Accounting for Externalities > Ecosystem > Primary resources and social cost

Dung beetles get their names from their feeding method, which is mainly based on feces.
Recycling, coprophagous, they find in the waste of their ecosystem, the nutrients necessary for their functioning.
They are thus able to rid the environment of their waste while feeding.
In a world where resources are being depleted, this particular regime applies to the economy, but with some adaptations to the production tool. The impact on ecosystems, by using waste rather than using natural resource stocks, is beneficial, by allowing, temporarily, to treat a waste, a nuisance, and then to maintain the stock of the natural environment. This transformation, which is ideal (and forbidden by the third law of thermodynamics), nevertheless allows us to imagine a company which, thanks to recycling, would produce without consuming anything other than its own waste. In this case, the company would have a neutral balance of externalities, and therefore no impact on its environment.
Of course, companies that recycle and consume other elements from the natural environment, but let’s see how this can translate into a balance of externalities.

For primary resources, these are either:

  • Renewable: the stocks regenerate over an acceptable period of time (biological stocks, agriculture), in relation to the rate of extraction, or are infinite (solar energy),
  • Nonrenewable: the stocks are finished (ores) or the regeneration time is very long compared to the rate of withdrawal (fossil fuels, soil quality).

Let’s first consider renewable resources.
For renewable resources (only the withdrawal is considered), the private cost of withdrawal corresponds to the value of the resource:

  • for a plant resource: cost of immobilization of the land (a given time),
  • for an animal resource: cost of raising the resource,

The social cost, which is the cost of returning to the initial (arbitrary) state, must correspond to the private cost. We place ourselves in the case, or for production and withdrawal, we have not used any additional resources (for simplification). The externalities are thus nil for withdrawals of natural resources, if we consider that the latter does not mobilize any other resource that is a source of externalities.

During short cycles (for example, the production of cereals), there is a balance between social cost and private cost, if the production tool maintains its yields (the cost in year N+1, which will make it possible to reconstitute the stock, is the same as in year N).

If the production tool has decreasing yields, then the time needed to recover the historical yields while stopping the production tool must be defined (in the case of a set-aside for example).

For agriculture, the value of the production tool is linked to the land value of the land. This land area must take into account the fallow periods, the impact on biodiversity, etc.

For non-renewable resources, there are, in general, private costs or exploitation rights. A resource can be qualified as non-renewable, when the withdrawal is higher than the rate of renewal of the resource.
In this case, the social cost can be calculated in two different ways:

  • If regeneration takes place within an acceptable time horizon, then the social cost is equal to the private cost + the cost of immobilizing the resource so that it returns to a normal state: for example, in the case of a fish resource that would take 20 years to be reconstituted, this is the same as taking ,
  • If the resource cannot renew itself quickly (fossil energy), then a renewable substitute for this resource must be taken, and if necessary, the impact must be calculated,

The consumption of non-renewable resources has an impact on the economy’s ability to find substitutes, which are renewable. The social cost is therefore the renewable equivalent value that would allow the non-renewable source to substitute (at equivalent capacity) for the renewable source. Thus fossil energy (non-renewable) is used to produce Joules, it must therefore be possible to replace it by an equivalent renewable source (with equivalent characteristics). A first problem appears relative to the production chain and added value of one energy compared to another. We will deal with this point in another article.

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