8 - Sustainability and the Threats of Resource Depletion

Summary

Resource depletion and sustainable resource extraction is the main focus of this chapter. Depletion is an accentuated scarcity, which can be measured in different ways, four of which are presented in turn: (a) The trends in the adequacy of reserves from which the resource can be extracted provide an important physical insight into the seriousness of the depletion threat. (b) The progress of real prices is seen by economists to reflect accentuating or subsiding scarcity. (c) The long-run change in the unit price in real terms of identified but unexploited resources still in the ground is an alternative measure of the extent of the depletion threat. (d) Finally, the development of the long-run marginal cost of supply, equivalent to the total average cost in the marginal project, is yet another economic indicator of scarcity. Since depletion is a slow, drawn-out process, long time series are needed to make measurement meaningful. The chapter documents and discusses the available data on each of the measures in turn. The chapter ends with a discussion of sustainability in relation to the acceptance by society of extraction of nonrenewable resources.