Environmental and resource accounts: Frequently asked questions

Why a national accounting approach to the environment and resource accounts?

The focus on the national accounting framework in the development of environmental and resource accounts can be explained by a number of factors. First, the national accounting framework is well-established, having a history of more than 50 years of implementation around the world. Second, the national accounts are a very influential source of economic information. Environmental information linked with the national accounts can, therefore, be quickly and easily integrated into existing economic decision-making processes. Third and perhaps the most important reason is the desire by statistical agencies to address the long-standing environmental criticisms of the national accounts. Briefly, they include neglecting to measure the contribution of the environment to national wealth; treating the receipts from the depletion of natural resources as current income rather than capital depletion; measuring the benefits of the use of the environment but not the costs; and including expenditures to protect the environment as part of gross production. Many of these criticisms are controversial and not all are accepted as legitimate by all parties of the debate. Many countries including Canada have attempted to address one or more of them in their environmental and resources accounts.

Does Statistics Canada produce a measure of “green” GDP?

Statistics Canada does not redefine or supplement existing national accounts aggregates such as Gross or Net Domestic Product. Nevertheless, the Canadian System of Environmental and Resource Accounts provides some information for those who may wish to calculate such “green aggregates”.

How are defensive expenditures (e.g., environmental protection expenditures) treated?

Some experts argue that so-called defensive expenditures should not be included in GDP because they do not contribute to well-being but are, in fact, a cost of maintaining social order. Statistics Canada makes no such judgement about any expenditure. GDP is not intended to measure well-being and therefore should not be adjusted to correct for a failure to do so. GDP is intended to measure the aggregate value of output in the economy, even if this output is considered “regrettable” in the eyes of some. Arbitrarily leaving some kinds of output out of the calculation would distort the picture of economic development and make it impossible to study the relationship between revenue and expenditure in the economy.

What is natural capital?

Natural capital is generally considered to be divided into three principal categories: natural resource stocks, land and environmental systems (or ecosystems). All are considered essential to the long-term sustainability of the economy. Natural resource stocks are the source of raw materials used in the production of manufactured goods. Land is essential for the provision of space in which economic activity can take place. Ecosystems are essential for the services that they provide directly and indirectly to the economy, including cleansing of fouled air and water; provision of productive soil; provision of biodiversity; provision of a predictable and relatively stable climate; protection from incident solar radiation; and provision of reliable flows of renewable natural resources.

Why bother measuring natural resource stocks? When we need more of them, we can always go out and find them.

The natural resource stock measures that we present reflect those resources that can be profitably exploited given today’s prices and technologies. Resource companies usually invest in finding just enough of these resources to meet predicted demand for the next decade or so. As these reserves are depleted, they search for new ones to replace them. But all resources are ultimately finite, so this process of replacement becomes gradually more difficult over time. For some resources (like sand and gravel) there might be no real limit on supply. For others, like conventional crude oil and natural gas, the depletion of Canada’s major reserves is already predicted for the first half of this century. This makes it worthwhile tracking their evolution in physical terms. Another reason motivates the monetary measure of these resources. This is that the wealth they represent can make a very substantial difference in the economic position of the government that owns them. And because the prices of resource commodities fluctuate widely and are determined by market forces outside of Canada’s control, this wealth can vary from one year to the next. All-in-all, tracking the evolution of Canada’s natural resource stocks makes sense from an environmental and an economic viewpoint.

Data from the environment and resource accounts seem a bit out of date. Are there any more recent available?

The data are the most recent available that present a comprehensive national picture. More recent data may be available for some aspects of the issues covered. Users should consult other sources (e.g., Environment Canada, provincial ministries). Users should be aware, however, that environmental data are generally not as timely as those in the social and economic domains.

What are some of the questions the environment and resource accounts may help to answer?

Questions of the sort can be addressed through the Canadian System of Environmental and Resource Accounts.

  • Are stocks of natural capital, in both value and physical terms, being maintained in Canada?
  • What are the flows of raw materials associated with economic activity? Who uses these flows (industries, households or government)? Are these flows on the increase or decrease, both in total and per unit of economic activity?
  • What are the patterns of land use in Canada? Are stocks of important land types, high quality agricultural land for example, being maintained?
  • How much is spent to protect the environment? Who makes these expenditures? Are they increasing or decreasing and why?
Date modified: