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Hoard or Exploit? Intergenerational Allocation of Exhaustible Natural Resources

Author

Listed:
  • Hala Abu-Kalla

    () (Department of Natural Resources and Environmental Management, University of Haifa, Haifa 3498838, Israel)

  • Ruslana Rachel Palatnik

    () (Department of Natural Resources and Environmental Management, University of Haifa, Haifa 3498838, Israel
    Department of Economics and Management, The Max Stern Yezreel Valley College, Yezreel Valley 1930600, Israel
    Natural Resource and Environmental Research Center, University of Haifa, Haifa 3498838, Israel)

  • Ofira Ayalon

    () (Department of Natural Resources and Environmental Management, University of Haifa, Haifa 3498838, Israel
    Natural Resource and Environmental Research Center, University of Haifa, Haifa 3498838, Israel)

  • Mordechai Shechter

    () (Natural Resource and Environmental Research Center, University of Haifa, Haifa 3498838, Israel)

Abstract

In this paper, a “general equilibrium” (GE) model was developed for the allocation of exhaustible natural resources to examine the impact of different extraction scenarios on intergenerational economic welfare. A stylized GE model was applied to Israel’s natural gas (NG) market to evaluate economic indicators resulting from NG-extraction scenarios: a baseline scenario based on current policy in the NG sector, a conservative scenario based on a lower extraction rate, and an intensive scenario based on a faster extraction rate. The impact of various resource income-allocation strategies on intergenerational economic welfare was examined through the mechanism of a “sovereign wealth fund” (SWF). The results indicate that a higher NG-extraction rate combined with an appropriate investment strategy for NG profits is preferable from an economic perspective compared to a conservative rate. Investment of the government take from the NG market in research and development (R&D) of renewable electricity production can sustainably increase economic welfare.

Suggested Citation

  • Hala Abu-Kalla & Ruslana Rachel Palatnik & Ofira Ayalon & Mordechai Shechter, 2020. "Hoard or Exploit? Intergenerational Allocation of Exhaustible Natural Resources," Energies, MDPI, Open Access Journal, vol. 13(24), pages 1-20, December.
  • Handle: RePEc:gam:jeners:v:13:y:2020:i:24:p:6657-:d:463617
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