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Environmental and Resource Economics

, Volume 54, Issue 3, pp 419–441 | Cite as

Depletion: Bridging the Gap Between Theory and Practice

  • Bram Edens
Article

Abstract

Adjusting national income for depletion is important in order to send correct signals to policy makers. This article reviews a number of depletion measures that have been recently brought forward in the context of environmental accounting (‘practice’) and green accounting (‘theory’): depletion as change in total wealth; depletion as ‘using up’ of the resource; depletion as net savings; or, depletion as net investment. The differences in assumptions between these measures are clarified by contrasting their approaches with the classic theory of a firm engaged in extraction. All measures are evaluated using a time series of data on Dutch natural gas reserves. Our main findings are that correcting for the cost of depletion would lead to significant adjustments of both level and growth rates of Dutch net national income, with a strong dependency on the chosen measure.We counter criticism that accounting in practice would necessarily underestimate depletion. The choice for a depletion measure should be determined by the context of use: measurement of social welfare or sustainable income. The physical measure put forward in the SEEA Central Framework can be justified by its consistency with the income concept that underlies the SNA.

Keywords

Capital gains Depletion Environmental accounting Genuine saving Green accounting Hicksian income Non-renewable resources Social welfare 

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Copyright information

© Springer Science+Business Media B.V. 2012

Authors and Affiliations

  1. 1.Faculty of Economics and Business AdministrationVU University AmsterdamThe HagueThe Netherlands
  2. 2.National Accounts Department, Statistics NetherlandsThe HagueThe Netherlands

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