economics and energy

8/14/2019 Economics And Energy

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First Edition, 2011

ISBN 978-93-81157-41-1

All rights reserved.

Published by:The English Press4735/22 Prakashdeep Bldg, Ansari Road, Darya Ganj,Delhi - 110002 Email: [email protected]


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Table of Contents

Chapter 1- Energy Economics

Chapter 2 - Ecological Economics

Chapter 3 - Environmental Economics

Chapter 4 - Green Economics

Chapter 5 - Natural Resource Economics

Chapter 6 - Energetics

Chapter 7 - Economics of Global Warming

Chapter 8 - Electricity Market

Chapter 9 - Cost of Electricity by Source

Chapter 10 - Eroei & Thermoeconomics


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Chapter- 1

Energy Economics

Energy economics is a broad scientific subject area which includes topics related tosupply and use of energy in societies. Due to diversity of issues and methods applied andshared with a number of academic disciplines, energy economics does not present itselfas a self contained academic discipline, but it is an applied subdiscipline of economics.From the list of main topics of economics, some relate strongly to energy economics:

Econometrics Environmental economics Finance Industrial organization Microeconomics Macroeconomics Resource economics

Energy economics also draws heavily on results of energy engineering, geology, politicalsciences, ecology etc. Recent focus of energy economics includes the following issues:

Climate change and climate policy Risk analysis and security of supply Sustainability Energy markets and electricity markets - liberalisation, (de- or re-) regulation Demand response Energy and economic growth Economics of energy infrastructure Environmental policy Energy policy Energy derivatives Forecasting energy demand Elasticity of supply and demand in energy market Energy elasticity


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Some institutions of higher education (universities) recognise energy economics as aviable career opportunity, offering this as a curriculum. The University of Cambridge,Massachusetts Institute of Technology and the Vrije Universiteit Amsterdam are the topthree research universities, and Resources for the Future the top research institute. Thereare numerous other research departments, companies and professionals offering energy

economics studies and consultations.

History

Energy related issues have been actively present in economic literature since the 1973 oilcrisis, but have their roots much further back in the history. As early as 1865, W.S.Jevons expressed his concern about the eventual depletion of coal resources in his bookThe Coal Question . One of the best known early attempts to work on the economics ofexhaustible resources (incl. fossil fuel) was made by H. Hotelling, who derived a price

path for non-renewable resources, known as Hotelling's rule.

Energy economics concerns the application of economic theory and methods to issues ofenergy supply, energy demand, energy markets, and energy policy, as well as theinteractions between energy and other issues (e.g., environment, finance).

Ecological economics

Ecological economics is a transdisciplinary field of academic research that aims toaddress the interdependence and coevolution of human economies and naturalecosystems over time and space. It is distinguished from environmental economics,which is the mainstream economic analysis of the environment, by its treatment of the

economy as a subsystem of the ecosystem and its emphasis upon preserving naturalcapital.

Environmental economics

Environmental economics is a subfield of economics concerned with environmentalissues. Environmental economics undertakes theoretical or empirical studies of theeconomic effects of national or local environmental policies around the world. Particularissues include the costs and benefits of alternative environmental policies to deal with air

pollution, water quality, toxic substances, solid waste, and global warming. Many ofthese environmental issue originate at least in part from energy use.

Natural resource economics

Natural resource economics deals with the supply, demand, and allocation of the Earth'snatural resources. One main objective of natural resource economics is to betterunderstand the role of natural resources in the economy in order to develop moresustainable methods of managing those resources to ensure their availability to future


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generations. Resource economists study interactions between economic and naturalsystems, with the goal of developing a sustainable and efficient economy.

Energetics

Energetics is the scientific study of energy flows and storages under transformation.Because energy flows at all scales, from the quantum level, to the biosphere and cosmos,energetics is therefore a very broad discipline, encompassing for examplethermodynamics, chemistry, biological energetics, biochemistry and ecologicalenergetics.

Thermoeconomics

Thermoeconomics, also referred to as 'biophysical economics', is a school of heterodoxeconomics that applies the laws of thermodynamics to economic theory.

Thermoeconomics can be thought of as the statistical physics of economic value.Thermoeconomics is based on the proposition that the role of energy in biologicalevolution should be defined and understood through the second law of thermodynamics

but in terms of such economic criteria as productivity, efficiency, and especially the costsand benefits (or profitability) of the various mechanisms for capturing and utilizingavailable energy to build biomass and do work.

EROEI

EROEI (Energy Returned on Energy Invested), sometimes referred to as EROI (EnergyReturn On Investment), is the ratio of the amount of usable energy acquired from a

particular energy resource to the amount of energy expended to obtain that energyresource. Emergy is a somewhat related measure of the quantity and nature of the energythat went into making a product or service.


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Chapter- 2

Ecological Economics

The three pillars of sustainability.

Three circles enclosed within one another showing how both economy and society aresubsets of our planetary ecological system. This view is useful for correcting themisconception, sometimes drawn from the previous "three pillars" diagram, that portionsof social and economic systems can exist independently from the environment.

Ecological economics is a transdisciplinary field of academic research that aims toaddress the interdependence and coevolution of human economies and naturalecosystems over time and space. It is distinguished from environmental economics,which is the mainstream economic analysis of the environment, by its treatment of theeconomy as a subsystem of the ecosystem and its emphasis upon preserving naturalcapital. One survey of German economists found that ecological and environmentaleconomics are different schools of economic thought, with ecological economists


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emphasizing "strong" sustainability and rejecting the proposition that natural capital can be substituted by human-made capital.

Ecological economics was founded in the works of Kenneth E. Boulding, NicholasGeorgescu-Roegen, Herman Daly, Robert Costanza, and others. The related field of

green economics is, in general, a more politically applied form of the subject.

The identity of ecological economics as a field has been described as fragile, with nogenerally accepted theoretical framework and a knowledge structure which is not clearlydefined. According to ecological economist Malte Faber, ecological economics is defined

by its focus on nature, justice, and time. Issues of intergenerational equity, irreversibilityof environmental change, uncertainty of long-term outcomes, and sustainabledevelopment guide ecological economic analysis and valuation. Ecological economistshave questioned fundamental mainstream economic approaches such as cost-benefitanalysis, and the separability of economic values from scientific research, contending thateconomics is unavoidably normative rather than positive (empirical). Positional analysis,

which attempts to incorporate time and justice issues, is proposed as an alternative.Ecological economics includes the study of the metabolism of society, that is, the studyof the flows of energy and materials that enter and exit the economic system. Thissubfield may also be referred to as biophysical economics, bioeconomics, and has linkswith the applied science of industrial symbiosis. Ecological economics is based on aconceptual model of the economy connected to, and sustained by, a flow of energy,materials, and ecosystem services. Analysts from a variety of disciplines have conductedresearch on the economy-environment relationship, with concern for energy and materialflows and sustainability, environmental quality, and economic development.

Nature and ecology

Environmental Scientist sampling water.

A simple circular flow of income diagram is replaced in ecological economics by a morecomplex flow diagram reflecting the input of solar energy, which sustains natural inputsand environmental services which are then used as units of production. Once consumed,natural inputs pass out of the economy as pollution and waste. The potential of an


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environment to provide services and materials is referred to as an "environment's sourcefunction", and this function is depleted as resources are consumed or pollutioncontaminates the resources. The "sink function" describes an environment's ability toabsorb and render harmless waste and pollution: when waste output exceeds the limit ofthe sink function, long-term damage occurs. :8 Some persistent pollutants, such as some

organic pollutants and nuclear waste are absorbed very slowly or not at all; ecologicaleconomists emphasize minimizing "cumulative pollutants". :28 Pollutants affect humanhealth and the health of the climate.

The economic value of natural capital and ecosystem services is accepted by mainstreamenvironmental economics, but is emphasized as especially important in ecologicaleconomics. Ecological economists may begin by estimating how to maintain a stableenvironment before assessing the cost in dollar terms. :9 Ecological economist RobertCostanza led an attempted valuation of the global ecosystem in 1997. Initially publishedin Nature , the article concluded on $33 trillion with a range from $16 trillion to $54trillion (in 1997, total global GDP was $27 trillion). Half of the value went to nutrient

cycling. The open oceans, continental shelves, and estuaries had the highest total value,and the highest per-hectare values went to estuaries, swamps/floodplains, andseagrass/algae beds. The work was criticized by articles in Ecological Economics Volume 25, Issue 1, but the critics acknowledged the positive potential for economicvaluation of the global ecosystem. :129

The Earth's carrying capacity is another central question. This was first examined byThomas Malthus, and more recently in an MIT study entitled Limits to Growth . Althoughthe predictions of Malthus have not come to pass, some limit to the Earth's ability tosupport life are acknowledged. In addition, for real GDP per capita to increase real GDPmust increase faster than population growth. Diminishing returns suggest that

productivity increases will slow if major technological progress is not made. Food production may become a problem, as erosion, an impending water crisis, and soilsalinity (from irrigation) reduce the productivity of agriculture. Ecological economistsargue that industrial agriculture, which exacerbates these problems, is not sustainableagriculture, and are generally inclined favorably to organic farming, which also reducesthe output of carbon. :26

Global wild fisheries are believed to have peaked and begun a decline, with valuablehabitat such as estuaries in critical condition. :28 The aquaculture or farming of piscivorousfish, like salmon, does not help solve the problem because they need to be fed productsfrom other fish. Studies have shown that salmon farming has major negative impacts onwild salmon, as well as the forage fish that need to be caught to feed them.

Since animals are higher on the trophic level, they are less efficient sources of foodenergy. Reduced consumption of meat would reduce the demand for food, but as nationsdevelop, they adopt high-meat diets similar to the United States. Genetically modifiedfood (GMF) a conventional solution to the problem, have problems Bt corn produces itsown Bacillus thuringiensis, but the pest resistance is believed to be only a matter oftime. :31 The overall effect of GMF on yields is contentious, with the USDA and FAO


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acknowledging that GMFs do not necessarily have higher yields and may even havereduced yields.

Global warming is now widely acknowledged as a major issue, with all national scientificacademies expressing agreement on the importance of the issue. As the population

growth intensifies and energy demand increases, the world faces an energy crisis. Someeconomists and scientists forecast a global ecological crisis if energy use is not contained the Stern report is an example. The disagreement has sparked a vigorous debate onissue of discounting and intergenerational equity.

GLOBAL GEOCHEMICAL CYCLES CRITICAL FOR LIFE

Nitrogen cycle


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Water cycle


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Carbon cycle


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Oxygen cycle

Ethics

Mainstream economics has attempted to become a value-free 'hard science', butecological economists argue that value-free economics is generally not realistic.Ecological economics is more willing to entertain alternative conceptions of utility,efficiency, and cost-benefits such as positional analysis or multi-criteria analysis.Ecological economics is typically viewed as economics for sustainable development, andmay have goals similar to green politics.

Schools of thought

Various competing schools of thought exist in the field. Some are close to resource andenvironmental economics while others are far more heterodox in outlook. An example ofthe latter is the European Society for Ecological Economics . An example of the former isthe Swedish Beijer International Institute of Ecological Economics.

Differentiation from mainstream schools


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In ecological economics, natural capital is added to the typical capital asset analysis ofland, labor, and financial capital. Ecological economics uses tools from mathematicaleconomics, but may apply them more closely to the natural world. Whereas mainstreameconomists tend to be technological optimists, ecological economists are inclined to betechnological pessimists. They reason that the natural world has a limited carrying

capacity and that its resources may run out. Since destruction of important environmentalresources could be practically irreversible and catastrophic, ecological economists areinclined to justify cautionary measures based on the precautionary principle.

The most cogent example of how the different theories treat similar assets is tropicalrainforest ecosystems, most obviously the Yasuni region of Ecuador. While this area hassubstantial deposits of bitumen it is also one of the most diverse ecosystems on Earth andsome estimates establish it has over 200 undiscovered medical substances in its genomes- most of which would be destroyed by logging the forest or mining the bitumen.Effectively, the instructional capital of the genomes is undervalued by both classical andneoclassical means which would view the rainforest primarily as a source of wood, oil/tar

and perhaps food. Increasingly the carbon credit for leaving the extremely carbon-intensive ("dirty") bitumen in the ground is also valued - the government of Ecuador set a price of US$350M for an oil lease with the intent of selling it to someone committed tonever exercising it at all and instead preserving the rainforest. Bill Clinton, Paul Martinand other former world leaders have become closely involved in this project whichincludes lobbying for the issue of International Monetary Fund Special Drawing Rights torecognize the rainforest's value directly within the framework of the Bretton Woodsinstitutions. If successful this would be a major victory for advocates of ecologicaleconomics as the new mainstream form of economics.

History and development

Early interest in ecology and economics dates back to the 1960s and the work by KennethBoulding and Herman Daly, but the first meetings occurred in the 1980s. It began with a1982 symposium in Sweden which was attended by people who would later beinstrumental in the field, including Robert Costanza, Herman Daly, Charles Hall, Ann-Mari Jansson, Bruce Hannon, H.T. Odum, and David Pimentel. Most were ecosystemecologists or mainstream environmental economists, with the exception of Daly. In 1987,Daly and Costanza edited an issue of Ecological Modeling to test the waters. A booktitled Ecological Economics by Juan Martinez-Alier was published later that year. 1989saw the foundation of the International Society for Ecological Economics and first

publication of its journal Ecological Economics by Elsevier. Robert Costanza was the

first president of the society and first editor of the journal which is currently edited byRichard Howarth.

European conceptual founders include Nicholas Georgescu-Roegen (1971), WilliamKapp (1944) and Karl Polanyi (1950). Some key concepts of what is now ecologicaleconomics are evident in the writings of E.F. Schumacher, whose book Small Is Beautiful

A Study of Economics as if People Mattered (1973) was published just a few years before the first edition of Herman Daly's comprehensive and persuasive Steady-State


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Economics (1977). Other figures include ecologists C.S. Holling, H.T. Odum and RobertCostanza, biologist Gretchen Daily and physicist Robert Ayres. CUNY geography

professor David Harvey explicitly added ecological concerns to political economicliterature. This parallel development in political economy has been continued by analystssuch as sociologist John Bellamy Foster.

The antecedents can be traced back to the Romantics of the 1800s as well as someEnlightenment political economists of that era. Concerns over population were expressed

by Thomas Malthus, while John Stuart Mill hypothesized that the "stationary state" of aneconomy might be something that could be considered desirable, anticipating laterinsights of modern ecological economists, without having had their experience of thesocial and ecological costs of the dramatic post-World War II industrial expansion. AsMartinez-Alier explores in his book the debate on energy in economic systems can also

be traced into the 1800s e.g. Nobel prize-winning chemist, Frederick Soddy (18771956).Soddy criticized the prevailing belief of the economy as a perpetual motion machine,capable of generating infinite wealth a criticism echoed by his intellectual heirs in the

now emergent field of ecological economics.The Romanian economist Nicholas Georgescu-Roegen (19061994), who was amongDaly's teachers at Vanderbilt University, provided ecological economics with a modernconceptual framework based on the material and energy flows of economic productionand consumption. His magnum opus , The Entropy Law and the Economic Process (1971), has been highly influential.

Articles by Inge Ropke (2004, 2005) and Clive Spash (1999) cover the development andmodern history of ecological economics and explain its differentiation from resource andenvironmental economics, as well as some of the controversy between American and

European schools of thought. An article by Robert Costanza, David Stern, Lining He, andChunbo Ma responded to a call by Mick Common to determine the foundationalliterature of ecological economics by using citation analysis to examine which books andarticles have had the most influence on the development of the field.

Topics

Methodology

The primary objective of ecological economics (EE) is to ground economic thinking and practice in physical reality, especially in the laws of physics (particularly the laws ofthermodynamics) and in knowledge of biological systems. It accepts as a goal theimprovement of human well-being through development, and seeks to ensureachievement of this through planning for the sustainable development of ecosystems andsocieties. Of course the terms development and sustainable development are far fromlacking controversy. Richard Norgaard argues traditional economics has hi-jacked thedevelopment terminology in his book Development Betrayed .


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Well-being in ecological economics is also differentiated from welfare as found inmainstream economics and the 'new welfare economics' from the 1930s which informsresource and environmental economics. This entails a limited preference utilitarianconception of value i.e., Nature is valuable to our economies, that is because people will

pay for its services such as clean air, clean water, encounters with wilderness, etc.

Ecological economics is distinguishable from neoclassical economics primarily by itsassertion that the economy is embedded within an environmental system. Ecology dealswith the energy and matter transactions of life and the Earth, and the human economy is

by definition contained within this system. Ecological economists argue that neoclassicaleconomics has ignored the environment, at best considering it to be a subset of the humaneconomy.

The neoclassical view ignores much of what the natural sciences have taught us about thecontributions of nature to the creation of wealth e.g., the planetary endowment of scarcematter and energy, along with the complex and biologically diverse ecosystems that

provide goods and ecosystem services directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, wasteabsorption, food and medicine production, pollination, protection from solar and cosmicradiation, the view of a starry night sky, etc.

There has then been a move to regard such things as natural capital and ecosystemsfunctions as goods and services. However, this is far from uncontroversial withinecology or ecological economics due to the potential for narrowing down values to thosefound in mainstream economics and the danger of merely regarding Nature as acommodity. This has been referred to as ecologists 'selling out on Nature'. There is then aconcern that ecological economics has failed to learn from the extensive literature in

environmental ethics about how to structure a plural value system.

Allocation of resources

Resource and neoclassical economics focus primarily on the efficient allocation ofresources, and less on two other fundamental economic problems which are central toecological economics: distribution (equity) and the scale of the economy relative to theecosystems upon which it is reliant. Ecological Economics also makes a clear distinction

between growth (quantitative increase in economic output) and development (qualitativeimprovement of the quality of life) while arguing that neoclassical economics confusesthe two. Ecological economists point out that, beyond modest levels, increased per-capita

consumption (the typical economic measure of "standard of living") does not necessarilylead to improvement in human well-being, while this same consumption can haveharmful effects on the environment and broader societal well-being.

Strong versus weak sustainability


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Ecological economics challenges the conventional approach towards natural resources,claiming that it undervalues natural capital by considering it as interchangeable withhuman-made capitallabor and technology.

The potential for the substitution of man-made capital for natural capital is an important

debate in ecological economics and the economics of sustainability. There is a continuumof views among economists between the strongly neoclassical positions of Robert Solowand Martin Weitzman, at one extreme and the entropy pessimists, notably NicholasGeorgescu-Roegen and Herman Daly, at the other.

Neoclassical economists tend to maintain that man-made capital can, in principle, replaceall types of natural capital. This is known as the weak sustainability view, essentially thatevery technology can be improved upon or replaced by innovation, and that there is asubstitute for any and all scarce materials.

At the other extreme, the strong sustainability view argues that the stock of natural

resources and ecological functions are irreplaceable. From the premises of strongsustainability, it follows that economic policy has a fiduciary responsibility to the greaterecological world, and that sustainable development must therefore take a differentapproach to valuing natural resources and ecological functions.

Energy economics

A key concept of energy economics is net energy gain, which recognizes that all energyrequires energy to produce. To be useful the energy return on energy invested ( EROEI )has to be greater than one. The net energy gain from production coal, oil and gas hasdeclined over time as the easiest to produce sources have been most heavily depleted.

Ecological economics generally rejects the view of energy economics that growth in theenergy supply is related directly to well being, focusing instead on biodiversity andcreativity - or natural capital and individual capital, in the terminology sometimesadopted to describe these economically. In practice, ecological economics focuses

primarily on the key issues of uneconomic growth and quality of life. Ecologicaleconomists are inclined to acknowledge that much of what is important in human well-

being is not analyzable from a strictly economic standpoint and suggests aninterdisciplinary approach combining social and natural sciences as a means to addressthis.

Thermoeconomics is based on the proposition that the role of energy in biologicalevolution should be defined and understood through the second law of thermodynamics, but also in terms of such economic criteria as productivity, efficiency, and especially thecosts and benefits (or profitability) of the various mechanisms for capturing and utilizingavailable energy to build biomass and do work. As a result, thermoeconomics are oftendiscussed in the field of ecological economics, which itself is related to the fields ofsustainability and sustainable development.


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Exergy analysis is performed in the field of industrial ecology to use energy moreefficiently. The term exergy , was coined by Zoran Rant in 1956, but the concept wasdeveloped by J. Willard Gibbs. In recent decades, utilization of exergy has spread outsideof physics and engineering to the fields of industrial ecology, ecological economics,systems ecology, and energetics.

Energy accounting and balance

An energy balance can be used to track energy through a system, and is a very useful toolfor determining resource use and environmental impacts, using the First and Second lawsof thermodynamics, to determine how much energy is needed at each point in a system,and in what form that energy is a cost in various environmental issues. The energyaccounting system keeps track of energy in, energy out, and non-useful energy versuswork done, and transformations within the system.

Scientists have written and speculated on different aspects of energy accounting.

Environmental services

A study was carried out by Costanza and colleagues to determine the 'price' of theservices provided by the environment. This was determined by averaging values obtainedfrom a range of studies conducted in very specific context and then transferring thesewithout regard to that context. Dollar figures were averaged to a per hectare number fordifferent types of ecosystem e.g. wetlands, oceans. A total was then produced whichcame out at 33 trillion US dollars (1997 values), more than twice the total GDP of theworld at the time of the study. This study was criticized by pre-ecological and even someenvironmental economists - for being inconsistent with assumptions of financial capital

valuation - and ecological economists - for being inconsistent with an ecologicaleconomics focus on biological and physical indicators.

The whole idea of treating ecosystems as goods and services to be valued in monetaryterms remains controversial to some. A common objection is that life is precious or

priceless, but this demonstrably degrades to it being worthless under the assumptions ofany branch of economics. Reducing human bodies to financial values is a necessary partof every branch of economics and not always in the direct terms of insurance or wages.Economics, in principle, assumes that conflict is reduced by agreeing on voluntarycontractual relations and prices instead of simply fighting or coercing or tricking othersinto providing goods or services. In doing so, a provider agrees to surrender time and take

bodily risks and other (reputation, financial) risks. Ecosystems are no different than other bodies economically except insofar as they are far less replaceable than typical labour orcommodities.

Despite these issues, many ecologists and conservation biologists are pursuing ecosystemvaluation. Biodiversity measures in particular appear to be the most promising way toreconcile financial and ecological values, and there are many active efforts in this regard.The growing field of biodiversity finance began to emerge in 2008 in response to many


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specific proposals such as the Ecuadoran Yasuni proposal or similar ones in the Congo.US news outlets treated the stories as a "threat" to "drill a park" reflecting a previouslydominant view that NGOs and governments had the primary responsibility to protectecosystems. However Peter Barnes and other commentators have recently argued that aguardianship/trustee/commons model is far more effective and takes the decisions out of

the political realm.

Commodification of other ecological relations as in carbon credit and direct payments tofarmers to preserve ecosystem services are likewise examples that permit private partiesto play more direct roles protecting biodiversity. The United Nations Food andAgriculture Organization achieved near-universal agreement in 2008 that such paymentsdirectly valuing ecosystem preservation and encouraging permaculture were the only

practical way out of a food crisis. The holdouts were all English-speaking countries thatexport GMOs and promote "free trade" agreements that facilitate their own control of theworld transport network: The US, UK, Canada and Australia.

ExternalitiesEcological economics is founded upon the view that the neoclassical economics (NCE)assumption that environmental and community costs and benefits are mutually canceling"externalities" is not warranted. Juan Martinez Alier, for instance shows that the bulk ofconsumers are automatically excluded from having an impact upon the prices ofcommodities, as these consumers are future generations who have not been born yet. Theassumptions behind future discounting, which assume that future goods will be cheaperthan present goods, has been criticized by Fred Pearce and by the recent Stern Report(although the Stern report itself does employ discounting and has been criticized byecological economists).

Concerning these externalities, Paul Hawken argues that the only reason why goods produced unsustainably are usually cheaper than goods produced sustainably is due to ahidden subsidy, paid by the non-monetized human environment, community or futuregenerations. These arguments are developed further by Hawken, Amory and HunterLovins in "Natural Capitalism: Creating the Next Industrial Revolution".

Ecological-Economic Modeling

Mathematical modeling is a powerful tool that is used in ecological economic analysis.Various approaches and techniques include : evolutionary, input-output, neo-Austrian

modeling, entropy and thermodynamic models, multi-criteria, and agent-based modeling,the environmental Kuznets curve. Systems Dynamics and GIS are tools used in spatialdynamic landscape simulation modeling.


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Chapter- 3

Environmental Economics

Environmental economics is a subfield of economics concerned with environmental

issues. Quoting from the National Bureau of Economic Research EnvironmentalEconomics program:

[...] EnvironmentalEconomics [...]undertakes theoretical orempirical studies of theeconomic effects ofnational or localenvironmental policiesaround the world [...].Particular issues includethe costs and benefits ofalternativeenvironmental policies todeal with air pollution,water quality, toxicsubstances, solid waste,and global warming.

Topics and concepts

Central to environmental economics is the concept of market failure. Market failuremeans that markets fail to allocate resources efficiently. As stated by Hanley, Shogren,and White (2007) in their textbook Environmental Economics : "A market failure occurswhen the market does not allocate scarce resources to generate the greatest social welfare.A wedge exists between what a private person does given market prices and what societymight want him or her to do to protect the environment. Such a wedge implieswastefulness or economic inefficiency; resources can be reallocated to make at least one


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Nitrogen Cycle


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Water Cycle


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Carbon Cycle


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Oxygen Cycle

Valuation

Assessing the economic value of the environment is a major topic within the field. Useand indirect use are tangible benefits accruing from natural resources or ecosystemservices. Non-use values include existence, option, and bequest values. For example,some people may value the existence of a diverse set of species, regardless of the effectof the loss of a species on ecosystem services. The existence of these species may havean option value, as there may be possibility of using it for some human purpose (certain

plants may be researched for drugs). Individuals may value the ability to leave a pristineenvironment to their children.

Use and indirect use values can often be inferred from revealed behavior, such as the costof taking recreational trips or using hedonic methods in which values are estimated basedon observed prices. Non-use values are usually estimated using stated preference methodssuch as contingent valuation or choice modelling. Contingent valuation typically takesthe form of surveys in which people are asked how much they would pay to observe andrecreate in the environment (willingness to pay) or their willingness to accept (WTA)compensation for the destruction of the environmental good. Hedonic pricing examinesthe effect the environment has on economic decisions through housing prices, travelingexpenses, and payments to visit parks.


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Solutions

Solutions advocated to correct such externalities include:

Environmental regulations . Under this plan the economic impact has to beestimated by the regulator. Usually this is done using cost-benefit analysis. Thereis a growing realization that regulations (also known as "command and control"instruments) are not so distinct from economic instruments as is commonlyasserted by proponents of environmental economics. E.g.1 regulations areenforced by fines, which operate as a form of tax if pollution rises above thethreshold prescribed. E.g.2 pollution must be monitored and laws enforced,whether under a pollution tax regime or a regulatory regime. The main differencean environmental economist would argue exists between the two methods,however, is the total cost of the regulation. "Command and control" regulationoften applies uniform emissions limits on polluters, even though each firm hasdifferent costs for emissions reductions. Some firms, in this system, can abateinexpensively, while others can only abate at high cost. Because of this, the totalabatement has some expensive and some inexpensive efforts to abate.Environmental economic regulations find the cheapest emission abatement effortsfirst, then the more expensive methods second. E.g. as said earlier, trading, in thequota system, means a firm only abates if doing so would cost less than payingsomeone else to make the same reduction. This leads to a lower cost for the totalabatement effort as a whole.

Quotas on pollution . Often it is advocated that pollution reductions should beachieved by way of tradeable emissions permits, which if freely traded mayensure that reductions in pollution are achieved at least cost. In theory, if suchtradeable quotas are allowed, then a firm would reduce its own pollution load onlyif doing so would cost less than paying someone else to make the same reduction.In practice, tradeable permits approaches have had some success, such as theU.S.'s sulphur dioxide trading program or the EU Emissions Trading Scheme, andinterest in its application is spreading to other environmental problems.

Taxes and tariffs on pollution / Removal of "dirty subsidies ." Increasing the costs of polluting will discourage polluting, and will provide a "dynamic incentive," thatis, the disincentive continues to operate even as pollution levels fall. A pollutiontax that reduces pollution to the socially "optimal" level would be set at such alevel that pollution occurs only if the benefits to society (for example, in form of

greater production) exceeds the costs. Some advocate a major shift from taxationfrom income and sales taxes to tax on pollution - the so-called "green tax shift."

Better defined property rights . The Coase Theorem states that assigning propertyrights will lead to an optimal solution, regardless of who receives them, iftransaction costs are trivial and the number of parties negotiating is limited. Forexample, if people living near a factory had a right to clean air and water, or thefactory had the right to pollute, then either the factory could pay those affected by


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the pollution or the people could pay the factory not to pollute. Or, citizens couldtake action themselves as they would if other property rights were violated. TheUS River Keepers Law of the 1880s was an early example, giving citizensdownstream the right to end pollution upstream themselves if government itselfdid not act (an early example of bioregional democracy). Many markets for

"pollution rights" have been created in the late twentieth century. The assertionthat defining property rights is a solution is controversial within the field ofenvironmental economics and environmental law and policy more broadly; inAnglo-American and many other legal systems, one has the right to carry out anyaction unless the law expressly proscribes it. Thus property rights are alreadyassigned (the factory that is polluting has a right to pollute).

Relationship to other fields

Environmental economics is related to ecological economics but there are differences.Most environmental economists have been trained as economists. They apply the tools ofeconomics to address environmental problems, many of which are related to so-calledmarket failurescircumstances wherein the "invisible hand" of economics is unreliable.Most ecological economists have been trained as ecologists, but have expanded the scopeof their work to consider the impacts of humans and their economic activity on ecologicalsystems and services, and vice-versa. This field takes as its premise that economics is astrict subfield of ecology. Ecological economics is sometimes described as taking a more

pluralistic approach to environmental problems and focuses more explicitly on long-termenvironmental sustainability and issues of scale.

Environmental economics is viewed as more pragmatic in a price system; ecologicaleconomics as more idealistic in its attempts not use money as a primary arbiter ofdecisions. These two groups of specialists sometimes have conflicting views which may

be traced to the different philosophical underpinnings.

Another context in which externalities apply is when globalization permits one player ina market who is unconcerned with biodiversity to undercut prices of another who is -creating a "race to the bottom" in regulations and conservation. This in turn may causeloss of natural capital with consequent erosion, water purity problems, diseases,desertification, and other outcomes which are not efficient in an economic sense. Thisconcern is related to the subfield of sustainable development and its political relation, theanti-globalization movement.

Environmental economics was once distinct from resource economics. Natural resourceeconomics as a subfield began when the main concern of researchers was the optimalcommercial exploitation of natural resource stocks. But resource managers and policy-makers eventually began to pay attention to the broader importance of natural resources(e.g. values of fish and trees beyond just their commercial exploitation;, externalitiesassociated with mining). It is now difficult to distinguish "environmental" and "naturalresource" economics as separate fields as the two became associated with sustainability.


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Many of the more radical green economists split off to work on an alternate politicaleconomy.

Environmental economics was a major influence for the theories of natural capitalism andenvironmental finance, which could be said to be two sub-branches of environmental

economics concerned with resource conservation in production, and the value of biodiversity to humans, respectively. The theory of natural capitalism (Hawken, Lovins,Lovins) goes further than traditional environmental economics by envisioning a worldwhere natural services are considered on par with physical capital.

The more radical Green economists reject neoclassical economics in favour of a new political economy beyond capitalism or communism that gives a greater emphasis to theinteraction of the human economy and the natural environment, acknowledging that"economy is three-fifths of ecology" - Mike Nickerson.

These more radical approaches would imply changes to money supply and likely also a

bioregional democracy so that political, economic, and ecological "environmental limits"were all aligned, and not subject to the arbitrage normally possible under capitalism.

Professional bodies

The main academic and professional organizations for the discipline of EnvironmentalEconomics are the Association of Environmental and Resource Economists (AERE) andthe European Association for Environmental and Resource Economics (EAERE). Themain academic and professional organization for the discipline of Ecological Economicsis the International Society for Ecological Economics (ISEE) and The Green EconomicsInstitute for Green Economics [greeneconomics.org.uk] is its international Professional

body.


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Chapter- 4

Green Economics

A green economy is one that results in improved human well-being and social equity,while significantly reducing environmental risks and ecological scarcities - United

Nations Environment Programme (UNEP) (2010). A green economy is a economy oreconomic development model based on sustainable development and a knowledge ofecological economics. Its most distinguishing feature from prior economic regimes isdirect valuation of natural capital and nature's services as having economics value and afull cost accounting regime in which costs externalized onto society via ecosystems arereliably traced back to, and accounted for as liabilities of, the entity that does the harm orneglects an asset.

"green" economists and economics

A green economics loosely defined is any theory of economics by which an economy isconsidered to be component of the ecosystem in which it resides (after Lynn Margulis). Aholistic approach to the subject is typical, such that economic ideas are commingled withany number of other subjects, depending on the particular theorist. Proponents offeminism, postmodernism, the ecology movement, peace movement, Green politics,green anarchism and anti-globalization movement have used the term to describe verydifferent ideas, all external to some equally ill-defined "mainstream" economics. The useof the term is further ambiguated by the political distinction of Green parties which areformally organized and claim the capital-G "Green" term as a unique and distinguishingmark. It is thus preferable to refer to a loose school of "'green economists"' who generallyadvocate shifts towards a green economy, biomimicry and a fuller accounting for

biodiversity.

Some economists view green economics as a branch or subfield of more establishedschools. For instance, as classical economics where the traditional land is generalized tonatural capital and has some attributes in common with labor (providing nature's servicesto man) and physical capital (since natural capital assets like rivers directly substitute forman-made ones such as canals). Or, as Marxist economics with nature represented as aform of lumpen proletariat, an exploited base of non-human workers providing surplusvalue to the human economy. Or as a branch of neoclassical economics in which the price


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of life for developing vs. developed nations is held steady at a ratio reflecting a balanceof power and that of non-human life is very low. An increasing consensus around theideas of nature's services, natural capital, full cost accounting and interspecies ethicscould blur distinctions between the schools and redefine them all as variations of greeneconomics . As of 2010 the Bretton Woods institutions (notably the World Bank and

IMF (via its "Green Fund" initiative) responsible for global monetary policy have stated aclear intention to move towards biodiversity valuation and a more official and universal biodiversity finance.

Definition of a green economy

Karl Burkart defines a green economy as based on six main sectors:

Renewable energy (solar, wind, geothermal, marine including wave, biogas, andfuel cell)

Green buildings (green retrofits for energy and water efficiency, residential andcommercial assessment; green products and materials, and LEED construction)

Clean transportation (alternative fuels, public transit, hybrid and electric vehicles,carsharing and carpooling programs)

Water management (Water reclamation, greywater and rainwater systems, low-water landscaping, water purification, stormwater management)

Waste management (recycling, municipal solid waste salvage, brownfield landremediation, Superfund cleanup, sustainable packaging)

Land management (organic agriculture, habitat conservation and restoration;urban forestry and parks, reforestation and afforestation and soil stabilization)

The Global Citizens Center, led by Kevin Danaher, defines green economy in terms of a"triple bottom line," an economy concerned with being:

1. Environmentally sustainable, based on the belief that our biosphere is aclosed system with finite resources and a limited capacity for self-regulation and self-renewal. We depend on the earths natural resources,and therefore we must create an economic system that respects theintegrity of ecosystems and ensures the resilience of life supportingsystems.

2. Socially just, based on the belief that culture and human dignity are precious resources that, like our natural resources, require responsiblestewardship to avoid their depletion. We must create a vibrant economic

system that ensures all people have access to a decent standard of livingand full opportunities for personal and social development.

3. Locally rooted, based on the belief that an authentic connection to place isthe essential pre-condition to sustainability and justice. The GreenEconomy is a global aggregate of individual communities meeting theneeds of its citizens through the responsible, local production andexchange of goods and services.


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Other issues

Green economy includes green energy generation based on renewable energy tosubstitute for fossil fuels and energy conservation for efficient energy use. The greeneconomy is considered being able to both create green jobs, ensure real, sustainableeconomic growth, and prevent environmental pollution, global warming, resourcedepletion, and environmental degradation.

Because the market failure related to environmental and climate protection as a result ofexternal costs, high future commercial rates and associated high initial costs for research,development, and marketing of green energy sources and green products prevents firmsfrom being voluntarily interested in reducing environment-unfriendly activities(Reinhardt, 1999; King and Lenox, 2002; Wagner, 203; Wagner, et al., 2005), the greeneconomy is considered needing government subsidies as market incentives to motivatefirms to invest and produce green products and services. The German Renewable EnergyAct, legislations of many other EU countries and the American Recovery andReinvestment Act of 2009, all provide such market incentives.

However, there are still incompatibilities between the UN global green new deal call andthe existing international trade mechanism in terms of market incentives. For example,the WTO Subsidies Agreement has strict rules against government subsidies, especiallyfor exported goods. Such incompatibilities may serve as obstacles to governments'responses to the UN Global green new deal call. WTO needs to update its subsidy rulesto account for the needs of accelerating the transition to the green, low-carbon economy.Research is urgently needed to inform the governments and the international communityhow the governments should promote the green economy within their national borderswithout being engaged in trade wars in the name of the green economy and how theyshould cooperate in their promotional efforts at a coordinated international level.


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Chapter- 5

Natural Resource Economics

Natural resource economics deals with the supply, demand, and allocation of the Earth'snatural resources. One main objective of natural resource economics is to betterunderstand the role of natural resources in the economy in order to develop moresustainable methods of managing those resources to ensure their availability to futuregenerations. Resource economists study interactions between economic and naturalsystems, with the goal of developing a sustainable and efficient economy.

Areas of discussion

Natural resource economics is a transdisciplinary field of academic research withineconomics that aims to address the connections and interdependence between humaneconomies and natural ecosystems. Its focus is how to operate an economy within theecological constraints of earth's natural resources. Resource economics brings togetherand connects different disciplines within the natural and social sciences connected to

broad areas of earth science, human economics, and natural ecosystems. Economicmodels must be adapted to accommodate the special features of natural resource inputs.The traditional curriculum of natural resource economics emphasized fisheries models,forestry models, and minerals extraction models (i.e. fish, trees, and ore). In recent years,however, other resources, notably air, water, the global climate, and "environmentalresources" in general have become increasingly important to policy-making.

Academic and policy interest has now moved beyond simply the optimal commercialexploitation of the standard trio of resources to encompass management for otherobjectives. For example, natural resources more broadly defined have recreational, aswell as commercial values. They may also contribute to overall social welfare levels, bytheir mere existence.

The economics and policy area focuses on the human aspects of environmental problems.Traditional areas of environmental and natural resource economics include welfaretheory, pollution control, resource extraction, and non-market valuation, and also


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resource exhaustibility, sustainability, environmental management, and environmental policy. Research topics could include the environmental impacts of agriculture,transportation and urbanization, land use in poor and industrialized countries,international trade and the environment, climate change, and methodological advances innon-market valuation, to name just a few.

Natural resource economics also relates to energy, and is a broad scientific subject areawhich includes topics related to supply and use of energy in societies. Thermoeconomistsargue that economic systems always involve matter, energy, entropy, and information.Thermoeconomics is based on the proposition that the role of energy in biologicalevolution should be defined and understood through the second law of thermodynamics

but in terms of such economic criteria as productivity, efficiency, and especially the costsand benefits of the various mechanisms for capturing and utilizing available energy to

build biomass and do work. As a result, natural resource economics are often discussed inthe field of ecological economics, which itself is related to the fields of sustainability andsustainable development.

Hotelling's rule is a 1931 economic model of non-renewable resource management byHarold Hotelling. It shows that efficient exploitation of a nonrenewable andnonaugmentable resource would, under otherwise stable economic conditions, lead to adepletion of the resource. The rule states that this would lead to a net price or "Hotellingrent" for it that rose annually at a rate equal to the rate of interest, reflecting theincreasing scarcity of the resource. Nonaugmentable resources of inorganic materials (i.e.minerals) are uncommon; most resources can be augmented by recycling and by theexistence and use of substitutes for the end-use products (see below).

Vogely has stated that the development of a mineral resource occurs in five stages: (1)

The current operating margin (rate of production) governed by the proportion of thereserve (resource) already depleted. (2) The intensive development margin governed bythe trade-off between the rising necessary investment and quicker realization of revenue.(3) The extensive development margin in which extraction is begun of known but

previously uneconomic deposits. (4) The exploration margin in which the search for newdeposits (resources) is conducted and the cost per unit extracted is highly uncertain withthe cost of failure having to be balanced against finding usable resources (deposits) thathave marginal costs of extraction no higher than in the first three stages above. (5) Thetechnology margin which interacts with the first four stages. The Gray-Hotelling(exhaustion) theory is a special case, since it covers only Stages 13 and not the far moreimportant Stages 4 and 5.

Simon has stated that the supply of natural resources is infinite (i.e. perpetual)

These conflicting views will be substantially reconciled by considering resource-relatedtopics in depth in the next section, or at least minimized.

Perpetual resources vs. exhaustibility


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Background and introduction

The perpetual resource concept is a complex one because the concept of resource iscomplex and changes with the advent of new technology (usually more efficientrecovery), new needs, and to a lesser degree with new economics (i.e. changes in prices

of the material, changes in energy costs, etc.). On the one hand, a material (and itsresources) can enter a time of shortage and become a strategic and critical material (animmediate exhaustibility crisis), but on the other hand a material can go out of use, itsresource can proceed to being perpetual if it was not before, and then the resource can

become a paleoresource when the material goes almost completely out of use (i.e.resources of arrowhead-grade flint). Some of the complexities influencing resources of amaterial include the extent of recyclability, the availability of suitable substitutes for thematerial in its end-use products, plus some other less important factors.

The Federal Government suddenly became compellingly interested in resource issues onDecember 7, 1941, shortly after which Japan cut the U.S. off from tin and rubber and

made some other materials very difficult to obtain, such as tungsten. This was the worstcase for resource availability, becoming a strategic and critical material. After the war agovernment stockpile of strategic and critical materials was set up, having around 100different materials which were purchased for cash or obtained by trading off U.S.agricultural commodities for them. In the longer term, scarcity of tin later led tocompletely substituting aluminum foil for tin foil and polymer lined lined steel cans andaseptic packaging substituting for tin electroplated steel cans.

Resources change over time with technology and economics; more efficient recoveryleads to a drop in the ore grade needed. The average grade of the copper ore processedhas dropped from 4.0% copper in 1900 to 1.63% in 1920, 1.20% in 1940, 0.73% in 1960,

0.47% in 1980, and 0.44% in 2000.

Cobalt had been in an iffy supply status ever since the Belgian Congo (world's onlysignificant source of cobalt) was given a hasty independence in 1960 and the cobalt-

producing province seceded as Katanga, followed by several wars and insurgencies, localgovernment removals, railroads destroyed, and nationalizations. This was topped off byan invasion of the province by Katangan rebels in 1978 that disrupted supply andtransportation and caused the cobalt price to briefly triple. While the cobalt supply wasdisrupted and the price shot up, nickel and other substitutes were pressed into service.

Following this, the idea of a "Resource War" by the Soviets became popular. Rather than

the chaos that resulted from the Zairean cobalt situation, this would be planned, a strategydesigned to destroy economic activity outside the Soviet bloc by the acquisition of vitalresources by noneconomic means (military?) outside the Soviet bloc (Third World?), thenwithholding these minerals from the West.

An important way of getting around a cobalt situation or a "Resource War" situation is touse substitutes for a material in its end-uses. Some criteria for a satisfactory substitute are(1) ready availability domestically in adequate quantities or availability from contiguous


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nations, or possibly from overseas allies, (2) possessing physical and chemical properties, performance, and longevity comparable to the material of first choice, (3) well-established and known behavior and properties particularly as a component in exoticalloys, and (4) an ability for processing and fabrication with minimal changes in existingtechnology, capital plant, and processing and fabricating facilities. Some suggested

substitutions were alunite for bauxite to make alumina, molybdenum and/or nickel forcobalt, and aluminum alloy automobile radiators for copper alloy automobile radiators.Materials can be eliminated without material substitutes, for example by using dischargesof high tension electricity to shape hard objects that were formerly shaped by mineralabrasives, giving superior performance at lower cost, or by using computers/satellites toreplace copper wire (land lines).

An important way of replacing a resource is by synthesis, for example, industrialdiamonds and many kinds of graphite, although a certain kind of graphite could be almostreplaced by a recycled product. Most graphite is synthetic, for example, graphiteelectrodes, graphite fiber, graphite shapes (machined or unmachined), and graphite

powder.Another way of replacing or extending a resource is by recycling the material desiredfrom scrap or waste. This depends on whether or not the material is dissipated or isavailable as a no longer usable durable product. Reclamation of the durable productdepends on its resistance to chemical and physical breakdown, quantities available, priceof availability, and the ease of extraction from the original product. For example, bismuthin stomach medecine is hopelessly scattered (dissipated) and therefore impossible torecover while bismuth alloys can be easily recovered and recycled. A good examplewhere recycling makes a big difference is the resource availability situation for graphite,where flake graphite can be recovered from a renewable resource called kish, a

steelmaking waste created when carbon separates out as graphite within the kish from themolten metal along with slag. After it is cold, the kish can be processed.

Several other kinds of resources need to be introduced. If strategic and critical materialsare the worst case for resources, unless mitigated by substitution and/or recycling, one ofthe best is an abundant resource. An abundant resource is one whose material has so farfound little use, such as using high-aluminous clays or anorthosite to produce alumina,and magnesium before it was recovered from seawater. An abundant resource is quitesimilar to a perpetual resource. The reserve base is the part of an identified resource thathas a reasonable potential for becoming economically available at a time beyond whencurrently proven technology and current economics are in operation. Identified resourcesare those whose location, grade, quality, and quantity are known or estimated fromspecific geologic evidence. Reserves are that part of the reserve base that can beeconomically extracted at the time of determination; reserves should not be used as asurrogate for resources because they are often distorted by taxation or the owning firm's

public relations needs.

Comprehensive natural resource models


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Harrison Brown and associates stated that humanity will process lower and lower grade"ore". Iron will come from low-grade iron-bearing material such as raw rock fromanywhere in an iron formation, not much different from the input used to make taconite

pellets in North America and elsewhere today. As coking coal reserves decline, pig ironand steel production will use non-coke-using processes (i.e. electric steel). The aluminum

industry could shift from using bauxite to using anorthosite and clay. Magnesium metaland magnesia consumption (i.e. in refractories), currently obtained from seawater, willincrease. Sulfur will be obtained from pyrites, then gypsum or anhydrite. Metals such ascopper, zinc, nickel, and lead will be obtained from manganese nodules or the Phosphoriaformation (sic!). These changes could occur irregularly in different parts of the world.While Europe and North America might use anorthosite or clay as raw material foraluminum, other parts of the world might use bauxite, and while North America mightuse taconite, Brazil might use iron ore. New materials will appear (note: they have), theresult of technological advances, some acting as substitutes and some with new

properties. Recycling will become more common and more efficient (note: it has!).Ultimately, minerals and metals will be obtained by processing "average" rock. Rock,

100 tonnes of "average" igneous rock, will yield eight tonnes of aluminum, five tonnes ofiron, and 0.6 tonnes of titanium.

The USGS model based on crustal abundance data and the reserve-abundancerelationship of McKelvey, is applied to several metals in the Earth's crust (worldwide)and in the U.S. crust. The potential currently recoverable (present technology, economy)resources that come closest to the McKelvey relationship are those that have been soughtfor the longest time, such as copper, zinc, lead, silver, gold and molybdenum. Metals thatdo not follow the McKelvey relationship are ones that are byproducts (of major metals)or haven't been vital to the economy until recently (titanium, aluminum to a lesserdegree). Bismuth is an example of a byproduct metal that doesn't follow the relationshipvery well; the 3% lead reserves in the western U.S. would have only 100 ppm bismuth,clearly too low-grade for a bismuth reserve. The world recoverable resource potential is2,120 million tonnes for copper, 2,590 million tonnes for nickel, 3,400 million tonnes forzinc, 3,519 BILLION tonnes for aluminum, and 2,035 BILLION tonnes for iron.

Diverse authors have further contributions. Some think the number of substitutes isalmost infinite, particularly with the flow of new materials from the chemical industry;identical end products can be made from different materials and starting points. Plasticscan be good electrical conductors. Since all materials are 100 times weaker than theytheoretically should be, it ought to be possible to eliminate areas of dislocations andgreatly strengthen them, enabling lesser quantities to be used. To summarize, "mining"companies will have more and more diverse products, the world economy is movingaway from materials towards services, and the population seems to be levelling, all ofwhich implies a lessening of demand growth for materials; much of the materials will berecovered from somewhat uncommon rocks, there will be much more coproducts and

byproducts from a given operation, and more trade in minerals and materials.

Trend towards perpetual resources


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As radical new technology impacts the materials and minerals world more and more powerfully, the materials used are more and more likely to have perpetual resources.There are already more and more materials that have perpetual resources and less and lessmaterials that have nonrenewable resources or are strategic and critical materials. Somematerials that have perpetual resources such as salt,stone, magnesium, and common clay

were mentioned previously. Thanks to new technology, synthetic diamonds were addedto the list of perpetual resources, since they can be easily made from a lump of carbon.Another form of carbon, synthetic graphite, is made in large quantities (graphiteelectrodes, graphite fiber) from carbon precursors such as petroleum coke or a textilefiber. A firm named Liquidmetal Technologies, Inc. is utilizing the removal ofdislocations in a material with a technique that overcomes performance limitationscaused by inherent weaknesses in the crystal atomic structure. It makes amorphous metalalloys, which retain a random atomic structure when the hot metal solidifies, rather thanthe crystalline atomic structure (with dislocations) that normally forms when hot metalsolidifies. These amorphous alloys have much better performance properties than usual;for example, their zirconium-titanium Liquidmetal alloys are 250% stronger than a

standard titanium alloy. The Liquidmetal alloys can supplant many high performancealloys.

Exploration of the ocean bottom in the last fifty years revealed manganese nodules and phosphate nodules in many locations. More recently, polymetallic sulfide deposits have been discovered and polymetallic sulfide "black muds" are being presently depositedfrom "black smokers" The cobalt scarcity situation of 1978 has a new option now:recover it from manganese nodules. A Korean firm plans to start developing a manganesenodule recovery operation in 2010; the manganese nodules recovered would average 27%to 30% manganese, 1.25% to 1.5% nickel, 1% to 1.4% copper, and 0.2% to 0.25% cobalt(commercial grade) Nautilus Minerals Ltd. is planning to recover commercial gradematerial averaging 29.9% zinc, 2.3% lead, and 0.5% copper from massive ocean-bottom

polymetallic sulfide deposits using an underwater vacuum cleaner-like device thatcombines some current technologies in a new way. Partnering with Nautilus are TechCominco Ltd. and Anglo-American Ltd., world-leading international firms.

There are also other robot mining techniques that could be applied under the ocean. RioTinto is using satellite links to allow workers 1500 kilometers away to operate drillingrigs, load cargo, dig out ore and dump it on conveyor belts, and place explosives tosubsequently blast rock and earth. The firm can keep workers out of danger this way, andalso use fewer workers. Such technology reduces costs and offsets declines in metalcontent of ore reserves. Thus a variety of minerals and metals are obtainable fromunconventional sources with resources available in huge quantities.

Finally, what is a perpetual resource? The ASTM definition for a perpetual resource is"one that is virtually inexhaustible on a human time-scale". Examples given include solarenergy, tidal energy, and wind energy, to which should be added salt, stone, magnesium,diamonds, and other materials mentioned above. A study on the biogeophysical aspectsof sustainability came up with a rule of prudent practice that a resource stock should last


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700 years to achieve sustainability or become a perpetual resource, or for a worse case,350 years.

If a resource lasting 700 or more years is perpetual, one that lasts 350 to 700 years can becalled an abundant resource, and is so defined here. How long the material can be

recovered from its resource depends on human need and changes in technology fromextraction through the life cycle of the product to final disposal, plus recyclability of thematerial and availability of satisfactory substitutes. Specifically, this shows thatexhaustibility does not occur until these factors weaken and play out: the availability ofsubstitutes, the extent of recycling and its feasibility, more efficient manufacturing of thefinal consumer product, more durable and longer-lasting consumer products, and even anumber of other factors.

The most recent resource information and guidance on the kinds of resources that must beconsidered is covered on the Resource Guide-Update

Transitioning: perpetual resources to paleoresourcesPerpetual resources can transition to being a paleoresource. A paleoresource is one thathas little or no demand for the material extracted from it; an obsolescent material,humans no longer need it. The classic paleoresource is an arrowhead-grade flint resource;no one makes flint arrowheads or spearheads anymoremaking a sharpened piece ofscrap steel and using it is much simpler. Obsolescent products include tin cans, tin foil,the schoolhouse slate blackboard, and radium in medical technology. Radium has beenreplaced by much cheaper Cobalt 60 and other radioisotopes in radiation treatment.

Noncorroding lead as a cable covering has been replaced by plastics. The gypsum building plasters that used to cover interior walls in a building have been replaced by

drywall and its predecessors. This can be shown statistically: the tonnage of building plasters sold stayed the same from 1922 to 1962, while the tonnage of prefabricated building products (drywall) was multiplied almost 25 times in the same time period.

Pennsylvania anthracite is another material where the trend towards obsolescence and becoming a paleoresource can be shown statistically. Production of anthracite was 70.4million tonnes in 1905, 49.8 million tonnes in 1945, 13.5 million tonnes in 1965, 4.3million tonnes in 1985, and 1.5 million tonnes in 2005. The amount used per person was84 kg per person in 1905, 7.1 kg in 1965, and 0.8 kg in 2005. Compare this to the USGSanthracite reserves of 18.6 billion tonnes and total resources of 79 billion tonnes; theanthracite demand has dropped so much that these resources are more than perpetual.

Since anthracite resources are so far into the perpetual resource range and demand foranthracite has dropped so far, is it possible to see how anthracite might become a

paleoresource? Probably by customers continuing to disappear (i.e. convert to other kindsof energy for space heating), the supply network atrophy as anthracite coal dealers can'tretain enough business to cover costs and close, and mines with too small a volume tocover costs also close. This is a mutually reinforcing process: customers convert to otherforms of cleaner energy that produce less pollution and carbon dioxide, then the coal


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dealer has to close because of lack of enough sales volume to cover costs. The coaldealer's other customers are then forced to convert unless they can find another nearbycoal dealer. Finally the anthracite mine closes because it doesn't have enough salesvolume to cover its costs.


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Chapter- 6

Energetics

Energetics is the scientific study of energy under transformation. Because energy flowsat all scales, from the quantum level to the biosphere and cosmos, energetics is a very broad discipline, encompassing for example thermodynamics, chemistry, biologicalenergetics, biochemistry and ecological energetics. Where each branch of energetics

begins and ends is a topic of constant debate. For example, Lehninger (1973, p. 21)contended that when the science of thermodynamics deals with energy exchanges of alltypes, it can be called energetics.

Aims

In general, energetics is concerned with seeking principles that accurately describe theuseful and non-useful tendencies of energy flows and storages under transformation.'Principles' are understood here as phenomena which behave like historical invariantsunder multiple observations. When some critical number of people have observed suchinvariance, such a principle is usually then given the status of a 'fundamental law' ofscience. Like in all science, whether or not a theorem or principle is considered afundamental law appears to depend on how many people agree to such a proposition. Theultimate aim of energetics therefore is the description of fundamental laws. Philosophersof science have held that the fundamental laws of thermodynamics can be treated as thelaws of energetics, (Reiser 1926, p. 432). Through the clarification of these lawsenergetics aims to produce reliable predictions about energy flow and storagetransformations at any scale; nano to macro.

History

Energetics has a controversial history. Some authors maintain that the origins ofenergetics can be found in the work of the ancient Greeks, but that the mathematicalformalisation began with the work of Leibniz. Liet.-Col. Richard de Villamil (1928) saidthat Rankine formulated the Science of Energetics in his paper Outlines of the Science of


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Energetics published in the Proceedings of the Philosophical Society of Glasgow in 1855.W. Ostwald and E. Mach subsequently developed the study and in the late 1800senergetics was understood to be incompatible with the atomic view of the atomforwarded by Boltzmann's gas theory. Proof of the atom settled the dispute but notwithout significant damage. In the 1920s Lotka then attempted to build on Boltzmann's

views through a mathematical synthesis of energetics with biological evolutionary theory.Lotka proposed that the selective principle of evolution was one which favoured themaximum useful energy flow transformation. This view subsequently influenced thefurther development of ecological energetics, especially the work of Howard T. Odum.

De Villamil attempted to clarify the scope of energetics with respects to other branches of physics by contriving a system that divides mechanics into two branches; energetics (thescience of energy) and "pure", "abstract" or "rigid" dynamics (the science of momentum).According to Villamil energetics can be mathematically characterised by scalarequations, and rigid dynamics by vectorial equations. In this division the dimensions fordynamics are space , time and mass, and for energetics, length , time and mass (Villamil

1928, p. 9). This division is made according to fundamental presuppositions about the properties of bodies which can be expressed according to how one answers to followingtwo questions:

1. Are particles rigidly fixed together?

2. Is there any machinery for stopping moving bodies?

In Villamil's classification system, dynamics says yes to 1 and no to 2, whereasenergetics says no to 1 and yes to 2. Therefore, Villamil's in system, dynamics assumesthat particles are rigidly fixed together and cannot vibrate, and consequently must all be

at zero temperature. The conservation of momentum is a consequence of this view,however it is considered valid only in logic and not to be a true representation of the facts(Villamil, p. 96). In contrast energetics does not assume that particles are rigidly fixedtogether, particles are therefore free to vibrate, and consequently can be at non-zerotemperatures.

Principles of energetics


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Ecological analysis of CO 2 in an ecosystem

As a general statement of energy flows under transformation, the principles of energetics

include the first four laws of thermodynamics which seek a rigorous description.However the precise place of the laws of thermodynamics within the principles ofenergetics is a topic currently under debate. If the ecologist Howard T. Odum was right,then the principles of energetics take into consideration a hierarchical ordering of energyforms, which aims to account for the concept of energy quality, and the evolution of theuniverse. Albert Lehninger (1973, p. 2) called these hierarchical orderings the

... successive stages inthe flow of energythrough the biologicalmacrocosm

Odum proposed 3 further energetic principles and one corollary that take energyhierarchy into account. The first four principles of energetics are related to the samenumbered laws of thermodynamics, and are expanded upon in that article. The final four

principles are taken from the ecological energetics of H.T. Odum.

Zeroth principle of energetics


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If two thermodynamic systems A and B are in thermal equilibrium, and B and Care also in thermal equilibrium, then A and C are in thermal equilibrium.

First principle of energetics

The increase in the internal energy of a system is equal to the amount of energyadded to the system by heating, minus the amount lost in the form of work done by the system on its surroundings.

Second principle of energetics

The total entropy of any isolated thermodynamic system tends to increase overtime, approaching a maximum value.

Third principle of energetics

As a system approaches absolute zero of temperature all processes cease and theentropy of the system approaches a minimum value or zero for the case of a perfect crystalline substance.

Fourth principle of energetics

There seem to be two opinions on the fourth principle of energetics:

o The Onsager reciprocal relations are sometimes called the fourth law ofthermodynamics. As the fourth law of thermodynamics Onsager reciprocalrelations would constitute the fourth principle of energetics.

o In the field of ecological energetics H.T. Odum considered maximum power, the fourth principle of energetics. Odum also proposed theMaximum empower principle as a corollary of the maximum power

principle, and considered it to describe the propensities of evolutionaryself-organization.

Fifth principle of energetics

The energy quality factor increases hierarchically. From studies of ecologicalfood chains, Odum proposed that energy transformations form a hierarchicalseries measured by Transformity increase (Odum 2000, p. 246). Flows of energydevelop hierarchical webs in which inflowing energies interact and are

transformed by work processes into energy forms of higher quality that feedbackamplifier actions, helping to maximise the power of the system" (Odum 1994, p. 251)

Sixth principle of energetics

Material cycles have hierarchical patterns measured by the emergy/mass ratio thatdetermines its zone and pulse frequency in the energy hierarchy. (Odum 2000,


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p. 246). M.T. Brown and V. Buranakarn write, "Generally, emergy per mass is agood indicator of recycle-ability, where materials with high emergy per mass aremore recyclable".


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Chapter- 7

Economics of Global Warming

Definitions

Here, the phrase climate change is used to describe a change in the climate, measuredin terms of its statistical properties, e.g., the global mean surface temperature. In thiscontext, climate is taken to mean the average weather. Climate can change over periodof time ranging from months to thousands or millions of years. The classical time periodis 30 years, as defined by the World Meteorological Organization. The climate changereferred to may be due to natural causes, e.g., changes in the sun's output, or due humanactivities, e.g., changing the composition of the atmosphere. Any human-induced changesin climate will occur against the background of natural climatic variations.

Here, the phrase global warming refers to the change in the Earth's global average

surface temperature. Measurements show a global temperature increase of 1.4 F(0.78 C) between the years 1900 and 2005. Global warming is closely associated with a broad spectrum of other climate changes, such as increases in the frequency of intenserainfall, decreases in snow cover and sea ice, more frequent and intense heat waves,rising sea levels, and widespread ocean acidification.

Climate change science

This section describes the science of climate change in relation to economics(Munasinghe et al. , 1995:39-41):

Greenhouse gases :o These gases have been linked with current climate change and may result

in further climate change in the future. Greenhouse gases (GHGs) arestock pollutants, and not flow pollutants. This means that it is theconcentration of GHGs in the atmosphere that is important in determiningclimate change impacts, rather than the flow of GHGs into theatmosphere.


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o The stocks of different GHGs in the atmosphere depreciate at variousrates, e.g., the atmospheric lifetime of carbon dioxide is over 100 years. Ifthe atmospheric lifetime of the GHG is a year or longer, then the windshave time to spread the gas throughout the lower atmosphere, and itsabsorption of terrestrial infrared radiation occurs at all latitudes and

longitudes (US NRC, 2001:10). It is the flows from all the GHG sourcesof all nations that contribute to the stock of long-lived GHGs in theatmosphere.

Inertia : The emissions of GHGs in any one year represent a relatively smallfraction of the total global stock, meaning that the system as a whole has greatinertia. If emissions were to be reduced to zero, it would take decades to centuriesfor stock levels to decline significantly. The time required for stocks to depreciatedepends on the physical process of GHG removal. The stocks of GHGs withrelatively short atmospheric lifetimes, such as methane, depreciate more quicklythan the stocks of GHGs with longer atmospheric lifetimes, e.g., HFCs.

Impact data : Predictions of the physical impacts of climate change are based on

the work of climate scientists. Only once (or if) further climate change occurs,will the true social and economic impacts of climate change be known. (Note: The preceding sentence is from 1995. Climate change is acknowledged by mainstreamscience to exist, to be continuing and to be highly likely to be largely caused byhuman activity)

Scenarios

Socioeconomic scenarios are used by analysts to make projections of future GHGemissions and to assess future vulnerability to climate change (Carter et al. , 2001:151).Producing scenarios requires estimates of future population levels, economic activity, thestructure of governance, social values, and patterns of technological change. Economicand energy modelling (such as via the World3 or the POLES models) can be used toanalyse and quantify the effects of such drivers.

Emissions scenarios

One type of emissions scenario is called a "global future" scenario. These scenarios can be thought of as stories of possible futures. They allow the description of factors that aredifficult to quantify, such as governance, social structures, and institutions. Morita et al. (2001:137-142) assessed the literature on global futures scenarios. They foundconsiderable variety among scenarios, ranging from variants of sustainable development,

to the collapse of social, economic, and environmental systems.

No strong patterns were found in the relationship between economic activity and GHGemissions. Economic growth was found to be compatible with increasing or decreasingGHG emissions. In the latter case, emissions growth is mediated by increased energyefficiency, shifts to non-fossil energy sources, and/or shifts to a post-industrial (service-

based) economy.


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Factors affecting emissions growth

Development trends : In producing scenarios, an important consideration is howsocial and economic development will progress in developing countries (Fisher etal. , 2007:176). If, for example, developing countries were to follow a

development pathway similar to the current industrialized countries, it could leadto a very large increase in emissions. GHG emissions and economic growth : Emissions do not only depend on the

growth rate of the economy. Other factors are listed below:o Structural changes in the production system.o Technological patterns in sectors such as energy.o Geographical distribution of human settlements and urban structures. This

affects, for example, transportation requirements.o Consumption patterns : e.g., housing patterns, leisure activities, etc.o Trade patterns : the degree of protectionism and the creation of regional

trading blocks can affect availability to technology.

Trends and projections

Emissions

The Kaya identity expresses the level of energy related CO 2 emissions as the product offour indicators (Rogner et al. , 2007, p. 107):

Carbon intensity. This is the CO 2 emissions per unit of total primary energysupply (TPES)

Energy intensity. This is the TPES per unit of gross domestic product (GDP) GDP per capita (GDP/cap) Population

GDP/capita and population growth were the main drivers of the increase in globalemissions during the last three decades of the 20 th century. At the global scale, decliningcarbon and energy intensities have been unable to offset these effects, and consequently,carbon emissions have risen.

Projections :o Without additional policies

economics and energy

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