AbstractNatural resources are essential in all aspects of life. Most products comprise of a certain degree of natural resources. Utilization of natural resources is regulated through licenses and taxes by governments or individual states. According to Tietenberg & Lewis, (2016), they are of various types and are categorized into renewable and non-renewable resources. The latter is presently utilized by humanity. Different factors influence the utilization of non-recyclable resources. Examples include the availability of renewable resources, the marginal cost of exploration and advancement in technology. If environmental preservation is not a consideration, the factors either decrease or increase the rate of consumption. Field (2015) explains the differences of the concept current reserves, potential reserves and resource endowment. The differences are based on economic and geological concepts as well as the relation of size and price. As explained by Howe (2012), non-renewable sources are pollutants and cause harm to the environment. Environmental preservation strategies would lead to their decreased use and high price. Otherwise, there would be overutilization and finally depletion of the resources. Hopkins (2009) advocates for sustainability in businesses. If businesses use environmentally friendly methods, they increase sales and gain a competitive advantage hence increasing profits. This paper seeks to explore influence of natural resources to the sustainability of the economy.
The economics of natural resources focus on the demand and supply, and the manner in which the reserves are allocated. Artificial products in any economy are partly or wholly made of natural resources. Various types of the resources exist; current, also known as actual reserves, and potential among others. They occur in two broad categories’ renewable and non-renewable resources. Utilization of natural resources is regulated through licenses and taxes by governments or individual states. They not only determine the use of natural resources but also monitor the status and availability of the resources. Improper utilization of the resources leads to depletion. It is crucial to practice environmental conservation to ensure sustainability. Preservation and regulated use of natural resources are significant for sustainable economic development.
Three concepts classify the stock of exhaustible resources; potential reserves, current reserves and stock endowment. Current reserves entail those resources whose quantity and quality has been examined and determined (Tietenberg & Lewis, 2016). They are presently utilized by humanity and include natural gas and oil. Technology influences their development. Potential reserves exist in a particular region and may be used in the future. For instance, if a nation’s sedimentary rocks contain petroleum, it is a potential resource that can be extracted and put into use. Another crucial concept used in the natural resource topic is resource endowment. It entails the spontaneous incidence of supply on the globe (Howe, 2012). Since prices do not relate to the resource endowment size, resource endowment is a geological concept. Resource endowment is crucial as it symbolizes maximum limit natural resources availability.
The variance of the concepts; potential, current and natural endowment is noteworthy. The former two are economic concepts while resource endowment is not an economic concept but a geological one. Its size has nothing to do with prices (Field, 2015). Also, current reserves can be profitably drilled at present prices, and their magnitude can be expressed as a digit. Potential reserves are viewed as a function and not a figure (Field, 2015). The amount of available reserves is influenced by the prices rates that individuals can offer for the reserves. Increase in cost translates to increase in potential reserves. The increased prices lead to more technological techniques such as steam injection, to extract the resource from untapped sources.
The supply of Nonrenewable resources is limited. They cannot be replenished. Much of the resources originate from fossil fuels which take millions of years to form (Howe, 2012). Without any consideration for ecological conservation, various factors influence the degree at which the consumption of non-renewable resources happens. The accessibility of renewable resources limits the overutilization and depletion of Nonrenewable resources such as oil, coal and natural gas. Some individuals and industries, who are environmentally concerned, choose renewable sources and shun the use of non-renewable sources. But, a considerable percentage of people utilize non-renewable sources and hence the uncontrolled use of non-renewable resources would lead to their depletion. The availability of renewable sources does not necessarily guarantee perseveration of the non-replaceable ones.
Marginal cost affects the consumption rate of non-renewable sources. It entails the cost of determining the location, existence, economic value and quality of natural resources (Field, 2015). Without environmental preservation, the rate of consumption of non-renewable sources would increase. In turn, the marginal cost of exploration would increase as there would be a higher demand for the resource in the market. Further overutilization would result in depletion. If this occurs, the marginal cost of exploration increases since the resource becomes unavailable. Increase in Marginal cost of exploration leads to decrease in the use of nonrenewable sources. Also, Technological progress increases the utilization of non-renewable resources. The more they are used uncontrollably, the more high technology would be put in place to extract the resource through advanced techniques and from unconventional sources.
Non-renewable sources are pollutants. If strategies for environmental protection are enacted, the use of non-renewable sources would be limited. The approach would aim at having an environmentally friendly environment through the controlled use of resources. Consideration for environmental conservation means that agencies and governments would advocate for the continued use of renewable sources of energy that does not harm the environment. Sensitization measures would have a significant impact on environmental health and prevent harmful emissions (Howe, 2012). For instance, introduction and of alternative energy sources such as wind, geothermal and hydroelectric power would cause a considerable decrease in coal, oil and natural gas use. As a result, the price of natural resources would also increase due to increase in the marginal price of exploration and extraction.
Companies can utilize environmental apprehension to enhance corporate gains. Ecological sustainability approaches are part of the corporate social responsibility, CSR. If a company is environmentally conscious, its ecologically friendly strategies can be a competitive advantage and a way of attracting customers. CSR promotes profits, results to increased sales of products and services, and improves employee loyalty. According to Hopkins (2009), businesses have opportunities for increased gains caused by a focus on sustainability. Sustainability affects all aspects of the business from manufacturing and development to support functions and sales (Hopkins, 2009). It also affects values creation. Though sustainability is a cost for the business, it brings about benefits such as labor productivity and innovation gains.
In conclusion, preservation and regulated use of natural resources are significant for sustainable economic development. Depletion of natural resources increases the marginal cost of exploration and extraction of current reserves. Uncontrolled use of resources such as coal, oil and natural gas limits their availability and harms the environment. Consideration of environmental preservation strategies promotes the use of renewable resources, protects the exhaustion of nonrenewable resources; protects the environment and increases the worth of nonrenewable sources. Businesses have opportunities to grow profits through sustainability by adopting environmentally friendly methods. They increase sales, competitive advantage and employee loyalty.
- Field, B. C. (2015). Natural Resource Economics: An Introduction, Third Edition. Long Grove, IL: Waveland Press.
- Hopkins, M. S. (October 1, 2009). What Executives Don’t Get About Sustainability (and Further Notes on the Profit Motive). MIT Sloan Management Review, fall 2009.
- Howe, C. W. (2012). Natural resource economics: Issues, analysis, and policy. New York: Wiley.
- Tietenberg, T. H & Lewis, L. (2016). Environmental and Natural Resource Economics. London: Routledge Press.