Volatility in mineral resource pricing causes ecological footprints: A cloud on the horizon

Xiao Yang, Muhammad Khalid Anser, Zulkornain Yusop, Shujaat Abbas, Muhammad Azhar Khan and Khalid Zaman

Resources Policy, 2022, vol. 77, issue C

Abstract: Mineral resource extraction and depletion dominate the resource conservation agenda, previously controlled by socioeconomic and environmental factors in various economic contexts. South Africa's economy is a resource-rich country that is primarily confronted with significant resource capital management challenges, which reduces its ability to use its endowed natural resources in exportable commodities. Using time-series data from 1975 to 2019, the study assessed key critical components that account for the ‘resource damage function,' including ecological footprints, industrialization, resource rents, and trade openness. The variables were chosen using Hotelling's principle, which states that resource prices are critical in determining whether to overextend natural resources or wait for higher prices in the future. As a result, resource rents are employed as resource prices. At the same time, ecological footprints, industrial value-added, and trade openness are used as biocapacity deficit factors, responsible consumption and production, and trade policies consistent with resource management theory. The findings indicate that mineral resource rents, ecological footprints, and trade openness are the most important predictors of the resource damage function, which exhausts mineral resources in the short and long term. On the other side, long-term economic development backed by sustainable production aids in advancing the resource conservation agenda. The elasticity estimates show that a 1% rise in mineral rents, ecological footprint, and trade openness leads to 1.089 percent, 0.725 percent, and 1.418 percent exhaustion of mineral resources. The estimations of causation verified the unidirectional link between ecological footprint and mineral resource depletion and resource rents. On the other hand, industrialization increases resource revenue and per capita income, and mineral rents and trade openness increases per capita income and ecological footprints. The incentive-based resource regulations are imperative to reduce ecological footprints and resource depletion.

Keywords: Mineral resource depletion; Mineral resource rents; Arable land; Industrial value-added; ARDL estimator; South Africa (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:77:y:2022:i:c:s0301420722001210

DOI: 10.1016/j.resourpol.2022.102673

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