Environmental Valuation and Greening the National Accounts : Challenges and Initial Practical Steps

The national accounts are the single
most important source of information about the economy, and
are widely used in all countries to assess economic
performance and for policy analysis. However, the national
accounts have a number of well-known shortcomings when it
comes to treatment of the environment. For example, while
the income from harvesting timber is recorded in national
accounts, the simultaneous depletion of natural forest
assets is not; perhaps more importantly, essential
life-support services provided by forest ecosystems are not
explicitly recognized at all. Environmental accounts
'greening the national accounts' have been
developed to address the shortcomings of the national
accounts, but valuation of environmental services has been
controversial.The development of methods to value
environmental goods and services continues to evolve apace.
In an increasing number of countries, the practical uptake
of these methods has accelerated in numerous areas of public
policy that have environmental consequences. One policy
related domain, however, where this uptake has been largely
conspicuous by its absence is national accounting. In this
paper, we hope to make the case that there is an opportunity
to address this situation.