nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒04‒09
34 papers chosen by
Roger Fouquet
Imperial College, UK

  2. Are Shorter Work Hours Good for the Environment? A Comparison of U.S. and European Energy Consumption By David Rosnick; Mark Weisbrot
  3. Multi-scale Causality between Energy Consumption and GNP in Emerging Markets: Evidence from Turkey By Cifter, Atilla; Ozun, Alper
  4. Energy Consumption, Dependency and Growth By erdogdu, oya
  5. An Econometric Model of Production With Improvement in Energy Efficiency, 1970-1995, Working Paper Nota Di Lavoro 61.98, 1998 By Conrad, Klaus
  6. Estimating the Distribution of Plant-Level Manufacturing Energy Efficiency with Stochastic Frontier Regression By Gale Boyd
  7. Pricing behaviour under competition in the UK electricity supply industry By Giulietti, Monica; Otero, Jesus; Waterson, Michael
  8. An Agent-Based Computational Laboratory for Wholesale Power Market Design By Sun, Junjie; Tesfatsion, Leigh S.
  9. Price Competition and Product Differentiation when Goods have Network Effects By Klaus Conrad
  10. Influence of structure and ownership of lignite opencast mine and power plant bilateral monopoly on its operation By Jurdziak, Leszek
  11. Lignite price as a determinant of the split of profit in systems of mines and power plants. Part I – Split of profit proposals By Jurdziak, Leszek
  12. Hard Coal Subsidies: A Never-Ending Story? By Manuel Frondel; Rainer Kambeck; Christoph M. Schmidt
  13. The peak of oil extraction and consistency of the government's short- and long-run policies By Bazhanov, Andrei
  14. Adoption Subsidies and Environmental Impacts of Alternative Energy Crops By Bruce A. Babcock; Philip W. Gassman; Manoj Jha; Catherine L. Kling
  15. Network effects, Compatibility and the Environment: The Case of Hydrogen Powered Cars By Klaus Conrad
  16. The Optimal Path of Energy and CO2 Taxes for Intertemporal Resource Allocation By Conrad, Klaus
  17. Unfit to Learn? How Long View Organizations Adapt to Environmental Jolts By Heugens, P.P.M.A.R.; Zyglidopoulos, S.C.
  18. Redealing the Cards: How the Presence of an Eco-Industry Modifies the Political Economy of Environmental Policies By Joan Canton
  19. Carbon Taxes and Joint Implementation By Böhringer, Christoph; Conrad, Klaus; Löschel, Andreas
  20. Greenhouse gas emissions charges and credits agricultural land: what can a model tell us? By Joanna Hendy; Suzi Kerr; Troy Baisden
  21. Stringency and Distribution in the EU Emissions Trading Scheme –The 2005 Evidence By Stefan P. Schleicher; Claudia Kettner; Angela Köppl; Gregor Thenius
  22. Emission trading beyond Europe : linking schemes in a post-Kyoto world By Anger, Niels
  23. The Impact of the European Union Emissions Trading Scheme on Competitiveness in Europe By Oberndorfer, Ulrich; Rennings, Klaus
  24. Lignite price and split of profit negotiation in bilateral monopoly of lignite opencast mine and power plant By Jurdziak, Leszek
  25. Voluntary Environmental Agreements, Emission Taxes and International Trade: The Importance of the Timing of Strategies By Conrad, Klaus
  26. Environmental Taxation and International Eco-Industries By Joan Canton
  27. Abatement and Transaction Costs of Carbon-Sink Projects Involving Smallholders By Oscar Cacho; Leslie Lipper
  28. Economic Dynamics, Emission Trends and the EKC Hypothesis New Evidence Using NAMEA and Provincial Panel Data for Italy By Massimiliano Mazzanti; Anna Montini; Roberto Zoboli
  30. The Effects of the EU ETS on Companies: Research by Conducting Interviews in European Companies By Seiji Ikkatai; Daisuke Ishikawa; Shuichi Ohori
  31. Trading for the Future: Signaling in Permit Markets By Bard Harstad; Gunnar S. Eskeland
  32. Carbon Sequestration with Reforestations and Biodiversity-Scenic Values By A. Caparrós; E. Cerdá; P. Ovando; P. Campos
  33. Climate Coalitions: A Theoretical and Computational Appraisal By Thierry Bréchet; François Gerard
  34. A Modelling Framework for Addressing the Synergies between Global Conventions through Land Use Changes: Carbon Sequestration, Biodiversity Conservation, Prevention of Land Degradation and Food Security in Agricultural and Forested Lands in Developing Countries By Raul Ponce-Hernandez

  1. By: Katrin Rehdanz (Research unit Sustainability and Global Change, Hamburg)
    Abstract: We first examine the determinants of household expenditures on space heating and hot water supply in Germany. A number of socio-economic characteristics of households are included along with building characteristics. Our analysis covers information on more than 12,000 households in Germany for the years 1998 and 2003. The analysis continues by investigating whether different kinds of households are affected differently by increases in energy prices. Households in owner occupied properties are less affected compared to those in rented accommodation, this could be because owners are more likely to have installed energy-efficient heating and hot water supply systems and landlords have less of an incentive to improve the conditions of their rented accommodations. An energy policy targeting especially the latter group might benefit not only households in rented accommodation, but might increase energy-efficiency and reduce greenhouse gas emissions as well.
    Keywords: heating expenditures, Germany, space heating, energy-efficiency, price elasticity, income elasticity
    JEL: D12 Q40
    Date: 2005–06
  2. By: David Rosnick; Mark Weisbrot
    Abstract: European employees work fewer hours per year -- and use less energy per person -- than their American counterparts. This report compares the European and U.S. models of labor productivity and energy consumption. It finds that if all countries worked as many hours per week as U.S. workers do, the world would consume 15 to 30 percent more energy by 2050 than it would by following Europe's model.
    Date: 2006–12
  3. By: Cifter, Atilla; Ozun, Alper
    Abstract: Tests results for causality between energy consumption and economic growth do not have a consensus in the financial economics literature. Empirical evidence varies on the economies examined and methodology employed. This paper proposes a wavelet analysis as a semi- parametric model for detecting multi-scale causality between electricity consumption and growth in emerging economies. Using wavelet analysis we find that in the short run there is feedback relationship between GNP and energy consumption, while in the long run GNP leads to energy consumption. Wavelet correlation between GNP and energy consumption is maximum at 3rd time-scale(5-8 years) and this shows that GNP effects electricity consumption maximally around 5-8 years later in the long-run. We also find that the magnitude of the wavelet correlation changes based on time-scales for GNP and energy consumption and thus indicate that GNP and energy consumption are fundamentally different in the long run.
    Keywords: Economic Growth; Energy Consumption; Employment; Wavelets; Causality
    JEL: Q43 C1 C32
    Date: 2007–03–01
  4. By: erdogdu, oya
    Abstract: Energy being one significant factor of production, high rises of oil prices and Russia’s strategy of controlling natural gas resources and energy routes makes the policy of using domestic energy resources and developing new technologies to use these resources very popular. Today, USA, Europe and even China is taking serious actions on using their own energy resources rather than importing. Contrary to this strategy Turkey is getting more dependent on imported natural gas, rather than using own resources of energy. This study analyses the consequences of this policy. VAR methodology and Granger causality analyses performed to investigate the relations between imported energy, investment and employment. The results indicate serious negative impact of energy imports on private sector investment employment.
    Keywords: Energy consumption; Granger causality; VAR
    JEL: Q43 C32
    Date: 2007–01
  5. By: Conrad, Klaus (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: The purpose of this paper is to introduce a modification of a standard four input production process where energy is used in an inefficient way due to partly unnecessary waste of energy. In this production process, R&D investment is an additional input in
  6. By: Gale Boyd
    Abstract: A feature commonly used to distinguish between parametric/statistical models and engineering models is that engineering models explicitly represent best practice technologies while the parametric/statistical models are typically based on average practice. Measures of energy intensity based on average practice are less useful in the corporate management of energy or for public policy goal setting. In the context of company or plant level energy management, it is more useful to have a measure of energy intensity capable of representing where a company or plant lies within a distribution of performance. In other words, is the performance close (or far) from the industry best practice? This paper presents a parametric/statistical approach that can be used to measure best practice, thereby providing a measure of the difference, or “efficiency gap” at a plant, company or overall industry level. The approach requires plant level data and applies a stochastic frontier regression analysis to energy use. Stochastic frontier regression analysis separates the energy intensity into three components, systematic effects, inefficiency, and statistical (random) error. The stochastic frontier can be viewed as a sub-vector input distance function. One advantage of this approach is that physical product mix can be included in the distance function, avoiding the problem of aggregating output to define a single energy/output ratio to measure energy intensity. The paper outlines the methods and gives an example of the analysis conducted for a non-public micro-dataset of wet corn refining plants.
    Date: 2007–03
  7. By: Giulietti, Monica (Aston Business School); Otero, Jesus (Universidad del Rosario, Colombia); Waterson, Michael (University of Warwick)
    Abstract: This paper investigates the evolution of electricity prices for domestic customers in the UK following the introduction of competition. The empirical analysis is based on a panel data set containing detailed information about electricity supply prices over the period 1999 to 2006. The analysis aims to test theoretical hypotheses about the nature of consumers’ switching and search costs. The econometric analysis of persistence and price dispersion provides only limited support for the view that the market is becoming more competitive and also indicates that there remain significant potential benefits to consumers from searching alternative suppliers.
    Keywords: electricity supply ; price competition ; convergence ; dynamic panels ; crosssectional dependency
    JEL: L43 L13 L94 C22 C23
    Date: 2007
  8. By: Sun, Junjie; Tesfatsion, Leigh S.
    Abstract: This study reports on the model development and open-source implementation (in Java) of an agent-based computational wholesale power market organized in accordance with core FERC-recommended design features and operating over a realistically rendered transmission grid subject to congestion effects. The traders within this market model are strategic profit-seeking agents whose learning behaviors are based on data from human-subject experiments. Our key experimental focus is the complex interplay among structural conditions, market protocols, and learning behaviors in relation to short-term and longer-term market performance. Market power findings for a dynamic 5-node transmission grid test case are presented for concrete illustration.
    Keywords: Restructured electricity markets, Market design, Learning Traders, Transmission grid congestion, Market power, Agent-based computational economics
    JEL: C0 C6 D4 D43 L1 L13 L5 Q4
    Date: 2007–03–31
  9. By: Klaus Conrad (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: The objective of our approach is to develop a model which captures horizontal product differentiation under environmental awareness, product innovation under network effects, and price competition whereby environmentally friendly products are costlier to produce. As an example, we refer to automobile producers, offering cars with a gasoline powered engine and one with a natural gas powered engine. The network of petrol stations provide the complementary good. The fulfilled expectation equilibrium could be one with either the firm offering the conventional engine as the only producer, or one with the firm offering the new technology as the only producer, or one where both firms share the market. Which equilibrium will emerge depends on the cost of producing energy efficient engines and on environmental awareness of the consumers. Due to the latter aspect the innovative firm has a chance to enter the market. We use a two stage game in prices and characteristics to analyse the respective market structure. We show that if environmental awareness is strong, the firm with the conventional technology will improve energy efficiency of its product. If the network effect is weak, both firms will be in the market. Prices and profits will decline if the role of the network effect becomes important.
    JEL: L11 Q38 H23 L62
  10. By: Jurdziak, Leszek
    Abstract: Lignite mine and power plant can operate as two separate entities, two entities in one holding or joint venture and as the one vertically integrated energy producer. Each of these solutions has the influence on operation of this tandem including realization of its individual and joint objectives, price negotiation, transactional costs, irreversible investments (sunk costs), different access to information (asymmetric information), cooperation or rivalry, possibility of opportunistic behaviour and other threats, which can be used against the second side. An attempt has been made to show these problems from the point of view of economic effectiveness based on a bilateral monopoly (BM) model and game theory approach with usage of pit optimisation methods. Advantages and disadvantages of different solutions have been presented as well as rational incentives to vertical integration due to inherent conflict of individual and group rationality in BM. This conflict of interest can lead to Pareto sub optimal solution in case of lack of cooperation between both sides. Concentration on lignite price can lead to waste of potential profit and decrease of mineable reserves - excavation of smaller pit, which is optimal only to the mine but not to the whole BM.
    Keywords: bilateral monopoly; lignite mine; lignite power plant; price negotitiation; vertical structure; vertical integration; lignite price; opportunism; asymmetry of information; deposit knowledge; ownership structure; cooperative game; zero sum game; non-zero suma game; Pareto optimality; profit division; individual rationality; group rationality; long-term contract
    JEL: L22 L72 L44 Q31 L14 D43 Q41 D4 C72 L13 L24 L10 C78 L42 L0 D82 L94 D86 C71 C7 L25 Q32
    Date: 2006
  11. By: Jurdziak, Leszek
    Abstract: Different structures of lignite mines and power stations, which have appeared on the Polish market as a result of its transformation and the privatisation, were discussed. The attention is focused on the fact that the practice is overtaking the theory because there is lack of models of functioning of such structures. A model of cooperation between the mine and the power station was worked out for the established amount of coal what can describe the situation of particular ultimate pit choice (in long run) or realization of supplies of the constant amount of lignite in frames of the long-term contract (in short run e.g. one of year). It is proposed to treat a negotiation of the lignite price as a constant sum game and a lignite price as the determinant of the total profit division. The choice of lignite price between prices outlining break-even points of the mine and the power station determines the distribution of the profit to both sides. It is similar to the contract curve in the classical bilateral monopoly model. Ten different methods of the profit division are proposed. Argumentation speaking for proposed solutions was presented favouring the pro-posal of equal profit margins calculated without the costs of fuel purchase.
    Keywords: Bilateral monopoly; pit optimisation; bargaining; price negotiation; fair division; Nash bargaining solution; Kalai-Smorodinsky solution; lignite price; lignite mine; lignite power plant; coal mine; coal power plant
    JEL: R32 L22 L72 Q31 L14 D43 Q41 D4 C72 L13 L10 C78 L42 L0 D86 L94 C71 C7 Q32
    Date: 2006–11–01
  12. By: Manuel Frondel; Rainer Kambeck; Christoph M. Schmidt
    Abstract: In Germany, hard coal has been subsidized for almost half a century. Despite the declining significance of hard coal production for the domestic labor market, the magnitude of subsidies increased until the middle of the last decade. In 1996, they peaked at € 6.7 bill.While German hard coal subsidies have been shrinking to € 2.7 bill. in 2005, it is very likely that they will be extended well into the next decade and even beyond. This article discusses the feeble arguments raised by the proponents of hard coal subsidization in Germany and other EU countries. Most importantly, in addition to the drain imposed on public budgets, these subsidies imply a substantial opportunity cost, leading funds away from alternative, more beneficial public investments. From a social welfare perspective, we therefore recommend the rapid abolition of these subsidies not only in Germany, where in nominal terms the accumulated amount of subsidies has now by far exceeded € 130 bill., but all across Europe.
    Keywords: Energy policy, energy security, coal mining
    JEL: Q28 Q42 Q58
    Date: 2006–11
  13. 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 seems more important. We consider the economy which 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 nondecreasing consumption over time) pattern of the resource extraction. Different approaches are offered for the construction of the paths of switching to decreasing resource use. Some seemingly attractive short-run policies of switching to decreasing extraction can run counter to long-run criteria. Reformulation of the short-run criterion can imply the optimal transition path consistent with the long-run government goals. It is shown analytically and numerically that there are values of parameters for the transition paths of extraction that consumption along these paths is asymptotically constant or infinitely growing. Numerical examples show for different reserve estimates that the "sustainable" peak of oil extraction must be earlier than the expected "physical" peak. 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: 2007–03–20
  14. By: Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Philip W. Gassman (Center for Agricultural and Rural Development (CARD)); Manoj Jha (Center for Agricultural and Rural Development (CARD)); Catherine L. Kling (Center for Agricultural and Rural Development (CARD))
    Abstract: We provide estimates of the costs associated with inducing substantial conversion of land from production of traditional crops to switchgrass. Higher traditional crop prices due to increased demand for corn from the ethanol industry has increased the relative advantage that row crops have over switchgrass. Results indicate that farmers will convert to switchgrass production only with significant conversion subsidies. To examine potential environmental consequences of conversion, we investigate three stylized landscape usage scenarios, one with an entire conversion of a watershed to switchgrass production, a second with the entire watershed planted to continuous corn under a 50% removal rate of the biomass, and a third scenario that places switchgrass on the most erodible land in the watershed and places continuous corn on the least erodible. For each of these illustrative scenarios, the watershed-scale Soil and Water Assessment Tool (SWAT) hydrological model (Arnold et al., 1998; Arnold and Forher, 2005) is used to evaluate the effect of these landscape uses on sediment and nutrient loadings in the Maquoketa Watershed in eastern Iowa.
    Keywords: adoption subsidy, cellulosic ethanol, energy crops, land use, SWAT, switchgrass, water quality.
    Date: 2007–03
  15. By: Klaus Conrad (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: The paper addresses the problem of entry barriers for a new technology – hydrogen powered cars or cars with fuel cell engines – if the network of its filling stations is missing or thin. We use Hotelling’s model of product differentiation to characterize a situation where an incumbent firm produces the old technology, compatible with the existing network of filling stations, and an entrant, who cannot use this network for its products. We assume that the entrant has to invest in remodeling existing filling stations for making them compatible. This, however, raises his costs. In the intertemporal setting of our model, the Hotelling pricing rule for exhaustible resources encourages the entrant to invest in compatibility because the price of gasoline will rise in the long run to the price of the backstop technology - fuel cells. Depending on the cost of compatibility, our model indicates three possible outcomes. Either, the costs of compatibility are too high and governmental support is required. Or the incumbent bears losses in initial periods by waiting for profits in later periods when full compatibility of the network is reached. Or the entrant benefits from the fact that the price of oil reaches the price of the backstop technology (full cells) rather soon.
    JEL: L11 L15 L62 Q42
  16. By: Conrad, Klaus (Institut für Volkswirtschaft und Statistik (IVS))
  17. By: Heugens, P.P.M.A.R.; Zyglidopoulos, S.C. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Long view organizations have a technical core combining high levels of Woodwardian (1958) technological complexity and Thompsonian (1967) technological intensity. This significantly diminishes their capacity for operational flexibility and strategic adaptation. Little is known about how such organizations manage to learn from rare events. We shed light on this issue by reporting a thirteen-year longitudinal study of a major oil company, tracing its experiences with a socio-political crisis from original preparations to learnings that did not fully materialize until years after the event. We use three alternate templates to interpret the organization?s struggle to maintain its technical core under conditions of fierce contestation by changing constituent groups and dwindling public support: (1) a stakeholder template mapping shifts in the salience of constituent groups that punctuate long-standing negotiated equilibria; (2) a legitimacy template showing migration towards new forms of legitimacy while old forms crumble; and (3) a capability template highlighting how pre-existing stocks of capabilities hinder learning before being supplanted by new ones. These templates are tied together in a set of integrative propositions stating how long view organizations learn from rare events.
    Keywords: Organizational learning;Oil industry;Alternate templates;Environmental jolts;Institutional theory;Resource-based view;Stakeholder theory;
    Date: 2007–03–28
  18. By: Joan Canton (GREQAM, Université de la Méditerranée)
    Abstract: An incumbent government maximizes its chances of being reelected. Its objective function encompasses both social welfare and political contributions. Its only instrument is a pollution tax. In an open-economy context, we introduce an eco-industry in addition to lobbies of polluting firms and environmentalists. Not only does the eco-industry lobby add a new political contribution toward a higher environmental tax, it also modifies the incentives of the usual lobbies. When the foreign environmental policy is constant, environmentalists can be in favor of a decrease in the local tax in order to reduce foreign pollution. It could also be in the interest of a vertical industrial pressure group to lobby toward more stringent environmental policy. In general, the impact of lobbying activities on the politically optimal tax is ambiguous as pressure groups push in different directions.
    Keywords: Eco-Industry, Environmental Taxation, Lobbies, Political Economy
    JEL: H23 D72
    Date: 2007–02
  19. By: Böhringer, Christoph; Conrad, Klaus; Löschel, Andreas (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: In this paper, we investigate whether an environmental tax reform cum joint implementation (JI) provides employment and overall efficiency gains as compared to an environmental tax reform stand-alone (ETR). We address this question in the framework of a large-scale general equilibrium model for Germany and India where Germany may undertake joint implementation with the Indian electricity sector. Our main finding is that joint implementation offsets adverse effects of carbon emission constraints on the German economy. JI significantly lowers the level of carbon taxes and thus reduces the total costs of abatement as well as negative effects on labor demand. In addition, JI triggers direct investment demand for energy efficient power plants produced in Germany. This provides positive employment effects and additional income for Germany. For India, joint implementation equips its electricity industry with scarce capital goods leading to a more efficient power production with lower electricity prices for the economy and substantial welfare gains.
    JEL: D24 D58 F20 Q25
  20. By: Joanna Hendy (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research); Troy Baisden (Landcare Research)
    Abstract: Using the simulation model Land Use in Rural New Zealand version 1 -climate (LURNZv1-climate), we simulate the effects of an agricultural land-use emissions charge and a reward for native forest and scrub regeneration. Our results are preliminary and at this stage should be considered illustrative. We find that, on its own, an agricultural emissions charge based on solely on land use would be disruptive and may not be very effective in reducing emissions. In addition, we find that including an additional policy that rewards regenerating forest and scrub without a similar reward for plantation forestry might negatively impact on plantation forestry, increasing emissions growth in the short-run. We are currently developing a second version of LURNZ-climate, which will be more robust and thus lend more weight to our future results.
    Keywords: Climate change, land use, methane, nitrous oxide, dairy, sheep, beef, Government policy
    JEL: Q24 Q15 Q18 R14 Q54 Q58
    Date: 2006–06
  21. By: Stefan P. Schleicher (Austrian Institute of Economic Research); Claudia Kettner (Austrian Institute of Economic Research); Angela Köppl (Austrian Institute of Economic Research); Gregor Thenius (Austrian Institute of Economic Research)
    Abstract: With the release of the verified emissions for installations covered by the EU Emissions Trading Scheme for the first trading year 2005 we are able to compare actual emissions and allowances for each installation. Based on data available for 24 Member States as of January 2007, this paper uses a thorough data analysis for about 9,900 installations to investigate evidence on three issues: first, the stringency of the total allocation cap and allocation differences both among the Member States and a selection of emission intensive sectors; second, the distribution of the size of installations; and third, the spread of allocation discrepancies and possible allocation biases regarding the size of installations.
    Keywords: Emission Trading, EU Emissions Trading Scheme, Climate Policy
    JEL: D61 O1 Q51 Q54
    Date: 2007–02
  22. By: Anger, Niels
    Abstract: This paper assesses the economic impacts of linking the EU Emission Trading Scheme (ETS) to emerging schemes beyond Europe, in the presence of a post-Kyoto agreement in 2020. Simulations with a numerical multi-country model of the world carbon market show that linking the European ETS induces only marginal economic benefits: As trading is restricted to energy-intensive industries that are assigned generous initial emissions, the major compliance burden is carried by non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, excluded sectors can however be substantially compensated by international trading at the country level, thus increasing the political attractiveness of the linking process. From an efficiency perspective, a desirable future climate policy regime represents a joint trading system that enables international emission trading between ETS companies and governments. While the Clean Development Mechanism (CDM) cannot alleviate the inefficiencies of linked ETS, in a parallel or joint trading regime the access to abatement options of developing countries induces large additional cost savings. Restricting CDM access via a supplementarity criterion does not significantly decrease the economic benefits from project-based emission crediting.
    Keywords: EU ETS, Emission Trading, Kyoto Protocol, Clean Development Mechanism
    JEL: D61 H21 H22 Q58
    Date: 2006
  23. By: Oberndorfer, Ulrich; Rennings, Klaus
    Abstract: This literature review analyses the impacts of the EU ETS on competitiveness focussing on existing simulation studies. We have identified the choice of the reference scenario as the most critical issue for an appropriate analysis of the relevant literature. We find, however, that effects of the scheme on competitiveness are modest, even given the business as usual case that does not take the legally binding framework of the Kyoto Protocol into account. Furthermore, the impacts of the EU ETS are smaller than the impacts of alternative Kyoto-based regulation scenarios. Compared to these other regulation methods ETSs can have positive competitiveness effects. However, the EU ETS is not designed to boost Europe’s economy. Its prime purpose and justification is to ensure that Europe’s CO2 emissions are brought down and Kyoto targets are reached at minimal costs. To our opinion, it is therefore important that the system as well as modifications to it do not undermine the environmental goals associated with this policy instrument.
    Keywords: emissions trading, competitiveness, environmental regulation
    JEL: Q21 Q28 Q43
    Date: 2006
  24. By: Jurdziak, Leszek
    Abstract: The newest outcome of bilateral monopoly (BM) of lignite opencast mine & power plant analysis have been discussed. The determinism of optimal solution maximising joint profits not only in quantity of lignite - the size and shape of the ultimate pit (characteristic to classical solution) but also in its price has been stressed. It is proposed to treat negotiation between power plant and mine as a cooperative, two-stage, two-person, non zero-sum game. In the first stage the ultimate pit maximising joint profits of BM should be chosen and in the second one, during bargaining, the split of profit ought to be decided together with choosing the transfer price of lignite. The level of lignite prices has been presented in the time of their control and confirmation (1996-2003) as well as their new profit sharing role in the period of their freely negotiation. The Nash bargaining solution has been proposed as a tool for equitable split of profit in BM due to its rational conditions. The application of this solution on example from the “Szczerców” deposit has been presented.
    Keywords: bilateral monopoly; price negotiation; lignite mine; lignite power plant; pit optimisation; cooperative game; bargaining; profit division; transfere price; Nash bargaining solution; lignite deposit;
    JEL: R32 L22 Q31 L14 D43 Q41 D4 C72 L13 L10 C78 L42 L0 D86 L94 C71 C7 Q32
    Date: 2006
  25. By: Conrad, Klaus (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: The purpose of the paper is to narrow the gap between the widespread use of voluntary agreements and research on the rationale of such approaches. A topical example are voluntary agreements of many industries to reduce carbon dioxide emissions because of
    JEL: D43 F13 H23
  26. By: Joan Canton (GREQAM, Université de la Méditerranée)
    Abstract: Environmental policies are discussed when two countries differ in their ability to abate pollution. Northern eco-industries (the industry supplying abatement activities) are more efficient than Southern ones. Segmented environmental markets and a Northern monopoly yield identical second-best taxes in both countries. When markets are global, Southern countries underestimate the market power of eco-industries. Introducing competition creates positive (resp. negative) rent-shifting distortions in South (resp. North). Cooperation could reduce Northern pollution but has ambiguous consequences in South.
    Keywords: Eco-Industry, Strategic Environmental Policy, Asymmetric Oligopolies
    JEL: D62 H23 F12
    Date: 2007–02
  27. By: Oscar Cacho (University of New England); Leslie Lipper (Food and Agriculture Organization)
    Abstract: Agroforestry projects have the potential to help mitigate global warming by acting as sinks for greenhouse gasses. However, participation in carbon-sink projects may be constrained by high costs. This problem may be particularly severe for projects involving smallholders in developing countries. Of particular concern are the transaction costs incurred in developing projects, measuring, certifying and selling the carbon-sequestration services generated by such projects. This paper addresses these issues by analysing the implications of transaction and abatement costs in carbon-sequestration projects. A model of project participation is developed, which accounts for the conditions under which both buyers and sellers would be willing to engage in a carbon transaction that involves a long-term commitment. The model is used to identify critical project-design variables (minimum project size, farm price of carbon, minimum area of participating farms). A project feasibility frontier (PFF) is derived, which shows the minimum project size that is feasible for any given market price of carbon. The PFF is used to analyse how the transaction costs imposed by the Clean Development Mechanism of the Kyoto Protocol affect project feasibility.
    Keywords: Agroforestry, Climate Policy, Carbon Sequestration Costs
    JEL: Q23 Q57 O1 O13
    Date: 2007–03
  28. By: Massimiliano Mazzanti (University of Ferrara); Anna Montini (University of Bologna); Roberto Zoboli (CERIS-CNR and Catholic University of Milan)
    Abstract: This paper provides new empirical evidence on delinking trends concerning emission-related indicators in Italy. We discuss methodological issues regarding the analysis of delinking and examine the related Environmental Kuznets Curves (EKC) literature to explore and assess the most value added research lines after more than a decade of intensive research in the field. The main contribution of the paper is in providing EKC evidence exploiting environmental-economic merged panel datasets at a decentralized level exploiting long time series and rich cross section heterogeneity at both sectoral and provincial level. This crucially augments the unsatisfactory outcomes deriving from cross country analyses, which are less informative for policy purposes since they provide averages for environmental-economic relationships. Two panel datasets: 1990-2000 emissions at province level; and sectoral disaggregated NAMEA emissions sources for 1990-2001 are analyzed. We find mixed evidence supporting the EKC hypothesis. Some of the pollutants in the NAMEA data, such as CO2, CH4 and CO, produce inverted-U shaped curves with coherent within range turning points. Other emission trends for the period under consideration show monotonic or even N shaped (SOX, NOX, PM10) relationship. Other emissions show relatively less robust results, with mixed evidence arising from different specifications. This partially confirms some of the criticisms directed to EKC empirical investigations. However, our analysis shows that probably there is no single EKC dynamic, but rather many EKC dynamics, differing depending on (i) period of observation; (ii) country/area; (iii) emissions/environmental pressures; (iv) sectors. Sectoral disaggregated analysis highlights that an aggregated outcome should hide some heterogeneity across different sectors. Services tend to present an inverted-N shape in most cases. Manufacturing industry shows a mix of EKC inverted- U and N shapes, depending on the emission considered. The same is true for industry (all industries, not only manufacturing): though a turning point has been experienced, N shapes may lead to increased emissions with respect to very high levels of the income driver. The analysis of provincial data shows that inverted-U shaped curves are present for some of the emissions in the SINAnet- APAT database, such as CH4, NMVOC, CO and PM10, with coherent within range turning points. Other emission trends show a monotonic relationship (CO2 and N2O), or in some cases an inverted-N shaped relationship (SOX and NOX). This kind of analysis at macro sector and/or specific sector level appear to be the most promising and robust field of future research for the assessment of EKC dynamics. National studies grounded in geographical heterogeneity, rather than regional/international analysis, and focused on sectoral trends, are more informative for policy making. The implementation of such investigations needs larger datasets than are currently available. We thus point to the need for increasing and continual effort on constructing integrated environmental/economic statistical accounts.
    Keywords: Decoupling, NAMEA Emissions, Economic Drivers, Kuznets Curve, Environmental Efficiency
    JEL: C23 Q38 Q56
    Date: 2007–02
  29. By: Richard S.J. Tol (Economic and Social Research Institute, Dublin); Kristie L. Ebi; Gary W. Yohe
    Abstract: We study the effects of development and climate change on infectious disease in Sub-Saharan Africa. Infant mortality and infectious disease are close related, but there are better data for the former. In an international cross-section, per capita income, literacy, and absolute poverty significantly affect infant mortality. We use scenarios of these three determinants, and of climate change to project the future incidence of malaria, assuming it to change proportionally to infant mortality. Malaria deaths will first increase, because of population growth and climate change, but then fall, because of development. This pattern is robust to the choice of scenario, parameters, and starting conditions; and it holds for diarrhoea, schistosomiasis, and dengue fever as well. However, the time and level of the mortality peak is very sensitive to assumptions. Climate change is important in the medium term, but dominated in the long term by development. As climate can only be changed with a substantial delay, development is the preferred strategy to reduced infectious diseases, even if that is exacerbated by climate change.
    Keywords: Development, infectious disease, climate change, Sub-Saharan Africa, malaria
    JEL: I12 O13 Q54
    Date: 2006–06
  30. By: Seiji Ikkatai (Institute of Economic Research, Kyoto University); Daisuke Ishikawa (Institute of Economic Research, Kyoto University); Shuichi Ohori (Institute of Economic Research, Kyoto University)
    Abstract: We study the effects of the European Union Emission Trading Scheme (EU ETS)?which was introduced in January 2005?on companies by conducting interviews in some German and UK firms. In this paper, we demonstrate that although the introduction of the EU ETS has increased awareness of the importance of efforts to reduce global warming and emission costs, it has had little influence on the companies CO2 abatement efforts during the first period.
    Date: 2007–01
  31. By: Bard Harstad; Gunnar S. Eskeland
    Abstract: Tradable permits are celebrated as a political instrument since they allow (i) firms to equalize marginal abatement costs through trade and (ii) the government to distribute the burden of the policy in a politically fair and feasible way. These two concerns, however, conflict in a dynamic setting. Anticipating that high-cost firms will receive more permits in the future, firms purchase excessive amounts of permits to signal high costs. This raises the price above marginal costs and distorts abatements. In fact, it is better with non-tradable permits if the heterogeneity between the firms is small, if the (shadow) price for permits is large, and if the government redistributes permits frequently.
    Keywords: Tradable permits, private information, signaling
  32. By: A. Caparrós (Spanish Council for Scientific Research (CSIC)); E. Cerdá (University Complutense Madrid); P. Ovando (Spanish Council for Scientific Research (CSIC-IPGP)); P. Campos (Spanish Council for Scientific Research (CSIC-IPGP))
    Abstract: This paper presents an optimal control model to analyze reforestations with two different species, including commercial values, carbon sequestration and biodiversity or scenic values. We solve the model qualitatively with general functions and discuss the implications of partial or total internalization of environmental values, showing that internalizing only carbon sequestration may have negative impacts on biodiversity-scenic values. To evaluate the practical relevance, we compare reforestations in the South-west of Spain with cork-oaks (a slow growing native species) and with eucalyptus (a fast growing alien species). We do the analysis with two different carbon crediting methods: the Carbon Flow Method and the Ton Year Accounting Method. With the .first method forest surface increases more, but using mainly eucalyptus. With the second, additional reforestations are done mainly using cork-oaks. We value the impact on visitors of these reforestations using stated preferences methods, showing that when these values are internalized cork-oaks are favored.
    Keywords: Optimal Control, Forests, Carbon, Sequestration, Biodiversity, Scenic, Stated Preferences, Carbon Accounting
    JEL: Q23 Q26 Q51 Q57
    Date: 2007–03
  33. By: Thierry Bréchet (Université Catholique de Louvain); François Gerard (Center for Operations Research and Econometrics (CORE) and Université Catholique de Louvain)
    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 stability 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 “potential internal stability”) 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 terms of carbon concentration and global welfare) are always 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 D62 F42 Q2
    Date: 2007–02
  34. By: Raul Ponce-Hernandez (Trent University)
    Abstract: This paper proposed a methodological framework for the assessment of carbon stocks and the development and identification of land use, land use change and land management scenarios, whereby enhancing carbon sequestration synergistically increases biodiversity, the prevention of land degradation and food security through the increases in crop yields. The framework integrates satellite image interpretation, computer modelling tools (i.e. software customization of off-the-shelf soil organic matter turnover simulation models) and Geographical Information Systems (GIS). The framework addresses directly and indirectly the cross-cutting ecological concerns foci of major global conventions: climate change, biodiversity, the combat of desertification and food security. Their synergies are targeted by providing procedures for assessing and identifying simultaneously carbon sinks, potential increases in plant diversity, measures to prevent land degradation and enhancements in food security through crop yields, implicit in each land use change and land management scenario. The scenarios aim at providing “win-win” options to decision makers through the framework’s decision support tools. Issues concerning complex model parameterization and spatial representation were tackled through tight coupling soil carbon models to GIS via software customization. Results of applying the framework in the field in two developing countries indicate that reasonably accurate estimates of carbon sequestration can be obtained through modeling; and that alternative best soil organic matter management practices that arrest shifting “slash-and-burn” cultivation and prevent burning and emissions, can be identified. Such options also result in increased crop yields and food security for an average family size in the area, while enhancing biodiversity and preventing land degradation. These options demonstrate that the judicious management of organic matter is central to greenhouse gas mitigation and the attainment of synergistic ecological benefits, which is the concern of global conventions. The framework is to be further developed through successive approximations and refinement in future, extending its applicability to other landscapes.
    Keywords: Climate Change, Greenhouse Gas Mitigation, Carbon Sequestration, Soil Organic Matter, Modeling, Land-Use Change, Land Management, Ecological Synergies, Agriculture
    JEL: C15 C21 Q1 Q15 Q24
    Date: 2007–03

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