Advanced Search
MyIDEAS: Login

Incentive Compatible Extraction of Natural Resource Rent

Contents:

Author Info

  • Cornelia Luchsinger

    ()
    (Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerland)

  • Adrian Müller

    ()
    (Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerland)

Abstract

The exploitation of natural resources often generates considerable economic rent. Since such so-called resource rents accrue due to innate characteristics of the resource itself thus reflecting its eco-nomic value and not due to managerial abilities of the exploiting firm, at least part of it should - as a price for the use of the resource – be collected by the owner of the resource, which is often the gov-ernment. As the owner of the resource faces a classical principal-agent problem, the incentives to exploit a resource efficiently should be taken into account when setting up a rent extraction scheme. We pre-sent a formalism that unifies different existing approaches to such schemes and address issues such as asymmetric information, risk aversion, and uncertainty. Finally, we discuss the feasibility to base a rent extraction scheme on such a formalism and point out its main problems. The most important ones are the presence of intrinsically unobservable and very uncertain values and the high complexity of the formalism. There are mainly two possibilities to deal with these problems: either to make additional as-sumptions and to set boundary conditions such as to solve the problem in a simplified setting, as much of the literature does, or to refrain from solving it, and instead use it as a general guiding principle, which helps to avoid gross errors and shows the broad direction, but leaves the concrete implementa-tion rather to a political process than to an economic analysis.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepe.ethz.ch/publications/workingPapers/CEPE_WP21.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CEPE Center for Energy Policy and Economics, ETH Zurich in its series CEPE Working paper series with number 03-21.

as in new window
Length: 17 pages
Date of creation: Jan 2003
Date of revision:
Handle: RePEc:cee:wpcepe:03-21

Contact details of provider:
Postal: ETH-CEPE, Zürichbergstrasse 18, 8032 Zürich
Phone: +41-1-632 06 50
Fax: +41-1-632 16 22
Email:
Web page: http://www.cepe.ethz.ch
More information through EDIRC

Related research

Keywords: natural resource rent; incentives; rent extraction; regulation;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Grafton R. Quentin, 1995. "Rent Capture in a Rights-Based Fishery," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 48-67, January.
  2. Heaps, Terry & Helliwell, John F., 1985. "The taxation of natural resources," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 8, pages 421-472 Elsevier.
  3. Fraser, Rob & Kingwell, Ross, 1997. "Can expected tax revenue be increased by an investment-preserving switch from ad valorem royalties to a resource rent tax?," Resources Policy, Elsevier, vol. 23(3), pages 103-108, September.
  4. Osmundsen, Petter, 1995. "Taxation of petroleum companies possessing private information," Resource and Energy Economics, Elsevier, vol. 17(4), pages 357-377, December.
  5. Hamish Low & Daniel Maldoom, 2000. "Optimal taxation and risk sharing data," IFS Working Papers W00/01, Institute for Fiscal Studies.
  6. Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September.
  7. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
  8. Sansing, Richard, 1993. "A note on alternative petroleum taxation systems," Resource and Energy Economics, Elsevier, vol. 15(2), pages 243-246, June.
  9. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-37, October.
  10. Eirik S. Amundsen & Christian Andersen & Jan Gaute Sannarnes, 1992. "Rent Taxes on Norwegian Hydropower Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 97-116.
  11. Campbell, H. F. & Lindner, R. K., 1983. "On the optimal resource rent tax," Economics Letters, Elsevier, vol. 13(2-3), pages 263-268.
  12. Chavas, Jean-Paul, 1993. "The Ricardian Rent and the Allocation of Land under Uncertainty," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 20(4), pages 451-69.
  13. Garnaut, Ross & Clunies Ross, Anthony, 1975. "Uncertainty, Risk Aversion and the Taxing of Natural Resource Projects," Economic Journal, Royal Economic Society, vol. 85(338), pages 272-87, June.
  14. Sappington, David E. M. & Weisman, Dennis L., 1996. "Revenue sharing in incentive regulation plans," Information Economics and Policy, Elsevier, vol. 8(3), pages 229-248, September.
  15. Osmundsen, Petter, 2002. "Regulation of common property resources under private information about resource externalities," Resource and Energy Economics, Elsevier, vol. 24(4), pages 349-366, November.
  16. Fraser, Rob, 2000. "Is risk-sharing resource taxation in society's best interests if prices are log-normally distributed?," Resources Policy, Elsevier, vol. 26(4), pages 219-225, December.
  17. Lund, Diderik, 2002. "Rent taxation when cost monitoring is imperfect," Resource and Energy Economics, Elsevier, vol. 24(3), pages 211-228, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Reinhard Madlener & Carlos Henggeler Antunes & Luis C. Dias, 2006. "Multi-Criteria versus Data Envelopment Analysis for Assessing the Performance of Biogas Plants," CEPE Working paper series 06-49, CEPE Center for Energy Policy and Economics, ETH Zurich.
  2. Gürkan Kumbaroglu & Reinhard Madlener & Mustafa Demirel, 2004. "A Real Options Evaluation Model for the Diffusion Prospects of New Renewable Power Generation Technologies," CEPE Working paper series 04-35, CEPE Center for Energy Policy and Economics, ETH Zurich.
  3. Reinhard Madlener & Stefan Vögtli, 2006. "Diffusion of bioenergy in urban areas: socio-economic analysis of the planned Swiss wood-fired cogeneration plant in Basel," CEPE Working paper series 06-53, CEPE Center for Energy Policy and Economics, ETH Zurich.
  4. Reinhard Madlener & Carmenza Robledo & Bart Muys & Bo Hektor & Julije Domac, 2003. "A Sustainability Framework for Enhancing the Long-Term Success of LULUCF Projects," CEPE Working paper series 03-29, CEPE Center for Energy Policy and Economics, ETH Zurich.
  5. Reinhard Madlener & Martin Koller, 2006. "Economic and CO2 mitigation impacts of promoting biomass heating systems: an input-output study for Vorarlberg, Austria," CEPE Working paper series 06-50, CEPE Center for Energy Policy and Economics, ETH Zurich.
  6. Silvia Banfi & Massimo Filippini & Andrea Horeh�jov�, 2012. "Using a choice experiment to estimate the benefits of a reduction of externalities in urban areas with special focus on electrosmog," Applied Economics, Taylor & Francis Journals, vol. 44(3), pages 387-397, January.
  7. Eberhard Jochem, 2005. "An Agenda for Energy and Material Efficiency Policy – An Element of Technology Policy for a More Sustainable Use of Natural Resources," CEPE Working paper series 05-40, CEPE Center for Energy Policy and Economics, ETH Zurich.
  8. Silvia Banfi & Massimo Filippini & Andrea Horehájová, 2007. "Hedonic Price Functions for Zurich and Lugano with Special Focus on Electrosmog," CEPE Working paper series 07-57, CEPE Center for Energy Policy and Economics, ETH Zurich.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cee:wpcepe:03-21. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carlos Ordas).

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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