The Supply of Non-Renewable Resources

Julien Daubanes () and Pierre Lasserre

No 2017/03, IFRO Working Paper from University of Copenhagen, Department of Food and Resource Economics

Abstract: There exists no formal treatment of non-renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location not only depends on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own-price effect, cross-price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: A price increase at some point in space and time causes NRR supply to decrease at all other points. This new but orthodox supply setting extends to NRRs the partial equilibrium analysis of demand and supply policies. Thereby, it provides a generalization of many results about policy-induced changes on NRR markets. The properties of restricted and unrestricted supply functions are characterized for Hotelling (homogeneous) as well as Ricardian (non homogeneous) reserves, for a single deposit as well as for several deposits that endogenously come into production or cease to be active.

Keywords: Allocating reserves; Supply theory; Substitution effect; Stock compensation effect; Green paradox; Spatial leakage (search for similar items in EconPapers)
JEL-codes: D21 H22 Q38 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2017-03
New Economics Papers: this item is included in nep-ene and nep-env
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http://okonomi.foi.dk/workingpapers/WPpdf/WP2017/IFRO_WP_2017_03.pdf (application/pdf)

Related works:
Journal Article: The supply of non-renewable resources (2019)
Journal Article: The supply of non‐renewable resources (2019)
Working Paper: The supply of non-renewable resources (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:foi:wpaper:2017_03

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