IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v234y2024ics0165176523004743.html
   My bibliography  Save this article

Sustainability criterion implied externality pricing for resource extraction

Author

Listed:
  • Grainger, Daniel

Abstract

A dynamic model is constructed that generalises the Hartwick and Van Long (2020) endogenous discounting setup by introducing externalities and asks what implications this has for optimal natural resource extraction with constant consumption. It is shown that a modified form of the Hotelling and Hartwick rule holds in which the externality component of price is a specific function of the instantaneous user costs and cross price elasticities. It is demonstrated that the externality adjusted marginal user cost of remaining natural reserves is equal to the marginal user cost of extracted resources invested in human-made reproducible capital. This lends itself to a discrete form with a readily intuitive economic interpretation that illuminates the stepwise impact of externality pricing on optimal extraction schedules.

Suggested Citation

  • Grainger, Daniel, 2024. "Sustainability criterion implied externality pricing for resource extraction," Economics Letters, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523004743
    DOI: 10.1016/j.econlet.2023.111448
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176523004743
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2023.111448?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Externalities; Sustainability; Natural resources; Optimal extraction; Hotelling's rule; Hartwick's rule;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523004743. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.