economy-environment interactions. This observation is tempered by the realization that to date nothing approaching adequate comprehensive environmental accounting for a country of the complexity of the United States has yet been undertaken. For BEA or the federal government to prepare a full set of environmental accounts would require a substantial commitment.

This chapter provides a review of the issues involved in accounting for renewable and environmental resources. It is not intended to be a comprehensive review of work in this area. Rather, it delineates the issues that are involved in environmental accounting and presents two important specific examples that illustrate these issues. The first section reviews BEA's efforts in environmental accounting to date. Next, we analyze how stocks and flows of residuals from human activities relate to natural sources of residuals, natural resource assets, stock, flows, and economic activity. The third section examines issues involved in accounting for renewable and environmental resources. The chapter then turns to general issues associated with the physical data requirements of environmental accounting and with valuation. We next investigate in greater detail the cases of forests and air quality to illustrate how augmented accounting might actually be done. The chapter ends with the panel's conclusions and recommendations in the area of accounting for renewable and environmental resources. Appendix B identifies potentially useful sources of data for developing supplemental accounts identified by the panel in the course of its investigation.

BEA Efforts to Date in Accounting for Renewable and Environmental Resources

This section reviews BEA's initial design for its supplemental accounts for natural-resource and environmental assets. A more complete evaluation of BEA's efforts on forests is included later in the chapter. As discussed in Chapter 2, a critical issue involved in the development of augmented accounts is setting the boundary. How far from the boundary of the marketplace should the purview of the environmental accounts extend? Table 4-1 shows BEA's tentative decisions on how it proposed to structure its supplemental accounts (BEA's Integrated Environmental and Economic Satellite Accounts [IEESA] from Bureau of Economic Analysis, 1994a:Table 1). Phase II of BEA's development of supplemental tables focused on assets listed in rows 22-35 and 42-47 of Table 4-1, while Phase III considers rows 48-55. Because BEA has not completed Phases II and III, actual decisions on what will be included have yet to be made. Each of the following sections of this chapter considers an element of how to draw the line. While an ideal set of accounts would contain "everything,"



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