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Ordering the Extraction of Polluting Nonrenewable Resources

Ujjayant Chakravorty (), Michel Moreaux and Mabel Tidball ()

American Economic Review, 2008, vol. 98, issue 3, 1128-44

Abstract: A well-known theorem by Herfindahl states that the low-cost nonrenewable resource must be exploited first. Consider resources that are differentiated only by their pollution content. For instance, both coal and natural gas are used to generate electricity, yet coal is more polluting. We show that the ordering of extraction need not be driven by whether a resource is clean or dirty. Coal may be used first, followed by natural gas, and again by coal. Such "vacillation" does not occur under cost heterogeneity. A perverse policy implication is that regulating pollution may accelerate use of the polluting resource.

JEL-codes: Q38 Q53 Q58 Q32 (search for similar items in EconPapers)
Date: 2008
Note: DOI: 10.1257/aer.98.3.1128
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Working Paper: Ordering the Extraction of Polluting Nonrenewable Resources (2006) Downloads
Working Paper: Ordering the Extraction of Polluting Nonrenewable Resources (2006) Downloads
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