015 0.0016 0.0014 0.0002

0.]133 0.1080 0.1025 0.0886 0.1202 0.1197 0.1147 0.1169 0.]289 0.1099 0.0247

35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74

Food Crop Nonfood Crop Livestock and Products Forestry and hunting Fishery Metal Ore Mining Other Mining Handpounded Rice Milled Rice F a r m P r o c e s s e d Tea Processed Tea D r i e d and S a l t e d F i s h Canned Fish Brown Sugar Refined Sugar C a n n i n g (s&c) C a n n i n g (m&l) Kretek Clgs White Cigs O t h e r Fbt Wood and Construction T e x t i l e s etc Paper, T r a n s p o r t , M e t a l Chemicls, Cement etc Coal M i n i n g Petroleum etc Gasoline Fuel Oil 51ectric[ty T o w n Gas Water Distr[butlon Catering Hotels R o a d T r a n s p o r t etc A i r t r a n s p o r t etc B a n k i n g and i n s u r a n c e Real E s t a t e P u b l i c s e r v i c e s etc Personal Services etc

0.0966 0.0349 0.0415 0.0264 0.0366 0.0190 0.0348 0.0856 0.0770 0.0333 0.0283 0.0352 0.0322 0.0395 0.0277 0.0493 0.0524 0.0243 0.0155 0.0387 0.0207 0.0203 0.0133 0.0154 0.0188 0.0042 0.0060 0.0060 0.0116 0.0122 0.0181 0.0261 0.0407 0.0263 0.0294 0.0159 0.0153 0.0322 0.0326 0.0280

0.0017 0.0017 0.0017 0.1436 0.0021 0.0011 0.0020 0.0018 0.0016 0.0018 0.0021 0.0024 0.0018 0.0022 0.0015 0.0016 0.0015 0.0011 0.0007 0.0015 0.0073 0.0010 0.0018 0.0016 0.0009 0.0002 0.0003 0.0003 0.0007 0.0006 0.0014 0.0011 0.0018 0.0014 0.0013 0.0009 0.0008 0.0020 0.0014 0.0014

0.0055 0.0056 0.0051 0.0044 0.0057 0.0059 0.0060 0.0055 0.0053 0.0049 0.0073 0.0055 0.0062 0.0061 0.0057 0.0076 0.0067 0.0041 0.0026 0.0050 0.0076 0.0043 0.0042 0.0496 0.0054 0.1997 0.0976 0.0960 0.0128 0.0121 0.0054 0.0047 0.0063 0.0060 0.0085 0.0066 0.0031 0.0053 0.0055 0.0085

0.0987 0.0369 0.0434 0.0282 0.0387 0.0208 0.0371 0.0876 0.0794 0.0351 0.0303 0.0372 0.0344 0.0416 0.0298 0.0515 0.0545 0.0260 0.0171 0.0407 0.0235 0.0236 0.0167 0.0178 0.0210 0.0063 0.0084 0.0084 0.0141 0.0148 0.0208 0.0280 0.0430 0.0286 0.0318 0.0181 0.0168 0.0343 0.0349 0.0309

0.0018 0.0017 0.0018 0.1437 0.0022 0.0011 0.0021 0.0019 0.0017 0.0019 0.0022 0.0025 0.0019 0.0023 0.0016 0.0017 0.0016 0.0012 0.0008 0.0016 0.0074 0.0011 0.0020 0.0017 0.0010 0.0003 0.0005 0.0005 0.0008 0.0007 0.0015 0.0012 0.0019 0.0015 0.0015 0.0010 0.0009 0.0021 0.0015 0.0015

0.1038 0.1019 0.0979 0.0883 0.1036 0.0915 0.1139 0.1040 0.1192 0.0916 0.1007 0.1008 0.1121 0.1085 0.1094 0.1120 0.1068 0.0847 0.0753 0.0976 0.1393 0.1606 0.]677 0.1610 0.1078 0.2977 0.2113 0.2124 0.1283 0.1364 0.1317 0.0925 0.1146 0.1141 0.]207 0.1120 0.0760 0.1044 0.]143 0.1439

etc

307

308

M. W E A L E

Rph lbn extra paid to rural agricultural labour will result in land degradation with a capitalized value of Rph 48.8mn. In addition 2000 m 3 of extra timber will be harvested or damaged in logging and 5700 extra barrels of crude oil will be extracted. The latter two figures are also, of course, reductions in the stock of these natural resources. These calculations are on the assumption that no attempt is made to offset the influence on the balance of payments. However, if crude oil output is adjusted to remove the balance of payments effects, we see that the first two multipliers are only slightly affected; by contrast oil depletion rises from 5700 barrels to 111,500 barrels, thereby demonstrating the importance of investigating the possible crude oil output response. It can be seen from Table 3 that resource consumption is not greatly affected by the payment of exogenous income to any one of the factors of production 1-20. However, the effects of a transfer to incorporated capital are very different. Since the return to incorporated capital is mainly saved, the environmental effects are much lower. The one exception to this point arises from a notional transfer to foreign capital. A large part of the return to foreign capital is exported and so the resource effect, with balance of payments constant, is much larger than if a transfer is made to domestic incorporated capital. The multipliers for the institutional sectors show much the same points as those for the factors of production. They are broadly similar, except in the case of the corporate sector, which has much lower multipliers. The largest, and final group of multipliers shows the environmental effects of Rph lbn extra demand for tile output of each of the industries listed. It can be seen that there is much more variation in the multipliers across industries than there was across institutions or factors of production, which does not come as a great surprise. However, as a rough rule of thumb, the effect on oil reserves when a constant balance of payments is maintained is roughly 100,000 barrels larger than if the balance of payments is allowed to deteriorate. The largest environmental effects are found in the industries which are a direct cause of the environmental problem, i.e. food crops, forestry and hunting, and crude oil extraction. However, it can be seen that the food-based industries are significant indirect sources of land degradation and the wood and construction industry is the second-worst cause of timber harvesting. Apart from the fuel-based industries, cement and chemicals has the worst effect on crude oil depletion. These environmental multipliers do not show all environmental interactions. In order to do that, a full set of environmental accounts, such as is set out in Table 1 would be needed. However, they do demonstrate that the modelling of environmental effects is possible using little further information than is available in a typical social accounting matrix. 4. C O N C L U S I O N

Concern for the environment and natural resources creates a need to keep a careful tally of environmental statistics. Much more important than the redefini-

ENVIRONMETAL MULTIPLIERS

309

tion of n a t i o n a l i n c o m e is t h e c o m p i l a t i o n of a full r a n g e o f e n v i r o n m e n t a l statistics. I n m a n y cases t h e s e will b e a p p r o p r i a t e l y k e p t in p h y s i c a l t e r m s r a t h e r t h a n cash values. This is n o r e a l o b s t a c l e to t h e i r i n t e g r a t i o n in social a c c o u n t s . T h e final s e c t i o n o f t h e p a p e r d e m o n s t r a t e s t h a t e n v i r o n m e n t a l / n a t u r a l r e s o u r c e d a t a in p h y s i c a l t e r m s c a n b e c o m b i n e d with a social a c c o u n t i n g m a t r i x to f o r m t h e basis for a m o d e l o f e n v i r o n m e n t a l effects. T h e p r a c t i c a l i t y o f this is demonstrated by the calculation of environmental multipliers for Indonesia. ACKNOWLEDGEMENTS C o m m e n t s f r o m o n e o f t h e E d i t o r s o f this J o u r n a l a n d f r o m two a n o n y m o u s referees are gratefully acknowledged.

REFERENCES

GREFFE,X. (1990). La Valeur Economique du Patrimoine, Economica, Paris. HARRISON,A. (1989). 'Environmental Issues and the SNA'. Review of Income and Wealth, Series 35, 377-89. INSEE (1986) Les Comptes du Patrimoine Naturel, Paris. JOHANSSON, P. (1987). The Economic Theory and Measurement of Environmental Benefits, Cambridge University Press, Cambridge. KHAN, H. A. and THORBECKE, E. (1988). Macroeconomic Effects and Diffusion of Alternative Technologies within a Social Accounting Matrix Framework, Gower, Aldershot. MEADE, J. E. and STONE, J. R. N. (1941). 'The Construction of Tables of National Income, Expenditure, Savings and Investment'. Economic Journal, 51, 216-33. PYAT'r, G. and ROUND,J. (1979). 'Accounting and Fixed Price Multipliers in a Social Accounting Matrix', Economic Journal, 89, 850-73. REPETTO, R., MAGRATH,W., WELLS, M., BEER, C. and ROSSINI,F. (1989). Wasting Assets: Natural Resources in the National Income Accounts. World Resources Institute, Washington. STATISTISK SENTRALBYRA (1987). Natural Resource Accounting and Analysis: The Norwegian Experience, 1978-86. Oslo. STONE, J. R. N. and WEALE, M. R. (1986). 'Two Populations and their Economics', London Papers in Regional Science, 15, 74-89. UNITED NATIONS(1968). A System of National Accounts, New York.

310

M.

WEALE

ooo~oooooo~ ooooooo~o~o

~4

.......

~o

.=.

oooo~

oo~.~

<

0 oo ....

o ~ o

z

.=.

oooo.~ o ....

<

~o

.......

z

oooo~

z

©

zr,1

~'~

oooo~ ~

o

o

o

o

< z © z

© ×

oooo~

<

oooo~

oooo

z ooo~[4

z

©

m

~

< <

,,

© < N z <

~'~

~

0 •

V

ENVIRONMETAL

MULTIPLIERS

~ooooooooooooooooooo~o~ooo~ooo®oo~oooooo~o~ ~,,~oo~ooooooooooooooooo

oooooooooooooooooooo~o~ooo~ooo~oo~ooooooo~

~ ~ o ~ o o ~ o o o ~

~o~oooo~ooooo~ooo®~o

........

~ o o ~ o ~ o o ~ o ~ o o ~. . . . ~

ooooooo ....

~o~ . . . .

ooo~o~oo~oo~oo~o~

oooooooooo~

~oo~

.......

.....

~o~

~

........

.....

o

~

=

~

o

~

~ o ~ o ~ o o ~

~ o o ~ o ~ ® ~ o ~

oooo:

311

312

M. W E A L E

oooooooooooooooooooo~o~ooo~oo~ooo.oo

ooooooooooooooooooooooo

oooooooooooooooooooooo~oooooooooooo~oooooo~

ooooooooooooooooooooo~o

oooooooooooooooooooooo~o~oooooooooo~oooooo~

.....

~

oooo~ooo~ooo~ooooooo~o

oooooooooooooooooooooooooooooooooooooooooooo.

ooooooooooooooooooooooo

. . . . ~

. . . . . . ~

o

~

oooo~

............

o

o

~

~

ooooooooooooooo~ooo~o~ ooooooooooooooooooooooo

ooooooooooooooooooooooooo

ooooooooooooooooooooooo

ooooooooooooooooooooooooooooooooooooooo

....

oooooooooooooooo

. . . . . .

oooo~o~ooooooooooo~oooo

oooooooooooooooooo~ooo

ooooNooooooooooo~ooo~oooooooooogoo.ooooooooo N o o o o o o o o o o o o o o o o o o o o o o o

~o~oooooooooooooooooo~o

o~ooooooooooooooooooooooooooooo~oooooooooooo~

~

0~ ~

o~

ENVIRONMETAL

MULTIPLIERS

o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o. o. .o .o o o o o o o o o ~ o o o o o ~ o o o o o o o ~ o o o ~

. . . . . . . . . . . . . . . . . . . . . . . . .~ . . . .

~o~

. . . . .

~oo~

o o o o o o o o ~ o o o o o o o o . ~ o ~ o

ooooo~oooooo~oooooooo~o

o o o o o ~ o o o o o o o o o o o o o o ~ o o o o o o o ~ o o ~ o o ~ o o o o . , o o o ~ , ~

o o o o o o o o o o o o o o o o o o o o o o o o o o o ~ o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o o

. . . .

313