Natural Resource Economics

Course content

The course focuses on the economics and management of natural resources that are not indefinitely reproducible by nature, and deals with the main economic issues regarding such commodities. Examples include energy, biological and environmental resources.

Two peculiarities of natural resources make them interesting economic objects that deserve a special analytical treatment. First, resource exploitation has an intertemporal dimension, which is absent in classical economic theory. Second, the imperfect renewability of natural resources implies long-term supply limitations, unlike conventional goods that are indefinitely reproducible. Because of those peculiarities, many well-known economic results do not apply to the case of resources.

As a baseline case, an introduction to the partial equilibrium analysis of ordinary (non-resource) goods will be provided at the beginning of the course. In another introductory chapter, the standard mathematical (dynamic optimization) tools used in the economic analysis of resources will be exposed.

Then, the following topics will be addressed in a series of analytical chapters: the intertemporal theory of exhaustible resource supply; the dynamic market equilibrium allocation; the exploration and development of exploitable reserves; the heterogeneity of resource stocks; externalities arising from the use of resources (pollution, existence value, biodiversity, commons problems); the durability of resources (e.g., gold); the exercise of market power by resource suppliers (e.g., OPEC cartel); socially optimum extraction patterns and sustainability; the taxation of resources; uncertainty; and the renewability of resources (e.g., fisheries, water management, forestry).

Moreover, in a series of thematic interactive chapters, other topics will be addressed: These topics will be based on concrete examples of resource management selected by students, and developed in collaboration with them by applying the methodologies presented in the above series of analytical chapters.


MSc Programme in Environmental and Natural Resource Economics
MSc Programme in Agricultural Economics
MSc Programme in Agriculture
MSc Programme in Forest and Nature Management
MSc Programme in Environmental Science


Learning outcome

- The main objective is that students become able to rigorously approach an economic problem involving the use of natural resources.

- This learning outcome is not only relevant for the management of natural resources by private companies, but also for the regulation of these companies by public agencies, and for third-party analysis as, for example, by NGOs.

- Another objective is that students acquire a sufficient background -- in terms of mathematical techniques and methodology of economic analysis -- so that they can consolidate and develop their knowledge and skills autonomously.

More precisely, having successfully completed the course, students are expected to be able to:


- Identify natural resources and classify them according to their properties: non-renewable, renewable, heterogenous, durable, environmental.
- Be familiar with the main concepts that are specific to natural resources: e.g., shadow prices or user costs, external costs, intertemporal optimum, sustainable resource use.
- Understand the principal analytical methods in the economics of natural resources: dynamic partial-equilibrium analysis and welfare analysis, in steady state or with transitional dynamics.
- Present and discuss the main arguments established by the related academic literature.


- Formally characterize the properties of natural resources. 
- Formally represent an economic problem involving natural resources.
- Rigorously address such a problem by applying the aforementioned concepts and analytical tools.
- Be able to do so in various contexts: e.g., competitive and complete markets, open access, market power, externalities.
- Draw implications for the optimal management of natural resources and for public policy.


- Autonomously analyze economic problems involving natural resources in a rigorous way.
- Explain the main concepts of natural resource economics.
- Autonomously develop further their knowledge and skills on the economic analysis of natural resources.
- Exchange with experts in the field.
- Communicate economic analyses on natural resources. 

Following two short introductory chapters (methodology of partial equilibrium analysis and dynamic optimization), a basic synthetic partial equilibrium model of resource management will be exposed, which will be used all along the course. Then, each analytical chapter differs from this basic setting by only one single element, if possible, or by the minimal set of elements otherwise, that allows focusing on the issue under study.

Exercises aim at illustrating the general results obtained. They also show how various aspects of resources, presented in isolation by each analytical chapter, combine when they are considered simultaneously.

Thematic interactive chapters will be developed in collaboration with students over typical examples of natural resource management. These examples may include, among others, issues related to oil exploitation, forestry, fisheries, biodiversity conservation, and water management. If possible, some thematic chapters may rely on research presentations by IFRO expert staff members.

Lecture slides will be provided.

Students will also be encouraged to read some influential academic articles dealing with the issues under study. A list of references will be provided at the beginning of the course, and at the end of each chapter. It is likely to include the following ones.

Hanley, N., J.F. Shogren and B. White (2006), Environmental Economics in Theory and Practice, Oxford University Press 

Neher, P. (1990), Natural Resource Economics -- Conservation and Exploitation, Cambridge University Press 

Dasgupta, P.S., and G.M. Heal (1979), Economic Theory and Exhaustible Resources, Cambridge University Press

Sweeney, J.L. (1993), "Economic Theory of Depletable Resources: An Introduction", in: Handbook of Natural Resource and Energy Economics, Vol. III, Eds. A.V. Kneese and J. L. Sweeney, Elsevier: 759-854

Varian, H.R. (2014), Intermediate Microeconomics: A Modern Approach, Norton & Co

This is an advanced course in resource economics.

Elementary knowledge of microeconomics (like what is provided by H.R. Varian, Intermediate Microeconomics) is highly recommended. However, an introduction to standard partial equilibrium analysis will be provided at the beginning of the course, as a baseline and also a reminder.

It is also highly recommended that students have attended BSc courses in Environmental and Natural Resource Economics and have some background in mathematics and optimization methods.

7,5 ECTS
Type of assessment
Written examination, 4 hours under invigilation
The course has been selected for ITX exam at Peter Bangs Vej.
All aids allowed

NB: If the exam is held at the ITX, the ITX will provide computers. Private computer, tablet or mobile phone CANNOT be brought along to the exam. Books and notes should be brought on paper or saved on a USB key.


Marking scale
7-point grading scale
Censorship form
No external censorship
One internal examiner
Criteria for exam assessment

Evaluated according to the learning outcome

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 40,5
  • Exercises
  • 18
  • Study Groups
  • 22,5
  • Exam
  • 4
  • Preparation
  • 121
  • English
  • 206,0