Jean Louis Weber
This is an advance summary of a forthcoming article in the Oxford Research Encyclopedia of Environmental Science. Please check back later for the full article.
Environmental accounting is an attempt to broaden the scope of the accounting frameworks used to assess economic performance in order to take stock of elements that are not adequately recorded in books. Although national accounting has been the driving force, environmental accounting encompasses all accounting frameworks, including national accounts, financial accounting standards, and accounts established to assess the costs and benefits of plans and projects.
There are several approaches to economic environmental accounting at the national level. One purpose is the calculation of the genuine economic welfare, by taking into account the losses from environmental damages caused by economic activity and the gains from unrecorded services provided by nature. Particular attention is given here to the calculation of a “Green GDP” or “Adjusted National Income” and/or “Genuine Savings,” as well as natural assets value and depletion. A different view considers the damages caused to renewable natural capital and the resulting maintenance and restoration costs. Beside approaches of benefits and costs, more descriptive accounts in physical units are produced with the purpose of assessing resource use efficiency. With regard to natural assets, the focus can be on the ones directly used by the economy, or more broadly on the ecosystem capacity to deliver services, ecosystem resilience, and its possible degradation.
These different approaches are not necessarily contradictory, although controversies are noted in the literature. The discussion focuses on issues such as the legitimacy of combining values obtained with shadow prices (needed to value the elements that are not priced by the market) with the transaction values recorded in the national accounts, the relative importance of accounts in monetary vs. physical units, and ultimately, the goals for environmental accounting. These goals include assessing the sustainability of the economy in terms of conservation (or increase) of the net income flow and total economic wealth (the weak sustainability paradigm) in relation to the sustainability of the ecosystem, which supports livelihoods and well-being in the broader sense (strong sustainability).
In 2012, the UN Statistical Commission adopted an international statistical standard called SEEA-CF (System of Environmental-Economic Accounting Central Framework). The SEEA-CF covers only items that are mature enough to be proposed for implementation by national statistical offices. A second volume on SEEA-Experimental Ecosystem Accounting (EEA) was added in 2013, to supplement the SEEA-CF with a research agenda and the development of tests. Experiments of the SEEA-EEA are developing at the initiative of the World Bank (WAVES), UNEP (VANTAGE, ProEcoServ), or the CBD (SEEA-ENCA-QSP).
Beside the SEEA, and in relation to it, we can mention other environmental accounting frameworks, developed for specific purposes: “material flow accounting” (MFA), which is now a regular framework at the OECD; the IPCC guidelines for UNFCCC reporting; the Ecological Footprint; and the Millennium Ecosystem Assessment of 2005. Environmental accounting is also a subject of interest for business, both as a way to assess impacts, costs, and benefits of projects and to define new accounting standards to assess long-term performance and risks.
Vincent Moreau and Guillaume Massard
The concept of metabolism takes root in biology and ecology as a systematic way to account for material flows in organisms and ecosystems. Early applications of the concept attempted to quantify the amount of water and food the human body processes to live and sustain itself. Similarly, ecologists have long studied the metabolism of critical substances and nutrients in ecological succession towards climax. With industrialization, the material and energy requirements of modern economic activities have grown exponentially, together with emissions to the air, water and soil. From an analogy with ecosystems, the concept of metabolism grew into an analytical methodology for economic systems.
Research in the field of material flow analysis has developed approaches to modeling economic systems by assessing the stocks and flows of substances and materials for systems defined in space and time. Material flow analysis encompasses different methods: industrial and urban metabolism, input–output analysis, economy-wide material flow accounting, socioeconomic metabolism, and more recently material flow cost accounting. Each method has specific scales, reference substances such as metals, and indicators such as concentration. A material flow analysis study usually consists of a total of four consecutive steps: (a) system definition, (b) data acquisition, (c) calculation, and (d) interpretation. The law of conservation of mass underlies every application, which implies that all material flows, as well as stocks, must be accounted for.
In the early 21st century, material depletion, accumulation, and recycling are well-established cases of material flow analysis. Diagnostics and forecasts, as well as historical or backcast analyses, are ideally performed in a material flow analysis, to identify shifts in material consumption for product life cycles or physical accounting and to evaluate the material and energy performance of specific systems.
In practice, material flow analysis supports policy and decision making in urban planning, energy planning, economic and environmental performance, development of industrial symbiosis and eco industrial parks, closing material loops and circular economy, pollution remediation/control and material and energy supply security. Although material flow analysis assesses the amount and fate of materials and energy rather than their environmental or human health impacts, a tacit assumption states that reduced material throughputs limit such impacts.