Adjusted forest accounts for China

Abstract

So far there is no unified rule on the incorporation of degradation of environmental capital into national income accounting procedure. Net national product is currently derived by deducting from gross product the depreciation of man-made capital only. Deducting depreciation of natural capital in national income can provide a better indicator of the `green' net national product. The contribution of this paper is to show how one can use two methodologies in deriving `green' net national product. This paper estimates the depreciation of forest resources in national accounts for China from 1976 to 1992. The procedure of calculation is described in the paper by valuing the changes of forest resources. Two alternative approaches are used: the net price approach and the user cost approach. By using the net price approach both physical and monetary accounts are computed to derive forest depreciation. In the user cost approach 0, 5 and 10% discount rates are used to derive the depreciation. Measuring sustainability is proceeded by the level of net investment. Both approaches show that the development of the forest sector is not sustainable due to the negative net investment.