365 new Lect No 15 , 16 Natural Resource Economics.ppt 365 new Lect No 15 , 16 Natural Resource Economics.ppt

365 new Lect No 15 , 16 Natural Resource Economics.ppt

1. Lecture No.15 & 16
Resource Economics: Definition subject matter and Scope
Difference between NRE and Agril. Economics
Natural resources classification and characteristics-
Resource depletion and causes for same

2. ResourcesAnythingthataidsinproductioniscalleda
resource.Theyphysicallyentertheproduction
processtotransformintooutput.Examples:
Seeds,fertilizers,feeds,veterinarymedicines,
etc.
Resource
services
Theworkdonebyapersonoramachineor
livestockiscalledresourceservice.Hereonly
servicesareavailablefortheproductionandthe
resourcesdonotphysicallyenterthe
production.Examples:Servicesoflabourer,
machinery,farmimplementsetc.

3. Fixed
resources
Resourceswhichremainunchangedirrespectiveofthe
levelofproductionarecalledfixedresources.These
resourcesexistonlyintheshortrun.Thecostsassociated
withtheseresourcesarecalledfixedcosts.Farmerhas
littlecontrolovertheuseoftheseresources.Examples:
Land,buildings,machinery,implements,etc.
Variable
resources
Resourceswhichchangewiththelevelofproductionare
calledvariableresources.Higherthelevelofproduction,
greatertheuseoftheseresourcesandviceversa.The
costswhichareassociatedwithvariableresourcesare
calledvariablecosts.Theseresourcesexistintheshort
runaswellasinthelongrun.Farmercanexercisegreater
controlovertheuseoftheseresources.Examples:Seeds,
fertilizers,plantprotectionchemicals,feeds,etc.The
distinctionbetweenfixedandvariableresourcesceases
toexistinthelongrun.Inthelongrunallresourcesare
varied.

4. Flow
resources
Theresourceswhichcannotbestoredandshouldbeused
asandwhen.theyareavailable.Forinstance,ifthe
services.ofalaboureravailableonaparticulardayarenot
used,thentheyarelostforever,similarly,theservicesof
machineryfarmbuildings,etc.
Stock
resources
Stockresourcesarethosewhichfacilitatefortheirstorage,
when.theyarenotusedinoneproductionperiod.
Examples:Seeds,fertilizers,feed,etc.Defininganinput
asafloworstock,dependsonthelengthoftimeperiod
underconsideration.Theusefullifeofatractoris
assumedtobe10years,ifwetaketheservicesofatractor
foritsentire,usefullifeof10years,thentractorisastock
resource.But,tractorprovidesitsservicesduringeachday
ofaproduction'season.Ifweconsidertheservices
providedbytractorineachday,thenitisaflowresource.
Therefore,tractorcanberegardedasflowandstock
resource.Theotherexamplesarefarmbuildings,land,
machinery,etc.

5. Mono-
period
resource
Itistheresourcewhichcanbeused
onlyonceinproduction.Examples:
Seeds,fertilizers,etc.
Poly-period
resource
Itistheresourcewhichisusedin
theproductionprocessoverseveral
periods.Examples:Machinery,im-
plements,etc.

6. Resource Economics: Definition subject matter and Scope
•Naturalresourcesareresourcesthatexistwithoutactionsofhumankind.
•Thisincludesallvaluedcharacteristicssuchasmagnetic,gravitational,
electricalpropertiesandforces,etc.On Earthit
includessunlight,atmosphere,water,land(includesallminerals)along
withallvegetation,cropsandanimallifethatnaturallysubsistsuponor
withinthepreviouslyidentifiedcharacteristicsandsubstances.
•ParticularareassuchastherainforestinFatu-Hivaareoften
characterizedbythebiodiversityandgeodiversityexistentintheir
ecosystems.
•Naturalresourcesmaybefurtherclassifiedindifferentways.Natural
resourcesarematerialsandcomponents(somethingthatcanbeused)
thatcanbefoundwithintheenvironment.
•Everyman-madeproductiscomposedofnaturalresources(atits
fundamentallevel).Anaturalresourcemayexistasaseparateentitysuch
asfreshwater,air,andaswellasanylivingorganismsuchasafish,orit
mayexistinanalternateformthatmustbeprocessedtoobtainthe
resourcesuchasmetalores,rare-earthmetals,petroleum,andmost
formsofenergy.

7. •There is much debate worldwide over natural resource
allocations. This is particularly true during periods of
increasing scarcity and shortages (depletion and
overconsumption of resources).

8. •Therearevariousmethodsofcategorizingnaturalresources,
theseincludesourceoforigin,stageofdevelopment,andbytheir
renewability.
•Onthebasisoforigin,naturalresourcesmaybedividedinto
twotypes:
Biotic— Bioticresourcesareobtainedfrom
thebiosphere(livingandorganicmaterial),such
asforestsandanimals,andthematerialsthatcanbeobtained
fromthem.Fossilfuelssuchascoalandpetroleumarealso
includedinthiscategorybecausetheyareformedfrom
decayedorganicmatter.
Abiotic–Abioticresourcesarethosethatcomefromnon-
living,non-organicmaterial.Examplesofabioticresources
includeland,freshwater,air,rareearthmetalsandheavy
metalsincludingores,suchas,gold,iron,copper,silver,etc.

9. •Consideringtheirstageofdevelopment,naturalresources
maybereferredtointhefollowingways:
Potentialresources—Potentialresourcesarethosethatmay
beusedinthefuture—forexample,petroleumin
sedimentaryrocksthat,untildrilledoutandputtouse
remainsapotentialresource
Actualresources—Thoseresourcesthathavebeen
surveyed,quantifiedandqualifiedand,arecurrentlyused—
development,suchaswoodprocessing,dependson
technologyandcost
Reserveresources—Thepartofanactualresourcethatcan
bedevelopedprofitablyinthefuture
Stockresources—Thosethathavebeensurveyed,but
cannotbeusedduetolackoftechnology—for
example,hydrogen
•Manynaturalresourcescanbecategorizedaseither
renewableornon-renewable:

10. Renewableresources—Renewableresourcescanbereplenishednaturally.Some
oftheseresources,likesunlight,air,wind,water,etc.arecontinuouslyavailable
andtheirquantitiesarenotnoticeablyaffectedbyhumanconsumption.Though
manyrenewableresourcesdonothavesuchrapidrecoveryrate,theseresources
aresusceptibletodepletionbyover-use.Resourcesfromahumanuseperspective
areclassifiedasrenewablesolongastherateofreplenishment/recoveryexceeds
thatoftherateofconsumption.TheyreplenisheasilycomparedtoNon-renewable
resources.
Non-renewableresources–Non-renewableresourceseitherformslowlyordonot
naturallyformintheenvironment.Mineralsarethemostcommonresource
includedinthiscategory.Fromthehumanperspective,resourcesarenon-
renewablewhentheirrateofconsumptionexceedstherateof
replenishment/recovery;agoodexampleofthisarefossilfuels,whichareinthis
categorybecausetheirrateofformationisextremelyslow(potentiallymillionsof
years),meaningtheyareconsiderednon-renewable.Someresourcesactually
naturallydepleteinamountwithouthumaninterference,themostnotableofthese
beingradio-activeelementssuchasuranium,whichnaturallydecayintoheavy
metals.Ofthese,themetallicmineralscanbere-usedbyrecyclingthem,
[5]
but
coalandpetroleumcannotberecycled.
[6]
Oncetheyarecompletelyusedtheytake
millionsofyearstoreplenish.

11. •Resourceextractioninvolvesanyactivitythatwithdrawsresourcesfromnature.Thiscan
rangeinscalefromthetraditionaluseofpreindustrialsocieties,toglobalindustry.Extractive
industriesare,alongwithagriculture,thebasisoftheprimarysectoroftheeconomy.Extraction
producesrawmaterial,whichisthenprocessedtoaddvalue.Examplesofextractiveindustries
arehunting,trapping,mining,oilandgasdrilling,andforestry.Naturalresourcescanadd
substantialamountstoacountry'swealth,
[7]
however,asuddeninflowofmoneycausedbya
resourceboomcancreatesocialproblemsincludinginflationharmingotherindustries("Dutch
disease")andcorruption,leadingtoinequalityandunderdevelopment,thisisknownasthe
"resourcecurse".
•Extractiveindustriesrepresentalargegrowingactivityinmanyless-developedcountriesbut
thewealthgenerateddoesnotalwaysleadtosustainableandinclusivegrowth.Peopleoftenaccuse
extractiveindustrybusinessesasactingonlytomaximizeshort-termvalue,implyingthatless-
developedcountriesarevulnerabletopowerfulcorporations.Alternatively,hostgovernmentsare
oftenassumedtobeonlymaximizingimmediaterevenue.Researchersarguethereareareasof
commoninterestwheredevelopmentgoalsandbusinesscross.Thesepresentopportunitiesfor
internationalgovernmentalagenciestoengagewiththeprivatesectorandhostgovernments
throughrevenuemanagement andexpenditureaccountability,infrastructure
development,employmentcreation,skillsandenterprisedevelopmentandimpactsonchildren,
especiallygirlsandwomen.
[8]
Astrongcivilsocietycanplayanimportantroleinensuringeffective
managementofnaturalresources.Norwaycanserveasarolemodelinthisregardasithasgood
institutionsandopenanddynamicpublicdebatewithstrongcivilsocietyactorsthatprovidean
effectivechecksandbalancessystemforgovernment'smanagementofextractiveindustries.
[9]

12. Natural resource economies –
definition, subject matter and scope
•Naturalresourceeconomicsdealswiththesupply,demand
andallocationoftheearthnaturalresource.
•Mainobjectiveofnaturalresourceeconomicsistobetter
understandtheroleofnaturalresourcesintheeconomyin
ordertodevelopmoresustainablemethodsofmanaging
thoseresourcestoensuretheiravailabilitytofuture
generations.
•Resourceeconomistsstudyinteractionsbetweeneconomic
andnaturalsystems,withthegoalofdevelopinga
sustainableandefficienteconomy.
•Itisamulti-disciplinaryfieldofacademicresearch.

13. Natural resource management
•Naturalresourcemanagementreferstothe
managementofnaturalresourcesuchasland,
water,soil,plantsandanimalswithaparticular
focusonhowmanagementaffectsthequalityof
lifeforbothpresentandfuturegenerations.
Naturalresourcemanagementdealsbrings
togetherlanduseplanning,watermanagement,
biodiversityconservationandthefuture
sustainabilityofindustrieslikeagriculture,
mining,fishing,etc.

14. Environmental and Ecological Economics
•Theinsightsintosustainabilityprovidedbymainstreameconomicsaretaken
muchfurtherbyenvironmentalandecologicaleconomists.
Themainareasofcontributionincludethefollowing:
•Aclassificationofsustainabilityviewsaccordingtoassumptionsaboutthe
conservationofnaturalresources
•Extendingtheanalysisofexternalitiestoprovideabasisfordesigning
antipollutionpoliciesanddecidingontheresourcesitisdesirabletodevote
toavoidingpollution
•Arangeofmethodologiesforevaluatingtheservicesprovidedby
environmentalassetsandsocialcapitaltoextendtheinclusivenessofCost
BenefitAnalysis.
•Modelsforprojectingthepricinganddepletionoffiniteresources.
•Assessmentsoftheimplicationsofvariousaccessregimesgoverningthe
harvestingofrenewableresources
Thereisconsiderableoverlapinthesubjectmatterofecologicalandenvironmental
economics.
Thekeydifferenceisoneoforientation.Environmentaleconomicstendstoembracethe
Neo-classicalparadigmasananalysisoftheeconomicsystemandseekstoincorporate
environmentalassetsandservices.Ecologicaleconomicsgivesprioritytothehealthof
complexinterrelatedecologicalsystemsandconsiderhoweconomicbehaviourcanbe
modifiedtothatend.

15. Subject matter
•Thereisconsiderableoverlapinthesubjectmatterof
ecologicalandenvironmentaleconomics.
•Thekeydifferenceisoneoforientation.
•EnvironmentaleconomicstendstoembracetheNeo-
classicalparadigmasananalysisoftheeconomicsystem
andseekstoincorporateenvironmentalassetsand
services.
•Ecologicaleconomicsgivesprioritytothehealthof
complexinterrelatedecologicalsystemsandconsiderhow
economicbehaviourcanbemodifiedtothatend.

16. Natural resources Classification
•Renewable resources: Renewable resources are generally living
resources (fish, coffee, and forests, for example), which can
restock (renew).
•Non-renewable natural resources: Non-living renewable
natural resources include soil, as well as water, wind, tides and
solar radiation, etc
•Carrying capacity Use of natural resource services is compared
with defined bio-physical limits for the supply of such services
Resourcescanalsobeclassifiedonthebasisoftheirorigini.e.biotic
andabiotic.
Bioticresources:Bioticresourcesarederivedfromanimalsand
plants(i.e-thelivingworld).Bioticisalivingcomponentofa
community;forexampleorganisms,suchasplantsandanimals.
Abioticresources:Abioticresourcesarederivedfromthenon-living
worlde.g.land,water,andair.Mineralandpowerresourcesarealso
abioticresourcessomearederivedfromnature.
Inbiologyandecology,abioticcomponentsarenon-livingchemical
andphysicalfactorsintheenvironmentwhichaffectecosystems

17. Natural resources:
•Waterresource:Waterresourcesareusuallyrenewableresourceswhich
naturallyrecharge.Overexploitationoccursifawaterresourceis
extractedataratethatexceedstherechargerate,thatis,ataratethat
exceedsthepracticalsustainedyield.
•Forestresources:Forestisoverexploitedwhentheyareloggedatarate
fasterthanreforestationtakesplace.Reforestationcompeteswithother
landusessuchasfoodproduction,livestockgrazing,andlivingspacefor
furthereconomicgrowth.
•Deforestation:Deforestationistheremovalofaforestorstandoftrees
wherethelandisthereafterconvertedtoanon-forestuse.Examplesof
deforestationincludeconversionofforestlandtofarms,ranches,orurban
use.Thetermdeforestationisoftenmisusedtodescribeanyactivitywhere
alltreesinanareaareremoved.Howeverintemperateclimates,the
removalofalltreesinanarea—inconformancewithsustainableforestry
practices—iscorrectlydescribedasregenerationharvest.Intemperate
climates,naturalregenerationofforeststandsoftenwillnotoccurinthe
absenceofdisturbance,whethernaturaloranthropogenic.Furthermore,
biodiversityafterregenerationharvestoftenmimicsthatfoundafter
naturaldisturbance,includingbiodiversitylossafternaturallyoccurring
rainforestdestruction

18. Resources characteristics
•Resourceshavethreemaincharacteristicsnamely
1)Utility,2)Limitedavailability,3)Potentialfordepletionor
consumption.
Utilityisameasureofsatisfaction,referringtothetotal
satisfactionreceivedbyaconsumerfromconsumingagoodor
service
Scarcityisthefundamentaleconomicproblemofhavinghumans
whohaveunlimitedwantsandneedsinaworldoflimited
resources.Itstatesthatsocietyhasinsufficientproductive
resourcestofulfillallhumanwantsandneeds.
ResourcedepletionResourcedepletionisaneconomicterm
referringtotheexhaustionofrawmaterialswithinaregion.
Resourcedepletionismostcommonlyusedinreferenceto
farming,fishing,mining,andfossilfuel

19. Causes of resource depletion
•Over-consumption/excessive or unnecessary use of resources
•Non-equitable distribution of resources
•Overpopulation
•Slash and burn agricultural practices, currently occurring in
many developing countries
•Technological and industrial development
•Erosion
•Irrigation
•Mining for oil and minerals
•Aquifer depletion
•Forestry
•Pollution or contamination of resources

20. Natural resources are also categorized based on the stage
of development
•PotentialResourcesareknowntoexistandmaybeusedinthe
future.Forexample,petroleummayexistinmanypartsof
IndiaandKuwaitthathavesedimentaryrocks,butuntilthe
timeitisactuallydrilledoutandputintouse,itremainsa
potentialresource.
•Actualresourcesarethosethathavebeensurveyed,their
quantityandqualitydetermined,andarebeingusedinpresent
times.Forexample,petroleumandnaturalgasisactivelybeing
obtainedfromtheMumbaiHighFields.Thatpartoftheactual
resourcethatcanbedevelopedprofitablywithavailable
technologyiscalledareserveresource,whilethatpartthat
cannotbedevelopedprofitablybecauseoflackoftechnologyis
calledastockresource

21. Economic Approaches to Resource Management
•Ineconomicsapproachestoresourcemanagement,thecommon
denominatoristypicallysomeformofmeasurementthatcanbe
relatedtoindividualwelfare.
•Economicsprovidesacomprehensiveframeworkforanalysingmost
aspectsofnaturalresourceandenvironmentalissues.Optimal
extractionanduseofnonrenewableresources,inparticularas
analysedbytheHotelling’srule.
•Economicindicatorsofsustainabilityderivedfromtheweak
sustainabilityviewthatthetotalamountofcapitalmustbe
maintained.ThebasicHotellingRuleisbasedonanumberof
simplifyingassumptions.Thetotalstockofresourcesisassumedto
beknownandofequalquality,andallthemarketplayersare
assumedtohavefullknowledge.Theconceptofmanagementof
non-renewableresourcesismainlyconcernedwithhowaresource
stockshouldbeusedoptimallyandnotconcernedwith
sustainability.

22. Major issues in use of natural resources –productivity,
equity &sustainability
•Sustainability:ThewordsustainabilityisderivedfromtheLatinsustinere
(tenere,tohold;sus,up).
•Themostwidelyquoteddefinitionofsustainabilityandsustainabledevelopment,
thatoftheBrundtlandCommissionoftheUnitedNationsonMarch20,1987:
“sustainabledevelopmentisdevelopmentthatmeetstheneedsofthepresent
withoutcompromisingtheabilityoffuturegenerationstomeettheirownneeds.
•Environmental,socialandeconomicdemands-the"threepillars"of
sustainability.
•Thewordsustainabilityisappliednotonlytohumansustainabilityonearth,but
toomanysituationsandcontextsovermanyscalesofspaceandtime,fromsmall
localonestotheglobalbalanceofproductionandconsumption.
•Sustainabilityisthecapacitytoendure.
•Inecology,sustainabilitydescribeshowbiologicalsystemsremaindiverseand
productiveovertime,anecessarypreconditionforhumanwell-being.Long-lived
andhealthywetlandsandforestsareexamplesofsustainablebiologicalsystems.
•Sustainabilityfarming:ItisthesystemthatinwhichNRSaremanagedsothat
thepotentialyieldandstockofNRSdonotdeclineovertime

23. Principles and concepts
•Thephilosophicalandanalyticframeworkofsustainability
drawsonandconnectswithmanydifferentdisciplinesand
fields.
•Inrecentyearsanareathathascometobecalled
sustainabilitysciencehasemerged.
•Sustainabilityscienceisnotyetanautonomousfieldor
disciplineofitsown,andhastendedtobeproblemdriven
andorientedtowardsguidingdecision-making.
•ScaleandcontextSustainabilityisstudiedandmanaged
overmanyscales(levelsorframesofreference)oftimeand
spaceandinmanycontextsofenvironmental,socialand
economicorganization.

24. Consumption —population, technology, resources
•Thetotalenvironmentalimpactofacommunityorofhumankindasa
wholedependsbothonpopulationandimpactperperson,whichinturn
dependsincomplexwaysonwhatresourcesarebeingused,whetheror
notthoseresourcesarerenewableandthescaleofthehumanactivity
relativetothecarryingcapacityoftheecosystemsinvolved.
•ToexpresshumanimpactmathematicallycalledasIPATformula.This
formulationattemptstoexplainhumanconsumptionintermsofthree
components:populationnumbers,levelsofconsumptionandimpactper
unitofresourceuse,whichistermedtechnologyused.
•Theequationisexpressed:
I=P×A×T
Where:I=Environmentalimpact,
P=Population,A=Affluence,T=Technology

25. Measurement Sustainability
•Measurementisatermthatdenotesthemeasurementsusedas
thequantitativebasisfortheinformedmanagementof
sustainability.
•Themetricsusedforthemeasurementofsustainability
(involvingthesustainabilityofenvironmental,socialand
economicdomainsareevolving:theyincludeindicators,
benchmarks,audits,sustainabilitystandardsandcertification
systems.
•Resourceproductivity:Resourceproductivityisthequantityof
goodorservice(outcome)thatisobtainedthroughthe
expenditureofunitresource.
•Thiscanbeexpressedinmonetarytermsasthemonetaryyield
perunitresource.Resourceproductivityandresourceintensity
arekeyconceptsusedinsustainabilitymeasurement.
•Thesustainabilityobjectiveistomaximizeresourceproductivity
whileminimizingresourceintensity

27. 6. Role of markets Well-defined markets Markets do not exist, a Well-defined markets

29. Ubiquitous: present, appearing, or found
everywhere.

30. Have
a
Nice Day

31. Thank you