Using Ecosystem Accounting to Integrate the Environment in Measures of Multifactor Productivity

There is increasing recognition of the relevance of integrating environmental considerations within standard macroeconomic measures including GDP and national wealth and, by extension to measures of multifactor productivity (MFP). A range of approaches to measuring environmentally adjusted MFP (EAMFP) have been developed over the past decade which variously adjust the measure of output or recognize explicitly natural capital inputs. This article summarizes the main approaches to EAMFP and discusses their merits from a national accounting principles perspective, identifying some concerns on potential double counting of environmental contributions and effects. It then considers the potential of ecosystem accounting as described in the System of Environmental-Economic Accounting (SEEA) Ecosystem Accounting to offer an alternative framing for integrating the environment into economy-wide MFP measures.