Hoard or exploit? Intergenerational allocation of exhaustible natural resources

Hala Abu-Kalla, Ruslana Rachel Palatnik, Ofira Ayalon, Mordechai Shechter

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish
Article number6657
JournalEnergies
Volume13
Issue number24
DOIs
StatePublished - 2 Dec 2020

Bibliographical note

Publisher Copyright:
© 2020 by the authors. Licensee MDPI, Basel, Switzerland.

Keywords

  • Economic welfare
  • Energy
  • Exhaustible resource
  • General equilibrium model
  • Natural gas
  • Sovereign wealth fund (SWF)

ASJC Scopus subject areas

  • Renewable Energy, Sustainability and the Environment
  • Fuel Technology
  • Energy Engineering and Power Technology
  • Energy (miscellaneous)
  • Control and Optimization
  • Electrical and Electronic Engineering

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