FEEM working papers "Note di lavoro" series
2015 .027

Time Scale Externalities and the Management of Renewable Resources


Authors: Giannis Vardas, Anastasios Xepapadeas
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro  
Keywords: Optimal Resource Harvesting, Fast Slow Dynamics, Singular Perturbation, Regulation, Open Loop, Closed Loop
JEL n.: D81, Q20

Abstract

The evolution of renewable resources is characterized in many cases by different time scales where some state variables such as biomass, may evolve relatively faster than other state variables such as carrying capacity. Ignoring this time scale separation means that a slowly changing variable is treated as constant over time. Management rules designed without accounting for time scale separation will result in inefficiencies in resource management. We call this inefficiency time scale externality and we analyze renewable resource harvesting when carrying capacity evolves slowly, either in response to exogenous forcing or in response to emissions generated by the industrial sector of the economy. We study cooperative and non-cooperative solutions under time scale separation. Using singular perturbation reduction methods (Fenichel 1979), we examine the role of different time scales in environmental management and the potential errors in optimal regulation when time scale separation is ignored.

***
Suggested citation: Vardas, G., A. Xepapadeas, (2015), 'Time Scale Externalities and the Management of Renewable Resources', Nota di Lavoro 27.2015, Milan, Italy: Fondazione Eni Enrico Mattei

Download file
Download PDF file

FEEM Update

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree