New System of National Accounts has Global Reach
Taking the Environment into Account

New System of National Accounts has Global Reach

UNITED NATIONS, Feb 1 1994 (IPS) - A new, revised System of National Accounts (SNA), introduced Tuesday by the World Bank and other U.N. agencies, is expected to provide a more accurate picture of national economies around the world.

The new SNA will take into account social factors, such as

population and poverty, and environmental concerns, including costs of ecological degradation, according to the World Bank.

Described as the main accounting framework used in economic analysis, the SNA is a widely accepted method of recording the various stocks and flows within an economy. Introduced during World War Two, it was last revised 25 years ago.

The revision of the SNA was coordinated by a special inter-agency group comprising the United Nations, the World Bank, the Organisation for Economic Cooperation and Development (OECD), the European Commission and the International Monetary Fund (IMF).

Global in reach, the new SNA will permit better comparisons of economic data among virtually all countries, according to the Bank.

This has come about largely through the end of the Cold War and the decision by most former communist countries to adopt the SNA and abandon the Material Product System which they used previously.

Environmental concerns are recognised in the new SNA which describes a system for integrating environmental and economic accounting.

It can also address issues such as the use of depleting natural resources and the costs of environmental degradation.

The World Bank said Tuesday that the revised SNA should provide officials with more accurate pictures of their economies and help them choose more effective policies.

Experts from both developing and developed countries, including some from the fomerly centrally planned economies of Eastern and Central Europe, participated in the revision.

The World Bank says it will promote the use of the revised SNA by its borrowing member countries and will continue to work with its partners in refining it further. (end/ips/td/yjc/94)

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The System of National Accounts (SNA) is an information system that produces macroeconomic indicators such as GDP and national income. In its present form, the SNA provides di storted information and indicators that lead to decisions encouraging natural resource depletion and deg radation. The system must therefore be fundamentally reformed to give full recognition to the values of t he environment. WWF is working with others to build up an international momentum for integrating the env ironment into the SNA.

The SNA is a set of internationally agreed guidelines for recording the values an d incomes generated by the production of goods and services on a national level. The information prepare d under the SNA, such as the levels of GDP or national income, is used by almost all countries as a b asic framework for formulating economic policies, which have major implications for the use of natural resources.

In its present form, the SNA provides distorted information about the values and incomes. It fails to account as costs the depletion and degradation of natural resources resulting from p roduction and, therefore, exaggerates the values and incomes created by production.

Distorted information leads to decisions that can be disastrous to conservation, to the economy, and to the quality of human life. Resource intensive activities and heavily polluting in dustries are encouraged or not constrained because their financial costs are superficially low. Environmenta l costs, which impair the physical basis for future production, are not accounted for. Such distortions en courage unsustainable activities.

Over the last years, international agencies and several governments have made pro gress in estimating the values of environmental costs. A basic framework is now in place with the public ation of the UN Handbook on Integrated Environmental and Economic Accounting. Methodologies for comp uting environmental costs are available. Several case studies have been carried out by int ernational agencies, national governments, research institutes, and NGOs.

Still, the fundamental problem has not been solved. The SNA still provides distor ted information about values and income. On the basis of the current economic and forthcoming environmenta l information systems, policy makers are, on the one hand, not able to make a trade-off between ec onomic and environmental gains and losses, while on the other hand they are being misguided by an over-estimation of a country's income.

There is still no real commitment to integrate the environment into the SNA core accounts and policy processes. International efforts have been poorly coordinated, disseminated, and ass essed. Communications among major agencies has been ineffective. Publications are often inc omprehensible to the public and policy makers. Financial resources for this specific topic have been insufficient.

WWF is concerned about the unsustainable resource use as a result of misguided ec onomic policies and actions. It has been actively advocating the reform of the SNA over the last few yea rs. In 1992, it published "Methodologies for the Calculation of Sustainable National Income" written by Ruefie Hueting of the Netherlands' Central Bureau of Statistics. It has also been involved in vario us international fora urging the integration of the environmental values into the SNA.

At present, WWF is carrying out a survey of international efforts in this area. I t aims to provide comprehensible information to the public and policy makers so as to facilitate the r eform process. It also tries to assess the methodological issues with a view to promoting an internationall y comparable approach which could prompt urgently needed policy change.

In September 1993, WWF and the Club of Rome launched a joint effort to advance th e course of the SNA reform. The Club of Rome is an international group of distinguished businessmen, statesmen, and scientists. It is known for such landmark works as "Limits to Growth" and "Beyond th e Limits", which provoked intense debates on the relationship between economic growth and the finite capacity of the environment and prompted global actions towards sustainability. Similarly, the prese nt joint effort of WWF and the Club of Rome is to generate political momentum and concrete actions for the reform of the SNA. This effort consists of a report "Towards a Sustainable National Income" be ing prepared by leading international experts and to be launched at a joint international conference to be held in April 1995, aimed at building the momentum for the reform. The European Parliament has agr eed to co-sponsor the Conference.

The proposed conference aims to generate an international momentum for taking the environment into national accounts and making the SNA better reflect the true costs of production and thus the national income, thus providing a more accurate basis for decision-making. It targets at a Eu ropean audience but has an international outreach and coverage. Specifically, the conference has the fol lowing objectives):

• To promote European and other in international, regional, and national efforts in incorporating environmental values into the System of National Accounts (SNA) and into economic d ecision-making processes.
• To mobilize European and other international agencies, governments, national accou ntants, environmental statisticians, economists, research institutes, NGOs, and the media, t o actively support such efforts.
• To provide information to target audiences on the linkage between the SNA and the concerns for sustainability, the current status, and country experiences.
• To launch a Club of Rome report "Towards a Sustainable National Income" and to dis tribute a WWF survey report on the subject.
• To formulate an Action Plan addressed to the international community, setting targ ets for steps to be taken by European agencies and governments as an example to other regions of the world.

The conference is strongly action-oriented. Internationally prominent leaders wil l analyze the policy relevance of the issue. Working sessions are tailored to the needs of different audi ences for basic information, country experiences, and existing methodologies. The conference should serve as a catalyst in mobilizing actions in the following areas.

1. Disseminating related information to governments, development agencies, national statistical offices, research institutes, the NGO community and other concerned parties.
2. Facilitating open debates on methodological issues and on policy application of e nvironmentally adjusted economic indicators
3. Integrating environmental accounting into the SNA and developing an international ly comparable framework for measuring the economic aspect of sustainability.
4. Strengthening coordination among international agencies in research activities, p ilot projects, country or regional focus, and application of adjusted economic indicators within each agency.
5. Linking environmental data collection with monetary valuation to the extent possi ble and facilitating dialogues among natural scientists, economists, and statisticians.
6. Providing financial and technical support to national statistical offices, includ ing, data collection, training, pilot projects, and regional and sub-regional centres of expertise.
7. Including environmental accounting in national sustainability strategies and repo rts and using adjusted economic indicators for guiding economic policies that contribute to sustainability.
8. Applying environmental accounting techniques at micro and international economic levels, ie. in cost/benefit analysis of projects and in the calculation of international balance of payments.

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