nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒09‒24
thirteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. A robust multivariate long run analysis of European electricity prices By Bruno Bosco; Lucia Parisio; Matteo Pelagatti; Fabio Baldi
  2. The Diculty to Behave as a (regulated) Natural Monopolist – The Dynamics of Electricity Network Access Charges in Germany 2002 to 2005 By Thomas Wein; Heike Wetzel
  3. Are We Going Toward a Coherence of the Institutional Arrangements in the Russian Oil Industry? By Sylvain Rossiaud
  4. Azerbaijan: Recent Economic Developments and Policy Issues in Sustainability of Growth By Singh, Rupinder; Laurila , Juhani
  5. Do Gasoline Prices Resond Asymmetrically to Cost Shocks? The Confounding Effect of Edgeworth Cycles By Michael Noel
  6. Une analyse néo-institutionnelle de l'ouverture de l'amont pétrolier russe aux compagnies privées. Les contraintes à l'effectivité des contrats pétroliers By Sylvain Rossiaud
  7. Economically rational expectations theory: evidence from the WTI oil price survey data By Georges Prat; Remzi Uctum
  8. Estimating global climate change impacts on hydropower projects : applications in India, Sri Lanka and Vietnam By IIMI, Atsushi
  9. Atmospheric stabilization of CO2 emissions : near-term reductions and intensity-based targets By Timilsina, Govinda R.
  10. The fundamentals of the future international emissions trading system By Loreta Stankeviciute; A. Kitous; Patrick Criqui
  11. Uncertainty, Learning and Ambiguity in Economic Models on Climate Policy: Some Classical Results and New Directions By LANGE Andreas; TREICH Nicolas
  12. Politique climatique et politique commerciale : <br />le projet français de taxe CO2 aux frontières de l’Europe By Michel Damian; Mehdi Abbas
  13. Bankruptcy Risk and the Performance of Tradable Permit Markets By John K. Stranlund; Wei Zhang

  1. By: Bruno Bosco; Lucia Parisio; Matteo Pelagatti; Fabio Baldi
    Abstract: This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of our robust multivariate long run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of long term dynamics among electricity prices and between electricity prices and gas prices may prove to be important for long term hedging operations to be conducted even in countries where well established and liquid electricity derivatives markets are not present. Since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series, we adapt and further develop a battery of robust inference procedures that should assure the reliability of our results.
    Keywords: European electricity prices, Cointegration, Interdependencies, Equilibrium Correction model, Oil prices, Robustness
    JEL: C15 C32 D44 L94 Q40
    Date: 2007–09
  2. By: Thomas Wein (Institute of Economics, Leuphana University of Lüneburg); Heike Wetzel (Institute of Economics, Leuphana University of Lüneburg)
    Abstract: Reviewing the development of network access charges in the German electricity market since 2002 reveals significant variation. While some firms continually increased or decreased their access charges, a variety of firms exhibited discontinuousn behavior with price changes in both directions. From an economic viewpoint this price setting turbulence is astonishing because grid operators are non-contestable natural monopolists, which in this time period were regulated by Negotiated Third Party Access (NTPA). Depending on the eectiveness or ineectiveness of NTPA,expected behavior would be either regulated average cost prices or monopoly prices, but not the observed turbulence. Although in 2005 NTPA scheme was replaced by a Regulated Third Party Access (RTPA) scheme with a regulator, an analysis of the factors influencing the price setting behavior within this period oers valuable information for the new regulator and the still discussed new incentive regulation, which is expected to start in 2009. Using multivariate estimations based on firm data covering the years 2000-2005, we test the hypotheses that asymmetric influence of regulatory threat, dierent cost and price calculation knowledge, strategic use of structural features and the obligation to publish specific access charges have influenced the electricity network access charges in Germany.
    Keywords: Keywords: deregulation, natural monopoly, power industry
    JEL: D42 L43 L94
    Date: 2007–09–18
  3. By: Sylvain Rossiaud (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II])
    Abstract: This article is concerned with the current reorganization of the Russian oil industry, i.e. the increasing involvement of state-controlled companies in upstream oil activities. Conversely to the widespread idea that this reorganization is a mere re-nationalization of oil assets explained by short-run political interests, this article aims at supporting the thesis that this reorganization is a coherent oil policy regarding the privatization process’s contradictions. These contradictions are brought to light by relying on the New Institutional Economics framework and especially works concerned with the institutional complementarity. It is stressed that the Russian oil model is currently incoherent and does not allow the effectiveness of institutions, private property rights on oil assets and oil contracts. Furthermore, the imposition of a state-controlled oil company beside privates ones could be an organizational arrangement likely to put an end to this incoherence. Then, it could allow the effectiveness of economic institutions. In this perspective, the current reorganization appears as a necessary stage for the Russian state to continue delegating oil upstream activities to private operators. The recent agreement signed by Gazprom and Total for exploring and developing the Shtockman field may be regard as a confirmation of this last assessment.
    Keywords: Russia ; Oil Industry ; Organizational Model ; Institutional Complementarity
    Date: 2007–09–20
  4. By: Singh, Rupinder (BOFIT); Laurila , Juhani (BOFIT)
    Abstract: The macro economic stabilisation in Azerbaijan has been successful. Following cessation of conflict with Armenia, and decline of GDP by 60 per cent from 1990 to 1995, the government in effect implemented a big-bang reform process in 1995. The inflation rate has now declined to the lowest rate of any transition country and important reforms in the monetary-fiscal mix have been undertaken. The second plank of first generation reforms, liberalisation, has also been successfully implemented with liberalisation of prices, the trade and foreign exchange regimes and virtual completion of small-scale privatisation, although the onset of the Russian crisis in 1998 has impacted negatively both internal and external balances. The paper presents the current economic picture for Azerbaijan and then assesses economic policy issues facing the country. Azerbaijan is well endowed with natural resources, particularly oil but also gas. The second part of the paper considers the question by focussing on policy issues related to the potential flow of oil-based monies into Azerbaijan. The possibility of the “Dutch Disease” syndrome impacting Azerbaijan through a rising real exchange rate on the non-oil sector is not considered to be a problem at present but is expected to become a policy concern in the medium- to long term. Structural reforms in public finance to deal with expected surpluses are lagging and are necessary in the next phase of the transition of Azerbaijan. Moreover, significant reforms are required in banking – privatisation, improvement in regulation and supervision and in the implementation of supporting legal rights, given the current lack of financial intermediation.
    Keywords: Azerbaijan; economic development; oil; Dutch Disease; transition economies
    JEL: E60 P20 P30
    Date: 2007–09–14
  5. By: Michael Noel (Department of Economics, University of California - San Diego)
    Abstract: Asymmetric price cycles which look similar to Edgeworth Cycles are appearing in increasingly many retail gasoline markets in the U.S. and worldwide. The cycles can give the appearance of asymmetric prices responses to cost shocks under traditional methodologies. This article shows how to remove the confounding effect of the cycles and test for any true underlying asymmetry in price responses. Designing the correct counterfactual is key. The methodology is demonstrated for one strongly cycling market and some asymmetry to cost shocks is found. Covert collusion is unlikely, but the ability to coordinate cyclical price increases may play a role. Consumers can still reduce xpenditures on gasoline up to 7.7% with simple timing rules of thumb.
    Keywords: Price cycles,
    Date: 2007–06–05
  6. By: Sylvain Rossiaud (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II])
    Abstract: Cette note traite de la réorganisation en cours de l'industrie pétrolière russe, à savoir l'augmentation du rôle des compagnies à capitaux majoritairement publics dans les operations d'exploration-production de pétrole. Contrairement à l'idée relativement répandue selon laquelle cette réorgansation s'apparente à une re-nationalisation des actifs pétroliers dictée par des intérêt politiques de court terme, cette note soutient la these que cette réorganisation constitue une réponse cohérente de la part de l'Etat fédéral au regard des contradictions induites par le processus de privatisation. Ces contradictions sont mises en lumière grâce à la mobilisation du cadre théorique de la Nouvelle Economie Institutionnelle, notamment les travaux relatifs à la complémentarité institutionelle. Il est montré que le modèle organisationnel de l'industrie pétrolière russe est à l'heure actuelle incohérent et ne permet pas l'effectivité des institutions économiques, droits de propriété privés sur les actifs pétroliers et contrats pétroliers. Il semble que l'imposition d'une compagnie nationale au sein des consortiums privés en charge des opérations d'exploration-production peut constituer un arrangement suscpetible de mettre un terme à cette incohérence et d'assurer ainsi l'effectivité des institutions économiques. Dès lors, la réorganisation actuelle de l'industrie pétrolière russe peut être appréhendée comme une étape nécessaire pour permettre de continuer à déléguer à des opérateurs privés les opérations d'exploration-production. A cet égard, le récent accord signé entre Gazprom et Total pour développer le gisement de Shtockman tend à valider cette position.
    Keywords: Russie ; industrie pétrolière ; modèle organisationnel ; complémentarité institutionnelle.
    Date: 2007–09–20
  7. By: Georges Prat (EconomiX - [CNRS : UMR7166] - [Université de Paris X - Nanterre]); Remzi Uctum (EconomiX - [CNRS : UMR7166] - [Université de Paris X - Nanterre])
    Abstract: In the light of the economically rational expectation theory, this article shows how an expert chooses an optimal oil price forecast function given that information is costly. In this framework we propose an expectational process which nests all processes considered in the literature. By aggregating individual processes, it is shown that the overall expectational process may result from individual mixing effects and/or group heterogeneity effects. Using Consensus Forecast survey data, for three and twelve month horizons, we find that the rational expectation hypothesis is rejected and that none of the traditional extrapolative, regressive and adaptive processes and macroeconomic fundamentals is relevant. We show however, that a combination of the three traditional processes explains satisfactorily oil price expectations, which appear to exert a stabilizing strength in the oil market.
    Keywords: expectation formation; oil price
    Date: 2007–09–18
  8. By: IIMI, Atsushi
    Abstract: The world is faced with considerable risk and uncertainty about climate c hange. Particular attention has been paid increasingly to hydropower generation in recent years because it is renewable energy. However, hydropower is among the most vulnerable industries to changes in global and regional climate. This paper aims to examine the possibility of applying a simple vector autoregressive model to forecast future hydrological series and evaluate the resulting impact on hydropower projects. Three projects are considered - in India, Sri Lanka, and Vietnam. The results are still tentative in terms of both methodology and implications; but the analysis shows that the calibrated dynamic forecasts of hydrological series are much different from the conventional reference points in the 90 percent dependable year. The paper also finds that hydrological discharges tend to increase with rainfall and decrease with temperature. The rainy season would likely have higher water levels, but in the lean season water resources would become even more limited. The amount of energy generated would be affected to a certain extent, but the project viability may not change so much. Comparing the three cases, it is suggested that having larger installed capacity and some storage capacity might be useful to accommodate future hydrological series and seasonality. A broader assessment will be called for at the project preparation stage.
    Keywords: Climate Change,Hydro Power,Energy Production and Transportation,Water and Energy,Global Environment Facility
    Date: 2007–09–01
  9. By: Timilsina, Govinda R.
    Abstract: This study analyzes CO2 emissions reduction targets for various countries and geopolitical regions by the year 2030 in order to stabilize atmospheric concentrations of CO2 at the level of 450 ppm (550 ppm including non CO2 greenhouse gases). It also determines CO2 intensity cuts that would be needed in those countries and regions if the emission reductions were achieved through intensity-based targets while assuming no effect on forecasted economic growth. Considering that the stabilization of CO2 concentrations at 450 ppm requires the global trend of CO2 emissions to reverse before 2030, this study develops two scenarios: reversing the global CO2 trend in (i) 2020 and (ii) 2025. The study shows that global CO2 emissions would be 42 percent above the 1990 level in 2030 if the increasing trend of global CO2 emissions is reversed by 2020. If reversing the trend is delayed by 5 years, the 2030 global CO2 emissions would be 52 percent higher than the 1990 level. The study also finds that to achieve these targets while maintaining assumed economic growth, the global average CO2 intensity would require a 68 percent drop from the 1990 level or a 60 percent drop from the 2004 level by 2030.
    Keywords: Climate Change,Transport and Environment,Environment and Energy Efficiency,Energy Production and Transportation,Energy and Environment
    Date: 2007–09–01
  10. By: Loreta Stankeviciute (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II]); A. Kitous (Enerdata - [Enerdata]); Patrick Criqui (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II])
    Abstract: The study aims to examine the efficiency aspects of the international carbon market, with a focus on economic impacts on the European energy system, by analyzing the sectoral Marginal Abatements Cost Curves (MACC) and the trading under different global carbon market configurations in 2010 and in 2020. To produce a consistent and realistic assessment we employ sources such as: second NAPs under ETS, GHG National Inventories, EIA data and POLES world energy model to constitute the sectoral base year and 2010, 2020 emission levels in different countries and regions. We then use the market analysis tool ASPEN, which enables to derive supply and demand from sectoral MACCs produced with POLES model, and to evaluate the economic impacts on the carbon market participants. The paper shows in particular that in compliance with 2020 emission reduction targets, the benefits of an extended carbon market gain importance since more than 50% of the reduction target is achieved by ETS sectors and especially electricity sector. Furthermore, the new flexibility margins provided by a longer time-period for the adjustment of investments in new generation capacities compensates for the increasing pressure towards stronger emission reductions
    Keywords: emission trading ; international carbon market ; CO2 price
    Date: 2007–09–14
  11. By: LANGE Andreas; TREICH Nicolas (LERNA, TSE)
    Date: 2007–08
  12. By: Michel Damian (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II]); Mehdi Abbas (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II])
    Abstract: L’article analyse la faisabilité de la taxe carbone aux frontières de l’Europe proposée par le Gouvernement français. L’objectif est d’éviter les distorsions de concurrence à l’encontre des industries européennes qui subissent le coût du Protocole de Kyoto et d’inciter les grands concurrents de l’Europe à rejoindre celui-ci. Les positions jusque-là exprimées divergent principalement sur la compatibilité d’une telle taxe avec les règles de l’OMC. Sans présager de l’issue d’une action devant son Organe de règlement des différends, l’article considère que le problème se situe moins dans la faisabilité technique ou les règles du commerce multilatéral que dans la détermination collective à diminuer drastiquement les émissions de gaz à effet de serre. Le projet français est donc un test des volontés politiques en matière de politique climatique après l’échéance du Protocole de Kyoto en 2012. L’article analyse les grandes orientations des prochaines négociations.
    Date: 2007–09–19
  13. By: John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); Wei Zhang (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: We study the impact of bankruptcy risk on markets for tradable environmental and natural resource permits. We find that firms that risk bankruptcy demand more permits than if they were financially secure. Consequently, bankruptcy risk in a competitive market for tradable property rights causes an inefficient distribution of individual choices among regulated firms. Moreover, the equilibrium distribution of permits is not independent of the initial distribution of permits. In fact, the inefficiency that is associated with bankruptcy risk is mitigated if financially insecure firms are given a larger share of the initial allocation of permits.
    Keywords: bankruptcy, tradable permits, permit markets
    JEL: L51 Q28 Q58
    Date: 2007–09

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