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 Natural Resource and Environmental
Economics

Concepts and classification of natural resources

Economy- environment interlinkages – The material balance model of economy

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 What is
resource ?
The word resource does not refer to a thing or a substance but to a function which a
thing or a substance may perform or to an operation in which it may take part,
namely, the function or operation of attaining a given end, such as satisfying a want.
In other word the word resource is an abstraction reflecting human appraisal and
relating to a function or operation.
- Zimmermann, E. W. – world resource and industries ; (1951) .
Resources are anything that can be used to satisfy a need or desire
- J.S. Fisher
Anything which may have some functions not only to satisfy human demand at
a given end but also to ensure preservation of biosphere should be considered
as resource.
- Earth Summit (1992)
Cont…
According to Encyclopedia of Social Sciences; (Vol-XI)
Resource are those aspect of man’s environment
render possible or facilitate the satisfaction of human
wants and the attainment of social objectives.

Natural resources are materials created in nature that are used and
usable by humans. Natural resources are resources that exist without
any actions of human. Materials occurring in the
environment thus are nothing more than ‘neutral
matter’ until people recognize their presence, attach
great importance to them.
 Important Characteristics of Resource:
Utility - Utility is what makes an object or substance a resource. The factors that
determine the utility of any natural resources foremost are human beings. Utility
power of a resources is not always same. For example, petroleum first used as fuel
but later is also used in multipurpose (nylon, fertilizer etc.)
Functionability- Another most important character is functionability.
Zimmerman explains that the development and functionality of resources is
a dynamic process and explains what the relations between the factors.
Without functionability everything is a neutral staff.
Serviceability- It indicate whether it is easy or difficult to control access to

a good or service. When some mater can produce different output that
can prove huge service to people.

Acceptability- When resource is accepted to all people from all community

without barrier (religion, caste, tribe.) .

Demand- Huge demand is necessary to resource and this demand is

everywhere.
Obsolescence- Resource have a power to be obsolescence. In respect of
time any particular resource are less used compare to its past and many
time a new resource is take place in the same position.

Limitation- In this earth environment have enough resources but due to

over population, human greed, unscientific use and other causes natural
resources is depleted very soon. So, Malthus, Meadows, Osborn and
some other economist think natural resource is limited.

Accessibility/Feasibility - It indicate whether it is easy or difficult to control

access. Some resource may lying under Himalaya is lying as a neutral staff. If
is accessible then it can changed into resource. Another thing easy access
leads more demand.
Eco-friendliness- Eco-friendliness means not to harm to environment,
other ways we can not say it is a resource. Lead is resource when it used in
colour or used in mixed up with other metal, but when lead it polluted the
air then it considered as pollutant not a resource.
Ability to preserve biosphere- In 1992 Rio de Janeiro earth summit, it is

said that Resource has power to save the earth. From this approach
Reserve forest, biotechnology and implication of law in proper way also
considered as resource.
 Concept of Natural Resources
• Resources are not present, they have to be made.
• Resource is a functional concept
• Resource is a dynamic concept not a static.
• Resource exists side by side with resistance and neutral stuff.
• The standard of man’s living in the result of the utilization of resources
• Concept of Resources Conservations.

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The 5 Most Important Natural
Resources are:
1. Air: Clean air is important for all the plants, animals, humans to survive on this
planet. So
it is necessary to take measures to reduce air pollution.

2.Water: 70% of the Earth is covered in water and only 2 % of that is

freshwater. Initiative to educate and regulate the use of water should be
taken.

3. Soil: Soil is composed of various particles and nutrients. It helps plants grow

4.Iron: It is made from silica and is used to build strong weapons,

transportation, and buildings

5. Forests: As the population increases, the demand for housing and

construction projects
Classification of Natural
Resources

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 Classification of
Resources
Classification of Resources: On the Basis of ownership:
a.Individual: Resources owned by individuals are called Individual Resources. For example – land
owned by farmers, house, etc.

b.Community: Resources owned by community or society are called Community Owned

Resources.
For example – Graveyard, grazing land, ponds, burial grounds, park, etc.

c. National Resources: Resources owned by Individual Nations are called National Resources. For
example – Government land, Roads, canals, railway, etc.

d.International Resources: Resources regulate by International bodies are called International

Resources. For example – Ocean and sea beyond the Exclusive Economic Zone. No individual
country can utilize these resources without the permission of International bodies
Classification of Resources: On the Basis
of origin:
a.Biotic Resources: All living organisms in our environment are called biotic resources. For
example, trees, animals, insects, etc.

b.Abiotic Resources: All non-living things present in our environment are termed as abiotic
resources. For example – earth, air, water, metals, rocks, etc.

Classification of Resources: On the basis of Exhaustibility:

a.Renewable Resources: Resources that can be replenished after a short period of time are
called Renewable Resources. For example – agricultural crops, water, forest, wildlife, etc.

b.Non-renewable Resources: Resources which takes million years of time to replenish are
called non-renewable resources. For example – fossil fuel.
 Difference between renewable and non-renewable resources
Renewable Resources Non-Renewable Resources

It can be renewed as it is available in Once completely consumed, it cannot

infinite quantity be renewed due to limited stock

Sustainable in nature Exhaustible in nature

High cost and less environment-

Low cost and environment-friendly friendly

Replenish slowly or do not replenish

Replenish quickly naturally at all
Classification of Resources: On the basis of Status of Development:
a.Potential Resources: Resources which are found in a particular region, but not
yet used properly. For example – Rajasthan and Gujarat receive plenty of solar
energy and have plenty of wind energy, but use of these resources so far has
not been developed properly.
b.Developed Resources: Resources which are developed and surveyed for
utilization and are being used in present time are known as Developed
Resources.
c.Stock: Resources that are available, but we do not have proper technology to
used them are called Stock. For example – water is made of oxygen and
hydrogen, which can be used as fuel, but because of lack of proper technology
these are not being used.
d.Reserves: Resources which are available and the know how to use them is
also present but they are yet to be used are called Reserves. For example –
river water which is not used to generate electricity
Natural resources are also categorized based on
distribution:
1.Ubiquitous resources are found everywhere (for example air, light, and
water).
2.Localized resources are found only in certain parts of the world (for example
metal ores and geothermal power).

Classification of resources based on touch ability:

3.Tangible resources: Whereas, tangible resources such as equipment have an

actual physical existence.
4.Intangible resources: Intangible resources such as corporate images, brands
and patents, and other intellectual properties exist in abstraction
 Economy – environment interlinkages

Link between economy and environment

Economy and the environment are well integrated. All economic activities either affect
or are affected by natural and environmental resources. So, there is a two-way
relationship between the economy and the environment.

1. Economic activities are influenced by the availability of natural resources.

Land and soil quality, climate and other resources determines the nature of
agriculture.
Similarly, natural resources critically influence the industrial activities.
2. Human activities decisively influence the environment.
Agriculture and industrial activities produce many adverse effects like soil
erosion, various types of pollution –land, water and air pollutions.
Depletion of resources, biodiversity loss and climatic change are some
of the irreparable loss to the environment due to economic activities.

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 Activities such as extraction, processing, manufacture, transport, consumption and
disposal change the stock of natural resources produce adverse effects on the
environmental systems and introduce wastes to environment.
Moreover, economic activities today affect the stock of natural resources available for the
future. The productivity of an economic system depends in part on the supply and quality
of natural and environmental resources.
Water, soil, air, biological, forest and fisheries resources are productive assets, whose
quality helps determine the productivity of the economy.

Air and water pollution are high affecting people in the developing world. Lost labour
productivity resulting from ill health, foregone crop output due to soil degradation and
erosion, lost fisheries output and tourism receipts from coastal erosion or lost soil
productivity from deforestation can be some of the examples of such reduced output.

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The following gives brief account of the dependence between environment and economy.
• Environment provides better living conditions to the human beings. Environmental
protection prevents pollution and the related cost of health care.
• Environment provides natural resources to the development of the economy.
• Reduction in pollution results in increased yield from agriculture and cattle.
• A healthy environment supports healthy human beings and increases productivity.
• In a protected environment, the effects of natural calamities such as drought and flood will
be less.
• Environmental protection produces job opportunities in the field of green industries and
ecotourism.
• As policymakers begin to incorporate environmental conservation into resource
management laws and practices, the quality and sustainability of our lives and economies will
improve.
The relationship between environment and economic activities became all important now.
Different types of economic activities have created pollution. Besides, global warming has
been accelerated. This has led to climatic changes and its adverse effects on human well-
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Interaction between the environment and the economy. Here, the two groups depend upon
the environment for the use of inputs. Similarly, they dispose the waste they created into
the environment. The services of environment to the economy are :
• Acts as a supplier of natural resource inputs; • Supplies of environmental or amenity
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Economic activities and environment –the environmental Kuznets curve
The environmental Kuznets curve (EKC), describe that as countries develop initially, pollution
increases and later as the economy achieves further development, pollution decreases. Following
diagram shows that relationship between economic development and level of economic
degradation.

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Thus, the environmental Kuznets curve shows an increasing
pollution initially, but declining pollution as economic progress
enhances further. The reason for this is that at low incomes, people
tend to value development over environmental quality, but as they
achieve greater wealth, they are willing to devote greater
resources to environmental quality improvements.
The relationship between environment and economic activities is
very strong. For example, uncontrolled expansion of economic
activities has now caused global warming and climatic changes.
Economic activities especially industrial activities have to be
regulated for the protection of the environment.

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Material balance model

The material balance model is a model that tracks and analyzes the flow of
materials and substances through economic systems, industries, and
ecosystems. The model is a quantitative approach that helps assess the use
of natural resources, the generation of waste, and the potential
environmental impacts of economic activities.

The primary goal of a material balance model is to understand and quantify

the flows of materials and substances, such as energy, water, minerals,
pollutants, and other resources, within a given system.

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The material balance model is shown in the figure. Environment is the superset in the
diagram. It engulfs both the two important sectors – the production sector and the
consumption sector.
The production sector produces goods while the household sector consumes it. Both
sectors create waste and turns it to the environment.
Production activities are represented by the circle called Production Sector. It
represents all productive activities in the economic system, such as agriculture,
industrial factories, mines, transportation and other public utilities. These activities use
the materials from the environment. Then they process or refines it and converts as
goods and services to sell in the market.
Raw material inputs that flow from environment are processed and produced in the
“Production Sector”. The production sector is supplying the consumable final products
to the household sector. In this process, the production sector creates some waste
products which are sent back to the environment.

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The household sector does not consume all the products supplied. They have wastes
which are unwanted by the households. These unwanted wastes or residues are
returned back to the environment. Thus, there is constant flow of residues from both
production and consumption sectors back to the environment.
‘Environment’ in the material balance model is shown as a large shell surrounding
the economic system.
So, under the material balance model:
1. the environment gives input to the production sector
2. The production sector gives output to the household sector and dispels waste to
the environment
3. The household sector after consuming a significant portion of the output expels
waste to the environment.
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Material balancing
The material flow diagram implies that mass inputs must equal mass outputs for every
process. Ultimately, all resources extracted from the environment eventually become
unwanted wastes and pollutants. Production of output by firms from inputs resulting in
discharge of solid, liquid and gaseous wastes. Similarly, waste results from consumption
activities by households.
In short, material and energy are drawn from environment, used for production and
consumption activities and returned back to the environment as wastes. In its simple form the
Material Balance Approach can be put in form equation.

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Under the model, the environment provides inputs to the economic
system and receives waste as a residue. There is overall balance as the
environment gives input, consumed by the household in the form of
output and the remainder is received back by the environment.

The input material received by the economic system from the

environment is dispelled in the form of output and waste. So,
environment becomes the critical factor in balancing the economic
activities by producing the material and receiving the residue out of the
economic activities.

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