I. ORGANIZATION OF THE SEMINAR
1. The Seminar on Environmental and Resource Accounting, organized by the secretariat of the Economic and Social Commission for Asia and the Pacific (ESCAP) in collaboration with the Korea Environmental Technology Research Institute (KETRI), was held in Seoul, Republic of Korea, from 27 to 31 May 1996. Host facilities were made available by the Government of the Republic of Korea. Financial assistance for the Seminar was provided by the Government of the Netherlands, supplemented by the Government of the Republic of Korea through KETRI.
2. The Seminar was attended by 27 participants from the following 20 members and associate members of ESCAP: Bangladesh, China, Fiji, Guam, Hong Kong, India, Indonesia, Japan, Kazakstan, Macau, Malaysia, Maldives, Nepal, Pakistan, Papua New Guinea, Philippines, Republic of Korea, Sri Lanka, Thailand and Viet Nam. The United Nations Statistics Division, the United Nations University and the World Bank were represented. Representatives of Keio University and of the World Wide Fund for Nature also attended.
B. Opening of the Seminar
3. Mr Jong Gie Kim, President of the Korea Environmental Technology Research Institute, inaugurated the Seminar. He noted that the United Nations Conference on Environment and Development (UNCED) in 1992 had heightened the importance of finding practical ways to integrate environmental and economic considerations into national policy-making. The development of the System of Integrated Environmental and Economic Accounts (SEEA) by the United Nations Statistics Division (UNSD) had provided useful guidelines on how to undertake "greening" of the national accounts, a topic that had received worldwide attention recently.
4. Mr Kim described how KETRI, under a cost-sharing arrangement with the United Nations Development Programme and with technical support from UNSD, had launched a pioneering research project based on SEEA which had resulted in a pilot compilation of integrated environmental and economic accounts for the Republic of Korea. That compilation had inter alia familiarized policy-makers with concepts and methods of integrated accounting which would assist them in setting up coordination mechanisms for economic and environmental policies. Mr Kim hoped that the Seminar would provide a forum not only for sharing the Korean experience with SEEA but also for a general discussion of various environmental accounting approaches and the possible formulation of a green accounting system for the region.
5. The welcoming address by His Excellency Mr Jong Taeck Chung, Minister, Ministry of Environment, was delivered on his behalf by Assistant Minister Mr Chin Seung Chung. In his address, the Minister pointed out that the Republic of Korea's dramatic economic transformation over the past three decades had been accompanied by mounting environmental problems. Noting the Government's forthright commitment at UNCED, he described the implementation of various measures towards achieving the goals of environmentally sound and sustainable development, and the emphasis on protection of the environment expressed at the highest political level. The Minister also drew attention to the prominent role that his Government had played in hosting international meetings designed to promote environmental management and develop appropriate policy measures for sustainable consumption.
6. The Minister noted that his Government had fully accepted Agenda 21's call for a system of integrated environmental and economic accounting which drew attention to the need for a broader assessment of growth and welfare than that provided by conventional national accounts. The concept of green accounting would be reflected in the Korean national accounts in the longer term, and the Minister expressed the wish that other countries in the ESCAP region would be making similar efforts. He also hoped that the Seminar would provide an opportunity for regional and global cooperation to meet the challenge of achieving sustainable development.
7. A message from Mr Adrianus Mooy, Executive Secretary of ESCAP, was read out by the Director of ESCAP Statistics Division. Mr Mooy expressed his gratitude to the Government of the Netherlands for providing generous financial support for the Seminar, and to the Government of the Republic of Korea for furnishing excellent host facilities for the meeting as well as supplementary finance. He noted that the growing realization of the consequences of environmental degradation and depletion of natural resources had led to the acceptance of the concept of economic growth through sustainable development. He recalled that Agenda 21 adopted at UNCED in 1992 promoted the integration of environment and development in decision-making and recommended the establishment of systems for integrated environmental and economic accounting.
8. The Executive Secretary noted that the Seminar would be exploring the several conceptual, coverage and valuation issues associated with accounting for environmental concerns. The 1993 System of National Accounts (SNA) provided the flexibility of linking satellite systems for environmental accounting to core national accounts concepts, and the UNSD's Handbook on Integrated Environmental and Economic Accounting provided a framework for the coordinated development of environmental accounting methodologies. It was in that context that the five countries participating intensively in the ESCAP Netherlands-funded project would be presenting their case studies to the Seminar, which the Executive Secretary hoped would contribute to the exchange of experience among countries in the region. In concluding, Mr Mooy hoped that the collective wisdom of the participants and resource persons at the Seminar would contribute to the development of feasible approaches to environmental accounting suitable to the circumstances and capabilities of the countries of the region.
C. Election of officers
9. The Seminar elected Mr Ataul Haq (Bangladesh) as Chairman, and Mr Seung-Woo Kim (Republic of Korea) and Mr Thomas David Williams (Fiji), Vice-Chairmen. Ms Loida Cruz (Philippines) was elected Rapporteur.
D. Adoption of the agenda
10. The Seminar adopted the following agenda:
- Opening of the Seminar.
- Election of officers.
- Adoption of the agenda.
- Review of various methodologies proposed for environmental and resource accounting.
- Guidelines for compilation of environmental and resource accounts based on the SEEA framework.
- Methods for valuing natural resource depletion and environmental degradation.
- Review of country practices on environmental and resource accounting and application of proposed methodologies.
- Other matters.
- Adoption of the report.
It was agreed that a presentation on greenhouse gas accounting could be accommodated within the above agenda.
11. A list of the documents presented for the Seminar is provided in the annex to the present report.
12. At the conclusion of the Seminar, participants expressed their thanks and deep gratitude to the staff of the Korean Environmental Technology Research Institute (KETRI) for the excellent arrangements made for the Seminar and the warm hospitality extended to them.
II. REVIEW OF VARIOUS METHODOLOGIES PROPOSED FOR ENVIRONMENTAL AND RESOURCE ACCOUNTING
13. The Seminar considered the item on the basis of the following documents: "Greening National Accounts" (STAT/SERA/4), prepared by Mr Peter Bartelmus, Chief, Environment, Energy and Industry Statistics Branch of the United Nations Statistics Division; "Pilot Compilation of Environmental - Economic Accounts for the Republic of Korea" (STAT/SERA/8), prepared by Mr Seung-Woo Kim of KETRI, Mr Bartelmus and other United Nations staff; "Environmental and Natural Resources Accounting in the Philippines: the Peskin Approach " (STAT/SERA/7), prepared by Ms Estrella Domingo and Ms Loida Cruz of the National Statistical Coordination Board of the Philippines; "The NAMEA Experience" (STAT/SERA/6), prepared by Mr Steven Keuning of Statistics Netherlands and introduced by Mr Michael Ward of the World Bank; and "Environmental Accounting: An Operational Perspective" (STAT/SERA/3), prepared by Mr Bartelmus and Mr Jan van Tongeren of UNSD.
14. In introducing paper STAT/SERA/4, Mr Bartelmus provided an overview of the history, mandates, objectives, approach and policy use of the United Nations System of integrated Environmental and Economic Accounting (SEEA). The system was developed in response to the need to assess the "interdependencies" between the economy and the environment that crucially affected the sustainability of economic growth and development. The 1992 Earth Summit in Rio de Janeiro had requested the United Nations Statistics Division to make the concepts and methods of the SEEA available to all Member States, and urged all countries to implement the system as a "satellite" of the universally adopted 1993 System of National Accounts (SNA).
15. The objectives of the SEEA could be summarized as
- segregation of environmental (protection) expenditures;
- provision of a data framework for physical and monetary accounting and statistics;
- measurement of environmental (depletion and degradation) cost and benefits;
- compilation of environmentally adjusted indicators of income, product, cost, saving, capital stock, capital formation etc., including the economy's sum total - an Environmentally-adjusted net Domestic Product (EDP).
16. The Seminar noted that the SEEA incorporated natural assets -- both "economic" and "non-economic" (environmental) -- and their use in monetary and non-monetary terms in different "versions" or modules. Those versions reflected, in particular, different categories of valuation, namely market valuation, maintenance costing and contingent (and related) valuations.
17. Various stages of acceptance and rejection of "green accounting" could be observed. Pressures from "environmentalists" to replace conventional national accounts by environmental accounts were being resisted by most national accountants, who rejected valuation of such environmental "externalities" as "research" or "analysis". In response, environmentalists were focusing on the development of "indicators of sustainable development". Problems of aggregation and comparability with economic aggregates brought about a general realization that only monetary valuation could capture comprehensively the different interactions between the economy and the environment. The Seminar noted that a consensus on key elements of integrated environmental and economic accounting seemed now to be in the making.
18. The Seminar also observed that macro- and microeconomic policy uses of the results of green accounting could be distinguished. The former referred to the use of environmentally modified macro indicators in policy-making or through "filters" of modelling and analysis; the latter made use of assessments of the environmental costs caused by different sectors of the economy for setting more accurately "economic instruments" (effluent charges, tradeable pollution permits etc.) of cost internalization by households, enterprises and public institutions.
19. It was pointed out that a great deal of consensus had already been achieved over the past seven years on the application of the SEEA. The Seminar noted that consensus had been to a great extent facilitated by initiatives of the World Wide Fund for Nature and other international organizations in recent conferences in Brussels and Washington on environmental accounting. The need was stressed for linking social, economic and environmental indicators and environmental accounting; the need for international standards that could be applied globally was also noted. Participants were urged to start working with available data; the Seminar heard that all the case studies supported by UNSD used existing data, which showed that even with relatively low statistical capacities rough studies of integrated accounting could be carried out.
20. The Seminar noted that there was value in having varied types of material related to environmental and resource accounting, especially in the ESCAP region where a plurality of approaches might be appropriate given that the region had particular problems in specific resource areas, as illustrated by the various case studies. The guidelines being produced under the ESCAP project, while based on the underlying methodology of the SEEA, would no doubt benefit from the wealth of diverse material and circumstances described in the case studies.
21. In introducing document STAT/SERA/8, "Pilot Compilation of Environmental - Economic Accounts for the Republic of Korea", Mr Seung-Woo Kim noted that it was a joint project of UNDP and the Government through KETRI. The compilation provided a basic SEEA framework for the Republic of Korea, assessed data availability, and set the direction for future data development and compilation of SEEA. Although the resulting estimates were preliminary, the project did attempt to evaluate the "social" (more commonly termed environmental) costs of environmental degradation and resource depletion. The Seminar noted that one of the major limitations of the pilot compilation was that data availability determined the accounting scope and the coverage of the environmentally-adjusted net domestic product and of environmental protection expenditures.
22. The presentation of the compilation covered inter alia data sources and availability (1985 to 1992), the concept of maximum sustainable yield, the criteria used for accounting for environmental degradation, estimation methods for environmental costs, and the calculation of unit pollution abatement costs. The difference between EDP and NDP (net domestic product) was not found to be very substantial. Mr Kim noted that further work was indicated in the areas of more detailed surveys of environmental products and services, alleviation of inconsistencies in time-series data, and the creation of new data sets needed to assure data comparability.
23. Mr Bartelmus supplemented Mr Kim's presentation with observations on the similar growth rates of EDP and the relatively small difference between EDP and NDP. The reasons, which would be further examined in a more popular version of the pilot project report, could be: (a) low coverage of environmental impacts, e.g., of hazardous waste cost; (b) the fact that only impacts generated during the accounting period were accounted for (rather than the accumulated "environmental debt"); (c) the relatively low (prevention) cost of environmental degradation in the country.
24. The Seminar also heard a brief and tentative analysis of environmentally adjusted national aggregates. It was suggested that the small difference between total EDP and NDP might indicate that it would be more profitable to look at value added at the sectoral level, where there might be wide variations. The flow of transboundary environmental impacts was also noted by the Seminar. It was agreed that, subject to clearance from the Korean authorities, the data from the pilot compilation could usefully be shared with other countries.
25. The presentation by Ms Loida Cruz of paper STAT/SERA/7, "Environment and Natural Resources Accounting in the Philippines: the Peskin Approach", first focused on the illustration of the structure and essential elements of the Peskin framework. The discussion then proceeded to the description of each of the additional entries that made up the modified GDP accounts under the Peskin approach. Those items were unmeasured household production, environmental services, environmental damages, direct nature services, net environmental benefit, and natural resources depreciation. The methodologies employed to derive estimates on those items were then reviewed. Some issues regarding the principles and estimation procedures adopted were pointed out, including the "crudeness" of the estimates, the insufficiency of available data, the borrowing of parameters and the differences of concepts and definitions of the Peskin approach from the SNA standards. The Seminar noted that the study had nevertheless generated a useful set of data.
26. It was pointed out that while some direct nature services were already captured in conventional accounts for example, through entrance fees charged in parks, there were also some natural sites where people went for relaxation and enjoyment and for which no fees were charged. The 'unpriced' benefit derived from those sites, valued at travel cost, was what had been placed under direct nature services in the modified account.
27. On the treatment of discoveries, the Seminar noted that the Peskin approach of depreciation measured total value changes in assets, whether they were caused by economic activity or by natural causes. In the SNA, depreciation of assets came about as a result of production activity, while other changes like those due to discoveries or natural disasters were covered under "other volume changes".
28. The Seminar noted that the paper did not contain specific data, nor an indication of the kind of specific policy analysis made. In sharing some results of the study, which inter alia showed that GDP and adjusted GDP were fairly close, Ms Cruz indicated that some outcomes could be considered controversial, for example, where the cost of waste disposal services appeared to greatly exceed pollution damages. The policy implications of statements based on the study might therefore be potentially dangerous. It was highly possible that damages were underestimated because most of the parameters used were borrowed from developed countries where the situation differed from that of the Philippines. In that connection the Seminar noted with interest the suggestion that rather than relying mostly on developed country data, parameters might possibly be borrowed from studies recently conducted in developing countries.
29. Paper STAT/SERA/6, "The NAMEA Experience", was introduced by Mr Ward on behalf of Statistics Netherlands. NAMEA (National Accounts Matrix and Environmental Accounts) was a framework yielding consistent estimates between the economy and the environment from a flow perspective that enabled comparisons - through the familiar Leontief system and inverse matrix which helped generate the associated economic and environmental coefficients - of the contribution of different economic activities to environmental problems. The Seminar heard that environmental concerns were defined in terms of resource depletion and five broad themes related to environmental degradation: greenhouse effects, ozone layer depletion, acidification, eutrophication and waste. The environmental indicators, analogous to other major concerns like unemployment linked intimately to economic activity, were measured in physical terms and through reflecting global, regional, national and local issues measured the Dutch contribution to those problems. The indicators were not implicitly or explicitly modelled but linked to desirable goals (standards) for a given date (2001 initially) determined at a political level. That facilitated the derivation of estimates of the distance between present performance and the goal, and determined an implicit gradient that defined the gravity of the issue under consideration. The Seminar observed that a single environmental 'core' policy index was obtained by using the inverse of the norm as a weight for each theme. The rationale for retaining only physical measures and norms and not attaching any values to them lay in the need to provide politicians with a clear and understandable instrument by which to quantify their choices.
30. In commenting on the NAMEA system, participants raised a number of philosophical and methodological questions. Those included whether political norms should be part of the objective function of a statistical system or the result of it; whether the themes were unambiguously defined and measured in a mutually exclusive and separable way; and whether the weighting structure for each theme and for the environment in total was sufficiently transparent and appropriate. An issue on transfer pricing was also raised. The Seminar noted that the Dutch were considering adding 'space' - congestion, use-load density etc. - as a sixth theme. From an evaluation perspective, a trend towards technology-process classification in the economic accounts matrix and away from a commodity-industry specification would clearly yield more relevant and meaningful environmental outcome coefficients. Associated refinements already under way to the utility and production functions used in the modelling process would enable the authorities to give more emphasis to achieving reductions in the most polluting sectors rather than attaching equal weights to the same reduction in output.
31. The Seminar considered that the main virtue of the NAMEA was that the link to the economic system was close and explicit, even though the underlying valuation criterion (related to some concept of "sustainability") was not. It observed, however, that in a parliamentary system - and faced by the annual demands of budget ministries - politicians had to come up with decisions based on the alternative costs of pursuing different policies; that posed, perhaps, the biggest future challenge to the NAMEA.
32. In introducing document STAT/SERA/3, "Environmental Accounting - An Operational Perspective", Mr Bartelmus referred only to those aspects of the paper that dealt with the implementation of the SEEA. The document itself was distributed originally as technical background on the more operational concepts and methods of the SEEA. The presentation provided Seminar participants with an opportunity to learn more about the actual implementation and organization of a programme of integrated environmental and economic accounting, based on the (limited) experience of eight case studies technically supported by UNSD. The usual sequence of implementation was as follows:
- Organization of a national seminar of potential producers and users of data relating to an integrated accounting exercise. The purpose was
- to identify key environmental and economic concerns and policy priorities in the country;
- to set up coordination and cooperation mechanisms such as a national committee supervising the work, a task force carrying out the work, and/or an executing agency such as a research institute or the national statistical office;
- Training and discussion workshops to specify data requirements and availability, and the processing of data for accounting purposes - with external and/or national consultants;
- A final national seminar (or meeting of the committee) to assess the results and make recommendations for the institutionalization of environmental accounting in the country.
33. The Seminar heard that for the actual implementation of a country project, UNSD developed "worksheets" which presented the basic statistics in a format that was compatible with the SEEA framework. The worksheets presented included accounts for environmental expenditures and economic and non-economic assets in physical and monetary terms, and tables of emissions and market values and maintenance costs of asset use.
34. It was noted that the costs of a pilot compilation ranged between US$ 100,000 to 150,000, including technical assistance. A project was typically planned to last one year, but that duration was usually exceeded (up to two years). Comprehensive "benchmark" compilations could be carried out every five years or longer, while annual "reduced-format" compilations could be conducted cheaply and quickly by extrapolating key data. Additionally, special studies might focus on particular sectors (and their environmental impacts), particular impacts (and the sectors causing them), selected resource accounts (forests, fish, land use etc.) or on full accounts for a particular (subnational) region.
III. GUIDELINES FOR COMPILATION OF ENVIRONMENTAL AND RESOURCE ACCOUNTS BASED ON THE SEEA FRAMEWORK
IV. METHODS FOR VALUING NATURAL RESOURCE DEPLETION AND ENVIRONMENTAL DEGRADATION
35. The Seminar decided to consider the agenda items together, on the basis of documents of similar titles (STAT/SERA/1 and STAT/SERA/2, respectively), both prepared by Mr and Mrs Parikh of the Indira Gandhi Institute of Development Research, Mumbai, in their capacities as consultants to the secretariat, and document STAT/SERA/5, "The Value of Nature: Valuation and Evaluation in Environmental Accounting", prepared by Mr Bartelmus of UNSD. Participants noted that chapters within STAT/SERA/1 and /2, appropriately rearranged, would form the basis of the guidelines for compilation of environmental and resource accounts based on the SEEA which would comprise an output of the current ESCAP project.
36. The Seminar noted that the first of the four chapters in the guide to environmental and resource accounting dealt with an introduction to environmental accounting and why it was needed. Apart from indicating whether the economy was on the path of sustainable development, environmental accounting should also contribute to a clear understanding of the environmental trade-offs of economic development.
37. Environmental degradation associated with economic development and population growth was visible in many places. Many economic activities required natural resources and environmental inputs. That use changed their quality. Whenever human activity was at a level above the regeneration capacity of the natural environment, there would be a decline in the quality of those resources.
38. The Seminar heard that the degradation of natural resources, or a loss in the quality of the environment, imposed a burden on present and future generations. Borrowing from coming generations was justifiable if they were left richer in the final analysis. Hence there was a need to know how much of a resource the current generation was using up and how much of a burden it was leaving behind.
39. Such accounting of environmental resource use did not normally take place in the process of economic activities. While the effects of environmental resource depletion might be outside the profit and loss account of a firm, they fell within the accounts of the society, the nation, or mankind. Keeping track of the resource base and the state of the environment through appropriate accounting could alter perceptions of what kind of development was desirable and of what policy choices were to be made.
40. In the conventional SNA, depreciation of natural assets was not subtracted from income to arrive at net national income. The Seminar noted the view that the economy's performance was thus judged using a defective scale, since even classical economists had recognized natural capital as a factor of production. Accounting for natural capital and its depreciation was a logical extension of the idea of national income accounting. The Seminar recognized that the preparation of natural resource accounts and their regular publication could bring much needed accountability of public policy.
41. The main objectives of valuation of natural resources were to assess relative environmental priorities, the cost-effectiveness of environmental investments, trade-offs, and environmental impact assessment. The Seminar heard that there were differences in the three approaches for valuation: the accounting approach, the economic approach, and the environmentalist approach.
42. The scorekeeping function of integrated economic and environmental accounting (IEEA) was emphasized. The Seminar also heard that at the same time the natural resource accounting exercise was important for environmental policy-making. At times the scope of valuation and what was included in it might differ for preparation of an IEEA and for guiding environmental policy. The valuation effort could have a wider scope at times and should serve those various needs in addition to IEEA. The Seminar noted the special characteristics of the ESCAP region which was rapidly industrializing; the size of the population, the incidence of poverty and the significance of the non-market sector were important considerations.
43. A generic step-by-step approach to moving from the SNA to the IEEA framework of UNSD was described, starting with the conventional input-output representation of the SNA. The relationships between various approaches such as SEEA, NAMEA and Peskin's method were clarified to the Seminar.
44. The flow and capital stock accounts of the revised SNA also constituted the IEEA, except that the capital stock in the latter also included non-produced and produced natural assets. Those accounts needed to be expanded in many ways in order to consider the various economic activities of production and consumption and also the sectoral detail account for the resources of interest.
45. The Seminar noted that in the conventional accounts each column could be looked upon as an activity which required as input the items supplied by the various rows and which produced the output listed at the bottom of the column. To each of those columns, the associated emissions, effluents, and pollutants generated, known as environmental joint products, could be appended. The row for environmental joint products described how each production activity affected the environment.
46. Different sectors also needed to be segregated as the scale of production might lead to different levels of emissions, and techniques of production and input uses and intensities also affected the associated environmental consequences. Separate inputs provided by natural resources were also needed.
47. The Seminar noted that the environmental consequences of various economic activities affected both the qualities and amounts of the different natural resources. Since the objective was to describe quantitatively the changes brought about in the various natural assets, physical accounts had to be prepared for each of those resources. The Seminar also heard that while the need for valuation might not be questioned, that task involved many difficult assumptions and ethical judgments.
48. The Seminar sought guidance on how changes in environmental assets due to natural causes, such as land erosion due to wind, were to be accounted for in the extended framework under discussion. It was pointed out that many changes in asset quality could not be easily ascribed to the activity that caused them; nevertheless, while the cause might not be known, the asset did suffer depreciation. If data were available separately, the framework presented could account for it, just as was done in the SEEA's revaluation of assets due to natural causes.
49. Given that the most critical step in preparation of an IEEA was valuation, what alternative approaches measured and what ought to be measured were clarified to the Seminar. Thus, the maintenance cost, the restoration cost and the social cost borne by others were different approaches and measured different things. Clarity was needed in a given situation as to whether the particular approach selected gave a lower or upper bound estimate. For example, when a country had no pollution control requirement, the maintenance cost might be higher than the social cost; whereas in a country with strict standards, the maintenance cost for the residual pollution might be smaller than the social cost.
50. The Seminar heard an elaboration of the valuation of some resources of concern, such as agricultural land, exhaustible mineral resources, and regenerating resources such as forests and fisheries. Competitive markets for some of those resources did not exist in many countries, and while common property resources such as fishery grounds were overexploited, data on fish stocks were generally not available. The Seminar noted that special valuation approaches were needed in most instances.
51. The value of cultivated land might be taken on the basis of the agricultural output it could provide. Soil quality affected the yield and therefore, yield as a function of soil quality and other inputs could be indicative of the value of soil as a resource. To estimate change in land quality, soil properties such as soil type, colour, depth, drainage, salinity and percolation needed to be collected on a sample basis. The Seminar noted that change in the value of soil could be taken as the present discounted value of loss of output in future. Physical accounts of soil could be established using estimated soil quality indices for different parts of the country.
52. The Seminar noted that the value of an Exhaustible Mineral Resource asset could be considered to be its present value under optimal exploitation. Under an optimum extraction rate there should be no difference in extracting one additional unit today or a year later. The Seminar took note of one definition of a sustainable rate of extraction advocated by Solow. The Seminar noted that the notion of a permanent income could be used to calculate the true income from the use of exhaustible resources. It also noted that ways of determining which part of the extraction income was available for current consumption and which was needed for accumulation to compensate for depletion of the resource would be covered in the forthcoming guidelines.
53. The Seminar noted that there was a need to include both value provided by the forests in the SNA and also to account for their depletion and degradation. The latter required the filling of data gaps in areas such as the assessment of resource stock, atmospheric interactions, ecological discontinuities etc.
54. The valuation of forests as a resource involved the concept of Total Economic Value, including carbon store value and biodiversity value, whereas the valuation of forests as productive assets involved only direct use value. The Seminar noted that the income derived from a forest would depend upon the strategy of management, and that the price that a competitive market for forests would fetch would correspond to the present value of the income stream generated under an optimal management plan.
55. While the main problem in valuing fisheries was lack of data, valuation could be undertaken by attempting to measure the productivity of the sea, analogously to that of the soil. The Seminar noted that fishery catch depended on the stock of fish in fishery grounds as well as on inputs in terms of fishing effort and the quality of fishing gear used. Historical data on catch, effort and gear would allow the productivity of the fishery to be estimated.
56. The Seminar noted that the approaches to valuation of resources to be described in the guidelines were motivated by the scarcity of data, particularly in developing countries. They relied on information likely to be available or which could be collected through sample surveys.
57. The Seminar also took up the question of valuation of environmental change. The environmental joint products associated with economic activities needed to be converted in monetary terms. Three broad approaches for valuation were described to the Seminar, their suitability depending on the issue of concern and data availability.
58. The Seminar heard that the physical linkage method depended upon causality connection between environmental change and its effects on other objects. Environmental values were estimated by attempting to establish relationships between physical effects of an environmental change on some other thing.
59. In the abatement cost method, the costs required or incurred to abate the pollution were taken as an estimate of the value of damage. It was also known as the maintenance cost method, as the costs involved would maintain the environmental quality at a constant level.
60. The Seminar noted that the behavioural linkage valuation technique in general assumed that the value of environmental goods should be based on people's willingness to pay to secure better environmental quality or to escape environmental deterioration.
61. The Seminar noted the applicability of the various methods to different situations. When dose-response relationships existed, the physical linkage methods might be more appropriate. They included the cost-of-illness method; however, to address environmental policy issues, one might have to go beyond financial transactions for illness and also include loss in human capital due to ill-health; even loss of IQ and value of loss of lives might need to be considered.
62. The abatement cost method tended to be used when the cost of technical or other measures was used as a surrogate to value degradation.
63. The Seminar noted that behavioural linkage methods were subdivided into revealed and stated preference methods. Preference for environmental amenities could be expressed or revealed in a "market-place" by incurring travel cost for going to environmental amenities such as national parks, beaches and so on. Stated preference methods included contingent valuation survey methods and referendum methods.
64. The Seminar discussed the questions of data requirements and the time and staff needed to undertake various valuation exercises, which varied widely in the various studies undertaken. It was pointed out that the national accounts could be only as good as the underlying data from which they were constructed. Various existing studies, data and information would have to be used and some surveys might have to be specially commissioned. It was therefore essential to know the distinction between information that should go into the national accounts and other available information which might contain other elements because of the purposes for which the analysis or data gathering might have been done.
65. It was felt that the valuation exercises cited were very interesting and provided broad perspectives, but it was suggested that more references and information were needed from developing countries which was now becoming available, along with material from developed countries.
66. Considerable discussion took place on the institutional framework in which the IEEA should be prepared, and the best way to achieve the transition from national accounts to SEEA. The Seminar noted that once the process of preparing IEEA had reached a certain degree of maturity, the logical place to do such work was the national statistical agency or other office preparing the national accounts. However, the Seminar also recognized that the needed competence often did not yet exist in many statistical agencies. It had therefore been found useful in several countries to involve researchers from a variety of disciplines in the initial stages of the work, since they could generate the new ideas and creativity needed. The Seminar also noted that in evolving a new system, its purpose should be kept in mind; the type of issues to be addressed would help determine the structure of the system. It was thus felt that a broad participation reflecting a plurality of views should be encouraged.
67. In discussing future work, the Seminar noted that the guidelines being prepared under the ESCAP project were expected to be finalized by the consultants soon and published within the constraints of available resources. It also noted that the Nairobi group was preparing a detailed handbook on environmental accounting, to which the ESCAP consultants would also be contributing. The Nairobi group handbook was expected to be about a year or so in preparation. The view was expressed that the ESCAP guidelines could be of considerable use to countries which were in the initial stages of IEEA, whereas the handbook and manual from the Nairobi group would be more useful to countries already deeply involved in such work; the two processes were seen as complementary.
68. As agreed during the adoption of the agenda, a special presentation was made by Mrs Parikh on greenhouse gas (GHG) accounting. Since most countries in the region were signatories to the United Nations Framework Convention on Climate Change, reporting GHG inventories had become an obligation for them. The Seminar noted the steps necessary to prepare sectoral GHG accounts on the basis of a case study of India. The input-output framework was used to compute carbon dioxide (CO2) emissions for 40 sectors by assigning coefficients for fossil fuel use, i.e., coal, oil, and natural gas, in each sector. The coefficients related to fuel use for energy purposes only.
69. The Seminar noted the results of the study with interest. The share of direct CO2 emissions accounted for by various sectors included electric power (47 per cent), transport (12 per cent) and iron and steel (11 per cent). Direct and indirect CO2 emissions differentiated by sector, income class and rural and urban areas had also been calculated. The Seminar also noted the estimated impacts on carbon emissions in 1998 and 2005 that different policies on energy efficiencies and poverty reduction would have.
70. In introducing paper STAT/SERA/5, "The Value of Nature: Valuation and Evaluation in Environmental Accounting", Mr Bartelmus discussed the dichotomy between physical indicator development and monetary accounting. That dichotomy could be viewed as due to the imposition of economic values on environmental concerns by "green economists" and the resistance of certain "environmentalists" to the "commodification" of the environment.
71. The Seminar noted the three basic valuation methods of (a) market valuation of economic natural assets (and their simplifications, i.e., the net-price method and the user cost allowance), (b) maintenance valuation of the environmental costs caused by economic agents, to expand the coverage of the SEEA to non-economic "environmental" assets and (c) contingent and other related valuations which attempted to capture the environmental costs borne by economic agents. Costs caused referred to the direct environmental impacts generated by production and consumption activities. Costs borne were welfare oriented, measuring ultimate environmental damage and its welfare effects. The view was expressed that damage and welfare valuation were already fraught with problems at the project and programme level and were hardly possible to apply at the national level. The Seminar nevertheless recognized that the SEEA opened a window to further research, perhaps at local levels, in several versions of damage costing.
72. While noting that there were still widely differing viewpoints, the Seminar observed that the more extreme opposition in the "environmental camp" to monetary valuation had become muted. Some participants expressed a preference for "income sustainability" as a substitute for the term "weak" sustainability utilized in the paper as a commonly used economic concept for maintaining income generation (irrespective of the composition of the capital stock). The problem of encouraging a pluralism of research and experimentation in a new and developing field of applied statistics and at the same time meeting the need for standardized concepts and methods in country applications was also recognized by the Seminar.
V. REVIEW OF COUNTRY PRACTICES ON ENVIRONMENTAL AND RESOURCE ACCOUNTING AND APPLICATION OF PROPOSED METHODOLOGIES
73. The Seminar considered the agenda item on the basis of country studies undertaken by Guam, India, Republic of Korea and the Philippines, and the country papers as listed in the Annex.
74. Mr. Eugene Li of Guam presented his case study in the paper "Environmental and Resource Accounting for Water Resources" (STAT/SERA/CRP.2). The study focused on two aspects, water quantity and water quality. The water quantity study concentrated on aquifer resource examination, while the water quality study focused on nearshore marine water pollution.
75. The Seminar heard that Guam currently consumed 12 billion gallons a year which was below the sustainable level. To forecast aquifer depletion, theoretical and empirical models were built. Annual data from 1981-1994 were used in regression analysis which included as dependent variable the volume of the aquifer, with four independent variables: population, per capita income, visitor days and price of the aquifer. After analysis and tests, price and per capita income were omitted.
76. The results showed that for a one person increase in the resident population and a one visitor day increase to the island, aquifer demand increased by 42,650 and 998 gallons respectively. It was estimated that aquifer demand would be 22.7 billion gallons in the year 2010, exceeding the sustainable capacity (estimated by Mink in 1976) of 21.9 billion gallons. When the sustainable capacity was surpassed, water quality would begin to d eteriorate.
77. The case study also examined Guam's marine water pollution and its causes with the objective of understanding the primary causes of pollution: economic development, natural weather conditions, or both. Quarterly data from 1985 to 1994 were used.
78. To examine water quality, the study tested the relation between marine water pollution with faecal coliform in the ocean water as the dependent variable and rainfall, visitor arrivals and resident housing units as independent variables. The regression analysis indicated that for every inch increase in rainfall, the frequency of acceptable bacterial level exceedences increased by 1.2. The results showed that while both rain and visitors contributed to marine pollution, rain was a much more significant factor. It was clarified that rainfall acted as a medium in transporting the pollutants to the ocean.
79. The Seminar noted that although Guam had no immediate environmental problems, the study showed that there might be an overpumping problem from the aquifer which needed further investigation. It felt that the study should prove useful for policy-makers to consider measures for the supply of additional water or to introduce measures for water conservation. The Seminar noted that visitors' consumption was eight times more per day than that of the local population.
80. Mrs Jyoti Parikh presented the Indian case studies on the basis of document STAT/SERA/CRP.3. She informed the meeting that the Government of India had not yet decided on compiling IEEA, and the funds were therefore not available. Nevertheless case studies and methodological development which could be useful for IEEA could be undertaken.
81. The Seminar was given an overview of environmental problems in India. It had a large population, dominant agriculture, and existence of both market and non-market sectors. In terms of environmental issues, some of the important areas were preservation of forests and biodiversity, prevention of soil degradation, and air pollution. Case studies were conducted on air pollution, solid waste management in the informal sector, and environmental degradation in tanneries. According to the study, air pollution was prevalent both in urban and rural areas due to a large number of motor vehicles and rapid industrialization. Suspended particulate matter (SPM) was a major pollutant in urban air pollution. Rural air pollution was mainly caused by the use of non-commercial fuel, which caused a very high incidence of eye troubles, lung diseases, and other health problems.
82. The Seminar noted that for the study of air pollution, the input-output (I-O) framework was used which called for substantial data sets, most of which were collected by various departments of the government. The study described various steps involved in the methodology and their data requirements. The first would be identification of polluting activities for which the I-O matrix and data for corresponding environmental joint products would be needed. The next step involved converting the I-O matrix into physical units for which administered prices of various inputs and data or resource flow into various output sectors would be required. The third step consisted of compilation of emission factors. Information on pollution control and technical competence to identify various processes were needed for computing gross emissions.
83. The Seminar noted with satisfaction that the emission factors had been compiled and reported for the purpose of sharing information with other countries. However, final integration could not be carried out due to limited resources for collecting sector-specific maintenance cost data. The I-O sectoral approach was useful to determine the effects of technical change and of input substitutes, and to account for global pollutants. However, it suffered from the limitations that actual maintenance costs might be lower than actual costs borne by other residents. To go from sectoral emissions to actual concentrations was difficult because of insufficient knowledge of pollution dispersal, absorption and transformation. Therefore, a separate approach to investigate health costs of air pollution was carried out. The study also demonstrated another valuation method, namely the cost of illness for Chembur region, Mumbai city, which was undertaken with the collaboration of city planners, medical doctors, environmental organizations and other research institutes. It was estimated that the value of impacts of mortality and morbidity was about Rs. 224 million (US$ 12.4 million). The damage per unit increase of SPM was Rs. 2.4 million. That study was then used as a basis for the estimation of other cities. Damages in four metropolises, namely Calcutta, Delhi, Madras, and Mumbai were estimated to be Rs. 2200 million.
84. The Seminar heard that poor sanitation conditions, lack of sewage facilities and deficiencies in the management of solid waste also contributed to environment problems. The informal sector in India was large and employed many persons. The case study was taken up to show how both formal and informal sectors contributed to solid waste management services. In that connection, a second study related to solid waste management (SWM) through the informal sector in Mumbai was carried out. The objective was to compile an IEEA for the country taking the Mumbai satellite account as the basis.
85. The study estimated that 75 per cent of waste was collected by the formal sector which employed 26,000 persons and used a considerable number of trucks which themselves emitted pollutants. The balance was collected by the informal sector which relied on some 100,000 ragpickers. The informal sector played an important role in recycling and reusing waste material. The ragpickers thus contributed to the economy and society in conserving resources, reducing the pollution load and generating employment. The study also attempted to compile the waste account by using an input-output matrix in which the waste recycle component was treated in a separate row. It was recognized that solid waste involved several independent components and that, in an I-O framework, different waste types would originate through the I-O matrix. For that purpose, the conceptual framework presented in the study recognized various kinds of wastes, although waste was treated as a single homogeneous material in the case study.
Republic of Korea
86. Mr. Seung-Woo Kim of the Korea Environmental Technology Research Institute (KETRI) presented the results of the case study on water resources in the Republic of Korea on the basis of paper STAT/SERA/CRP.4. The Seminar noted that since the start of economic development in the 1960s, the environment had suffered significant deterioration owing to rapid industrialization, population growth and urbanization. Water pollution in the Republic of Korea had worsened since the 1970s, affecting river ecosystems. The protection of drinking water sources and the supply of safe drinking water had become the most pressing environmental issues facing Korean society. At the same time the quantity of water available, which could vary significantly with the seasons, critically influenced water quality. In that context the establishment of an environmental accounting framework was considered useful as a tool for water quality and resources management.
87. The study was an attempt to develop an appropriate framework for water resource accounting based on the System for integrated Environmental and Economic Accounting (SEEA) for the period 1985-1992. The basic approach was to construct a time series database on water quality and account for emissions of water pollutants, environmental costs of water quality degradation, and water uses and supplies for the selected period based on existing data, and finally, to compile accounts for inland water resources. However, water pollutants' emission tables and their monetary accounts were substituted for water quality degradation accounts as the connections between emission, concentration, and contamination could not be made in the study. Due to lack of data, water quantity was assumed to be the same in the long run and thus the cost of water depletion was not estimated. The Seminar noted that for the estimation of environmental degradation cost, the maintenance cost approach had been used.
88. According to the study, domestic wastewater contributed the most to the degradation of water quality in inland water streams when measured in terms of the amount of biochemical oxygen demand (BOD). The amounts of BOD discharged into water streams by industries were much lower since most industrial wastewater was treated to meet the emission standards set by the government. That fact was confirmed by the four-fold increase in expenditures for the prevention of water pollution by the private sector over the past eight years. However, the industrial wastewater emissions of hazardous water pollutants, such as cadmium (Cd), cyanide (CN), polychlorinated biphenyl (PCB) and arsenic (As) were not covered for the environment costs imputed in the study.
89. The Seminar noted that the amount of BOD in domestic wastewater was 2.8 times that in livestock wastewater in 1993, but that the environmental cost of livestock wastewater was about 2.4 times that of domestic wastewater because of high concentrations of pollutants.
90. The Seminar noted the limitations of the study in terms of valuing the cost of environmental degradation and resource depletion. That was due to the deficiency of data in physical terms as well as for related valuation calculations. The limitations applied also to assessing the effects of water quality degradation on human health, aquatic life, recreation activities and property value. As the market price for water could differ with its use, the appropriateness of the monetary valuation of the stock of natural resources with multiple uses was questioned. The Seminar also discussed the issues of emission of pollutants across national boundaries. It noted a proposal to treat compensatory payments in that regard as a transfer in the revised version of SEEA, thus affecting national disposable income.
91. The Seminar noted that the Philippines ESCAP case study (STAT/SERA/CRP.5) to test the SEEA was focussed on the compilation of the asset accounts for fishery, forest and mineral resources, the depletion/destruction of its natural resources being a major environmental concern of the country. The report, presented by Ms Estrella Domingo, described in detail the Philippine experience on operationalizing the asset account on the lines of the SNA and SEEA. It demonstrated the use of administrative and research data (no primary data collection was undertaken) and methodologies to fill in the items in the account. The National Statistical Coordination Board (NSCB) adopted the strategy of interagency collaboration with other environmental accounting activities in the country. That provided the expertise as well as the data needed for the accounts, not to mention the interest created among the data users.
92. To operationalize the asset accounts for the three resources, the coverage was first defined, followed by the design of the framework for each of the resources covered. The framework showed the stock levels at the beginning and end of the year and the transactions that caused the change in the stock levels. The Seminar noted that physical and monetary accounts had been compiled for all the resources.
93. Data for the accounts were sourced from administrative and research data and surveys. The entries in the accounts were obtained directly or indirectly depending on the availability of data. For those that had to be computed indirectly, estimation methodologies were developed, of which details were contained in the report.
94. The Seminar noted the following findings and recommendations of the study:
- The SEEA framework could be operationalized but on a modular basis;
- Current survey/census data had yet to include the requirements of the SEEA;
- Use of administrative data could be developed and improved as an alternative source for the SEEA data;
- Operationalization of the SEEA should be a joint effort of the planning, environmental and statistical agencies and research institutions;
- Training on the SNA, SEEA, and on environmental and resource economics was required; and
- Institutionalization of the SEEA should be within the agency that compiled the national accounts.
95. In a supplementary report from the Philippines, Ms Naz presented "Environment and natural resources accounting in the Philippines: Policy Considerations and Directions" (STAT/SERA/CRP.6). The report covered the three ENRA projects in the Philippines, namely, the ENRA Project (USAID) using Peskin's approach, the Integrated Environmental Management for Sustainable Development at the Department of Environment and Natural Resources and the ESCAP-ENRA Project of the National Statistical Coordination Board, which used the IEEA approach.
96. Those ENRA projects had assisted policy-makers in addressing some key development issues such as whether a total or selective log ban should be implemented in the Philippines; the costs and benefits of a leaded gasoline phase-out; and identification of the most important investments in order to reduce water pollution.
97. The Seminar noted that the ENRA findings provided empirical analysis and opinions that led to policy directions such as a total log ban in old growth dipterocarp forests and a selective log ban in provinces with less than 40 per cent forest cover. For forests earmarked for timber production, economic efficiency considerations implied that postponement of harvest also delayed forest appreciation from enhanced tree growth. Harvesting should thus be encouraged selectively, albeit with constraints due to off-site impacts.
98. The Seminar noted that other policy options were the use of less capital-intensive logging and road building; long-term tenure of timber licensees; and correct pricing of timber to enable licensees to capture the future gains from sound forest management and to engage in enrichment planting and silvicultural improvements. Other forestry policy recommendations included long-term contracts for community-based forestry (to arrest forest depletion by upland farmers) and increased public and private sector support for investments in plantations and agroforestry (for increased on-site environmental benefits, with priority for areas with substantial surface run-off).
99. Another policy application of the ENRA concerned the provisions of options on reducing the lead content of gasoline. Those options covered both command-and-control and market-based instruments with their corresponding benefits and costs. A third application of ENRA was in trade and environment linkages, such as the study on the benefits and costs of internalizing pollution costs through pollution taxes while liberalizing trade. The Seminar also noted that there was a wide range of applications of ENRA as a management tool for policy formulation.
100. The Seminar noted that other policy considerations and directions of ENRA in the Philippines were:
- Retargeting of policies towards domestic pollution sources;
- Direction of policies towards the maintenance and increase of the stock of renewable resources ;
- Incorporation of unmarketed production activities and use of time of households in household surveys;
- Legislation to enjoin policy advocates to assess costs and benefits of prospective policies;
- Orientation and training of policy-makers and policy analysts on ENRA methods;
- Intensification of the environment and natural resources monitoring system; and
- Institutionalization of ENRA.
101. In the ensuing discussion, the possibility was suggested of integrating the items relating to environmental concerns into regular establishment and household surveys in order to identify data gaps. Likewise, the use and processing of administrative records for that purpose were encouraged. The Seminar sought clarification on why households were a larger generator of pollutants than were industries; it noted as a contributory factor that a major portion of pollutants generated by transportation was credited to households.
102. The Seminar also noted the usefulness of presenting some policy applications of the accounts. The presentation had cited interesting policy recommendations, but questions were raised on whether those recommendations were based on the case studies, or had been formulated on the basis of other sets of information in addition. The Seminar emphasized the importance of providing analyses on the links of the environment to the rest of the economy, which could only be obtained through integrated economic and environmental accounts. The Seminar noted that in integrating accounts, environment ministries also had a key role to play.
103. In reviewing the case studies as a whole, the Seminar noted with interest the large amount of data they entailed. It was suggested that some of the coefficients derived from the studies or from other studies carried out within the region could be usefully applied by other countries. It cautioned however that conditions in the countries differed and such coefficients should be used with circumspection. The Seminar noted the major sources of pollutants in India, which had serious policy implications that ought to be brought to the notice of policy-makers.
104. The Seminar noted that the case studies and surveys could be useful in constructing environmental accounts. There could, however, sometimes be conflicting results from such studies. Thus, satellite accounts were needed in the initial phase, so that when the conflicts were resolved, final results could be u tilized.
105. From the country papers presented, the Seminar noted that countries in the region were aware of the importance of environmental issues, and the merit of using environment statistics for policy-making. The countries also realized the importance of developing environmental and resource accounting in an integrated framework like SEEA.
106. The Seminar noted that data on natural resources in physical terms were already collected by many countries in the region. Some had already brought out compendia of environment statistics while many others were still in the process of initiating such data collection. It noted that data on the environment in physical terms were essential for the compilation of resource accounting.
107. In the compilation of environmental accounts, country situations varied significantly. Other than those which had participated in the ESCAP project, Japan had done extensive work in that area. It had produced estimates of environmental degradation and depletion and had attempted to compute environmentally adjusted domestic product. In its studies it had used the maintenance cost approach. The Seminar noted with interest that Indonesia had recently initiated a study on the compilation of environmental accounting based on the SEEA framework. It had compiled a guidebook covering the concepts and definitions, data requirements and methods for constructing physical and monetary accounts. Indonesia had already compiled physical and monetary data for a number of years in respect of crude oil, natural gas and coal. In China studies had begun on the accounting of natural resources such as mineral resources, surface and underground water resources, forests, land and grassland resources. The studies focused on the valuation of the resources, the pricing and accounting methods, and the policy for the utilization of the individual resources. The Seminar noted with interest the use of environmental data for policy decisions in the Philippines, though integrated environmental accounts were yet to be fully developed. It noted also the efforts made by international agencies and non-governmental organizations in promoting the development of integrated environmental and economic accounting for policy purposes.
108. The Seminar appreciated the fact that the ESCAP project had contributed not only to the awareness of the importance of the subject matter, but also to the development of methodology on specific resources of interest to the countries. It noted the interest shown by other countries to participate in similar projects and expressed the hope that it would be possible for the ESCAP secretariat to enable their participation in future studies.
VI. OTHER MATTERS
109. No other matters were raised.
VII. ADOPTION OF THE REPORT
110. The Seminar adopted its report on 31 May 1996.
LIST OF DOCUMENTS
Symbol - Title
- STAT/SERA/L.1 - Provisional Agenda
- STAT/SERA/1 - Guidelines for Compilation of Environmental and Resource Accounts Based on the System of Integrated Environmental and Economic Accounting
- STAT/SERA/2 - Methods for Valuing Natural Resource Depletion and Environmental Degradation
- STAT/SERA/3 - Environmental Accounting: An Operational Perspective
- STAT/SERA/4 - Greening National Accounts
- STAT/SERA/5 - The Value of Nature: Valuation and Evaluation in Environmental Accounting
- STAT/SERA/6 - The NAMEA Experience
- STAT/SERA/7 - Environment and Natural Resource Accounting in the Philippines: The Peskin Approach
- STAT/SERA/8 - Pilot Compilation of Environmental - Economic Accounts for the Republic of Korea
- STAT/SERA/CRP.1 - Economic Development, Poverty Reduction and Carbon Emissions in India
- STAT/SERA/CRP.2 - Environmental and Resource Accounting and Water Pollution Case Studies, Guam
- STAT/SERA/CRP.3 - Environmental Accounting for India: Some Case Studies
- STAT/SERA/CRP.4 - Environmental and Economic Accounts for Water Resources in Korea
- STAT/SERA/CRP.5 - Philippines Case Study on the Compilation of Natural Resource Accounts
- STAT/SERA/CRP.6 - Environmental and Natural Resource Accounting (ENRA) in the Philippines: Current Approaches and Policy Directions
- Hong Kong
- Papua New Guinea
- Sri Lanka
- Viet Nam
- Integrated Environmental and Economic Accounting, Series F, No. 61, ISBN 92-1-161359-0 (Published by the United Nations Statistics Division, New York.)
- Paper by Keio University at Shonan Fujisawa presented at the Third Meeting of the London Group on National Environmental Accounts, held at Statistics Sweden, Stockholm, May 28-31, 1996
- Real Value For Nature: Executive Summary (by World Wide Fund for Nature)