nep-ene New Economics Papers
on Energy Economics
Issue of 2006‒05‒20
fifteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. Energy, Development, and the Environment: An Appraisal Three Decades After the "Limits to Growth" Debate By Giovanni Dosi; Marco Grazzi
  2. The Evaluation of Standard of Living and the Role of Household Electricity Consumption - A Panel Cointegration Analysis By Roselyne Joyeux; Ronald D. Ripple
  3. Stipulations, the consumer advocate and utility regulation in Florida By Stephen Littlechild
  4. The Opportunity Cost of Electricity Outages and Privatization of Substations in Nepal By Roop Jyoti; Aygul Ozbafli; Glenn Jenkins
  5. Price Cap Regulation and Investment Incentives under Demand Uncertainty By Fabien A. Roques; Nicos S. Savva
  6. An Elephant in the Garden: The Allies, Spain, and Oil in World War II By Leonard Caruana; Hugh Rockoff
  7. Energy Demand and Capacity to Adjust in U.S. Agricultural Production By Miranowski, John
  8. Investigating the Characteristics of Stated Preferences for Reducing the Impacts of Air Pollution: A Contingent Valuation Experiment By Ian J. Bateman; Michael P. Cameron; Antreas Tsoumas
  9. Analysis of Environmental Costs of Mobility due to Urban Sprawl - A Modelling Study on Italian Cities By Chiara M. Travisi; Roberto Camagni; Peter Nijkamp
  10. An input-output analysis of the "key" sectors in CO2 emissions from a production perspective: an application to the Spanish economy By Vicent Alcantara Escolano; Emilio Padilla Rosa
  11. Mitigation Strategies and Costs of Climate Protection: The effects of ETC in the hybrid Model MIND By Kai Lessmann; Ottmar Edenhofer; Nico Bauer
  12. Distributional constraints and efficiency in a tradable permit market By Hagem, Cathrine; Westskog, Hege
  13. Análisis de los factores determinantes de las desigualdades internacionales en las emisiones de CO2 per cápita aplicando el enfoque distributivo: una metodología de descomposición por factores de Kaya By Juan Antonio Duro Moreno; Emilio Padilla Rosa
  14. Forest vintages and carbon sequestration By Duarte, Clara Costa; Sa, Maria A. Cunha e
  15. Natural Disasters in a Two-Sector Model of Endogenous Growth By Masako Ikefuji; Ryo Horii

  1. By: Giovanni Dosi; Marco Grazzi
    Abstract: This work builds upon some long-term secular regularities concerning the relation between consumption of energy, technological progress and economic growth and reassesses the old question raised around forty years ago in the "limits to growth" discussion (Meadows et al. [1972]), namely are the current patterns of development and in particular the current patterns of energy use environmentally sustainable? The questions we shall address are the following. First, the environmental sustainability of patterns of energy consumption that for long have implied the notion of the environment as a free good, without any negative social externalities and even less so any environmental threat. Second, the importance - and limits - of relative price changes with respect to the dynamics of consumption of energy. Third, the role of fundamental discontinuities between different "technological paradigms".
    Keywords: Energy Consumption, Emissions, Sustainability
    Date: 2006–05–16
  2. By: Roselyne Joyeux (Department of Economics, Macquarie University); Ronald D. Ripple (Department of Economics, Macquarie University)
    Abstract: This research takes the analysis of the relationship between energy and income in a different direction than prior research, and it introduces a new set of analytical tools to the area. The results of our research are important because they raise additional questions about the effectiveness of income as a proxy indicator for standard of living, and these conclusions are supported by the use of more powerful analytical techniques. Our paper employs state-of-the-art econometric time series panel techniques to evaluate the nature of the relationship between income measures and energy consumption measures for seven East Indian Ocean countries. The fundamental premise of our research is that energy consumption at the household/residential level is a key indicator of the standard of living for the residents of a country. The general finding of the paper is that income and household electricity consumption measures are not cointegrated. Given this finding we conclude that standard of living measures/indexes that rely on income measures and do not directly include householdlevel energy consumption information will necessarily miss important indications of both levels and changes of standard of living.
    Keywords: Standard of living, energy consumption, panel cointegration.
    JEL: I31 C33 Q43
    Date: 2004–10
  3. By: Stephen Littlechild
    Abstract: Relatively little is known about the practice of settlement rather than litigation in US utility regulation, or about the activities of consumer advocates. This paper presents evidence from Florida. During 1976-2002, over 30 per cent of earnings reviews were settled by stipulations involving the Office of Public Counsel but only 5 per cent of other cases. Over three quarters of the rate reductions associated with earnings reviews derived from these stipulations, and in the decade 1976-86 the proportion was over 95 per cent. The average value of a rate reduction was seven times higher with a stipulation than without. Only 1 per cent of the rate increases associated with company requests derived from stipulations. In these few cases the stipulation typically provided for a lower proportion of the requested rate increase than a litigated outcome allowed (about one third compared to one half). This research suggests that settlements deserve consideration in utility regulation generally, even outside the US context.
    Keywords: stipulations, settlements, consumer advocate, regulation
    JEL: L51 L97 L94 L
    Date: 2006–05
  4. By: Roop Jyoti (Ministry of Finance, Nepal); Aygul Ozbafli (Girne American University, North Cyprus); Glenn Jenkins (Queen's University, Canada)
    Abstract: The unreliability of electricity supplies is a major cause of the high cost of manufacturing in developing countries. In this paper we are able to measure the cost imposed by power outages and suggest some feasible mitigating measures. The study employs a rich, if not unique, set of data from three large manufacturing enterprises in Nepal. Using it the opportunity costs to the enterprises from lost production from electricity outages can be estimated accurately. Power outages due to substation failure can be separated from other electricity systems failures. An analysis is carried out on the feasibility of privatized electricity substations. We find that this is a very worthwhile capital investment for the private sector to undertake, even when additional generation capacity to improve overall electricity reliability is not justified.
    Keywords: electricity supply, reliability, opportunity costs, privatization
    JEL: L94 Q41 Q48
    Date: 2006–04
  5. By: Fabien A. Roques; Nicos S. Savva
    Abstract: We study the effect of price cap regulation on investment in new capacity in an oligopolistic (Cournot) industry, using a continuous time model with stochastic demand. A price cap has two mutually competing effects on investment under demand uncertainty: it makes the option of deferring investment very valuable, but it also reduces the interest of strategic underinvestment to raise prices. We show that there exists an optimal price cap that maximizes investment incentives. As with deterministic demand, the optimal price cap is the clearing price of the competitive market. However, unlike the deterministic case, we show that such a price cap does not restore the competitive equilibrium; there is still under-investment. Sensitivity analyses and Monte Carlo simulations show that the efficiency of price cap regulation depends critically on demand volatility and that errors in the choice of the price cap can have detrimental consequences on investment and average prices.
    Keywords: real options, stochastic games, price cap regulation, electricity markets
    JEL: C73 D92 L51 L94
    Date: 2006–05
  6. By: Leonard Caruana; Hugh Rockoff
    Abstract: During World War II the Allies controlled Spain's oil supply in order to limit Spain's support for the Axis. This experiment with sanctions is unusually informative because a wide range of policies was tried over a long period. Three episodes are of special interest: (1) a total embargo on oil for Spain in 1940 that was surprisingly successful in dissuading Spain from joining the Axis; (2) a period of reduced supplies in 1941-42 that we call "the Squeeze" that was only partially successful; and (3) a second total embargo in 1944 that was a disappointment for the Allies, given the course of the war, that produced a rift between Churchill and Roosevelt. Our analysis is based on new monthly estimates of Spain's imports of gasoline and other petroleum products, which we describe in the text and report in the appendix. These estimates allow us to draw a clearer picture of the oil sanctions than has been possible in the past.
    JEL: H4
    Date: 2006–05
  7. By: Miranowski, John
    Abstract: The objectives of this paper on energy demand and the capacity to adjust in the agricultural sector are: first, to establish a baseline for energy demand in agricultural production in the aggregate, by region, and by major type of crop and livestock farm; second, to evaluate the capacity of agricultural producers to adjust to real energy price changes and shocks as well as supply disruptions through input substitution and output adjustments; third, to assess how changing technology, improving energy efficiency, and growing agriculture productivity alter the capacity to adjust over time; and finally, to discuss the potential roles of government to achieve food and energy security.
    Date: 2006–05–16
  8. By: Ian J. Bateman (University of East Anglia); Michael P. Cameron (University of Waikato); Antreas Tsoumas (University of the Aegean)
    Abstract: This paper investigates the nature of stated preferences for reducing air pollution impacts. Specifically a contingent valuation (CV) experiment is designed to elicit individuals’ values for reducing these impacts and to examine how these may change when multiple schemes for reducing differing impacts are valued. The novel survey design allows simultaneous testing for the presence of several anomalies reported in the CV literature within the same context, including (i) scope sensitivity (ii) part-whole or substitution effects (iii) ordering effects and (iv) visible choice set effects. Results indicate some scope sensitivity and interaction between ordering effects and visible choice set effects, as well as substantial part-whole or substitution effects between two exclusive schemes. A practical consequence of these findings is that estimates of the value of combined programmes may not readily be obtained by summing the values of their constituent parts obtained using the CV method.
    Keywords: air pollution; contingent valuation; stated preferences; part-whole effect; experimental surveys
    JEL: C42 C90 Q51 Q53
    Date: 2006–05–11
  9. By: Chiara M. Travisi (DIG, Politecnico di Milano, and Fondazione Eni Enrico Mattei); Roberto Camagni (DIG, Politecnico di Milano, Milano, Italy); Peter Nijkamp (Vrije Universiteit Amsterdam, The Netherlands)
    Abstract: A sound empirical and quantitative analysis on the relationship between different patterns of urban expansion and the environmental or social costs of mobility is rare, and the few studies available provide at best a qualitative discussion of these issues. Some recent tentative studies on the metropolitan area of Milan have empirically explored whether different patterns of urban expansion generate different levels of land use and heterogeneous impacts of urban mobility. The results confirmed the expectation that a higher environmental impact of mobility may result from more extensive and sprawling urban development, from recent urbanisation processes and from residential specialisation. The present paper extends the previous empirical analysis to seven major Italian metropolitan areas (namely, Bari, Florence, Naples, Padua, Perugia, Potenza and Turin) in order to corroborate the previous tentative results for the Italian context. The novelty of the prese! nt paper is threefold. First, we are interested in exploring the changes that have occurred due to the increased intensity of mobility across a ten-year period, from 1981 to 1991, which corresponds to the Italian economic boom years. Secondly, using an econometric analysis of cross-section data, we consider several metropolitan areas simultaneously, and are therefore able to explore whether there are significant differences in the way the model explains variations in the mobility impact across various Italian urban areas. And finally, we offer a structural interpretation of the causal chain in the explanation of the mobility impact intensity by using Causal Path Analysis as a statistical test framework.
    Keywords: urban mobility; sprawl; environmental costs; self-containment capacity; causal path analysis
    JEL: Q56 R14 R41
    Date: 2006–05–01
  10. By: Vicent Alcantara Escolano (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Emilio Padilla Rosa (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: Here we present an approach that allows the identification of the "key" productive sectors responsible for CO2 emission. For this purpose, we develop an input- output methodology from a supply perspective. We focus on the impact of an increase in the value-added of the different productive sectors on total CO2 emissions and we identify the productive sectors responsible for the increase in CO2 emissions when there is an increase in the income of the economy. The approach shows the contribution of the various sectors to CO2 emission from a production perspective and allows us to identify the sectors that deserve more consideration for mitigation policies. This analysis is complementary to the input–output analysis from a demand perspective. The
    Keywords: CO2 emissions,key productive sectors,input-output analysis
    JEL: C67 Q40 Q43
    Date: 2006–02
  11. By: Kai Lessmann (Potsdam Institute for Climate Impact Research (PIK)); Ottmar Edenhofer (Potsdam Institute for Climate Impact Research); Nico Bauer (Paul ScherrerInstitute (PSI))
    Abstract: MIND is a hybrid model incorporating several energy related sectors in an endogenous growth model of the world economy. This model structure allows a better understanding of the linkages between the energy sectors and the macro-economic environment. We perform a sensitivity analysis and parameter studies to improve the understanding of the economic mechanisms underlying opportunity costs and the optimal mix of mitigation options. Parameters representing technological change that permeates the entire economy have a strong impact on both the opportunity costs of climate protection and on the optimal mitigation strategies, e.g. parameters in the macro-economic environment and in the extraction sector. Sector-specific energy technology parameters change the portfolio of mitigation options but have only modest effects on opportunity costs, e.g. learning rate of the renewable energy technologies. We conclude that feedback loops between the macro-economy and the energy sectors are crucial for the determination of opportunity costs and mitigation strategies.
    Keywords: Endogenous technological change, Climate change mitigation costs, Integrated assessment, Growth model, Energy sector, Integrated assessment
    JEL: O41 Q40 Q43 Q55 C61 D99
    Date: 2005–12
  12. By: Hagem, Cathrine (Dept. of Economics, University of Oslo); Westskog, Hege (CICERO, Center for International Climate and Environmental Research)
    Abstract: It is a well known result that taking distributional constraints into account when allocating tradable permits to different agents can lead to an imperfectly competitive permit market. Hence, the emission target is no longer met at least cost. In this paper we suggest an allocation rule for permits which can handle this problem. If the permits are allocated twice during the same period, and the allocation in the second round is dependent on the market price for permits, this allocation rule can achieve both cost effectiveness and meet specific requirements for cost distribution across agents.
    Keywords: Climate Change; Emission Permits; Allocation; Cost Effectiveness; Distributional Constraints
    JEL: Q52 Q54
    Date: 2006–05–08
  13. By: Juan Antonio Duro Moreno (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Emilio Padilla Rosa (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: En este trabajo desarrollamos una metodología para descomponer las desigualdades internacionales en las emisiones de CO2 en factores (multiplicativos) de Kaya y dos términos de interacción. Utilizamos el índice de desigualdad de Theil y mostramos que esta metodología de descomposición puede extenderse para analizar los componentes de desigualdad inter e intragrupal. A continuación podemos analizar los factores detrás de las desigualdades en las emisiones de CO2 per cápita entre países, entre grupos de países y dentro de los grupos de países. La ilustración empírica sugiere algunas cuestiones. Primero, la desigualdad internacional en las emisiones de CO2 per cápita es principalmente atribuible a las desigualdades en los niveles de renta per cápita, lo que ayuda a explicar su reciente reducción, mientras que las diferencias en la intensidad de carbono de la energía y la intensidad energética han hecho una contribución mucho menos significativa. Este resultado está fuertemente influenciado por el comportamiento de China e India. En segundo lugar, el componente de la desigualdad entre grupos, que es el mayor, está también explicado en buena medida por el factor ingreso. En tercer lugar, el componente de la desigualdad dentro de los grupos aumentó ligeramente durante el período, algo principalmente debido al cambio en el
    Keywords: desigualdad en las emisiones, desigualdad entre países, factores de Kaya,índice de Theil
    JEL: C19 D39 Q43
    Date: 2006–02
  14. By: Duarte, Clara Costa; Sa, Maria A. Cunha e
    Abstract: In the current paper we examine the role of forest carbon sequestration benefits in optimal forest management. When carbon benefits are considered not only the forested area is relevant, but also the flow of carbon between land and the atmosphere through the carbon cycle. To account for all these impacts a multi-vintage forest setting is used, following Salo and Tahvonen (2004). The model is extended to three different carbon accounting methods to measure the benefits form carbon sequestration: carbon flow regime, tonne-year crediting and average storage. In the case of the carbon flow regime, the impact on the optimal management and allocation of land will depend upon the amount of carbon released when the forest is harvested. Under the other two accounting systems optimal steady state forest area will be increased, and in cases where optimal management imply cyclical harvesting, considering carbon benefits will always increase cycles dimension.
    Date: 2006
  15. By: Masako Ikefuji (Graduate School of Economics, Osaka University); Ryo Horii (Graduate School of Economics, Osaka University)
    Abstract: This paper studies sustainability of economic growth considering the risk of natural disasters caused by pollution in an endogenous growth model with physical and human capital accumulation. We consider an environmental tax policy, and show that economic growth is sustainable only if the tax rate on the polluting input is increased over time and that the long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax. The social welfare is maximized under a positive steadystate growth in which faster accumulation of human capital compensates the productivity loss due to declining use of the polluting input.
    Keywords: natural disasters, human capital, endogenous depreciation, economic growth.
    JEL: O41 O13 E22
    Date: 2006–05

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