We will focus on the concept of reserves with is

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We will focus on the concept of reserves, with is endogenous since the concept evolves in time. Oil The graph says how long will the reserves last if we keep extract them. Given the reserves in 2018, the reserves of Africa will last for 40 years at the same rate of extraction of 2018. Given the same concept from 1998 till now, we can see there is only one big discovery of oil in 2003 in Middle east, or a huge discovery of oil in Venezuela. They have now way more resources in S America since they don’t extract a lot.
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In the 1996, big discovery in North America. Gas You have sill a lot of gas under the ground. In middle east there have been a big discovery but it kept decreasing over the years. Minerals There are some minerals where there is no time left. Copper not so much time left. ----------------------------------------------------------------------------------- In 2014, 100 billion $ spent to find new deposits of oil & gas . Felt when the price of oil was lower. There also have been very recent discovery (2019). What is a conventional discovery? Conventional oil & gas = that use to be exploited for a long time Non-conventional oil & gas = In the US: shale gas & oil (gaz de schiste) that have been discovered by fracturing rocks. In Canada, Alberta province: tar sands (goudron) from sand. In France/ Europe this kind of technique is forbidden. Why? because we don’t know what to do with most of the trash it creates & it can deteriorate water tables. Very expensive and it pollutes a lot. Coal No risk of getting short of coal. I. The optimal extraction of a non-renewable resource Hotelling 1931 Cake-Eating model (partage du gateau)
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Discounting makes the future like it doesn’t count
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2 assumptions: U (0) = A < +∞, C (0) = 0 A= choke price (prix d’ettouffement). At this price, people don’t want the resource anymore. When the utility is higher than A then we use the resource. There is no more demand since the cost is too high. U′(0) means that the extraction is very low, it means that when the extraction is very low r=0, there is a substitute to the non-renewable resource A available immediately in infinite supply but very expensive. Thus A is the choke price, means it is the lowest price at which the quantity demanded of a good is equal to zero. The good price is too high compared to its utility so there is no demand for it. At any price below the choke price, consumers will demand some quantity of the good. At any price equal to or above the choke price, consumers will not express any demand for the good. For the value of the resource underground : λ T = A means that at the point A, the price of the resource under the ground is too high, hence there will be no more demand for that good ( equivalent to T= exhaustion of the non-renewable resource). Question: do we consider that the point of λ T = A is when there is no more resource or that the price is too high so no more demand for that resource so we consider it as exhausted ?
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Final date of the extraction program: R = O , u ' ( 0 ) c ' ( 0 ) = A For the stock of resources: St S o T t For the extraction: It is decreasing in time, Rt Surfaceunder the curve = s o T t T= when there is no more resources.
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  • Fall '19
  • Ecological economics, Renewable resource

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