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Other Natural Capital Accounts Timber Accounts Although around 20 countries have compiled timber stock accounts, only seven of them have done so regularly. A possible explanation is that forests often provide, in addition to timber production, a broad range of services that are difficult to value because of their nonmarket nature. Many timber-rich countries, rather than pursuing stock accounts, have chosen to compile economic accounts for forestry that provide information about the overall importance of the forestry sector for the economy.
COUNTRY EXPERIENCES WITH WEALTH ACCOUNTING 135Land Accounts There has been increasing interest lately in estimating stock values of land (Australian Bureau of Statistics 2010; Statistics Netherlands 2010). At least 11 countries currently compile estimates for land, but not all of them cover all types of land, and only six of them currently include these estimates in the national balance sheet. Several methods are used, ranging from business surveys and registers to household budget surveys (Kim 2008).
Fish Accounts New Zealand, Norway, and Japan appear to be the only countries that regularly compile stock values for various species of fish. The Japanese estimate is based upon the capitalization method. Norway uses the NPV applied to estimated resource rent. New Zealand introduced a system of individually tradable quotas to manage its fisheries, resulting in a large competitive market for fish quota sales and rentals. This system has established a direct market price for the asset value of fisheries, which is used in the New Zealand fisheries accounts.
Several countries, such as Namibia and Iceland, have experimented with fish accounts. When no quota valuation is available the NPV method can be difficult to apply in practice. In a number of pilot studies, the resource rent from fisheries is negative. In most instances this is the result of heavy subsidies (World Bank and FAO 2009), but in some cases it may result from strong vertical integration of the fisheries industry (Harkness and Aki 2008).
Other Stock Accounts Norway records a stock account for hydropower. New Zealand has experimented in the past with a stock account for water. The Netherlands is currently working on estimating stock values for renewable energy (wind and solar). Mexico has calculated the depletion of groundwater resources based on a calculation of the shadow price of groundwater according to the residual value method in combination with an annual water balance.
Human Capital There is an increasing interest in the compilation of human capital accounts, and at least seven countries so far have conducted pilot studies or initiated work in this field. Most countries estimate human capital as the present value of future labor income, using the Jorgenson-Fraumeni method described in chapter 6, although differences exist regarding its precise application and scope (e.g., ages covered, treatment of nonmarket activities). Only three countries have compiled complete stock accounts, and none compile these accounts regularly. The OECD recently established a consortium to develop human capital accounts, and 17 countries have joined. Only Norway has incorporated human capital into its wealth accounts.
136 THE CHANGING WEALTH OF NATIONSBalance Sheets Although many countries estimate their financial assets and liabilities, only about 20 publish balance sheets for nonfinancial assets (covering at least produced assets).4 Only six countries include estimates for nonproduced assets in their national accounts balance sheets.
Norway compiles stocks of produced capital, but these are not included in the balance sheets of the national accounts. Norway has a long tradition of research on wealth accounting and publishes an indicator of national wealth that is disseminated as part of the country’s annual report on sustainable development indicators.
Wealth Accounting in Recent Initiatives In response to increasing policy demands, the statistical community agreed in 2006 that it was time to mainstream environmental-economic accounting and related statistics within the national statistical system. To this end, the United Nations Statistical Commission decided to revise the SEEA and elevate it to an international statistical standard. This will put environmental accounting on the same footing as the System of National Accounts. A statistical standard requires a high degree of international agreement on methodology; while such agreement exists for certain aspects of the environmental accounts, there are other aspects on which consensus has not yet been reached. Guidelines for the former will be published in volume 1, the statistical standard, while volume 2 will address issues that are highly relevant to policy but on which no consensus exists at this time (UNSD 2008).The statistical standard will include subsoil assets, timber assets, fisheries, and land.
The Joint UNECE/OECD/Eurostat Working Group on Statistics for Sustainable Development was mandated to “articulate a broad conceptual framework for sustainable development measurement with the concept of capital at its centre” in order to propose a set of indicators to enhance international comparability (UNECE 2009). At the same time, the working group reviewed existing practices in countries that have adopted policy-based approaches to the measurement of sustainable development in order to look for commonalities between indicator sets.
Although members of the working group held diverging opinions regarding the precise interpretation of sustainable development,5 the group’s report resulted in a set of 28 indicators that are consistent with both the comprehensive wealth approach and the most commonly used physical indicators (UNECE 2009). The list includes indicators for the value of stocks of financial, produced, human, and
COUNTRY EXPERIENCES WITH WEALTH ACCOUNTING 137natural capital, as well as for flow measures (net investment/depletion) for these assets. These correspond conceptually to the World Bank’s wealth accounts and to adjusted net saving. The report notes the difficulty in measuring social capital and underlines the need for additional indicators in order to capture “the wellbeing effects of capital that cannot or should not be captured in a market-based monetary measure” and the existence of critical capital (UNECE 2009). The Joint UNECE/OECD/Eurostat Task Force on Measuring Sustainable Development, established in 2008 as a successor group, has established a research program to address some of these issues.
The Report by the Commission on the Measurement of Economic Performance and Social Progress, also known as the Stiglitz-Sen-Fitoussi report (2009), clearly distinguishes between assessments of current well-being and assessments of sustainability. The report concurs with several of the recommendations in the report by the Joint UNECE/OECD/Eurostat Working Group (UNECE 2009). In principle, Stiglitz, Sen, and Fitoussi endorse the comprehensive wealth approach to measuring sustainability (recommendation 3) while noting that the correct valuation of certain stocks is highly problematic.6 They recommend accounts for stocks of resources that have market prices, such as minerals or timber, but question whether reliable values can be obtained for other natural capital.
Summing Up Since our benchmark year of 1979, wealth accounting has become increasingly widespread in the statistical community. The strongest advances have been made in the areas of mineral and energy accounting, while recent years have seen increasing interest in assessing stock values of land and human capital. The valuation of renewable assets (like fish) lags, largely because of measurement difficulties.
At the same time, both the Stiglitz-Sen-Fitoussi (2009) report and the Joint UNECE/OECD/Eurostat Working Group report (UNECE 2009) have come out strongly in support of wealth accounting, although they recommend that physical indicators be included with the monetary indicators. The great majority of countries with environmental accounting programs use SEEA guidelines. Wealth accounting is likely to get a further stimulus from the forthcoming elevation of the revised SEEA to a statistical standard, on par with the System of National Accounts. This should provide clear guidelines and recommendations that country statistical offices can use to construct natural capital accounts.
138 THE CHANGING WEALTH OF NATIONSNotes 1 For example, Mungatana, Hassan, and Lange (forthcoming) report a number of case studies for African countries.
2 That is, they compile at least one of the asset accounts and/or balance sheets regularly.
3 The focus in China has been less on stocks and more on flows (green GDP).
4 There may be additional non-OECD countries that compile balance sheets for produced assets whose practices were outside the scope of this assessment.
5 “One view within the group, referred to as the integrated view, held that the goal of sustainable development is to ensure both the well-being of those currently living and the potential for the well-being of future generations. The second, labelled the future-oriented view, held that the concern of sustainable development is properly limited to just the latter;
that is, sustainable development is about ensuring the potential for the well-being of future generations” (UNECE 2009, 3).
6 The explanatory text to recommendation 3 states, “Measures of wealth are central to measuring sustainability. What is carried over into the future necessarily has to be expressed as stocks... ” (Stiglitz, Sen, and Fitoussi 2009).
References Australian Bureau of Statistics. 2010. “Accounting for Natural Resources—Land and Subsoil Assets—in the Australian Bureau of Statistics.” Paper prepared for the Conference of European Statisticians/Group of Experts on National Accounts, Tenth Session, Geneva, April 26–29.
European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, and World Bank. 2009. System of National Accounts 2008. New York: United Nations.
Hamilton, K., and M. Clemens. 1999. “Genuine Savings Rates in Developing Countries.” World Bank Economic Review 13 (2): 333–56.
Harkness, Jane, and Luke Aki. 2008. “A Numerical Comparison of Fish Quota Values and Standard Resource Rent Calculations Using New Zealand’s Commercial Fish Resource.” Paper LG/13/6 presented at the 13th Meeting of the London Group on Environmental Accounting, Brussels, September 29–October 3.
Kim, Y. 2008. “Estimation of the Stock of Land in OECD Countries.” Paper presented at the meeting of the OECD Working Party on National Accounts, Paris, October 14–16.
Mungatana, E., R. Hassan, and G. Lange, eds. Forthcoming. Implementing Environmental
Accounts: Case Studies from Eastern and Southern Africa. Dordrecht, Netherlands:
OECD (Organisation for Economic Co-operation and Development). 2008. “Results of the Survey on Sub-soil Assets in OECD Countries.” STD/CSTAT/WPNA(2008)7. Paper presented at the meeting of the OECD Working Party on National Accounts, Paris, October 14–16.
Pasquier, J., G. Quirino, and C. Kesy. 2007. “Environmental Accounts: State of Play of Recent Work.” Final report to Eurostat, Luxembourg.
COUNTRY EXPERIENCES WITH WEALTH ACCOUNTING 139Statistics Netherlands. 2010. “Measuring Natural Assets in the Netherlands.” Paper prepared for the Conference of European Statisticians/Group of Experts on National Accounts, Tenth Session, Geneva, April 26–29.
Stiglitz, Joseph E., Amartya Sen, and Jean-Paul Fitoussi. 2009. Report by the Commission on the Measurement of Economic Performance and Social Progress. Paris: Commission on the Measurement of Economic Performance and Social Progress.
UNECE (United Nations Economic Commission for Europe). 2009. Measuring Sustainable Development: Report of the Joint UNECE/OECD/Eurostat Working Group on Statistics for
Sustainable Development. Prepared in cooperation with OECD and Eurostat. New York:
United Nations, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development, and World Bank. 2003. Handbook of National Accounting: Integrated Environmental and Economic Accounting 2003. To be issued as Series F, No. 61, Rev. 1 (ST/ESA/STAT/SER.F/61/Rev.1). New York: United Nations.
UNSD (United Nations Statistics Division). 2008. Environmental-Economic Accounting.
———. 2009. “Report on the Global Assessment of Energy Accounts.” Background document for the 40th session of the United Nations Statistical Commission, New York, February 24–27. http://unstats.un.org/unsd/envaccounting/ceea/surveyEEA.asp.
World Bank and FAO (Food and Agriculture Organization). 2009. The Sunken Billions: The Economic Justification for Fisheries Reform. Washington, DC: World Bank.
Building the Wealth Estimates:
Methodology This appendix details the construction of wealth, genuine savings, and savings gap estimates.
The wealth estimates are composed of the following:
■ Total wealth ■ Produced capital ● Machinery, equipment, and structures ● Urban land ■ Natural capital ● Energy resources (oil, natural gas, hard coal, lignite) ● Mineral resources (bauxite, copper, gold, iron, lead, nickel, phosphate, silver, tin, zinc) ● Timber resources ● Nontimber forest resources
● Pasture land ● Protected areas ■ Net foreign assets Intangible capital is calculated as a residual, that is, as the difference between total wealth and the sum of produced and natural capital and net foreign assets.
142 THE CHANGING WEALTH OF NATIONS
The current value of total wealth at time t is a function of the consumption at time t and the pure rate of time preference.
Expression (A.1) implicitly assumes that consumption is on a sustainable path, that is, the level of saving is enough to offset the depletion of natural resources. The calculation of total wealth requires that two issues be considered
in computing the initial level of consumption: