Australian Bureau of Statistics

Rate the ABS website
ABS Home > Statistics > By Release Date
ABS @ Facebook ABS @ Twitter ABS RSS ABS Email notification service
1301.0 - Year Book Australia, 2007  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 24/01/2007   
   Page tools: Print Print Page RSS Feed RSS Bookmark and Share Search this Product  
Contents >> Environment and Heritage >> Environmental assets

ENVIRONMENTAL ASSETS

The economy has a complex relationship with the environment. The environment provides the raw materials and energy for the production of goods and services that support people's lifestyles. The environment also sustains damage through the activities of households and businesses. While this damage is well documented in the environmental literature, it falls outside the scope of the national accounts. National accounts include the value of goods and services produced and the income generated through the use of environmental assets, but does not reflect the economic cost of depleting environmental assets or the damage that arises from economic activity. In recognition of this asymmetry, the Australian Bureau of Statistics (ABS) has completed work to capture the environmental damage sustained in servicing the Australian economy and the longer-term sustainability in exploiting Australia's environmental assets.

This section discusses how the environment is currently treated in the Australian national accounts and gives a broad overview of some environmental accounting that the ABS has done to capture the economic cost to the environment.

ENVIRONMENTAL ASSETS IN THE AUSTRALIAN NATIONAL ACCOUNTS

For an asset to be included in the Australian national accounts, compiled by the ABS, it must have an identifiable owner, and the owner must be able to derive an economic benefit from holding or using the asset. Environmental assets that could be considered economic assets for the purposes of a national account include subsoil assets, land, forests, water, and fish stocks in open seas that are under the control of an economic agent, often the government.

Environmental assets such as the atmosphere are outside the scope of the national accounts, as they do not have an identifiable owner who can derive an economic benefit from their use. This is not to suggest that these assets are of no value. On the contrary, many environmental assets are essential to life itself. However, even if they fell within the definition of an economic asset, the valuation techniques available to measure such assets tend to be arbitrary and controversial.

There are four environmental assets in the Australian national and sector balance sheets: land; significant subsoil assets; plantation timber; and native standing timber available for exploitation. Land valuations are available through administrative sources and net present value techniques, which take into account current production rates, prices, costs, and discount rates are used to value both subsoil and native forest assets. Plantations are included in the balance sheet as inventories because timber growth is controlled. Water and fish stocks have not been included on the Australian national balance sheet due to a lack of available data.

The Australian national balance sheet recorded $5,598b worth of assets at 30 June 2005, of which $2,278b (41%) were economic environmental assets (table 24.37). The value of environmental assets grew strongly over the period 1997-2005, with an average annual growth rate of 13.1%.


24.37 ASSETS, Current prices - 30 June

1997
2005
Average
annual
change
$b
$b
%

Financial
230
622
13.2
Buildings and structures
1,204
2,146
7.5
Machinery and equipment
288
376
3.4
Other produced
116
166
4.5
Other non-produced
-
10
n.a.
Environmental
851
2,278
13.1
Total assets
2,689
5,598
9.6

Source: Australian System of National Accounts, 2004-05 (5204.0).


Land accounted for 84% of the value of Australia's environmental assets included in the national balance sheet as at June 2005. It almost tripled in the period 1997-2005 - an average annual growth of greater than 10%. Subsoil assets, which account for about 15% of the assets, more than tripled in value over the period and timber (native and plantation), which accounts for less than 1% of Australia's environmental assets, saw relatively modest growth.


24.38 ENVIRONMENTAL ASSETS, Current prices - 30 June

1997
2005
Average
annual
change
$b
$b
%

Rural land
93
209
10.6
Other land
633
1,715
13.3
Oil and gas
69
148
10.0
Other subsoil
47
195
19.3
Native standing timber
2
3
5.6
Plantation standing timber
6
8
3.8
Total
851
2,278
13.1

Source: Australian System of National Accounts, 2004-05 (5204.0).


The strong growth in Australia's environmental assets (table 24.38) was mainly due to rising prices. Over the period 1997-2005, average annual growth in volume or real terms was only 1.6%. Average annual growth in the volume of land was 1.2% in the period, while subsoil average annual volume growth was 3.7%. Table 24.39 indicates that real growth in the stock of environment assets has been quite modest over the period, and that the strong growth in values can be attributed mainly to price effects.


24.39 ENVIRONMENTAL ASSETS, Volume/Real(a) - 30 June

1997
2005
Average
annual
change
$b
$b
%

Land
1,482
1,633
1.2
Subsoil
208
278
3.7
Native standing timber
3
3
3.4
Plantation standing timber
7
8
1.6
Total
1,700
1,923
1.6

(a) Reference year is 2003-04.
Source: Australian System of National Accounts, 2004-05 (5204.0).


MEASURING DEPLETION

Depletion is defined in the international System of National Accounts 1993 (SNA93) as the:

    ... reduction in the value of deposits of subsoil assets as a result of the physical removal and using up of the assets, ... the depletion of water resources, and the depletion of natural forests, fish stocks in the open seas and other non-cultivated biological resources as a result of harvesting, forest clearance, or other use (SNA93, 12.29 and 12.30).
Depletion in an economic sense results because the value of the resource stock has been lowered through its use in a productive activity, and the use has reduced the asset's ability to produce an income stream in the future. In this sense, depletion is analogous to depreciation of produced assets whereby the current value of the stock of fixed assets declines through normal use, wear and tear and foreseen obsolescence.

Physical depletion may not necessarily equate to economic depletion in cases where asset values are low or the resource life is long. While the physical dimension of depletion can be fairly readily observed in practice, its value cannot. This is because the mineral or other natural resource product is not what is being valued - rather it is the decline in the value of the mineral asset below the ground or the standing timber in the forest. Generally, one has to resort to capital theory to undertake this valuation. (See Environment by Numbers: Selected Articles on Australia's Environment, 2003 (4617.0)).

SUBSOIL ASSETS

The depletion of minerals and fossil fuels in any one year is the change in the value of the asset between the beginning and end of the year arising purely from the extraction of these natural resources. An 'addition' occurs when previously unknown stocks of minerals are discovered and delineated, or previously subeconomic stocks become economic because of changes in prices or mineral extraction techniques. An 'addition' can also be negative. For example, if mineral prices fall and previously economic stocks become subeconomic, the owner can no longer derive an economic benefit from the asset so it is excluded from asset values. In the Australian national accounts, the value of a new discovery is not in itself considered as output or income because it is a 'gift of nature'. Similarly, reclassification of the economic status of known stocks is considered to be an 'other change in volume', not production or income.

Graph 24.40 shows depletions are increasing at a relatively constant rate whereas 'additions' are erratic as subsoil discoveries can be both substantial and sporadic. The result is that in some years more subsoil resources are added than are depleted while in other years, the reverse is true. In some years, depletions and 'additions' are more or less equal in value. Subsoil 'additions' exceeded $5b in the three years to 2004-05, due mainly to increasing crude oil extractions rather than discoveries. The volume of extraction of crude oil has averaged about 26 GL per year over the last decade, and at the same time crude oil prices have increased, resulting in the recent strong growth in the value of depletions.

24.40 SUBSOIL ADDITIONS AND DEPLETION


LAND

If land is used sustainably, it has an infinite life and therefore, no adjustment for depletion is required. However, where land is being degraded due to economic activity, an adjustment to income for land degradation is applicable. In the context of economic depletion used here, land degradation represents the year-to-year decline in the capital value of land resulting from economic activity after deducting price rises due to inflation.

Changes in the value of agricultural land can be determined from data on market values or land rates data. However, data for land values are affected by a host of factors other than changes in productive capacity from the impact of land degradation, including inflation, technological advances and changes in land use due to re-zoning, subdivision and 'lifestyle' considerations.

Two recent national studies used different approaches to measuring economic losses due to land degradation. One used a farm survey to estimate the extent of land degradation on farms. Combining data from the survey with land value data, regression techniques were used to estimate that the difference in the capital value of farms with and without degradation was approximately $14.2b in 1999. This represents the total accumulated value of losses in land value due to degradation. The other - the National Land and Water Resources Audit - used models to estimate the 'yield gap', that is, the difference between profits with and without soil degradation. Lost profit at full equity due to salinity, sodicity and acidity was estimated as $2.6b in 1996-97.

In concept, these two approaches can be reconciled because the net present value of future lost profits should be equal to the decline in the capital value of land due to degradation. The ABS has used the data from these studies to produce estimates of the incremental effect of land degradation on the value of land and the lost profits from agricultural production each year. The results are presented in graph 24.41.

24.41 LAND DEGRADATION


FOREST ASSETS

Forests are renewable biological resources. In the national balance sheet, forests are depicted as two types - old growth native forests and plantations. The valuation of the depletion of renewable assets presents a different set of issues to valuation of non-renewable assets as it may be possible to replace, over time, the part of the asset that is used in the current period. Where a forest is harvested sustainably, no depletion adjustment is required.

Estimates for depletion of native forests are not available. However, given the value of native forests on the national balance sheet is $3b compared with $343b for subsoil assets, it is expected that depletion will have a relatively insignificant effect on the overall value of natural resources. This is premised on a narrow economic view that does not account for damage to intrinsic non-monetary values such as ecosystem services, biodiversity and aesthetic/recreational values.

ADJUSTING THE AUSTRALIAN NATIONAL ACCOUNTS

There is currently an asymmetry in the Australian national accounts between the treatment of produced assets, such as buildings and environmental assets. Depreciation of produced assets (termed consumption of fixed capital (COFC) in the national accounts) is deducted to derive various 'net' income measures in the national accounts such as net domestic product (NDP), net operating surplus (NOS), net national income and net saving. No similar deduction is made for environmental assets when they are used up or degraded as a result of economic activity. The net measures thus fall short of being sustainable concepts of income, although they are superior to the various 'gross' measures in the Australian national accounts in this respect.

The experimental estimates derived for the value of depletions and discoveries of subsoil assets and the degradation of agricultural land are indicative of adjustments that could be made to the national accounts in the context of a satellite account and are shown in table 24.42. Depletion adjustments unambiguously lower the net values. If the value of discoveries is included in income in place of the value of mineral exploration, the net effect of that adjustment can be positive or negative.

The net saving levels are changed by the same amount as for NOS so the nation's net lending position is left unchanged.


24.42 PRODUCTION AND CAPITAL INCOME ADJUSTED FOR DEPLETION AND ADDITIONS

2000-01
2001-02
2002-03
2003-04
2004-05
$m
$m
$m
$m
$m

Subsoil depletion
2,388
3,275
3,948
4,490
4,612
plus
Land degradation
304
313
321
332
344
less
Subsoil additions
2,040
2,408
5,280
5,277
5,041
plus
Cost of mineral exploration
1,708
1,523
1,728
1,731
2,074
less
COFC on mineral exploration
1,572
1,603
1,670
1,717
1,837
equals
Net depletion adjustment
788
1,100
-953
-441
152
GDP
689,340
735,783
782,798
838,251
891,524
less
Consumption of fixed capital
107,638
115,794
122,029
128,249
134,771
equals
NDP
581,702
619,989
660,769
710,002
756,753
less
Net depletion adjustment
788
1,100
-953
-441
152
equals
Depletion adjusted NDP
580,914
618,889
661,722
710,443
756,601
GOS and GMI(a)
269,287
295,486
312,860
340,472
363,949
less
Consumption of fixed capital
107,638
115,794
122,029
128,249
134,771
equals
NOS
161,649
179,692
190,831
212,223
229,178
less
Net depletion adjustment
788
1,100
-953
-441
152
equals
Depletion adjusted NOS
160,861
178,592
191,784
212,664
229,026
Net saving
26,709
33,452
34,405
42,384
41,698
less
Net depletion adjustment
788
1,100
-953
-441
152
Depletion adjusted saving
25,921
32,352
35,358
42,825
41,546

(a) Gross operating surplus and gross mixed income.
Source: ABS data available on request, Australian National Accounts.


Adjusting the Australian national accounts for depletion and additions of subsoil assets also affects growth rates. As table 24.43 shows, the adjustments have the largest impact on the growth rates of NDP and NOS in 2000-01, and 2002-03. The growth rates are changed significantly when the net depletion adjustment swings from positive (a depletion) to negative (an addition). The swing between 2001-02 and 2002-03 exceeded $2b due to the high increase in subsoil asset additions in 2002-03, resulting in a 0.3 point increase in the growth of NDP.


24.43 CHANGES IN PRODUCTION AND CAPITAL INCOME GROWTH AFTER ADJUSTMENT FOR DEPLETION AND ADDITIONS

2000-01
2001-02
2002-03
2003-04
2004-05
%
%
%
%
%

GDP
6.8
6.7
6.4
7.1
6.4
NDP
6.9
6.6
6.6
7.5
6.6
Depletion adjusted NDP
6.7
6.5
6.9
7.4
6.5
Net change in NDP growth
-0.2
-0.0
0.3
-0.1
-0.1
GOS and GMI(a)
5.7
9.7
5.9
8.8
6.9
NOS
5.0
11.2
6.2
11.2
8.0
Depletion adjusted NOS
4.5
11.0
7.4
10.9
7.7
Net change in NOS growth
-0.6
-0.1
1.2
-0.3
-0.3

(a) Gross operating surplus and gross mixed income.
Source: ABS data available on request, Australian National Accounts.


Previous PageNext Page


Bookmark and Share. Opens in a new window


Commonwealth of Australia 2014

Unless otherwise noted, content on this website is licensed under a Creative Commons Attribution 2.5 Australia Licence together with any terms, conditions and exclusions as set out in the website Copyright notice. For permission to do anything beyond the scope of this licence and copyright terms contact us.