Handbook on the Economics of Natural Resources

Handbook on the Economics of Natural Resources

Edited by Robert Halvorsen and David F. Layton

The topics discussed in the Handbook on the Economics of Natural Resources are essential for those looking to understand how best to use and conserve the resources that form the foundation for human well-being. These include nonrenewable resources, modeling of biological resources, conservation of biological resources and water resources. The expert contributors of this Handbook provide solutions to many of the problems that growing populations now face, and sketch the likely future developments in the field of natural resource economics whilst paving the way for new thinking.

Chapter 4: The taxation of nonrenewable natural resources

Gérard Gaudet and Pierre Lasserre

Subjects: economics and finance, environmental economics, environment, environmental economics

Extract

A distinctive feature of nonrenewable natural resource markets is that the marginal revenue from the sale of the resource exceeds the marginal cost of extracting it. This difference constitutes a rent, which is due strictly to the nonrenewability of the resource stock. The in situ resource being very often under public ownership, taxes can then become instruments used by governments to recuperate this scarcity rent from the private resource extracting firms to which the extraction has been delegated. This use of the tax system is particularly important in the case of nonrenewable natural resources and the taxes used can take different forms. So-called severance taxes are one type of tax that is often used, in the form of a tax either on the quantity extracted (a specific tax) or on the market value of the resource extracted (an ad valorem tax). Profit or net revenue taxes, variably defined, are also common. Some form of fixed licence fees, independent of the quantity extracted or of the revenues, may also be used in some cases.

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