Suppose you have been hired by the developing country of Equatoria to calculate its Green GDP. Assume for simplicity that only three adjustments need to be made to account for natural capital depreciation and pollution damages; timber capital, oil capital, and carbon dioxide damages. You have been given the following data:

Economic Data
Gross domestic product: $40 billion
Depreciation of manufacture capital: $6 billion


Timber data
End-of-year timber stocks (board-feet): 2.0 billion
Start-of-year timber stocks (board-feet): 2.4 billion
End-of-year timber price ($/board-foot): $6
Start-of-year timber price ($/board-foot): $4


Oil data
End-of-year oil stocks (barrels): 500 million
Start-of-year oil stocks (barrels): 550 million
End-of-year oil price ($/barrel): $60
Start-of-year oil price ($/barrel): $50


Carbon data
CO2 emissions (tons): 75 million
Damage per ton of CO2 emissions: $20

For timber and oil, you will need to calculate the value of depreciation, or appreciation, as the change in the total market value of the resource during the year, where total market value is the physical quantity times the resource price.

a) What is the Green GDP for Equatoria, also accounting for the depreciation of manufactured capital?
b) Would you recommend that Equatoria use Green GDP to measure its progress toward sustainability objectives, or perhaps some other indicator discussed in Chapter 10?
c) Would you make any other recommendations to policy makers in Equatoria? Explain clearly

Answer rating: 100% (QA)

A THE TOTAL MARKET VALUE OF RESOURCES DURING THE YEAR PHYSICAL QUANTITY RESOURCE PRICE FOR TIMBER AT THE BEGINNING STOCK AT THE BEGINNING PRICE AT THE ... View the full answer