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World Bank Pushes for "Green Accounting" by Nations

Many nations are part of an effort to account for the economic goods provided for free by nature--but not the U.S.
image of great barrier reef from above



Wikimedia Commons/NASA

Botswana's diamond mining sector accounts for 31 percent of the country's economic output -- and a glistening De Beers five-diamond bracelet sells online for $1,500. But how much does depleting diamond mines cut into Botswana's overall economic health?

The Philippines' untapped gold and nickel is valued at nearly $1 trillion, but the mines and refining process needed to tap them will require a great deal of water. If climate change leads to reduced rainfall in the country, how much would be lost by diverting water from agriculture?

And in Australia, the government has found that pesticides used in farming are causing significant damage to the Great Barrier Reef. But how much might that damage affect the tourist economy that thrives around the World Heritage site?

Those countries and a handful of others have been trying to answer precisely those kinds of questions as they develop some of the world's first "green" accounting systems. Known formally as natural capital accounting, the idea of measuring the economic value of clean water, clean air, forests and ecosystems in addition to traditional measures of the market value of a country's goods and services has been gaining traction since the 1980s.

In February, the U.N. Statistical Commission adopted a standardized accounting method, which advocates called a major step, essentially helping environmentalists use the same language and tools that finance ministers and economists use to measure strictly in terms of national accounts. Now, with the approach in June of the U.N. Conference on Sustainable Development in Rio de Janeiro, activists hope that green accounting's time has finally come.

"When it comes to natural capital accounting, we have been talking about it for 30, maybe even more years. This is something it is time to stop talking about and it is time to start implementing," Rachel Kyte, the World Bank's vice president for sustainable development, said recently.

The World Bank is pushing for countries at the Rio summit, commonly called Rio+20, to commit to implementing natural accounting systems alongside their gross domestic product measurements. Kyte acknowledged that questions remain about green accounting but said countries can "learn while we're doing," and argued that the data gleaned by valuing ecosystems are critical to help governments make more sustainable decisions.

Not all assets are given a value
"The lack of valuation for natural resources in the environment is one of the major reasons for the continuing decline of ecosystems," said Glenn-Marie Lange, a senior environmental economist at the World Bank who leads a partnership known as WAVES (Wealth Accounting and Valuation of Ecosystem Services) aimed at helping countries develop and implement natural accounting systems.

"For decades, GDP has been growing and growing in many countries, but a large segment of society hasn't been getting any better off," said John Talberth, a senior economist at the World Resources Institute. "I think we've reached a critical threshold where international consensus said we really need to move in a more deliberate and systematic manner to get better accounts up and running that reflect the true state of the economy."

Those who are already trying it say natural capital accounting is slow going but they expect it to be rewarding. Australia, for example, already has a program of annual environmental accounts for water, energy, natural resources and timber, as well as subsoil assets like coal. Now it's starting to look at assets like the Great Barrier Reef to better understand what degradation caused by agriculture or climate change might mean for the country as a whole.

"The Great Barrier Reef is a natural ecosystem and supports a huge tourism industry. But what is the value of the Great Barrier Reef? We're not really sure," said Michael Vardon, director of the Australian Bureau of Statistics Centre of Environment and Energy Statistics. Upstream, he noted, farmers are making decisions that are rational for their livelihoods -- using pesticides and fertilizer, for example -- and it's clear that those decisions are corroding the world's largest coral reef system.

Accounting for the eco-wealth of the reef as well as for the deterioration, he said, could help the government decide to encourage farmers to plant elsewhere, or perhaps provide payments for planting trees instead of agriculture.

"I think that what the accounting does is it enables you to see the costs and benefits of different courses of action," Vardon said.

And in Botswana, the government is directing two initiatives to try to make the economic value of the country's natural resources tangible. Ruud Jansen, the chief technical adviser for Botswana's Ministry of Finance and Development Poverty-Environment Initiative, said the country has been working for more than a year to move out of theory and into the practice of understanding how to value the country's diamonds as well as its delta.

Balancing diamonds and fresh water
"In Botswana, we feel the value of our natural resources, though assumed, has not been made very clear," Jansen said. Working with both the U.N. Environment Programme and the World Bank, the government is trying to determine how much investment in keeping the delta healthy translates into freshwater availability as well as tourism dollars in Botswana, he said.

Meanwhile, he said, they're also taking stock of the country's diamonds. Right now, he said, the government estimates its exportation of minerals will peak within the next decade. At the same time, there's been little work to understand exactly what the country's stock is. Once that is in hand, he said,

the government can perhaps come up with a plan to regulate the export of diamonds and extend that resource's life span over 20 or 25 years, giving the country more time to diversify its economy.

"I think it can potentially change things quite a bit. We've always had this idea that diamonds were like windfall. We were never too clear how long they were going to last or how much they would bring in on an annual basis," Jansen said. "Putting a value on these things is really going to affect decisionmaking. You can only make these decisions consciously if you have a very good idea of what is in your stocks."

But the idea of green accounting hasn't been without controversy or opponents. In 2006, China dropped an attempt to develop a green GDP index, saying it was too difficult to accurately calculate a figure for GDP adjusted for the impact on the environment.

Historic U.S. disinterest
Yet Talbert of the World Resources Institute said Chinese leaders were primarily concerned to find that factoring in environmental degradation meant the double-digit growth rates they had been touting plummeted to 2 percent.

Mary Ann Lucille Sering, secretary of the Philippines Climate Change Commission, said countries like hers that are eyeing how climate change might affect water availability want and need the tools to make new decisions about resource allocation. But, she said, many officials still need convincing.

"There's a lot of interest, but what we're up against is the current paradigm, which is very much entrenched. And there's still a demand for proof in concept. Are we willing to be a guinea pig in this area which might impact GDP growth?" Sering said.

The United States, meanwhile, does not do natural capital accounting on a national level, something Talbert attributed to a historic U.S. disinterest in major environmental initiatives.

"In the whole world of sustainable development, the U.S. is not one of the leaders, and it never has been. It's on the margins of the international sustainable world for many years now," he said.

Whether Rio+20 marks a turning point remains to be seen. The draft agenda calls for directing the U.N. secretary-general to initiate a program to get as many countries as possible to use natural capital accounts, though it gives little formal direction. But activists said they believe inertia on green accounting is finally giving way to action. Within five years, Talbert said, he's hoping the value of clean water, intact forests, wetland and oceans is cited routinely.

"At the very minimum," he said, "every time we hear reports about GDP growth on the news, we should also hear how sustainable growth really is."

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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