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Introduction
This paper entails an analysis on a case study that illustrates a number of issues. First, the case evaluates the circumstances that can enhance the development of the coal business by opening up and exploiting coalmines. Secondly, the paper evaluates the significance of the marginal concept and its application in minimising destruction of rain forests. Finally, the paper evaluates how marginal concepts can be integrated in the process of formulating strategies aimed at enhancing conservation of natural resources such as crude oil.
Discussion
Climate change is one of the critical challenges facing the society today. The debate on global warming will not end soon as the involved stakeholders hold disparate views on the issue. Different aspects can be used to explain the high rate of climate change. One of these issues relates to environmental pollution. Using coal as one of the sources of energy without incorporating the necessary environmental measures may increase the rate of environmental pollution.
The coal industry is considered as one of the most complex energy industries. For example, it is estimated that the United Kingdom’s coal industry contributes approximately 33% to the country’s Gross Domestic Product (GDP). Europe is characterised by abundant coal reserves. Despite this aspect, the industry has experienced a significant decline in the rate of its growth. No new coal businesses are currently being established in the country.
One of the main reasons for this trend relates to the high costs associated with exploiting coal reserves. One of the main issues that can be used to explain whether there will be more coal businesses established in Europe relates to whether exploiting the coal reserves is economically beneficial. The high rate of closure amongst coalmines in the European region is an indicator of a high marginal cost compared to the marginal benefit.
The global energy industry is undergoing a rampant change. Businesses are increasingly inclining to clean sources of energy in an effort to minimise emission of greenhouse gases.
If the marginal utility of producing energy from coal compared to crude oil is high or the cost of importing gas from other countries is high as compared to exploiting coal, then the total utility of exploiting coal would be high. Subsequently, it would be economically viable to open new coal businesses in order to exploit the coal resources. However, this scenario is not the case contemporarily.
Currently, crude oil is the main source of energy. However, there has been a significant increment in demand for oil over the years as compared to supply. Most countries do not have adequate oil capacity to satisfy the corresponding demand. Subsequently, oil prices in the global market are rising at an alarming rate. Considering the scarce nature of non-renewable resources, countries will be forced to consider how they can exploit coal resources, which are currently considered as economically non-viable.
One of the ways through which, this goal will be achieved is by investing in technology that will lead to the reduction of the marginal cost of exploiting the coal. At that point, the marginal benefit of exploiting coal compared to the marginal cost will be high. Currently, the industry is undergoing a high rate of modernisation, rationalisation, and restructuring.
Subsequently, one can envisage a situation whereby coal business will increase in the European region. Businesses should consider it economically viable to undertake their production processes at a point where the marginal benefit is equal to or higher than the marginal cost as illustrated by the graph below.
Protecting the rain forests
The past few years have been characterised by an increment in the rate of environmental degradation. The rainforests have not been spared. Some of the reasons that explain the high rate of rainforest destruction such as the Amazon Basin include exploitation of bio-fuels, livestock breeding, logging, and exploiting raw materials deposited in the forests.
High marginal benefits can be derived from protecting the environment. First, rainforests act as habitat for the world’s greatest biodiversity. Previous studies show that 1 hectare of rainforest holds close to 2000 plant life forms and close to 1000 different forms of trees.
Approximately, ten (10) million forms of flora and fauna reside in the rainforests. The rainforests are characterised by plants that have high medicinal values, some of which have not been discovered. Moreover, rainforests play a fundamental role in minimising environmental pollution. The rainforests also are characterised by immense carbon sink reserves, which are critical in preserving air quality and minimising the rate of global warming.
Destroying the rainforests, for example by burning the forests, leads to depletion of the carbon sink. Subsequently, this aspect leads to concentration of greenhouse gases in the atmosphere, hence increasing the rate of climate change. This increment will further escalate the rate of other climatic related conditions such as draughts and floods.
From the above analysis, it is evident that the marginal value of preserving the rainforest is higher than the marginal cost. Moreover, the social costs that can be incurred for failure to protect the rainforests are high. Therefore, it is imperative for both government and non-governmental organisations to preserve the rain forests as opposed to destroying it.
Marginal concepts and environmental protection strategies
Understanding the marginal concepts [marginal costs and marginal benefits] is fundamental in formulating strategies that would culminate towards the protection of natural resources. First, such an understanding would aid in imparting sufficient knowledge to individuals living close to areas hosting such natural resources to be conscious of the environment. With regard to crude oil, it is important for investors in the oil industry to consider the best way to exploit the crude oil without affecting the environment adversely.
One of the ways through which this goal can be achieved is by integrating new, effective, and efficient oil exploration and exploitation technologies. Secondly, understanding the relationship between marginal cost and marginal revenue would also enable oil-producing companies to implement technologies that would result in minimal or no emission of greenhouse gases. One of these strategies relates to the concept of carbon footprint and carbon trading.
Moreover, understanding the cost of exploiting crude oil would motivate companies in the energy sector to consider the probability of integrating other sources of renewable energy such as solar energy. Adopting such strategies will play a critical role in protecting the natural resources.
Conclusion
The case study illustrates the importance of protecting natural resources through the integration of marginal concepts. Stakeholders in the energy sector should take into account the measures that can enhance protection of natural resources, which are non-renewable. In a bid to achieve this goal, it is imperative to understand the marginal benefits and marginal costs associated with exploiting the natural resources.
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