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Environmental economics report - Expert reaction

New Zealand's economy grew faster than the country's greenhouse gases over the past 25 years, according to a new report.

Statistics New Zealand has released the first report of the System of Environmental-Economic Accounts, which is intended to be an annual report that feeds into Treasury's investment statements. It highlights the importance of natural resources to the economy, alongside impacts on the environment.

The SMC asked a lecturer in environmental economics to comment on the report. Any further comments will be added to our website.

Dr Viktoria Kahui, Senior Lecturer, Economics Department, University of Otago Business School, comments:
no conflicts of interest declared.

"The release of the Environmental-economic accounts: 2018 is a positive step towards the growing consensus that our environment is a capital asset that provides us with the many things we need to survive and thrive; fresh air, drinking water, timber, fish, aesthetic beauty but also the capacity to assimilate waste such as water filtration from wetlands. Excessive waste and mismanagement of resources can degrade this very special, life-sustaining asset and the first step to understanding its value is to measure it.

"Putting a monetary value on the environment can cause controversy between those who say nature has an intrinsic value that cannot be measured in monetary terms, and those who say it is the very lack of monetary value that makes it all too easy to ignore in business decision making.

"The government’s report avoids much of the controversy by, among other things, focusing on physical measures of land cover, timber and water, and where possible, the value of natural assets based on market values. The report follows the System of Environmental-Economic Accounting (SEEA), which is internationally recognised and provides some coherence with national income accounting.

"The authors acknowledge, on the last page of the report, that 'the most significant gap in our environmental accounts relates to ecosystem service', and the significance of this omission cannot be overstated. Physical measures of the quantity of water available do not take into account the quality of the water such as the rapid degradation of waterways from dairy farming and urban runoff. Land cover measures do not reflect the rapid loss in biodiversity of native fauna and flora, and none of the measures provided show the importance of the growing tourism industry, which thrives off the back of New Zealand’s ‘green and clean’ brand, although this issue has been debated.

"If national accounts were to include the value of New Zealand’s ecosystem services then we could see a major shift in view away from the consumption and production of goods and services as a catalyst for economic growth towards maximising the dividends of a well-functioning natural capital stock. This necessarily implies the improvement and maintenance of ecosystems, the minimisation of waste and the effective use of natural resources."

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