Natural resources - Business Environment

In economics, natural resources are put under the heading of land as a factor of production. It would include all natural resources like the soil, minerals, oil, forests, fish, water, the sun, and so on. The uneven distribution of natural resources throughout the world means that they can be used as economic and political weapons.Although the area of land in a country is fixed, land as a factor of production is not completely fixed in supply as more land can be made available through land reclamation schemes and better irrigation. The productivity of agricultural land can be increased by the use of fertilizers. It is true, however, that our natural resources are in finite supply. And often their true extent is not known with certainty.It is in the area of natural resources that the distinction between renewable and non-renewable resources is most important. Natural resources can be either. Land can often be used for more than one purpose for example, agricultural land can be used to grow one crop one year and another the next but oil, once it is used up, cannot be used again. And even though land can be used for more than one purpose it is still immobile both geographically and between different uses. Land can be used for agriculture or industry, but using it for one purpose makes it more difficult to use it for another. If a factory is built on a piece of land, it would be both expensive and time consuming to clear the land for farming.

The use of agriculture land

Table shows the changing usage of agricultural land in the UK between 1971 and 2003. There are slight differences between the years, most notably the inclusion of ‘set aside’ land in the 1993, 1997, 2000 and 2003 columns. This is part of EU Common Agricultural Policy where farmers are paid not to use land in an attempt to reduce the overproduction of agricultural goods.

Protection of the environment
Increased knowledge of the effects of depletion of natural resources has led to increased environmental awareness among the population. There has been an increased interest in conservation and recycling and the search for alternative forms of energy. A survey by the Department of the Environment recently found that 90 per cent of the adult population in the UK were either ‘fairly concerned’ or ‘very concerned’about the environment. The issues which caused concern included traffic congestion, global warming, air and water pollution and depletion of the ozone layer. This change in public opinion has already had a major impact on the way in which business operates and is likely to have even bigger effects.The government in the UK has a variety of targets for environmental protection. For example: it is committed to cutting the emission of carbon dioxide by 20 per cent by 2010 (in line with the Kyoto agreement); it wants 10 per cent of the UK’s electricity to come from renewable sources by 2010; local authorities are expected to recycle or compost 30 per cent of household rubbish by 2010; it has a target of20 per cent of plastic to be recycled by 2006. Progress towards these targets (and others) is variable but the level of recycling in the UK is low by international standards. It is often the case that legislation designed to protect the environment has the opposite effect. In the case of the target for composting, because the government has not set out safety standards for compost local authorities worried that their compost might not meet any standards set have resorted to burning household rubbish instead. EU directives that all fridges and cars should be recycled has led to fridge and car mountains springing up all over the place as people dump them rather than pay the cost of recycling. A new directive from the EU on waste electronic and electrical equipment which came into force in 2004 made it illegal to send computers, mobile phones, TVs and radios to landfill sites and worsened this situation. Producers of these have predicted that as a result of this directive prices would rise by around 5 per cent. Environmental groups try to counter such arguments by estimating how many jobs could be created by shifting investment from private transport to public transport, boosting recycling and organic farming and schemes to clear up the environment.The UK is not well endowed with high-grade minerals; the main natural resource is energy. There is a good deposit of coal and the discovery of North Sea oil and gas has made the UK self-sufficient in energy supplies. The usage of energy has doubled since 1970 but as Table shows there has been a change in the relative importance of the different sources of energy.Coal has lost its place to oil and gas as the most important sources of energy. The increase in the usage of both oil and gas is due to the discovery of North Sea oil and gas in the UK. The biggest single user of energy in the UK is transport (33 per cent of energy produced), followed by the domestic sector (28 per cent) and industry (20 per cent).There is great variation in the fuels used for the generation of electricity acrossEurope as Table shows.The amount of electricity generated by nuclear power has increased by around 6 per cent since 1990 and several EU countries use it as their primary generator of electricity. The use of nuclear power creates lower emissions of greenhouse gases but increases the risk of accidental leakage of radioactivity and raises the problem of the disposal of radioactive waste. The use of coal in the generation of electricity has fallen and the use of gas has increased.

The OECD predicts that the energy requirements of western Europe will increase; the proportion of this being met from oil will fall, the deficiency being taken up by natural gas. There is not expected to be any growth in nuclear power over the next decade although this may change in the long term, as the non-renewable energy sources are used up. There is a demand for alternative sources of energy. The alternatives of hydro, wind and solar energy sources will also grow in importance. In the UK the government has tried to promote the search for renewable energy sources through projects like the Non-Fossil Fuel Obligation which requires regional electricity boards to obtain a certain percentage of their electricity from clean sources. It also funds experimental work in the search for new sources of energy.As well as recycling and searching for new sources of energy there is the concept of‘nega demand’ where the use of less produces negative demand for those commodities. This concept can be applied to energy and water saving, driving, shopping, etc.

Primary usage of energy


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