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Does Productive Capital Affect the Order of Resource Exploitation

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  • Favard, P.

Abstract

The purpose of this paper is to show that in a general equilibrium framework it is not always optimal to exploit resources in strict sequence, beginning with the lowest cost deposit, even if it is possible to accumulate productive capital. Indeed if there is an exogenous upper bound on the flow of the substitute, it is always optimal to consume it simultaneously with a lower cost stock. Moreover, it may be optimal to consume the high-cost substitute before using a lower cost resource. Classification-JEL: Q3

Suggested Citation

  • Favard, P., 2001. "Does Productive Capital Affect the Order of Resource Exploitation," Cahiers du LASER (LASER Working Papers) 2001.01, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1.
    • Handle: RePEc:mop:lasrwp:2001.01
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    References listed on IDEAS

    as
    1. Lewis, Tracy R, 1982. "Sufficient Conditions for Extracting Least Cost Resource First," Econometrica, Econometric Society, vol. 50(4), pages 1081-1083, July.
    2. 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.
    3. 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.
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    Cited by:

    1. Gerlagh, Reyer & Lise, Wietze, 2005. "Carbon taxes: A drop in the ocean, or a drop that erodes the stone? The effect of carbon taxes on technological change," Ecological Economics, Elsevier, vol. 54(2-3), pages 241-260, August.
    2. 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.
    3. Istvan, Bessenyei, 2005. "Does market value maximization affect the order of resource exploitation?," Economic Modelling, Elsevier, vol. 22(6), pages 1090-1104, December.
    4. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2008. "Energy substitutions, climate change and carbon sinks," Ecological Economics, Elsevier, vol. 67(4), pages 589-597, November.
    5. Gaudet, Gerard & Moreaux, Michel & Withagen, Cees, 2006. "The Alberta dilemma: Optimal sharing of a water resource by an agricultural and an oil sector," Journal of Environmental Economics and Management, Elsevier, vol. 52(2), pages 548-566, September.
    6. Freni, Giuseppe, 2009. "Factor intensity and order of resource extraction," MPRA Paper 18790, University Library of Munich, Germany.
    7. Giuseppe Freni, 2016. "Order of resource extraction and factor intensity," Discussion Papers 3_2016, CRISEI, University of Naples "Parthenope", Italy.

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    More about this item

    Keywords

    NATURAL RESOURCES ; SUBSTITUTE ; PRODUCTIVE CAPITAL ; GENERAL EQUILIBRIUM;
    All these keywords.

    JEL classification:

    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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