nep-ene New Economics Papers
on Energy Economics
Issue of 2005‒04‒24
thirteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. Enhancing Brazil's regulatory framework for network industries: the case of electricity, oil and gas, and water and sanitation By Edmar Almeida; Nanno Mulder
  2. The Allure of Technology: How France and California Promoted Electric Vehicles to Reduce Urban Air Pollution By David Calef; Robert Goble
  3. An Integrated Multi-Criteria System to Assess Sustainable Energy Options: An Application of the Promethee Method By Fausto Cavallaro; University of Molise
  4. Forecasting China's Carbon Dioxide Emissions: A Provincial Approach By Maximilian Auffhammer; Richard Carson; Teresa Garin-Munoz
  5. The Effect of Pollution Permit Allocations on Firm-Level Emissions By Meredith Fowlie; Jeffrey Perloff
  6. Application of Technological Control Measures on Vehicle Pollution: A Cost-Benefit Analysis in China By Paulo Augusto Nunes; Qiang Wu
  7. The Dynamics of Carbon and Energy Intensity in a Model of Endogenous Technical Change By Valentina Bosetti; Carlo Carraro; Marzio Galeotti
  8. Decomposition of CO2 Emissions over 1980–2003 in Turkey By Wietze LISE
  9. Emissions Trading, CDM, JI, and More – The Climate Strategy of the EU By Gernot Klepper; Sonja Peterson
  10. Key Environmental Innovations By Joseph Huber
  11. Dynamic Effects on the Stability of International Environmental Agreements By Aart de Zeeuw
  12. The Effect of Climate Change and Extreme Weather Events on Tourism By Andrea Bigano; Alessandra Goria; Jacqueline Hamilton; Richard S.J. Tol
  13. The Impact of Climate on Holiday Destination Choice By Richard S.J. Tol; Andrea Bigano; Jacqueline M. Hamilton

  1. By: Edmar Almeida; Nanno Mulder
    Abstract: This paper assesses Brazil’s regulatory framework and agencies for several network industries (electricity, oil and gas, and water and sanitation). Private investment can be encouraged by tackling regulatory uncertainty in many areas. To this end, recent initiatives include a new regulatory model for the electricity sector, and new draft legislation on the role and structure of the regulatory agencies (currently in Congress). The overall approach to regulatory reform in network industries, particularly in electricity, is well thought out but the risk of regulatory failure should not be underestimated. Implementation will be the ultimate test of reform in this area. In natural gas, the dominance of Petrobras, the national oil company, throughout the industry has often been perceived as an obstacle to its development. Private investment in water and sanitation is constrained by a lack of clarity over the assignment of regulatory powers across different levels of government. These reforms are consistent with the government’s agenda for growth, focusing on meeting the challenge of improving the business environment. This Working Paper relates to the 2005 OECD Economic Survey of Brazil ( <p> Améliorer le cadre réglementaire des industries de réseau au Brésil: le cas de l'électricité, du pétrole et du gaz, et de l'eau et de l'assainissement <p> Cet article évalue le cadre réglementaire ainsi que les agences régulatrices pour plusieurs industries de réseau (électricité, pétrole et gaz, eau et assainissement). L’investissement privé pourrait être encouragé en réduisant l’incertitude réglementaire dans plusieurs domaines. A ce propos, des initiatives récentes incluent un nouveau modèle réglementaire pour le secteur de l’électricité et un projet de loi sur le rôle et la structure des agences régulatrices (actuellement au Congrès). L’approche générale retenue en ce qui concerne la réforme de la réglementation dans les industries de réseau, notamment dans le secteur de l’électricité, est judicieuse, mais le risque de défaillance de la réglementation ne doit pas être sous-estimé. C’est au stade de sa mise en œuvre que la réforme dans ce domaine sera mise à l’épreuve. Pour ce qui est du gaz naturel, la position dominante de la société pétrolière nationale Petrobras dans l’ensemble du secteur a souvent été perçue comme un obstacle au développement de celui-ci. L’investissement privé dans les secteurs de l’eau et de l’assainissement se heurte à un manque de clarté dans la répartition des pouvoirs de réglementation entre les différents niveaux d’administration. Ces réformes se situent dans la lignée du programme de croissance du gouvernement, en mettant l’accent sur l’amélioration de l’environnement des entreprises. Ce document de travail se rapporte à l'Étude économique de l'OCDE du Brésil, 2005 (
    Keywords: Brazil; regulation; regulatory agencies; economics of regulation; electricity; oil; gas; pipelines; water utilities; sanitation; Government Policy (Energy)
    JEL: K23 L51 L94 L95 O54 Q48
    Date: 2005–04–08
  2. By: David Calef (Fondazione Eni Enrico Mattei); Robert Goble (George Perkins Marsh Institute, Clark University)
    Abstract: All advanced industrialized societies face the problem of air pollution produced by motor vehicles. In spite of striking improvements in internal combustion engine technology, air pollution in most urban areas is still measured at levels determined to be harmful to human health. Throughout the 1990s and beyond, California and France both chose to improve air quality by means of technological innovation, adopting legislation that promoted clean vehicles, prominently among them, electric vehicles (EVs). In California, policymakers chose a technology-forcing approach, setting ambitious goals (e.g., zero emission vehicles), establishing strict deadlines and issuing penalties for non-compliance. The policy process in California called for substantial participation from the public, the media, the academic community and the interest groups affected by the regulation. The automobile and oil industries bitterly contested the regulation, in public and in the courts. In contrast, in France the policy process was non-adversarial, with minimal public participation and negligible debate in academic circles. We argue that California's stringent regulation spurred the development of innovative hybrid and fuel cell vehicles more effectively than the French approach. However, in spite of the differences, both California and France have been unable to put a substantial number of EVs on the road. Our comparison offers some broad lessons about how policy developments within a culture influence both the development of technology and the impact of humans on the environment.
    Keywords: Environmental policy, Electric vehicles, Air pollution, Technology policy, Sustainable transport
    JEL: O33 O57 Q53 K32 L5
    Date: 2005–01
  3. By: Fausto Cavallaro (University of Molise); University of Molise
    Abstract: The planning and appraisal of sustainable energy projects involve rather complex tasks. This is due to the fact that the decision making process is the closing link in the process of analysing and handling different types of information: environmental, technical economic and social. Such information can play a strategic role in steering the decision maker towards one choice instead of another. Some of these variables (technical and economic) can be handled fairly easily by numerical models whilst others, particularly ones relating to environmental impacts, may only be adjudicated qualitatively (subjective or not). In many cases therefore, traditional evaluation methods such as cost-benefit analysis and the main economic and financial indicators (NPV, ROI, IRR etc.) are unable to deal with all the components involved in an environmentally valid energy project. Multi-criteria methods provide a flexible tool that is able to handle and bring together a wide range of variables appraised in different ways and thus offer valid assistance to the decision maker in mapping out the problem. This paper sets out the application of a multi-criteria method (PROMETHEE developed by J.P. Brans et al. 1986) to a real life case that is in tune with the objectives of sustainable development.
    Keywords: Renewable energy, Multicriteria, Sustainable devolopment
    JEL: Q42 Q48 C63
    Date: 2005–02
  4. By: Maximilian Auffhammer (University of California, Berkeley); Richard Carson (University of California, San Diego); Teresa Garin-Munoz (UNCED - Madrid)
    Keywords: carbon dioxide emissions, climate change,
    Date: 2004–02–03
  5. By: Meredith Fowlie (University of California, Berkeley); Jeffrey Perloff (University of California, Berkeley, and Giannini Foundation)
    Abstract: According to the Coase theorem, if property rights to pollute are clearly established and emissions markets nearly eliminate transaction costs, the market equilibrium will be independent of how the permits are initially allocated across firms. Using panel data from Southern California's RECLAIM program, we find that initial allocations are a statistically significant determinant of firm-level emissions. This relationship between allocation and emissions is stronger among firms with relatively high transaction costs. Thus, care must be exercised in the initial allocation of permits to ensure efficiency.
    Keywords: emissions trading, transaction costs,
    Date: 2004–02–01
  6. By: Paulo Augusto Nunes (University Ca' Foscari of Venice); Qiang Wu (Bologna Center, SAIS and Johns Hopkins University)
    Abstract: For the past two decades, China has experienced strong, continuous economic growth. At the same time, the number of motor vehicles in China has rapidly increased. As a direct result of such a phenomenon, China has been registering significant increases in air pollution. In spite of recent advances in air pollution control, it remains a serious problem for China’s major cities, and constitutes an important issue in the agenda of its policy makers. The object of this paper is to explore the use of cost-benefit analysis (CBA) to evaluate and rank alternative policy scenarios regarding the control of air pollution emitted by motor vehicles. The empirical analysis carried out relates specifically to the Chinese context, over a twenty year period, from 2001 to 2020, and focuses on emission changes of the following three principal pollutants: CO, HC and NOx.
    Keywords: Vehicle, Pollution, CO, HC, NOx, Scenario, Standard, Cost, Benefit, China
    JEL: O33 O53
    Date: 2005–01
  7. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Carlo Carraro (Università di Venezia and Fondazione Eni Enrico Mattei); Marzio Galeotti (Università di Milano and Fondazione Eni Enrico Mattei)
    Abstract: In recent years, a large number of papers have explored different attempts to endogenise technical change in climate models. The obvious reason is that technical change is widely considered the main route to achieving a significant reduction in global GHG emissions. This recent literature has emphasized that four factors – two inputs and two outputs – should play a major role when modelling technical change in climate models. The two inputs are R&D investments and Learning by Doing, the two outputs are energy-saving and fuel switching. Indeed, R&D investments and Learning by Doing are the main drivers of a climate-friendly technical change that eventually affect both energy intensity and fuel-mix. In this paper, we present and discuss an extension of the FEEM-RICE model in which these four factors are explicitly accounted for. In our new specification of endogenous technical change, an index of technical progress depends on both Learning by Researching and Learning by Doing. This index enters the equations defining energy intensity (i.e. the amount of carbon energy required to produce one unit of output) and carbon intensity (i.e. the level of carbonization of primarily used fuels). This new specification is embodied in the RICE 99 integrated assessment climate model and then used to generate a business as usual scenario and to analyze the relationship between climate policy and technical change. Sensitivity analysis is performed on different key parameters of the energy module in order to obtain crucial insights into the relative importance of the main channels through which technological changes affects the impact of human activities on climate. In addition, the effectiveness of different possible ways of combining Learning by Researching and Learning by Doing is also investigated.
    Keywords: Climate Policy, Environmental Modelling, Integrated Assessment, Technical Change
    JEL: H0 H2 H3
    Date: 2005–01
  8. By: Wietze LISE (Vrije Universiteit)
    Abstract: There is a multi-dimensional need for studying the energy situation in Turkey and to ob-tain insight into the development of CO2 emissions. On the one hand, recent projections of the OECD show that Turkey has a yearly GDP growth potential of over 7%. On the other hand, recent projections of UNDP and World Bank indicate that the level of CO2 emission is going to rise six-fold by 2025 with respect to the level of emissions in 1990. It is a great challenge to both meet the growth target and keep the CO2 under control. Thereupon, this paper tries to unfold factors that explain CO2 emissions by undertaking a complete decomposition analysis for Turkey over the period 1980–2003. The analysis shows, as is common to relatively fast growing economies, that the biggest contributor to the rise in CO2 emissions is the expansion of the economy (scale effect). The carbon intensity and the change in composition of the economy, which nearly move in tandem, also contribute to the rise in CO2 emissions, albeit at a slower rate. The energy intensity of the economy, which is decreasing, is responsible for a modest reduction in CO2 emissions. Hence, in congruence with the scale effect, we do not find a decoupling of carbon emissions and economic growth in Turkey over the period 1980–2003.
    Keywords: Decomposition analysis, Turkey, Energy, CO2 emissions, Economic growth
    JEL: Q4 Q54
    Date: 2005–02
  9. By: Gernot Klepper (Kiel Institute for World Economics); Sonja Peterson (Kiel Institute for World Economics)
    Abstract: The objective of this paper is to assess the likely allocation effects of the current cli-mate protection strategy as it is laid out in the National Allocation Plans (NAPs) for the European Emissions Trading Scheme (ETS). The multi-regional, multi-sectoral CGE-model DART is used to simulate the effects of the current policies in the year 2012 when the Kyoto targets need to be met. Different scenarios are simulated in order to highlight the effects of the grandfathering of permits to energy-intensive installations, the use of the project-based mechanisms (CDM and JI), and the restriction imposed by the supplementarity criterion.
    Keywords: Kyoto targets, EU, EU emissions trading scheme, National allocation plans, CDM and JI, Computable general equilibrium model, DART
    JEL: D58 F18 Q48 Q54
    Date: 2005–04
  10. By: Joseph Huber (Martin-Luther-University)
    Abstract: This paper is based on empirical research on a taxonomy of technological environmental innovations. It draws on a databank with over 500 examples of new technologies (materials, products, processes and practices) which come with benign environmental effects. The approaches applied to interpreting the datasets are innovation life cycle analysis, and product chain analysis. Main results include the following: 1. Innovations merely aimed at eco-efficienc y do in most cases not represent significant contributions to improving the properties of the industrial metabolism. This can better be achieved by technologies that fulfill the criteria of eco-consistency (metabolic consistency), also called eco-effectiveness. 2. Ecological pressure of a technology is basically determined by its conceptual make-up and design. Most promising thus are technologies in earlier rather than later stages of their life cycle (i.e. during R&D and customisation in growing numbers), because it is during the stages before reaching the inflection point and maturity in a learning curve where technological environmental innovations can best contribute to improving ecological consistency of the industrial metabolism while at the same time delivering their maximum increase in efficiency as well.3. Moreover, environmental action needs to focus on early steps in the vertical manufacturing chain rather than on those in the end. Most of the ecological pressure of a technology is no rmally not caused end-of-chain in use or consumption, but in the more basic steps of the manufacturing chain (with the exception of products the use of which consumes energy, e.g. vehicles, appliances). There are conclusions to be drawn for refocusing attention from downstream to upstream in life cycles and product chains, and for a shift of emphasis in environmental policy from regulation to innovation. Ambitious environmental standards, though, continue to be an important regulative precondition of ecologically benign technological innovation.
    Keywords: Technological innovation, Environmental innovation, Life cycle analysis, Sustainability strategies, Environmental policy
    JEL: O33 Q00
    Date: 2005–03
  11. By: Aart de Zeeuw (Tilburg University)
    Abstract: In terms of the number of signatories, one observes both large and small international environmental agreements. The theoretical literature, based on game theory, discusses different concepts and mechanisms for the stability of coalitions and has reached the conclusion that, under farsightedness, both large and small stable coalitions can occur. In the context of a repeated game, this implies that large stable coalitions can also be sustained over time by a simple trigger mechanism, for large enough discount factors. However, if changes in time implement changes in state, this conclusion does not hold anymore: only small stable coalitions can be sustained.
    Keywords: IEA’s, Coalitional stability, Dynamics
    JEL: Q2 C70 F42
    Date: 2005–03
  12. By: Andrea Bigano (Fondazione Eni Enrico Mattei); Alessandra Goria (Fondazione Eni Enrico Mattei); Jacqueline Hamilton (Hamburg University and Centre for Marine and Atmospheric Science); Richard S.J. Tol (Hamburg University, Vrije Universiteit and Engineering and Public Policy, Carnegie Mellon University)
    Abstract: Tourism is an industry of primary importance for the world economy. For some countries, tourism is the first source of income and foreign currency, and many local economies heavily depend on tourism. Tourists are sensitive to climate and to climate change, which will affect the relative attractiveness of destinations and hence the motive for international tourists to leave their country of origin. Yet, until recently, the attention devoted by the tourism literature to climate change and by the climate change literature to tourism has been quite limited. This paper is divided in two parts. The first part reviews the literature on the relationship between climate change and tourism. We find that the existing studies have but started unveiling the complexities of this relationship, by means of very heterogeneous approaches and scarcely comparable studies. A comprehensive, coherent quantitative message cannot yet be drawn from the literature. The broad qualitative message is clear, however: climate change will affect tourism, and the consequences for the economy might be wide and pervasive. The second part analyses empirically the relationship between climate characteristics, weather extremes and domestic and international tourism demand across Europe, with a focus on Italy. This study draws on the results on the Italian tourist sector of the WISE project, a multi-sector research project that investigates the impacts of extreme weather events on the socio-economic systems of some European countries by means of both quantitative and qualitative analyses. In general, temperature is the strongest indicator of domestic tourism. The relationship between tourism and temperature is generally positive in the same-month all across Europe, except in winter sports regions. The climate impact depends as well on destination type: for example coastal resorts respond more favourably to summer temperature increases than inland resorts. Moreover, it is not just temperature that counts, but also the expectations about future temperature levels; not just the presence of weather extremes, but also the expectations about their future occurrence. Qualitative results, based on individual surveys, show that during an unusually hot summer day trips are more climate-responsive than short breaks, that short breaks are more climate-responsive than main holidays, and that most people tend not to change plans for their main vacation: those that do change either stay at home or in their own country. On the basis of our literature survey and of our empirical study’s results, the paper concludes by indicating the most urgent gaps to be filled in the knowledge about the relationship between climate change and tourism and by pointing at the most promising directions for further research.
    Keywords: Tourism, Climate change, Extreme weather events
    JEL: L83 Q25 C23 C42
    Date: 2005–02
  13. By: Richard S.J. Tol (Hamburg University); Andrea Bigano (Fondazione Eni Enrico Mattei and Catholic University of Leuven); Jacqueline M. Hamilton (Hamburg University and Centre for Marine and Atmospheric Science)
    Abstract: The holiday destination choice is analysed for tourists from 45 countries, representing all continents and all climates. Tourists are deterred by distance, political instability and poverty, and attracted to coasts. Tourists prefer countries with a sunny yet mild climate, shun climes that are too hot or too cold. A country’s tourists’ aversion for poverty and distance can be predicted by that country’s average per capita income. The preferred holiday climate is the same for all tourists, independent of the home climate. However, tourists from hotter climates have more pronounced preferences.
    Keywords: Climate change, Impacts, Adaptation, Acclimatisation, Domestic tourism, International tourism
    JEL: L83 Q25
    Date: 2005–01

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