Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis

Following the Boskin et al., (1996) report, it became widely recognized that price indexes in the U.S. and elsewhere overstate inflation. Svedberg and Tilton (2006) highlighted that this inflation bias may have important implications for estimated long-term trends in nonrenewable resource prices. ST construct an inflation-bias corrected CPI (and PPI) for the U.S. and use their corrected deflator(s) to define a so-called ‘real real’ price of copper. Their ‘real real’ price of copper is then used to re-estimate long-term trends in real copper prices. This paper proposes a quick method for obtaining inflation-bias-corrected estimates of long-run trends in real primary commodity prices directly from estimates in the published literature. Our approach obviates the need re-do existing empirical studies using a corrected or ‘real real’ price of nonrenewable resources. The two approaches are mathematically equivalent.     

A cointegration and causality analysis of copper consumption and economic growth in rich countries

The paper examines the copper consumption-economic growth nexus for 16 rich economies from the period 1966 to 2010. Various generations of panel unit root and cointegration tests are applied. Both series are found to be integrated of order one. Evidence of cointegration is found especially when controlling for breaks and long-run cross-sectional dependence. Causality is investigated using a vector error-correction mechanism (VECM) framework. At individual level, unidirectional causality running from economic growth to copper consumption is unraveled for Finland, France and UK in the long-run. Unidirectional causality is also found running from copper consumption to economic growth for Spain. Long-run bi-directionality between economic growth and copper consumption is found for Belgium, Greece, Italy, Japan and South Korea. The neutrality hypothesis holds for Australia, Austria, Canada, Netherlands, Portugal, Sweden and USA in the long-run. Taken as a whole, panel causality test reveals a long-run unidirectional causality running from economic growth to copper consumption.     

Broadening the statistical search for metal price super cycles to steel and related metals

During the past five years, industry analysts have proclaimed that metal prices are in the early phase of a ‘super cycle,’ driven primarily by Chinese industrial expansion. Academic economists have generally been very skeptical about the presence of long cycles. A time-series econometric analysis by Cuddington and Jerrett [2008. Super cycles in real metals prices? IMF Staff Pap. 55(4), in press], however, has used band-pass filtering techniques to isolate super cycles in the prices of six metals traded on the London Metal Exchange (the ‘LME6’). This paper extends the search for super-cycle behavior to three additional metal products that are critical in the early phases of industrial development and urbanization: steel, pig iron, and molybdenum (a key ingredient in many steel alloys). There is strong evidence of super cycles in these three metals, although their timing differs to some extent from the super cycles found for the LME6.     

Duration and characteristics of metal price cycles

This paper addresses the fluctuations in real metal prices: are they simply random variations or do they display some degree of cyclicality? This study identifies peaks and troughs in the inflation adjusted prices for 14 metals, using monthly average data from January 1947 through December 2007. Duration dependence testing, which is performed on the expansions, contractions, and full cycles, finds many cases in which the duration of these phases are not purely random and have some degree of cyclicality. Additional characterization show that contractions generally persist longer than expansions (in contrast to macroeconomic cycles) that long-term real prices have been trendless, and that the amplitude of price changes over the phases has little regularity. For those performing this type of analysis, the appendices explain the procedures for dating turning points and assessing duration dependence.     

An empirical approach to determine specific weights of driving factors for the price of commodities—A contribution to the measurement of the economic scarcity of minerals and metals

In recent years, commodity markets show a large amount of volatility and substantial price jumps, indicating an increasing economic scarcity in many cases. As this scarcity makes commodity procurement a critical issue for national economies, industry sectors and manufacturing companies, a number of criticality indices have been presented and utilized in science as well as in practice. These indices are mostly based on an aggregation of different key figures, both qualitative and quantitative. However, the weighting of the different factors is in most cases arbitrary or based on rough estimates.     

Dynamics of global oil prices,exchange rate and precious metal prices in India

This study examines cointegration and Granger causality among global oil prices, precious metal (Gold, Platinum and Silver) prices and Indian Rupee–US Dollar exchange rate using daily data spanning from 2nd January 2009 to 30th December 2011. ARDL bounds tests indicate that the series are cointegrated. Toda–Yamamoto version of Granger causality has been employed to establish the causation amongst the variables. The study also examines generalized error variance decomposition of variables due to various shocks in the system. Such information provides insight into the transmission links between the global oil market and the Indian precious metals and foreign exchange market. These have the potential for significant impact in further research, portfolio management and central bank policy design.     

An overview of global gold market and gold price forecasting

The global gold market has recently attracted a lot of attention and the price of gold is relatively higher than its historical trend. For mining companies to mitigate risk and uncertainty in gold price fluctuations, make hedging, future investment and evaluation decisions, depend on forecasting future price trends. The first section of this paper reviews the world gold market and the historical trend of gold prices from January 1968 to December 2008. This is followed by an investigation into the relationship between gold price and other key influencing variables, such as oil price and global inflation over the last 40 years. The second section applies a modified econometric version of the long-term trend reverting jump and dip diffusion model for forecasting natural-resource commodity prices. This method addresses the deficiencies of previous models, such as jumps and dips as parameters and unit root test for long-term trends. The model proposes that historical data of mineral commodities have three terms to demonstrate fluctuation of prices: a long-term trend reversion component, a diffusion component and a jump or dip component. The model calculates each term individually to estimate future prices of mineral commodities. The study validates the model and estimates the gold price for the next 10 years, based on monthly historical data of nominal gold price.     

The fate of the poor in growing mineral and energy economies

There are frequent suggestions that countries specializing in mineral and energy extraction have a type of growth that is bad for the poor. Others claim that extraction-led growth is particularly good for the poor. Both claims are made without the support of substantial empirical evidence. This paper uses longitudinal data on income growth by quintile in 57 developed and developing countries to statistically assess how mineral and energy extraction has affected the relationship between growth and the poor. We can find no evidence that the data support either the claim that extraction-led growth is good for the poor or that extraction-led growth is bad for the poor. This finding does not rule out that extractive activity can have special positive or negative impacts on the poor in some countries or regions. Rather, it simply brings to light that such effects are not evident as a persistent statistical phenomenon in the national level data that are available, which may be why the debate tends to move along without resolution.     

An analysis of future platinum resources,emissions and waste streams using a system dynamic model of its intentional and non-intentional flows and stocks

Platinum is increasingly used intentionally and non-intentionally in several applications. This has raised the concern about its future resources, emissions and losses during its life cycle. On the one hand, increasing platinum emissions might affect human health. On the other hand, the accumulated platinum in mineral waste, soil, landfill sites and construction materials as a result of the emissions, losses and the utilization of secondary materials can be seen as potential resources for platinum. This paper is aimed at (1) analyzing the long term impacts of the use of platinum intentionally and non-intentionally on its future demand and supply, release to the environment and accumulation in mineral waste, soil, landfill sites and construction materials and (2) quantifying the amount of platinum in secondary materials that would be available for platinum future supply. The analysis is carried out on a global level using a system dynamic model of platinum intentional and non-intentional flows and stocks. The analysis is based on four scenarios for the introduction of fuel cell vehicles (FCVs). The results show that platinum demand is increasing overtime in all scenarios at different rates and its identified resources are expected to deplete before the end of the century with or without the introduction of FCVs. The release of platinum to the environment and the accumulation in soil are expected to decrease when conventional ICE vehicles is replaced by FCVs. The amount of platinum accumulated in mineral waste, soil, landfill sites and construction materials by the time platinum is depleted are more than double its identified resources and would be potential resources for platinum that are available in different parts of the world. The methodology presented in this paper can be used in the assessment of other technologies and other metals.     

Preventing land loss in coastal Louisiana: estimates of WTP and WTA

A dichotomous-choice contingent-valuation survey was conducted in the State of Louisiana (USA) to estimate compensating surplus (CS) and equivalent surplus (ES) welfare measures for the prevention of future coastal wetland losses in Louisiana. Valuations were elicited using both willingness to pay (WTP) and willingness to accept compensation (WTA) payment vehicles. Mean CS (WTP) estimates based on a probit model using a Box-Cox specification on income was $825 per household annually, and mean ES (WTA) was estimated at $4444 per household annually. Regression results indicate that the major factors influencing support for land-loss prevention were income (positive, WTP model only), perceived hurricane protection benefits (positive), environmental and recreation protection (positive), distrust of government (negative), age (positive, WTA model only), and race (positive for whites).     

Lithium availability in the EU27 for battery-driven vehicles: The impact of recycling and substitution on the confrontation between supply and demand until2050

The adverse impacts of climate change are widely recognized as well as the importance of the mitigation of carbon dioxide (CO₂). Battery driven vehicles are expected to have a bright future, since GHG emissions can be reduced. Lithium-ion (Li-ion) batteries appear to be the most promising, due to their high energy density. Recently, the discussion concerning adequate lithium carbonate (Li₂CO₃) resources is resolved. The current challenge is the needed increase in flow rate of Li₂CO₃ into society to foresee in forecasted demand. This research determines ten factors which influence the availability of Li-ion batteries for the EU27 in the coming decades. They are used in a system dynamics analysis. The results of this research show that undersupply can be expected in the EU27 until 2045 somewhere between 0.5 Mt and 2.8 Mt. Substitution of Li₂CO₃ in other end-use markets and recycling can relieve the strain on Li₂CO₃ supply to some extent. In 2050, 20% of the vehicle fleet in the EU27 can be battery electric vehicles (BEVs). The lack of resources in the EU27 and the geographical distribution of lithium in politically sensitive areas suggest that the shares of lithium available for the EU27 will be less than assumed in this research. The increase in flow rate shows to be the bottle-neck for a transition to (partly) battery driven vehicles in the EU27, at least when Li-ion batteries are used. Focusing on large-scale application of BEVs with Li-ion batteries in order to substantially mitigate CO₂ emissions in transport is a futile campaign.     

Artisanal and small-scale gold mining in Burkina Faso: Suggestion of multi-agent methodology as a complementary support in elaborating a policy

In order to better manage artisanal and small-scale gold mining, the Burkinabe authorities have planned to build a suitable methodological support as an aid to elaborating appropriate policies and actions. The developed methodology concerns (a) at a spatial level, the generation and analysis of a geological resources map needed by the artisanal miners and (b) at a socioeconomic level, analysis of the miners' activity. This paper reports and discusses the results of our suggestion to also introduce the use of an approach known as multi-agent system (MAS) as a complementary part of this initial methodology, at a downstage level to the above two analysis stages. MAS methodology could be used to develop simulation models to forecast the future of the activity. MAS is appropriate for describing the dynamics of systems where it is impossible to obtain all output data of a model from a purely mathematical or statistical transformation of input data. Our suggestion involves (i) demonstrating the capacity of the approach to simulate all parameters needed by mining policy makers and (ii) evaluating to what extent the methodology is accepted by them, as well as, at a more scientific level, the literature regarding mining system simulation.     

An economic analysis of environmental protection and management: An example from the Philippines

Summary The island of Palawan covers some 12000 km² and is located in the southwest of the Philippines archipelago. It is a beautiful and as yet relatively unspoilt island but in recent years the social and economic pressures on its natural resources and environment have begun to mount. If present trends continue, severe environmental damage will result. In recognition of this danger, the Philippines government and the European Economic Community have commissioned the preparation of an Integrated Environmental Program (IEP) for the island, as part of an overall economic development program. Phase one of the IEP study comprised an assessment of the island's resources and present situation and the formulation of a plan for the future protection of its environment, taking due account of the need for continuing economic development.An analysis was made of the likely economic returns from the proposed environmental protection program, using conventional benefit-cost analysis methodology. Due to the inadequate data base and the wide-ranging assumptions which had to be made, this was inevitably very approximate in nature. It was carried out in terms of the three main types of conservation activity proposed, namely land-based conservation, mangrove conservation and inshore marine conservation, and the program as a whole. The main benefits and costs were identified and, where appropriate, quantified for inclusion in the analysis.Choice of discount rate and length of analysis period are critical factors affecting the economics of environmental protection, which essentially involves the pursuit of long-term rather than short-term gains, output in the immediate future being restricted to the level of long-term sustained yield for the benefit of future generations. Use of the high discount rates customarily applied for project analysis in countries such as the Philippines (typically, 10–15 percent) places a heavy premium on short-term gains and attributes little or no value to benefits and costs further in the future. To take account of this problem the present values of costs and benefits were calculated using low discount rates of zero and 5 percent. Though this was a necessarily crude and arbitrary method of adjustment it was considered to be a better alternative than that of following normal convention and applying the high rates of discount customarily used in the Philippines.The analysis indicated that the various conservation activities could be expected to produce acceptable, though not spectacular, levels of economic return. Mangrove conservation would be particularly beneficial and the irrigation benefits from preserving river base flows and preventing an increase in peak floods, by means of catchment protection, would be high. The unquantifiable ecological and social benefits would also be substantial.Christopher Finney is Chief Economist of Hunting Technical Services Limited, UK, a major consulting firm involved in planning and implementation of agricultural development overseas, and has been with the firm since 1962. He is an agricultural economist with particular interest and experience in the fields of irrigation, livestock, farm mechanisation, general agriculture and conservation. He has worked on a wide variety of projects in numerous countries in Africa, Asia and Latin America. Mr Stanley Western is a senior soil scientist and land use planner with the same company. Since joining the firm in 1960 he has undertaken a very wide range of resource assessment and planning assignments in Asia, Africa and Latin America. He was Team Leader on the Palawan Integrated Environmental Program planning study.     

Viability of processing in copper-mining areas : An economic analysis

Although copper is exported mainly in the form of semi-refined or refined copper, exports of copper in the form of ores and concentrates increased their share of world copper exports in the 1970s. These exports mainly originate from copper-mining areas with limited access to the inputs required for stages subsequent to mining. This article surveys the options open to copper-producing countries to increase their revenue from copper, and concludes that changes in the composition of exports to favour the export of more processed forms of copper would require substantial changes in the economic structure of a country. Trade barriers are not felt to constitute a substantial obstacle to world trade in refined or semi-fabricated copper.     

Steel consumption and economic activity in the UK: The integration and cointegration debate

This research examines whether a long-run stationary equilibrium relationship holds between economic activity and the consumption of crude steel within the UK. Using the theory of fractionally integrated and cointegrated processes, and allowing for the possibility that the equilibrium path changes abruptly at occasional points in time, it is possible to determine if steel consumption and economic activity follow a common stochastic trend or whether the two series randomly drift apart over time. Evidence is found to support such a long term relationship. This result is at odds with the conclusions drawn by previous researchers in the area. The reason for this difference may be due to these researchers concentrating only on I(0) and I(1) specifications, without consideration of fractional possibilities and also to a failure to account for structural breaks in the equilibrium relationship. Such conclusions are made within the framework of the ARFIMA methodology that yields reliable inferences on the degree of fractional integration and cointegration. Critical values for fractional contegration with an ARFIMA model in the presence of structural breaks are also derived in this paper.     

Climate change adaptation and livestock activity choices in Kenya: An economic analysis

This paper examines the impact of climate change on the decision of farmers to engage or not to engage in livestock activities and also on the choice of different livestock species in Kenya. To this end, cross‐sectional household level data supplemented by long‐term averages of climate data are used. The probit model is employed to derive the response of the probability of engaging in livestock activities to climate change. Probit and multivariate probit methods are employed to model the choice of different livestock species. Atmosphere–ocean global circulation models are used to project the impact of different climate scenarios on the probability of engaging in livestock activities and also of adopting different livestock species according to variations in climate. The results suggest that farmers adapt livestock management decisions to climate change. At low levels of temperature increase, the probability of engaging in livestock activities falls, but at higher levels of climate change, the probability rises. The results further show that as it gets hotter, farmers change their livestock choices from dairy cattle and sheep to beef cattle and goats.     

The legal environmental risk analysis (LERA) sample of mining and the environment in Turkish legislation

As advancing technology and increasing demands for natural resources continue to mount pressure on the environment, environmental conservation and sustainable management have become ever more important. Individual countries have been increasingly taking action to reduce environmental destruction caused by human activities in an attempt to find a balance in between the necessary exploitation of resources and environmental conservation. In Turkey, the struggle between environmental conservation and mining activities is set within the legal context, with the requisite legal regulations (which describe various procedures) in the midst of being updated or renewed. The legal environmental risk analysis (LERA), beginning by discussing the main legal regulations of environmental conservation in relation to mining activities, defines basic environmental components which form the basis of environmental conservation in relation to mining, and analyzes the impact of mining on each component. The analysis (LERA) finishes with an evaluation of the components as they currently stand and makes some suggestions for the improvement of insufficient regulations.     

Economic impact measurement and evaluation of China's investment in geological exploration: The empirical analysis based on the data from 1999 to 2009

With the continued growth in demand for mineral resources and China's efforts in increasing investment in geological prospecting, economic impact evaluation of geological exploration becomes a research hotspot.     

Perceived and actual wildfire danger: An economic and spatial analysis study in Colorado (USA)

Over the last 20 years, costs for wildfire initial attack in the U.S. have increased significantly. The increased cost relates to wildfire suppression practices, as well as the growing number of homes in the wildland urban interface. Requiring wildland urban interface residents to pay an annual tax for their wildfire risk could lower costs to the general taxpayer. Willingness-to-pay for wildfire prevention, in relation to both perceived and actual wildfire danger, was the focus of this study. Surveyed Colorado wildland urban interface residents were found to have a high awareness of wildfire risk and were willing-to-pay over $400 annually to reduce this risk. Respondents' beliefs about wildfire frequency were comparable to the wildfire regimes of their areas' pre-European settlement.     

Demotivating factors affecting the implementation of ISO 14001:2015 in Malaysia

Industrialization has brought with it environmental problems and the consequences of pollution, which has been affecting the world for decades. Immediate action is required to raise industry's awareness of its social responsibilities toward the environment. However, experience shows that companies that have obtained International Organization of Standardization (ISO) 14001:2015 certifications in Malaysia occupy but a small niche among the country's businesses. The purpose of this study is to assess the list of barriers and challenges to implementing and obtaining certifications under the ISO 14001:2015 Environmental Management System (EMS) by Malaysian firms. In addition, this study will rank these factors relative to their importance. This study is aimed at EMS experts at the Scientific and Industrial Research Institute of Malaysia (SIRIM QAS International Sdn. Bhd.). The study uses mathematical pairwise comparisons to generate the list of critical challenges and barriers. Therefore, the study is expected to raise environmental awareness among Malaysia's industries regarding the adoption of ISO 14001:2015 standards. Furthermore, the study provides a guideline for Malaysia's industries and policy‐makers to provide them with a better understanding of the barriers and challenges that companies face in implementing ISO 14001:2015 EMS, and at the same time, help them understand the need to eliminate the difficulties of standard implementation.