ABSTRACT

Halifax Harbour Clean-Up:
A Full-Cost Accounting Analysis

Like crime and sickness, pollution is "good" for the economy. Whenever money is spent, the GDP goes up, which in turn is taken as a sign of progress and well being. In the Genuine Progress Index, pollution is regarded as a cost. Like crime (and in contrast to measures of progress based on the GDP), "less" is "better."

The GPI regards pollution clean-up costs as "defensive expenditures" that compensate for past environmental degradation. Rather than signifying an absolute advance in well being, as measures of progress based on the GDP imply, these defensive expenditures seek to restore an earlier state of greater well being.

Statistics Canada's new Canadian System of Environmental and Resource Accounts contains a set of Environmental Protection Expenditure Accounts that allows analysts to calculate the value of a "net domestic product" or "green domestic product" in which pollution abatement expenditures are subtracted or counted as costs. That is the basic principle underlying the GPI approach to pollution clean-up expenditures.

At the same time, this does not mean that such expenditures should not be undertaken. Indeed, they are essential if our well being is not to decline further. They are seen as necessary re-investment in natural capital assets that will produce future benefits and services as environmental quality is restored. For that reason, a full benefit-cost analysis, that includes social and environmental costs and benefits, can be very useful in evaluating pollution clean-up and abatement projects.

The GPI is intended not only as a macro-measure of societal progress, but also as a practical tool that policy makers can use to assess whether different investment strategies will produce long-term benefits to society or carry hidden costs that may adversely impact future generations.

This case study looks at the proposed sewage treatment plants for Halifax Harbour, taking into account potential impacts on tourism, property values, ecosystem and population health, and residents' "willingness to pay" for a cleaner harbour, assigning dollar values to benefits and costs wherever possible on the basis of previous empirical studies. The study will constitute one chapter in the GPI Water Quality module scheduled for completion in April, 2000.