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Division of Resource Economics
Institutional Resource Economics I: the
Necessity of Institutions of Sustainability
DAAD Workshop on:
“Developing Multi-level and Decentralized
Implementation Capacity for Natural Resource
Management and Environmental Policies: a contribution
to polycentric governance in an emerging democracy“,
Kiev, September 7-11, 2009
Konrad Hagedorn
Humboldt University Berlin
Division of Resource Economics
Philippstrasse 13, 10099 Berlin, Germany
Phone: + 49-30-2093 6305, Fax: + 49-30-2093 6497
E-mail: [email protected]
www.agrar.hu-berlin.de/wisola/fg/ress/
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Current Situation
Hunger, poverty,
diseases, social
exclusion
Resource
degradation,
evironmental
destruction
A triangl
of fundamental
global threats
Increasing
scarcity of
fossil energy,
climate change
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Basic Insights
Entropy Law: „Second Law of Thermodynamics“
Energy and Matter are preserved: but change form!
Georgescu-Roegen: „Transition from low to high entropy“
Economists: scarcity can be „substituted away“!
Only applies to relative, not to absolute scarcity!
Low entropy is subjected to absolute scarcity (Herman Daly)
Fortunately the Earth is no isolated but a closed system
Future efficiency of using solar radiation will determine
consumption and reproduction („humans and artefacts“)
Can this be based on natural resources: soil, water,
biosphere, genetic diversity, etc.?
Can these deliver both: food and energy for the world?
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Interdependencies between resource
degradation and nutrition and energy
•
•
•
•
Hunger: 2005 to 2008 - 850 mill to 1 bill (> 20 % of population)
Malnutrition: about 160 Mio children (about 30 % of children);
Food prices from 2005 to 2008: wheat + 80 %, rice + 100%
2009 food prices dropped due to financial crisis and better harvest
• Energy prices: prices of crude
oil more than doubled from 2005
to 2008, then dropped drastically
due to financial crisis
• Rivalry for natural resources,
particularly for water and land:
Will provision of bioenergy gain
priority over food production?
• Remember: energy and food have always been substitutes
• Applies to products and allocation of production factors
• But: this is different in a globalised economy!!!
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Worldwide Resource Degradation 1/3
• Increase of soil degradation: 1945-1990 17 % of the biomass
producing area on the world lost; productivity of 16 % of the land in
developing countries will be considerably reduced (IFPRI)
• Increasing desertification: 34,75 mill km2 of
agricultural area threatened by desertification
(= 8 % of the worlds’ grazing land, 6 % of the
worlds’ rain-fed crop land, 20 % of the worlds’
irrigated crop land); > 250 mill people affected
• By 2050 3 bill people more will need additional area for settlement
and traffic: 120 mill ha (= 1-200 % of the European Unions’ agricultural area). Only for cars: + 60 mill ha for traffic and parking needed
• Competition for land between agriculture and nature conservation:
in Germany 4588 FFH sites = 3,3 mill ha = 9,3 % of the overall land
area. 120 ha per day are converted non-agricultural land use.
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Land and Soil Issues in Ukraine 1/2
53,8% of total Ukrainian land is arable land!
Ukraine is rich in terms of land-man ratio!
Soil degradation:
Erosion is the main factor of soil degradation in Ukraine:
 Water erosion affects 32 % of arable land
 In years with wind storms, wind erosion affects up to
60.4 % of arable land
In general, the area of degraded and low productivity
soils is more than 20 % on arable land
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Land and Soil Issues in Ukraine 2/2
Soil pollution:
 20% of Ukrainian territory is significantly polluted by
toxic compounds
 8.4 mill ha of land (including 3.5 mill ha of arable land) is
contaminated by radionuclide
 1.5 mill ha recreational land radionuclide contaminated
 Contamination with petroleum products is dangerous
(not stored in soil but migrate into ground water).
 Extraction of 1 ton of oil causes destruction of
pollution of 1.3 m3 of soil
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Worldwide Resource Degradation 2/3
•
Water scarcity : 1.1 bill people in developing countries have no
clean drinking water; 2.6 bill in these countries live without
sanitation. In 2025 1.8 bill people will have to live in regions with
absolute scarcity of water. China: 300 mill people have no clean
drinking water
•
Water pollution by industries, agriculture, waste, etc. also in Ukraine
•
Overfishing of the Sea and reduced fish resources: global
availability of fish will decline by 25 % until 2025 compared to 1990
•
Reduction in diversity of species and varieties: cultivated plants
by 75 % since 1920; 34.000 plant and 5.200 animal varieties and
about 30 % of used animal breeds threatened by extinction
•
Loss of genetic resources: e.g. in the Fifties about 30.000 rice
varieties existed in India, today 50 % of world nutrition is achieved
by 5 grain species, 95 % of world nutrition by 30 plant species
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Worldwide Resource Degradation 3/3
• International Panel for Climate Change:
Agriculture contributes 13,5 %, forestry
17,4 % to the global greenhouse gas
emissions; not much less than industry
(19,4 %) and the energy sector (25,9 %)
Methane from cultivation rice and cattle
• CO2 sinks reduced worldwide: deforestation of natural tropical and nontropical forests: tropical forest -14,2 %, non-tropical forests + 1,7 %, taken
together -12,5 % (1990-2000); the process of deforestation continues!
• Germany had 9000 km2 of natural mires; today only 600 km2 are
preserved under natural conditions (< 7%). Mires in Ukraine?
• Decrease of permafrost soils in Siberia causes additional greenhouse
gas emissions:, but also shift of the South Siberian corn belt
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Adaptation Requirements to Climate
Change Differ between Regions
The eastern
part of
Germany is
particularly
affected by
climate
change!
Quelle: Zebisch et al. (2005)
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Influence of Climate Change on
Agricultural Production
ECHAM4 2080
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Climate Change Impact in Ukraine 1/2
The results of scientific research … show that climate
change in Ukraine has significant impacts on agriculture,
forestry, water and coastal resources.
It is highly probable that crop yields could be changed
significantly.
Transformation of types, species composition, productivity
and stability of forests is likely to take place in the course of
climate warming within the territory of Ukraine.
Coastal zone vulnerability is already a reality: the Black
Sea level is rising 1.5 mm per year.
Source: The United Nations Framework Convention on Climate Change, The
First National Communication on Climate Change, Kyiv 1998
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Climate Change Impact in Ukraine 2/2
Number and magnitude of extreme weather events (storms,
floods, droughts, heat waves, heavy rains and winds)
increased almost twice during 2001-2005 in comparison
with 1980s and early 1990s.
Changes in precipitations:
 In South, Eastern and Central Ukraine rain is expected to
decrease by 35-40%, in Winter – decrease by 20%.
 Annual river stock decrease by 50% in South and East.
 Shortage of water for local population. In particular where
access to water is insufficiently organized.
Source: National Ecological Centre of Ukraine and Working Group on
Climate Change
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What Questions Arise?
• Although agriculture has made large progress in
increasing food production (see India and China),
it is still unable to feed the world
• At the same time natural resources are rapidly
degrading due to human impact
• The Green Revolution is weakening: growth of
productivity down from 4 % p.a. to 1 % p.a.
• Can the natural resource base – additionally provide energy to
– fill the gap resulting from the depletion of fossil resources
– meet energy demand from the fast growing countries?
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„The End of Ancient Sunlight“
Quantity
of energy
Burning „ancient
sunlight“ in one
„earth second“
Energy delivery
from solar radiation
Sustainable
energy
provision
from
renewables
Pre-industrial
energy
consumption
Which level will we arrive at?
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Earth
time
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Global population growth, 1950-2050
Year
Population
(millions)
Average annual
population growth
(millions)
38
1950
2557
1975
4084
71
2000
6072
76
2025
7959
68
2050
9402
46
Quelle: Harald von Witzke, Steffen Noleppa and Gerald Schwarz: Global agricultural market trends
revisited: The roles of energy prices and biofuel production. Working Paper 89 (2009); HU Berlin, p. 8.
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Agricultural commodity prices and
the price of crude oil, 2007-2008
Quelle: Harald von Witzke, Steffen Noleppa and Gerald Schwarz: Global agricultural market trends
revisited: The roles of energy prices and biofuel production. Working Paper 89 (2009); HU Berlin, p. 8.
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Food and Energy Prices Show a
Parallel Development !
Wheat
Crude Oil
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Real world market prices of
selected agricultural commodities
2003/2005 – 2015/17
Market
2003/05
(US$/mt)
2015/17 (US$/mt)
base scenario
2015/17 in per
cent of 2003/05
Wheat
158
Corn
106
219
107
Other grains
91
137
51
Oilseeds
288
492
71
Sugar
250
493
97
272
72
Quelle: Harald von Witzke, Steffen Noleppa and Gerald Schwarz: Global agricultural market trends
revisited: The roles of energy prices and biofuel production. Working Paper 89 (2009); HU Berlin, p. 8.
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Real world market prices under
alternative scenarios (US$ per metric ton)
Market
2003/05
2015/17
base
scenario
2015/17 with
2003/05
energy
price
2015/17 with
003/05 biofuel
production
Wheat
158
272
186
237
Corn
106
219
157
158
Other grains
91
137
104
129
Oilseeds
233
492
398
394
Sugar
250
493
326
405
Quelle: Harald von Witzke, Steffen Noleppa and Gerald Schwarz: Global agricultural market trends
revisited: The roles of energy prices and biofuel production. Working Paper 89 (2009); HU Berlin, p. 8.
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Main Conclusions 1/3
Mankind – individuals, governments and other actors –
must change their behaviour fundamentally!
Towards more sustainable resource use!
This raises three questions:
1. What has this to do with institutions and governance
structures?
2. How is this related to institutional diversity, polycentric
governance, decentralization and participation?
3. Why does this require changes towards democracy,
open society and legal state?
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Main Conclusions 2/3
Ad 1: Social behavior is regularized by norms and rules.
This also applies to human-ecosystem interaction!
 Conceptualized by the IoS framework
Ad 2: Natural systems are different from systems designed
by humans - complexity and interconnectedness – plurality of
types of institutions and combinations of governance modes
 Shown by properties of of nature-related transactions
Ad 3: It seems likely that there are mutual dependencies and
synergies: Successful resource management may depend
on successful democratic development and progress in
resource governance may enhance democracy
 Examples from the CEESA Project
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Main Conclusions 3/3
We will follow the sequence of topics mentioned above
 IoS framework, nature-related transactions
and CEESA Project results
Before we will explain selected basics of institutional analysis
 Definitions of institutions, transaction cost
economics, coase theorem, etc.
Tomorrow additional basic approaches will be explained
 IAD framework and Property Rights Regimes
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THANK YOU
for your attention!
--------------------------Institutional Resource Economics I: the
Necessity of Institutions of Sustainability
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