12 THE CHANGING WEALTH OF NATIONS
Decomposing Changes in Natural Wealth from 1995 to 2005 Having described the changing composition of capital, we would also like to understand the driving forces behind this change. We focus on natural capital both because of the importance of natural capital to developing countries and because we have concrete, independent measures for detailed components of this type of wealth to support this analysis. Changes in the value of natural capital can result from many factors, some related to the price or returns to an asset and some related to the physical quantity of an asset. For example, the value of total agricultural land in a country may increase when more land is brought under cultivation (a quantity effect) or when the net price of crops produced on a given amount of land increases (price effect). Similarly, the value of subsoil assets may increase with rising world market prices (price effect) or an increase in proven reserves (quantity effect). Obviously, many of these factors change simultaneously and it is not easy to sort out the relative importance of each one. A technique called decomposition analysis, applied in chapter 3, is used to determine the relative importance of different factors that change the value of natural capital over time. We found that price changes played a significant role in many regions. Declining agricultural land value in Sub-Saharan Africa and South Asia has been driven mainly by declining prices for crop and livestock products.7 The decline was partly offset by increases in production and yields, but the price effect has dominated in these regions. By contrast, in East Asia and the Pacific as well as Latin America and the Caribbean, there was a net increase in agricultural land values because the decline in prices was more than offset by increases in crop production area, crop yields, and livestock production. Forest land has been particularly important to wealth creation in Latin America and the Caribbean, mainly because of the increase in timber prices. The effect is particularly important in Brazil. In other regions, the rising value of subsoil assets played a major role in changing the value of natural capital. While the expanding volume of reserves contributed, the most important factor was the sharp increase in unit rents for subsoil assets. Worldwide, 71 percent of the growth in subsoil asset values can be explained by increases in unit rents. In developing countries, unit rent increases contributed 65 percent of the increase in subsoil asset values. Greenhouse Gas Emissions and the Wealth of Nations Damages from greenhouse gas emissions will have an impact on future well-being and on the sustainability of individual countries and the world. The high level of global concern with climate change demands that we start to look at greenhouse gas emissions from a wealth–accounting perspective.8 Annual country emissions of greenhouse gases are closely monitored, and estimates of the shares of the