Abiotic Resource Characteristics
Abiotic resources all have many different characteristics used to classify them so they can be differentiated. They are first characterized by whether they are a stock-flow resource or a fund-service resource. Stock-flow resources are resources that must be materially transformed into what they what they are being used for. They can be used at any rate that is desired and can be stock piled. They are also used up as opposed to worn out. Fund-service resources are resources that are not material transformed into what they are used for and can be used directly as they are harvested. They can only be used at a given rate, they cannot be stock-piled, and can be worn out.
It is also determined whether or not abiotic resources can be made excludable.
This means that a person can own the particular resource and is allowed to exclude other people from using their asset while they use it because they have a property right to control it. This also depends on whether or not the resource is rival or non rival. Rival resources are those whose use by one person reduces the amount available by another person. Rival resources are more easily made excludable than non rival resources.
Abiotic resources are also characterized by whether or not they are rival between generations. This basically means that resources that are rival between generations are being used now, which decreases their ability to be used by future generations.
Abiotic resources can also be characterized by whether or not they are substitutable. This basically determines whether or not there are other resources that can be used in place of a particular resource. This becomes very important for nonrenewable resources because they will eventually run out, so substitutes are very necessary.
1.) Explain Market Failure through 5 different categories of abiotic Resources a.
Fossil Fuels b.
Mineral Resources c.
Solar Energy d.
Fresh Water e.
Ricardian Land
Fossil Fuels
Fossil fuels and their uses create some of the biggest market failures on the planet when the focus is on abiotic resources. Even though the prices at the pump may seem ridiculously high already there are still fees caused by negative externalities, rent and other things that we are not yet paying for. One of the main causes of this discussion is the belief of many people that we have hit peak oil and are now on a decline towards the

end of cheap oil (Peak oil discussion and good explanation by Richard Heinburg http://youtube.com/watch?v=jaTIo1QTJ). Market failures of fossil fuels for many have to do with our use of fossil fuels now without thinking about the use that will be needed in the future. Efficiency is one way to cut down on the waste and in an online book called
“Winning the Oil End Game” efficiency mainly in the transportation section is explained so that fuel can be saved (http://oilendgame.com/SavingOil.html).
Activity : World Without Oil http://worldwithoutoil.org/
Eventually, however, no matter how hard we try and save fossil fuels there is going to be a time when oil runs out. Watch the movie about the World Without oil idea and think of how you would live in a world without oil.
(World without oil is a website that gets people to participate in a game where scenarios are played out and documented on how they would live without oil. Contributions are from all over the world and range anywhere from online blogs, video blogs, cartoons, comic strips and more.)
Mineral Resources
Mineral Resources are rival and excludable goods. Their extraction and use almost always results in negative externalities. These externalities continue to go unrecognized by much of our society. As mineral use increases and scarcity increases their price still continues to fall. This fact is not consistent with conventional economic theory. This means that prices poorly reflect scarcity. As true with fossil fuels, mineral prices are determined by the aboveground availability and not total availability (aboveground+ underground). As minerals are mined and exploited two things happen. First, total availability decreases. Secondly, information of where to find more minerals increases.
This means that a price increase should occur and scarcity increases. Although this is not the case now, a large price increase should be expected within the near future.
Activity:
1. Read part 3 of the article Mineral Resources and Sustainability: Challenges for Earth
Scientists.
(Can be found at ("http://books.nap.edu/openbook.php?record_id=9077&page=7" http://books.nap.edu/openbook.php?record_id=9077&page=7)
Copyright © 2008. National Academy of Sciences

Solar Energy
1.) {Read the below excerpt from the article “Economics of Solar Power are Looking
Brighter” by Daren Fonda from http://www.smartmoney.com/mag/index.cfm?story=july2007-sun }:
“
ERIC OLSEN'S TWO-STORY house looks just like the other homes on his tree-lined street, with its little patch of grassy yard and the pool in back where his son can splash around. Look a little closer, however, and you'll see something less commonplace: an array of 48 solar panels attached to the back roof. Olsen, a systems architect for UPS, had the panels installed in 2005, and since then they've cut his utility bills in half. The system is even putting cash in his pocket, thanks to an arrangement that allows Olsen to sell power credits to utilities. But what's most striking about this home power plant is its location — not in the Southwest, but in that renowned sun-worshipping mecca Totowa,
N.J. "I'm not a tree-hugger," he says, "I'm just sensible about energy."
After years of fits and starts, solar power may be shedding its reputation as a technology only a hippie could love. With energy costs at record levels, and solar gear becoming cheaper and more efficient, the economics have never looked brighter. The cost of installing solar panels has quietly fallen by half over the past 15 years, cutting the cost of a system that can power a typical home to about $30,000, and analysts expect the cost to drop much more rapidly over the next few years. Throw in tax breaks and other incentives, and the systems often can pay for themselves within a decade. As a result,
New Jersey is hardly the only state outside the SPF 30 Belt to attract solar pioneers:
Residential installations rose 56% last year, to more than 7,400. That's admittedly a tiny number, but it's a big leap from 2000, when all of 339 households switched. "Solar is now on a good sustained growth curve," says Larry Sherwood, a researcher with the Interstate
Renewable Energy Council.
The solar surge has been spurred by everything from government subsidies to improvements in photovoltaic panels, the basic building blocks that convert sunlight to electricity. But sunpower still faces hurdles that have kept it from going mainstream.
Those tax breaks and subsidies, for example, can be confusing — and they can run out, as
New Jersey's recently did. Since residential solar power is so new, experienced contractors can be hard to find. And while today's PV panels are relatively unobtrusive, they still spark neighborhood quarrels over everything from building codes to tree pruning. All that said, the technology pays dividends both tangible (lower bills) and intangible (the joy of reducing greenhouse gases) — and homeowners who have taken the solar plunge mostly say they're satisfied.”
2.) Watch Paul MacCready’s talk “Flying on Solar Wings” @ http://www.ted.com/index.php/talks/view/id/176
3.) Answer the following questions:

A.) Is solar power is a viable alternative energy source to the currently most heavily utilized sources, i.e. nuclear, coal, hydroelectric? Why or why not?
B.) Since distribution of land is a major factor in the process of capturing sunlight, solar energy can technically be considered both an excludable and rival resource, meaning the use of it by some impedes the ability of others to use it simultaneously; does this make it a less attractive option as compared to more mainstream sources? Why or why not? Is this true of any current mainstream energy sources? And if so, which sources, and in what ways?
C.) As the above article mentions, the government grants tax breaks for the use of solar panels, and utilities companies often pay solar panel owners for energy credits, as well. What, if any, other ways can you think of to promote the use of solar energy as an alternative energy resource?
FRESHWATER
Freshwater is 100% essential to human survival and non-substitutable. We use it for many activities, like showering or watering our plants, and in this sense water becomes a stock-flow resource. As our global economy continues to grow larger in relation to the overall ecosystem, water becomes scarcer. Since freshwater is extremely important to us, no matter how high its market price becomes we will still buy it, at least for our most essential uses.
And here is where the market fails in easing the situation. First, people who do not have enough money will not be able to purchase the necessary freshwater because the market is based on its use. Also, private providers of water will only be focused on gaining money from that scarcity rather than working towards greater efficiency because of the global market’s innate competitiveness.
Activities:
Read “Privatization, the World Water Crisis, and the Social Contract” by Richardson Dilworth and write a page reaction to the journal; make sure to comment on whether you agree with some of the proposed beliefs and possible solutions. o http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=65171
2#
Watch “The Global Water Crisis” video, Question 1, with Maude Barlow o http://fora.tv/2008/02/18/Maude_Barlow_Global_Water_Crisis

Ricardian Land
The market failure of Ricardian Land is not seen within generations but instead between generations. One person’s use of the land in a given generation does not inhibit someone else’s use of that same land in another generation which makes it nonrival and therefore markets are not the best way to allocate Ricardian Land between generations.
Land receives its value through its proximity to other humans. The most valuable land is within the densest populations and this value is created from the externality of many people choosing to settle nearby this land, creating a market failure in itself. Another market failure in the case of land is that it is present in fixed amounts, which means that the supply is perfectly inelastic and unresponsive to changes in price. As the earth becomes more populated demand for land increases and the supply is constant, which leads to skyrocketing prices for land. Markets are not always bad in the case of Ricardian
Land, however there are failures that need to be understood.
Activity: Go to this link and watch the Powerpoint titled “Market Failures:
The Case of Externalities” ftp://ftp-fc.sc.egov.usda.gov/Economics/EconTrain/Externalities%2024sep03.ppt
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Proof of Learning Quiz
Multiple Choice
1.
Which of the following is an externality associated with fossil fuel extraction? a.
Acid mine drainage b.
Cyanide releases c.
War
2.
Oil prices reflect its above-ground scarcity. a.
True b.
False
3.
Water prices are always elastic with respect to price. a.
True b.
False
4.
What makes Ricardian land valuable? a.
proximity to large industry b.
local weather patterns c.
proximity to people
5.
Humans cannot affect the allocation, distribution, or scale of sunlight hitting the earth. a.
True

b.
False
6.
Fossil fuels are: a.
indestructible fund b.
nonrenewable stock c.
renewable fund
7.
Water is a nonrival good that cannot be made excludable. a.
True b.
False
Short Answer
8.
List at least two examples of market failures associated with abiotic resources.
Explain why they are considered market failures and how they affect the environment.
Although the market can be effective when it comes to allocating certain resources, this is not always the case, especially regarding ecosystem goods and services. In fact, no ecosystem good or service has all of the characteristics needed in order to be efficiently allocated by the market. The market has difficulty efficiently and sustainably allocating numerous abiotic resources, such as fossil fuels, minerals, water, Ricardian land, and solar energy. This inefficient allocation can generate significant externalities, resulting in environmental degradation as well as resource depletion. You should now feel comfortable identifying different market failures regarding abiotic resources and be able to explain how and why they occur. This will get you thinking about what sorts of policies and changes need to be put in place in order for these problems to be solved.