Unit 9: Slideshow Flashcards
How should we decide to allocate nonrenewables across generations
Hartwick’s rule
What is Hartwick’s Rule
Value of nonrenewables to be invested for future generations
How do we value resource consumption that will take place in the future
Interest Rates
What is RESOURCE DEPLETION TAX
Tax imposed on the extraction or sale of natural resource
What is HOTELLING’S RULE
In equilibrium the net price of a resource must rise at a rate equal to the rate
How do high discount rates relate to extraction
Extract more know and invest-favour the present more
How do low discount rates relate to extraction
Greater incentive to conserve
What other factors affect prices on NonRenewable Resources
-changing estimates of reserves
-changing definitions of oil
-technological changes
-changing demand curve-rising incomes
-cheaper alternatives
-cheaper alternatives
-lack of investment
-capital constraints
-changing expectations
What are ECONOMIC RESERVES
quantity of resource that can be extracted profitably
What are the 2 factors of ECONOMIC RESERVES
Current Price
Technology
What are PHYSICAL RESERVES
Total quantity without looking at economic feasibility
What are IDENTIFIED RESERVES
quantity of reserves that have been identified
-varying levels of confidence
-economic & subeconomic
