Renewable resources and the gains from trade

Seminar Paper, 2018

13 Pages, Grade: 3




1. Introduction

2. The terms of renewable resources and gains from trade

3. The model
a) Establishing a Basic Model
b) Autarky

4. Economic development and a gains from trade

5. Conclusion

6. References:

1. Introduction

Expansion and liberalization of world trade lasted for ages at the expense of the natural environment.

In 2013, the financial volume of world trade amounted to 23.4 trillion US $, about a third of world GDP. At the same time, global environmental indicators show the impact of trade on the environment. Population growth and rising incomes fuel the demand for goods and services, which is often met by natural resources, especially land and water.

Tripling of the world population over the last six decades and fourfold the increase in GDP expected by 2050, were only some of the factors affecting on the growth of trade. These trends led to an increasing number of ecosystems in the world far beyond their service potential. For example, global demand for food is expected to double between today and 2050 year. By this time, it is estimated that 3.9 billion people or 40% of the projected world population will live in countries that are availability of just 1,000 liters of water per person per year (Verbruggen A., Lauber V., 2012).

To reverse these trends, trade should be used as a catalyst for positive economic, social and ecological change, and not as a factor of environmental degradation.

2. The terms of renewable resources and gains from trade

Some of the natural resources fulfill the role of living conditions of people (air, water). This also includes resources for recreation, treatment, and training. The rest serve the needs of industry (raw materials and used territory).

There are such a types of natural resources:

By type of use (for production, recreation, aesthetics and others).

By the nature of the natural components (soil, water, biological, energy).

If possible, recovery (renewable, partially renewable, non-renewable, inexhaustible). Inexhaustible types of natural resources are: water (all the water of the planet), cosmic (solar beams, cosmic rays, tides),climatic (wind, temperature and humidity of the atmosphere). Natural resources are classified into practically inexhaustible and exhaustible. The latter are divided into renewable and non-renewable. The dividing line is conditional. Practically inexhaustible are the resources whose existence is not limited by time frames. At any intensity of their consumption, the quantity at the disposal of mankind does not decrease or decrease so insignificantly that in practice this magnitude can be neglected. Such resources include solar radiation, hydro- and wind energy potential, etc.

Exhausted, but renewable (or conditionally unlimited) are resources, which are based on elements of the natural environment, capable of self-renewal. The state of these resources depends on the degree and intensity of their use. They can exist as long as the intensity of their self-renewal exceeds the intensity of production consumption. Such resources include, for example, objects of fauna, flora, and reserves of clean water.

A renewable resource is a natural resource which replenishes to overcome resource depletion caused by usage and consumption, either through biological reproduction or other naturally recurring processes in a finite amount of time in a human time scale. Renewable resources are a part of Earth's natural environment and the largest components of its ecosphere. A positive life cycle assessment is a key indicator of a resource's sustainability (Stead, J. G2017״).

There are a lot of definitions of the term ״gains from trade“ but in economics, gains from trade are the net benefits to economic agents from being allowed an increase in voluntary trading with each other. In technical terms, they are the increase of consumer surplus plus producer surplus from lower tariffs or otherwise liberalizing trade (Deardorff, A. v.,2001). Agent can be individual, business or culture. Trade can increase a wellfair of all participants if country specialise in producing the goods they can produce at the lowest cost relative to the other participants.This concent is known as comparative advantage.The compertative advantage is not proucing what you are producing best, but producing goods that you can produce cheaper, at the lowest opportunity cost, that all other participants. When country specialising in producing goods they have comparative advantage.When they enter into trade with other countries all participants experience increased net benefits.

3. The model

The green economy represents a model for reversing environmental risks and ecological scarcities, changes in economic policies and incentives in such a way as to support growth, social justice and wellbeing by and sustainable use of natural resources and vigilant control pollution.

Renewable resources are indispensable for economic activity and well-being of people. Their reserves are part of natural capital; they provide US with raw materials, energy, water, air, land and support environmental and social services needed to produce other forms of capital.

The extraction and consumption of resources affect the quality of life and well-being of both the current and future generations.

For the rational management of natural capital, three key ingredient are important: (i) knowledge - people need to know what and how to do; (ii) aspiration - people should want to do it; and (iii) opportunities - people should be able to do this (Campbell, 2006). It is particularly important that available knowledge is available that should be freely distributed within the framework of the resource management system, flows in the economy.

Decision-makers need information both for forecasting consequences of their decisions, and for a retrospective analysis of causal links between their solutions and environmental and economic outcomes ahead of future decisions and actions. In many cases, inaccurate information on natural resources and the complexity of environmental and economic relationships outweigh the potential of decision-making institutions, which prevents to make informed decisions in the absence of sound environmental information.

In connection with the resource's peculiarity, fishery management occurs against the background of the presence of inaccurate information. The size of stocks, the rate of their growth, their relationship with other types of reserves accurately are unknown. And even if they were known with greater accuracy, regulation of the sector would not be perfect, especially in some areas (for example, marine fishing). Given the inaccuracies in information and imperfection of control, precautions are necessary, since, if thresholds are exceeded, stocks can undergo commercial destruction. The ambiguity in the status and dynamics of fish stocks can be very significant. In the eco-region of the Northern Sea, for example, the state of 8 types of resources (out of 27 species) is unclear or only partially clarified.

The state of 16 more species is considered to be "unknown". These ambiguities complicate the task of biologists in the field of fisheries during scientific advice on management issues fisheries.

Errors in decision making, due to incomplete or inaccurate information, and sometimes collected, but useless information, all over the world can lead to serious violations in economic- ecological relationships (such as misses in the field of fisheries, the decline in agricultural production due to erosion and degradation soil, desertification caused by overexploitation of forest resources and irrational water intake, etc.) and entailed serious economic costs.

The cost of irrational use of renewable resources can be very high. As noted by the OECD (2008), this primarily includes direct costs associated with loss of the resource. For example, the exploitation of fish stocks up to economic extermination will forever lead to irretrievable loss of commercial fishing. This may have important indirect consequences for the local population and the economy in broader plan. Given the importance of certain types of renewable resources, (for example, water) for economic development. There can be serious public costs for mitigation of the impact of irrational use of resources on the well-being of the population.

An adequate knowledge base on natural capital of the country and its development is a key factor for optimization of economic development solutions and avoidance of costs associated with degradation or loss of resources.

Thus, data on natural assets and environmental information serve the whole a number of objectives, including the following:

Ensuring adequate supply of renewable and non-renewable resources to support economic activity and growth;

A description of the status of resources (for example, availability, quantity, quality and availability of stocks) and assessing the economic and environmental conditions of the loads,

the changes that occur due to changes in their condition;

: Prevention (identification and quantification) of the impact of economic decisions and actions of people on natural resources;

Prioritizing policies based on available information and the adoption of operational decisions on the management of natural capital;

Identification of needs and measures in support of non-commercial environmental services;

: Harmonization and integration of sustainable management measures natural capital into economic and sectoral policies;


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Renewable resources and the gains from trade
University of Lüneburg
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ISBN (eBook)
ISBN (Book)
Resources, Gains, Expansion, liberalization, GDP
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Anonymous, 2018, Renewable resources and the gains from trade, Munich, GRIN Verlag,


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