The taxation of nonreplenishable natural resources revisited

The theory of nonreplenishable resource extraction has been extended to allow for extraction costs which increase as deposits are increasingly depleted. In these cases, profit maximization may result in the cessation of extraction before reserves are totally exhausted. The effect of various taxation policies on optimal extraction patterns in these models are derived. With a few exceptions, the results are that the imposition of a tax will cause operators to extract at faster rates over shorter periods of time and to reduce the total amount of ore extracted. The analysis allows for an output price which increases over time.