Challenges for a sustainable resource use: Uncertainty,trade, and climate policies

We integrate new challenges to thinking about resource markets and sustainable resource use policies in a general framework. The challenges, emerging from six papers that JEEM publishes in a special issue, are (i) demand uncertainty and stockpiling, (ii) international trade and resource dependence, (iii) deforestation, and (iv) intertemporal effects of climate change policies (“Green Paradox”). We discuss new insights and results on these issues by fitting them into the Hotelling model of non-renewable resource depletion.     

Regulatory attitudes and environmental innovation in a model combining internal and external R&D

The extent to which environmental regulatory institutions are either ‘green’ or ‘brown’ impacts not just the intensity of regulation at any moment, but also the incentives for the development of new pollution-control technologies. We set up a strategic model of R&D in which a polluter can deploy technologies developed in-house, or license technologies developed by specialist outsiders (an ‘eco-industry’). Polluters exert R&D effort and may even develop redundant technologies to improve the terms on which they procure technology from outside. We find that, while regulatory bias has an ambiguous impact on the best-available technology, strategic delegation to systematically biased regulators can improve social welfare.     

Endogenous growth,asymmetric trade and resource dependence

The aggregate income of oil-exporting countries relative to that of oil-poor countries has been remarkably constant in recent decades, despite the existence of structural gaps in productivity growth rates. This stylized fact is rationalized in an endogenous growth model of asymmetric trade where resource-poor and resource-rich economies display productivity differences but stable income shares due to terms-of-trade dynamics. The model yields two testable predictions that deserve empirical scrutiny: (i) the asymmetric impact, between exporters and importers, of national taxes on resource use on income shares and (ii) the inverse relation between terms-of-trade dynamics and total factor productivity growth.