Green Accounting:
Prof.Mahendra Kumar Ghadoliya
Meaning:
“Green accounting is a
type of accounting that attempts to factor environmentalcosts
into the financial results of operations. It has been argued that gross
domestic product ignores the environment and therefore policymakers need a
revised model that incorporates green accounting.”Wikipedia, (https://en.wikipedia.org)
Our national income data are useful indicator of economic
health of a country. Gross Domestic Product measures the level of economic
activity and indicates the variations in these activities. The national income
data do not incorporate the environmental concerns in it. It is now believed
that the development alone does not matter, it should be sustainable so that
our posterity may live in the same comfort, which we had if not better. System of National Accounting (SNA) has three
main defects:
Defects:
a)
It neglects the depletion of natural capital
such as land, forests, water, minerals etc.
b)
Environmental pollution is not reflected in the
SNA.
c)
Expenditure incurred in facing the external
effects of environmental degradation becomes the part of SNA.
In recent years, a new system of
sustainable accounting, known as Green Accounting, has emerged. “It
permits the computation of income for a nation by considering the economic
damage and depletion in the natural resource base of an economy”.
On the earth day US president
Clintonsaid in his address from white house on 21st April, 1993 that
the Bureau of Economic Analysis should come out with a ‘Green GDP’ measure that
would incorporate changes in the natural environmentinto the calculation of
national income and wealth. This was the beginning of Green Accounting or
Environmental Accounting for sustainable development. The development path we
have followed in the past has caused serious threats to the environment and in
the name of growth we have polluted water in the rivers and seas, denuded
forests, heated up the globe and depleted ozone layer. The development should
be without destruction i.e. it should be sustainable development.
To me,“sustainable development is the development that rationally utilises
the available resources natural as well as man-made so that present as well as
future generations may satisfy their needs comfortably.” The concept of sustainable development is not static but dynamic in
which exploitation of resources, the direction of investment, the orientation
of technological development and institutional changes are made consistent with
present as well as future needs. The notion of more
fully incorporating the use of natural resources and the environment into the
national accounts have been called Green Accounting.
Why Green Accounting:
Measures of the economic activity in the system of
National Income Accounting can be misleading as:
(a)
Environmental quality is not reflected in the
conventional data.
(b)
Depletion of natural resources is
not considered.
(c)
Earlier economists believed that
natural resources were gift of nature. This was wrong in fact their quality has
an impact on the quality of life.
(d)
The expenditure made on
maintenance of the environmental hazards is mistakenly considered as investment
in the System of National Income Accounting (SNA)
Sustainable development requires meeting the basic
needs of all by increasing productive potential without threating natural eco
system that support life on earth. Minimising the requirements of non-renewable
resources, the conservation of plant and animals and use of technology for
reduction in environmental degradation.
Objectives of Green Accounting:
To overcome the above mentioned drawbacks of system
of national accounting the statistical
division of UN has developed the System of Environmental Economic Accounting
(SEEA). The SEEA focuses on:
1.
Accounting for depletion of scarce
natural resources.
2.
Measuring the cost of
environmental degradation and its prevention.
Redefining Growth and Development.
Accounting economic growth
Control Population,
Equitable distribution of income
Rational use of available resources
Use of appropriate technology.
We appreciate much better today that economic and
environmental system are interdependent and that there are trade off. While
economic growth gives rise to pollution it also suggests ways and provides
technology and resources to improve environmental quality. Indira Gandhi the
prime Minister of India, declared at the UN Stockholm Conference that poverty
is the biggest polluter and that growth is essential for removal of poverty and
preserve environment. Thus, growth per se
is not bad, what we need is right kind of growth. Thus,
environmentally sound sustainable development has now been accepted as a
desirable objective.
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