1. A Framework for Constructing Indicators for Policies to enhance Sustainable Development Keynote speech at The Conference of European Statisticians, June 14 2005 Thorvald Moe, PH.D Deputy Secretary General Norwegian Ministry og Finance

2. Finansdepartementet Content 1. Introduction 2. Sustainable Development and the Management of National Wealth 2.1The Consept 2.2Sustainability for whom 2.3National Wealth as the basis for welfare. The Capital approach 2.4National Wealth as an indicator of sustainability 2.4.1 Critical resources 2.4.2 System Complecity 2.4.3 Practical problems 3. The Norwegian Core Set of Indicators for Sustainable Development: An Example 4. Conclusions

3. Finansdepartementet Introduction 1.1Indicators for Sustainable Development (SD) should be constrained to key,long term economic, environmental and social policy challenges and interactions between them. Should focus on a few key indicators and policy areas. 1.2For day to day (shorter term) policies one needs in addition more detailed economic-, environmental and social statistics. 1.3What the key longer term policy challenge are should be determined by the political authorities (in each country). 1.4National Wealth (NW) should be the point of depature.

4. Finansdepartementet SD and the Management of NW 2.1Brundtland: ”SD is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” 2.2SD: Developments that can contiue ”for ever”, or at least the time horizon considered by policy. The level of welfare, or living standards broadley defined, should not reduced over time 2.3The global versus the national perspective: Key global challenges: poverty and the global environmental commons. National SD policies and action plans in OECDs contries make sense because 2/3 of GDP produced there, and a ”sustainable” OECD would contribute importantly to global SD

5. Finansdepartementet 2.4NW as a basis for welfare. The Capital Approach. 2.4.1What is the (best) future welfare developments we can expect given the present day point of departure? 2.4.2What resources do we have at our disposal today, and how should we mange these over time? 2.4.3Key resources are: - Financial Capital -Real assets (produced capital goods) -Natural resources (Non-renewable mineral resources and petroleum) and conditional renewable resources (forests, fish, hydropower etc.) -Environmental resources (Cleaning services,functioning of the basic ecological system) -Human resources or human capital

6. Finansdepartementet 2.4.4The total resource base is termed our National Weath (NW) The value of NW depends on the welfare effects that the use of its various components may yield over time The value of NW equals the discounted sum of welfare produced by its various components over time Whether developments may be called sustainable, depends on whether NW broadly defined increases or decreases 2.4.5Critical resources. Without a reasonable stable climate, or without a minimum of biological diversity, economic developments cannot be sustained over time 2.4.6System complexity. Lack of knowledge. Key individual elements of NW should be monitored

7. Finansdepartementet 2.4.7Practical problems - Difficult to get good shadow prices -Individual environmental services are not traded in markets Summing up:Chose indicators that best reflect the value, defined as the welfare effects, of the key components of NW. I.e: The Capital Approach

8. Finansdepartementet 3.The Norwegian Core Set of SD indicators: An Example: In the Table 3.1The 16 indicators are referred to the 6 main policy areas in the National Agenda 21 which is the Norwegian Action Plan for SD 3.2The set is, in the table to the right, related to the five types of national capital: -Financial capital -Real capiatal -Human capital -Natural capital -Environmental capital

9. Finansdepartementet

10. 4.Conclusions 4.1The Capital Approach: -Is a sound economic approach -Central Statisical Agencies compute (or should compute) NW estimates 4.2We need separate measures for the main capital categories: Financial, real, human, natural and environmental 4.3This work should as far as possible be carried out by Central Statistical Agencies 4.4Need for an international framework and coordination: The Conference of European Statisticians? 4.5A global set of SD indicators should focus on poverty and the global environment. Point of departure: UN Millennium Goals