Cost Accounting of Environmental Degradation by Pollution Loss Method

Abstract

The biosphere provides many natural processes to maintain a healthy and sustainable environment for human life, which is known as ecosystem services. Economic theory often disregards the impact of its decisions on the biosphere or assumes unlimited resources or capacity for its needs. However, whenever humans alter the ecosystem, we potentially limit or remove ecosystem services. While individually, these activities may seem inconsequential to the total ability of the biosphere’s functioning potential, cumulatively they are directly impacting the biodiversity and causing environmental degradation. Many scholars mostly adopt Costanza's method in the evaluation of ecosystem service function. However, the evaluation of ecosystem service function is static and not spatial, which is not intuitive enough. In this paper, the cost accounting of environmental degradation using the pollution loss method is summarized. Considering that the loss caused by pollution is often unmanageable and the cost of pollution control is often different from the loss caused by pollution, the pollution loss method is adopted in the selection of pollution accounting method instead of the traditional cost method. The InVEST model is introduced when calculating specific indicators. The model is very accurate to calculate the loss of environmental damage, has great significance for our future cost of protecting the environment but also saving environmental protection.