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Over-exploitation of natural resources is followed by inevitable declines in economic growth and discount rate

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  • Adam Lampert

    (Arizona State University
    Arizona State University)

Abstract

A major challenge in environmental policymaking is determining whether and how fast our society should adopt sustainable management methods. These decisions may have long-lasting effects on the environment, and therefore, they depend critically on the discount factor, which determines the relative values given to future environmental goods compared to present ones. The discount factor has been a major focus of debate in recent decades, and nevertheless, the potential effect of the environment and its management on the discount factor has been largely ignored. Here we show that to maximize social welfare, policymakers need to consider discount factors that depend on changes in natural resource harvest at the global scale. Particularly, the more our society over-harvests today, the more policymakers should discount the near future, but the less they should discount the far future. This results in a novel discount formula that implies significantly higher values for future environmental goods.

Suggested Citation

  • Adam Lampert, 2019. "Over-exploitation of natural resources is followed by inevitable declines in economic growth and discount rate," Nature Communications, Nature, vol. 10(1), pages 1-10, December.
    • Handle: RePEc:nat:natcom:v:10:y:2019:i:1:d:10.1038_s41467-019-09246-2
    DOI: 10.1038/s41467-019-09246-2
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    Cited by:

    1. Nguyen, Thanh-Tung & Nguyen, Trung Thanh & Do, Manh Hung & Nguyen, Duy Linh & Grote, Ulrike, 2022. "Shocks, agricultural productivity, and natural resource extraction in rural Southeast Asia," World Development, Elsevier, vol. 159(C).
    2. Li, Tianyu & Yue, Xiao-Guang & Waheed, Humayun & Yıldırım, Bilal, 2023. "Can energy efficiency and natural resources foster economic growth? Evidence from BRICS countries," Resources Policy, Elsevier, vol. 83(C).
    3. Ye, Xinyu & Lin, Runtian, 2023. "Financial market risk and innovation nexus with growth: Channelizing the role of natural resources volatility for United States," Resources Policy, Elsevier, vol. 81(C).
    4. Wang, Wen & Niu, Yanfang & Gapich, Alexander & Strielkowski, Wadim, 2023. "Natural resources extractions and carbon neutrality: The role of geopolitical risk," Resources Policy, Elsevier, vol. 83(C).
    5. Mahapatra, Santosh K. & Schoenherr, Tobias & Jayaram, Jayanth, 2021. "An assessment of factors contributing to firms’ carbon footprint reduction efforts," International Journal of Production Economics, Elsevier, vol. 235(C).
    6. Chinazaekpere Nwani & Festus Victor Bekun & Phillips O. Agboola & Philip C. Omoke & Ekpeno L. Effiong, 2023. "Industrial output, services and carbon emissions: the role of information and communication technologies and economic freedom in Africa," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(4), pages 3299-3322, April.
    7. Liang, Jinhao & Razzaq, Asif & Sharif, Arshian & Irfan, Muhammad, 2022. "Revisiting economic and non-economic indicators of natural resources: Analysis of developed economies," Resources Policy, Elsevier, vol. 77(C).
    8. Luo, Jing & Ali, Syed Ahtsham & Aziz, Babar & Aljarba, Ahmed & Akeel, Hatem & Hanif, Imran, 2023. "Impact of natural resource rents and economic growth on environmental degradation in the context of COP-26: Evidence from low-income, middle-income, and high-income Asian countries," Resources Policy, Elsevier, vol. 80(C).
    9. Mirja Mikkilä & Papitchaya Utanun & Jukka Luhas & Mika Horttanainen & Lassi Linnanen, 2021. "Sustainable Circular Bioeconomy—Feasibility of Recycled Nutrients for Biomass Production within a Pulp and Paper Integration in Indonesia, Southeast Asia," Sustainability, MDPI, vol. 13(18), pages 1-21, September.
    10. Woon, Kok Sin & Phuang, Zhen Xin & Taler, Jan & Varbanov, Petar Sabev & Chong, Cheng Tung & Klemeš, Jiří Jaromír & Lee, Chew Tin, 2023. "Recent advances in urban green energy development towards carbon emissions neutrality," Energy, Elsevier, vol. 267(C).

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