Green Accounting for Black Gold

Robert D. Cairns

The Energy Journal, 2009, vol. 30, issue 4, 113-140

Abstract: In the petroleum industry, valid green economic accounting magnitudes are influenced by natural and other constraints on production, by non-convexity of technology and by non-optimality of output. The paper undertakes an economic analysis of oil extraction that explicitly represents the conditions and constraints that influence the decisions of a firm. This microeconomic analysis diverges from conventional, “Hotelling†macroeconomic models of nonrenewable-resource extraction and has substantially different findings. Optimality conditions such as Hotelling’s rule or first-order conditions are not utilized in defining accounting statistics. Contrary to the findings of many studies, it is found that traditional (non-green) accounting practice for commercial natural resources such as petroleum sensibly balances the aims of economic accounting. Instead, adjustments to practice are most needed for non-commercial values such as pollution or amenities.

Keywords: Hotelling's rule; production constraints; non-convexity; non-optimality; oil exploration; green accounting (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:30:y:2009:i:4:p:113-140

DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No4-4

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