Here you find the solutions to the first assignment of the course Natural Resource Economics (NRE). This assignment counts for 10% of the final grade. We chose the following academic paper: "Regulating Biological Resources: Lessons from Marine Fisheries in the United States." We received a perfect ...
This assignment is due on April 21st before 23:59.
There will be a penalty of 10% per day for late assignments.
To submit, upload a pdf of your exercise on the Assignment tab on Canvas.
Only one submission per group is necessary.
1. Oil reserves and prices [25 points]
Our World in Data is an initiative created by the NGO Global Change Data Lab and Oxford
University. It is objective is to make “research and data to make progress against the world’s largest
problems” publicly available. You can read more about the initiative in the About section of their
website: https://ourworldindata.org/about
You are going to analyze some data on natural gas reserves and prices. From the Home page of the
website (https://ourworldindata.org/), find the data on Fossil Fuels as follows:
• Articles by topic (link in the top-center of the page) à Energy and the Environment à Fossil
fuels
• Scroll down and expand the menu “Interactive charts on Fossil Fuels”.
• Then, open the links for “Gas reserves” and “Natural gas prices” and download the data in
each.
a. [7] Using the software of your choice, plot the evolution of World gas reserves from 1984 to
2020. Plot as well the evolution of the Average German Import price for natural gas during
the same time. Graph both time series on the same line plot and use a separate y-axis for each
time series. Label all axes and add a legend to your graph.
Note: the datasets contain more data (other regions and other years) than those you are requested to plot. You
need to select the relevant subset of the data before plotting it.
b. [3] Describe the overall trend of gas reserves.
1
, c. [5] Natural gas is a non-renewable resource that cannot grow over time. As a result, reserves
can only be declining over time. Refer to your answer in (b) to argue if this statement is true
or false, and explain why.
d. [5] If the assumptions for the two-period resource depletion model we saw in lecture held in
practice, how did you expect the price of natural gas to change over time?
e. [5] Does the evolution of prices you plotted in (a) follow the trend you described in (d)?
Discuss two reasons why or why not this might be.
Note: there are more than two possible reasons. You are only asked to describe two.
2. Fisheries [25 points]
a. [3] The natural growth of a fishery is described by the following formula:
!
!(#) = 0.08 ∙ # *1 − "####-, where X is the fish stock of the fishery. Using Excel or other
software of your choice, compute the natural growth the fishery F(X) for values of X ranging
from 0 to 10000, in 200-unit intervals. Create a plot.
b. [3] In this fishery, what would be the maximum sustainable yield (MSY)? At what level of
stock of is the MSY reached?
c. [3] Assume the stock of this fishery is at its carrying capacity before the fishery starts to become
commercially exploited (that is, before some of its fish are harvested.) Harvest is set at the
maximum sustainable yield regardless of the level of the stock. Include this level of harvest in
your graph. Include the resulting graph in your answer.
d. [2] Using the graph you plotted in (c) for intuition, discuss: will the fish stock initially increase
or decrease? What is the long-term level of fish stock you expect in the long-term?
e. [4] Measuring fisheries in practice is challenging. Assume that the carrying capacity of the
fishery we are analyzing had been overestimated, and in reality, it is 8000. Plot the resulting
natural growth in the fishery. Include harvest as well in your graph, which is still constant at
the level you identified above.
f. [2] What is the long-term level of fish stock you expect in the long-term in the case described
in (e)?
We are going to use some data on overfishing available in Our World Data (Note: overfishing is
defined in Our World in Data as biologically overfished). From the Home page of the website
(https://ourworldindata.org/), find the data on overfishing as follows:
2
,Articles by topic à Energy and the Environment à Biodiversity
From there, go to “Fish and overfishing”, and then “How is overfishing changing over time?”
a. [5] Download the related dataset. This dataset contains information on the proportion of fish
stocks within biologically sustainable levels (not overexploited) for different world regions (for
instance, Easter Central Atlantic, Mediterranean and Black Sea, etc.) Note: To see these data, focus
on those rows in the spreadsheet for which the region name (in column A) includes the term “(FAO)”.
Construct a table that summarizes the change in the proportion of fish stocks that are within
biologically sustainable levels between 2004 and 2017 for these 15 regions. For which regions
has the share of overexploited fisheries increased the most and decreased the most between
2004 and 2017?
Read the following sections in Our World in Data:
• Data on global fish stocks is incomplete (link: https://ourworldindata.org/fish-and-
overfishing#data-on-global-fish-stocks-is-incomplete )
• Fishery stocks are likely to be poor across much of Asia, Africa, and South America (link:
https://ourworldindata.org/fish-and-overfishing#fish-stocks-are-likely-to-be-poor-across-
much-of-asia-africa-and-south-america )
g. [3] In your own words, provide a succinct (3-4 sentence) summary of these two sections. Do
you expect the proportion of fish stocks that are within biologically sustainable levels in those
regions for which we do not have reliable data to be higher or lower than the values you
included in your table in (g)?
3. Summary and evaluation of academic paper [50 points]
You are going to do a critical reading of one recent academic paper in the field of Natural Resource
Economics. To do so, you should select ONE of the papers listed below. All the papers are available
in Canvas.
• Chakravorty, U., Dar, M. H., & Emerick, K. (2023). Inefficient Water Pricing and Incentives
for Conservation. American Economic Journal. Applied Economics, 15(1), 319–350.
• Englander, G., Zhang, J., Villaseñor-Derbez, J. C., Jiang, Q., Hu, M., Deschenes, O., &
Costello, C. (2023). Input Subsidies and the Destruction of Natural Capital: Chinese Distant
Water Fishing (No. w31008). National Bureau of Economic Research.
• Frank, E., & Oremus, K. (12/2022). Regulating Biological Resources: Lessons from Marine
Fisheries in the United States.
• Rafey, W. (2023). Droughts, Deluges, and (River) Diversions: Valuing Market-Based Water
Reallocation. The American Economic Review, 113(2), 430–471.
3
, • Sekhri, S., & Hossain, M. A. (2023). Water in Scarcity, Women in Peril. Journal of the
Association of Environmental and Resource Economists. https://doi.org/10.1086/725247
• Taylor, C. (2022). Cicadian Rhythm: Insecticides, Infant Health, and Long-term Outcomes.
A complete response must have the following three components:
a. A brief summary of the paper in your own words. Make sure your summary contains:
• What is the research question of the paper?
• Why is the research question interesting according to the authors?
• In which setting do the authors test their question, and with which data?
• What are the main results of the paper?
Note: All these papers have some parts that are fairly technical (like the methods, or theoretical model
sections). You should skim these sections to get a sense of the steps the authors took to answer their
research question, but you are not expected to understand every aspect covered. You are also not
expected to discuss the more technical aspects of the paper in your answer).
b. One (or more) points made in the paper that you found interesting. When doing so, link these
points to the content of the lectures: how did the paper advance your knowledge with respect
to what you have learned in lecture?
c. One (or more) points of constructive criticism, for instance:
• An extra analysis you would have liked to see in the paper.
• Highlight a result you are skeptical about, arguing why this is the case.
Your answer should have between 500 and 1000 words. You should devote roughly the same space
in your answer (that is, 1/3) to each of the 3 components noted above.
4
, Assignment 1 : Natural Resource economics
1. Oil reserves and prices
a)
- The left y-axis indicates the world gas reserves in 10 trillion m³.
- The right y-axis indicates the average German import prices of gas measured in
current US dollars per m³.
- The x-axis shows the years from 1984 to 2020.
- The data we used is shown in the table below
, (world gas reserves in 10 trillion cubic metres).
b)
From the graph above, we can see an upward sloping blue line from the years 1984 to 2020,
which shows that there is an overall increase in the number of gas reserves in the world. In
1984 the world gas reserves were approximately 80 trillion m³ (in exact numbers
80211980000000), while in 2020 the world gas reserves were approximately 190 trillion m³
(in exact numbers 188073780000000). This implies that the overall world gas reserves more
than doubled between the years 1984 and 2020.
We do however see a decrease in the level of reserves in the years 2015 and 2020. It is
however difficult to determine with certainty why the reserves of natural gas are decreasing
in a specific year since it can be influenced by many factors. However we will attempt to do
so. In 2015, decreases in reserves can potentially be explained by the depletion of existing
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