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CG Forum: 

United States Government Accountability Office: 

GAO: 

September 2007: 

Highlights of A GAO/NAS Forum: 

Measuring Our Nation's Natural Resources and Environmental 
Sustainability: 

Environmental Accounts: 

GAO-08-127SP: 

GAO Highlights: 

Highlights of GAO-08-127SP, a GAO and NAS forum. 

Why GAO Convened This Forum: 

One of the greatest challenges facing the United States in the 21st 
century is sustaining our natural resources and safeguarding our 
environmental assets for future generations while promoting economic 
growth and maintaining our quality of life. To manage natural resources 
effectively and efficiently, policymakers need information and methods 
to analyze the dynamic interplay between the economy and the 
environment. 

Enhancing the information to make sound decisions can be facilitated by 
developing national environmental accounts. These accounts provide a 
framework for organizing information on the status, use, and value of 
natural resources and environmental assets, as well as on expenditures 
on environmental protection and resource management. While many 
countries have developed and are using environmental accounts, the 
United States lags behind. 

GAO and the National Academy of Sciences (NAS) convened this forum to 
discuss developing accounts in the United States. Participants included 
U.S. federal agency officials and national and international 
statistical, energy, environment, and natural resource experts. 
Comments expressed do not necessarily represent the views of any one 
participant or the organizations that these participants represent, 
including GAO and NAS. 

What Participants Said: 

Forum participants discussed potential criteria to help in developing 
environmental accounts, lessons learned from the international 
community, and strategies for overcoming challenges. Participants also 
made general observations about developing these accounts and discussed 
next steps. 

Suggested Criteria to Help in Developing Environmental Accounts: 

Participants suggested four broad criteria to use in determining what 
components of environmental accounting should be developed. These 
criteria were identifying the objective of the accounts, considering 
the availability and quality of data, ensuring that accounts provide 
information on current natural wealth, and considering the timeliness 
and regularity with which accounts can be produced. Participants 
generally agreed that pollution and material flow accounts, which 
provide industry-level information about the generation of pollutants 
and solid waste and energy and material use, are most critical for the 
United States to develop first. 

Lessons Learned from the International Community: 

Participants shared the following lessons learned from other countries’ 
experiences in developing environmental accounts: 

* Provide data in a timely manner. To be useful to decision makers, 
environmental accounting data must be timely. 

* Political interest can wax and wane. Shifting political agendas can 
affect policymakers’ interest in environmental accounting. 

* Environmental accounting is a long-term investment. Developing 
accounts requires a sustained effort over an extended period. 

Strategies for Overcoming Key Challenges: 

Participants broadly agreed that the greatest challenge to developing 
environmental accounts in the United States is the need for support 
from policymakers and others. Other key challenges include 
institutional differences based on agencies’ varying missions; the need 
for funding; data availability, compatibility, and reliability; and 
methodological uncertainty. Participants suggested the following 
strategies, among others, for overcoming these challenges: 

* Identify policymakers, experts, and others who support the effort. 

* Build an economic business case for environmental accounting. 

* Use an incremental approach. 

* Take the time necessary to develop high quality accounts. 

General Observations and Next Steps: 

Participants generally agreed that developing environmental accounts is 
important for both our nation’s environmental and economic 
sustainability. Several participants offered to be partners in an 
effort to develop U.S. environmental accounts but noted that they would 
need congressional support and a designated lead agency to spearhead 
the effort. 

[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-127SP]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Robert Robinson at (202) 
512-3841 or robinsonr@gao.gov. 

[End of section] 

Contents: 

Letter: 

Introduction from the Comptroller General of the United States: 

Introduction from the National Academy of Sciences: 

Criteria to Help in Developing Environmental Accounts in the United 
States: 

Perspectives and Lessons Learned from the International Community: 

Key Challenges and Strategies for Developing Environmental Accounts: 

General Observations and Next Steps: 

Appendix I: Agenda: 

Appendix II: List of Participants: 

Appendix III: Background on Components of Environmental Accounting: 

Appendix IV: Background on Selected Other Countries' Experiences: 

Appendix V: Background on Key Challenges: 

Appendix VI: Presentation Given by the Comptroller General of the 
United States: 

Appendix VII: Contacts and Acknowledgments: 

Related Products: 

Related NAS Products: 

Related GAO Products: 

Abbreviations: 

BEA: Bureau of Economic Analysis: 

GDP: gross domestic product: 

NAMEA: National Accounting Matrix including Environmental Accounts: 

NAS: National Academy of Sciences: 

OECD: Organisation for Economic Co-operation and Development: 

SEEA 2003: Handbook of National Accounting: Integrated Environmental 
and Economic Accounting 2003: 

UN: United Nations: 

UNCEEA: United Nations Committee of Experts on Environmental-Economic 
Accounting: 

United States Government Accountability Office: 

Washington, DC 20548: 

Introduction from the Comptroller General of the United States: 

The United States faces a range of challenges to its continued security 
and prosperity in the 21st century. Widely discussed examples of these 
challenges include a growing fiscal imbalance driven by ballooning 
entitlement expenditures for Social Security, Medicare, and Medicaid 
and a health care system that many experts believe is already in 
crisis. Another important 21st century challenge is sustaining our 
natural resources and safeguarding our environmental assets for future 
generations while promoting economic growth and maintaining a high 
relative quality of life. A critical first step to addressing this 
challenge is to ensure that sufficient and reliable information exists 
to take stock of current conditions, set goals, and measure progress. 

Currently, policymakers lack the information needed to understand the 
potential environmental impacts of their decisions and the economic 
implications of changes to the environment and our natural resources. 
In contrast, based on decades of development and refinement, a wealth 
of information is available about production and income in the national 
economic accounts. These accounts provide policymakers with key 
national economic indicators, such as growth in health care spending 
and the change in economic investment, that help policymakers 
understand the state of the economy, monitor trends, and make 
projections that inform policy debates. Based in part on the data in 
the national economic accounts, policymakers can choose whether and how 
to take action to influence economic conditions. However, there are no 
comparable national environmental accounts even though the environment 
and our natural assets influence our economic condition and collective 
well-being. While environmental data are collected at various national 
and subnational levels, limitations in the data diminish its value to 
policymakers. The data are incomplete, vary in quality, and often are 
not comparable, resulting in a lack of key national environmental 
indicators to comprehensively understand the state of the environment 
or how it is changing over time. 

Consequently, decisions are made with inadequate information about 
potential environmental impacts and economic or social consequences. 
For example, Hurricane Katrina caused massive devastation, including 
the loss of over 1,300 lives and billions of dollars in property 
damage, in part, because the wetlands that would have served as natural 
buffers to the storm had been lost to development. Better information 
on the wetlands' value to the economy could potentially have resulted 
in decisions that would have reduced the damage caused by the 
hurricane. 

The United Nations (UN), the Organisation for Economic Co-operation and 
Development (OECD), and other international institutions have 
recommended that countries develop environmental accounts. 
Environmental accounts provide a framework for collecting and 
organizing information on the status, use, and value of the nation's 
natural resources and environmental assets, as well as on expenditures 
on environmental protection and resource management. To support the 
development of such accounts, the UN, European Commission, 
International Monetary Fund, OECD, and the World Bank issued a handbook 
in 2003 for use by both national and international agencies for 
compiling environmental accounts reflecting their information needs and 
priorities.[Footnote 1] This handbook describes the following four 
components of environmental accounting: 

* Natural resource asset accounts, which primarily include information 
on stocks of natural resources. 

* Pollution and material flow accounts, which provide information at 
the industry level about the use of energy and materials and the 
generation of pollutants and solid waste. 

* Environmental protection and resource management expenditure 
accounts, which identify expenditures made by industry, government, and 
households to protect the environment or manage resources. 

* Environmentally adjusted macroeconomic aggregates, which include 
indicators of sustainability, such as an environmentally adjusted net 
domestic product. 

Many industrialized countries, such as Australia, Canada, and France, 
and some developing countries, including Namibia and the Philippines, 
have developed some components of environmental accounting and continue 
to refine their accounts. For example, to better understand how to make 
the most of Australia's limited water resources, the Australian Bureau 
of Statistics and the National Water Commission have produced three 
water accounts since 2000 that track the supply and use of water in the 
Australian economy. In addition, since the early 1990s, Canada has 
annually produced environmental accounts, which have been used, among 
other things, to develop environment-economy indicators such as urban- 
rural land use change and annual stock estimates for timber, energy, 
and mineral resources. The United States, however, lags behind these 
and other countries. 

In the United States, in 1992, the Department of Commerce's Bureau of 
Economic Analysis (BEA) began developing a set of environmental 
accounts called the Integrated Economic and Environmental Satellite 
Accounts. BEA created prototype accounts for the mineral resources 
sector and planned to continue its work by developing accounts for 
other sectors. However, from fiscal year 1995 through fiscal year 2002, 
congressional appropriations committees directed BEA not to pursue this 
initiative. Although this restriction has now been lifted, to date no 
funding has been appropriated for BEA to resume its work. 

In 1999 and again in 2005, two independent National Academy of Sciences 
(NAS) panels, the first commissioned by the Department of Commerce and 
the second by the Glaser Progress Foundation, found that developing a 
set of comprehensive environmental accounts should be a high priority 
for the nation. The panels concluded that these accounts can have many 
benefits. Environmental accounts can provide policymakers with 
ecological indicators and descriptive statistics to monitor the 
environment's contribution to the economy and the economy's impact on 
the environment. In addition, environmental accounting can potentially 
serve as a tool for strategic planning and policy analysis to identify 
the implications of different regulations, taxes, and consumption 
patterns on environmental sustainability and paths to sustainable 
development of specific economic activities. For example, the United 
States currently lacks reliable, comprehensive information on fish 
stocks and the extent to which certain fish stocks are being depleted. 
More comprehensive data could help federal fishery managers better 
identify appropriate harvest limits and provide policymakers with 
better information to use in negotiating international fishing 
treaties. 

BEA officials recently indicated that they will participate in any 
cross-cutting Administration initiative to develop environmental 
accounts as long as Congress supports the effort and the initiative is 
led by the agencies that gather and analyze the data. Initial steps 
toward developing environmental accounts include raising awareness of 
the importance of such accounts, obtaining support for such accounts, 
and prioritizing developmental efforts by identifying features and 
characteristics needed to make the accounts as useful as possible. 
Developing environmental accounts will require a long-term commitment. 
Despite some challenges, the effort could produce substantial public 
benefits for the nation. 

Building on a prior collaborative effort on key national indicator 
systems,[Footnote 2] GAO and NAS jointly convened a forum on June 19, 
2007, to discuss (1) criteria to help in developing environmental 
accounts in the United States, (2) lessons learned from the 
international community, and (3) strategies for overcoming challenges 
to developing environmental accounts in the United States. (See app. I 
for the agenda.) In addition, participants spoke generally about some 
of the benefits of environmental accounting and potential next steps to 
developing environmental accounts in the United States. The forum 
brought together a diverse array of experts, including representatives 
from government, the international community, nonprofit organizations, 
industry, and academia. (See app. II for a list of participants.) This 
forum was designed so participants could comment on these issues 
openly, without individual attribution, in order to facilitate a rich, 
frank, and substantive discussion. 

This report summarizes the ideas and themes that emerged at the forum, 
the collective discussion of participants, and comments received from 
participants based on a draft of this report. The highlights summarized 
in this report do not necessarily represent the views of any individual 
participant or the organizations that these participants represent, 
including GAO and NAS. 

We want to thank all the forum participants for taking the time to 
share their knowledge, insights, and perspectives. We will benefit from 
these insights as we carry out our work, and we look forward to working 
with the forum's participants on this and other issues of mutual 
interest and concern in the future. 

Signed by: 

David M. Walker: 

Comptroller General of the United States: 

Introduction from the National Academy of Sciences: 

The National Academy of Sciences appreciated the opportunity to jointly 
convene the GAO/NAS Forum on Measuring Our Nation's Natural Wealth and 
Environmental Sustainability. The NAS recognizes the importance of the 
topic, and, indeed, issues in environmental accounting have been the 
subject of major reports by panels convened under NAS's Committee on 
National Statistics (see the 1999 report Nature's Numbers--Expanding 
the National Economic Accounts to Include the Environment and the 2005 
report Beyond the Market--Designing Nonmarket Accounts for the United 
States). 

I and the other NAS staff who worked with GAO staff to convene the 
forum valued the collegial relationship that characterized every aspect 
of the project. The discussions at the forum were illuminating of 
issues and concerns that merit attention in the development of 
environmental accounts. The NAS is pleased to have contributed to this 
effort. 

Signed by: 

Constance F. Citro: 

Director, Committee on National Statistics National Academy of 
Sciences: 

October 24, 2007: 

Criteria to Help in Developing Environmental Accounts in the United 
States: 

Participants suggested several criteria for the United States to use in 
determining what components of environmental accounting to develop. In 
addition, participants identified which components are most critical to 
develop first. To ensure a common framework from which to discuss 
environmental accounting, we provided participants with background 
information on the four components of environmental accounting prior to 
the forum (see app. III). 

Criteria for Focusing U.S. Efforts to Develop Environmental Accounts: 

Participants suggested four broad criteria to use in focusing U.S. 
efforts to develop environmental accounts. These criteria included 
relevance to the main policy objective, availability and quality of 
data, ability to provide information on both current and future natural 
wealth, and timeliness. 

Relevance to the Objective: 

Participants generally agreed that the first step in identifying what 
components of environmental accounting to develop is determining the 
overall policy objective for the accounts. Participants made the 
following suggestions in this regard: 

* Identify all possible objectives and then prioritize the objectives 
to determine what components of environmental accounting to develop. 

* Determine which policy questions are most pressing and design 
accounts to answer those questions. History has shown that progress is 
made more easily when problems are more urgent in nature. Some 
participants cited climate change as a pressing concern, and suggested 
environmental accounts as a way to help inform decision making as 
climate change policies are developed. 

* Focus on areas where environmental accounts will provide new 
information to enhance policy decision making. The most useful accounts 
will provide data that policymakers need but would otherwise lack to 
inform their actions. 

* Do not dedicate funds to developing environmental accounts until a 
clear objective is established. To emphasize this point, one 
participant explained that because Norway and Sweden did not 
sufficiently develop their accounts to inform policy, the accounts have 
ultimately been underutilized. Additionally, one participant explained 
that, at times, agencies start initiatives by doing whatever is easiest 
instead of identifying and beginning work on the most critical or 
beneficial areas. This participant warned to resist such a tendency 
when developing environmental accounts. 

Data Availability and Quality: 

Participants generally agreed that data availability, gaps, and quality 
need to be considered when determining what components of environmental 
accounting to develop. Participants made the following suggestions in 
this regard: 

* Identify sources of available, reliable, and consistent data. Data 
used in environmental accounts must be of good quality. 

* Ensure, to the extent possible, that the data collected at the 
national level are useful at the regional and state levels so that 
local managers can also use the information for decision making. 

* Pursue data consistency for comparability purposes across 
jurisdictional boundaries, both within the United States and 
internationally. Consistent measures will allow analysts to value 
resources and assess sustainability throughout political and 
environmental systems and at varying levels within those systems. 

Ability to Provide Information on Current Natural Wealth: 

Participants generally agreed that environmental accounts developed by 
the United States should provide information on the nation's current 
natural wealth. In addition, this data could be collected in such a way 
to allow analysts to make projections of future natural wealth. These 
projections would enable policymakers to better understand the 
implications of current consumption on future natural wealth. 
Participants made the following comments in this regard: 

* Our nation has an obligation not to unfairly disadvantage future 
generations by overconsumption of resources today. Environmental 
accounting can provide data needed to ensure sustainable patterns of 
natural resource use. 

* To determine natural wealth, it is important to include monetary 
values for the natural resources and environmental assets that are 
included in our nation's environmental accounts. Some participants 
noted that, while it is difficult, appropriate and accepted 
methodologies need to be developed to value our natural resources and 
environmental assets. 

Timeliness: 

Some participants noted that accounts produced on a regular basis are 
generally more useful than irregularly or occasionally published 
accounts. Several participants explained that identifying an 
appropriate time period for updating accounts is important for 
obtaining trend data. The trend data derived from accounts over time 
can be used to predict the status of the nation's natural resources and 
environmental assets, understand how changes in the quality and 
quantity of these resources and assets will affect the economy, and 
evaluate trade-offs of policy options. 

Most Critical Components of Environmental Accounting for the United 
States: 

Participants generally agreed that pollution and material flow 
accounts, which provide information at the industry level about the 
generation of pollutants and solid waste and the use of energy and 
materials, are the most critical accounts for the United States to 
develop first. In addition to pollution and material flow accounts, 
participants identified natural resource asset accounts and 
environmental protection and resource management expenditure accounts 
as high priorities for the nation. Some participants noted that the 
United States does not have nationwide inventories of natural 
resources. One participant cited the lack of data on mineral reserves 
as a prominent example. 

As a long-term goal, one participant noted that, in 1999, NAS 
recommended a comprehensive set of environmental accounts for the 
nation.[Footnote 3] Participants generally agreed that building a 
comprehensive set of accounts will be technically challenging and will 
take place incrementally over a long period of time. One participant 
likened the building of a comprehensive set of environmental accounts 
to the slow and gradual development of the national income and product 
accounts that took place during the 1920s and 1930s. 

Perspectives and Lessons Learned from the International Community: 

Participants from the international community described their 
perspectives on environmental accounting and some key lessons learned 
from other countries' experiences. We provided participants with 
general information about select foreign countries' experiences prior 
to the forum (see app. IV). 

International Perspectives on Environmental Accounting: 

Common themes expressed by participants from the international 
community included the need to standardize environmental accounting 
concepts and practices internationally, the potential for environmental 
accounting to inform sustainable development, and the noticeable 
absence of the United States in the international advancement of 
environmental accounting. Some participants also expressed concern 
about using environmental accounts to produce official measures of 
gross domestic product (GDP) adjusted to account for environmental 
goods and services--also known as "green" GDP--because this approach 
faces significant methodological challenges. 

International Efforts to Standardize Environmental Accounting Concepts 
and Practices: 

Several participants described efforts by the United Nations, Eurostat, 
and other international organizations to standardize environmental 
accounting concepts and practices, such as water accounting practices. 
According to these participants, standardizing environmental accounting 
concepts and practices can yield important benefits. For example, 
standardization would allow for comparability across different nations' 
environmental accounting data, such as for energy and water. According 
to one participant, standardization and comparability of environmental 
accounting data would enhance efforts to mitigate climate change, as 
well as other leading environmental and natural resources challenges 
facing the international community. 

One participant sketched the development of environmental accounting at 
the UN, focusing on the following two salient events: (1) joint 
publication of the Handbook of National Accounting: Integrated 
Environmental and Economic Accounting 2003 (SEEA 2003) and (2) 
formation of the United Nations Committee of Experts on Environmental- 
Economic Accounting (UNCEEA). According to this participant, a major 
objective of the UN and UNCEEA is to further elaborate and refine the 
SEEA 2003 and elevate it to an internationally recognized formal 
accounting standard, with standardized and formalized reporting 
requirements. Another participant questioned this publication's 
suitability as a universal standard for environmental accounting. 
According to this participant, SEEA 2003 has too much of a "green 
tilt," is not sufficiently grounded in rigorous economic principles, 
and has not generated professional consensus. Another participant 
pointed out that SEEA 2003 is a starting point for developing consensus 
among all stakeholders and suggested that achieving consensus on the 
concepts and practices will require more time. 

Another participant explained that 36 countries have already 
standardized their water accounting practices per SEEA 2003, and 
approximately 36 additional countries are currently in the process of 
standardizing theirs. According to this participant, the international 
environmental accounting community could continue to gradually 
standardize concepts and practices for natural resource categories, 
eventually constructing a comprehensive environmental accounting 
system. One participant also noted that, for countries to adopt 
meaningful environmental accounting practices, there needs to be a 
credible, unified voice that articulates standard concepts and 
practices. Another participant cited an example of varying definitions 
of what constitutes a natural resource "stock" and noted that a 
commonly agreed upon definition would increase consistency among 
countries. 

Environmental Accounting as a Tool for Informing Sustainable 
Development: 

Several participants stated that environmental accounting could serve 
as a tool for informing policies attempting to foster sustainable 
development in both developed and developing countries. One participant 
noted that the European Union's explicit environmental policy goal is 
sustainable development--characterized by the participant as 
development that breaks the link between economic growth and 
environmental degradation. Under the goal of sustainable development, 
environmental accounting is a useful analytical tool for gathering and 
organizing relevant data, the participant explained. 

Another participant observed that development agencies often lack a 
common metric and even a common language for describing the 
environmental ramifications of development projects. To ameliorate this 
situation, the participant suggested that environmental accounting-- 
because it ascribes values to environmental goods and services, tracks 
those values across time, and provides information on the relative 
costs and benefits of economic development and environmental trade- 
offs--could serve as a valuable common language for communicating about 
environmental issues with constituents in developing countries. 

U.S. Absence in International Environmental Accounting Efforts: 

Several participants indicated that, although the United States 
discontinued its environmental accounting work in the mid-1990s, many 
other countries and major international organizations have continued to 
develop environmental accounting. Several participants noted the 
conspicuous absence of the United States from international efforts to 
develop a standardized framework for environmental accounting. 
Participants pointed out that, given its global economic significance, 
U.S. involvement is essential for further elaboration and eventual 
standardization of environmental accounting concepts and practices. One 
participant noted that the lack of a role by the United States in 
developing internationally comparable databases of common environmental 
information is glaring because the country produces and consumes 
natural resources and generates pollution in proportionally large 
quantities compared with other countries. 

Another participant acknowledged that while there is no consensus on 
the concepts and practices used by countries to develop environmental 
accounts, those countries are nonetheless actively collaborating in 
developing accounts through international organizations like the UN, 
Eurostat, and OECD. Continued U.S. absence in international 
environmental accounting efforts only delays this process and hinders 
international efforts to develop more informed environmental and 
natural resource policies. 

Cautioning Against Adjusting GDP to Account for Environmental Goods and 
Services: 

Some participants warned against developing a "green" GDP that would 
incorporate the costs to and contributions of the environment within 
traditional national economic accounts. One participant characterized 
developing a green GDP as a risky endeavor because of significant 
methodological uncertainties. This participant described a foreign 
government's 2-year effort to calculate such a measure and noted that, 
in the end, the national statistical agency determined that it was not 
able to produce such a measure. One participant asserted that some 
types of environmentally adjusted macroeconomic aggregates are biased 
toward including environmental costs and ignoring some environmental 
benefits, and for this reason should not be pursued by countries 
developing environmental accounts. Instead of such a measure, some 
participants advised an environmental accounting approach focused on 
natural wealth. 

One participant defended the practice of calculating a green GDP. 
According to this participant, developing a green GDP is a worthwhile 
endeavor for countries to undertake in order to better understand, at 
an aggregate level and in proportion to economic activity, the 
influence of economic decisions on the environment and vice versa. 

Key Lessons Learned from Other Countries: 

Participants shared the following lessons learned from other countries' 
experiences in developing environmental accounts: 

* Provide data in a timely manner. Two participants stressed the 
importance of providing environmental accounting information to 
policymakers in a timely manner. They illustrated this point with 
examples of information derived from environmental accounts that 
reached decision makers and policy analysts too late to be of any 
influence. To prevent such situations, one participant recommended that 
certain aspects of environmental accounts--depending upon a country's 
most pressing environmental-economic concerns--be made available to 
decision makers on a quarterly basis. The participant explained that 
quarterly reporting would ensure that relevant information about 
interactions between the economy and the environment reach decision 
makers within a reasonable time frame for action. 

* Political interest can wax and wane. Another participant pointed out 
that interest in environmental accounting among a country's political 
leadership waxes and wanes according to shifting political agendas. In 
light of the varying receptivity to environmental accounting 
information, the participant warned that practitioners should be 
cognizant of differing attitudes toward information derived from 
environmental accounts. 

* Environmental accounting is a long-term investment. One participant 
noted that developing environmental accounts is a long-term, gradual 
process. It must be acceptable to gradually develop a system of 
environmental accounts, rather than implementing a comprehensive 
environmental accounting system all at once. The participant also 
noted, however, that while the ultimate benefits of environmental 
accounting can only be realized in the long-term, short-term benefits 
can also be achieved, including improved data collection across a range 
of government statistics and more rigorous, contextually sophisticated 
environmental indicators. 

Key Challenges and Strategies for Developing Environmental Accounts: 

Participants discussed several key challenges to developing 
environmental accounts in the United States. Participants also 
suggested numerous strategies, a number of which were applicable to 
several of the challenges. To ensure a common framework from which to 
discuss the key challenges, we provided participants with a list of 
challenges prior to the forum (see app. V). These challenges included 
institutional differences based on agencies' varying missions, a need 
for support from policymakers and others, a need for financial 
resources, methodological uncertainty, and data availability, 
compatibility, and reliability. 

Key Challenges to Developing Environmental Accounts: 

Participants broadly agreed that the greatest challenge to developing 
environmental accounts in the United States is the need to generate 
support from policymakers and others. Some participants expressed 
concern that Congress might halt any new efforts to develop accounts, 
as happened with BEA's previous effort in the 1990s when congressional 
members from coal-producing states raised methodological and other 
concerns. Therefore, participants emphasized the need for building and 
sustaining support among policymakers and the public to develop 
environmental accounts. 

After the need for political support, participants generally agreed 
that institutional differences were the next greatest challenge to 
developing environmental accounts in the United States. Some 
participants explained that differences in agencies' individual 
missions can hinder collaborative efforts because data are collected 
specifically to meet the agencies' needs, and there is resistance to 
change the way the data has been collected over time. In addition, 
agencies are under pressure to reduce costs and produce only the most 
pertinent high-priority information that programs require. One 
participant pointed out that the National Academy of Public 
Administration is currently working on identifying ways to improve 
institutional capabilities and is developing a set of options for 
improving coordination of data collection. The results of this effort 
might help inform appropriate institutional arrangements for developing 
environmental accounts. 

Participants found the other key challenges--the need for funding; data 
availability, compatibility, and reliability; and methodological 
uncertainty--to be considerable and noted that they must be confronted 
in any attempt to develop environmental accounts. Some participants 
emphasized the need for appropriate and accepted methodologies for 
valuing our natural resources and environmental assets. One participant 
explained, for example, that some natural resource goods and services, 
such as clean air and water, are not traded in the market and are, 
therefore, methodologically difficult to value. Estimating nonmarket 
value is inherently uncertain, raising concerns that including such 
estimates in environmental accounts would diminish the usefulness of 
existing GDP measures. 

Participants generally agreed that, while it is important for the 
United States to develop environmental accounts, the key challenges 
make it a difficult endeavor. Participants also generally agreed that 
if developing environmental accounts was simple, the United States 
would most likely already have done so, noting that a general consensus 
on the need for environmental accounts dates back to the 1930s. At the 
same time, one participant stated that success in developing 
environmental accounts is inevitable, although it will be measured in 
decades rather than years. 

Strategies for Developing Environmental Accounts: 

Participants generally agreed that it is possible for the U.S. to 
overcome its key challenges to environmental accounting. Participants 
provided the following strategies, some of which cut across several of 
the identified challenges, to policymakers and other individuals who 
seek to develop environmental accounts: 

* Understand other countries' experiences with developing environmental 
accounts in more depth. Participants broadly agreed that a GAO report 
that details other countries' experiences with establishing 
environmental accounts would be useful for informing a U.S. effort to 
develop accounts. 

* Develop an economic case for environmental accounting. Participants 
generally agreed that the economic case for environmental accounting 
needs to be intergenerational because environmental accounting is about 
ensuring that our children and grandchildren experience a comparable 
standard of living. One participant explained that the United States is 
a wealthy nation in part because it has a healthy environment. The 
participant suggested that it would be helpful for advocates of 
environmental accounting to develop narratives that explain how the 
health of the environment is changing and reveal the potential economic 
and social consequences that can result from those changes. 
Participants generally advised against using the concept of 
sustainability to justify developing environmental accounts because the 
term is sometimes viewed negatively. Instead, participants suggested 
possible alternatives, such as using natural capital and natural 
resource stewardship as the principal rationale behind developing 
environmental accounts. 

* Focus on accountability and performance. One participant suggested 
that when making the case for environmental accounting, advocates 
should move from discussing "accounting" to emphasizing "accountability 
and performance." This participant noted that such a change in language 
would help focus attention on the federal government's poor job of 
assessing the performance of environmental programs and help inform the 
public that while the United States has well-established environmental 
laws, it does not have effective ways of measuring their performance. 
Another participant disagreed with the notion that the government does 
not measure the performance of environmental programs. The participant 
speculated that most programs have metrics for measuring performance, 
while also acknowledging that those metrics may not be the best 
quality. 

* Identify policymakers, technical experts, and others who support the 
effort. Participants noted that continued support is critical for 
initiating and sustaining efforts to develop environmental accounts. 

* Identify and solicit the help of environmental experts. Specialists 
in environmental accounting and related technical fields can be 
instrumental in assisting these efforts. 

* Use an incremental approach. Participants generally agreed that an 
incremental approach must be used because the combination of 
challenges--questions about how the data will be used, broad apathy 
from policymakers and others, and technical difficulties--can appear 
insurmountable and thereby derail the effort. Interim measures must be 
developed if the United States is to successfully implement national 
environmental accounting. 

* Take the time necessary to develop quality accounts. One participant 
compared the effort to develop environmental accounts with the effort 
to create national economic accounts that started in the 1920s. The 
effort to establish our national economic accounts took decades to 
complete, while the data improved over time. Participants generally 
agreed that creating environmental accounts should be taken seriously 
but slowly. 

General Observations and Next Steps: 

Participants provided general observations on the overall value of 
environmental accounting to the United States and sustaining an effort 
to develop environmental accounts. Participants broadly agreed that the 
United States should develop environmental accounts and that 
environmental accounting can serve as a valuable tool to better account 
for the nation's natural resources and environmental assets. In 
addition, participants generally agreed that developing environmental 
accounts is important for both U.S. environmental and economic 
sustainability. 

Some participants discussed comparisons between environmental 
accounting and environmental indicators, noting that, unlike 
indicators, environmental accounts can help evaluate trade-offs between 
policy options, and thereby help inform policymakers' decisions. They 
noted that data in environmental accounts can also be used to develop 
environmental indicators. Some participants noted that indicators that 
are based in environmental accounts are higher quality indicators. 

Several participants offered to be partners in an effort to develop 
environmental accounts in the United States but also noted that they 
would need support and a designated lead agency to spearhead the 
effort. Participants disagreed about which agency should lead a 
national effort to develop environmental accounts but agreed that it 
will need to be directed and supported by the Administration and 
Congress. Some participants believed that BEA should lead the effort to 
develop environmental accounts. Other participants thought that the 
three agencies that spend the greatest amount of funding to collect 
environmental data--specifically the Departments of Agriculture and the 
Interior, and the Environmental Protection Agency--should play leading 
roles in the effort. In this regard, one participant noted the NAS 
recommendation for cross-agency collaboration with a policy agency 
leading the effort. Other participants thought that a separate entity 
to collect and analyze data, establish environmental accounts, and 
disseminate environmental information would be a better vehicle than 
interagency cooperation within the current federal structure. One 
participant observed that much work can be done in the interim, before 
getting everyone's cooperation. 

Finally, participants suggested continuing the discussion on 
environmental accounting to build momentum for the effort. Several 
participants observed that this forum was a good venue in which to 
further the discussion on environmental accounting and noted the 
importance of continuing the dialogue among key experts. 

[End of section] 

Appendix I: Agenda: 

8:00 a.m.: Check-in: 

8:30 a.m.: Opening session: 

Welcome and introductions: 

Setting the stage--presentation by the Comptroller General: 

9:00 a.m.: Session I: What components of national environmental 
accounts should the United States develop and why? 

Presentation on history of environmental accounting in the United 
States and components of national environmental accounts: 

Presenter: Steve Landefeld, Bureau of Economic Analysis: 

9:15 a.m.: Group discussion: 

What criteria should be used to determine which components of 
environmental accounts should be developed? 

What specific components of environmental accounts should the United 
States develop in the short and long term? 

10:15 a.m.: Coffee break: 

10:30 a.m.: Session II: What are the lessons learned from other 
countries' experiences in developing environmental accounts? 

Presentation on other countries' experiences: 

Presenter: Glenn-Marie Lange, Columbia University: 

10:45 a.m.: International perspective from select participants: 

Featured speakers: 

Ivo Havinga--U.N. Statistical Division: 

Brennan Van Dyke--U.N. Environment Programme: 

Enrico Giovannini--Organisation for Economic Co-operation and 
Development: 

Pieter Everaers--Eurostat: 

Walter Radermacher--German Federal Statistical Office: 

Rob Smith--Statistics Canada: 

11:15 a.m.: Group discussion: 

11:45 a.m.: Lunch is distributed: 

12:00 p.m.: Session III: How should the United States address key 
challenges in developing environmental accounts? 

Presentation on key challenges Presenter: Ted Heintz, White House 
Council on Environmental Quality: 

12:15 p.m.: Group discussion: 

1:15 p.m.: Wrap-up: 

2:00 p.m.: Adjournment: 

[End of section] 

Appendix II: List of Participants: 

Moderators: 

David M. Walker: 
Comptroller General of the United States: 
U.S. Government Accountability Office: 

Glenn-Marie Lange Senior Research Scholar, The Center for Economy, 
Environment, and Society: 
Columbia University: 

Participants: 

James Boyd: 
Senior Fellow and Director, Energy and Natural Resources: Resources for 
the Future: 

Pieter Everaers: 
Director, Agriculture and Environment Statistics and International 
Cooperation: 
Eurostat: 

Ronald S. Fecso: 
Chief Statistician: 
U.S. Government Accountability Office: 

John Felmy: 
Chief Economist: 
American Petroleum Institute: 

Enrico Giovannini: 
Director of Statistics and Chief Statistician: 
Organisation for Economic Co-operation and Development: 

Howard Gruenspecht: 
Deputy Administrator: 
Energy Information Administration: 

Ivo C. Havinga: 
Chief of Branch, Economic Statistics Branch: 
United Nations Statistics Division: 

H. Theodore Heintz, Jr.: 
Indicator Coordinator: 
White House Council on Environmental Quality: 

Christopher Hoenig: 
Chair, Executive Committee: 
Key National Indicators Initiative: 

Christopher B. Kearney: 
Deputy Assistant Secretary for Policy and International Affairs: 
U.S. Department of the Interior: 

Steve Landefeld: 
Director: 
U.S. Bureau of Economic Analysis: 

William J. Mates: 
Economist/Research Scientist: 
New Jersey Department of Environmental Protection: 

Gary W. Mast: 
Deputy Undersecretary for Natural Resources and the Environment: 
U.S. Department of Agriculture: 

Steven Murawski: 
Director of Scientific Programs: 
National Oceanic and Atmospheric Administration: 

Susan E. Offutt: 
Chief Economist: 
U.S. Government Accountability Office: 

Marcus C. Peacock: 
Deputy Administrator: 
U.S. Environmental Protection Agency: 

Walter Radermacher: 
President German: 
Federal Statistical Office: 

Carol Raulston: 
Senior Vice President, Communications: 
National Mining Association: 

Robert Repetto: 
Professor: 
Yale School of Forestry and Environmental Studies: 

Robert A. Robinson: 
Managing Director, Natural Resources and Environment: 
U.S. Government Accountability Office: 

Robert Smith Division Director, Environment Accounts and Statistics 
Statistics Canada: 

Brennan Van Dyke: 
Director, Regional Office for North America: 
United Nations Environment Programme: 

[End of section] 

Appendix III: Background on Components of Environmental Accounting: 

To ensure a common framework from which to discuss environmental 
accounting, we provided participants with information on the four 
components of environmental accounting prior to the forum. We 
identified these components through literature reviews and discussions 
with a range of subject matter experts. The information provided to 
forum participants is reproduced below. 

Background: 

As described below, there are four primary components of environmental 
accounts. These accounts provide data for varying purposes and include 
physical information on resources and pollution, as well as monetary 
values. 

1. Natural resource asset accounts primarily deal with stocks of 
natural resources. These accounts provide indicators that help monitor 
the sustainability of a resource. 

a. Physical asset accounts help monitor ecological sustainability by 
tracking the physical amount of a resource. 

b. Monetary asset accounts establish a monetary value for the total 
national wealth of a resource. 

Examples of natural resource accounts include land accounts that track 
the conversion of agricultural land to urban settlements and the value 
of native forests. 

2. Pollution and material flow accounts provide information at the 
industry level about the use of energy and materials and the generation 
of pollutants and solid waste. These accounts provide indicators of 
sustainability, information on the sources of environmental pressure, 
and options for change. 

a. Physical flow accounts help set priorities for policy based on the 
volume of material use and pollution. 

b. Monetary flow accounts identify relative costs and benefits of 
reducing pollution. 

Examples of pollution and material flow accounts include time series 
accounts for pollution emissions and energy use and an index of water 
use, gross domestic product growth, and population growth. 

3. Environmental protection and resource management expenditure 
accounts identify expenditures made by industry, government, and 
households to protect the environment or manage resources. These 
accounts help address questions about regulation, i.e., the cost of 
environmental regulation over time; the effectiveness of environmental 
protection expenditures and eco-taxes; and the impact of such 
expenditures on prices, productivity, and international 
competitiveness. Examples of environmental protection and resource 
management expenditure accounts include fees collected by government 
for resource use, such as levies on minerals, forestry, or fisheries, 
and funds spent on water treatment and solid waste management. 

4. Environmentally adjusted macroeconomic aggregates include indicators 
of sustainability such as an environmentally adjusted net domestic 
product. These aggregates can be physical or monetary and help assess 
overall environmental health and economic progress. Examples of 
environmentally adjusted macroeconomic aggregates include theme 
indicators for greenhouse gas emissions, acidification, and solid waste 
and environmentally adjusted product and income accounts. 

[End of section] 

Appendix IV: Background on Selected Other Countries' Experiences: 

Prior to the forum, we provided participants with information about 
select foreign countries' experiences. We identified key research and 
programs through literature reviews and discussions with international 
experts and country representatives. The information provided to forum 
participants is reproduced below. 

Background: 

Up until the mid-1990s, the United States was on par with other 
industrialized nations in developing environmental accounts. However, 
since Congress prohibited BEA's work in this area in fiscal year 1995, 
many nations' statistical offices and ministries of environment have 
developed and implemented sophisticated natural resource and 
environmental accounts. In doing so, they have experienced important 
lessons that could benefit the U.S. federal government's implementation 
of environmental accounting. Three such countries are Canada, 
Australia, and the Netherlands. 

Canada: 

Since the early 1990s, Statistics Canada has annually produced asset, 
material and energy flow, and environmental protection expenditure 
accounts, which together comprise the Canadian System of Environmental 
& Resource Accounts. A set of 10 environment-economy indicators has 
twice been published based on these accounts. As Canada is perhaps 
closest to the United States in size, resource composition, and 
environmental policies, it could serve as a useful study in how the 
United States might develop a comprehensive system of environmental 
accounts. 

Australia: 

Much of Australia is arid, and there is extreme year-to-year variation 
in the amount of rainfall. To better understand how to make the most of 
Australia's limited water resources, the Australian Bureau of 
Statistics and the National Water Commission have tracked and 
documented the supply and use of water in the Australian economy since 
2000. So far, three water accounts have been produced. Australia's 
experience with water accounting could be particularly relevant for 
regional water management in the arid U.S. Southwest and other areas 
with competing water needs. In addition to water accounts, Australia 
produces annual environmental accounts for subsoil, timber, and land 
assets. Australia also produces occasional accounts for energy flows, 
greenhouse gas emissions, fish assets, waste flows, and environmental 
protection expenditures. 

Netherlands: 

Although the Netherlands is a geographically small, homogenous, and 
natural resource-poor country, Statistics Netherlands compiles rigorous 
accounts on pollution and material flows. Indeed, statisticians from 
the Netherlands developed a widely influential material flows 
accounting system--the NAMEA, National Accounting Matrix including 
Environmental Accounts. NAMEA functions as an instrument for a variety 
of analyses, including the identification of the economic and 
environmental effects of consumption of certain products. In addition, 
Statistics Netherlands and the Netherlands Environmental Assessment 
Agency have developed an Environmental Data Compendium, based in large 
measure upon these accounts. The Netherlands' overall experience with 
the NAMEA approach may be useful to any country contemplating 
environmental accounting. 

[End of section] 

Appendix V: Background on Key Challenges: 

To ensure a common framework from which to discuss the key challenges, 
we provided participants with a list of challenges prior to the forum. 
We identified these challenges through literature reviews and 
discussions with experts. The information provided to forum 
participants is reproduced below. 

Background: 

The Bureau of Economic Analysis's (BEA) effort to develop environmental 
accounts in the early 1990s--as well as other multilateral and 
mulitstakeholder efforts such as environmental indicators--provides 
policymakers with insight into challenges that the United States will 
face in developing national environmental accounts. To be successful, 
the U.S. approach will need to strategically address the following five 
challenges: 

1. Institutional differences--What agencies should be involved in 
developing and producing these accounts and how should their work be 
coordinated? What new institutional capabilities or arrangements are 
needed? 

BEA was the lead agency in past efforts, but developing environmental 
accounts will draw upon expertise, resources, and data held by a 
diverse range of federal agencies. For example, to develop a national 
forest account, the BEA would need to aggregate data from the Forest 
Service, Park Service, Bureau of Land Management, state forestry 
agencies, and others. 

2. Need for support--Will agencies have the broad support needed to 
devote time and resources to designing environmental accounts? 

The federal government's previous effort to develop environmental 
accounts was halted by Congress. Renewed efforts need the support of 
the administration, Congress, and the public. 

3. Need for resources--How will the United States fund the development 
of environmental accounts? 

A new institutional arrangement designed to allow disparate agencies to 
collaboratively develop environmental accounts would require additional 
funding. Securing such funding in the present era of tightly 
constrained budgets could pose a significant challenge. 

4. Methodological uncertainty--How should the United States address 
uncertainties, for example in measuring and valuing our natural 
resources and environmental assets? 

In the past, resistance to environmental accounting has stemmed from 
questions about the methodological soundness for measuring stocks and 
flows of natural resources and quantities of environmental services and 
procedures for valuing nonmarket goods and services. Developing 
national environmental accounts requires consensus on methodological 
approach and implementation techniques. 

5. Data availability, compatibility, and reliability--What actions are 
needed to ensure that the essential data are produced? 

Sufficient, compatible, and reliable data must be available to develop 
and populate environmental accounts. While many entities collect 
relevant data, it may or may not be available, compatible, and/or 
reliable. 

[End of section] 

Appendix VI: Presentation Given by the Comptroller General of the 
United States: 

Measuring Our Nation's Natural Wealth and Environmental Stability: 
The Honorable David M. Walker: 
Comptroller General of the United States: 

June 19, 2007: 

Sustainability: Are We On Track?

Are we sustaining our natural resources and safeguarding our 
environmental assets for future generations while also promoting 
economic growth and maintaining our quality of life? 

Assessing sustainability requires reliable and accurate national data: 

* For example, we have reliable budget protection data, so we can 
predict a large and growing fiscal imbalance. 

* The data show that we are not on a sustainable path. 

Figure: Potential Fiscal Outcomes: Under Baseline Extended (January 
2001): Revenues and Composition of Spending As a Share of GDP: 

This is a bar graph showing potential fiscal outcomes. Net Interest, 
Social Security, Medicare and Medicaid, and All Other Spending are 
shown by different shading of the bars. The X axis of the chart shows 
the percent of GDP, and the Y axis shows the fiscal year. 

[See PDF for image]-graphic text: 

Source: GAO's 2001 analysis. 

[End of figure] 

Figure: Potential Fiscal Outcomes: Discretionary Spending Grows with 
GDP After 2007 and All Expiring Tax Provisions Extended through 2017: 
(Thereafter Revenue Returns to Historical Average of 18.3% of GDP plus 
Deferred Revenue): 

This is a bar graph showing potential fiscal outcomes. Net Interest, 
Social Security, Medicare and Medicaid, and All Other Spending are 
shown by different shading of the bars. The X axis of the chart shows 
the percent of GDP, and the Y axis shows the fiscal year. 

[See PDF for image]-graphic text: 

Source: GAO's 2007 analysis. 

[End of figure] 

21st Century Challenges Report: 

* These potential fiscal outcomes are inextricably linked to 21st 
Century Challenges. 

* GAO has developed a report that is intended to guide Congress in 
overcoming these challenges. 

* Provides background, framework, and questions to assist in 
reexamining the base of federal government. 

* One of twelve reexamination areas is Natural Resources, Energy, and 
the Environment. 

Source: GAO. 

Managing Natural Resources, Energy, and the Environment as a 21st 
Century Challenge: 

* As the nation moves into the 21st Century, it is becoming 
increasingly apparent that the current approach to natural resources 
use and environmental protection may need changes to address the long-
term stresses affecting so many of our nation's natural ecosystems. 

* "...the broad, long term challenge is determining how the nation can 
reconcile the desire for consumption today with the need to protect 
resources to sustain the future." 

Source: GAO. 

National Natural Resource and Environmental Information: 

* Many federal agencies collect natural resource and environmental 
data, but no agency coordinates and aggregates this data. 

* As a result, we do not know whether we are using our natural 
resources and environmental assets in a sustainable manner. 

* Moreover, current environmental protection efforts, alone, cost 
businesses and taxpayers over $100 billion a year. However, we don't 
know whether these efforts are targeted with maximum effect. 

Environmental Accounting as Policy Tool: 

* According to the National Academy of Sciences, environmental and 
natural resource accounts would provide useful data on resource trends 
and help governments, businesses, and individuals better plan their 
economic activities and investments. 

* Environmental accounting provides a framework for the information we 
need to assess sustainability. 

Source: GAO. 

Key Issues to Consider in Developing Environmental Accounts in the 
U.S.: 

* What short and long-term goals should the U.S. have for developing 
environmental accounts? 

* What are the chief obstacles impeding progress on environmental 
accounting in the U.S. and how should they be overcome?

* what should be the first steps taken by the U.S. federal government 
to initiate environmental accounting? 

Source: GAO. 

[End of slide presentation} 

Appendix VII: Contacts and Acknowledgments: 

Contacts: 

Robert A. Robinson, (202) 512-3841, robinsonr@gao.gov Constance F. 
Citro, (202) 334-2000, ccitro@nas.edu: 

Acknowledgments: 

In addition to the contacts above, James Cosgrove, Acting Director; 
Jóse Alfredo Gómez, Assistant Director; Richard Bakewell; John 
Delicath; and Barbara Patterson, all of GAO; and Jane Ross, Director, 
and Christopher Mackie, Study Director, both of NAS; managed all 
aspects of the work. 

[End of section] 

Related Products: 

Related NAS Products: 

Beyond the Market: Designing Nonmarket Accounts for the United States. 
Washington, D.C.: National Research Council, 2005. 

Nature's Numbers: Expanding the National Economic Accounts to Include 
the Environment. Washington, D.C.: National Research Council, 1999. 

Related GAO Products: 

Environmental Information: Status of Federal Data Programs That Support 
Ecological Indicators. GAO-05-376. Washington, D.C.: September 2, 2005. 

Environmental Indicators: Better Coordination Is Needed to Develop 
Environmental Indicator Sets That Inform Decisions. GAO-05-52. 
Washington, D.C.: November 17, 2004. 

Watershed Management: Better Coordination of Data Collection Efforts 
Needed to Support Key Decisions. GAO-04-382. Washington, D.C.: June 7, 
2004. 

Geographic Information Systems: Challenges to Effective Data Sharing. 
GAO-03-874T. Washington, D.C.: June 10, 2003. 

Forum on Key National Indicators: Assessing the Nation's Position and 
Progress. GAO-03-672SP. Washington, D.C.: May 1, 2003. 

Great Lakes: An Overall Strategy and Indicators for Measuring Progress 
Are Needed to Better Achieve Restoration Goals. GAO-03-515. Washington, 
D.C.: April 30, 2003. 

Major Management Challenges and Program Risks: Environmental Protection 
Agency. GAO-03-112. Washington, D.C.: January 1, 2003. 

Results-Oriented Management: Agency Crosscutting Actions and Plans in 
Border Control, Flood Mitigation and Insurance, Wetlands, and Wildland 
Fire Management. GAO-03-321. Washington, D.C.: December 20, 2002. 

Environmental Protection: Observations on Elevating the Environmental 
Protection Agency to Cabinet Status. GAO-02-552T. Washington, D.C.: 
March 21, 2002. 

[End of section] 

Footnotes: 

[1] United Nations, Handbook of National Accounting: Integrated 
Environmental and Economic Accounting 2003 (New York, N.Y.: 2003). 

[2] GAO, Forum on Key National Indicators: Assessing the Nation's 
Position and Progress, GAO-03-672SP (Washington, D.C.: May 1, 2003). 

[3] National Academy of Sciences, Nature's Numbers: Expanding the 
National Economic Accounts to Include the Environment (Washington, 
D.C.: 1999). 

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