A recent, widely quoted study has concluded that a five to ten fold increase in economic activity will be required over the next fifty years in order to meet the needs of a burgeoning world population, as well as to begin reducing mass poverty. Continued economic growth of this magnitude portends an ecological dilemma. On the one hand, the requisite growth for poverty reduction will require further depletion of apparently dwindling stocks of natural resources and deterioration of the environment. On the other hand, unless poverty is reduced significantly and soon, pressure on diminishing global stocks of basic resources will increase rapidly. The proposed solution to this dilemma is sustained development which aims at improving living standards, without diminishing natural resource stocks or degrading the natural environment. Closely related to the idea of resource sustainability of a resource is the notion of resource depreciation, which is analogous the familiar concept of capital depreciation as is applied to an asset like a machine tool. The purpose of this research is to develop a theory of sustainable resource management and a consistent measure of resource and environmental depreciation. The methodology developed for measuring resource and environmental depreciation will be applied to the problem of global energy use and greenhouse warming, with a particular focus on Indonesia whose oil is a major export commodity. Policies aimed at effectively dealing with the threat of global warming must balance energy conservation, against the relative cost effectiveness of alternative mechanisms for limiting emission of greenhouse gases. This study will place particular emphasis on carbon dioxide emissions. The specific modeling problem is to compute an efficient profile of global energy use, taking in to account the externality costs of carbon dioxide emissions, to recompute the model after the introduction of projected distortions, and then to compute the value of environmental depreciation.
