Towards the Measurement of Net Economic Welfare: Inter-temporal Environmental Accounting in the US Economy

Abstract: This analysis employs environmental accounting methodology to measure the Gross External Damage (GED) due to air pollution emissions in the United States (U.S.) economy in 2002, 2005, and 2008. The paper measures three indices: the GED, the GED-to-Value Added ratio (GED/VA), and Net Value Added (NVA), defined as Value Added minus the GED. Each of these indices is computed for each sector of the U.S. economy in 2002, 2005, and 2008. Real GED is estimated to be $440 billion in 2002, $430 billion in 2005, and $335 billion in 2008. Most of the reduction in GED from 2005 to 2008 is due to fewer emissions in the utility, manufacturing, agriculture, and transportation sectors. The GED/VA begins in 2002 at 0.043, drops to 0.039 in 2005, and then declines significantly to 0.029 in 2008. The empirical time-series estimation of NVA is an important augmentation to standard measures of growth. From 2002 to 2005 VA grew at an annual rate of 2.86 percent. Over the same period NVA grew at 3.01 percent. Between 2005 and 2008 VA grew at 1.24 percent while the NVA increased by 1.58 percent. Thus, the reduction in the GED over these time periods results in growth rates in the NVA greater than VA by 0.15 and 0.34 percent.

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*Please note, this event differs from the other AEDE Seminar dates and times, the event will be held on a Thursday, rather than a Monday, and is scheduled for 11:30am-1:00pm.

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