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On natural resource substitution

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Author Info
Francisco J. André () (Universidad Pablo de Olavide de Sevilla)
Emilio Cerdá (Universidad Complutense de Madrid)

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Abstract

We present a simple dynamic model to get some key insights about the substitution of renewable for nonrenewable resources in production and the consequences for sustainability. We highlight the role of the elasticity of substitution (technological component) to determine the adjustment of every sector as a response to scarcity and growing ability of resources (environmental component). Sometimes, the model predicts a smooth substitution of renewable resources for nonrenewables, but this process could work in the opposite direction if renewable resources are temporarily beyond their maximum sustainable yield, so that their marginal natural growth is negative. If substitution possibilities are high enough, it may be optimal to suspend the extraction of a resource, for example, to allow for regeneration of the biomass. We show analytically that a production process is more likely to be sustainable the more heavily it depends on renewable, rather than nonrenewable resources.

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Publisher Info
Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/48.

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Length: 31 pages
Date of creation: 2004
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Handle: RePEc:cea:doctra:e2004_48

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Related research
Keywords: Renewable resources Nonrenewable resources Production Optimal control.

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Find related papers by JEL classification:
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Christian Groth & Poul Schou, 2004. "Capital Taxation, Growth, and Non-renewable Resources," EPRU Working Paper Series 04-16, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  2. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1201-34, December.
  3. Hartwick, John M., 1978. "Investing returns from depleting renewable resource stocks and intergenerational equity," Economics Letters, Elsevier, vol. 1(1), pages 85-88. [Downloadable!] (restricted)
    Other versions:
  4. Smith, Vernon L, 1971. "Economics of Production from Natural Resources: Reply," American Economic Review, American Economic Association, vol. 61(3), pages 488-91, June. [Downloadable!] (restricted)
  5. Tomiyama, Ken, 1985. "Two-stage optimal control problems and optimality conditions," Journal of Economic Dynamics and Control, Elsevier, vol. 9(3), pages 317-337, November. [Downloadable!] (restricted)
  6. Christian Groth, 2003. "Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate," EPRU Working Paper Series 03-20, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  7. repec:att:wimass:1920310 is not listed on IDEAS
  8. Huhtala, Anni, 1999. "Optimizing production technology choices: conventional production vs. recycling," Resource and Energy Economics, Elsevier, vol. 21(1), pages 1-18, January. [Downloadable!] (restricted)
  9. Daly, Herman E., 1990. "Toward some operational principles of sustainable development," Ecological Economics, Elsevier, vol. 2(1), pages 1-6, April. [Downloadable!] (restricted)
  10. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Tsur, Yacov & Zemel, Amos, 2003. "Optimal transition to backstop substitutes for nonrenewable resources," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 551-572, February. [Downloadable!] (restricted)
  12. Spence, A Michael & Starrett, David, 1975. "Most Rapid Approach Paths in Accumulation Problems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 388-403, June. [Downloadable!] (restricted)
  13. Hartwick, John M., 1990. "Natural resources, national accounting and economic depreciation," Journal of Public Economics, Elsevier, vol. 43(3), pages 291-304, December. [Downloadable!] (restricted)
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  14. Brian R. Copeland & M. Scott Taylor, 2003. "Trade, Growth and the Environment," NBER Working Papers 9823, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Swallow, Stephen K., 1990. "Depletion of the environmental basis for renewable resources: The economics of interdependent renewable and nonrenewable resources," Journal of Environmental Economics and Management, Elsevier, vol. 19(3), pages 281-296, November. [Downloadable!] (restricted)
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Cited by:
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  1. Jakub, GROWIEC & Ingmar, SCHUMACHER, 2006. "On Technical Change in the Elasticities of Resource Inputs," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2006031, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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