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on Energy Economics |
| By: | Tooraj Jamasb; William J. Nuttall; Michael G. Pollitt |
| Abstract: | There is a growing concern over our reliance on conventional electricity sources and their long-term environmental, climate change, and security of supply implications, and much hope is vested in the ability of future technological progress to tackle these issues. However, informed academic analysis and policy debates on the future of electricity systems must be based on the current state, and prospects of, technological options. This paper is the introductory chapter in the forthcoming book Future Electricity Technologies and Systems. The book comprises contributions from leading experts in their respective technology areas. The chapters present state of the art and likely progress paths of conventional and new electricity generation, networks, storage, and end-use technologies. In this paper we review the growth trend in electricity demand and carbon emissions. We then present a concise overview of the chapters. Finally, we discuss the main contextual factors that influence long-term technological progress. |
| Keywords: | Energy technology, electricity, sustainable development, environment |
| JEL: | Q42 Q55 Q56 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0608&r=ene |
| By: | David Newbery |
| Abstract: | Europe is liberalising electricity in accordance with the European Commission’s Electricity Directives. Different countries have responded differently, notably in the extent of restructuring, treatment of mergers, market power, and vertical unbundling. While Britain and Norway have achieved effective competition, others like Germany, Spain and France are still struggling to deal with dominant and sometimes vertically integrated companies. The Netherlands offers an interesting intermediate case, where good economic analysis has sometimes been thwarted by legalistic interpretations. Investment under the new Emissions Trading system could further transform the electricity industry but may be hampered by slow progress in liberalising European gas markets. |
| Keywords: | Competition, liberalisation, restructuring, electricity, market power |
| JEL: | G34 K23 L51 L94 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0615&r=ene |
| By: | Stephen Littlechild |
| Abstract: | The ‘standard model’ of electricity reform has been refined in many countries but not extended to others. Government is supplanting the role of regulation. Revised calculations suggest that the benefits of UK electricity privatisation were higher than previously estimated and more widely shared with consumers. Other calculations suggest that generation market power in the US is less than previously estimated by Lerner index calculations. Unduly tight price controls explain why there has been less customer switching in some residential electricity markets. There has been significant development of fixed price contracts in Nordic markets, posing questions for regulation in the absence of retail competition. There are alternatives to regulation of network monopolies. In Australia regulated interconnectors have been less economic than merchant interconnectors. In Argentina arrangements for users to determine transmission expansions have worked well. In Florida negotiated settlements have secured a better deal for customers than regulation. |
| Keywords: | : regulation, competition, electricity, transmission |
| JEL: | L94 L51 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0616&r=ene |
| By: | Ian Elders; Graham Ault; Stuart Galloway; James McDonald; Jonathan Köhler; Matthew Leach; Efterpi Lampaditou |
| Abstract: | The next fifty years are likely to see great developments in the technologies deployed in electricity systems, with consequent changes in the structure and operation of power networks. This paper, which forms a chapter in the forthcoming book Future Electricity T echnologies and Systems, develops and presents six possible future electricity industry scenarios for Great Britain, focussed on the year 2050. The paper draws upon discussions of important technologies presented by expert authors in other chapters of the book to consider the impact of different combinations of key influences on the nature of the power system in 2050. For each scenario there is a discussion of the effects of the key parameters, with a description and pictorial illustration. Summary tables identify the role of the technologies presented in other chapters of the book, and list important figures of interest, such as the capacity and energy production of renewable generation technologies. |
| Keywords: | Energy technology, electricity, sustainable development, environment |
| JEL: | Q42 Q55 Q56 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0609&r=ene |
| By: | Paul L Joskow |
| Abstract: | Modern theoretical principles to govern the design of incentive regulation mechanisms are reviewed and discussed. General issues associated with applying these principles in practice are identified. Examples of the actual application of incentive r egulation mechanisms to the regulation of prices and service quality for “unbundled” transmission and distribution networks are presented and discussed. Evidence regarding the performance of incentive regulation in practice for electric distribution and transmission networks is reviewed. Issues for future research are identified. |
| Keywords: | regulation, incentives, networks, electricity, transmission, distribution |
| JEL: | L94 L51 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0607&r=ene |
| By: | Xinmin Hu; Daniel Ralph |
| Abstract: | CWPE0619 (EPRG0602) Xinmin Hu and Daniel Ralph (Feb 2006) Using EPECs to model bilevel games in restructured electricity markets with locational prices We study a bilevel noncooperative game-theoretic model of electricity markets with locational marginal prices. Each player faces a bilevel optimization problem that we remodel as a mathematical program with equilibrium constraints, MPEC. This gives an EPEC, equilibrium problem with equilibrium constraints. We establish sufficient conditions for existence of pure strategy Nash equilibria for this class of bilevel games and give some applications. We show by examples the effect of network transmission limits, i.e. congestion, on existence of equilibria. Then we study, for more general EPECs, the weaker pure strategy concepts of local Nash and Nash stationary equilibria. We model the latter via complementarity problems, CPs. Finally, we present numerical examples of methods that attempt to find local Nash or Nash stationary equilibria of randomly generated electricity market games. The CP solver PATH is found to be rather effective in this context. |
| Keywords: | electricity market, bilevel game, MPEC, EPEC, Nash stationary point, equilibrium constraints, complementarity problem |
| JEL: | C61 C62 C72 Q40 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0619&r=ene |
| By: | Hongliang Yang |
| Abstract: | In China, many ongoing problems in the electricity sector can be traced back to the old ‘centrally planned’ economy. Since the start of liberalization in the 1980s, the clash between a liberalized economy (excluding a few so-called strategic industries) and a centrally controlled electricity industry has gradually become more and more apparent. The Chinese electricity industry is in need of constructive restructuring. In the absence of a universal agreement on optimal industry design, the Chinese government should have a firm and clear understanding of the implications of electricity restructuring for long-term social welfare. Otherwise the electricity industry might, again, be locked into an inferior industry design which would be very costly to change. |
| Keywords: | Chinese electricity industry, reform, electricity policy |
| JEL: | L22 L52 Q48 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0617&r=ene |
| By: | Louis Coulomb; Karsten Neuhoff |
| Abstract: | The heuristic concept of learning curves describes cost reductions as a function of cumulative production. A study of the Liberty shipbuilders suggested that product quality and production scale are other relevant factors that affect costs. Significant changes of attributes of a technology must be corrected when assessing the impact of learning-by-doing. We use an engineering-based model to capture the cost changes of wind turbines that can be attributed to changes in turbine size. We estimate the learning curve and turbine size parameters using more than 1500 price points from 1991 to 2003. The fit between model and empirical data confirms the concept. |
| Keywords: | Learning curve, Turbine scale, Wind turbines |
| JEL: | O33 N70 L64 L94 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0618&r=ene |
| By: | Pobochy Serguey; Yudashkina Galina |
| Abstract: | This paper estimates regional features of the electricity sector regulation in Russia. We use panel data for 77 Russian regions during 1998–2003. Our analysis is based on the interest-group theory of regulation. The objective of the project is to estimate the influence of regional energy company, consumers, and governor on regulation policy in the region. Empirical analysis shows that governors' elections are accompanied by tariffs' decrease. We found that during 1999–2001 there was a gap between federal and regional regulation, and that energy-intensive enterprises choose the strategy to buy electricity from federal wholesale market, but not to bargain with regional regulator about low tariffs. Based on our analysis we conclude that it is necessary to separate social and economic parameters of regulation. Economic requirements call for the change of pricing method to "rate of return" approach that will stimulate monopolist to increase efficiency. Social requirements should incorporate in regulation mechanisms of taking into account the poverty level in a given region. |
| Keywords: | Russia, Russian regions, electricity sector, regulation, interest-group theory, regional governors, panel data analysis |
| JEL: | L94 L51 |
| Date: | 2006–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:eer:wpalle:05-15e&r=ene |
| By: | Karsten Neuhoff; Andreas Ehrenmann; Lucy Butler; Jim Cust; Harriet Hoexter; Kim Keats; Adam Kreczko; Graham Sinden |
| Abstract: | Investment planning models inform investment decisions and government policies. Current models do not capture the intermittent nature of renewable energy sources, restricting the applicability of the models for high penetrations of renewables. We provide a methodology to capture spatial variation in wind output in combination with transmission constraints. The representation of wind distributions with stochastic approaches or an extensive historic data set would exceed computational constraints for real world application. Hence we restrict the amount of input data, and use boot-strapping to illustrate the robustness of the results. For the UK power system we model wind deployment and the value of transmission capacity. |
| Keywords: | Investment planning model, Wind distribution, Electricity transmission, Renewables |
| JEL: | L94 C61 C53 O21 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0620&r=ene |
| By: | Ignacio Contín-Pilart (Universidad Pública de Navarra); Aad F. Correljé (Delft Technical University, and Clingendael International Energy Programme); M. Blanca Palacios (Universidad del País Vasco) |
| Abstract: | The restructuring of the Spanish oil industry produced a highly concentrated oligopoly in the retail gasoline market. In June 1990 the Spanish government introduced a system of ceiling price regulation in order to ensure that \"liberalization\" was accompanied by adequate consumer protection. This paper examines the pricing behavior of the retail gasoline market using multivariate error correction models over the period January 1993 (abolishment of the state monopoly)-December 2004. The results suggest that gasoline retail prices respond symmetrically to increases and decreases in the spot price of gasoline. However, one the ceiling price regulation was abolished, the \"collaboration\" between the government and the major operators, Repsol-YPF and Cepsa-Elf in order to control the inflation rate results in a slower rate of increase (decrease) of gasoline retail prices when gasoline spot prices went up (went down) than elsewhere in the European Union. Finally, retail margins were by the end of our timing period of analysis, as in the first years after the abolishment of the state monopoly, well above the European ones. |
| Keywords: | Competition, regulation, pricing behavior, gasoline market |
| JEL: | L11 L43 L51 L71 |
| Date: | 2006–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehu:biltok:200602&r=ene |
| By: | Jose Noguera; Rowena A. Pecchenino |
| Abstract: | OPEC’s stated mission is to promote the economic development and growth of its member states while minimizing volatility in the oil markets. But after a promising beginning many member states’ economies have declined rather than prospered—a clear indication of OPEC’s failure to meet their development goals. Thus, we ask if a resource cartel can achieve the joint goals of development and resource market stability. In a model in which oil producing countries choose whether to join an oil cartel or remain in the fringe, we find that, in a highly elastic oil market, a profit maximizing cartel is inconsistent with oil market stability in the face of demand shocks. Thus, it is inimical to macroeconomic stability, an essential requirement for long-lasting capital investment, and therefore economic development and growth. Consequently, it may not be optimal for an oil-exporting country that cares adequately about macroeconomic stability to join the cartel. But for a country where short-run considerations overwhelm long-run concerns, cartel membership may be the correct choice. Yet the oil rich are ultimately cursed by their excessive reliance on their resource wealth—current profligacy begets future decline. |
| Keywords: | OPEC, macroeconomic stability, resource curse, economic development. |
| JEL: | E6 F4 Q43 Q32 O11 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp280&r=ene |
| By: | Y. Hossein Farzin (University of California); Ken-Ichi Akao (Waseda University) |
| Abstract: | We assume that people value employment not only to earn income to satisfy their consumption needs but also as a means of community/social involvement that provides socio-psychological (non-pecuniary) benefits. We show that the latter incentive can encourage full employment harvesting resources and explain why poor resource-based communities may exhaust a natural resource in a finite time even if there is a sustainable path of resource consumption available. We show that communities could sustain their natural resources by using outside-the-community employment and economic diversification, but, to be effective, such policies must ensure that the outside wage rate and the initial capital stock are above certain minimum levels, which will be higher the longer these policies are delayed. |
| Keywords: | Non-pecuniary effects, Employment value, Resource extinction, Sustainability |
| JEL: | E24 O12 O13 Q28 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.24&r=ene |
| By: | Y. Hossein Farzin (University of California); Ken-Ichi Akao (Waseda University) |
| Abstract: | Exhaustion of a natural resource stock may be a rational choice for an individual and/or a community, even if a sustainable use for the resource is feasible and the resource users are farsighted and well informed on the ecosystem. We identify conditions under which it is optimal not to sustain resource use. These conditions concern the discounting of future benefits, instability of social system or ecosystem, nonconvexity of natural growth function, socio-psychological value of employment, and strategic interaction among resource users. The identification of these conditions can help design policies to prevent unsustainable patterns of resource use. |
| Keywords: | Renewable resource management, Sustainability, Finite-time exhaustion, Optimal path, Policy implications |
| JEL: | Q20 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.23&r=ene |
| By: | Lucas Bretschger (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH)) |
| Abstract: | The paper first develops a theoretical model with different sectors, each providing a channel for an impact of energy prices on growth. In the short run, growth is hampered by increasing energy prices. In the long run, however, capital accumulation may be crowded out by energy use. This happens in the sectors with poor substitution possibilities between primary inputs where growth increases with rising energy prices. In the empirical part, estimations using di¤erent channels and energy sources with five-year average panel data for a sample of 44 developed countries in the period 1975-1999 are presented. It is shown that, for a large variety of constellations, rising energy prices are not a threat to economic development, they can even be positive for growth. |
| Keywords: | Energy Prices and Growth, Endogenous Capital Accumulation, Structural Change, Panel Data |
| JEL: | Q43 Q56 O41 O47 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:06-47&r=ene |
| By: | David Newbery |
| Abstract: | The European Emissions Trading Scheme (ETS) limits CO2 emissions from covered sectors, especially electricity until December 2007, after which a new set of Allowances will be issued. The paper demonstrates that the impact of controlling the quantity rather than the price of carbon is to reduce the elasticity of demand for gas, amplifying the market power of gas suppliers, and also amplifying the impact of gas price increases on the price of electricity. A rough estimate using just British data suggests that this could increase gas market power by 50%. |
| Keywords: | Climate change, emissions trading, market power, gas, quotas vs taxes |
| JEL: | Q54 Q58 L94 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0606&r=ene |
| By: | Aldy, Joseph (Resources For the Future) |
| Abstract: | Decisionmakers considering policies to mitigate climate change will benefit from information about current and future distributions of carbon dioxide (CO2) emissions. Examining the emissions dynamics of advanced economies that have experienced income convergence could provide insights about how distributions of country-level emissions may evolve over time if country-level incomes eventually undergo some convergence. This paper addresses the question of whether income convergence is sufficient for per capita CO2 emissions convergence by focusing on a set of advanced economies, the U.S. states. I undertake a variety of cross-sectional and stochastic convergence tests with two novel measures of 1960–1999 state-level CO2 emissions per capita—production (pre-electricity trade) CO2 and consumption (post-electricity trade) CO2—and with income per capita. Although incomes continue to converge, I find stark divergence in production CO2 per capita and no evidence of convergence for consumption CO2 per capita. Forecasts of future distributions show little convergence in emissions. |
| Keywords: | Markov chain transition matrix, sigma convergence, stochastic convergence, emissions distributions |
| JEL: | O40 Q54 Q56 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-06-07&r=ene |
| By: | Valentina Bosetti (Fondazione Eni Enrico Mattei); Carlo Carraro (Università Ca’ Foscari di Venezia and Fondazione Eni Enrico Mattei); Marzio Galeotti (Università di Milano and Fondazione Eni Enrico Mattei) |
| Abstract: | The issue of greenhouse gas (GHG) stabilization stands on three critical open questions. Namely, what are the impacts deriving from different levels of climate change and their distribution. What are the levels at which GHG concentration should be stabilized in order to avoid unacceptable impacts. And, finally, what are the costs and what are the instruments available to reach such stabilization targets. In the present paper, we address the latter question, in the specific attempt of shedding some light on the debated role of technological progress in lowering the costs of GHG stabilization. In particular, we use an optimal growth climate-economy model, where technical change is endogenously driven by learning by researching and learning by doing. In the model, when an ambitious stabilization target has to be reached, some additional technological innovation and diffusion is induced. The magnitude of this induced effect substantially affects the costs of stabilizing greenhouse gasses and may even make a well-designed climate policy a win-win strategy. A sensitivity analysis on the model crucial parameters is performed to account for structural and parametric uncertainties on learning effects, on the relationship between knowledge accumulation and the energy and carbon intensity of the economic system, and on the crowding out of investments in the energy sector R&D with respect to other research fields. |
| Keywords: | Climate policy, Environmental modelling, Integrated assessment, Technical change |
| JEL: | H0 H2 H3 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.2&r=ene |
| By: | Philippe Quirion (CIRED) |
| Abstract: | Energy efficiency commitments, often associated with tradable energy efficiency certificates, dubbed "white certificates", were recently implemented in the United Kingdom and Italy and will soon start in France. Energy suppliers have to fund a given quantity of energy efficiency measures, or to buy "white certificates" from other suppliers who exceed their target. We develop a partial equilibrium model to compare white certificates to other policy instruments for energy efficiency, i.e., taxes and standards. Our conclusions are: First, if white certificates are chosen, each supplier's target should be set as a percentage of the energy they sell during the commitment period rather than in absolute terms, e.g. based on past variables. Indeed the latter solution decreases sharply energy suppliers' profit since they cannot pass the cost of certificate generation on to consumers. Such a system thus risks generating a fierce opposition from these industries. Furthermore, setting individual targets independently of the evolution of market shares seems unfair. At last, this system risks creating a large rebound effect, i.e., a large increase in energy services consumption. Second, compared to taxes and standards, white certificates (with targets in percentage of energy sold) seem particularly interesting to reach a certain level of energy savings while limiting distributional effects, thus to limit oppositions to its implementation. Furthermore, they generate less rebound effect than standards and seem more able than taxes to mobilise a part of the no regret potential. However if targets are too weak there is a real risk that white certificates systems fund mostly business-as-usual energy efficiency activities, thus having little impact while delaying the implementation of other policy instruments. |
| Keywords: | White certificate, Energy efficiency certificate, Energy savings, Energy efficiency, Standard, Tax, Rebound effect, No-regret potential |
| JEL: | Q38 Q48 Q58 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.18&r=ene |
| By: | Rob B. Dellink (Wageningen University); Marjan W. Hofkes (Vrije Universiteit) |
| Abstract: | This paper shows in an empirical context that substantial cost reductions can be achieved in the implementation of Dutch national climate policy by (i) targeting the policy at the stock of greenhouse gases, thus allowing polluters flexibility in their timing of emission reductions; and (ii) integrating climate policy with other policies, thereby optimising the restructuring of the economy needed to achieve environmental policy targets. A dynamic applied general equilibrium model with bottom-up information on abatement techniques is used to show that the optimal timing of GHG emission reductions tends to follow the timing for the other environmental themes with an additional emphasis on emission reductions in the later periods. The optimal mix of technical measures and economic restructuring as source of emission reductions is affected by the strictness of environmental policy targets for all themes and hence can only be derived from an integrated analysis of these policies. |
| Keywords: | Economic growth, Applied general equilibrium model, Climate change, Environmental policy |
| JEL: | D58 H23 O41 Q28 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.17&r=ene |
| By: | Marzio Galeotti (Fondazione Eni Enrico Mattei); Matteo Manera (University of Milan-Bicocca and Fondazione Eni Enrico Mattei); Alessandro Lanza (Eni S.p.A. and Fondazione Eni Enrico Mattei) |
| Abstract: | Since its first inception in the debate on the relationship between environment and growth in 1992, the Environmental Kuznets Curve has been subject to continuous and intense scrutiny. The literature can be roughly divided in two historical phases. Initially, after the seminal contributions, additional work aimed to extend the investigation to new pollutants and to verify the existence of an inverted-U shape as well as assessing the value of the turning point. The following phase focused instead on the robustness of the empirical relationship, particularly with respect to the omission of relevant explanatory variables other than GDP, alternative datasets, functional forms, and grouping of the countries examined. The most recent line of investigation criticizes the Environmental Kuznets Curve on more fundamental grounds, in that it stresses the lack of sufficient statistical testing of the empirical relationship and questions the very existence of the notion of Environmental Kuznets Curve. Attention is drawn in particular on the stationarity properties of the series involved – per capita emissions or concentrations and per capita GDP – and, in case of unit roots, on the cointegration property that must be present for the Environmental Kuznets Curve to be a well-defined concept. Only at that point can the researcher ask whether the long-run relationship exhibits an inverted-U pattern. On the basis of panel integration and cointegration tests for sulphur, Stern (2002, 2003) and Perman and Stern (1999, 2003) have presented evidence and forcefully stated that the Environmental Kuznets Curve does not exist. In this paper we ask whether similar strong conclusions can be arrived at when carrying out tests of fractional panel integration and cointegration. As an example we use the controversial case of carbon dioxide emissions. The results show that more EKCs come back into life relative to traditional integration/cointegration tests. However, we confirm that the EKC remains a fragile concept. |
| Keywords: | Environment, Growth, CO2 Emissions, Panel data, Fractional integration, Panel cointegration tests |
| JEL: | O13 Q30 Q32 C12 C23 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.22&r=ene |
| By: | Mohamed Jallal El Adnani (LEST - Laboratoire d'économie et de sociologie du travail - http://www.univ-aix.fr/lest - CNRS : UMR6123 - Université de Provence - Aix-Marseille I;Université de la Méditerranée - Aix-Marseille II) |
| Abstract: | Dans cette communication, nous allons essayer de montrer que les institutions et les normes qui régissent le secteur de l'artisanat sont internes et établies par des pratiques héritées d'une longue histoire. Elles sont socialement construites2. Et ce sont les interactions sociales et les relations entre les individus qui ont favorisé l'émergence de ces normes. C'est une convention domestique qui prédomine traditionnellement (première partie ). L'État a cherché à introduire - pour moderniser le secteur - une convention professionnelle adossée à un système de formation professionnelle formalisée. Cette convention se heurtant à la logique qui régule le système d'apprentissage sur le tas dans le secteur finit par échouer (la défaillance conventionnelle). (Deuxième partie). |
| Keywords: | Théorie des Conventions; Artisanat; Formation professionnelle; Apprentissage; Système d'éducation et de formation; Comparaison; Maroc |
| Date: | 2006–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00008915_v1&r=ene |
| By: | Rousseau Sandra (K.U.Leuven-Center for Economic Studies) |
| Abstract: | This article studies the effects of informal, non-monetary sanctions, such as warnings, which are often used as an enforcement instrument by environmental inspection agencies. In cases of uncertainty with respect to the measured emissions due to measurement errors or accidental violations, some firms are unjustly penalised. As warnings provide a buffer period in which the firm is informed about the violation without any monetary consequences, it will be theoretically shown that warnings can help to reduce the welfare cost of such type II-errors and reduce the overdeterrence of low-cost firms - albeit at the cost of underdeterring medium-cost firms. |
| Keywords: | Enforcement; non-monetary sanctions; warnings; measurement errors |
| JEL: | Q38 K42 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:ete:etewps:ete0508&r=ene |
| By: | Alistair Ulph (University of Manchester); Santiago J. Rubio (Universitat de València) |
| Abstract: | In Barrett's (1994) paper on transboundary pollution abatement is shown that if the signatories of an international environmental agreement act in a Stackelberg fashion, then, depending on parameter values, a self-enforcing IEA can have any number of signatories between two and the grand coalition. Barrett obtains this result using numerical simulations and also ignoring the fact that emissions must be non-negative. Recent attempts to use analytical approaches and to explicitly recognize the non-negativity constraints have suggested that the number of signatories of a stable IEA may be very small. The way such papers have dealt with non-negativity constraints is to restrict parameter values to ensure interior solutions for emissions. We argue that a more appropriate approach is to use Kuhn-Tucker conditions to derive the equilibrium of the emissions game. When this is done we show, analytically, that the key results from Barrett's paper go through. Finally, we explain why his main conclusion is correct although his analysis can implicitly imply negative emissions. |
| Keywords: | international externalities, self-enforcing environmental agreements, Stackelberg equilibrium, non-negative emissions constraints |
| JEL: | C72 D62 F02 Q20 |
| Date: | 2004–06 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2004-23&r=ene |
| By: | Michael Greenstone (MIT); Olivier Deschenes (University of California) |
| Abstract: | This paper measures the economic impact of climate change on US agricultural land by estimating the effect of the presumably random year-to-year variation in temperature and precipitation on agricultural profits. Using long-run climate change predictions from the Hadley 2 Model, the preferred estimates indicate that climate change will lead to a $1.1 billion (2002$) or 3.4% increase in annual profits. The 95% confidence interval ranges from -$1.8 billion to $4.0 billion and the impact is robust to a wide variety of specification checks, so large negative or positive effects are unlikely. There is considerable heterogeneity in the effect across the country with California’s predicted impact equal to -$2.4 billion (or nearly 50% of state agricultural profits). Further, the analysis indicates that the predicted increases in temperature and precipitation will have virtually no effect on yields among the most important crops. These crop yield findings suggest that the small effect on profits is not due to short-run price increases. The paper also implements the hedonic approach that is predominant in the previous literature. We conclude that this approach may be unreliable, because it produces estimates of the effect of climate change that are very sensitive to seemingly minor decisions about the appropriate control variables, sample and weighting. Overall, the findings contradict the popular view that climate change will have substantial negative welfare consequences for the US agricultural sector. |
| Keywords: | Cost of climate change, Hedonics, Agricultural profits, Agricultural production, Crop yields |
| JEL: | Q50 Q12 Q54 Q51 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.6&r=ene |
| By: | Seema Jayachandran |
| Date: | 2005–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:cla:uclaol:358&r=ene |
| By: | Fabio Cerina (CRENoS and University of Cagliari) |
| Abstract: | This study focuses on the dynamic evolution of a small open economy specialized in tourism based on natural resources when tourist services are supplied to foreign tourists who are crowding-averse and give positive value to the environmental quality. We analyse the steady-state properties and run several policy exercises in two versions of our model: in the first, private agents’ income is spent entirely on consumption while, in the second, agents are allowed to invest part of their income in pollution abatement technology (PAT) which artificially increases the rate of regeneration of the environmental asset. A unique locally saddle point equilibrium is found in both versions and for both the market and the centralized solution. Our main findings are that: 1) a corrective income tax raises steady state utility in both versions but is capable of leading the economy in its first-best dynamic path only when agents cannot invest in the PAT; 2) when the PAT is available to the government but not to agents, an income tax which finances abatement expenditures may increase steady state utility with respect to the market solution when the natural regeneration rate of the environment and the degree of crowding-aversion are both low enough; 3) when PAT is available, the market chooses to devote a higher fraction of income to abatement than the central planner but in both cases this fraction is positive only if the natural rate of regeneration is not too large; 4) when PAT is available an income pollution tax does not affect the dynamic path of the market economy. |
| Keywords: | Tourism specialization, Sustainability, Environmental quality, Crowding, Pollution abatement |
| JEL: | L83 O41 Q26 Q56 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2006.11&r=ene |