Class notes Environmental Economics Natural Resource and Environmental Economics, ISBN: 9780321417534

ENVIRONMENTAL ECONOMICS
LECTURE 1: CHAPTER 2 SUSTAINABILITY

Chapter 2: Origins of the sustainability problem

2.1 ECONOMY-ECOLOGY INTERDEPENDENCE

2.1.1 ECO-SERVICES: ECONOMY – ECOLOGY INTERACTION

Different types of natural resources

 Resource economics (input in production)
- “Non-renewable” and renewable
- Land, fossil fuels, minerals, timber, food
 Environmental economics (services)
- life support: e.g. air, water, ozone
- waste sink: recycling?, assimilation?
 Emitting pollutants
- amenity: direct welfare
 Natural beauty
 Complex interactions
- river example: drinking water , cooling for power plants, waste sink, transport,
landscape, support for fisheries, support for fish species
- climate change

LAND (NOT IN THIS COURSE)

 Malthus (1798)
- people like to have 𝑓 > 2 children per couple.
- that leads to exponential population growth
- Food cannot grow along, so that famine recurs and people stay poor and hungry (as
equilibrium mechanism)
- Only remedy: have fewer children
 Ricardo (+/-1809)
- (i) more and less fertile land available
- (ii) marginal land determines cost of food
- (iii) more fertile land produces rent for owner (𝑟𝑋 = 𝑝𝑌 − 𝑤𝐿)
- Characteristic: fixed (constant) supply of heterogeneous quality
 Important to agricultural economies

NON-RENEWABLE RESOURCES (WK 2-3)

 Non-renewable resources (CH15)
 A non-renewable resource (also called a finite resource) is a natural resource that cannot be
readily replaced by natural means at a quick enough pace to keep up with consumption.
- Hotelling (1931): optimal management of oil well: when would an oil producer like to sell
his stock?
- Subsequently applied to all minerals
- Main characteristic: essential input in production + finite cumulative supply
- Important to early industrial economies

, - Oil, natural gas, coal (steenkool) and nuclear energy (kernenergie) = fossil fuels




RENEWABLE RESOURCES (WK 4-6)

 Renewable resources (CH17)
 Renewable resources include biomass energy (such as
ethanol), hydropower, geothermal power, wind energy, and solar energy. Biomass refers to
organic material from plants or animals. This includes wood, sewage, and ethanol (which
comes from corn or other plants)
 A renewable resource is a natural resource which will replenish to replace the
portion depleted by usage and consumption, either through natural reproduction or other
recurring processes in a finite amount of time in a human time scale. Renewable resources
are a part of Earth's natural environment and the largest components of its ecosphere. A
positive life cycle assessment is a key indicator of a resource's sustainability.
- optimal management of forests and fish stocks: how much should we harvest each year?
- Main characteristic: regenerates, but can become exhausted (extinct)
- Important for economies where harvesting possibilities exceed the natural regeneration
capacity
- Important for economies that access an open resource as open seas

COMPLEX ENVIRONMENTAL RESOURCES (WK 7-…)

 river: provides drinking water , support for fisheries, cooling for power plants, waste sink for
industry, transport for economy, landscape for tourists, support for fish species
 Acid rain: kills forests and statues, waste sink for SO2 and NOx
 climate change: supports ecosystems, waste sink for GHGs, etc.
- optimal management of various types of ‘pollution’: how much pollution is acceptable
each year?
- Main characteristic: regenerates, but complicated and sometimes irreversible
- Important for economies where emissions exceed the natural absorption capacity
- Important for economies that share same environmental resource