Nature's Numbers Expanding the National Economic Accounts to Include the Environment (1999) / Chapter Skim
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5 Overall Appraisal of Environmental Accounting in the United States
5 Overall Appraisal of Environmental Accounting in the United States
Pages 153-180
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From page 153... ...
FUTURE DIRECTIONS FOR THE U.S. INTEGRATED ENVIRONMENTAL AND ECONOMIC ACCOUNTS This section presents the panel's overall conclusions and recommendations with regard to eight key questions related to the construction of integrated environmental and economic accounts: 1.
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7. What are appropriate techniques for measuring quantities and values for nonmarket activities in the national accounts?
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These ideal measures of national output and sustainable income can serve as a useful guide to the United States as it improves its national accounts by extending their boundaries. 5.1 The panel concludes that extending the National Income and Product Accounts (NIPA)
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Better information on the value of minerals on federal lands would be useful in determining appropriate royalty rates and leasing policies for resources not allocated through competitive auctions. For renewable resources, better information on the stumpage value of timber in national forests would be useful not only for accounting purposes, but also for improved management of these forests and for decision making on the balance of different uses among timber harvesting, wilderness preservation, recreation, and other uses.
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From page 157... ...
environmental database is the lack of comprehensive and reliable data on actual human exposures to major pollutants. Better information on physical emission trends, human exposures, and the economic impacts and damages due to air and water pollution would be valuable for expanded accounting measures of productivity.
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In addressing these issues, the panel is concerned that, particularly since the congressional stop-work order of 1994, the United States has fallen behind in developing environmental and other augmented accounting systems. The United States has in place today only the bare outline of a set of extended environmental accounts, with numerical estimates limited to subsoil mineral assets; the nation has no set of satellite environmental accounts, no physical accounting system, and no environmental input-output system.2 In weighing future directions for environmental accounting in the United States, the panel offers three general conclusions, which are followed by three associated recommendations.
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From page 159... ...
These agencies have considerable expertise in the analysis of environmental and nonmarket activities and would be useful partners in providing the data and developing prototype systems for nonmarket accounts. Third, the panel is mindful of BEA's important mission and of the precious nature of the data on marketed economic activity it provides.
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The work plan involves developing environmental accounts in three phases. Phase I, completed in April 1994, focused on subsoil mineral assets.
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An alternative to the proposed BEA work plan is a comprehensive approach that would involve developing a broad set of nonmarket accounts in parallel with the near-market accounts. Under this approach, BEA would endeavor to develop accounts not only for the minerals and near-market sectors, but also for nonmarket activities and products, and for environmental and nonenvironmental products and activities.
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According to BEA, the advantage of satellite accounts is that they provide expanded detail and allow for the exploration of alternative methodologies without reducing the utility of the core national accounts for macroeconomic policy and analysis. Placing environmental and nonmarket activities in a satellite account implies that these activities would not change the core estimates of gross domestic product (GDP)
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Because of the importance of the core accounts for many purposes, it is essential that comparable measures be retained. The core national accounts do not now include, nor would the panel recommend including, nonmarket activities by redrawing the boundary to incorporate, for example, all unwaged work or all natural-resource and environmental activities.
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From page 164... ...
In this respect, both the SEEA and IEESA appear to equate the terms "nonmarket" and "noneconomic." Omission of the economic services provided by environmental assets conflicts with the objective of permitting better analyses of environmental-economic interactions. Clearly, this conflict can be resolved only as a full set of nonmarket accounts is developed.
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7. What Are Appropriate Techniques for Measuring Quantities and Values for Nonmarket Activities in the National Accounts?
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BEA is reluctant to rely on contingent valuation and nonbehavioral, willingness-to-pay approaches because they are not constrained to fit into a double-entry bookkeeping system and because their results are seen as implausible in many cases, inconsistent with the overall accounting framework, unstable when budget constraints are added, and extremely expensive to implement. The panel is sympathetic with the reluctance of a government statistical agency responsible for producing the official national accounts to use con 4The aggressive approach was used in a study of the benefits of clean-air regulations conducted by the u.s.
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Although there are difficulties with nonbehavioral approaches such as contingent valuation, work on the development of such novel valuation techniques will be important for developing a comprehensive set of production and asset accounts. Further research and validation on nonbehaviorally based techniques would be useful in order to determine their objectivity, stability, and reliability for national economic accounts (see recommendation 4.2~.
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"Developed natural assets" such as oil, orchards, agricultural land, and forests would then be treated symmetrically with "made assets" such as houses, computers, and steel mills. The panel agrees that improvements in valuing subsoil assets would be useful elements in a phased approach to environmental accounting.
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From page 169... ...
Developing such accounts will require continued basic research on the underlying science and economics involved in estimating the benefits of public goods such as clean air, as well as applied research on accounting tools and valuation of nonmarket activities and assets. 5.8a If a phased approach is undertaken, the panel recommends that work to extend natural-resource and environmental accounting resume as soon as possible.
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In the long run such an effort would require developing a comprehensive accounting framework for exhaustible minerals and renewable resources along with a set of nonmarket service and investment accounts. Substantial incremental resources would be required both within BEA to develop the accounts and outside BEA to provide the data.
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Need for Interagency Cooperation on Data Collection As noted in Chapters 3 and 4, much valuable information necessary for integrated environmental and economic accounts is already collected by the federal government and is potentially available to BEA. Extensive information is available in federal agencies on physical stocks and values of economically important natural resources, including subsoil minerals, energy, timber, commercial fisheries, and land.
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Useful data collection efforts that might be found expendable by one agency operating under tight budgetary constraints might be continued under costsharing agreements among several agencies. Existing statistical coordinating and advisory bodies within the federal government, including the Office of Management and Budget, could play a useful role in coordinating data collection efforts useful for both environmental accounting and other important federal purposes.
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Data and Research Needs with Respect to Exhaustible Resources BEA's preliminary implementation of its environmental accounts resulted in estimates of accounts for subsoil minerals, including fuels, metals, and nonmetallic minerals. In its 1994 article on minerals accounting (1994b)
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Value of associated capital. Mineral reserves usually consist of mineral assets and associated physical capital constructed to exploit the reserves.
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In improving BEA's accounts for subsoil assets, further analysis is needed to assess different valuation techniques. Preliminary assessments indicate that the standard Hotelling valuation approach overestimates resource values, and this finding should be incorporated in valuation approaches.
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Similarly, data sources, though of varying accuracy, are available from which to estimate the market value of developed land. Accounting for renewable resources such as forests encounters some of the same information issues and data gaps as does accounting for exhaustible resources.
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Measurement of service flows. The main challenge for research and data collection arises from the need in a comprehensive set of environmental accounts to estimate the environmental service flows provided by forests, freshwater, and other renewable resources.
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The development of accounts for changes in air and water quantity was postponed to Phase III of the IEESA effort, as was accounting for uncultivated biological resources such as wild fish and undeveloped land. Though ambient environmental quality represents an important dimension of current consumption and from a conceptual point of view belongs within an expanded set of environmental accounts, data needed to implement this approach are currently unavailable except in a small number of cases.
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Unless EPA and other agencies undertake or underwrite a substantial effort to improve the data in this area, the lack of comprehensive information on the value of nonmarketed environmental goods and services is likely to constrain the development of a full set of environmental accounts. The nub of the difficulty in constructing a set of environmentally adjusted national accounts lies in estimating the consumption services of environmental assets.
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5.10 The panel recommends regular periodic accounting in the natural-resource, environmental, and other augmented accounts. The accounts for subsoil assets and forests could be developed, calculated, and reported on an annual basis.
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