Natural Resource Economics

Course content

The course in Natural Resource Economics mainly deals with optimal pricing and extraction of natural resources. Examples of such resources are oil, gold, forests and fish stocks.Three characteristics make natural resources different from other goods. First, natural resources are both economic goods and capital assets. Second, extraction and growth takes place over a reasonable long time period. Third, imperfect renewability of natural resources implies supply limitations (unlike conventional goods, which are indefinitely reproducible). These three characteristics make natural resources interesting economic objects that deserve a special analytical treatment since pricing and extraction has an intertemporal dimension.

Because of the intertemporal dimension, dynamic optimization methods must be used to analyze natural resources and, therefore, we start by introducing these methods. From an economic point of view it is important to distinguish between non-renewable (e.g. oil and gold) and renewable resources (e.g., forestry and fisheries). In the course, both kinds of resources are analyzed by using economic models. Throughout the course, we focus on the development in the price and extraction over time under various assumptions about the economic relations characterizing the resources. Examples of these assumptions are constant marginal cost, variable marginal costs, stock effects in cost functions, perfect competition, monopoly and imperfect competition.


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


Learning outcome

Learning outcome:

The main objective is that the students become able to analyze an economic problem involving pricing and extraction of natural resources. This learning outcome is not only relevant for private companies, but also for the regulation of these companies by public agencies. Another objective is that students acquire sufficient knowledge (in terms of mathematical techniques) to undertake analysis of intertemporal, dynamic problems.


  • Understand the analytical methods for dynamic problems (typically represented by adjustments in the price and extraction over time and a steady state equilibrium).
  • Identify natural resources and classify these as non-renewable or renewable.
  • Be familiar with the specific concepts within natural resource economics (e.g., shadow prices and stock sizes).
  • Obtain knowledge about the implications of various assumptions about the economic relations for the price and extraction of natural resources.



  • Characterize the properties of natural resources formally.
  • Address a problem with natural resources by applying consistent analytical tools.
  • Understand the implications of various assumptions about the economic relations characterizing natural resources.



  • Autonomously analyze dynamic economic problems involving natural resources in a rigorous way.
  • Explain the main concepts of natural resource economics.
  • Autonomously develop further knowledge related to natural resource economics.
  • Present and discuss main arguments in established academic literature.
  • Communicate economic analyses on natural resources. 

Following a short introduction to dynamic optimization, a number of economic models covering pricing and extraction of non-renewable and renewable resources will be presented and each model differ with respect to the assumptions adopted. Furthermore, a number of exercises will be posed and these are calculated in class in groups. The exercises provide an illustration of the various models which are presented during the course. If possible, guest lectures will be provided on relevant topics by scientific experts.

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.

Notes written by the teacher will be provided and, furthermore, it is likely that the following literature will be used (the precise literature will announced on Absalon):

Barro, R.J. and Sala, X. (1995). Economic Growth, New-York: McGraw-Hill, pp. 498-510.

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

Dorfman, R. (1969). An Economic Interpretation of Optimal Control Theory, American Economic Review, 59, pp. 817-831.

Englin, J.E. and Klan, M.S. (1990). Optimal Taxation: Timber and Externalities, Journal of Environmental Economics and Management, 18, pp. 263-275.

Hartman, R. (1976). The Harvesting Decision when A Standing Forest has Value, Economic Inquiry, 14, pp. 52-58.

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

This is an advanced microeconomics course.

Extensive knowledge of intermediate microeconomics with mathematics (especially optimization) is highly recommended.

It is also highly recommended that students have attended BSc courses in Environmental and Natural Resource Economics.

Academic qualifications equivalent to a BSc degree in either environmental economics or economics are recommended.

Continuous feedback during the course of the semester
7,5 ECTS
Type of assessment
Written examination, 4 hours under invigilation
All aids allowed



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
  • 48
  • Preparation
  • 136
  • Exercises
  • 18
  • Exam
  • 4
  • English
  • 206