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world bank expert meeting on environmental accounting and the SNA, Paris, 21–22 November 1988
Ecological Economics. 1 (1989) 283-285 Elsevier Science Publishers B.V.. Amsterdam
283 - Printed
in The Netherlands
News
UNEP/WORLD ACCOUNTING
BANK EXPERT MEETING ON ENVIRONMENTAL AND THE SNA, PARIS, 21-22 NOVEMBER 1988
The UNEP/World Bank Expert Meetings on Environmental Accounting have met periodically since 1983. At the Washington meeting (November 1986) the Group decided to press for ‘Environmental Satellite Accounts’ in the forthcoming revisions of the System of National Accounts (SNA). A paper prepared by the UN Statistical Office on this subject was presented to the SNA Meeting in Vienna (March 1988). The Paris meeting was, in essence, a further development of the dialogue between national accountants and environmentalists. More specifically the Group discussed a (draft) paper prepared by Messrs. Bartelmus and Van Tongeren (UNSO) entitled SNA framework for environmental satellite accounting. The major points of agreement were: (1) The need for the SNA to include Environment Satellite Accounts, which specify: (a) the flow of ‘environmental goods and services’ as intermediate inputs in production and final consumption, (b) the ‘value added’ component of these goods and services, (c) environmental expenditure in the public and private domain (referred to as ‘defensive expenditure’), and (d) the inclusion of environmental assets in the National Balance Sheets. (2) A prerequisite for evaluating (in monetary terms) environmental goods and services in the SNA is the availability of aggregate measures of stocks and flows in natural resources, i.e., Natural Resource Accounts (NRA), and qualitative measures of the state, and change of state, of the environment, e.g., State of Environment Reporting. (3) That a handbook be prepared by UNSO to describe concepts, methods, and models of satellite accounts. (4) That pilot studies of ‘satellite accounts’ be implemented in ThirdWorld Countries under UNEP/World Bank sponsorship to obtain ‘realThe approach should be ‘pluralistic’, attuned to the world experience’. country-specific ‘environmental problems’. (5) That the preferred approach is to employ a ‘net product’ concept that would subtract depletion of natural stocks from GDP. This should eventually lead to a ‘sustainable income concept’ whereby national income would be net of replacement and environmental maintenance costs, i.e., the maximum amount which can be consumed worth in tact.
within any given period
while maintaining
net
DISCL’SSION
Although there was a clear consensus on the urgency of national statistical offices to direct attention (and commitment of resources) to the development of these accounts, the question on how to treat environmental change in terms of national aggregates was not resolved. The Bartelmus-Van Tongeren Paper proposed to treat ‘environmental flows’ as an intermediate product in the production process. This approach requires that environmental goods and services be defined within the current production boundaries of the SNA. However, ‘boundary criteria’ require that an (artificial) distinction be made between ‘productive’ and ‘non-productive’ environmental goods and services. The latter, in essence, enter the SNA as a ‘free good’. The transformation to ‘productive’ takes place when a ‘market value’ is recorded, e.g., a tree into a log. To balance the ‘in’ and ‘out’ flow of environmental goods and services, an environmental supply column is introduced. It is here that the transfers between the ‘non-productive’ and ‘productive’ sectors are recorded. Thus, by assigning negative values in the supply column for the use of, or withdrawal from, the environment, the aggregate GDP remains unchanged. Despite this legerdemain substantive data on (a) the use of environmental goods and services in production, and (b) the cost of degradation to the environment is recorded in these accounts. An example of the latter is the use value of the environment to assimilate waste residuals, such as pollution loadings in water, which is then balanced by an equivalent loss value in the the supply of ‘clean water’. For some of the participants this approach seemed to defeat the purpose of satellite accounts. After all, isn’t the degradation of the environment, or permanent reduction in natural resources, a ‘real loss’ in national product? The accountants argued, on the other hand, that the purpose of National Accounts is to measure the level of economic actiuity, and to the extent that environmental degradation reduces this level (e.g., eroded soils reducing crop production) it will show up in the Accounts, albeit indirectly. It was clear that the environmentalist would like to see a modification of the concept of national income. In fact, the Hicksean permanent income hypothesis seemed to provide a sound theoretical basis for taking out of GDP the cost of environmental degradation and maintaining natural resources on a sustainable basis. This approach was viewed as a logical extension of the current practice of calculating (net) national product, i.e., depreciation of man-made capital stock. Despite these differences in approach there was a general consensus that the design of satellite accounts should be considered in the context of policy. Thus, if the capacity of the environment to sustain GDP is a policy objective,
then an all-out effort should be made to design the databases and collect the requisite data for this purpose. This led to a general agreement that these accounts are highly dependent upon the development of (physical) databases on the environment and natural resources. CONCLUSIONS
This meeting was perhaps one of the more successful in the sense that the gap between the accountants and environmentalists was narrowed, although not completely closed. Several of the participants were also members of the Expert Group involved in the revisions of the SNA. The Bartelmus-Van Tongeren Paper was a good start for the development of a framework. The proposals suggest a well-integrated approach within the current SNA framework based, as it is, on production, consumption, and wealth accounts, i.e., Input/Output, Income, Expenditure, and (partial) Balance Sheet Accounts. In the case of the latter, the proposal is limited to the ‘flow’ part, i.e., additions to, or subtraction from, stocks. These are recorded in the ‘environmental supply column’. Admittedly the paper addressed satellite accounting at a highly abstract level and therefore left unanswered many of the nitty-gritty questions of feasibility and the implications of different approaches. Nor was there much discussion on the crucial question of monetary values of non-market goods and services and the scope and nature of the statistical databases to support satellite accounts, in particular the relationship to Natural Resource Accounting. These, and many other questions, are clearly agenda items for future work. ANTHONY
M. FRIEND
Statistics Canada R.H. Coats Building, Ottawa, Ont. KIA 0T6, Canada
283 - Printed
in The Netherlands
News
UNEP/WORLD ACCOUNTING
BANK EXPERT MEETING ON ENVIRONMENTAL AND THE SNA, PARIS, 21-22 NOVEMBER 1988
The UNEP/World Bank Expert Meetings on Environmental Accounting have met periodically since 1983. At the Washington meeting (November 1986) the Group decided to press for ‘Environmental Satellite Accounts’ in the forthcoming revisions of the System of National Accounts (SNA). A paper prepared by the UN Statistical Office on this subject was presented to the SNA Meeting in Vienna (March 1988). The Paris meeting was, in essence, a further development of the dialogue between national accountants and environmentalists. More specifically the Group discussed a (draft) paper prepared by Messrs. Bartelmus and Van Tongeren (UNSO) entitled SNA framework for environmental satellite accounting. The major points of agreement were: (1) The need for the SNA to include Environment Satellite Accounts, which specify: (a) the flow of ‘environmental goods and services’ as intermediate inputs in production and final consumption, (b) the ‘value added’ component of these goods and services, (c) environmental expenditure in the public and private domain (referred to as ‘defensive expenditure’), and (d) the inclusion of environmental assets in the National Balance Sheets. (2) A prerequisite for evaluating (in monetary terms) environmental goods and services in the SNA is the availability of aggregate measures of stocks and flows in natural resources, i.e., Natural Resource Accounts (NRA), and qualitative measures of the state, and change of state, of the environment, e.g., State of Environment Reporting. (3) That a handbook be prepared by UNSO to describe concepts, methods, and models of satellite accounts. (4) That pilot studies of ‘satellite accounts’ be implemented in ThirdWorld Countries under UNEP/World Bank sponsorship to obtain ‘realThe approach should be ‘pluralistic’, attuned to the world experience’. country-specific ‘environmental problems’. (5) That the preferred approach is to employ a ‘net product’ concept that would subtract depletion of natural stocks from GDP. This should eventually lead to a ‘sustainable income concept’ whereby national income would be net of replacement and environmental maintenance costs, i.e., the maximum amount which can be consumed worth in tact.
within any given period
while maintaining
net
DISCL’SSION
Although there was a clear consensus on the urgency of national statistical offices to direct attention (and commitment of resources) to the development of these accounts, the question on how to treat environmental change in terms of national aggregates was not resolved. The Bartelmus-Van Tongeren Paper proposed to treat ‘environmental flows’ as an intermediate product in the production process. This approach requires that environmental goods and services be defined within the current production boundaries of the SNA. However, ‘boundary criteria’ require that an (artificial) distinction be made between ‘productive’ and ‘non-productive’ environmental goods and services. The latter, in essence, enter the SNA as a ‘free good’. The transformation to ‘productive’ takes place when a ‘market value’ is recorded, e.g., a tree into a log. To balance the ‘in’ and ‘out’ flow of environmental goods and services, an environmental supply column is introduced. It is here that the transfers between the ‘non-productive’ and ‘productive’ sectors are recorded. Thus, by assigning negative values in the supply column for the use of, or withdrawal from, the environment, the aggregate GDP remains unchanged. Despite this legerdemain substantive data on (a) the use of environmental goods and services in production, and (b) the cost of degradation to the environment is recorded in these accounts. An example of the latter is the use value of the environment to assimilate waste residuals, such as pollution loadings in water, which is then balanced by an equivalent loss value in the the supply of ‘clean water’. For some of the participants this approach seemed to defeat the purpose of satellite accounts. After all, isn’t the degradation of the environment, or permanent reduction in natural resources, a ‘real loss’ in national product? The accountants argued, on the other hand, that the purpose of National Accounts is to measure the level of economic actiuity, and to the extent that environmental degradation reduces this level (e.g., eroded soils reducing crop production) it will show up in the Accounts, albeit indirectly. It was clear that the environmentalist would like to see a modification of the concept of national income. In fact, the Hicksean permanent income hypothesis seemed to provide a sound theoretical basis for taking out of GDP the cost of environmental degradation and maintaining natural resources on a sustainable basis. This approach was viewed as a logical extension of the current practice of calculating (net) national product, i.e., depreciation of man-made capital stock. Despite these differences in approach there was a general consensus that the design of satellite accounts should be considered in the context of policy. Thus, if the capacity of the environment to sustain GDP is a policy objective,
then an all-out effort should be made to design the databases and collect the requisite data for this purpose. This led to a general agreement that these accounts are highly dependent upon the development of (physical) databases on the environment and natural resources. CONCLUSIONS
This meeting was perhaps one of the more successful in the sense that the gap between the accountants and environmentalists was narrowed, although not completely closed. Several of the participants were also members of the Expert Group involved in the revisions of the SNA. The Bartelmus-Van Tongeren Paper was a good start for the development of a framework. The proposals suggest a well-integrated approach within the current SNA framework based, as it is, on production, consumption, and wealth accounts, i.e., Input/Output, Income, Expenditure, and (partial) Balance Sheet Accounts. In the case of the latter, the proposal is limited to the ‘flow’ part, i.e., additions to, or subtraction from, stocks. These are recorded in the ‘environmental supply column’. Admittedly the paper addressed satellite accounting at a highly abstract level and therefore left unanswered many of the nitty-gritty questions of feasibility and the implications of different approaches. Nor was there much discussion on the crucial question of monetary values of non-market goods and services and the scope and nature of the statistical databases to support satellite accounts, in particular the relationship to Natural Resource Accounting. These, and many other questions, are clearly agenda items for future work. ANTHONY
M. FRIEND
Statistics Canada R.H. Coats Building, Ottawa, Ont. KIA 0T6, Canada