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On monetary valuation of environmental degradation
in the framework of the System of EnvironmentalEconomic Accounting
Discussion paper based on a presentation at the Workshop on “Rationale
and Methods for Measuring Environmental Impact”
18-19 September 2006, New Delhi (India)
Karl Schoer
Wiesbaden, June 2007
Federal Statistical Office Germany
Environmental-Economic Accounting (EEA)
2
On monetary valuation of environmental degradation in the
framework of the System of Environmental-Economic Accounting
1. Introduction
Political measures for improving the environmental performance of a society usually are directed
at influencing the behaviour of the economic protagonists. As the system of environmental
economic accounting describes the interaction between the economy and the environment it can
provide an ideal data base for the formulation of cost efficient environmental measures.
The two principal options for measuring environmental degradation in the framework of the
System of Environmental-Economic Accounting in monetary terms - i.e. the damage cost and the
maintenance cost approach - are discussed in this paper with reference to their usefulness for
the political decision making process.
2. Measuring the sustainability gap
The data of the Environmental-Economic Accounting (EEA) expands the economic accounting
system (SNA) by a description of important interactions with the environment. The SNA is the
world wide accepted standard for describing the economic process. It is confined to describing
the interactions within the economic system which are almost described exclusively in monetary
terms. The EEA extends the economic accounts by a description of the interrelationships of the
economic and the environmental system. The interaction can be described basically only in
physical terms, by including the non-produced environmental assets (natural assets) as an
additional production factor into the system. The natural assets on the one hand provide inputs
for the economic system (raw materials, environmental services). On the other hand the
utilization of the natural assets causes pressures to the state of the environment which finally
may lead to a diminishing of natural assets. Those changes in the state of the environment can
have impacts on human systems which directly may influence human welfare (e.g. human health,
availability of recreational and general life support functions) as well as the production system.
The EEA-satellite system uses in principle the same concepts, definitions and classifications as
the SNA. One central classification of the accounting system is detailed break down by economic
activities (homogeneous branches of production or industries and final use activities). The
conceptual coherence guarantees that the data of the two systems can be combined with each
other, i.e. they form an integrated database.
As the links between the economy and the environment originally are of physical nature the
primary approach has to be a hybrid monetary/physical description of the interaction. However
the physical data on environmental stocks and flows in principal can also be converted by
valuation into monetary terms. Those monetary variables could be utilized for adjusting the
conventional macroeconomic aggregates of the SNA into environmentally adjusted figures.
An important contribution of the expanded System of National Accounts for measuring
sustainable development is attributable to the general idea that the economic income, as it is
calculated in the traditional reporting system of the National Accounts (SNA), has to be
transformed into a “sustainable” or - less ambitious - into an environmentally adjusted income.
The “economic income” is calculated – at the national level as well as at the level of enterpriseby taking into account the current flows of expenditures and returns as well as the change in the
economic assets (produced assets) in the period under consideration (depreciation). In addition
to that the concept of environmentally adjusted income (ecological sustainability) includes also
the change in the natural assets. For that purpose the asset boundary of the SNA as it is used for
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the determination of income has to be extended accordingly. If there is a decrease in the stock of
the natural assets the environmentally adjusted income is lower than the economic income. That
difference can be interpreted as the ecological sustainability gap. The sustainability gap
indicates in a summarized way and in monetary terms to what extent future generations are
burdened by current economic activities.
The change in environmental assets can be divided into two aspects, depletion and degradation.
Depletion refers to quantitative change (e.g. diminishing of subsoil-resources) and degradation
indicates a qualitative change of environmental assets (e.g. of eco-systems or of the climate
system).
For depletion of natural resources the fundamental accounting relationship between stocks and
flows (opening stocks minus flows is equal to the closing stock) holds as it is known from the
conventional economic accounts. The monetary valuation of the physical stocks appears to be
comparatively easy, as for raw material usually market prices are available, though some details
are still under discussion. Such the value of the extracted resources, the so-called resource rent,
can be calculated as a difference between the market value of the raw material and the extraction
costs. For countries which are well stocked in raw materials the calculation of depletion of the
stock of subsoil resources can be extremely important under the view of intergenerational justice.
Those figures are important in order to judge whether the depletion of national subsoil assets
has lead to diminishing national wealth by consuming the resource rent or whether the depletion
has been compensated by increasing the stock of other assets, like a growth of produced or
financial assets, improving the ability for utilizing substitutes or using the remaining reserves
more efficient. For countries which are rather poor in subsoil resources those calculations are of
less importance compared to the high political relevance of degradation of eco-systems.
3. Monetary valuation of degradation
3.1 The approach of the SEEA 2003
Compared to depletion, for degradation the calculation of depreciation in monetary terms is still
a highly controversial issue.
The international Handbook on environmental-economic accounting (SEEA 2003)1 does not
present a clear recommendation in that area. In the handbook two principal alternatives– the
maintenance and the damage cost approach – are presented and advantages and shortcomings
of both are discussed. The damage cost approach tries to valuate directly or indirectly the
damage that is imposed by economic activities to the environmental assets. The maintenance
cost approach is aimed at estimating the hypothetical cost for avoiding pressures on the
environment.
The discussions during the process of developing the SEEA 2003 showed that mainly the
European statistical offices favoured the maintenance cost approach whereas the World Bank
and especially some developing countries preferred the damage cost approach. The different
kinds of attitude are mainly influenced by varying political requirements as well as by differing
levels in the development of the statistical systems. In developed countries usually a clear set of
goals for environmental policy is formulated and the issue is rather to develop the most efficient
political instruments for reaching those goals. Against that in many developing countries the
1
United Nations/European Commission/International Monetary Fund/Organisation for Economic Co-Operation and
Development/World Bank: Handbook of Integrated Environmental and Economic Accounting (SEEA) 2003, Final Draft
prior to official editing, Studies in methods, Series F, No.61, Rev.1, Final Draft prior to official editing. (2003), chapters
9 and 10.
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challenge is rather to convince the protagonists that there is a need for environmental action. For
that purpose quantifying the environmental damage in one monetary figure could be a rather
useful instrument.
For the discussion of the two alternatives technical as well as political criterions are of
importance: Firstly: Is it possible to calculate monetary values with a sufficient degree of
coverage, accuracy and consistency and secondly: To what extent are those data useful for the
political decision process?
3.2 Damage cost approach for valuation of degradation
In the SEEA 2003 a number of valuation techniques are presented for estimating degradation of
environmental assets in monetary terms. After accomplishing valuation the next logical step
would be to adjust the conventional macro-economic aggregates accordingly. However due to the
tremendous problems to obtain estimates that fit to the accounting requirements, the SEEA 2003
only proposes an adjustment for health damages. The health damages refer to the effects caused
by ambient concentration of harmful substances in the air. The valuation of health damages is a
type of indirect valuation of degradation, which is related to the impact of environmental
degradation on human systems. What is measured by that approach is not the diminishing of an
environmental asset itself but a specific type of human welfare loss caused by a decrease of
environmental services.
The economic accounts provide a systematic and complete description of the economic
interactions for a given territory and a given period of time. Moreover as far as the data are
provided by the official statistical system the results have to comply with certain quality
standards. Those requirements in principal should also be valid if the economic accounting
system is expanded to the environmental-economic interactions. In the light of those
requirements the techniques suggested for damage cost valuation as well as the approaches for
the adjustment of the macro-economic aggregates face a number of problems regarding
coverage, quality and conceptual consistency which will be discussed in the following.
Physical description of degradation: For calculating meaningful environmentally adjusted macroeconomic aggregates it is a precondition to include the degradation of at least the important
components of the environmental assets. According to the asset classification of the SEEA 2003
the environmental assets comprise, beside the subsoil resources, land, surface waters,
terrestrial and aquatic eco-systems including the atmosphere. As a starting point for each
component a detailed statistical description is required that is appropriate for measuring the
change of the quality in physical terms. However a complete statistical description of the
components of the environmental assets in physical terms has not been put into practice in a
satisfying manner so far. For certain components, like eco-systems, it is rather difficult to
establish a description according to accounting principles at a national level, as suitable basic
data and even measuring concepts are still lacking in many cases. This shortcoming is somehow
reflected in the fact that the SEEA 2003 recommends only a rather partial adjustment for health
damages.
A direct monetary valuation of the degradation of individual components of the environmental
assets is subject to tremendous uncertainties. Even if sufficiently accurate information on the
degradation of the components would be available in physical units, usually no market prices are
available for a monetary valuation of the physical changes. For bridging that gap shadow prices
are used, like estimates for the willingness to pay or similar concepts for a direct valuation of the
changes.
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Those partial analytical approaches are tried and tested and are suitable methods for
determining population’s monetary valuation of a specific type of environmental degradation in a
given local context. But a valuation on a national level would have to cover at least all
quantitatively relevant components of the natural assets. That would require comprehensive
information on the benefit functions of individuals which is not feasible in practice. Beyond that,
as long term effects of current economic activities are concerned, changes in the benefits of
future generations have to be estimated, which adds considerable uncertainties to the valuation
on basis of the willingness to pay of the present generation.
There is not only the issue of inaccuracy, but also a general limitation for monetary valuation that
applies to a number of cases. Especially the multi-functionality of the global climate and of the
general biodiversity is a collective good for which there is no substitute, i.e. it has a categorical
character. Therefore in principle it cannot be assigned an exchange value and consequently
cannot be given a market price at all.
The indirect valuation approach of measuring health damages, as it is suggested in the SEEA
refers only to a selected aspect of degradation. Other important aspects like the politically
extremely important issue of climate change as well as the degradation of eco-systems (e.g.
decline in biodiversity) remain excluded. One advantage of that indirect approach is that it can at
least partially be based on real cost information, like treatment costs or opportunity cost for lost
working days. But also those estimates are subject to considerable uncertainties, as for example
the quantitative relationship between a given level of concentration of air pollutants on human
health in a certain locality can only be estimated with a model (e.g. dose response function).
Link between damage costs and economic activities: In the traditional economic accounts a clear
relationship can be established between the production activities and the change of the
produced assets. In principle this relationship is measured by the flows capital formation and
depreciation. For adjusting the macro-economic aggregates by environmental depreciation a
coherent link has to be established between the economic activities as the driving forces and the
change of the environmental assets. However with regard to degradation establishing that link
seems to be rather difficult for two reasons:
-
complex cause-effect relationships between environmental pressures and the
degradation of environmental assets and
-
cross-boundary and cross-time flows of environmental pressures.
The link between production activities and final use activities and the resulting pressures on the
environment can be established very well and that relationship is the very basis for calculating
maintenance costs (see below). Against that, the next step in the chain the cause-effect
relationship between the pressures on the environment and the degradation of environmental
assets is usually rather complex. An example for that is the link between greenhouse gas
emissions and the global and even more the local climate, which can only be estimated with
extremely sophisticated models with a very limited degree of accuracy. The relationship between
certain environmental pressures and the change in the quality of eco-systems may be even more
difficult.
Many environmental pressures are characterized by a considerable proportion of cross-boundary
and cross-time flows. That is, the environmental damage does not necessarily take place in the
same accounting period or on the same territory the causing environmental pressure is
originating from. Hence the demarcation of the changes by degradation in the national
environmental asset stock in a given period on the one hand and the demarcation of the
economic activities of that economy on the other hand do not fit conceptually.
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The results of the damage cost approach for the measurement of the environmental damage
correspond to the perspective of allocation of primary income to the resident units of a country
(national income), i.e. it indicates the environmental effects on the total assets and subsequently
on the income and the savings of a country. Insofar those damage cost figures are suitable for
adjusting economic accounting aggregates like Gross and Net National Product as well as the
savings. However it has to be noted that the measurement of the actual damage, as is suggested
in the SEEA 2003, does not include the future damages attributable to the economic pressures of
the reference period, i.e. cross-time effects are not regarded. By taking into account only the
current damages on the environmental assets violates the principal rules of the accounting
system. Depending on the type of pressures cross-time effects can be highly relevant. That is
obvious in the case of greenhouse gases, but it may also be of importance for many other
pressures on eco-systems. However, to include those flows with a sufficient degree of accuracy
will be rather difficult if not impossible in practice, as the measurement of future (and past)
degradation effects is necessarily highly speculative. Insofar, the damage cost measured for the
reference period can only be used for adjusting economic accounting aggregates for those types
of degradation for which cross-time flows are quantitatively not relevant.
The demarcation of the economic production and final use activities follows the perspective of
generation of primary income by the resident units (domestic income). The environmental
pressures caused by domestic economic activities may lead to a change of the domestic
environmental assets as well as of the environmental assets of the rest of the world. So the
change of environmental assets that fits to the income generation perspective differs from the
allocation perspective by the net cross-boundary flows of damages. Moreover not only the
current cross-boundary flows but also the cross-time cross-boundary flows have to be regarded.
It can be concluded that the damage costs, even if they would take into account the cross-time
flows, are not a suitable yardstick for directly adjusting the conventional Gross or Net Domestic
Product.
Cross-boundary flows related to the degradation of environmental assets can be rather
significant, depending on the type of environmental pressure and the size and the geographical
location of a country. A very clear example is again green house gas, with a world wide effect on
growing greenhouse gas concentration, however with rather different local impacts which occur
with a time lag. Cross-boundary flows are also frequent for other emissions into air and water.
In the conventional economic accounts the generation and the allocation perspective differ only
by the cross-boundary flows of primary income in the reference period, which can be quantified
on basis of economic statistics.
Against that quantifying the environmental cross-boundary flows of damages is an extremely
difficult task. The GARP-project2 is the only example so far which tried to estimate those flows for
a number of specific air emissions (pressures) for European countries. The chain between
economic activities and their environmental pressures in physical units and the change of the
quality of environmental assets in physical and monetary units has to be specified and for all
these flows the cross-boundary flows have to be identified separately. As already mentioned, the
link between the driving forces (production and final use activities) and the pressures on the
environment are well known. However, even if the original physical pressure flows can be
assigned to the receiving countries by a model, the next step of estimating the related crossboundary effect of degradation of environmental assets is considerably more difficult, due to the
usually rather complex cause-effect relationship between the pressures and the degradation of
environmental assets. Moreover not only the current cross-boundary, but as already mentioned,
also the cross-time cross-boundary effects have to be quantified. Therefore it is rather unlikely
2
See Chapter 9 of SEEA
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that the gap between the two accounting perspectives which is related to environmental
degradation can be bridged in practice.
That leads to the conclusion that an accounting relationship cannot be established in practice
between figures on the change of environmental assets obtained by the damage cost approach
and the causing economic activities. That aspect will especially be of relevance in the context of
political application of the data, which will be discussed below.
3.3 The maintenance cost approach and greened economy modelling
The SEEA 2003 describes different types of maintenance costs approaches. The following
description concentrates on so called green economy modelling which is based on the
maintenance cost approach.
The maintenance cost approach for measuring environmental degradation refers to the
environmental pressures, like air, water and waste emissions as well as structural pressures like
certain types and practices of the use of land and eco-systems, which are measured in physical
terms. The approach estimates the hypothetical costs for reducing the pressures. The
demarcation of the costs corresponds to that of the economic production and final use activities
(perspective of income generation). Insofar in principle a clear relationship between the
economic activities and the maintenance costs can be established. The hypothetical
maintenance cost can be interpreted as a measure for the depreciation of environmental assets.
If at least all important pressures are included into the calculation the sum of the maintenance
costs represents the total depreciation on environmental asset that was caused by the domestic
economy in a given period.
The hybrid (physical/monetary) maintenance cost approach has four important elements:
-
quantitative goals for the reduction of the individual pressures in physical terms have to
be fixed
-
the technical maintenance costs have to be estimated
-
the indirect economic maintenance costs related to non-marginal technical changes (side
effects) have to be estimated
-
calculation of a greened economy Gross Domestic Product
The amount of maintenance costs for a certain pressure depends on the degree of reduction to
be obtained. Therefore quantitative action goals in physical terms (e.g. reduction of greenhouse
gas emissions by a certain amount) are a necessary precondition for calculating maintenance
costs.
Usually the respective reduction goal for a pressure cannot be determined by a pure scientific
approach. Therefore social preferences have to be used as an approximation. Greenhouse gases
may be a good example on how a process can look like for fixing such standards. For many
countries national reduction goals were fixed. Starting point were results from scientific climate
models which demonstrated that the current and the projected world wide emission of
greenhouse gases will increase the greenhouse gas concentration in the atmosphere and
subsequently lead to a considerable change of the world climate. The climate change is expected
to have serious impacts on the economic conditions and the human living conditions. The world
community agreed in the Kyoto protocol to restrict further greenhouse gas emissions on the basis
of the available and still incomplete information and without being able to quantify exactly the
expected damages even in physical units. The world wide target was allocated to national
standards for the development of greenhouse gas emissions. For other environmental domains
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similar processes took place for fixing action goals at the national level. For example in the
German national strategy for sustainable development quantitative action goals were agreed for
improving the efficiency of the use of energy and other raw materials as well as for reducing the
amount of other air emissions and the use of area for settlement and traffic and to change
agricultural practices in order to protect the quality of eco-systems and biodiversity.
For calculating the hypothetical technical maintenance costs for a given pressure and a given
reduction standard available information on costs can be utilized. It can be rather difficult and
costly to obtain exact cost information and in practice assumptions have to be used to bridge
lacking information.
The technical costs have to be supplemented by indirect maintenance costs, because it is not
sufficient to estimate the abatement costs only as direct technical costs in a static partial model.
Usually the technical changes in the production processes will not only have a marginal effect on
the total system. For example, the replacement of domestic coal by imported natural gas may be
a measure for reducing carbon-dioxide emissions for a given amount of energy consumption.
However such a measure will change the input structures, price relationships, demand structures
and income in the economy considerably. Those side effects cannot be neglected for the
calculation of total maintenance costs. Those indirect costs can only be estimated properly by
utilizing environmental-economic modelling approaches. The econometric models should be
based on a detailed breakdown by branches in order to make full use of the detailed data of the
expanded accounting system. Those modelling calculations have to be done by scientific
institutes and not by the statistical offices. In Germany there are rich experiences with those
models, which refer predominantly to forecasting and modelling the effects of certain political
measures for reducing environmental pressures.
Those models can be used for calculating a so called greened economy GDP. In a first step a
scenario on the development of the economy and the environmental pressures is established on
condition that no measures are taken (business-as-usual scenario). In a second step an economy
can be simulated that complies with the sustainability standards of the society. Such a system
condition could be obtained by implementing an appropriate bundle of cost-efficient political
measures for reducing the pressures on the environment. The difference between the paths of
GDP obtained from the basic scenario and from the measurement scenario indicates the
sustainability gap of the economy. So in that approach it is calculated not an environmentally
adjusted GDP that takes account of the environmental damages, but an adjusted economy that
achieves the environmental goals of the society.
4. Policy use
Supporting the political process with facts is the main purpose for compiling accounting data.
Therefore it should be investigated to what extend the different accounting approaches can
contribute to the political process. A policy approach which is based on empirical information
can broadly be described as a policy cycle with four major steps which are shown in the figure
below. The main stages are problem description, analysis, measures and performance control.
Data from Environmental-Economic Accounting are needed at all stages of the process.
Problem description means that the priority areas for political action have to be defined and
communicated and goal for action have to be developed and agreed. For that purpose rather
simple statistical indicators are needed. Highly aggregated physical or monetary indicators are
the most suitable instrument, as they can reduce the complex reality to a limited number of
figures.
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As far as environmental or sustainable development policy is concerned physical indicator
systems can serve as a comparatively simple communication tool mainly directed to the general
public and the media. The indicators are used for describing important problems under n
environmental or sustainability perspective and, depending on the process of developing the
indicator set, may more or less reflect the political preferences of the society. The sustainability
gap - i.e. the difference between the actual situation of the society and a state, which is desired
under a sustainability perspective - can be measured by comparing the observed values with the
target values for each indicator. Indicator sets are used in many countries as a statistical basis
for a strategy on sustainable development. The indicators can either be taken from basic
statistical sources or they can be derived from the accounting data base by aggregation.
The SEEA offers concepts for a description of the environmental assets in physical term as well as
for physical flow indicators on environmental pressures. Physical indicators on the stock of
environmental assets can be very useful for describing the state of the environment. A systematic
physical description which is based on accounting tools – i.e. for eco-systems or land - can be
very useful and sufficient for developing environmental quality goals. Those quality goals have to
be translated into action goals. Physical pressure indicators are the basis for formulating action
goals. The SEEA 2003 provides various physical indicators in the chapter physical flow accounts
as well as in the chapters for specific resource accounts that can be used for that purpose.
Figure:
The policy cycle
Problem description
Analysis
Measures
Performance control
As was discussed in the previous chapter the system of Environmental-Economic Accounting
offers different types of monetary indicators at the macro-level. On condition that accurate and
conceptually sound figures could be produced the results on damage costs as well as on
maintenance cost based figures on the greened economy GDP could contribute a powerful
problem description by expressing the environmental problem in one single figure. They could
quantify in a more or less comprehensive manner the environmental income or welfare losses
that are not recorded in the conventional accounts. As those figures quantify the environmental
problem of a society and relate it to the performance of the economy they could be very useful for
convincing the protagonist of the urgency of environmental political action. The figures can be
used to form environmental quality goals in monetary terms. A differentiation by type of
environmental assets or environmental problem may provide a basis for deciding on priorities.
However that fully holds for the description of depletion of environmental assets. But if it comes
to degradation the scope appears to be more limited. As was shown in the previous chapter the
damage cost approach has a number of shortcomings that refer to coverage, data quality and
consistency. Against that the approach of the greened economy GDP has clear advantages as it
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avoids the shortcomings that are related to consistency and the scope can be much more
comprehensive, as especially the climate problem can be covered. However calculations on
greened economy GDP are modelling results which highly depend on the type of the modelling
approach and on assumptions
Analysis is required at different levels for understanding the reasons of the change of the
environmental indicators. For such an analysis highly aggregated indicators alone are generally
not sufficient. An analysis of the underlying mechanisms and reasons for change of the indicator
values requires detailed disaggregated information which especially covers the interaction
between the economic driving forces and the environmental pressures, as far as pressure
indicators are concerned.
The SEEA modules on physical and hybrid flow accounts provide an approach for linking
environmental pressures and economic driving forces (economic production and final use
activities). Especially the material flows between the economy and the environment are provided
in a detailed breakdown by economic activities according to the concepts of the National
Accounts (so called NAMEA-type breakdown). Those physical data in combination with respective
data from the National Accounts can be used in descriptive analysis as well as in econometric
models.
Against that the above described data on damage cost cannot contribute to the analysis of the
reasons of the change, as they are not linked to the economic driving forces.
Environmental policy measures are usually directed at achieving the political action goals. That
means in order to reduce environmental pressures the behaviour of the economic protagonists
has to be influenced accordingly. For that purpose information is required on who is responsibly
to what extent for the economic pressure, what will be the effect of a certain measure for
achieving the goal and what is the opportunity cost related to other goals. Decisions on
measures aiming at the improvement of one indicator at the same time have to consider the
effects that may occur on the other relevant goals of the overall political strategy. Econometric
modelling scenarios are the most suitable tools for those considerations. The hybrid integrated
accounting data base which combines the monetary data of the economic accounting system
with data on physical pressures of the environmental-economic accounting system is the ideal
data base for those analytical tools.
For selected problems as negative effects on health monetary data on damage costs could play a
role at the macro-economic level for comparing the cost of the damage with the respective
maintenance costs (cost-benefit analysis).
The physical and monetary indicators, especially if they are combined with quantitative goals,
serve as an instrument for general performance control of political measures. A reduction of the
gap between the observed and the target values indicates improvement of sustainable score
keeping for individual indicators. Modelling can provide a more complex approach of score
keeping by comparing the “business-as-usual Gross Domestic Product” (GDP) to a “sustainable
GDP”3. This can be achieved by comparing a modelling scenario for the economic-socialenvironmental system without measures (business-as-usual) with a scenario that simulates the
effects of a bundle of measures which are orientated towards respecting the sustainability goals
of the society. Date on damage cost are also suitable for the purpose of performance control.
3
See: Meyer, B.: Research-Statistical-Policy Cooperation in Germany: Modelling with Pantha Rei, Report on an EU
Research Project. In: European Commission (publisher): Proceedings from a Workshop, Luxembourg, 28-29 September
1998. and Radermacher, W.: “Green Stamp” Report on an EU Research Project. In: European Commission (publisher):
Proceedings from a Workshop, Luxembourg, 28-29 September 1998
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5. Summary and conclusion
The data of the Environmental-Economic Accounting (EEA) expands the economic accounting
system (SNA) by a description of important interactions with the environment.
The links between the economy and the environment originally are of physical nature. Therefore
the primary approach of Environmental-Economic Accounting has to be a hybrid
monetary/physical description of the interaction.
However the physical data on environmental stocks and flows in principal can also be converted
additionally by valuation into monetary terms. Those monetary variables could be utilized for
adjusting the conventional macroeconomic aggregates of the SNA indo environmentally adjusted
figures. For that purpose the asset boundary of the SNA as it is used for the determination of
income has to be extended accordingly. If there is a decrease in the stock of the natural assets
the environmentally adjusted income is lower than the economic income. The change in
environmental assets can be divided into two aspects, depletion and degradation. Depletion
refers to quantitative change (e.g. diminishing of subsoil-resources) and degradation indicates a
qualitative change (e.g. of eco-systems or of the climate system) of environmental assets.
Compared to depletion, for degradation the calculation of depreciation in monetary terms is still
a highly controversial issue. The international Handbook on environmental-economic accounting
(SEEA 2003) does not present a clear recommendation in that area. In the handbook two
principal alternatives– the maintenance and the damage cost approach – are presented and
advantages and shortcomings of both are discussed.
The techniques suggested for damage cost valuation as well as the approaches for the
adjustment of the macro-economic aggregates face a number of problems regarding coverage
and quality and conceptual consistency which will are discussed in this paper. The maintenance
cost approach measures the hypothetical costs for reducing the pressures. In order to cover not
only the technical maintenance cost but also indirect costs environmental-economic modelling
approaches have to be applied. Those models can be used for calculating a so called greened
economy GDP. Compared to the damage cost approach the concept of greened economy GDP has
clear advantages as it avoids the shortcomings that are related to consistency, the scope can be
much more comprehensive, as especially the climate problem can be covered.
The data of the EEA are mainly used as a base for a policy approach that is directed at integrating
environmental concerns into the sector policies, or - more broadly - for a policy towards
sustainable development (SD). The main purpose of German EEA data is their utilisation for
analysis in the context of scientific policy advising. The main steps of a policy approach which is
based on empirical information can broadly be described as a policy cycle. The policy cycle
consists of the following main steps: problem description, analysis, measures and performance
control. EEA data are needed in all stages of the process. However monetary data can only
support the problem description and the performance control, whereas the hybrid data base
serves all stages of the cycle.