nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒11‒24
five papers chosen by
Roger Fouquet
Imperial College, UK

  1. Post Kyoto Options for Belgium, 2012-2050 By Nijs Wouter; Van Regemorter Denise
  2. Interaction of carbon and electricity prices under imperfect competition By Chernyavs’ka, Liliya; Gullì, Francesco
  3. Take or Pay Contracts and Market Segmentation By Scarpa, Carlo; Polo, Michele
  4. With Exhaustible Resources, Can A Developing Country Escape From The Poverty Trap? By Cuong Le Van; Katheline Schubert; Tu Anh Nguyen
  5. Assessing the governance of electricity regulatory agencies in the Latin American and the Caribbean region : a benchmarking analysis By Azumendi, Sebastian Lopez; Diop, Makhtar; Guasch, Jose Luis; Andres, Luis

  1. By: Nijs Wouter (VITO); Van Regemorter Denise (K.U.Leuven-Center for Economic Studies)
    Abstract: This report examines possible post-Kyoto options for Belgium. Climate change is coming up again at the top of the policy agenda with the decision of the European Commission to reduce its GHG emissions by 20% by 2020. The analysis is done with the MARKAL/TIMES model, a partial equilibrium model for the energy system. It is a technico-economic model, which assembles in a simple but economic consistent way technological information (conversion-efficiency, investment- and variable costs, emissions, etc.) for the entire energy system. Two CO2 reduction scenarios for Belgium are analysed up to the horizon 2050, with and without the possibility of nuclear and carbon capture technologies. The scenarios analysed show that it is possible to attain very stringent CO2 reductions in Belgium. The welfare cost remains limited in the case of a -22.5% reduction in 2050 compared to 1990. The cost is 0.7% of GDP on an annual base but it can become more expensive and reaches up to 1.3% of GDP on an annual base, when the reduction is -52%. These costs are the costs within the energy system without considering any potential side benefits (reduction of other air pollutants and energy security) and assuming a CO2 tax or a permit system as policy instrument for achieving the CO2 reduction target, i.e. an efficient instrument.
    Keywords: climate change, energy system modelling, post-Kyoto
    Date: 2007–11
  2. By: Chernyavs’ka, Liliya; Gullì, Francesco
    Abstract: In line with economic theory, carbon ETS determines a rise in marginal cost equal to the carbon opportunity cost regardless of whether carbon allowances are allocated free of charge or not. Hence, common sense would suggest that .rms in imperfectly competitive markets will pass-through into electricity prices only a part of the increase in cost. Instead, by using the load duration curve approach and the dominant .rm with competitive fringe model, the analysis proposed in this paper shows that the result is ambiguous. The increase in price can be either lower or higher than the marginal CO2 cost depending on several structural factors: the degree of market concentration, the available capacity (whether there is excess capacity or not) and the power plant mix in the market; the allowance price and the power demand level (peak vs. off-peak hours). The empirical analysis of the Italian context (an emblematic case of imperfectly competitive market), which can be split in four sub-markets with different structural features, confirms the model predictions. Market power, therefore, can determine a significant deviation from the "full pass-through" rule but we can not know which is the sign of this deviation, a priori, i.e. without before carefully accounting for the structural features of the power market.
    Keywords: Emission trading; power pricing; imperfect competition
    JEL: Q41 L13 Q21
    Date: 2007–05
  3. By: Scarpa, Carlo; Polo, Michele
    Abstract: This paper examines competition in the liberalized natural gas market. Each .firm has zero marginal cost core capacity, due to long term contracts with take or pay obligations, and additional capacity at higher marginal costs. The market is decentralized and the firms decide which customers to serve, competing then in prices. In equilibrium each .firm approaches a different segment of the market and sets the monopoly price, i.e. market segmentation. Antitrust ceilings do not prevent such an outcome while the separation of wholesale and retail activities and the creation of a wholesale market induces generalized competition and low margins in the retail segment.
    Keywords: Entry; Segmentation; Decentralized market
    JEL: L11 L13 L95
    Date: 2007
  4. By: Cuong Le Van (Centre d'Economie de la Sorbonne, Universite Paris-1, France); Katheline Schubert (Université Paris 1 Panthéon-Sorbonne, CNRS, Paris School of Economics); Tu Anh Nguyen (Centre d'Economie de la Sorbonne, Universite Paris-1, France)
    Abstract: This paper studies the optimal growth of a developing non-renewable natural resource producer, which extracts the resource from its soil, and produces a single consumption good with man-made capital. Moreover, it can sell the extracted resource abroad and use the revenues to buy an imported good, which is a perfect substitute of the domestic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We study the optimal extraction and depletion of the exhaustible resource, and the optimal paths of accumulation of capital and of domestic consumption. We show that the extent to which the country will optimally escape from the poverty trap and the exhaustible resource will be a blessing depends on the characteristics of its technology and of the revenues from the resource function, on its impatience, on the level of its initial stock of capital, and on the abundance of the natural resource. If the marginal productivity of capital at the origin is greater than the sum of the social discount rate and the depreciation rate, the country will accumulate capital along the entire growth path, and will escape from the poverty trap, whatever its initial stocks of capital and resource, and provided that the marginal revenue obtained from the exportation of the resource is finite at the origin. On the contrary, if the marginal productivity of capital is lower than the depreciation rate whatever the level of capital, and if moreover the initial stock of capital is small, then the country will never accumulate; it will consume the revenues obtained from selling abroad the extracted resource, until there is no resource left and the economy collapses. We also show that any optimal path may be decentralized in a competitive equilibrium by using a tax/subsidy scheme for firms.
    Keywords: Optimal growth, Exhaustible resource, Convex-concave technology, Poverty trap, Competitive equilibrium with tax/subsidy
    JEL: Q32 C61
    Date: 2007–07
  5. By: Azumendi, Sebastian Lopez; Diop, Makhtar; Guasch, Jose Luis; Andres, Luis
    Abstract: This paper focuses on an evaluation and benchmarking of the governance of regulatory agencies in the electricity sector in Latin American Countries (LAC). Using a unique database, we develop an index of regulatory governance and rank all the agencies in the LAC countries. The index is an aggregate number of the evaluation of four key governance characteristics: autonomy, transparency, accountability, and regulatory tools, including not only formal aspects of regulation but also indicators related to actual implementation. Based on 18 different indexes, we analyze the positions of agencies with regard to different aspects of their regulatory governance, considering not only performance in each variable but also scores in the different components of each category. This evaluation allows for the identification of particular country shortcomings regarding governance, and indicates needed improvements. Although the region shows an overall good governance design of their regulatory agencies, the implementation of the independent regulator model still faces several challenges. This is particularly evident in political autonomy and in the informal aspects of governance, where the region shows the largest number of countries with the lowest scores. Trinidad and Tobago and Brazil show the best results and Ecuador, Honduras, and Chile the poorest performances. The rest of the countries vary according to the different indexes. We give each governance variable equal weights and positively test the robustness of our approach using Principal Component Analysis.
    Keywords: National Governance,Governance Indicators,Public Sector Corruption & Anticorruption Measures,Country Strategy & Performance,Banks & Banking Reform
    Date: 2007–11–01

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