*Sr.Lecture,
**Lecture,
Governments around the world develop economic data systems known as national income accounts to calculate macroeconomic indicators such as Gross Domestic Product. Building a nation's economic use of the environment into such accounts is a response to several perceived flaws in the System of National Accounts (SNA), as defined by the United Nations and used internationally. One flaw in the SNA often cited is that the cost of environmental protection cannot be identified. Consequently, money spent, say, to put pollution control devices on smokestacks increases GDP, even though the expenditure is not economically productive, some argue. These critics call for differentiating “defensive” expenditures from others within the accounts. Also misleading is the fact that some environmental goods are not marketed though they provide economic value. Fuel wood gathered in forests, meat and fish gathered for consumption, and medicinal plants are examples. So are drinking and irrigation water, whose sale prices reflect the cost of distribution and treatment infrastructure, but not the water itself. While some countries do include such goods in their national income accounts, no standard practices exist for doing so.
Environmental accounting is underway in several dozen countries, where bureaucrats, statisticians, and other proponents both foreign and domestic have initiated activities over the past few decades. Several countries have made continuous investments in building routine data systems, which are integrated into existing statistical systems and economic planning activities. Others have made more limited efforts to calculate a few indicators, or analyze a single sector. Some of the earliest research on environmental accounting was done at RFF by Henry Peskin, ivorking on the design of accounts for the United States. One of the first countries to build environmental accounts is Norway, which began collecting data on energy sources, fisheries, forests, and minerals in the 1970s to address resource scarcity.
The developing countries like India are facing the twin problem of protecting the environment and promoting economic development. A study on price of pollution in India made by two World Bank officials for 1992 (M. Balachandran 2002) shows the impact of the major problems in terms of cost. They have calculated that damage to environment costs India about Rs. 34,000 cr per year, about 9.5 per cent of gross domestic product. But unless the proper accounting work is done either by the individual firm or by the Government itself, it cannot be determined that both has been fulfilling their responsibilities towards environment or not. Therefore, the need of environmental accounting has emerged. Still, attention towards the style and recognition of environmental accounting is not a generalized one. Legal authorities, standard setting bodies and other regulators cannot come to a consensus regarding the conceptual framework of environmental accounting and its disclosure. Thus, such disclosure is not mandatory rather voluntary that has no specific style or format. With the passage of time, more guidelines are coming in customized format that may lead us to reach a common format for recognizing environment related data and disclosure thereof through financial statements. Still, such disclosure is guided by the social responsibility and commitment on thepart of the entities that work as strong agents for polluting the environment. Environmental accounting would receive a substantial boost if an international consensus could be reached on methodology.
In this paper, the theoretical foundation of environmental accounting is discussed with special reference to India. More emphasis is given on environmental accounting and awareness for that as this is supposed to be the need of today.
