Objectives of SEEA

The main objectives of SEEA and Environment are:

1) Segregation and elaboration of all environment related flows and stocks of traditional accounts: The objective is to present separately environmental protection expenditures.' These expenditures have been considered as part of the costs necessary to compensate for the negative impacts of economic growth. in other words as defensive expenditures.

2) Linkage of physical accounts with monetary environmental accounts and balance sheets. It consists of a description of the interrelationships between the natural environment and the economy in physical terms (like changes in total stock or reserves of natural resources and changes therein, even if those resources are not affected by the economic system). These accounts provide the physical counterpart of the monetary stock and flow accounts of the SEEA.

3) Assessment of environmental costs and benefits: The SEEA expands and complements the SNA with regards to assigning costs to a) the use of natural resources in production auld final demand and b) the changes in environmental quality, resulting from pollution and other impacts of production, consumption and natural events on the one hand, and environmental protection expenditures on the other.

4) Accounting for the maintenance of tangible wealth: The SEEA broadens the concept of capital to cover not only the man-made but also the natural capital. Natural capital includes scarce renewable resources such as marine or tropical forests non-renewable resources like land, soil and subsoil assets (mineral deposits) and cyclical resources of air and water. Capital formation is correspondingly changed into a broader concept of capital accumulation.

5) Elaboration and measurement of indicators of environment-adjusted product and income: Including the costs of depletion of natural resources and changes in environmental quality allows for the calculation of modified macroeconomic aggregates in SEEA. Indicators thus compiled include, in particular, an environment-adjusted net domestic product (EDP).

The third, fourth and fifth objectives mentioned above require valuation of environmental resources. In order to facilitate this, SEEA proposes three different versions based on different techniques of valuation. One version of SEEA applies a market valuation approach. The second uses a maintenance cost approach while the third version combines the market valuation with the contingent valuation approach. Of these three methods, the market valuation is the closest to the conventional SNA. In the market valuation approach, the stocks of non-produced economic and environmental assets can be valued using either the net-price discounted present value user-cost methods. The net price of the asset is defined as the actual market price of the raw materials minus its marginal exploitation costs including the rate of return on the invested produced capital. In case of exhaustible resources SEEA proposes using the user-cost method to value the depletion. The idea behind this method is to convert a time-bound stream of (net) revenues from the sales of an exhaustible natural resource into a permanent income stream by investing a part of the revenues, that is, the 'user-cost allowance' over the lifetime of the resource. Only the remaining amount of revenues should be considered as 'true income'. The discounted present value of natural resources is obtained by using the discounted value of the goods extracted/services provided by those assets in the future reduced by the exploitation costs (net return). However, the limitation of market value approach is that it covers only those natural assets that have an economic value. As an alternative to market valuation, maintenance cost valuation is introduced. Maintenance costs are defined as the costs of using natural environment that would have been incurred if the environment has been used in such a way that its future use had not been affected. The maintenance costs concept implies that uses of the environment that have no impact on nature have a zero (monetary) value, i.e., if water is available in plenty, extracting water do not have any value.