System of Environmental Economic Accounts (SEEA)

Economic Activities Environment

Prod. ROW Final Economic Assets Other Non-
Consump. Produced Non- produced
Assets produced Natural
Natural Assets
Assets
1 2 3 4 5 6
(i) Opening K0 p.ec. K0 np.ec.
Stocks
(ii) Supply P M
(iii) Economic Ci X C Ig
Uses
(iv) Consump. CFC -CFC
of fixed capital
(v) Net NDP X-M C I
Domestic Prod.
(vi) Use of non- Use np -Use np.ec. -Use np.env.
prod. Nat.
assets
(vii) Other I np.ec. -I np.env.
accum. of non-
prod. Nat.
assets
(viii) Envtly. EDP X-M C A p.ec. A np.ec. -A np.env.
Adjusted
aggregates
(ix) Holding Rev p.ec. Rev np.ec.
gains/losses
(x) Other Vol p.ec. Vol np.ec.
changes in vol.
Of assets
(xi) Closing K1 p.ec. K1 np.ec.
stock of assets
Row (ii) represents total supply
P = Domestic production
M = Imports
Row (iii) shows how total supply is used
C i = Proportion of supply used in further production
C = Consumption by households or government
X = Exports
M = Imports
Column (1) shows cost structure of domestic production, P
C i = Cost of goods and services used in production
CFC = Cost of consumption of fixed (man-made) capital
Consumption of fixed capital also appears as a negative item in column (4); gross
investment, Ig less capital consumption is equal to net investment, I.

Row (v) yields the familiar national accounts identity

NDP = (X-M) + C + I

Row (ix) and (x) include various adjustments to the stock of produced and non-
produced assets, including adjustments to account for changes in prices of assets,
destruction of assets due to natural disaster etc. Thus, the opening stocks in the next
accounting period are given by,

K1 p.ec. = K0 p.ec. + I ± Rev p.ec. ± Vol p.ec.

K1 np.ec. = K0 np.ec. ± Rev np..ec. ± Vol np.ec.

Rows (vi) to (viii) show how the system can be extended to incorporate other
environmental accounts, which may be expressed in physical or monetary units, or
both.
Expressed in physical units, these additional flows can be viewed as supplementary to
the SNA. Expressed in monetary units, they can be used to obtain environmentally
adjusted measure of domestic product.

Column (6) covers natural capital not classified as economic (because their usage
does not involve market or quasi-market transactions). These are air, eco-system,
virgin forests etc.

Row (vi) records use or consumption of non-produced natural assets.

Use np. = Depletion/degradation of natural capital (analogous to CFC)

Use np = Use np.ec. + Use np.env.
Where, Use np.ec. = Depletion of economic natural assets such as minerals, oil etc.
Use np.env. = Degradation of other natural assets, such as air, water etc.

Use np.ec. and Use np.env. are entered as negative elements in columns (5) and (6) and
hence reduce the stocks of natural assets.
Row (vii) records the transfer of assets from non-economic to economic activity.
Examples include, improved techniques of extraction have enhanced reserves of
commercially recoverable oil.
I np.ec. = Quantity/value of the increase in reserves – enters as a +ve entry in (5)
I np.env. = Equal to Inp.ec., but appears as –ve entry in (6)

Note that the addition of rows (vi) and (vii) to the table will affect the Vol np.ec. of
SNA.

If the entries in the additional column and rows are expressed in physical units, this
completes the table and SNA monetary aggregates remain unchanged. Thus, the
environmental data supplement the monetary accounts by linking levels of economic
activity with changes in the environment.

If the environmental changes can be monetized, conventional SNA aggregates can be

modified to reflect the use of environmental assets.

Row (viii) records the modified data:

• Column (1) shows deduction of consumption of natural capital (Use np ) from
NDP to arrive at environmentally adjusted domestic product (EDP).
• Columns (2) and (3) remain unchanged.
• Columns (4), (5), and (6) introduce the concept of net accumulation in place of
net capital formulation in the SNA.
• For produced assts, net accumulation is same as net capital formation, i.e.,
A p.ec =I.
• For non-produced assets, net accumulation is the sum of depletion/degradation
and additions to the economic reserves.

EDP = (X-M) + C + A p.ec. + (A np.ec. - A np.env. )

= (X-M) + C + I + (-Use np.ec. + Inp.ec. ) + (-Use np.env. – Inp.env. )
= NDP - Use np