Address for correspondence : Noritoshi Ariyoshi, Faculty of Law, Kumamoto University 2-40-1 Kurokami, Kumamoto, 860 JAPAN ; E-mail: ariyoshi@toko.ge.kumamoto-u.ac.jp; Fax: +81 96 342 2852

　　The purpose of this paper is to propose a Complete System for integrated Environmental and Economic Accounting (a Complete SEEA or a CSEEA), which is an extended form of the SEEA proposed in 1993 by the United Nations Statistics Division (UNSD). The SEEA by the UNSD does not include the financial and income distribution accounts and the detailed rest-of-the-world account. On the other hand, the NAMEA proposed by S.J. Keuning et al. does not include the stock account (balance sheets). The CSEEA is a comprehensive accounting matrix which contains a complete sequence of flow and stock accounts of the 93SNA as well as the environmental accounts of the SEEA type.

　　The CSEEA has two distinctive features. First, it includes both the financial and income distribution accounts, and the full balance sheets and accumulation accounts, thus representing the relationships between the financial and income distribution flows and the accumulated environmental impacts through the concepts of "environmental debt" as an inter-generational liability, and of "genuine saving" as a means of repaying the debt. I would demonstrate such economy-environment interaction by describing the influence of taxation and financial policy on the environment.

　　Secondly, in order to respond better to the international environmental problems, the CSEEA includes the detailed rest-of-the-world account and the global environment account. The former account reflects the environmental impacts and pertinent economic transactions between the related countries, and the latter account reflects the impacts on/from the global commons. In the CSEEA matrix, the accounts for each countries, the rest of the world and the global commons are arranged in a diagonal line from top-left to bottom-right, and thus the flows of international linkages between them are represented in a left-handed revolution. The Framework of the CSEEA is also applicable to the representation of the environment-economy interactions between regions inside a nation, between a region and a nation, and between a region and foreign countries.

Abstract

1. Introduction ・・・・・・・・・・・・・・・・・・・・・・・・・・・ 1

2. International environmental problems and the CSEEA ・・・・・・・・・・・ 3

　2.1 International environmental problems and the original SEEA ・・・・・・・・ 3

　2.2 Two distinctive features of the CSEEA ・・・・・・・・・・・・・・・・ 4

3. Conceptual framework of the CSEEA (table 1) ・・・・・・・・・・・・・・　5

　3.1 Accounting rules of the CSEEA ・・・・・・・・・・・・・・・・・・ 5

　3.2 Accounting structure of the CSEEA　・・・・・・・・・・・・・・・・ 6

　3.3 "Environmental debt", "genuine saving" and the financial and income accounts ・ 13

　3.4 On the deduction of defensive expenditures and environmental costs from NDP ・ 15

4. Illustration of the CSEEA for Japan (table2) ・・・・・・・・・・・・・・・ 16

5. Extension of the CSEEA to the global accounting system (table 3) ・・・・・・・ 16

6. Comparison of the CSEEA with the SEEA and the NAMEA (table 4) ・・・・・ 17

7. Issues for the future ・・・・・・・・・・・・・・・・・・・・・・・・ 17

References ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 17

1. Introduction

　　The discussion of sustainable development has received increased attention from the international community. In response to this, the United Nations Handbook on the SNA satellite System for integrated Environmental and Economic Accounting (SEEA) was issued in 1993 by the United Nations Statistics Division (UNSD) with the objective of describing the inter-relationships between the natural environment and the economy (United Nations, 1993). The SEEA is an accounting system of the supply and use table type which is constructed by introducing the environment-related disaggregation and extension of the SNA category into the supply and use table and the non-financial asset accounts. Therefore, the SEEA is suitable for the description of the direct relationships between the domestic economic activities and the change in the natural environment of a nation.

　　In recent years, the various sorts of international or global environmental problems, such as the environmental disruption in the less developed countries caused by international transactions and the disruption on a global level by greenhouse effect, have attracted considerable attention throughout the world. It is worth noting that these problems relate not only to production activities but also to the international monetary flow such as economic assistance, the situation of income distribution, and so forth. Therefore, in order to suitably display these environmental problems, a comprehensive accounting system is needed, containing not only the supply and use table and the non-financial asset accounts, but also the various sorts of accounts such as the distribution and use of income accounts, the financial accounts and the rest of the world accounts.

　 The purpose of this paper is to propose an extended form of the SEEA which can reflect various environmental problems on a global level, as well as those on a regional (sub-national) and national level. This extended form can be called a Complete System for integrated Environmental and Economic Accounting (a Complete SEEA or a CSEEA). Compared with the SEEA, the CSEEA is a comprehensive accounting matrix which contains a complete sequence of flow and stock accounts of the 93SNA (Commission of the EC et al., 1993). Therefore, it can represent more various inter-relationships between the environment and economic activities.

　　S.J.Keuning et al. have proposed and developed the NAMEA (National Accounting Matrix including Environmental Accounts) which is the national accounting matrix extended with environmental accounts in physical units(de Boo et al., 1993; Keuning, 1993; Keuning and de Haan, 1996; de Haan and Keuning, 1996). The NAMEA is the accounting system which attracts a great deal of attention in many countries. Though the CSEEA is in the first stage of the development, it is similar to the NAMEA as far as it is represented in the form of Social Accounting Matrix (SAM). However, while the NAMEA only contains the flow accounts, the CSEEA also contains the full balance sheets and a detailed rest of the world account.

　　The CSEEA represents both the impact of economic activities on the environment and the effect of the environment on economic activities on a single accounting matrix. The impact on the environment is treated as over-consumption of environmental goods and services, and the effect of the deterioration of the environment on economic activities as consumption of negative environmental goods and services. 　

　　In order to respond better to the international or global environmental problems, the CSEEA contains the detailed rest of the world accounts and the global environment accounts for the impacts on /from the global commons. When the CSEEA is extended further subdividing the rest of the world accounts into the countries and regions such as country A, region B, ･･･, the rest, it is also called a Global Accounting Matrix (GAM).

　　In 1995, the Economic Planning Agency of Japan published the first estimates for the SEEA (Oda et al., 1996). Since the CSEEA or GAM are constructed by incorporating the SEEA into the full sequence of the 93SNA, they are useful to the countries which are compiling the SEEA as the satellite account of the SNA, such as Japan.

　　The CSEEA is an extended form of the SEEA with a Social Accounting Matrix (SAM), a detailed rest-of-the-world account and a global environmental account. On the other hand, it is also the extension of the NAMEA with full balance sheets and a detailed rest of the world account. Therefore, its matrix is expected to successfully represent any issues to be included in the revised SEEA. I would like to propose the CSEEA matrix as the framework for the revised SEEA.

　　The next section contains two subsections. To begin with, in section 2.1, the international or global environmental problems are classified into five types, and it is shown that the SEEA cannot represent these problems precisely. Next, in section 2.2, the CSEEA is introduced as a comprehensive accounting system responding more efficiently to these problems, and two distinctive features of the CSEEA are highlighted.

　　The accounting structure of the CSEEA is explained in detail in section 3.1 and 3.2 (table 1). In section 3.3, it is shown for the CSEEA to be able to represent the relationships between the financial and income distribution flows and the accumulated environmental impacts through the concepts of "environmental debt" and "genuine saving". Furthermore, section 3.4 shows the reason why the defensive expenditures and environmental cost should not be deducted from NDP or national income.

　　It is interesting to introduce the trial estimates of the SEEA for Japan and the related figures of the SNA for Japan to the CSEEA. This is shown in section 4 (table 2). In section 5, the extended form of the CSEEA which represents explicitly the international linkages between the related countries is displayed as a Global Accounting Matrix (GAM) (table 3). Section 6 gives a concise comparison of the CSEEA with the SEEA by the UN and the NAMEA by S.J.Keuning et al. (table 3). Finally, in section 7, the issues of the future have been highlighted.

2. International environmental problems and the CSEEA

2.1 International environmental problems and the original SEEA

　　The international or global environmental problems are classified into five types of environmental disruption (Ueta, 1992) :

(a)Transboundary pollution, such as acid rain,

(b)Environmental disruption in the less developed countries(LDC) caused by direct foreign investment and economic assistance,

(c)Depletion of natural resources in the LDC caused by international trade,

(d)Disruption of the ecosystem caused by the poverty in the LDC, such as desertification,

(e)Disruption on a global level, such as the greenhouse effect and depletion of the ozone layer.

　　Among these, the four types (a) to (d) are often called the international environmental problem, and the (e)-type the global environmental problem. I will use the term "International environmental problem" to refer to all the types (a) to (e). In order to respond better to these international environmental problems, it is necessary for the accounting system to contain various sorts of accounts, such as the income distribution accounts, the financial accounts, and the rest of the world accounts.

　　As an initial example, any type of international environmental problem relates either to certain specific countries or to all countries worldwide. Therefore, solving any such problem requires an accounting system which can represent every inter-relationship between the relevant countries and global commons. 　　

　　Moreover, each type of environmental problem needs a detailed account for the transaction to which it relates. For example, in order to represent the (a) and (e)-types of environmental problem, an account which can record the international environmental impacts and effects is necessary. The (b)-type of environmental problem relates to the international financial flows, because the direct foreign investment and the economic assistance are regarded as the capital transfer and the acquisition of financial assets (or the incurrence of liabilities) ; therefore, a detailed financial flow account is needed. On the (c)- type, a detailed goods and services account and the rest of the world account is required. The (d)-type of environmental problem has a direct relationship to the situation of income distribution, though the income distribution is indirectly related to all types of environmental problem. Therefore, the (d)-type requires a detailed income distribution account.

　　The original SEEA proposed by the UNSD does not have access to these accounts, because it is constructed only on the basis of the supply and use table and also on the non-financial assets accounts. Therefore, the SEEA cannot sufficiently describe the international environmental problems such as mentioned above.

2.2 Two distinctive features of the CSEEA

　　I propose an extended form of the SEEA, that is, a Complete SEEA or a CSEEA (Complete System of integrated Environmental and Economic Accounting) as an accounting system which can suitably represent any kind of international environmental problems.

　　Though the CSEEA is an extended form of the SEEA with the full system of the 93SNA, its method of presentation is not the 93SNA type of accounting matrix (table 2.5 in ) that was used in the NAMEA, but the 68SNA type of accounting matrix (table 2.1 in United Nations, 1968) instead. The matrix structure of the 93SNA type is very complex, and includes some problems, particularly in the presentation of the accumulation accounts and balance sheets (see Commission of the EC et al.,1993, paragraph 19-20, p.57). On the other hand, If we represent the 93SNA by means of the 63SNA type of matrix, we can solve the problems which the 93SNA type of matrix contains, and hence better understand the 93SNA as a whole. Therefore, the complete SEEA does not use the 93SNA type of matrix, but the 68SNA type of matrix instead.

　　By using the 68SNA type of matrix, the complete SEEA has two distinctive features:

(1) The first feature of the CSEEA is that it consistently contains both the financial and income distribution accounts and the full balance sheets and accumulation accounts, and thus can represent the relationships between the financial and income distribution flows and the accumulated environmental impacts through the concepts of "environmental debt" as an inter-generational liability and of "genuine saving" as a means of repaying the debt (see Bartelmus, 1997 for these concepts). In section 3.3, the influence of taxation and financial policy on the accumulation of environmental impacts is demonstrated in regard to these concepts.

　　The CSEEA intends to represent both the impacts of the economy on the global commons and the environment of each nation and the effects of the deterioration of environment on the economy and the human welfare. However, there are various difficulties in assessing these impacts and effects. Therefore, the CSEEA would include some empty cells. However, such empty cells would provide us with information concerning the impacts and effects which could not be assessed. Thus such empty cells would still be included in the CSEEA.

　　In the CSEEA, the accounts for countries, regions and the global commons are arranged in a diagonal line to assist in the display of international linkages. Thus the flows of such international linkages in the CSEEA, as I shall explain in section 3.2, have a left-handed revolution on a matrix, because the impacts on the environment are reflected in the row and the effects from the environment in the column. This feature would facilitate the understanding of the accounting structure of the CSEEA. It is worth noting that whilst the SEEA (and also the NAMEA) is designed from the point of view of a country which keeps the accounts, the CSEEA is designed from a global point of view.

　　Consequently, the CSEEA is a global accounting matrix (GAM) which contains the financial and income distribution accounts, the detailed rest of the world account and the global environmental account, and covers international and regional accounting as well as national accounting. Its accounting framework is shown in the next section.

3. Conceptual framework of the CSEEA

3.1 Accounting rules of the CSEEA

　　Table 1 presents the conceptual framework of the CSEEA, which consists of the accounts for Nation A, the rest of the world (the ROW) and the global commons. As mentioned above, the CSEEA is represented in a form of a matrix.

　　Following the convention of the accounting matrix, in the CSEEA, a set of one column and one row which have the same number constitutes one account (or in exceptional cases, more than one). For example, a set of column A1 and row A1 constitutes the production account. It can be also called account A1. As we shall see later, account A9 and R2 contain some accounts including the stock accounts.

　　In each account, the items which are incomings or receipts for the account are reflected in the rows, and the items which are outgoings or outlays for the account are reflected in the columns. Most of the accounts contain a balancing item. In the flow accounts, it is defined as the total incomings less the total outgoings, and is reflected in the column. The balancing item in the stock accounts is the net worth which is defined as the total outgoings (non-financial and financial assets) less the total incomings (liabilities), and is reflected in the row. these balancing items are doubly framed in table 1. Consequently, on each column and row of the same number, the column total is equal to the row total without exception. This fact guarantees the consistency of the CSEEA as an accounting matrix.

　　The cell in the accounting matrix is presented as the intersection of a row and a column. Therefore, in table 1, the cell is displayed as "(row number, column number)". For example, the cell which is in the intersection of the row A1 and the column A0 is displayed as (A1, A0).

　　Each account in the accounting matrix can be divided into sub-accounts. For example, the parentheses in account A1 is that it is divided according to the groups of production activities. Therefore, in general, each cell in the accounting matrix is presented in sub-matrix or vector form.

3.2 Accounting structure of the CSEEA

　　The CSEEA includes the environmental flows and stocks which are not taken into account in the SNA, the same as the SEEA. In table 1, the cells that reflect these items are shaded, and reflect physical data as well as monetary data. The unshaded portion represents a full sequence of the 93SNA with the 68SNA type of matrix form . I will give a concise description of the table 1 in this section.

(account A0)

　　Account A0 is the goods and services account which is subdivided according to the groups of products. This account includes in the columns the output, taxes less subsidies on products, and imports, and in the rows the intermediate consumption, final consumption, gross capital formation and exports. The columns show the supply of goods and services, the rows the demands.

　　This account shows the relations of the "what / from whom ?" type and "what / to whom ?", and does not have a balancing item. This type of account is called a transaction account, a dummy account or a screen account. On the other hand, the account which shows the relations of the "what / from whom / to whom ?" type and contains a balancing item is referred to as a transactor account (see Commission of the EC et al.,1993, para.2.152). For example, the following account A1 is a transactor account with NDP as a balancing item.

　　The detailed subdivision of account A0 gives the input-output tables. The introduction of the detailed product classifications of environmental goods and services into the input-output tables facilitates the use of input-output tables. Such detailed input-output tables should be elaborated on separately as satellite systems of the CSEEA in order to avoid overburdening the CSEEA.

(account A1)

　　Account A1 is the production account of Nation A. In this account, production activities are classified into the environmental protection-related activities, and others. Account A1 includes in the columns the intermediate consumption, consumption of fixed capital and net value added(net domestic product;NDP) as the cost of production, and in the row the output. It is noteworthy that intermediate consumption in cell (A0,A1) includes the actual environmental costs. The balance item of this account is NDP.

　　In addition, the column of this account shows, in cells (A12,A1), (R3,A1) and (E2,A1), the impacts of Nation A's production by activities group on Nation A's environment, the ROW's environment and the global environment. These impacts are valued at maintenance costs as imputed environmental costs caused. Moreover, in the row of this account, the effects on Nation A's production activities by the deteriorations of Nation A's environment, the ROW's environment and the global environment is reflected in cells (A1,A12), (A1,R3) and (A1,E2) with a negative sign. These effects may be valued at market values as imputed environmental costs borne.

　　In this account, it must be noted that each cell matrix for the impacts includes the column total with a negative sign, each cell matrix for the effects includes the row total with a positive sign. As a result, the consistency of account A1 is kept. The same applies to account A2, A5, A10, A11, R1, R2, and E1.

(account A2)

　　Account A2 is the dummy account which reallocates the final consumption by purpose (A2,A6) which is the outgoings item in the account A6, to the final consumption by products group (A0,A2). It is worth noting that final consumption includes the actual environmental costs of households.

　　In addition, the column of this account shows, in cells (A12,A2), (R3,A2) and (E2,A2), the impacts of Nation A's consumption by purpose on Nation A's environment, the ROW's environment and the global environment. These impacts are valued at maintenance costs as imputed environmental costs caused, the same as the impacts by production activities.

　　In account A2, the stock and flow of the consumer durables is also registered. The opening stock of consumer durables is reflected in cell (OA1,A2). The final consumption (A0,A2) includes the purchase of consumer durables, and in cell (X1,A2), other changes in consumer durables is registered. Cell (Y1,A2) reflects the total of these flows in this period. Cell (CA1,A2) reflects the closing stock of consumer durables which is defined as the total of opening stock (OA1,A2) and changes in this period (Y1,A2).

(account A3)

　　Account A3 is the dummy account which shows consumption of fixed capital. The row total in this account is zero , because consumption of fixed capital is twice registered with a different sign in the row, as mentioned below. Therefore, the column is omitted.

(account A4)

　　NDP, the balancing item of account A1, is the incomings for account A4 which is the primary distribution of income account. In account A4, taxes less subsidies on products and factor income from the ROW to Nation A are reflected in the row, factor income from Nation A to the ROW in the column. The balancing item of this account is net national income(NNI), registered in cell(A5c,A4).

(account A5)

　　Account A5 is the secondary distribution of income accounts and is subdivided into the current transfers account and the institutional sectors account (account A5c). The former is further subdivided into the current taxes account (account A5a) and the other current transfers account (account A5b).

　　Account A5a is the dummy account which displays payments and receipts of current taxes on income, wealth etc. by institutional sectors. Payments are reflected in cell (A5a,A5c) and receipts in cell (A5c,A5a), and zero is registered in cell (A5c,A5a) except for the government sector.

　　Account A5b is the dummy account which displays payments and receipts of other current transfers. In this account, payments of by institutional sectors and payments from the ROW to Nation A is reflected in cells (A5b,A5c) and (A5b,R1) respectively. On the other hand, receipts by institutional sectors and receipts of Nation A's current transfers by the ROW is reflected in cells (A5c,A5b) and (R1,A5b) respectively.

　　Account A5c is the institutional sectors account on the secondary distribution of income. In this account, net national income, receipts of current taxes and other current transfers is reflected in the row, and payments of current taxes and other current transfers and disposal income(DI) in the column. DI in cell (A6,A5c) is the balancing item of this account.

　　Moreover, in the row of this account, the effects on Nation A's household caused by the deterioration of Nation A's environment, the ROW's environment and the global environment is reflected in cells (A5,A12),(A5,R3) and (A5,E2) respectively. These effects may be valued at market values as imputed environmental costs borne.

(account A6)

　　Account A6 is the use of income account, displays in the row DI as the item of incomings. The items of outgoings in this account are final consumption and net saving, reflected in cell (A2,A6) and (A9,A6) respectively. Final consumption in cell (A2,A6) contains information on consumption by purpose. Net saving is the balancing item of this account.

(account A7)

　　Account A7 is the dummy accounts which shows the receipts and payments of capital transfers. In this account, the net receipts (receipts less payments) of capital transfers (including capital taxes) by Nation A and the ROW are both reflected in the column. By definition, these net receipts also add up to zero. Therefore, the row is empty.

(account A8)

　　Account A8 is the dummy account which displays the balance of flow of the financial assets and liabilities according to the types. Net incurrences (incurrence less extinction) of liabilities by Nation A and the ROW is reflected in the column, net acquisitions (acquisition less disposition) of financial assets by Nation A and the ROW in the row. By definition, the total of the former is equal to the total of the later.

(account A9)

As mentioned above, net saving , a balance item of account A6, is registered in the row of account 9. Account A9 is a special account which contains six accounts :

　　(1) Opening balance sheet : It consists of opening net worth (A9,OA1) and liabilities(A9,OA2) in the row and opening non-financial assets (OA1,A9) and financial assets (OA2,A9) in the column. The balancing item of the opening balance sheet is net worth (A9,OA1).

　　(2) Capital account : It consists of net saving (A9,A6) and net receipt of capital transfers (A9,A7) in the row and net capital formation (A10,A9) and (A11,A9) in the column. A balancing item of this account is called the net lending(+)/net borrowing(-) to the ROW or the balance of saving and investment, which are defined as net saving (A9,A6) plus net receipt of capital transfers (A9,A7) less net capital formation (A10,A9) and (A11,A9). However, this balancing item is not registered in table 1, as stated in the next paragraph.

　　(3) Financial account : It consists of net incurrence of liabilities (A9,A8) in the row and net acquisition of financial assets (A8,A9) in the column. A balancing item of this account is called the net lending(+) /net borrowing(-) to the ROW or the financial surplus or deficit, which are defined as the latter (A8,A9) less the former (A9,A8). By definition, a balancing item of the financial account is equal to a balancing item of the capital account. These balancing items are cancelled out, and neither are registered, because the capital and financial accounts are both included in account A9.

　　(4) Other changes in assets account : It consists of other changes in net worth (A9,X1) and other changes in liabilities(A9,X2) in the row and other changes in non-financial assets (X1,A9) and other changes in financial assets (X2,A9) in the column. The balancing item of the other changes in assets account is other changes in net worth (A9,X1).

　　(5) Changes in balance sheet : It consists of changes in net worth (A9,Y1) and changes in liabilities(A9,Y2) in the row and changes in non-financial assets (Y1,A9) and changes in financial assets (Y2,A9) in the column. The balancing item of the changes in balance sheet is changes in net worth (A9,Y1). The contents of each cell in this account are as follows :

(Y1,A9)=(A10,A9)+(A11,A9)+(X1,A9)

(Y2,A9)=(A8,A9)+(X2,A9)

(A9,Y1)=(A9,A6)+(A9,A7)+(A9,X1)

(A9,Y2)=(A9,A8)+(A9,X2)

　　(6) Closing balance sheet : It consists of closing net worth (A9,CA1) and liabilities(A9,CA2) in the row and closing non-financial assets (CA1,A9) and financial assets (CA2,A9) in the column. A balancing item of the closing balance sheet is net worth (A9,CA1). The contents of each cell in this balance sheet are as follows :

(CA1,A9)=(OA1,A9)+(Y1,A9)

(CA2,A9)=(OA2,A9)+(Y2,A9)

(A9,CA1)=(A9,OA1)+(A9,Y1)

(A9,CA2)=(A9,OA2)+(A9,Y2)

　　A Similar account is also included in account R2 of the rest of the world accounts(the ROW accounts).

(account A10)

　　Account A10 is the dummy account which reallocates the capital formation by the type of produced assets according to products groups and displays the definitive relationship on capital formation of produced assets. It shows in the rows the net capital formation, and in the columns the gross capital formation and consumption of fixed capital. It must be noted that consumption of fixed capital with a negative sign is registered in cell(A3,A10).

　　In addition, the column of this account shows, in cells (A12,A10), (R3,A10) and (E2,A10), the impacts of the residuals derived from Nation A's produced assets on Nation A's environment, the ROW's environment and the global environment. These impacts are valued at maintenance costs as imputed environmental costs caused, the same as the impacts by production activities. Moreover, account A10 includes the other shaded cells. The relationships between these cells are as follows :

(Y1,A10)=(A0,A10)+(A3,A10)+(X1,A10)

(CA1,A10)=(OA1,A10)+(Y1,A10)

It is worth noting that account A10 is divided into the man-made and natural assets according to the types of produced assets, while account A9 is divided according to the groups of institutional sectors. Account A10 includes the information on cultivated natural growth assets such as crops and plants of cultivated forests.

(account A11)

　　Account A11 is the dummy account which reallocates the non-produced natural assets by the type of assets (A11,A9) according to products groups. The capital formation of non-produced natural assets contains land improvement and capitalized exploration. Because there is no consumption of fixed capital for non-produced natural assets, net capital formation in the row is equal to gross capital formation in the column.

　　In addition, this account also presents in the column the opening stocks, the flows for the relevant term and the closing stocks of non-produced natural assets(NPNA). Cell (OA1,A11) shows Opening NPNA/cumulative impacts on Nation A's environment. The total impacts on Nation A' environment in this term is registered in cell (A12,A11) with a negative sign. Cell (X1,A11) shows the other changes in NPNA or cumulative impacts. Cell (Y1,A11) and (CA1,A11) show the changes in NPNA/cumulative impacts for the relevant term and the closing NPNA/cumulative impacts respectively. The relationships between cells in the column of this account are as follows.

(Y1,A11)=(A0,A11)+(A12,A11)+(X1,A11)

(CA1,A11)=(OA1,A11)+(Y1,A11)

　　"Opening cumulative impacts" mentioned above mean the accumulated environmental impacts from previous accounting terms. Therefore, it is considered the inter-generational liabilities, that is, "environmental debt". Furthermore, it is possible to regard cell (Y11,A11) as "genuine saving" which is a means of repaying the environmental debt. The interpretation of these concepts in the CSEEA is explained in section 3.3 in detail.

　　It must be noted that the columns in the account A10 and A11 correspond to column 3 in the SEEA matrix by the UNSD, “Non-financial assets (uses and stocks of assets)”. Account A11 also contains in the row the total effects caused by Nation A's environment. Similar account is also included in account R2 of the rest of the world accounts(the ROW accounts) and in account E1 of the global environmental accounts.

(account A12)

　　Account A12 contains both the impact of economic activities on the environment and the effect of the deterioration of the environment on economic activities. The former impact is regarded as over-consumption of environmental goods and services, and this is reflected in the rows. On the other hand, the latter effect is regarded as consumption of negative environmental goods and services, and this is reflected in the column.

　　For example, in the row of account A12, the impact on Nation A's environment caused by Nation A's producers, consumers, produced assets and the ROW's economic activities, are recorded in cells (A12,A1), (A12,A2), (A12,A10) and (A12,R1) respectively. The total of these items is recorded in cell (A12,A11) with a negative sign and thus the row total is zero. It must be noted that the row of account A12 composes a dummy account. The row of account A12 in the CSEEA corresponds to row 3 in the SEEA matrix by the UN, “Use of non-financial assets”.

　　Contrary to this, in the column of account A12, the effects on Nation A's producers and consumers and the ROW's economic activities caused by Nation A's deterioration of the environment, are recorded in cells (A1,A12), (A5,A12) and (R1,A12) with a negative sign respectively. The total of these items is recorded in cell (A11,A12) with a positive sign and hence the column total is zero. Therefore, the column of account A12 also composes a dummy account.

　　In account A12, the impact of economic activities on the environment is recorded as "costs caused" in the row, and the effect of the deterioration of the environment on economic activities is recorded as "costs borne" in the column. However, I never intended to calculate a difference between costs caused and costs borne. The feasibility of such a calculation is very questionable and should therefore, in my view, not be attempted.

　　As mentioned above, the row and column total is both zero. Therefore, account A12 satisfies the accounting rule that the row total has to be equal to the column total, and composes an account. Account A12 is also a dummy account. This dummy account shows which of the impacts was caused by whom and then in turn, what effects were caused to whom, not which kind of the deterioration was caused by whom to whom. Consequently, account A12 represents the flow of the impacts and effects in a left-handed revolution from (A12,A1), (A12,A2) and (A12,A10) in the row to (A1,A12) and (A5c,A12) in the column.

　　Account R3 of the rest of the world accounts and account E2 of the global environment accounts also have these characteristics, the same as account A12..

(account R1)

　　Let us turn to the rest of the world account(the ROW account). It must be noted that this account is established from the point of view of the ROW. Account R1 is the current account. This account shows in the row the "exports" from the ROW to Nation A, the factor income and current transfers from Nation A to the ROW, in the column the "imports" from Nation A to the ROW, the factor income and current transfers from the ROW to Nation A, and the current external balance. The balancing item of this account is the current external balance (R2,R1), which corresponds to the net saving in the account for Nation A.

　　In addition, account R1 includes, in cells (A5,A12), (A5,R3) and (A5,E2) in the row, the effects on the ROW' economic activities caused by the deterioration of Nation A's environment, the ROW's environment and the global environment respectively. Moreover, the column of this account shows, in cells (A12,R1), (R3,R1) and (E2,R1), the impacts of the ROW's economic activities on Nation A's environment, the ROW's environment and the global environment.

(account R2)

　　Account R2 corresponds to account A7-A11 for the Nation A, and includes the accumulation account and balance sheet of the ROW. Net acquisition of Nation A's financial assets by the ROW (A8,R2) less net incurrence of liabilities for Nation A by the ROW (R2,A8) is called the net lending(+)/net borrowing(-) to the Nation A. By definition, this is equal to current external balance (R2,R1) plus net receipt of capital transfers by the ROW (R2,A7). It is worth noting that net lending(+)/net borrowing(-) to the Nation and that to the ROW add up to zero. See the account A9-A11 for the other parts of this account.

(account R3)

　　Account R3 is similar to account A12, and thus the impacts of Nation A on the environment of the ROW is reflected in the row and the effects of the environmental deterioration of the ROW on Nation A in the column. Therefore, the flows of the impacts and effects on/from are represented in a left-handed revolution in order of Nation A's account, the row of account R3, the column of account R3 and Nation A's account. Please refer to account A12.

(account E1)

　Account E1 is the account for global environmental themes. This is similar to accountR2. See account R2 and the relevant account for this account.

(account E2)

　　Account E2 is the account for global impacts and effects. The accounting structure of this account is similar to that of account A12 and R3 and thus the impacts of Nation A and the ROW on the global environment is reflected in the row and the effects of the deterioration of the global environment on Nation A and the ROW in the column. Therefore, the flows of the impacts and effects on/from the environment are represented in a left-handed revolution in order of Nation A's account and the ROW's account, the row of account E2, the column of account E2, and Nation A's account and the ROW's account. Please refer to account A12.

(account OA1)

　　Account OA1 is concerned with only the unshaded cells. this account presents the definitive relationship that the stock of non-financial assets is equal to the total of net worth in the Nation A and the ROW. Its accounting structure is similar to account X1, Y1 and CA1.

(account OA2)

　　Account OA2 presents the definitive relationship that the total of financial assets is the total of liabilities. The accounting structure of this account is similar to account X2, Y2 and CA2.

(account X1), (account Y1) and (account CA1)

　　See account OA1.

(account X2), (account Y2) and (account CA2)

　　See account OA2.

3.3 "Environmental debt", "genuine saving" and the financial and income 　　　　accounts

　　Bartelmus(1996, Box 5) points out the importance of the concepts of "environmental debt" and "genuine saving" from the point of view of a inter-generational liabilities for the environment (also refer to Hamilton, 1994 for genuine saving). Bartelmus also recommends assessing these concepts in relation to the financial and income distribution flows of environment-economy interaction (Bartelmus, 1997, section 3.5). The CSEEA can respond to this suggestion because it contains not only the financial and income distribution accounts but also the concepts of environmental debt and genuine saving as explained below.

　　The column (OA1,A11) of table 1 can reflect the concepts of environmental debt and genuine saving. The interpretation of related cells is as follows;

Cell (OA1,A11) : This reflects the accumulated environmental impact in the beginning of this period, that is , the "environmental debt" which the present generation bears for the future generations in the beginning of this period.

Cell (Y1,A11) : This reflects the "genuine saving" as a means of repaying the environmental debt. It is defined as (Y1,A11) = (A0,A11) - (A12,A11) + (X1,A11). In this definitive expression, cell (A0,A11) reflects the capital formation, cell (A12,A11) the depletion and degradation of non-produced natural assets, and cell (X1,A11) the other changes in non-produced natural assets.

Cell (CA1,A11) : This reflects the accumulated environmental impacts at the end of this period, that is , the environmental debt which the present generation bears for the future generations at the end of this period. It is defined as the accumulated environmental impacts(-) in the beginning of this period (OA1,A11) plus the genuine saving during this period (Y1,A11). Needless to say, the environmental debt at the end of this period is also the environmental debt at the beginning of the next period.

　　Moreover, in the CSEEA, these concepts are related to the financial and income distribution flows of environment-economy interaction. The following are two random examples.

Example 1: Taxation on products and production is registered in the cells (A4,A0) and (A4,A1). Such taxation has effects on the genuine saving and environmental debt through two routes. Firstly, it is expected to reduce the environmental impact of production activities. This impact is reflected in the cell (A12,A1). Therefore, the total impact on the environment which is registered in the cell (A12,A11) also decreases. This brings about larger genuine saving (Y1,A11) and hence reduces the environmental debt at the end of this period (CA1,A11). Secondly, taxation on products and production has a corresponding effect on the net national income (A5,A4), the disposal income (A6,A5), the net saving (A9,A6) and capital formation (A11,A9). Furthermore, the capital formation in the cell (A11,A9) is reallocated to the cell (A0,A11). Consequently, the change of capital formation which is registered in the cell (A0,A11) affects the genuine saving (Y1,A11) and environmental debt at the end of this period (CA1,A11).

Example 2: the central and local governments of Japan sometimes lend low-interest funds for investment in environmental protection facilities to industries. In this case, the lending by the government is reflected in the cell (A8,A9), the borrowing by the industry in the cell (A9,A8), and the investment by the industry in the cells (A10,A9) and (A0,A10). This investment would be followed by fewer impacts on the environment. The fewer number of impacts are reflected in the cell (A12,A1) and hence in the cell (A12,A11). The reduction in the total impacts which is registered in the cell (A12,A11) would cause larger genuine saving (Y1,A11) and less closing environmental debt (CA1,A11).

　　As these examples show, the complete SEEA can explicitly demonstrate the environment-economy interaction and/or the influence of financial policy on the environment in relation to the concepts of environmental debt and genuine saving.

3.4 On the deduction of defensive expenditures and environmental costs from 　　NDP

　　I would like to present my view to the question of whether the defensive expenditures and environmental costs should be deducted from NDP or national income. Firstly, I think that there is no need to deduct the defensive expenditures (protection and repercussion expenditures) from NDP or national income. We can obtain any useful information simply from studying the NDP, the defensive expenditure and the proportion of the latter to the former. The deduction of such expenditures from NDP, however, could cause us to miss the important facts. I also think that the environmental protection expenditures are vital in order to promote sustainable development, that is, to "meet the needs of the present without compromising the ability of future generations to meet their own needs"(World Commission on Environment and Development, 1988). Furthermore, it must be noted that the external environmental protection activities actually yield product and income. Consequently, such expenditures should not be deducted.

　　I also think that the indicators such as EVA and EDP are not needed, as they obscure the facts and do not provide additional information. For example, the increase in the EDP does not necessarily mean environmental improvement. If the NDP is increasing at a more rapid rate than the EDP, it means the situation is becoming more serious. On the contrary, even if the EDP is increasing at a more rapid rate than the NDP, as long as the NDP is larger than the EDP, the impact on the environment still occurs and its accumulation will progress. We can obtain the useful informations from the NDP, the environmental cost and the proportion of the latter to the former, not from the EDP.

　　In addition, the SEEA has proposed a "shifting" technique which shift the environmental cost caused by households from the household sector to "other industries", in order to calculate the EVA or EDP. However, if the EVA or EDP are not calculated as mentioned, there is no need to use such a shifting technique. Without this, the accounting matrix is somewhat simplified and it is easier to see which economic activity had an impact on the environment. For example, please refer to the row A12 of table 1.

4. Illustration of the CSEEA for Japan

　　In 1995, the Economic Planning Agency of Japan published the first estimates for the SEEA (Oda et al., 1996). Since the CSEEA are constructed by incorporating the SEEA into the full sequence of the 93SNA, it is possible to introduce these estimates into the CSEEA. Table 2 illustrates the CSEEA for Japan in monetary terms by substituting the estimates of the SEEA and the relative figures of the SNA in the CSEEA. Furthermore, it is also expected to assign the physical data to the shaded cells. The CSEEA with both the physical data and monetary data would provide a lot of information on both the environment and the economy. It is a problem which is yet to be solved as to filling in the cells which are not assigned with data. A fuller explanation of table 2 will be presented in the following version of this paper.

5. Extension of the CSEEA to the Global Accounting System

　　Table 3 presents the extended form of the CSEEA which is made by subdividing the ROW account in table 1 into Nation B and the remaining nations. This extended form can display in detail the inter-relationship between Nation A , Nation B, the ROW and the global environment. Therefore, this matrix is also called a Global Accounting Matrix (GAM).

　　In table 3, the accounts for Nation A, Nation B, the ROW and the global environment are arranged in turn in a diagonal line from top-left to bottom-right. Hence, the flows of international linkages between them, the same as table 1, are represented in a left-handed revolution.

　　For example, cells (B12,A1), (B12,A2) and (B12,A10) represent the flows of environmental impacts from Nation A to Nation B, and cells (E2,B1), (E2,B2) and (E2,B10) represent the flows of environmental impacts from Nation B to the global environment. Furthermore, cells (B1,A12) and (B4~B7,A12) represent the flows of environmental effects from Nation A to Nation B, and cell (R1~R2,A12) the flows of environmental effects from Nation A to the ROW.

　　On the other hand, cells (A1,B12) and (A4~A7,B12) represent the environmental effects from Nation B to Nation A, and cell (R1~R2,B12) the environmental effects from Nation B to the ROW. Similarly, cells (B1,E2) and (B4~B7,E2) represent the effects from the global environment to Nation B, and cell (R1~R2,E2) the effects from the global environment to the ROW. Furthermore, cells (A12,B1), (A12,B2) and (A12,B10) represent the impacts from Nation B to Nation A, and cell (A12,R1~R2) the impacts from the ROW to Nation A. The flows in a left-handed revolution characterizes the CSEEA or GAM and would facilitate the understanding and use of the accounting structure of the CSEEA or GAM.

　　We come up against the regional (sub-national or local) environmental problems such as pollution of rivers, lakes and the air, as well as national and international problems. The regional environmental impacts and pertinent economic transactions often have both a trans-regional and trans-national nature. Therefore, in order to suitably respond to the regional environmental problems, we have to represent the inter-relationships between regions inside a nation, between a region and a nation, and between a region and foreign countries. These inter-relationships are successfully represented by means of the application of the accounting framework of the CSEEA or GAM.

　　A further investigation of table 3 including the application to the regional environmental accounting will be presented in the following version of this paper.

6. Comparison of the CSEEA with the SEEA and the NAMEA

Table 4 shows a concise comparison of the CSEEA with the SEEA by the UN and the NAMEA by Dr. S.J.Keuning et al. However, the details of this section are still under investigation. A fuller discussion will be presented in the following version of this paper.

7. Issues for the future

　　This paper has limited the discussion to the design of the conceptual framework of the CSEEA. Thus, it does not suitably deal with the problem of the valuation of the environmental flow and stock. In addition to this, there is also the problem of whether sufficient environmental data is available for this conceptual framework. These are the issues for the future.

　　The CSEEA (or GAM) contains the financial and income distribution accounts and the detailed balance sheets and accumulation accounts, and thus can clearly represent the relationships between the financial and income distribution flow, the environmental impacts/effects, and the accumulation of environmental impacts. Furthermore, the CSEEA provide the common matrix format to the regional (sub-national), and international environmental accounting as well as the national environmental accounting, though its environmental implications are not yet elaborated enough. I wish the CSEEA proposed in this paper would contribute to the revision of the SEEA which the UNSD and the London Group are grappling with at this time.

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