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Natural resource economics deals with the supply, demand, and allocation of the Earth's . One main objective of natural resource economics is to better understand the role of natural resources in the economy in order to develop more Sustainability methods of managing those resources to ensure their availability for future generations. Resource economists study interactions between economic and natural systems, with the goal of developing a sustainable and efficient economy.http://www.uri.edu/cels/enre/ University of Rhode Island Department of Environmental and Natural Resource Economics Retrieved October-22-09
Academic and policy interest has now moved beyond simply the optimal commercial exploitation of the standard trio of resources to encompass management for other objectives. For example, natural resources more broadly have defined recreational, as well as commercial values. They may also contribute to overall social welfare levels, by their mere existence.
The economics and policy area focuses on the human aspects of environmental problems. Traditional areas of environmental and natural resource economics include welfare theory, land/location use, pollution control, resource extraction, and non-market valuation, and also resource exhaustibility,Geoffrey Heal (2008). "exhaustible resources," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract 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 in non-market valuation, to name just a few.
Hotelling's rule is a 1938 economic model of non-renewable resource management by Harold Hotelling. It shows that efficient exploitation of a nonrenewable and nonaugmentable resource would, under otherwise stable economic conditions, lead to a depletion of the resource. The rule states that this would lead to a net price or "Hotelling rent" for it that rose annually at a rate equal to the rate of interest, reflecting the increasing scarcity of the resource. Nonaugmentable resources of inorganic materials (i.e. minerals) are uncommon; most resources can be augmented by recycling and by the existence 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 the reserve (resource) already depleted. (2) The intensive development margin governed by the 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 new deposits (resources) is conducted and the cost per unit extracted is highly uncertain with the cost of failure having to be balanced against finding usable resources (deposits) that have marginal costs of extraction no higher than in the first three stages above. (5) The technology margin which interacts with the first four stages. The Gray-Hotelling (exhaustion) theory is a special case, since it covers only Stages 1–3 and not the far more important Stages 4 and 5.Vogely, William A. "Nonfuel Minerals and the World Economy", Chapter 15 in "The Global Possible" by Repetto, Robert, World Resources Institute Book Yale University Press
Simon has stated that the supply of natural resources is infinite (i.e. perpetual) Simon, Julian. "Can the Supply of Natural Resources Really be Infinite? Yes!", "The Ultimate Resource" 1981, Chapter 3
These conflicting views will be substantially reconciled by considering resource-related topics in depth in the next section, or at least minimized.
Furthermore, Hartwick's rule provides insight to the sustainability of welfare in an economy that uses non-renewable resources.
The Federal Government suddenly became compellingly interested in resource issues on December 7, 1941, shortly after which Japan cut the U.S. off from tin and rubber and made some other materials, such as tungsten, very difficult to obtain. This was the worst case for resource availability, becoming a strategic and critical material. After the war a government stockpile of strategic and critical materials was set up, having around 100 different materials that were purchased for cash or obtained by trading off U.S. agricultural commodities for them. In the longer term, scarcity of tin later led to completely substituting aluminum foil for tin foil and polymer lined steel cans and aseptic packaging substituting for tin can steel cans.
Resources change over time with technology and economics; more efficient recovery leads to a drop in the ore grade needed. The average grade of the copper ore processed has 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."Domestic Reserves vis-a-vis Resources","Congressional Handbook on U.S. Materials Import Dependency" House Committee on Banking, Finance & Urban Affairs, September 1981, pp. 19-21
Cobalt had been in an iffy supply status ever since the Belgian Congo (world's only significant source of cobalt) was given a hasty independence in 1960 and the cobalt-producing province seceded as Katanga, followed by several wars and insurgencies, local government removals, railroads destroyed, and nationalizations. This was topped off by an invasion of the province by Katangan rebels in 1978 that disrupted supply and transportation and caused the cobalt price to briefly triple. While the cobalt supply was disrupted and the price shot up, nickel and other substitutes were pressed into service.U.S. Bureau of Mines, 1978-79 Minerals Yearbook, "Cobalt" and "The Mineral Industry of Zaire" chapters, Vol. I pp. 249-258, Vol. III pp. 1061-1066
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 strategy designed to destroy economic activity outside the Soviet bloc by the acquisition of vital resources by noneconomic means (military?) outside the Soviet bloc (Third World?), then withholding these minerals from the West."THE RESOURCES WAR", "Congressional Handbook on U.S. Materials Import Dependency" House Committee on Banking, Finance, and Urban Affairs, September 1981, pp. 160-174
An important way of getting around a cobalt situation or a "Resource War" situation is to use 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 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 exotic alloys, and (4) an ability for processing and fabrication with minimal changes in existing technology, capital plant, and processing and fabricating facilities. Some suggested substitutions were alunite for bauxite to make alumina, molybdenum and/or nickel for cobalt, and aluminum alloy automobile radiators for copper alloy automobile radiators."SUBSTITUTION", "Congressional Handbook on U.S. Material Import Dependency" House Committee on Banking, Finance, and Urban Affairs, September 1981, pp. 242-254 Materials can be eliminated without material substitutes, for example by using discharges of high tension electricity to shape hard objects that were formerly shaped by mineral abrasives, giving superior performance at lower cost,Charles W. Merrill "Mineral Obsolescence and Substitution" "Mining Engineering", AIME, Society of Mining Engineers, September 1964, pp. 55-59 or by using computers/satellites to replace copper wire (land lines).
An important way of replacing a resource is by synthesis, for example, industrial diamonds and many kinds of graphite, although a certain kind of graphite could be almost replaced by a recycled product. Most graphite is synthetic, for example, graphite electrodes, graphite fiber, graphite shapes (machined or unmachined), and graphite powder.
Another way of replacing or extending a resource is by recycling the material desired from scrap or waste. This depends on whether or not the material is dissipated or is available as a no longer usable durable product. Reclamation of the durable product depends on its resistance to chemical and physical breakdown, quantities available, price of availability, and the ease of extraction from the original product.Peter T. Flawn. "Mineral Resources (Geology, Engineering, Economics, Politics, Law)" Rand McNally, Chicago, 1966, pp. 374-378 For example, bismuth in stomach medicine is hopelessly scattered (dissipated) and therefore impossible to recover, while bismuth alloys can be easily recovered and recycled. A good example where 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 the molten metal along with slag. After it is cold, the kish can be processed.P. D. Laverty, L. J. Nicks, and L. A. Walters "Recovery of Flake Graphite from Steelmaking Kish", U.S. Bureau of Mines RI9512, 1994, 23 p.
Several other kinds of resources need to be introduced. If strategic and critical materials are the worst case for resources, unless mitigated by substitution and/or recycling, one of the best is an abundant resource. An abundant resource is one whose material has so far found 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 quite similar to a perpetual resource.Charles W. Merrill "Introduction" U.S. Bureau of Mines Bulletin 630, 1965, p. 2 The reserve base is the part of an identified resource that has a reasonable potential for becoming economically available at a time beyond when currently proven technology and current economics are in operation. Identified resources are those whose location, grade, quality, and quantity are known or estimated from specific geologic evidence. Reserves are that part of the reserve base that can be economically extracted at the time of determination;U.S. Geological Survey "Mineral Commodity Summary", Appendix C, 2008, p. C1-C3 reserves should not be used as a surrogate for resources because they are often distorted by taxation or the owning firm's public relations needs.
The USGS model based on crustal abundance data and the reserve-abundance relationship 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 sought for the longest time, such as copper, zinc, lead, silver, gold and molybdenum. Metals that do not follow the McKelvey relationship are ones that are byproducts (of major metals) or have not been vital to the economy until recently (titanium, aluminum to a lesser degree). Bismuth is an example of a byproduct metal that does not follow the relationship very 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 is 2,120 million tonnes for copper, 2,590 million tonnes for nickel, 3,400 million tonnes for zinc, 3,519 billion tonnes for aluminum, and 2,035 billion tonnes for iron.R. L. Erickson "Crustal Abundance of Elements, and Mineral Reserves and Resources", "United States Mineral Resources" U.S. Geological Survey Professional Paper 820, 1973, pp. 21-25
Diverse authors have further contributions. Some think the number of substitutes is almost infinite, particularly with the flow of new materials from the chemical industry; identical end products can be made from different materials and starting points. Since all materials are 100 times weaker than they theoretically should be, it ought to be possible to eliminate areas of dislocations and greatly strengthen them, enabling lesser quantities to be used. To summarize, "mining" companies will have more and more diverse products, the world economy is moving away from materials towards services, and the population seems to be levelling, all of which implies a lessening of demand growth for materials; much of the materials will be recovered from somewhat uncommon rocks, there will be much more coproducts and byproducts from a given operation, and more trade in minerals and materials.Harold A. Taylor. "The Future of the Mineral Industry" University of Minnesota, Minneapolis, Dept. of Mining Engineering, 1968, 15 p.
Exploration of the ocean bottom in the last fifty years revealed manganese nodules and in many locations. More recently, polymetallic sulfide deposits have been discovered and polymetallic sulfide "black muds" are being presently deposited from "black smokers" F. M. Herzig and M. Hannington "Polymetallic Sulfides at the Modern Seafloor-A Review" Ore Geology Reviews, Vol. 10 (Elsevier) 1995, pp. 95-115 The cobalt scarcity situation of 1978 has a new option now: recover it from manganese nodules. A Korean firm plans to start developing a manganese nodule 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) |http://minerals.usgs.gov/pubs/commodity/manganese/mangamyb04.pdf Nautilus Minerals Ltd. is planning to recover commercial grade material 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 that combines some current technologies in a new way. Partnering with Nautilus are Tech Cominco Ltd. and Anglo-American Ltd., world-leading international firms.Platts Metals Week "Underseas Mining Finds Richer Grades at Lower Cost: Nautilus", "Platts Metals Week", September 22, 2008, p. 14-15
There are also other robot mining techniques that could be applied under the ocean. Rio Tinto is using satellite links to allow workers 1500 kilometers away to operate drilling rigs, load cargo, dig out ore and dump it on conveyor belts, and place explosives to subsequently blast rock and earth. The firm can keep workers out of danger this way, and also use fewer workers. Such technology reduces costs and offsets declines in metal content of ore reserves.Wall Street Journal "Miner Digs for Ore in the Outback With Remote-Controlled Robots", March 2, 2010, pp. D1 Thus a variety of minerals and metals are obtainable from unconventional 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 solar energy, tidal energy, and wind energy,ASTM E60 "E2114-08 Standard Terminology for Sustainability", ASTM, 2008, pp. 615-618 to which should be added salt, stone, magnesium, diamonds, and other materials mentioned above. A study on the biogeophysical aspects of sustainability came up with a rule of prudent practice that a resource stock should last 700 years to achieve sustainability or become a perpetual resource, or for a worse case, 350 years.http://www.dieoff.org/page 113.htm
If a resource lasting 700 or more years is perpetual, one that lasts 350 to 700 years can be called 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 from extraction through the life cycle of the product to final disposal, plus recyclability of the material and availability of satisfactory substitutes. Specifically, this shows that exhaustibility does not occur until these factors weaken and play out: the availability of substitutes, the extent of recycling and its feasibility, more efficient manufacturing of the final consumer product, more durable and longer-lasting consumer products, and even a number of other factors.
The most recent resource information and guidance on the kinds of resources that must be considered is covered on the Resource Guide-Update [4]
Pennsylvania anthracite is another material where the trend towards obsolescence and becoming a paleoresource can be shown statistically. Production of anthracite was 70.4 million tonnes in 1905, 49.8 million tonnes in 1945, 13.5 million tonnes in 1965, 4.3 million tonnes in 1985, and 1.5 million tonnes in 2005. The amount used per person was 84 kg per person in 1905, 7.1 kg in 1965, and 0.8 kg in 2005.U.S. Bureau of Mines, 1956 Minerals Yearbook, "Coal-Pennsylvania Anthracite" pp. 120-165, and 1971 Minerals Yearbook, "Coal-Pennsylvania Anthracite" pp. 378-404 Compare this to the USGS anthracite reserves of 18.6 billion tonnes and total resources of 79 billion tonnes;Paul Averitt "Coal", "United States Mineral Resources" U.S. Geological Survey Professional Paper 820, 1973, p.137 the anthracite 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 for anthracite 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 kinds of energy for space heating), the supply network atrophy as anthracite coal dealers cannot retain enough business to cover costs and close, and mines with too small a volume to cover costs also close. This is a mutually reinforcing process: customers convert to other forms of cleaner energy that produce less pollution and carbon dioxide, then the coal dealer has to close because of lack of enough sales volume to cover costs. The coal dealer's other customers are then forced to convert unless they can find another nearby coal dealer. Finally, the anthracite mine closes because it does not have enough sales volume to cover its costs.
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