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Article

Geologists’ reframing of the global changes arising from human impacts can be used to consider how the insights from environmental economics inform policy under this new perspective. They ask a rhetorical question. How would a future generation looking back at the records in the sediments and ice cores from today’s activities judge mankind’s impact? They conclude that the globe has entered a new epoch, the Anthropocene. Now mankind is the driving force altering the Earth’s natural systems. This conclusion, linking a physical record to a temporal one, represents an assessment of the extent of current human impact on global systems in a way that provides a warning that all policy design and evaluation must acknowledge that the impacts of human activity are taking place on a planetary scale. As a result, it is argued that national and international environmental policies need to be reconsidered. Environmental economics considers the interaction between people and natural systems. So it comes squarely into conflict with conventional practices in both economics and ecology. Each discipline marginalizes the role of the other in the outcomes it describes. Market and natural systems are not separate. This conclusion is important to the evaluation of how (a) economic analysis avoided recognition of natural systems, (b) the separation of these systems affects past assessments of natural resource adequacy, and (c) policy needs to be redesigned in ways that help direct technological innovation that is responsive to the importance of nonmarket environmental services to the global economy and to sustaining the Earth’s living systems.

Article

Jean-Louis Weber

Environmental accounting is an attempt to broaden the scope of the accounting frameworks used to assess economic performance, to take stock of elements that are not recorded in public or private accounting books. These gaps occur because the various costs of using nature are not captured, being considered, in many cases, as externalities that can be forwarded to others or postponed. Positive externalities—the natural resource—are depleted with no recording in National Accounts (while companies do record them as depreciation elements). Depletion of renewable resource results in degradation of the environment, which adds to negative externalities resulting from pollution and fragmentation of cyclic and living systems. Degradation, or its financial counterpart in depreciation, is not recorded at all. Therefore, the indicators of production, income, consumption, saving, investment, and debts on which many economic decisions are taken are flawed, or at least incomplete and sometimes misleading, when immediate benefits are in fact losses in the long run, when we consume the reproductive functions of our capital. Although national accounting has been an important driving force in change, environmental accounting encompasses all accounting frameworks including national accounts, financial accounting standards, and accounts established to assess the costs and benefits of plans and projects. There are several approaches to economic environmental accounting at the national level. Of these approaches, one purpose is the calculation of genuine economic welfare by taking into account losses from environmental damage caused by economic activity and gains from unrecorded services provided by Nature. Here, particular attention is given to the calculation of a “Green GDP” or “Adjusted National Income” and/or “Genuine Savings” as well as natural assets value and depletion. A different view considers the damages caused to renewable natural capital and the resulting maintenance and restoration costs. Besides approaches based on benefits and costs, more descriptive accounts in physical units are produced with the purpose of assessing resource use efficiency. With regard to natural assets, the focus can be on assets directly used by the economy, or more broadly, on ecosystem capacity to deliver services, ecosystem resilience, and its possible degradation. These different approaches are not necessarily contradictory, although controversies can be noted in the literature. The discussion focuses on issues such as the legitimacy of combining values obtained with shadow prices (needed to value the elements that are not priced by the market) with the transaction values recorded in the national accounts, the relative importance of accounts in monetary vs. physical units, and ultimately, the goals for environmental accounting. These goals include assessing the sustainability of the economy in terms of conservation (or increase) of the net income flow and total economic wealth (the weak sustainability paradigm), in relation to the sustainability of the ecosystem, which supports livelihoods and well-being in the broader sense (strong sustainability). In 2012, the UN Statistical Commission adopted an international statistical standard called, the “System of Environmental-Economic Accounting Central Framework” (SEEA CF). The SEEA CF covers only items for which enough experience exists to be proposed for implementation by national statistical offices. A second volume on SEEA-Experimental Ecosystem Accounting (SEEA-EEA) was added in 2013 to supplement the SEEA CF with a research agenda and the development of tests. Experiments of the SEEA-EEA are developing at the initiative of the World Bank (WAVES), UN Environment Programme (VANTAGE, ProEcoServ), or the UN Convention on Biological Diversity (CBD) (SEEA-Ecosystem Natural Capital Accounts-Quick Start Package [ENCA-QSP]). Beside the SEEA and in relation to it, other environmental accounting frameworks have been developed for specific purposes, including material flow accounting (MFA), which is now a regular framework at the Organisation for Economic Co-operation and Development (OECD) to report on the Green Growth strategy, the Intergovernmental Panel on Climate Change (IPCC) guidelines for the the UN Framework Convention on Climate Change (UNFCCC), reporting greenhouse gas emissions and carbon sequestration. Can be considered as well the Ecological Footprint accounts, which aim at raising awareness that our resource use is above what the planet can deliver, or the Millennium Ecosystem Assessment of 2005, which presents tables and an overall assessment in an accounting style. Environmental accounting is also a subject of interest for business, both as a way to assess impacts—costs and benefits of projects—and to define new accounting standards to assess their long term performance and risks.