ENVIRONMENTAL ACCOUNTING: Current Status and Options for SAIs ENVIRONMENTAL ACCOUNTING Environmental accounting is a systematic process of organizing

information of natural resources regarding their uses and value as environmental assets, as well as the related expenditures thereof. It is used as a medium to provide link between environmental data and economic data. KEY DEVELOPMENT The UN set up the World Commission on Environment and Development. It examined whether nations were misusing their natural and environmental resources and issued a report entitled Our Common Future in 1987. The report talks about the concept of sustainable development and defined it as the development that meets the needs of the present without compromising the ability of future generations to meet their own needs. ADVANTAGES Provide policymakers with ecological indicators and descriptive statistics to monitor the environments contribution to the economy and the economys impact to the environment. Help policymakers for better management of natural resources; Management may use it as an effective decision-making tool for better resource management, assessment of environmental pressure, identification of regulations and taxes implications and analysis of the current issue popularly known as climate change.

ILLUSTRATION. Comprehensive information on fish stocks and the extent to which fish stocks
are being depleted could help fishery managers to identify appropriate harvest limits and provide policymakers with better information for use in negotiating international fishing treaties. FOUR TYPES OF ENVIRONMENTAL ACCOUNTS 1. NATURAL RESOURCE ASSET ACCOUNT. Primary deals with the number of natural resources including its opening, closing, and changes to stocks which is classified into two types: changes due to economic activity and changes due to natural processes. a. PHYSICAL ASSET ACCOUNTS. Show the amount of the natural resources using its physical aspect. This will help the management monitor and assess the related

ENVIRONMENTAL ACCOUNTING: Current Status and Options for SAIs effects of their implemented policies on natural resources. Example: Land account that tracks the conversion of agricultural lands to urban settlements. b. MONETARY ASSET ACCOUNTS. Measure the natural resources in terms of monetary value for determination of total national wealth of a resource. Example: Forest account that tracks the value of native forests.

2.

POLLUTION AND MATERIAL PHYSICAL FLOW ACCOUNTS. Provides data about the resources used (energy, water, materials) in economic activities and the resulting residuals (solid waste, air emission, wastewater) generated on these activities. It includes information about materials and pollution from point of origin to point of usage. Example: Time series accounts for tracking trends in carbon dioxide emissions and energy use over time. Physical Flow accounts are used to identify the sources of environmental degradation and to assess alternatives for alleviating them. It can also be an indicator that shows whether national goals, such as specified level of greenhouse gas emissions are being achieved.

3. MONETARY AND HYBRID ACCOUNTS. Focus solely on the expenditures and taxes associated with management and protection of natural resources including the economic contribution of environmental services industries. These are the fees collected by the government from the industries that are levied on forestry, fisheries and mining sites. Funds that are used to implement solid waste management and water treatment are also included. There are five types of monetary and hybrid accounts: a. ENVIRONMENTAL
ACCOUNTS. PROTECTION AND RESOURCE MANAGEMENT EXPENDITURE

These are the expenses incurred by the households, industries and

government to manage and protect natural resources. b. ENVIRONMENTAL GOODS AND SERVICES INDUSTRY ACCOUNTS. Taking into account the environmental goods and services that will affect the economy through Gross Domestic Product, exports and employment. c. ENVIRONMENTAL RESOURCE AND TAX ACCOUNTS. Taxes collected by the government that are levied upon industries for usage of natural resources and pollution discharge. d. HYBRID FLOW ACCOUNTS. Integration of physical and monetary flow accounts.

ENVIRONMENTAL ACCOUNTING: Current Status and Options for SAIs 4. ENVIRONMENTALLY-ADJUSTED MACROECONOMIC AGGREGATES. Used to evaluate the overall environmental health and economic progress to include the monetary value of declines in resource stocks from environmental extraction and depletion. BENEFITS OF ENVIRONMENTAL ACCOUNTING TO SAIs Environmental accounting may be used as an important tool in making audit programs for environmental audit. For example, flow accounts for air emissions could help SAIs determine if acid rain control policies instituted by their governments are succeeding in reducing harmful pollutants. Other benefits are the following: Assessment of the effect of control policies implemented by the management; Useful in a situation that demands a quick response, provided that the company will provide capital for data gathering; Environmental accounts are more consistent compare to environment statistics in terms of methodologies and concepts thus, enhancing the evaluation of the industry. STATUS OF INTERNATIONAL EFFORTS TO DEVELOP STANDARD The UN and other international institutions have recommended that countries develop environmental accounts to respond to the need for consistent environmental information to provide policymakers in monitoring the interaction between the economy and the environment. The handbook System of Environmental and Economic Accounts 2003 (SEEA-2003) provides framework for bringing order and comparability to environmental statistics to facilitate international comparisons. In connection with this, they also released series of publications to support SEEA: Handbook of National Accounting: Integrated Environmental and Economic Accounting for Fisheries (SEEAF) in 2004; System of Environmental Accounting for Water (SEEAW) in 2007; System of Environmental Economic Accounting for Energy (SEEA-E); System of Environmental-Economic Accounting for Material Flow Accounts (SEEA-MFA)

ENVIRONMENTAL ACCOUNTING: Current Status and Options for SAIs ONGOING ENVIRONMENTAL ACCOUNTING Many industrialized countries like Australia, Canada, France, as well as the Philippines had established an environmental accounting program. Several countries have developed their own methods, while others have adopted environmental accounting techniques and used environmental accounts for policy purposes. In the Philippines, the Environment and Natural Resource Accounting Project (ENRAP) was formed in 1991. It used several accounts, such as the GNP for the depreciation of forests and accounting for the production of fuelwood and food by rural households, which were considered important because of their potential links to deforestation. The country developed resource stock accounts for forests, minerals, fisheries and soil and estimated cost of preventing air and water pollution. IMPACTS OF ENVIRONMENTAL ACCOUNTING TO IMPLEMENTING COUNTRIES One study determined that increasing environmental controls (enforcing laws more strictly) would not substantially reduce business competitiveness for the majority of industries; Liberalizing trade while using current technologies will create more pollution. CLIMATE CHANGE INDICATORS Environmental accounts play a significant role in the development and evaluation of policy instruments and regulations. Since climate change is linked to economic growth, governments must be able to connect economics to environmental data to develop policies that allow for economic growth while supporting sustainability. As governments understand the driving forces of climate change, appropriate policy responses can be developed. Environmental accounts can indicate climate change by the following: Accounts of greenhouse gas stocks and flows can illuminate the impacts of policy initiatives that are intended to mitigate climate change; Forest asset accounts can be used to help estimate the change in carbon stocks since forests act as carbon sinks; Land use and land cover accounts can be useful for assessing the impacts of climate change, since land cover affects the global climate system through various biological processes. 4

ENVIRONMENTAL ACCOUNTING: Current Status and Options for SAIs o Changes in land cover due to deforestation and forest fires alter ecosystems and release greenhouse gases to the atmosphere; Water accounts, since climate change is expected to decrease the availability of fresh water while demand rises, resulting to water scarcity. Fish accounts, since climate change is expected to alter the temperature, salinity, and acidity of water, thus affecting fish stocks. OPTIONS FOR SAIs In countries that have developed environmental accounts, SAIs can take the following actions: Audit the reliability of environmental accounts; Use environmental accounts in program audits to assess the effectiveness of environmental policies and programs, whether the government programs are complying with national laws; Assess the extent to which program managers are using environmental accounts in decision-making and identify the opportunities for managers to enhance their use of the accounts.