Integrated economic and environmental accounting aims to provide a picture of the interactions between the economy and the environment. The accounts highlight the fact that economic sustainability depends on environmental sustainability, and they provide data to help analyze the costs and benefits for the careful stewardship of our economic and environmental assets. Consistent and detailed accounting of the interactions between the economy and the environment provides a common framework for integrating the work of environmental specialists, economists, and other analysts from a wide range of disciplines.
The benefits of integrated environment and development accounting include greater efficiency in the use of natural resources, and an increase in the number of enterprises that manage environmental issues in compliance with legal requirements, using the principles and methods of such strategies as cleaner production, eco-efficiency, green productivity and pollution prevention. The economic benefits include increased productivity and economic efficiency, greater competitiveness and likelihood of economic returns on investments, a better image for the enterprise, a decrease in social insurance premiums, and lower health care costs.
This strategy features in the framework of Agenda 21 as formulated at UNCED (Rio de Janeiro, 1992), now coordinated by the United Nations Commission on Sustainable Development and implemented through national and local authorities. Agenda 21 recommends: (a) developing and implementing methods and rules for accounting for sustainable development; establishing systems for integrated environmental and economic accounting; and (b) that UNEP develops and promotes the use of techniques such as natural resource accounting and environmental economics.
The United Nations System of Environmental and Economic Accounting (SEEA) is a flexible, expandable satellite system. It draws on the materials balance approach to present the full range of interactions between the economy and the environment. The SEEA builds on, and is designed to be used with, the System of National Accounts (SNA) 1993. Like the SNA, the SEEA is primarily concerned with the implications of the environment for production, income, consumption, and wealth.
The SEEA has four stages, each successively providing a more comprehensive accounting for the interaction between the economy and the environment. Stage A disaggregates, or provides additional detail on, environmentally related economic activities and assets. This stage, for example, focuses on actual expenditures intended to prevent or repair the degradation of the environment. It includes a detailed breakdown of the stocks of natural resource assets and changes in these stocks. Stage B begins with the physical counterpart of stage A. It maps, in physical terms, the interaction between the environment and the economy. It provides the physical quantities to which prices are applied to derive the economic values included in the economic accounts. Stage C provides far more comprehensive and explicit measures of the interaction between the economy and the environment. It does so by the use of alternative valuation techniques. These alternative valuation techniques include estimates based on maintenance costs, or the costs necessary to maintain at least the present level of environmental assets, and estimates based on contingent valuation, or the willingness to pay for reductions in depletion or degradation of natural assets. Stage D consists of further extensions of the SEEA. They include household production and the use of recreational and other unpriced environmental services in household production.
Economic accounts should reflect the parallelism that is apparent in business accounting between depreciation, a charge for the using up of plant and equipment in production, and depletion, a charge for the using up of natural resources in production.
U.S. economic growth as currently measured is not sustainable because the stocks of natural and environmental resources that ultimately determine economic growth are being run down.
The purpose of natural resource accounting is clear: to enable governments to obscure the costs of environmental protection by calling them "benefits" and to force businesses to list wealth-creating activities as societal "costs." But the effects will be profound. Companies around the world will see their regulatory expenses skyrocket and their markets shrink. Consumers will pay inflated prices for fewer products and higher taxes to support bloated bureaucracies.
According to this Orwellian theory of accounting, grants from the World Bank to radical environmental groups could be counted among the bank's income, whereas the value of electricity from a new dam financed by the organization could be counted among the bank's expenditures.