nep-ene New Economics Papers
on Energy Economics
Issue of 2006‒09‒03
ten papers chosen by
Roger Fouquet
Imperial College, UK

  1. Do Birds of a Feather Flock Together? Speculator Herding in the World Oil Market By Robert Weiner
  2. The Turning Black Tide: Energy Prices and the Canadian Dollar By Ramzi Issa; Robert Lafrance; John Murray
  3. Resource Booms, Inequality, and Poverty: The Case of Gas in Bolivia By Jann Lay; Rainer Thiele; Manfred Wiebelt
  4. Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect By Kenneth A. Small; Kurt Van Dender
  5. Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia By Susan Olivia; John Gibson
  6. Siting Renewable Energy Facilities: A Spatial Analysis of Promises and Pitfalls By Vajjhala, Shalini
  7. Double Dividend Hypothesis, Golden Rule and Welfare Distribution By Mireille Chiroleu-Assouline; Mouez Fodha
  8. Double Dividend with Involuntary Unemployment: <br />Efficiency and Intergenerational Equity By Mireille Chiroleu-Assouline; Mouez Fodha
  9. Voluntary Environmental Agreements when Regulatory Capacity Is Weak By Blackman, Allen; Lyon, Thomas P.; Sisto, Nicholas
  10. Unraveling the World-Wide Pollution Haven Effect By Jean-Marie GRETHER; Nicole A. MATHYS; Jaime DE MELO

  1. By: Robert Weiner (Resources for the Future)
    Abstract: This paper looks at speculative behavior in the international oil market. Much of the blame for oil-market turbulence has been placed on speculators, particularly hedge funds. Speculative capital has been characterized as “hot money,” with capital flows driven by “herding,” “flocking,” and “contagion.” Policies to deal with volatility by weakening, or even disabling speculation, have been based largely on anecdote, convenience (speculators have long served as scapegoats for various problems), and ideology, rather than careful analysis. Part of the problem arises from the secrecy with which speculators operate. Because speculative trading cannot easily be observed, it is difficult to assess speculators’ contribution, if any, to volatility. The paper utilizes a large, detailed database on individual trader positions in crude-oil and heating-oil futures markets. The paper is exploratory, with focus on measuring and assessing the tendency of speculators to herd (trade in the same direction as a group) and flock (trade in the same direction by subgroups of speculators).
    Keywords: oil, speculation, volatility, herding, derivatives, futures
    JEL: G13 G18 L71 Q48
    Date: 2006–06–29
  2. By: Ramzi Issa; Robert Lafrance; John Murray
    Abstract: The authors revisit the relationship between energy prices and the Canadian dollar in the Amano and van Norden (1995) equation, which shows a negative relationship such that higher real energy prices lead to a depreciation of the Canadian dollar. Based on structural break tests, the authors find a break point in the sign of this relationship, which changes from negative to positive in the early 1990s. The break in the effect between energy prices and the Canadian dollar is consistent with major changes in energy-related cross-border trade and in Canada’s energy policies.
    Keywords: Exchange rates; Econometric and statistical methods
    JEL: F31
    Date: 2006
  3. By: Jann Lay; Rainer Thiele; Manfred Wiebelt
    Abstract: This paper addresses the question of whether the Bolivian gas boom of the 1990s has bypassed large parts of the poor population, thereby leading to increasing inequalities in an already unequal society. Using a Computable General Equilibrium model that is sequentially linked to a microsimulation model, we examine the transmission channels through which the large resource inflows related to the gas boom, both initial foreign investment in the sector and the subsequent export earnings, as well as large public transfer programs affect the distribution of income. These transfers may well be interpreted as a means of redistributing resource rents. Our focus is on labour market impacts, in particular on shifts between formal and informal employment and changes in relative factor prices. Our simulation results suggest that the gas boom induces a combination of unequalising and equalising forces, which tend to offset each other. As net distributional change is limited, growth generated by the boom reduces poverty despite increasing informality.
    Keywords: Poverty, Distribution, Computable General Equilibrium Model, Microsimulation, Natural Gas, Bolivia
    JEL: D3 D58 O17 O54 Q33
    Date: 2006–07
  4. By: Kenneth A. Small (Department of Economics, University of California-Irvine); Kurt Van Dender (Department of Economics, University of California-Irvine)
    Abstract: We estimate the rebound effect for motor vehicles, by which improved fuel efficiency causes additional travel, using a pooled cross section of US states for 1966-2001. Our model accounts for endogenous changes in fuel efficiency, distinguishes between autocorrelation and lagged effects, includes a measure of the stringency of fuel-economy standards, and allows the rebound effect to vary with income, urbanization, and the fuel cost of driving. At sample averages of variables, our simultaneous-equations estimates of the short- and long-run rebound effect are 4.5% and 22.2%. But rising real income caused it to diminish substantially over the period, aided by falling fuel prices. With variables at 1997-2001 levels, our estimates are only 2.2% and 10.7%, considerably smaller than values typically assumed for policy analysis. With income at the 1997 – 2001 level and fuel prices at the sample average, the estimates are 3.1% and 15.3%, respectively.
    Keywords: Carbon dioxide; Fuel economy; Travel demand; Motor vehicle use; Rebound effect
    JEL: Q0 D5 R4 C2
    Date: 2006–03
  5. By: Susan Olivia (University of California, Davis); John Gibson (University of Waikato)
    Abstract: The proper design of price interventions in energy markets requires consideration of equity and efficiency effects. In this paper, budget survey data from 29,000 Indonesian households are used to estimate a demand system for five energy sources, which is identified by the spatial variation in unit values (expenditures divided by quantities). We correct for the various quality and measurement error biases that result when unit values are used as proxies for market prices. The price elasticities are combined with tax and subsidy rates to calculate the marginal social cost of price changes for each item. The results suggest that even with high levels of inequality aversion there is a case for reducing the large subsidies on kerosene in Indonesia, supporting the reforms that have been announced recently.
    Keywords: demand elasticities; energy; subsidies; unit values
    JEL: D12 Q31
    Date: 2006–08–01
  6. By: Vajjhala, Shalini (Resources for the Future)
    Abstract: Recent efforts to site renewable energy projects have provoked as much, if not more, opposition than conventional energy projects. Because renewable energy resources are often located in sensitive and isolated environments, such as pristine mountain ranges or coastal waters, siting these facilities is especially difficult. Moreover, the viability of different renewable energy projects depends not only on complex economic and environmental factors, but also on the availability of supporting infrastructures, such as transmission lines. This paper examines the spatial relationships between four types of renewable energy resources – wind, solar, geothermal, and biomass – and an empirical measure of state-level transmission-line siting difficulty. Analyses explore the locations of renewable resource potential relative to areas of high siting difficulty, state electricity demand and imports, and states with renewable portfolio standards (RPSs). Major results reveal that state resource potential varies, and siting is significantly more difficult in states that import electricity and those with RPSs. These results suggest that states with the greatest incentives to develop renewable energy also face the most serious obstacles to siting new facilities.
    Keywords: siting, renewable energy, transmission lines, wind, solar, geothermal, biomass, geographic information systems (GIS), renewable portfolio standards (RPS)
    JEL: L94 L98 Q42 Q48
    Date: 2006–07–20
  7. By: Mireille Chiroleu-Assouline (CES - Centre d'Economie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]); Mouez Fodha (CES - Centre d'Economie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: This paper analyzes the double dividend issues within the framework of overlapping generations models. We characterize the necessary conditions for obtaining a double dividend, i.e. an improvement of environmental and non-environmental welfare when the revenue from the pollution tax is recycled into a change in the labor tax rate. We show that, depending on the initial capital stock and on the intertemporal elasticity of substitution, conditions may be defined to simultaneously allow (i) the obtaining of a long term double dividend, (ii) the economy to move closer to the modified golden rule and (iii) in the short term, an improvement in the welfare of the two present generations.
    Keywords: Environmental tax; Overlapping generations model; Golden rule; Double dividend
    Date: 2006–08–24
  8. By: Mireille Chiroleu-Assouline (EUREQ - Equipe Universitaire de Recherche en Economie Quantitative - [Université Panthéon-Sorbonne - Paris I]); Mouez Fodha (EUREQ - Equipe Universitaire de Recherche en Economie Quantitative - [Université Panthéon-Sorbonne - Paris I])
    Abstract: This paper analyzes the double dividend and distributional issues within an overlapping <br />generations models framework with involuntary unemployment. We characterize <br />the necessary conditions for the obtention of a double dividend when the revenue of <br />the environmental tax is recycled by a variation of the labor tax rate. We show that an <br />employment dividend may occur without any efficiency dividend and that the young <br />generation is not always harmed by the fiscal reform, even without any<br /> intergenerational transfers. Therefore, three dividends <br />(environmental, efficiency and intergenerational equity) can simultaneously occur.
    Keywords: Environmental tax; Intergenerational equity; <br />Unemployment; Double dividend
    Date: 2006–08–24
  9. By: Blackman, Allen (Resources for the Future); Lyon, Thomas P.; Sisto, Nicholas
    Abstract: Voluntary agreements (VAs) negotiated between environmental regulators and industry are increasingly popular. However, little is known about whether they are likely to be effective in developing and transition countries, where local and federal environmental regulatory capacity is typically weak. We develop a dynamic theoretical model to examine the effect of VAs on investment in regulatory infrastructure and pollution abatement in such countries. We find that under certain conditions, VAs can improve welfare by generating more private-sector investment in pollution control and more public-sector investment in regulatory capacity than the status quo.
    Keywords: voluntary environmental regulation, developing country
    JEL: Q28 O13 C72
    Date: 2006–07–03
  10. By: Jean-Marie GRETHER; Nicole A. MATHYS; Jaime DE MELO
    Abstract: This paper contributes to the debate on the existence of pollution haven effects by systematically measuring the pollution content of trade (measured by the polluction content of imports (PCI)) and decomposing it into three components: a 'deep' (i.e. unrelated to the environmental debate) component and two components (factor endowments and environmental policies) that occupy centerstage in the debate on trade and the environment. The decomposition is carried out for 1986-88 for an extensive data set covering 10 pollutants, 48 countries and 79 ISIC 4-digit sectors. Illustrative decompositions presented for 3 of the 10 pollutants in the data set indicate a significant pollution haven effect and highlight the role of factor endowments in each region's PCI. However, because the bulk of trade is intra-regional with a high North-North share, these effects are small relative to the 'deep' determinants of the worldwide pollution content of trade.
    Keywords: trade and the environment; pollution haven
    JEL: F18
    Date: 2006–08

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