nep-ene New Economics Papers
on Energy Economics
Issue of 2006‒06‒24
thirteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. Power sector reform, private investment and regional co-operation By David Newbery;
  2. Is cost recovery a feasible objective for water and electricity ? The Latin American experience By Yepes, Tito; Foster, Vivien
  3. A Dynamic Model of Food and Clean Energy By CHAKRAVORTY, Ujjayant; MAGNE, Bertrand; MOREAUX, Michel
  4. Russian Natural Gas Exports to Europe : Effects of Russian Gas Market Reforms and the Rising Market Power of Gazprom By Eirik Lund Sagen; Marina Tsygankova
  5. Energy prices, production and the adoption of cogeneration in the UK and the Netherlands By David Bonilla;
  6. Input-Outrageous: The Economic Impacts of Modern Biofuels Production By Swenson, David A.
  7. Can Nuclear Power solve the Global Warming Problem? By CHAKRAVORTY, Ujjayant; MAGNE, Bertrand; MOREAUX, Michel
  8. Allocation and competitiveness in the EU emissions trading scheme: policy overview By Michael Grubb; Karsten Neuhoff
  9. Auctioning of EU ETS Phase II allowances: how and why? By Cameron Hepburn; Michael Grubb; Karsten Neuhoff; Felix Matthes; Maximilien Tse
  10. Permis d'Emission Négociables, Ressources Non-Renouvelables et Croissance By GRIMAUD, André; ROUGÉ, Luc
  11. Substitutions entre énergies, effet de serre et puits de carbone By LAFFORGUE, Gilles; MAGNE, Bertrand; MOREAUX, Michel
  12. The Optimal Sequestration Policy with a Ceiling on the Stock of Carbon in the Atmosphere By LAFFORGUE, Gilles; MAGNE, Bertrand; MOREAUX, Michel
  13. Carbon capture and sequestration: how much does this uncertain option affect near-term policy choices? By Laurent Gilotte; Valentina Bosetti

  1. By: David Newbery;
    Abstract: Modern infrastructure, particularly electricity, is critical to economic development. South Asia, with inefficient and bankrupt state-owned vertically integrated electricity supply industries, encouraged private generation investment to address shortages selling power to largely unreformed state electricity boards, exacerbating financial distress. Reforming the SEBs is an essential first step, followed by privatisation to sustain reform. Reducing losses and increasing plant load factors yield far higher returns than generation investment, where India and Pakistan under-price and exceed predicted levels of electric intensity. Private investors will require assurances that the contracts needed for IPPs are honoured, that legal disputes are efficiently and fairly resolved, subject to fall-back international arbitration, and that their purchasers are credit-worthy. This is easier with cheap gas, which is available to Bangladesh, but scarce in India. Regional energy trade would therefore do much to improve the investment climate, and a South Asia Energy Charter could underwrite increased energy trade.
    Keywords: infrastructure, electricity, direct foreign investment, gas, privatisation, regional co-operation, South Asia
    JEL: H54 K23 L32 L94 Q48 R58
    Date: 2006–06
  2. By: Yepes, Tito; Foster, Vivien
    Abstract: Given the relatively small segment of the population that faces genuine affordability problems in Latin America, there appears to be a promising case for using targeted subsidies to reconcile the cost recovery objective with social protection concerns. Social tariff schemes of various kinds are already widespread in Latin America, but they suffer from a number of design flaws. Increasing block tariff (IBT) structures are the most prevalent form of social tariffs in the region. These are likely to be more successful in the electricity sector than in the water sector because the correlation between consumption and income is much stronger in the case of electricity than water. Moreover, IBT structures in electricity tend to be much better designed than in the case of water, with lower fixed charges, lower subsistence blocks, and steeper gradients. A number of more sophisticated social tariff schemes are also being applied that combine consumption criteria with some form of socioeconomic screening. These are generally found to perform better than IBTs, although they also present significant room for improvement.
    Keywords: Infrastructure Economics,Town Water Supply and Sanitation,Public Sector Management and Reform,Regional Governance,Urban Governance and Management
    Date: 2006–06–01
  3. By: CHAKRAVORTY, Ujjayant; MAGNE, Bertrand; MOREAUX, Michel
    JEL: Q41 Q42 Q15
    Date: 2006–05
  4. By: Eirik Lund Sagen; Marina Tsygankova
    Abstract: Gazprom, the dominant gas company in Russia, is widely believed to be the key supplier of gas to Europe in the foreseeable future. However, there are numerous uncertainties and challenges within the Russian and European gas industry that may alter the allocation of Gazprom´s gas sales between domestic and export markets. In this paper we use both theoretical and numerical models to study potential effects on Russian gas exports from changes in Russian domestic gas prices and the production capacities in 2015. We also investigate whether the liberalization of the European gas markets may provide incentives for Gazprom to induce monopoly power in its export markets. Our main findings suggest that both increased domestic gas prices and sufficient production capacities are vital to maintain Gazprom´s market share in Europe over the next decade. At low domestic prices, Gazprom may even have difficulties to carry out its long-term export commitments. However, if export possibilities are ample due to both lower domestic demand at higher prices and high overall production capacities, a large share of spot trades in Europe may encourage Gazprom to exercise market power in its export markets.
    Keywords: Russia, Natural gas, production capacity, export, Western Europe, price, numerical model
    JEL: F17 D42 Q31 Q38
    Date: 2006
  5. By: David Bonilla;
    Abstract: This paper investigates economic incentives influencing the adoption of energy saving technology by industry, namely, CHP in UK and Dutch manufacturing sectors. The empirical analysis is based on a cross sectional time series econometric model, and examines how industrial output and historical increases in the price of electricity relative to gas prices, spark the diffusion of CHP. Production and price elasticities are estimated across heterogeneous industrial groups. Using data for 13 manufacturing sectors the model shows that fuel cost savings and industry output impact significantly on CHP uptake. Model outcomes are found to differ depending on the period of estimation and the estimation period is key in determining the impact of gas price and purchased power prices on adoption of CHP.
    Keywords: energy, manufacturing sector, econometric modeling, electricity prices, energy conservation, technology diffusion
    JEL: C23 C50 Q40 L6
    Date: 2006–06
  6. By: Swenson, David A.
    Abstract: Measuring the net economic impacts of ethanol plants has been problematical: access to good industrial accounts is limited, the sector has historically gone through volatile swings, regional logistical responses to a plant beyond corn inputs are not well understood, and the sector is currently expanding rapidly. In the current uncertain energy world, the prices paid for inputs and received for outputs are also volatile. There exists quite a bit of confusion about the overall value of this dimension of value added agricultural processing to local, regional, and national accounts. There is a tendency for proponents of this industry to overstate, over-describe, and outright double-count economic activity linked to ethanol and other biofuels production. This paper will present the findings of a modeled ethanol plant configuration in a hypothetical three-county region in Iowa.
    JEL: C5
    Date: 2006–06–13
  7. By: CHAKRAVORTY, Ujjayant; MAGNE, Bertrand; MOREAUX, Michel
    Date: 2006–01
  8. By: Michael Grubb; Karsten Neuhoff
    Abstract: The European emissions trading scheme (EU ETS) has an efficient and effective market design that risks being undermined by three interrelated problems: the approach to allocation; the absence of a credible commitment to post-2012 continuation; and concerns about its impact on the international competitiveness of key sectors. This special issue of Climate Policy explores these three factors in depth. This policy overview summarizes key insights from the individual studies in this issue, and draws overall policy conclusions about the next round of allocations and the design of the system for the longer term.
    Date: 2006–06
  9. By: Cameron Hepburn; Michael Grubb; Karsten Neuhoff; Felix Matthes; Maximilien Tse
    Abstract: The European Directive on the EU ETS allows governments to auction up to 10% of the allowances issued in Phase II 2008-2012, without constraints specified thereafter. This paper reviews and extends the long-standing debate about auctioning, in which economists have generally supported and industries opposed greater use of auctioning. The paper clarifies the key issues by reviewing six ‘traditional’ considerations, examines several credible options for auction design, and then proposes some new issues relevant to auctioning. It is concluded that greater auctioning in aggregate need not increase adverse competitiveness impacts, and could in some respects alleviate them, particularly by supporting border-tax adjustments. Auctioning within the 10% limit might also be used to dampen price volatility during 2008-12 and, in subsequent periods, it offers the prospect of supporting a long-term price signal to aid investor confidence. The former is only possible, however, if Member States are willing to coordinate their decision-making (though not revenue raising) powers in defining and implementing the intended pricing mechanisms.
    Keywords: European emission trading, auctions, price floor
    JEL: D44 L10 Q52
    Date: 2006–06
  10. By: GRIMAUD, André; ROUGÉ, Luc
    Date: 2005
  11. By: LAFFORGUE, Gilles; MAGNE, Bertrand; MOREAUX, Michel
    Date: 2006–02
  12. By: LAFFORGUE, Gilles; MAGNE, Bertrand; MOREAUX, Michel
    JEL: Q32 Q42 Q48
    Date: 2006–01
  13. By: Laurent Gilotte (CIRED - Centre International de Recherche sur l'Environnement et le Développement - [CNRS : UMR8568] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Valentina Bosetti (FEEM - Fondazione Eni Enrico Mattei)
    Abstract: Policy makers as well as many economists recognize geological Carbon Capture and Sequestration (CCS) as a key option to avoid costly emission reduction. While an extreme perspective is to envision CCS as a magic bullet to solve the issue of climate change, the economics perspective is more balanced and see it as a part of a portfolio of mitigation actions. Besides, as any novel mitigation technology, CCS can be implemented with a twofold purpose; on one side it can substitute some other technological efforts to reach a given environmental target. On the other side, it offers the opportunity to go for additional emission reductions and<br />reach a "safer" climate target. In order to balance these two<br />possible utilizations of CCS and assess their respective effects on<br />early policystrategies, we undertake a twofold numerical experiment.<br /> First, a cost-efficiency analysis is undertaken where CCS sole effect<br /> is substitution of other efforts. This is followed by a cost-benefit analysis where both purposes have to be balanced. We find that future availability of CCS is less a reason to relax near-term abatement efforts than what could be inferred from previous analyses. Moreover, cost-benefit analysis indicates that the environmental target should be more ambitious when CCS is included in the picture.
    Keywords: Climate Change, Uncertainty, Sequestration, Cost-benefit analysis
    Date: 2006–06–16

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