Non-renewable natural capital and the social cost of carbon in wealth accounting

Rintaro Yamaguchi, Matthew Agarwala and Giles Atkinson

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Fossil fuels represent a significant portion of the wealth of resource-rich nations. However, their valuation as non-renewable natural capital in inclusive or comprehensive wealth accounting to indicate sustainability does not embody the external costs of climate change damages. This study consistently incorporates the social cost of carbon (SCC) into the value of depletion of non-renewable natural capital for wealth accounting of resource-rich nations. We derive shadow prices of depletion under different resource allocation mechanisms (RAMs) in the presence of externality costs from emissions, allowing for declining extraction and an unburnable natural capital stock constraint. In our application to oil, depletion is valued differently across RAMs, depending on how rent, SCC, and decarbonisation develop in the future. The sustainability implication of the choice of RAM is even more significant in the presence of SCC.

Keywords: genuine savings; natural capital; fossil fuel; inclusive wealth accounting; social cost of carbon; sustainable development (search for similar items in EconPapers)
JEL-codes: C43 D63 O47 Q01 Q54 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2026-05-31
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Published in Journal of Environmental Economics and Management, 31, May, 2026, 137. ISSN: 0095-0696

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:137191

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