nep-ene New Economics Papers
on Energy Economics
Issue of 2005‒11‒12
nine papers chosen by
Roger Fouquet
Imperial College, UK

  1. Policy uncertainty and supply adaquacy in electric power markets By Brunekreeft,G.; McDaniel,T.
  2. Why Did British Electricity Prices Fall after 1998? By Joanne Evans and Richard Green
  3. Impact of the allowance allocation on prices and efficiency By Karsten Neuhoff; Michael Grubb; Kim Keats
  4. Liberalizing the Dutch electricity market 1998-2004 By Damme,E. van
  5. The Effect of NAFTA on Energy and Environmental Efficiency in Mexico By David I. Stern
  6. Svenska nätbolags syn på nätnyttomodellen 2005 By Lantz, Björn
  7. Strengthening Regulation in Chile: The Case of Network Industries By Luiz de Mello; Alexander Galetovic
  8. Health effects and optimal environmental taxes in welfare state countries. By Jean-Christophe Caffet
  9. The logic of two-level games with endogenous lobbying : the case of international environmental agreements. By Houda Haffoudhi

  1. By: Brunekreeft,G.; McDaniel,T. (TILEC (Tilburg Law and Economics Center))
    Date: 2005
  2. By: Joanne Evans and Richard Green
    Abstract: In an attempt to reduce high electricity prices in England and Wales, the government and regulator forced the largest generators to divest some plant in the late 1990s, and introduced New Electricity Trading Arrangements in March 2001. We use a supply function model to simulate prices from April 1997 to March 2004, and find no change in the relationship between our simulations and actual prices over this period. This implies that while the reduction in concentration has had a significant impact on short-term wholesale electricity prices, the switch from a centralised to a decentralised market has not.
    Keywords: Electricity, market power, concentration, market rules
    JEL: L94
    Date: 2005–07
  3. By: Karsten Neuhoff; Michael Grubb; Kim Keats
    Abstract: Successful cap and trade programs for SO2 and NOx in the US allocate allowances to large emitters based on a historic base line for a period of up to thirty years. National Allocation Plans in Europe allocate CO2 allowances in an iterative approach first for a three then for a five-year period. The potential updating of the base line creates perverse incentives for operation and investment. Some allowances are also reserved for new entrants further distorting the scheme. We use analytic models and numeric simulations for the UK power sector to illustrate and quantify how these effects contribute to an inflation of the allowance price while reducing utilisation and investment in efficient technologies. The inflated allowance prices are likely to increase the European allowance budget and emissions, e.g. through the Linking Directive. As a result opportunity costs of emitting CO2 are reduced relative to an efficient cap and trade program.
    Keywords: : Emission Trading, Allowance Allocation, Investment Decision, Operation, Inefficiencies.
    JEL: D24 D92 Q28 L10
    Date: 2005–11
  4. By: Damme,E. van (TILEC (Tilburg Law and Economics Center))
    Date: 2005
  5. By: David I. Stern (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)
    Abstract: Prior to Mexico's entry to NAFTA predictions of the consequent impact on the environment in that country ranged from the dire to the very optimistic. This paper investigates NAFTA's outcomes in terms of energy use and the emission of atmospheric pollutants. Specifically, has entry into NAFTA led to a convergence or divergence in indicators of emissions, environmental efficiency, and emissions specific technology in Mexico, the United States, and Canada? Four emissions variables are considered: energy, carbon, sulfur, and NOx. Three different indicators of emissions and environmental efficiency are computed and tested for both convergence and the presence of a structural break associated with the introduction of NAFTA: energy or emissions per capita; energy or emissions intensity of GDP; and the state of technology in sulfur abatement and energy efficiency derived from a production frontier model estimated using the Kalman filter. Three convergence tests test for beta-convergence, sigma-convergence, and cointegration of the trends and the effect of NAFTA on these measures. I also test whether NAFTA induced a structural break in the trend of the various indicators. The results show that the extreme predictions of the outcomes of NAFTA have not materialized. Rather, trends that were already present before the introduction of NAFTA continue and in some cases improve post-NAFTA, but not yet in a dramatic way. There is strong evidence of convergence for all four intensity indicators across the three countries towards a lower intensity level. Though intensity is rising initially in some cases in Mexico, it eventually begins to fall post-NAFTA. Per capita measures for the two criteria pollutants also show convergence, but this is not the case for energy and carbon and the latter variables also drift moderately upwards. The state of technology in energy efficiency and sulfur abatement is improving in all countries, though there is little if any sign of convergence and NAFTA has no effect on the rate of technology diffusion. However, total energy use and carbon emissions increase both pre- and post- NAFTA and total NOx emissions increase in Mexico. Only total sulfur emissions are stable and falling in all three NAFTA partners.
    JEL: Q56
    Date: 2005–11
  6. By: Lantz, Björn (Department of Business Administration, School of Economics and Commercial Law, Göteborg University)
    Abstract: This paper reports the results of a survey study regarding the attitudes towards the Network Performance Assessment Model (NPAM). The NPAM is a revenue cap regulation model that has been developed to evaluate revenue reasonableness of the electricity distribution companies (EDCs) in Sweden. The EDC attitudes towards the NPAM was mapped and the main conclusion from the study is that there are three typical respondents in the study: ”The generally dissatisfied”, ”the critical analyst” and ”the generally optimistic”. <p>
    Keywords: Electricity distribution; regulation
    Date: 2005–11–01
  7. By: Luiz de Mello; Alexander Galetovic
    Abstract: Chile’s regulatory framework is working reasonably well. The country’s structural reforms since the 1980s, with the privatisation of utilities and deregulation of product and labour markets, have improved resource allocation and increased the population’s access to basic services, while calling for a comprehensive upgrading of regulatory institutions. At the same time, public-private partnerships (PPPs) are contributing to closing Chile’s infrastructure deficit, particularly in transport. The recurrent cuts in shipments of natural gas from Argentina since 2004 have put additional strain on regulation in the electricity sector to encourage investment in generation and ensure the security of supply. This paper reviews regulatory reform in three network industries (electricity, gas and telecoms), where further liberalisation, particularly in electricity retailing, and improvements in the regulation of telecoms would do much to further improve the business climate. The governance of public-private partnerships can be improved by increasing transparency and accountability in the concession process. In doing so, the government’s exposure to contingent liabilities can be contained. This Working Paper relates to the 2005 OECD Economic Survey of Chile ( <P>Renforcer la réglementation au Chili Le cadre de la règlementation chilienne fonctionne assez bien. Les réformes structurelles depuis les années 80, avec la privatisation des services et la réglementation des marchés des produits et du travail, ont amélioré l'allocation des ressources et augmenté l'accès de la population aux services de base, en même temps que modernisé les institutions de réglementation. Parallèlement, les partenariats public-privé ont contribué à réduire le déficit d'infrastructure du Chili, particulièrement dans les transports. Les coupures récurrentes dans les exportations de gaz naturel de l'Argentine depuis 2004 ont ajouté une contrainte sur la réglementation du secteur d'électricité, qui a encouragé l'investissement dans la production et garanti la sécurité de l'offre. Ce document passe en revue les réformes de la réglementation dans trois industries de réseau (électricité, gaz et télécommunication), dans lesquelles plus de libéralisation, particulièrement concernant la vente de détail de l'électricité, et des progrès dans la réglementation des télécommunications, amélioreraient grandement le climat des affaires. La gouvernance des partenariats public-privé peut-être améliorée en augmentant la transparence et la responsabilité du processus de concession. En faisant ainsi le gouvernement évite de s'exposer à d'éventuels passifs. Ce Document de travail se rapporte à l'Étude économique de l'OCDE du Chili, 2005 (
    Keywords: telecommunications, télécommunications, network industries, réglementation, industrie de réseau, regulations, electricity, gas, électricité, gaz, Chile, Chili
    JEL: D4 H4 K2
    Date: 2005–10–27
  8. By: Jean-Christophe Caffet (EUREQua)
    Abstract: Most studies on the green tax reform issue point out that environmental taxes exacerbate pre-existing tax distortions, thereby increasing the welfare costs associated with the overall tax code. As a result, the optimal environmental tax should lie below the Pigovian level (or marginal social damages). This article challenges this finding by arguing that health benefits from reduced pollution may sufficiently affect labor supply to create benefit-side tax interactions which, in turn, may be of the same magnitude as cost-side ones. Using a simple general equilibrium model that assumes the existence of a social security system, this paper shows that the optimal environmental tax rate could be greater than traditionally thought.
    Keywords: Environmental tax, double dividend, employment, health, social security.
    JEL: D60 H21 H23 I18 J22 Q28
    Date: 2005–07
  9. By: Houda Haffoudhi (LAEP)
    Abstract: International environmental agreements (IEAs) are increasingly important in a globalized economy. The aim of our paper is study the effect of political pressure groups-lobbies on the size and stability of IEAs. To this purpose we use the framework of two-level games to explain how national political situation influences the decisions of governments at the international negotiations arena. We present an endogenous lobbying model in which we assume that lobbies try to influence the policy choice of governments by offering political contribution in return for policy compromise. Indeed, we use the "interest based explanation" of international environmental policy to describe the incentives of countries to join an agreement. This approach classifies countries in four categories : pushers, bystanders, intermediate and draggers. We found that, when government gives the same weight to contribution and to social welfare, the contributions from the industrial lobby give incentives to government (Pushers, intermediate) to participate in the grand coalition making it stable. Our results suggest that in order to sustain the grand coalition, weak global environmental agreements -i.e. those involving small abatement targets- should be negotiated. The result is similar if governments are more interested by political contribution. However, if governments care less about political contribution than about social welfare, industrial contribution is not enough to limit the free riding incentives of each type of government. In this situation, pushers are the more expected to sustain a small stable coalition.
    Keywords: Non-cooperative game, interest group, coalition theory, environmental policy.
    JEL: C72 D72 D78 Q28
    Date: 2005–09

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