Measuring sustainability in the UN system of envrionmental-economic accounting

Kirk Hamilton

No 154, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment

Abstract: The adoption of the System of Environmental-Economic Accounting 2012: Central Framework as a UN statistical standard is a landmark in environmental accounting. The SEEA has the same authority and weight as the System of National Accounts in the pantheon of official statistics. The SEEA defines the unit value of depletion of an exhaustible resource to equal the average value of the asset (the total asset value divided by the physical stock of resource). By applying this definition to a non-optimal Dasgupta-Heal-Solow model of an extractive economy, we show that �depletion-adjusted net saving� as defined in the SEEA supports a generalized version of the Hartwick Rule. This measure of saving can guide policies for sustainable development in extractive economies, in particular fiscal policies concerning consumption and investment expenditures funded by resource rents. The conditions required to support this finding are not unduly restrictive: that extraction declines over time at a constant rate, and that the marginal cost of resource extraction is constant.

Date: 2014-04
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