Sustainable National Income: A Trend Analysis for the Netherlands for 1990-2000

Abstract

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).