Resources – Natural Capital

1. Resources – Natural Capital IB syllabus: 3.2

2. Syllabus Statements • 3.2.1: Explain the concept of resources in terms of natural capital • 3.2.2: Define the terms renewable, replenishable, and non-renewable natural capital • 3.2.3: Explain the dynamic nature of the concept of a resource • 3.2.4: Discuss the view that the environment can have its own intrinsic value. • 3.2.5: Explain the concept of sustainability in terms of natural capital and natural income • 3.2.6: Discuss the concept of sustainable development • 3.2.7: Calculate and explain sustainable yield from given data

3. vocabulary • Natural Income • Natural Capital • Non-renewable • Renewable • Replinishable • Sustainability • Sustainable yield

4. Economic view • Traditional economy based on land, labor and capital • See environment as only one set of resources within a larger economic sphere • Environmental economists view environment as providing goods and services on which humans depend • Economy is constrained by limits of environmental resources • Environment provides raw materials and means of absorbing wastes

5. Economic Activity: Classic View

6. Economic production is the process of converting the natural world into a manufactured world. • Example: trees to paper to trash

7. Economic Activity: Environmental View

8. Resources & Natural Capital • Term coined by ecologically minded economists • If properly managed renewable & replenishable resources are forms of wealth that can produce “natural income” • “natural income” = indefinitely available valuable goods and services (based off of renewable and replenishable) • Marketable commodities or goods (timber, grain) • Ecological / Life-support services (flood & erosion protection from forests) • Non-renewable resources = forms of economic capital that cannot generate wealth without being liquidated

9. Natural Capital & Natural Income • Natural Capital  Standing stocks • Stock = present accumulated amount of capital • Forests, Fish • Natural Income  Flows • Sustainable rate of harvest of a stock • Harvests of timber, fishing

10. New England Groundfish Fisheries Example

12. Too many boats, too few fish • November 1994 moves to shut down north atlantic groundfish fishery • Public outcry and economic effects • What caused the collapse • Decades of unsustainable harvest • Magnuson Act of 1976 supported unprecedented growth of the fishing fleet • 570 boats to 900 • Bigger boats with more technology to catch fish • Removing large breeders and young before they can breed • Common syndrome for fisheries collapse • The flow (harvest) was bigger than the stock (population) could support

14. Classes of Natural Capital I • RENEWABLE NATURAL CAPITAL • Living species, ecosystems • Self producing & self maintaining • May use solar energy in photosynthesis • Can yield marketable goods (wood, meat) • Essential services when left in place (climate regulation)

15. Classes of Natural Capital II • REPLENISHABLE NATURAL CAPITAL • Non-living & dependent on solar engine for renewal • Groundwater, Ozone layer

16. Classes of Natural Capital III • NON-RENEWABLE NATURAL CAPITAL • Like inventories • Any use requires liquidating part of the stock • Fossil fuels, Metals, & Minerals • Some may regenerate in a geological time scale

17. The status of these resources changes over time • Cultural, economic, and technological factors influence a resource’s status over time and space • Uranium – never valued, but with advent of nuclear technologies now extremely valuable • Bluefin Tuna – prior to 1970 exclusively sport fish (.05 / lb)  Japanese specialty market develops –now a single large fish has sold for $180,000 • Solar Power – 1960s space race makes it important  1970s oil embargo makes it critical  1990s competes with dropping oil prices  now peak oil and increasing price make it desirable again

19. Natural Capital has Value • Ecological, Economic, Aesthetic value • Value assigned based on diverse perspectives • Industrial Societies emphasize monetary & economic valuations of nature • Economic value determined by market price of goods or services produced • Extrinsic Values

20. Ecosystem Capital: Goods and Services

21. Natural Capital has Intrinsic Value • Ecological processes have no formal value • Still important though  waste elimination, flood & erosion control, nitrogen fixation, photosynthesis • Essential for existence but taken for granted

22. Natural Capital has Intrinsic Value • Organisms & Ecosystems valued for aesthetic or intrinsic reasons may not produce commodities identifiable as goods or services • Unpriced & undervalued from economic standpoint • Value from spiritual, ethical, or philosophical perspective • So diverse perspectives needed to evaluate natural capital

24. Value vs. Sustainability • Hard to compare the values without prices • Attempts being made to acknowledge the diverse values so they are weighed more rigorously against traditional values (GNP, etc.) • Is this kind of valuation possible? • Sustainability debate hinges around the problem of how to weigh conflicting values of natural capital

25. Wealth of Nations • Determined by 3 components • Produced assets, Natural Capital, Human resources • Complement each other and contribute to well being • Dominant source of national wealth may vary between the 3 components

27. How Society’s Assets Complement Each Other

28. Composition of World Wealth

29. Wealth of Nations • Often represented by GNP (Gross national product) sum of goods and services produced in a country • Shows economic health and wealth • GDP = GNP – net income from abroad • Often used to compare rich and poor countries • Depreciation in materials accounted for • Depreciation of natural capital never taken into account • This is a problem

30. Example • If a country cuts down 1 million acres of forest • We see positive on income side from timber sales • Only depreciation accounted is in chain saws and trucks • What about the loss of natural services • Situations like this lead to undervaluing natural resources

32. Sustainability • Living within the means of nature, on the interest or sustainable income generated by natural capital • Societies supporting themselves by depleting essential forms of natural capital is unsustainable • If well being dependent on certain goods or services must harvest with care • Specifically long term harvest or degradation should not exceed rates of capital renewal

34. Sustainable Development • Term first used in 1987 in Our Common Future • Development that meets current needs without compromising the ability of future generations to meet their own needs • Economist view  stable annual return on investment regardless of environmental impact • Environmentalist view  stable return without environmental degradation • http://www.earthsummit.info/

36. http://www.binishells.com/index.html

37. The Earth Summit (1992) and its aftermath • Rio de Janeiro Conference on the Environment and Development • Env. Issues that cross international borders • Pollution, ocean conditions, atmospheric effects, forest destruction, loss of biodiversity • Agenda 21  focus on sustainable development for the 21st century • Reconcile future economic development with environmental protection • Followed by 2002 world summit on sustainable development in Johannesburg

38. Sustainable Yield • Sustainable Yield = SY • SY = Rate of increase in natural stock • Amount to exploit without depleting initial stock or potential for replenishment • SY for a crop = annual gain in biomass or energy • These gains from growth or recruitment (production of offspring)

39. Calculating sustainable Yield

40. Sample Calculation • An average bluefin tuna produces 10 million eggs per year but only 10 of those survive to adult hood. Out of every 10, 3 will migrate to other areas of the ocean. If you start with 5000 tuna, what is the sustainable yield in your fishery? • So what would be a scenario where it would be a simple calculation?