**Etienne Verhaegen^1^**

**Hilde Wustenberghs^2^**

**Ludwig Lauwers^2^**

**Erik Mathijs^3^**

**National Institute for Statistics, Brussels and Université Catholique
de Louvain, Louvain-la-Neuve, Belgium¹**

**Centre for Agricultural Economics, Ministry of the Flemish Community,
Brussels, Belgium²**

> **Centre for Agricultural and Food Economics, Katholieke Universiteit
> Leuven, Belgium³**

Abstract

This paper presents the methodological and conceptual aspects of a
framework, which extends the conventional economic accounts for
agriculture with environmental issues, valued in monetary terms. This
leads to Economic *and Environmental* Accounts for Agriculture (EEAA).
The EEAA are based on the conventional agricultural accounts and on
existing tools for valuing non-market goods and services. The private
costs and benefits of the sector are integrated with external "social"
ones, i.e. commodity goods and services with non- commodity ones.
Emphasis is put on those external costs and benefits that are already
internalised as taxes and subsidies. As both positive and negative
externalities are accounted for, the EEAA allow a better monitoring and
evaluation of agriculture's multifunctionality. They enable simulating
impacts of policy instruments, such as a subsidy increase, not only on
agricultural income, but also on societal welfare. It also becomes
possible to appreciate the shares of different stakeholders (producers,
public authorities, water agency, consumers, etc.) in the costs or
benefits of the environmental goods and services provided by
agriculture. The case of Belgium, with an intensive agriculture in a
highly urbanised context is given.

1.  Introduction

Evaluating the multiple functions of agriculture and monitoring the
related policies requires appropriate indicators. These should comprise
the sector's economic value, but also reflect environmental concerns and
non-market functions. Conventional agricultural accounts allow a macro
level follow-up of the economic functions, but offer no insights in the
multifunctional contribution of the agricultural sector to society, nor
do they reflect the true costs and benefits of agricultural production
for society.

This paper presents an integrated accounting system that provides a
comprehensive perspective. A linkage is made between economic data from
market transactions and both the costs of environmental bads and the
benefits of environmental goods.

A general framework that uses quantitative internalisation of external
effects is developed. The Economic *and Environmental* Accounts for
Agriculture (EEAA) are built from the conventional agricultural
accounts. Non-trade concerns, valued in monetary terms, are exogenously
introduced. Relative shares can then be appreciated of those
environmental goods and services that are already subject to market
exchanges, those that are partially "monetarised" through public
intervention and those for which there is no market or public
transaction (and thus require proxies like avoidance costs).

The paper is structured as follows. The next two sections discuss the
study rationale and the extension from conventional welfare oriented
accounts to more comprehensive well-being approaches. Section 4 shows
the frame around which the accounts are built, the steps involved in the
process and emphasises the accounting of subsidies and taxes. First
results for Belgium are shown in section 5. Finally, some preliminary
conclusions are drawn and further research orientations are discussed.

2.  Need for more comprehensive accounting

2.1. Shortcomings of the conventional Economic Accounts for Agriculture
(EAA)

The conventional Economic Accounts for Agriculture \[Eurostat, 2000\]
focus on the measurement of economic performance and growth as reflected
in market activities and their evolution over time. From these accounts,
indicators such as the gross value added (GVA) or agricultural income
are calculated. Table 1 shows an example of the EAA for Belgium. The
calculated indicators are often interpreted as the agricultural sector's
contribution to society. However, the sector's contribution to the mere
welfare is only one component of its significance to societal
well-being. Human well-being is also influenced by other factors, such
as the quality of the environment. The conventional accounts do not
feature such factors and thus ignore a main part of agriculture's
multifunctionality.

Table 1: The EAA for Belgium in 2001 (in million euro).

  ------ ------------------------------------------------ ----------------
         Output value at **basic** prices\                7 376,33
         (incl. subsidies and taxes on products)          

  −      Intermediate consumption b.p.                    4 562,14

         **Gross value added** at basic prices            **2 814,19**

  −      Consumption of fixed capital                     606,18

         **Net Value Added** at basic prices              **2 208,02**

  −      Compensations of employees                       321,40

  \+     Other subsidies on production\                   127,45
         (grants for interest relief, for set-aside,      
         agro-environmental subsidies, etc.)              

  −      Other taxes on production\                       16,96
         (taxes on property, vehicles, pollution, etc)    

         **Net operating surplus\                         **2 318,51**
         **(factor income)                                
  ------ ------------------------------------------------ ----------------

Even the few internalisations of environmental concerns that currently
enter into the EAA are not treated univocally. Most environmental taxes
are taxes on products and thus enter into the basic price of the
intermediate consumption and into the GVA. Most environmental subsidies
are granted for specific methods of production and thus enter into the
bulk of "other subsidies on production" and not into the GVA. Some
environmentally inspired subsidies, such as the grant for cessation of
animal production, are not entered into the EAA at all.

To provide policy-makers and public debate with a more comprehensive
assessment of sustainable growth and development, first the
environmental subsidies and taxes need to be emphasised, secondly the
scope and coverage of economic accounting need to be broadened. In order
to reflect agriculture's multiple functions, it becomes necessary to set
off economic data (monetary values) against social and environmental
data (physical values). To be able to measure the impacts and responses
of a policy correctly, sociological and environmental information needs
to be made consistent with the economic monitoring.

2.2. Literature review on economic accounting for the environmental
outputs

Efforts towards combining economic and environmental data up to now
differ in exhaustiveness, but a full integration has not yet been
reached. Physical accounting is abundantly done in various monitoring
reports, e.g. the European Environmental Agency's annual report. More
integrating systems are Material Flow Accounting, Input-Output Analysis
\[Goodlass *et al*. 2001\], Asset Accounting and Ecological Footprinting
methods \[Rees and Wackernagel, 1996; Wackernagel *et al*., 1997;
Hubacek and Giljum, 2003\]. The mere physical data can already be linked
to economic data in the so-called hybrid accounts. These allow deriving
aggregate and ratio indicators, e.g. eco-efficiency indicators. Examples
are the Material Input Per Service concept \[Factor 10 Club, 1997\] and
the National Accounting Matrix including Environmental Accounts \[NAMEA,
De Haan and Keuning, 2000\].

The main problem in balancing all costs and benefits is the conversion
of various physical data to the same units as the economic accounts. Up
to now several attempts have been made to assign monetary values to the
negative externalities of agriculture, e.g. pesticide use \[Pimentel *et
al*., 1992; Waibel *et al*., 1999; Foster and Mourato, 2000; Pretty *et
al*., 2000; Kærgård *et al*., 2002\]; nutrient leaching \[Bailey *et
al*., 1999; Pretty *et al*., 2002\] or erosion \[Pimentel *et al*.,
1995; Pretty *et al*., 2000\]. Environmental economists have also
developed methods for valuing environmental service functions, such as
willingness-to-pay techniques \[Freeman, 1993; Carson and Bergstrom,
2003\]. Unfortunately, these have rarely been applied in comprehensive
studies evaluating the aggregate positive side effects of agriculture.
In Belgium, research by Vanslembrouck \[2002\], gives an economic
assessment of landscape amenities provided by farmers. Difficulties in
valuing the positive externalities of agriculture are undoubtedly the
reason why they are often under-emphasized in economic assessments.

Until recently the environmental costs and benefits of agriculture had
not been integrated into a comprehensive framework linking them with
monetary dimensions at macro or sector-wide level. In contrast, some
whole-economy attempts to integrate economic and environmental
information were made, such as SERIEE \[Système Européen de
Rassemblement des Informations Economiques de l'Environnement;
Kestemont, 1999; Eurostat, 2002\]. However these systems lack sufficient
detail to deal with the different agricultural productions and they are
limited to those environmental aspects that can directly be expressed in
monetary terms.

Breakthroughs are realised by our own research \[Verhaegen *et al*.,
2002, 2003\] and by the "Framework for environmental accounts for
agriculture" recently published by eftec \[Atkinson *et al*., 2004\].
Both accounting systems are based on the whole-economy System for
Environmental and Economic Accounts \[UN, 2000\]. This framework
complements and expands the System of National Accounts \[UN, 1993\] to
include environmental assets, non-commodity assets are monetised and
both physical and monetary measures are integrated.

The eftec study provides monetary estimates of both the positive
environmental services provided by agriculture and the negative flows
resulting from over-use of natural assets. Distinction is made between
impacts on other sectors and impacts on society's welfare in general The
first, are valued trough market data, like purification costs, damage to
roads from soil erosion, damage from flooding, etc. The latter are
valued through non-market data derived from household willingness to pay
(WTP). However, no effort is made to integrate these values into the
economic accounts.

Eftec's starting points are similar to ours, except that they put the
environment in the centre of the framework and thus account for
agriculture's effect on different environmental compartments (water,
air, soil, landscape, habitats and species, waste and nuisance). Our
framework puts agricultural production in the centre and links the
environmental outputs as closely as possible to the agricultural
activities. This has the advantage that the accounts might be split up
in different sub-sectors, by which means the activities where
alterations need to be made can be identified more easily.

In or opinion, the mean weakness of the eftec approach is the lack of
articulation between the classical economic accounts and the monetary
estimations of environmental impacts. Because the income accounts are
kept as a "black box" and the monetised externalities as satellite
accounts, interpretation possibilities for the results are rather
limited. For instance, the way in which agro-environmental subsidies and
taxes are dealt with has to be stressed, as will be seen in section 4.2.

3.  Building blocks and finalities of multifunctional accounting

Our accounting framework starts from the conventional Economic Accounts
for Agriculture \[EAA; Eurostat, 2000\]. The non-commodity outputs are
internalised into the EAA, which thus becomes extended to Economic *and
Environmental* Accounts (EEAA). These "multifunctional" accounts are
fully expressed in monetary terms and integrate on the one hand the
costs of negative and on the other hand the value of positive
externalities with the value added of agricultural production. The EEAA
produces a "multifunctional value added", enabling a complete evaluation
of sustainability over time.

This study goes beyond most of the "green accounting" efforts, as it
internalises not only the negative environmental effects, but also the
service or amenity function of agriculture. Building the EEAA involves
three main research topics:

1.  Definition of the system boundaries: not all externalities of
    agriculture activities need to be taken into account, either while
    their links with the activities are rather vague or too indirect
    (e.g. the depletion of natural resources for tractor manufacturing)
    or while estimation difficulties outweigh relevance (e.g. consumer's
    avoidance costs in relation with pollution, like the choice to drink
    only bottled water).

2.  Association of flows of identified environmental goods and services
    and flows of pollutant emissions with monetary flows. Monetary
    values are derived from proxies like subsidies, taxes, treatment and
    restoration costs, etc. and from indirect valuation ("willingness to
    pay" approaches).

3.  Integration these values with direct (market) flows into a single
    framework and calculation of aggregate indicators, such as a
    "multifunctional GVA".

From the EEAA, two types of analyses can be implemented. First, it
becomes possible to appreciate the overall impact of multifunctional
aspects of agriculture at national or regional level. This allows
simulating scenarios (e.g. increasing agri-environmental subsidies),
taking into account either the impact on agricultural income (through
the effect on production level and the premium itself) or on societal
welfare. Secondly, it allows evaluating the share of different actors
(producers, public authorities, water agency, consumers, etc.) in the
costs or benefits of environmental goods and services provided by
agriculture. For example, the proposed framework emphasizes some aspects
that are already internalised in the conventional accounts, like
agro-environmental subsidies and taxes. In the conventional EAA,
agriculture's income increases when subsidies increase. However, these
subsidies are costs for society. In the EEAA the two effects are linked
and can be compared. Thus, this approach allows for a better way to deal
with financial transfers from society to farmers and conversely.

1.  General framework and methodology

4.1. The accounting framework

While building the EEAA framework, the environment is considered to
provide three functions to agriculture and to the economy and mankind in
general: *source*, *sink* and *service* functions \[UN, 2000\].
Furthermore the agricultural system is evaluated according to the
*driving force -- pressure -- state -- impact* and *response* or DPSIR
cause-effect chain \[EEA, 1999\]. The P‑ and S‑indicators are typically
measured in physical values. The I‑indicators might be valued in
monetary terms, through avoidance or restoration costs for the source
and service functions or through revealed or stated preference
techniques (WTP) for the service functions.

The R‑indicators, the responses from the government, often consist in
subsidies paid to (or taxes imposed on) farmers for adopting (or
abandoning) certain (less) sustainable practices. Some, but not all of
them already enter into the EAA. As subsidies and taxes form an
exceptional type of benefits and costs, the way they are accounted for
will be discussed in detail in section 4.2.

The general framework, with the different accounts proposed, is
represented in figure 1. The EEAA are built in three stages.

The first stage comprises the monetary and physical accounts. The
starting point is the conventional EAA, with the monetary driving
factors (GVA etc.) and already including some subsidies and taxes
(table 1). From the EAA and external information on subsidies and taxes
that are not yet internalised, the Environmental Protection Expenditures
Account (EPEA) is derived. It reveals all the expenditures and
investments concerning the environment, especially the public ones.

Next to the monetary accounts, satellite physical accounts are drawn up.
They contain information on both pressure and state indicators and are
differentiated into 3 accounts in order to reflect the 3 environmental
functions. For example, the Pollutants and Residuals Account, reflecting
the sink function, contains things like the nutrient surplus on the soil
balance and the nitrate concentration in surface water. The Asset
Account, reflecting the service function, contains for example the
number of endangered animals/plants being kept/cultivated on farms.

Figure 1: General framework of the Economic and Environmental Accounts
for Agriculture (EEAA).

![](media/image1.wmf){width="6.5in" height="4.477083333333334in"}

In the second stage, monetary values are assigned to the positive and
negative externalities in the physical accounts. Previously elaborated
valuation methods are applied to the non-tradable by-products of
agriculture. Together with the EPEA, these monetary values form the
Non-Tradable Output Account (NTOA), which represents the economic value,
i.e. the costs and benefits of the environmental goods and bads. The
eftec study \[Atkinson *et al*., 2004\] stops at this point.

In the third and final stage, the NTOA is combined with the conventional
EAA. At that point the complete DPSIR cause-effect chain is integrated
into a single accounting system and the Economic and Environments
Accounts for Agriculture (EEAA) arise. From these accounts indicators
allowing a more "social" policy evaluation, such as the "multifunctional
value added", can be calculated. . In contrast to the current EAA, which
only records private costs and benefits, the expanded EEAA also include
the external environmental costs and benefits, i.e. the cost and
benefits the rest of society. Table 2 gives an example for pesticide use
(with negative externalities) and for landscape amenities (positive
externalities).

4.2. Accounting for subsidies and taxes

Should agro-environmental subsidies and taxes be taken into account in
the EEAA? In the eftec framework, they are not included. Atkinson *et
al*. \[2004\] argue that the value of environmental impacts should be
recorded regardless of the fact that they may be \"internalised" through
subsidies or taxes. Their primary rationale is to account for changes in
natural assets, regardless of the policy measures in place, since it is
not currently clear if taxes "over"- or "under"-regulate environmental
impacts. Taxes can not be assumed "optimal" in the sense of
internalising an externality consistent with the economic optimum; on
the contrary, they represent a rather arbitrary form of
"internalisation". However, even if it is unlikely that subsidies and
taxes reflect society's true WTP, they are an important factor affecting
the amount of an environmental function that is produced by the
agricultural sector. When for instance nutrient surpluses are strictly
taxed, the sector will try to abate its nutrient production or when
small landscape elements are heavily subsidised, this is an incentive
towards providing this service to society.

So there certainly is a linkage (even if very difficult to establish)
between damage costs or WTP for a better environment and subsides and
taxes. When the community accepts to pay farmers for less intensive
agricultural practices, the damage and restoration costs for society
will probably decrease, but the avoidance costs (here, contribution to
the agricultural policy budget) increases. Government's WTP should be
considered as much as private (household) WTP. Precisely because it is
not clear if any tax or subsidy internalises environmental impacts in a
economic optimal way, we argue it is very useful and important to
highlight these transfers between farmers and rest of the society and to
record them together with other costs and benefits (table 2), when
comparing environmental agricultural accounts in different spaces or
time.

From an accounting point of view, subsidies increase farmer\'s Net Value
Added and decrease the financial means of public authorities for
preventing or repairing environmental degradation (and consequently
increase taxation of citizens). In the EEAA, environmental subsidies and
taxes appear only as transfers from one part (External social costs) to
the other (Private costs and benefits). Therefore the agro-environmental
subsidies and taxes are recorded twice, once with a positive and once
with a negative sign.

Table 2: Examples of the EEAA for pesticide use and landscape amenities.

+--------+---------------------------+-----+-------------------------+
| **Pes  |                           | **  |                         |
| ticide |                           | Lan |                         |
| use**  |                           | dsc |                         |
|        |                           | ape |                         |
|        |                           | am  |                         |
|        |                           | eni |                         |
|        |                           | tie |                         |
|        |                           | s** |                         |
+--------+---------------------------+-----+-------------------------+
| #      |                           |     |                         |
|  Priva |                           |     |                         |
| te cos |                           |     |                         |
| ts and |                           |     |                         |
|  benef |                           |     |                         |
| its of |                           |     |                         |
|  the a |                           |     |                         |
| gricul |                           |     |                         |
| tural  |                           |     |                         |
| sector |                           |     |                         |
|  (EAA) |                           |     |                         |
+--------+---------------------------+-----+-------------------------+
|        | Output value of plant     |     | Total output value      |
|        | production                |     |                         |
+--------+---------------------------+-----+-------------------------+
| −      | Intermediate pesticide    | −   | Total Intermediate      |
|        | consumption, including    |     | consumption             |
|        | tax on some pesticides    |     |                         |
+--------+---------------------------+-----+-------------------------+
|        | Gross Value Added at      |     | Gross Value Added at    |
|        | basic prices              |     | basic prices            |
+--------+---------------------------+-----+-------------------------+
| −      | Consumption of fixed      | −   | Consumption of fixed    |
|        | capital                   |     | capital                 |
+--------+---------------------------+-----+-------------------------+
|        | Net Value Added at basic  |     | Net Value Added at      |
|        | prices                    |     | basic prices            |
+--------+---------------------------+-----+-------------------------+
| \+     | Environmental subsidies:  | \+  | Environmental           |
|        |                           |     | subsidies:              |
|        | organic farming,          |     |                         |
|        | integrated fruit          |     | Installation and/or     |
|        | pro-duction, mechanical   |     | maintenance of small    |
|        | weed killing, etc.        |     | landscape elements      |
+--------+---------------------------+-----+-------------------------+
| −      | Environmental taxes:      |     | /                       |
|        |                           |     |                         |
|        | contribution for          |     |                         |
|        | recycling recipients      |     |                         |
+--------+---------------------------+-----+-------------------------+
| \+     | (other subsidies -- other | \+  | (other subsidies --     |
|        | taxes) on production      |     | other taxes) on         |
|        |                           |     | production              |
+--------+---------------------------+-----+-------------------------+
|       | External social cost      | **  | External social         |
|        |                           | +** | benefits                |
+--------+---------------------------+-----+-------------------------+
| −      | Environmental subsidies   | −   | subsidies               |
+--------+---------------------------+-----+-------------------------+
| \+     | Environmental taxes       |     |                         |
+--------+---------------------------+-----+-------------------------+
| Avo    | cost of reducing          | \+  | Value attached to       |
| idance | production or pesticide   |     | landscape by society:   |
| cost   | use                       |     |                         |
+--------+---------------------------+-----+-------------------------+
| Aba    | cost of reducing          |     | value of living in the  |
| tement | environmental impact,     |     | countryside, value of   |
| cost   | e.g. by new products or   |     | surroundings for rural  |
|        | new technology            |     | tourism, recreational   |
|        |                           |     | value, etc.             |
|        |                           |     |                         |
|        |                           |     | -   Mostly non-market   |
|        |                           |     |     values              |
|        |                           |     |                         |
|        |                           |     | -   valuation trough\   |
|        |                           |     |     "willingness to     |
|        |                           |     |     pay" approaches:    |
|        |                           |     |                         |
|        |                           |     | > hedonic price         |
|        |                           |     | > analysis\             |
|        |                           |     | > travel cost methods\  |
|        |                           |     | > etc.                  |
+--------+---------------------------+-----+-------------------------+
| Tre    | end-of-pipe costs of      |     |                         |
| atment | decreasing the discharge  |     |                         |
| cost   | of pollutants in the      |     |                         |
|        | environ-ment, e.g. cost   |     |                         |
|        | of retrieving recipients  |     |                         |
+--------+---------------------------+-----+-------------------------+
| Resto  | expenditures by third     |     |                         |
| ration | parties for restoring     |     |                         |
| costs  | degraded natural systems  |     |                         |
|        |                           |     |                         |
|        | cost for drinking water   |     |                         |
|        | purification              |     |                         |
+--------+---------------------------+-----+-------------------------+
| Damage | costs linked to over-use  |     |                         |
| costs  | of environ-mental sinks,  |     |                         |
|        | e.g. biodiversity loss,   |     |                         |
|        | health problems           |     |                         |
+--------+---------------------------+-----+-------------------------+
| **=**  | **Multifunctional net     |     |                         |
|        | value added**             |     |                         |
+--------+---------------------------+-----+-------------------------+

The principal interest of the EEAA is not as much the absolute value of
each section, but their relative weight and the overall evolution of
their share over time. Therefore agro-environmental subsidies and taxes
explicitly appear, despite their neutral effect on the total. One of the
main purposes of the EEAA is to be able to monitor in long run which
sections' importance is decreasing and which one is increasing.

1.  Results

The physical accounts are drawn up as in classical environmental
reporting. The next step is to elaborate the Environmental Protection
Expenditures Account (EPEA). This elucidates the transfers between the
government and the agricultural sector and overcomes inconsistencies in
the conventional accounts mentioned above. The EPEA contains all
environmental subsidies and taxes, irrespective of whether they already
are in the EEA. For Belgium in 2001, the total environmental subsidies
amount to 59 million euro, the total taxes to 19 million euro. Thus the
net government expenditures amount to 40 million euro, i.e. 1.8 % of the
net value added of the agricultural sector.

Still one step further, filling in the external social cost and benefits
part of the EEAA necessitates valuation of external data. This is
relatively easy for those environmental effects where market
transactions are involved. But for those externalities, for which there
is no market, people's willingness to pay (WTP) for amenities or to
avoid damage needs to be assessed. However, implementing economic
valuation for every environmental effect of agriculture is beyond the
scope of our study. This means that WTP estimates have to be taken from
literature. Unfortunately very few valuation studies have been
undertaken at the Belgian level, so often the assumption will have to be
made that WTP in Belgium is similar to that in other European countries.
Table 3 shows the example of pesticide use and what the elements of the
EEAA might look like.

Table 3: Elements of the EEAA for pesticide use.

+---+---------------------+-------+------------------------------------+
|   | Private costs and   | euro  | Comment                            |
|   | benefits            |       |                                    |
+---+---------------------+-------+------------------------------------+
|   | Output value of     | 3 2   |                                    |
|   | plant production    | 17.58 |                                    |
+---+---------------------+-------+------------------------------------+
| − | Intermediate        | ‑ 18  | A tax of 2,5 euro/kg applies to 5  |
|   | pesticide           | 0.15\ | pesticides that are most often     |
|   | consumption,        | (     | found in surface and ground water  |
|   | including tax on    | incl. |                                    |
|   | some pesticides     | --    |                                    |
|   |                     |  1,0) |                                    |
+---+---------------------+-------+------------------------------------+
| \ | Environmental       | \+    | Organic farming, integrated fruit  |
| + | subsidies           | 3.86  | production, management agreements  |
|   |                     |       | for input reduction                |
+---+---------------------+-------+------------------------------------+
| − | Environmental taxes | n.a.  | Waste tax on recipients not        |
|   |                     |       | applicable, as \> 80 % are         |
|   |                     |       | retrieved                          |
+---+---------------------+-------+------------------------------------+
|  | External social     |       |                                    |
|   | cost                |       |                                    |
+---+---------------------+-------+------------------------------------+
| − | Environmental       | ‑     | EPEA                               |
|   | subsidies           |  3.86 |                                    |
+---+---------------------+-------+------------------------------------+
| \ | Environmental taxes | +     |                                    |
| + |                     |  1.00 |                                    |
+---+---------------------+-------+------------------------------------+
| − | Avoidance cost      | Costs | Costs incurred following           |
|   |                     | for   | restrictions on or withdrawal of   |
|   |                     | a     | products  internalised via        |
|   |                     | gricu | production value ↓                 |
|   |                     | lture |                                    |
|   |                     | al    |                                    |
|   |                     | ready |                                    |
|   |                     | in    |                                    |
|   |                     | terna |                                    |
|   |                     | lised |                                    |
+---+---------------------+-------+------------------------------------+
| − | Abatement cost      |       | Cost of adopting new technology   |
|   |                     |       | internalised via intermediate      |
|   |                     |       | consumption (new products) or\     |
|   |                     |       | investment cost (e.g. adjusted     |
|   |                     |       | sprayers)                          |
+---+---------------------+-------+------------------------------------+
| − | Treatment cost      | (‑    | Operating cost of Phytofar Recover |
|   |                     | 8.75) | for retrieving recipients\         |
|   |                     |       |  to be entered in chemical,       |
|   |                     |       | rather than agricultural account   |
+---+---------------------+-------+------------------------------------+
| − | Restoration costs   | ‑     | Cost of drinking water             |
|   |                     |  7.92 | purification (in Flanders)         |
+---+---------------------+-------+------------------------------------+
| − | Damage costs        | Need\ | Sources of valuation methods:      |
|   |                     | to be |                                    |
|   |                     | v     | \- Biodiversity loss: Foster &     |
|   |                     | alued | Mourato \[2000\]                   |
|   |                     |       |                                    |
|   |                     |       | \- Human health: Waibel *et al*.   |
|   |                     |       | \[1999\], Pretty *et al*. \[2000\] |
|   |                     |       |                                    |
|   |                     |       | \- Production loss in other        |
|   |                     |       | sectors (e.g. fisheries)           |
+---+---------------------+-------+------------------------------------+

2.  Conclusions

We propose an integrated accounting framework that internalises on the
one hand the costs of natural resource depletion and the use of the
environment as a sink for negative externalities and on the other hand
the value of agriculture's service functions. Filling in this framework
in consecutive steps highlights society's expenses; the ratio of the
physical values in the satellite environmental accounts to the
conventional monetary values and the economic values of the non-tradable
outputs; to finally get to the fully integrated Economic *and
Environmental* Accounts for Agriculture (EEAA). As the integrative
framework is built from the conventional economic accounting core (EAA)
and is gradually built up through sub-accounts, the EEAA obtains a
strong analytical power. Unfortunately, data collection is still ongoing
and overall results, such as the "multifunctional value added" are still
missing. However, the principal interest of the EEAA is not as much the
absolute value of each section or indicator, as their relative weight
and the overall evolution of their share in total cost/benefit over
time.

References

Atkinson, G.; Baldock, D.; Bowyer, C.; Newcombe, J.; Ozdemiroglu, E.;
Pearce, D. and Provins, A. (2004), "Framework for environmental accounts
for agriculture", London, Economics for the Environment Consultancy
(eftec).

Bailey, A.P.; Rehman, T.; Park, J.; Keatunge, J.D.H. and Trainter, R.B.
(1999), "Towards a method for the economic evaluation of environmental
indicators for UK integrated arable farming systems", Agriculture,
Ecosystems and Environment, vol. 72, pp. 145‑158.

Carson, R.M. and Bergstrom, J.C. (2003), "A review of ecosystem
valuation techniques", University of Georgia, Department of Agricultural
and Applied Economics, Faculty Series 03-03.

De Haan, M. and Keuning, S. (2000), "The NAMEA as Validation Instrument
for Environmental Macro-economics", Nota di Lavoro 90.2000, Milano,
Fondazione Eni Enrico Mattei.

EEA (1999), "Environmental indicators: typology and overview", Technical
report n° 25, Copenhagen, European Environment Agency,
<http://reports.eea.eu.int/TEC25/en/tech_25_text.pdf>.

Eurostat (2000), "Manual on the economic accounts for agriculture and
forestry EAA/EAF 97 (Rev. 1.1)", Luxemburg, European Communities.

Eurostat (2002), "SERIEE. Environmental Protection Expenditure Accounts
-- Compilation Guide", EC Methods and Nomenclature, theme 2: Economy and
finance, Luxemburg, Eurostat.

Factor 10 Club (1997), "The International Factor 10 Club's Statement to
Government and Business Leaders: a ten-fold leap in energy and resource
efficiency" (1997 Carnoules Statement of the Factor 10 Club), Wuppertal,
Factor 10 Club, http://www.factor10-institute.de.

Foster, V. and Mourato, S. (2000), "Valuing the multiple impacts of
pesticide use in the UK: a contingent ranking approach", Journal of
Agricultural Economics, vol. 51, n° 1, pp. 1‑21.

Freeman, A.M. (1993), "The measurement of environmental and resource
values, Theory and Methods", Washington D.C., Resources for the Furture,
516 pp.

Goodlass, G.; Halberg, N. and Verschuur, G. (2001), "Study on
Input/Output Accounting Systems", CLM 489, Utrecht, Centre for
Agriculture and Environment.

Hubacek, K. and Giljum, S. (2003), "Applying physical input-output
analysis to estimate land appropriation (ecological footprints) of
international trade activities", Ecological Economics, vol. 44,
pp. 137‑151.

Kærgård, N.; Fransen, S.E.; Jøgensen, A.W.; Ørum, J.E.; Jacobsen, L.B.
and Dubgaard, A. (2001), "The economics of pesticides in Danish
Agriculture", Proceedings from the Seminar on the Multifunctionality of
Agriculture, University of Bergen, 16-18 February 2001.

Kestemont, B. (1999), "Le compte des dépenses de protection de
l\'environnement en Belgique, Première évaluation suivant la méthode
SERIEE", ACCT-EXP/99/4.2.1, Luxembourg, Eurostat, 84 pp.
[http://www.ulb.ac.be/ceese/STAFF/bkest/421FR.pdf](http://www.ulb.ac.be/ceese/STAFF/bkest/421FR.pdf )

Pimentel, D.; Acguay, H.; Biltonen, M.; Rice, P.; Silva, M.; Nelson, J.;
Lipner, V.; Giordano, S.; Harowitz, A. and d\'Amore, M. (1992),
"Environmental and economic cost of pesticide use", Bioscience, vol. 42,
n° 10, pp. 750‑760.

Pimentel, D.; Harvey, C.; Resosudarmo, P.; Sinclair, K.; Kunz, D.;
McNair, M.; Crist, S.; Shpritz, L.; Fitton, L.; Saffouri, R. and Blair,
R. (1995), "Environmental and economic costs of soil erosion and
conservation benefits", Science, vol. 267, pp. 1117‑1123.

Pretty, J.N.; Brett, C.; Gee, D.; Hine, R.E.; Mason, C.F.; Morison,
J.I.L.; Raven, H.; Rayment, M.D. and van der Bijl, G. (2000), "An
assessment of the total external costs of UK agriculture", Agricultural
Systems, vol. 65, pp. 113‑136.

Pretty, J.N.; Mason, C.F.; Nedwell, D.B. and Hine, R.E. (2002), "A
preliminary assessment of the environmental costs of the eurtrophication
of fresh waters in England and Wales", Centre for Environment and
Society (CES), University of Essex, Occasional Paper 2002-1, Essex, CES.

Rees, W. and Wackernagel, M. (1996), "Our ecological footprint. Reducing
human impact on the earth" Gabriola Islands, British Columbia, New
Society Publishers.

United Nations, International Monetary Fund, Commission of the European
Communities, OECD and World Bank (1993), "System of National Accounts",
New York, United Nations.

United Nations, World Bank, OECD and Eurostat (2000), "System of
Environmental and Economic Accounting", New York, United Nations,
http://www4.statcan.ca/citygrp/london/london.htm

Vanslembrouck I. (2002), "Economic assessment of landscape amenities
provision by farmers", PhD thesis, Ghent University.

Verhaegen, E.; Campens, V.; Wustenberghs, H.; Lauwers, L. and Nutelet,
R. (2002), "TAPAS 2001 (5), Environmental Aspects of Agricultural
Accounts, Execution report", Brussels, Centre for Agricultural
Economics.

Verhaegen, E.; Wustenberghs, H. and Lauwers, L. (2003), "Elements for
"green accounts" for the agricultural sector", TAPAS 2002, Environmental
Aspects of Agricultural Accounts, Execution report, Brussels, Centre for
Agricultural Economics.

Wackernagel, M.; Onisto, L.; Callejas Linares, A.; Lopéz Falfán, I.S.;
Méndez García, J.; Suárez Guerrero, A.I. and Suárez Guerrero, G. (1997),
"Ecological footprints of Nations. How much nature do they use? How much
nature do they have?", International Council for Local Environmental
Initiatives (ICLEI), <http://www.ecouncil.ac.cr/rio/focus/report>.

Waibel, H.; Fleischer, G. and Becker, H. (1999), "The economic benefits
of pesticides: a case study from Germany", Agrarwirtschaft, vol. 48,
n° 6, pp. 219 230.