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Resources 2019, 8(1), 19; https://doi.org/10.3390/resources8010019

The Social Cost of Sub-Soil Resource Use

1
RDC Environment, 57 Avenue Gustave Demey, 1160 Brussels, Belgium
2
Danish Centre for Environmental Assessment, Aalborg University, Rendsburggade 14, 9000 Aalborg, Denmark
*
Author to whom correspondence should be addressed.
Received: 6 December 2018 / Revised: 4 January 2019 / Accepted: 9 January 2019 / Published: 15 January 2019
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Abstract

This paper presents a market-price-based method to value sub-soil resources in environmental Cost-Benefit Analysis and Life Cycle Assessment. The market price incorporates the privileged information of the market agents, explicitly or implicitly anticipating future applications of the resource, future backstop technologies, recycling potentials, the evolution of reserves and extraction costs. The market price is therefore considered as the best available integrated information reflecting the actual values of these parameters. Our method is based on the Hotelling rule and the fact that private agents discount future costs and benefits at a higher rate than society as a whole. In practice, the price of the last resource unit sold is calculated with the Hotelling rule using a market discount rate. Then, the price at depletion is retropolated with a social discount rate smaller than the market discount rate. The resulting corrected “socially optimal” price is higher than the market price. The method allows to calculate the social cost of resource exhaustion, which is applicable in Cost-Benefit Analysis and Life Cycle Assessment. The method is applied to mineral and fossil resources and the results are compared with other recent methods that seek to place a monetary value on resource depletion. View Full-Text
Keywords: Hotelling; resource depletion; price correction; extraction cost; social discount rate; external cost valuation Hotelling; resource depletion; price correction; extraction cost; social discount rate; external cost valuation
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Huppertz, T.; Weidema, B.P.; Standaert, S.; De Caevel, B.; van Overbeke, E. The Social Cost of Sub-Soil Resource Use. Resources 2019, 8, 19.

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