The Integrated Environmental and Economic Accounting Matrix and its Application to the Computable General Equilibrium Analysis

Abstract

This paper analyzes the CGE (computable general equilibrium) model based on Japan's national accounts and Japan's SEEA (system for integrated environmental and economic accounting). First, an environmental SAM (social accounting matrices) was compiled by introducing Japan's SEEA into the SAM of Japan's national accounts. Then, a CGE analysis of Japan's environmental SAM was conducted with a focus on “imputed environmental costs,” also known as “eco-margin,” with the use of GAMSHERCULES software. In conclusion, we have gained three main results: 1) an increase in environmental tax rates reduces the eco-margin; 2) an increase in capital has undesirable effects (on the other hand, labor has desirable effects) on the environment; 3) a direct reduction of “imputed environmental costs,” by increasing inputs needed for environmental protection purposes, has almost no noticeable effects on the rest of the economy, with eco-margin being reduced to zero. © 2003, JAPAN SECTION OF THE REGIONAL SCIENCE ASSOCIATION INTERNATIONAL. All rights reserved.