Sustainability and the intergenerational distribution of natural resource entitlements

The paper describes an OLG economy with a single exhaustible resource that has amenity value. The steady states of this economy form a continuum, impl ying path-dependency. We compare three policy scenarios; first, a 'zero ext raction' policy of enforced conservation that avoids environmental degradat ion, possibly at the expense of intertemporal efficiency. Second, a 'grandf athering' policy that endows the present generations with all resources, an d that ensures efficiency but cannot prevent a persistent decline in lifeti me utility from one generation to the next. Third, a 'trust fund' policy, w here future generations receive claims for the natural resource. Of the thr ee, only the trust fund ensures efficiency and protects welfare of all gene rations. (C) 2001 Elsevier Science BN. All rights reserved.