Valuing the environment: Economic accounts
Statisticians from Australia and Indonesia are cooperating to ensure environmental considerations are not ignored in economic accounts.
How does one measure the value of a forest? In traditional national accounts, a forest has no value at all unless it is chopped down for timber or cleared to grow crops that can be traded in markets.
More far-sighted economists take account of a forest’s role in providing the planet with clean air and water, providing habitat for wildlife, and capturing green-house gases to counter climate change. They might even consider culture, recreation and whether it makes society any happier.
Measuring these indirect benefits is extremely difficult. But statisticians are starting to do it, based on what is known as the System of Environmental Economic Accounting, a framework adopted by the UN’s Statistical Commission in 2012 that provides a comprehensive view of the interrelationships between the economy and the environment.
“The heart of the program is to alleviate poverty but without degrading the environment,” says Peter Meadows, one of five members of the Australian Bureau of Statistics who visited Jakarta in February as part of a partnership with Indonesia’s statistics agency.
“It’s looking at the way we use natural resources in an economic sense. And how it provides the basic set of goods and services from the environment to society.”
The Indonesian archipelago has some of the world’s most valuable ecosystems, from forests and mangroves, to coral reefs and peat wetlands. But in recent decades rapid economic development and the extraction of natural resources has put enormous pressure on the environment.
The ABS team spent a week in Jakarta holding workshops with the Indonesian Bureau of Statistics (BPS) exploring why it is important to increase efforts, how to engage, and how to link the results from environmental accounts to core issues such as agriculture, climate change and the UN’s Sustainable Development Goals (SDGs)—global targets to end poverty, protect the planet, and promote peace and prosperity.
“They are producing some really good information,” says Mr Meadows. “Indonesia will be a leader in this area if they can maintain the emphasis on producing better information.”
Improved environmental accounting will also help Indonesia to measure its progress towards SDGs covering responsible production and consumption, climate action, and food security.
But Mr Meadows says that ABS’s cooperation with BPS goes beyond simply filling spreadsheets with numbers to much more complex concepts.
During one of the workshops, participants looked at subsistence farming, he said. “Is Indonesia having to substitute other activities for farming to pay for food? Is it increasing debt? What’s the substitution? Is it sustainable?”
As it develops, the partnership should provide policymakers with the evidence they need to follow a sustainable path to prosperity.