Natural Resource
Economics
Group-06
Introduction
• What is Natural Resource Economics ?
Natural
Resource
Economics
Natural
Resources
Economics
• Natural Resource
– Specific attributes of the environment that are
valued to humans -G. Johnston
– Aspects of nature tha...
Natural Resource Economics
• Application of economics to manage naturally
occurring resources for human needs/wants
with e...
Importance of Natural Resource
Economics
• Global warming
• Ozone Depletion
• Acid Deposition
• Conservation of Biological...
Classification of Natural
Resources
Natural
Resources
Production
resources
Renewable
resources
Non
renewable
resources
Non...
1. Production Resources
• Natural resources provide economics with raw
materials that are turned into goods via process of...
2. Non Production resources
• These are the resources which do not have a
direct relationship with the production of
goods...
• Renewable resources
Renewable resources are natural resources that
can be replenished in short period of time
Ex:- Solar...
• Non Renewable resources
Non renewable resources are natural resources
that cannot be re-made or re-grown at a scale
comp...
Renewable resources
1. Flow resource
a.)Non storable
• Often indivisible
• Inexhaustible (in human span of time)
• Time & ...
b. b.) storable
• May be divisible
• Time & management relevant to both to
consumption & supply
• The services are what ar...
Storable Flow Resources
Solar
Wind
Wave
Energy
Geothermal
Energy
Hydrogen Energy WaterHydro
Power
2.Fund resources
• Regenerative within human use time frame
• Assumes use within minimum & maximum
thresholds
Fund Resources
Timber
& Crops
Animals
(human &
nonhuman
Fish
Grazing
Lands
Soil & Water
Quality
Forests & some
Unique ecos...
3.Biological resources
Biological resources refer to the living
landscape, the plants, animals and other
aspects of nature...
Non renewable Resources
1. Recyclable resources
• A recyclable resource is one that can be used over
and over, but must fi...
2.Non recyclable Resources
Non recyclable resources are those resources
which cannot be used after it has been used
once
E...
Quantitative Expression of Natural
Resources
• Nature of Flow resources
Ft = Rt +St +Wt
Ft=Flow resource obtained with in ...
• Nature of fund resources
𝑆𝑡 = 𝐹𝑡 − 𝑅𝑡 − 𝑊𝑡 + 𝐹𝑡
St= stored fund resource at t time
Ft=Fund resource at t time
Rt= Consum...
• Nature of Biological resources
𝑆𝑡 = 𝑆0 − (𝑅𝑡 − 𝐻𝑡
St= Current biological mass
S0= Biological mass at the beginning
Ht= H...
Economic Evaluation methods of
Natural Resources
• The main conceptual principles of economic
evaluation methods of natura...
1.Natural Resource as an Asset
• In economics environment is considered as a complex
asset that provides different service...
• Complexity of environmental economics is
determined by meeting these contradictive
conditions and restrictions.
• It is ...
Households Firms
Output Market
Factor Market
Circular flow model of Economic activity
Households Firms
Nature
Factor Market
Output Market
Demand for
goods & services
Material Balance Model
3R:- Recovery
Recyc...
2.Economic Approach
• It provides better understanding about connection
between economic system and natural assets.
• Posi...
Ex:- Positive economic approach
• In order to evaluate dynamics of use of natural
resources.
• It helps determine whether ...
3. Normative criteria for decision making
• If it is essential to find out whether the proposed
actions are desirable, the...
• It can be formulated as follows: if B is benefit from
use of natural resources and C is costs then:
• o B>C action desir...
Steps proceeded by Normative
Analysis
1. Identify an optimal outcome
2. Understand extent to which institutions
produce op...
Static Efficiency and Dynamic
Efficiency
• Comparing benefit- cost analysis occur at
different points in time.
• With the ...
Static Efficiency
• An allocation of resources is said to satisfy the
static efficiency criterion if the economic
surplus ...
cost
Benefit
Pareto efficiency
• When the equlibrium of benefit curve and
cost curve implise the efiiciency point of
resource allocation.
• Pareto Effici...
Dynamic Efficiency
• Benefit-cost analysis requires comparing
benefits and costs that usually occur at
different points in...
– An allocation has achieved dynamic efficiency if it
maximizes the present value of net benefits
– Discounting is the pro...
• Present value of a net benefit received in “n”
year
PV [ Bn ] = Bn /(1+i)n
– Present value of steam of net benefits rece...
• According to the dynamic efficiency criterion,
the efficient allocation is that maximize present
value of net benefits.
...
period1 period2
Quantity
price
price
Dynamically
efficient point
P.V of net benefit curve (p1)
P.V of net benefit curve (p...
Conclusions
• Effective use of natural resources promotes
development of a country.
• Ineffective use of natural resources...
References
• Tietenberg, T. (2005) Environmental and natural
resource economics -6th edition-Pearson
• Callan,S.J. &Thomas...
Group Members
• K.K.H.M. Rathnayake UWU/EAG/12/0032
• Subadharshani.M UWU/EAG/12/0038
Natural resource economics
Natural resource economics
Natural resource economics
Natural resource economics
of 47

Natural resource economics

Introduction to Natural Resource Economics is a presentation done by Export Agriculture 3 rd Year students in Uva Wellassa University In Sri Lanka.
Published on: Mar 3, 2016
Published in: Economy & Finance      
Source: www.slideshare.net


Transcripts - Natural resource economics

  • 1. Natural Resource Economics Group-06
  • 2. Introduction • What is Natural Resource Economics ? Natural Resource Economics Natural Resources Economics
  • 3. • Natural Resource – Specific attributes of the environment that are valued to humans -G. Johnston – Aspects of nature that can be used by humans to satisfy human wants--Hite & Mulkey • Economics The study of the production ,processing , distribution and consumption of goods/services in an exchange system
  • 4. Natural Resource Economics • Application of economics to manage naturally occurring resources for human needs/wants with efficiency as the primary goal.
  • 5. Importance of Natural Resource Economics • Global warming • Ozone Depletion • Acid Deposition • Conservation of Biological Diversity
  • 6. Classification of Natural Resources Natural Resources Production resources Renewable resources Non renewable resources Non Production resources Flow resources Fund resources Biological resources Recyclable resources Non recyclable resourcesLife Support system Absorptive & Protective system Aesthetic and recreational system
  • 7. 1. Production Resources • Natural resources provide economics with raw materials that are turned into goods via process of production. • Environment also provides a direct service to the consumer. Ex:-Fuel, Fishery ,Forest, Water
  • 8. 2. Non Production resources • These are the resources which do not have a direct relationship with the production of goods and services.
  • 9. • Renewable resources Renewable resources are natural resources that can be replenished in short period of time Ex:- Solar, Water, Biomass, Wind
  • 10. • Non Renewable resources Non renewable resources are natural resources that cannot be re-made or re-grown at a scale comparable to its consumption Ex:- Nuclear energy, coal, Petroleum
  • 11. Renewable resources 1. Flow resource a.)Non storable • Often indivisible • Inexhaustible (in human span of time) • Time & management relevant only to consumption, not supply Ex:-Sunshine, Weather, Eco systems, Ocean waves
  • 12. b. b.) storable • May be divisible • Time & management relevant to both to consumption & supply • The services are what are significant for humans
  • 13. Storable Flow Resources Solar Wind Wave Energy Geothermal Energy Hydrogen Energy WaterHydro Power
  • 14. 2.Fund resources • Regenerative within human use time frame • Assumes use within minimum & maximum thresholds
  • 15. Fund Resources Timber & Crops Animals (human & nonhuman Fish Grazing Lands Soil & Water Quality Forests & some Unique ecosystems
  • 16. 3.Biological resources Biological resources refer to the living landscape, the plants, animals and other aspects of nature and are important to production
  • 17. Non renewable Resources 1. Recyclable resources • A recyclable resource is one that can be used over and over, but must first go through a process to prepare it for reuse. Ex:- Glass, Aluminium • There is no limit to the number of times these products can be recycled
  • 18. 2.Non recyclable Resources Non recyclable resources are those resources which cannot be used after it has been used once Ex:- soil, coal, Mineral oil, Natural gases.
  • 19. Quantitative Expression of Natural Resources • Nature of Flow resources Ft = Rt +St +Wt Ft=Flow resource obtained with in t time Rt=Consumed amount of flow resources St= stored amount of flow resources Wt=Wasted amount of flow resources
  • 20. • Nature of fund resources 𝑆𝑡 = 𝐹𝑡 − 𝑅𝑡 − 𝑊𝑡 + 𝐹𝑡 St= stored fund resource at t time Ft=Fund resource at t time Rt= Consumed amount of fund resource Wt= Wasted amount of fund resource
  • 21. • Nature of Biological resources 𝑆𝑡 = 𝑆0 − (𝑅𝑡 − 𝐻𝑡 St= Current biological mass S0= Biological mass at the beginning Ht= Harvested bio mass during t time Rt= Net new addition of bio mass during t time
  • 22. Economic Evaluation methods of Natural Resources • The main conceptual principles of economic evaluation methods of natural resources are: 1. Natural resources as asset 2. Economic approaches 3. Standard Criteria to decision making
  • 23. 1.Natural Resource as an Asset • In economics environment is considered as a complex asset that provides different services • It is a very special asset that ensures not only our existence but also development of economics . • The resources are limited but our wishes are unlimited. • Therefore there is a tendency that the speed of extraction and use of natural resources is growing to the maximum but the resources are limited.
  • 24. • Complexity of environmental economics is determined by meeting these contradictive conditions and restrictions. • It is essential to compare all costs and outcome but also evaluate efficiency of use of natural resources.
  • 25. Households Firms Output Market Factor Market Circular flow model of Economic activity
  • 26. Households Firms Nature Factor Market Output Market Demand for goods & services Material Balance Model 3R:- Recovery Recycle Reuse
  • 27. 2.Economic Approach • It provides better understanding about connection between economic system and natural assets. • Positive economics shows what is, what was and what will be. • Normative economics answers the question what should be. • Argument between these economics ensures continuous development and both approaches are important.
  • 28. Ex:- Positive economic approach • In order to evaluate dynamics of use of natural resources. • It helps determine whether use of resources has increased, decreased or has stayed on previous level. Ex:-Normative economic approach • To determine whether the speed of utilization of natural resources is acceptable or not and also to analyze possible ways of using natural resources.
  • 29. 3. Normative criteria for decision making • If it is essential to find out whether the proposed actions are desirable, the first step should be determination of benefits and losses. • If benefits are higher than losses then action is desirable. • This simple system is economic basis in decision making.
  • 30. • It can be formulated as follows: if B is benefit from use of natural resources and C is costs then: • o B>C action desirable; • o B< C action to be rejected • o B = C point of no losses • All benefits and costs are evaluated taking into consideration their effect on development of humankind
  • 31. Steps proceeded by Normative Analysis 1. Identify an optimal outcome 2. Understand extent to which institutions produce optimal outcomes and where conflicts occur. 3. Design appropriate policy solutions.
  • 32. Static Efficiency and Dynamic Efficiency • Comparing benefit- cost analysis occur at different points in time. • With the consideration of time there are 2 types of efficiency decision making concepts Static efficiency Dynamic efficiency
  • 33. Static Efficiency • An allocation of resources is said to satisfy the static efficiency criterion if the economic surplus derived from those resources is maximized by that allocation. • Economic surplus is the sum of consumer’s surplus and producer’s surplus.
  • 34. cost Benefit Pareto efficiency
  • 35. • When the equlibrium of benefit curve and cost curve implise the efiiciency point of resource allocation. • Pareto Efficiency When the system is in equilibrium can not make others worse off even though one can not better off.
  • 36. Dynamic Efficiency • Benefit-cost analysis requires comparing benefits and costs that usually occur at different points in time. • The problem is how to compare net benefits in one period with the net benefits received in another time • The traditional criterion used to find an optimal allocation when time is involved is called dynamic efficiency
  • 37. – An allocation has achieved dynamic efficiency if it maximizes the present value of net benefits – Discounting is the process of calculating present value. • The present value of a one-time net benefits received n years from now is   PV FV i n 1
  • 38. • Present value of a net benefit received in “n” year PV [ Bn ] = Bn /(1+i)n – Present value of steam of net benefits receive over “n” period of n year PV [B1 - Bn ] = ∑ Bn /(1+i)n i = interest rate.
  • 39. • According to the dynamic efficiency criterion, the efficient allocation is that maximize present value of net benefits. • The present value of net benefit for both years is simply the sum of present value in each of the two years. period1 period2p p q q
  • 40. period1 period2 Quantity price price Dynamically efficient point P.V of net benefit curve (p1) P.V of net benefit curve (p2)
  • 41. Conclusions • Effective use of natural resources promotes development of a country. • Ineffective use of natural resources decreases potential of sustainable development of a country. • Ineffective use of resources can also cause considerable losses to environment and economics.
  • 42. References • Tietenberg, T. (2005) Environmental and natural resource economics -6th edition-Pearson • Callan,S.J. &Thomas,J.M. 2004 Environmental Economics & Management-3rd edition, Phoenix
  • 43. Group Members • K.K.H.M. Rathnayake UWU/EAG/12/0032 • Subadharshani.M UWU/EAG/12/0038

Related Documents