Requisite Modifications to National Income Accounts

To measure the national income more precisely, two kinds of adjustments to the existing national income accounts are needed. The first adjustment needs defining and valuing non-marketed environmental goods and services, while the other requires measuring and valuing the changes in the stock of natural resources. For example, to account for natural resources like forests, one has to be extends traditional NDP by including the non-marketed benefits associated with forests. Additionally, the traditional NDP should also be adjusted for the value of change in forest resources. Even though there has been wide consensus that greening the national accounts is important. There has been little consensus on how to do it with different researchers advocating different approaches. A number of are concerned with preserving the stock of environmental assets while others are concerned with the effect of environmental change on welfare. We can group these approaches to incorporating natural resources in national income accounting into four main categories. These are:

1) Pollution expenditure accounting

2) Physical accounting

3) Development of green indicators

4) Extension of the SNA type systems.