additions to petroleum reserves in these years was considerably larger than all categories of depletion combined, leading to negative depreciation. One way of resolving this apparent anomaly would be to account separately for additions and subtractions from natural resource assets. Real capital gains (as distinct from those resulting from price changes) can be accounted for as gross income and gross capital formation. This is consistent with our earlier definition of income because additions to resources during the current year augment the amount that could be consumed currently without reducing potential consumption in future years. This is obvious in the case of forest growth but less obvious for mineral discoveries, because current discoveries may leave less to be discovered later on. However, insofar as additions to mineral reserves reflect advances in the technology of exploration or extraction, the total potential resource base will have expanded.

  • 2.  

    The value used for off-site damages from soil erosion in the Northeast is $8.16 per ton of eroded soil. Because these numbers were calculated (Ribaudo, 1989) based on gross erosion and gross damages, sediment delivery need not be estimated. Values are available for each production region.

  • 3.  

    Our working definition of "alternative" includes those production practices that enhance environmental quality and make efficient use of nonrenewable resources. This follows the legal definition of "sustainable." Thus, some practices that may be considered ''conventional," such as reduced tillage, may be included as alternatives if they are not the predominant practice in a given region.

  • 4.  

    There are 20 LRRs identified by the Natural Resources Conservation Service in the 48 contiguous states. Few LRRs are contained within a single production region. Where an LRR is cut by a production region, we have split the LRR. This analysis does not include Alaska or Hawaii.

  • 5.  

    The U.S. Environmental Protection Agency's damage estimate for nitrogen oxides included a "credit" for a reduction in smog formation with increasing NOx emissions. This credit was omitted in the analysis because the NOx's smog-inhibiting effect is temporary and spatially limited. The marginal damage cost, including the credit, would be $69 per ton.

  • 6.  

    Because year-by-year estimates of marginal damages were not available, two alternative assumptions were used to extrapolate the marginal damages backward in time to 1970. The assumptions reflect two offsetting trends: in earlier years, emissions were greater, so marginal damages should have been higher, but the size of the economy was smaller, so that damages should have been smaller, also. The first assumption, therefore, was that marginal damages were constant over the period in real terms (Index A of Table 5). The alternative was that marginal damages increased in real terms in proportion to real GNP (Index B of Table 5). Alternative estimates of MP were made reflecting these assumptions.


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Faeth, P., ed. 1993. Agricultural Policy and Sustainability: Case Studies from India, Chile, the Philippines and the United States. Washington, D.C.: World Resources Institute.

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