The Changing Wealth of Nations 2021 : Managing Assets for the Future
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“Policies and Investments Increasing Low-Carbon Transition Risks
Many countries with high rents from nonrenewable natural capital have not invested sufficiently to offset the depleting asset.
This is expressed in terms of negative adjusted net savings.
This is true not only for hydrocarbon-rich countries, such as Iraq and Nigeria, but also for some mineral-rich countries, such as Guinea and Sierra Leone.
The negative adjusted net savings in these countries is a lead indicator of unsustainable wealth management.
If continued, it will negatively impact the value of future wealth.
This is because the value of a depleting nonrenewable asset is being consumed rather than invested in offsetting asset accumulation— such as via human capital or productive capital investment.
Therefore, governments may need to consider policies that would better preserve and build wealth or look for alternative sources of income to raise their net savings.
Investments in renewable natural capital and human capital could help countries to diversify their asset portfolio and reduce their dependence on nonrenewable natural capital.
Peszko et al. (2020) suggest that an asset diversification strategy where a country invests in renewable natural capital and intangible assets, like knowledge, innovation, and institutions, could help reduce the exposure to low-carbon energy transition risks.
They also suggest that this strategy increases the flexibility, resilience, productivity, and climate mitigation co-benefits.”
Nonrenewable Natural Capital and Human Capital Distortions: Impact on Accumulation, Gender, and the Public Sector
“The accumulation of human capital and its increasing share in total wealth is widely considered an important component of achieving sustainable development and prosperity according to the 2018 edition of The Changing Wealth of Nations (Lange, Wodon, and Carey 2018).
As discussed in chapter 9, nonrenewable natural capital wealth forms a large share of some countries’ wealth endowments: for example, 30 percent in high-income non-OECD countries.
This can be as high as 65 percent of total wealth in fossil fuel–rich countries (Iraq, for example) and as high as 24 percent of total wealth in mineral-rich countries, such as Mongolia.
Converting nonrenewable natural assets into sustainable productive assets, such machines, infrastructure, and an educated, healthy population with quality jobs, is a challenging task.
Nonetheless, economists identify this as an important requisite for sustainability (Hartwick 1977).”
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