Measures of Environmental Performance and Ecosystem Condition (1999) / Chapter Skim
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Accounting for Natural Resources in Income and Productivity Measurements
Accounting for Natural Resources in Income and Productivity Measurements
Pages 70-88
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From page 70... ...
This income concept encompasses not only current earnings but also changes in asset levels: Capital gains represent income increase and capital losses income reduction. The depreciation account reflects the fact that unless the capital stock is maintained and replaced, future consumption possibilities will inevitably decline.
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From page 71... ...
The first example provided in this paper looks at adjustments to the national accounts using NRA as a way to measure the economic value of resource depletion in Indonesia. The second example, assessing or analyzing agricultural systems, employs NRA to value soil and water depletion, and also measures off-site damages to account for environmental performance in a larger economic sense.
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From page 72... ...
Although capital formation is assigned a central role in economic theories, natural resources are not treated like other tangible assets in the system of national accounts. Activities that deplete or degrade natural resources are not recorded as consuming capital, nor are activities that increase the stock of natural resources defined as capital formation.
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From page 73... ...
Table 1 compares the GDP at constant prices with the net domestic product (NDP) , derived by subtracting estimates of net natural resource depreciation for only three sectors: petroleum, timber, and soils.
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From page 74... ...
It is therefore relevant to compare the figures for GDI with those representative of natural resource depletion. If gross investment is less than resource depletion, the country is drawing down, rather than building up, its asset base and using its natural resource endowment to finance current consumption.
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From page 75... ...
Increased silt concentrations affect fisheries and downstream water users. Although crop yields have improved in the hills because farmers have used better seed and more fertilizers, estimates indicate that the annual depreciation of soil fertility (calculated as the value of lost farm income)
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From page 76... ...
The tables compare net farm income and net economic value per acre for a predominantly cornsoybean rotation in Pennsylvania, with and without allowances for natural resource depreciation. Column 2 of Table 3 shows a conventional financial analysis of net farm income per acre per year.
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From page 77... ...
Item Accounting Conventional Accounting Natural Resource Gross operating margin 75 75 Less soil depreciation -- 24 Net farm operating income 75 51 Less off-site costs of soil erosion -- 49 Net farm income 75 2 xxx
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From page 78... ...
Within this framework, we accounted for the value of long-term soil productivity changes and off-site surface water damages for alternative farming practices. We also analyzed the financial value to farmers and the economic value to society of each farming practice under five policy scenarios.
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From page 79... ...
To date, no national economic model has used such extensive information on alternative production systems, the environmental impact of predominant and alternative farming systems, or the economic value of natural resource impacts. The research plan involved four steps: • collecting and organizing existing agronomic data on predominant and alternative3 production systems, • calculating crop budgets and simulating the environmental characteristics for each predominant and alternative production system, • reprogramming an existing economic policy model to incorporate alternative production systems and physical and economic accounts for natural resource impacts of both predominant and alternative systems and establishing an economic baseline for the adapted model, and • using the adapted model to test alternative policy scenarios and undertake sensitivity analysis.
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From page 80... ...
The data collected in the course of this study included basic agronomic data such as crop yield, input use, crop sequence, and field operations. These data provided a solid foundation for deriving estimates of various characteristics of each farming system, including cost of production, soil erosion rates, leachate contamination, and soil carbon sequestration.
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From page 81... ...
Using the completed NRA version of the USMP model, WRI tested a variety of agricultural policy scenarios for the 1995–1996 farm bill discussions. The analysis estimated several variables for each policy scenario for each region, including commodity production, commodity prices, farm income, net economic value of agricultural production, fiscal cost of income support, value and level of agricultural trade, land use, gross soil erosion, value of soil depreciation, value of soil carbon sequestered, and value of off-farm surface water impacts.
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From page 82... ...
Math Programming model for economic policy analysis. SOURCE: Faeth (1995)
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From page 83... ...
Such alternative production practices could greatly help farmers conserve resources, improve productivity and profits, and reduce fiscal costs. Policy changes that remove the biases against such production practices would allow further improvement and save taxpayers money.
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From page 84... ...
that are not marketed or to assess their significance for economic productivity. What follows is an exploratory step in that direction, using the private electric power industry in the United States as an example.
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From page 85... ...
In summary, productivity growth in the private electric power industry during these years appears two to three times as high if its progress in reducing economically damaging emissions is taken into account. In addition, productivity in the industry increased more rapidly in the 1970s, when emissions were being reduced more rapidly, than it did in the 1980s, when the rate of decline was more modest.
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From page 86... ...
bIndex B assumes that marginal damages increased in real terms in proportion to gross national product. Refer to footnote 6 for more information.
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From page 87... ...
. The alternative was that marginal damages increased in real terms in proportion to real GNP (Index B of Table 5)
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From page 88... ...
1989. Wasting Assets: Natural Re sources in the National Income Accounts.
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