IB Environmental systems and societies Hl.bb Environmental Accounting Notes

Environmental Accounting: Putting a Price on Nature

1. It helps governments, businesses, and policymakers make informed sustainable decisions.
2. It exposes the cost of environmental damage and resource depletion that standard accounts leave out.

Three Types of Environmental Accounting

1. Corporate accounting
   1. Firms track their own impact, such as pollution levels and resource use.
2. National accounting
   1. Countries fold resource depletion into national figures, as the Genuine Progress Indicator adjusts GDP for environmental costs.
3. Natural capital accounting
   1. Values ecosystem services such as clean air, water, and biodiversity as economic assets.

Why Environmental Accounting Is So Hard

1. No clear market price
   1. Services like clean air and biodiversity have no obvious price tag.
2. No agreed method
   1. Countries and industries use different frameworks, so figures are hard to compare.
3. Competing goals
   1. Short-term profit often overrides long-term sustainability.
   2. Firms may greenwash their figures and governments may under-report damage to protect growth numbers.

Use vs Non-Use Value: Two Ways Nature Is Worth Something

Nature can hold use value from being used, or non-use value that exists independent of any use.

1. Direct use value
   1. Comes from consuming or extracting a resource, such as timber and fuelwood.
2. Indirect use value
   1. Comes from ecosystem services without extraction, such as wetlands regulating floods.

Non-Use Value: Worth Beyond Any Use

1. Intrinsic value
   1. Nature has worth regardless of human use, such as a rare species no one interacts with.
2. Option value
   1. The potential future use of a resource, such as an undiscovered rainforest medicine.
3. Bequest value
   1. The worth of leaving nature intact for future generations.

Measuring Non-Use Value: Willingness to Pay

1. Because non-use value has no market price, economists rely on surveys.

The Contingent Valuation Method

1. The Contingent Valuation Method (CVM) asks people how much they would pay to protect a resource.
2. It can also ask how much compensation they would need to accept its loss.