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Accounting for Sustainability

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Extended national accounts: SEEA, net (genuine) saving, genuine progress ... is directly related to a looser definition of sustainability: non-decreasing ... – PowerPoint PPT presentation

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Title: Accounting for Sustainability


1
Accounting for Sustainability
  • Kirk Hamilton
  • Environment Department
  • The World Bank

2
Outline
  • Approaches to SD indicators
  • Net or genuine saving
  • Issues concepts, measurement

3
Approaches to SD indicators
  • Extended national accounts SEEA, net (genuine)
    saving, genuine progress indicator / ISEW
  • Biophysical accounts ecological footprint
  • Unweighted indices environmental sustainability
    index, Living Planet index
  • Weighted indices environmental pressure indices
  • Eco-efficiency resource flows / GDP
  • Indicator sets UN CSD, various countries

4
Desirable characteristics for SD indicators
  • Underlying framework
  • Numeraire / aggregation rules
  • Clear interpretation regarding sustainability
  • Linkage to policy levers through aggregates or
    sub-aggregates

5
Net (genuine) saving
  • Net saving is the change in the real value of all
    assets (investment minus depreciation minus net
    foreign borrowing).
  • Net saving ?(PV of social welfare)??-1
  • Positive genuine saving indicates rising social
    welfare negative genuine saving indicates that
    social welfare will fall in the future.

6
Composition of net saving, 1999
7
Adjusted net saving vs GDP/cap 1999
8
?Wealth/capita vs population growth, 1999
9
Conceptual issues
  • Asset accounts in monetary units provide a
    consistent framework and yardstick for measuring
    development prospects.
  • The components of net saving (gross saving,
    depletion, damage) can be affected by policy,
    permitting tradeoffs in the pursuit of
    sustainability.

10
Conceptual issues (2)
  • Negative net saving indicates unsustainability by
    standard definitions.
  • The saving measure is directly related to a
    looser definition of sustainability
    non-decreasing present value of social welfare.

11
Measurement issues
  • Valuing stocks or changes in stocks is difficult
    because it requires assumptions about the future.
  • Certain environmental problems are difficult to
    handle e.g. vertical marginal damage curves,
    biodiversity.
  • Trans-boundary pollutants (including CO2) require
    assumptions about property rights.

12
Measurement issues (2)
  • Social issues are problematic because of the
    difficulty in identifying and quantifying
    relevant assets and flows.
  • Aggregate asset values and adjusted income
    measures are not particularly useful for
    measuring sustainability.
  • Net saving, the change in the real value of
    assets, is directly relevant for measuring
    development prospects.

13
Conclusions
  • Net saving has a strong basis in theory, and
    empirical testing is promising.
  • Complementary biophysical indicators will
    probably always be required.
  • Net saving is a more useful indicator as the
    breadth of assets accounted increases.
  • Even with the World Banks limited asset
    coverage, there are 10-20 countries each year
    with negative net savings.
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