FROM GREEN GNP TO THE SUSTAINABILITY GAP: RECENT DEVELOPMENTS IN NATIONAL ENVIRONMENTAL ECONOMIC ACCOUNTING

Abstract

It is now generally accepted that the national accounts which give a comprehensive overview of national economic activity should also account for the way the economy uses, and often has a negative impact on, the environment. However, a number of areas of uncertainty and disagreement remain as to how this should be carried out, involving such issues as whether Net National Product (NNP) is a measure of production or of economic welfare, whether environmental damage can be adequately valued for the purpose of the national accounts, how the macroeconomic aggregates can be adjusted for environmental impacts, and the correct treatment of defensive expenditures. On the basis of a review of these and other issues, the paper's principal conclusion is that there is no methodologically sound and operationally feasible way of deriving a figure for Green GNP by subtracting figures pertaining to environmental degradation or depletion from GNP, but that it is possible to calculate a "sustainability gap" for the economy, in either physical or monetary terms. When expressed as a ratio of GDP, this gives an indicator of the "unsustainability intensity" of economic activity, comparable to the energy intensity indicator that is already in wide use.