The supply of non-renewable resources

Julien Daubanes (jxada@dtu.dk) and Pierre Lasserre

No 2018.09, Working Papers from FAERE - French Association of Environmental and Resource Economists

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 depends not only 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. Our new—although orthodox—setting takes into account not only NRR supply limitations, but also the heterogeneity of NRR deposits, and the endogeneity of their development and opening. Our analysis extends to NRRs the partial-equilibrium analysis of demand and supply policies. Thereby, it provides a generalization of results about policy-induced changes on NRR markets.

Keywords: Allocating reserves; Supply theory; Substitution effect; Green paradox; Spatial leakage (search for similar items in EconPapers)
JEL-codes: D21 H22 Q38 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2018-08
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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Forthcoming in Canadian Journal of Economics

Downloads: (external link)
http://faere.fr/pub/WorkingPapers/Daubanes_Lasserre_FAERE_WP2018.09.pdf First version, 2018 (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 (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2018.09

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