Forest map

World maps of physical quality of life [PQL] index and another map of the location of the worlds great forests.

money TreeAccounting for Environmental Assets,”

Robert Repetto

Scientific American, June 1992, pp. 94 - 100.

introduction | accounting table | Keynesian analysis of nature | ignored assets | marginal utility | deforestation | Conclusion

warnings about conveying data

“Impoverishment is taken for progress.”

problem with the UN System of National Accounts (SNA)

“completely ignores the crucial environmental changes of our times: the marked degradation of natural resources in much of the the developing world and the growing pressures on global life support systems such as climate and biological diversity.

“By failing to recognize the asset value of natural resources, the accounting framework that underlies the principle tools of economic analysis misrepresents the policy choices nations face.”

accounting table | Keynesian analysis of nature | ignored assets | marginal utility | deforestation | Conclusion

Cotapaxi Volcano, by Frederick Church, nineteenth century American artist.


Accounting table of costly and beneficial activities

category debit credit earth capital
Examples red line
deforestation reforestation < genetic variety
soil erosion mulching > nutrients
aquifer pollution wetland creation > wildlife
surface pollution sewage treatment > fish
wildlife extinction hunting reserves
fisheries depletion hatcheries < genetic variety
air pollution scrubbers > respiratory health



introduction | accounting table | Keynesian analysis of nature | ignored assets | marginal utility | deforestation | Conclusion


How is nature a free good?

“Keynesian analysis for the most part ignored the productive role of natural resources, so does the current system of national accounts.” (94)

“there is a dangerous asymmetry in the way economists measure, and hence the way they think about the value of natural resources.”

“Buildings, equipment and other manufactured assets are valued as income producing capital, and their depreciation is written off as a charge against the value of production. This practice recognizes that consumption cannot be maintained indefinitely simply by drawing down the stock of capital without replenishing it. Natural resource assets, however, are not so valued. Their loss, even though it may lead to a significant decrease in future production, entails no charge against current income.” (96)

Natural resources are economic goods but are treated as ignored assets.

“Although the model balance sheet in the U.N. SNA recognizes land, minerals, and timber as economic assets to be included in a nation’s capital stock, the SNA income and product accounts do not.” (96)

“Ironically, low-income countries, which are typically most dependent on natural resources for employment, revenues and foreign exchange earnings, are instructed to use a national accounting system that almost completely ignores their principle assets.”



introduction | accounting table | Keynesian analysis of nature | ignored assets | marginal utility | deforestation | Conclusion | start

marginal value

“Behind this anomaly is the mistaken assumption that natural resources are so abundant that they have no marginal value.”

“Another misunderstanding is that natural resources are ‘free gifts of nature,’ so that there are no investment costs to be written off per se. The value of an asset, however, is not its investment cost but the present value of its income potential.”

“The true measure of depreciation is the capitalized present value of the reduction in future income from the asset because of its decay or obsolescence. In the same way that a machine depreciates as it wears out, soils depreciate as their fertility is diminished, since they can produce the same crop yield only at higher cost.” (96)


Deforestation is the loss of forests.

deforestation“One of the hemisphere’s highest rates of deforestation (Costa Rica) has led to the loss of 30% of the country’s forests. Furthermore, most of the forest was simply burned to clear land for relatively unproductive pastures and hill farms, sacrificing both valuable tropical timber and myriad plant, animal and insect species. Because most of the area converted from forest was unusable for agriculture, its soil eroded in torrents. Losses averaged more than 300 tons per hectare from land use to grow annual crops and nearly 50 tons per hectare from pastures.” (96-97)

“Because forests, fisheries, farming and mining directly account for 17 percent of
Costa Rica’s national income, 25 percent of its employment and 55% of its export earnings, this destruction caused severe economic losses. . . .

Yet nothing in Costa Rica’s national economic accounts records these economic losses.” (97)

“The experience of other developing countries for which natural resource accounts have been compiled parallels that of Costa Rica. In the Philippines, for example, annual losses resulting from deforestation averaged 3.3 percent of the GDP between 1970 and 1987. . . .

"This pollution, together with over fishing, wiped out all profits by 1984. Although the nation’s accounts showed a mounting external debt, they gave no sign of destruction in productive capacity that made paying back that debt more unlikely.” (98)





Oregon coastal road exposes clear cutting of a private forest.


graphExisting accounting methods hide significant facts and increase our risks from failing to protect necessary water, soil, forests, and fisheries–all significant expensive resources needed for subsistence.

“Indonesia’s natural resource accounts fernshow that between 1977 and 1984 the depletion of natural resources totaled 19 percent of GDP. . . . Once again, conventional accounting methods show no sign of this impending danger.” (100)

  1. The current dominant means used to determine national wealth entirely ignores or discounts the importance of natural resources.
  2. Nature is not a free good and its services are costly in that they require reinvestment.
  3. By not accounting for the depreciating value of soils, forests or water the future losses of valuable assets is underestimated.
  4. The loss of forests is just one example, but a key factor, or central example of how poor countries assets are not accounted for and they disappear,
  5. When natural resources disappear the cost of replacing the ecosystem services that produced them is often more costly than countries can afford to replace.

habsSO2 emissions

The costs of environmental degradation, damage or disturbance.

You can never do merely one thing because of how our world is tied together.

Nature is a source of wealth transformed by cultures into assets.


introduction | accounting table | Keynesian analysis of nature | ignored assets | marginal utility | deforestation | Conclusion | start


Trees take more than one generation to grow into usable timber.population

The 23,000 kinds of trees in the world all differ in rates of growth.

The U.K.N.F. reports that "Trees grow at different rates depending on the species. Yews can grow for a thousand years whilst poplars can be grown and felled in only 20 years. It is said that an oak takes 200 years to grow, 200 years to mature, . . . "



Forests as one land-use type

Forests create protection for watersheds and a source of water.


warnings about interpreting and then conveying data

Forests create watershed

Natural Capital | Accounting for natural assets | Worth of ecosystem services