Michigan's Natural Resources and Environment:
Michigan’s Natural Resources and Environment: Contributions of Natural Capital in Michigan’s New Economy Patricia Norris Department of Community, Agriculture, Recreation and Resource Studies Michigan State University [email protected]
Overview • • • •
Economics Ecology Situation/trends in U.S. and Michigan Policy Considerations
The Economy Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Economies produce goods and services using Energy
Labor
and Capital…
Materials
Manufactured capital
Social capital
and… Human capital
Natural Capital
Material stocks in all its variations
Space on earth
Solar energy
Ecosystems and their functions
Natural capital gives us: • Inputs to production • Goods and services for direct consumption • Places to dispose of waste • Ecosystem functions
Ecosystem functions • Functions of natural systems – Hydrologic cycling – Material recycling and waste assimilation – Nutrient cycling – Climate moderation
Natural Capital in Michigan’s Economy • • • • • • •
Agriculture Forestry Recreation and Tourism Mining Oil and gas extraction Food manufacturing Other manufacturing
Measuring Economic Activity • Gross Domestic Product – U.S. • Gross State Product – Michigan – Final value of all goods and services produced in a year – Used as measure of income/well-being
• Net Domestic Product – Accounts for depreciation of capital stock
Contributions to MI Economy A Subset Sector Natural-resource dependent
Motor vehicle and parts manufacturing Finance and insurance Real estate Professional and technical services Health care and social assistance
Percent of SDP
2006 7.70 6.57 7.20 11.58 7.68 7.60
2007 7.39 7.50 6.65 11.70 7.74 7.70
2008 7.69 5.89 6.96 11.80 8.01 8.20
Do GDP/NDP measure well-being? • Non-market goods and services not included (GDP understates well-being) • Natural assets are treated differently from manufactured assets (GDP overstates well-being) • Defensive expenditures enter accounts as income (GDP overstates well-being) – Pollution control expenditures – Remediation expenditures
Agriculture in Michigan • 2007: Gross sales $5.7 billion • 2007: 10,031,807 acres – 4% reduction since1997 Change in number of farms, by farm size 1-9 acres
Up 25%
10-49 acres
Up 36%
50-179 acres
Down 5.5%
180-499 acres
Down 24%
500-999 acres
Down 19%
1000-1999 acres
Up 5.2%
2000 + acres
Up 46%
Agriculture in Michigan • 2007 irrigated acres 500,248 – We are seeing an increase in some locations
• Water use in 2006: 222.97 million gallons per day – Some perspective: 1 million gallons = = = = 3.07 acre feet – Public water supply in 2006: 1,077.39 million gallons per day
Forestry in Michigan • 19 million acres of forest – 47% non-industrial private ownership – 8% forest industry ownership – 20% state forests – 14% national forests
• Forest products industry: – $12 billion per year in annual revenues – 10% of manufacturing employment
Outdoor Recreation in Michigan
Participation by region (% of population) 1
54%
4
51%
7
46%
2
53%
5
48%
8
46%
3
52%
6
46%
9
45%
Active Outdoor Recreation Indiana, Illinois, Michigan, Ohio, Wisconsin Contribution to States’ Economy (2006) (million) Jobs generated
691,507
Gear retail sales
$7,007
Trip-related sales
$34,665
Taxes (federal, state)
$7,151
Total contribution
$61,953
Outdoor Recreation • Most popular activities nationwide based on number of participants (2009) – Freshwater, saltwater and fly fishing – Car, backyard and RV camping – Running, jogging and trail running – Road biking, mountain biking and BMX – Hiking
Outdoor Recreation in Michigan (2002) Activity
Participation per capita
National Rank
Backpacking
5.9%
27
Bicycling – paved road
36.6%
7
21%
9
Bird watching
11.4%
8
Camping
8.8%
15
Car camping
28.6%
11
Canoeing
19.7%
4
Fly fishing
5.9%
23
Hiking
35.3%
22
13%
10
Bicycling – off-road
Cross country skiing Merchandise expenditures
$831 million
Tourism in Michigan 2007
2008
2009
(million) Person-stays - resident
72.86
68.45
70.55
- non-resident
31.07
25.45
22.82
- resident
$9,022
$8,506
$7,967
- non-resident
$9,088
$7,814
$7,149
Direct spending
Contrasting Views about Natural Capital • Resource (capital) substitutability – Substitute technology (manufactured capital) and knowledge (human capital) for natural capital
• Minimum critical level – Natural capital is needed to produce, use other forms of capital – With over-harvest, renewable resources lose their ability to reproduce themselves – Damaged ecosystems lose functionality
Public and Private Choices • Consume natural capital [extract inputs and discharge wastes] – Without replacement – how fast? – With replacement – how much?
• Protect/steward natural capital • Restore/invest in natural capital When benefits and costs of private choices are not born solely by the chooser – public policy responds.
Why Economy vs. Environment is a False Choice • Usually its economy vs. economy – Natural resource conservation and environmental protection do require sacrifices and have a cost – Choice is not about whether there is a cost but about who bears the cost • Loss of natural capital is also a cost
– Natural capital has an important place in economic activity
Why Economy or Environment is a False Choice • Usually its economy vs. economy • Economies don’t produce everything we want – Conservation and protection assure continued production of ecosystem goods and services, robust and resilient ecosystems
Why Economy or Environment is a False Choice • Usually its economy vs. economy • Economies don’t produce everything we want • Firms don’t look for places with little environmental regulation; they look for places with good environments
Why Economy or Environment is a False Choice • Usually its economy vs. economy • Economies don’t produce everything we want • Firms don’t look for places with little environmental regulation; they look for places with good environments • Environmental performance is increasingly rewarded in financial markets
Trade-offs: When we have to choose • Incompatible uses – Consumptive vs. nonconsumptive uses of water – Open space vs. built
• Intertemporal allocations – How quickly should we use nonrenewable resources? – Do we use resource now and worry about potential ecological impacts later?
Environmental and Natural Resource Governance • What is valued? What are desired outcomes? • How much can/should state government do? • Who else should be involved? • How can individual and societal objectives be aligned?
Overview • • • •
Economics Ecology Situation/trends in U.S. and Michigan Policy Considerations
The Economy Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Goods and Services
Labor
Wages Consumer Expenditures
Economies produce goods and services using Energy
Labor
and Capital…
Materials
Manufactured capital
Social capital
and… Human capital
Natural Capital
Material stocks in all its variations
Space on earth
Solar energy
Ecosystems and their functions
Natural capital gives us: • Inputs to production • Goods and services for direct consumption • Places to dispose of waste • Ecosystem functions
Ecosystem functions • Functions of natural systems – Hydrologic cycling – Material recycling and waste assimilation – Nutrient cycling – Climate moderation
Natural Capital in Michigan’s Economy • • • • • • •
Agriculture Forestry Recreation and Tourism Mining Oil and gas extraction Food manufacturing Other manufacturing
Measuring Economic Activity • Gross Domestic Product – U.S. • Gross State Product – Michigan – Final value of all goods and services produced in a year – Used as measure of income/well-being
• Net Domestic Product – Accounts for depreciation of capital stock
Contributions to MI Economy A Subset Sector Natural-resource dependent
Motor vehicle and parts manufacturing Finance and insurance Real estate Professional and technical services Health care and social assistance
Percent of SDP
2006 7.70 6.57 7.20 11.58 7.68 7.60
2007 7.39 7.50 6.65 11.70 7.74 7.70
2008 7.69 5.89 6.96 11.80 8.01 8.20
Do GDP/NDP measure well-being? • Non-market goods and services not included (GDP understates well-being) • Natural assets are treated differently from manufactured assets (GDP overstates well-being) • Defensive expenditures enter accounts as income (GDP overstates well-being) – Pollution control expenditures – Remediation expenditures
Agriculture in Michigan • 2007: Gross sales $5.7 billion • 2007: 10,031,807 acres – 4% reduction since1997 Change in number of farms, by farm size 1-9 acres
Up 25%
10-49 acres
Up 36%
50-179 acres
Down 5.5%
180-499 acres
Down 24%
500-999 acres
Down 19%
1000-1999 acres
Up 5.2%
2000 + acres
Up 46%
Agriculture in Michigan • 2007 irrigated acres 500,248 – We are seeing an increase in some locations
• Water use in 2006: 222.97 million gallons per day – Some perspective: 1 million gallons = = = = 3.07 acre feet – Public water supply in 2006: 1,077.39 million gallons per day
Forestry in Michigan • 19 million acres of forest – 47% non-industrial private ownership – 8% forest industry ownership – 20% state forests – 14% national forests
• Forest products industry: – $12 billion per year in annual revenues – 10% of manufacturing employment
Outdoor Recreation in Michigan
Participation by region (% of population) 1
54%
4
51%
7
46%
2
53%
5
48%
8
46%
3
52%
6
46%
9
45%
Active Outdoor Recreation Indiana, Illinois, Michigan, Ohio, Wisconsin Contribution to States’ Economy (2006) (million) Jobs generated
691,507
Gear retail sales
$7,007
Trip-related sales
$34,665
Taxes (federal, state)
$7,151
Total contribution
$61,953
Outdoor Recreation • Most popular activities nationwide based on number of participants (2009) – Freshwater, saltwater and fly fishing – Car, backyard and RV camping – Running, jogging and trail running – Road biking, mountain biking and BMX – Hiking
Outdoor Recreation in Michigan (2002) Activity
Participation per capita
National Rank
Backpacking
5.9%
27
Bicycling – paved road
36.6%
7
21%
9
Bird watching
11.4%
8
Camping
8.8%
15
Car camping
28.6%
11
Canoeing
19.7%
4
Fly fishing
5.9%
23
Hiking
35.3%
22
13%
10
Bicycling – off-road
Cross country skiing Merchandise expenditures
$831 million
Tourism in Michigan 2007
2008
2009
(million) Person-stays - resident
72.86
68.45
70.55
- non-resident
31.07
25.45
22.82
- resident
$9,022
$8,506
$7,967
- non-resident
$9,088
$7,814
$7,149
Direct spending
Contrasting Views about Natural Capital • Resource (capital) substitutability – Substitute technology (manufactured capital) and knowledge (human capital) for natural capital
• Minimum critical level – Natural capital is needed to produce, use other forms of capital – With over-harvest, renewable resources lose their ability to reproduce themselves – Damaged ecosystems lose functionality
Public and Private Choices • Consume natural capital [extract inputs and discharge wastes] – Without replacement – how fast? – With replacement – how much?
• Protect/steward natural capital • Restore/invest in natural capital When benefits and costs of private choices are not born solely by the chooser – public policy responds.
Why Economy vs. Environment is a False Choice • Usually its economy vs. economy – Natural resource conservation and environmental protection do require sacrifices and have a cost – Choice is not about whether there is a cost but about who bears the cost • Loss of natural capital is also a cost
– Natural capital has an important place in economic activity
Why Economy or Environment is a False Choice • Usually its economy vs. economy • Economies don’t produce everything we want – Conservation and protection assure continued production of ecosystem goods and services, robust and resilient ecosystems
Why Economy or Environment is a False Choice • Usually its economy vs. economy • Economies don’t produce everything we want • Firms don’t look for places with little environmental regulation; they look for places with good environments
Why Economy or Environment is a False Choice • Usually its economy vs. economy • Economies don’t produce everything we want • Firms don’t look for places with little environmental regulation; they look for places with good environments • Environmental performance is increasingly rewarded in financial markets
Trade-offs: When we have to choose • Incompatible uses – Consumptive vs. nonconsumptive uses of water – Open space vs. built
• Intertemporal allocations – How quickly should we use nonrenewable resources? – Do we use resource now and worry about potential ecological impacts later?
Environmental and Natural Resource Governance • What is valued? What are desired outcomes? • How much can/should state government do? • Who else should be involved? • How can individual and societal objectives be aligned?
