Framework for valuing the utilization of the environment

Purpose – The purpose of this paper is to apply a methodology (drawn from the literature) to value the environment as a capital. Design/methodology/approach – The main analytic framework considered is a factor utilization function, which traditionally deals with labour and manufactured capital. The development of a three-factor function in terms of labour, manufactured capital and environmental capital enables the display of mistaken notions of economic performance. Findings – The purpose of this illustration is to identify the patterns of environmental capital utilization as an economy grows. Although there are some differences in the patterns of environment utilization between Australia and Canada, the patterns observed are in line with that of the environmental Kuznets curve (EKC). Practical implications – This illustration is made with reference to two commodity-driven economies, namely, Australia and Canada. The findings could be used as a point of reference for resource rich economies. Originality/value – This paper illustrates an approach for valuing the environment as an economy grows. This approach is applied to two selected resource rich economies and the findings demonstrate traits similar to that of the EKC.