nep-ene New Economics Papers
on Energy Economics
Issue of 2006‒09‒11
nine papers chosen by
Roger Fouquet
Imperial College, UK

  1. Cursing the blessings? Natural resource abundance, institutions, and economic growth By Christa N. Brunnschweiler
  2. Single or Multiple Pricing in Electricity Pools? By Ahmed Anwar
  3. Capital-Energy Substitution and Shifts in Factor Demand: A Meta-Analysis By Mark J. Koetse; Henri L.F. de Groot; Raymond J.G.M. Florax
  4. The Direction of Technical Change in Capital-Resource Economies By Corrado Di Maria; Simone Valente
  5. Financing the alternative: renewable energy in developing and transition countries By Christa N. Brunnschweiler
  6. An organic farming perspective on the production of biomass for energy use By Muller, Adrian
  7. Putting decomposition of energy use and pollution on a firm footing - clarifications on zero and negative values and the residual By Muller, Adrian
  8. How to Make the Clean Development Mechanism Sustainable - The Potential of Rent Extraction By Muller, Adrian
  9. Solutions to the residual and zero-value problems in energy decomposition By Muller, Adrian

  1. By: Christa N. Brunnschweiler (Center of Economic Research, Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: Since Sachs and Warner's (1995a) contribution, there has been a lively debate on the so-called natural resource curse. This paper re-examines the effects of natural resource abundance on economic growth using new measures of resource endowment and considering the role of institutional quality. We find a positive direct empirical relationship between natural resource abundance and economic growth. In both OLS and 2SLS re- gressions, the positive resource effects are particularly strong for subsoil wealth. Our results also show no evidence of negative indirect effects of natural resources through the institutional channel.
    Keywords: Natural resources, resource curse, economic growth, institutional quality
    JEL: O11 O13 Q0
    Date: 2006–06
  2. By: Ahmed Anwar
    Abstract: We present a 2 bidder multi-unit, common cost auction model with uncertain demand and capacity constraints which ensure that the participants sometimes face a residual market share. The model is motivated by electricity pools. We show that a single-price auction where the bidders can submit only one bid for all units weakly dominates an auction where the bidders can make multiple-price bids in terms of average prices. In the case of uniform price auctions we give an example where the dominance is strict.
    Keywords: Electricity Pool, Multi-Unit Auction, Revenue Ranking
    JEL: D44 L13 L94
  3. By: Mark J. Koetse (Vrije Universiteit Amsterdam); Henri L.F. de Groot (Vrije Universiteit Amsterdam); Raymond J.G.M. Florax (Purdue University, and Vrije Universiteit)
    Abstract: This paper presents results of a meta-regression analysis on empirical estimates of capital-energy substitution. Theoretically it is clear that a distinction should be made between Morishima substitution elasticities and cross-price elasticities. The former represent purely technical substitution possibilities while the latter include an income effect and therefore represent economic substitution potential. We estimate a meta-regression model with separate coefficients for the two elasticity samples. Our findings suggest that primary model assumptions on returns to scale, technological change and separability of input factors matter for the outcome of a primary study. Aggregation of variables and the type of data used in empirical research are also relevant sources of systematic effect-size variation. Taking these factors into consideration, we compute ideal-typical elasticities for the short, medium and long run. The resulting figures clearly show that s! ubstitution elasticities are substantially higher than cross price elasticities. Therefore, despite considerable technical opportunities for capital-energy substitution, they are almost entirely outweighed by the negative income effect brought about by energy price increases; the short and medium run cross price elasticities are not statistically different from zero. In the long run this pattern does not hold. Our findings therefore suggest that actual changes in the demand for capital due to energy price increases take time.
    Keywords: production function; capital-energy substitution; cross-price elasticity; Morishima substitution elasticity; meta-analysis
    JEL: C10 D24 D33 E23 O33 Q40
  4. By: Corrado Di Maria (CentER, Tilburg University); Simone Valente (Center of Economic Research, Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: We analyze a multi-sector growth model with directed technical change where man-made capital and exhaustible resources are essen- tial for production. The relative profitability of factor-specific inno- vations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that convergence to bal- anced growth implies zero capital-augmenting innovations: in the long run, the economy exhibits purely resource-augmenting technical change. This result provides sound microfoundations for the broad class of models of exogenous/endogenous growth where resource-aug- menting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.
    Keywords: Endogenous Growth, Directed Technical Change, Exhaustible Resources, Sustainability
    JEL: O31 O33 O41 Q32
    Date: 2006–03
  5. By: Christa N. Brunnschweiler (Center of Economic Research, Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: This paper examines the determinants of credit allocation to renewable energy firms in developing and transition countries. Using a simple en- dogenous growth model, we show that the development of the renewable energy sector, i.e. the diversification of renewable energy resources used in primary energy production, depends on the quality of financial intermedia- tion, debtor information costs to banks, and financing needs of renewable energy firms. Policies should aim at increasing financial sector perfor- mance through better institutional frameworks and improving financing conditions for new energy firms. The empirical analysis confirms the pos- itive effect of financial intermediary development on the renewable energy sector.
    Keywords: Financial intermediation, banks, renewable energy, economic growth
    JEL: Q42 G10 O41
    Date: 2006–03
  6. By: Muller, Adrian (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Bioenergy is seen as a promising option to curb greenhouse gas emissions. There is, however, a potential competition for land due to increased demand for biomass resulting in increased food prices. This also would exacerbate future global water scarcity and negatively affect the food security of poor countries depending on cereal imports. Furtheron, the question of how a sufficient large amount of biomass for energy production could be grown sustainably needs to be addressed. Conventional agriculture often has negative effects on the environment. Organic agriculture is one sustainable alternative. Burning significant quantities of organic matter, however, is incompatible with the principles of organic agriculture. Nevertheless, there is potential for sustainable implementation of small-scale, on-site bioenergy projects, in particular in developing countries and also of some forestry practices to harvest biomass for energy use. On the other hand, large-scale production of biomass for transport fuels is likely to be particularly unsustainable. To assess the sustainability of bioenergy on project level and as a global strategy, detailed differentiation is necessary. This paper combines these issues focusing on the potential challenges related to sustainable bioenergy production and its potential incompatibility with sustainable agricultural practices. <p>
    Keywords: bioenergy; sustainable energy; organic agriculture; land scarcity; water scarcity
    JEL: Q01 Q42
    Date: 2006–08–31
  7. By: Muller, Adrian (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: I show how the problems with zero and negative values in decomposition can be resolved by reference to integral approximation, which is the basis of any decomposition analysis. Referring to integral approximation, I also discuss the residual in decomposition and show that the presence of a non-zero residual is natural and that requiring a zero residual as a strategy to identify optimal decomposition methods is without basis. I illustrate these findings with the logarithmic mean Divisia Index decomposition approach and simulations allowing for comparison of the LMDI results to the values based on exact solution of the integrals involved. <p>
    Keywords: decomposition analysis; Divisia Index; logarithmic mean; energy consumption; emissions
    JEL: C63 Q41 Q50
    Date: 2006–08–31
  8. By: Muller, Adrian (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The Clean Development Mechanism (CDM) should foster sustainable development and greenhouse gas emissions reductions. The design of the CDM and first experience suggest that it may not achieve these goals. Developing countries hosting CDM projects may loose cheap emissions reduction possibilities for their own future use, and sustainable development and technology transfer may not take place. On the other hand, the CDM has the potential to generate considerable rents if permit prices are high or costs low. A deliberate decision on how to distribute these rents should be taken and the potential failure of the CDM in meeting its goals calls for further regulation. I suggest to combine these two issues and to extract the rents by a profit tax. The tax revenues could contribute to national sustainable development strategies, to offset external costs imposed by CDM projects and to extract part of the resource rent they may generate. The international character of the CDM offers a frame for internationally coordinated tax design. This would hedge against a potential race to the bottom. <p>
    Keywords: Clean Development Mechanism; economic rent; rent extraction; profit tax; sustainable development
    JEL: H23 Q01 Q54
    Date: 2006–08–31
  9. By: Muller, Adrian (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This topical note shows how the problems of values equal zero and the residual in energy decomposition can be resolved. The ultimate cause of these problems lies in approximation of integrals and derivatives and illdefined division by zero. Reference to that identifies promising approaches to improve decomposition methods. <p>
    Keywords: Decomposition; Index numbers; Divisia Index; Energy consumption
    JEL: C63 Q41 Q50
    Date: 2006–08–31

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