Natural
resource economics
Three
circles enclosed within one another showing how both economy and society are
subsets of our planetary ecological system. This view is useful for correcting
the misconception, sometimes drawn from the previous "three pillars"
diagram, that portions of social and economic systems can exist independently
from the environment.[1][unreliable source?]
Natural resource economics
deals with the supply, demand,
and allocation of
the Earth's natural resources. One main objective of
natural resource economics is to better understand the role of natural
resources in the economy in order to develop more sustainable methods of managing those resources to
ensure their availability to future generations. Resource economists study
interactions between economic and natural systems, with the goal of developing
a sustainable and efficient economy.[2]
Areas of discussion
Natural resource economics is a transdisciplinary field of academic research
within economics that aims to address the connections and interdependence
between human economies and natural ecosystems. Its focus is how to operate an economy
within the ecological constraints of earth's natural resources.[3] Resource economics brings together and
connects different disciplines within the natural and social sciences connected
to broad areas of earth science, human economics, and natural ecosystems.[4] Economic models must be adapted to
accommodate the special features of natural resource inputs. The traditional
curriculum of natural resource economics emphasized fisheries models, forestry
models, and minerals extraction models (i.e. fish, trees, and ore). In recent
years, however, other resources, notably air, water, the global climate, and
"environmental resources" in general have become increasingly
important to policy-making.
Academic and policy interest has now moved beyond simply
the optimal commercial exploitation of the standard trio of resources to
encompass management for other objectives. For example, natural resources more
broadly defined have recreational, as well as commercial values. They may also
contribute to overall social welfare levels, by their mere existence.
The economics and policy area focuses on the human
aspects of environmental problems. Traditional areas of environmental and
natural resource economics include welfare theory, pollution control, resource
extraction, and non-market valuation, and also resource exhaustibility,[5] sustainability, environmental management,
and environmental policy.
Research topics could include the environmental impacts of agriculture,
transportation and urbanization, land use in poor and industrialized countries,
international trade and the environment, climate change,
and methodological advances in non-market valuation, to name just a few.
Hotelling's rule is a 1931 economic model
of non-renewable resource management by
Harold Hotelling. It shows that efficient
exploitation of a nonrenewable and nonaugmentable resource would, under
otherwise stable economic conditions, lead to a depletion of
the resource. The rule states that this would lead to a net price or "Hotelling rent" for it
that rose annually at a rate equal to the rate of interest,
reflecting the increasing scarcity of the resource. Nonaugmentable resources of
inorganic materials (i.e. minerals) are uncommon; most resources can be augmented
by recycling and by the existence and use of substitutes for the end-use
products (see below).
Vogely has stated that the development of a mineral
resource occurs in five stages: (1) The current operating margin (rate of
production) governed by the proportion of the reserve (resource) already
depleted. (2) The intensive development margin governed by the trade-off
between the rising necessary investment and quicker realization of revenue. (3)
The extensive development margin in which extraction is begun of known but
previously uneconomic deposits. (4) The exploration margin in which the search
for new deposits (resources) is conducted and the cost per unit extracted is
highly uncertain with the cost of failure having to be balanced against finding
usable resources (deposits) that have marginal costs of extraction no higher
than in the first three stages above. (5) The technology margin which interacts
with the first four stages. The Gray-Hotelling (exhaustion) theory is a special
case, since it covers only Stages 1–3 and not the far more important Stages 4
and 5.[6]
These conflicting views will be substantially reconciled
by considering resource-related topics in depth in the next section, or at
least minimized.
Furthermore, Hartwick's rule
provides insight to the sustainability of welfare in an economy
that uses non-renewable resources.
Perpetual resources vs.
exhaustibility
Background and introduction
The perpetual resource concept is a complex one because
the concept of resource is complex and changes with the advent of new
technology (usually more efficient recovery), new needs, and to a lesser degree
with new economics (e.g. changes in prices of the material, changes in energy
costs, etc.). On the one hand, a material (and its resources) can enter a time
of shortage and become a strategic and critical
material (an immediate exhaustibility crisis), but on
the other hand a material can go out of use, its resource can proceed to being
perpetual if it was not before, and then the resource can become a
paleoresource when the material goes almost completely out of use (e.g.
resources of arrowhead-grade flint). Some of the complexities influencing
resources of a material include the extent of recyclability, the availability
of suitable substitutes for the material in its end-use products, plus some
other less important factors.
The Federal Government suddenly became compellingly
interested in resource issues on December 7, 1941, shortly after which Japan
cut the U.S. off from tin
and rubber and made some other
materials very difficult to obtain, such as tungsten. This was the worst case
for resource availability, becoming a strategic and critical material. After
the war a government stockpile of strategic and critical materials was set up,
having around 100 different materials which were purchased for cash or obtained
by trading off U.S. agricultural commodities for them. In the longer term,
scarcity of tin later led to completely substituting aluminum foil for tin foil and polymer lined steel cans and aseptic
packaging substituting for tin electroplated steel cans.
Resources change over time with technology and economics;
more efficient recovery leads to a drop in the ore grade needed. The average
grade of the copper
ore processed has dropped from 4.0% copper in 1900 to 1.63% in 1920, 1.20% in
1940, 0.73% in 1960, 0.47% in 1980, and 0.44% in 2000.[8]
Cobalt
had been in an iffy supply status ever since the Belgian Congo
(world's only significant source of cobalt) was given a hasty independence in
1960 and the cobalt-producing province seceded as Katanga, followed by several
wars and insurgencies, local government removals, railroads destroyed, and
nationalizations. This was topped off by an invasion of the province by
Katangan rebels in 1978 that disrupted supply and transportation and caused the
cobalt price to briefly triple. While the cobalt supply was disrupted and the
price shot up, nickel and other substitutes were pressed into service.[9]
Following this, the idea of a "Resource War" by
the Soviets became popular. Rather than the chaos that resulted from the
Zairean cobalt situation, this would be planned, a strategy designed to destroy
economic activity outside the Soviet bloc by the acquisition of vital resources
by noneconomic means (military?) outside the Soviet bloc (Third World?), then
withholding these minerals from the West.[10]
An important way of getting around a cobalt situation or a
"Resource War" situation is to use substitutes for a material in its
end-uses. Some criteria for a satisfactory substitute are (1) ready
availability domestically in adequate quantities or availability from
contiguous nations, or possibly from overseas allies, (2) possessing physical
and chemical properties, performance, and longevity comparable to the material
of first choice, (3) well-established and known behavior and properties
particularly as a component in exotic alloys, and (4) an ability for processing
and fabrication with minimal changes in existing technology, capital plant, and
processing and fabricating facilities. Some suggested substitutions were alunite
for bauxite to make alumina, molybdenum and/or nickel for cobalt, and aluminum alloy automobile
radiators for copper alloy automobile radiators.[11] Materials can be eliminated without material
substitutes, for example by using discharges of high tension electricity to
shape hard objects that were formerly shaped by mineral abrasives, giving
superior performance at lower cost,[12] or by using computers/satellites to replace
copper wire (land lines).
An important way of replacing a resource is by synthesis,
for example, industrial diamonds and many kinds of graphite, although a certain kind of graphite could
be almost replaced by a recycled product. Most graphite is synthetic, for
example, graphite electrodes, graphite fiber, graphite shapes (machined or
unmachined), and graphite powder.
Another way of replacing or extending a resource is by
recycling the material desired from scrap or waste. This depends on whether or
not the material is dissipated or is available as a no longer usable durable
product. Reclamation of the durable product depends on its resistance to
chemical and physical breakdown, quantities available, price of availability,
and the ease of extraction from the original product.[13] For example, bismuth in
stomach medicine is hopelessly scattered (dissipated) and therefore impossible
to recover, while bismuth alloys can be easily recovered and recycled. A good
example where recycling makes a big difference is the resource availability
situation for graphite, where flake graphite can be recovered from
a renewable resource called kish, a steelmaking waste created when carbon
separates out as graphite within the kish from the molten metal along with
slag. After it is cold, the kish can be processed.[14]
Several other kinds of resources need to be introduced.
If strategic and critical materials are the worst case for resources, unless
mitigated by substitution and/or recycling, one of the best is an abundant
resource. An abundant resource is one whose material has so far found little
use, such as using high-aluminous clays or anorthosite to produce alumina, and
magnesium before it was recovered from seawater. An abundant resource is quite
similar to a perpetual resource.[15] The reserve base is the part of an
identified resource that has a reasonable potential for becoming economically
available at a time beyond when currently proven technology and current
economics are in operation. Identified resources are those whose location,
grade, quality, and quantity are known or estimated from specific geologic
evidence. Reserves are that part of the reserve base that can be economically
extracted at the time of determination;[16] reserves should
not be used as a surrogate for resources because they are often distorted by
taxation or the owning firm's public relations needs.
Comprehensive natural
resource models
Harrison Brown and associates stated that humanity will
process lower and lower grade "ore". Iron will come from low-grade
iron-bearing material such as raw rock from anywhere in an iron formation, not much
different from the input used to make taconite pellets in North America and elsewhere
today. As coking coal reserves decline, pig iron and steel production will use
non-coke-using processes (i.e. electric steel). The aluminum industry could shift from using bauxite to
using anorthosite and clay. Magnesium metal and magnesia consumption (i.e. in
refractories), currently obtained from seawater, will increase. Sulfur will be
obtained from pyrites, then gypsum or anhydrite. Metals such as copper, zinc, nickel, and lead will be obtained from manganese nodules or the Phosphoria
formation (sic!). These changes could occur irregularly in different parts of
the world. While Europe and North America might use anorthosite or clay as raw
material for aluminum, other parts of the world might use bauxite, and while
North America might use taconite, Brazil might use iron ore. New materials will
appear (note: they have), the result of technological advances, some acting as
substitutes and some with new properties. Recycling will become more common and
more efficient (note: it has!). Ultimately, minerals and metals will be
obtained by processing "average" rock. Rock, 100 tonnes of
"average" igneous rock, will yield eight tonnes of aluminum, five
tonnes of iron, and 0.6 tonnes of titanium.[17][18]
The USGS model based on crustal abundance data and the
reserve-abundance relationship of McKelvey, is applied to several metals in the
Earth's crust (worldwide) and in the U.S. crust. The potential currently
recoverable (present technology, economy) resources that come closest to the
McKelvey relationship are those that have been sought for the longest time,
such as copper, zinc, lead, silver, gold and molybdenum. Metals that do not follow the McKelvey
relationship are ones that are byproducts (of major metals) or haven't been
vital to the economy until recently (titanium, aluminum to a lesser degree). Bismuth is an
example of a byproduct metal that doesn't follow the relationship very well;
the 3% lead reserves in the western U.S. would have only 100 ppm bismuth,
clearly too low-grade for a bismuth reserve. The world recoverable resource
potential is 2,120 million tonnes for copper, 2,590 million tonnes for nickel,
3,400 million tonnes for zinc, 3,519 BILLION tonnes for aluminum, and 2,035
BILLION tonnes for iron.[19]
Diverse authors have further contributions. Some think
the number of substitutes is almost infinite, particularly with the flow of new
materials from the chemical industry; identical end products can be made from
different materials and starting points. Plastics can be good electrical conductors.
Since all materials are 100 times weaker than they theoretically should be, it
ought to be possible to eliminate areas of dislocations and greatly strengthen
them, enabling lesser quantities to be used. To summarize, "mining"
companies will have more and more diverse products, the world economy is moving
away from materials towards services, and the population seems to be levelling,
all of which implies a lessening of demand growth for materials; much of the
materials will be recovered from somewhat uncommon rocks, there will be much
more coproducts and byproducts from a given operation, and more trade in
minerals and materials.[20]
Trend towards perpetual
resources
As radical new technology impacts the materials and
minerals world more and more powerfully, the materials used are more and more
likely to have perpetual resources. There are already more and more materials
that have perpetual resources and less and less materials that have
nonrenewable resources or are strategic and critical materials. Some materials
that have perpetual resources such as salt,stone, magnesium, and common clay were mentioned previously.
Thanks to new technology, synthetic diamonds were added to the list of perpetual
resources, since they can be easily made from a lump of carbon. Another form of carbon,
synthetic graphite, is made in large quantities (graphite electrodes, graphite
fiber) from carbon precursors such as petroleum coke or a textile fiber. A firm
named Liquidmetal Technologies, Inc. is utilizing the removal of dislocations
in a material with a technique that overcomes performance limitations caused by
inherent weaknesses in the crystal atomic structure. It makes amorphous metal alloys, which retain a random
atomic structure when the hot metal solidifies, rather than the crystalline
atomic structure (with dislocations) that normally forms when hot metal
solidifies. These amorphous alloys have much better performance properties than
usual; for example, their zirconium-titanium Liquidmetal
alloys are 250% stronger than a standard titanium alloy. The Liquidmetal alloys
can supplant many high performance alloys.[21]
Exploration of the ocean bottom in the last fifty years
revealed manganese nodules and phosphate nodules in many locations. More recently,
polymetallic sulfide deposits have been discovered and polymetallic sulfide
"black muds" are being presently deposited from "black
smokers" [22] The cobalt scarcity situation of 1978 has a
new option now: recover it from manganese nodules. A Korean firm plans to start
developing a manganese nodule recovery operation in
2010; the manganese nodules recovered would average 27% to 30% manganese, 1.25% to 1.5% nickel, 1% to 1.4% copper,
and 0.2% to 0.25% cobalt (commercial grade) [23] Nautilus Minerals Ltd. is planning to
recover commercial grade material averaging 29.9% zinc, 2.3% lead, and 0.5%
copper from massive ocean-bottom polymetallic sulfide deposits using an
underwater vacuum cleaner-like device that combines some current technologies
in a new way. Partnering with Nautilus are Tech Cominco Ltd. and Anglo-American
Ltd., world-leading international firms.[24]
There are also other robot mining techniques that could
be applied under the ocean. Rio Tinto is using satellite links to allow workers
1500 kilometers away to operate drilling rigs, load cargo, dig out ore and dump
it on conveyor belts, and place explosives to subsequently blast rock and
earth. The firm can keep workers out of danger this way, and also use fewer
workers. Such technology reduces costs and offsets declines in metal content of
ore reserves.[25] Thus a variety of minerals and metals are
obtainable from unconventional sources with resources available in huge
quantities.
Finally, what is a perpetual resource? The ASTM
definition for a perpetual resource is "one that is virtually
inexhaustible on a human time-scale". Examples given include solar energy,
tidal energy, and wind energy,[26] to which should
be added salt, stone, magnesium, diamonds, and other materials mentioned above.
A study on the biogeophysical aspects of sustainability came up with a rule of
prudent practice that a resource stock should last 700 years to achieve sustainability
or become a perpetual resource, or for a worse case, 350 years.[27]
If a resource lasting 700 or more years is perpetual, one
that lasts 350 to 700 years can be called an abundant resource, and is so
defined here. How long the material can be recovered from its resource depends
on human need and changes in technology from extraction through the life cycle
of the product to final disposal, plus recyclability of the material and
availability of satisfactory substitutes. Specifically, this shows that
exhaustibility does not occur until these factors weaken and play out: the
availability of substitutes, the extent of recycling and its feasibility, more
efficient manufacturing of the final consumer product, more durable and
longer-lasting consumer products, and even a number of other factors.
The most recent resource information and guidance on the
kinds of resources that must be considered is covered on the Resource Guide-Update
[1]
Transitioning: perpetual
resources to paleoresources
Perpetual resources can transition to being a
paleoresource. A paleoresource is one that has little or no demand for the
material extracted from it; an obsolescent material, humans no longer need it.
The classic paleoresource is an arrowhead-grade flint resource; no one makes flint arrowheads or
spearheads anymore—making a sharpened piece of scrap steel and using it is much
simpler. Obsolescent products include tin cans, tin foil, the schoolhouse slate blackboard, and radium in medical technology.
Radium has been replaced by much cheaper Cobalt 60 and other radioisotopes in
radiation treatment. Noncorroding lead as a cable covering has been replaced by
plastics.
Pennsylvania anthracite is another material where the trend towards
obsolescence and becoming a paleoresource can be shown statistically.
Production of anthracite was 70.4 million tonnes in 1905, 49.8 million tonnes
in 1945, 13.5 million tonnes in 1965, 4.3 million tonnes in 1985, and 1.5
million tonnes in 2005. The amount used per person was 84 kg per person in
1905, 7.1 kg in 1965, and 0.8 kg in 2005.[28] [2] Compare this to the USGS anthracite reserves
of 18.6 billion tonnes and total resources of 79 billion tonnes;[29] the anthracite demand has dropped so much
that these resources are more than perpetual.
Since anthracite resources are so far into the perpetual
resource range and demand for anthracite has dropped so far, is it possible to see
how anthracite might become a paleoresource? Probably by customers continuing
to disappear (i.e. convert to other kinds of energy for space heating), the
supply network atrophy as anthracite coal dealers can't retain enough business to
cover costs and close, and mines with too small a volume to cover costs also
close. This is a mutually reinforcing process: customers convert to other forms
of cleaner energy that produce less pollution and carbon dioxide, then the coal
dealer has to close because of lack of enough sales volume to cover costs. The
coal dealer's other customers are then forced to convert unless they can find
another nearby coal dealer. Finally the anthracite mine closes because it
doesn't have enough sales volume to cover its costs.
References
1. Jump up ^ Willard, B. (2011). "3 Sustainability Models"
citing The Power of Sustainable Thinking by Bob Doppelt, and The
Necessary Revolution by Peter Senge et al. Retrieved on: 2011-05-03.
2. Jump up ^ http://www.uri.edu/cels/enre/
University of Rhode Island Department of Environmental and Natural Resource
Economics Retrieved October-22-09
5. Jump up ^ Geoffrey Heal (2008). "exhaustible
resources," The New Palgrave Dictionary
of Economics, 2nd Edition. Abstract
6. Jump up ^ Vogely, William A. "Nonfuel Minerals
and the World Economy", Chapter 15 in "The Global Possible" by Repetto,
Robert, World Resources Institute Book Yale University Press
7. Jump up ^ Simon, Julian. "Can the Supply of
Natural Resources Really be Infinite? Yes!", "The Ultimate
Resource" 1981, Chapter 3
8. Jump up ^ "Domestic Reserves vis-a-vis
Resources","Congressional Handbook on U.S. Materials Import
Dependency" House Committee on Banking, Finance & Urban Affairs,
September 1981, pp. 19-21
9. Jump up ^ U.S. Bureau of Mines, 1978-79 Minerals
Yearbook, "Cobalt" and "The Mineral Industry of Zaire"
chapters, Vol. I pp. 249-258, Vol. III pp. 1061-1066
10. Jump up ^ "THE RESOURCES WAR",
"Congressional Handbook on U.S. Materials Import Dependency" House
Committee on Banking, Finance, and Urban Affairs, September 1981, pp. 160-174
11. Jump up ^ "SUBSTITUTION",
"Congressional Handbook on U.S. Material Import Dependency" House
Committee on Banking, Finance, and Urban Affairs, September 1981, pp. 242-254
12. Jump up ^ Charles W. Merrill "Mineral
Obsolescence and Substitution" "Mining Engineering", AIME,
Society of Mining Engineers, September 1964, pp. 55-59
13. Jump up ^ Peter T. Flawn. "Mineral Resources
(Geology, Engineering, Economics, Politics, Law)" Rand McNally, Chicago,
1966, pp. 374-378
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