Depletion of renewable resources

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(No Transcript)
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Depletion of renewable resources
London Group Meeting, December 2007
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Options for identifying the income element of
resource rent

• SEEA Box 10.1
• A1. All resource rent represents income
• A2. No resource rent represents income it is all
  a decline in the value of the resource
• A3. Part of the resource rent represents a
  decline in the value of the asset and part is
  income

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Options for identifying the income element of
resource rent

• Option A3 accepted in Johannesburg
• but how does this apply to renewable natural
  resources?
• if depletion of natural resources reduces income,
  should growth of renewable natural resources be
  considered additions to income?
• does depletion relate to the full amount of the
  harvest of the renewable natural resource, or
  just the net reduction in stock?

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Renewable resources

• Characteristics
• able to replace harvested stocks through natural
  growth
• if used sustainably in production, will last in
  perpetuity
• can be exhausted if used unsustainably in
  production

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Depletion of non-renewable resources

• SNA - in an economic sense, depletion is the
  reduction in the value of a resource as a result
  of physical removal and using up of the resource
• fairly straightforward when applied to
  non-renewable resources such as minerals and
  petroleum, etc.

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Depletion of renewable resources

• SEEA - possible to integrate values of extraction
  (harvest) and natural growth into a more
  meaningful measure of sustainability
• 'adjusted' measures (of output, income etc.)
  could indicate whether a renewable resource is
  being depleted through its use in production
• no change to balance sheet treatment

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Valuing SEEA depletion

• using SNA accounts as a template
• value of net natural growth recorded as 'other
  non-market output' in the Production account
• value of extraction recorded as 'consumption of
  natural capital (depletion) in Production
  account
• 'excess' position represents an addition to (or
  subtraction from) value added
• operating surplus saving change by 'excess'
  amount in income accounts
• additions and disposals of non-produced
  non-financial assets recorded in Capital account
• net lending is unchanged

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Net natural growth of renewables an addition to
output?

• Natural growth (less natural mortality)
• not output in strict SNA sense
• but see SNA cultivated assets
• human influence over natural growth
• often an expectation that natural growth will
  ultimately be harvested
• symmetry with depletion of renewable natural
  resources

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Depletion of renewable natural resources

• Depletion of renewable natural resources
• is the decline in value of the resource stock due
  to extraction (harvest)
• equivalent to consumption of natural capital
• shown as a charge against production and income
• synonymous with SNA concept of consumption of
  fixed capital (COFC)

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Depletion of renewable natural resources,
continued

• Depletion (consumption of natural capital)
  applies to both renewable and non-renewable
  natural resources

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Measuring income

• the operating surplus of any unit using natural
  resources in production can be split into returns
  to the produced assets used and returns to
  non-produced assets
• the return to the owner of natural resources in
  production is resource rent (RR)
• RR can be further split into a return to the
  owner of the resource and a measure of depletion
  of the natural resource being used

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Decomposing income non-renewable natural
resources
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Decomposing income renewable natural resources
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(1) Calculating RR - SNA
Current (SNA) treatment RR of renewable natural resource used in production Current (SNA) treatment RR of renewable natural resource used in production Current (SNA) treatment RR of renewable natural resource used in production Current (SNA) treatment RR of renewable natural resource used in production Current (SNA) treatment RR of renewable natural resource used in production Current (SNA) treatment RR of renewable natural resource used in production Current (SNA) treatment RR of renewable natural resource used in production

  t1 t2 t3 t4 t5 tn
Physical data (tonnes)            
1. Opening stock 45,000 42,600 41,415 41,150 37,849 35,795
2. Natural growth (a) 3,600 3,408 3,313 3,292 3,028 2,864
3. Natural mortality (a) 2,500 2,343 2,278 2,263 2,082 1,969
4. Harvest 2,000 3,000 3,300 3,330 3,000 2,940
5. Other volume changes -1,500 750 2,000 -1,000 0 -500
6. Closing stock (12-3-45) 42,600 41,415 41,150 37,849 35,795 33,250
7. Expected asset life infinite infinite infinite infinite infinite infinite
8. Unit value (unit price-unit cost) '000 (b) 1.2 1.2 1.2 1.2 1.2 1.2
Monetary (SNA) data ('000)            
9. Depletion (harvest) (4x8) 0 0 0 0 0 0
10. Return to owner of natural resource 2,400 3,600 3,960 3,996 3,600 3,528
11. Resource rent 2,400 3,600 3,960 3,996 3,600 3,528
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SNA treatment (1)

• Following do not appear in production account
• natural growth
• natural mortality
• charge for depletion

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SNA treatment (1)

• Resource rent entirely attributed to income no
  charge for depletion (CONC)
• even though the renewable natural resource stock
  is diminishing.

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Use of renewables - adjusted income

• when RR is adjusted to include net natual growth
  as output, and depletion (CONC) as a charge
  against income, a more informed picture of the
  income of the producer is provided

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(2) proposed RR and income
Proposed SEEA treatment Adjusted RR of renewable natural resource used in production Proposed SEEA treatment Adjusted RR of renewable natural resource used in production Proposed SEEA treatment Adjusted RR of renewable natural resource used in production Proposed SEEA treatment Adjusted RR of renewable natural resource used in production Proposed SEEA treatment Adjusted RR of renewable natural resource used in production Proposed SEEA treatment Adjusted RR of renewable natural resource used in production Proposed SEEA treatment Adjusted RR of renewable natural resource used in production

  t1 t2 t3 t4 t5 tn
Physical data (tonnes)            
1. Opening stock 45,000 42,600 41,415 41,150 37,849 35,795
2. Natural growth (a) 3,600 3,408 3,313 3,292 3,028 2,864
3. Natural mortality (a) 2,500 2,343 2,278 2,263 2,082 1,969
4. Harvest 2,000 3,000 3,300 3,330 3,000 2,940
5. Other volume changes -1,500 750 2,000 -1,000 0 -500
6. Closing stock (12-3-45) 42,600 41,415 41,150 37,849 35,795 33,250
7. Expected asset life (years) 47.3 21.4 18.2 16.4 17.4 16.3
8. Unit value (unit price-unit cost) '000 (b) 1.2 1.2 1.2 1.2 1.2 1.2
Monetary (SEEA) data ('000)            
9. Depletion (harvest) (4x8) 2,400 3,600 3,960 3,996 3,600 3,528
10. 'Unadjusted' resource rent (c ) 3,154 3,025 2,972 2,844 2,651 2,486
11. Net natural growth ((2-3)x8) 1,320 1,278 1,242 1,235 1,135 1,074
12. Income to owner natural resource 2,074 703 255 82 187 32
13. Adjusted resource rent (1011) 4,474 4,303 4,215 4,078 3,787 3,560
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(2) proposed RR and income, continued

• Adjusted resource rent incorporates
• net natural growth as an addition to output
• Adjusted resource rent split between
• depletion (harvest) and
• income.

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(2) proposed RR and income, continued

• As harvest continues to exceed net natural
  growth, this is reflected as a negative
  adjustment to income.
• i.e. a charge for using up renewable natural
  capital

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Questions

• For renewable natural resources, should SEEA
  accounts
• include net natural growth as an addition to
  output?
• treat the value of harvest as consumption of
  natural capital (depletion)?
• view (adjusted) resource rent as made up of
  income and depletion components?