nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒02‒10
twelve papers chosen by
Roger Fouquet
Imperial College, UK

  2. The peak of oil extraction and a modified maximin principle By Bazhanov, Andrei
  3. The Dynamics of Efficiency and Productivity Growth in U. S. Electric Utilities By Supawat Rungsuriyawiboon; Spyro Stefanou
  4. Endogenous Price Mechanisms,Capture and Accountability Rules: Theory and Evidence By Carmine Guerriero
  5. Lignite price negotiation between opencast mine and power plant as a two-stage, two-person, cooperative, non-zero sum game By Jurdziak, Leszek
  6. Electricity consumption and economic growth: evidence from Spain. By Aitor Ciarreta Antuñano; Ainhoa Zarraga Alonso
  7. Poverty and environmental impacts of electricity price reforms in Montenegro By Silva, Patricia; Klytchnikova, Irina; Radevic, Dragana
  8. Multi-Level governance: Towards an analysis of renewable energy governance in the English regions By Adrian Smith
  9. Will markets direct investments under the Kyoto Protocol ? By Larson, Donald F.; Breustedt, Gunnar
  10. Optimal Timing of Environmental Policy. Interaction between Environmental Taxes and Innovation Externalities By Reyer Gerlagh, Snorre Kverndokk and Knut Einar Rosendahl
  11. Measuring Environmental Efficiency of Industry: A Case Study of Thermal Power Generation in India By M N, Murty; Kumar, Surender; Dhavala, Kishore
  12. Social Cost-Benefit Analysis of Delhi Metro By M N, Murty; Dhavala, Kishore Kumar; Ghosh, Meenakshi; Singh, Rashmi

  1. By: Lundahl, Mats (Stockholm School of Economics); Sjöholm, Fredrik (European Institute of Japanese Studies)
    Abstract: Timor-Leste is among the youngest nations in the world. It started its independence under difficult circumstances: poverty is widespread, education is poor, the industrial sector is non-existent, and political turbulence is on the rise. On the positive side, future oil revenues are predicted to be substantial, which could potentially be of large help in Timor-Leste’s strive for development. This paper examines critically the possibility for Timor-Leste to use oil revenues to achieve economic development. It describes how difficult it is to estimate the future revenues because of volatile prices, territorial disputes, and insufficient seismological mapping. It continues with a discussion of the “resource curse”: the difficulty of combining natural resources with economic development. Moreover, the particular challenges for Timor Leste’s development are dealt with at some length, as are possible ways to avoid the resource curse.
    Keywords: Timor-Leste; Oil; Resource Curse; Economic Development
    JEL: L71 O13 O53
    Date: 2006–10–01
  2. By: Bazhanov, Andrei
    Abstract: The term "oil peak" usually is connected with the positive analysis problem, namely, with the problem of defining the year when the increase in the rate of oil extraction will be physically impossible. However, a normative approach to the problem of optimal extraction of a nonrenewable resource, which is considered in the paper, seems more important. The economy depends on the essential nonrenewable resource and the rate of the resource extraction increases over time. At some instant the government gradually switches to a sustainable (in sense of non-decreasing consumption over time) pattern of the resource extraction. Different criteria are considered for the construction some curves of switching to decreasing paths of the resource depletion. Consumption paths have diverse behavior patterns along these curves, including a path of unlimited growth. A new approach to the Rawlsian maximin criterion which allows for growth of consumption is offered.
    Keywords: Nonrenewable resource; Intergenerational justice; Generalized Rawlsian criterion
    JEL: Q38 Q32
    Date: 2006–12–03
  3. By: Supawat Rungsuriyawiboon (Chiang Mai University); Spyro Stefanou (Pennsylvania State University)
    Abstract: This study recognizes explicitly the efficiency gain or loss as a source in explaining the growth. A theoretically consistent method to estimate the decomposition of dynamic total factor productivity growth (TFP) in the presence of inefficiency is developed which is constructed from an extension of the dynamic TFP growth, adjusted for deviations from the long-run equilibrium within an adjustment cost framework. The empirical case study is to U.S. electric utilities, which provides a measure to evaluate how different electric utilities participate in the deregulation of electricity generation. TFP grew by 2.26 percent per annum with growth attributed to the combined scale effects of 0.34 percent, the combined efficiency effects of 0.69 percent, and the technical change effect of 1.22 percent. The dynamic TFP grew by 1.66 percent per annum for electric utilities located within states with the deregulation plan and 3.30 percent per annum for those located outside. Electric utilities located within states with the deregulation plan increased the outputs by improving technical and input allocative efficiencies more than those located outside of states with deregulation plans.
    Keywords: productivity growth, adjustment costs, dynamic duality, inefficiency, decomposition, deregulation, e
    JEL: D24 D92 L94
    Date: 2004–07
  4. By: Carmine Guerriero (University of Cambridge)
    Abstract: This paper analyzes the constitutional determinants of cost reimbursement rules. In order to design the optimal incentive schemes, a possibly partisan planner will take into account the market cost structure, the institutional design of the supervision hierarchical structure and its technology. I employ electricity data from the U.S. electric power market to test the model’s predictions. The evidence shows that reforms from low powered incentive scheme (COS) to high powered one (PBR) are linked to high cost industries, the presence of elected supervisors, high inter-party platform distance and large (slim) majority when the reformer is Republican (Democratic). Moreover, there is some evidence in the data that performance-based regulation lowers regulated prices.
    Keywords: Industrial Policy, Political Economy, Regulation and Incentives
    JEL: L51 D72 D82 H11
    Date: 2006–08
  5. By: Jurdziak, Leszek
    Abstract: Based on the simple model of the deposit the methodology of finding the optimal solution for bilateral monopoly (BM) of lignite mine and power plant is shown taking into account pit optimisation. It is proposed to treat lignite price negotiation as a kind of game. In the first stage (cooperative) both sides should select the ultimate pit maximising joint profits of BM and in the second one (competitive) the agreement should be achieved regarding profit division. This can be realised through side payments or by establishing the lignite transfer price. Lack of cooperation and opportunism can lead to the suboptimal solution – excavation of the smaller pit. Due to information asymmetry realisation of the optimal solution is more probably in vertically integrated firms. Dynamic adjustments of LOM BM plan to short-term changes of energy market using optimisation, BM model, game theory and their valuation as real options is the new direction of further re-search.
    Keywords: bilateral monopoly; co-operative game; price negotiation; non-zero sum game; Pareto optimal solution; lignite price; power plant; lignite mine; pit optimisation; optimal ultimate pit; pit phases;
    JEL: L22 D82 D43 D86 C78 D24 L13 D74 L11 L14 Q31 L72 C71 L94
    Date: 2006–09–24
  6. By: Aitor Ciarreta Antuñano (UPV/EHU); Ainhoa Zarraga Alonso (UPV/EHU)
    Abstract: The paper investigates both linear and nonlinear causality between electricity consumption and economic growth in Spain for the period 1971-2005. We use the methodology of Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996). We also apply the standard Granger causality tests in a VAR for the series in first differences to achieve stationarity. The results are similar with both methodologies, which shows their robustness. We find unidirectional linear causality running from real GDP to electricity consumption. On the contrary, we find no evidence of nonlinear Granger causality between the series in either direction.
    Keywords: Electricity consumption, economic growth, causality
    JEL: C32 Q40
    Date: 2007–01–31
  7. By: Silva, Patricia; Klytchnikova, Irina; Radevic, Dragana
    Abstract: The Government of Montenegro is preparing an electricity tariff reform due to recent developments in the national and regional electricity markets. Electricity tariffs for residential consumers in Montenegro are likely to gradually increase by anywhere from 40 to over 100 percent. This significant price rise will impose a heavy burden on poor households and it may adversely affect the environment. In an ex-ante investigation of the welfare impact of this price increase on households in Montenegro, the authors show that the anticipated price increase will result in a significant increase in households ' energy expenditures. A simulation of alternative policy measures analyzes the impact of different tariff levels and structures on the poor and vulnerable households in particular. Higher electricity prices could also significantly increase the proportion of households using fuelwood for space heating.
    Keywords: Energy Production and Transportation,Electric Power,Environment and Energy Efficiency,Energy and Environment,Engineering
    Date: 2007–02–01
  8. By: Adrian Smith (SPRU, University of Sussex)
    Keywords: governance, renewable energy
    JEL: Q48 Q28
    Date: 2007–02–01
  9. By: Larson, Donald F.; Breustedt, Gunnar
    Abstract: Under the Kyoto Protocol, countries can meet treaty obligations by investing in projects that reduce or sequester greenhouse gases elsewhere. Prior to ratification, treaty participants agreed to launch country-based pilot projects, referred to collectively as Activities Implemented Jointly (AIJ), to test novel aspects of the project-related provisions. Relying on a 10-year history of projects, the authors investigate the determinants of AIJ investment. Their findings suggest that national political objectives and possibly deeper cultural ties influenced project selection. This characterization differs from the market-based assumptions that underlie well-known estimates of cost-savings related to the Protocol ' s flexibility mechanisms. The authors conclude that if approaches developed under the AIJ programs to approve projects are retained, benefits from Kyoto ' s flexibility provisions will be less than those widely anticipated.
    Keywords: Environmental Economics & Policies,Investment and Investment Climate,Non Bank Financial Institutions,Energy Production and Transportation,Economic Theory & Research
    Date: 2007–02–01
  10. By: Reyer Gerlagh, Snorre Kverndokk and Knut Einar Rosendahl (Statistics Norway)
    Abstract: This paper addresses the impact of endogenous technology through research and development (R&D) and learning by doing (LbD) on the timing of environmental policy. We develop two models, the first with technological change through R&D and the second with LbD. We study the interaction between environmental taxes and innovation externalities in a dynamic economy and prove policy equivalence between the second-best R&D and the LbD model. Our analysis shows that the difference found in the literature between optimal environmental policy in R&D and LbD models can partly be traced back to the set of policy instruments available, rather than being directly linked to the source of technological innovation. Arguments for early action in LbD models carry over to a second-best R&D setting. We show that environmental taxes should be high compared to the Pigouvian levels when an abatement industry is developing. We illustrate our analysis through numerical simulations on climate change policy.
    Keywords: Environmental policy; technological change; research and development; learning by doing
    JEL: H21 O30 Q42
    Date: 2007–02
  11. By: M N, Murty; Kumar, Surender; Dhavala, Kishore
    Abstract: Technical and environmental efficiency of some coal-fired thermal power plants in India is estimated using a methodology that accounts for firm’s efforts to increase the production of good output and reduce pollution with the given resources and technology. The methodology used is directional output distance function. Estimates of firm-specific shadow prices of pollutants (bad outputs), and elasticity of substitution between good and bad outputs are also obtained. The technical and environmental inefficiency of a representative firm is estimated as 0.10 implying that the thermal power generating industry in Andhra Pradesh state of India could increase production of electricity by 10 per cent while decreasing generation of pollution by 10 percent. This result shows that there are incentives or win-win opportunities for the firms to voluntarily comply with the environmental regulation. It is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms. The variation in marginal cost of pollution abatement and compliance to regulation across firms could be reduced by having economic instruments like emission tax.
    Keywords: environmental and technical efficiency; shadow prices of bad outputs; air pollution.
    JEL: Q52 Q51 Q53
    Date: 2006–04
  12. By: M N, Murty; Dhavala, Kishore Kumar; Ghosh, Meenakshi; Singh, Rashmi
    Abstract: The growing demand for public transport in mega cities has serious effects on urban ecosystems, especially due to the increased atmospheric pollution and changes in land use patterns. An ecologically sustainable urban transport system could be obtained by an appropriate mix of alternative modes of transport resulting in the use of environmentally friendly fuels and land use patterns. The introduction of CNG in certain vehicles and switching of some portion of the transport demand to the metro rail have resulted in a significant reduction of atmospheric pollution in Delhi. The Delhi Metro provides multiple benefits: reduction in air pollution, time saving to passengers, reduction in accidents, reduction in traffic congestion and fuel savings. There are incremental benefits and costs to a number of economic agents: government, private transporters, passengers, general public and unskilled labour. The social cost-benefit analysis of Delhi Metro done in this paper tries to measure all these benefits and costs from Phase I and Phase II projects covering a total distance of 108 kms in Delhi. Estimates of the social benefits and costs of the project are obtained using the recently estimated shadow prices of investment, foreign exchange and unskilled labour as well as the social time preference rate for the Indian economy for a study commissioned by the Planning Commission, Government of India and done at the Institute of Economic Growth. The financial internal rate of return on investments in the Metro is estimated as 17 percent while the economic rate of return is 24 percent. Accounting for benefits from the reduction of urban air pollution due to the Metro has increased the economic rate of return by 1.4 percent.
    Keywords: Transport; Air Pollution; Cost- benefit analysis and Shadow prices.
    JEL: Q51 Q58 Q53
    Date: 2006–10

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