There is a small literature on the joint production of mining products like copper and gold but to our knowledge, very little attention has been given to joint production from a single exhaustible resource.

We contribute to this literature by using the example of oil extraction, and the coproduction of energy and plastic In a standard theoretical model of exhaustible resources, we assume that energy is essential in the utility function, whereas plastic is considered non essential.

We create a series of scenarios to study:

i asymmetric backstop technologies or substitutes between the two outputs;

ii) the endogenous choice in the production of plastic v energy;

iii) the presence of externalities.

In the absence of plastic in the utility function, the social planner’s program follows the standard Hotelling rule. When plastic is added, both the utility and the marginal utility are higher. Thus, the introduction of plastic could be expected to reduce energy consumption yet plastic production also makes resource extraction more profitable, i e energy cheaper. Overall, the impact of plastic on the extraction path depends, however, upon the magnitude of the utility cross derivative and the intertemporal elasticity of substitution. Extraction can be postponed, at first, retarding possibly the adoption of a backstop technology it can also be anticipated, triggering a “green paradox”.

About the speaker

Etienne Billette de Villemeur is professor of economics at the University of Lille, France and a researcher at LEM (UMR 9221 CNRS). He is also associated with UQAM, Canada as well as with the Chaires Universitaires Toussaint Louverture, in Haiti. His research includes theoretical contributions in axiomatic theories of justice as well as works on much more applied issues, such as water pricing in Port au Prince. Thanks to his multiple collaborations, he is also the author of publications in other disciplines, including in life sciences.

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