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Environmental and Economic Accounting in the Pacific

February 27, 2018
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The System of Environmental Economic Accounting (SEEA) is central to the discussion of environmental accounting. The SEEA was adopted by the UN Statistical Commission in 2012 and is an internationally agreed upon statistical framework measuring the environment and its interactions with the economy.[i] Based on the 2008 System of National Accounts (SNA2008),[ii] an agreed upon national accounting framework measuring Gross Domestic Product, the SEEA, expands upon GDP accounts and helps us understand how to place a value on biodiversity and degradation and how to incorporate it into the national accounting system. By integrating this statistical data with our GDP, the SEEA will not only provide us with a greater determination of how to value our regional equity, but give us greater capacity in the struggle over the ecological well-being of our planet as well.

To get a sense of the importance of the national accounting system, in December 2016, a comprehensive revision of Japan’s National Accounts was published by the IMF.[iii] This revision reflects Japan’s switch to the SNA2008, and brought Japan up to the international standards adopted by most OECD countries. Under this revision, nominal GDP 2015 rose 6.2 percent, with 61 percent of the revision reflecting capitalization of Research & Development under SNA2008 changes. What this did was decrease the public debt-to-GDP by 15 points. Even though real GDP growth grew slightly as a result of this shift, the real advantage, according to the IMF, is that this data revision improved Japan’s standing relative to G7 peers.

An example of how changes to the National Accounting System affects policy, is that one of the changes made to SNA2008 was moving military expenditures from being treated as intermediate consumption to being a fixed asset. What this means is that rather than accounting for the off-the-shelf use of weapons and munitions, it would treat military spending as an asset the way that bridges and tunnels are accounted for—as a public good.

Brent Moulton, US Bureau of Economic Analysis advisor to the UN SNA, explains the shift like this: “To many users of the national accounts, however, this distinction between destructive and productive assets appears normative and outside the usual purpose and scope of the national accounting system. Similar distinctions are not drawn in other areas of the accounts—for example, both equipment that generates pollution and equipment used for pollution abatement and control are treated as fixed assets in SNA93. Thus the seemingly normative SNA93 distinction between destructive weapon systems and productive military assets appears inconsistent with the concepts that generally guide the rest of the System.”[iv]

When the United States adopted changes to the 2008SNA, in 2010, military systems alone, added half a percentage point to its change over of standards to GDP.[v]

The SEEA is already being implemented in the Pacific. During the last few years, the Samoa Bureau of Statistics has been compiling information of its water accounts.[vi] The water account highlights the flow of water from the environment to the economy, and while the methodologies are still in its infancy, the data being collected will inform a baseline for consumption across various sectors and industries.

In 2013, UNESCAP invited Cook Islands, Fiji, Papua New Guinea, Solomon Islands, Tonga and Vanuatu to Samoa to develop a program for implementing the SNA2008 and the 2012 SEEA.[vii] The purpose for implementing this program was to enhance environmental and economic statistical data in an attempt to improve national decision-making in sustainable development initiatives in the SDG context. Further, in 2016, UNESCAP organized a training program on the SEEA for Small Island Developing States in an effort to enhance basic concepts and applications for data requirement in the compilation of water, waste, and energy accounts.[viii] Ostensibly, while the SIDS SEEA program may strengthen national statistical systems and funding capacity at the international level, in its current form, I do not know how much it does for the region as a whole.

An example of a regional approach using statistical accounting to drive economic growth is ASEAN’s recent announcement that they were on track to make solar and other renewables account for 23% of the regions’ total primary energy supply and that will have greater economic impacts beyond simply boosting the annual GDP of countries.[ix]

For SIDS, the national accounts informing GDP are too small to have much effect on the larger economies. As independent states, we are not in a good position to leverage rules addressing climate impacts. OECD countries have a different set of accounting and debt rules from developing countries, and are more or less immune to the demands of developing countries and so we must instead rely upon international prestige and good will to foment change.

I propose that an ecologically integrated Pacific comprised of small island states and territories, with its vast wealth of ecological ocean data, could begin to leverage the value of its biodiversity to create programs that would help meet the security needs of Pacific peoples and protect the region from many of the vulnerabilities the region faces.

GDP is calculated with statistical data. Algorithms aggregate various sets of data indicators that measure volume, value and price. Our region has enormous volume that is grossly undervalued. We can give it value by measuring and managing our ocean of statistical data. It is unlikely to be simply an accounting oversight that biodiversity and Pacific Island assets have not been included in the accounting matrix the way that, for example, oil has been valued for OPEC countries, or research and development is measured in advanced economies.

Once we establish a regional baseline of our ecological accounts, we will begin to leverage the value of our biodiversity for further investment and win-win development. To be clear, the value of our biodiversity is not measured on the sale or the privatization of our regional biodiversity which would be undervalued in the capitalization marketplace, but rather, the value will be measured in what is sacrosanct, left alone, protected in what I refer to as our intemerate accounts.

While the Millennium Development Goals was seen as a program that would address the vulnerabilities of developing countries, its replacement, the Sustainable Development Goals was quick to also include funding priorities that would benefit the advanced economies at the expense of developing countries. Despite its appearance of good intent, in one aspect, the SDGs became a global development initiative that would reinforce the context of dependency, and nowhere is this more evident than in the accounting of investment initiatives, creating action packages that are little more than what UNCTAD has called, “a big push for private investment in the SDGs.”[x] This new generation of private investment in sustainable development may appear to be necessary if we are to meet the 2030 agenda, but what the Pacific and other developing regions need to consider is what the rules will be for investment and trade. At the moment, China’s Belt and Road Initiative seems to be providing an alternative route for SDG implementation that is structured very differently from how funding may have originally been conceived in the 2014 SAMOA Pathways Action Plan.[xi]

In line however, with the 2015 Addis Ababa Action Plan, which opened alternative pathways for financing development initiatives, Cook Islands, Fiji, Samoa, Timor-Leste, Tonga, and Vanuatu recently joined the Asia Infrastructure Investment Bank (AIIB), a new decentralized global bank that despite its claim to the contrary, is likely to be the funding arm for the China-led Belt and Road Initiative.[xii] And while the Belt and Road Initiative is not a replacement for the SDGs, it is central to the financing of the kind of infrastructure development that PICS have been seeking as it has expanded its operational capacity to be inclusive of not just Africa and Eurasia, but the Pacific, South America and the Caribbean, as well.

If the only option for Pacific islands were the SAMOA pathways, we would find that private investment strategies could have a debilitating impact on Pacific Island economies. Privatizing Marine Protected Areas, for example, could very well end up being accounted for by the advanced economies, benefitting from the value of MPAs when the SEEA and SNA are fully integrated. Should foreign investment consortiums privatize MPAs, it would further alienate Pacific Island Countries from accounting for their stewardship of the region. For example, if advanced economies pegged the value of their carbon expenditures to MPAs, it would be a tremendous resource giveaway, so it is important for the region to reassess that value appropriately.”[xiii]

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[i] United Nations. System of Environmental-Economic Accounting 2012: Central Framework. United Nations, New York 2014. p. vii.

[ii] United Nations. System of National Accounts, 2008. United Nations, New York 2008.

[iii] IMF. Japan: 2017 Article IV Consultation-Press Release’ Staff Report; and statement by the Executive Director for Japan. IMF Country Reports 17/242. 2017

[iv] Moulton, Brent R. “Canberra II Group’s Recommendations to Treat Military Weapon Systems as Fixed Assets. 17 December, 2003.

[v] van de Ven, Peter. New standards for compiling national accounts: what’s the impact on GDP and other macro-economic indicators? OECD Statistics Brief. P11. http://www.oecd.org/std/na/new-standards-for-compiling-national-accounts-SNA2008-OECDSB20.pdf

[vi] “Water Accounts for Samoa, 2014-15. Samoa Bureau of Statistics. http://www.unescap.org/sites/default/files/Samoa%27s%20Water%20Accounts_2014-15.pdf

[vii] UNESCAP Regional Programme on Economic Statistics “Developing Programmes for Implementing the 2008 SNA, the 2012 SEEA and Supporting Statistics in the Pacific Region (Apia, Samoa, 20-23 August 2013). http://unstats.un.org/unsd/envaccounting/workshops/SEEA_Conf_2013/main.htm

[viii] “Training Programme on the System of Environmental-Economic Accounting (SEEA) for Asia Pacific Small Island Developing States.” http://www.unescap.org/announcement/training-programme-system-environmental-economic-accounting-seea-asia-pacific-small

[ix] “Renewables to drive economic growth in SE Asia” PV Magazine. February 27, 2018. https://www.pv-magazine-australia.com/2018/02/27/renewables-to-drive-economic-growth-in-se-asia-irena/

[x] UNCTAD: Investing in Sustainable Development Goals: Action Plan for Private Invesments in SDGs, UN 2015

[xi] SIDS Accelearted Modalities of Action (SAMOA) Pathway. 15 December 2014, UNGAR (A/69/L.6)

[xii] “No Free AIIB pass for belt and road projects, bank executive says.” South China Morning Post.February 26, 2018. http://www.scmp.com/news/china/diplomacy-defence/article/2110407/no-free-aiib-pass-belt-and-road-projects-bank-executive

[xiii] Saiki, Arnie. “Measuring Regional Progress for a Blue Economy” State, Society, and Governance in Melanesia. University of South Pacific and Australia National University, February 2017.

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