A rapidly rising carbon tax leads to faster extraction of fossil fuels and accelerates global warming. We analyze how general equilibrium effects operating through the international capital market affect this Green Paradox. In a two-region, two-period world with identical homothetic preferences...

The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling rule and the Hartwick rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational...

Optimal climate policy is studied. Coal, the abundant resource, contributes more CO2 per unit of energy than the exhaustible resource, oil. We characterize the optimal sequencing oil and coal and departures from the Herfindahl rule. "Preference reversal" can take place. If coal is very dirty...

The effects of stochastic future oil prices on optimal oil extraction paths and optimal tax, spending and government debt policies are analyzed when demand for oil is linear and preferences quadratic. Without prudence, optimal oil extraction is governed by the Hotelling rule and optimal...

For a country fractionalized in competing factions, each owning part of the stock of naturalexhaustible resources, or with insecure property rights, we analyze how resources are transformed into productive capital to sustain consumption. We allow property rights to improve as the country...

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...