natural resource accounting
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Natural Resource Accounting. Session Objectives: Interpret the results of natural resource accounting Develop policies based on the results of resource accounting. Session Agenda. What is natural resource accounting Major accounting methods Application of natural resource accounting - PowerPoint PPT PresentationTRANSCRIPT
Natural Resource AccountingNatural Resource Accounting
Session Objectives:
Interpret the results of natural resource accounting
Develop policies based on the results of resource accounting
Session AgendaSession Agenda
What is natural resource accounting
Major accounting methods
Application of natural resource accounting
Discussions
What is Natural Resource What is Natural Resource Accounting?Accounting?
Estimate $ value of resource depletion & environmental degradation as a result of economic activities
Adjust economic indicators (GDP, value-added) to reflect such value
Interpret adjusted economic indicators
Publicize adjusted economic indicators
Suggest policy options
Natural Resource Accounting Natural Resource Accounting StepsSteps
GDP - depreciation of produced capital = NDP
NDP - natural resource depletion = EDP1 EDP1 - environmental degradation = EDP2 EDP2 = environmentally adjusted NDP
User- Cost MethodUser- Cost Method
Split the annual net profits generated through sale of a resource into 2 parts: true income and user cost
True income can all be consumed User cost is estimated in such a
way that if it is invested, the annual revenue from the investment together with any true income from the resource in each year will generate a constant stream of true income annually, indefinitely
R - X = R/(1+r)T+1
R = net profits
X = true income
r = discount rate
T = life time of a exhaustible resource
Net Price MethodNet Price Method
Estimate the total net values of a resource stock at the beginning and end of the year
The difference is the value of environmental loss
Vt = (pt -ct)Q = NtQ
Vt = value of a resource at
the beginning of period t
pt = market value per unit of
the resource
ct = per unit production cost
Nt = net price
Maintenance Cost MethodMaintenance Cost Method
Costs that would have had to be incurred during the accounting period in order to avoid current and future environmental deterioration from the impacts caused during the same period.
Choose avoidance, prevention, or restoration activities based on available knowledge and technologies and according to cost-efficient principle.
Calculate the costs of the chosen activities.
Policy Application 1Policy Application 1 Assess macroeconomic performanceAssess macroeconomic performance
EDP measures genuine net value created by an economy
Given GDP-K1-K2=EDP, for EDP to grow:– No further increase of K1 and K2 while GDP grows;
– Reduction of K1 and K2 even if GDP stays the same;
– Increase of K2 is at least compensated for by reduction of K1; or
– GDP growth must exceed the rate of increase in K1 and K2.
Policy Application 2Policy Application 2 Reform economic policiesReform economic policies
Have resource users pay for user cost or net price and invest the proceeds for ensuring a constant stream of income.
Have users pay for maintenance costs and invest the proceeds for maintaining those functions.
Restructure industrial policies according to relative importance of industries as revealed by sectoral EDPs.
Prevent currency overvaluation and Dutch Disease by correcting the under-pricing of exportable resources
Policy Application 3Policy Application 3Evaluating effects of SD policiesEvaluating effects of SD policies
Environmental impacts over time: (NDP - EDP)/NDP
Living off natural assets: C/NDP vs. C/EDP– C = consumption
Environmental investment: ECF/EDP– ECF = environmentally adjusted net capital formation
Genuine capital productivity: EDP/CAP– CAP = total capital stock
CaveatsCaveats
NRA does not include all economic values of natural resources and environmental functions
NRA does not address the question of environmental irreversibility
The use of NRA must be complemented by environmental and social indicators