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Readings… Ecological Economics: Principles and Applications Chapters 3 – 5 See link on website Will print it for you too

The Allocation of Depletable and Renewable Resources: An Overview Readings: Chapter 7 The Allocation of Depletable and Renewable Resources: An Overview

The nature of resources and the resources of nature Stock-flow resources: materially transformed into what it produces A stock can provide a flow of material The flow can be of virtually any magnitude; stock can be used up at almost any rate desired A flow can be stockpiled Used up – not worn out Example? You tell me Fund-service resources

The nature of resources and the resources of nature Fund-service resources Suffers wear and tear from production but does not become a part of the thing produced Provides a service at a fixed rate Appropriate unit for measuring the service is physical output per unit of time Cannot be stockpiled Are worn out; not used up

Think about it Think about a specific ecosystem Make a list of 3 stock-flow resources provided by (or found in) that ecosystem Be very specific about the use of each resource Example: drinking water is a stock-flow; water for swimming is a fund-service

Review: excludability and rivalness Excludability: a legal term When enforced allows an owner to prevent others from using his/her asset In the absence of social institutions enforcing ownership, nothing is excludable You tell me: what is an excludable resource? What is a non-excludable, owned resource? Rivalness: an inherent characteristic of certain resources whereby consumption or use by one person reduces amount available

All stock-flow resources are rival All nonrival goods are fund-service Some fund-service goods are rival Example: bike: fund that provides the services of transportation, but is rival Example: ozone layer: fund that provides the service of screening UV rays but is non-rival

8 types of goods and services, provided by nature, divided into living and nonliving Fossil fuels Minerals Water Land Solar energy Renewable resources Ecosystem services Waste absorption

Nonrenewable resources Fossil fuels Nonrenewable source of low-entropy energy Very important as material building blocks Minerals Fixed stocks ; in varying combinations and degrees of purity Raw material on which all economic activity and life itself ultimately depends Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

Abiotic resources Nonrenewable resources + Water Land Solar energy Fixed stock ; fresh water: only a miniscule fraction is freshwater All life on Earth depends on water; human life depends on freshwater Land Physical structure; a substrate; or a site Separate from the productivity of soil; distinct from land as source of nutrients and minerals Solar energy Ultimate source of low entropy upon which the entire system depends

Biotic resources Renewable resources Ecosystem services Photosynthesizing biological resources and others Can be exploited to extinction Ecosystem services When ecosystem functions are of use to humans -> ecosystem services Waste absorption A specific type of ecosystem service; economic characteristic makes it worthy of separate classification

Natural capital All the structures and systems that provide these goods and services Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

A Resource Taxonomy – depletable resources: A resource taxonomy is a classification system used to distinguish various categories of resource availability. Current reserves are known resources that can be extracted profitably at current prices. Potential reserves resources potentially available. They depend on people’s willingness to pay and technology. (The higher the price, the larger the potential reserves) Resource endowment represents the natural occurrence of resources in the earth. Upper limit on the availability of terrestrial resources Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

A resource taxonomy: current reserves = Measured resources: material for which quality and quantity estimates are within a margin of error of less than 20% from geologically well-known sample sties + Indicated resources: material for which quantity and quality have been estimated partly from sample analyses and partly from reasonable geological projections + inferred resources: material in identified but unexplored deposits whose quantity and quality have been estimated using geological projections Current reserves = measured resources + indicated resources + inferred resources Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

Why is this distinction important? Common mistake #1  using data on current reserves as if they represented the maximum potential reserves Common mistake #2  assuming that the entire resource endowment can be made available as potential reserves at some price that people are willing to pay Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

A recyclable resource has some mass that can be recovered after use. A depletable resource is not naturally replenished or is replenished at such a low rate that it can be exhausted. The depletion rate is affected by demand, and thus by the price elasticity of demand, durability and reusability. A recyclable resource has some mass that can be recovered after use. Copper is an example of a depletable, recyclable resource. A renewable resource is one that is naturally replenished. Examples are water, fish, forests and solar energy. Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

Some issues… Some issues regarding depletable/ recyclable resources… Possibility of economic replenishment (price is a primary factor) Potential reserves can be exhausted (importance of durable/reusable products) Storing opportunities Limits on recycling (natures of some resources, entropy law) Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

Some issues regarding Renewable Resources High rate of replenishment Replenishment: restored to former level/condition Some renewable resources can be stored, others cannot Managing renewable resources: maintaining an efficient sustainable FLOW (while managing depletable resources means distributing resources among generations while meeting the ultimate transition to renewable resources)

The management problem for depletable resources is how to allocate dwindling stocks among generations while transitioning to a renewable alternative. The management problem for renewable resources is in maintaining an efficient and sustainable flow. Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

Abiotic resources Fossil fuels, minerals, water, land, solar energy How do the laws of thermodynamics, distinction between stock-flow and fund-service resources, and concept of excludability and rivalness relate to these resources? Why? To understand the role they play in the ecological-economic system Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

Land (Ricardian land): Fossil fuels and mineral resources frequently grouped together but energy in fossil fuels can’t be recycled, while mineral resources can be, at least partially Water: Fossil aquifers: similar to mineral resources. How? Rivers, lakes, streams: more similar with biotic resources. Renewable through hydrological cycle; can have both stock-flow and fund-service properties Land (Ricardian land): Can’t be produced or destroyed (except…?)

Fossil fuels Hydrocarbons 1995: supplied 38% of energy inputs into global economy; coal: 25%; natural gas: 22% 85% of energy in economy: fossil hydrocarbons Fixed stock – in geological terms Recoverable supplies – our main concern What does recoverable mean?

Admin/ homework / exam Exam graded. Project assignment #2: 37% - 84%. Mean: 64% Unhappy? Re-do the essay questions. See exam Project assignment #2: Due Tuesday April 5 (today) by 8 am Received nothing from chicken investigators Tobacco people: submit tools by the end of the day Contact: find another contact if the one I gave you fails.

EVSC 239: Reader 2 Ecological economics Chapters 407, 10-12, 20-23 Environmental and resource economics Chapters 14, 12, and 9 The cost of environmental degradation Chapter 6

Recoverable? Found in varying quality, at varying depths, varying accessibility Different costs associated with extraction of different deposits Recoverable supplies: those for which total extraction costs are less than the sales revenues But: fossil fuel prices vary widely Recoverable supplies: a hydrocarbon is recoverable if there is a net energy gain from extraction (less than a barrel of oil to recover a barrel of oil) Must include ALL energy costs While technological change can reduce some of these, irreducible limit to energy costs: 9.8 joules of energy to lift 1 kilogram 1 meter

Fossil fuel As we deplete most accessible first…will take more energy to recover remaining supplies Energy return on investment: ratio of gross fuel extracted to economic energy directly and indirectly to deliver the fuel to society in a useful tem Declines over time 1950s in the US: every barrel of oil invested in exploration led to 50 1999: ratio 1 to 5 By 2005: ratio: 1 to 1

More on fossil fuels What does it mean that fossil fuels are stock-flow resources? Thus? Why are they nonrenewable but not exhaustible? Over time: quantitative and qualitative decline in stocks Rate of flow is largely determined by human efforts Thus If we had adequate infrastructure, we could theoretically extract all entropically recoverable fossil energy stocks in a single year Or we could make them last 1000 generations THUS: How long recoverable stocks will last is determined as much by how fast we extract them as by how much there actually is Because. We almost certainly will never exhaust fossil fuel stocks in physical terms. Why? Because there will always remain some stocks that too energy intensive or too expensive to recover. Rate of flow is largely determined by human efforts Thus If we had adequate infrastructure, we could theoretically extract all entropically recoverable fossil energy stocks in a single year Or we could make them last 1000 generations THUS: How long recoverable stocks will last is determined as much by how fast we extract them as by how much there actually is Because. We almost certainly will never exhaust fossil fuel stocks in physical terms. Why? Because there will always remain some stocks that too energy intensive or too expensive to recover.

‘pink elephant’ re: fossil fuels Consequences of use Used fuel does not disappear. Nothing can. Acid rain. Global warming. Carbon monoxide. Heat pollution. Oil spills. Issue of scale. “The sink will be full before the source is empty.” Plus… impact on ability of ecosystems to capture solar energy; difficult to measure and so much ignored

Know this equation Net recoverable energy from oil = (initial total stock of entropically recoverable reserves) – (energy cost of extraction) – (loss of solar energy due to induced loss of capacity to capture) – (lost fund capacity)

Thus… fossil fuels are: Rival goods Finite Stock-flow resource Dependency on fossil fuels Dependency on fossil fuels How? Energy needs used to produce food Provide the raw materials for a substantial portion of our economic production

Mineral Resources As with fossil fuels: Unlike fossil fuels: total stock is finite; occurring in varying degrees of purity; uncertain of total stock of any particular mineral; energy required to obtain resource; consequences (damage in extraction; waste) Unlike fossil fuels: can be recycled (naturally, this requires energy) Aboveground stock = minerals in use + those that can be recycled energy required to obtain resource Currently mining accounts of about 10% of global energy use Debate: - if solar energy can replace fossil fuel, nothing can replace minerals; mineral depletion a bigger deal

Mineral resources: waste Products that have stopped working Not recycled (now). Why? Mechanical or chemical erosion of the material in question Virtually no control here As with oil: the threat to us is probably more from the impacts of the waste itself than from the exhaustion of mineral resources.

Thus… mineral resources : ‘Rival goods within a generation, but as partially nonrival between generations – depending on how much is wasted and how much recycled’ Since the use by one generation does not leave less of the resource for future generations Stocks are finite; extracted at any rate we choose; waste can be minimized Survival dependency Substitutes for specific minerals developed

Water Stock is finite Stock-flow resource for drinking, irrigation, industry, and waste disposal Both renewable and nonrenewable Many water resources are renewable (hydrological cycle) Many aquifers are ‘fossil’ water – negligible recharge rates Can be both: stock-flow and fund-service resource simultaneously. How? But: we cannot positively influence the flow No substitute Rival and nonrival, depending; intergenerationally nonrival; varying excludability (rainfall?) Can be both: stock-flow and fund-service resource simultaneously How? Water itself is a stock-flow resource that is rapidly renewed by the hydrologic cycle When mechanical energy in the water is converted to electric energy by a microhydro power plant – it is essentially a fund-service resource Damming of the river allows the energy to be stockpiled by converting mechanical energy to potential energy – which is a stock-flow resource When used for transportation, recreation, or sustaining all the ecosystems, water is a fund-service resource

Ricardian Land Services excludable; Rival at any given point (land as a physical substrate and location, distinct from its other productive qualities) Services excludable; Rival at any given point Intergenerationally nonrival Nondepletable … though dynamic now

Solar Energy = to 19 trillion tons of oil (toe)/ year Difficult to capture and concentrate Most: reflected back (fortunately) Global energy consumption: 9 billion toe Forms of solar energy: biomass, wind, hydroelectricity, photovoltaics, wave/ocean thermal energy; (photosynthesis) Energy investments needed to produce infrastructure to capture solar energy Decrease plant surface area Fund-service resource

Essence… We have control over the rate at which we use fossil fuels, mineral resources and water Greater flows from finite stocks being demanded with physical growth of economy Finite stock imposes (unapparent) limits on total economic production over time Funds: provide services at a fixed rate over which we have no control -> limit size of economy at any given time, but do not limit total production over time Substitutability: relevant to scale Rivalness: relevant to distribution (within and between generations) Excludability: primarily relevant to allocation