The Analysis Of The Article "Resources & Economic Growth" By Solow

“How much drag on the future economic growth of the developed world is likely to be exerted by the narrowing of its resource base, assuming indeed that the resource base is narrowing?” asks Solow, in his paper Resources and Economic Growth.

We are not likely to ‘run out’ of these resources. He cites copper as an example. Their extraction will only become much too uneconomical in the absence of much modern technology or if no new easy sources are found. We will have to give up the less valuable uses of these resources or find cheaper substitutes.

He talks about the effects on aggregate real output of a little easier or harder access to non-renewable resources based on

a) if non-renewable resources play a very large role in the process of production,

b) if they can’t easily be substituted by renewable or human resources and

c) if technological advancement is fast enough.

In the Solow model, the presence of non-renewable natural resources reduces the long-run growth rate of the economy. He come to the conclusion that elasticity of substitution between non-renewable natural resources and labour-capital input exceeds

But he clears that he doesn’t believe in this conclusion. On the other hand, he says that there is nothing in the data to suggest that the elasticity will be less than 1 (needed to create substantial vulnerability in the future). He infers that saying that the future will be rather like the past (resources will be used and sufficient technology will keep coming up to make more sources extractable and economical) does not have a lot of backing but saying the opposite has even less evidence to support it.

The technical solution to this question is to develop extraction plans that will leave all generations with the same consumption.Republic of Korea (South Korea) is the first country in the World to make Green Growth Strategy a national one. Ekaterina Zelenovskaya of ICCG (International Centre for Climate Governance) did a case study on the South Korean Green Growth Strategy to provide a reference to other countries that are planning to apply a Green Growth model to their economies.

Through the Green Growth policy (announced on the 60th anniversary by its President), South Korea aims to become the 7th Green World Power in 2020, and the 5th by 2050. The government issued a Framework Act on Low Carbon Green Growth in 2009 to achieve these ambitious goals and the legal mainly includes three objectives and ten policy directions. The South Korean government prioritised the following strategic-energy technologies: high-efficiency photovoltaic (PV) cells, fuel cells, advanced nuclear power, green cars, smart grid, advanced carbon capture and storage (CCS), water treatment, rechargeable batteries, Light Emitting Diodes (LED), Green IT.

For the fulfilment of the Green Growth Strategy, the government first introduced a Five-Year Action Plan (from 2010 to 2015) with a variety of green development measures included within the plan. It is annually investing approximately 2% of its GDP in Green Growth actions (double the amount recommended by the UN) and also trying to attract private investments for the same because private investments in green businesses have a positive impact on reducing GHG emissions.

According to The Environmental Impact Assessment (EIA) on GHGs, launched in South Korea in 2010, from 2010 to 2011, approximately 11.47 million tons of GHGs have been reduced due to the development of 53 new businesses in the Green technology field. It has included promoting strategic R&D and commercialisation of NRE (New and Renewable) technologies in the first Five- Year plan.

During the implementation of this strategy, around 30 South Korean business groups had already invested more than 15.1 trillion won (around $ 13,6 billion)16 in the green sector, starting with 2.4 trillion ($ 2.2 billion) in 2008, 5.4 trillion ($ 4.9 billion) in 2009 and 7.3 trillion ($ 6.6 billion) in 2010. To promote the participation by private businesses in the Green Growth strategy financial support, tax incentives are provided and the industrial regulations for the “green” companies are simplified. South Korean public and private sectors are, jointly, making considerable investments in greening economic growth through the development and commercialisation of NRE technologies.