Green accounting: from theory to practice

Abstract

A decade has passed since Wasting Assets, a study of Indonesia by Robert Repetto and colleagues at the World Resources Institute, drew widespread attention to the potential divergence between gross and net measures of national income. This was by no means the first ‘green accounting’ study. Martin Weitzman, John Hartwick, and Partha Dasgupta and Geoffrey Heal had all conducted seminal theoretical work in the 1970s. But the World Resources Institute study demonstrated that data were adequate even in a developing country to estimate adjustments for the depletion of some important forms of natural capital and that the adjustments could be large relative to conventional, gross measures of national product and investment. The adjusted, net measures suggested that a substantial portion of Indonesia's rapid economic growth during the 1970s and 1980s was simply the unsustainable ‘cashing in’ of the country's natural wealth.