Authors

Prof. Charles Perrings

Reference

Perrings, C. (2012). The road to wealth accounting. In UNU-IHDP and UNEP. Inclusive Wealth Report 2012. Measuring progress toward sustainability. Cambridge: Cambridge University Press

Key Messages from Chapter

It is clear that human activity has had a profound effect on our environment, and that these effects, in turn, have had an impact on human well-being. While the importance of this relationship is appreciated, there are still few reliable indicators of the value to people of biosphere change.

The Millennium Ecosystem Assessment was able to quantify the physical changes in ecosystem services that had occurred in the previous half century, but it was unable to assign a value to the loss of non-marketed ecosystem services.

This chapter considers the issues involved in developing metrics of the social importance of biosphere change. What is needed is a measure of the impact of biosphere change on wealth and wealth distribution. The chapter discusses the welfare-theoretic foundations of wealth accounting, and the steps taken so far to build wealth accounts. It then considers what is required to evolve wealth accounts from the current system of national accounts (SNA).

The SNA provides an incomplete picture of wealth because it includes only property that generates private claims to future benefits. It therefore excludes parts of natural capital that is essential to human well-being but cannot be privately held (e.g., the atmosphere or the open oceans).

Two major efforts to advance our understanding of wealth are discussed here: the World Bank’s idea of adjusted net savings, and the System of Environmental and Economic Accounts (SEEA). Both are important steps on the road to wealth accounting, but neither fully address the issues of what environmental stocks should be included, and how they should be measured and valued (the double counting caused by the SEEA’s inclusion of ecosystems is particularly problematic).

Ultimately, country wealth measurements should include all natural assets that are under a country’s jurisdiction and that contribute to human well-being, whether those assets are privately owned or not.

More work is still required on understanding and measuring the relationship among assets, environmental externalities, and poverty in an effort to advance human wellbeing.