ABSTRACT
Renewable resources are integrated into the analysis by relying on the simplest possible case–the resource is assumed to be supplied at a fixed, abundant rate and can be accessed at a constant marginal cost. Three separate concepts are used to classify the stock of depletable resources: current reserves, potential reserves, and resource endowment. The depletion rate is affected by the demand for and the durability of the products built with the resource, and the ability to reuse the products. Depletable energy resources such as coal, oil, and gas are irreversibly transformed when they are combusted. Renewable resources are differentiated from depletable resources primarily by the fact that natural replenishment augments the flow of renewable resources at a non-negligible rate. In the standard treatments when the resource can be extracted at a constant marginal cost, the efficient quantity of the depletable resource extracted declines over time.
