nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒12‒15
eight papers chosen by
Roger Fouquet
Imperial College, UK

  1. Prospects for the hydrogen transition based on the network economic approach : Insights from the electricity and gas experience in Europe By Nuno Bento
  2. Climate Policy Versus Development Aid By Richard S. J. Tol
  3. Evaluating the evidence on electricity reform: Lessons for the South East Europe (SEE) market By Pollitt, M.
  4. Diesel price convergence and mineral oil taxation in Europe By Axel Dreher; Tim Krieger
  5. In Defense of Electricity as a General Purpose Technology By Kander, Astrid; Schön, Lennart; Enflo, Kerstin
  6. Arbitrage in Energy Markets: Competing in the Incumbent's Shadow By Kupper, G.; Willems, B.R.R.
  7. Industrial dynamics and innovative pressure on energy - Sweden with European and Global outlooks By Kander, Astrid; Schön, Lennart
  8. Vertically Integrated Firms' Investments in Electricity Generating Capacities By Anette Boom

  1. By: Nuno Bento (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: This paper aims to investigate the transition to a new energy system based on hydrogen in the European liberalized framework. After analyzing the literature on the hydrogen infrastructure needs in Europe, we estimate the size and scope of the transition challenge.<br />We take the theoretical framework of network economics to analyze early hydrogen infrastructure needs. Therefore, several concepts are applied to hydrogen economics such as demand club effects, scale economies on large infrastructures, scope economies, and positive socio-economical externalities. On the examples of the electric and natural gas industry formation in Europe, we argue for public intervention in order to create conditions to reach more rapidly the critical size of the network and to prompt network externalities allowing for the market diffusion of and, thus, an effective transition to the new energy system.
    Keywords: Economics of regulation ; network economics ; technological change ; energy economics ; hydrogen ; electricity ; natural gas
    Date: 2007–11–28
  2. By: Richard S. J. Tol (Economic and Social Research Institute (ESRI))
    Abstract: Rich countries have emitted most of the greenhouse gases in the atmosphere, while poor countries will suffer most from climate change. Rich countries have therefore committed to help poor countries adapt. However, this is financed from the general development budget, and hence may do more harm than good. Furthermore, development aid also finances emission reduction. These aspects of climate policy need to be overhauled. Development assistance should consider the impact of climate change, and reduce emissions where it can, but this can be achieved by marginal adjustments to current practice.
    Date: 2007–12
  3. By: Pollitt, M.
    Abstract: This paper discusses the evidence on electricity reform and relates it to the current situation of the South East Europe (SEE) electricity market. We begin by discussing the main elements of the European Union (EU) electricity reform model. Then we go on to discuss emerging good practice in the regulation of national electricity markets in the EU. This is important because it reflects the key role placed on independent regulation of the electricity sector in the EU reform model. Next, we evaluate the empirical evidence on the success of the EU reform model in particular before and the success of electricity reforms more generally. This leads on to a discussion of the particular context of SEE electricity reform and what specific issues this raises. We conclude with a discussion of the importance of more general institutional context of SEE electricity reform. The paper suggests that it will be a substantial, but worthwhile, challenge to create a workable supra-national electricity market in the region.
    Keywords: Electricity reform, South East Europe, European single electricity market.
    JEL: L94 P31
    Date: 2007–09
  4. By: Axel Dreher (KOF Swiss Economic Institute, ETH Zurich); Tim Krieger (University of Paderborn, Department of Economics, Paderborn, Germany)
    Abstract: We empirically analyze convergence of European producer and consumer prices for diesel fuel and investigate the role of excise taxation. By comparing the speed of convergence of prices and taxes we find a surprisingly fast speed of convergence for consumer prices. While this can in part be explained by fuel tourism, the main driving force is producer price dynamics. Tax convergence contributes weakly to price convergence, but the overall effect is to slow down consumer relative to producer price convergence.
    Keywords: price convergence, diesel, international taxation, European integration, panel unit roots
    JEL: F15 H73 Q48 C23
    Date: 2007–12
  5. By: Kander, Astrid; Schön, Lennart; Enflo, Kerstin
    Abstract: Electricity has been regarded as a typical example of a general purpose technology and important for the surge both in energy productivity and overall productivity in the American economy in the 1920s. This view was challenged by Nicholas and Moser (2004) based on patent statistics. We argue that other methods are required for studying productivity effects and propose cointegration analyses. We demonstrate a clear impact from electrification on energy productivity in those broad Swedish industrial branches that used electricity for multiple uses. This effect goes beyond mere book-keeping effects and indicates the existence of dynamic effects.
    Keywords: electricity, GPT, productivity, cointegration, dynamic effects
    JEL: O31 O32 O33 O34 O38 N5 O47 R58
    Date: 2007
  6. By: Kupper, G.; Willems, B.R.R. (Tilburg University, Center for Economic Research)
    Abstract: This paper studies the welfare implications of using market mechanisms to allocate transmission capacity in recently liberalized electricity markets. It questions whether access to this essential facility should be traded on a market, or whether the incumbent should retain exclusive usage rights. We show that granting exclusive use to the incumbent might be optimal, if the capacity of the essential facility is small and the incumbent can reduce production costs by taking advantage of interregional production-cost differences. This result counters the intuition that arbitrage will improve the social surplus when there is no output contraction. The reason is that when competition is imperfect, arbitrage might reduce production efficiency. We advise policymakers to introduce market mechanisms for the allocation of transmission capacity only if sufficient investment in the network is ensured or if the market power of the incumbent is broken in at least one of the markets in which it is active.
    Keywords: Arbitrage;electricity sector;price discrimination
    JEL: D40 L10 L50 Q48
    Date: 2007
  7. By: Kander, Astrid; Schön, Lennart
    Abstract: The focus in this paper is on industrial dynamics and its impact on energy systems.. We highlight some fundamental patterns of this long-term dynamics, using the Dahmenian concept ‘development blocks’, with ‘market widening’ and ‘market suction’, and discuss the implications for innovative pressure in the energy sector. We discern three epochs in the historical data: the Traditional Areal Epoch, the Punctiform Industrial Epoch and the Modern Areal Epoch. Each epoch has its typical energy sources and encompasses some fundamental development blocks. The Modern Areal Epoch is in formation at the end of the 20th century; its innovations are still under incremental evolution, and we discuss its future potential - in particular in relation to those shifts in markets that presently occur due to global spread of industrialization and economic growth.
    Keywords: Development blocks, innovation, energy epochs, biofuels
    JEL: O31 O32 O33 O34 O38 N5 O47 R58
    Date: 2007
  8. By: Anette Boom (Copenhagen Business School)
    Abstract: We compare investments in generating capacities of an integrated monopolist with the aggregate investments of two vertically integrated competing firms. The firms invest in their capacity and fix the retail price while electricity demand is uncertain. The wholesale price is determined in a unit price auction where the firms know the level of demand when they bid their capacities. Total capacities can be larger or smaller with a duopoly than with a monopoly. If the two firms select the Pareto dominant equilibrium, then the retail price is always higher and the social welfare lower in the duopoly case.
    Date: 2007–10

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