Are we measuring natural resource wealth correctly? A reconceptualization of natural resource value in the era of climate change

Underlying the management of revenues from natural resource extraction is a set of assumptions about how abundant and how valuable these resources are. Nevertheless, existing approaches to measuring the value of extractive resources are seriously flawed. This paper proposes two avenues for improving them. It explains how a multidimensional approach to measuring resource wealth can be used to identify the policy challenges that a country might face as it sets out its strategy for managing extractive revenues. It also provides a rethinking of the valuation of extractive wealth by integrating environmental considerations. Extractive activities can at times incur a great loss of (renewable) opportunity income, either directly or indirectly, because of their environmental impact. By analysing a range of examples from across the globe, this paper extracts key lessons on the true value of extractives and why it matters for policy makers, civil society, and international donors today.