1Natural ResourceManagementNatural Resource Management IThe Role of Business:The Changing Landscape Concept: They advocate a shift from the current production economy thatdisregards the environmental costs of goods, toward a service economy inwhich durability, ease of repair, and the elimination of waste transformscommerce so that we have sustainable profit, not short-term destructiveprofit. What is necessary? Information (so consumers and investors know who thesustainable firms are), values (so consumers and investors favor sustainablefirms and products) and a level playing field created by policy.The Natural Capitalism Vision by Paul Hawken,Amory Lovins, L. Hunter LovinsBook (pictured) and Harvard Business ReviewarticleThe Interface Story A business plan with three novelelements: Transition to carpet tiles Leasing carpet, not selling it New product (Solenium) can be completelyremanufactured into itself (not converted to alower valued use) Result: Embodied materials and energyreduced by a phenomenal 97% whilecosts reduced and profit margin increased.Ray Anderson, Interface CEOSocial Entrepreneurs Challenge: How to bring appropriate products todeveloping counties to facilitate sustainabledevelopment. Problem: More profitable to focus on the wealthy,leaving the problems of the poor unaddressed. Social entrepreneurs are “Revolutionaries with abusiness plan” according to Paul Hudnut. For more see:http://www.pbs.org/opb/thenewheroes/ whatis/resources.htmlSocial Entrepreneurs: An Example OneWorld Health directs a worldwide effort touncover, research, and develop new medicinesfor neglected infectious diseases.Their approach is simple. Identify the most promising drug andvaccine candidates. Develop them into safe, effective and affordablemedicines. Then partner with companies, non-profit hospitals andorganizations in the developing world to conduct medical research onnew cures, manufacture and distribute newly approved therapies thatwill impact the health of millions of people.They challenge the assumption that pharmaceutical researchand development is too expensive to create the newmedicines that the developing world desperately needs.Dr. Victoria Hale, CEOSources of UnsustainabilityThe Role of Incentives Or Why GoodPeople Degrade the Environment!2“The Natural Resource Commons” In “commons” extraction rights arejointly shared, but extracted resourcesare individually consumed. Can you come up with some examplesof resources that fit this description? Depletable RenewableFisheries: an Example When does the problem arise? Hardin’s “Tragedy of theCommons” The pivotal role for free-access What is the perverse incentive? The incentive to conserve theresource is lost. The Chocolate Chip CookieTheorem Scarce, free-access resources willtend to be overexploited and theirvalue dissipated.Fisheries What are the specific consequences? Excess capacity (too many boats,excessively large boats, too manyfishermen) Depletion of the stock (despiteeveryone’s interest in maintaining it). Note that this is an example whereprivate actors are prevented fromacting individually in a sociallyresponsible way, despite goodintentions. Neither values, norinformation are sufficient to solve theproblem.Changing Incentives: Difficulties The difficulty of finding a solution Stock is depleted. Tremendous dependency on an unsustainablelevel of fishing (mortgage payments on boats andequipment, need to put food on the table) Need to diminish harvesting pressure on resourceto allow it to regenerate. Obvious solution (stop fishing for a few yearswhile stock rebuilds) has very high economic costand is politically difficult to implement.Potential Solutions to theChocolate Chip Cookie Problem Centralized Authority Collective Action (Self-regulation) Privatizing accessThe Central Authority Solution The Historical Approach Gear Restrictions Trip Limits Set Total Allowable Catch Close season once aggregate catch level reached. In the majority of the cases this does not, by itself, solvethe tragedy of the commons and indeed make make itworse (derby fishing)3The Self-Regulation Solution The Lobster Gangs of Maine Defining harvest rules amongfishers-no longer free access. Excluding outsiders Illegal, but effective enforcement Size restrictions V-NotchingConditions for SuccessStable communityNot too much pressure on resourceComplementary Regulatory supportPrivatizing Access:The New Zealand Approach Total allowable catch established (by science) and reduced overtime Set up individual transferable harvesting quotas (ITQ’s) that sumto equal the total allowable catch. Result: (1) substantial reduction in fishing effort, but incomeincreased ( lower costs, more fish, price effects); (2)regeneration of the stock; (3) withdrawal from fishery wasvoluntary, (4) indigenous rights (Maori) protected. Incentive to conserve protected. Do you see how and why? Not universally successful-the orange roughy caseExternalities:A Second Incentive Source of Unsustainability The Definition: Externalities exist when a decisionimposes costs and/or confers benefits on partiesother than the decision maker. The Implication: Decision-makers have a tendencyto give full weight to the costs and benefits they bear,but to ignore or give less weight to those born byothers. External social benefits and costs will beinadequately considered.Externalities: Consequences Biased decision-making. Resource exploitationstrategies may look privately attractive even when theyoverexploit resources Creates uneven playing field Out-of-pocket costs for environmentally destructive choicesmay be lower even if the total costs (considering theenvironmental costs) are not. For example generating electricity from coal may SEEMcheaper than wind, but wind may actually be cheaper if theenvironmental costs of coal (climate change, human health,aesthetic) are considered.Land Use:The Maine Example Since 1998, approximately7,217,107 acres has changedhands in Maine’s North Woods. The character of ownership haschanged from paper companiesto private individuals anddevelopment companies. What does this mean for thecharacter of Maine Forests?Forest Externalities Do forest owners accrue all the benefits that societyaccrues from forests or are externalities at work?