We introduce learning into a Hotelling model of a non-renewable resource market. By combining learning and scarcity we add significantly to the dynamics implied by learning and substantially enhance the volatility of commodity prices. In our learning model we show how a self confirming...

Unilateral second-best carbon taxes are analysed in a two-period, two-country model with international trade in final goods, oil and bonds. Acceleration of global warming resulting from a future carbon tax is large if the price elasticities of oil demand are large and that of oil supply is...

The optimal reaction to a pending productivity shock of which the expected arrival time increases with global warming is to accumulate more precautionary capital to smooth consumption and to levy a carbon tax, proportional to the marginal hazard of a catastrophe, to curb the risk of climate...

Carbon dioxide emissions may cause global warming. But own emissions have negligible effects for a small nation, which may thus regard carbon taxes as distortionary. Such taxes may have other effects, however. When research and development (R&D) has positive external effects, carbon taxes may...

We build a two-sector dynamic general equilibrium model with one-sided substitutability between fossil carbon and biocarbon. One shock only, the discovery of the technology to use fossil fuels, leads to a transition from an inital pre-industrial phase to three following phases: a pure fossil...

We estimate an aggregate production function with constant elasticity of substitution between energy and a capital/labor composite using U.S. data. The implied measure of energy-saving technical change appears to respond strongly to the oil-price shocks in the 1970s and has a negative medium-run...

Oil exporters typically do not consider below-ground assets when allocating their sovereign wealth fund portfolios, and ignore above-ground assets when extracting oil. We present a unified framework for considering both. Subsoil oil should alter a fund’s portfolio through additional leverage...

Three funds are necessary to manage an oil windfall: intergenerational, liquidity and investment funds. The optimal liquidity fund is bigger if the windfall lasts longer and oil price volatility, prudence and the GDP share of oil rents are high and productivity growth is low. We apply our theory...

This paper diagnoses the symptoms of the Dutch disease in a two-sector stochastic endogenous growth model. A productive, low skill-intensive primary sector causes the currency to appreciate in real terms, thus hampering the development of a high skill-intensive secondary sector and thereby...

We investigate the Hartwick rule for saving of a nation necessary to sustain a constant level of private consumption for a small open economy with an exhaustible stock of natural resources. The amount by which a country saves and invests less than the marginal resource rents equals the expected...