nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒04‒21
23 papers chosen by
Roger Fouquet
Imperial College, UK

  1. The pricing dynamics of utilities with underdeveloped networks By Kessides, Ioannis N.; Chisari, Omar O.
  2. Oligopolistic Competition in the Japanese Wholesale Electricity Market: A Linear Complementarity Approach By TANAKA Makoto
  3. The Old and the New Reform of Chile’s Power Industry By Soledad Arellano
  4. Current and forthcoming issues in the Sout h African electricity sector By Maurer, Luiz; Bogetic, Zeljko; Kessides, Ioannis N.
  5. Forecasting crude oil and natural gas spot prices by classification methods By Viviana Fernández
  6. Oil Prices and the Russian Economy. Some Simulation Studies with NiGEM By Paavo Suni
  7. Privatization with Government Control: Evidence from the Russian Oil Sector By Daniel Berkowitz; Yadviga Semikolenova
  8. Dutch Disease Scare in Kazakhstan: Is It Real? By Balázs Égert; Carol S. Leonard
  9. Ordering the Extraction of Polluting Nonrenewable Resources By CHAKRAVORTY, Ujjayant; MOREAUX, Michel; TIDBALL, Mabel
  10. Extracting Several Resource Deposits of Unknown Size: Optimal Order By Murray C. Kemp; Ngo Van Long
  11. Une tarification saisonnière pour le gaz? Les coûts d'un schéma de régulation rigide pour un bien stockable By DE VILLEMEUR, Etienne
  12. Estimating demand for new car fuel economy in the UK 1970-2004 using a two-stage error correction model By David Bonilla; Tim Foxon
  13. Systèmes de transports urbains et impacts environnementaux : quelle évaluation ? Une analyse comparative des agglomérations de Bordeaux, Grenoble, Lyon et Paris By Damien Verry
  14. Does Extending Daylight Saving Time Save Energy? Evidence from an Australian Experiment By Ryan Kellogg; Hendrik Wolff
  15. Retail Energy Prices and Consumer Expenditures By Edelstein, Paul; Kilian, Lutz
  16. Emerging in between: the multi-level governance of renewable energy in the English regions By Adrian Smith
  17. Efficiency in Managing the Environment and the Opportunity Cost of Pollution Abatement By Subhash C. Ray; Kankana Mukherjee
  18. Environmental Efficiency Measurement with Translog Distance Functions: A Parametric Approach By Cuesta, Rafael A.; Knox Lovell, C.A.; Zofío, José Luis
  19. An endogenous timing analysis of international duopoly with transboundary stock pollution By Kenji Fujiwara; Norimichi Matsueda
  20. Gains from trade in a polluting product in the presence of transboundary stock pollution By Kenji Fujiwara; Norimichi Matsueda
  21. Effects of transboundary pollution on the mode of international trade of a polluting good By Kenji Fujiwara; Norimichi Matsueda
  22. Energy Substitutions, Climate Change and Carbon Sinks By LAFFORGUE, Gilles; MAGNE, Bertrand; MOREAUX, Michel

  1. By: Kessides, Ioannis N.; Chisari, Omar O.
    Abstract: This paper uses an analytically tractable intertemporal framework for analyzing the dynamic pricing of a utility with an underdeveloped network (a typical case in most developing countries) facing a competitive fringe, short-run network adjustment costs, theft of service, and the threat of a retaliatory regulatory review that is increasing with the price it charges. This simple dynamic optimization model yields a number of powerful policy insights and conclusions. Under a variety of plausible assumptions (in the context of developing countries) the utility will find its long-run profits enhanced if it exercises restraint in the early stages of network development by holding price below the limit defined by the unit costs of the fringe. The utility ' s optimal price gradually converges toward the limit price as its network expands. Moreover, when the utility is threatened with retaliatory regulatory intervention, it will generally have incentives to restrain its pricing behavior. These findings have important implications for the design of post-privatization regulatory governance in developing countries.
    Keywords: Ec onomic Theory & Research,Markets and Market Access,Urban Water Supply and Sanitation,Infrastructure Regulation,Access to Markets
    Date: 2007–04–01
  2. By: TANAKA Makoto
    Abstract: Using a linear complementarity approach, we simulate the Japanese wholesale electricity market as a transmission-constrained Cournot market. Following Hobbs (2001), our model adopts the Cournot assumption in the energy market and the Bertrand assumption in the transmission market. The Bertrand assumption means that generators consider transmission charges as being exogenous, which can be interpreted as a kind of bounded rationality. We then present a simulation analysis of the Japanese wholesale electricity market, considering eight areas linked by interconnection transmission lines. Specifically, this paper examines the potential effects of both investment in interconnection transmission lines and the divestiture of dominant players' power plants.
    Date: 2007–04
  3. By: Soledad Arellano
    Abstract: Chile’s regulatory framework introduced in 1981 remained unchanged for more than 20 years. The reform had a positive effect but several warning signals appeared by the end of the 90s indicating the need to introduce changes. The most important problems were the lack of competition in the generation segment and the reluctance to expand capacity. These problems were appropriately faced by two amendments to the law (2004 -2005). Knowing the experience of Chile is relevant because the lessons learnt can be applied to other countries which have adopted the same model. In addition it illustrates that the power industry can work reasonably well under a “regulated” competition framework, different from the de-regulation model currently being discussed in other countries.
    Date: 2006
  4. By: Maurer, Luiz; Bogetic, Zeljko; Kessides, Ioannis N.
    Abstract: One of the contentious issues in electricity reform is whether there are significant gains from restructuring systems that are moderately well run. South Africa ' s electricity system is a case in point. The sector ' s state-owned utility, Eskom, has been generating some of the lowest-priced electricity in the world, has largely achieved revenue adequacy, and has financed the bulk of the government ' s ambitious electrification program. Moreover, the key technical performance indicators of Eskom ' s generation plants have reached world-class levels. Yet the sector is confronted today with serious challenges. South Africa ' s electricity system is currently facing a tight demand/supply balance, and the distribution segment of the industry is in serious financial trouble. This paper provides a careful diagnostic assessment of the industry and identifies a range of policy and restructuring options to improve its performance. It suggests removing distribution from municipal control and privatizing it, calls for vertical and horizontal unbundling, and argues that the cost-benefit analysis of different structural options should focus on investment incentives and not just current operating efficiency.
    Keywords: Energy Production and Transportation,Electric Power,Environment and Energy Efficiency,Energy and Environment,Infrastructure Economics
    Date: 2007–04–01
  5. By: Viviana Fernández
    Abstract: In this article, we forecast crude oil and natural gas spot prices at a daily frequency based on two classification techniques: artificial neural networks (ANN) and support vector machines (SVM). As a benchmark, we utilize an autoregressive integrated moving average (ARIMA) specification. We evaluate out-of-sample forecast based on encompassing tests and mean-squared prediction error (MSPE). We find that at short-time horizons (e.g., 2-4 days), ARIMA tends to outperform both ANN and SVM. However, at longer-time horizons (e.g., 10-20 days), we find that in general ARIMA is encompassed by these two methods, and linear combinations of ANN and SVM forecasts are more accurate than the corresponding individual forecasts. Based on MSPE calculations, we reach similar conclusions: the two classification methods under consideration outperform ARIMA at longer time horizons.
    Date: 2006
  6. By: Paavo Suni
    Abstract: Russia has greatly benefited both from exporting more energy commodities in volume terms and from the improvement of it’s terms of trade due to the rise in oil and other commodity prices in the 2000’s. To study the impacts, the counterfactual simulation for the years 2001-2006 and the “usual” oil price rise simulations for the future were made. According to the counterfactual simulations, the role of oil has been a key driver in the recent Russian economic development in the 2000’s. The average GDP growth in 2001-6 would have been around 4 per cent, around 2.5 percentage points lower than in the actual case. The effect was strongest in the last years of the period bringing the growth even below one per cent in 2006 instead of more than 6 per cent. The strong effect is due to large and rising price difference between the actual and counterfactual oil prices especially in the years 2003-6, which would have meant pronouncedly smaller oil income into the economy than actually took place. In the other simulations, the effects of the permanent 20 USD price rise to the baseline was compared. The economy reacted initially strongly to the shocks with e.g. raising GDP growth and current account strongly. The effect was, however, quickly vanishing after the rise. The temporary end of the current commodity boom would cause serious difficulties in the Russian eco-nomic development as the fuel for the engine would dry. The more robust growth would necessitate drastic changes in the economic structure from resource based economy towards more normal economic structure. Given the short and rather undeveloped Russia time series and from this reason also rather undeveloped models, the results contain large uncertainty. However, simulations provide one useful benchmark on the size of the effects of the energy price rise on the Russian economy.
    Keywords: Russian economy, simulation, oil price
    JEL: Q32 Q43 F47
    Date: 2007–04–18
  7. By: Daniel Berkowitz; Yadviga Semikolenova
    Abstract: Governments that privatize state industries often retain control over key distribution assets. While there are many examples of this form of partial privatization, to our knowledge there are no substantial quantitative studies of how governments use their control under these circumstances. In this paper we argue that the Russian government privatization of the oil sector during 1994-2003 is a useful case study because the federal government privatized oil production but retained monopoly control rights over the transport of crude onto world markets. Based on a simple analysis of the costs and benefits of control and ownership, we argue that that in these circumstances the federal government would use its control over transport capacity to provide privileged access to those companies over which it has influence. We find that in 2003 this is indeed the case and that this system detracted from economic efficiency. In particular, private and regionally owned companies had to be much more productive than companies over which the federal government (the state) had influence to receive comparable access to world markets; state-influence companies had preferential access to routes with more capacity; and, the allocation of route capacity was sensitive to transport costs only in the state-influence sector.
    Keywords: control, ownership, oil pipeline, Tobit
    JEL: K23 L5 P20
    Date: 2006–02–01
  8. By: Balázs Égert; Carol S. Leonard
    Abstract: In this paper we explore the evidence that would establish that Dutch disease is at work in, or poses a threat to, the Kazakh economy. Assessing the mechanism by which fluctuations in the price of oil can damage non-oil manufacturing—and thus long-term growth prospects in an economy that relies heavily on oil production—we find that non-oil manufacturing has so far been spared the perverse effects of oil price increases from 1996 to 2005. The real exchange rate in the open sector has appreciated over the last couple of years, largely due to the appreciation of the nominal exchange rate. We analyze to what extent this appreciation is linked to movements in oil prices and oil revenues. Econometric evidence from the monetary model of the exchange rate and a variety of real exchange rate models show that the rise in the price of oil and in oil revenues might be linked to an appreciation of the U.S. dollar exchange rate of the oil and non-oil sectors. But appreciation is mainly limited to the real effective exchange rate for oil sector and is statistically insignificant for non-oil manufacturing.
    Keywords: Dutch Disease, Kazakhstan, real exchange rate
    JEL: F31 F36 O11
    Date: 2007–03–01
  9. By: CHAKRAVORTY, Ujjayant; MOREAUX, Michel; TIDBALL, Mabel
    JEL: Q12 Q32 Q41
    Date: 2006–09
  10. By: Murray C. Kemp; Ngo Van Long
    Abstract: Oil companies often announce revised estimates of their reserves. This indicates that stock uncertainty is a prevalent feature of natural resource industries. In this paper we consider the multi-deposit case where resource extraction produces information about the size of reserves. We show that the optimal order of extracting resource deposits depends both on the informational characteristics of the extraction process and on the extraction costs. Differences in extraction costs, a key consideration highlighted in Solow and Wan (1976), must be balanced against the relative value of information generated by the extraction of various deposits. Our model supplies an explanation of why high cost deposits are sometimes extracted when lower cost deposits have not been exhausted. <P>Les compagnies pétrolières révisent souvent les chiffres de leurs réserves, ce qui indique que l’incertitude concernant les stocks est prévalente. Nous considérons le cas où l’extraction donne des informations sur la taille des réserves. Nous prouvons que l’ordre optimal d’exploitation des stocks dépend des propriétés du processus d’extraction concernant la révélation d’information et des coûts. La différence des coûts, qui est une considération importante dans Solow and Wan (1976), doit être balancée contre la valeur informative des réserves. Notre modèle fournit une explication du fait que les réserves plus coûteuses sont parfois exploitées avant l’épuisement des réserves moins coûteuses.
    Keywords: order of extraction, value of information, uncertainty, ordre d’extraction, valeur de l’information, incertitude
    JEL: Q30
    Date: 2007–04–01
  11. By: DE VILLEMEUR, Etienne
    JEL: L93 L51
    Date: 2007
  12. By: David Bonilla (Department of Land Economy, University of Cambridge, UK); Tim Foxon (Department of Land Economy, University of Cambridge, UK)
    Abstract: Over the past 30 years, governments have sought to stimulate improvements in new car fuel economy to contribute to air quality, energy security and climate change goals. We analyse the demand for new car fuel economy in the UK using a two-stage econometric model to investigate the drivers of this demand in the short and long run over the period 1970-2004.We find that higher incomes and long run price changes are the main drivers to achieve improvements in fuel economy particularly for gasoline cars; and that new car fuel economy changes were scarcely induced by the Voluntary Agreement on CO2 emissions reductions adopted in the 1990s. We find that the demand for fuel economy is price inelastic for both fuels, in agreement with other studies. Our calculated long run income elasticity (gasoline with -0.31 and diesel fuels with -0.20) values are above the range of international studies for gasoline but within the range for diesel.
    Keywords: fuel economy policy and standards; energy policy; energy demand; resource conservation; transport policy.
    JEL: Q2 Q4 R4
    Date: 2007
  13. By: Damien Verry (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat])
    Abstract: L'attractivité d'un territoire est de plus en plus évaluée à l'aune de critère environnementaux. L'objet de cet article est de proposer une méthodologie permettant de comparer les émissions de polluants et les consommations énergétiques liés aux déplacements urbains de quatre agglomérations françaises. Le but est notamment de relier de manière quantitative les pratiques de mobilité, différentes entre les agglomérations, aux émissions de CO2 par individus et par km. Quatre Diagnostics Energies Environnements Déplacements (DEED) sont réalisés à partir d'enquêtes décrivant la mobilité de plus de 60 000 individus interrogés sur leurs déplacements de la veille. Les résultats obtenus suggèrent qu'il est nécessaire de prendre en compte simultanément les différences d'émissions entre les agglomérations mais aussi à l'intérieur de celles ci.
    Keywords: Mobilité urbaine ; émissions de CO2 ; Enquêtes Ménages Déplacements ; DEED
    Date: 2007–04–16
  14. By: Ryan Kellogg (University of California, Berkeley); Hendrik Wolff (University of California, Berkeley and IZA)
    Abstract: Several countries are considering extending Daylight Saving Time (DST) in order to conserve energy, and the U.S. will extend DST by one month beginning in 2007. However, projections that these extensions will reduce electricity consumption rely on extrapolations and simulations rather than empirical evidence. This paper, in contrast, examines a quasiexperiment in which parts of Australia extended DST in 2000 to facilitate the Sydney Olympics. Using detailed panel data and a triple differences specification, we show that the extension did not conserve electricity, and that a prominent simulation model overstates electricity savings when it is applied to Australia.
    Keywords: public economics, daylight saving time, energy
    JEL: Q48 C21
    Date: 2007–03
  15. By: Edelstein, Paul; Kilian, Lutz
    Abstract: In the absence of a major disruption in spending by consumers and firms, the effects of energy price shocks on the economy will be small. In this paper, we quantify the direct effect on real consumption of (1) unanticipated changes in discretionary income, (2) shifts in precautionary savings, and (3) changes in the operating cost of energy-using durables. We also evaluate the evidence for asymmetries in the response of real consumption that would be expected, for example, if shifting expenditure patterns cause sectoral reallocations. While we do find evidence of changing expenditure patterns based on a detailed analysis of more than 130 expenditure items, there is no compelling evidence for an allocative effect on consumer spending, aggregate unemployment, or consumer expectations. The absence of such an effect, despite a comparatively large effect of energy price shocks on the consumption of new domestically produced automobiles, is consistent with the small share of the U.S. auto industry in domestic real GDP and employment. It is also consistent with the symmetric behavior of real consumption in 1979 (when energy prices rose sharply) and in 1986 (when they fell equally sharply). This finding has important implications for theoretical models of the transmission of energy price shocks. Our analysis also sheds light on the declining importance of energy price shocks for the U.S. economy. We not only document the extent to which consumption aggregates have become less responsive to energy price shocks since the mid-1980s, but we trace the declining importance of energy price shocks relative to the 1970s to changes in the composition of U.S. automobile production and the declining overall importance of the U.S. automobile sector.
    Keywords: asymmetry; consumer sentiment; consumption; energy prices; price elasticity of energy demand; purchasing power
    JEL: E21 Q43
    Date: 2007–04
  16. By: Adrian Smith (SPRU, University of Sussex)
    Keywords: multi-level governance, renewable energy, English regions
    JEL: O30 Q20
    Date: 2007–04–13
  17. By: Subhash C. Ray (University of Connecticut); Kankana Mukherjee (Worcester Polytechnic Institute)
    Abstract: Using the directional distance function we study a cross section of 110 countries to examine the efficiency of management of the tradeoffs between pollution and income. The DEA model is reformulated to permit 'reverse disposability' of the bad output. Further, we interpret the optimal solution of the multiplier form of the DEA model as an iso-inefficiency line. This permits us to measure the shadow cost of the bad output for a country that is in the interior, rather than on the frontier of the production possibilities set. We also compare the relative environmental performance of countries in terms of emission intensity adjusted for technical efficiency. Only 10% of the countries are found to be on the frontier. Also, there is considerable inter-country variation in the imputed opportunity cost of CO2 reduction. Further, differences in technical efficiency contribute substantially to differences in the observed levels of CO2 intensity.
    Keywords: Data Envelopment Analysis, directional distance function, pollution- income tradeoff, shadow price.
    Date: 2007–04
  18. By: Cuesta, Rafael A. (Departamento de Economía, Universidad de Oviedo, E-33071, Oviedo, Spain.); Knox Lovell, C.A. (Department of Economics, Terry College of Business, University of Georgia, Athens, GA 30602, USA); Zofío, José Luis (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: We use a flexible parametric hyperbolic distance function to estimate environmental efficiency when some outputs are undesirable. Cuesta and Zofio (J. Prod. Analysis (2005), 31-48) introduced this distance function specification in conventional input-output space to estimate technical efficiency within a stochastic frontier context. We extend their approach to accommodate undesirable outputs and to estimate environmental efficiency within a stochastic frontier context. This provides a parametric counterpart to Färe et al.’s popular nonparametric environmental efficiency measures (Rev. Econ. Stat. 75 (1989), 90-98). The distance function model is applied to a panel of U.S. electricity generating units that produce marketed electricity and non-marketed SO2 emissions.
    Keywords: Undesirable outputs; parametric distance functions; stochastic frontier analysis; environmental efficiency
    JEL: C32 L95
    Date: 2007–03
  19. By: Kenji Fujiwara (School of Economics, Kwansei Gakuin University); Norimichi Matsueda (School of Economics, Kwansei Gakuin University)
    Abstract: This paper looks into potential determinants of the mode of international competition in a polluting good market by analyzing a so-called timing game between two environmentally concerned governments. From the equilibrium results of our intergovernmental game based on an international duopoly model with transboundary stock pollution, we show how an exact form of international competition depends on the magnitudes of international transportation coefficients of pollutant emissions and decay rates of pollutant stocks in respective countries as well as on other environmental and economic variables.
    Keywords: international duopoly, transboundary pollution, stock pollution, gains from trade, endogenous timing.
    JEL: F10 F12 Q20
    Date: 2007–04
  20. By: Kenji Fujiwara (School of Economics, Kwansei Gakuin University); Norimichi Matsueda (School of Economics, Kwansei Gakuin University)
    Abstract: This paper examines how the opening of trade affects a countryfs welfare in the context of an international polluting duopoly model with transboundary stock pollution. In this framework, we show that trade liberalization can have quite different welfare implications, depending on the mode of international competition and the magnitudes of international transportation coefficients of pollutant emissions and decay rates of pollutant stocks in respective countries, as well as on the values of other environmental and economic variables.
    Keywords: gains from trade, international duopoly, Cournot-Nash competition, Stackelberg competition, transboundary stock pollution.
    JEL: F10 F12 Q20
    Date: 2007–04
  21. By: Kenji Fujiwara (School of Economics, Kwansei Gakuin University); Norimichi Matsueda (School of Economics, Kwansei Gakuin University)
    Abstract: This paper looks into potential determinants of the mode of international competition in a polluting good market by analyzing a strategic interaction between two environmentally concerned governments. From the equilibrium outcomes of our game based on an international duopoly model with transboundary pollution, we show how a resulting form of international competition can be influenced by, among other things, the magnitudes of the marginal damage cost and transboundary impact of pollution and also the degree of similarity between the two nations in these aspects.
    Keywords: international duopoly, transboundary pollution, gains from trade.
    JEL: F10 F12 Q20
    Date: 2007–04
  22. By: LAFFORGUE, Gilles; MAGNE, Bertrand; MOREAUX, Michel
    Date: 2007–01
  23. By: Warwick McKibbin
    Date: 2007–03

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