WP4 : Economic Analysis of Geological Resources and Geotechnologies

Xavier Galiègue (Université LEO), Eric Gloaguen (BRGM), Eric Marcoux (ISTO)

Background and rationale

The exploitation of mineral and energy resources constitutes a major issue with regard to respecting the environment and fighting against global warming.

On the one hand, the more or less finite nature of these resources impels societies to make difficult choices between conserving these resources and economic growth. Exhausting a natural research allows rapid growth today at the risk of being brought to a haltwhen the resource runs out. The depletion of resources is also a key element in their price evolution.

On the other hand, these resources can also play a non-negligible role by their long-term storage capacities for the gaseous emissions and waste generated by economic activity. Sustainable exploitation of resources requires implementing more or less well-controlled techniques. The most recent are obviously those in which there is the greatest uncertainty with regard to their overall effectiveness and therefore their profitability. These very often exist, but their spread throughout the economy is hindered by this intrinsic uncertainty. LEO has expertise that allows planning longer-term avenues for research, pertaining,respectively, to the economic analysis of geological resources (1) and, on the other hand, to theevaluation of the contribution of geotechnology and the economic use of the subsoil (2).

The proposed economic analysis has developed relevant tools for economic assessment of these new technologies. This evaluation takes into account not only actual short-term costs and benefits, but also potential medium- and long-term costs and benefits, whether private or social, the future uncertainty in this economic, technological and environmental context, the irreversibility of the present choices, the possibilities for technical progress and the acceptability of these techniques. Two major themes are considered:

Economic analysis of geological resources

  • The concepts of industrial economics is applied in order to understand the role of research & development and innovation in the field of currently unexploited geological resources: do these resources constitute a potential driver for economic growth and the external competitiveness of a country? It is particularly a matter of comparing the short-term economic cost generated by the sectors working on these not-yet exploitable resources with the possible long-term benefits.
  • The economic analysis of the development of eco-industries in the fight against depletion of resources will be considered, since the recycling sector, which allows increasing the lifespan of resources, has a direct impact on the pressure exerted on primary geological resources. The rapid development of these activities has a major effect on competition since collector-recyclers constitute a competitive fringe against monopolies by owners of the raw material. On the other hand, if future production becomes conditioned by current production, this means that the profits of tomorrow depend on the profits of today. This point can be the source of economic instability. Finally, it is a question of understanding the contribution of public opinion, the green movement, and social acceptability in the concept of corporate social responsibility.
  • Geosciences and carbon-free energy: the challenges of geothermal energy. It is a matter of exploring the possibilities offered by geothermal energy in the search for sustainable energy. This search constitutes on of the common points with the BRGM’s ITE “GEODENERGIES” project.

The economic analysis of geotechnologies and the use of subsoil.

  • The economic analysis of the challenges of deep geological storage of CO2 aims to illuminate the conditions for spreading this technology: what is the role of technical progress, what is the breakeven, how is it reached? Should we rely on leadership that could give rise to innovation and patents or on regulation (price/taxes – quantities permitted, Kyoto-type protocol, etc.). What is the future of CO2 capture and storage, and notably the problems of designing networks posed by the transport of CO2 from small emission sources? The economic analysis of the issues of storage of radioactive material will highlight the conditions for spreading this technology: what is the role of technical progress, what is the breakeven, how is it reached? What is the impact of social acceptability and how do we fix the “Not in My Backyard”phenomenon? Can mastering this technology lead to the emergence of radioactive pollution havens?
  • The economic analysis of the risks and uncertainties in the development of geotechnologies: how do economic agents incorporate the risk of leaks when deciding to store CO2 in deep geological layers?
    What are the public policy matters facing the problems related to nuclear waste storage site security?

Results of WP 4 (2011-2014)

The Labex Voltaire has supported two different kinds of researches, general-purpose research in the field of environment and energy economics, and research more oriented towards geosciences application.

General-purpose research in the field of environment and energy economics. This research is mainly realized to contribute to the design of environmental policy in order to realize the energy transition. In this field, we have studied (i) the optimal policy which should be enforced in storing CO2 and nuclear wastes, (ii) how recycling by household could create deterministic cycle, (iii) the different channels by which energy prices affects the CO2 price on the ETS market over the phase II of this market. Another important point is linked to environmental taxation, namely on the trade-off between environment taxation and income redistribution: energy taxes are generally regressive, so it is necessary to create a new design of environment taxes that will help them to be progressive. The spatial aspects of energy taxation has also been studied using French “departments” data. As income level and climate conditions show large disparities between French departments, a uniform carbon tax would have high spatial regressive effects that could be offset by redistributive measures, a variable carbon tax, or a financial compensation towards the poorest areas. These redistributive effects can also interfere between generations, more precisely between public debt and environmental policy. Another point is the role devoted to Innovation by questionning the role of environmental innovation, which can have some perverse effect in the working of environmental policy.

The second category of WP4 researches are more tightly linked to geosciences. They have been driven in a close cooperation with other partners of the Labex Voltaire. They can be easily grouped in four themes:

Energy transition and Mineral Resources. This theme addresses the question of the consequences of energy transition on the use of mineral resources. Renewables technologies are mostly using minerals, some of them being critical. So their massive deployment should raise their demand, which could even be limited by shortage of some critical metals. This issue has been investigated by O. Gharbi since October 2014, in a post doctoral project financed by the Labex Voltaire at the University of Montpellier with the laboratory Art-Dev under the joint supervision of X. Galiègue (LEO) and F. Ricci (University of Montpellier 1). This post doctoral research is linked with the ReMinER project (Mineral Resources for Renewable Energy, coordinator O. Vidal, Isterre, University of Grenoble). It aims at using a global world economic model in order to evaluate the needs of different metals that will be induced by the energy transition. The first step of this research will be to use the EPPA4 MIT model (from Emissions Prediction and Policy Analysis) that is a top-down model to obtain some forecast of this demand according to different scenario/policies in the deployment of wind and solar electricity. The second step is to deduce the needs of raw materials using the ReMinER data base, and the last will compare these needs to the actual structure of international trade using the CHELEM data base.

The PhD work of N. Clootens, has been devoted to the economic analysis of intergenerational choice in presence of non-renewable resources, typically a mineral resource, with the joint supervision of M. Fodha and X. Galiègue. Its main tool is overlapping models, which have not been used by now in this field. Some theoretical results have been already been obtained, addressing the question of intergenerational equity in the use of a limited resource. The transposition of this approach to mineral resources will be further documented.

Economic Analysis of coupling CCS and Geothermal Energy. The work performed in the Labex Voltaire has benefited since 2013 from the ANR project CO2 DISSOLVED with the BRGM as coordinator. We explored the technical and economic feasibility of a promising technology that will combine CCS in a dissolved state with geothermal energy. Its main advantage by comparison with usual CCS technology is its lower cost of capture and storage, and its better energy efficiency. Its main inconvenient is linked to the small size of its units, and by the necessity to match each source of CO2 with geothermal resources. Some early results have been obtained on a case study on a BCCS unit with Capex and Opex lower than using CCS in a supercritical state, and a lower price of avoided CO2.

Economic Analysis of environment and economic benefits of the reintroduction of improved vegetable crops. The expertise available in the Labex Voltaire about the economic consequences of the reintroduction of new crops led to the funding of a project in 2013 by the Region Centre-Val de Loire (project PUIGES, with INRA). This project studies basically the improvement that will entail the rhizome inoculation of legumes, mainly grain legume crop, on both yielding of cultures and capacity to capture the No2. The Labex Voltaire participation to this project is to measure the value of the environment improvement that will create the introduction of these new cultures, in term of avoided CO2, to evaluate the propensity to receive of farmers (the price that farmers will require to grow them), and to propose an incentive scheme in order to promote these cultures.

Geothermal preconfiguration of deep underground drillings. The last research theme is devoted to the analysis of the geothermal preconfiguration of deep drilling. France’s energy mix gives little place to geothermal energy, mainly for juridical and regulation reasons. The Labex Voltaire contributed to a ANR research proposal (ANR PREGO project) with BRGM as coordinator. This project which was granted in 2014 is basically a multidisciplinary project, with judicial, economic and geological aspects. It aims at studying the feasibility of a new regulation framework that will force each drilling to study the possibility of a geothermal use. It will use a multilevel approach that will evaluate the economic and environmental benefits that could be obtained from such a regulation reform.

Results of WP 4 (2015-2018)

During this period, the WP4 has pursued driving jointly general-purpose research in the field of environment and energy economics, and research more oriented towards geosciences applications, with in some case the support of the other partners of VOLTAIRE, the French geological survey BRGM and the national institute of agronomy INRA.

From the start of the Labex Voltaire, the WP 4 developed a complementary approach in a project dedicated to cut-edging Earth sciences development. Economics and social aspects are more and more a crucial stake in the field of geosciences, from the use of geological resources (mineral and energy) to the exchanges earth-atmosphere and the climate mitigation technologies.

Once implicated in projects linked to the economics of Carbon Capture and Storage (CCS) with Bioenergy in a regional project (CPER Artenay project, 2007-11) headed by the BRGM, the Laboratory of Economics of Orléans (LEO) has proved an increasing concern is this field. Its implication through the WP4 is threefold:

  • A first concern is linked to debate between Geosciences and Social Sciences technologies in all their aspects:
    • Mineral resources and energy
    • Exchange earth-atmosphere
    • Climate change mitigation technologies
  • A second concern was to bend the works of the LEO team, which were oriented to finance, econometrics, and international economics, towards natural resources and environmental economics. It has been made in a gradual approach, mainly focused on international economics issues, which is at the core of the team “international economics and sustainable development”.
  • A third concern is linked to the need of further economic research in the field of mineral and energy economics, a field in which economic research in France is split between different research center in economics and geosciences, in Grenoble, Nancy, Paris-Dauphine, and Orléans. The Labex Voltaire played a crucial role in this field, in helping to federate this research and to promote research cooperation and networking, between French and foreign academics, and between researcher in geosciences and social sciences. This concern led mainly to the organization of scientific events (workshops, conference) in the University of Orléans.

The details of the various actions carried out via the hiring of post doctoral and doctoral grants is given nex:  It results in the enrolment of 7 post-doctoral fellows over the last five years (2012-18), each on specific aspects of geosciences, namely:

  • Building up a specific tool of predictive command on job forecast in the geoscience field (Christelle Garrouste)
  • Evaluating the effect of energy price on carbon price (Djamel Kirat)
  • Studying the spatial dynamics of polluting activities (Julien Cucci)
  • Assessing the effect of energy transition on the demand of mineral resource, through a world EPPA economic model (O. Gharbi)
  • Evaluating the effect of Artisanal mining on the reduction of poverty (Victoire Girard)
  • Evaluating the effect of environmental regulation on international trade, with a specific focus on hazardous products and waste management. (Thais Nunez-Rocha)
  • Assessing the technical and economic aspects of the hard-rock Lithium European industry, with BRGM (Blandine Gourcerol)

Two doctoral grants have been funded by the Labex Voltaire

  • Nicola Clootens, “ Three essays on the long term relationship between growth and environment” (dir: M. Fodha and X. Galiègue, 2013-17)
  • Dylan Bourny, “ Trade, Location and environment: a focus on natural resources” (dir: C. Turcu and D. Mirza)

Visibility, outreach, sharing and promoting actions

The WP4 got an increasing concern in promoting actions through the organization of scientific events, mainly in 2017 and 2018.

  • Works on the modelization of Worlwide Mineral resource have been presented and discussed in the REMINER Project meetings, in April 2015, Grenoble.
  • A workshop on Energy transition and Mineral resources demand has been organized in March 2017, gathering economists, geoscientist academics and professional experts for fruitful exchanges.
  • An international conference in environmental economics: a focus on natural resources has been organized in April 2018, with more than 100 participants. For more details see: https://sites.google.com/view/eenr-orleans/home, program and papers available on https://www.dropbox.com/sh/mf9mrdq1wgkfnoa/AABAphd3c7gnat-dTKVbrhYQa?dl=0.
  • Victoire Girard has open a blog on the World Bank blog site, devoted to its research theme on the impact of artisanal mines on poverty reduction, “Gold in the dust: when artisanal mines shine” see https://blogs.worldbank.org/fr/team/victoire-girard. and another blog on the globaldev site http://www.globaldev.blog/blog/artisanal-mines-potentially-positive-effects-local-living-standards

Impact: local, national and international

The impact of VOLTAIRE and more particularly of WP4 has helped to build up a network of economist concerned by environment and natural resource issues. As most of Voltaire post doc alumni got a position as Assistant professor in different universities (two a the LEO, two in other universities), they continued to work in their field in close relationship with the LEO, then helping to build up new scientific cooperations.

In a broader sense, the WP4 scientific events had helped to structure a national and international community network that participates to scientific events. A first Workshop on the effect of the Energy transition on Mineral resources has been organized on March 31 2017 at the Laboratory of Economics of Orléans, following the participation of Voltaire-supported researchers to the network ReMiner, led by the laboratory Isterre from the University of Grenoble. This workshop has been a first opportunity for French geoscientists, experts in mineral resources and economists to exchange on the crucial issue of the pressure exerted on mineral resources (commonly used metals like copper or iron, and rare earth), by the rising demand for renewable energy technologies. It raises the questions of the availability of mineral resources reserves, of the energy requirements and the environmental consequences of their extraction, and of the recycling potential of our economies. After this first event, an international two-days conference “Environmental Economics: a focus on natural resources” has been set up in April 2018 by the Laboratory of Economics of Orléans. The conference gathered most of the leading economists in this field, with more than 100 worldwide academics participants. It has been organized around general sessions addressing different environmental and economic dimensions of natural resources exploitation, and special sessions devoted to special issues, like a special BRGM-Voltaire session devoted to the economics of recycling. A selection of the best conference papers will be proposed for publication to an international economic review.

Two special references should be made on the impact of the WP4. A first one should be given to the issue of the prospective of mineral resources at a national and European level, through the cooperation set up by the BRGM between a post doctoral Voltaire research contract (B. Gourcerol) on the Lithium hard-rock European industry (Fig. 1), a doctoral dissertation on the economics and geopolitics of mineral resources (R. Danino-Perraud) supported by the Centre Région and the BRGM, and a post doctoral BRGM researcher, Aurélie Gaudieux working on the modelization of Mineral resources process and market using multi-agent modeling. This informal team, working with the other economist of the BRGM, has already obtained significant results, with some papers published or presented in international conferences, and further developments in perspective.

Figure 1Location map of the Li deposits (Table 4) in Europe (map modified after Artemieva et al., 2006; Charles et al., 2013). Note that categories refer to: Category A ≥ 1,000,000,000 Li metal; 1,000,000,000 ≥ Category B ≥ 100,000 Li metal; 100,000 ≥ Category C ≥ 50,000 Li metal; 50,000 ≥ Category D ≥ 5,000 Li metal. Source: B. Gourcerol, E. Gloaguen, J. Melleton, J. Tuduri, Xavier Galiegue, A re-assessment of European lithium resource potential – A review of lithium resources and metallogeny, Working paper

Lithium is not rare in Europe and well represented through several orogenic events from the Proterozoic to the Cenozoic. Among them, it appears that the Variscan orogeny may show the strongest Li-enrichment through presence of various type of lithium occurrences, whereas oldest orogenies are geographically more localized due to successive orogenic reworks. Moreover, based on resources/reserves estimations, 30 hard-rock deposits such as pegmatites, greisens and rare metal-granites, are identified in Europe and their production may secure, in some part, the European supply in the near future.

A second reference has to be made to the international work of dissemination done on the rather controversial issue of the link between mining activity and poverty reduction in developing countries. One of the main results of the research made by Victoire Girard and Remi Bazillier,-namely that artisanal mines development should lead to a reduction of poverty in a specific context (in artisanal gold mines in Burkina Faso, Fig. 2)- has been presented and discussed on the World Bank web site, and on the Globaldev indian site, with a high flow of comments and discussions. Further development in this field has also been obtained by Victoire Girard in the Geneva Graduate Institute, who began new cooperation with Mathieu Couttenier and Nicolas Berman, two of the leading economists in this research field, from February to May 2018.

Figure 2. Au in Burkina Faso

The livelihood of over 100 million people worldwide depends on artisanal mines that often compete for land with industrial mines (figure a, in the Burkina Faso case). The Figure b shows that artisanal gold mines in Burkina Faso have important positive economic spillovers. It uses data on the consumption of 30,000 households in Burkina Faso. Data collection took place in 1998, 2003, 2009 and 2014. Consumption is the best indicator of household income in the absence of income data . Conversely, we do not find any significant economic spillover of opening an industrial gold mine in Burkina Faso over the study period Source : Rémi Bazillier and Victoire Girard,  Natural resources: a curse or a blessing? Evidence from Burkina Faso’s gold boom, LEO 2017 and AFD 2018 Working paper, proposed for publication to the Review of Economics and Statistics.

Scientific added value

The WP4 shows an increasing record in publications and participations to international conferences. They are coming not only from Doctoral and post-doctoral researcher, funded by the Labex Voltaire, but more and more from the LEO academics, former post doctoral researchers and other, who are increasingly involved in environment and natural resources concerns (see the list of publications below). The VOLTAIRE support helped to promote new research strand in the Economics of Natural resources, especially in the field of the link of poverty alleviation and artisanal mines (Victoire Girard) that has been previously presented and on the impact of environmental regulation on international trade in hazardous product trade (Thais Nunez-Rochas and Immacula Martinez-Zarzoso, Economic Modelling, 2018) They found that the ratification of the Rotterdam Convention (RC) and the Stockholm Convention (SC) has led to a reduction in trade of hazardous substances from OECD to non-OECD countries.  Further results are waited in using a broader measure of environmental regulation stringency and testing its influence on trade in resources,  discussing the existence of «pollution heavens » in developing countries (Th. Nunez-Rochas, Dylan Bourny).

Figure 3 Imports of Hazardous chemical and persistent organic pollutants from developed countries (OEDC) to developing countries (non OEDC) according to the ratification of the Stockhom and Rotterdam Convention Source: Thais Nunez-Rochas and Immacula Martinez-Zarzoso, Are international environmental policies effective? The case of the Rotterdam and Stockholm Conventions, Economic Modelling, 2018)

Human resources, leverage effect

VOLTAIRE and activities in WP4 have helped to consolidate positions by helping to find financing of post doc and doctoral contracts on different financing sources:

  • Three Post Doc contract has been obtained during the last years on different regional and national projects
    • APR PUIGES, regional project with INRA 6- month contract (Igor Bagayev, October 2015- April 2016)
    • ANR CO2-DISSOLVED, then PILOTE_CO2DISSOLVED GEODENERGIE: one year post doc (Nicolas Béfort, then Diea Khemiri, 2017-18)
    • ANR PREGO, One year post doc (Sihame Hini, 2017-18)
  • One Doctoral Régional Contract has been obtained, with the support of the BRGM (Raphael Dannino-Perraud), form October 2016.

Financial resources, leverage effect

The LEO team participates to national and regional projects linked to environment and natural resources.

  • One regional project on the impact of legume crop adoption on nitrogeneous emissions APR-PUIGES, led by the INRA. (resp. Catherine Henault).
  • Two project funded by the National Research Agency (ANR), piloted by the BRGM:
    • ANR CO2-DISSOLVED, then PILOTE_CO2DISSOLVED GEODENERGIE (2013-16, 2016-18) on combining CCS in dissolved state and geothermal energy (resp. Ch. Kervevan)
    • ANR PREGO (2014-18), for Geothermal Prefiguration of Deep Drilling One year post doc (resp H. Lesueur, then Feninstoa Andriansimoro).
  • Participation to three regional networks
    • APR-IA MUTMOND (2015-18), the future of Mondialisation: the role of environmental, technological and institutional change, (resp R. Bazillier)
    • APR MSH-Val de Loire (2018-19), Circular Economy and Pollution Haven (resp. I. Rabaud, LEO)
    • ITR MIDI Milieux et Diversité, (2014-18) with the LEO participation to workshops, seminars and conferences.

Future research

Future research will be made in three main directions

  • A first direction is linked to the effect of energy transition on mineral resources, It will benefit from the dynamcs of the prevailing works made in the WP4, and contribute to the networking of french and foreign researchers in this field. The publication of a collective french-written book on this issue is in progress (F. Fizaine with X. Galiègue)
  • A second direction concerns the impact of environmental regulations on international trade. International trade flows are influenced, not only by natural resources and economic factors, but also by disparities in environmental regulations. It will integrate the doctorate and post doctorate works in progress, and of LEO academics involved in this field.
  • A third direction is linked to diverse works related on the study of the mechanisms enabling the energy transition at a lower cost. By now this works concern new development of CCS and Geothermal energy, agricultural practices and land uses, and circular economy and eco-systemic uses economics.

 Publications

  • Ahamada Ibrahim et Kirat Djamel (2015), “The impact of phase II of the EU ETS on wholesale electricity prices” Revue d’Economie politique, 2015.
  • Rémi Bazillier and Victoire Girard (2017), Natural resources: a curse or a blessing? Evidence from Burkina Faso’s gold boom, LEO Working paper, proposed for publication to the Review of Economics and Statistics.
  • Clootens N., D. Kirat, D. (2017). A Reappraisal of the Resource Curse. Economic Bulletin, 37(1), 12-18.
  • Clootens, N. (2016). Public Debt, Life Expectancy, and the Environment,.Environmental Modeling Assessment, 1-12
  • Mouez Fodha (2015). Nuclear waste storage and environmental intergenerational externalities. International Journal of Sustainable Development, Inderscience, 2015, 18, pp.94.
  • Fodha et F. Magris (2015) “Recycling of Household Waste and Deterministic Cycles”, International Journal of Economic Theory, International Journal of Economic Theory, N°11(4), 2015.
  • Fodha et O. Zaghdoud (2015) “Decomposition analysis of aggregate energy intensity changes in Tunisia over the period 1980-2007”,  Environmental Modelling and Assessment,vol 20(3), 2015.
  • Fodha, Seegmüller T. et I. Yamagami (2017), Environmental policies under debt constraint”, Annals of Economics and Statisitics, forthcoming, 2017
  • Galiègue et A. Laude (2017), Combining Geothermal Energy and CCS: from the transformation to a reconfiguration of socio-technical regime, Energy Proceedia, April 2017
  • Claire GAVARD & Djamel KIRAT (2015) , « Flexibility in the market for international carbon credits and price dynamics difference with European allowances », Fondazione Eni Enrico Mattei working paper series N°: 3.2015, January 2015.
  • Hajare El Hadri, Daniel Mirza et Isabelle Rabaud (Université d’Orléans, LEO) Natural Disaster and Exports of Agricultural Products in Developing Countries? Document de Recherche du LEO, 2017
  • Djamel Kirat, Ibrahim Ahamada (2018), Non-linear Pass-Through of the CO2 Emission-Allowance Price onto Wholesale Electricity Prices, Environmental Modeling and Assessment, April 2018
  • Kirat, I. Ahamada et M. Fodha,(2017) Regional differences in CO2 emissions from the French residential sector: determinants and distributional consequences, Revue d’économie politique, Vol 127 (3), 353-374, 2017.
  • Djamel Kirat, Nicolas Clootens (2017), “A Reappraisal of the Resource Curse” Economics Bulletin 37 (1) 12-18
  • Djamel Kirat, Ibrahim Ahamada, (2016) “Evidence for threshold eff​ects in the pass-through of carbon prices to wholesale electricity prices” Economics Bulletin 36 (4) 2350-2364
  • Djamel Kirat, Ibrahim Ahamada (2015) “The impact of phase II of the EU ETS on wholesale electricity prices” Revue d’Économie Politique 125 (6) 887-908
  • Djamel Kirat, Ibrahim Ahamada (2011a) “L’impact de la contrainte carbone sur le secteur électrique”, Revue d’Économie Politique 121 259-281
  • Djamel Kirat, Ibrahim Ahamada (2011b) “The impact of the European Union Emission Trading Scheme on the electricity-generation sector”, Energy Economics 33 995-1003
  • Martinez-Zarzozo and T. Nunez-RochaIs, Is National Environmental Legislation Affecting Emissions?,  DR LEO 2018-01