SYSTEM OF ENVIRONMENTAL AND ECONOMIC ACCOUNTING

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SYSTEM OF ENVIRONMENTAL AND ECONOMIC ACCOUNTING
UN RECOMMENDATIONS AND ENDEAVOURS IN ASIAN
COUNTRIES????????-??????????????

• A.C. Kulshreshtha
• UN Statistical Institute for Asia and the
  Pacific(SIAP)
• ??????????

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Premises for development of SEEA ??SEEA?????

• Sustainable development and the SEEA
• Three pillar approach to sustainable development
• Economic, Social, and Environmental needs
• Natural capital and sustainable development
• Three kind of functions that Natural capital
  (natural resource stocks, land and ecosystems)
  provides are
• Resource functions mineral deposits, deep forest
  timber, deep sea fish
• Sink functions absorb waste products in
  air,water, sea, landfill sites
• Service functions habitat for living
  beings..air, water, survival and amenity functions

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Premises for development of SEEA??SEEA?????

• Weak sustainability seeks to maintain from year
  to year the per capita income generated from
  total capital stock
• Strong sustainability requires that all forms of
  capital be maintained intact independent of one
  another
• Caution for Strong sustainability
• Renewable resources should not be used in excess
  of their natural regeneration
• Non- renewable resources should be used
  prudently, with care for its availability to
  future generations
• Sink functions should not be used beyond their
  assimilative capacities,
• Activities which cause deterioration in service
  functions should be avoided or at least minimised
  

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Objectives and structure of the SEEASEEA??????

• Conventional system of national accounts (SNA)
  addresses role of environment in economic
  performance in part only
• System of Integrated Environmental and Economic
  Accounting (SEEA) supplements the SNA by
• Identifying expenditures related to
  environmental issues, and
• Incorporating Environmental Assets changes
  therein
• in the Supply Use and Asset Accounts of the SNA

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Objectives and structure of the SEEA(contd.)
SEEA??????

• In the SNA , overlap of flows and Stocks
  comprises of capital formation and consumption
  of fixed capital
• SEEA incorporates Environmental concerns by
• (i)Segregating environment related flows
  stocks, and
• (ii)Including environmental assets and changes
  therein,

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Objectives and structure of the SEEA(contd.)
SEEA??????

• Further SEEA also takes care of environmental
  concerns by
• Introducing impacts (environmental cost) on
  natural (economic and environmental) assets,
  caused by
• production
• consumption activities of industries,
  households, and
• government

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SEEA Flow and Stock Accounts with Environmental
AssetsSEEA????????????
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Economic and Environmental assets definition
/classification?????????/??

• Distinction between Economic and
  Environmental natural assets is the heart of
  environmental accounting
• Economic assets supply the economy with
  natural resources or raw materials for use in
  production and consumption processes.
• As per 1993 SNA, the economic assets include
  all those natural assets
• (a) over which ownership rights are enforced by
  institutional units, individually or
  collectively, and (b) from which economic
  benefits may be derived.

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Economic and Environmental assets definition
/classification(Contd.)?????????/??

• Natural assets can be produced (agricultural
  crops), or non- produced (land, mineral deposits,
  fish in lakes or the ocean).
• Environmental Assets are all those non-produced,
  non-economic natural assets that function as
  providers not of natural resource inputs
  into production but of environmental services of
  waste absorption, ecological functions such as
  habitat and flood and climate control, or
  other non-economic amenities such as health and
  aesthetic values.

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Classification of natural assets in the SNA and
the SEEA ?SNA?SEEA????????
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Classification of natural assets in SNA and SEEA
(contd.)?SNA?SEEA????????

• Asset boundaries of both SEEA and SNA in respect
  of cultivated assets and sub-soil assets are
  same.
• Air is included only in SEEA and not in SNA.
• SNA land includes associated water surfaces such
  as lakes and rivers and in some instances also
  ground water. SEEA excludes these categories from
  land but includes them under Water. SEEA land
  includes ecosystems.
• SNA water resource is restricted to aquifers.
• Classification of natural assets for
  environmental accounting is required in order to
  fully cover depletion, degradation and other
  accumulation

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Economic and Environmental assets definition
/classification(Contd.)?????????/??

• A major point of deviation between SNA and SEEA.
• Changes in the availability of economic,
  non-produced (natural) assets, resulting from
  depletion or degradation, are accounted
• in the SNA as Other Changes in Volume of
  Assets account.
• in the SEEA, as cost into the Production
  and Income-generation accounts

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WHAT SEEA GIVES SEEA???

• (a) Assessment of environmental costs
• (i) The use (depletion) of natural resources in
  production and final consumption
• (ii) The impacts on environmental quality
  (emissions) resulting from pollution by
  production and consumption activities.
• (b) Linkage of physical accounts with monetary
  environmental accounts and balance sheets
• Natural Resource Accounts provide physical
  counterpart of the SEEA's monetary stock and
  flow accounts

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WHAT SEEA GIVES(Contd.) SEEA???

• (c) Accounting for the maintenance of tangible
  wealth the SEEA extends the concept of capital
  to cover not only human-made capital but also
  non-produced natural capital.
• (d) Elaboration and measurement of
  environmentally adjusted aggregate
  Environmentally adjusted Net Value Added,
  Domestic Product, and Capital Accumulation

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Valuation of Natural Resources and Environmental
Impacts????????????

• Only economic natural assets are valued in
  monetary terms in SNA.
• In SEEA the depletion of economic natural assets
  (Other changes in Volume) is taken as cost in the
  Production Account. As such costs are not
  accounted in budgets ,they are taken as Social
  costs.
• SEEA attempts to put monetary value on such
  Social costs using three alternative approaches
• (a)Market Valuation (Net present value/Net
  price/User cost)
• (b)Maintenance Valuation,
• (c)Contingent Valuation

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Green National Accounting System Environmentally
Adjusted Accounting Indicators????????????????

• Using appropriate valuation approach for
  estimating natural resource depletion and
  environmental degradation,
• Environmentally adjusted economic aggregates are
  obtained
• by subtracting
• the cost of Use of natural assets (depletion and
  degradation)
• from conventional (SNA) macro economic aggregate.

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Environmentally Adjusted Accounting
Indicators????????????????(contd.)

• Thus Environmentally adjusted Net Value Added for
  industry i, is
• EVAi Oi ICi CFCi ECi NVAi ECi
• Where, Oi , ICi , CFCi ,and ECi denote output,
  intermediate consumption, consumption of fixed
  capital, and environmental costs of industry I.
• NVAi is unadjusted net value added

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Environmentally Adjusted Accounting
Indicators????????????????

• Environmentally adjusted Net Domestic Product
  would be,
• EDP ?i EVAi - ECh NDP ECh
• C CF CFC ECh X M
• where, ECh is environmental cost generated by
  households, C, CF, X, and M denote consumption,
  capital formation, export and import
• Environmentally adjusted Net Capital
  Formation is
• ECF (CF CFC) ECc
• where, ECc is Natural capital consumption

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Environmentally Adjusted Accounting Indicators
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FRAMEWORK FOR INTEGRATED ENVIRONMENTAL AND
ECONOMIC ACCOUNTING????????????

• An overall framework for integrated environmental
  and economic accounting whose components can be
  implemented in selective or phased approaches,
  depending on data availability and priority
  concerns of a particular country is shown in the
  next chart. Modifications of conventional
  economic accounts can be seen in the chart.
• We need to have
• (a) the separate identification of environmental
  expenditures in the supply, use and asset
  accounts of the SNA
• (b) The accounting of natural resource
  stocks and use in physical and monetary
  terms
• (c) The measurement and valuation of emissions,
  that is to say, of so-called environmental
  externalities

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Framework for integrated environmental and
economic accounting
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SEEA implementation Step by step
approachSEEA????????

• Step 1 Compilation of the supply and use
  accounts
• Step 2 Identification /compilation of
  environmental protection expenditures
• Step 3 Compilation of produced natural asset
  accounts
• Step 4 Compilation of physical natural resource
  accounts
• 4.1 Land and soil accounts
• 4.2 Subsoil asset accounts
• 4.3 Forest accounts (economic functions)
• 4.4 Fishery resources and other biota accounts
• 4.5 Water accounts

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SEEA implementation Step by step approach
SEEA????????

• Step 5 Valuation of natural resources compiling
  the monetary accounts
• Step 6 Compilation of physical environmental
  assets accounts (optional)
• Step 7Compilation of emissions by economic
  sector
• Step 8 Maintenance costing of emissions
• Step 9 Aggregation and tabulation
• Step10 Comparison of conventional and
  environmentally adjusted indicators

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SEEA, 2003

• The SEEA is a satellite system of SNA that
  comprises of four categories of accounts
• Category 1 Physical and Hybrid flow accounts
• Category 2 Economic accounts and
  environmental transactions
• Category 3 Asset accounts in physical and
  monetary terms
• Category 4 Extending SNA aggregates to
  account for depletion, defensive
  expenditure and degradation

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SEEA, 2003 (contd.)

• Four types of Physical flow accounts are
  distinguished in the SEEA
• Flow accounts for Products
• Supply and Use of goods and services produced
  within economy and ROW
• Flow accounts for Natural resources
• Supply and Use of natural resources fuel wood,
  mineral,biological resources
• Flow accounts for Ecosystem inputs
• Supply and Use of water and natural nutrients,
  oxygen, carbon-dioxide
• Flow accounts for Residuals
• Supply and Use of solid, liquid and gaseous
  wastes

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Flow accounts for Products??????

• Total supply Domestic production imports
• Total use Intermediate consumption household
  final consumption government final
  consumption
• fixed capital formation change in
  inventories
• exports

Supply and use table for products
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Flow accounts for Natural resources????????

• Supply of natural resources fuel wood, mineral,
  biological resources, etc. is from the
  Environment
• Use of natural resources fuel wood,
  mineral,biological resources, etc is made by the
  industries, households and ROW

Supply and use table for natural resources
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Flow accounts for Ecosystem inputs???????????

• Supply of ecosystem inputs of water and other
  natural nutrients like oxygen, carbon-dioxide are
  made by the Environment, of course.
• Use of water and other natural nutrients like
  oxygen, carbon-dioxide are made by the
  industries, households, plants, and animals for
  growth

Supply and use table for ecosystem inputs
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Flow accounts for Residuals????????

• Supply of solid, liquid and gaseous wastes are
  made by the industries , households, and ROW,
  disposal of capital items could be shown under
  Capital use head
• Use of solid, liquid and gaseous wastes are made
  by the industries (use of wastes for recycling
  without payment to disposer) , and Capital
  (landfill sites)

Supply and use table for residuals
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Summary physical flow accounts????????

• The four flow accounts for Products, Natural
  resources, Ecosystem inputs, and residuals can be
  assembled into a single table to show summary
  physical flow account. To show balancing amount
  of supply and use for each category of
  User/Producer, an item Net accumulation is placed.

Summary physical flow accounts
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Physical supply and Use Tables????????

• SEEA,2003 recommends matrix form of presentation
  for various accounts. So double entry system,
  like the one used in SNA in accounts and the
  Social Accounting matrix in monetary terms. A
  simple Supply and use table for products in
  physical terms is shown below

A simple Supply and use table for products in
physical terms
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A simple Supply and use table for all physical
flows????????????????
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The SNA Supply and Use TableSNA???????

• The SNA supply and Use Table is in monetary
  terms.
• For products we can present it by
  incorporating the margins on the production
  (output that is at basic value) and include the
  factor inputs (value added) under the column for
  industries showing intermediate consumption

A simple Supply and use table in monetary terms
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A Hybrid Supply and Use Table?????????

• The Supply and Use Table in monetary terms (SNA)
  for products, if superimposed on the Supply and
  Use Table for all physical flows
  (products,natural resources, ecosystem inputs and
  residuals) results in the Hybrid Supply and Use
  Table.
• A Hybrid Supply and Use Table, in matrix way of
  presentation, is an important part of the SEEA

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A simple Hybrid Supply and Use Table
?????????????
Monetary data (in italics) in
billions of currency units physical data
(non-italic) in M.Tonnes
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Endeavours to compile SEEA in Asian
Region??????SEEA???

• Environmental accounting still a newly emerging
  area of importance
• Only few countries in the region have advanced
  in Natural Resource Accounts
• Adjustment to national accounts only on
  trial/experimental basis
• Japan- Economic Planning Agency-Study on SEEA-
  Trial estimates of E P Expenditure Account,1990

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Endeavours to compile SEEA in Asian
Region??????SEEA???

• Philippines NSCB - framework on Philippines
  System of Integrated Environmental and Economic
  Accounting (PSEEA)
• Environmental and Natural Resources Accounting
  Project , EP Expenditure survey, 1998, Trial
  estimates of NRA
• West Asian countries- Still in the process of
  firming up NRA
• Australian Bureau of Statistics (ABS) experience
  could be guiding force

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Thanks!