Natural Resources and Technologies

This Working Paper joint two previous article by the authors: The economic theory of exhaustible natural resources, in “Enciclopedia degli Idrocarburi”, vol. IV, Istituto della Enciclopedia Treccani, Roma, 2008, pp. 3-10; Technological innovation, relative scarcity, investments, in “Enciclopedia degli Idrocarburi”, vol. IV, Istituto della Enciclopedia Treccani, 2008, pp. 11-22 In the first one (cap. 1-4), we consider the contribution of economic theory (partly through a reevaluation of history) in order both to interpret and predict events, and to identify economic policies; this happens especially when the world economy feels the significant constraints imposed by some natural resources and raw materials, partly due to the rapid growth of a number of developing countries, and when there is an urgent need to increase resources rapidly to ensure continuing availability. Even if the problem of scarce resources (of which natural resources are the most obvious category) has been central to analysis for centuries, natural resource economics is contradictory. The main reason for this is that economic theory is out of step with prevailing economic conditions, as a consequence of the varying concern for a crucial phenomenon in the dynamics of economic systems: the opposition-coexistence of the scarcity of natural resources and the producibility of commodities. Natural resource economics can be summarized by dividing it into three main lines of thought: the theory of producibility and scarcity developed by classical economists; the theory of general and natural scarcities developed by marginalists and neoclassicals; the theory of dynamics with and without natural scarcities developed by macroeconomists, structuralists and empirical stylizers. Using this three-way subdivision, which is not clearly codified in economic theory, the basic features of each approach will be examined with special attention to its early exponents. The historical starting point is the second half of the Eighteenth century, although we will ignore contributions such as those made by the Physiocrats who, during the same period, developed a theory of production based on the surplus generated by agriculture. In the second one (cap. 5-6), we consider that the role of technological innovation for resources use and conservation is often measured by empirical indicators of intensity or efficiency which express the evolution of resource use in relation to variables such as population and GDP. The historical evolution of these indicators tends to indicate a process of decoupling – in other words, a decrease in the energy/emissions intensity of economic activity or an increase in the efficiency/productivity of resource use. These empirical regularities have led to the proposition of stylized facts representing the relationships between resource-use efficiency and economic growth known as environmental Kuznets curves. However, the economic interpretations of the innovation mechanisms underlying the progress suggested by efficiency indicators, nonetheless, remain open and complex at the very time when there is increasing demand for further substantial advances in resource-use efficiency. We will survey the empirical evidence on the mediumand long-term dynamics of these indicators and will discuss their significance. This will be followed by an analysis of the possible role played by economic factors (especially resource prices and markets) and institutional factors (especially climate policy) in triggering and supporting progress in the use efficiency of energy resources.