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on Energy Economics |
| By: | Richard Green |
| Abstract: | Volatile fuel prices affect both the cost and price of electricity in a liberalised market. Generators with the price-setting technology will face less risk to their profit margins than those with a technology that is not price-setting, even if its costs are not volatile. Emissions permit prices may respond to relative fuel prices, further increasing volatility. This paper simulates the impact of this on generators' profits, comparing an emissions trading scheme and a carbon tax against predictions for the UK in 2020. The carbon tax reduces the volatility faced by nuclear generators, but raises that faced by fossil fuel stations. Optimal portfolios would contain a higher proportion of nuclear plant if a carbon tax was adopted |
| Keywords: | Electricity, emissions trading, emissions taxes, fuel price risk |
| JEL: | L94 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:07-02&r=ene |
| By: | Noureddine Krichene |
| Abstract: | Crude oil prices have been on a run-up spree in recent years. Their dynamics were characterized by high volatility, high intensity jumps, and strong upward drift, indicating that oil markets were constantly out-of-equilibrium. An explanation of the oil price process in terms of the underlying fundamentals of oil markets and world economy was provided, viewing pressure on oil prices mainly as a result of rigid crude oil supply and an expanding world demand for crude oil. A change in the oil price process parameters would require a change in the underlying fundamentals. Market expectations, extracted from call and put option prices, anticipated no change, in the short term, in the underlying fundamentals. Markets expected oil prices to remain volatile and jumpy, and with higher probabilities, to rise, rather than fall, above the expected mean. |
| Keywords: | Characteristic function , crude oil , cumulants , drift , Fourier inversion , jump-diffusion , kurtosis , option pricing , skewness , variance-gamma distribution , volatility , Oil prices , Economic models , |
| Date: | 2007–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/299&r=ene |
| By: | Reik H. Boerger; Alvaro Cartea (School of Economics, Mathematics & Statistics, Birkbeck); Ruediger Kiesel; Gero Schindlmayr |
| Abstract: | The understanding of joint asset return distributions is an important ingredient for managing risks of portfolios. While this is a well-discussed issue in fixed income and equity markets, it is a challenge for energy commodities. In this paper we are concerned with describing the joint return distribution of energy related commodities futures, namely power, oil, gas, coal and carbon. The objective of the paper is threefold. First, we conduct a careful analysis of empirical returns and show how the class of multivariate generalized hyperbolic distributions performs in this context. Second, we present how risk measures can be computed for commodity portfolios based on generalized hyperbolic assumptions. And finally, we discuss the implications of our findings for risk management analyzing the epxosure of power plants which represent typical energy portfolios. Our main findings are that risk estimates based on a normal distribution in the context of energy commodities can be statistically improved using generalized hyperbolic distributions. Those distributions are flexible enough to incorporate many characteristics of commodity returns and yield more accurate risk estimates. Our analysis of the market suggests that carbon allowances can be a helpful tool for controlling the risk exposure of a typical energy portfolio representing a power plant. |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:0709&r=ene |
| By: | George Milunovich (Department of Economics, Macquarie University); Roselyne Joyeux (Department of Economics, Macquarie University) |
| Abstract: | We examine the issues of market efficiency and price discovery in the European Union carbon futures market. Our findings suggest that none of the carbon futures contracts examined here are priced according to the cost-of-carry model, although two of the three futures contracts studied here form a stable long-run relationship with the spot price, and hence act as adequate risk mitigation instruments. We apply a new testing procedure and find weak evidence of convenience yield in the market for carbon allowances. In terms of price discovery, it appears that the spot and futures markets share information efficiently and contribute to price discovery jointly. Similar to the information diffusion pattern found in returns, we report some evidence of bi-directional volatility transfers between the spot and various futures contracts. |
| Keywords: | Carbon-dioxide allowances, futures, cost-of-carry, price discovery, market efficiency, cointegration, granger causality, volatility spillover, global warming. |
| JEL: | C32 G13 G14 C32 Q25 Q40 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:mac:wpaper:0701&r=ene |
| By: | Catherine Locatelli (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II]) |
| Abstract: | Les échanges gaziers entre la Russie et l'Union européenne suscitent des interrogations. Avec ses immenses réserves, ce pays devrait rester un fournisseur majeur de l'Europe. Le développement de stratégies d'exportation vers l'Asie et les États-Unis devrait aussi s'affirmer comme une variable clé de la politique gazière de la Russie. |
| Keywords: | INDUSTRIE GAZIERE ; EXPORTATIONS ; RUSSIE |
| Date: | 2007–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00142203_v1&r=ene |
| By: | Patrick Criqui (LEPII - Laboratoire d'économie de la prospective et de l'intégration internationale - [CNRS : UMR5252] - [Université Pierre Mendès-France - Grenoble II]); Philippe Menanteau (LEPII - Laboratoire d'économie de la prospective et de l'intégration internationale - [CNRS : UMR5252] - [Université Pierre Mendès-France - Grenoble II]) |
| Abstract: | Le pétrole et le gaz naturel se font de plus en plus rares. Les énergies émettrices de CO2 sont de plus en plus surveillées. Les énergies renouvelables sont de plus en plus attendues. Face à cette nouvelle donne, le secteur de l'énergie évolue rapidement. Déjà, certains grands groupes réorientent ou diversifient leur activité. Quels choix faut-il faire pour les technologies énergétiques de demain ? |
| Keywords: | ENERGIE RENOUVELABLE ; TECHNOLOGIE ; ENERGIE ; CRITERE DE CHOIX |
| Date: | 2007–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00143292_v1&r=ene |
| By: | Dorothée Boccanfuso (GREDI, Faculte d'administration, Université de Sherbrooke); Antonio Estache (World Bank and, the European Centre for Advanced Research in Economics and Statistics at the Free University of Brussels); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke) |
| Abstract: | This paper uses a computable general equilibrium (CGE) microsimulation model to explore the distributional and poverty-related effects of price reform in the electricity sector of Mali, a poor country in West Africa. In the first part of the paper we analyze the distribution of electricity in Mali by income deciles, showing that few poor households are connected to the electricity grid. We then apply a sequential CGE microsimulation model to track the transmission mechanisms between increases in electricity prices and changes in poverty and inequality among different household groups. Our results show that direct price increases have a minimal effect on poverty and inequality, whereas the general equilibrium effects of such increases are quite strong and negative. The compensating policies we tested do not help those who lose from the pricing reform. In fact they amplify the negative effects |
| Keywords: | computable general equilibrium model, micro-simulation, poverty analysis, income distribution, privatization, water utilities |
| JEL: | D58 D31 I32 L33 L93 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:07-10&r=ene |
| By: | Daniel Leigh; Stéphane Carcillo; Mauricio Villafuerte |
| Abstract: | In a number of oil producing countries, oil revenue accounts for the majority of government revenue, but is expected to be depleted in a relatively short time frame. Ensuring that fiscal policy is on a sustainable path is thus a high priority, but political and social adjustment costs create incentives to delay fiscal consolidation. This paper estimates how the permanently sustainable non-oil primary deficit (PSNOPD) depends on the speed of consolidation, using an optimization model with habit formation. Realism is added by allowing for negative growth-adjusted interest rates during a temporary period of catch-up growth. Applied to the Republic of Congo, this approach leads to the following conclusions: (i) the current fiscalpolicy stance is unsustainable; (ii) social adjustment costs justify spreading the bulk of the adjustment over five years; and (iii) the slower the adjustment, the lower the PSNOPD level. |
| Keywords: | Sustainable fiscal policy , habit formation , permanent-income hypothesis , catch-up growth , oil , Republic of Congo , |
| Date: | 2007–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/80&r=ene |
| By: | David Coady; Amine Mati; Taimur Baig; Joseph Ntamatungiro |
| Abstract: | The paper reviews recent developments in the pass-through of international to domestic petroleum product prices, in the different fuel pricing regimes, and in fuel subsidies in a range of emerging market and developing economies. The main finding of the paper is the limited price pass-through in many countries and the consequent increase in fuel subsidies. The paper proposes that key elements of a successful strategy to contain subsidies should comprise: making subsidies explicit; making pricing mechanisms more robust; combining reductions in subsidies with measures to protect the poorest; using the resulting savings well, and transparency and consultation. |
| Keywords: | Fiscal policy , petroleum , subsidies , |
| Date: | 2007–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/71&r=ene |
| By: | Sheri Markose; Amadeo Alentorn; Deddy Koesrindartoto; Peter Allen; Phil Blythe; Sergio Grosso |
| Abstract: | To control and price negative externalities in passenger road transport, we develop an innovative and integrated computational agent based economics (ACE) model to simulate a market oriented "cap" and trade system. (i) First, there is a computational assessment of a digitized road network model of the real world congestion hot spot to determine the "cap" of the system in terms of vehicle volumes at which traffic efficiency deteriorates and the environmental externalities take off exponentially. (ii) Road users submit bids with the market clearing price at the fixed "cap" supply of travel slots in a given time slice (peak hour) being determined by an electronic sealed bid uniform price Dutch auction. (iii) Cross-sectional demand data on car users who traverse the cordon area is used to model and calibrate the heterogeneous bid submission behaviour in order to construct the inverse demand function and demand elasticities. (iv) The willingness to pay approach with heterogeneous value of time is contrasted with the generalized cost approach to pricing congestion with homogeneous value of travel time. |
| Date: | 2007–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:630&r=ene |