Environmentally sustainable industrial modernization and resource consumption: Is the Hotelling’s rule too steep?

Abstract The suggested model describes the optimal management of a manufacturing system (a firm, region, or industry) that consumes a scarce natural resource and replaces obsolete productive assets with new resource-efficient ones. The model includes resource-saving embodied technological change, a varying resource price, and environmental quotas on resource consumption. Mathematically, it leads to the infinite-horizon optimal control of nonlinear integral equations with unknown integration limits. A steady-state analysis of the model addresses environmentally sustainable manufacturing and provides important implications for both firm and government decision-making.

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