Measuring the trade-off between economic growth and a clean environment

This article surveys various aspects of the measurement of environmental quality from the view point of national accounting and welfare economics. It focuses on the question whether GNP or NNP should be corrected for environmental change (‘green’ or ‘eco’-GNP) or whether physical accounts provide sufficient information for an assessment of the trade-off mentioned above. We conclude that valuation of (services from) environmental capital cannot be avoided for such assessment, but can only be made using a model based approach. Statistical agencies should continue to collect data on environmental quality and to value changes in environmental capital in the context of national resource accounting. However, official statisticians should refrain from correcting GNP or NNP for environmental change, as this correction implicitly contains a political judgment and cannot be based on mere technical knowledge. Copyright Kluwer Academic Publishers 1994