1. Copyright 2008 The McGraw-Hill Companies 15W-1 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show 15 Natural Resource and Energy Economics WEB

2. Copyright 2008 The McGraw-Hill Companies 15W-2 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Chapter Objectives Resource Supplies: Doom or Boom? Can Governments Raise Birthrates? Are We Running Out of Energy? Turning Entrails (and Nearly Anything Else) Into Oil Natural Resource Economics Using Present Values to Evaluate Future Possibilities Nonrenewable Resources Renewable Resources

3. Copyright 2008 The McGraw-Hill Companies 15W-3 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Resource Supplies: Doom or Boom Population Growth –Replacement Rate –Total Fertility Rate –Demographers Resource Consumption Per Person –British Thermal Unit (BTU) Energy Economics –Efficient Energy Use

4. Copyright 2008 The McGraw-Hill Companies 15W-4 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Resource Supplies: Doom or Boom U.S. Electricity Generation Sources –50% Coal –20% Nuclear –18% Natural Gas –6.5% Hydroelectric –3.0% Petroleum –2.3% Renewables –0.2% Other

5. Copyright 2008 The McGraw-Hill Companies 15W-5 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Barrel Oil Price Viability Alternative Fuel Resource Supplies: Doom or Boom Oil Prices at Which Alternative Sources Become Economically Viable $80Biodiesel 60 U.S. Corn-Based Ethanol 50Shale Oil 40Tar Sands; Brazilian Sugar- Cane-Based Ethanol; Gas-to- Liquids; Coal-to-Liquids 20Conventional Oil

6. Copyright 2008 The McGraw-Hill Companies 15W-6 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Natural Resource Economics Net Benefits Renewable Natural Resources Nonrenewable Natural Resources Present Value to Evaluate Future Possibilities User Cost Present Use Versus Future Use

7. Copyright 2008 The McGraw-Hill Companies 15W-7 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Extraction Costs Choosing the Optimal Extraction Level Dollars First Year Quantity Extracted UC EC TC = EC + UC P 0 Q2Q2 Q1Q1 Q0Q0 A B

8. Copyright 2008 The McGraw-Hill Companies 15W-8 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Market Failures Lead to Excessive Present Use Applications –Conflict Diamonds –Elephant Preservation Renewable Resources –Forest Management –Forest Growth Rates Early Slow Growth Maturing Rapid Growth Mature Slow to Zero Growth

9. Copyright 2008 The McGraw-Hill Companies 15W-9 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Market Failures Lead to Excessive Present Use Optimal Fisheries Management –Fishery –Fishery Collapse Status of World Fisheries in 2003 –3% Underexploited –21% Moderately Exploited –52% Fully Exploited –16% Overexploited –7% Depleted –1% Recovering From Depletion

10. Copyright 2008 The McGraw-Hill Companies 15W-10 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Market Failures Lead to Excessive Present Use Policies to Limit Catch Sizes Total Allowable Catch (TAC) Individual Transferable Quotas (ITQ)

11. Copyright 2008 The McGraw-Hill Companies 15W-11 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Is Economic Growth Bad For the Environment Environmental Quality Higher in Richer Countries Positive Nature of Growth Improved Standard of Living Greater Environmental Spending Yale EPI Environmental Score Data Supports Positive Aspects of Growth for the Environment Last Word

12. Copyright 2008 The McGraw-Hill Companies 15W-12 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Key Terms replacement rate total fertility rate demographer British thermal unit (BTU)British thermal unit (BTU) net benefits renewable natural resourcesrenewable natural resources nonrenewable natural resourcesnonrenewable natural resources present value user cost extraction cost conflict diamondsconflict diamonds fishery fishery collapse total allowable catch (TAC)total allowable catch (TAC) individual transferable quota (ITQ)individual transferable quota (ITQ)

13. Copyright 2008 The McGraw-Hill Companies 15W-13 Resource Supplies: Doom or Boom? Natural Resource Economics Extraction Costs Market Failures Lead to Excessive Present Use Last Word Key Terms End Show Next Chapter Preview… Government and Market Failure