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Green Accounting for Black Gold

Robert D. Cairns

Year: 2009
Volume: Volume 30
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No4-4
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Abstract:
In the petroleum industry, valid green economic accounting magnitudes are influenced by natural and other constraints on production, by non-convexity of technology and by non-optimality of output. The paper undertakes an economic analysis of oil extraction that explicitly represents the conditions and constraints that influence the decisions of a firm. This microeconomic analysis diverges from conventional, �Hotelling� macroeconomic models of nonrenewable-resource extraction and has substantially different findings. Optimality conditions such as Hotelling�s rule or first-order conditions are not utilized in defining accounting statistics. Contrary to the findings of many studies, it is found that traditional (non-green) accounting practice for commercial natural resources such as petroleum sensibly balances the aims of economic accounting. Instead, adjustments to practice are most needed for non-commercial values such as pollution or amenities.



Reconciling Hotelling Resource Models with Hotelling's Accounting Method

Robert D. Cairns and John M. Hartwick

Year: 2022
Volume: Volume 43
Number: Number 5
DOI: 10.5547/01956574.43.5.rcai
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Abstract:
In green accounting, it is seldom checked that depreciation must sum to original value. A re-examination of green accounting under this condition finds that, in a non-autonomous program, income should include capital gains. Subtle questions respecting the role and treatment of capital gains are brought to light through six models in exhaustible-resource economics. It is likely that there are sources of non-autonomy when a problem is not optimal or when there are non-priced assets—in practice, always. Accordingly, the questions raised strongly influence accounting method.





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