326 Int. J. Environment and Pollution, Vol. 10, No. 2, 1998 Resource exploitation under environmental uncertainty Yacov Tsur Dept. of Agricultural Economics & Management, The Hebrew University P.O.B. 12, Rehovot 76100, Israel, and Dept of Applied Economics, University of Minnesota, 1994 Buford Avenue, St. Paul, MN 55108, USA Amos Zemel Center for Energy and Environmental Physics, The Jacob Blaustein Institute for Desert Research, Ben-Gurion University of the Negev, Sde Boker Campus, 84990, Israel, and Dept of Industrial Engineering and Management. Ben Gurion University of the Negev, Beer Sheva, 84105, Israel Abstract: Optimal resource management is considered, with a special emphasis on the possible occurrence of a catastrophic environmental event, whose occurrence conditions arc subject to uncertainty. The events are classified according to the extent to which the damage they inflict is reversible, and th7acterized as exogenous or endogenous. The implications of this classification on the ensuing optimal policies are analysed. The framework presented unifies the analysis of the plethora of events considered, relating their optimal state processes to the particular class to which the corresponding event belongs. We find that endogenous events give rise to equilibrium intervals and always entail more conservation. In contrast, exogenous events entail isolated equilibrium levels, and conservation is ensured only if the event is reversible. Keywords: conservation, endogenous/exogenous events, event uncertainty, irreversibility, optimal resource management. Reference to this paper should be made as follows: Tsur, Y. and Zemel, A. (1998) ‘Resource exploitation under environmental uncertainty’, Int. J. Environment and Pollution, Vol. 10, No. 2, pp. 326-338. 1 Introduction Many environmental processes involve uncertainty, and their evolution cannot be predicted precisely. Anthropogenic activity, such as natural resource exploitation or the enhanced pollution associated with production processes, can entail undesirable, or even catastrophic events. In most cases, it is not possible to predict the exact occurrence date of these events, either because we do not understand completely the dynamics that drive them, or because their occurrence is triggered by exogenous environmental conditions that are, to some extent, random. Accounting for event uncertainty is of particular relevance for the derivation of optimal natural resource management or pollution control policies, because the effects of the event can he so costly that preventing its occurrence might turn out to be a dominant consideration. In this paper we consider optimal exploitation under event occurrence Copyright © 1998 Inderscience Enterprises Ltd.