nep-ene New Economics Papers
on Energy Economics
Issue of 2005‒08‒13
twenty papers chosen by
Roger Fouquet
Imperial College, UK

  1. Security of Energy Supply: Comparing Scenarios From a European Perspective By Giorgio Vicini; Francesco Gracceva; Anil Markandya; Valeria Costantini
  2. Fuel Poverty and Access to Electricity:\\ Comparing Households When They Differ in Needs By Paul Makdissi; Quentin Wodon
  3. Exploration of Future Risks on the Global Market for Oil, Coal and Uranium By Robert Arnott
  4. Exogenous Oil Supply Shocks: How Big Are They and How Much do they Matter for the US Economy? By Kilian, Lutz
  5. Oil Price Developments: Drivers, Economic Consequences and Policy Responses By Christophe André; Anne-Marie Brook; Robert Price; Douglas Sutherland; Niels Westerlund
  6. The Oil Supply and Demand Context for Security of Oil Supply to the EU from the GCC Countries By Robert Skinner; Robert Arnott
  7. Energy Biased Technical Change: A CGE Analysis By Vincent M. Otto; Andreas Löschel; Rob Dellink
  8. Electricity Transmission Pricing and Performance-Based Regulation By Ingo Vogelsang
  10. Russia’s Gas Sector: The Endless Wait for Reform? By Rudiger Ahrend; William Tompson
  11. Restructuring Russia’s Electricity Sector: Towards Effective Competition or Faux Liberalisation? By William Tompson
  12. Accounting for Russia's Post-Crisis Growth By Rudiger Ahrend
  13. How Substitutable is Natural Capital? By Anil Markandya; S. Pedroso
  14. Tradable Emission Permits in a Federal System By Harrie A. A Verbon; Cees A. Withagen
  15. ODA and Investment for Development: What Guidance Can Be Drawn from Investment Climate Scoreboards? By Hans Christiansen
  16. Natural Disasters and Adaptive Capacity By Jeff Dayton-Johnson
  17. Carbon Capture and Sequestration: How Much Does this Uncertain Option Affect Near-Term Policy Choices? By Valentina Bosetti; Laurent Gilotte
  18. Non-C02 greenhouse gases; all gases count. By Gerard Verweij; Willemien Kets
  19. Globalization, Cross-Border Pollution and Welfare By Panos Hatzipanayotou; Sajal Lahiri; Michael S. Michael
  20. Joint ventures, pollution abd environmental policy By Indrani Roy Chowdhury

  1. By: Giorgio Vicini (Fondazione Eni Enrico Mattei); Francesco Gracceva (Fondazione Eni Enrico Mattei and ENEA, National Institute for New Technologies, Energy and Environment); Anil Markandya (Fondazione Eni Enrico Mattei); Valeria Costantini (Fondazione Eni Enrico Mattei and ENEA, National Institute for New Technologies, Energy and Environment)
    Abstract: This paper compares different results from a set of energy scenarios produced by international energy experts, in order to analyze projections on increasing European external energy dependence and vulnerability. Comparison among different scenarios constitutes the basis of a critical review of existing energy security policies, suggesting alternative or complementary future actions. According to the analysis, the main risks and negative impacts in the long term could be the increasing risk of collusion among exporters due to growing dependence of industrialized countries and insufficient diversification; and a risk of demand/supply imbalance, with consequent instability for exporting regions due to insufficient demand, and lack of infrastructures due to insufficient supply. Cooperation with exporting countries enhancing investments in production capacity, and with developing countries in order to reinforce negotiation capacity of energy importing countries seem to be the most effective policies at international level.
    Keywords: Energy security, Energy scenarios, Oil and natural gas markets
    JEL: Q40 Q41 Q48
    Date: 2005–06
  2. By: Paul Makdissi (Département d'économique, Université de Sherbrooke); Quentin Wodon (AFTPM, World Bank)
    Abstract: Although sequential stochastic dominance techniques have been used in the literature to make comparisons of income poverty which are robust to the assumptions made about the economies of scale within households, the techniques could be applied to a much wider set of issues. In this paper, we apply the techniques to energy deprivation in Guatemala. We compare fuel poverty among households with and without access to electricity, and we assess whether access to electricity for those who do not have access currently would eliminate the observed difference in fuel poverty between the two groups of households.
    Keywords: Energy, electricity, poverty, equivalence scales, sequential stochastic dominance
    JEL: I32 Q42
    Date: 2001
  3. By: Robert Arnott (Oxford Institute for Energy Studies)
    Abstract: This study is divided into four sections. The first section deals with the issues and definitions that relate to the meaning of security of supply. The following three sections deal in turn with the risks to future supply for oil, coal and uranium. The analysis has examined the impact that supply disruptions have had in the past, the events that have disturbed energy supply and the affect that they have had on prices, on the economy and on society. For each commodity we have analysed the political, economic, institutional and technical risks and have qualitatively assessed the impact that each might have on the two price scenarios provided by the CPB. We also discuss the policy responses that governments have adopted in the aftermath of supply disruptions.
    Keywords: Energy, Security, Supply,
    JEL: P Q Z
    Date: 2005–07–27
  4. By: Kilian, Lutz
    Abstract: Since the oil crises of the 1970s there has been strong interest in the question of how oil production shortfalls caused by wars and other exogenous political events in OPEC countries affect oil prices, US real GDP growth and US CPI inflation. This study focuses on the modern OPEC period since 1973. The results differ along a number of dimensions from the conventional wisdom. First, it is shown that under reasonable assumptions the timing, magnitude and even the sign of exogenous oil supply shocks may differ greatly from current state-of-the-art estimates. Second, the common view that the case for the exogeneity of at least the major oil price shocks is strong is supported by the data for the 1980/81 and 1990/91 oil price shocks, but not for other oil price shocks. Notably, statistical measures of the net oil price increase relative to the recent past do not represent the exogenous component of oil prices. In fact, only a small fraction of the observed oil price increases during crisis periods can be attributed to exogenous oil production disruptions. Third, compared to previous indirect estimates of the effects of exogenous supply disruptions on real GDP growth that treated major oil price increases as exogenous, the direct estimates obtained in this paper suggest a sharp drop after five quarters rather than an immediate and sustained reduction in economic growth for a year. They also suggest a spike in CPI inflation three quarters after the exogenous oil supply shock rather than a sustained increase in inflation, as is sometimes conjectured. Finally, the results of this paper put into perspective the importance of exogenous oil production shortfalls in the Middle East. It is shown that exogenous oil supply shocks made remarkably little difference overall for the evolution of US real GDP growth and CPI inflation since the 1970s, although they did matter for some historical episodes.
    Keywords: Counterfactual; Economic activity; Exogeneity; inflation; oil shock; Oil supply; war; weak instruments
    JEL: C32 E32
    Date: 2005–07
  5. By: Christophe André; Anne-Marie Brook; Robert Price; Douglas Sutherland; Niels Westerlund
    Abstract: <P>This paper analyses the factors influencing the price of oil and its likely evolution over the next quarter century. It begins by investigating the fundamental forces shaping long-term oil price developments, highlighting the importance of growth-led demand for oil, particularly that emanating from fast-growing, energy-intensive developing countries, and the implications of increasingly geographically concentrated oil reserves. The paper presents oil price projections to 2030 and examines the sensitivity of the projections to the assumptions about growth and non-OPEC supply. While certain combinations of factors could lead to a significantly higher oil price, the projections also suggest that the optimal strategy of resource-rich oil producers would be to prevent it rising too far. The paper then documents short-term influences on the oil price, which peaked at $50 a barrel in 2004, and notes that they have probably led to a significant departure from the long-run equilibrium price ...</P> <P>Ce document analyse les facteurs qui influencent le prix du pétrole et son évolution probable au cours du prochain quart de siècle. Il examine d’abord les déterminants fondamentaux de l’évolution des prix du pétrole à long terme, en soulignant l’importance de la demande pétrolière alimentée par la croissance, en particulier celle émanant des pays en développement à forte intensité d’énergie et en expansion rapide, ainsi que les conséquences de la concentration géographique croissante des réserves pétrolières. Le document présente des prévisions des prix du pétrole jusqu’à l’horizon 2030 et évalue leur sensibilité aux hypothèses concernant la croissance et l’offre hors OPEP. Tandis que certaines combinaisons de facteurs pourraient se traduire par un prix du pétrole nettement plus élevé, les prévisions montrent aussi que pour les producteurs pétroliers dotés d’abondantes réserves la stratégie optimale consisterait à empêcher une hausse excessive des cours. L’étude décrit ensuite les ...</P>
    Keywords: market structure, structure de marché, energy, énergie, crude oil, pétrole brut
    JEL: L13 Q41 Q43 Q48
    Date: 2004–12–08
  6. By: Robert Skinner (Oxford Institute for Energy Studies); Robert Arnott (Oxford Institute for Energy Studies)
    Abstract: In examining the prospects for oil and gas supply from the GCC countries, we draw on the evidence that the supply of oil and gas from the region has been relatively reliable, notwithstanding the region’s perceived political instability. The approach taken here starts from this empirical observation; namely, that supply from the region will be available when called upon, as it has in the past. Oil and gas are of central importance to the economies of most GCC countries. Hydrocarbons provide the basis on which to gradually diversify GCC economies. Continued hydrocarbon-based economic growth provides the platform for economic diversification which can in turn underpin internal social and political cohesion and stability of these countries. Broadly speaking, Russia and the rest of the FSU will increasingly dominate the world’s oil supply outside OPEC and the Middle East, while China, India and North America will continue to determine oil demand. The political evolution of the FSU and the economic evolution, and macroeconomic policy making in particular, of the big Asian countries and the United States will be the determinants of the prospects for the call of GCC oil. Two scenarios of oil supply and demand; namely, Russia’s oil supply falters while China’s demand soars, versus Russia’s oil supply soars while China’s demand collapses, present two totally different outcomes for the economies of the GCC, and specifically affecting their ability to invest in their comparative advantages and diversify their economies. Paradoxically then, the internal prospects of the Middle East depend on external developments. Thus, this analysis looks outside for a basis to develop propositions for the inside with respect to, for example, ‘How much of the global oil and gas markets can GCC countries count on supplying?’
    Keywords: Oil, Demand, Supply, Security, GCC
    JEL: P Q Z
    Date: 2005–07–27
  7. By: Vincent M. Otto (Wageningen University); Andreas Löschel (Centre for European Economic Research (ZEW)); Rob Dellink (Wageningen University)
    Abstract: This paper studies energy bias in technical change. For this purpose, we develop a computable general equilibrium model that builds on endogenous growth models. The model explicitly captures links between energy, the rate and direction of technical change, and the economy. We derive the equilibrium determinants of biased technical change and show the importance of feedback in technical change, substitution possibilities between final goods, and general-equilibrium effects for the equilibrium bias. If the feedback effect is strong, or the substitution elasticity large, or both, our model tends to a corner solution in which only technologies are developed that are appropriate for production of non-energy intensive goods.
    Keywords: Computable general-equilibrium models, Endogenous technical change, Energy, Environment
    JEL: O32 O33 O38 H23 D58
    Date: 2005–06
  8. By: Ingo Vogelsang
    Abstract: Performance-based regulation (PBR) is influenced by the Bayesian and non-Bayesian incentive mechanisms. While Bayesian incentives are impractical, the insights from their properties can be combined with practical non-Bayesian mechanisms for application to transmission pricing. This combination suggests an approach based on the distinction between ultra-short, short and long periods. Ultra-short periods are marked by real-time pricing of point-to-point transmission services. Pricing in short periods involves fixed fees and adjustments via price-cap formulas or profit sharing. Productivity-enhancing incentives have to be tempered by long-term commitment considerations, so that profit sharing may dominate pure price caps. Investment incentives require long-term adjustments based on rate-of-return regulation with a “used and useful” criterion.
    JEL: L50 L90
    Date: 2005
  9. By: Pene Kalulumia (Département d'économique, Université de Sherbrooke); Denis Bolduc (GREEN Département d'économique Université Laval, Québec G1K 7P4)
    Abstract: In this paper, we applied the generalized mixed estimation approach to the problem of estimating the Quebec residential electricity demand for space and water heating. A multinomial discrete-continuous choice model is used and estimated in two stages. The discrete choice is modelled as a multinomial probit model, while the continuous choice is estimated from a reduced form approach which corrects for the simultaneity biases. The results indicate that the GM estimator which combines prior and sample information dominates the classical ML estimator of the MNP models and hence, provides better prevision for electricity consumption. Evidence also shows that heating-system capital and operating costs, households characteristics, and energy prices have a significant impact on the choice of heating systems and electricity use. In particular, price substitution effects are well predicted.
    Keywords: Generalized mixed estimator, residential electricity demand, multinomial probit, discretecontinuous choice.
    JEL: C C13 C51 D12 Q41
    Date: 2004
  10. By: Rudiger Ahrend; William Tompson
    Abstract: <P>The gas industry is perhaps Russia’s least reformed major sector. Prices are regulated, exports are monopolised and the domestic market is dominated by a state-controlled, vertically integrated monopolist, OAO Gazprom. Gazprom combines commercial and regulatory functions, and maintains tight control over the sector’s infrastructure and over information flows within it. The sector as it is currently constituted is highly unlikely to be able to sustain sufficient output growth to satisfy both rising export commitments and domestic demand. There is significant potential for accelerating the growth of non-Gazprom production and making gas supply in Russia more competitive, but this will require fundamental reform. The proposals for reform advanced in the paper address two sets of issues. First, there is an urgent need to increase transparency in the sector and transfer many of the regulatory functions now performed by Gazprom to state bodies. Secondly, there is a longer-term need for a ...</P> <P>Le secteur du gaz en Russie : l’attente interminable pour des réformes? <P>L’industrie du gaz est peut être le secteur majeur le moins réformé en Russie. Les prix sont réglementés, les exportations sont effectuées par un monopole, et le marché intérieur est dominé par OAO Gazprom, un monopole verticalement intégré sous contrôle de l’État. Gazprom mélange des fonctions commerciales et de réglementation, et contrôle étroitement aussi bien l’infrastructure que les flux d’information à l’intérieur du secteur. De ce fait il est fortement improbable que le secteur dans sa forme actuelle soit capable d’atteindre une croissance de la production suffisante pour satisfaire aussi bien les engagements croissants d’exportations et la demande domestique. Le potentiel pour accroître la croissance de la production de gaz par d’autres producteurs que Gazprom, et de rendre l’offre de gaz en Russie plus compétitive, est fort. Mais l’exploitation de ce potentiel va nécessiter des réformes fondamentales. Les réformes proposées dans cet article concernent deux types de ...</P>
    Keywords: Regulation, Réglementation, Exports, competition, energy, énergie, gaz, Russia, economy, natural gas, infrastructure, pipelines, monopoly, state ownership, Gazprom, subsidies, ring fence, Russie, économie, infrastructure, pipelines, monopole, compétition, entreprises d’État, Gazprom, subventions, exportations, cantonnement
    JEL: L95 O52 P28 Q32 Q48
    Date: 2004–09–17
  11. By: William Tompson
    Abstract: <P>Russia in 2003 embarked on the restructuring of its electricity sector. The reform is intended to introduce competition into electricity production and supply, leaving dispatch, transmission and distribution as regulated natural monopolies with non-discriminatory third-party access to the networks. The ultimate aim of the reform is to create conditions that will encourage both investment in new capacity and greater efficiency of both production and consumption. The overall approach embodied in the reform is promising. However, there remains a serious risk that its aims could be subverted by special-interest lobbying during the lengthy implementation phase. If the reform is to succeed, the marketised segments of the sector must be characterised by real competition based on economically meaningful prices. There are two dangers here. The first is that private-sector interests will secure strategic holdings that allow them to exercise market power or even local monopoly power. The ...</P> <P>La restructuration du secteur de l’électricité : vers une véritable concurrence ou une fausse libéralisation? <P>En 2003, la Russie a entrepris de restructurer le secteur de l’électricité. L’objectif de ces réformes est d’instaurer la concurrence aux stades de la production et de la fourniture, en laissant le dispatching, le transport et la distribution sous le régime de monopoles naturels réglementés assortis d’un accès non discriminatoire des tiers aux réseaux. Le but ultime de la réforme est de créer les conditions pour encourager l’investissement dans de nouvelles capacités de production aussi bien que l’augmentation de l’efficacité de la production et de la consommation. La stratégie générale de réforme est prometteuse. On ne peut cependant négliger le risque que les objectifs fondamentaux de la réforme soient relégués au second rang par les pressions exercées par des groupes d’intérêt spéciaux pendant tout le temps qui sera nécessaire à sa mise en œuvre. Pour que la réforme puisse réussir, la concurrence doit pouvoir véritablement jouer dans les segments du secteur ouverts aux forces du ...</P>
    Keywords: privatisation, competition, concurrence, privatisation, electricity, électricité, Russia, economy, infrastructure, monopoly, state ownership, Russie, économie, infrastructure, monopole, entreprises d’État, grid, réseau
    JEL: L94 O52 P28 P31
    Date: 2004–09–30
  12. By: Rudiger Ahrend
    Abstract: <P>This paper provides an in depth analysis of Russia’s recent growth, with a view to understanding the prospects for its continuation. It examines in detail the main drivers of growth, as well as the main developments and policies that have been underlying it. A key finding is that the role of the oil sector, and particularly privately owned oil companies, has been vastly more important in driving economic growth since 2001 than most analyses have recognised. The oil sector’s contribution to growth has hitherto been severely underestimated as official data do not account for transfer pricing and thus fail to reflect fully the importance of the hydrocarbon sector in the Russian economy. The paper further argues that prudent postcrisis fiscal policy, by balancing the federal budget over the oil-price cycle, has also been essential for creating a macroeconomic environment conducive to strong growth. Looking forward, it is argued that - given its economic structure - Russia is bound to ...</P> <P>Bilan de la croissance après la crise en Russie <P>Cet article analyse en profondeur la croissance économique récente en Russie afin de comprendre les perspectives de sa continuité. L’article examine en détail les principaux moteurs de la croissance, ainsi que les principales évolutions et politiques sous-jacentes. Un des principaux résultats est que le rôle du secteur pétrolier, en particulier les compagnies pétrolières privées, a été considérablement plus important comme moteur de la croissance depuis 2001 que ne l’ont constaté la plupart des analystes. La contribution à la croissance du secteur pétrolier a jusqu’à présent été grandement sous-estimée à cause des données officielles qui ne prennent pas en compte l’utilisation des prix de transfert, et par conséquent ne reflètent pas entièrement l’importance du secteur des hydrocarbures dans l’économie russe. Cet article fait également le point sur la politique budgétaire prudente d’après la crise, qui en gardant le budget fédéral équilibré sur l’ensemble du cycle des cours ...</P>
    Keywords: Economic growth, croissance économique, Transition, Transition, fiscal policy, politique budgétaire, monetary policy, politique monétaire, gas, gaz, Russia, Russie, Real Exchange Rate, Capital Flight, Natural Resources, Dutch Disease, Resource Curse, Oil, Property Rights, Diversification, taux de change réel, fuite des capitaux, ressources naturelles, syndrome néerlandais, malédiction des ressources, pétrole, droits de propriété, diversification
    JEL: E6 O1 O52 P2 Q43
    Date: 2004–09–30
  13. By: Anil Markandya (Fondazione Eni Enrico Mattei, World Bank and University of Bath); S. Pedroso (World Bank)
    Abstract: One of the recurring themes in the sustainability literature has been the legitimacy of using an economic framework to account for natural resources. This paper examines the potential for substituting between different inputs in the generation of income, where the inputs include natural resources such as land and energy resources. A nested CES production function is used to allow flexibility in the estimated elasticities of substitution. Also, with this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship with income generation. No statistically significant relationship between income and any of the institutional indicators was found.
    Keywords: Wealth accounting, Natural resources, Nested CES production function
    JEL: O47 Q24 Q32
    Date: 2005–06
  14. By: Harrie A. A Verbon; Cees A. Withagen
    Abstract: A system of tradable permits in the standard setting is effective in attaining the policy objective with regard to pollution reduction at the least cost. This outcome is challenged in case of a tradable permit system in a federal state with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness of the system, under different institutional arrangements, through the initial allocation of permits.
    Keywords: tradable permits, trade bans, fiscal federalism
    JEL: H21 H23 Q00
    Date: 2005
  15. By: Hans Christiansen
    Abstract: <P>The present paper was prepared in the context of a joint project between the OECD Investment Committee (IC) and Development Assistance Committee (DAC) on Official Development Assistance and Investment for Development. It responds to discussions at the IC-DAC Workshop on Synergies between ODA and Foreign Direct Investment on 11 March 2004, during which participants opined that development agencies lack information about the quality of the investment climate in developing countries and the likely repercussions for direct investment.</P><P>The purpose of the present paper is threefold. First, it provides an overview of a variety of scoreboards for the investment climate that have been established by a number of actors, including the World Bank, UNCTAD and several private “think tanks”. Second, it documents their similarities and discrepancies in assessing the investment climates of developing, emerging and transition economies (henceforth jointly referred to as “developing countries”) ...</P>
    Date: 2004–11
  16. By: Jeff Dayton-Johnson
    Abstract: <P>Natural disasters (droughts, earthquakes, epidemics, floods, wind storms) damage wellbeing, both in their immediate and long-term aftermath, and because the insecurity of exposure to disasters is in itself harmful to risk-averse people. As such, mitigating and coping with the risk of natural disasters is a pressing issue for economic development. This paper provides a conceptual framework for understanding natural disasters. Disasters, which imply tragic human costs, are distinguished from hazards, which are events like earthquakes or flooding: hazards only translate into disasters when societies are vulnerable to them. Consequently international development policy can play a role in reducing the costs of disasters by addressing vulnerability. A review of two recent disasters — the Turkish earthquakes of 1999, and Hurricane Mitch in 1998 — illustrates the importance of precarious urbanisation and environmental degradation for increased vulnerability to natural hazards. These cases ...</P> <P>Les catastrophes naturelles (sécheresses, tremblements de terre, épidémies, inondations, ouragans) sont nuisibles au bien-être, tant par leurs retombées immédiates et de long terme que par la nuisance provoquée par l’insécurité qui leur est associée chez les individus adverses au risque. Ainsi, la gestion des effets des catastrophes naturelles, de même que celle du risque de leur déclanchement, sont des questions urgentes pour le développement économique. Ce document fournit un cadre conceptuel pour mieux comprendre les catastrophes naturelles. Celles-ci impliquent des coûts humains tragiques et se distinguent des situations à risque, qui sont des événements tels que les tremblements de terre ou les inondations : les situations à risqué ne deviennent des catastrophes que lorsque les sociétés leur sont vulnérables. Par conséquent, les politiques publiques internationales pour le développement peuvent contribuer à réduire leur coût en visant sur la vulnérabilité. Un examen de deux ...</P>
    Date: 2004–08
  17. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Laurent Gilotte (CIRED)
    Abstract: One of the main issues in the climate policy agenda, the timing of abatement efforts, hinges on the uncertainties of climate change risks and technological evolution. We use a stochastic optimization framework and jointly explore these two features. First, we embed in the model future potential large-scale availability of Carbon Capture and Storage (CCS) technologies. While non-CCS mitigation that reduces fossil energy use is modelled as exerting inertia on the economic system, mainly due to the durability of the capital in energy systems and to technology lock-in and lock-out phenomena, the implementation of CCS technologies is modelled as implying less resilience of the system to changes in policy directions. Second, climate uncertainty is related in the model to the atmospheric temperature response to an increase in GHGs concentration. Performing different simulation experiments, we find that the environmental target, derived from a cost-benefit analysis, should be more ambitious when CCS is included in the picture. Moreover, the possible future availability of CCS is not a reason to significantly reduce near-term optimal abatement efforts. Finally, the availability of better information on the climate cycle is in general more valuable than better information on the CCS technological option.
    Keywords: Climate change, Uncertainty, Sequestration, Cost-benefit analysis
    JEL: D62 D63 H23 Q29
    Date: 2005–06
  18. By: Gerard Verweij; Willemien Kets
    Abstract: Under the Kyoto Protocol, a group of countries commit themselves to reduce the emissions of greenhouse gases to some 5% below the 1990 level. Countries can decide to spread their reduction commitment over several gases to lower compliance costs. Employing a multi-gas strategy can offer considerable efficiency gains because of the widely diverging marginal abatement cost for the different emission sources. In this Discussion Paper, the analysis of climate policy for the most important greenhouse gas, carbon dioxide, is extended with two other important greenhouse gases, methane and nitrous oxide. The multi-region and multi-sector Applied General Equilibrium model WorldScan has been used as an instrument for addressing this issue. The approach presented is consistent with the bottom-up information on reduction possibilities for those non-CO2 greenhouse gases while it allows for general equilibrium effects and intergas interactions. Including non-CO2 greenhouse gases into the analysis has important sectoral impacts while the regional effects are limited. A considerable part of the burden on gas, coal and oil products will be shifted to the agricultural sectors. Reductions of non-CO2 gases could be especially important for countries like China and India.
    Keywords: Climate policy; non-CO2 gases; Applied General Equilibrium Model
    JEL: Q56 H23 F18
  19. By: Panos Hatzipanayotou; Sajal Lahiri; Michael S. Michael
    Abstract: We construct a two-good general equilibrium model of international trade for two small open economies where pollution from production is transmitted across borders. Governments in both countries impose emission taxes non-cooperatively. Within this framework, we examine the effect of trade liberalization and of changes in the perception of cross-border pollution on Nash emission taxes, emission levels, and welfare.
    Keywords: cross-border pollution, emission taxes, terms of trade, globalization, welfare
    JEL: H23 Q28
    Date: 2005
  20. By: Indrani Roy Chowdhury (National Institute of Public Finance and Policy)
    Abstract: We examine the impact of abatement taxes on the pollution level in a duopoly framework with endogenous market structure. We demonstrate that an increase in abatement taxes could trigger a regime-switch from joint ventures to Cournot competition, causing the pollution level to increase. Moreover, abatement taxes can implement the first best outcome if and only if the industry is not too polluting. In case it is, the second best level of taxes may or may not equal the optimal tax under either joint venture, or Cournot competition.
    Keywords: Joint ventures, pollution, abatement tax, endogenous market structure
    JEL: H23 L13
    Date: 2005–05

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