Full-Cost Accounting
Full-cost accounting is the assessment, in dollar terms, of costs or benefits associated with changes in the environment. This is also referred to as environmental valuation, and the costs and benefits in such an analysis are commonly referred to as environmental externalities—costs not reflected in the normal market price of goods and services (such as cost of cleaning waterways polluted by urban wastewater or industrial processes).
In 2003, IISD embarked on a five-year research project with Agriculture and Agri-food Canada to study the issue of full-cost accounting and its application to policy development in agriculture. This project and its outputs can be viewed here. Over the course of the project, our research focus shifted increasingly towards watershed analysis—specifically valuing the public benefits of the ecosystems services produced through beneficial management practices (BMPs)—in agricultural watersheds. If the public receives significant benefits from particular agricultural BMPs, the rationale for government support for these practices is clear.
Our analysis quantified the public benefits associate with three BMPs: conservation tillage, forage conversion and small-scale water storage. Estimating such public benefits is very important to build the case that integrated watershed management deserves policy and programming investments.
