After studying this chapter you will be able to understand: Explain why falling birthrates mean that we are not likely to run out of natural resources, describe why using a mix of energy sources is efficient, even if some of them are quite costly, discuss why running out of oil would not mean running out of energy, show how the profit motive can encourage resource conservation, relate how to use property rights to prevent deforestation and species extinction.
15 NaturalResourceandEnergy Economics McGrawưHill/Irwin Copyrightâ2012byTheMcGrawưHillCompanies,Inc.Allrightsreserved ResourceSupplies:DoomorBoom? ã ã ã LO1 Population increased from billion people in 1800 to about 6.8 billion today Standard of living is 12 times higher Consumption of resources is much higher 15-2 Population Growth • • • • LO1 Thomas Malthus’s (1798) predictions Replacement rate Total fertility Modernization • Death rates fall • Fertility rate falls below replacement rate 15-3 Resource Consumption Per Person • • • • LO1 Increasing commodity demand Population growth Rising consumption per person Commodity supply has risen faster than demand • Commodity prices are falling 15-4 Resource Consumption Per Person • • LO1 Will resource supplies be sustainable in the future? Prospects are hopeful • Demand for resources will reach a peak and decline with falling birthrates • Resource consumption per capita leveled off or is decreasing 15-5 Resource Consumption Per Person • • • LO1 Leveled off in the rich countries Demand will increase in poorer countries Challenge is to move resource supplies from their place of origin to places of need 15-6 Resource Consumption Per Person 15-7 Resource Consumption Per Person 15-8 Resource Consumption Per Person LO1 15-9 Efficient Energy Use • LO2 Achieve efficiency in business conditions with • Variations in fixed costs • Daily variations in demand • Different types of generation technology U.S. Energy Generated Coal, 4 % Nuclear , 1 % Hydr oelectr ic, % Petr oleum, 1 % Natur al gas, % Other , 0 % Renew ables, % 15-10 Running Out of Energy? • • LO3 Will run out of oil or cheap energy Lack of energy is not a concern • Alternative sources • Externalities 15-11 Natural Resource Economics • Policies for extracting resources to maximize net benefits • Present vs future consumption • Present value • Renewable resources • Nonrenewable resources LO4 15-12 Natural Resource Economics • Nonrenewable resources • Oil, coal, and metals • Extraction strategy to maximize • • LO4 stream of profits User cost • Sell today, cannot sell in the future Higher expected demand encourages less extraction today • Property rights 15-13 Renewable Resources • Optimal fisheries management • Difficult to assign property rights • Policies to limit catch sizes • Total allowable catch • Individual transfer quota LO5 15-14 ... consumption • Present value • Renewable resources • Nonrenewable resources LO4 1 5-1 2 Natural? ?Resource? ?Economics • Nonrenewable resources • Oil, coal, and metals • Extraction strategy to maximize... countries Demand will increase in poorer countries Challenge is to move resource supplies from their place of origin to places of need 1 5-6 Resource Consumption Per Person 1 5-7 Resource Consumption... out of oil or cheap energy Lack of energy is not a concern • Alternative sources • Externalities 1 5-1 1 Natural? ?Resource? ?Economics • Policies for extracting resources to maximize net benefits