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Sinn, Hans-Werner (2007): Pareto optimality in the extraction of fossil fuels and the greenhouse effect: a note. CESifo Working Paper, 2083
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This note generalizes the Solow-Stiglitz efficiency condition for natural resources to the problem of fossil fuel extraction with a greenhouse effect. The generalized optimality condition suggests that the greenhouse effect implies overextraction in the sense of leaving future generations a wrongly composed wealth portfolio with too few natural resources relative to man-made capital. This judgment is independent of society s ethical preferences concerning the well-being of future generations.