Environmental Accounting
Environmental Accounting
Where We Are Now, Where We Are Heading by Joy E. Hecht
Interest is growing in modifying national income accounting systems to promote understanding of the links between economy and environment.
T
he field of environmental accounting has made great strides in the past two decades, moving from a rather arcane endeavor to one tested in dozens of countries and well established in a few. But the idea that nations might integrate the economic role of the environment into their income accounts is neither a quick sell nor a quick process; it has been under discussion since the 1960s. Despite the difficulties and controversies described in this article, however, interest is growing in modifying national income accounting systems to promote understanding of the links between economy and environment.
Why Change?
Governments around the world develop economic data systems known as national income accounts to calculate macroeconomic indicators such as gross domestic product. Building a nation’s economic use of the environment into such accounts is a response to several perceived flaws in the System of National
Accounts (SNA), as defined by the United Nations and used internationally. One flaw in the SNA often cited is that the cost of environmental protection cannot be identified. Consequently, money spent, say, to put pollution control devices on smokestacks increases GDP, even though the expenditure is not economically productive, some argue. These critics call for differentiating “defensive” expenditures from others within the accounts.
Also misleading is the fact that some environmental goods are not marketed though they provide economic value. Fuelwood gathered in forests, meat and fish gathered for consumption, and medicinal plants are examples. So are drinking and irrigation water, whose sale prices reflect the cost of distribution and treatment infrastructure, but not the water itself.
While some countries do
Where We Are Now, Where We Are Heading by Joy E. Hecht
Interest is growing in modifying national income accounting systems to promote understanding of the links between economy and environment.
T
he field of environmental accounting has made great strides in the past two decades, moving from a rather arcane endeavor to one tested in dozens of countries and well established in a few. But the idea that nations might integrate the economic role of the environment into their income accounts is neither a quick sell nor a quick process; it has been under discussion since the 1960s. Despite the difficulties and controversies described in this article, however, interest is growing in modifying national income accounting systems to promote understanding of the links between economy and environment.
Why Change?
Governments around the world develop economic data systems known as national income accounts to calculate macroeconomic indicators such as gross domestic product. Building a nation’s economic use of the environment into such accounts is a response to several perceived flaws in the System of National
Accounts (SNA), as defined by the United Nations and used internationally. One flaw in the SNA often cited is that the cost of environmental protection cannot be identified. Consequently, money spent, say, to put pollution control devices on smokestacks increases GDP, even though the expenditure is not economically productive, some argue. These critics call for differentiating “defensive” expenditures from others within the accounts.
Also misleading is the fact that some environmental goods are not marketed though they provide economic value. Fuelwood gathered in forests, meat and fish gathered for consumption, and medicinal plants are examples. So are drinking and irrigation water, whose sale prices reflect the cost of distribution and treatment infrastructure, but not the water itself.
While some countries do