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  1. Resources – Natural Capital IB syllabus: 3.2

  2. 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

  3. Economic Activity: Classic View

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

  5. Economic Activity: Environmental View

  6. 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

  7. 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

  8. 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)

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

  10. 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

  11. The status of these resources changes over time • 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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