Trends in the extraction of non-renewable resources: The case of fossil energy

Unurjargal Nyambuu and Willi Semmler

Economic Modelling, 2014, vol. 37, issue C, 271-279

Abstract: This paper considers a strategy for the extraction and production of non-renewable resources that are finite in quantity. Specifically, we illustrate empirical data on reserves, production, consumption, and price evolution for fossil fuel. Our model is an intertemporal model of a short decision time horizon with a monopolistic resource producer extracting non-renewable resources. The model is solved numerically using a finite horizon solution method called Nonlinear Model Predictive Control (NMPC), which approximates well models with a longer decision time horizon. Consistent with the results of recent empirical studies, our numerical solution method shows a U-shaped path for the price and an inverted U-shaped path for the extraction rate, in the case of modest initial stock of proved reserves.

Keywords: Non-renewable resource; Fossil fuel; Dynamic decision theory; Nonlinear Model Predictive Control (search for similar items in EconPapers)
JEL-codes: C61 Q30 Q32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:37:y:2014:i:c:p:271-279

DOI: 10.1016/j.econmod.2013.11.020

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