Natural Resources Accounting - All You Need To Know
Natural resources accounting is a process of estimating the value of natural resource depletion and environmental degradation due to economic activities. In recent years, it became an important environmental assessment tool. The Natural resource accounting will be used for the accountability of natural resources such as land, water, forests and mineral wealth. Also, it will suggest policies to… Read More »
Natural resources accounting is a process of estimating the value of natural resource depletion and environmental degradation due to economic activities. In recent years, it became an important environmental assessment tool. The Natural resource accounting will be used for the accountability of natural resources such as land, water, forests and mineral wealth. Also, it will suggest policies to prevent environmental degradation due to over-exploitation of natural resources. ”Earth...
Natural resources accounting is a process of estimating the value of natural resource depletion and environmental degradation due to economic activities. In recent years, it became an important environmental assessment tool.
The Natural resource accounting will be used for the accountability of natural resources such as land, water, forests and mineral wealth. Also, it will suggest policies to prevent environmental degradation due to over-exploitation of natural resources.
”Earth provides enough to satisfy every man’s need,but not every man’s greed” – Mahatma Gandhi
I. Natural Resources and Natural Resources Accounting: Meaning & Definition
Natural resources are the resources which can naturally exist on the planet. They are the gift of nature to mankind and constitute the resources that are to be preserved and managed properly for the sustainable use of the resources.
Overexploitation of the resources will lead to environmental degradation. Hence, the more moderate use of natural resources is very much necessary so that nature can reproduce them. Examples of natural resources: Air, Water, Plants, animals, other minerals such as iron ore & manganese ore, aluminium, coal etc.
Natural resources are defined as natural assets (raw materials) occurring in nature that can be used for economic production or consumption.[1]
Natural resource accounting is defined as an accounting system that deals with stocks and stock changes of natural assets, comprising biota (produced or wild), subsoil assets (proved reserves), water and land with their aquatic and terrestrial ecosystems[2].
II. Availability of Natural resources and problems in India
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Water Resources
Water is considered to be an important natural resource that is available for human consumption, agricultural activities, power generation, transportation and waste disposal. Water is an essential commodity for humans, animals and plants. Therefore, the management of water quality and quantity is very much important for humans as well as for the environment.
Nowadays people use excessive groundwater to make money. Therefore, the problems arising like lowering of groundwater table, waterlogging and salinity problems, drought and health problems. The World Health organisation has mentioned that by the year 2025, the water consumption will have been cut by 50% hence, there is a need to address imbalances in the water supply.
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Forest Resources
Forests are considered to be an important natural resource, it contains trees, herbs, shrubs, climbers, lianes etc. 33% of the world’s land has been covered by forest. The forest can be used for commercial and ecological purposes, regulation of climate, reducing global warming, soil conservation, medicinal value, food products etc. The forest resources have been over-exploited for commercial uses, raw materials for industries, developmental projects, fuel requirements etc. Hence, we face global warming, lack of rainwater, overexploitation of land resources etc. Therefore, forest conservation is necessary.
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Mineral Resources
There is a wide range of minerals that are available in our country. The categories of minerals shall include graphite, diamond, quartz, feldspar, bauxite, coal, oil, natural gas, laterite etc. The critical minerals such as Fe, Al, Cu, Au are required for the development of our country. Therefore, there will be excessive exploitation of critical resources. These resources will be used for the development of industrial plants, manufacturing telephone wires, cables, electronic devices, fertilisers, transportation purposes etc.
Due to overexploitation of these minerals, there are major problems to people such as displacement from one place to another, river pollution, land encroachment, high sulphur contamination to groundwater etc.
III. Objective of Natural Resource Accounting
- To support environmental policy.
- To maintain and restore the natural resources.
- Accountable to the state government concerning providing information about the exploitation of resources and changes affecting natural resources.
- Sustainability of environmental development.
IV. Importance of Natural Resource Accounting
- Natural resources are very essential for the smooth functioning of the economy and human life. The minerals such as bauxite, Iron and Copper are forming the basics in day to day life and other natural resources such as water, air, soil and salt are highly required for humans.
- Therefore, it is the duty to save natural resources and to manage minerals. The Natural Resource accounting is important and it facilitates its usefulness in analytical purposes, this will bring a connection between natural resources, economic development and environmental issues, and bring this to the attention of decision-makers.
V. Natural Resource Accounting is a Promising Assessment Tool
In the 35th meeting of the Government Accounting Standards Advisory Board (GASAB), it had discussed the “Natural Resource Accounting” as a promising tool for environmental impact assessment, which helps in stating the usage of Natural Resources.
The meeting was chaired by Anita Pattanayak, deputy comptroller and auditor general. The members of the meeting have suggested that the NRA is an important tool for assessment and sustainable development of the environment and also in assessing projects approved by the Central Government.
The GASAB prepared a report regarding NRA with the Delhi University economics and environmental sciences development and that report mainly focuses on land, water, forest and mineral wealth of the nation. The Board has informed formulation regarding prior period adjustments, revenue recognition, external assistance and contingent liability for compliance.
The draft has been prepared and tested underway in two states and it is known as the inter-ministerial group, constituted by the central government for formulating policies and account standards related to financial transactions of the centre and state. It will play an important role in projects and policies involving usage of land, water, forests and mineral resources.
Steps involved in Natural Resource Accounting
- Physical Accounting
- Monetary valuation
- Integration with Economic Accounting
System of Natural Accounting (SNA)
It takes into account the environmental components and the goods & services they contribute to economic development. It is entirely based on monetary considerations where it can be harmful to both the economy as well as to the environment.
Therefore, the balance between economic development and environmental development should be properly understood and maintained in order to achieve sustainable development of the country. There must be data generation for goods and services and their valuation in economic terms, so that generated information can be used for the policy implementation for the sustainable development of the environment.
Integrated Environmental and Economic Accounting (IEEA)
The main objectives of integrated environmental accounting are segregation and elaboration of all environmental and economic accounts, linkages of physical resource accounts with monetary environmental accounts and balance sheets, assessments of environmental costs, benefits and accounting for the maintenance of tangible wealth. It is, thus, a complete accounting procedure for environmental assets[3].
United Nations Handbook of National Accounting Integrated Environmental and Economic Accounting
The United Nations Handbook of national accounting integrated environmental and economic accounting is commonly referred to as SEEA 2003. The UN, the European Union, International Monetary Fund, the Organisation for Economic Cooperation and Development, the World Bank together undertook the task of the revision of SEEA 2003.
It provides a common framework for permitting a consistent analysis of the contribution of the environment to the economy, the impact of the economy on the environment and economic & environmental accounting. It intends to interact between the environment and economy for serving a strategic plan for the sustainable development of the society.
VI. International Organisations related to Natural Resources Accounting
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United Nations Environment Programme
The UNEP has initiated the global effort in developing environmental accounting during 1983. The UNEP jointly with the World Bank has conducted various workshops related to natural resource accounting and also sponsored several workshops. It still supports environmental accounting with the collaboration of UNSD and UNECE.
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United Nations Statistical Division
The UNSD has, in collaboration with UNSTAT and UNEP organised a workshop on “Environmental and Natural Resource Accounting” with particular reference to countries in transition to market economies. This workshop was held in Misra Harmonia in Slovakia.[4]
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Organisation for Economic Cooperation and Development
The work performed by OECD is with the support of the OECD Council and G7 Countries. The program is based on environmental indicators and environmental accounting. The programme focuses on natural resource and environmental accounts in terms with physical units.
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The World Bank
The World Bank collaborated with UNSTAT and organised various workshops with the United Nations. The bank has its special division for pollution and environmental economics.
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The Statistical Office of the European Communities
The EUROSTAT is responsible for the implementation of the “System of Natural Accounting” with the European Union. In collaboration with the Central Statistical office, it has designed a special method with regard to the collection of data on expenditures of environmental activities.
VII. Conclusion
The whole world has now realised the importance of natural resources and the impacts of environmental degradation. The natural resources are the precious gifts of nature to mankind but due to financial greed, humans were destroying the resources and have faced major impacts.
Environmental issues in India had been growing for a long time and it also reflected in the Indian constitution in 1950. There should be a balance between economic development and environmental protection. The economy is related to the country but the environment is related to the life of people which is more important than anything.
[1] Glossary of Statistical Terms, OECD, Available Here
[2] Glossary of Statistical Terms, OECD, Available Here
[3] Development of Environment Statistics in India, Chapter Two, Available Here
[4] http://iced.cag.gov.in/wp-content/uploads/2013/02/INTOSAI-study-nra.pdf Natural Resource Accounting: Working Group Document, May 25, 1998, INTOSAI Working Group on Environmental Auditing, C/O The Netherlands Court of Audit, Available Here
