Ordering the Extraction of Polluting Nonrenewable Resources
AbstractA well-known theorem by Herfindahl states that the low-cost nonrenewable resource must be exploited first. Consider resources that are differentiated only by their pollution content. For instance, both coal and natural gas are used to generate electricity, yet coal is more polluting. We show that the ordering of extraction need not be driven by whether a resource is clean or dirty. Coal may be used first, followed by natural gas, and again by coal. Such "vacillation" does not occur under cost heterogeneity. A perverse policy implication is that regulating pollution may accelerate use of the polluting resource.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 415.
Date of creation: Sep 2006
Date of revision:
Publication status: Published in American Economic Review, vol.�98, n°3, juin 2008, p.�1128-1144.
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Other versions of this item:
- Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-44, June.
- CHAKRAVORTY Ujjayant & MOREAUX Michel & TIDBALL Mabel, 2006. "Ordering the Extraction of Polluting Nonrenewable Resources," LERNA Working Papers 06.19.212, LERNA, University of Toulouse.
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
This paper has been announced in the following NEP Reports:
- NEP-AGR-2007-04-21 (Agricultural Economics)
- NEP-ALL-2007-04-21 (All new papers)
- NEP-ENE-2007-04-21 (Energy Economics)
- NEP-ENV-2007-04-21 (Environmental Economics)
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