Course:ECON372/OK2019WT2/Topic9
The Valuation of Natural Resources
Due system time (GMT), 07:59, 7 February 2020
Group #1
https://www.theguardian.com/environment/2012/aug/10/nature-economic-value-campaign
Summary:
This article comes from the guardian, it discusses the possibility of associating monetary values to ecosystem components. This would decrease environmental degradation that has occurred as a result of our unsustainable relationship with nature. It would mean governments “putting a price on nature” derived from the public benefits created by natural systems. As nature is essential for economic activity and growth, in order for continued economic prosperity it will be necessary to maintain nature. The article discusses the inability to properly value our ecosystem components and some methods that can be used to develop a proper value system. This is quite a lengthy discussion since nature has both an active value (extracting from nature) as well as a passive value such as oxygen production or CO2 sinks. However the discussion becomes more complicated when adding less tangible passive value such as animals' lives or even beauty, since they are subjective.
Analysis:
The assets provided by ecosystems are crucial to human existence and continued economic prosperity, due to these necessary functions it is crucial to find a sustainable method of conserving them. The proposal to attribute monetary value to ecosystems however is not as simple of a solution as it might seem. Due to the complex nature of ecosystems and their synergy it can be extremely complicated to attribute a single monetary value on a single ecosystem component. Beneficial functions of ecosystems are reliant on other processes that may not be accounted for. Not to mention beneficial attributes that cannot be given a price tag like beauty. Additionally the idea of environmental capital would require all proponents to agree on a single price for an ecosystem component which can prove extremely difficult. Bias in assessment would also be an issue as we are putting a value on a non use benefit. It would also require many regulations to set up a rigorous system that would reliably value and conserve ecosystem components.
Though it can be complicated to associate an actual value to an ecosystem function doing so could help preserve them. Once a value has been attributed to an ecosystem we can prove its value compared to the possibility of harming it for other means. However this mindset is still difficult to achieve a ecosystem function having a passive existence value.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 10 | |
| Summary (20) | 20 | |
| Course Related Analysis (30-50) | 35 | The article does not really provide any discussion of the methods, nor of how economic valuations would actually impact on policy. Valuing ecological services may mean we have a better understanding of the external costs of our decisions, but it doesn't mean that we will choose the socially efficient policy. |
| Extended Analysis (0-20) | ||
| Presentation (10) | 10 | |
| Total | 85 |
Group #2
Summary
The article is a case study to analyze the environmental impact of opening a new project. Formosa, a petrochemical corporation from Taiwan, is planning to build a plant in Louisiana. While this has the effect of creating jobs, both directly and through the second sector, there are serious environmental issues. The state government of Louisiana supports the factory's existence, due to its contributions to the tax revenue. A myriad of activist groups however, think that the state doesn't have enough capability to handle such environmentally sensitive projects. They cited cases like a court settlement for environmental wrongdoings, and historical evidence of pollution of Formosa, to support their claim. The project takes place in the "cancer zone" - a stretch of industrial zones in the Mississippi River, which was known to have high levels of cancer and respiratory diseases. It is noted that no EIS was registered.
Analysis
The case of Formosa should be viewed with a benefits/costs analysis approach. Its tangible benefits of creating direct jobs and secondary sector employment is clear - the government had done extensive research on that. People would also agree that it has not much nonmarket benefits, as people's WTP to be near a factory is usually low. However, the analysis in the cost side is much more abstract and tedious. W
While not changing the landscape much in an industrialized setting, Formosa's future impact on the surrounding air quality is a major natural resource concern t The lack of information in this regard had undermined the true cost of the plastic plant to society. Furthermore, while cost of physical facilities built can be reported by the firm, regulatory costs of hosting a powerplant this size has been unclear, and is subject to political sensitivities rather than mathematical analysis. What Formosa costs the regulatory bodies, and hence the people, should be explored further, as they're directly linked to the environmental and natural welfare of affected populations. oo.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 4 | More pollution than resource issue. |
| Summary (20) | 15 | |
| Course Related Analysis (30-50) | 30 | In this chapter we talked about valuation, including methods. How would you measure the costs? |
| Extended Analysis (0-20) | ||
| Presentation (10) | 8 | |
| Total | 67 |
Group #3
https://www.cbc.ca/news/canada/nova-scotia/caution-from-maine-over-canadian-seafood-ban-1.5443840
Summary
This article represented that Canadian fisherman and government attempt to make effort on whole protections. Last September, nine conservation organizations in the United States signed a letter admonishing the United States that it should consider banning the import of snow crabs from Canada due to the upcoming new marine mammal protection measures of 2020. These groups have put pressure on the Canadian government to strengthen their protection of whales. In addition, there were 20 right whales in Canada that were dying from entanglement in 2017. The Canadian government has set new regulations for the use of special equipment markets to protect endangered right whales by 2020; in fact, the United States can ban the import of seafood from counties without the same whale protection measures. New regulations could harm the industry and fail to address entanglement. Lobster fishermen and processors on both sides of the border discussed the protection of whale in Moncton. The lobster industry has merged in both countries. Both sides of the lobster fishery use traps to trap lobsters and have a responsibility to protect whales from entanglement. Everyone should keep their borders open and support each other.
Analysis
New regulations on the use of special gear may increase the cost of lobster fishing. New regulations change the cost of lobster fishing. For example, the regulation could affect about 150 lobster fisheries on Nova Scotia's eastern coast once the fishing season arrives.(https: //www.cbc.ca/news/canada/nova-scotia/canada-mandatory-gear-marking-2020-fishing-industry-1.5422962) As increasing cost of the supply side, the supply curve will shift up due to the regulation. In addition, output will be decreased and industry prices will be increased. How can we know the cost of new regulation? Cost surveys can be introduced into this situation by asking the fisheries about cost of new equipment and training on employees. Then, the extra cost of regulation can be recognized by the surveys. However, cost survey also has limitation that the data collected from surveys may not be accurate due to subjective opinions of participants and using past data on similar regulation. Therefore, the government can compare how new net profit and new cost on new regulation are generated. Although the new regulations may affect or harm the Canadian lobster industry, the implementation of the new regulations is necessary from an economic perspective. The largest exporter is the United States ($ 4.27B), which accounts for 61.7% of Canada's total fish and seafood exports. In fact, lobster was the largest species exported in 2018, with an export volume of 2.22B. (https://www.dfo-mpo.gc.ca/ea-ae/economic-analysis/Canada-Fish-Seafood-trade-commerce-poisson -fruits-de-mer-eng.html) If the Canadian lobster industry does not meet the requirements of the new US protection law, the United States can ban imported on Canadian lobster. As a result, demand for lobster will decrease and there may be a surplus of exports; these factors will cause prices in the lobster industry to fall. Therefore, compared with the decline in the price of the lobster industry, the fisheries and government would likely to consider implementing new regulations, which will cause less damage to the industry.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 10 | |
| Summary (20) | 18 | |
| Course Related Analysis (30-50) | 40 | |
| Extended Analysis (0-20) | ||
| Presentation (10) | 10 | |
| Total | 88 |
Group #4
https://globalnews.ca/news/5126664/shell-capp-carbon-pricing/
Summary
In the article written by the CBC, Shell, one of the largest international oil companies decided to change its policies to support the Carbon Tax that was first practiced in BC and then nationalized by the Liberal government. In addition to its own policy changes, it urges other companies in the field to do the same. Shell has decided to end its members with organizations that do not engage in friendly environmental practices and are in consideration to leave the Calgary based CAPP. Shell believes that their practices do not aline with the Paris Peace accord. The implications of this movement by Shell is massive, as CAPP is one of the biggest associations in Canada with its members responsible for 80 percent of oil and gas. CAPP’s responses criticize the methods proposed by the Paris accord but are in support of the carbon reduction goal.
Analysis
This is interesting because most corporations would react as the CAPP CEO did in criticizing government intervention, especially in the form of a tax, however the Carbon price proposed by the Trudeau government is not identical to a regular tax. One of the biggest critique of the Carbon pricing system is that corporations will just hike up the prices and put the burden of tax on the consumers. Consumer surplus would decrease and there would be a deadweight loss. As demonstrated by the graph in today’s class, taxation provides inefficiencies. This system however offers rebates, which more than makes up for the increased gas prices at the nozzles. The higher price also incentivizes people to look for more sustainable alternatives, such as bussing, carpooling or even biking.
It is very easy for CAPP to critique a system that would reduce the profits of its members but also support the overall objective of the paris peace accord. No company that openly defies the carbon dioxide reduction objective would do well in the shifting political and social environment towards green development, so logically speaking the CAPP response is quite warranted. CAPP spokesperson speaks of other methods to reduce carbon emissions and meet the Paris accord’s 2 degree quota but does not provide any examples. I have searched for any additional comments made by CAPP and tried to find any information on their alternatives to the carbon tax. Interestingly enough there has been none which raises the question on the reliability and legitimacy of CAPP’s CEO.
The interest of the article lies in Shell’s support of both the Paris accord but also the carbon tax as well. As mentioned above normally taxes reduce both the consumer surplus and producer surplus, so why does Shell support something that may reduce their own profits?
One answer may lie with its focus in shifting away from “dirty oil” in search for alternative energy. Evidence of this could be found scattered through the article. At the end, it mentions that it had already sold most of its oil sand assets to Canadian Natural Resources with only a 10 percent claim.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 10 | |
| Summary (20) | 13 | |
| Course Related Analysis (30-50) | 45 | Pretty good. One important thing missed is that taxes need not be inefficient when there is an externality. In this case, a tax can increase efficiency - increase net benefit. |
| Extended Analysis (0-20) | ||
| Presentation (10) | 9 | |
| Total | 87 |
Group #5
https://www.cbc.ca/news/canada/edmonton/stats-canada-natural-resources-decline-1.3899824
Summary:
The article in question is addressing the issue of the value of Canada's natural resources, which have steadily declined over the last year from writing, after increasing in value during the year before. From 2013 to 2014, the value of total natural resources increased by 28 percent, with oil and gas reserves increased by 49 percent just in their own isolated category. However, from 2014 to 2015, the value of these resources declined significantly to $287 billion. This figure is a 73 percent decrease for the whole market of natural resources from what the market value of these resources was in 2014. In 2015, the value of coal, crude bitumen, crude oil, and natural gas decreased by 93 percent and came to stand at $56 billion. Statistics Canada has cited lower crude bitumen prices as one of the main contributing reasons behind this drastic drop (News).
The 2015 decrease came after an announcement by the federal government about Trans Mountain and Line 3 pipelines being given the go-ahead and that they were planning their future operations. These initiatives were expected to add a million barrels of oil to the current extraction happening in Alberta's oilsands. Other resources have also seen a volatile last two months, with mineral assets declining by 24 percent in 2014 and 28 percent in 2015. They now stand at $74 billion overall. Timber saw different trends, increasing 9 percent in 2014 and decreasing 1 percent in 2015 (News). Despite the trends showing volatility and disruptions in the market for natural resources and a hugely populated market driving down the prices of oil, experts were optimistic about the future of natural resources in Canada, and expected the price of oil to rise in 2017.
Analysis:
The news article related to this chapter was also published by the CBC News on December 16, 2016. Written by Matthew Brown, the paper is titled “Value of Canada's natural resources sees steep decline”. The article talks about the astounding sharp decline in the total value of Canada’s natural resources by a whopping 73 percent in a single year. According to the author, the report created by Statistics Canada showed that the steep decline was experienced in 2015, and it was mainly caused by the lowered prices on crude bitumen. The statistics have verified that Canada’s natural resource assets value as recorded in 2015 was $287 billion, which was a drop by 73% from the previous year, 2014. To explain that decline, the article illustrates how the oil prices experienced a steep drop in 2015, and how the drop affected the value of the natural resources. In the same year, the author states that the value of crude oil, crude bitumen, coal, and natural gas was only $56 billion. That amount represents a decline of more than 93% from the previous year 2014. It is also important to note that this decline in prices experienced in 2015 was an outcome of the increases in the quantity of the reserves, with oil and gas reserves experiencing an almost 50% increase between 2013 and 2014. In general, the total of the natural resources, when minerals and timber are included, increased by almost 30% in that period. Additionally, the federal government had just announced its approval of the Trans Mountain and Line 3 pipelines, which would be pumping more than one million oil barrels each day, from the Alberta oilsands. It was anticipated that with the imminent shift towards investments in renewable sources in the years leading up to 2030, the value of the natural resources would start to rise as the prices are forced to rise, to encourage the population to make the shift for sustainable development.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 10 | |
| Summary (20) | 20 | |
| Course Related Analysis (30-50) | 20 | One key point is that the value of natural capital depends on prices. You talk about the different trends for different asset categories, and then at the end treat it as if there is only one type of resource. |
| Extended Analysis (0-20) | ||
| Presentation (10) | 10 | |
| Total | 70 |
Group #6
http://regardssurlaterre.com/en/valuing-natural-resources-accounting-change
Summary:
At present, the issue of environmental protection cannot ignore in the development of various countries. This article argues that natural resources are resources that can generate capital. Therefore, the sustainable use of natural resources is a significant issue that the World Organization's attention and considers. Firstly, we need to valuation the importance of natural resources. In some areas of the economy, profits derived from the consumption of natural resources. However, we cannot ignore the wasting of resources caused by the excessive use of resources. The wasting of resources and pollution will also bring actual economic losses . and the author also proves this to us with some data. The second is the impact of the use of natural resources on political decisions. And the political choices can directly affect economic markets. Because governments of various countries attach great importance to the protection of natural resources, it is inevitable to consider this factor when formulating policies. The author's argument here is that maintaining natural resources will limit local development, and the benefits of natural resources will flow to the whole economic market. They use the Indian example to analyze the impact of mineral and forest resources on the Indian government's economic and political decisions.
Analysis:
Natural resources are the assets of a country, and these assets provide flows of services for human survival, such as ecosystems that provide air and water purification. Air and water are fundamental to human existence. As the number of humans continues to grow, many available resources are becoming scarce. As mentioned in this article, their natural processes cannot be replicated. This means that sustainable mining or the use of natural resources at a rate greater than the replenishment rate will only reduce them. Therefore, attention to natural resources is a problem that all human beings need to face.
The author of this article mentions that socio-economic development is poor in areas rich in mineral and forest resources in India, but these resources have provided the impetus for the country's economic growth. Russia, a country different from India, has abundant natural resources. Russia's natural gas reserves have reached 40 trillion cubic meters, accounting for one-third of the world's natural gas reserves. This number is rising almost every year. If all of this natural gas is developed, it can support more than 3,000 years of current human consumption. Russia's mineral resources are extremely rich. The diamond output here is around 12 million carats, and the rare earth reserves are the second largest in the world. However, most of the resources are distributed in the very cold north-central region, and there are huge resources even on the continental shelf of the Arctic Circle. These resources are located in areas with extreme weather. Although the reserves are huge, they are scarcely visited and the difficulty of exploitation is very high. Therefore, although most of the resources have been explored, they have not been developed. Russia does not regard resource exports as its main economic source, so Russia has steadily developed resources. This is why there are so many resources, but Russia's production value is still not very high. This also explains that maintaining natural resources will limit local development options, and the benefits of natural resources will flow to the entire economy.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 10 | |
| Summary (20) | 10 | |
| Course Related Analysis (30-50) | 20 | Not much of an analysis. More of an extension of the summary with additional information about Russia. We have talked a lot about substitution and that sustainability means maintaining the value of all capital that provides services. This did not enter into your analysis. |
| Extended Analysis (0-20) | ||
| Presentation (10) | 7 | |
| Total | 57 |
Group #7
Summary
In a October 29th (2017) article, titled "Canadian cities are counting on nature- and its paying off" the Globe and Mail's Stephanie Cairns states, in a year riddled with extreme weather and natural disasters governments have been faced with billions of dollars in rebuilding and clean up costs. These natural disaster bills have been trending upward, but what a recent study has found is that nature is one of the best (and cost efficient) defences for extreme weather and natural disasters. The article uses wetlands preventing half a billion dollars of direct damages during hurricane Sandy in 2012 as its first example in demonstrating this "natural phenomenon". Also mentioned are swamps, forests, estuaries and bays of intertidal vegetation as these ecosystems have the ability to defend against storms with their main quality being able to absorb mass amounts of precipitation/run off. As a result these natural ecosystems decrease damages, death, injury and loss of work time in the communities they surround. The Municipal Natural Asset Initiative is a tool that local governments can integrate into their their asset management and finances to help manage and value natural assets in terms of their benefit they provide the community. [in 2017] Many of these natural assets are unaccounted for and their performance and service to society are being overlooked.
Analysis...
With the article discussing the value and impact of natural assets, it relates directly to the concepts of the Valuation of Natural Resources. As we recognize more and more the benefits of natural assets, governments willingness to pay increases to keep these natural assets in play. Spending a smaller portion of capital to conserve or restore natural assets have been witnessed to save well beyond a large portion of capital later down the road when extreme weather strikes. In the mean time, these natural asset is also providing social benefit to others in the form of bequest, existence, and use value if public access is granted. Cost wise, natural assets are not free. The cost of maintaining and initially conserving the land are a beginning point, but there must also be a consideration of the opportunity cost of developing the land which would also have its own costs and benefits. More often than not in infrastructure dense areas the value of natural assets are over looked or misunderstood in the cost- benefit analysis' but if considered accurately the benefit in many areas can greatly impact future spending.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 10 | |
| Summary (20) | 20 | |
| Course Related Analysis (30-50) | 48 | A bit of misuse of the term capital. Otherwise, good analysis linking to a variety of course concepts. |
| Extended Analysis (0-20) | ||
| Presentation (10) | 10 | |
| Total | 98 |
Group #8
https://www.theguardian.com/sustainable-business/2014/oct/15/valuing-natural-capital-helps-companies-make-better-business-decisions
Summary:
Many businesses are dependent on natural capital in order to remain profitable, but it can be quite difficult to accurately value these natural resources. The article, "Valuing natural capital helps companies make better business decisions" explains how it is in a company's best interest to put a reasonable valuation on its natural resources so that it can better formulate sustainable strategic plans. Author Gemma Cranston mentions a Trucost report figure which claims that "the world's 100 biggest risks are costing the economy around $4.7 trillion per year." This number is so intimidatingly large that many businesses are confused about how to reduce these risks. The Natural Capital Leaders Platform shows how natural capital valuation can be used to help mitigate risks as well as reduce a company's environmental impact.
The article used the example of two resources that are extremely important in industries like food production and agriculture, but are not valued in economic systems: quality soil and clean water. One way to help determine the value of clean water is to gather valuation data from people through the survey technique called contingent valuation. Fresh water becomes an extremely valuable asset when people do not have easy access to it, so by gathering data to understand this dependency companies can better assess the impact their decisions may have. The article finished by briefly explaining an online game released by the Cambridge Institute for Sustainability Leadership. "Evaluate: the Game" lets players make strategic decisions while considering business risks, limited budgets, environmental impacts, and how to effectively value natural resources.
Analysis:
I chose to analyze this article because although I had never heard of it before, I thought the online game "Evaluation: the Game" is an engaging way to better understand the material discussed in chapter nine. The article does not go into much detail about the game's features, but it seems like it would be a good hands-on approach to understand resource valuation through trial and error. In theory, it can be easy to mandate that all relevant natural resources must be accurately valued before proposing a new business plan, but in practice with so many things to consider, this can be a very challenging task. This game seems like it could be a good way to gain an elementary grasp on how to place valuations on natural resources while making business decisions.
One of the foundation ideas in economics is trade-offs. What is the opportunity cost of one's decision? Although it can often be a difficult task, by placing a reasonable valuation on natural resources one gains more complete information and allows companies to make smarter business decisions. Like the article presented, a useful benefit of valuation is the comparability of having a single common metric. By putting everything into dollar values it becomes easier to compare and visualize the environmental costs and benefits of different business decisions.
The article mentions the Living Planet Report's publication that the aggregate world consumption of natural capital resources for 2014 was 50% more than what the Earth can replenish in a single year. Since that report natural resource use has only increased though; in 2019 the world was using 75% more natural resources than the Earth could regenerate. This shows that although there have been new techniques and policies in an effort to provide better natural resource valuations, the world continues to use up its natural capital at an unsustainable rate. It is important that we consider more than just the active resource value and consumptive natural resource value but also account for passive non-use benefits such as existence and bequest value. If we collectively place value on ensuring that future generations can benefit from particular species, wildernesses, and resources, we must factor that into the valuation of natural resources. This will then help companies make better business decisions as the article envisions.
| Category | Mark | Comments |
|---|---|---|
| Article Source (10) | 10 | |
| Article Relevance (10) | 10 | |
| Summary (20) | 20 | The game is pretty cool. |
| Course Related Analysis (30-50) | 45 | One important thing missing from these articles is that we are often dealing with a public good type problem. The values provided by natural assets are not completely captured by business. Thus, while it is interesting to know the full value provided by natural assets - e.g. carbon storage of a forest, water filtration of a wetland - if the business cannot make money based on these services, it won't act to protect them. |
| Extended Analysis (0-20) | ||
| Presentation (10) | 10 | |
| Total | 95 |