nep-ene New Economics Papers
on Energy Economics
Issue of 2006‒03‒18
eleven papers chosen by
Roger Fouquet
Imperial College, UK

  1. The challenge of energy policy in New England By Carrie Conaway
  2. Do Crises Tear the Fabric of Oil Trade? By Weiner, Robert
  3. Quantifying Siting Difficulty: A Case Study of U.S. Transmission Line Siting By Vajjhala, Shalini; Fischbeck, Paul S.
  4. Air Emissions of Ammonia and Methane from Livestock Operations: Valuation and Policy Options By Shih, Jhih-Shyang; Burtraw, Dallas; Palmer, Karen L.; Siikamäki, Juha V.
  5. Swedish Industry and Kyoto An Assessment of the Effects of the European CO2 Emission Permit Trading System By Brännlund, Runar; Lundgren, Tommy
  6. Environmental policy competition and differential tax treatment; a case for tighter coordination? By Richard Nahuis; Paul Tang
  7. Market Design Test Environments By Widergren, Steven; Sun, Junjie; Tesfatsion, Leigh S.
  8. The Impact of International Organizations on the Environment: An Empirical Analysis By Axel Dreher; Magdalena Ramada-Sarasola
  9. How Effective are Emission Taxes in an Open Economy? By Jota Ishikawa; Tomohiro Kuroda
  10. Economic, Demographic and Political Determinants of Pollution Reassessed: A Sensitivity Analysis By Martin Gassebner; Michael Lamla; Jan-Egbert Sturm
  11. Ascribing Societal Benefit to Environmental Observations of the Earth from Space: The Multi-angle Imaging Spectroradiometer (MISR) By Macauley, Molly K.

  1. By: Carrie Conaway
    Abstract: New England needs a reliable supply of energy for its day-to-day functioning and its economic growth. The right mix of fuels and technologies must be in the right place at the right time, all the time. Because of the long lead times in building energy infrastructure, ensuring system reliability requires making decisions, investments, and policy today that will allow the region to meet expected demand many years from now, while at the same time buffering the region from the impact of unexpected short-term changes in energy markets. And this, in turn, requires both well-functioning markets and carefully crafted public policies.
    Keywords: Energy policy - New England
    Date: 2006
  2. By: Weiner, Robert (Resources for the Future)
    Abstract: In 1990, Iraq invaded Kuwait, touching off an economic, financial, diplomatic, and military crisis associated with a tremendous spike in oil prices and recession in OECD and oil-importing developing countries. But was the Gulf Crisis a disruption? Did it affect the fabric of oil trade? To examine this question, this paper examines the changing role of international trade intermediaries (ITIs, often referred to as “trading companies”) in the oil market. ITIs connect buyers and sellers, serving as the glue that holds many commodity markets together. Oil trading companies have attracted harsh scrutiny form policymakers as a result of allegations regarding their role in the United Nations’ Iraqi Oil-for-Food Program, but minimal scholarly attention. The paper takes advantage of a unique microdatabase on the Brent market. Produced in the U.K. North Sea, Brent Blend is by far the most widely traded crude oil in the international market. Participants in the Brent market are diverse, with the largest traders falling into two categories. The first comprises “industrial MNEs”—companies active in the business of producing or refining crude oil. The second category comprises financial houses and trading companies. This diversity provides an opportunity to test hypotheses regarding behavioral differences across types of companies and geographic origin, before, during, and after the crisis.
    Keywords: oil, trading companies, crisis, Brent, North Sea
    JEL: D74 F23 L14 L71 Q41
    Date: 2006–03–08
  3. By: Vajjhala, Shalini (Resources for the Future); Fischbeck, Paul S.
    Abstract: The worldwide demand for new energy infrastructures has been paralleled in recent years by the increasing difficulty of siting major facilities. Siting difficulty is the subject of widespread discussion, but because of the complexity of the problem, potential solutions are not obvious or well understood. This paper presents a two-step policy-level framework that first develops an empirical measure of siting difficulty and then quantitatively assesses its major causes. The approach is based on the creation and aggregation of four siting indicators that are independent of the common causes and localized effects of siting problems. The proposed framework is demonstrated for the case of U.S. transmission line siting. Results of the analyses reveal significant variations in state siting difficulty and industry experts’ perceptions of its dominant causes, with implications for the long-term success of Regional Transmission Organizations (RTOs) and knowledge transfer among siting professionals in the deregulated industry.
    Keywords: electric transmission lines, facilities siting, public opposition, Regional Transmission Organizations (RTOs), siting difficulty
    JEL: L94 L98
    Date: 2006–02–22
  4. By: Shih, Jhih-Shyang (Resources for the Future); Burtraw, Dallas (Resources for the Future); Palmer, Karen L. (Resources for the Future); Siikamäki, Juha V. (Resources for the Future)
    Abstract: The animal husbandry industry is a major emitter of methane, which is an important greenhouse gas. The industry is also a major emitter of ammonia, which is a precursor of fine particulate matter—arguably, the number-one environment-related public health threat facing the nation. We present an integrated process model of the engineering economics of technologies to reduce methane and ammonia emissions at dairy operations in California. Three policy options are explored: greenhouse gas offset credits for methane control, particulate matter offset credits for ammonia control, and expanded net metering policies to provide revenue for the sale of electricity generated from captured methane gas. Individually, any of these policies appears to be sufficient to provide the economic incentive for farm operators to reduce emissions. We report on initial steps to fully develop the integrated process model that will provide guidance for policymakers.
    Keywords: methane, ammonia, carbon dioxide, greenhouse gases, climate change, offset, particulate matter, net metering, environmental policy, CAFO, manure management, biodigester, electricity, global warming, cost-benefit, incentive approach
    JEL: Q2 Q4 Q53
    Date: 2006–03–14
  5. By: Brännlund, Runar (Department of Forest Economics, Swedish University of Agricultural Sciences); Lundgren, Tommy (Department of Forest Economics, Swedish University of Agricultural Sciences)
    Abstract: We assess the effects on Swedish industry input and output demands of different climate policy scenarios connected to energy policy induced by the Kyoto protocol. A unique data set containing firm level data on outputs and inputs during the years 1991 – 2001 is used to estimate a factor demand model, which is then simulated for different policy scenarios. Sector specific estimation suggests that the proposed quadratic profit function specification exhibit properties and robustness that are consistent with economic <p> theory; that is, all own-price elasticities are negative and all output elasticities are positive. Furthermore, the elasticities show that the input demands are, in most cases, relatively inelastic. Simulation of the model for 6 different policy scenarios reveal that the effects on Swedish base industry of a EU level <p> permit trade system is dependent on (i) removal or no removal of current CO2 tax, (ii) the established price of permits, and (iii) what will happen to the electricity price. Our analysis show that changes in electricity price may be more important than the price of permits for some sectors.
    Keywords: CO2-emissions; factor demand; fossil fuels; tradable permit market
    JEL: Q58
    Date: 2006–03–03
  6. By: Richard Nahuis; Paul Tang
    Abstract: The Kyoto Protocol binds the level of greenhouse gas emissions in participating countries. It does not, however, dictate how the countries are to achieve this level. The economic costs of reaching emission targets are generally evaluated to be low. For example, evaluations with applied general-equilibrium models estimate the costs to be in the range of 0.2% to 0.5% of GDP, when international trade in emissions rights among governments is allowed for. We argue that important costs are overlooked since governments have an incentive to choose highly distorting tax schemes. <P> This paper shows that governments generally choose different energy tax rates for households and for internationally operating firms as the result of tax competition or pollution competition: in the first case, governments try to undercut other governments to attract firms to their country, whereas in the second, they try to push dirty industries across the border. In both cases, the incentive for firms and households to use or save energy is different at the margin. Both cases call for coordination of climate change policies that goes beyond a binding ceiling on greenhouse gas emissions and international trade in permit rights among governments alone.
    Keywords: energy taxes; tax competition; climate change policies
    JEL: H23 Q48 Q58
    Date: 2005–10
  7. By: Widergren, Steven; Sun, Junjie; Tesfatsion, Leigh S.
    Abstract: Power industry restructuring continues to evolve at multiple levels of system operations. At the bulk electricity level, several organizations charged with regional system operation are implementing versions of a Wholesale Power Market Platform (WPMP) in response to U.S. Federal Energy Regulatory Commission initiatives. Recently the Energy Policy Act of 2005 and several regional initiatives have been pressing the integration of demand response as a resource for system operations. These policy and regulatory pressures are driving the exploration of new market designs at the wholesale and retail levels. The complex interplay among structural conditions, market protocols, and learning behaviors in relation to short-term and longer-term market performance demand a flexible computational environment where designs can be tested and sensitivities to power system and market rule changes can be explored. This paper discusses the use of agent-based computational methods for the study of electricity markets at the wholesale and retail levels, and explores distinctions in problem formulation between these levels.
    JEL: B4 C0 C6 L1 L5 Q4
    Date: 2006–03–06
  8. By: Axel Dreher (Department of Management, Technology, and Economics, Swiss Federal Institute of Technology Zurich (ETH)); Magdalena Ramada-Sarasola (University of Konstanz, Department of Economics)
    Abstract: When analyzing the impact of international organizations on the environment, two main issues arise. First, we have to quantify the participation of the organizations on countries they deal with. Second, the environmental impact of this involvement has to be measured. This paper attempts to do this. We employ panel data to empirically analyze whether and to what extent the presence of IMF, World Bank, regional Multilateral Development Banks, WTO and Global Environmental Facilities has an impact on environmental governance and outcomes. Our results for a large number of countries and years show that the international organizations affect the environment directly via their impact on CO2 emissions. Projects financed by World Bank, ADB, UNDP, and membership in the WTO increase emissions, while IADB projects reduce emissions. EBRD and UNEP do not significantly affect CO2 emissions, while the AfDB increases emissions after 1985 only. Taking the indirect impact through trade liberalization into account, however, the WTO reduces emissions, while the IADB increases emissions. There is some evidence that the international organizations investigated here also influence SO2 emissions, water pollution, and round wood production; environmental governance is not affected.
    Keywords: International Organizations, Environment, Governance, IMF, World Bank, WTO, Trade Liberalization
    JEL: Q53 Q56 F34 F35
    Date: 2006–02
  9. By: Jota Ishikawa; Tomohiro Kuroda
    Abstract: This paper compares emission taxes with other taxes from the viewpoint of emission reduction in an open economy. Using a simple monopoly model, we show that emission taxes may not be very effective to protect environment because of the spillover effects between markets stemming from non-constant marginal costs and transboundary externalities. Other taxes such as production taxes and tariffs are more effective under certain conditions. Thus, an easy application of emission taxes should be discreet in the open economy framework.
    Date: 2006–03
  10. By: Martin Gassebner (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland); Michael Lamla (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland); Jan-Egbert Sturm (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: Recent literature proposes many variables as significant determinants of pollution. This paper gives an overview of this literature and asks which of these factors have an empirically robust impact on water and air pollution, i.e. do not depend upon the conditioning information set. For this, we apply Extreme Bound Analysis (EBA) on a panel of 208 countries covering the period 1960–2001. We find supportive evidence on the existence of the environmental Kuznets curve. Furthermore, mainly demographic variables and variables capturing the economic structure of a country contribute in explaining air and water pollution.
    Keywords: pollution; environment; sensitivity analysis; environmental Kuznets curve
    JEL: C52 F18 L60 O13 Q53
    Date: 2006–02
  11. By: Macauley, Molly K. (Resources for the Future)
    Abstract: At the request of managers at the National Aeronautics and Space Administration, this paper describes frameworks for and illustrates societal benefits associated with Earth observations from an experimental satellite known as the Multiangle Imaging SpectroRadiometer (MISR). MISR is a unique camera that images Earth’s atmosphere and other characteristics simultaneously from nine angles. This multiangle perspective enhances our ability to measure and monitor dimensions of climate, weather, air quality, natural hazards, and the biosphere. “Societal benefit” in this paper generally refers to practical applications of data and data products beyond their intrinsic science merit. The paper has two objectives: to demonstrate how several societal benefit frameworks work, and to highlight some of these benefits in the case of MISR. Such consideration of practical benefits is timely, as their realization is becoming a prominent objective of future space remote sensing activities. At least four groups of experts recommend that societal benefit serve as a heavily weighted criterion for prioritizing Earth science research opportunities. The National Academy of Sciences’ forthcoming decadal survey for U.S. Earth science applications from space, the U.S. Climate Change Research Program, the framework for the international Global Earth Observing System of Systems (GEOSS), and the new world water program of the World Meteorological Organization (WMO) all argue that societal benefit should be a determining factor in selecting the next Earth-observing spacecraft missions and instruments. If these recommendations are implemented, the frameworks and illustrations below may prove useful in guiding benefit descriptions in future space-derived Earth observation programs.
    Keywords: societal benefits, resource and environmental management, earth observations, earth science
    JEL: O32 O38 Q28
    Date: 2006–03–08

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