IDEAS home Printed from https://ideas.repec.org/p/fae/wpaper/2019.06.html
   My bibliography  Save this paper

Mineral Resources for Renewable Energy: Optimal Timing of Energy Production

Author

Listed:
  • Adrien Fabre

    (Paris School of Economics and University Paris 1 Panthéon Sorbonne)

  • Mouez Fodha

    (Paris School of Economics and University Paris 1 Panthéon Sorbonne)

  • Francesco Ricci

    (CEE-M, Univervité de Montpellier, CNRS, INRA, SupAgro, Montpellier, France)

Abstract

The production of energy from renewable sources is much more intensive in minerals than that from fossil resources. The scarcity of certain minerals limits the potential for substituting renewable energy for scarce fossil resources. However, minerals can be recycled, while fossils cannot. We develop an intertemporal model to study the dynamics of the optimal energy mix in the presence of mineral intensive renewable energy and fossil energy. We analyze energy production when both mineral and fossil resources are scarce, but minerals are recyclable. We show that the greater the recycling rate of minerals, the more the energy mix should rely on renewable energy, and the sooner should investment in renewable capacity take place. We confirm these results even in the presence of other better known factors that affect the optimal schedule of resource use: growth in the productivity in the renewable sector, imperfect substitution between the two sources of energy, convex extraction costs for mineral resources and pollution from the use of fossil resources.

Suggested Citation

  • Adrien Fabre & Mouez Fodha & Francesco Ricci, 2019. "Mineral Resources for Renewable Energy: Optimal Timing of Energy Production," Working Papers 2019.06, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2019.06
    as

    Download full text from publisher

    File URL: http://faere.fr/pub/WorkingPapers/Fabre_Fodha_Ricci_FAERE.WP2019.06.pdf
    File Function: First version, 2019
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    2. André Grimaud & Luc Rouge, 2008. "Environment, Directed Technical Change and Economic Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(4), pages 439-463, December.
    3. Amigues, Jean-Pierre & Kama, Alain Ayong Le & Moreaux, Michel, 2015. "Equilibrium transitions from non-renewable energy to renewable energy under capacity constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 89-112.
    4. Vogt-Schilb, Adrien & Meunier, Guy & Hallegatte, Stéphane, 2018. "When starting with the most expensive option makes sense: Optimal timing, cost and sectoral allocation of abatement investment," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 210-233.
    5. Mouez Fodha & Francesco Magris, 2015. "Recycling waste and endogenous fluctuations in an OLG model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(4), pages 405-427, December.
    6. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880, Elsevier.
    7. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, vol. 25(1), pages 59-79, February.
    8. Saleem H. Ali & Damien Giurco & Nicholas Arndt & Edmund Nickless & Graham Brown & Alecos Demetriades & Ray Durrheim & Maria Amélia Enriquez & Judith Kinnaird & Anna Littleboy & Lawrence D. Meinert & R, 2017. "Mineral supply for sustainable development requires resource governance," Nature, Nature, vol. 543(7645), pages 367-372, March.
    9. De Beir, Jean & Fodha, Mouez & Magris, Francesco, 2010. "Life Cycle Of Products And Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 14(2), pages 212-230, April.
    10. Chakravorty, Ujjayant & Magne, Bertrand & Moreaux, Michel, 2006. "A Hotelling model with a ceiling on the stock of pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2875-2904, December.
    11. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May.
    12. Karen Pittel & Lucas Bretschger, 2010. "The implications of heterogeneous resource intensities on technical change and growth," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(4), pages 1173-1197, November.
    13. R. Davison, 1978. "Optimal Depletion of an Exhaustible Resource with Research and Development towards an Alternative Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(2), pages 355-367.
    14. Stefan Ambec & Claude Crampes, 2019. "Decarbonizing Electricity Generation with Intermittent Sources of Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1105-1134.
    15. Wickart, Marcel & Madlener, Reinhard, 2007. "Optimal technology choice and investment timing: A stochastic model of industrial cogeneration vs. heat-only production," Energy Economics, Elsevier, vol. 29(4), pages 934-952, July.
    16. Raouf Boucekkine & Fouad Ouardighi, 2016. "Optimal Growth with Polluting Waste and Recycling," Dynamic Modeling and Econometrics in Economics and Finance, in: Herbert Dawid & Karl F. Doerner & Gustav Feichtinger & Peter M. Kort & Andrea Seidl (ed.), Dynamic Perspectives on Managerial Decision Making, pages 109-126, Springer.
    17. Fizaine, Florian, 2015. "Minor metals and organized markets: News highlights about the consequences of establishing a futures market in a thin market with a dual trading price system," Resources Policy, Elsevier, vol. 46(P2), pages 59-70.
    18. Moss, R.L. & Tzimas, E. & Kara, H. & Willis, P. & Kooroshy, J., 2013. "The potential risks from metals bottlenecks to the deployment of Strategic Energy Technologies," Energy Policy, Elsevier, vol. 55(C), pages 556-564.
    19. Herbert Dawid & Karl F. Doerner & Gustav Feichtinger & Peter M. Kort & Andrea Seidl (ed.), 2016. "Dynamic Perspectives on Managerial Decision Making," Dynamic Modeling and Econometrics in Economics and Finance, Springer, number 978-3-319-39120-5, May.
    20. Lewis, Tracy R, 1982. "Sufficient Conditions for Extracting Least Cost Resource First," Econometrica, Econometric Society, vol. 50(4), pages 1081-1083, July.
    21. Moreaux, Michel & Ricci, Francesco, 2005. "The simple analytics of developing resources from resources," Resource and Energy Economics, Elsevier, vol. 27(1), pages 41-63, January.
    22. Shmuel S. Oren & Stephen G. Powell, 1985. "Optimal Supply of a Depletable Resource with a Backstop Technology: Heal's Theorem Revisited," Operations Research, INFORMS, vol. 33(2), pages 277-292, April.
    23. Pittel, Karen & Amigues, Jean-Pierre & Kuhn, Thomas, 2010. "Recycling under a material balance constraint," Resource and Energy Economics, Elsevier, vol. 32(3), pages 379-394, August.
    24. Rob Hart, 2019. "To Everything There Is a Season: Carbon Pricing, Research Subsidies, and the Transition to Fossil-Free Energy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(2), pages 349-389.
    25. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    26. Amigues, Jean-Pierre & Kama, Alain Ayong Le & Moreaux, Michel, 2015. "Equilibrium transitions from non-renewable energy to renewable energy under capacity constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 89-112.
    27. repec:hal:pseose:hal-01308387 is not listed on IDEAS
    28. Derek Lemoine & Christian Traeger, 2014. "Watch Your Step: Optimal Policy in a Tipping Climate," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 137-166, February.
    29. Bocar Samba Ba & Philippe Mahenc, 2019. "Is Recycling a Threat or an Opportunity for the Extractor of an Exhaustible Resource?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1109-1134, August.
    30. Geoffrey Heal (ed.), 1993. "The Economics of Exhaustible Resources," Books, Edward Elgar Publishing, number 554.
    31. Weinstein, Milton & Zeckhauser, Richard, 1973. "Critical ratios and efficient allocation," Journal of Public Economics, Elsevier, vol. 2(2), pages 147-157, April.
    32. Vernon L. Smith, 1972. "Dynamics of Waste Accumulation: Disposal versus Recycling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(4), pages 600-616.
    33. Schulze, William D., 1974. "The optimal use of non-renewable resources: The theory of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 53-73, May.
    34. Tahvonen, Olli & Salo, Seppo, 2001. "Economic growth and transitions between renewable and nonrenewable energy resources," European Economic Review, Elsevier, vol. 45(8), pages 1379-1398, August.
    35. Fizaine, Florian, 2013. "Byproduct production of minor metals: Threat or opportunity for the development of clean technologies? The PV sector as an illustration," Resources Policy, Elsevier, vol. 38(3), pages 373-383.
    36. Morton I. Kamien & Nancy L. Schwartz, 1978. "Optimal Exhaustible Resource Depletion with Endogenous Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(1), pages 179-196.
    37. Partha Dasgupta & Richard J. Gilbert & Joseph E. Stiglitz, 1982. "Invention and Innovation Under Alternative Market Structures: The Case of Natural Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(4), pages 567-582.
    38. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-1452, November.
    39. Lafforgue, Gilles & Rouge, Luc, 2019. "A dynamic model of recycling with endogenous technological breakthrough," Resource and Energy Economics, Elsevier, vol. 57(C), pages 101-118.
    40. Murto, Pauli & Nese, Gjermund, 2002. "Input price risk and optimal timing of energy investment: choice between fossil- and biofuels," Working Papers in Economics 15/02, University of Bergen, Department of Economics.
    41. Tsur, Yacov & Zemel, Amos, 2005. "Scarcity, growth and R&D," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 484-499, May.
    42. Kemp, Murray C & Long, Ngo Van, 1980. "On Two Folk Theorems Concerning the Extraction of Exhaustible Resources," Econometrica, Econometric Society, vol. 48(3), pages 663-673, April.
    43. Kverndokk, Snorre & Rosendahl, Knut Einar, 2007. "Climate policies and learning by doing: Impacts and timing of technology subsidies," Resource and Energy Economics, Elsevier, vol. 29(1), pages 58-82, January.
    44. Di Vita, Giuseppe, 2007. "Exhaustible resources and secondary materials: A macroeconomic analysis," Ecological Economics, Elsevier, vol. 63(1), pages 138-148, June.
    45. Goulder, Lawrence H. & Schneider, Stephen H., 1999. "Induced technological change and the attractiveness of CO2 abatement policies," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 211-253, August.
    46. Wirl, Franz, 1988. "Resource extraction of imperfect substitutes," Energy Economics, Elsevier, vol. 10(3), pages 242-248, July.
    47. Di Vita, Giuseppe, 2001. "Technological change, growth and waste recycling," Energy Economics, Elsevier, vol. 23(5), pages 549-567, September.
    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


    Cited by:

    1. Chazel, Simon & Bernard, Sophie & Benchekroun, Hassan, 2023. "Energy transition under mineral constraints and recycling: A low-carbon supply peak," Resource and Energy Economics, Elsevier, vol. 72(C).
    2. Ba, Bocar Samba & Soubeyran, Raphael, 2023. "Hotelling and recycling," Resource and Energy Economics, Elsevier, vol. 72(C).
    3. Pommeret, Aude & Ricci, Francesco & Schubert, Katheline, 2022. "Critical raw materials for the energy transition," European Economic Review, Elsevier, vol. 141(C).
    4. Rahat, Birjees & Nguyen, Pascal, 2023. "Does ESG performance impact credit portfolios? Evidence from lending to mineral resource firms in emerging markets," Resources Policy, Elsevier, vol. 85(PB).
    5. Han, Zhanbing & Zakari, Abdulrasheed & Youn, Ik Joong & Tawiah, Vincent, 2023. "The impact of natural resources on renewable energy consumption," Resources Policy, Elsevier, vol. 83(C).
    6. Zhou, Sophie & Smulders, Sjak, 2021. "Closing the loop in a circular economy: Saving resources or suffocating innovations?," European Economic Review, Elsevier, vol. 139(C).
    7. Liu, Yang & Dong, Kangyin & Taghizadeh-Hesary, Farhad & Dong, Xiucheng, 2024. "How do minerals affect the global energy transition? Metallic versus non-metallic mineral," Resources Policy, Elsevier, vol. 92(C).
    8. He, Ruifang & Zhong, Meirui & Huang, Jianbai, 2021. "Technological progress and metal resource consumption in the electricity industry—A cross-country panel threshold data analysis," Energy, Elsevier, vol. 231(C).
    9. Aldakhil, Abdullah Mohammed & Nassani, Abdelmohsen A. & Zaman, Khalid, 2020. "The role of technical cooperation grants in mineral resource extraction: Evidence from a panel of 12 abundant resource economies," Resources Policy, Elsevier, vol. 69(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pommeret, Aude & Ricci, Francesco & Schubert, Katheline, 2022. "Critical raw materials for the energy transition," European Economic Review, Elsevier, vol. 141(C).
    2. Renaud Coulomb & Oskar Lecuyer & Adrien Vogt-Schilb, 2019. "Optimal Transition from Coal to Gas and Renewable Power Under Capacity Constraints and Adjustment Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 557-590, June.
    3. Moreaux, Michel & Ricci, Francesco, 2005. "The simple analytics of developing resources from resources," Resource and Energy Economics, Elsevier, vol. 27(1), pages 41-63, January.
    4. Halvor B. Storrøsten, 2020. "Emission Regulation of Markets with Sluggish Supply Structures," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(1), pages 1-33, September.
    5. Gregory Casey, 2024. "Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(1), pages 192-228.
    6. Lafforgue, Gilles & Rouge, Luc, 2019. "A dynamic model of recycling with endogenous technological breakthrough," Resource and Energy Economics, Elsevier, vol. 57(C), pages 101-118.
    7. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2012. "Cycles in nonrenewable resource prices with pollution and learning-by-doing," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1448-1461.
    8. Jin, Wei, 2021. "Path dependence, self-fulfilling expectations, and carbon lock-in," Resource and Energy Economics, Elsevier, vol. 66(C).
    9. Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-1144, June.
    10. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2008. "Energy substitutions, climate change and carbon sinks," Ecological Economics, Elsevier, vol. 67(4), pages 589-597, November.
    11. Lafforgue, Gilles & Lorang, Etienne, 2022. "Recycling under environmental, climate and resource constraints," Resource and Energy Economics, Elsevier, vol. 67(C).
    12. Di Maria, Corrado & Smulders, Sjak & van der Werf, Edwin, 2008. "Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions," Climate Change Modelling and Policy Working Papers 46626, Fondazione Eni Enrico Mattei (FEEM).
    13. Di Vita, Giuseppe, 2006. "Natural resources dynamics: Exhaustible and renewable resources, and the rate of technical substitution," Resources Policy, Elsevier, vol. 31(3), pages 172-182, September.
    14. Derek Lemoine, 2024. "Innovation-Led Transitions in Energy Supply," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(1), pages 29-65, January.
    15. Oskar Lecuyer & Adrien Vogt-Schilb, 2013. "Assessing and ordering investments in polluting fossil-fueled and zero-carbon capital," CIRED Working Papers hal-00850680, HAL.
    16. Jin, Wei & Shi, Xunpeng & Zhang, Lin, 2021. "Energy transition without dirty capital stranding," Energy Economics, Elsevier, vol. 102(C).
    17. Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298, Elsevier.
    18. Amigues, Jean-Pierre & Moreaux, Michel & Ricci, Francesco, 2008. "Resource-augmenting R&D with heterogeneous labor supply," Environment and Development Economics, Cambridge University Press, vol. 13(6), pages 719-745, December.
    19. Wei Jin & ZhongXiang Zhang, 2018. "Capital Accumulation, Green Paradox, and Stranded Assets: An Endogenous Growth Perspective," Working Papers 2018.33, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    Renewable and Non-Renewable Natural Resources; Mineral Resources; Recycling; Energy Transition;
    All these keywords.

    JEL classification:

    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fae:wpaper:2019.06. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dorothée Charlier (email available below). General contact details of provider: https://edirc.repec.org/data/faereea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.