nep-ene New Economics Papers
on Energy Economics
Issue of 2005‒12‒09
24 papers chosen by
Roger Fouquet
Imperial College, UK

  1. Global per capita CO2 emissions - stable in the long run? By Bjart Holtsmark
  2. Analysis of Technological Portfolios for CO2 stabilizations and Effects of Technological Changes By Fuminori Sano; Keigo Akimoto; Takashi Homma; Toshimasa Tomoda
  3. The Stability of the Adjusted and Unadjusted Environmental Kuznets Curve By Leonardo Becchetti; Sabrina Auci
  4. A MERGE Model with Endogenous Technological Change and the Cost of Carbon Stabilization By Socrates Kypreos
  5. Multi-Product Crops for Agricultural and Energy Production – an AGE Analysis for Poland By Adriana Ignaciuk; Rob B. Dellink
  6. Impact of Climate Policy on the Basque Economy By Mikel González; Rob Dellink
  7. The Value of ITC under Climate Stabilization By Reyer Gerlagh
  8. Impact des politiques climatiques sur le prix du carbone et les marchés de l'énergie By Odile Blanchard; Patrick Criqui; Alban Kitous; Silvana Mima
  9. Induced Technological Change in a Limited Foresight Optimization Model By Fredrik Hedenus; Christian Azar; Kristian Lindgren
  10. Impact Assessment of Emissions Stabilization Scenarios with and without Induced Technological Change By Claudia Kemfert; Truong P. Truong
  11. Assessing Climate Change Impacts: Agriculture By Francesco Bosello; Jian Zhang
  12. Economie de l'adaptation au changement climatique et<br />agriculture dans le Bassin Méditerranéen By Nathalie Rousset; René Arrus
  13. A Cge Model for Environmental and Trade Policy Analysis in Chile: Case Study for Fuel Tax Increases By Raúl O'Ryan; Carlos J. de Miguel; Sebastian Miller
  14. A Flexible Global Warming Index for Use in an Integrated Approach to Climate Change Assessment By Truong P. Truong; Claudia Kemfert
  15. Cap-and-Trade or Carbon Taxes? The Feasibility of Enforcement and the Effects of Non-Compliance By Jon Hovi og Bjart Holtsmark
  16. Coalition Formation under Uncertainty: The Stability Likelihood of an International Climate Agreement By Rob Dellink; Michael Finus; Niels Olieman
  17. Subsidizing Technological Innovations in the Presence of R&D Spillovers By Carsten Helm; Anja Schöttner
  18. Eco-Efficiency Analysis of Consumer Durables Using Absolute Shadow Prices By Mika Kortelainen; Timo Kuosmanen
  19. Urban Environmental Health and Sensitive Populations: How Much are the Italians Willing to Pay to Reduce Their Risks? By Anna Alberini; Aline Chiabai
  20. Urban Air Quality and Human Health in Latin America and the Caribbean By Luis A. Cifuentes; Alan J. Krupnick; Raúl O'Ryan; Michael A. Toman
  21. Oil Prices, Inflation and Interest Rates in a Structural Cointegrated VAR Model for the G-7 Countries By Matteo Manera; Alessandro Cologni
  22. Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with two Elites By Josef Falkinger; Volker Grossmann
  23. Some Inequalities related to the analysis of electricity auctions By Holmberg, Pär; Hästö, Peter
  24. Restructuring Italian Utility Markets: Household Distributional Effects By Paola Valbonesi; Raffaele Miniaci; Carlo Scarpa

  1. By: Bjart Holtsmark (Statistics Norway)
    Abstract: Global per capita CO2 emissions have been relatively stable during the last decades. It has been suggested that the Intergovernmental Panel on Climate Change (IPCC) and its scenario makers have ignored this stability. This paper presents a simple analytical framework explaining generally the stability of global per capita CO2 emissions during the last decades. The same analytical framework, supported by numerical illustrations, indicates that this stability is unlikely to persist and that current trends in regional per capita emissions are in close agreement with the IPCC scenarios
    Keywords: Global carbon emissions; SRES; IPCC; scenarios.
    JEL: Q30 Q41
    Date: 2005–10
  2. By: Fuminori Sano (Research Institute of Innovative Technology for the Earth); Keigo Akimoto (Research Institute of Innovative Technology for the Earth); Takashi Homma (Research Institute of Innovative Technology for the Earth); Toshimasa Tomoda (Research Institute of Innovative Technology for the Earth)
    Abstract: In this study, cost-effective technological options to stabilize CO2 concentrations at 550, 500, and 450 ppmv are evaluated using a world energy systems model of linear programming with a high regional resolution. This model treats technological change endogenously for wind power, photovoltaics, and fuel-cell vehicles, which are technologies of mass production and are considered to follow the “learning by doing” process. Technological changes induced by climate policies are evaluated by maintaining the technological changes at the levels of the base case wherein there is no climate policy. The results achieved through model analyses include 1) cost-effective technological portfolios, including carbon capture and storage, marginal CO2 reduction costs, and increases in energy system cost for three levels of stabilization and 2) the effect of the induced technological change on the above mentioned factors. A sensitivity analysis is conducted with respect to the learning rate.
    Keywords: Energy systems model, Global warming, Technological portfolios, Technological changes
    JEL: C61 O33 Q41 Q42
    Date: 2005–10
  3. By: Leonardo Becchetti (University of Rome Tor Vergata); Sabrina Auci (University of Rome Tor Vergata)
    Abstract: In our paper, we test the stability of the unadjusted and adjusted Environmental Kuznets Curve (EKC). Our results provide evidence in favour of the significance of the adjusted EKC hypothesis in which the impact of per capita GDP on the intensity of CO2 emissions is evaluated conditionally to the effects of the energy-supply infrastructure and of additional socio-demographic variables. In this framework, the GDP-CO2 relationship appears robust to the inclusion of additional regressors and to changes in the estimation period and interval
    Keywords: Sustainable development, Kuznets curve, CO2 emissions
    JEL: Q53
    Date: 2005–07
  4. By: Socrates Kypreos (Paul Scherrer Institute)
    Abstract: Two stylized backstop systems with endogenous technological learning formulations (ETL) are introduced in MERGE: one for the electric and the other for the non-electric markets. Then the model is applied to analyze the impacts of ETL on carbon-mitigation policy, contrasting the resulting impacts with the situation without learning. As the model considers endogenous technological change in the energy sector only some exogenous key parameters defining the production function are varied together with the assumed learning rates to check the robustness of our results. Based on model estimations and the sensitivity analyses we conclude that increased commitments for the development of new technologies to advance along their learning curves has a potential for substantial reductions in the cost of climate mitigation helping to reach safe concentrations of carbon in the atmosphere.
    Keywords: Climate change stabilization policies, Non-linear optimization, Induced technological change, Energy and macroeconomy
    JEL: C61 O30 Q42 Q43
    Date: 2005–10
  5. By: Adriana Ignaciuk (Wageningen University); Rob B. Dellink (Wageningen University)
    Abstract: By-products from agriculture and forestry can contribute to production of clean and cheap (bio)electricity. To assess the role of such multi-product crops in the response to climate policies, we present an applied general equilibrium model with special attention to biomass and multi-product crops for Poland. The potential to boost production of bioelectricity through the use of multi-product crops turns out to be limited to only 2-3% of total electricity production. Further expansion of the bioelectricity sector will have to be based on biomass crops explicitly grown for energy purposes. The competition between agriculture and biomass for scarce land remains limited, given the availability of relatively poor land types and substitution possibilities. The importance of indirect effects illustrates that the AGE framework is appropriate.
    Keywords: Applied general equilibrium (AGE), Biomass, Energy policy, Renewable energy
    JEL: D58 H23 Q28 Q42
    Date: 2005–10
  6. By: Mikel González (University of Basque Country); Rob Dellink (Wageningen University)
    Abstract: In this paper we analyze the economic effects of CO2 emission reductions in the Basque Country (Spain) using an applied general equilibrium (AGE) model with specific attention to environment-energy-economy interactions. Environmental policy is implemented through a system of tradable pollution permits that the government auctions. The costs of different levels of CO2 abatement are discussed, focusing on the variations of macroeconomic, sectoral and environment-energy variables. Results show that the costs for achieving the Kyoto targets can remain limited if the appropriate combination of changes in fuel-mix and restructuring of the economy is induced.
    Keywords: Applied general equilibrium, Climate change, Tradable pollution permits, Basque country
    JEL: D58 H21 Q20 Q48
    Date: 2005–09
  7. By: Reyer Gerlagh (IVM/VU)
    Abstract: We assess the effect of ITC in a global growth model, DEMETER-1CCS, with learning by doing where energy savings, an energy transition, and carbon capturing and sequestration (CCS) are the main options for emissions reductions. The model accounts for technology based on learning by doing embodied in capital installed in previous periods. We have run five scenarios, one baseline scenario in which climate change policy is assumed absent, and four stabilization scenarios in which atmospheric CO2 concentrations are stabilized at 550, 500, 450, and 400 ppmv. We find that the timing of emission reductions and the investment strategy is relatively independent of the endogeneity of technological change. The vintages structure of production is more important. But ITC reduces costs by about factor 2, though these benefits only materialize after some decades.
    Keywords: Energy, Carbon taxes, Endogenous technological change, Niche markets
    JEL: Q43 Q54 Q55
    Date: 2005–10
  8. By: Odile Blanchard (LEPII-EPE - Laboratoire d'économie de la prospective et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II); Patrick Criqui (LEPII-EPE - Laboratoire d'économie de la prospective et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II); Alban Kitous (Enerdata S.A.); Silvana Mima (LEPII-EPE - Laboratoire d'économie de la prospective et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Ce papier vise à analyser les interactions entre les politiques de stabilisation des concentrations de gaz à effet de serre dans l'atmosphère et les fondamentaux de la scène pétrolière mondiale, à partir de simulations du modèle POLES. La « valeur du carbone » est l'artifice de modélisation qui synthétise l'intensité des politiques climatiques. Elle constitue le signal qui déclenche les investissements de réduction des émissions de gaz à effet de serre, investissements socialement responsables au regard du défi climatique. La comparaison d'un scénario énergétique tendanciel avec un scénario de division par quatre des émissions des pays industrialisés à l'horizon 2050 permet de montrer que la conduite de politiques climatiques très ambitieuses permet à la fois de limiter le changement climatique et de gérer la question de l'épuisement des ressources mondiales d'hydrocarbures.
    Date: 2005–11–25
  9. By: Fredrik Hedenus (Chalmers University); Christian Azar (Chalmers University); Kristian Lindgren
    Abstract: The threat of global warming calls for a major transformation of the energy system the coming century. Modeling technological change is an important factor in energy systems modeling. Technological change may be treated as induced by climate policy or as exogenous. We investigate the importance of induced technological change (ITC) in GET-LFL, an iterative optimization model with limited foresight that includes learning-by-doing. Scenarios for stabilization of atmospheric CO2 concentrations at 400, 450, 500 and 550 ppm are studied. We find that the introduction of ITC reduces the total net present value of the abatement cost over this century by 3-9% compared to a case where technological learning is exogenous. Technology specific polices which force the introduction of fuel cell cars and solar PV in combination with ITC reduce the costs further by 4-7% and lead to significantly different technological solutions in different sectors, primarily in the transport sector.
    Keywords: Energy system model, Limited foresight, Climate policy, Endougenous learning, Technological lock-in
    JEL: O33
    Date: 2005–10
  10. By: Claudia Kemfert; Truong P. Truong
  11. By: Francesco Bosello (Fondazione Eni Enrico Mattei); Jian Zhang (EEE Program, Abdus Salam International Center of Theoretical Physics)
    Abstract: The economy-wide implications of climate change on agricultural sectors in 2050 are estimated using a static computable general equilibrium model. Peculiar to this exercise is the coupling of the economic model with a climatic model forecasting temperature increase in the relevant year and with a crop-growth model estimating climate change impact on cereal productivity. The main results of the study point out on the one hand the limited influence of climate change on world food supply and welfare; on the other hand its important distributional consequences as the stronger negative effects are concentrated on developing countries. The simulation exercise is introduced by a survey of the relevant literature.
    Keywords: Climate change, Computable general equilibrium models, Agriculture
    JEL: D58 C68 N50 Q54
    Date: 2005–07
  12. By: Nathalie Rousset (LEPII - Laboratoire d'économie de la production et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II); René Arrus (LEPII - Laboratoire d'économie de la production et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Le changement climatique fait peser des risques élevés pour l'agriculture méditerranéenne, qui pourrait voir ses rendements diminuer fortement, en liaison avec la<br />raréfaction des ressources hydriques. L'adaptation anticipative des systèmes agricoles à ces changements apparaît ainsi comme un enjeu majeur pour cette région pour le 21e siècle.
    Keywords: eau ; changement climatique ; agriculture ; adaptation
    Date: 2005–11–25
  13. By: Raúl O'Ryan; Carlos J. de Miguel; Sebastian Miller
    Abstract: Computable General Equilibrium (CGE) models are a powerful economic tool for multidimensional/multi-sectoral analysis. They improve traditional input-output analysis generating quantities and prices endogenously and reflecting market incentives. They complement partial equilibrium analysis with a broader scope of analysis and the quantification of indirect and often non-intuitive effects. Environmental applications of CGE models include trade and environment, climate change, energy problems, natural resources management and environmental regulation analysis. The ECOGEM-Chile model described in this paper can be used to analyse impacts on macro, sectoral, social and environmental (air, water and land pollutants) variables of different economic, social or/and environmental policies, such as trade policies, environmental taxes, external price shocks, among others. The model incorporates the recently released 1996 input/output matrix as well as the most recent information on wages and income. In the specific application developed here, the model is used to analyse direct and indirect impacts on the Chilean economy of increasing fuel taxes by 100%. Additionally a trade policy of reducing tariffs to compensate the increase in revenues of these taxes is simulated. The tariff reductions are in line with the current Chilean trade policy. Winners and loser from both exercises are identified as well as the main determinants of the results.
    Date: 2005
  14. By: Truong P. Truong; Claudia Kemfert
  15. By: Jon Hovi og Bjart Holtsmark (Statistics Norway)
    Abstract: One of the proposed alternatives to Kyoto’s cap-and-trade approach is a regime based on an internationally harmonized carbon tax. In this paper, we consider and compare the enforcement problems associated with a tax regime and a cap-and-trade regime, respectively. The paper tries to convey two main points. First, both types of regime require an effective enforcement mechanism. However, such a mechanism is unlikely to be adopted as part of a regime with full participation, because the political process leading up to its adoption tends to water down the enforcement mechanism to a point where it no longer has much bite. And even if this is somehow avoided, countries expecting compliance to be difficult or costly will almost certainly decline to sign – not to mention ratify – the resulting agreement. Second, the implications of non-compliance in a tax regime differ in important ways from the corresponding implications in a cap-and-trade regime. In a cap-and-trade regime emissions trading can make inaction legitimate for buyers of emission permits. In particular, overselling of permits by one (or a few) permit exporting countries might completely undermine the regime’s environmental effect. In a tax regime, by contrast, one country's non-compliance can not make inaction by other countries legitimate. It follows that an agreement based on a harmonized carbon tax will always have some effect, provided that at least one country complies.
    Keywords: Climate agreements; compliance; enforcement; emissions trading; carbon taxes.
    JEL: Q30 Q41
    Date: 2005–10
  16. By: Rob Dellink (Wageningen University); Michael Finus (Institute of Economic Theory and University of Hagen); Niels Olieman (Wageningen University)
    Abstract: Results derived from empirical analyses on the stability of climate coalitions are usually very sensitive to the large uncertainties associated with the benefits and costs of climate policies. This paper provides the methodology of Stability Likelihood that links uncertainty about benefits and costs of climate change to the stability analysis of coalitions in a stochastic, empirical setting. We show that the concept of Stability Likelihood improves upon the robustness and interpretation of stability analysis. Our numerical application is based on a modified version of the climate model STACO. It turns out that the only non-trivial coalition structure with a relatively high Stability Likelihood (around 25 percent) is a coalition between the European Union and Japan, though quantitative results depend especially on the variance in regional benefits from abatement.
    Keywords: Climate change, Coalition formation, International environmental agreements, Uncertainty
    JEL: C79 H87 Q54
    Date: 2005–07
  17. By: Carsten Helm (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Anja Schöttner (School of Business and Economics, Humboldt University Berlin)
    Abstract: We analyze a situation where a principal wants to induce firms to produce an output, e.g. electricity from renewable energy sources. Firms can undertake non-contractible investments to reduce production costs of the output. Parts of these investments spills over and also reduce production costs of the other firm. Comparing the general price subsidy and an innovation tournament, we find that the principal's expected cost of implementing a given expected output are always higher under the tournament, even though this scheme may lead to more innovation.
    Keywords: R&D spillovers, tournaments, subsidies, moral hazard
    JEL: Q55 D82 H23 D43
    Date: 2005–11
  18. By: Mika Kortelainen (University of Joensuu, Department of Business & Economics); Timo Kuosmanen (Wageningen University, Environmental Economics & Natural Resources Group)
    Abstract: We develop a method for eco-efficiency analysis of consumer durables by utilizing Data Envelopment Analysis (DEA). In contrast to previous product efficiency studies, we consider the measurement problem from the perspective of a policy maker. The novel innovation of the paper is to measure efficiency in terms of absolute shadow prices that are optimized endogenously within the model to maximize efficiency of the good. Thus, the efficiency measure has a direct economic interpretation as a monetary loss due to inefficiency, expressed in some currency unit. The advantages as well as technical differences between the proposed approach and the traditional production-side methods are discussed in detail. We illustrate the approach by an application to eco-efficiency evaluation of Sport Utility Vehicles.
    Keywords: Activity Analysis, Data Envelopment Analysis (DEA), Environmental efficiency, Product evaluation, Sport Utility Vehicles (SUVs)
    JEL: C14 C61 D61 D62
    Date: 2005–11–29
  19. By: Anna Alberini (University of Maryland); Aline Chiabai (Fondazione Eni Enrico Mattei)
    Abstract: We use contingent valuation to elicit WTP for a reduction in the risk of dying for cardiovascular and respiratory causes, the most important causes of premature mortality associated with heat wave and air pollution, among the Italian public. The purpose of this study is three-fold. First, we obtain WTP and VSL figures that can be applied when estimating the benefits of heat advisories, other policies that reduce the mortality effects of extreme heat, and environmental policies that reduce the risk of dying for cardiovascular and respiratory causes. Second, our experimental study design allows us to examine the sensitivity of WTP to the size of the risk reduction. Third, we examine whether the WTP of populations that are especially sensitive to extreme heat and air pollution—such as the elderly, those in compromised health, and those living alone and/or physically impaired—is different from that of other individuals. We find that WTP, and hence the VSL, depends on the risk reduction, respondent age (via the baseline risk), and respondent health status. WTP increases with the size of the risk reduction, but is not strictly proportional to it. All else the same, older individuals are willing to pay less for a given risk reduction than younger individuals of comparable characteristics. Poor health, however, tends to raise WTP, so that the appropriate VSL of elderly individuals in poor health may be quite large. Our results support the notion that the VSL is “individuated.”
    Keywords: Contingent valuation, Willingness to Pay, Mortality risk reductions, Value of a Statistical life, Scope test, Cardiovascular and respiratory risks, Heat waves, Heat advisories, Adaptation to climate change, Air pollution, Premature mortality
    JEL: Q51 Q54
    Date: 2005–09
  20. By: Luis A. Cifuentes; Alan J. Krupnick; Raúl O'Ryan; Michael A. Toman
    Abstract: This working paper is being published with the objective of contributing to the debate on a topic of importance to the region, and to elicit comments and suggestions from interested parties. This paper has not undergone consideration by the SDS Management Team. As such, it does not reflect the official position of the Inter-American Development Bank.
    Date: 2005
  21. By: Matteo Manera (University of Milan-Bicocca and Fondazione Eni Enrico Mattei); Alessandro Cologni (Fondazione Eni Enrico Mattei)
    Abstract: Sharp increases in the price of oil are generally seen as a major contributor to business cycle asymmetries. Moreover, the very recent highs registered in the world oil market are causing concern about possible slowdowns in the economic performance of the most developed countries. While several authors have considered the direct channels of transmission of energy price increases, other authors have argued that the economic downturns arose from the monetary policy response to the inflation presumably caused by oil price increases. In this paper a structural cointegrated VAR model has been considered for the G-7 countries in order to study the direct effects of oil price shocks on output and prices and the reaction of monetary variables to external shocks. Empirical analysis shows that, for most of the countries considered, there seems to be an impact of unexpected oil price shocks on interest rates, suggesting a contractionary monetary policy response directed to fight inflation. In turn, increases in interest rates are transmitted to real economy by reducing output growth and the inflation rate.
    Keywords: Oil price shocks, Monetary policy response, Structural VAR models
    JEL: E31 E32 E52 Q41
    Date: 2005–09
  22. By: Josef Falkinger; Volker Grossmann
    Abstract: This paper develops a model in which the interaction of entrepreneurial investments and power of the owners of land or other natural resources determines structural change and economic development. A more equal distribution of natural resources promotes structural change and growth through two channels: First, by weakening oligopsony power of owners and thereby easing entrepreneurial investments for credit-constrained individuals whose investment possibilities depend on their income earned in the primary goods sector. Second, by shifting the distribution of political power from resource owners towards the entrepreneurial elite, resulting in economic policy and institutions which are more conducive to entrepreneurship and productivity progress. We argue that these hypotheses are consistent with a large body of historical evidence from the Americas and with evidence on transition economies.
    Keywords: credit constraints, distribution, economic development, entrepreneurship, institutions, oligopsony power, political elites
    JEL: H50 O10
    Date: 2005
  23. By: Holmberg, Pär (Department of Economics); Hästö, Peter (Department of Mathematics and Statistics)
    Abstract: Most balaning markets of electric power are organized as uniform-price auctions. In 2001, the balancing market of England and Wales switched to a pay-as-bid auction with the intention of reducing wholesale electricity prices. Numerical simultations of an electricity auction model have indicated that this should lead to decreased average prices. In this article we prove two inequalities which give an analytic proof of this claim in the same model.
    Keywords: supply function equilibrium; uniform-price auction; pay-as-bid auctions; discriminatory auction; oligopoly; capacity constraint; wholesale electricity markets; inequalities
    JEL: C62 D43 D44 L11 L13 L94
    Date: 2005–08–26
  24. By: Paola Valbonesi (Università di Padova); Raffaele Miniaci (Università di Padova); Carlo Scarpa (Università di Brescia)
    Abstract: Competition in public utility sectors has been encouraged in recent years throughout Europe. In this paper we try and analyse the welfare effects of these reforms in Italy, with particular attention to water and energy goods. The first step is to introduce a sensible measure of affordability of public utilities and to see how many households fall below a critical threshold. This issue is analysed stressing how climatic conditions dramatically affect households’ expenditure and how the affordability of utility bills varies a lot from region to region. So far, utilities’ reforms do not seem to have produced negative effects on the weaker group of households.
    Keywords: Consumer behaviour, Public utilities, Regulation, Gas, Electricity, Water
    JEL: D12 L51 L97
    Date: 2005–10

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