chapter 15 natural resource and energy economics mcgraw-hill/irwin copyright © 2009 by the...
TRANSCRIPT
Chapter 15
Natural Resource and Energy Economics
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Objectives
• Falling birth rates
• Sources of energy
• Running out of oil vs. running out of energy
• Resource conservation
• Property rights
15-2
Resource Supplies
• Will the world run out of natural resources?–World population 6.6 billion
–Standard of living 12 times higher than 1800
–Growing demand for natural resources
15-3
Population Growth
• Thomas Malthus 1798–Living standards remain at
subsistence level
–Population continues to grow
• Higher living standards have produced lower birth rates–Replacement rate
–Total fertility rate15-4
Total Fertility Rates 2007
Country Total Fertility Rate
Australia 1.76Canada 1.61China 1.75France 1.98Germany 1.40Hong Kong 0.98Italy 1.29Japan 1.23Russia 1.39South Korea 1.28Sweden 1.66United States 2.09
15-5
Population Growth
• Demographers –Population to peak at 9 billion
• Historically:–Death rates fall with modernization–Population explodes–Fertility rate eventually falls below
replacement rate–Children as economic assets vs.
liabilities 15-6
Resource Consumption
• Commodity demand rising the last 150 years–Population growth
–Rising consumption per person
• Commodity supply rising faster
• Declining real commodity prices
• Will this trend continue?15-7
Resource Consumption
• Resource consumption per person leveled off in richest countries–Water use
–Energy use
–Trash generated
• Resource demand will increase as more countries modernize
15-8
Energy Economics
• Dealing with energy scarcity• Rising U.S. inflation adjusted GDP
per 1 million BTU’s–Energy efficiency
• Will the world run out of energy?–Run out of oil, or cheap energy–Alternative sources–Externalities
15-9
Sources of Energy
U.S. electricity sources 2006–Coal 49%
–Nuclear 19.4%
–Natural gas 20%
–Hydroelectric 7%
–Renewables 2.4%
–Petroleum 1.6%
–Other 0.6%15-10
Alternative Energy Sources
• Economic viability of alternative fuels
• Oil price at which alternative becomes viable
–Biodiesel $80
–U.S. corn based ethanol $60
–Shale oil $50
–Tar sands, Brazilian ethanol $40
–Conventional oil $2015-11
Natural Resource Economics
• Policies for extracting resources to maximize net benefits
• Present vs. future consumption–Present value
• Renewable resources
• Nonrenewable resources
15-12
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
15-13
Renewable Resources
• Forests and wildlife
• Well structured property rights encourage sustainable use
• Optimal forest harvesting–30% of world land area
–Variation in growth rates
–Differences in property rights
15-14
Renewable Resources
• Optimal fisheries management–Fishery identified by location and
species
–Difficult to establish property rights
–Overfishing encouraged
–Policies to limit catch size
–Total allowable catch
–Individual transferable quota15-15
Economic Growth and the Environment
• Is growth bad for the environment?
• Richer countries produce and consume more
• Richer countries spend more to maintain the environment
• Environmental Performance Index (EPI)– Richer countries have higher scores
15-16
Key Terms
• replacement rate• total fertility rate• demographers• British thermal unit
(BTU)• net benefits• renewable natural
resource• nonrenewable
natural resource
• present value• user cost• extraction cost• conflict diamonds• fishery• fishery collapse• total allowable catch
(TAC)• individual
transferable quota (ITQ)
15-17
Next Chapter Preview…
Public Goods, Externalities, and Information Asymmetries
15-18