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Sustainable national income (SNI)



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Sustainable National Income (SNI)
Onno Kuik (
1 Introduction
SNI assesses the distance between the present and the sustainable level of production and
consumption. SNI represents the maximum level of economic activity that can be
developed within an accounting period that respects the sustainability standards. All the
costs that need to be made to meet the standards of pollution and resource use in order to
prevent the sustainability standards to be exceeded, irrespective whether they are to be
made by industry, government or households, are considered to be intermediary
expenditures and should therefore not count as income. To put it simply, SNI is the
difference between standard national income and the expenditures that need to be made
to respect the sustainability standards.
In Hueting’s approach to sustainable income accounting, a sharp distinction is made
between objectively determinable sustainability and the sustainable use of environmental
functions on the one hand, and society’s subjective preferences for such a use on the
other hand. Environmental functions can be defined as the set of possible uses of the
biophysical environment. If the use of one function is at the expense of other functions or
of its own future use, the function is scarce, i.e., its use entails an opportunity cost—a
“price” (Hueting, 1974). Sustainability requires such use of environmental functions as to
assure their indefinite availability. Note that this definition of sustainability does not
necessarily require the conservation of all environmental assets. If an environmental
function can be performed by several environmental assets, substitution between these
assets is allowed in principle. For example, the function “resources for energy
production” can be performed by fossil energy resources such as coal, oil and gas, but
also by renewable energy resources such as solar, wind, and hydro. For a sustainable use
of the function “resources for energy production” the depletion of the stock of one kind
of asset (e.g., oil) is no problem as long as its depletion is accompanied by an equivalent
increase in the stock of substitute assets (e.g., solar).
Is sustainability, i.e., the sustainable use of environmental functions, desirable? Does
society want to preserve all environmental functions indefinitely at all costs? The answer
to these questions can only be given on the basis of society’s subjective preferences for
the use of environmental functions. Hueting stresses the point that, in general, society’s
subjective preferences for environmental functions and therefore its “demand” for these
functions is not (completely) observable. It is difficult to derive individual preferences for
environmental functions based on observed behaviour. There are no markets for
environmental functions. Although some information on the demand for environmental
functions can be inferred from defensive expenditure and financial damage, this
information is incomplete and often does not address the most vital functions such as the
This paper has been written for the Overview of Advanced Tools for Sustainability Assessment of the
“Sustainability A-Test” project of the European Union, DG Research, see (6
April 2006).
functions of the life-support systems of our planet. Alternative valuation techniques such
as contingent valuation are not very accurate and are not always applicable. Moreover,
none of these techniques can provide reliable data on society’s preferences for a liveable
environment for future generations. In a word, whether or not we want to become
“sustainable” is not known. Hueting therefore makes assumptions on preferences. He
strictly separates the “objective” concept of sustainability (the indefinite availability of
environmental functions) from the question whether or not society really wants to achieve
such sustainability (Hueting and Reijnders, 1998).
2 Methodology
Given the lack of knowledge of subjective preferences, SNI shows the correct measure of
national income only if one assumes that society’s preferences for the sustainable use of
the environment are absolute, i.e., independent of their costs. Hueting argues that there
are as many green national incomes as there are assumptions on subjective preferences
for environmental services. These subjective preferences include preferences for future
availability of environmental functions, thus affecting the discount rate at which future
benefits and costs are assessed. This situation will persist as long as we are unable to
correctly measure subjective preferences for the current and future use of environmental
functions. In this unfortunate situation it is necessary to be explicit about one’s
assumptions. Sustainable National Income represents the maximum level of income that
can be derived from thát level and composition of economic activity that leaves
environmental functions available, now and in the future, given the state of technology in
the year of reporting. Whether Sustainable National Income, thus defined, correctly
measures welfare or utility is another question altogether. An important assumption is
that society’s preference for the sustainable use of environmental functions is absolute,
i.e., independent of the cost of achieving this sustainable use. Hueting stresses the point
that this assumption cannot be accepted or refuted on empirical grounds. Another
important issue regards the role of future technological improvement in the efficiency of
use of environmental resources. Hueting, deliberately, does not take this factor into
account. He acknowledges that such future technological improvement could in principle
lessen the tension between economic growth and environmental degradation, but he does
not want to speculate on it. In fact, he is sceptical on the chances that as yet not
implemented an unknown technology can safeguard the environment for future
generations in the face of ever-increasing population and production (Hueting, 1996).
SNI assesses the distance between the present and the sustainable level of production and
consumption, given today’s technology. When the calculation of SNI is repeated in later
years it can be assessed whether technological improvement has indeed reduced this
Hueting further assumes that conditions for the sustainable use of environmental
functions can be determined by science and can be expressed in the form of physical
standards. The sustainability standards should be in the form of “no more pollution
should be allowed than can be naturally assimilated by the environment”, or “so many
fish may be caught that the catch is maximal but sustainable” and consequently does not
deplete the stock (Hueting and Reijnders, 1998). SNI is directly dependent on the
sustainability standards. When there is large scientific uncertainty on the maximum
sustainable use of environmental resources, there will be a corresponding uncertainty
in the estimated SNI.
SNI assesses the maximum level of economic activity that can be developed within an
accounting period that respects the sustainability standards. The diagram in Figure 1
illustrates this idea in a simplified way.
Figure 1 Demand and supply of environmental functions. Source: Hueting et al. (1995).
s = supply curve or elimination cost curve
d = incomplete demand curve based on individual preferences (revealed from
expenditures on compensation of functions and on restoration of physical
d’ = approximate demand curve based on assumed preferences for
BD = distance that must be bridged in order to arrive at sustainable use of
environmental functions;
EF = costs of the loss functions, expressed in money.
The X-axis depicts the level of an environmental function, e.g., the cleanness of air, the
integrity and size of natural habitats, the stock of fish in the sea, all expressed in physical
dimensions. The Y-axis depicts money. Curve s is the supply curve for the environmental
function or the elimination cost function. It shows the costs of sustaining a certain level
of the environmental function. The part of the social demand curve for the environmental
function that can be observed is d. This curve is based on individual preferences revealed
from expenditures on compensation of functions and resoration of physical damages and
is obviously incomplete. Hueting et al. (1995) argue that a complete demand curve for
environmental functions, based on individual preferences, cannot be determined. Many
governments, however, including the Dutch, have adopted ‘sustainable development’ as
official government policy. If this is taken seriously, one may assume that society has
collectively expressed an absolute preference for the preservation of (certain)
environmental functions. This absolute preference is depicted in the assumed ‘collective’
demand curve d’. Demand for an environmental function is then equal to the
sustainability standard, and it is completely inelastic. Now assume that the present level
of the environmental function on the X-axis is B. To reach the sustainable level at D,
elimination costs of the magnitude of EF have to be made. If this exercise is repeated for
all environmental functions that have to be sustained, then the sum of all EF’s is the
money-difference between the standard national income and the SNI.
In the SNI approach cost-effectiveness or elimination cost curves play a central role. A
cost-effectiveness curve indicates the relationship between the level of an environmental
function and the social costs that are needed to restore and maintain this level. In the SNI
methodology costs can accrue from two different sets of actions. The first set of actions
comprise technical measures to reduce pollution from a given economic activity. These
technical measures can be ‘end of pipe’ measures, process changes, or the development
of alternatives for non-renewable resources. Abatement cost functions for the depletion of
fossil fuels, climate change, depletion of the ozone layer, acidification, VOCs,
eutrophication, zinc emissions, photochemical ozone, aridification, and local soil
pollution have been estimated (Dellink et al., 1997). The second set of actions comprise
volume reductions in the burdening or extracting economic activities themselves, under
the condition of constant employment. In a macro-economic or general equilibrium
framework such volume reductions would amount to structural shifts in the sectoral
composition of an economy - that is a shift away from environment burdening towards
less-burdening activities.
The measures from one or more of these sets of actions will typically affect more than
one sector of the economy, and possibly all. The effects of the implementation of
technical measures and sectoral shifts on the level of national income should therefore
preferably be evaluated in an integrated multi-sector framework (Hueting and De Boer,
2001; Zeelenberg et al., 1997).
Gerlagh et al. (2002) built an applied general equilibrium model for the Netherlands with
elimination cost curves and sustainability standards for various environmental themes by
which such an integrated assessment could be carried out.
3 Process
The SNI is computed by an applied general equilibrium model (the SNI-AGE model) in
which the ‘sustainability standards’ act as restrictions on the feasible set of solutions. The
model contains detailed abatement cost curves for environmental themes. The difference
or “gap” between SNI and conventional NNI measures the dependence of the economy
on that part of its natural resource use that exceeds the sustainable exploitation levels.
The gap between SNI and NNI is therefore an indicator of the extent of unsustainability
of an economy
To compute the SNI, one needs the SNI computer model with a set of environmental
restrictions and abatement cost curves, a dataset with economic and environmental
(NAMEA) data for a particular country and year, a set of sustainability standards.
4 Review
4.1 Evaluation results
The SNI method gives an ex-post assessment of the economic performance of an
economy over a time period of a year. Aspects of sustainable development that are
included are economic performance and environmental damage and resource depletion. It
calculates the hypothetical national income that would have been achieved if the
economy had respected the sustainability standards.
The sustainability standards presently incorporated in the SNI-AGE model refer to nine
environmental themes (see Table 1). For sustainability – it is assumed – individual
environmental pressures should be reduced by a range from 46 percent (fine particles in
air) to 100 percent (dehydration, soil contamination). The SNI model contains detailed
information on abatement technology for each environmental pressure with respect to
effectiveness as well as costs. There are, however, limits to the extent to which abatement
technology can be employed cost-effectively. For example, to meet the sustainability
standard for the greenhouse effect, about 45% of the required reduction can be achieved
through technical measures in various sectors of the economy, while the remainder
should be reduced through changes in the size and composition of the economy (Gerlagh
et al., 2002).
Table 1 Sustainability standards for the Netherlands, 1990
Unit Base 1990 Sustainability
Reduction (%)
Greenhouse effect bln kg CO
-eq. 251 53 79%
Ozone depletion mln kg CFC11-eq. 10.4 0.5 94%
Acidification bln Acid eq. 38.4 10.0 74%
Eutrophication mln kg P eq. 312 128 59%
Fine particles in air mln kg PM10 440 240 46%
Smog formation mln kg NMVOS 44 20 55%
Dispersion to water bln AETP eq 194 73 62%
Dehydration % affected area 100 0 100%
Soil contamination # contaminated
600,000 0 100%
Source: Gerlagh et al., 2002.
SNI-AGE can also calculate the consequences to sustainable national income of
alternative economic scenarios. It is therefore able to be of use for prospective, ex-ante,
assessments of the sustainability impacts of economic developments.
4.2 Experiences
Sustainable National Income for the Netherlands has been calculated for 1990, 1995 and
2000 (Gerlagh et al., 2002; Hofkes et al., 2004). The calculations show that sustainable
national income would be about 56 percent below conventional national income (NNI) in
the year 1990. The reduction of greenhouse gases is responsible for the bulk of the
income loss. The trend analysis of Hofkes et al. (2004) shows that the relative gap
between NNI and SNI has decreased in the Netherlands over the period 1990 to 2000, but
that the absolute gap over the same period has increased by 13 billion Euro. Hofkes et al.
(2004) decompose the changes in SNI over the period 1990-2000 in scale, composition
and technique effects. The technique effect (the emission intensities of economic
activities) has contributed most to the relative increase in SNI over that period and
prevented a further increase of the absolute gap between NNI and SNI.
4.3 Combinations
The SNI-AGE model makes use of NAMEA data, abatement cost curves, and
sustainability standards.
4.4 Strengths and weaknesses
The main strengths of the SNI method are its clear and comprehensive measure of
sustainability that is not dependent upon estimates of subjective preferences for
environmental quality, and its robust general equilibrium methodology that takes account
of all interdependencies and feedbacks between one the one hand the economy and the
environment and on the other hand between various alternative environmental themes.
The SNI-AGE model is complex and needs highly skilled personnel to operate and
maintain it. The formulation of the sustainability standards is difficult, but once obtained,
several standards may be transposed to other countries. For the general public, the
methodology (the applied general equilibrium model) may be difficult to
4.5 Further work
It would be interesting to test the SNI-AGE model for other countries inside and outside
the EU. Another interesting direction would be to use SNI-AGE for an ex-ante
assessment of alternative socio-economic development paths.
4.6 References
Dellink, R., F. van der Woerd, B. de Boer (1997). Kosteneffectiviteit van milieuthema’s (Cost
Effectiveness of Environmental Problems, in Dutch), Institute for Environmental Studies,
Vrije Universiteit, Amsterdam.
Gerlagh, R., R. Dellink, M. Hofkes, H. Verbruggen (2002). A Measure of Sustainable National
Income for the Netherlands, Ecological Economics, 41, 157-174.
Hofkes, M., R. Gerlagh, and V. Linderhof (2004). Sustainable National Income: a trend analysis for
the Netherlands for 1990-2000. IVM Report R-04/02, Institute for Environmental Studies,
Vrije Universiteit, Amsterdam.
Hueting, R. (1974). Nieuwe Schaarste en Economische Groei, Amsterdam. Published in English as
New Scarcity and Economic Growth, North-Holland, Amsterdam (1980).
Hueting, R. (1996). Three Persistent Myths in the Environmental Debate, Ecological Economics, 18
(1996) 81-88.
Hueting, R., P. Bosch, B. De Boer (1995). The Calculation of Sustainable National Income, IDPAD
Occasional Papers and Reprints, The Hague/New Delhi.
Hueting, R. and L. Reijnders (1998). Sustainability is an Objective Concept, Ecological Economics,
27 (1998) 139-147.
Hueting, R. and B. de Boer (2001). Environmental Valuation and Sustainable National Income
Accoding to Hueting. In: E.C. van Ierland, J. van der Straaten and H. Vollebergh, Economic
Growth and Valuation of the Environment, Edward Elgar, Cheltenham, UK/Northampton,
Zeelenberg, K., B. de Boer, R. Brouwer (1997). Sustainability in Growth Models, Statistics
Netherlands, Research Paper no. 9744, Voorburg.
This paper aims at establishing the elements of sustainable development in the accounting of the economic entities. Emphasis is placed on the principles of sustainable development both in the national context and in the European space. The entities’ approach to integrating the requirements of sustainable growth into the accounting model has long been debated since the consumed natural resources are not to be found distinctly in the accounting records of the entity. The debate on this topic is carried out through specific instruments in the form of sustainable development indicators. Thus, in this paper, macroeconomic elements are promoted and, through their compositions, they integrate as many elements of the sustainable development into the accounting model and they are the most appropriate to meet the requirements of the development.
Full-text available
Sustainability is defined as the use of the vital functions (possible uses) of our biophysical surroundings in such a way that they remain indefinitely available. This situation can be established scientifically. Consequently, sustainability is an objective concept to the extent that natural science is objective. The objective description of sustainable use of functions and the subjective preferences for such a use -the question whether or not we want to achieve such use -should be sharply distinguished.
Technical Report
Full-text available
We study the relation between sustainability and national income in a neoclassical growth model with one product, which is used both as consumption good and investment good, and one natural resource, which is used in production. We analyse the possibilities for an indicator of sustainability, looking in particular at two indicators: the change in real national wealth and the ratio between sustainable constant consumption and actual consumption. It appears that both indicators can only be computed if the sustainable path of the economy is first computed, ànd that they must be computed for the whole future path of the economy, so that it is not sufficient to compute them for a single time period. For official statistics this means that sustainability indicators can only be computed by means of an economic model, and cannot be measured with actual data only.
Technical Report
This paper presents a trend analysis of the Sustainable National Income (SNI) indicator for the Netherlands over the period 1990-2000. The SNI indicator, first proposed by Hueting, corrects net national income (NNI) for the costs to bring back environmental resource use to a 'sustainable' level. We use an applied general equilibrium (AGE) model specifying 27 production sectors given a set of pre-determined sustainability standards. The AGE model is extended with emissions and abatement cost curves, based on a large data set for nine environmental themes. The numerical results indicate that, over time, SNI moves closer to NNI. In addition, we apply a 4-factor decomposition analysis of the SNI trend to identify the underlying forces of economic development. Overall productivity growth led to an increase in NNI and a less than proportional increase in SNI (scale effect). Changes in composition of the economy had a small effect on SNI (composition effect). Emission intensities substantially decreased and led to lower emissions and an increased SNI (technique effect). Finally, during the sub-period 1995-2000, many new emission-poor technologies became available but were left unused, leaving actual emissions unchanged but increasing SNI (abatement effect).
Throughout the last three decades of working on environmental and resource problems I have encountered three persistent myths: (1) environment conflicts with employment; (2) production must grow to create scope for financing environmental conservation; and (3) although society would like to save the environment, it is too expensive. Testing these three propositions, individually and mutually, leads to the conclusion that as long as they dominate the environmental debate, the world will drift ever further away from environmental sustainability.
Proefschrift Groningen. Met een samenvatting in het Engels. - Met lit. opg. - Index.
En la UE se ha estimado que los costes de la congesti�n representan el 2% de su PIB y que el coste de la poluci�n del aire y ruido supera el 0,6% del PIB, siendo alrededor del 90% de los mismos ocasionados por el transporte terrestre. Ante este hecho y el continuo aumento de la demanda del transporte privado frente al p�blico para los desplazamientos, muchos abogan por una conjunci�n de medidas tanto restrictivas como alternativas al uso del coche. Dentro de las primeras se encuentra el establecimiento de un peaje o una tarifa por el uso de las carreteras, medida que aunque desde el punto de vista de la Teor�a Econ�mica es la manera m�s eficiente para corregir el fallo de mercado que supone la congesti�n, desde la visi�n de pol�ticos y del p�blico no goza de gran aceptaci�n. En este trabajo se pretende hacer una simulaci�n de los efectos que tendr�a sobre el bienestar social de la implantaci�n de una medida de este tipo en la Bah�a de C�diz. In the European Union it has been estimated that the congestion cost are the 2% of the gross domestic product and the cost of pollution and noise is over 0,6%, olso it is known that the 90% of this cost are caused by overland transport. For this reason and for the always increasing demand of private transport, there are professionals who thinks that the solution have to be restrictive measures added to alternatives to the car. road pricing is a restrictive measures that for the economic theory is the most efficient way to solve congestion cost but for politicians and user of transport is not always accepted. In this study we are going to simulate road pricing for commuters in the Bah�a of C�diz and then it will be estimated welfare effects.
Environmental Valuation and Sustainable National Income Accoding to Hueting Economic Growth and Valuation of the Environment
  • R Hueting
  • B De
  • E C Ierland
  • J Der
  • H Straaten
  • Vollebergh
Hueting, R. and B. de Boer (2001). Environmental Valuation and Sustainable National Income Accoding to Hueting. In: E.C. van Ierland, J. van der Straaten and H. Vollebergh, Economic Growth and Valuation of the Environment, Edward Elgar, Cheltenham, UK/Northampton, USA. Zeelenberg, K., B. de Boer, R. Brouwer (1997). Sustainability in Growth Models, Statistics Netherlands, Research Paper no. 9744, Voorburg.
Kosteneffectiviteit van milieuthema's (Cost Effectiveness of Environmental Problems
  • R Dellink
  • F Van Der Woerd
  • B De Boer
Dellink, R., F. van der Woerd, B. de Boer (1997). Kosteneffectiviteit van milieuthema's (Cost Effectiveness of Environmental Problems, in Dutch), Institute for Environmental Studies, Vrije Universiteit, Amsterdam.
The Calculation of Sustainable National Income, IDPAD Occasional Papers and Reprints, The Hague
  • R Hueting
  • P Bosch
  • B De Boer
Hueting, R., P. Bosch, B. De Boer (1995). The Calculation of Sustainable National Income, IDPAD Occasional Papers and Reprints, The Hague/New Delhi.