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
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 optionsWhat is Natural Resource Accounting?
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 resourceUser- Cost 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 priceNet Price Method
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 resourcesPolicy Application 2Reform economic policies