SNA - does not provide guidance for the collection of natural resource and environmental statistics -The SNA consists of five sub-systems: gross domestic product accounting, inputoutput accounting, flow of funds accounting, the balance of payments accounting and balance accounting -The SNA is built for a whole economy: at national level; at region level of province SEEA - brings together economic and environmental information in a common framework to measure the contribution of the environment to the economy and the impact of the economy on the environment It provides policy-makers with indicators and descriptive statistics to monitor these interactions as well as a database for strategic planning and policy analysis to identify more sustainable paths of development - gross domestic product accounting, inputoutput accounting and balance accounting comprise the basis of SEEAwhile SEEA include four components: Natural resource asset accounts, Pollutant and material (energy and resource) flow accounts, Environmental protection and resource management expenditure accounts, Environmentally-adjusted macroeconomic aggregates + The input-output table is needed to fully describe the relationship between economic activities and resource depletion and pollutant emissions; + the framework of a balanced accounting is needed to fully account for natural assets owned by a country and its significance to sustainable development + The framework of gross domestic product accounts is needed to systemically measure impacts on the environment by economic activities, scientifically measure outputs of economic activities and calculate environmentally adjusted economic products (namely green GDP) - SEEA should be implemented not only at national level but also at regional level - necessary to have a solid basis for natural resource and environmental statistics in order to incorporate environmental criteria into the SNA + natural resource and environmental statistics can provide physical data about resource and environmental inventories and changes + it can confirm the prices of resource and environmental elements Basic Concepts Natural Assets - three functions to the economic system: a) resource functions: providing basic materials to the economic system; b) sink functions: absorbing emitted wastes from the economic system, and; c) ecological service functions: providing landscapes and the habitat for all living beings including mankind - Natural assets can be grouped into three categories according to linkages with the SNA: + cultivated asset: all kinds of cultivated plant and animal resources (Economic asset) + non-cultivated assets: land, forest, water, and subsoil mineral (Economic asset) + environmental elements excluded from economic assets: Ecological services or ecosystem functions - natural assets may still be grouped into cultivated assets and non-cultivated assets to be compatible with SNA Economic uses of natural assets - to measure the contribution that the environment and specifically, natural assets, makes to the economic system -Economic uses of natural assets can be defined from two different perspectives: + from the perspective of natural assets, it refers to those natural assets that are inputs to and consumed in the economic process during an accounting period + from the perspective of economic processes, it refers to those natural assets inputs consumed in the economic process - a separate accounting item for the changes in volume of natural assets due to economic uses is required to account for the natural assets consumed in the economic process (In traditional SNA, economic uses of natural assets either are included in “other changes in volume of assets” or aren’t accounted for; in either case, they natural assets are not regarded as inputs in the economic process.) * Resource depletion value, environmental degradation value, resource management and environmental protection expenditure - The environmental cost associated with the use of natural assets in economic production is the monetary value of natural assets consumed as inputs to economic activities during an accounting period -an important goal of implementing SEEA is to estimate and incorporate the monetary values of natural assets consumed in the economic process, measure the environmental cost of economic activities, and adjust the traditional macro-economic aggregates such as GDP for both natural resource depreciation/depletion and environmental costs -environmental cost and its measurement are important issues in SEEA - the adjustment of macro aggregates, like the GDP, can’t be resolved unless there is general acceptance of both the definition and valuation methods for environmental costs and natural asset depreciation - the concept of environmental costing can take several forms: resource depletion value, environmental degradation value, or resource management and environmental protection expenditures - Resource depletion (or natural capital depreciation) value is the cost of natural resources used and consumed in the economic process, namely the economic value of deductions of natural resources stocks, emphasizing particularly quantitative uses of natural assets - Environmental degradation value is the cost of using environmental service functions in the economic process, namely the values of deterioration of environment as a result of their economic uses, emphasizing particularly on qualitative uses of natural assets - Resource management and environmental - This kind of cost has been accounted for in SNA, but it should be separated from SNA as an independent part protection expenditures are incurred to use resources in a sustainable manner and prevent environment from degradation, namely the cost paid by the economic system for environmental protection - The monetary valuation of resource management and environmental protection expenditure is based on actually incurred expenses, while resource depletion value and environmental degradation value are measured on imputed valuation (e.g economic or resource rent calculations for resource depletion values) by estimating environmental impacts without being protected - there are huge empirical measurement difficulties in terms of how to value environmental costs - environmental costs can be assessed in terms of actual expenditures by firms in protecting natural assets and environmental services or using clean up costs of environmental degradation as a proxy for economic value - alternative methods of valuation including shadow pricing or proxy valuation methods as well as resource or economic rent calculations for renewable and nonrenewable natural asset depletion EDP: Environmentally - adjusted domestic product Adjusted environmentally domestic product (EDP for short) or green GDP is obtained by adjusting original GDP after introducing environmental cost into production accounting in SNA as economic production cost Although EDP is also an economic aggregate, it takes economic uses of natural assets into account - NDP is an adjusted GDP for man-made asset (fixed assets) depreciation - eaNDP is not a “gross value” but a “net value”, because it represents a further adjustment to NDP In practice, GDP is used more often than NDP It should be clear that when the term “green GDP” (or EDP) is used, the term refers to an environmentally adjusted NDP which resulted from a man-made-capital-depreciation-adjusted GDP First, theoretically speaking, the indicator being adjusted is not gross domestic product (GDP) but net domestic product (NDP), and “adjusted environmentally domestic product-EDP” should be green NDP but not green GDP Considering general acceptation of GDP in practice, the better choice is to define EDP on the basis of “gross”, namely measuring green GDP Secondly, measurements of EDP are made at different levels due to the different measurement levels of environmental cost “Depletion-adjusted domestic product” is obtained by taking out resource depletion value; “defensive adjusted domestic product” is obtained by taking out resource management and environmental protection expenditure; “degradation- adjusted domestic product” is obtained by taking out environmental degradation value Thirdly, EDP can be measured and reported three different ways, just as GDP is measured using three different methods Using the production approach, EDP is obtained by deducting intermediate consumption and environmental cost from total outputs; in income approach, environmental cost should be deducted from operating surplus while keeping compensation of employees and taxes on production unchanged; in the expenditure approach, environmental costs should be deducted from capital formation, namely taking impacts of compensation for the environment on investment into account Calculation formulae are as follows: Production approach： EDP = total outputs – intermediate consumption – environmental cost Income approach： EDP = compensation of employees + taxes less subsidies on production + consumption of fixed capital+(operating surplus– environmental cost) Expenditure approach： EDP = final consumption expenditure + (capital formation–environmental cost) + net exports Making adjustment by resources depletion Making adjustments to economic aggregates like the GDP for natural resources depletion requires deducting resources depletion values (using resource rent valuation methods) from GDP to get resources depletion-adjusted gross domestic product or simply dpGDP There is almost no dispute on this adjustment Making adjustment by environmental degradation Making adjustment to economic aggregate by environmental degradation is deducting environmental degradation costs from GDP to obtain an environmental-degradation adjusted economic aggregate that is called eaGDP Comparing with the dpGDP, eaGDP is more controversial either in the maturity of adjustment methods or in the explanation of adjusted aggregates Making adjustment by resource management and environmental protection expenditure Making adjustment to conventional macro-economic aggregates by resource management and environmental protection expenditure is deducting actual expenses on environmental protection during an accounting period from GDP However, there is still debate amongst national income accounts as to how, due to their special characteristics, these resource management and environmental protection expenditures should be measured and used to adjust macro-economic aggregates The accounting framework of SEEA - SEEA should include both natural asset (resource) stocks accounts and flows accounts - stocks accounts : All natural capital assets from forests to water should be accounted for that contributes to economic well being to form a complete picture or account of natural assets - flows accounts: To fulfill flow accounting objectives, we should regard the use and consumption of the stocks of natural assets, as well as consideration for the degradation of their qualitative conditions, as inputs of economic activities -SEEA should include two complementarily independent parts in view of different functions of resource and environment One part is natural resource accounts in terms of resource functions of natural assets, which measure resource stocks and flows consumed by the economic activities during an accounting period The other part accounts for changes in the quality of environment (e.g ecosystem integrity and services) and the degradation of environment as a result of economic activities in terms of sink functions and service functions of environment - SEEA can be implemented both at physical accounting and monetary accounting level - SEEA should include resource management and environmental protection activities Natural resource management activities can be defined as all management and maintenance activities for sustainable use of natural resources, and environmental protection activities can be defined as those that prevent the environment from being damaged by the economic activities and that restore the environment after it has been damaged - ... of environment (e.g ecosystem integrity and services) and the degradation of environment as a result of economic activities in terms of sink functions and service functions of environment - SEEA. .. values of deterioration of environment as a result of their economic uses, emphasizing particularly on qualitative uses of natural assets - Resource management and environmental - This kind of cost... regard the use and consumption of the stocks of natural assets, as well as consideration for the degradation of their qualitative conditions, as inputs of economic activities -SEEA should include