Economic versus Thermodynamic Accounting - Thanatia: The Destiny of the Earth's Mineral Resources - page 43

Second, the environment is treated both as a source of natural resources and a
sink of wastes. For the natural scientist, it is perhaps a crude utilitarian method that
considers Nature as an input/output of human productivity. Dividing Nature into
assets does not reflect all interactions among natural systems. Converting a forest
into a stock of timber does not reflect its multifaceted role nor the multiple benefits
derived from its existence such as flood protection, clean air, soil maintenance,
climate regulation or even recreational purposes. Numbers will never be indicative
of causality and may even provoke greed for rapid exploitation of natural resources.
For the SEEA Central Framework, the whole is exactly the sum of its parts. It
resigns holism in favour of reductionism.
In addition, the fact that SEEA uses physical accounts without homogeneity
in units or specificity in the type of mineral/material, makes the tracing of physi-
cal flows along a life cycle all the more confusing, since materials react, mix and
decompose. This is something which would be better facilitated through the use
of exergy values (as will be seen throughout this topic) and trace analyses using
Sankey diagrams 10 .
That said, the authors recognise that the SEEA constitutes an impressive ini-
tiative for putting numbers to Man-Nature interactions, in a rational and global
way. It has the merit of being a pioneering proposal for a global accord with which
to take Nature into account. There is no other initiative. Even if many countries
have their own classifications for environmental assets, they are not as complete
and are far from being standard. Furthermore there remains no consensus as to
standardised definitions and in many cases, it is necessary to apply conversions if
one wishes to compare across nations. Therefore, the SEEA initiative, despite its
failings, could be an important step for establishing a complete picture of effective
and globalised natural resource management, as will be discussed in Sec. 17.5.1.
2.5.2 The net price and the user cost methods
As explained previously, the Net Present Value (NPV) is the accounting method
recommended by the SNA and SEEA for valuing mineral resource stocks. It con-
sists of converting future cash flows to their present day value and subtracting the
capital cost invested throughout the extraction period. However, there are other
valuation methods in the literature worthy of appraisal (Domingo and Lopez-Dee,
2007; Rubio, 2005).
The Income Approach as with the NPV, tries to predict future benefits con-
verting them to a present day value. The principal approaches are the Net Price
Method, which considers depletion to be capital depreciation (Repetto, 1988, 1992;
Hartwick, 1990; Maler, 1991) and the User Cost Method (El-Serafy, 1989).
Economists/accountants regard depreciation as a physical degradation of ma-
chinery 11 . Basing their procedure on the principle of “keeping capital intact” they
10 Sankey diagrams visualise material or energy flows with proportional arrow magnitudes.
11 Thermodynamicists name this degradation irreversibility or exergy destruction of manufacturing
systems.