FEEM working papers "Note di lavoro" series
2000 .002

Does Productive Capital Affect the Order of Resource Exploitation?


Authors: Pascal Favard
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Natural resources,substitute,productive capital,general equilibrium
JEL n.: Q3
JEL: Journal of Eco Dynamics and Control

Abstract

The purpose of this paper is to show that in a general equilibrium framework it is never optimal to use high cost substitute after lower cost exhaustible resource even if it is possible to accumulate productive capital. Indeed if the high cost substitute is scarce 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.

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