nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒02‒24
fifteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. A CGE-Analysis of Energy Policies Considering Labor Market Imperfections and Technology Specifications By Robert Küster; ingo Ellersdorfer; Ulrich Fahl
  2. Causality between Energy and Economic Growth: the Italian case By Edgardo Sica
  3. Risks to Global Trade and Implications for South Africa’s Economy and Policy By Jeremy Wakeford
  4. Consumers’ Attitudes on Services of General Interest in the EU: Accessibility, Price and Quality 2000-2004 By Carlo Fiorio; M. Florio; S. Salini; P. Ferrari
  5. Dynamics in the European Petroleum Markets By Szymon Wlazlowski; Monica Giulietti; Jane Binner; Costas Milas
  6. Evaluating the Empirical Performance of Alternative Econometric Models for Oil Price Forecasting By Matteo Manera; Chiara Longo; Anil Markandya; Elisa Scarpa
  7. Dynamic Equilibrium of Electricity Consumption and GDP in Hong Kong: An Empirical Investigation By Ho, Chun-Yu; Siu, Kam-Wing
  8. Economic and Poverty Impacts of a Voluntary Carbon Reduction for a Small Liberalized Developing Economy: The Case of the Philippines By Erwin L. Corong
  9. CO2 Emissions vs. CO2 Responsibility: An Input-Output Approach for the Turkish Economy By G. Ipek Tunc; Serap Turut-Asik; Elif Akbostanci
  10. Uncertain R&D, Backstop Technology and GHGs Stabilization By Valentina Bosetti; Massimo Tavoni
  11. La dépollution dans les pays en transition est-elle volontaire ? Le cas des émissions industrielles de carbone. By Natalia Zugravu; Katrin Millock; Gérard Duchêne
  12. The Production and Consumption Accounting Principles as a Guideline for Designing Environmental Tax Policy By Mònica Serrano
  13. Forestry and the Carbon Market Response to Stabilize Climate By Massimo Tavoni; Valentina Bosetti; Brent Sohngen
  15. Economic Implications of Differences in Member State Regulations for the European Union Emission Trade System By Adriaan Perrels

  1. By: Robert Küster (Universität Stuttgart); ingo Ellersdorfer (Universität Stuttgart); Ulrich Fahl (Universität Stuttgart)
    Abstract: The paper establishes a CGE/MPSGE model for evaluating energy policy measures with emphasis on their employment impacts. It specifies a dual labor market with respect to qualification, two different mechanisms for skill specific unemployment, and a technology detailed description of electricity generation. Non clearing of the dual labor market is modeled via minimum wage constraints and via wage curves. The model is exemplarily applied for the analysis of capital subsidies on the application of technologies using renewable energy sources. Quantitative results highlight that subsidies on these technologies do not automatically lead to a significant reduction in emissions. Moreover, if emission reductions are achieved these might actually partly result from negative growth effects induced by the promotion of cost inefficient technologies. Inefficiencies in the energy system increase unemployment for both skilled and unskilled labor.
    Keywords: CGE, Energy Economic Analysis, Employment Impact, Choice of Technology
    JEL: Q42 Q43 Q48 Q52
    Date: 2007–01
  2. By: Edgardo Sica
    Abstract: The causal relationship between economic growth and energy consumption represents a widely studied topic in energy economics literature. Although it is very well known that there is a strong correlation between energy use and growth, the issue of “causality” still remains to be answered. This study aims to investigate the possibility of the “energydemand- led growth” and “growth-driven energy demand” hypotheses in Italy by testing the causality between real GDP and electric power consumption through an ECM model. Results do not reveal any causality linkage.
    Keywords: Causality; Economic growth; Energy Consumption
    Date: 2007–01
  3. By: Jeremy Wakeford (School of Economics, University of Cape Town)
    Abstract: Abstract: The past two decades have witnessed an unprecedented globalisation of trade in goods and services. This process has been driven, inter alia, by technology, ideology and the availability of relatively cheap energy. By extrapolating this trend, one may expect further integration of world markets and increasingly unhindered international trade. However, there is mounting evidence of significant risks to global trade, at least in goods and possibly in certain services as well. Three main risk areas are identified here: (1) fossil fuel depletion, in particular a possible peak in world oil production within the next five to ten years; (2) climate change, and especially its effects on agricultural production, transport and financial risk; and (3) instability in the world financial system caused primarily by the US’s unsustainable twin deficits. The paper explores some possible implications of these risks for the South African economy and its foreign trade in particular. It argues that South Africa’s trade policy should take due cognizance of these threats, and advocates adaptation and mitigation strategies designed to improve self-sufficiency and to protect the poor in sensitive areas, especially food and energy security.
    Keywords: Sector-Specific Policies and Regulations, SMEs
    JEL: A1
    Date: 2006–07
  4. By: Carlo Fiorio (University of Milan); M. Florio (University of Milan); S. Salini (University of Milan); P. Ferrari (University of Milan)
    Abstract: The research question addressed by this paper is a simple one: are European consumers happy with the services provided by the utilities after two decades of reforms? We focus on electricity, gas, water, telephone in the EU 15 Member States. The variables we analyse are consumers’ satisfaction with accessibility, price and quality, as reported in three waves of Eurobarometer survey, 2000-2002-2004, comprising around 47,000 observations. We use ordered logit models to analyze the impact of privatization and regulatory reforms, as represented by an OECD dataset, controlling for individual and country characteristics. Our results do not support a clear association between consumers’ satisfaction and a standard reform package of privatization, vertical disintegration, liberalization.
    Keywords: Consumers’ Satisfaction, Gas, Electricity, Telephone, Water, Eurobarometer
    JEL: L94 L95 L96 L50
    Date: 2007–01
  5. By: Szymon Wlazlowski (Aston Business School, Aston University); Monica Giulietti (Aston Business School, Aston University); Jane Binner (Aston Business School, Aston University); Costas Milas (Keele University, Centre for Economic Research and School of Economic and Management Studies)
    Abstract: This paper analyses horizontal and vertical price dynamics in the EU petroleum markets. The results indicate that the cross-country price differentials have significant impact on the local price adjustments. The uncovered patterns can be seen as the first empirical support for the politically-charged concept of ‘‘fuel tourism’’, obtained using pan-European cross-product time-series database. Even more interestingly, when analysed in cross-country setting, the dreaded welfare transfer due to the asymmetric price transmission phenomenon is found to be less pronounced than claimed before.
    Keywords: Production, Pricing, and Market Structure; Petroleum, General Energy, Energy and Macroeconomy.
    JEL: L11 Q40 Q43
    Date: 2007–02
  6. By: Matteo Manera (University of Milan Bicocca); Chiara Longo (Fondazione Eni Enrico Mattei); Anil Markandya (University of Bath and Fondazione Eni Enrico Mattei); Elisa Scarpa (Risk Management Department, Intesa-San Paolo)
    Abstract: The relevance of oil in the world economy explains why considerable effort has been devoted to the development of different types of econometric models for oil price forecasting. Several specifications have been proposed in the economic literature. Some are based on financial theory and concentrate on the relationship between spot and futures prices (“financial” models). Others assign a key role to variables explaining the characteristics of the physical oil market (“structural” models). The empirical literature is very far from any consensus about the appropriate model for oil price forecasting that should be implemented. Relative to the previous literature, this paper is novel in several respects. First of all, we test and systematically evaluate the ability of several alternative econometric specifications proposed in the literature to capture the dynamics of oil prices. Second, we analyse the effects of different data frequencies on the coefficient estimates and forecasts obtained using each selected econometric specification. Third, we compare different models at different data frequencies on a common sample and common data. Fourth, we evaluate the forecasting performance of each selected model using static and dynamic forecasts, as well as different measures of forecast errors. Finally, we propose a new class of models which combine the relevant aspects of the financial and structural specifications proposed in the literature (“mixed” models). Our empirical findings can be summarized as follows. Financial models in levels do not produce satisfactory forecasts for the WTI spot price. The financial error correction model yields accurate in-sample forecasts. Real and strategic variables alone are insufficient to capture the oil spot price dynamics in the forecasting sample. Our proposed mixed models are statistically adequate and exhibit accurate forecasts. Different data frequencies seem to affect the forecasting ability of the models under analysis.
    Keywords: Oil Price, WTI Spot And Futures Prices, Forecasting, Econometric Models
    JEL: C52 C53 Q32 Q43
    Date: 2007–01
  7. By: Ho, Chun-Yu; Siu, Kam-Wing
    Abstract: Public debates on electricity policy in Hong Kong focus on the regulation regime but seldom discuss the macroeconomic impact. In this paper, we use the novel dataset on electricity consumption and report the following findings: (1) there is a long run equilibrium relationship between real GDP and electricity consumption, (2) a one-way causal effect exists from electricity consumption to real GDP, (3) a significant adjustment process occurs when equilibrium is interrupted, (4) there exists possible structural change in the relationship between electricity consumption and economic activities in 1990s.
    Keywords: Cointegration and error correction; electricity; Hong Kong.
    JEL: Q48 Q43 Q41
    Date: 2006–07
  8. By: Erwin L. Corong (De La Salle University-Manila)
    Abstract: This paper analyzes the economic and poverty effects of a voluntary carbon emission reduction for a small liberalized economy—the Philippines. The simulation results indicate that tariff reductions undertaken by the Philippine government between 1994 and 2005 reduced the cost of fossil fuels thereby resulting in an increase in carbon emissions. The economic cost of reducing carbon emissions by imposing a carbon tax appears minimal as the reduction in consumer prices due to tariff reductions outweigh the increase in production cost from the imposition of a carbon tax. Overall results suggest that maintaining carbon emissions relative to 1994 levels appears to be a sensible alternative for the country
    Keywords: Climate Change, Carbon Emissions, International Trade, Computable General Equilibrium, Micro-Simulation, Macro-Micro Models, Philippines
    JEL: C68 D58 F18 I39 Q56
    Date: 2007–01
  9. By: G. Ipek Tunc (Department of Economics, METU); Serap Turut-Asik (Department of Economics, METU); Elif Akbostanci (Department of Economics, METU)
    Abstract: Recently, global warming (greenhouse effect) and its effects have become one of the hottest topics in the world agenda. There have been several international attempts to reduce the negative effects of global warming. Kyoto Protocol can be cited as the most important agreement which tries to limit the countries’ emissions within a time horizon. For this reason it becomes important to calculate the greenhouse gas emissions of countries. The aim of this study is to estimate the amount of CO2 -the most important greenhouse gas- emissions, for the Turkish economy. An extended input-output model is estimated by using 1996 data in order to identify the sources of CO2 emissions and to discuss the share of sectors in total emission. Besides ‘CO2 responsibility’, which takes into account the CO2 content of imports, is estimated for the Turkish economy. The sectoral CO2 emissions and CO2 responsibilities are compared and these two notions are linked to foreign trade volume. One of the main conclusions is that the manufacturing industry has the first place in both of the rankings for CO2 emissions and CO2 responsibilities; while agriculture and husbandry has the last place.
    Keywords: CO2 responsibility, Turkey, input-output analysis
    Date: 2006–03
  10. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Massimo Tavoni (Fondazione Eni Enrico Mattei)
    Abstract: This paper analyses optimal investments in innovation when dealing with a stringent climate target and with the uncertain effectiveness of R&D. The innovation needed to achieve the deep cut in emissions is modelled by a backstop carbon-free technology whose cost depends on R&D investments. To better represent the process of technological progress, we assume that R&D effectiveness is uncertain. By means of a simple analytical model, we show how accounting for the uncertainty that characterizes technological advancement yields higher investments in innovation and lower policy costs. We then confirm the results via a numerical analysis performed with a stochastic version of WITCH, an energy-economy-climate model. The results stress the importance of a correct specification of the technological change process in economy-climate models.
    Keywords: Climate Change, Information and Uncertainty, Environmental Policy, Optimal R&D Investments
    JEL: O32 Q54 Q55
    Date: 2007–01
  11. By: Natalia Zugravu (Centre d'Economie de la Sorbonne); Katrin Millock (Centre d'Economie de la Sorbonne); Gérard Duchêne (ERUDITE - Université Paris 12)
    Abstract: emissions between 1996 and 2001. Was this emission reduction just the fortuitous result of the major economic transformation undergone by those countries in the transition away from a centralized plan economy ? Or is the emission reduction rather a result of more stringent environmental policy ? The objective of the article is to answer this question through a model of the relation between environmental quality and enforcement, on the one hand, and environmental quality and economic growth, on the other hand. We develop structural equations for the demand (emissions) and supply (environmental stringency) of pollution. The supply equation takes into account the institutional quality of the country (control of corruption and political stability) as well as consumer preferences for environmental quality, as proxied by per capita revenue and unemployment. The system is estimated by three stage least squares on a sample of three groups of countries for comparative analysis : Central and Eastern European countries, Western European countries and emerging economies. The results indicate that, all else equal, the scale effect on its own would have increased industrial CO2 emissions in the Central and Eastern European countries in our sample by 44,6% between 1996 and 2001. The composition effect accounted for a corresponding reduction in emissions by 16%. The technique effect had the largest marginal impact corresponding to a 37,4% reduction in emissions.
    Keywords: Transition, CO2 emissions, environmental policy, scale, composition and technique effects.
    JEL: C33 D72 P5 P27 Q53 Q58
    Date: 2007–01
  12. By: Mònica Serrano (Universitat de Barcelona)
    Abstract: This paper evaluates two alternative tax policies aimed at reducing atmospheric pollutant emissions. One based upon an environmental tax that burdens directly firms’ emissions, and the other one that burdens both directly and indirectly household consumption’s emissions. Applying input-output approach, we reallocate the emissions generated in the economy according to the responsibility definition, i.e. the production or the consumption accounting principle. Afterwards, we analyse the effects on the products’ prices of implementing an ad-quantum environmental tax based on the Producer Pays Principle (PPP) and/or on the User Pays Principle (UPP). The results obtained, show that both PPP and UPP environmental tax have the same effect on the final products’ prices. However, the price of the intermediate products is only affected by the PPP environmental tax, whereas the UPP environmental tax keeps the prices unchanged.
    Keywords: Input-Output Analysis, Environmental Taxes, Atmospheric Pollutants
    JEL: C67 H23 Q53
    Date: 2007–01
  13. By: Massimo Tavoni (Fondazione Eni Enrico Mattei); Valentina Bosetti (Fondazione Eni Enrico Mattei); Brent Sohngen (AED Economics, Ohio State University)
    Abstract: This paper investigates the potential contribution of forestry management in meeting a CO2 stabilization policy of 550 ppmv by 2100. In order to assess the optimal response of the carbon market to forest sequestration we couple two global models. An energy-economy-climate model for the study of climate policies is linked with a detailed forestry model through an iterative procedure to provide the optimal abatement strategy. Results show that forestry is a determinant abatement option and could lead to significantly lower policy costs if included. Linking forestry management to the carbon market has the potential to delay the policy burden, and is expected to reduce the price of carbon of 40% by 2050. Biological sequestration will mostly come from avoided deforestation in tropical forests rich countries. The inclusion of this mitigation option is demonstrated to crowd out some of the traditional abatement in the energy sector and to lessen induced technological change in clean technologies.
    Keywords: Forestry, Climate Policy, Technological Innovation
    JEL: Q23 Q52 Q55
    Date: 2007–01
  14. By: Valeria Costantini
    Abstract: The aim of this paper is to describe a general overview of the large number of theoretical and empirical studies that analyze the relationships between trade openness and environment. In Section 1, the paper presents a first description of the multidimensional links between a general definition of globalization and the effects on environment and natural resources. In Section 2, there is a more specific analysis on the impacts of trade liberalization process on the environmental degradation caused by increasing polluting emissions. A comparative advantages model is therefore described as a general framework for evaluating degradation effects linked to increasing trade flows. In Section 3, the specific relationships between trade openness and natural resources exploitation are analyzed, distinguishing between exhaustible and renewable resources. Finally, a specific model analysing the effects of property rights regimes on the resource exploitation choices in case of trade openness is described.
    Keywords: International Trade, Environment, Natural resources, Pollution
    JEL: F18 H23 O13 Q56
    Date: 2006–12
  15. By: Adriaan Perrels
    Abstract: This report discusses the economic implications of the regulatory organisation of the European Emission Trade System (EU ETS) in the member states, and more in particular the consequences of differences between national regulations. It is part of a larger study regarding juridical aspects of the implementation of EU-ETS (Upston-Hooper et al, 2006), which has been carried out in the framework of the CLIMBUS programme funded by TEKES.
    Keywords: Emission trading, level playing field, regulation
    Date: 2007–02–14

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