Post on 14-Apr-2018
7/30/2019 greenact_4
1/8
Development of the SEEA 2003 and its implementation
Robert Smith
Environment Accounts and Statistics Division, Statistics Canada, 7-B, R.H. Coats Building, Ottawa, Canada K1A 0T6
A R T I C L E I N F O A B S T R A C T
The preparation of the System of Environmental and Economic Accounts 2003 marks an
important milestone in the world of official statistics. Just as the development of theoriginal
guidelines for national accounting in the 1950s was the first step toward today's robust,
internationally comparable economic statistics, the System of Environmental and Economic
Accounts 2003 offers hope to bring order and comparability to environmental statistics. How
the systemcame to be and why it is an important achievement are outlined.Thisis followed
by an overview of its accounting structure. A discussion of the implementation of the SEEA
2003, both in ideal terms and as actually practiced in statistical offices, concludes.
2006 Elsevier B.V. All rights reserved.
Article history:
Available online 17 November 2006
Keywords:
SEEA 2003
Environmental accounting
System of National Accounts
Natural capital
The preparation of the System of Environmental and Economic
Accounts 2003 (SEEA 2003) marks an importantmilestonein the
world of official statistics. Just as the development of the
original guidelines for national accounting in the 1950s wasthe first step toward today's robust, internationally compara-
ble economic statistics, the SEEA offers hope to bring order
and comparability to environmental statistics. In what
follows, we outline how the SEEA 2003 came to be and why
it is an important achievement. This is followed by an
overview of its accounting structure. We conclude with a
discussion of the implementation of the SEEA 2003, both in
ideal terms and as actually practiced in statistical offices.
1. The origin of the SEEA 2003
The SEEA 2003's origins can be traced directly back to theinternational discussions that led to the creation of the 1993
edition of the international guidebook on national accounting,
the System of National Accounts 1993 (SNA 93). The environment
was not a central consideration in the development of the
original system of national accounts in the 1940s and 1950s.
That this is so wasa sourceof concern, notleastamongnational
accountants, almost from the moment the first accounts
appeared. Despite this longstanding concern, it was not until
the preparation of the 1993 edition of the guidebook that any
serious consideration was given to dealing with the environ-
ment in the national accounts.
While some progress toward a more realistic view of theenvironment in relation to the economy can be noted in the
SNA 93 in particular in the extension of the system's asset
boundary to include some natural resources the handbook is
far from ideal in this regard. Among other gaps, it fails entirely
to account for the negative consequences of economic activity
through pollution emissions, it does not go far enough in
extending the asset boundary to include natural capital
particularly ecosystem assets and it fails to work the
extension of the asset boundary fully through all the potential
consequences for the accounting system, including the
possibility of adjusted figures for nationalproduct and savings.
Thatthe SNA 93 isonly a modeststepforwardin treatingthe
environment within the national accounts should not be takenas an indication that at least some of those who drafted it were
not interested in going further. Indeed, considerable time and
effort during drafting were devoted to discussing the environ-
ment and its proper treatment in the system. Yet, the drafters
failed to find sufficient common ground to go further than the
modest steps taken in the SNA 93. Recognizing the importance
of moving forward on this set of issues, which, even in the late
1980s, was already decades-old, the decision was made to
E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
Tel.: +1 613 951 2810.E-mail address: robert.b.smith@statcan.ca.
0921-8009/$ - see front matter 2006 Elsevier B.V. All rights reserved.doi:10.1016/j.ecolecon.2006.09.005
a v a i l a b l e a t w w w . s c i e n c e d i r e c t . c o m
w w w . e l s e v i e r . c o m / l o c a t e / e c o l e c o n
mailto:robert.b.smith@statcan.camailto:robert.b.smith@statcan.cahttp://dx.doi.org/10.1016/j.ecolecon.2006.09.005http://dx.doi.org/10.1016/j.ecolecon.2006.09.005mailto:robert.b.smith@statcan.ca7/30/2019 greenact_4
2/8
prepare a separate handbookof national accountingto deal with
the integration of environment into the system. The United
Nations Statistics Division was tasked with the preparation of
the handbook, which appeared in 1993 as an interim
publication under the title of Handbook of National Accounting:
Integrated Environmental and Economic Accounting and with the
acronym SEEA 1993 (United Nations, 1993).1
The SEEA 1993 represented the first international hand-book on environmental accounting. As such, it was a
landmark achievement. Its preparation showed that the
international community was serious about the need to better
integrate environment into the national accounts. This
seminal work would not have been possible had it not been
for the pioneering efforts of a few countries in preparing their
own sets of environmental accounts in the 1970s and 1980s.
Notable among these early national efforts were those of
Norway (Alfsen et al., 1987; Alfsen and Graeker, this volume)
and France (Theys, 1989).
By the time the SEEA 1993 was being conceived in the early
1990s, there was a surge in environmental accounting activity
at the national level. The fewcountries that had pioneered the
effort were joined at this time by Australia, Canada, Denmark,
Finland, Germany, Indonesia, Italy, Japan, the Netherlands,
the Philippines, Sweden and the United Kingdom. The
accounts developed by these countries differed from one
another both conceptually and empirically, reflecting the
varied environmental challenges faced by them and the
differing expertise found in their statistical offices. Those
endowed with significant natural resource wealth, like
Australia and Canada, paid particular attention to the
development of resource stock accounts. Countries with
constraints on space for human activity, like Germany, were
leaders in the development of land use and land cover
accounting. Many countries devoted effort to compilation of
pollution emission accounts, pollution being an issue of
importance in nearly every nation. The Netherlands is often
pointed to as a leader in this regard, having developed the so-
called National Accounts Matrix including Environmental Accounts
(NAMEA) system (De Haan et al., 1993). This system, which
focused on the integration of economic statistics and pollution
emissions statistics through inputoutput matrices, was
widely promoted by the European Commission's statistical
office (Eurostat) during the 1990s. As a result, it has become
something close to a pan-European standard in pollution
accounting.
The appearance of the first version of the SEEA in 1993 did
not, as one might expect, have an immediate effect on most
national environmental accounting efforts. By 1993, many
countries had already established environmental accounting
programs anddecided upon their ownpriorities. They took note
of the SEEA 1993, but did not necessarily adjust their national
efforts toalignwith it.Moreover, theSEEA1993was publishedas
a set of international recommendations rather than as an
international standard. As such, no country was obliged to
follow it.2 Nonetheless, several major efforts were made at im-
plementing the SEEA 1993 in part or in whole. Japan and
Germany undertook some of the most far-reaching of these
efforts (Fukami, 1998; Brouwer et al., 1998).
By the early 1990s activity in environmental accounting
was advancing rapidly. Countries and international agencies
were developing new and sometimes diverging concepts and
methods and applying these in the elaboration of newaccounts. The SEEA 1993 had provided some coherence to
these efforts, but not enough in the opinion of many national
statistics offices. There also remained considerable reluctance
on the part of most national accountants to the adjustment of
the central measures of the SNA 93 most notably Gross
Domestic Product to account for environmental concerns.
Given the SEEA 1993's focus on such adjustments, many were
uncomfortable with pursuing its full implementation.
Seeing the need to provide a forum for the exchange of
country experience to encourage further development of
environmental accounting, the statistical offices of Canada
and the United Kingdom, along with Eurostat, proposed the
creation of an international groupon environmental accounting
in 1992. The group was to bring together the leading agencies in
the world on a voluntary basis to discuss and agree upon best
practice in the conceptsand methods.It met forthe first time in
London, England (Statistics Canada, 1994) and as a result came
to be known as the London Group on Environmental
Accounting.3
The London Group proved effective. All of the leading
national and international agencies involved in environmen-
talaccounting at thetime joined the group and have remained
members ever since. Given that most of the international
know-how in environmental accounting was found among its
members, it was logical that the international community
should look to the London Group when it came time in the late
1990s to reconsider the interim SEEA 1993. The United Nations
Statistical Commission, at its session in 1998, formally
requested the London Group to review the SEEA 1993 and to
provide recommendations for its revision. The group formally
began its review at its 1998 meeting in the French village of
Fontevraud. Over the next 5 years, its members worked
systematically to produce recommendations for a revised
version of the SEEA that would align more closely with
environmental accounting as it was practiced in national
statistical agencies. The services of an editor expert in both
national accounting and environmental accounting (Anne
Harrison of the OECD) were engaged in 2001 to take the
contributions of various national experts and turn them into a
1 We would be remiss if we did not recognize the threeindividuals most closely associated with this first version of theSEEA. These are Mr. Peter Bartelmus and Mr. Jan Van Tongeren,
both then of the United Nations Statistics Division and Mr.CarstenStahmer, then of the Federal Statistical Office of Germany.
2 In contrast, the System of National Accounts 1993 i s aninternational standard sanctioned by the United Nations andseveral other international agencies. Countries must follow itsguidelines if they wish their national accounts to be consideredlegitimate by the international community.3 The London Group is one of a number of similarcity groups
formed by statistical agencies since the late 1980s. Each of thesegroups treats a particular area of statistics. Although they areindependent bodies made up of countries that voluntarilycontribute their expertise and finance their own involvement,the city groups report annually on their work programmes to theUnited Nations Statistical Commission.
593E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
7/30/2019 greenact_4
3/8
coherent handbook. The results of this collective effort,
approved by the UN Statistical Commission in 2003, are what
we know of today as the SEEA 2003.
The SEEA 2003 comprises four categories of accounts. The
first considers how physical statistics relating to flows of
materials and energy can be built into accounts compatible
with the SNA. Two types of accounts are described: exclusively
physical accounts constructed according to the structure of theSNA (e.g., physical inputoutput tables) and hybrid accounts
combining both physical and economic statistics. The accounts
of this category areoutlinedin chapters 3 and 4 of thehandbook.
The second category of accounts (chapters 5 and 6) takes
those elements of the existing SNA that are relevant to the good
management of the environment and shows how the environ-
ment-related transactions can be made more explicit. An
account of expenditures made by businesses, governments
andhouseholds toprotectthe environment is an example of the
accounts included in this category.
The third category of accounts in the SEEA comprises
accounts for environmental assets measured in physical and
monetary terms. For example, timber stock accounts showing
opening and closing timber balances and the related changes
over the course of an accounting period are an example. These
accounts are described conceptually in Chapter 7 of the
handbook; empirical examples are presented in Chapter 8.
The final category of SEEA 2003 accounts considers how the
economic accounts of the SNA might be adjusted to account for
the impact of the economy on the environment. Three sorts of
adjustments are considered; those relating to depletion, those
concerning so-called defensive expenditures and those relating
to degradation. Chapters 9 and 10 cover this material.
More is said about each of these four categories in the
section below dealing with implementation of the system.
2. Why the SEEA?
The collection and analysis of environmental statisticspresents
a challenge for developing and developed countries alike. Even
in developed countries with mature statistical systems, envi-
ronmental statistics can suffer from severe quality constraints.
Most importantly, environmental statistics are often incom-
plete.For some issues, they aremissing completely.4These gaps
prevent complete understanding of trends in the state of the
environment andof thehumanactivities linkedto these trends.
Even where gaps are not a major problem, other short-
comings can limit the usefulness of environmental statistics.
It may be difficult to access the statistics because govern-
ments pay inadequate attention to their management and
distribution. Sometimes governments are not the data custo-
dians at all, but researchers or corporations. In these cases,
access to the statisticsby thepublic andby researchersmay be
even more difficult.
Perhaps most frustrating for researchers, environmental
statistics are much more than their economic and social
cousins subject to inconsistency and incoherence. They are
inconsistent because they suffer from methodological and
conceptual changes over time. These changes, which are rarely
implemented backwards in time, limit the usefulness of
environmental statistics in analysis.
Environmental statistics are incoherent in that statistics on
different environmental issues say greenhouse gas emissions
and sulphur dioxide emissions cannot always be comparedeasily with one another. This is so for a number of reasons, the
most common being that the statistics are compiled using
different organizational structures and collection methods. In
addition to the incompatibility of environmental statistics
among themselves, their compatibility with economic and
social statistics is limited. Environmental statistics cannot
usually be combined easily with other statistics for example,
in modelling frameworks. This further restricts researchers'
ability to analyse the linkages between human activities and
environmental quality.
These limitations are such that environmental statistics
have generally failedto realizetheir fullimpact, especially in the
important world of public policy analysis. Before they will do so,
environmental statistics must be made more complete, more
readily accessible and more coherent, both among themselves
and with economic and social statistics. It is to this challenge
that environmentaleconomic accounting in general, and the
SEEA 2003 specifically, attempts to rise.
Rising to the challengeof integratedenvironmental statistics
requires first and foremost a conceptual framework. This is
what gives the information its internal logic and structure. In
the absence of a well-founded framework, data collection is
often ad hoc, being driven by the often narrowly focused
interests of those who sponsor it. Such ad hoc collection the
basis for most environmental statistics collection today may
meet the specific needs of its sponsors, but will not generally
meet the needs of a wide range of users. In contrast, statistics
collected on the basis of a sound conceptual framework are
more likely to be of wider relevance.
The conceptual framework explains in theory the
relationship between the variables measured in the system
and the exogenous variables of interest to data users. That is,
it offers a theoretically sound means of probing questions
about the nature of interaction among a defined set of
variables. It serves to explain why the variables found in an
informationsystem arethere. Equally, it serves to explain why
the system cannot be fully elaborated, and will not be fully
useful, if some variables are missing. Thus, the structure
provided by the framework gives the data compiler clear
direction as to where and how he should focus his data
collection efforts. This has the great advantage of ensuring
that users get the information they need from the system. Just
as importantly, it also ensures that they do not get informa-
tion they do not need.
The second challenge in creating integrated environmental
information is comprehensiveness. A system that is compre-
hensive is one in which variables are fully measured in all
their dimensions. Statistics with a regional dimension, for
example, must be measured for all regions represented in the
system. Statistics with an industrial dimension must be,
likewise, measured for all industries. Comprehensiveness is
a necessary precondition for relevance. If the statistics within
4 Obviously, the cases in which this is true differ from onecountry to the next. To name one example in Canada, there are
essentially no national data describing the extent or quality ofwetlands.
594 E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
7/30/2019 greenact_4
4/8
the system do not cover all dimensions, they will be unable to
answer all the questions the system was designed to address.
Consistency is thethirdchallenge. It refersto theneedfor the
statistics within the system to be measured consistently over
time. Consistent measurement ensures that trends in the
statistics can be analysed meaningfully. Without consistency,
analysts cannot be certain that trends apparent in the statistics
represent real evolution of the variables in the system and notsimply arbitrary movements due to changes in measurement
methods. Of course, it is unavoidable that measurement
methods change over time. Indeed, they must change if
improvements in data quality are to be made. Such changes
should not be allowed to disrupt the integrity of times series
however. When they occur, effort is needed to revise and
republish statisticscompiledin earlierperiods to reflect thenew
methods. In this way, the comparability of the statistics over
time is maintained to the greatest extent possible.
The final challenge is coherence. Two dimensions are
relevant: coherence of statistics among themselves and their
coherence with other sorts of statistics. Both are important, but
the first is especially so. Internal coherence requires that the
statistics withinthe system be comparablewith eachother. This
in turn requires the use of consistent concepts and methods
across the statistics within the system. (Internal coherence is
really just another form of consistency.) For example, all
statistics within the system that have an industrial dimension
must be classified using the same classification of industries.
Such internal coherence is essential if the statistics are to truly
forma system; without it,theycannot aspire tomuch more than
what ad hoc datasets offer in terms of analytical potential.
External coherence is also a desirable, if not essential,
characteristic in an information system. It exists whenstatistics
from within the system can be meaningfully and easily
combined and compared with statistics from other systems.
Clearly, the challenge of creating integrated environmental
information is not insignificant. It is reasonable to question
whether the SEEA 2003, or any information system for that
matter, is up to the challenge. While there is no guarantee
that environmental statistics compiled according to the SEEA
2003will be perfectlyintegrated,therearereasonsto suggestthat
it offers considerable hope for improvement over the currently
fragmented environmental statistics found in most countries.
On theneed for a clear conceptual framework,the authors of
SEEA 2003are careful to note thatthe systemwas not created to
implement any particular framework. Nevertheless, they note
that it is well-suited to implementation of measurement based
on the concept of natural capital, which has emerged in the last
10 years as a rigorous and valuable framework for thinking
about the environmenthumanity relationship (see, among
many others, Pearce and Turner, 1990).
On the questions of comprehensiveness and consistency,
there is nothing in the SEEA 2003 per se that guarantees these
two qualities. Whether they exist or not is really a question of
the quality of implementation of the system. Two aspects of it
will tend to drive implementation toward comprehensiveness
and consistency however. One is simply the completeness of
the accounting framework itself. Because the framework lays
outveryclearly what a full setof accounts shouldlook like, it will
be very apparent to anyone who inquires whether a given
implementation is comprehensive or not. The other is the close
relationship between the SEEA 2003 and the SNA 93. Over many
decades of effort, national accountants have established a
record of preparing comprehensive and consistent statistics on
the economy. This serves as an encouragement to those who
implement environmental accounts to also strive for compre-
hensiveness and consistency in implementation.
On the last question of coherence, the SEEA 2003 is likely to
yield a considerable improvement over the current situation.Because of the internal logic and structure of the system, the
environmental statistics compiled within it should have a high
degree of coherence among themselves. As for external coher-
ence, the close structural links between the SEEA 2003 and the
SNA93 mean that the environmental statisticsof theformer will
be highly coherent with the economic statistics of the latter.
3. Implementation of the SEEA
The SEEA 2003 is a large and complex system. Its full
implementation is unlikely to be of interest to or within
reach of most national statistical agencies today. Indeed, no
country has implemented the complete system, although a
few countries (Australia, Canada, Denmark, Germany, Italy,
New Zealand and Norway) have implemented accounts that
cover many of the system's categories.
Thatno countryhas yet(or may ever)implement the whole of
the SEEA 2003 shouldnot be interpretedas a criticismor takenas
a reason for concern about its relevance. Many might be sur-
prised to learn that the SNA 93 is also not implemented in
anything like its entirety in most countries. Even among leading
statistical offices, some parts of the SNA 93 are implemented
only sketchily. This reflects the fact that economic conditions
vary among countries and the need for economic information
variesalongwiththem. Thesystemwasconceivedin itsentirety
because of the need to define in conceptual terms what a
complete, integrated national accounting system should look
likenotbecause many countriesactually need such a system.
Although each of its elements is of interest in at least some
countries, few countries have an interest in the whole system.5
The same is true of the SEEA 2003. Taken as a whole, it
presents a complete and integrated set of environmental
accounts for a nation. But the environmental and economic
conditions of only a handful of countries are such that the full
set of accounts is of interest. For this to be the case, a country
would have to enjoy a relatively complete set of national
accounts to begin with; have a large, diverse landmass; possess
significant natural resources; suffer from excessive material
consumption and/or pollution emissions; undertake significant
expenditures for environmental protection; and have an
interest in preparing environmentallyadjusted macroeconomic
aggregates. To date, the only country that might legitimately
5 It is worth noting that many countries fail to implement partsof the SNA 93 that are in theory important to them because of lackof statistical capacity. For example, relatively few countriescompile national balance sheet accounts, despite the obviousimportance in all nations of measuring national wealth and itsevolution. The one element of the system that no country ignoresis the income and expenditure accounts, as these are the basis forestimating the widely used economic indicator Gross DomesticProduct.
595E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
7/30/2019 greenact_4
5/8
respond positively on each of these fronts is, arguably, China,
and it has only recently begun to think seriously about building
environmental accounts (China Daily, 2004). For the majority of
countries, the value of the SEEA 2003 lies not in providing an
ultimate target to strive for in terms of implementation, but in
providing a complete and coherent portrait of the environment
and the economy from which to select pieces that respond to
national needs. Countries that follow the SEEA 2003 guidelineswill also benefit from the comparability of the accounts they
compile with those of other countries that have followed suit.
In spite of the advantages it offers, the publication of the
SEEA 2003 will not result in immediate convergence on
environmental accounting concepts and methods. As noted
above, environmental accounting has been practised in a
number of countriesfor many years nowand theseprogrammes
are well-ensconced with their own particular and sometimes
divergent characteristics. In spite of this, there are at least three
reasons why conceptual and methodological convergence can
be hoped for as a longer term consequence of the SEEA 2003.
First, the SEEA 2003 is a clearer reflection of environmental
accounting as it is practised in countries than was its
predecessor. While there remain areas of divergence among
country practices (e.g., water accounting, land accounting,
fisheries accounting), it is also so that a degree of convergence
in some areas of environmental accounting had already
occurred by the time the SEEA 2003 was drafted. The handbook
naturally adopted the concepts and methods as practised in
countries wherever there was such convergence. This means
that as newcountries begin compiling these accounts, there is a
good chance their efforts will immediately align with practice in
established accounting programmes. For example, the compi-
lation of inputoutput based material andenergy flow accounts
(along the lines of the Dutch NAMEA described earlier)has been
practised in a comparable fashion for some time now in a
number ofcountries. Thesameis true of assetaccountsfor fossil
fuels, minerals and timber. Environmental protection accounts
are also compiled more or less comparably by many countries.
Second, theSEEA 2003 is theresult of a collectiveefforton the
part of many national and international agencies, whereas the
SEEA 1993 was drafted by a small team of experts. As such, the
SEEA 2003 benefits from a high degree of initial buy-in from
many of those who will be asked to see to its implementation.
Finally, a decision has been taken recently by the newly
formed United Nations Committeeof Experts on Environmental
and Economic Accounting to elevate the SEEA 2003 to the level
of an international standard by 2010. As an international
standard, countries will face a higher degree of pressure from
within and without to conform to its concepts and methods.
Having discussed the challenges and promise of imple-
menting the SEEA 2003, we now turn to a more practical
discussion of theimplementation of the accountsin each of its
four categories.
3.1. Physical and hybrid flow accounts
The physical and, especially, hybrid flow accounts of chapters
3 and 4 of the SEEA 2003 are of wide interest in principle, since
material and energy flows are common to all economies.
Accounts expressed in purely physical terms provide a means
of considering economic activity that stands in stark contrast
to standard economic accounts. Rather than an industry's
importance being determined by the value of its output,
physical accounts reveal itsimpact in material terms.Sincean
economy's impact on the environment is determined in large
part by the scale and character of its material flows, such
accounts contain much information relevant to understand-
ing the relative contribution of different industries to envi-
ronmental degradation.These accounts form the basis for the calculation of
aggregate indices of material flows that have a growing
following, particularly in Europe and in Japan. The Wuppertal
Institute in Germany is most closely associated with the
development of these indices, which include measures of
total material requirements among others. To date, relatively
few countrieshave investedin theelaboration of purelyphysical
environmental accounts,Germany andJapanhaving among the
greatest experience (Moriguchi, 2001; Schoer and Schweinert,
2005). The OECD has recently embarked upon a programme of
work on material flow accounting that may result in their wider
implementationin thefuture (OECDCouncil,2004).Chiefamong
reasons for not compiling such accounts is ambiguity in
interpreting the results, especially for aggregate material flow
indices in which flows of all materials are added together
without weighting according to relative environmental impact.
Hybrid flow accounts those that combine physical and
monetary statistics are implemented more commonly. As
noted earlier, inputoutput based hybrid accounts similar to
the Dutch NAMEA system have been implemented in many
European countries. Their aim has been mainly the study of
the relationship between air pollution emissions and eco-
nomic activity. Another popular use of hybrid accounts is to
link energy use in physical terms with economic activity. The
accounts are flexible though and can be used to study a wide
range of issues. Essentially any raw material (or energy) input
or waste material (or energy) output for which physical
statistics are available can be analysed through hybrid flow
accounts. Because issues of resource use and waste output are
pervasive across economies, hybrid flow accounts are among
the most commonly implemented of environmental accounts.
Countries in which they exist include Australia, Canada,
Denmark, Germany, New Zealand, Norway and Sweden. A
common use of the accounts in these countries is measure-
ment ofdecoupling. This is the word used to describe what
happens when economic activity becomes less dependent on
material inputs or pollution outputs over time, a key issue in
assessing movement toward sustainability.
3.2. Environmental protection and management accounts
The second category of accounts in the SEEA 2003 (chapters 5
and 6) includes those devoted to measuring environmental
protection and management activities. As noted earlier, these
accounts take the environment-related transactions that are
already implicit in the SNA 93 and show how they can be made
more explicit. Examples of such transactions include invest-
ments in pollution control equipment, natural resource man-
agement expenses and environmental taxes. The accounts are
of interest primarily in countries in which businesses, govern-
ments or households undertake such transactions in a signif-
icant and regular fashion. In practice, the largest of these
596 E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
7/30/2019 greenact_4
6/8
transactions tend to be those associated with industrial
pollution control, which makes the accounts of particular
interest in industrialised nations. Nations in which natural
resource management for example, operation of wildlife
preserves or silvicultural activities is a significant part of
economic activity will also find these accounts of interest.
In their fullest implementation, the environmental protec-
tion and management accounts measure both the costs and
benefits of reducing human impact on the environment. The
purchase of a pollution control system may be seen as a cost to
the industry that must install it, but it is a source of revenue to
the industry that produced it in the first place. Increasingly,
governments are looking to seize the potential for the develop-
ment of new markets, especially through exports to heavily
polluted economies like China and India, that production of
these environmental protection technologies represents.
Canada, for one, has identified this as an explicit goal of public
policy (Government of Canada, 2004).
In practice, the implementationof environmental protection
and management accounts to date has focused more on
measurement of costs than benefits. There are a number of
reasons for this. For one, it is generally considered easier to
measure costs than benefits.Firms or public agencies that incur
costs for protection or management of the environment are
generally able to identify these costs as such and give
reasonably accurate estimates of their extent. Grey areas do
exist, such as attribution of costs that have simultaneous
environmental and economic motivations, but careful attention
to wordingof survey questionscan minimise theproblems they
present. Measuring environmental revenues can be more
difficult. The problem with these is that firms that produce
generic products (pumps, for example) may have no idea what
uses their products are put to and whether any of them can be
considered environmental uses.
The second reason why measurement of costs is more
common is that there has been greater effort devoted to
development of the related techniques. The unquestioned
leader in this development is Eurostat, which produced the
definitive handbook on the topic (Eurostat, 1994). This hand-
book's existence, coupled with Eurostat's promotion of the
effort led to the development of environmental protection
expenditure accounts in many European nations during the
1990s. In addition, Australia, Canada, the United Kingdom and
several other European countries have long-standing programs
to measure environmental protection expenditures.
Implementation of accounts for environmental taxes is
much less common.
3.3. Asset accounts in physical and monetary terms
The environment can be thought of in natural capital terms as
a collection of assets of various types: natural resources, land
and ecosystems. Accounts for measuring these assets are
described and illustrated in chapters 7 and 8 of the SEEA 2003.
Of the three types of natural capital, the most fully articulated
concepts and methods are presented for natural resource
assets. Land and, especially, ecosystem accounts are still in
their relative infancy and are presented more by way of
suggested avenues for exploration in the handbook than as
clearly worked out recommendations.
The SEEA 2003 offers guidance on the construction of
environmental asset accounts in both physical and monetary
units. Physical accounts present statistics on stocks of environ-
mental assets using units of measure that are appropriate for
the asset in question. A physical account for timber resources,
for example, might portray the size of a country's timber stocks
in cubic metres of standing timber. A land account could
describe a country's land holdings in hectares. Accountsexpressed in physical units may have several benefits over
monetary accounts.Theyare generally easier to construct,since
they do not rely on complex and data-intensive valuation
methods. They are also less controversial, especially to users
from the scientific community, because they avoid the value-
laden debate over pricing the priceless. Finally, they are less
prone to the volatility that can be introduced in monetary
accounts due to the frequent and sizeable price swings that are
common for internationally traded natural resources.
At the same time, physical accounts suffer from one major
drawback at least in the eyes of users who view the world
through an economic lens: they offer very little chance for
aggregation. Timber accounts expressed in cubic metres are
not easily combined with accounts for mineral assets
expressed in tonnes. This incommensurability means that
accounts expressed exclusively in physical terms are not
especially helpful in studying tradeoffs among various forms
of capital. What if it is found that timber stocks are increasing
in physical terms while mineral stocks are decreasing? Is a
country getting better off under such conditions, or worse off?
Adding in the additional factor of comparing trends in physical
capital with trendsin produced capital makes thesituation even
more difficult to sort out. For this reason, many commentators
suggest that environmental assetaccountsdo notfind their true
value until they are expressed in monetary terms.
Monetary environmental assets accounts are portrayed
using monetary units of measure regardless of the asset in
question. They thus offer, at least in principle, the possibility
of comparing trends in different environmental assets on a
completely equal footing both among themselves and in
contrast to produced capital. This solves the problem of
incommensurability and allows questions about national
well-being in terms of environmental assets to be unambig-
uously answered. While there is obviously great attraction in
this promise, monetary accounts are also not without their
problems, both practical and conceptual. The practical pro-
blems are related mainly to the limitations of the methods
used to estimate environmental asset values and the difficulty
in obtaining the data required to implement them. The
conceptual challenges are numerous, ranging from lack of
appropriate valuation methods for complex assets like
ecosystems to philosophical and scientific debates over the
very legitimacy of the valuation approach.
One of the most vexing challenges is how to treat so-called
critical natural capital. Critical natural capital, it is argued, is
irreplaceable and therefore ought not be measured in mone-
tary terms lest the message be given that it can be traded off
with other forms of capital measured in monetary terms.
Others question the meaning of any value at all ascribed to
critical natural capital on thebasisof prevailing market prices.
Such prices are contingent upon the existence of critical
natural capital and would be rendered meaningless in the
597E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
7/30/2019 greenact_4
7/8
event of any major disruption of it. They are, therefore,
inappropriate as thebasisfor the marginal valuation of critical
natural capital.
The SEEA 2003 makes no particular effort to resolve these
controversies, especially not in the chapters devoted to envi-
ronmentalasset accounts.It notes themand thechallenges they
present for the development of environmental asset accounts.
Where valuation methods arewell-developedand notespeciallycontroversial, the handbook presents them in considerable
detail, oftennotingmorethanone method where consensushas
yet to be reached. This is the case for methods applied to
traditional natural resources, such as energy, minerals and
timber. In the more complex areas of land and, especially,
ecosystem service valuation, the handbook is comparatively
silent. This is as it should be. The handbook is intended as a
guide to practitioners in a new and rapidly developing field. Its
role is to reflect the best practice in environmental accounting,
not to resolve the intellectual debates that afflict it today and
will likely do so for some time to come.
Environmental asset accounts are among the more widely
implemented of environmental accounts. Countries having
prepared them include Australia, Canada, Denmark, Norway,
and the United Kingdom. The most common assets to be
measured are energy resources coal, oil and natural gas.
Accounts for these are popular because of the economic
importance of the resources, because the underlying physical
statistics are of good quality and because the valuation
methods are well-established. Mineral and timber stocks are
the other two assets most commonly measured in environ-
mental accounts. A few countries make estimates for fish
(Australia, Indonesia, New Zealand) and water assets (Aus-
tralia, Morocco, France) as well.
A few countries (Australia, Canada, Denmark, Norway)
have started to include the value of environmental assets
alongside the measures of produced assets on their national
balance sheets. The resulting measures of national wealth
including natural capital are a much better reflection of the
actual asset base of these countries than traditional national
balancessheetsthat include only produced capital. The results
show that natural capital represents an important component
of total wealth in these countries. Themost recent statistics for
Canada, for example, indicate that a limited basket of envi-
ronmental assets energy, minerals, timber, farmland and
commercial land represented 39% of national wealth in
2005 (Statistics Canada, 2006). That Canada is one of the
handful of countries to haveincludedenvironmental assets on
its national balance is fitting in a little known way. It was
actually a noted Canadian resource economist, Anthony Scott
of the University of British Columbia, who made the earliest
explicit call in the economic literature in 1956 for the
inclusion of natural resource assets on the national balance
sheet (Scott, 1956).
4. Conclusion
The current state of environmental information around the
world is, by most accounts, unacceptable. Environmental
statistics are scattered among too many organizations. They
are not coherent with one another, let alone with other types of
statistics. They are incomplete and not consistent over time.
This situation greatly restricts national and international
capacity to develop and monitor progress toward environmen-
tal policy goals; for example, those associated with Goal 7 of the
UN MilleniumDevelopment Goals(United Nations, 2005).Asthe
need to pursue the harmonization of economic and environ-
mental goals becomes more urgent, this situation will become
increasingly untenable. Integrated environmental informationof the sort promised by the SEEA 2003 will become essential to
good public policy making.
Environmental accounting alone will not answer all ques-
tions that environmental policy makers and the public might
pose. It has been argued here, however, that integrated en-
vironmental information founded on a clear and rigorous
conceptual foundationand organized in parallel with economic
information is much better suited to today's needs than is
existing environmental information. Environmental accounts
are, we believe, a powerful response to the weaknesses that
prevent existing statistics from having the impact on public
policy that they should, and indeed, must have.
Acknowledgement
The opinions expressed herein are those of the author and
should not be taken as representative of those of Statistics
Canada. Thanks are due to Mr. Jan van Tongeren for useful
comments on an earlier draft of this paper. All remaining
faults of any sort are the responsibility of the author.
R E F E R E N C E S
Alfsen, K.H., Bye, T., Lorentsen, L., 1987. Natural ResourceAccounting and Analysis, the Norwegian Experience 19781986. Central Bureau of Statistics, Oslo.
Brouwer, R., O'Connor, M., Radermacher, W., 1998. Greenednational statistical and modelling procedures: The GREEN-STAMP approach to the calculation of environmentally ad-
justed national income figures. International Journal ofSustainable Development, vol. 2, No. 1, pp. 731.
China Daily, 2004. China Plans to Set Up Green GDP System in 35 Years. http://www.chinadaily.com.cn/english/doc/2004-03/12/content_314332.htm 2004 March 12, on-line version.
De Haan, M., Bosch, P.R., Keuning, S.J., 1993. Integrated indicatorsin a national accounting matrix including environmentalaccounts (NAMEA). National Accounts Occasional Paper No.NA-060. Centraal Bureau voor de Statistiek, Heerlen/Voorburg,the Netherlands.
Eurostat, 1994. SERIEE Systme europen pour le rassemblementdes informations conomiques sur l'environnement Version1994. Commission of the European Union, Luxembourg.Catalogue No: CA-84-94-654- -C.
Fukami, M., 1998. Outline of Trial Estimates for Japan's IntegratedEnvironmental and Economic Accounting. Department ofNational Accounts Economic Research Institute, EconomicPlanning Agency of Japan. http://www5.cao.go.jp/98/g/19980714g-eco-e/19980714g-eco-e.html.
Government of Canada, 2004. The Speech from the Throne toOpen the First Session of the Thirty-Eighth Parliament ofCanada (October), Ottawa.
Moriguchi, Y., 2001. Material Flow Accounting as a Tool forIndustrial Ecology, ecodesign. 2nd International Symposium on
598 E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
http://www.chinadaily.com.cn/english/doc/2004-12/content_314332.htmhttp://www.chinadaily.com.cn/english/doc/2004-12/content_314332.htmhttp://www5.cao.go.jp/98/g/19980714gco/19980714gco.htmlhttp://www5.cao.go.jp/98/g/19980714gco/19980714gco.htmlhttp://www5.cao.go.jp/98/g/19980714gco/19980714gco.htmlhttp://www5.cao.go.jp/98/g/19980714gco/19980714gco.htmlhttp://www.chinadaily.com.cn/english/doc/2004-12/content_314332.htmhttp://www.chinadaily.com.cn/english/doc/2004-12/content_314332.htm7/30/2019 greenact_4
8/8
Environmentally Conscious Design and Inverse Manufacturing(EcoDesign'01), p. 880.
OECD Council, 2004. Recommendation of the Council on MaterialFlows and Resource Productivity. OECD, Paris. www.oecd.org/dataoecd/3/63/31571298.pdf.
Pearce, D.,Turner, R., 1990. Economics of Natural Resources andtheEnvironment. The John Hopkins University Press, Baltimore.
Schoer, K., Schweinert, S., 2005. Use of primary material in
Germany by branches and material categories, 1995 2002.Paper Presented at an OECD Workshop on Material FlowIndicators and Related Measurement Tools, Berlin 2324 May.Federal Statistical Office of Germany.
Scott, A., 1956. National Wealth and Natural Wealth. TheCanadian Journal of Economics and Political Science, vol. 22,No. 3, pp. 373378. August.
Statistics Canada, 1994. National Accounts and the Environment:Papers and Proceedings from a Conference, London, England,March 1994, Ottawa.
Statistics Canada, 2006. National Balance Sheet Accounts, FourthQuarter 2005 and Annual 2005. Statistics Canada, Ottawa.http://www.statcan.ca/Daily/English/060317/d060317a.htm.
Theys, J., 1989. Environmental accounting in development policy:the French experience. In: Ahmad, Y., El Serafy, S., Lutz, E.(Eds.), Environmental Accounting for Sustainable Develop-ment. The World Bank, Washington, D.C.
United Nations, 1993. Handbook of National Accounting
Integrated Environment and Economic Accounting. Series: F,No.61, Sales number: 93.XVII.12, New York.
United Nations, 2005. The Millennium Development Goals Report2005. United Nations, New York. http://unstats.un.org/unsd/mi/mi_dev_report.htm.
599E C O L O G I C A L E C O N O M I C S 6 1 ( 2 0 0 7 ) 5 9 2 5 9 9
http://www.oecd.org/dataoecd/3/63/31571298.pdfhttp://www.oecd.org/dataoecd/3/63/31571298.pdfhttp://www.statcan.ca/Daily/English/060317/d060317a.htmhttp://unstats.un.org/unsd/mi/mi_dev_report.htmhttp://unstats.un.org/unsd/mi/mi_dev_report.htmhttp://unstats.un.org/unsd/mi/mi_dev_report.htmhttp://unstats.un.org/unsd/mi/mi_dev_report.htmhttp://www.statcan.ca/Daily/English/060317/d060317a.htmhttp://www.oecd.org/dataoecd/3/63/31571298.pdfhttp://www.oecd.org/dataoecd/3/63/31571298.pdf