nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒09‒30
eight papers chosen by
Roger Fouquet
Imperial College, UK

  1. Reference Models and Incentive Regulation of Electricity Distribution Networks: An Evaluation of Sweden’s Network Performance Assessment Model (NPAM) By Jamasb, T.; Pollitt, M.
  2. Information Disclosure Policies: Evidence from the Electricity Industry By Magali Delmas; Maria Montes-Sancho; Jay P. Shimshack
  3. The Unbundling Regime for Electricity Utilities in the EU: A Case of Legislative and Regulatory Capture? By Silvester van Koten; Andreas Ortmann
  4. Natural Resources: Are They Really a Curse? By Alexandr Cerny; Randall K. Filer
  5. The Bank of Canada's Version of the Global Economy Model (BoC-GEM) By Rene Lalonde; Dirk Muir
  6. Economy-wide and distributional impacts of an oil price shock on the south African economy By Thierfelder, Karen; Robinson, Sherman; Korman, Vijdan; Kearney, Marna; Go, Delfin S.; Essama-Nssah, B.
  7. The economic impact of climate change on agriculture in Cameroon By Lambi, Cornelius M.; Molua, Ernest L.
  8. Temporal and spatial homogeneity in air pollutants panel EKC estimations: Two nonparametric tests applied to Spanish provinces By Ordás Criado, Carlos

  1. By: Jamasb, T.; Pollitt, M.
    Abstract: The world-wide electricity sector reforms have led to a search for alternative and innovative approaches to regulation to promote efficiency improvement in the natural monopoly electricity networks. A number of countries have used incentive regulation models based on efficiency benchmarking of the electricity network utilities. While most regulators have opted adopted parametric and non-parametric frontier-based methods of benchmarking some have used engineering designed ‘reference firm’ or ‘norm’ models for the purpose. This paper examines the incentive properties and other related aspects of the norm model NPAM used in regulation of distribution networks in Sweden and compares these with those of frontier-based benchmarking methods. We identify a number of important differences between the two approaches to regulation benchmarking that are not readily apparent and discuss their ramifications for the regulatory objectives and process.
    Keywords: Electricity, regulation, benchmarking.
    JEL: L51 L94 L97
    Date: 2007–09
  2. By: Magali Delmas; Maria Montes-Sancho; Jay P. Shimshack
    Abstract: A “third wave” of environmental policy has recently emerged that emphasizes information provision as an integral part of the risk mitigation strategy. While theory suggests information programs may correct market failures and improve welfare, the empirical effectiveness of these programs remains largely undetermined. We show that mandatory information disclosure programs in the electricity industry achieve stated policy goals. We that the average proportion of fossil fuels decreases and the average proportion of clean increases in response to disclosure programs. However, the programs also produce unintended consequences. Customer composition and pre-existing fuel mix significantly affect program response, suggesting that effective information disclosure policies may not be efficient.
    Keywords: disclosure, information, fuel mix, electric utilities
    JEL: D83 Q58 D21
    Date: 2007
  3. By: Silvester van Koten; Andreas Ortmann
    Abstract: Theory and empirics suggest that by curbing competition, incumbent electricity companies which used to be and here are referred to as Vertically Integrated Utilities (VIUs), can increase their profitability through combined ownership of generation and transmission and/or distribution networks. Because curbing competition is generally believed to be welfare-reducing, EU law requires unbundling (separation) of the VIU networks. However, the EU allows its member states the choice between incomplete (legal) and complete (ownership) unbundling. There is tantalizing anecdotal evidence that VIUs have tried to influence this choice through questionable means of persuasion. Such means of persuasion should be more readily available in countries with a more corrupted political culture. This paper shows that among the old EU member states (EU-15), countries which are perceived as more corrupt are indeed more likely to apply weaker forms of unbundling. Somewhat surprisingly, we do not obtain a similar finding for the new EU member states that acceded in 2004 (NMS-10). We provide a conjecture for this observation.
    Keywords: Electricity markets; regulation; vertical integration; corruption.
    JEL: K49 L43 L51 L94 L98
    Date: 2007–05
  4. By: Alexandr Cerny; Randall K. Filer
    Abstract: The curse of natural resources detected in numerous cross-country growth regressions isquestioned. Although natural resource dependence is associated with slow economic growth, there is no evidence that natural resource abundance per se is negatively related to growth. Thus, the supposed link between resource dependence and growth arises not from the numerator of the dependence measures (i.e. resources themselves) but rather, because of the inherent relationship between slow growth and a small non-resource sector caused by other undetermined characteristics of the economy.
    Keywords: Natural resources; Economic growth; Institutions.
    JEL: O13 Q32 Q38
    Date: 2007–03
  5. By: Rene Lalonde; Dirk Muir
    Abstract: The Bank of Canada's version of the Global Economy Model (BoC-GEM) is derived from the model created at the International Monetary Fund by Douglas Laxton (IMF) and Paolo Pesenti (Federal Reserve Bank of New York and National Bureau of Economic Research). The GEM is a dynamic stochastic general-equilibrium model based on an optimizing representative-agent framework with balanced growth, and some additional features to help mimic the overlappinggenerations' class of models. Moreover, there is a concrete role for fiscal policy (albeit not fully optimized) and monetary policy. At the Bank, the model has been extended beyond the standard version with tradable and non-tradable goods sectors to include both oil and non-oil commodities. Furthermore, the oil sector is decomposed into oil for production and oil for retail consumption. The authors provide a detailed technical description of the model's structure and calibration. They also describe the model's simulation properties for Canadian and U.S. domestic shocks, and describe how the model can be used to analyze issues that currently are at the forefront for the Canadian and global economies, such as trade protectionism, global imbalances, and increasing oil prices.
    Keywords: Economic models; International topics; Business fluctuations and cycles
    JEL: C68 E27 E37 F32 F47
    Date: 2007
  6. By: Thierfelder, Karen; Robinson, Sherman; Korman, Vijdan; Kearney, Marna; Go, Delfin S.; Essama-Nssah, B.
    Abstract: As crude oil prices reach new highs, there is renewed concern about how external shocks will affect growth and poverty in developing countries. This paper describes a macro-micro framework for examining the structural and distributional consequences of a significant external shock-an increase in the world price of oil-on the South African economy. The authors merge results from a highly disaggregative computable general equilibrium model and a micro-simulation analysis of earnings and occupational choice based on socio-demographic characteristics of the household. The model provides changes in employment, wages, and prices that are used in the micro-simulation. The analysis finds that a 125 percent increase in the price of crude oil and refined petroleum reduces employment and GDP by approximately 2 percent, and reduces household consumption by approximately 7 percent. The oil price shock tends to increase the disparity between rich and poor. The adverse impact of the oil price shock is felt by the poorer segment of the formal labor market in the form of declining wages and increased unemployment. Unemployment hits mostly low and medium-skilled workers in the services sector. High-skilled households, on average, gain from the oil price shock. Their income rises and their spending basket is less skewed toward food and other goods that are most affected by changes in oil prices.
    Keywords: Economic Theory & Research,,Labor Policies,Markets and Market Access,Access to Finance
    Date: 2007–09–01
  7. By: Lambi, Cornelius M.; Molua, Ernest L.
    Abstract: This study examines the impact of climate change on crop farming in Cameroon. The country ' s economy is predominantly agrarian and agriculture and the exploitation of natural resources remain the driving force for the country ' s economic development. Fluctuations in national income are due not merely to the decline in world demand for Cameroon ' s traditional agricultural exports or to mistakes in economic policy making, but also to the vagaries of the weather. Based on a farm-level survey of more than 800 farms, the study employs a Ricardian cross-sectional approach to measure the relationship between climate and the net revenue from crops. Net revenue is regressed on climate, water flow, soil, and economic variables. Further, uniform scenarios assume that only one aspect of climate changes and the change is uniform across the whole country. The analysis finds that net revenues fall as precipitation decreases or temperatures increase across all the surveyed farms. The study reaffirms that agr iculture in Cameroon is often limited by seasonality and the availability of moisture. Although other physical factors, such as soil and relief, have an important influence on agriculture, climate remains the dominant influence on the variety of crops cultivated and the types of agriculture practiced.
    Keywords: Climate Change,Environmental Economics & Policies,Global Environment Facility,Common Property Resource Development,Economic Theory & Research
    Date: 2007–09–01
  8. By: Ordás Criado, Carlos
    Abstract: Although panel data have been used intensively by a wealth of studies investigating the GDP-pollution relationship, the poolability assumption used to model these data is almost never addressed. This paper applies a strategy to test the poolability assumption with methods robust to functional misspecification. Nonparametric poolability tests are performed to check the temporal and spatial homogeneity of the panel and their results are compared with the conventional F-tests for a balanced panel of 48 Spanish provinces on four air pollutant emissions (CH4, CO, CO2 and NMVOC) over the 1990-2002 period. We show that temporal homogeneity may allow the pooling of the data and drive to well-defined nonparametric and parametric cross-sectional U-inverted shapes for all air pollutants. However, the presence of spatial heterogeneity makes this shape compatible with different timeseries patterns in every province - mainly increasing or decreasing depending on the pollutant. These results highlight the extreme sensitivity of the income-pollution relationship to region- or country-specific factors.
    Keywords: Environmental Kuznets Curve; Air pollutants; Non/Semiparametric estimations; Poolability tests
    JEL: C23 Q53 C14 O40
    Date: 2007–08–31

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