Environmental Accounting: Valuing Natural Resources
Definition
Environmental accounting
Environmental accounting (also called green accounting) is the process of assigning economic value to natural resources, environmental degradation, and ecosystem services.
Purpose:
- Helps governments, businesses, and policymakers make informed sustainable decisions.
- Highlights the cost of environmental damage and resource depletion in economic planning.
- Supports the idea that economic growth should include environmental impact assessments.
Types of Environmental Accounting
Corporate Environmental Accounting
Companies track their environmental impact (e.g., pollution levels, resource use).Example
A factory calculates the cost of air and water pollution it generates.
National Environmental Accounting
Countries integrate natural resource depletion into GDP calculations.Example
The Genuine Progress Indicator (GPI) adjusts GDP by subtracting environmental costs.
Natural Capital Accounting
Evaluates ecosystem services (e.g., clean air, water, biodiversity) as economic assets.Example
Forests are valued not just for timber, but also for carbon sequestration and oxygen production.
Challenges in Environmental Accounting
Difficulty in Valuing Natural Resources
- Some ecosystem services (e.g., clean air, biodiversity) don’t have clear market prices.
- Stakeholders (governments, corporations, and local communities) disagree on valuation methods.
Lack of Standardized Accounting Methods
- There is no global consensus on how to measure environmental costs accurately.
- Different countries and industries use different frameworks, making comparisons difficult.
Conflicts Between Economic & Environmental Goals
- Short-term economic gains often overshadow long-term sustainability.
- Industries may resist environmental regulations due to cost concerns.
Political & Corporate Resistance
- Some businesses greenwash environmental accounting to appear sustainable without real change.
