GREEned National STAtistical and Modelling Procedures: the GREENSTAMP approach to the calculation of environmentally adjusted national income figures

The paper gives an overview of the GREENSTAMP Project (GREEned National STAtistical and Modelling Procedures) which, during 1994–1996, developed results and recommendations concerning empirically and theoretically robust methods for greening national accounts. The recommended approach centres on methods for quantifying economic opportunity costs associated with meeting specified environmental performance standards. In this perspective, a "greened GDP" is a hypothetical measure of a performance potential, viz., an estimate of the level of output (or of consumption, or of national income, etc.) that a national economy would be able to achieve while simultaneously respecting specified environmental quality and resource husbandry requirements. The GREENSTAMP approach is modular, establishing linkages with different categories of data and analyses. First, information is organised in so-called satellite environmental accounts, which describe the state of the environment according to chosen categories and measures (largely non-monetary), and which establish links between economic activity sectors and environmental change in terms of the pressures acting on each environmental category. Second, cost information is obtained through various levels of analysis (firms and households, sectors and macro-economic aggregates) about the economic resource requirements – such as investments needed or consumption foregone – that would be necessary in order to reduce a specified environmental pressure. Environmental defensive expenditures, pollution avoidance cost curves, and macroeconomic comparative static and dynamic scenario modelling are among the applicable cost concepts and tools. In this cost-effectiveness perspective, the value of environmental assets and services is not estimated in monetary terms directly. Rather, estimates of the costs – at various scales of analysis and timeframes – of specified improvements in environmental performance are considered in relation to scientific, political and economic judgements about the importance of the environmental functions, services and assets in question.