TY - JOUR
T1 - Backward- and Forward-looking Shadow Prices in Inclusive Wealth Accounting
T2 - An Example of Renewable Energy Capital
AU - Yamaguchi, Rintaro
AU - Managi, Shunsuke
N1 - Funding Information:
The authors would like to thank three anonymous referees for their insightful comments, which substantially improved the paper. They are also particularly grateful to Louis Dupuy, Wataru Nozawa, Ayumi Onuma, John Rulfe, Ingmar Schumacher, and other session participants of the 6th World Congress of Environmental and Resource Economists (WCERE) in Gothenburg, the 9th International Research Meeting in Business and Management (IRMBAM) in Nice, SEEPS in Tokyo, and seminar participants at NIES, Tokyo Tech, Kyushu U, and Zaiseigaku Kenkyukai, all held in 2018. All remaining errors are the authors' own. This work was supported by KAKENHI Grant Numbers JP16K16237 and JP26000001 from the Japan Society for the Promotion of Science . Author contributions: R.Y. designed and conceived the research, conducted the analyses, and wrote and edited the paper. S.M. provided comments.
Publisher Copyright:
© 2018 The Authors
PY - 2019/2
Y1 - 2019/2
N2 - Attaching weights to the list of capital assets is crucial in inclusive wealth accounting and sustainability assessments. These weights, or shadow prices, can be constructed in theory by looking prospectively at future social profits that the capital in question is expected to yield. In practice, however, both backward- and forward-looking shadow prices are used. This study confirms that these two approaches are theoretically equivalent under strong assumptions and reviews how and why the two approaches are taken. The two approaches are then applied to renewable energy capital (REC), which has rarely been done in either produced or natural capital accounting and sustainability assessments. Renewable energy capital provides an ideal example with which to compare the two approaches, as it is a class of produced capital that substitutes both produced and natural capital. The numerical results of both approaches demonstrate that renewable energy capital starts to account for as large a share as natural capital does, if not produced capital or inclusive wealth, in those countries where natural capital is poorly endowed and investment in renewable energy capital has been witnessed.
AB - Attaching weights to the list of capital assets is crucial in inclusive wealth accounting and sustainability assessments. These weights, or shadow prices, can be constructed in theory by looking prospectively at future social profits that the capital in question is expected to yield. In practice, however, both backward- and forward-looking shadow prices are used. This study confirms that these two approaches are theoretically equivalent under strong assumptions and reviews how and why the two approaches are taken. The two approaches are then applied to renewable energy capital (REC), which has rarely been done in either produced or natural capital accounting and sustainability assessments. Renewable energy capital provides an ideal example with which to compare the two approaches, as it is a class of produced capital that substitutes both produced and natural capital. The numerical results of both approaches demonstrate that renewable energy capital starts to account for as large a share as natural capital does, if not produced capital or inclusive wealth, in those countries where natural capital is poorly endowed and investment in renewable energy capital has been witnessed.
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U2 - 10.1016/j.ecolecon.2018.09.020
DO - 10.1016/j.ecolecon.2018.09.020
M3 - Article
AN - SCOPUS:85055054996
VL - 156
SP - 337
EP - 349
JO - Ecological Economics
JF - Ecological Economics
SN - 0921-8009
ER -
