Hoard or Exploit? Intergenerational Allocation of Exhaustible Natural Resources

In this paper, a “general equilibrium” (GE) model was developed for the allocation of exhaustible natural resources to examine the impact of different extraction scenarios on intergenerational economic welfare. A stylized GE model was applied to Israel’s natural gas (NG) market to evaluate economic...

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Bibliographic Details
Published in:Energies (Basel) 2020-12, Vol.13 (24), p.6657
Main Authors: Abu-Kalla, Hala, Palatnik, Ruslana Rachel, Ayalon, Ofira, Shechter, Mordechai
Format: Article
Language:English
Subjects:
Coal
Consumption
Decision making
Economic growth
economic welfare
Electric power generation
Energy
Environmental policy
exhaustible resource
general equilibrium model
Impact analysis
Income distribution
Literature reviews
Market economies
Natural gas
Natural gas industry
Natural gas reserves
Natural resources
Profits
R&D
Regulation
Research & development
sovereign wealth fund (SWF)
Sustainable development
Taxation
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Summary:In this paper, a “general equilibrium” (GE) model was developed for the allocation of exhaustible natural resources to examine the impact of different extraction scenarios on intergenerational economic welfare. A stylized GE model was applied to Israel’s natural gas (NG) market to evaluate economic indicators resulting from NG-extraction scenarios: a baseline scenario based on current policy in the NG sector, a conservative scenario based on a lower extraction rate, and an intensive scenario based on a faster extraction rate. The impact of various resource income-allocation strategies on intergenerational economic welfare was examined through the mechanism of a “sovereign wealth fund” (SWF). The results indicate that a higher NG-extraction rate combined with an appropriate investment strategy for NG profits is preferable from an economic perspective compared to a conservative rate. Investment of the government take from the NG market in research and development (R&D) of renewable electricity production can sustainably increase economic welfare.
ISSN:1996-1073
1996-1073
DOI:10.3390/en13246657