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on Energy Economics |
| By: | John C. V. Pezzey (Australian National University,Centre for Resource and Environmental Studies); Frank Jotzo (Australian National University, Research School of Pacific and Asian Studies); John Quiggen (University of Queensland, School of Economics and Political Science) |
| Abstract: | Effective climate policy requires global emissions of greenhouse gases to be cut substantially, which can be achieved by energy supply technologies with lower emissions, greater energy use efficiency, and substitution in demand. For policy to be efficient requires fairly uniform, fairly pervasive emission pricing from taxes, permit trading, or combinations of the two, as well as significant government support for low-emission technologies. We compare the technology-focused climate policies adopted by Australia and the 'Asia-Pacific Partnership on Clean Development and Climate' (AP6), against this ideal policy yardstick. We find that such policies omit the need for emission pricing to achieve abatement effectively and efficiently; they over-prescribe which abatement actions should be used most; they make unrealistic assumptions about how much progress can be achieved by voluntarism and cooperation, in the absence of either adequate funding or mandatory policies; and they unjustifiably contrast technology-focused policy and the Kyoto Protocol approach as the only two policies worth considering, and thus ignore important combined policy options. |
| Keywords: | climate policy, greenhouse gas emissions, abatement, emission taxes, emissions trading, technology policy, innovation, Asia-Pacific Partnership, AP6 |
| JEL: | Q00 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:anu:eenwps:0611&r=ene |
| By: | Frank Jotzo (Australian National University, Research School of Pacific and Asian Studies) |
| Abstract: | What is the magnitude of uncertainties about future greenhouse gas emissions, GDP and emissions intensity of economies? Is there a link between fluctuations in economic activity and fluctuations in emissions? These questions are crucial to understand the extent and composition of cost uncertainty under emissions trading schemes, the degree to which it can be reduced by mechanism design options such asintensity targets, and for calibrating models of emissions trading under uncertainty.This paper provides empirical analyses, using historical emissions data in forecast models and in country-level analysis over time. The results indicate that uncertainty about future energy sector CO2 emissions and emissions intensity is greater than uncertainty about future GDP; that uncertainties are greater in non-OECD than in OECD countries; and that there is a strong positive correlation between fluctuations in GDP and fluctuations in CO2 emissions, but not in all cases and not outside the energy sector. |
| Keywords: | Uncertainty; greenhouse gas emissions; GDP; emissions intensity; intensity targets; forecasting.; Uncertainty; greenhouse gas emissions; GDP; emissions intensity; intensity |
| JEL: | Q00 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:anu:eenwps:0603&r=ene |
| By: | Xingjun Zhao (Department of International Economics and Trade, Nankai University, PR China); Yanrui Wu (UWA Business School, The University of Western Australia) |
| Abstract: | Sustained economic growth in China has triggered a surge of energy imports, especially oil imports. This paper investigates the determinants of China’s energy import demand by using cointegraiton and VECM techniques. The findings suggest that, in the long run, growth of industrial production and expansion of transport sectors affect China’s oil imports, while domestic energy output has a substitution effect. Thus, as the Chinese economy industrializes and the automotive sector expands, China’s oil imports are likely to increase. Though China’s domestic oil production has a substitution effect on imports, its growth is limited due to scarce domestic reserve and high exploration costs. It is anticipated that China will be more dependent on overseas oil supply regardless of the world oil price. |
| Keywords: | Energy consumption, energy imports, China and VECM |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:uwa:wpaper:07-03&r=ene |
| By: | Rao, B. Bhaskara; Rao, Gyaneshwar |
| Abstract: | This paper examines how energy-output ratios in Fiji have responded to the energy crises and in particular if they have declined after the shocks. The expectation is that energy efficiency should improve after the oil shocks. For this purpose we used at first a few simpler procedures and then the recently developed tests for structural breaks by Bai and Perron (1998 and 2003). |
| Keywords: | Energy Output Ratios; Energy efficiency; Structural Breaks; Deterministic and Stochastic trends and Bai and Perron tests. |
| JEL: | C50 C53 C52 C51 Q49 Q40 |
| Date: | 2007–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3258&r=ene |
| By: | Nicola Cantore (Alma Mater Studiorum University of Bologna); Emilio Padilla (Universidad Autónoma de Barcelona) |
| Abstract: | Emissions distribution is a focus variable for the design of future international agreements to tackle global warming. This paper specifically analyses the future path of emissions distribution and its determinants in different scenarios. Whereas our analysis is driven by tools which are typically applied in the income distribution literature and which have recently been applied to the analysis of CO2 emissions distribution, a new methodological approach is that our study is driven by simulations run with a popular regionalised optimal growth climate change model over the 1995-2105 period. We find that the architecture of environmental policies, the implementation of flexible mechanisms and income concentration are key determinants of emissions distribution over time. In particular we find a robust positive relationship between measures of inequalities in the distribution of emissions and income and that their magnitude will essentially depend on technological change. |
| Keywords: | Integrated assessment, Inequality, Emissions distribution |
| JEL: | D58 D63 O13 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:bag:deiawp:7001&r=ene |
| By: | Luca Tacconi (Australian National University, Crawford School of Economics and Government); Frank Jotzo (Australian National University, Research School of Pacific and Asian Studies); R. Quentin Grafton (Australian National University, Crawford School of Economics and Government) |
| Abstract: | Lack of action on cross-border environmental problems in developing countries is often ascribed to gaps in local capacity and resources, failure of regional cooperation, and lack of financial support from rich countries. Using the case of the Southeast Asian Haze pollution from forest and peat fires in Indonesia, we explore the challenges posed by environmental problems whose causes are closely linked to local development and livelihood strategies, and whose impacts are local, regional (haze) as well as global (carbon emissions). We assess whether there are real opportunities to implement effectively the recent Association of Southeast Asian Nations (ASEAN) Agreement on Transboundary Haze Pollution. To address the deep determinants behind haze pollution, we propose signatories to the Agreement refocus their efforts to controlling peat fires rather than strive for a zero-burning regime. We also recommend a new approach to financing sustainable development based on rules and incentives, with a regional pool of funds, contributed by rich countries through the Global Environment Facility and countries in Southeast Asia. |
| Keywords: | ASEAN, climate change, fires, GEF, haze pollution, regional agreements |
| JEL: | Q54 O20 C60 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:anu:eenwps:0613&r=ene |
| By: | John C. V. Pezzey (Australian National University,Centre for Resource and Environmental Studies); Frank Jotzo (Australian National University, Research School of Pacific and Asian Studies) |
| Abstract: | We give theoretical, partial equilibrium comparisons of a tax with thresholds, tradable targets ('emissions trading' or ET), and non-tradable targets, as mechanisms to abate well-mixed ('global') emissions from many parties, under independent uncertainties in both future business-as-usual emissions and marginal abatement costs. All three mechanisms are revenue-neutral, and use flexible thresholds or targets indexed continuously to parties' activity levels. We analyse both risk-neutral or risk-averse behaviour. Key theoretical results are that because of emissions uncertainty, there is no simple Weitzman (1974) rule for choosing between 'prices' (a tax) to 'quantities' (ET); under ET, marginal abatement cost uncertainty is a benefit, compared to certainty; and under risk aversion, any mechanism with more expected welfare also gives more expected abatement. We apply our theory to global greenhouse gas abatement in 2020, using an 18-region numerical simulation model with new uncertainty estimates. Key global, empirical results are that under either risk behaviour, a tax dominates ET, which hugely dominates non-tradable targets; and under risk aversion, an optimally indexed tax gives about 60% more welfare and 30% more abatement than unindexed ET, while optimally indexed ET achieves about two-fifths of these improvements. |
| Keywords: | emissions trading, global abatement, greenhouse gases, risk aversion, tax, uncertainty |
| JEL: | D81 H23 Q54 Q58 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:anu:eenwps:0604&r=ene |
| By: | Frank Jotzo (Australian National University, Research School of Pacific and Asian Studies); John C. V. Pezzey (Australian National University,Centre for Resource and Environmental Studies) |
| Abstract: | Uncertainty is an obstacle for commitments under cap and trade schemes. We assess how well intensity targets, where countries' permit allocations are indexed to future realised GDP, can cope with uncertainties in international greenhouse emissions trading. We present some empirical foundations for intensity targets and derive a simple rule for the optimal degree of indexation to GDP. Using an 18-region simulation model of a cooperative, global cap-and-trade treaty in 2020 under multiple uncertainties and endogenous commitments, we show that optimal intensity targets could reduce the cost of uncertainty and achieve significant increases in global abatement. The optimal degree of indexation to GDP would vary greatly between countries, including super-indexation in some advanced countries, and partial indexation for most developing countries. Standard intensity targets (with one-to-one indexation) would also improve the overall outcome, but to a lesser degree and not in all individual cases. Although target indexation is no magic wand for a future global climate treaty, gains from reduced cost uncertainty and the potential for more stringent environmental commitments might justify the increased complexity and other potential downsides of intensity targets. |
| Keywords: | climate policy, emissions trading, uncertainty, flexible targets, intensity targets, optimality, simulation modelling |
| JEL: | Q00 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:anu:eenwps:0605&r=ene |
| By: | Bukhari, Syed Adnan Haider Ali Shah; Ali, Liaquat |
| Abstract: | In present study complete decomposition model employed to decompose the changes in energy consumption and energy strength in Pakistan during 1960 to 1998. A general decomposition model raises a problem due to residual term. In some models the residual term is omitted that cause a large estimation error, while in some models the residual term is regarded as an interaction that might create a puzzle for the analysis. A complete decomposition model used here to solve this problem. |
| Keywords: | complete decomposition model; energy consumption; energy strength and residual term |
| JEL: | L60 O21 |
| Date: | 2007–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3204&r=ene |
| By: | Glachant, J.M.; Saguan, M. |
| Abstract: | The so-called “electricity wholesale market” is, in fact, a sequence of several markets. The chain is closed with a provision for “balancing,” in which energy from all wholesale markets is balanced under the authority of the Transmission Grid Manager (TSO in Europe, ISO in the United States). In selecting the market design, engineers in the European Union have traditionally preferred the technical role of balancing mechanisms as “security mechanisms.” They favour using penalties to restrict the use of balancing energy by market actors. While our paper in no way disputes the importance of grid security, nor the competency of engineers to elaborate the technical rules, we wish to attract attention to the real economic consequences of alternative balancing designs. We propose a numerical simulation in the framework of a two-stage equilibrium model. This simulation allows us to compare the economic properties of designs currently existing within the European Union and to measure their fallout. It reveals that balancing designs, which are typically presented as simple variants on technical security, are in actuality alternative institutional frameworks having at least four potential economic consequences: a distortion of the forward price; an asymmetric shift in the participants’ profits; an increase in the System Operator’s revenues; and inefficiencies. |
| Keywords: | Electricity Forward Market, Balancing Mechanism, Risk Aversion, Penalty, Institutional Frame, Market Design. |
| JEL: | D8 D23 L51 L94 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0724&r=ene |
| By: | Tokgoz, Simla; Elobeid, Amani; Fabiosa, Jacinto F.; Hayes, Dermot J.; Babcock, Bruce A.; Yu, Tun-Hsiang (Edward); Dong, Fengxia; Hart, Chad E.; Beghin, John C. |
| Abstract: | Projections of U.S. ethanol production and its impacts on planted acreage, crop prices, livestock production and prices, trade, and retail food costs are presented under the assumption that current tax credits and trade policies are maintained. The projections were made using a multi-product, multi-country deterministic partial equilibrium model. The impacts of higher oil prices, a drought combined with an ethanol mandate, and removal of land from the Conservation Reserve Program (CRP) relative to baseline projections are also presented. The results indicate that expanded U.S. ethanol production will cause long-run crop prices to increase. In response to higher feed costs, livestock farmgate prices will increase enough to cover the feed cost increases. Retail meat, egg, and dairy prices will also increase. If oil prices are permanently $10-per-barrel higher than assumed in the baseline projections, U.S. ethanol will expand significantly. The magnitude of the expansion will depend on the future makeup of the U.S. automobile fleet. If sufficient demand for E-85 from flex-fuel vehicles is available, corn-based ethanol production is projected to increase to over 30 billion gallons per year with the higher oil prices. The direct effect of higher feed costs is that U.S. food prices would increase by a minimum of 1.1% over baseline levels. Results of a model of a 1988-type drought combined with a large mandate for continued ethanol production show sharply higher crop prices, a drop in livestock production, and higher food prices. Corn exports would drop significantly, and feed costs would rise. Wheat feed use would rise sharply. Taking additional land out of the CRP would lower crop prices in the short run. But because long-run corn prices are determined by ethanol prices and not by corn acreage, the long-run impacts on commodity prices and food prices of a smaller CRP are modest. Cellulosic ethanol from switchgrass and biodiesel from soybeans do not become economically viable in the Corn Belt under any of the scenarios. This is so because high energy costs that increase the prices of biodiesel and switchgrass ethanol also increase the price of corn-based ethanol. So long as producers can choose between soybeans for biodiesel, switchgrass for ethanol, and corn for ethanol, they will choose to grow corn. Cellulosic ethanol from corn stover does not enter into any scenario because of the high cost of collecting and transporting corn stover over the large distances required to supply a commercial-sized ethanol facility. |
| Keywords: | biofuels, corn acreage, crop prices, ethanol production, food prices. |
| Date: | 2007–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12812&r=ene |
| By: | Simla Tokgoz (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Dermot J. Hayes (Center for Agricultural and Rural Development (CARD)); Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Tun-Hsiang (Edward) Yu; Fengxia Dong (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Chad E. Hart (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | Projections of U.S. ethanol production and its impacts on planted acreage, crop prices, livestock production and prices, trade, and retail food costs are presented under the assumption that current tax credits and trade policies are maintained. The projections were made using a multi-product, multi-country deterministic partial equilibrium model. The impacts of higher oil prices, a drought combined with an ethanol mandate, and removal of land from the Conservation Reserve Program (CRP) relative to baseline projections are also presented. The results indicate that expanded U.S. ethanol production will cause long-run crop prices to increase. In response to higher feed costs, livestock farmgate prices will increase enough to cover the feed cost increases. Retail meat, egg, and dairy prices will also increase. If oil prices are permanently $10-per-barrel higher than assumed in the baseline projections, U.S. ethanol will expand significantly. The magnitude of the expansion will depend on the future makeup of the U.S. automobile fleet. If sufficient demand for E-85 from flex-fuel vehicles is available, corn-based ethanol production is projected to increase to over 30 billion gallons per year with the higher oil prices. The direct effect of higher feed costs is that U.S. food prices would increase by a minimum of 1.1% over baseline levels. Results of a model of a 1988-type drought combined with a large mandate for continued ethanol production show sharply higher crop prices, a drop in livestock production, and higher food prices. Corn exports would drop significantly, and feed costs would rise. Wheat feed use would rise sharply. Taking additional land out of the CRP would lower crop prices in the short run. But because long-run corn prices are determined by ethanol prices and not by corn acreage, the long-run impacts on commodity prices and food prices of a smaller CRP are modest. Cellulosic ethanol from switchgrass and biodiesel from soybeans do not become economically viable in the Corn Belt under any of the scenarios. This is so because high energy costs that increase the prices of biodiesel and switchgrass ethanol also increase the price of corn-based ethanol. So long as producers can choose between soybeans for biodiesel, switchgrass for ethanol, and corn for ethanol, they will choose to grow corn. Cellulosic ethanol from corn stover does not enter into any scenario because of the high cost of collecting and transporting corn stover over the large distances required to supply a commercial-sized ethanol facility. |
| Keywords: | biofuels, corn acreage, crop prices, ethanol production, food prices. |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:ias:fpaper:07-sr101&r=ene |
| By: | Vajjhala, Shalini (Resources for the Future); Gode, Jenny; Torvanger, Asbjørn |
| Abstract: | This essay was prepared as part of a workshop on carbon capture and sequestration held by the International Risk Governance Council (IRGC) in Washington, DC, from March 15–16, 2007. The goal of the workshop was to bring together researchers, practitioners, and regulators from Europe, the United States, and Australia to outline the attributes that an effective regulatory regime for carbon capture and storage should possess. This essay focuses specifically on providing an overview of eight fundamental elements that we believe any effective international and national regulatory structure must address: 1) classification of carbon dioxide (CO2); 2) oversight of CO2 capture and storage; 3) site ownership and storage rights; 4) site operation and management; 5) long-term management and liability; 6) regulatory compliance and enforcement; 7) links to CO2 markets and trading mechanisms; and 8) risk communication and public acceptance. This essay is one of 12 collected for the workshop, and the recommendations herein are the views of the authors and do not reflect the views of their agencies, the IRGC, or specific workshop discussions. |
| Keywords: | carbon sequestration, geologic storage, risk, regulation |
| JEL: | Q38 Q48 |
| Date: | 2007–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-07-13&r=ene |
| By: | Junyi Shen (OSIPP,Osaka University); Tatsuyoshi Saijo (ISER,Osaka University) |
| Abstract: | In this paper we apply hypothetical choice experiments through a field survey in Shanghai of China to examine whether China Energy Efficiency Label affects consumersf choices of air conditioner and refrigerator. A latent class approach is used to observe both heterogeneities among the respondents and product brands. The results suggest that the effect of energy efficiency label on consumersf preferences is twofold. First, more energy efficient air conditioners or refrigerators are preferred by consumers, no matter whether they are with foreign brands or domestic brands and whether they are new or second-hand. Second, energy efficiency label per se is recognized by consumers. In addition, presence of a (hypothetical) label that indicates the electricity billfs difference comparing to a standard model is significantly preferred by the respondents in most of the cases, suggesting that more information provided to consumers makes them much happier. Finally, the class probability weighted willingness to pay values for one rank upgrading in energy efficiency of refrigerator are higher than those of air conditioner, implying that consumers have an incentive to pay more for appliances used more frequently. |
| Keywords: | Energy efficiency label, Consumersf purchase decision, Latent class model, Willingness to pay, China |
| JEL: | C25 C93 D12 Q49 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:osp:wpaper:07e005&r=ene |
| By: | Johnston, A.; Amalia, A.; Neuhoff, K. |
| Abstract: | Renewables require support policies to deliver the European 20% target. We discuss the requirements for least cost development and efficient operation and quantify how different schemes (i) allow for the development of a renewable energy technology portfolio; (ii) reduce rent transfers to infra-marginal technologies or better than marginal resource bases; and (iii) minimise regulatory risk and thus capital costs for new projects. Long-term take or pay contracts minimise regulatory uncertainty, create appropriate incentives for location and operation, allow for efficient system operation and seem compatible with European state aid. We discuss how property rights legislation protects existing renewables investors, and thus can ensure ongoing investment during a transition towards the new scheme. |
| Keywords: | Renewable support policy, Property rights, Transition, Regulatory risk. |
| JEL: | L50 L94 O31 P14 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0723&r=ene |
| By: | Westerlund, Joakim; Basher, Syed A. |
| Abstract: | This paper tests the convergence in per-capita carbon dioxide emissions for a collection of developed and developing countries using data spanning the period 1870 to 2002. For this purpose, three recently developed panel unit root tests that permit for dependence among the individual countries are employed. The results lend strong support in favor of convergence for the panel as a whole. Estimates of the speed of this convergence is also provided. |
| Keywords: | Emissions convergence; Panel unit root tests; Common factors; Half-life. |
| JEL: | C32 C33 Q54 Q28 |
| Date: | 2007–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3262&r=ene |
| By: | Gillingham, Kenneth T.; Newell, Richard G.; Pizer, William A. (Resources for the Future) |
| Abstract: | The approach used to model technological change in a climate policy model is a critical determinant of its results. We provide an overview of the different approaches used in the literature, with an emphasis on recent developments regarding endogenous technological change, research and development, and learning. Detailed examination sheds light on the salient features of each approach, including strengths, limitations, and policy implications. Key issues include proper accounting for the opportunity costs of climate-related knowledge generation, treatment of knowledge spillovers and appropriability, and the empirical basis for parameterizing technological relationships. No single approach appears to dominate on all these dimensions, and different approaches may be preferred depending on the purpose of the analysis, be it positive or normative. |
| Keywords: | exogenous, technology, R&D, learning, induced |
| JEL: | Q21 Q28 Q48 O38 |
| Date: | 2007–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-07-14&r=ene |
| By: | Rimvydas Baltaduonis (University of Connecticut and George Mason University) |
| Abstract: | In my recent experimental research of wholesale electricity auctions, I discovered that the complex structure of the offers leaves a lot of room for strategic behavior, which consequently leads to anti- competitive and inefficient outcomes in the market. A specific feature of these complex-offer auctions is that the sellers submit not only the quantities and the minimum prices at which they are willing to sell, but also the start-up fees that are designed to reimburse the fixed start-up costs of the generation plants. In this paper, using the experimental method I compare the performance of two complex-offer auctions (COAs) against the performance of a simple-offer auction (SOA), in which the sellers have to recover all their generation costs --- fixed and variable ---through a uniform market-clearing price. I find that the SOA significantly reduces consumer prices and lowers price volatility. It mitigates anti-competitive effects that are present in the COAs and achieves allocative efficiency more quickly. |
| Keywords: | strategic behavior, sealed-bid auction, complex offer auction, electricity, efficiency |
| JEL: | C72 D4 D61 L94 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2007-14&r=ene |
| By: | Kwoka, J.; Pollitt, M. |
| Abstract: | This paper analyses the performance impact of the merger wave which took place in the US electricity industry during the period 1994-2003. It does so by analyzing the impact on operating and total cost in electricity distribution. While there are past studies of efficiency and productivity effects, as well as of prices, profits, and other outcomes, this study differs in several ways. First, the database consists of many merging and non-merging firms, rather than only a few on which to base inferences. Second, all of these mergers arise in a single industry, greatly facilitating controlled comparison. Third, we have data on the several years of pre-merger and post-merger efficiency of the specific merging units, unlike virtually all past studies. And finally, we employ a powerful nonparametric technique - data envelopment analysis - to measure the efficiency of each operating unit. The results indicate that electricity mergers are not consistent with improved cost performance. |
| Keywords: | mergers, efficiency analysis, electricity distribution, data envelopment analysis. |
| JEL: | L25 L43 L94 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0725&r=ene |
| By: | Frank Jotzo (Australian National University, Research School of Pacific and Asian Studies); John C. V. Pezzey (Australian National University,Centre for Resource and Environmental Studies) |
| Abstract: | A 'new Kyoto', called for by the Australian government, may well be based on cap-and-trade, but with significant changes. Under the old Kyoto, broad participation and meaningful commitments were difficult to achieve - in part because of uncertainty about compliance costs and the dichotomy between countries with targets and those without. This policy brief examines options for making greenhouse gas commitments under a 'New Kyoto' more flexible: intensity targets, sectoral targets, non-binding targets, permit price caps, and linking targets with commitments for technology development. We also touch on market-based options outside the target-based paradigm. |
| Keywords: | new Kyoto, compliance costs, greenhouse gas commitments |
| JEL: | Q00 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:anu:eenwps:0610&r=ene |
| By: | Rimvydas Baltaduonis (University of Connecticut and George Mason University) |
| Abstract: | A Payment Cost Minimization (PCM) auction has been proposed as an alternative to the Offer Cost Minimization (OCM) auction to be used in wholesale electric power markets with the intention to lower the procurement cost of electricity. Efficiency concerns about this proposal have relied on the assumption of true production cost revelation. Using an experimental approach, I compare the two auctions, strictly controlling for the level of unilateral market power. A specific feature of these complex-offer auctions is that the sellers submit not only the quantities and the minimum prices at which they are willing to sell, but also the start-up fees that are designed to reimburse the fixed start-up costs of the generation plants. I find that both auctions result in start-up fees that are significantly higher than the start-up costs. Overall, the two auctions perform similarly in terms of procurement cost and efficiency. Surprisingly, I do not find a substantial difference between less market power and more market power designs. Both designs result in similar inefficiencies and equally higher procurement costs over the competitive prediction. The PCM auction tends to have lower price volatility than the OCM auction when the market power is minimal but this property vanishes in the designs with market power. These findings lead me to conclude that both the PCM and the OCM auctions do not belong to the class of truth revealing mechanisms and do not easily elicit competitive behavior. |
| Keywords: | strategic behavior, sealed-bid auction, complex offer auction, electricity, efficiency |
| JEL: | C72 D4 D61 L94 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2007-13&r=ene |
| By: | Nick D. Paulson; Roger G. Ginder |
| Abstract: | The biodiesel industry in the United States has realized significant growth over the past decade through large increases in annual production and production capacity and a transition from smaller batch plants to larger-scale continuous producers. The larger, continuous-flow plants provide operating cost advantages over the smaller batch plants through their ability to capture co-products and reuse certain components in the production process. This paper uses a simple capital budgeting model developed by the authors along with production data supplied by industry sources to estimate production costs, return-on-investment levels, and break-even conditions for two common plant sizes (30 and 60 million gallon annual capacities) over a range of biodiesel and feedstock price levels. The analysis shows that the larger plant realizes returns to scale in both labor and capital costs, enabling the larger plant to pay up to $0.015 more per pound for the feedstock to achieve equivalent return levels as the smaller plant under the same conditions. The paper contributes to the growing literature on the biodiesel industry by using the most current conversion rates for the production technology and current price levels to estimate biodiesel production costs and potential plant performance, providing a useful follow-up to previous studies. |
| Keywords: | biodiesel, biofuels, feedstock, production costs, return on investment. |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:07-wp448&r=ene |