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Accounting for Natural Capital in Productivity of the Mining and Oil and Gas Sector

In: Productivity and Efficiency Analysis

Author

Listed:
  • Pat Adams

    (Statistics Canada)

  • Weimin Wang

    (Statistics Canada)

Abstract

This paper presents a growth accounting framework in which subsoil mineral and energy resources are recognized as natural capital input into the production process in two ways. Firstly, the income attributable to subsoil resources, or resource rent, is estimated as a surplus value after all extraction costs and normal returns on produced capital have been accounted for. The value of a resource reserve is then estimated as the present value of the future resource rents generated from the efficient extraction of the reserve. Secondly, with extraction as the observed service flows of natural capital, multifactor productivity growth and sources of economic growth can be reassessed by updating income shares of all inputs and then by estimating the contribution to growth coming from changes in the value of natural capital input. The empirical results on the Canadian oil and gas extraction show that, adding natural capital increases the annual multifactor productivity growth in the oil and gas sector from −2.2 to −1.5 % over the 1981–2009 period. During the same period, the annual real value-added growth in this industry was 2.3 %, of which about 0.3 percentage points or 15 % comes from natural capital.

Suggested Citation

  • Pat Adams & Weimin Wang, 2016. "Accounting for Natural Capital in Productivity of the Mining and Oil and Gas Sector," Springer Proceedings in Business and Economics, in: William H. Greene & Lynda Khalaf & Robin Sickles & Michael Veall & Marcel-Cristian Voia (ed.), Productivity and Efficiency Analysis, edition 1, chapter 0, pages 211-232, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-23228-7_13
    DOI: 10.1007/978-3-319-23228-7_13
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