Noritoshi Ariyoshi Faculty of Environmental Studies Nagasaki University The Development of Japanese NAMEA International Workshop for Interactive Analysis on Economy and Environment Cabinet Office, Government of Japan, 4 March 2006 The Purpose of Accounting is not Compilation itself but Application to Policy
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Noritoshi Ariyoshi Faculty of Environmental Studies Nagasaki University The Development of Japanese NAMEA International Workshop for Interactive Analysis.
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Noritoshi AriyoshiFaculty of Environmental Studies
Nagasaki University
The Development of Japanese NAMEA
International Workshopfor Interactive Analysis on Economy and Environment
Cabinet Office, Government of Japan, 4 March 2006
The Purpose of Accounting isnot Compilation itself
but Application to Policy
2
CONTENTS
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan
2. Japanese SEEA : Outline and the controversial points
3. Japanese NAMEA : Outline, Features, and Indicators
4. Issues for the Future
3
(fiscal year) First Stage (92-94) Second Stage (95-97) Third Stage (98-00) Fourth Stage (01-03) Fifth Stage (04- )Themes Basic Research Trial Estimation Extension Development Application
Subjects Study of handbook of SEEA93Trial estimation
of Japanese SEEAExtension of Japanese SEEA
Developmentof policy-oriented accounting
Application of Japanese NAMEAto policy analysis and
development of Regional NAMEA
1) Adoption of SEEA ver.IV.21) Improvement of precision ofenvironmental data
1) Compilation of waste account
2) Study of estimation methodsfor environmental cost
2) Establishment of estimationmethods for actual and imputedenvironmental costs
2) Re-estimation according tocompilation of EPEA and wasteaccount
3) Design of Japanese accountingframework based on SEEA93
3) Retroactive estimation andrealisation for 1970, 75, 80, 85,90, and 95
3) Traial estimation of imputedenvironmental cost caused byimport
4) First trial estimation for 1985and 1990
4) Compilation of physical table ofimputed environmental costs
4) Re-estimation based ontransition to SNA93
1) Study of EPEA by Eurostat 1) Study of EPEA by SEEA20031) Compilation of other tables ofEPEA
2) First trial estimation of EPEA2) Compilation of Supply and UseTable for EnvironmentalProtection Services
2) Integration of EPEA toJapanese NAMEA
1) Study of original NAMEA bythe Netherlands
1) Integration of EPEA toJapanese NAMEA
2) Design of Japanese NAMEAframework
2) Application of JapaneseNAMEA to policy analysis
3) First trial estimation for 1990,1995 and 20004) Proposal of environmentalefficiency improvement index
1) Preliminary study of ResionalNAMEA2) Pailot study of regional NAMEAfor Hyogo Prefecture
Regional NAMEA
Table 1 Overview of Research Activities on J apanese System for Environmental and Economic Accounting
JapaneseSEEA
Japanese NAMEA(Hybrid Accounting System integrating Environmental Pressures and Economic Activities: HASEPEA)
Japanese EPEA( Environmental Protection Expenditure Account)
4
92 ~ 00: Trial Estimation on Japanese SEEA based on version .2 of UN’s SEEA93*, Ⅳ(maintenance cost approach)
*SEEA is an acronym for System for Integrate Environmental and Economic Accounting.
*See United Nations (1993) for SEEA93
*See United Nations (2003) for SEEA2003
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan (see Table 1)
5
98 ~ 03 : Trial Estimation of Japanese EPEA* based on SERIEE-1994 Version (98-00),and Supply and Use Table for Environmental Protection Services based on Chapter 5 of UN’s SEEA2003* (00 ~ 03)
*EPEA is an acronym for Environmental Protection Expenditure Account
*See Eurostat (1994) and Chapter 5 of United Nations (2003), for EPEA
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan (see Table 1)
(continued)
6
01 ~ 03 : Design and Trial Estimation on Japanese NAMEA based on original NAMEA* by the Netherlands.
*NAMEA is an acronym for National Accounting Matrix including Environmental Accounts.
*See de Haan M. and S.J. Keuning (1996) and Chap. 2, 4 etc. of United Nations (2003)
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan (see Table 1)
(continued)
7
04 ~ 06:
1) Application of Japanese NAMEA to Policy Analysis (research on interactive analysis on economy and environment)
2) Pilot Study on Regional (Prefectural) NAMEA
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan (see Table 1)
(continued)
8
CONTENTS
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan
2. Japanese SEEA : Outline and the controversial points
3. Japanese NAMEA : Outline, Features, and Indicators
Notes) This table is a summary of tabel 2.3.1.7-5 of Research Report on Establishment of Integrated Environmental and Economic Accounting by J apan Research Institute,commissioned from Cabinet Office of J apan, 2001. In table, "-" shows a cell which does not exist conceptually, and "・・" shows a cell which cannot estimate.
Table 2 J apanese SEEA (1995) - Summary Table -
Impu
ted
envi
ronm
enta
l cos
ts
Environmentallyadjusted netdomestic product(EDP)
Reconciliation items on accumulation of naturalassets
Goods and services related to environment
Other goods and services
Opening stocks
Imputedenvironmenta
l costs
Sum of imputed environmental costs (-) Sum of deterioration of non-natural=
Economicindicator
Environmentalindicator(2) What does EDP indicate ?
(3) What kinds of problemsdoes maintenance costapproach cause ?(4) What do imputedenvironmental cost bymaintenance cost approachmean ?
(1) Outline of Japanese SEEA
10
1) It’s based on version .2 (Maintenance Ⅳcost approach) of UN’s SEEA93,
2) Maintenance cost approach is indirect valuation method which evaluates environmental pressure by imputed cost needed if some environmental measure is taken.
(1) Outline of Japanese SEEA
2. Japanese SEEA : an Outline and the Controversial Points
11
3) Maintenance cost approach chooses one of possible environmental measures, and calculates imputed environmental cost as follows:
4) Imputed environmental costs = (maintenance costs / eliminated environmental pressures)× national total of environmental pressures.
1) If NDP has larger growth rate than imputed environmental cost, EDP is increasing while imputed environmental cost is increasing. Therefore, EDP is not adequate indicator for sustainability.
2) We need other indicators such as OECD’s decoupling indicator.
(2) What does EDP indicate?
Does Larger EDP bring more sustainable economy ?
13
1) Choice of environmental measures : Different imputed environmental costs are derived by what kinds of environmental measures are chosen.
2) Zero-emission principle : Imputed environmental costs are calculated from a point of view of zero-emission principle.
(3) What kinds of problems does maintenance cost approach cause?
14
3) Simple calculation by cost-per-elimination: It does not take account of increasing cost caused by increasing volume of elimination.
4) Maintenance cost approach as a model : This approach is a model and different from ordinary data estimation. If imputed environmental costs are actually paid by producers and consumers, various economic data would be affected. ---- Greened economy GDP!
From Japanese SEEA to Japanese NAMEA !
(3) What kinds of problems does maintenance cost approach cause?
(continued)
15
1) It gives a sketch of actual environmental cost which producers and consumers have to pay if abatement policy for environmental pressure is actually taken
2) Japanese SEEA using maintenance cost approach is an economic accounting which incorporates the response of producers and consumers to environmental policy.
(4) What do imputed environmental cost calculated by maintenance cost approach
mean ? (I thank Prof. Sakuma for his helpful suggestions)
16
3) It gives an interesting policy analysis to simulate influences on various economic activities when producers and consumers pay actually imputed environmental cost in response to environmental policy.
* See Ariyoshi, Sakuma and Taniguchi, 2006
(4) What do imputed environmental cost calculated by maintenance cost approach
mean ?
(continued)
17
CONTENTS
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan
2. Japanese SEEA : Outline and the controversial points
3. Japanese NAMEA : Outline, Features, and Indicators
Note) This is a summary table of the attachment#1-3 of New System of Integrated Environmental and Economic Accounting , Department of National Accounts, Economic and Social Research Institute (ESRI), Cabinet Office ofJ apan, 2004 (http://www.esri.cao.go.jp/jp/sna/kouhyo.html).
Final consumption (purposes)Production (activities)Goods & services (products)
Opening stocks
Fina
l con
sum
ptio
n (p
urpo
se)
Account(classification)
Goo
ds &
ser
vice
s (p
rodu
cts)
Non
-fina
ncia
l ass
ets
(kin
ds)
Final disposition of wasteWastewate
Agricultural land
Changes infishery resources
Processing and recycleof pollutants
Exploitation ofdomestic natural
resources
The potential contributions to Global warming, acidification andEutrophication are expressed in GWP, AEQ and EEQ, respectively. Global Warming Potencials (GWP) CO2 1, N2O 310, CH4 21: : : Acid Equivalents (AEQ) Nox 0.7, So2 , NH3: :1 Eutrophication Equivalents (EEQ) P 3.06, N 0.42: :
Processing of pollutants andexploitationof natural resources
Pressures on natural resources andrestoration of natural resources
Changes in Forests
Chamges inwater esources
Changes innatural
resources
Changes inland use
Contribution to global environmental issues
Contribution to regionalenvironmental issues
B
A
Nationaleconomy
ROW
C
Exploitation of ROW'snatural resourcescaused by imports
Hidden material flowsin domestic area
Hidden material flows inROW caused by imports
汚染物質の排出 Changes in land useEmission of pollutants
Restoration of Natural resources
A-B
Making indicatorsPressures onenvironment
Others
Others
Depletion of energy resources
Others
Hidden material flowsEnvironmental indicators D
Closing stocks
Opening stocks
Environmental indicators
Monetary flows Material flows : Cells for environmental flow dataareas
: Cells for environmental indicator
20
1) It is based on the original NAMEA* by the Netherlands, estimates for 90, 95, and 00
* NAMEA : National Accounting Matrix including Environmental Accounts.
2) It has twofold parallel structure: national accounting matrix (NAM) at monetary term and environmental accounts (EA) at physical term.
3) It has twofold structure of EA : substance accounts and environmental problem accounts.
3. Japanese NAMEA : Outline, Features, and the Problem
(1) Outline of Japanese NAMEA
21
(2) Features of Japanese NAMEAto original NAMEA
1) It attaches the stock accounts to capital accounts and records the various social capitals and environmental protection plants.
2) It estimates the emission of pollutions not only by households, but also by the government.
3) It introduces the land use accounts.
4) It adds coal, forests, water, and fish to the category of natural resources.
22
(2) Features of Japanese NAMEAto original NAMEA
5) It records the depletion of natural resources in the rest of the world caused by imports.
6) It records the hidden material flows induced by domestic activities and imports.
7) It attaches the stock accounts to parts of the environmental theme accounts. Damage from environment to us is caused by deteriorated environmental assets. See page 11 of my paper
Note) This is a summary table of the attachment#1-3 of New System of Integrated Environmental and Economic Accounting , Department of National Accounts, Economic and Social Research Institute (ESRI), Cabinet Office ofJ apan, 2004 (http://www.esri.cao.go.jp/jp/sna/kouhyo.html).
Final consumption (purposes)Production (activities)Goods & services (products)
Opening stocks
Fina
l con
sum
ptio
n (p
urpo
se)
Account(classification)
Goo
ds &
ser
vice
s (p
rodu
cts)
Non
-fina
ncia
l ass
ets
(kin
ds)
Final disposition of wasteWastewate
Agricultural land
Changes infishery resources
Processing and recycleof pollutants
Exploitation ofdomestic natural
resources
The potential contributions to Global warming, acidification andEutrophication are expressed in GWP, AEQ and EEQ, respectively. Global Warming Potencials (GWP) CO2 1, N2O 310, CH4 21: : : Acid Equivalents (AEQ) Nox 0.7, So2 , NH3: :1 Eutrophication Equivalents (EEQ) P 3.06, N 0.42: :
Processing of pollutants andexploitationof natural resources
Pressures on natural resources andrestoration of natural resources
Changes in Forests
Chamges inwater esources
Changes innatural
resources
Changes inland use
Contribution to global environmental issues
Contribution to regionalenvironmental issues
B
A
Nationaleconomy
ROW
C
Exploitation of ROW'snatural resourcescaused by imports
Hidden material flowsin domestic area
Hidden material flows inROW caused by imports
汚染物質の排出 Changes in land useEmission of pollutants
Restoration of Natural resources
A-B
Making indicatorsPressures onenvironment
Others
Others
Depletion of energy resources
Others
Hidden material flowsEnvironmental indicators D
Closing stocks
Opening stocks
Environmental indicators
Monetary flows Material flows : Cells for environmental flow dataareas
: Cells for environmental indicator
1) Stock accounts 7) Stock accounts 3) Land use accounts
4) Natural resources accounts
5) Depletion by imports
2) Emission of pollution by household and government
6) Hidden material flows
Features of Japanese NAMEA to original NAMEA
24
1) Global warming (CO2: approximate estimate)1) Unit 1990 1995 2000Growth rate
1) A forest usually absorbs more volumeof CO2 in the growth period than in themature period. However, the researchteam did not evaluate the fluctuation inforest CO2 absorption capacity becausethere is much uncertainty. If any reliablecalculation result becomes available inthe future, it will be incorporated in theabove tables.2)The research team employedapplicable conversion coefficients in orderto grasp pollutant's contribution toenvironmental problems.
Table 4 Trends of Major Environmental Pollutants based on J apanese NAMEA
Water quality-related substances (T-P, T-N, wastewater)Acidification gases (NOx, SO
2)
Greenhouse gases (CO2, N2O, CH4, HFCS, PFCS, SF6)
CO2 Emission level vs. output
Emission level vs. final consumption
Source)
Total recycled volume
This table is reprinted from Table 3 of New System of Integrated Environmental and Economic Accounting, Department of National Accounts, Economic and Social Research Institute (ESRI), Cabinet Office of Japan,2004 (http://www.esri.cao.go.jp/jp/sna/kouhyo.html).
25
(3) Remarks on Japanese NAMEA
1) EA (environmental accounts) part of NAMEA is recorded in physical term. Therefore, it includes no problems on monetary valuation.
2) Does EA give sufficient information to make environmental policy? In order to adequately understand environmental problems and those priority and to make environmental policy, is it unnecessary to estimate the monetary costs to eliminate environmental pressures and the monetary damage cost caused by environmental pressures?
26
(3) Remarks on Japanese NAMEA
2) (continued) For example, Physical data on the environmental pressure not necessarily represent the seriousness of the environmental issue. ----- See page 12 of my paper
3) It would be important to have both physical and monetary environmental data
1) EEII represents the relationship between economic activities and environmental pressures .
2) OECD calls this type of index "decoupling indicator."
3) EEII does not represent strong sustainability because environmental pressures may be larger than sustainable flow level even if environmental efficiency is improving.
30
(5) Remarks on EEII
4) EEII is flow indicator and not stock indicator. Stock of EP (environmental pressures) is increasing as long as EP occurs every year, even if EP’s growth rate is on the downward trend ( EEII is on the upward trend) year by year.
5) Therefore, the stock of EP probably increases over the sustainable stock level of EP. EEII is efficiency indicator, not necessarily adequate indicator for sustainability.
(continued)
31
(6) Hicks’ Income and Indicator for Sustainability
1) Hicks’ Income is a maximum of weekly outlay which the economic situation at week beginning can be still sustained at the week end. It is ex-ante concept and give a guideline for prudent behavior.
2) Hicks’ Income suggests, as a sustainable indicator, a maximum of National Income which the environmental stocks at beginning of year can be still sustained at end of year.
32
(6) Hicks’ Income and Indicator for Sustainability
3) Can we calculate, at beginning of the year, a maximum use of environmental stocks as a sink of pollutants and as a source of natural resources which the environmental stocks at beginning of year can be still sustained at end of year?
4) Use of environmental stocks is a debt for environmental stocks. We have to use environmental stocks according to plan, as same as financing (borrowing and repaying) on bank
(continued)
33
CONTENTS
1. Overview of Research Activities on Environmental Accounting in Cabinet Office of Japan
2. Japanese SEEA : Outline and the controversial points
3. Japanese NAMEA : Outline, Features, and Indicators
4. Issues for the Future
34
4. Issues for the future
1) Further improvements of the precision of estimation on Japanese NAMEA.
2) Development of regional version of Japanese NAMEA. Pilot study of Regional NAMEA starts from 2005.
3) Development of stock indicators which represent strong sustainability.
4) Application of Japanese NAMEA to policy analysis. Purpose of Japanese NAMEA is not compilation itself but application to policy.
35
International exchange of information and experiences is extremely useful.
In this respect, I would extend my best thanks to the ESRI and JRI (Japan Research Institute) for organizing this workshop and giving me the opportunity of this presentation.