- -ENlRoraNT22744 DEPARTMENPA.T : ~~~~D E P A R T M E N T Eml) P A P E R S PAPER NO. 77 TOWARD ENVIRONMENTALLY AND SOCIALLY SUSTAINABLE DEVELOPMENT ENVIRONMENTAL ECONOMICS SERIES Genuine Saving as a Sustainability Indicator'- Kirk Hamilton October 2000 The World.Bank THE WORLD BANK ENVIRONMENT DEPARTMENT Genuine Saving as a Sustainability Indicator Kirk Hamilton October 2000 Papers in this series are not formal publications of the World Bank. They are circulated to encourage thought and discussion. The use' and citation of this paper should take this into account. The views expressed are those of the authors and should not be attributed to the World Bank. Copies are available from the Environment Department, The World Bank, Room MC-5-126. Contents Introduction 1 Genuine Saving-A Formal Model 2 Coverage and Calculation Issues 4 Results 5 Policy Issues 8 Conclusions 8 Notes 13 References 15 FIGURIE 1 Genuine saving rate versus depletion share of GDP in resource-dependent economies, 1997 7 TABLES 1 Genuine saving as percent of GDP, 1997 6 Al Genuine saving and its components as percent of GDP, 1997 10 Environmental Economics Series iii Genuine Saving as a Sustainability Indicator Introduction technology and pure rate of time preference combined with an exhaustible resource that is The publication of the Brundtland Comnmission essential for production-see Dasgupta and report in 1987 introduced a critical new Heal 1979). Choosing sustainability implies a dimension to our conception of economic concern with the welfare of future generations development by raising the issue of the that is not captured by the Utilitarian sustainability of development. While definitions maximand. The fact that most countries and of sustainable development abound (Pezzey international institutions have adopted 1989 is a good summary), economists have sustainable development as an explicit goal settled on a simple formulation that can capture suggests that a powerful impulse is at work. a very rich set of phenomena: a development path is sustainable if total welfare does not The question of sustainability is particularly decline along the path. As long as the welfare stark for an extractive economy reliant upon function is sufficiently expansive in what it exhaustible resources. Economists posed the measures (consumption, environmental quality, question of sustainability in somewhat different social equity, and other factors contributing to words at the time of the first oil crisis of the the quality of life), this definition permits a 1970's: would economies that depend upon an rigorous characterization of sustainable exhaustible resource inevitably decline as the development. resource is depleted? An early paper on this topic by Solow (1974) spurred Hartwick (1977) Pearce and others (1989) take the sustainability to provide a simple answer to this question. If argument one step farther by positing the the "Hartwick rule" is followed, so that existence of critical natural capital (the ozone investment in produced capital just equals layer, for instance) for which no substitutes current scarcity rents on the exhaustible exist. This conception of strong sustainability resource at each point in time, then the resulting therefore requires the preservation of critical path for the economy is one where welfare natural capital in order for development to be equals a maximal constant value ad infinitum- sustainable. Weak sustainability assumes that in other words, this is a sustainable economy. there are substitutes for all assets. This holds even for a fixed technology. Hamilton (1995) explores the critical role that As should be obvious, opting for sustainability the elasticity of substitution between produced is an ethical decision. The Utilitarian maximand assets and natural resources plays in the assumed in most models of economic growth, feasibility of the Hartwick path. - the present value of welfare along the optimal path, can be shown to lead to unsustainable However it may be defined in detail, achieving outcomes under simple assumptions (fixed sustainable development necessarily entails Enviromnental Economics Series I Genuine Saving as a Sustainability Indicator creating and maintaining wealth. Given the production of a composite good that may be centrality of savings and investment in consumed, invested in produced assets or economic theory, it is perhaps surprising that human capital, or used to abate pollution, so the effects of depleting natural resources and that F(K, R, N) = C + K + a + m, where R is degrading the environment have not, until resource use, a is pollution abatement recently, been considered in the measurement of expenditures, N is human capital, and m is national savings. Augmented measures of investment in human capital (current education savings and wealth in the national accounts expenditures). Function q(m) transforms offer promise, therefore, as indicators of education expenditures into human capital that sustainable development, which was a prime does not depreciate (it can be considered to be a motivation for the publication of Expanding the form of disembodied knowledge), so that Measure of Wealth (World Bank 1997). The first N = q(m) 1. Labour is fixed and is therefore cross-country application of these greener factored out of the production function. accounting methods to the measurement of net savings appeared in Pearce and Atkinson Pollution emissions are a function of production (1993), who combined published estimates of depletion and degradation for 20 countries with and abatement, e = e(F,a), and pollutants standard national accounting data to examine where d is the quantity of natural dissipation of true savings behaviour. By this measure many the pollution stock. The flow of environumental countries appear to be unsustainable because their gross savings are less than the combined services B is negatively related to the size of the sum of conventional capital depreciation and pollution stock, so that B = a( X), aZx <0. natural resource depletion. dResource stocks S grow by an amount g and are depleted by extraction R, so that S = -R+ g(S), The indicator of sustainability developed below and resources are assumed to be costless to is termed "genuine saving," to distinguish it produce. The utility of consumers is assumed to from the usual national accounts definitions of be a function of consumption and environ- saving. Not surprisingly, the definition of this mental services, U = U(C,B). There is a fixed measure hinges on a fundamental question: pure rate of time preference r. what is income? This note will develop a theoretical approach to measuring whether an Following Hartwick (1990), new 'green' national economy is on a sustainable path, and then accounting aggregates are defined on the basis present empirical evidence on the sustainability of an intertemporal optirnization problem. of a range of economies. Wealth W is defined to be the present value of utility on the optimal path. It is assumed that a Genuine Saving-A Formal Model social planner wishes to maximize wealth as The notion of genuine saving was presented follows, briefly and informally in Hamilton (1994) and Pearce et al. (1996). This section provides a more max W = L U(C,B)e ds subject to: rigorous development of these ideas, using a K = F - C - a - m model that, while extremely simple, serves to identify the adjustments needed to savings measures in order to account for natural S = -R + g resources, pollutants and human capital. = q(m) We assume a simple closed economy with a The current value Hamiltonian function, which single resource used as an input to the is maximized at each point in time, is given by, 2 Envirornment Department Papers H = U + rKk + Yx X + rsS + YNrN, (1) cumulative pollutants the term in dissipation d can be discarded. where YK' YI yx , and y, are respectively the shadow prices in utils of capital, pollution, Genuine saving consists therefore of investment resources and human capital. Deriving the static in produced assets and human capital, less the first-order conditions for a maximum, the value of depletion of natural resources and the Hamiltonian function may be written as, value of accumulation of pollutants. It is straightforward to show that, H = U(C,B)+UC(k-(l -beF)FR(R-g) UCG=W=rW-U. (3) - b(e - d) + q / q'). Expression (3) entails the following property: measuring negative genuine saving at a point in Note that b is the marginal cost of pollutiontmeipeshafuretltyslsshn abatement. It is shown in Hamilton (1996) that . . this is precisely equal to the marginal social cost current utility over some period of time on the of pollution emissions, and that this in tum is optimal path. Negative genuine saving equal to the level of a tax-the Pigovian tax therefore serves as an indicator of non- required to maximize welfare-on emissions. sustainability. These equalities hold because the economy is at the optimum. The term beF is the effective tax This expression also implies that Hicksian rate on production as a result of the emrissions income, the maximum amount of produced tax. Therefore, although we have started with output that could be consumed while leaving an optimal growth problem, the prices that total wealth instantaneously constant, is given result are those that would prevail in a by, competitive economy with a Pigovian tax on pollution. Note as well that l / q' is the NNP = C + k - (1- beF)FR (R - g) marginal cost of creating a unit of human - b(e - d) + q / q'. (4) capital. Hamilton and others (1998) argue that policy Since S = -R+g, X =e- d and N = q, the distortions in a typical economy lead to over- parenthesized expression in the second term of extraction of natural resources and excess this expression is equal to the change in the real pollution emissions. Under these conditions it value of assets in this simple economy, where can be shown that current resource rents exceed human capital is valued at its marginal creation their optimal level, as do marginal pollution cost, pollution stocks are valued at marginal damages. More optimal resource and abatement costs and natural resources at the environmental policies will reduce this bias and resource rental rate, FRI net of the effective tax also increase genuine savings. rate on production associated with pollution emnissions. This expression serves to define The current model can easily be extended to genuine saving, G, include foreign trade and depreciation of produced assets. If produced capital depreciates G - K - (1- beF) FR (R - g) - b(e - d) + q I q'. (2) at a percentage rate equal to 8, then the accounting identity for these assets becomes, For non-living resources the term in growth g can be dropped from expression (2), while for K = F - C - a - m - &K. Environmental Economics Series 3 Genuine Saving as a Sustainability Indicator Turning to foreign trade, net foreign assets A lower-bound estimate of the investment in accumulate as a result of exports E, and human capital. decumulate with imports M. For a fixed international rate of return i, therefore, the asset Expression (5 says that pollution abatement accounting identity is, expenditures a are essentially intermediate in character and should be deducted in measuring A = iA + E - M. genuine saving. In practice, most current abatement expenditures are already treated as intermediate inputs in standard national With these added assumptions the measure of NNP (derived, as above, as extended Hicksian accounting. income) for an open economy is given by, Finally, it is important to present the formula for calculating genuine saving from real data. For NNP = C + K _ 35K + £ - M + jA produced asset depreciation 3K, net resource (1- beF)FR (R - g) - b(e- d) + q q'. rental rate n, and marginal social cost of pollution a this is given by, The first six terms in this expression are precisely the standard measure of NNP. G = GNP - C - 3K - n(R - g) - s(e - d) + m. (6> Expanding the asset base implies that standard NNP should be adjusted by deducting net Here GNP - C is traditional gross saving, which depletion of natural resources and the marginal includes foreign savings, while GNP - C - SK is damages from net pollution accumulation, and traditional net saving. Similarly, since carbon by adding investments in human capital. dioxide is the only pollutant considered in what follows, the adjustment to net resource rents The treatment of current education (I- beF) can safely be assumed to be near 1, expenditures and pollution abatement while dissipation d is assumed to be small expenditures requires more elaboration. relative to emnissions e2. Hamilton (1994) essentially argues that current educaion xpendture are ot cnsumpion,Net natural growth of living resources (R - g) is education expenditures are not consumption, novde teun svig whniti and therefore should be included in saving. not added to genuine savings when it is aefindng therefore uld besnclded ient s positive, but net depletion (that is when R > g) Defining net margiNal resource rents as is deducted. VVhile this will bias the results n _ (1- beF ) F* , NNP be can be defined as, against sustainability, Vitousek and others (1986) estimate that less than 33 percent of NNP = GNP-a -m -n(R- g)-b(e-d)+ qlq' standing forests are merchantable. Subtracting =GNP -a-n(Rg)b(e d)llq (5) only net depletion of forests ensures that the -n(R )- b(e -d)± --1 growth of uneconomic forest resources is not counted as an addition to income. where I / q' is the marginal cost of creating a unit of human capital and m J q is the average Coverage and Calculation Issues cost. Assuming increasing marginal education The list of data sources for the resource rental costs, expression (5) suggests that the value of estimates are given in Hamilton and Clemens investments in human capital should be greater (1999). The basic approach to calculating than current education expenditures-these resource rents for non-renewable resources is to current expenditures can therefore serve as a subtract country- or region-specific average 4 Environment Department. Papers costs of extraction from the world price for the cost structure was applied to all of the resource in question, all expressed in c-urrent US producing countries in the region. dollars. Many world prices were derived from World Bank commodity data-where multiple The total rent estimates used in this note are markets, for example London and New York, therefore fairly crude. In compensation, the are reported, a simple average of these market estimates are calculated using a uniform prices serves as the world price. methodology and the coverage is quite wide. Li addition to timber, coal, oil and natural gas, the For minerals the levels of total resource rents are minerals covered include zinc, iron ore, thus calculated as: phosphate rock, bauxite, copper, tin, lead, nickel, gold, and silver. Data problems led to the Rent = World price - mining cost exclusion of diamonds from these estimates. - milling and beneficiation costs - smelting costs - transport to port Resource depletion is assumed to be equal to - 'normal' return to capital. total resource rents, an application of the "net price" method of depletion estimation (Repetto For crude oil, unit rents are calculated as the and others 1989). This arguably over-estimates world price less lifting costs. Natural gas, the value of resource depletion, particularly for though its international trade has soared in countries having large reserves to production recent years, does not have a single world price. ratios. Where this estimation method could A world price was estimated by averaging free- significantly influence the empirical results it is on-board prices from several points of export noted below. worldwide, following which the unit rents were calculated as for oil. Turning to pollution damages, these should ideally reflect emissions and exposure data for There are several further points to note about the full range of local, regional and global this methodology: pollutants. In practice, there are no comprehensive data on local and regional * Countries may or may not be selling their pollutants. As a "place-holder" for other natural resources for internal consumption pollutants, therefore, damages from carbon at the world market price, although one dioxide emissions are included in the genuine would expect that they have every incentive saving calculation, using a figure of $20 per ton to do so. Moreover, the-use of uniform of carbon derived from Fankhauser (1995) and world prices will tend to overstate rents for widely available data on CO2 emissions from countries with lower-grade resources. industrial sources. Making a deduction for emissions of a global pollutant is conceptually * Extraction costs are measured at a fixed correct if certain property rights are assumed, in point in time, a point which differs from particular the right not to be damaged by your country to country and resource to resource neighbour's pollution emissions. according to data availability, and held aconstantdingreal terms. Wrla d p esa Education expenditure data are from UNESCO constant in real terms. World prices vary 19) over time, leading to corresponding (1998). variations in calculated rental rates. Results * Where the extraction cost data were region- Country-level results for genuine saving and its rather than country-specific, the regional components in 1997 are presented in Table Al. Environmental Economnics Series 5 Genuine Saving as a Sustainability Indicator As this table indicates, negative genuine saving countries choose not to benefit from this natural is more than a theoretical possibility. It is advantage. important to note several issues with regard to these figures. First, a point measure of genuine Broad trends in the savings figures can be seen saving does not necessarily imply that the in Table 1, which summarizes genuine savings country in question is fated for an unsustainable for regional and income-level aggregations of development path; it does imply, however, that countries. continuing the current policy mix is Comparing low and middle income countries in unsustainable. Second, it may be perfectly Table 1, the 10.2 percent difference in genuine rational for either extremely poor or extremely savings is largely explained by a 9.2 percent rich countries to consume wealth in the short difference in the gross saving rate. However, run, in the former case to hold off starvation, in depletion is significantly higher in low income the latter because consuming a very small countries, at 6.6 percent of GDP as compared proportion of wealth entails a low loss of with 4.5 percent in middle income. Much of this welfare over time. Finally, negative genuine difference in turn is a function of the 1.8 percent savings rates represent an opportunity not of GDP that net forest depletion represents in taken: resource endowments represent a type of low income countries. In high-income countries, stored development finance, and some depletion is only 0.5 percent of GDP and Table 1. Genuine saving as percent of GDP, 1997 Gross Consumption Net Net Carbon Genuine domestic offixed domestic Education Energy Mineral forest dioxide domestic savings capital savings expenditure depletion depletion depletion damage savings World 22.2 11.7 10.5 5.0 1.2 0.1 0.1 0.4 13.6 Low income 17.0 8.0 9.1 3.4 4.2 0.6 1.8 1.2 4.8 Middle 26.2 9.2 17.0 3.5 3.8 0.5 0.2 1.1 15.0 incofme High income 21.4 12.4 9.0 5.3 0.5 0.0 0.0 0.3 13.5 East Asia & 38.3 6.9 31.4 2.1 0.9 0.5 0.7 1.7 29.7 Pacific Europe & 21.4 13.7 7.9 4.2 4.9 0.1 0.0 1.6 5.6 Central Asia Latin 20.5 8.3 12.2 3.6 2.7 0.7 0.0 0.3 12.1 America & Carib. Middle East 24.1 8.8 15.3 5.2 19.7 0.1 0.0 0.9 -0.3 & N. Africa South Asia 18.2 9.1 9.1 3.8 2.1 0.4 2.0 1.3 7.1 Sub-Saharan 16.8 9.1 7.8 4.5 5.9 1.4 0.5 0.9 3.4 Africa 6 Environment Department Papers education expenditures are 2 percent higher genuine saving rate for the most resource than in low and mniddle income countries. dependent countries (those where depletion exceeds 5 percent of GDP) against the share of Tuming to regional comparisons, East Asia and depletion in GDP. As the regression equation the Pacific exhibits high gross and genuine next to the fitted line shows, there is a weak savings rates, with depletion amounting to 2.1 tendency (R2 = 0.389) for increasing depletion percent. As the events of 1997/98 have made shares of GDP to be associated with lower clear, however, high savings rates are not genuine savings rates. The regression synonymous with financial and macroeconomic coefficients are significant (t = -4.44 and 3.75 for stability, however advantageous they may be the slope and the constant respectively). The for rapid wealth accumulation. In Latin slope of the regression line can be interpreted as America and the Caribbean the average genuine an elasticity, and therefore says that each 1 saving effort is fairly robust, although this percent rise in the depletion share of GDP is masks some individual examples of poor associated with a 0.82 percent decline in the performance as in the case of Venezuela. Other genuine saving rate. regions exhibit a weak genuine saving effort, particularly in the oil states of the Middle East This slope can also be interpreted as the and North Africa,3 and in Sub-Saharan Africa marginal propensity to consume resource rents, where depletion is a substantial 7.8 percent of although it must be kept in mind that the slope GDP. is derived from cross-sectional data. It says that there is a tendency, looking across countries, for More insight into 1997 genuine savings rates is 82 percent of each increment in resource rents as provided by Figure 1, which scatters the a share of GDP to be consumed. If in each Figure 1. Genuine saving rate versus depletion share of GDP in resource-dependent economies, 1997 40 30 mc 20. o ., + w ~ ~~5 10 Is 30 35 40 45 5 S~~~ * ., 10- -30- 40. Depletion share of GDP (percentage) Environrnental Econornidcs Series 7 Genuine Saving as a Sustainability Indicator country all resource rents were invested rather Note that the policy prescriptions for boosting than consumed then no statistically significant genuine savings should never be to stop tendency would be visible in Figure 1-an extra extracting resources or emitting pollutants unit of resource rent in GDP would have no altogether. Rather, pricing resources and effect on genuine savings, other things being pollutants correctly and enforcing property equal. rights will lead to efficient levels of exploitation of the environment, reducing incentives to This interpretation of the regression results 'high-grade' resources or pollute indiscrimi- must be tempered by recalling that the countries nately. Optimal resource and environmental with largest depletion share of GDP (those in policies will maximize genuine savings, subject the lower right of Figure 1) tend also to be those to the macroeconomic policy regime in place. with the largest resource endowments, and so However, the sorts of issues raised by Gelb the total rent approach to measuring depletion (1988) about the nature and effects of oil may be influencing the results derived. windfalls in developing countries are Policy Issues particularly relevant to the policy issues just raised: without sound macroeconomic policies It is abundantly clear that monetary and fiscal and prudent allocation of public resources, the policies are the biggest levers for boosting effects of reliance upon large resource savings rates. The first policy issue is therefore a endowments can be negative for many classic macroeconomic one: to what extent do countries. monetary and fiscal policies encourage strong domestic savings? Conclusions While natural resource exports boost foreign Growth theory provides the intellectual savings and therefore the overall savings effort, underpinning for expanded national accounting the analysis of genuine savings suggests a and, through the measure of genuine saving, an further question: to what extent do exports of indicator of when economies are on an exhaustible resources boost the genuine rate of unsustainable development path. This theory saving?4 The answer to this lies in netting out points in useful directions for countries the value of resource depletion from gross concerned with sustainable development. export values. Far from being a mere theoretical possibility, More optimal natural resource extraction paths there is abundant evidence for countries whose will, other things being equal, boost the value of policy mix results in negative genuine saving genuine savings. The policy question for natural rates. While the latest World Bank estimates for resource management is therefore: to what 1997 are emphasized here, previous studies extent can stronger resource policies (royalty such as Hamilton and Clemens (1999) and regimes, tenure) boost the genuine rate of Atkinson and others (1997) have shown this to saving? be true over decades as well. Similarly, reducing pollution emissions to The evidence suggests that, while resource- socially optimal levels will boost the value of dependent economies are potentially genuine savings. The policy issue with respect sustainable if resource rents are invested in to pollution is: to what extent can more optimal other productive assets (including human pollution control policies increase the rate of capital), many of these economies have not genuine saving? chosen this path. The results presented here 8 Envirorunent Department Papers show distinctive patterns of genuine savings beyond the traditional concern with the macro across regions and country income groups. and microeconomic determinants of savings effort. The questions of rent capture, public However, as the example of Southeast Asia in investments of resource revenues, resource 1997/98 shows, robust genuine savings do not tenure policies, and the social costs of pollution necessarily lead to a smooth development path. emissions are equally germane in determining Some of the broader lessons from the financial the overall level of saving, although it is clear crisis in Southeast Asia concern the rates of that monetary and fiscal policy remain the big return that were achieved with these savings- levers. many investments were yielding zero or exceedingly small returns. So the lessons to be This analysis also provides a practical way for drawn from the analysis of genuine saving must natural resource and environmental issues to be go beyond the level of saving to a concern with discussed in the language that ministries of the quality of the investments that are made Finance understand. This may prove to be an with these savings. important advantage as many resource- dependent economies struggle to achieve their The genuine savings analysis raises an development goals. important set of policy questions that goes Envirorunental Economics Series 9 Genuine Saving as a Sustainability Indicator Table Al. Genuine saving and its components as percent of GDP, 1997 Goss Cn 0tion Net Net Carbon Genuine domestic offixed dfmec Ebucaion Eny Minerol frest dixide doeic 5sav cclitod sain expedi&tre depletion depleti de dep/etion d ge vn Albania -13.2 12.4 -25.6 2.8 0.0 0.1 0.0 0.5 -23.5 Aleia 34.5 9.3 25.2 6.3 24 0.1 0.0 1.1 27.9 Anhla 27.3 6.0 21.2 2.6 20.7 0.0 0.0 0.4 2.7 Argentina 18.4 10.5 7.9 2.4 0.5 0.0 0.0 0.2 9.6 Armerna -28.8 .. 0.0 0.0 0.0 0.0 1.3 Australia 20.7 14.6 6.1 4.7 1.2 1.5 0.0 0.4 7.6 Austria 23.5 12.9 10 .S 4.9 0.1 0.0 0.0 0.1 15.2 Azerbaijan 9.5 14.0 -4.5 0.0 21.8 0.0 0.0 S.A -31.4 Bangladh 14.7 7.2 7.5 2.1 0.2 0.0 0.0 0.3 9.1 Belarus 21.6 17.2 4.4 4.7 0.0 0.0 0.0 1.7 7.4 Belrum 22.3 10.1 12.2 4.9 0.0 0.0 0.0 0.2 16.9 Benin 10.8 5.4 5.4 0.0 0.0 0.0 0.0 0.2 5.2 Bolivia 10.1 8.1 2.0 2.6 0.9 1.1 0.0 0.7 1.8 BEsria and Henegovina .. .. .. .. 0.0 0.0 0.0 Boswana 44.7 13.3 31.4 6.9 0.0 0.8 0.0 0.3 37.2 Brad 18.6 7.5 11.1 4.2 0.6 0.7 0.0 0.2 13.9 Bulgari 17.4 10.1 7.3 4.0 0.5 1.3 0.0 2.7 6.7 Burkina Faso 9.2 4.6 4.6 2.8 0.0 0.0 0.0 0.2 7.1 Burundi 2.6 4.4 -1.8 3.0 0.0 0.0 8.5 0.1 -7.4 Canbodia 4.2 5.0 -0.8 0.0 0.0 0.0 0.0 0.1 -0.9 Cameroon 20.6 7. 13.1 2.3 7.4 0.0 0.0 0.3 7.7 Canada 21.5 12.5 9.0 6.1 1.5 0.4 0.0 0.4 12.8 Central African Republic 6.7 5.2 1.5 3.8 0.0 0.0 0.0 0.1 5.1 Chad 1.2 4.6 -3.4 0.0 0.0 0.0 0.0 0.0 -3.5 Chile 24.5 6.8 17.7 3.2 0.1 6.4 0.0 0.4 14.1 China 42.7 6.2 36.5 1.9 0.0 0.5 0.6 2.4 34.9 HongKong, China 30.6 .. .. 2.0 0.0 0.0 0.0 0.1 Colombia 15.8 6.5 9.4 2.8 4.4 0.1 0.0 0.4 7.3 Congo. Den. Rep. 9.0 5.0 4.0 0.7 0.0 0.6 0.0 0.2 3.8 Congo. Rep. 34.8 9.2 25.6 4.3 23.9 0.0 0.0 0.4 5.6 Costa Rica 25.0 2.5 22.5 4.6 0.0 0.0 0.0 0.3 26.8 C6tedlvoire 23.1 7.0 16.0 5.7 1.5 0.0 0.0 0.7 19.6 Croatia 3.3 9.2 -5.9 0.0 0.9 0.0 0.0 0.5 -7.3 Cuba _. .. .. .. 0.0 0.0 0.0 Czech Republic 28.4 17.2 11.2 5.3 0.4 0.0 0.0 1.3 14.8 Denmnark ..15.3 .. 7.7 0.4 0.0 0.0 0.2 D ominican Republic 22.1 5.9 16.1 1.2 0.0 0.5 0.0 0.8 16.0 Ecuador 21.2 6.9 14.2 2.7 12.0 0.0 0.0 0.7 4.2 Ept, Arab Rep. 13.0 7.9 5.1 4.8 3.2 0.1 0.0 0.7 5.9 ElSalvador 4.5 6.1 -1.6 2.2 0.0 0.0 2.0 0.3 -1.6 Eritre -17.4 4.1 -21.5 .. 0.0 0.0 0.0 .. Estonia 18.4 10.5 7.9 4.3 1.7 0.0 0.0 2.3 8.2 Ethiopia 8.7 .. .. 2.9 0.0 0.0 0.0 0.3 Finland 24.6 16.7 7.9 7.2 0.0 0.0 0.0 0.2 14.8 France 19.7 12.9 6.8 5.0 0.0 0.0 0.0 0.1 11.6 Gabon 48.3 15.2 33.1 3.1 15.8 0.0 0.0 .0.4 20.0 Garnbia The 3.8 12.3 -8.6 3.3 0.0 0.0 0.0 0.3 -5.6 Georgia -3.7 .. .. 0.0 0.0 0.0 0.0 0.9 Gerrnany 22.4 13.2 9.2 4.4 0.1 0.0 0.0 0.2 13.4 Ghamn 9.8 4.3 S.S 2.4 0.0 2.5 0.0 0.4 5.0 Greece .. 8.5 .. .. 0.0 0.0 0.0 Guatemala 8.1 6.0 2.1 2.1 0.6 0.0 2.0 0.2 1.4 Guinea 18.7 6.1 12.6 2.3 0.0 18.8 0.0 0.2 -4.1 Guinea-Bissau 5.0 4.8 0.3 1.8 0.0 0.0 0.0 0.5 1.5 Haiti -4.5 1.5 -6.0 2.3 0.0 0.0 7.4 0.1 -11.3 Honduras 21.8 6.0 15.8 3.7 0.0 0.2 0.0 0.4 18.8 Hungary 26.9 8.0 18.9 5.2 0.4 0.1 0.0 0.7 23.0 India 20.0 10.0 10.0 4.3 2.6 0.5 2.3 1.6 7.4 Indonesia 30.6 5.0 25.6 0.9 3.8 0.8 0.7 0.9 20.5 Iran, Wsnlic Rep. .. 15.3 .. .. 0.0 0.0 0.0 Iraq .. 9.0 .. .. 0.0 0.0 0.0 Ireland 33.1 9.2 23.9 5.1 0.0 0.1 0.0 0.3 28.7 Israel 8.7 13.8 -5. 1 6.7 0.0 0.1 0.0 0.3 1.3 10 Environment Department Papers Gross Consumption Net Net Carbon Genuine domestic affixed domestic Education Energy Mineral forest dioxide domestic senngs capital savings eenditu-e depiction depletien depWetion damage SVNS Italy 22.3 12.4 9.9 4.2 0.1 0.0 0.0 0.2 13.9 Jamaica 21.6 6.4 15.2 4.4 0.0 12.5 0.0 1.1 6.0 Japn 30.5 15.8 14.6 5.8 0.0 0.0 0.0 0.1 20.3 Jordan 5.5 9.7 -4.2 3.4 0.0 1.2 0.0 1.1 -3.1 Kazakhstan 13.5 7.4 6.1 0.0 18.5 0.0 0.0 5.5 -17.9 Kenya 11.4 6.7 4.7 5.9 0.0 0.0 8.0 0.4 2.1 Korea, Derm Rep. .. .. .. .. 0.0 0.0 0.0 Korea, Rep. 34.2 10.0 24.3 3.0 0.0 0.0 0.0 0.5 26.7 Kuwait 25.2 8.6 16.6 4.3 44.5 0.0 0.0 .. -23.6 Kyrryz Republic 13.8 10.2 3.6 4.3 0.6 0.0 0.0 2.3 5.0 Lao PDR 11.4 S.5 5.8 1.8 0.0 1.4 0.0 0.1 6.2 Latvia 9.6 11.7 -2.1 6.5 0.0 0.0 0.0 1.2 3.1 Lebanon -16.7 8.7 -25.5 I.5 0.0 0.0 0.1 0.5 -24.5 Lesotho -9.8 8.3 -18.1 4.8 0.0 0.0 0.0 .. -13.3 Libya .. .. .. .. 0.0 0.0 0.0 Lithuania 16.0 7.1 8.9 4.4 0.0 0.0 0.0 1.0 12.3 Macedonia FYR 3.5 .. .. 5.7 0.0 0.0 0.0 Madagascar 3.6 4.9 -1.3 2.3 0.0 0.0 0.0 0.2 0.8 Malawi 2.1 6.4 -4.3 3.2 0.0 0.0 5.4 0.2 -6.7 Malaysia 44.4 9.3 35.1 4.8 4.1 0.1 2.1 0.7 32.9 Mali 13.6 5.8 7.8 2.8 0.0 0.0 0.0 0.1 I 0.5 Mauritania 8.5 8.6 -0.1 4.9 0.0 14.6 0.0 1.7 - I.5 Mauritius 24.1 7.7 16.4 3.1 0.0 0.0 0.0 0.2 19.3 Me3dco 26.4 10.4 16.0 3.7 4.8 0.2 0.0 0.5 14.2 Moldova 0.3 .. .. 5.0 0.0 0.0 0.0 2.8 Mongolia 17.5 7.6 9.9 5.9 0.0 9.6 0.0 6.2 0.3 Morocco 16.8 7.7 9.1 4.7 0.0 0.4 0.0 0.5 13.0 Mozambique 13.6 3.6 10.0 3.9 0.0 0.0 3.7 0.2 9.9 Myanmar .. 2.8 .. .. 0.0 0.0 0.0 Namibia 14.2 13.8 0.4 1.7 0.0 0.6 0.0 .. 1.5 Nepal 10.0 3.0 7.0 3.4 0.0 0.0 10.3 0.2 0.0 Netherlands 26.3 11.7 14.6 6.0 0.1 0.0 0.0 0.2 20.3 New Zealand 22.5 9.4 13.1 5.0 0.3 0.1 0.0 0.2 17.4 Nicargua 2.8 6.3 -3.5 3.9 0.0 0.1 0.0 0.9 -0.6 Niger 3.3 4.5 -1.2 1.9 0.3 0.0 0.0 0.4 0.2 Nigeria 21.9 2.4 19.5 0.8 30.7 0.0 0.0 3.5 -12.0 Norway .. 16.4 .. 6.7 5.9 0.0 0.0 0.2 Ornan .. .. .. .. 0.0 0.0 0.0 Pakistan 10.4 6.4 4.0 1.9 1.1 0.0 1.5 0.8 2.5 Panama 32.0 7.2 24.8 5.0 0.0 0.0 0.0 0.4 29.5 Papua New Guinea 33.2 11.0 22.2 5.8 6.7 8.2 0.0 0.3 12.8 Paaguay 20.3 7.8 12.5 I.5 0.0 0.0 0.0 0.2 13.8 Peru 20.8 4.3 16.6 3.1 0.6 0.8 0.0 0.3 18.0 Philippines 14.5 9.0 5.5 3.1 0.0 0.2 1.3 0.4 6.7 Poand 18.1 8.9 9.3 5.7 0.6 0.3 0.0 1.7 12.5 Portugal .. 4.5 .. 5.0 0.0 0.3 0.0 0.3 Puerto Rico .. 6.6 .. .. 0.0 0.0 0.0 Romania 14.5 7.6 6.9 3.5 3.3 0.3 0.0 2.1 4.9 Russian Federation 24.7 19.3 5.3 4.1 9.3 0.0 0.0 1.8 -1.6 Rwanda -7.5 5.6 -13.1 3.2 0.0 0.1 0.0 0.2 -10.2 Saudi Ambia 34.6 10.0 24.6 5.8 43.6 0.0 0.0 1.0 -14.2 Senegal 13.2 5.3 7.9 4.1 0.0 0.4 0.0 0.4 11.1 Sierra Leone -8.0 5.7 -13.8 2.5 0.0 3.6 0.0 0.2 -I5.I Singapore 51.2 13.2 38.3 2.2 0.0 0.0 0.0 0.5 39.8 Slovak Republic 28.4 15.4 12.9 5.0 0.0 0.0 0.0 1.3 16.6 Sovenia 23.1 16.9 6.2 7.1 0.0 0.0 0.0 0.4 12.9 South Africa 17.0 13.8 3.2 6.6 2.1 1.9 0.1 1.4 4.4 Spain 21.4 11.4 10.0 4.8 0.0 0.1 0.0 0.2 14.5 Sri Lanka 17.3 5.0 12.3 2.5 0.0 0.0 0.0 0.2 14.6 Sudan .. 5.5 .. 2.6 0.0 0.0 0.0 0.2 Sweden 21.3 13.3 8.0 6.6 0.0 0.1 0.0 0.1 14.4 Switeriand .. 10.5 .. 5.2 0.0 0.0 0.0 0.1 SyrianArabRepublic 19.0 3.5 15.5 2.8 22.5 0.1 0.0 1.6 -5.9 Environmental Economics Series 11 Genuine Saving as a Sustainability Indicator Gorss Camption Net Net Cabon Genuine dowestic affixed donwstc Education Ene&rV Mineral frest dioxide domestic RMviny cviw g e*wAte depletin dlkt- depkt,on dwnxze sarwe Taikistan .. 5.3 .. .. 0.0 0.0 0.0 Tanzania 3.4 2.8 0.6 2.9 0.0 0.0 0.0 0.2 3.2 Thaiand 35.7 10.9 24.8 2.9 0.2 0.0 0.0 0.6 26.9 ToPo 9.8 5.1 4.7 5.3 0.0 2.4 0.0 0.3 7.4 TrnidadandTobago 29.1 11.2 17.9 4.1 10.8 0.0 0.0 1.8 9.4 Tunisia 24.2 8.7 15.4 6.0 2.4 0.7 0.4 0.5 17.3 Turkey 19.3 6.5 12.8 3.0 0.3 0.1 0.0 0.5 14.9 TurkLvIetan .. 7.0 .. .. 0.0 0.0 0.0 Ugwah 7.5 5.0 2.5 2.6 0.0 0.0 3.4 0.1 1.6 Ukraine 16.3 18.4 -2.1 4.6 3.0 0.0 0.0 3.0 -3.4 United Amb Eirates .. 14.6 .. .. 0.0 0.0 0.0 United Kigdomn 15.1 10.4 4.8 4.5 0.8 0.0 0.0 0.3 8.2 United States 16.0 10.7 5.3 5.8 0.7 0.0 0.0 0.4 9.9 Uruguay 12.5 7.4 5.1 2.6 0.0 0.0 0.4 0.1 7.1 Uzbeki=n 18.6 4.4 14.2 7.7 82 0.0 0.0 2.4 11.4 Veneuela 26.9 7.1 19.7 4.1 22.5 0.7 0.0 1.1 -0.4 Vietnam 21.1 5.0 16.2 1.4 4.0 0.1 3.4 0.8 9.2 West Bank and Gaza .. .. .. .. 0.0 0.0 0.0 Yemen, Rep. 12.8 7.7 5.1 3.9 34.7 0.0 0.0 .. -25.7 Zambia 9.8 9.9 -0.1 3.8 0.Q 1.3 0.0 0.4 1.9 Zimbabwe 11.9 6.0 5.9 8.2 0.8 9.9 0.4 1.0 2.0 12 Environment Department Papers Notes 1. Human capital provides a type of 3. It must be recalled, however, that the total endogenous technical progress. Cf. rent approach to measuring depletion tends Weitzman and Lofgren (1997), who deal to exaggerate the value of depletion, with exogenous technical change. particularly for countries with very large resource endowments. 2. Carbon dioxide has an atmospheric residency time of 200 years, or a dissipation 4. The question is also germane for rate of roughly 1/2 percent per year. For an unsustainable forest harvest programs. average growth rate in emissions of 5 percent per year, therefore, the equilibrium ratio of d to e is 1/11. Environmental Economics Series 13 References Atkinson, G., Dubourg, R., Hamilton, K., Development: An Indicator of Weak Munsinghe, M., Pearce, D.W., and Young, C., Sustainability, Ecological Economics 8: 103-8. 1997, Measuring Sustainable Development: Pearce, D.W., Hamilton, K., and Atkinson, G., Macroeconomics and the Environment. 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Environmental Economnics Series 15 Environm eht Department . . - .S . ;t.i s g The World Bank-::- .-.--: 1 - ,;. - Washington, D.C. 20433 --i ; Telephone: 2Q2-473-3641 . : Wi0t0\E.l. 5 d--;:00:; ;0t2 : Faxsimile: 202-477-0565 .: i. .f< -?^- - t000 l a~~~~~~~ ., aS:u><&i?:D d ~~~~~~~~~jJ~~~~~~~~~~~~~~~~~~~~~~~ ~ ~ Prite on 100%X postconume recycle paper.. , - s SeDS D)zeAyEPf g;40akS->>XCtse;e t->ESCE B; (KES;; (00>0