Environmental Taxes on Exhaustible Resources.

Environmental problems are tied to the use of exhaustible resources. A resource tax extracts rents from the resource owning countries, whitout creating significant incentives for consumers to reduce their resource consumption. The placement of the tax burden on resource owners affects the international distribution of wealth. In this paper we show that it is optimal for small countries who do not coordinate their national environmental policies, to impose a time-variant Pigovian tax.