Natural capital accounting: Using economic theory to “Green” the national accounts and measure sustainable development
McGrath, Luke
McGrath, Luke
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Publication Date
2022-02-22
Type
Thesis
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Abstract
For prudent economic, social and environmental policy, it is vital to have appropriate measures to inform us about the sustainability of our economic development. A key aim of the thesis is the advancement towards better practical and theoretical grounded indicators of sustainable economic development. The core focus of this thesis is the empirical application and theoretical testing of natural capital or “green” accounting theory by focusing on the capital approach to sustainable development and the related Genuine Savings indicator. The thesis explores the potential to harness the theoretical strength of the capital approach within a practical assessment framework. Potential paths forward are presented for a coherent sustainable development assessment framework that could harness the theoretical strength of the capital approach. The strength of sustainable development indicators is ultimately dependent on the quality of data available to construct them. A contribution of the thesis is to construct refined Genuine Savings estimates to address some of the repeated limitations of the World Bank methodology. A key finding was that the construction of refined GS estimates can lead to a considerable divergence from the GS estimates reported by the World Bank. The divergence was generally driven by remarkable levels of local air pollution damages. The thesis contributes to the understanding of Irish economic history, and the phenomenon of economic convergence, by conducting a reassessment of Ireland’s economic development through the lens of sustainable development. The main difference between a sustainable development assessment versus a growth-based assessment surrounds the 1950-1980 period. The traditional growth-based literature viewed Ireland as an economic failure but from a sustainability perspective, this period might be considered a success where Ireland achieved a “great transition” along a typical weakly sustainable path driven by improved institutions and economic and social policies. Finally, the thesis contributes to the literature that tests the key theoretical propositions that underpin green accounting theory. Long run time series of Irish Genuine Savings are tested. Overall, all the technology augmented savings variants predicted future consumption changes closely in line with green accounting theory. The results thus provide support for the use of real-world GS as a sustainability indicator.
Publisher
NUI Galway