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Sustainability indicators and the shadow price of natural capital

Sato, Masayuki and Phim, Runsinarith and Managi, Shunsuke (2015): Sustainability indicators and the shadow price of natural capital.

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Abstract

This paper investigates the effect of shadow price regarding weak sustainability indicators based on the genuine savings indicator. We analyse the forest resources considering positive externalities of natural capital, as the approximation from market rent alone would under-estimate the true shadow price. On the basis of previous valuation results of forest resources, we estimate the non-market value and shadow price of forest, which are further used in deriving sustainability indicators measurement. The results show the importance of shadow pricing of natural capital to reflect weak sustainability indicators. Re-calculations of the sustainability indicator provide evidences suggesting that existing weak sustainability indicators tend to over-estimate sustainability, especially among countries with a higher dependence on forest-resource exploitation.

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