GEOG 3000 Resource Management RESOURCES AND SUSTAINABILITY

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GEOG 3000 Resource ManagementRESOURCES AND
SUSTAINABILITY

• M.D. Lee CSU Hayward Winter 2002

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Reviewing the Foundations

• In your initial readings
• CRO take us through the different philosophies
  and the history of natural resource use.
• They also introduce us to the basic economic
  principles that underlie the past and present
  patterns of natural resource use and how these
  perhaps should be retooled.
• WRI tackles the broad topic of global ecology and
  human sources of wealth and welfare.
• They identify the principle benefits we gain from
  our environment, the trade offs between goods and
  services and environmental quality, and the
  driving forces behind ecological degradation.

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Learning to Live Sustainably

• CRO suggest we must all understand ways to live
  that can maintain healthy communities.

• Every year population increases means more
  resources are needed for food, shelter, water,
  etc.
• As a consequence, many resources are declining in
  quality and productivity and pollution is
  increasing.
• Can the earth support the high standard of living
  many of us enjoy and offer it to millions who do
  not?

4
Limits to Growth

• According to studies in the 1970s, exponential
  population growth was expected to lead to
  long-term declines in food availability,
  industrial output and ultimately, population.

P
T

• These forecasts were revised in the 1990s, but
  still the conclusion was the same, uncontrolled
  growth appeared fundamentally unsustainable and
  could lead to catastrophic decline.
• Not everyone was/is so pessimistic observers
  like Simon and Spilhaus suggest human ingenuity
  and technology will resolve any forthcoming
  resource and environmental problem.
• In particular, Spilhaus believes all that will be
  required is an abundance of cheap energy and that
  future inventions will yield such sources (see p5
  CRO).

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Pessimistic?

• Pessimists include a group known as the
  neo-Malthusians (after Malthus, late 1700s).
• They see problems and degradation developing
  faster than we can create solutions.
• Can we reverse this situation soon enough?
• CRO suggests we can, but it wont be easy due to
  a range of ethical, economic, legal and other
  weaknesses inherent in our national and global
  system.
• They point to ways that we have changed and must
  continue to change toward a sustainable society,
  one based on conservation, recycling, renewable
  resources, restoration of damage, population
  control and management, and continually adaptive
  change.

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Our Evolving Attitudes to Resources

• US natural resource management has gone through a
  metamorphosis.
• Resource exploitation phase opening up the
  country to a wave of immigration and colonization
  and uninhibited, unregulated resource
  exploitation (1819th C) .
• Resource management and control phase greater
  public control over the commons (the Roosevelt
  eras).
• Resource conservation phase more rational and
  cost-effective use of resources with
  environmental protection and remediation (The
  60s 70s).
• Sustainability phase is this the new paradigm
  shift? Addressing local, national and global
  concerns with respect to our ability to support
  present and future generations at current levels
  of welfare.

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Obstacles to Sustainability

• CRO explain that a lot of our modern day
  problems stem from interrelated questions of
  ethics and economics (see box 2.1).
• Economics has often been unsuccessful in
  balancing short-term and long-term resource
  conflicts and reconciling local and more global
  issues.
• Economics focuses on the bottom line the cost
  of providing a good or service relative to the
  market prices that consumers are willing to pay.
• Such a focus excludes many indirect (external)
  costs and benefits of a social and environmental
  nature.
• A new breed of economists (Hawken, Elkington,
  etc.) call for a triple bottom line financial
  (economy), social (people) and environmental
  (nature).

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Some Economic Flaws

• In Section 2.1, CRO explain how companies
  produce a given amount of goods and services
  based on the expectation of demand and the
  potential for profit.
• In theory, demand and supply equate at an
  equilibrium price (of course, all three fluctuate
  over time).
• Consumers are assumed rational, aiming to
  maximize utility from their purchases.
• But consumers have imperfect information on the
  true costs of the goods and services they
  purchase i.e. they do not sense their ecological
  backbacks and trails of externalities.
• Related to this, consumers do not pay the full
  price for their goods and services due to direct
  or indirect subsidies funded by their taxes

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Commercial and Environmental Interests
Frequently Clash

• Business
• Favors immediate, high returns. Makes decisions
  over short cycles e.g. 5 years.
• When resources are plentiful prices are cheap.
  When prices are cheap, demand is greatest. Future
  shortages and higher prices are not factored in.
• Free markets encourage environmental
  externalities, discourage full-cost pricing
  (increases individual profit margin).

• Environment
• Favors long-term, moderate yields. May take
  cycles of 100s of years to recover from damage.
• When prices are cheap, efficiency, protection,
  conservation, etc. are unattractive.
  Environmental investment is avoided.
• Without full-cost pricing, environmental costs
  are not easily linked in the minds of users to
  the resources they consume (goods and services
  seem cheaper than they are).

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A Flawed Notion of Progress?

• GNP/GDP fails to distinguish between good and
  bad economic activities (CRO p26)
• Good GNP activities genuinely contribute to
  economic welfare and progress (i.e. are
  unequivocally beneficial).
• Bad GNP activities contribute little to human
  well-being or should have been unnecessary had we
  not committed avoidable mistakes.
• Thus with our current notion of GNP, the more
  people who get sick, the more environmental
  damage we have to clean up, and the more we use
  up our non-renewable resources, the better off we
  are judged to be doing.

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Alternative Measures

• Ecological economists like Herman Daly have
  suggested we need to practice social and
  environmental accounting.
• The Index of Sustainable Economic Welfare tries
  to add up all the beneficial activities that
  improve our standard of living while subtracting
  those expenditures necessary to simply maintain
  it in the face of past mistakes, and those that
  cause it to be reduced, now or in the future.
• It thus subtracts (some debatable) things like
• costs of waste disposal (note not recycling)
• costs of pollution
• non-preventive (i.e. avoidable) health
  expenditures

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USA Genuine Progress Indicator (ISEW)
2000 GNP/cap!
Unsustainability Gap?
per capita
GPI ?
Year
(Modified from CRO)
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Myths and Legends

• Protection and conservation is bad for the
  economy. Yes or no?
• Clearly, GNP will not rise as fast, but at least
  increases will be predominantly good GNP.
• Short term increases in costs will occur, but
  they are usually offset by substantial benefits
  in the longer run, frequently avoided costs
  rather than increased revenues.
• Financial gains are traded for environmental
  gains, but the latter provides broader, more
  lasting and important quality of life benefits
  than with the disproportionate wealth gains by
  the rich and powerful.
• Selected locations and industries will suffer in
  the short run, but at the broader scale, net
  benefits will outweigh these costs, allowing
  relief to be offered.

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Opportunity Knocks

• Natural resources can be valued from two broad
  perspectives
• Use value - the utility/benefits we can get today
  by exploiting them.
• Non-use values - the utility/benefits we can get
  from leaving them largely unchanged in the
  environment/doing little with them.
• We must establish the true opportunity costs of
  deciding if and when to exploit and if to protect
  and conserve comparing alternative costs and
  benefits scenarios for each and every resource
  management decision.

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Comparing Opportunities

• To truly evaluate the opportunity cost of a given
  resource management decision we must do a
  detailed comparison of all possible options
  against a do-nothing scenario over an appropriate
  period of time.
• Thus analysis must take into account not only
  expected costs and revenues but also avoided
  costs.
• Thus for forest management we could compare
• Direct and indirect costs and revenues from
  leaving the forest as a forest, versus
• Direct and indirect costs and revenues from
  cutting down the forest and replanting, versus
• Direct and indirect costs and revenues from
  cutting down the forest and abandoning it,
  versus
• ..(others)

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The Future at a Discount

• CRO highlight the importance of discount rates
  in favoring destructive resource management
  options.
• Decision-makers use various analytical tools that
  require looking at the equivalent present value
  of different alternatives based on the projected
  values of future revenue and cost streams.
• Two key factors in determining these present
  values (NPV) or equivalent rates of return (IRR)
  is the cost of capital (the discount rate) and
  the time over which costs and revenues are
  considered (the discount period).
• Frequently, discount rates have been too high,
  discount periods too short, and revenue and cost
  streams too narrowly defined to give more
  sustainable projects a level playing field.

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Costs and Benefits

• The use of natural resources will give rise to
  pollution you cant make an omelette without
  breaking eggs - the question is how much?
• Through the use of command and control laws,
  regulations, incentives we can influence how
  much.
• Economics and the trade offs between cost of
  prevention and costs of pollution damage
  determine the levels of pollution we allow.
• Here we continue to face the obstacle of our
  ability to quantify avoided costs of damage and
  assign economic values to things that a) will be
  prevented b) have no market value.

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Impacts of Cost Assumptionson Pollution
Prevention

• Cost of control is relatively easy to calculate.
• Cost of damage is more difficult and uncertain.
• Look at the impacts of different damage cost
  assumptions on the trade off equilibrium.

High
Cost of damage

Cost of control
Low
High
Low
Break-even points.
Level of pollution remaining
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Full-Cost Pricing

• Having introduced us to the reasons why natural
  resource decisions are frequently short-sighted
  and damaging, CRO talk about some economic
  remedies (p32-35).
• The most important concept offered is perhaps
  full-cost pricing i.e. the steps taken to
  approach the point at which the market price
  charged for a good or service reflects the true
  financial, social and environmental cost of its
  production and (if this is extended to life-cycle
  costs) its ultimate disposal.
• In other words, all economic externalities
  associated with that good or service, that would
  otherwise be paid indirectly by this or future
  generations, are internalized in the transaction
  between buyer and seller today!.