The elephant in Hotelling's room

Rob Hart and Daniel Spiro

Energy Policy, 2011, vol. 39, issue 12, 7834-7838

Abstract: This paper questions the assumption, commonly used in theoretical and policy research, that scarcity rents make up a large proportion of market prices for oil and coal. We show that the empirical literature, simple calculations of historical and future scarcity rent shares, and possible theoretical explanations all imply the same overall conclusions: that scarcity rents seem to have been marginal or non-existent historically; that they almost certainly do not dominate fossil resource prices today; and that there will be other factors shaping the prices in the upcoming decades. We therefore argue that using the scarcity rent as the main or only basis for policy or for explaining empirical outcomes is ill-advised.

Keywords: Resource scarcity; Climate policy; Green paradox (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:39:y:2011:i:12:p:7834-7838

DOI: 10.1016/j.enpol.2011.09.029

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