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on Energy Economics |
| By: | Pollitt, M. |
| Abstract: | In this paper we raise a number of issues that are important for the UK to consider in the light of its decision to leave the European Union (EU). The first of these is the nature of the EU Single Market in Electricity and Gas and the UK’s role within this. The second is the nature of UK energy policy in the light of Brexit, and the opportunities for changing this. And third, we consider some of the key issues to be addressed in a negotiating position with the EU. |
| Keywords: | Brexit, Energy Policy |
| JEL: | L94 |
| Date: | 2017–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1706&r=ene |
| By: | Ignas Mikalauskas (Vilnius University) |
| Abstract: | The importance of technological advances reaches each and every one. New innovations drive the world we live in, form societies and economies around us. One of the main and primitive questions to every day human is whether or not he can afford a new technology, for a manufacturer ? can he make a profit of selling it, for an environmentalist ? how will it impact the future? One thing is certain ? none of that can be answered if it?s unknown whether the technology is reachable to every day user, starting from the price of the technology itself, including different levels of investments, ending with the costs of actually installing the technologies to common households worldwide, for green, economically growing and sustainable future. |
| Keywords: | renewable energy, innovative renewable energy sources, cost of energy |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507196&r=ene |
| By: | Olivier Damette; Philippe Delacote; Gaye del Lo |
| Abstract: | The paper investigates the factors influencing households’ energy choices, and the drivers of switching toward cleaner energy. We first present a theoretical framework to determine the factors that explain households’ energy consumption and highlight the motivations underlying their transition towards less polluting sources, including their environmental preference. Using French household data from ADEME, we provide an econometric test of qualitative variables following studies by Dubin and McFadden (1984). Our results show that income and prices are the main determinants of household energy consumption. Environmental considerations seem to influence the choice of energy sources more than consumption. We also find evidence that income and relative capital costs are the most important variables for household energy switching. |
| Keywords: | Energy choice, Switching, Environmental preference, Discrete and continuous model. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1702&r=ene |
| By: | Julie Rozenberg; Adrien Vogt-Schilb; Stephane Hallegatte |
| Abstract: | To mitigate climate change, some governments opt for instruments focused on investment, like performance standards or feebates, instead of carbon prices. We compare these policies in a Ramsey model with clean and polluting capital, irreversible investment and a climate constraint. Alternative instruments imply different transitions to the same balanced growth path. The optimal carbon price minimizes the discounted social cost of the transition to clean capital, but imposes immediate private costs that disproportionately affect the current owners of polluting capital, in particular in the form of stranded assets. A phased-in carbon price can avoid stranded assets but still result in a drop of income for the owners of polluting capital when it is implemented. Second-best standards or feebates on new investment lead to higher total costs but avoid stranded assets, preserve the revenues of vested interests, and smooth abatement costs over individuals and time. These results suggest a trade-off between political feasibility and cost-effectiveness of environmental policies. |
| Keywords: | Stranded Assets, Energy efficiency, Greenhouse Gas Emissions, Power plants, Coal, Environmental taxes, Environmental Policy, Climate change mitigation, clean capital, stranded assets, BIDcambioclima |
| JEL: | L50 O33 O44 Q52 Q54 Q58 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:98039&r=ene |
| By: | Olivier JOALLAND; Tina RAMBONILAZA |
| Abstract: | Installing greater numbers of renewable energy solutions in France has the potential to generate various negative externalities for the users of rural areas. Wind turbines and overhead power lines can often be seen as “eyesores” which adversely affect the aesthetic qualities of rural landscapes, thus reducing their use value. In this study, we apply the hedonic price method to evaluate this loss of value from the point of view of the tourist industry. Data were collected relating to the prices of rural gîtes (small cottage rentals) in three French regions. Prices were linked to three categories of variables relating to the properties: characteristics of the properties themselves, the surrounding environment, and their proximity to power-related infrastructure. The generalized method of moments was used to deal with spatial autocorrelation of errors. Our results highlighted the importance of comfort and proximity to the coast in determining the rental value of each property. Landscape value was significantly reduced when properties were located close to energy infrastructures. While it is important not to lose sight of the fact that the majority of rural cottages are located at some considerable distance from energy infrastructures, the losses highlighted in this study show that appropriate support mechanisms need to be put in place in affected rural areas. |
| Keywords: | Externalities - Hedonic prices - Renewable energy -Wind power |
| JEL: | Q51 R11 R33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2017-10&r=ene |
| By: | Marc Baudry; Clément Bonnet |
| Abstract: | Renewable energy technologies are called to play a crucial role in the reduction of greenhouse gas emissions. Since most of these technologies did not yet reach grid parity, public policies can rely on two types of approach: supply push and demand pull. The latter aims at creating demand for new technologies and at stimulating their diffusion. Nevertheless, due to the complex self-sustained dynamics of diffusion and to spillovers between the countries it is hard to determine whether newly installed capacities are imputable to national support policies and/or to policies implemented by neighbor countries. The paper addresses this problem. A micro-founded model of technology diffusion is developed and calibrated. It captures the influence of demand pull policies on installed capacities for six European countries over the last decade. A counter-factual analysis is carried out to assess the impact of demand pull policies on wind power development by taking into account the interplay between national policies via spillovers. |
| Keywords: | Renewable energy, Technology diffusion, Demand pull instruments. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1607&r=ene |
| By: | Divya Vohra; Edith Felix; Duncan Chaplin; Arif Mamun |
| Abstract: | The Kigoma solar activity, funded by the Millennium Challenge Corporation, was designed to promote solar power systems in the Kigoma region of western Tanzania. This brief covers results from a recently completed performance evaluation of the Kigoma solar activity. |
| Keywords: | Solar Power, Electricity, Millennium Challenge Corporation, Tanzania, Developing Countries |
| JEL: | F Z |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:5b5087568f5a430a82d0bcb29e1fc523&r=ene |
| By: | Fridrik Mar Baldursson; Julia Bellenbaum; Ewa Lazarczyk; Lenja Niesen; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen)) |
| Abstract: | We develop an analytical model to derive the competitive market equilibrium for electricity spot and reserve markets under stochastic demand and uncertain renewable electricity generation. We then derive the welfare-optimal provision of reserves. At rst-best, cost of reserve capacity is balanced against expected cost of outages. The rst-best market equilibrium of the model implies an increase of reserve provision with a growing share of renewable generation. Furthermore, a growing share of renewable generation decreases the level of reliability as measured in energy not served. Additionally, required reserves to balance higher expected deviations will be more expensive, resulting in a trade-o between higher reserve costs and costs of energy not served. |
| Keywords: | Renewable Energy Sources, Electricity Reserves, Reliability, Electricity Market |
| JEL: | Q40 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1703&r=ene |
| By: | Liski, M.; Vehviläinen, I. |
| Abstract: | Subsidies to renewable energy are costly and contentious. We estimate the reduction in prices that follows from the subsidized entry of wind power in the Nordic electricity market. A relatively small-scale entry of renewables leads to a large-scale transfer of surplus from the incumbent producers to the consumers: 10 % market share for wind generation eliminates one-half of the total electricity market expenditures. The subsidies generate net gains to consumers. We develop an approach to analyzing storage and renewable energy in equilibrium, and provide an anatomy of a market dominated by such technologies. |
| Keywords: | Electricity, renewables, storage, climate policies |
| JEL: | L51 L94 Q28 Q42 Q48 |
| Date: | 2017–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1701&r=ene |
| By: | Pollitt, M.; Yang, C-H.; Chen, H. |
| Abstract: | We begin with a brief background to the current Chinese power market reforms which began with the State Council No.9 Document of March 2015. We introduce 14 different electricity reform elements from international experience. Under each of these reform elements we will discuss: its theoretical significance; general reform experiences with it; and its application in the Chinese context. Our motivation is how China might bring down the currently high industrial price of electricity. We identify four promising sources of price reduction: the introduction of economic dispatch of power plants; rationalisation of electricity transmission and distribution; reduction of high rates of investment; and rebalancing of electricity charges towards residential customers. We draw out some overall lessons and identify some important points for future research into Chinese power market reform. |
| Keywords: | power market reform, international experience, China, industrial electricity price |
| JEL: | L94 |
| Date: | 2017–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1713&r=ene |
| By: | Foster, John; Wagner, Liam; Liebman, Ariel |
| Abstract: | This final Future Grid Cluster Project 3 report provides the deployment of key modelling results and the identification of strategic priorities for stakeholders. The purpose of the University of Queensland’s project has been to create “Economic and Investment Models for the Future Grid” and the primary objectives are as follows: Provide broad understanding of how the electricity sector will need to change in a carbon constrained world. This transition to a lower emissions intensive technology base will require significant structural and regulatory reform to the energy markets; Development of quantitative methods to analyse how price levels and volatility on the wholesale electricity market are affected by changes to the transmission network structure and technology deployment; Implement modelling platforms which can inform stakeholders in the energy market of how changing network structure and electricity generation technology effects electricity prices; Develop market simulation platforms for natural gas to gain a better understanding of how changing the fuel and technology mixes will affect the power delivery process; Develop a scenario planning tool set for future electricity market modelling. This deliverable 6 reports the final analysis and results for the Future Grid project for the University of Queensland (UQ). It is also intended to highlight the progress made on the following topics: Modelling the National Electricity Market under fuel price uncertainty and the shift from coal to gas as the primary fuel source in the generation fleet.The tools developed to model the east coast gas market are discussed in the previous deliverable report [1]. The planning and scenario development is discussed in brief below (section 2) and in [2-4]; Modelling the rise Renewable Energy with a proactive consumer base (“Prosumer”) and the effects on the electricity market. The details of proactive consumers affect electricity markets and the development of modelling techniques to accommodate this new consumer class are detailed more fully in [5, 2, 6, 4, 7]. This report summarises the work carried out by the Project 3 team and a separate report details the work of Future Grid Cluster and its interconnections and progress by other projects. The work carried out by this team is also summarized by several working papers available on the Energy Economics and Management Group website . Details of how this and other projects within the cluster have co-contributed to addressing the transition to a carbon constrained future is detailed in its final summary document. |
| Keywords: | Electricity Markets; Energy Economics |
| JEL: | Q2 Q21 Q41 Q42 Q47 Q55 Q58 |
| Date: | 2017–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78866&r=ene |
| By: | Salci, Sener |
| Abstract: | The analytical challenges in evaluating the impacts of transmission line investments have vexed practitioners and electricity market regulators. The purpose of this study is to provide a guideline for improving the accuracy and predictability of the impacts of electricity rehabilitation projects. The subject is too broad to address completely here. The proposed guideline is suitable for evaluations of such project implemented in a broken electricity network. In such case, the demand for electricity is deterred, the supply of the electricity is unreliable, and the system is far away from its least-cost optimum production/consumption level. The guideline does not rebut the catalog of existing evaluation models or approaches. The guideline utilizes them for a reasonable ex-ante assessment to identify “good” projects that satisfy the economic and public objectives of the economy. An integrated cost-benefit analysis (CBA) framework is recommended to appraise such projects along with allocating the impacts to stakeholders in a manner that is commensurate with the net benefits they receive. Such an integrated analysis is much more than a set of procedures for estimating the expected net present values or rates of return of the project. |
| Keywords: | Electricity, Transmission Line, Rehabilitation Investment, Reliability, Cost-Benefit Analysis, Haiti |
| JEL: | D61 H43 L94 |
| Date: | 2017–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78926&r=ene |
| By: | Luigi Grossi (Department of Economics (University of Verona)); Fany Nan (Joint Research Centre of EU (Ispra)) |
| Abstract: | In this paper a robust approach to modelling electricity spot prices is introduced. Differently from what has been recently done in the literature on electricity price forecasting, where the attention has been mainly drawn by the prediction of spikes, the focus of this contribution is on the robust estimation of nonlinear SETARX models. In this way, parameters estimates are not, or very lightly, influenced by the presence of extreme observations and the large majority of prices, which are not spikes, could be better forecasted. A Monte Carlo study is carried out in order to select the best weighting function for GM-estimators of SETAR processes. A robust procedure to select and estimate nonlinear processes for electricity prices is introduced, including robust tests for stationarity and nonlinearity and robust information criteria. The application of the procedure to the Italian electricity market reveals the forecasting superiority of the robust GM-estimator based on the polynomial weighting function on the non-robust Least Squares estimator. Finally, the introduction of external regressors in the robust estimation of SETARX processes contributes to the improvement of the forecasting ability of the model. |
| Keywords: | Electricity price, Nonlinear time series, Price forecasting, Robust GM-stimator, Spikes, Threshold models |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:06/2017&r=ene |
| By: | Bartosz Uniejewski; Grzegorz Marcjasz; Rafal Weron |
| Abstract: | A recent electricity price forecasting study has shown that the Seasonal Component AutoRegressive (SCAR) modeling framework, which consists of decomposing a series of spot prices into a trend-seasonal and a stochastic component, modeling them independently and then combining their forecasts, can yield more accurate point predictions than an approach in which the same autoregressive model is calibrated to the prices themselves. Here, we show that further accuracy gains can be achieved when the explanatory variables (load forecasts) are deseasonalized as well. More importantly, considering a novel extension of the SCAR concept to probabilistic forecasting and applying two methods of combining predictive distributions we find that (i) SCAR-type models nearly always significantly outperform the autoregressive benchmark but are in turn outperformed by combined SCAR forecasts, (ii) predictive distributions computed using Quantile Regression Averaging (QRA) outperform those obtained from historical simulation and bootstrap methods, and (iii) averaging over predictive distributions generally yields better probabilistic forecasts of electricity spot prices than averaging over quantiles. |
| Keywords: | Electricity spot price; Long-term seasonal component; Seasonal Component AutoRegressive (SCAR) model; Probabilistic forecasting; Quantile Regression Averaging (QRA); Pinball score |
| JEL: | C14 C22 C51 C53 Q47 |
| Date: | 2017–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:wuu:wpaper:hsc1702&r=ene |
| By: | Littlechild, S. |
| Abstract: | This paper is an attempt to understand better the CMA’s analysis of the domestic retail energy market in Great Britain. It uses elementary economics textbook diagrams to examine the CMA’s calculations of the alleged customer detriments caused by market power. The paper finds that the CMA’s calculations do not really relate to, or measure, the extent to which prices are above “the competitive level”. Rather, they concern something different, viz. the detriment to customers because of suppliers being less efficient than the CMA considers they should be. The CMA’s calculations do not, therefore, indicate that the retail energy market is characterised by market power, price discrimination or excessive prices in the conventional sense. Nor is the CMA report convincing about the link between weak customer response and inefficiency. The CMA report has pointed policymakers and the media in an unhelpful direction. |
| Keywords: | retail energy markets, market power, price discrimination, efficient costs |
| JEL: | L94 L95 L51 |
| Date: | 2017–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1707&r=ene |
| By: | Hukkinen, Taneli; Mattila, Juri; Ilomäki, Juuso; Seppälä, Timo |
| Abstract: | Abstract This report documents a blockchain application developed for the energy sector that enables distributed market coordination for decentralized energy systems. As its core element, it utilizes Ethereum-based smart contracts to facilitate market matching between individual producers and consumers of electricity. The motive for this application was to understand the process of developing blockchain applications with industrial partners. Moreover, the purpose of this exercise was to examine whether Ethereum-based smart contracts could be effectively utilized for similar applications in industry and society at large. The application and the discussions during its development indicate that similar horizontal market structures may spring up in value chains in which the dynamicity of the market is growing and in which the roles of the market actors are shifting from fixed roles towards switch-role markets. |
| Keywords: | Blockchain, application, distributed marketplace, energy industry, Ethereum, smart contract |
| JEL: | L1 L17 L52 L73 L94 |
| Date: | 2017–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:71&r=ene |
| By: | Andreas Leibbrandt; John Lynham |
| Abstract: | There is conflicting evidence about whether abundant resources are indeed a blessing or a curse. We make use of specially designed economic experiments to investigate how resource abundance affects cooperation in the absence or presence of regulatory institutions. We observe that in the absence of regulatory institutions, there is less cooperation in groups with access to large resource pools than in groups with access to small resource pools. However, if regulatory institutions are present, we show that there is more cooperation in groups with access to large resource pools than in groups with access to small resource pools. Our findings also reveal that resource users are more willing to regulate access to abundant than to small resource pools. These findings provide causal evidence for the “paradox of plenty” and identify the causes for the pitfalls and potentials of resource wealth. |
| Keywords: | lab experiment; stakes; institutions; rent seeking. |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2017-03&r=ene |
| By: | Zi-Yi Guo (Wells Fargo Bank, N.A.) |
| Abstract: | In the last two years, the world crude oil prices have dropped dramatically, and consequently the oil market has become very volatile and risky. Since energy markets play very important roles in the international economy and have led several global economic crises, risk management of energy products prices becomes very important for both academicians and market participants. We apply Schwartz and Smith?s model (2000) to calculate risk measures of Brent oil futures contracts and light sweet crude oil (WTI) futures contracts. The model includes a long-term factor and a short-term factor. We show that the two factors explain the Samuelson effect well and the model present well goodness of fit. Our backtesting results demonstrate that the models provide satisfactory risk measures for listed crude oil futures contracts. A simple estimation method possessing quick convergence is developed. |
| Keywords: | Factor model, Samuelson effect, value-at-risk, least square estimation. |
| JEL: | C58 G13 G32 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507452&r=ene |
| By: | Hector M. Zarate-Solano (Banco de la República de Colombia); Daniel R. Zapata-Sanabria (Banco de la República de Colombia) |
| Abstract: | This paper examines inflation expectations of the World Economic Survey for ten inflation targeting countries. First, by a Self Organizing Maps methodology, we cluster the trajectory of agents inflation expectations using the beginning of the oil price shock occurred in June of 2014 as a benchmark in order to discriminate between those countries that anticipated the shock smoothly and those with brisk changes in expectations. Then, the expectations are modeled by artificial neural networks forecasting models. Second, for each country we investigate the information content of the quantitative survey forecast by comparing it to the average annual inflation based on national consumer price indices. The results indicate the presence of heterogeneity among countries to anticipate inflation under the oil shock and, also different patterns of accuracy to predict average annual inflation were found depending on the observed inflation trend. Classification JEL: C02, C222, C45, C63, E27 |
| Keywords: | Inflation expectations, machine learning, self-organizing maps, nonlinear autoregressive neural network, expectation surveys |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:993&r=ene |
| By: | Graham von Maltitz |
| Abstract: | Southern African countries’ interest in biofuel is due of its rural development potential. Finding models to optimize this benefit is therefore paramount. High-energy-density crops with low perishability allow farmers to grow small quantities on existing lands. Highly perishable, lowdensity crops such as sugarcane require tight integration between growers and mills. Models where growers have full ownership in the feedstock production facilities are possible, but this normally means that smallholder farmers need to work as a unit to achieve benefits of scale. Finding marketbased mechanisms to ensure sound and equitable returns for land and labour inputs is critical. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2017-100&r=ene |
| By: | Asta Mikalauskiene (Vilnius University); Dalia Streimikiene (Vilnius University) |
| Abstract: | Lithuania, Latvia and Estonia successfully implemented Kyoto protocol commitments in the period from 2008 to 2012. Moreover, targets of the Europe 2020 strategy, in which countries committed to reduce the greenhouse gas emissions of 1990 by 20% until 2020 are also achievable for Lithuania, Latvia and Estonia. It is forecasted that the reduction of GHG emissions in 2020 in the Baltic States will be much higher than EU average target. Baltic States have achieved significant reduction of GHG emissions during 1990-2015, especially in energy sector which is the major sources of GHG emissions in Baltic States. During the period 1990?2013, Lithuania?s gross domestic product (GDP) per capita increased by 56.8 per cent, while GHG emissions per GDP and GHG emissions per capita decreased by 66.7 and 47.8 per cent, respectively. The major reason for the decrease in per capita emissions are the structural changes in the energy sector. At the same period, Latvia?s population decreased by 24.4 per cent, GDP per capita increased by 64.0 per cent, while GHG emissions per GDP and GHG emissions per capita decreased by 66.4 and 44.8 per cent, respectively. Latvia?s economy grew rapidly in the period 2000?2007, with a GDP increase of 82.0 per cent. Economic growth rates and climatic conditions have been the most important drivers for GHG emissions trends in Latvia. Estonia?s gross domestic product (GDP) per capita increased by 85.1 per cent, while GHG emissions per GDP and GHG emissions per capita decreased by 65.1 and 35.3 per cent, respectively. Such significant GHG emission reduction in Estonia was driven by restructuring of the economy and efficiency improvement in the energy industry and energy demand sectors. There is a significant decoupling of emissions from economic growth in all three countries however countries have very different energy supply balances and implemented various climate change mitigation policies. |
| Keywords: | GHG emissions, drivers, energy sector, Baltic States |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507194&r=ene |
| By: | Ke Wang; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology); Zhimin Huang |
| Abstract: | Appropriate measurement of environmental and emission abatement efficiency is crucial for assisting policy making in line with constructing a more sustainable society. The majority of traditional approaches for environmental efficiency measures take pollutant emissions as either undesirable outputs or environmentally determined inputs which suffer a limitation of not satisfying the physical laws that regulate the operation of economic and environmental process. In this study, we propose a DEA based approach which is combined with the materials balance principle (MBP) that accounts for laws of thermodynamics to jointly evaluate environmental and abatement efficiency. This approach is along the line of weak G-disposability based modelling but is an extension to existing models that in our approach the identification of possible adjustments on polluting mass bound in inputs and outputs, and potential adjustments on abatement of pollutants are all included. The overall environmental efficiency measured by this approach is decomposed into the measures of technical efficiency, polluting inputs allocative efficiency, and polluting and non-polluting inputs allocative efficiency with the emphasizing of incorporating pollutant abatement activities. Accordingly, new measures of abatement efficiency are proposed which help to identify the pollutant abatement potential that can be achieved from end-of-pipe abatement technology promotion associated with polluting input quality promotion and input resources reallocation. Furthermore, several global Malmquist productivity indices for identifying the changes on environmental and abatement efficiency are proposed. This approach is applied to China¡¯s thermal power industry and some empirical results verifying the necessity of introducing the MBP are obtained. |
| Keywords: | OR in environment and climate change; Electricity generation; Emission reduction; Materials balance principle; Pollutant abatement |
| JEL: | Q54 Q40 |
| Date: | 2017–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:biw:wpaper:108&r=ene |
| By: | Simon Quemin; Christian de Perthuis |
| Abstract: | Linkages between Emissions Trading Systems are deemed to play an important role in implementing the Paris Agreement. However linkages have been few and far between. This is attributable to their multi-faceted nature and growing heterogeneity in policy designs. This article compares various link restrictions in facilitating linkage negotiations, namely quantitative restrictions, border permit taxes, exchange and discount rates, and unilateral linkage. These restrictions undermine cost-efficiency and generate rents and should thus be used as a transitory mechanism to full linkage. Trial restricted-link periods may allow to test the effects of the link while containing its reach, spur cooperation and provide more time and flexibility in circumventing impediments to full linkage. There is no ideal transitional restricted link as each has its relative merits and weaknesses. While quantitative restrictions seem to be the natural route to a full link, their implications can be misleading. While those of a border tax are more manageable, this policy seems harder to pursue. Exchange rates adjust for programmes' stringencies and have potential to increase overall ambition, but are challenging to select. As experience corroborates, unilateral linkage may constitute a practical and promising approach. |
| Keywords: | Emissions trading, Linkage, Trade restrictions. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1701&r=ene |
| By: | Simon Quemin |
| Abstract: | We study intertemporal abatement decisions by an ambiguity averse firm covered under a cap and trade. Ambiguity aversion is introduced to account for the prevalence of regulatory uncertainty in existing cap-and-trade schemes. Ambiguity bears on both the future permit price and the firm's demand for permits. Ambiguity aversion drives equilibrium choices away from intertemporal efficiency and induces two effects: a pessimistic distortion of beliefs that overemphasises 'detrimental' outcomes and a shift in the effective discount factor. Permit allocation is non neutral and the firm's intertemporal abatement decisions do not solely depend on expected future permit prices, but also on its own expected future market position. In particular, pessimism leads the expected net short (resp. long) firm to overabate (resp. underabate) early on relative to intertemporal efficiency. We show that there is a general incentive for early overabatement and that it is more pronounced under auctioning that under free allocation. |
| Keywords: | Emissions trading, Regulatory uncertainty, Permit banking, Ambiguity aversion. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1703&r=ene |
| By: | Shahbaz, Muhammad; Shafiullah, Muhammad; Papavassiliou, Vassilios; Hammoudeh, Shawkat |
| Abstract: | Using a two-century long dataset and some recently popularized nonparametric econometric techniques, this study revisits the nexus between economic growth and carbon dioxide (CO2) emissions for the G7 countries over nearly two centuries. The use of nonparametric modelling is warranted by the fact that long historical time series are often subject to structural breaks and other forms of nonlinearity over the course of time. We employ nonparametric cointegration and causality tests along with the cross-validated Local Linear technique analysis and validate the existence of the environmental Kuznets curve in six of the G7 countries – Canada, France, Germany, Italy, U.K. and the U.S.– and the only exception is Japan. Our empirical analysis also finds CO2 emissions and economic growth to be cointegrated and closely interrelated in the Granger sense. Our results are robust and highlight the nonlinear causal relationship between the two variables. |
| Keywords: | G7 Countries, Economic Growth, CO2 Emissions, EKC Hypothesis, Nonparametric Econometrics. |
| JEL: | A1 |
| Date: | 2017–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79019&r=ene |