1 The objective of this handbook...............................................................................................1
2 The structure of the chapter ....................................................................................................2

1 The three-pillar approach to sustainable development ...........................................................2
2 The ecological approach to sustainable development.............................................................3
3 The capital approach to sustainable development ..................................................................4
4 The SEEA as a framework for measuring sustainable development......................................7

1 Category 1: Physical and hybrid flow accounts......................................................................8
2 Category 2: Economic accounts and environmental transactions...........................................9
3 Category 3: Asset accounts in physical and monetary terms..................................................9
4 Category 4: Extending SNA aggregates to account for depletion, defensive
expenditure and degradation.................................................................................................10

1 Chapter 2: The accounting structure of the SEEA................................................................11
2 Chapter 3: Physical flow accounts........................................................................................11
3 Chapter 4: Hybrid flow accounts..........................................................................................12
4 Chapter 5: Accounting for economic activities and products related to the
environment ..........................................................................................................................13
5 Chapter 6: Accounting for other environmentally related transactions ................................13
6 Chapter 7: Asset accounts and the valuation of natural resource stocks ..............................14
7 Chapter 8: Specific resource accounts..................................................................................14
8 Chapter 9: Valuation techniques for measuring degradation................................................14
9 Chapter 10: Making environmental adjustments to the flow accounts.................................15
10 Chapter 11: Policy application and uses...............................................................................16
11 Annexes ...............................................................................................................................17

1 The relation between the SEEA and environmental statistics ..............................................17
2 Flexibility of implementation ...............................................................................................18
3 The progression of the system ..............................................................................................20
4 Comparing accounts in physical and monetary terms ..........................................................20
5 Integration in the SEEA framework .....................................................................................21
6 Limitations of present work..................................................................................................22
7 An assessment of the current position ..................................................................................23

1 Objectives of the chapter ......................................................................................................25
2 The need for an accounting approach...................................................................................25
3 Environmental accounts and the SNA..................................................................................26

1 The economy/environment interface.................................................................................... 28
2 The types of flows of interest............................................................................................... 30
3 Flow accounts for products .................................................................................................. 31
4 Flow accounts for natural resources..................................................................................... 32
5 Flow accounts for ecosystem inputs..................................................................................... 33
6 Flow accounts for residuals.................................................................................................. 33
7 Summary physical flow accounts......................................................................................... 33
8 Determining suitable classifications.....................................................................................34
9 Physical flow accounts, national borders and accounting periods ....................................... 34

1 Physical supply and use tables ............................................................................................. 35
2 Monetary supply and use tables ........................................................................................... 37
3 A hybrid supply and use table.............................................................................................. 39
4 Introduction of the term NAMEA........................................................................................ 42
5 Supply and use and input-output.......................................................................................... 42

1 The SNA sequence of (current) accounts............................................................................. 43
2 Relevance of the accounts in the SEEA ............................................................................... 44
3 The sectors of the national accounts .................................................................................... 45
4 A full accounting matrix ...................................................................................................... 45
5 Identifying environmental transactions within the accounts................................................ 46

1 Compiling a supply and use table ........................................................................................ 48
2 National expenditure on environmental protection .............................................................. 50

1 Defining assets ..................................................................................................................... 50
2 An asset account in physical terms ...................................................................................... 51
3 Asset accounts in the SNA................................................................................................... 51
4 Placing a value on assets ...................................................................................................... 52
5 The decline in the value of an asset...................................................................................... 53
6 Valuing natural resources..................................................................................................... 53
7 Incorporating asset accounts in the matrix presentation ...................................................... 54

1 Showing depletion in the accounts....................................................................................... 56
2 Accounting for defensive expenditure ................................................................................. 61
3 Accounting for degradation.................................................................................................. 62
4 Depletion and degradation ................................................................................................... 64

1 The SEEAland data set......................................................................................................... 64
2 Further information on specific accounting issues............................................................... 68

1 Objectives............................................................................................................................ 69
2 Accounting for physical flows ............................................................................................. 70
3 Elaboration of the accounts.................................................................................................. 72
4 Scope and limitations of the accounts .................................................................................. 72

1 Units.................................................................................................................................... 76
2 Types of flows...................................................................................................................... 76
3 Determining origin and destination of flows........................................................................ 85
4 Types of flows ......................................................................................................................86

1 Identifying economic activities.............................................................................................89
2 Use table for natural resources .............................................................................................91
3 Use table for ecosystem inputs .............................................................................................93
4 Supply and use tables for products .......................................................................................95
5 Supply and use tables for residuals.......................................................................................97
6 The complete system of physical flow accounts ................................................................102
7 Input-output identities.........................................................................................................112

1 Introduction ........................................................................................................................114
2 Residuals and recycling in physical flow accounts (West Germany, 1990).......................114
3 Biological assets and ecosystems inputs.............................................................................116
4 Accounts for timber and wood products.............................................................................118
5 Economy-wide Material Flow accounts (MFA).................................................................121
6 Physical input-output tables (PIOT) ...................................................................................125

1 Objectives ...........................................................................................................................129
2 Products and industries.......................................................................................................130
3 Elaborating and using hybrid flow accounts.......................................................................132
4 Scope and limitations of hybrid flow accounts...................................................................132

1 Introduction ........................................................................................................................134
2 The SEEAland hybrid supply and use tables......................................................................134
3 Emission accounts ..............................................................................................................140
4 Energy balances and carbon dioxide emissions for Denmark ............................................141
5 Accounts for emissions - the Netherlands ..........................................................................147

1 Supply and use versus input-output....................................................................................158
2 An input output table ..........................................................................................................159
3 Environmental requirements of products............................................................................160
4 Environmental requirements of consumption.....................................................................163

1 Objectives ...........................................................................................................................169
2 Introducing purpose classifications ....................................................................................170
3 Environmental protection expenditure accounts (EPEA)...................................................172
4 Scope and limitations of the accounts ................................................................................173

1 Environmental activities and purpose classifications .........................................................173
2 Environmental protection activities....................................................................................181
3 Environmental products......................................................................................................184
4 The “Environment Industry” ..............................................................................................186

1 Supply and use tables for environmental protection...........................................................188
2 National expenditure on environmental protection ............................................................195
3 Financing environmental protection................................................................................... 197
4 Net cost of environmental protection ................................................................................. 199
5 Description of main data sources ....................................................................................... 200

1 Links to physical data......................................................................................................... 209
2 Time series and constant prices.......................................................................................... 209
3 Environmental input-output analysis - German experience ............................................... 210
4 Environmental Research and Development - Canadian experience................................... 211

1 Objectives.......................................................................................................................... 215
2 Economic instruments........................................................................................................ 216
3 Identifying all environmental flows in the accounts .......................................................... 218
4 Scope and limitations of the accounts ................................................................................ 218

1 Environmental taxes and specific taxes ............................................................................. 219
2 Environmental taxes and sales of environmental protection services ................................ 219
3 Environmental taxes in general .......................................................................................... 219
4 Environmental taxes within the national accounting framework....................................... 221

1 Property income ................................................................................................................. 222
2 Property rights.................................................................................................................... 223

1 The problem ....................................................................................................................... 226
2 Consumption of fixed capital ............................................................................................. 226
3 Terminal costs .................................................................................................................... 227
4 Remedial costs ................................................................................................................... 230
5 Summary ............................................................................................................................ 230

1 Tabulating redistributive processes.................................................................................... 231
2 Portraying redistribution in a matrix form ......................................................................... 233
3 Exploiting the potential of a matrix formulation of the accounts....................................... 236
4 A hybrid accounting matrix for the SEEAland data set ..................................................... 240
5 Adding other physical data................................................................................................. 244

1 Objectives of the chapter.................................................................................................... 245
2 Defining environmental assets ........................................................................................... 245
3 The form of an asset account ............................................................................................. 246
4 Valuation........................................................................................................................... 246
5 Asset accounts in monetary terms...................................................................................... 248
6 Linking asset accounts and flow accounts ......................................................................... 248

1 Environmental assets in the 1993 SNA.............................................................................. 248
2 Environmental assets and functions ................................................................................... 249
3 Environmental functions, benefits and uses....................................................................... 251
4 The SEEA asset classification ............................................................................................251

1 Units of account..................................................................................................................258
2 Asset accounts in the SNA .................................................................................................258
3 Asset accounts for environmental assets in the SEEA .......................................................261
4 Accounting entries for specific resources...........................................................................265

1 Asset classifications of the SNA and SEEA.......................................................................270
2 Valuation of assets in 1993 SNA........................................................................................272
3 Valuation of non-produced assets.......................................................................................275
4 Estimating the value of the stock level of the resource ......................................................281
5 Summary of methods to value natural resource stocks.......................................................282

1 Mineral and energy resources.............................................................................................284
2 Biological resources ...........................................................................................................290
3 Fish ....................................................................................................................................296
4 Land...................................................................................................................................298
5 Valuation of water resources ..............................................................................................300
6 Ecosystems .........................................................................................................................301
7 Other changes in assets.......................................................................................................302

1 Asset accounts vs. accumulation accounts .........................................................................303
2 Completing the asset accounts............................................................................................306
3 Examples based on the SEEAland data set.........................................................................306

1 Chapter objectives ..............................................................................................................311
2 Mineral and energy resources.............................................................................................311
3 Water resources ..................................................................................................................312
4 Forests, wooded land and forest products...........................................................................312
5 Aquatic resources ...............................................................................................................313
6 Land and ecosystem accounts.............................................................................................313

1 Introduction ........................................................................................................................314
2 Asset accounts in physical terms ........................................................................................314
3 Asset accounts in monetary terms ......................................................................................317
4 Mineral exploration and mineral extraction........................................................................318
5 Balance sheet entries for the assets associated with mineral exploitation ..........................321

1 Introduction ........................................................................................................................323
2 The hydrological system.....................................................................................................324
3 Monetary Accounts.............................................................................................................339

1 Introduction ........................................................................................................................341
2 Physical accounts for forested land ....................................................................................341
3 Physical accounts for timber...............................................................................................346
4 Monetary accounts for forested land and timber ................................................................349
5 Accounts for forest products...............................................................................................351
6 Expenditures on forest management and protection...........................................................353
7 Supplementary tables ......................................................................................................... 354
8 Compatibility with international data sources.................................................................... 360

1 Introduction....................................................................................................................... 360
2 Characteristics of the fishing industry................................................................................ 361
3 Classification..................................................................................................................... 364
4 Measuring the physical levels of stocks............................................................................. 366
5 An asset account for aquatic resources in physical terms .................................................. 368
6 Monetary asset accounts .................................................................................................... 371
7 Ancillary fishing industry information............................................................................... 372

1 Role of land and ecosystem accounting ............................................................................. 372
2 State of development of land and ecosystem accounting................................................... 373
3 Observation units and classifications ................................................................................. 374
4 Structure of the land and ecosystem accounts.................................................................... 377
5 Integration of soil ............................................................................................................... 389

1 Objectives.......................................................................................................................... 391
2 Why value degradation?..................................................................................................... 391
3 Valuing costs and damages ................................................................................................ 392
4 What is being valued? ........................................................................................................ 393
5 Problems with valuing degradation.................................................................................... 393
6 Methods of valuing degradation......................................................................................... 394
7 Degradation crossing time and space ................................................................................. 395
8 Status and future work on valuing degradation.................................................................. 396

1 Structural adjustment costs ................................................................................................ 396
2 Abatement costs ................................................................................................................. 397
3 Restoration Costs ............................................................................................................... 399

1 Estimating the damage done .............................................................................................. 400
2 Revealed-preference pricing techniques ............................................................................ 403
3 Stated preferences .............................................................................................................. 405
4 Benefit transfer................................................................................................................... 408
5 An assessment of different benefit/damage pricing techniques ......................................... 409

1 Methodological reservations ..............................................................................................412
2 The suitability of pricing techniques.................................................................................. 412
3 Data limitations .................................................................................................................. 413

1 Introduction....................................................................................................................... 415
2 Objectives of the chapter.................................................................................................... 415

1 Asset accounts.................................................................................................................... 418
2 Economic rent and resource rent ........................................................................................419
3 Accounting for changes in the stock levels of environmental assets..................................421
4 A set of depletion-adjusted accounts ..................................................................................428

1 Current and capital environmental protection expenditure.................................................438
2 Environmental protection expenditure by government and industry..................................438
3 A possible symmetric treatment .........................................................................................439
4 Implications at constant prices............................................................................................440

1 Alternative approaches .......................................................................................................441
2 Damage-based methods to derive macro-aggregates..........................................................443
3 Cost-based methods to derive macro-aggregates................................................................448

1 Depletion ............................................................................................................................458
2 Defensive expenditure ........................................................................................................460
3 Degradation ........................................................................................................................461
4 Conclusion.........................................................................................................................463

1 Objectives ...........................................................................................................................465
2 The examples cited .............................................................................................................466

1 Indicators and descriptive statistics ....................................................................................466
2 Policy analysis and strategic planning................................................................................470

1 Indicators and descriptive statistics ....................................................................................475
2 Policy analysis and strategic planning................................................................................479

1 Indicators and descriptive statistics ....................................................................................482
2 Policy analysis and strategic planning................................................................................488

1 Indicators and descriptive statistics ....................................................................................493
2 Policy analysis ....................................................................................................................496

1 Depletion adjusted macro-aggregates.................................................................................497
2 Cost-based estimates...........................................................................................................498
3 Damage-based estimates.....................................................................................................501
4 Modelling approaches to macroeconomic indicators .........................................................503