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Exploitation and Recycling of Exhaustible Resources: The Case of Rare Earths and Phosphorus

Bocar Samba Ba () and Raphael Soubeyran ()
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Bocar Samba Ba: Centre d'Etudes et de Recherches sur le Développement International (CERDI)

No 2017.01, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We study the exploitation of recyclable exhaustible resources such as rare earths and Phosphorus. We use a standard Hotelling model of resource exploitation that includes a primary sector and a recycling sector. We show that, when the primary sector is competitive, the price of the recyclable resource increases through time. This result stands in contrast to durable resources, for which the optimal price path is either decreasing or U-shaped. We then show a new reason why the price of an exhaustible resource may decrease: when the primary sector is monopolistic, the primary producer has incentives to delay its production activities in order to delay recycling. As a consequence, the price path of the recyclable resource may be U-shaped. We also show that a technological improvement in the recycling sector increases the price in the short term but decreases it later.

Keywords: Rare earths; Phosphorus; Recycling; Competition; Optimal control (search for similar items in EconPapers)
JEL-codes: D40 D43 L12 L13 Q31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene and nep-env
Date: 2017-01
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