1. 15 Natural Resource and Energy Economics McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. LO1 Resource Supplies: Doom or Boom? Population increased from 1 to 6.8 billion Standard of living is 12 times higher Consumption of resources is much higher 15-2

3. LO1 Population Growth Thomas Malthus (1798) predictions Replacement rate Total fertility Modernization Death rates fall Fertility rate falls below replacement rate 15-3

4. LO1 Source: The World Factbook, http://www.cia.gov. Data are 2009 estimates.http://www.cia.gov. Total Fertility Rates, 2009 CountryTotal Fertility Rate Australia1.78 Canada1.58 China1.79 France1.98 Germany1.41 Hong Kong1.02 Italy1.30 Japan1.21 Russia1.41 South Korea1.21 Sweden1.67 United States2.05 15-4

5. LO1 Resource Consumption Per Person Increasing commodity demand Population growth Rising consumption per person Commodity supply has risen faster than demand Commodity prices are falling 15-5

6. LO1 Resource Consumption Per Person 15-6

7. 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 Resource Consumption Per Person 15-7

8. LO1 Resource Consumption Per Person 15-8

9. 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 Resource Consumption Per Person 15-9

10. LO1 Resource Consumption Per Person 15-10

11. LO1 Resource Consumption Per Person 15-11

12. LO1 Energy Economics 15-12

13. LO2 Efficient Energy Use Achieve efficiency in business conditions with: Variations in fixed costs Daily variations in demand Different types of generation technology 15-13

14. LO2 Efficient Energy Use Source: United States Energy Information Administration, http://www.eia.doe.gov.http://www.eia.doe.gov. 15-14

15. LO3 Running Out of Energy? Will run out of oil or cheap energy Lack of energy is not a concern Alternative sources Externalities 15-15

16. LO4 Running Out of Energy? Oil Price per Barrel at Which the Alternative Is Economically Viable Alternative Fuel $80Biodiesel 60U.S. corn-based ethanol 50Shale Oil 40Tar sands: Brazilian sugar-cane based ethanol: gas to liquids: liquids; coal-to-liquids 20Conventional oil Sources: Cambridge Energy Research Associates, http://www.cera.com The Economist, April 22, 2006, http://www.economist.com.http://www.cera.com http://www.economist.com 15-16

17. LO4 Natural Resource Economics Policies for extracting resources to maximize net benefits Present vs. future consumption Present value Renewable resources Nonrenewable resources 15-17

18. LO4 Natural Resource Economics Nonrenewable resources Oil, coal, and metals Extraction strategy to maximize stream of profits User cost Sell today, cannot sell in the future Higher expected demand encourages less extraction today Property rights 15-18

19. LO4 Natural Resource Economics AB TC = EC + UC EC Q0Q0 Q1Q1 Q2Q2 0 First-year quantity extracted Dollars P UC 15-19

20. Natural Resource Economics LO4 TC = EC + UC 0 EC Q0Q0 Q1Q1 0 First-year quantity extracted Dollars P UC TC = EC + UC 1 UC 1 15-20

21. LO5 Renewable Resources Elephant preservation Strong property rights Forest management Optimal forest harvesting Differences in property rights Variation in growth rates 15-21

22. LO5 Global Perspective Percentage Change in the Amount of Land Covered by Forests 15-22

23. LO5 Optimal Forest Harvesting 15-23

24. LO5 Renewable Resources Optimal fisheries management Difficult to assign property rights Policies to limit catch sizes Total allowable catch Individual transfer quota 15-24

25. LO5 Renewable Resources FisheryMarket Value of Catch Sea scallop$385,922,993 Lobster360,389,768 Walleye pollock297,460,589 Dungeness crab227,197,666 Pacific halibut227,120,758 Pacific cod224,300,686 Sockeye salmon205,363,084 White shrimp194,132,043 Brown shrimp175,378,324 Blue crab128,181,534 15-25

26. LO5 Renewable Resources 15-26

27. Economic Growth & the Environment A Growing Economy Richer countries: Produce and consume more Spend more to maintain the environment Earn higher scores on measures of environmental quality (EPIs) 15-27