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On natural resource substitution

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  • Andre, Francisco J.
  • Cerda, Emilio

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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Suggested Citation

  • Andre, Francisco J. & Cerda, Emilio, 2005. "On natural resource substitution," Resources Policy, Elsevier, vol. 30(4), pages 233-246, December.
  • Handle: RePEc:eee:jrpoli:v:30:y:2005:i:4:p:233-246
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    Cited by:

    1. Ohler, Adrienne M., 2014. "Behavior of the firm under rate-of-return regulation with two capital inputs," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 61-69.
    2. Mosiño, Alejandro, 2012. "Producing energy in a stochastic environment: Switching from non-renewable to renewable resources," Resource and Energy Economics, Elsevier, vol. 34(4), pages 413-430.
    3. Growiec, Jakub & Schumacher, Ingmar, 2008. "On technical change in the elasticities of resource inputs," Resources Policy, Elsevier, vol. 33(4), pages 210-221, December.
    4. Francisco André & Emilio Cerdá, 2006. "On the Dynamics of Recycling and Natural Resources," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 33(2), pages 199-221, February.

    More about this item

    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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