Résumé
Herfindahl extended the hotelling theory by showing that if nonrenewable resources differ by their cost of extraction, then extraction must follow the “least cost first” principle. In this paper we consider the sequence of extraction when resources are differentiated by their pollution characteristics. For instance, both coal and natural gas are used to generate electricity, yet coal is more polluting. The solution is shown to depend on the abundance of the polluting resource. If coal supplies are limited, both resources have the same scarcity rent. They follow a strict Hotelling path. However, if coal is abundant, the two resources have different scarcity rents. The sequence of extraction has an unusual turnpike property – use both resources at the maximum allowable limit until gas is depleted, then only coal at the end. When resources are abundant, all paths must pass through this turnpike.