(Article) CSM - June 2013: Green National Accounting System in India

Green National Accounting System in India

Government in 2011 had constituted an expert group under the chairmanship of Pratha Dasgupta from the Cambridge University to develop a framework for green national accounts, identification of data gaps and preparation of a road map for its implementation. The system of green national accounting would take into account the environmental costs of development and reflect the use of precious depletable natural resources in the process of generating national income. The need for green national accounts emerged as there was a growing recognition that contemporary national accounts were becoming unsatisfactory basis for economic evaluation. “The qualifier ‘green’ signals that we should be especially concerned about the absence of information on society’s use of the natural environment.” Double-digit GDP fixation is threatening India’s biodiversity and its long-term growth and security. Green accounting methods have estimated the loss of ecological wealth in India. GDP measures the value of output produced within a country over a certain time period. However, any depreciation measurements used, will account only for manmade capital and not the negative impact of growth on valuable natural capital, such as water, land, forests, biodiversity and the resulting negative effects on human health and welfare. Over the course of the last fifty years, India has lost over half its forests, 40 per cent of its mangroves and a significant part of its wetlands. At least 40 species of plants and animals have become extinct with several hundred more endangered.

In “green accounting” approach national accounts are adjusted to include the value of nature´s goods and services. Mr Jairam Ramesh, the former environment minister, advocated greening India’s national accounts by 2015 and encouraged policy makers to recognise the trade-off between pursuing high growth economic policies against the extensive impact they could have on India’s natural capital. The Green Indian States Trust (GIST) which, in 2003 unleashed a series of environmentally adjusted accounts under the Green Accounting for Indian States Project. According to their results, the loss of forest ecological services (i.e.soil erosion prevention, flood control and ground water augmentation) over three years (2001-03) due to declining dense forests was estimated at an astounding 1.1 per cent of GDP. According to GIST´s latest results, the North-Eastern states continue to be most affected, particularly Arunachal Pradesh and Mizoram where the loss of forest ecological services is more than 12 per cent of their NSDP.

India expects to put in place in five years a system of green national accounting that would take into account the environmental costs of development and reflect the use of precious depletable natural resources in the process of generating national income. “In the last few months, I have tried to set the ball rolling so that by 2015 at least we can have a system of green national accounting,” Union Minister of State for Environment and Forests Jairam Ramesh said here. Economists estimate gross domestic product (GDP) as a broad measure of national income, while net domestic product (NDP) accounts for the use of physical capital. “But as yet, we have no generally accepted system to convert gross domestic product into green domestic product that would reflect the use up of precious depletable natural resources in the process of generating national income”, he said. Economists all over the world have been at work for quite some time on developing a robust system of green national accounting but “we are not there as yet”. “Ideally, if we can report both gross domestic product and green domestic product, we will get a better picture of the trade-offs involved in the process of economic growth”, the Minister added. India expects to put in place in five years a system of green national accounting that would take into account the environmental costs of development and reflect the use of precious depletable natural resources in the process of generating national income.

A new global partnership to help developing countries integrate the economics of ecosystems into national accounting systems has been launched by the World Bank. The alarming loss of biological diversity around the world is attributable to the lack of proper valuation of the ecosystems and the services they provide. The valuation and its integration into national accounts are expected to lead to better management of natural environments. According to Mr Robert B. Zoellick, President, World Bank Group, the natural wealth of nations should be a capital asset valued in combination with its financial capital, manufactured capital and human capital. The national accounts should reflect the vital carbon storage services that forests provide and the coastal protection values that come from coral reefs and mangroves.

The first phase of the partnership to ‘green’ national accounts has been launched starting with India and Colombia, which will be in a group of six to 10 countries. A forthcoming World Bank Publication, titled ‘The Changing Wealth of Nations’, states that the commercial value of farmlands, forests, minerals and energy worldwide is more than $44 trillion, of which, the developing countries account for $29 trillion. But, there is more value in the services provided by ecosystems such as forests, like hydrology regulation, soil retention and pollination. The partnership initiative builds on ‘The Economics of Ecosystems and Biodiversity’ (TEEB) project of the United Nations Environment Programme (UNEP). It will include developing and developed countries, nongovernmental organisations and the global organisation for legislators. During the initial five-year pilot period, the programme will focus on how countries can quantify the ecosystems and their services in terms of income and asset values; developing ways to incorporate these values into policies on wealth and economic growth; and evolve guidelines for implementation of the valuations worldwide, according to a World Bank report. The feasibility studies to identify priority ecosystems will start soon in India and Colombia, while many other countries in Africa, Asia, Latin America and Central Europe have evinced interest to become partners in the pilot programme. India and Brazil lead the number of countries who are willing to draw on findings from the three-year study project The Economics of Ecosystems and Biodiversity (TEEB) to make their economies more environmentfriendly and effectively use the services of nature. The Brazilian and Indian governments are among those keen to use findings from The Economics of Ecosystems and Biodiversity (Teeb) project. Final results from the three-year study were unveiled here at the UN Convention on Biological Diversity meeting.Nature’s services must be counted if they are to be valued, its leader said.

Gyanesh Pandey

 

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