I. ORGANIZATION OF THE MEETING
- The Expert Group Meeting on Environmental and Resource Accounting was organized by the secretariat of the Economic and Social Commission for Asia and the Pacific (ESCAP) at Bangkok from 20 to 23 February 1996, with financial assistance from the Government of the Netherlands under the project entitled "Systems of Environmental and Resource Accounting".
- The Meeting was attended by seven expert participants from the following six members and associate members of ESCAP: Australia, Guam, India, Islamic Republic of Iran, Philippines and the Republic of Korea. The United Nations Statistics Division was represented at the Meeting.
- The Deputy Executive Secretary and Officer-in-Charge, a.i. of the Commission, Ms Seiko Takahashi, inaugurated the Expert Group Meeting. In welcoming the participants, Ms Takahashi expressed gratitude to the Government of the Netherlands for its generous financial support to the project. She also thanked the Australian Bureau of Statistics and the United Nations Statistics Division for contributing to the documentation and for sending resource persons to participate in the Meeting.
- The Deputy Executive Secretary observed that environmental degradation had become a major concern for most countries in the region, and that their environmental outlook would be gloomy had they not been alerted to the need to protect their environment and natural resources. She also noted that while the significance and the degree of severity of environmental problems varied from country to country, their mitigation inevitably required the integration of environmental considerations into the planning process and developmental activities.
- Ms Takahashi noted that conventional systems of national accounting did not adequately reflect the effects of a degrading environment on the economy. She therefore expressed satisfaction that the United Nations Statistics Division (UNSD) had been active in developing satellite accounts with linkages to the 1993 System of National Accounts (SNA), and in producing the revised SNA Handbook on Integrated Environmental and Economic Accounting (SEEA), which envisaged accounts both in physical and monetary terms. That Handbook had not however been fully tested, and considering the developmental level of environmental accounting methodologies and their complex nature, the formulation of practical guidelines for the application of SEEA to the developing countries of the region had become necessary. Ms Takahashi hoped that those guidelines, which the secretariat was developing with input from the case studies being undertaken by the participating countries, would enable the countries of the region to prepare simplified systems of environmental accounts, standardized to the extent possible, and to compute environmentally adjusted gross domestic product and associated indicators comparable over time and across the countries.
- Observing that the conceptual frameworks for environmental and resource accounting were still under discussion, the Deputy Executive Secretary noted that the work being undertaken by the participating countries was of a pioneering and challenging nature. She nevertheless expressed confidence that the deliberations of the experts would be useful not only in finalizing and improving the contents of the guidelines, but also in developing and refining techniques for valuing environmental and natural resources and their depletion.
Arrangements for the conduct of the Meeting
- In view of the small and informal nature of the meeting, it was decided to dispense with the election of officers.
Adoption of the agenda
- The Meeting adopted the following agenda:
- Opening of the Meeting.
- Arrangements for the conduct of the Meeting.
- Adoption of the agenda.
- Review of the various environmental and natural resource account methodologies: draft guidelines for the computation of environmental and resource accounts.
- Techniques of valuing resource depletion/environmental pollution.
- Results of country case studies and suggestions for their finalization.
- Other matters.
- Adoption of the report.
Documentation
- A list of the documents prepared for the Meeting is provided in the annex to the report.
II. REVIEW OF VARIOUS ENVIRONMENTAL AND NATURAL RESOURCE ACCOUNT METHODOLOGIES: DRAFT GUIDELINES FOR THE COMPUTATION OF ENVIRONMENTAL AND RESOURCE ACCOUNTS
- The Expert Group Meeting considered the item on the basis of document STAT/EGM/ERA/7, "Natural Resource Accounting: A Guide", prepared by a consultant to the secretariat, and STAT/EGM/ERA/5 which described the United Nations Statistics Division's activities in the development and collection of environmental data.
- In reviewing the draft guidelines on environmental and resource accounts as presented by the consultant, the Meeting noted that the need for the System for Integrated Environmental and Economic Accounting (SEEA) was now well recognized, as GDP by itself was not a good compass to guide policy. The steps involved in moving from the 1993 System of National Accounts (SNA) to the basic SEEA were described.
- The Expert Group Meeting noted that there were a number of different concepts of environmentally adjusted domestic product (EDP). Those various notions corresponded to different levels of sophistication and adjustments made to SNA. Experts also noted that the particular concept of EDP followed would depend both on data availability and on the objective for using the accounts; that was illustrated by a description of the adjustments needed to arrive at an EDP that followed from the objective of defining an optimal sustainable development path.
- The necessity of carefully determining what was actually being measured was also pointed out. To avoid making unduly large or small corrections, it was important that the environmental costs to be subtracted from the GDP were those that were in excess of socially "optimal" levels of pollution.
- The Expert Group Meeting also noted the important role of physical accounts, which helped to link activities responsible for creating environmental problems with those specific problems and their impacts on ambient environmental quality. Those linkages needed to be known in order to design efficient policies based on the "polluter pays principle" as well as to target policies appropriately. While physical accounts were important, the Meeting noted that for certain types of valuation purposes it was sufficient merely to examine changes in environmental resource quality. For example, to assess the value of air quality deterioration in a city it was not necessary to know who had caused that deterioration. It would be adequate if changes in ambient air quality and its current status were known.
- The Expert Group Meeting noted that valuation of natural resources was the key to compiling SEEA, and heard detailed descriptions of approaches to valuation of exhaustible resources, agricultural land, forests, fisheries and water resources.
- The Experts emphasized the complexity of valuation exercises and the concomitant data needs. It was recognized that for want of data, shortcuts might be needed and assumptions might have to be made. It was, however, stressed that in that process consistent estimation processes needed to be applied.
- In discussing exhaustible resources, the Expert Group Meeting recognized that resources had different probabilities of existence. To value resources outside the proven and probable range would involve the estimation of probabilities from geological information and their adjustment by taking into account exploration and developmental costs to arrive at confirmed probable reserves.
- In his presentation of paper STAT/EGM/ERA/5, the representative of the United Nations Statistics Division (UNSD) reviewed various methodologies and activities needed for integrated environmental and economic accounts. The Expert Group heard that the first step for integrating environmental concerns into mainstream economic planning and policies was to account for both socio-economic performance and environmental effects. For that the traditional SNA would need to be replaced by "green accounts".
- The Expert Group Meeting noted that the recently revised SNA already contained selected elements of environmental accounting. Those included the incorporation of national balance sheets and a separate chapter on satellite accounts which dealt with the links between the SNA and SEEA. The SEEA had been developed as an expansion of conventional stock (asset) and flow (supply and use) accounts, with additional environmental costs incorporated. The Expert Group Meeting emphasized the need for keeping the satellite accounts and the core account separate but consistent.
- The Meeting also noted that the degradation and depletion of air, water, forests or species in the wilderness had been considered social costs of economic growth and development for which economic activities should be made accountable. An alternative version of SEEA followed a maintenance valuation approach, while a third version of SEEA combined imputed market valuation with a contingent valuation. Policy use and application of SEEA were also indicated and the limits and prospects of green accounting were discussed.
- The representative of the United Nations Statistics Division emphasized the need to develop environment statistics, as well as a system of environment indicators, along with the SEEA. The Meeting also recognized that many more years would probably be needed before a consensus on the concepts and methods of environmental accounting could be reached. It welcomed the fact that UNSD would develop a training manual on integrated environmental and economic accounting, which was expected to be completed in 1997. Based on experience gained in country projects, the manual would provide a practical step-by-step description of how to implement the SEEA at the national level.
- The different approaches to environmental indicators being followed by the United Nations Commission for Sustainable Development and UNSD were also noted. While the former had more than 100 indicators, the latter suggested only 11. The Meeting noted that further work was needed to develop a commonly agreed set of indicators.
23. The Meeting recognized that top-down approaches to valuation needed to be complemented by bottom-up or micro-level case studies, which gave insights into what actually happened at ground level. Such a strategy would provide a menu of approaches and methods for all countries and facilitate the borrowing of experience as well as of parameters and assumptions.
III. TECHNIQUES OF VALUING RESOURCE DEPLETION/ENVIRONMENTAL POLLUTION
24. The Expert Group Meeting had before it two papers entitled "Valuation of Environmental Resources: Methodological Approaches" (STAT/EGM/ERA/8) and "Natural Resource Valuation - the Australian Experience" (STAT/EGM/ERA/4). The Meeting noted that economic valuation of environmental resources could help make decisions on resource utilization and allocations more meaningful. It could also help in prioritizing decisions regarding sectoral allocation designed to improve environmental quality.
25. The Expert Group noted that a variety of economic techniques and models had been developed for assigning monetary values to capture gains or losses associated with changes in the quantity or quality of environmental amenities. The aim of those techniques was to obtain an estimate of the value of environmental amenities that would be revealed if there were a competitive market for those amenities. The Meeting noted that, broadly speaking, two types of valuation techniques were needed for the valuation of environmental changes -the first approach was to directly value the changes in the environment and the second was to value some impacts of changes in the environment.
26. The Meeting noted that physical linkage methods considered cause-effect relationships, whereby attempts were made to establish relationships between the physical effects due to environmental changes on, for example, human health, property prices, agricultural productivity, livestock, forests or biodiversity. It also noted that in order to provide a format to capture such effects, that method had been applied to several case studies in India that estimated degradation costs. A case study for air pollution in Bombay had been undertaken in detail, first using the "cost-of-illness" approach, augmented by the human capital method that considered losses in expected earnings. The limitations of those methods were pointed out. In a second example relating to the leather industry, the cost of degradation due to air, water and land (soil) pollution from tannery effluents had been calculated. The cost of abatement method had also been used to compare the results. It was suggested that similar approaches could be used to capture losses due to pollution in agriculture yields, and in fishery, livestock and forest productivity.
27. The Expert Group Meeting also considered behaviour linkage methods, such as "revealed preference methods" that included the travel cost method, to value amenities such as national parks. Other methods discussed included "stated preference methods" such as the contingent valuation (CV) or referendum method, where the public stated their preference in a democratic framework. The foregone benefits could be taken as people's willingness-to-pay for environmental assets.
28. The Expert Group heard with interest the Australian experience in valuing natural resources in balance sheets, which was based on the presentation of paper STAT/EGM/ERA/4. It noted that as a major step towards developing environmental satellite accounts, the Australian Bureau of Statistics (ABS) had implemented the recommendations of the 1993 SNA which suggested that countries compile a comprehensive national balance sheet. The national balance sheet extended the existing flow accounts by providing estimates for produced and non-produced assets such as forests, land and subsoil assets.
29. The Expert Group noted that valuation of land was carried out by using "rateable" values of rural, urban residential and commercial land, and valuation of subsoil assets was arrived at through the Net Present Value (NPV) of Australia's proven and probable resources. Native forests were valued using NPV while pine plantations were valued using insurance values. It was explained that national parks were not valued because products were not harvested. In principle, national parks could be valued using the travel cost or contingent valuation methods; however, the ABS was not yet satisfied as to the reliability of those techniques. Fishery and water resources had not yet been valued owing to insufficient information and other difficulties.
IV. RESULTS OF COUNTRY CASE STUDIES AND SUGGESTIONS FOR THEIR FINALIZATION
30. The Expert Group considered the following papers under the item: "Environmental and Resource Accounting and Water Pollution Case Studies" (STAT/EGM/ERA/1), from Guam, "Environmental and Economic Accounts for Water Resources in the Republic of Korea" (STAT/EGM/ERA/2), "Environmental Accounting for India: Some Case Studies" (STAT/EGM/ERA/3), "Environmental and Economic Accounts for Water Resource in the Islamic Republic of Iran" (STAT/EGM/ERA/6) and "Philippine Case Study on the Adaptation of the UN System of Integrated Environmental and Economic Accounting (UN SEEA)" (STAT/EGM/ERA/9).
31. The Expert Group noted that the case study of Guam (STAT/EGM/ERA/1) concerned two aspects, namely aquifer resources and water pollution and its causes. For the first aspect, the study presented a model utilizing empirical data from 1981 to 1994 to predict when the demand on the aquifer resource would exceed the sustainable capacity. Based on regression analysis the study had arrived at an equation consisting of population and number of visitors as independent variables explaining the variance of aquifer demand. The results indicated that in the year 2008 the estimated aquifer demand would exceed the sustainable capacity. It was noted that the analysis could be improved by normalizing the independent variables, such as by replacing the number of visitors with number of visitor days.
32. For the second aspect in the Guam study the regression model had attempted to determine the causes of water pollution using rainfall, number of visitors, value of construction, and number of employees in agriculture as predictors. Two dependent variables had been used as indicators of water pollution, namely faecal coliform in the ocean water and chloride in the aquifer. The Expert Group noted that there was not much variation in the chloride level, which also fell far below the acceptable level. Further, the independent variables used in the model were highly correlated. When faecal coliform was used as an indicator of water pollution, only 46 per cent of the variance was explained by two factors - rainfall and number of visitors. It was recommended that further studies be conducted of the potential indicators of water pollution and its causes, including livestock and its relation with faecal coliform.
33. The Expert Group heard with interest that the study from the Republic of Korea (STAT/EGM/ERA/2) was designed to develop an environmental accounting system for water resources in the country and to compile the related accounts. The basic framework adopted had been the SEEA, which could be linked to the 1993 SNA. For those objectives, some aspects of uses and supplies of water resources and water quality had been reviewed and a suitable framework for the Republic of Korea, based on the SEEA, had been suggested. The study had also examined the methods of compilation of water resources accounts and available data, and presented some exploratory results. Of the various measures of water quality, the study had restricted itself to BOD unloaded to water streams. Owing to the lack of data the impact of pollutants such as cadmium, cyanide, polychlorinated biphenyl and arsenic had not been covered.
34. According to the study, the contribution of domestic wastewater to the degradation of water quality was the highest among the three major sources of pollution, i.e., domestic, industrial and livestock wastewater. Compared to domestic and livestock wastewater, the amount of BOD discharged into water streams by industrial wastewater was not high since most industrial wastewater was treated to meet the emission standards set by the government. That fact was also reflected in the size and increasing trend of expenditures for the prevention of water pollution by the industries in terms of intermediate consumption and capital formation. Such expenditure was estimated to have increased by 432 per cent over the past eight years.
35. The Expert Group noted that the results of the Korean study could be improved further in the future. The results presented to date were exploratory in nature and could not be fully utilized for policy purposes, one reason being that the estimates of exact stocks of various water resources were not available and thus the depletion factor had been disregarded in the study. Similarly, it had not been possible to examine the effects of degradation of water quality on human health, aquatic life, recreation activities and property value around the waterfront areas.
36. The focus of the case study of the Islamic Republic of Iran (STAT/EGM/ERA/6) was estimation of depletion of water resources and the effects of water pollution. The Expert Group noted that of the 31 water basins, Daryacheh Namak had been selected for the case study. The estimates indicated that for the year 1993 the depletion in that water basin amounted to 876 million cubic metres.
37. Based on a sample of five villages, the study had examined the quantity of heavy metals, such as nickel, copper, zinc, lead, chromium and cadmium in plants. It was concluded that the amounts of several heavy metals exceeded the safe limits, thus polluting the plants with consequential effects on human life. The study had also estimated the amount of land under cultivation affected by water pollution, which had led to significant losses of agricultural production. The source of water and soil pollution due to heavy metals was primarily the industrial waste discharged into the river system.
38. The Working Group noted a number of data gaps which made it difficult to estimate the damage due to water pollution, such as to the soil and to human health. Although some data were available on the number of patients by type of disease, it was not possible to determine the proportion of patients directly affected by water pollution.
39. The Expert Group took note of some of the important environmental problems in India which were presented in document STAT/EGM/ERA/3. The quality of air was deteriorating, both in the urban and rural areas. The rise in the number of vehicles, which had increased fourfold during the past ten years, and rapid industrialization, which gave rise to high concentrations of carcinogens and suspended particulate matter (SPM), were the major causes of deterioration of air quality in urban areas. By contrast the burning of firewood, primarily by households in the absence of commercial fuel, constituted the major source of pollution in rural areas. Further, poor sanitary conditions, lack of sewage facilities and lack of treatment of water wastes also contributed to environmental problems. A large proportion of the population, particularly in the rural areas, was exposed to health hazards due to the unavailability of piped water. There was an increasing trend in the use of fertilizers and pesticides and the need for controlling their indiscriminate use was noted. Other areas of priority mentioned were the need to preserve forests and biodiversity, and to prevent soil degradation. The case studies of India in STAT/EGM/ERA/3 concerned solid waste management in the informal sector, the framework for accounting for one of the non-market resources, namely air, and the framework for environmental accounting for Indian tanneries.
40. The Expert Group heard that both formal and informal sectors were engaged in solid waste management (SWM) in Bombay, which had been selected for the pilot study. However, the focus of the study was the informal sector, although comparative information was provided on the formal sector SWM. It had been estimated that the informal sector SWM, which relied on some 100,000 ragpickers, collected about one-fourth of the total waste collected by the formal sector. The informal sector played an important role by recycling and re-use of the waste material. The ragpickers thus contributed to the economy and society by conserving resources, reducing the pollution load and generating employment.
41. The Indian study also attempted to compile the waste account by using an input-output (I-0) matrix in which the waste and recycling components were treated in a separate row and column. It was recognized that solid waste involved several independent components and that, in an I-0 framework, different waste types would originate from different sectors and move differently through the I-0 matrix. For that purpose the conceptual framework presented in the study recognized various kinds of wastes, although waste was in fact treated as a single homogeneous material in the case study.
42. The Expert Group discussed the difficulties of capturing a representative sample of such a mobile and scattered population as ragpickers. At the same time it was recognized that the study provided valuable information on the mechanics of SWM in the informal sector which could be useful for future studies of a similar nature. It was suggested that some of the parameters emerging from various studies could be used by other developing countries of the region.
43. The Expert Group stressed the need for closer cooperation among various agencies concerned with environmental issues and data collection, including the national accounts offices.
44. The Philippines case study (STAT/EGM/ERA/9) presented the details of that country's experience in the compilation of resource asset accounts following closely the SEEA framework. It had considered three assets for the purpose, i.e., fisheries, forests and minerals, and had worked out estimates of environmentally adjusted net domestic product (NDP) and an enlarged concept of net accumulation based on the three resources for the period 1988 to 1992.
45. Although fishery resources were acknowledged to cover both cultivated and uncultivated resources, the Expert Group noted that the study was restricted to marine fisheries. In the absence of data on fish stocks, the estimates of depletion had been obtained on the basis of fish catch, fishing effort and sustainable yield. The latter had been estimated using the Fox model. Depletion had been derived as the difference between fish catch and sustainable catch, while the net price method had been used to value depletion.
46. The Expert Group noted that in the compilation of the forestry resource account, only dipterocarps, pine and rattan had been included because of non-availability of complete information. The opening and closing stock data in area and volume terms were available from reports of the Forest Management Bureau. As the cutting of forest trees in the country had been quite extensive, the study had assumed that extraction of logs already exceeded the sustainable level. Thus depletion included logging together with damage from logging. To convert those estimates to monetary accounts, the net price method had been used.
47. The estimate of the asset account for mineral resources was limited to metallic minerals, covering gold, copper, chromite, iron, nickel and manganese. The account had been compiled both in physical and monetary terms. In physical terms, the account was presented in ore form and in metal content. However, valuation in monetary terms was limited to gold, copper and chromite. Following the asset account framework, opening stock considered only proven reserves which included both positive and probable reserves. To convert data available in ore form to metal content, a weighted average grade for proven reserves had been applied to gold, copper and chromite. While it was recognized that ore bodies might contain more than one metal, only the primary metal had been considered. Since only the data on opening and closing stocks and extractions were available, other accumulation and other volume changes had been derived as residuals. To value the asset account in monetary terms, two methods of valuation had been employed, the net price method and the El Serafy method. The Expert Group observed that the difference in the two estimates was quite large and warranted further scrutiny.
48. The Expert Group Meeting noted that using preliminary estimates of depletion of the three resources covered in the study, the NDP had been partially adjusted to derive an environmentally adjusted NDP. The results indicated that over the five-year period, the adjusted NDP had gradually increased from around 97 per cent of NDP in 1988 to 99 per cent in 1992. The decline in depletion was attributed to government intervention to stop logging and preserve fishery resources.
49. The Expert Group Meeting noted the conclusions of the Philippines study that:
- It was feasible to compile the asset accounts using the SEEA framework;
- Current survey/census data were still inadequate for environmental accounting;
- Administrative data along with special studies could be transformed into useful information for environmental accounting;
- Involvement of planning, environmental and statistical agencies and research institutions was considered critical in the work on environmental accounting;
- Training was required on the SNA, SEEA, environmental economics, and resource valuation methodologies, among other topics;
- Environmental accounting should be institutionalized in the agency compiling the national accounts.
V. OTHER MATTERS
50. The secretariat informed the Expert Group Meeting that the final regional seminar under the project "Systems of Environmental and Resource Accounting" would be held at Seoul, Republic of Korea from 27 to 31 May 1996. The participating countries were required to finalize their country case studies and submit them to ESCAP before the end of April 1996. They were also required to prepare separately a brief summary report based on the case study reports for presentation during the Seoul meeting. The meeting was also informed that the practical guidelines on environmental and resource accounting being prepared by the secretariat were expected to be completed by April 1996.
VI. ADOPTION OF THE REPORT
51. The Expert Group Meeting adopted its report on 23 February 1996.
LIST OF DOCUMENTS
- STAT/EGM/ERA/L.1 and /Rev.1 Provisional agenda
- STAT/EGM/ERA/1 Environmental and resource accounting and water pollution case studies [Guam]
- STAT/EGM/ERA/2 Environmental and economic accounts for water resources in the Republic of Korea
- STAT/EGM/ERA/3 Environmental accounting for India: some case studies
- STAT/EGM/ERA/4 Natural resource valuation - the Australian experience
- STAT/EGM/ERA/5 United Nations Statistics Division activities in the development and collection of environmental data
- STAT/EGM/ERA/6 Environmental and economic accounts for water resource in the Islamic Republic of Iran
- STAT/EGM/ERA/7 Natural resource accounting: a guide
- STAT/EGM/ERA/8 Valuation of environmental resources: methodological approaches
- STAT/EGM/ERA/9 Philippine case study on the adaptation of the UN System of Integrated Environmental and Economic Accounting (UN SEEA)
BACKGROUND DOCUMENT
- The value of nature: valuation and evaluation in environmental accounting (by Mr Peter Bartelmus)
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