The NAMEA, as firstly presented by De Booet al.(1991), provides a pragmatic way to direct the national accounts towards environmental concerns. They sketch the conceptual design of a national accounts module that “. . . should provide information, step by step, on the human-induced flows of matter, species and energy (commodity flows), as well as on the resulting effects on the environment (changes in ecosystems), and on the nuisance experienced by the population, thus linking economy, environment and society” (De Booet al., 1991, p.3). They advocate the NAMEA in its capacity to provide a complete and systematic account of all environmental changes caused by production and consumption processes in a way that is explicitly linked to the SNA framework.
The main objectives of the NAMEA as presented by De Booet al.are “. . . to sketch the trade-offs between the objective of environmental sustainability and other macro-economic policy objectives.” This led them “. . . to pay much attention to the linkageof indicators of environmental change no only to GDP-growth, but also to other important policy objectives like income distribution, balance of payments equilibrium etc.” (p.4, emphasis on linkage added). They argue that the NAMEA
should also provide basic material for designing performance indicators on the relationships between production and environment, addressing for example developments in energy or environmental efficiencies.
According to De Booet al. the transformation of the NAM into a NAMEA contains the following steps:
– recording the environmental changes stemming from economic activities in the period of observation, encompassing the elements ‘net pollution’ and ‘net depletion’;
– recording the actual costs and benefits of environmental prevention and protection and the recording of non-restored damages.
Although no argumentation is given why, stock accounts are completely ignored.
Chapter XX of the SNA-1993 (cf.table 20.7) shows that, conceptually, there is no restriction of representing balance sheets in a NAM framework.
The NAM used by De Booet al.builds on the SNA-1993 and is a slightly extended version of the NAM presented in table 4.1. Their table has a complete set of accumulation accounts, including the ‘other changes in assets’ that are due neither to transactions between institutional units, as recorded in the capital and financial accounts, nor to holding gains and losses. Examples of other changes in assets are the natural growth of non-cultivated biological resources, depletion of natural assets and catastrophic losses. In this way, their NAM gives a full record of all changes in assets and liabilities.
De Booet al.extend this NAM with two additional environmental accounts: one for the recording of environmentalagentsand another one for the recording of changes in environmentalassets. The first account registers extractions and emissions of all kinds of agents from and to the environment. In other parts of this thesis, the more general name of ‘environmental requirement’ is used to indicate all sorts of environmental-economic dependencies. The environmental assets account is introduced to show the effects of resource depletion and pollution accumulation on environmental assets and ecosystems. As such, this account is meant to provide a general description of changes in the environmental state. Both accounts are expressed in non-monetary units. The other accounts in the NAMEA, represented by the NAM, are denominated in money terms.
The two environmental accounts in the NAMEA, as introduced by De Booet al., are defined on the basis of the following accounting identities discussed in the following subsections.
4.3.1 Agents account: the representation of natural resources
The agents account presents the depletion of natural resources with the help of the following accounting identity (cf. p.21).
extraction + net losses due to natural causes = referable damage of owned assets
due to environmental effects + net depletion of not owned environmental assets (4.1)
The extraction of natural resources is recorded at the intersection of the agents account with the production account. In this way, resource extractions are recorded in connection to the corresponding mining industries that are responsible for their extraction.
The ‘net losses due to natural causes’ include positive changes, for example the natural growth of non-cultivated biological resources, and negative changes apart from extractions such as catastrophic losses.
The representation of natural resources is somewhat being complicated by the fact that all changes in natural resources that are subject to ownership are already recorded in the other changes in (non-produced) assets account of the NAM. The entry ‘referable damage of owned assets due to environmental effects’ is used to account, in physical terms, for the environmental pressures leading to value losses of assets subject to ownership. This entry also includes in physical terms the extraction of natural resources. As a result, equation (4.1) includes two ‘physical’
depletion items: one for owned assets and another one for assets not subject to ownership.5)
The NAMEA presentation of the De Booet al.records the depletion of natural assets subject to ownership twice: firstly, in the other changes in assets account in money terms and secondly, in the environmental agents account in physical terms. De Boo et al.show that this double recording is eliminated when the extraction of natural resources in the agents account is given a money value. In this way, depletion is no longer recorded as an other change in asset but instead as a cost of production.
This alternative recording decreases all balancing items throughout the sequence of accounts, from ‘value added’ to ‘changes in net worth do to saving and capital transfers’.
4.3.2 Agents without a capital character
Agents without a capital character or with non-recurrent repercussions do not accumulate but only have immediate impacts. Repercussions will stop at the moment the dispersion of these agents stops. Examples of such agents are the nuisance from stench and noise. In the first NAMEA design, these agents are presented according to the following accounting identity.
‘free’ emissions by production + ‘free’ emissions by consumption =
current consumption of pollutants (4.2)
With the prefix ‘free’ the authors indicate that the emissions are recorded without a money value. The non-recurrent effects of these emissions are recorded in terms of consumption of pollutants. As far as equation (4.2) refers to physical pollution, it must be notified that this equation does not follow the material balance principle. It is unlikely that all emissions with non-recurrent impacts are physically consumed by those affected. Instead, agents without a capital character enter the environment where they subsequently alter the environmental state on an impermanent basis.
As a result, equation (4.2) mixes up agent flows with their impacts. There is not necessarily a one-to-one relationship between the dispersion of these emissions and their nonrecurring impacts.
In physical terms, the recording of these agents could be rephrased as follows.
‘free’ emissions by production + ‘free’ emissions by consumption = dispersion of
pollutants (or agents) without a capital character (4.2)
The common sense behind equation (4.2) is that these agents lead tot immediate welfare effects that negatively influence consumption as defined in an extended national accounting framework. In value terms, this recording is in line with the welfare extensions of the national accounts as discussed in chapter 2. However, an environmentally extended consumption concept is unavoidably tied to an extended income concept. In the NAMEA presentation of De Booet al., it remains unclear how the income of households is being adjusted by the immediate welfare effects of pollution without a capital character. As shown in subsection 4.3.4, they suggest such a symmetric adjustment of income and consumption when recording the repercussions from recurrent environmental degradation.
4.3.3 Agents with a capital character
Agents with a capital character accumulate in the environment with long lasting repercussions. These agents are also referred to as stock pollutants. Agents with a capital character are represented in the agents account on the basis of the following accounting identity.
‘free’ emissions by production + ‘free’ emissions by consumption +
‘free’ emissions from abroad = ‘free’ emissions to abroad + referable damage of
owned assets due to environmental effects + immission into ecosystems (4.3) This accounting identity is almost identical to identity (3.4) presented in chapter 3 and is used in the annually published Dutch NAMEA for those pollutants for which it is relevant to determine their accumulation on the domestic economic territory.
There is however one exception: equation (4.3) also includes the entry ‘referable damage of owned assets due to environmental effects’ to reflect pollution related damages of assets that are included in the national accounts balance sheet. As already discussed, this item mixes up the recording of (physical) flows with their repercussions. Only for a restricted set of pollutants, it is meaningful to record the physical accumulation of agents in assets that are represented in the national accounts balance sheet. An example is the contamination of crops. In all other cases, effects will result via indirect cause-effect relationships which should be recorded as the consequential changes in ecosystems.
4.3.4 National ecosystems
In addition to an account for agents, the NAMEA presented by De Booet al.also add to the NAM an environmental account for changes in environmental assets or national ecosystems that are not subject to ownership. The authors present the following accounting identity to structure this account (cf.p.22).
(–) current effects of past disposals + natural cleansing + (–) immission = (–) current effects of past disposals + non-referable degradation + net depletion
+ (–) changes in worth of ecosystems (4.4)
Equation (4.4) mixes up three dimensions: the accumulation of physical flows in the natural environment, the concomitant changes in ecosystems and the repercussions that follow from ecosystem changes. The minus signs indicate a negative welfare effect.
Firstly, equation (4.4) represents the net depletion of (not owned) natural resources and the net accumulation of pollution. These items are denominated in the corresponding units as found in the agents account.
Secondly, the ecosystems account also present net depletion and net immission in terms of their effects on ecosystem assets. In case of natural resource depletion, this effect is simply a decline in the physical availability of the asset, most likely denominated in the same unit in which their extraction and (other) losses are recorded in the agents account.
In the case of degradation the relationship between pollution immission and asset degradation is less easily spelled out. The authors recommend a subdivision of the immision (agents×ecosystems) sub-matrix into cause and effect matrices. They acknowledge the complexities of monitoring the dispersion patterns of agents and their subsequent accumulation in various ecosystems. They also acknowledge the complexities of assigning the changes in ecosystems to the accumulation of individual agents.
Another complexity of this account, not mentioned by De Booet al., is that certain ecosystems and related damages may exceed the borders of individual countries.
For global warming or ozone layer depletion, it seems only feasible to account for the contributions to these global environmental problems of individual economies.
The appearance of the concomitant environmental assets, i.e. global climate regulation and the ozone layer, in an national accounts balance sheet is simply infeasible.
Thirdly, the entries on ‘current effects of past disposals’ in equation (4.4) reflect the repercussions of environmental degradation to society.
In conclusion, equation (4.4) can be unravelled by the following two equations. With respect to changes in ecosystems, equation (4.4) encloses the following identity.
natural cleansing – (impacts of) immission – non-referable degradation – net depletion =
changes in worth of ecosystems (4.4’)
Natural cleansing could encompass the biodegradability of agents in which case this entry would preferably be represented in the agents account, leading to a reduced immission total. In case natural cleansing addresses the (permanent) accumulation of pollutants below threshold levels or the natural recovery of ecosystems, it would probably be appropriate to introduce this item in identity (4.4’). It must be noticed that an aggregate presentation of the changes in worth of ecosystems can only be given on the basis of damage valuation.
The second identity addresses the repercussions of environmental deterioration.
current effects (on extended disposable income) of past disposals =
current effects (on extended consumption) of past disposals (4.4’’) De Booet al., firstly present the current effects of past disposals in the secondary distribution of income account were an attached damage value would lower disposable income. Current effects of past disposals are subsequently recorded in the use of income account, showing the negative adjustments of an environmental extended consumption concept in cases for which the corresponding values are being observed.