Environmental accounts have been in the air for decades. As early as the 1970s, a few European countries were experimenting with ways to build environmental data into their national accounts, and by the late 1980s the United Nations and other international organizations were beginning to organize the proliferation of methods that had been proposed to build the accounts. This led to the publication, in 1993, of an interim handbook on environmental accounting, and, in 2003, of a greatly revised and much more detailed handbook.
This paper reviews the methodology set out in those handbooks and discusses challenges that arise in its implementation, illustrating the discussion with examples from developed and developing countries.
The accounting work may be organized into three broad components: accounting for monetary or physical flows related to the environment, accounting for natural resource assets, and constructing environmentally adjusted macroeconomic indicators. The broad areas of pollution and environmental protection expenditures fall into the first component, which has primarily been addressed in developing countries where pollution is a major problem. The second covers forests, minerals, land, fisheries, and water, tracking how they change over time in both physical and monetary units; this has been more important than the flow accounts in resource-dependent developing countries. The third component encompasses what is popularly referred to as "green GDP," explaining why this measure is very difficult to calculate, and discussing the more modest adjusted macroeconomic indicators that have been included in the accounts and are more often used.