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CALCAS SWOT
Analysis framework
Basic information: [1 page]
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Name: Green Accounting
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Acronym: GA
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Author of SWOT evaluation (name, organisation, address, e-mail):
Harish Jeswani and Adisa Azapagic, School of Chemical Engineering and
Analytical Science (SCEAS), The University of Manchester, PO Box 88,
Sackville Street, Manchester, M60 1QD, UK;
[email protected] & [email protected]

Level of analysis: Macro
micro (e.g. household, company, product level),
meso (e.g. sectors, material flow systems, branches),
macro (e.g. countries, economies).
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Assessed aspects of sustainability: economic

Main purpose of the assessment: To incorporates environmental assets and their
source and sink functions into national accounts.
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Description of the methodology: Green accounting incorporates environmental
assets and their source and sink functions into national and corporate
accounts. It is the popular term for environmental and natural resource
accounting.
Detailed description [1-3 pages]
Green accounting is based on the concept that a proper assessment of a country’s
income and wealth needs to account for the contributions of activities made by all
sectors of the economy and their impact on resource depletion and degradation (UN,
2003). Green accounting addresses the shortcoming of traditional national
accounting, known as the System of National Accounts (SNA) by factoring
environmental costs into the financial results of operations. It is argued that traditional
SNA ignores the value of resources (on and in the ground) as well as the value of
environmental degradation (Bartelmus, et al., 2008). Therefore, it gives a false
impression of income and wealth and often leads policy-makers to ignore or destroy
the environment to further economic development. Incorporating the real value of
natural resources as well as their depletion and degradation allows for better
allocation of priorities, thereby helping to address the causes of current major
environmental problems including the over-exploitation of natural resources such as
forests.
It is a controversial practice however, since depletion is already factored into
accounting for the extraction industries and the accounting for externalities may be
arbitrary. Environmentalists criticise the use of market values for ‘pricing the
priceless’ categories of nature. In their view, assessing environmental assets and
their services in monetary terms ‘commodifies’ nature, whose intrinsic value should
not be subjected to market preferences. They prefer measuring environmental
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impacts by physical indicators and aggregating material flows through the economy
(‘throughput’) in material flow accounts. However, weighting nature by the weight of
materials and pollutants assigns doubtful significance (in tonnes) to diverse
environmental impacts such as the depletion of a timber tract, emission of a toxic
pollutant or the extinction of a cherished species.
Green GDP (or sometimes called Green NDP, or Eco-Domestic Product) is the most
popular adjusted macroeconomic aggregate under green accounting framework. It is
actually conventional GDP minus all form of capital depreciations (man-made,
natural, or human capital). It accounts only for natural capital consumption, ignoring
the depreciation of produced ('fixed') capital.
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Strength: [1 page]
a) scope of assessment (what is being assessed)
b) methodology (robustness, validity & reliability)
 A particular strength of green accounting is the measurement of
environmental cost caused by economic agents of households and
enterprises.
 Green accounting and accounting analysis can assess the economic and
ecological efficiency of different environmental protection measures by
governmental and non-governmental organizations.
 Green GDP has been associated with sustainable development. It could
predict the impact of natural resources depletion on a country’s long-run
consumption possibilities by checking whether the trend in Green GDP is
upward or downward.
Weaknesses/Limitations: [1 page]
a) scope of assessment
b) methodology
 The Green GDP faces the usual problems when addressing environmental
damage in monetary terms.
 As no internationally recognised standards for calculating ‘Green GDP’ exists,
the comparability to other indices is low. The SEEA Handbook (UN 2003)
concludes that “there is no consensus on how ‘green GDP’ could be
calculated and, in fact, still less consensus on whether it should be attempted
at all”.
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Opportunities for broadening
approaches: [1 page]
and
deepening
life
cycle
Benefits for social or economic development, scientific progress, primarily in relation to the
policies as described in chapter 2.
 Apart from answering the question whether the economy has performed
sustainably during one or more accounting periods, green accounting
indicators (green GDP) can be employed in policy formulation and evaluation.
 Green GDP calculations can contribute to raise awareness for sustainability
concerns among national governments / policy makers, who tend to
concentrate on their countries’ fast economic development.
Threats for broadening and deepening life cycle approaches:
[1 page]
Risks caused by or for social or economic development, scientific progress, polices as described
in chapter 2.
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 Literature/Internet links:
UN (2003), Handbook of National Accounting: Integrated Environmental and
Economic
Accounting
2003.
United
Nations.
http://millenniumindicators.un.org/unsd/envaccounting/seea2003.pdf
Bartelmus, P.,
Richmond, A. and Kumar, S. (2008) Green accounting, In:
Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.:
Environmental Information Coalition, National Council for Science and the
Environment. http://www.eoearth.org/article/Green_accounting
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