Green accounting and economic policy

Through the lens of conventional national accounting, resource depletion and natural environment degradation often appear misleadingly as desirable economic growth. The old System of National Accounts (SNA) has been revised and a set of environmental 'satellite accounts' proposed. Certain weaknesses, however, pervade the new proposals. The conventional measurements remain largely unaltered, and the satellite accounts are of unclear purpose and unnecessarily complex. As proposed, they rely on the valuation of environmental stocks, while the economically more important flow accounts, to their detriment, are to be derived indirectly from changes in stock values. The SNA, the paper stresses, is primarily an economic framework, incapable of capturing all environmental change, and the national accounts are far more useful economically than environmentally. Greening the accounts would be optional for most affluent countries, whose overriding environmental concern is pollution. This can be addressed directly through taxation and regulation. Pollution information in satellite accounts can indeed be valuable, but revised and fully integrated resource accounting is a priority concern for those developing countries that are running down natural resources, and for which conventional accounting distorts macroeconomic measurement, analysis and policy. The paper argues that green accounting can only ensure income (sometimes called weak) sustainability, which should be considered as a step leading ultimately to an ecological (or stronger) sustainability.