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This project aims to address two major problems. The first is a shortage of data on the major impacts to human health, wellbeing and the economy of the environmental damage caused by economic activity. This data shortage limits the ability of policymakers to identify the most appropriate environmental policies. The second major problem to be addresses is related to the framework of economic and environmental reporting that indicates to policymakers and the general public the success of the economy. The existing environmental accounting frameworks have been criticised for a number of reasons, and in particular because they do not place sufficient weight on sustainability concerns. This project will develop and apply an environmental accounting framework that addresses these concerns.

The project's scientific objectives are thus:

1. To develop a framework of monetary economic and environmental assessment that accounts for both economic efficiency and sustainability.
2. To extend the methodology by which physical environmental damage is measured. This has hitherto been carried out mainly by means of the impact pathway approach (tracing environmental damage from activities (emissions, pressures) via environmental quality modelling to physical impacts). This will improve the availability of economic-environmental data.
3. To review work done and, where necessary, develop a methodology with which to estimate the reductions in impacts required in order to satisfy a definition of sustainable development
4. To attach economic costs to the environmental impacts and the actions required to meet sustainability standards, and to use this data to apply the framework developed in (i).

The expected impacts of the project's final results are twofold; consisting of both environmental policy recommendations and of contributions to a standard framework of environmental accounting. The policy guidance will consist of estimates of the appropriate aims of environmental policy under a joint criterion of economic efficiency and environmental sustainability, using data gathered on both the economic costs of environmental damage and estimates of "sustainability standards". The second aspect of the guidance to policymakers is the improvement of the quality of current green national accounting measures, and the application of the integrated framework of economic-environmental reporting. The improved information on current welfare losses due to environmental damage will be made available to national statistical offices for inclusion in environmental satellite accounts. Moreover, the values of current welfare losses and the estimated economic costs of meeting sustainability standards will be used in the new synthesised framework of economic-environmental reporting to provide an estimate of the maximum welfare attainable under a policy of efficiency and sustainability. The project's policy conclusions will help to minimise the costs of attaining sustainable development.

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The first step in the implementation of the project is the development of a framework for integrated economic-environmental reporting that accounts for both economic efficiency and sustainability in estimating the maximum sustainable level of economic welfare. The framework to be developed will consist of a synthesis of the standard, welfare-based, national accounting framework as applied by the EC-funded GARP project, and the sustainability standards approach as developed by the EC-funded GREENSTAMP project.

This task will involved reviewing the theoretical developments in accounting methodologies, including the revised SEEA guidelines, and national accounting practitioners will be consulted as to the perceived shortcomings of the current framework. The theoretical framework will be developed as part of an intertemporal model of economic efficiency in natural resource use and of environmental sustainability. This will be used to show how, in theory, a measure of maximum sustainable economic welfare, as well as sustainable income, may be derived, illustrating the circumstances under which economic efficiency could constitute a more stringent policy constraint than sustainable development. In order to be applied, the model may have to be modified to account for limitations in available data, in particular in pricing data. Data will be collected on all of the impact categories considered under the project, and this data used to apply the accounting framework.

This task will also review the work done on the identification of sustainability standards and, with the agreement of all the project partners, identify the most appropriate methodology with which to estimate sustainability standards within the project. This methodology will vary with the impact considered, but the general methodology will be agreed so as to be as consistent as possible across the project, so that the sustainability standard for each impact will be the standard consistent e.g. with a maintenance of human welfare and the support of essential ecosystem services.

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