Env-Econ 101: Hotelling's Rule Part 2

Environmental Economics

In Part 1 of our Hotelling's Rule explanation , we laid out the basic economic observation that for a non-renewable, exhaustible resource with completely known stock, no discoveries possible, no alternatives, no recycling, private ownership and constant costs of extraction, the price of the resource will increase at the interest rate over time.  The complete stock of the resource is fully known and there is no more. There are no alternatives to the resource.

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Green Future: Google Invests $1 Billion in Clean Energy

Environmental News Network

If you haven’t guessed it by now, Google invested specifically in clean wind power — $275 million in Texas resources alone. In addition, Google heated things up by including solar energy resources in the mix. The Benefits of Alternative Resources.

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Shipping container “cargotecture” not all they’re stacked up to be!

Green Prophet

Shipping box homes make sense where containers are available and alternate resources scarce, but it’s still cheaper and less energy consuming to build a structure using traditional framing or concrete block.

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Wither coal (despite all attempts to the contrary)? What's next?

Environmental Economics

The important corollary to the Hotelling rule regarding transition to alternative fuel sources is: As the price of the depletable resource rises and/or the price of the alternative resource decreases, incentives are created to switch between the resources

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"The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future" is a good bet

Environmental Economics

  OK, it wasn't really over the Hotelling rule , but it was about Hotelling-like predictions of changes in depletable resource prices.    One observable indicator of Ehrlich's and his colleagues' dire predictions would be the Hotelling-like rise in depletable resource prices over time.    As resources become more scarce (reach their natural limits), prices would have to rise. 

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