Green National Accounting: Why and How?

The present paper gives an overview of the theory of green national accounting. Three purposes of green national accounting (measurement of sustainable income, social welfare, or net social profit) and two measures (Green NNP and Hicksian income) are considered. It is argued that sustainable income and social welfare correspond to different purposes. Under the assumption of no exogenous technological progress, Green NNP is shown to equal Hicksian income if there is a constant interest rate or if consumption is constant. It is established as a general result that sustainable income < Hicksian income < social welfare, while Green NNP < social welfare under no exogenous technological progress and a constant utility discount rate. Green NNP is shown to measure gross social profit rather than net social profit.