The need for ‘convention’ in environmental valuation

The rate of growth or decline in Gross Domestic Product (GDP) is reported quarterly in New Zealand and regarded as the ultimate measure of the current wealth and wellbeing of the nation. However, the economy is much greater than the exchanges that take place in the marketplace (which is the source of GDP statistics) and in reality cannot be separated from the people who produce and consume goods or the environment from which the economy extracts resources and dumps wastes. Systems to report GDP were first developed by the United Nations after World War II and are now hardwired into the decision-making and political process. As a result it is relatively easy to extract and count exchanges involving money. For the inputs provided by the environment, and many other unpaid services provided by households, no such mechanisms exist. The Genuine Progress Indicator (GPI) measures the contribution made by the environment and social fabric of society to the economy. GPIs have been constructed for a number of countries and they all show such contributions are considerable, but difficult to measure. No ‘convention’ has been established for the constructing of a GPI. This paper looks specifically at the approaches taken to value natural capital and environmental services provided to the economy over the 1970 to 2005 period in New Zealand, and, whether or not such approaches could be used by other countries. It advocates the need for ‘convention’ in GPI reporting as occurs with the System of National Accounts from which GDP is extracted “Everything should be made as simple as possible, but not simpler” (Albert