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Transition to Marine Mining?

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This study explores possible futures of the mining industry through numerical analysis of a conceptual mineral extraction problem with two resource stocks - terrestrial and marine. The model is inspired by the manganese mining industry. We consider four model scenarios. The first two consider a principal representing a cartel that invests and extracts to maximize the net present value of extraction from the onshore and offshore reserves. The second two consider two principals, each representing one cartel, that invests and extracts to maximize the net present value of extraction from their respective reserves subject to the decisions of the other cartel. The scenarios include several realistic features such as convex demand, operating costs, capital dynamics including irreversible investments, reserve-dependent capital efficiency, and capacity constraints. We present associated extraction paths and industry transformations. The results indicate that reserve-dependent capital efficiency and cross-sector competition can drive transition. Moreover, our results and discussion indicate that a transition to an industry with both onshore and offshore mining may be near, and that once the transition sparks, it may happen quickly.

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  • Rasmus Noss, Bang & Trellevik, Lars-Kristian Lunde, 2022. "Transition to Marine Mining?," Discussion Papers 2022/9, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2022_009
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    More about this item

    Keywords

    Terrestrial minerals; marine minerals; industry transition; monopoly; duopoly;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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