1. Copyright © 2013 Jonathan M. Harris
Environmental and Natural Resource Economics 3rd ed. Jonathan M. Harris and Brian Roach Chapter 11 – Nonrenewable Resources: Scarcity and Abundance
Copyright © 2013 Jonathan M. Harris

2. Figure 11.1: Classification of Nonrenewable Resources
Subeconomic
Economic
Increasing Geologic Assurance
Measured
Indicated
Demonstrated
Inferred
Identified
Undiscovered
Hypothetical (in known districts)
Hypothetical (in un-discovered districts)
Increasing Economic Feasibility
Reserves
The implication of this standard resource classification diagram is that reserves are not fixed but variable, and can be expanded in two ways: by new discovery or by new technology and changing market conditions. The currently identified economic reserves may be only a small portion of the ultimately recoverable reserves.
Source: Adapted from U.S. Bureau of Mines and U.S. Geological Survey, 1976.

3. Figure 11.2: Nonrenewable Resource Production Decisions
Price
Quantity MC Qm Q* P A
Figure 11.2: Nonrenewable Resource Production Decisions
Unlike ordinary competitive firms, firms that produce non-renewable resources will not produce where P = MC, but will balance the resource rent available from producing today with the expected rent available from producing in the future. They forgo potential profits equal to area A in the expectation of greater future profits. High-quality resources, with high recoverable rents, will be exploited first, while lower-grade resources may be held in reserve.
Source: Adapted from Hartwick and Olewiler, 1998, which provides a more advanced discussion of the economic theory of nonrenewable resource extraction.

4. Figure 11.3: Hypothetical Nonrenewable Resource Use Profile
Time
Price
Quantity Extracted
Stage I
Stage III
Stage II
Stage IV
Choke Price
In theory, non-renewable resources should face eventual exhaustion. The price of the resource should rise over time (in accordance with Hotelling’s rule), while the quantity extracted should gradually decline, reaching zero when the “choke price”, or highest possible market price for the resource, is reached. The complete life cycle of a resource includes a period of declining prices and increasing consumption, followed eventually by rising prices and decreasing consumption. Until recently, it has appeared that we have been in Stage I or II, although recent evidence suggests that we may be moving into Phase III with rising prices for many resources.
Source: Adapted from Hartwick and Olewiler, 1998,

5. Figure 11.4: Prices for Selected Minerals, 1996-2011
Copper
Lead
Zinc
Price per Pound
After a long period of stable or declining prices, prices for key minerals rose rapidly in , though they fell back somewhat in Prices rose again in and have declined somewhat since then, but remain above previous levels.
Source: U.S. Geological Survey, Minerals Commodities Summaries, various years.

6. Figure 11.5: Global Economic Reserves for Selected Minerals, 1996-2012
Copper
Zinc
Lead
Even though production has risen steadily since 1950, reserves for most minerals have increased, not decreased, due to new discovery and improved technology for resource recovery.
Source: U.S. Geological Survey, Minerals Commodities Summaries, various years.

7. Table 11.1: Expected Resource Lifetimes, Selected Minerals
2011 global production (thousand metric tons)
Global reserves (thousand metric tons)
Expected resource lifetime, years (static reserve index)
Aluminum
220,000
29,000,000
132
Cadmium 22
640 29
Copper
16,100
690,000 43
Iron ore
2,800,000
80,000,000
Lead
4,500
85,000 19
Lithium 34
13,000
382
Mercury 2 93 47
Nickel
1,800
80,000 44
Tin
253
4,800
Tungsten 72
3,100
Zinc
12,400
250,000 20
Reserve base estimates indicate that shortages are not imminent, although higher-quality reserves may run short in the relatively near future.
Source: U.S. Geological Survey, Minerals Commodities Summaries, various years.
Note: Aluminum data for bauxite ore, the primary source of aluminum.

8. Table 11.2: Potential Environmental Impacts of Mining
Activity
Potential impacts
Excavation and ore removal
Destruction of plant and animal habitat, human settlements, and other features (surface mining)
Land subsidence (underground mining)
Increased erosion; silting of lakes and streams
Waste generation
Acid drainage and metal contamination of lakes, streams, and groundwater
Ore concentration
Waste generation (tailings)
Organic chemical contamination
Acid drainage and metal contamination
Smelting/refining
Air pollution (including sulfur dioxide, arsenic, lead, cadmium and other toxics)
Waste generation (slag)
Impacts of producing energy (most energy used for mineral production goes into smelting and refining).
Mining has many negative environmental impacts on land, air, and water, with potential ecological and human health effects.
Source: Young, 1992.

9. Figure 11.6: Impact of Recycling on Virgin Resource Extraction Path
Stage III
Stage IV
Supply from Recycled Materials
Supply from Virgin Resource
Total Supply
Extraction Path without Recycling
Time
Resource Supply
Expansion of resource recycling and substitution of backstop (ideally renewable) resources can stretch out the lifetime of a non-renewable resource.

10. Figure 11.7: Marginal Costs of Recycling
Proportion of Supply Obtained from Recycled Materials
40% 0%
60%
100%
MCr
MPCv
MSCv
Equilibrium levels of recycling can be identified based on marginal costs of virgin and recycled materials. Producers will tend to operate where these marginal costs are equalized, which will be at a higher level of recycling with internalization of environment costs.

11. Figure 11. 8: Scrap Metal as a Percentage of Total U. S
Figure 11.8: Scrap Metal as a Percentage of Total U.S. Consumption, 2010
Scrap Metal (Percent)
Metals in the U.S. are recycled at varying rates. The proportion recycled is highest for lead, a durable metal with high environmental impacts from mining. More than half of U.S. iron and steel, and over 50% of aluminum, are recycled.
Source: USGS, 2012.