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on Energy Economics |
| By: | Roger E. Kasperson; Maria T. Bohn; Clark L. Goble |
| Abstract: | Our aim is to make an appropriate characterization and interpretation of the risk problem of rapid large sea level rise that reflects the very large uncertainty in present day knowledge concerning this possibility, and that will be useful in informing discussion about risk management approaches. We consider mainly the potential collapse of the West Antarctic ice sheet as the source of such a sea level rise. Our review, characterization and interpretation of the risk makes us conclude that the risk of a rapid large sea level rise is characterized by potentially catastrophic consequences and high epistemic uncertainty; effective risk management must involve highly adaptive management regimes, vulnerability reduction, and prompt development of capabilities for precautionary reduction of climate change forcings. |
| Keywords: | sea level rise, West Antarctic ice sheet, climate change, adaptive management, epistemic uncertainty, risk management arenas, vulnerability |
| JEL: | Q54 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:73&r=ene |
| By: | Kate G. Lonsdale; Thomas E. Downing; Robert J. Nicholls; Dennis Parker; Athanasios T. Vafeidis; Richard Dawson; Jim Hall |
| Abstract: | This paper considers the perceptions and responses of selected stakeholders to a scenarion of rapid rise in sea-level due to the collapse of the West Antarctic ice sheet, which could produce a global rise in sea-level of 5 to 6 metres. Through a process of dialogue involving one-to one interviews and a one-day policy exercise, we addressed influences on decision-making when information is uncertain and our ability to plan, prepare for and implement effective ways of coping with this extreme scenario. Through these interactions we hoped to uncover plausible responses to the scenario and identify potential weaknesses in our current flood management approaches to dealing with such an occurrence. By undertaking this exploratory exercise we hoped to find out whether this was a feasible way to deal with such a low probability but high consequence scenario. It was the process of finding a solution that interested us rather than the technical merits of one solution over another. We were not intending to produce definitive set of recommendations on how to respond but to gain insights into the process of making a decision, specifically what influences it and what assumptions are made. |
| Keywords: | Sea level rise, London |
| JEL: | Q54 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:77&r=ene |
| By: | Marc Poumadere; Claire Mays; Gabriela Pfeifle; Athanasios T. Vafeidis |
| Abstract: | Risk policy and public attitudes appear disconnected from research predicting warmer climate partially due to human activity. To step out of this stalled situation, a worst case scenario of a 5-6m sea level rise (SLR) induced by the collapse of the WAIS and occurring during the period 2030-2130 is constructed and applied to the Rhone delta. Physical and socio-economic scenarios developed with data from the Rhone delta context are developed and submitted to stakeholders for a day-long workshop. Group process analysis shows a high level of trust and cooperation mobilized to face the 5-6m SLR issue, despite potentially diverging interests. Two sets of recommendations stem from the scenario workshop. A conservative "wait and see" option is decided when the risk of the WAIS collapse is announced in 2030. After WAIS collapse generates an effective 1m SLR rise by 2050, decisions are taken for total retreat and rendering of the Rhone delta to its hydrological function. The transposition of these results into present times policy decisions could be considered. The methodology developed here could be applied to other risk objects and situations, and serve for policy exercises and crisis prevention. |
| Keywords: | Sea level rise, France, Camargue, scenario, extreme climate, stakeholder workshop |
| JEL: | Q54 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:76&r=ene |
| By: | Christine Schleupner (Research unit Sustainability and Global Change, Hamburg) |
| Abstract: | Based on a spatial model, the Martinique beaches and coastal wetlands are examined to identify the risks of coastal squeeze. In many cases coastal development prevents coasts from adapting by shifting landward. Also tourism infrastructure augments the vulnerability of beach reduction and mangrove squeeze. More than 70% of all Martinique beaches and 29% of mangrove forests are highly endangered by coastal squeeze if sea level rises. The majority of coastal constructions and especially tourist hotels are built at heights between 1 and 10 m above the present sea level and therefore also within the zone at risk to flooding and erosion. Spatial analysis based on a conducted GIS model is carried out that evaluates the tourist destinations most vulnerable to the impacts of sea level rise. If sea level rises and beach reduction becomes an increasing problem the attractiveness of Martinique beaches as tourist destination is likely to decline. |
| Keywords: | Caribbean, Lesser Antilles, Regional Planning, GIS, Climate Change, Coastal Change, Erosion, Inundation |
| JEL: | Q54 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:72&r=ene |
| By: | Christine Schleupner (Research unit Sustainability and Global Change, Hamburg) |
| Abstract: | Sea level in the Caribbean region is expected to rise approximately10-20 cm by 2025. In some areas of Martinique coastal erosion and saltwater intrusion are already a severe problem. Because the island has a mountainous character, the majority of its settlements are situated along the coast almost at sea level. Considerations and strategies for dealing with potential sea level rise and its consequences for Martinique do not exist. This part of a detailed case study concentrates on the evaluation of sea level rise impacts on Martinique. It is going to test the suitability of spatial data for impact scenarios at a regional scale. Also, it conceptualises the possible effects of sea level rise on the island for future regional planning purposes. An elevation model is created that visualises the low-lying coastal areas and a second model evaluates the sensitivity of each coastal segment to erosion, flooding and inundation. The resulting map distinguishes between coastal parts at high, medium, or low risk to sea level rise impacts. Results show that nearly three quarters of the Martinique coast are highly sensitive to flooding and erosion. |
| Keywords: | Caribbean, Lesser Antilles, Regional Planning, GIS, Climate Change, Coastal Change, Erosion, Inundation |
| JEL: | Q54 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:71&r=ene |
| By: | Marie-Laure Guillerminet; Richard S.J. Tol (Economic and Social Research Institute, Dublin) |
| Abstract: | A collapse of the West-Antarctic Ice Sheet (WAIS) would cause a sea level rise of 5-6 metres, perhaps even within one hundred years, with catastrophic consequences. The probability of such a collapse is small but increasing with the rise of the atmospheric concentrations of greenhouse gas and the resulting climate change. This paper investigates how the potential collapse of the WAIS affects the optimal rate of greenhouse gas emission control. We design a decision and learning tree in which decision are made about emission reduction at regular intervals. At the same time, the decision makers receive new information on the probability of a WAIS collapse and the severity of its impacts. The probability of a WAIS collapse is endogenous and contingent on greenhouse gas concentrations. We solve this optimisation problem by backward induction. We find that a potential WAIS collapse substantially bring the date of the optimal emission reduction forward and increases its amount if the probability is high enough, if the impacts are high enough, or if the decision maker is risk averse enough. We also find that, as soon as a WAIS collapse is a foregone fact, emission reduction falls to free up resource to prepare for adapting to the inevitable. |
| Keywords: | Decision making under uncertainty, West-Antarctic ice sheet |
| JEL: | Q54 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:79&r=ene |
| By: | Robert J. Nicholls; Richard S.J. Tol (Economic and Social Research Institute, Dublin); Athanasios T. Vafeidis |
| Abstract: | The threat of an abrupt and extreme rise in sea level is widely discussed in the media, but little understood in practise, including the likely impacts of such a rise. This paper explores for the first time the global impacts of extreme sea-level rise, triggered by a hypothetical collapse of the West Antarctic Ice Sheet (WAIS). As the potential contributions remain uncertain, a wide range of scenarios are explored: WAIS contributions to sea-level rise of between 0.5m/century up to 5m/century. Together with other business-as-usual sea-level contributions, in the worst case this gives an approximately 6-m rise of global-mean sea level from 2030 to 2130. Global exposure to extreme sea-level rise is significant: roughly 400 million people (or about 8% of global population) are threatened by a 5-m rise in sea level, just based on 1995 data. The coastal module within the FUND model is tuned with global data on coastal zone characteristics concerning population, land areas and land use, and then used for impact analysis under the extreme sea-level rise scenarios. The model considers the interaction of (dry)land loss, wetland loss, protection costs and human displacement, assuming perfect adaptation based on cost-benefit analysis. Unlike earlier analyses, response costs are represented in a non-linear manner, including a sensitivity analysis based on response costs. It is found that much of the world’s coast would be abandoned given these extreme scenarios, although according to the global model, significant lengths of the world’s coast are worth defending even in the most extreme case. Hence, this suggests that actual population displacement would be a small fraction of the potential population displacement. This result is consistent with the present distribution of coastal population, which is heavily concentrated in specific areas. Hence a partial defence can protect most of the world’s coastal population. However, protection costs rise substantially diverting large amounts of investment from other sectors, and large areas of (dry)land and coastal wetlands are still predicted to be lost. While some observations of response to abrupt relative sea-level rise due to subsidence support the global model results, detailed case studies of the WAIS collapse in the Netherlands, Thames Estuary and the Rhone delta suggest a greater potential for abandonment than shown by the global model. This probably reflects a range of issues, including: (1) economic criteria such as the cost-benefit ratio is not the only factor which drives response decisions, with wider perceptions of risk driving the actual response; (2) the inefficiencies of adaptation in the real world, including indecision and competition for limited resources; and (3) the possible loss of confidence under the scenario of abrupt climate change. Collectively, these results illustrate an area where there are potential limits to adaptation, even when economic analysis suggests that adaptation will occur. The significant impacts found in the global model together with the potential for greater impacts as found in the detailed case studies shows that the response to abrupt sea-level rise is worthy of further research, including exploring the differing impact results by scale. |
| Keywords: | Abrupt climate change, sea-level rise, coastal impacts, adaptation, adaptation limits |
| JEL: | Q54 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:78&r=ene |
| By: | Ferenc L. Toth; Eva Hizsnyik |
| Abstract: | A comprehensive understanding of the implications of extreme climate change requires an in-depth exploration of the perceptions and reactions of the affected stakeholder groups and the lay public. The project on “Atlantic sea level rise: Adaptation to imaginable worst-case climate change” (Atlantis) has studied one such case, the collapse of the West Antarctic Ice Sheet and a subsequent 5-6 meter sea-level rise. Possible methods are presented for assessing the societal consequences of impacts and adaptation options in selected European regions by involving representatives of pertinent stakeholders. Results of a comprehensive review of participatory integrated assessment methods with a view to their applicability in climate impact studies are summarized including Simulation-Gaming techniques, the Policy Exercise method, and the Focus Group technique. Succinct presentations of these three methods are provided together with short summaries of relevant earlier applications to gain insights into the possible design options. Building on these insights, four basic versions of design procedures suitable for use in the Atlantis project are presented. They draw on design elements of several methods and combine them to fit the characteristics and fulfill the needs of addressing the problem of extreme sea-level rise. The selected participatory techniques and the procedure designs might well be useful in other studies assessing climate change impacts and exploring adaptation options. |
| Keywords: | sea level rise, West Antarctic ice sheet, climate change |
| JEL: | Q54 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:74&r=ene |
| By: | Thierry, BRECHET (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Franois, GERARD; Henry, TULKENS |
| Abstract: | Using an updated version of the CWS model (introduced by Eyckmans and Tulkens in Resource and Energy Economics 2003), this paper intends to evaluate with numbers the respective merits of two competing notions of coalition stability in the standard global public goods model as customarily applied to the climate change problem. After a reminder of the model structure and of the definition of the two game theoretical stability notions involved - namely, core stabiilty and internal-external stability, the former property is shown to hold for the grand coalition in the CWS model only if resource transfers of a specific form between countries are introduced. It is further shown that while the latter property holds neither for the grand coalition nor for most large coalitions, it is nevertheless verified in a weak sense that involves transfers (dubbed Òpotential internal stabilityÓ) for most small coalitions. The reason for this difference is brought to light, namely the differing rationale that inspires the transfers in either case. Finally, it is shown that the stable coalitions that perform best (in termes of carbon concentration and global welfare) always are composed of both industrialized and developing countries. Two sensitivity analyses confirm the robustness of all these results. |
| Keywords: | climate change, coalitions, simulation, integrated assessment |
| JEL: | C71 C73 D9 F42 Q2 |
| Date: | 2007–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2007006&r=ene |
| By: | Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Marc, GERMAIN (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)) |
| Abstract: | The burden sharing of pollution abatement costs raises the issue of how to share the costs between entities (country, region or industry) and how the pollution permits should be distributed between the parties involved. This paper explores this issue in the framework of a dynamic endogenous growth 2 sectors - 2 regions - 2 inputs Heckscher-Ohlin model of a small open multi-regional economy with an international tradable permits market. Give an Òemission-based grand-fatheringÓ sharing rule, capital accumulation is more negatively affected by the environmental policy in the energy intensive sector. We show that such a property does not necessarily hold with a Òproduction-based grand-fatheringÓ sharing rule. We also show that the impact on capital is likely to translate into the sectoral added value level after some time, specially if the economy is submitted to an increasingly constraining environmental policy driving up the ratio price of permits to price of energy. Finally, we show that the impact of environmental policy at the regional level depends crucially on the specialization of the region along the baseline. |
| Keywords: | Pollution permits, Grand-fathering, Sectoral spillovers, Multi-regional economy, Endogenous growth |
| JEL: | D58 H21 E22 O40 |
| Date: | 2007–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2007010&r=ene |
| By: | Brechet, Thierry; Peralta, Susana |
| Abstract: | International markets for tradable emission permits (TEP) co-exist with national energy taxation. A firm trading emission permits in the international market also pays energy taxes in its host country, thus creating an interaction between the international TEP-market and national energy taxes. In this paper we model that interaction in a framework of a perfectly competitive international TEP-market, where heterogeneous firms trade their TEP endowments. National governments set energy taxes non-cooperatively so as to maximize fiscal revenue from energy and profit taxes. We identify the driving forces behind Nash equilibrium taxes. We show how they depend on the total amount of TEPs in the market, on firms' TEP-endowment and on the number of participating countries. We also show how energy taxation varies with the introduction of the market on a previously unregulated world. Finally, we highlight the fact that the TEP-market does not achieve abatement cost efficiency, despite its being perfectly competitive. |
| Keywords: | fiscal competition; Kyoto protocol; tradable permits |
| JEL: | H23 H73 Q48 Q52 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6209&r=ene |
| By: | Uwe A. Schneider (Research unit Sustainability and Global Change, Hamburg); Bruce A. McCarl |
| Keywords: | Soil carbon sequestration, Sink dynamics, Mathematical programming, Land use, Optimization, Agriculture, Forestry, Greenhouse gas mitigation |
| JEL: | Q54 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:81&r=ene |
| By: | Kevin Guerin (New Zealand Treasury) |
| Abstract: | New Zealand is facing increasing challenges in managing natural resources (land, freshwater, marine space and air quality) under pressures from domestic (population growth, agricultural intensification, cultural expectations) and international (climate change) sources. These challenges can be described in terms of managing ‘wicked problems’; i.e. problems that may not be understood fully until they have been solved, where stakeholders have different world views and frames for understanding the problem, the constraints affecting the problem and the resources required to solve it change over time, and no complete solution is ever actually found. Adaptive governance addresses wicked problems through a framework to engage stakeholders in a participative process to create a long term vision. The vision must identify competing goals and a process for balancing them over time that acknowledges conflicts cannot always be resolved in a single lasting decision. Circumstances, goals and priorities can all vary over time and by region. The Resource Management Act can be seen as an adaptive governance structure where frameworks for resources such as water may take years to evolve and decades to fully implement. Adaptive management is about delivery through an incremental/experimental approach, limits on the certainty that governments can provide and stakeholders can demand, and flexibility in processes and results. In New Zealand it also requires balancing central government expertise and resources, with local authorities which can reflect local goals and knowledge, but have varying resources and can face quite distinct issues of widely differing severity. It is important to signal the incremental, overlapping, iterative and time-consuming nature of the work involved in developing and implementing adaptive governance and management frameworks. Managing the expectations of those involved as to the nature of the process and their role in it, and the scope and timing of likely outcomes, is key to sustaining participation. |
| Keywords: | Adaptive capacity; governance; resilience |
| JEL: | Q28 Q58 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:07/03&r=ene |
| By: | Timo Goeschl (University of Heidelberg, Department of Economics); Grischa Perino (University of Heidelberg, Department of Economics) |
| Abstract: | The literature on environmental R&D frequently studies innovation as a two-stage process, with a single R&D event leading from a conventional polluting technology to a perfectly clean backstop. We allow for uncertainty in innovation in that the new technology may turn out to generate a new pollution problem. R&D may therefore be optimally undertaken more than once. Using and externding recent results from multi-stage optimal control theory, we provide a full characterization of the optimal pollution and R&D policies. The optimal R&D program is strictly sequential and has an endogenous stopping point. Uncertainty drives total R&D effort and its timing. |
| Keywords: | stock pollution, backstop technology, multi-stage optimal control, pollution thresholds, uncertainty |
| JEL: | Q55 Q53 O32 C61 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0437&r=ene |
| By: | Timo Goeschl (University of Heidelberg, Department of Economics); Grischa Perino (University of Heidelberg, Department of Economics) |
| Abstract: | We study the optimal R&D trajectory in a setting where new technologies are never perfect backstops in the sense that there is no perfectly clean technology that eventually solves the pollution problem once and for all. New technologies have stings attached, i.e. each emits a specific stock pollutant. Damages are convex in individual pollution stocks but additive across stocks, creating gains from diversification. The research and pollution policies are tightly linked in such a setting. We derive the optimal pollution path and R&D program. Pollution stocks overshoot and in the long run all available technologies produce. Research is sequential and the optimal portfolio of technologies is finite. |
| Keywords: | horizontal innovation, stock pollution, backstop technology, multistage optimal control, pollution thresholds, overshooting |
| JEL: | Q55 Q53 O32 C61 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0436&r=ene |
| By: | Malte Schwoon |
| Abstract: | Supply security and environmental concerns associated with oil call for an introduction of hydrogen as a transport fuel. To date, scenario studies of infrastructure build up and sales of fuel cell vehicles (FCVs) are driven by cost estimates and technological feasibility assumptions, indicating that there is a "chicken and egg problem": Car producers do not offer FCVs as long as there are no hydrogen filling stations, and infrastructure will not be set up unless there is a significant number of FCVs on the road. This diffusion barrier is often used as an argument for a major (public) infrastructure program, neglecting that the automobile market is highly competitive and car producers, consumers, and filling station operators form an interdependent dynamic system, where taxes influence technology choice. In this paper, an agent-based model is used that captures the main interdependencies to simulate possible diffusion paths of FCVs. The results suggest that a tax on conventional cars can successfully promote diffusion even without a major infrastructure program. However, consumers and individual producers are affected differently by the tax, indicating that differently strong resistance towards such a policy can be anticipated. Moreover, there is evidence that some producers might benefit from cooperation with filling station operators to generate a faster build up of infrastructure. |
| Keywords: | Diffusion Process, Agent Based Modeling, Hydrogen Economy, Alternative Fuel Vehicles |
| JEL: | O33 D11 D21 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:sgc:wpaper:59&r=ene |
| By: | Guy Michaels |
| Abstract: | What are the consequences of resource-based regional specialization, when it persists over a longperiod of time? While much of the literature argues that specialization is beneficial, recent worksuggests it may be costly in the long run, due to economic or political reasons. I examine this questionempirically, using exogenous geological variation in the location of subsurface oil in the SouthernUnited States. I find that oil abundant counties are highly specialized: for many decades their miningsector was almost as large as their entire manufacturing sector. During the 1940s and 1950s, oilabundant counties enjoyed per capita income that was 20-30 percent higher than other nearbycounties, and their workforce was better educated. But whereas in 1940 oil production crowded outagriculture, over the next 50 years it caused the oil abundant counties to develop a smallermanufacturing sector. This led to slower accumulation of human capital in the oil abundant counties,and to a narrowing of per capita income differentials to about 5 percentage points. Despite this caveat,the gains from specialization were large, and specialization had little impact on the fraction of totalincome spent by local government or on income inequality. |
| Keywords: | Specialization, Growth, Human Capital, Petroleum |
| JEL: | J24 O18 O33 Q33 R11 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0766&r=ene |
| By: | Pavel Filippov; Vlad Yorkovsky |
| Abstract: | Finnish and Russian energy clusters widely use resources and competences of each other. They can be considered as a good example of broader phenomenon which is internationalisation of clusters. Though these clusters are on very different development stages their internationalisation ambitions, geographical proximity and complementary resources encourage them to cooperate closely, and the scale of this cooperation is predicted to grow. The article investigates the current status of the concrete energy clusters cooperation, summarises the main reasons, benefits and barriers for their cooperation, and imposes some theoretical and practical questions related to internationalisation of clusters in general. |
| Keywords: | cluster, Northwest Russia, energy, international cooperation |
| JEL: | L14 L24 F15 F21 |
| Date: | 2007–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1078&r=ene |
| By: | Agustin, PEREZ BARAHONA |
| Abstract: | In this paper, we study the implications of assuming different technologies for physical capital accumulation and consumption. More precisely, we assume that physical capital accumulation is relatively more energy-intensive than consumption. We conclude that this hypothesis, together with the possibility of technical progress (in particular, energy-saving technical progress), has important implications on economic growth. This model entails some technical difficulties. However, we provide a full analytical characterization of both short and long-run dynamics usig Gauss Hypergeometric functions |
| Keywords: | Non-renewable resources, Energy-saging technical progress, Special Functions |
| JEL: | C68 C30 Q41 Q30 Q43 |
| Date: | 2007–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2007008&r=ene |
| By: | Agustin, PEREZ-BARAHONA |
| Abstract: | This paper studies the possibilities of technical progress to deal with the growth limit problem imposed by the usage of non-renewable energy resources, when physical capital production is relatively more energy-intensive than consumption. In particular, this work presents the conditions under which energy-saving technologies can sustain long-run growth, although energy is produced by means of non-renewable energy resources. The mechanism behind that is energy efficiency. |
| Keywords: | Nonrenewable resources, Energy-saving technical progress, Economic growth |
| JEL: | O31 O41 Q30 Q43 |
| Date: | 2007–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2007007&r=ene |
| By: | Paul Castillo; Carlos Montoro; Vicente Tuesta |
| Abstract: | This paper provides a fully micro-founded New Keynesian framework to study the interactionbetween oil price volatility, pricing behavior of firms and monetary policy. We show that when oilhas low substitutability, firms find it optimal to charge higher relative prices as a premium incompensation for the risk that oil price volatility generates on their marginal costs. Overall, in generalequilibrium, the interaction of the aforementioned mechanisms produces a positive relationshipbetween oil price volatility and average inflation, which we denominate inflation premium. Wecharacterize analytically this relationship by using the perturbation method to solve the rationalexpectations equilibrium of the model up to second order of accuracy. The solution implies that theinflation premium is higher when: a) oil has low substitutability, b) the Phillips Curve is convex, andc) the central bank puts higher weight on output fluctuations. We also provide some quantitativeevidence showing that a calibrated model for the US with an estimated active Taylor rule produces asizable inflation premium, similar to the levels observed in the US during the 70s. |
| Keywords: | Second Order Solution, Oil Price Shocks, Endogenous Trade-off |
| JEL: | E52 E42 E12 C63 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0782&r=ene |
| By: | Alexander Boogert (School of Economics, Mathematics & Statistics, Birkbeck); Dominique Dupont |
| Abstract: | We use a supply-demand framework to model the hourly day-ahead spot price of electricity based on publicly available information. With the model we can forecast the level and the probability of a spike in the spot price de¯ned as the spot price being above a certain threshold. Several European countries have recently started publishing day-ahead forecasts of the available supply. In this paper we show potential uses of such indicators and test their forecasting power in an hourly spot price model. We conclude that a forecast of the available supply can be part of a useful indicator and discuss ways to further improve the forecasts. |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:0707&r=ene |