Growth and natural resources Flashcards
What is the IPAT identity?
The IPAT identity states that environmental impacts (e.g., emissions) are the product of the level of population times affluence (income per capita, i.e. gross domestic product (GDP) divided by population) times the level of technology deployed (emissions per unit of income):
I ≡ P × A × T
Other things being equal, the impact of economy on the environment is expected to increase
with…
1. population size
2. the average quantity of goods and services consumed by an individual
3. the technologies becoming more resource-intensive.
Example: global emissions of CO2
in the year 2000: • P (global population) = 6 billion
• A (average global GDP per capita) = $7,000
• T (average amount of CO2 released into the atmosphere for each $ of
• global GDP produced in 2000) = 0.00055 tonnes
IPAT facilitates the identification of the proximate determinants of the environmental impacts
of economic activity.
It does not tell us about the fundamental, or underlying, determinants. If we have two
economies with very different levels of CO2 emissions, for example, IPAT tells us that they must differ in population size, and/or in affluence, and/or in the technologies in use, but…
It does not tell us why.
IPAT can be used for scenario analysis, e.g. following the CO2 example, 2000 values can be
substituted with future projections.
How do changes in technology affect IPAT?
In considering economic growth and the environment in terms of IPAT, it is important to think about changes in consumption technology as well as changes in production technology.
The question of, for example, whether CO2 emissions can be held constant while population and affluence increase is about what is consumed as well as about how it is produced.
Population and GDP per capita affect all environmental impacts, whereas
technology is impact-specific.
The effects that P and A have on any particular Ii depend on Ti. the impacts of two economies per unit of GDP depend on the technologies of production processes (intensity of use and/or waste production), and the sizes of each production process.
What is the Leontief production function?
The Leontief production function or fixed proportions production function is a production function that implies the factors of production will be used in fixed (technologically pre-determined) proportions, as there is no substitutability between factors.
What is the maximum sustainable yield of a RR?
If a renewable resource stock is not to be harvested to extinction, then the harvest must be held at, or below, a sustainable level. The largest constant harvest that can be taken indefinitely is the maximum sustainable yield.
The maximum sustainable yield (MSY) for a given fish stock means the highest possible annual catch that can be sustained over time, by keeping the stock at the level producing maximum growth. The MSY refers to a hypothetical equilibrium state between the exploited population and the fishing activity.
Growth and sustainable yield harvesting of RR
- with a Leontief production function: Y can never be greater than δ ×R, which
limit is the same however much capital is accumulated and however large the population grows. Once Y reaches its upper limit, if population continues to grow, then y, income per capita, falls at the rate at which population grows. - with a Cobb-Douglas production function: per capita national income reaches a peak, and thereafter it declines at an increasing rate. Capital per capita still increases, but at a declining rate. Despite capital accumulation and substitution, not only is economic growth in this model a transitory phenomenon, but it eventually goes into reverse (y<0). Higher savings rates cannot offset the effect of fixed level of the resource input. Simulations for this model with various
levels for s up to 0.99 simply delay the date at which per capita income peaks.
…so, even with capital accumulation and substitution, fixing the input of the renewable resource at a sustainable harvest level, means that for a growing human population the growth of per capita income eventually goes into reverse and per capita income falls.
Given sufficient technological progress, ongoing economic growth is possible with a growing human population using a sustainable yield from a renewable resource. This result arises in a model where there are possibilities for substitution between inputs.
If the production function is of the Leontief kind there are no substitution possibilities, but even in this case, sufficiently fast technical progress can keep the growth of per capita income going for a very long time.
Explain non-renewable resources depletion.
Given non-renewability, we know that any constant, or increasing, level of resource use will
exhaust the resource, implying that national income will eventually go to zero.
There is one kind of time profile for resource use that it is worth running simulations for. If the
amount of the resource extracted and used is always a constant proportion of the remaining
stock of the resource, then the amount used and the amount remaining get smaller and
smaller over time, but never actually become zero.
Explain non-renewable resource growth with constant population.
If the amount of the resource extracted and used is always a constant proportion of the
remaining stock of the resource:
- with a Leontief production function with no technical progress y remains constant until
resources depletion takes their stock to a level lower than L and K, and then y starts its
asymptotical decrease. With technical progress the first phase shows increasing y.
With no possibilities for substitution, capital accumulation and technical progress cannot overcome the fundamental problem presented by the use of a non-renewable resource in production. If the resource is used at a constant, or increasing, rate, it runs out and national income goes to zero. If the resource is used at a declining rate, so that it never completely runs out, economic growth can only go on for a limited time - eventually per capita income goes into decline. This is true even for a constant population size.
- with a Cobb-Douglas production function with no technical progress, once more per capita
national income reaches a peak, and thereafter it declines even at P constant, but with a very
long “transitory” growth period. Increasing s up to 0.99 doesn’t change dramatically the
dynamics, while decreasing δ down to very low values allows to postpone significantly the
decline.
With technological progress the shape of the curve becomes sigmoid and with high values of π
peak is moved far away in the future
Is the use of environmental resources sustainable?
For a closed economy that uses a renewable resource on a sustainable yield basis, in the absence of technical progress, economic growth is a transitory phenomenon even if capital can be substituted for the resource. Where substitution is possible, sufficiently rapid technical progress can keep growth going. The necessity of technical progress for continuing growth applies even if the human population is constant.
Where the resource is non-renewable, even with constant population, there is no constant rate of use that can be maintained indefinitely, no sustainable yield. If use is a constant proportion of the remaining stock, then it gets smaller and smaller over time and gets very close to, but never actually becomes, zero. With no possibility of substituting capital for the resource, growth is a transitory phenomenon even with technical progress.
Phenomena are postponed when the resource is unimportant in the production
and savings are high.
What is the EKC (Environmental Kuznets Curve) hypothesis?
The environmental Kuznets curve (EKC) is a hypothesized relationship between various indicators of environmental degradation and per capita income.
In its most general form, the EKC (Environmental Kuznets Curve) hypothesis is that as economic growth proceeds so environmental damage first increases, then levels off, then declines. The level taken by some indicator of environmental damage is measured on the vertical axis, and per capita income, y, on the horizontal axis, the expected shape is an inverted U.
• Motivations:
1. The evolving economy structure (primary to tertiary)
2. the evolving needs ad desires of better-off people
3. the evolving manufacturing (from low to high tech)
• Note: not valid for a closed economy
Water as resource
Global freshwater use has increased by a factor of six over the past 100 years. Agriculture currently accounts for 69% of global water withdrawals, which are mainly used for irrigation but also include water used for livestock and aquaculture. This ratio can reach up to 95% in some developing countries. Over two billion people live in countries experiencing water stress. Four billion people live in areas that suffer from severe physical water scarcity for at least one month per year. About 1.6 billion people face ‘economic’ water scarcity• Scarcity can derive also from quality issues.
What is the concept of virtual water?
Virtual water is the water embodied in the production of food and fiber and non-food commodities, including energy. For example, it requires about 1300 tons (cubic meters) of water to produce a ton of wheat and 16000 tons (cubic meters) of water to produce a ton of beef.
Importing a ton of wheat therefore relieves a community from having to harness 1.3 tons of its own water resources.
What are the practical uses of virtual water?
- Virtual water trade as an instrument to achieve water global security and efficient water use: virtual water trade from a nation where water productivity is relatively high to a nation where water productivity is relatively low implies that globally real water savings are made.
- Water footprints making the link between consumption patterns and the impacts on water: Hoekstra and Hung (2002) have introduced the concept of the water footprint.
How are virtual water flows calculated?
Virtual water flows between nations are calculated by multiplying commodity
trade flows by their associated virtual water content.
What is the water footprint?
The water footprint can be regarded as a comprehensive indicator of freshwater resources appropriation, next to the traditional and restricted measure of water withdrawal.
The water footprint of a product is the volume of freshwater used to produce the product, measured over the full supply chain.
The water footprint of one individual or of the individuals of one country are the cumulative virtual water content of all goods and services consumed, in analogy of the ecological footprint.
It is a multi-dimensional indicator, showing water consumption volumes by source and polluted volumes by type of pollution. All components of a total water footprint are specified geographically and temporally.
What are blue, green and grey water footprint?
The blue water footprint refers to consumption of blue water resources (surface and ground water) along the supply chain of a product.
– ‘Consumption’ refers to loss of water from the available ground surface water body in a catchment area, which happens when water evaporates, returns to another catchment area or the sea or is incorporated into a product.
The green water footprint refers to consumption of green water resources (rainwater stored in the soil as soil moisture). Green water refers to the precipitation on land that does not run off or
recharge the groundwater but is stored in the soil or temporarily stays on top of the soil or vegetation. Eventually, this part of precipitation evaporates or transpires through plants. Green water can be productive for crop growth
The grey water footprint refers to pollution and is defined as the volume of freshwater that is required to assimilate the load of pollutants based on existing ambient water quality standards.
