nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒01‒19
ten papers chosen by
Roger Fouquet
Imperial College, UK

  1. Strategic Trade Policy as Response to Climate Change? By Andreas Freytag; Leo Wangler
  2. Globalization, North-South Industrial Location and Environmental Competition By RIEBER Arsène; TRAN Thi Anh-Dao
  3. Hydrogen in Passenger Transport: A Macroeconomic Analysis By Jokisch, Sabine; Mennel, Tim
  4. Can China continue feeding itself ? the impact of climate change on agriculture By Zhang, Lijuan; Rozelle, Scott; Huang, Jikun; Dinar, Ariel; Mendelsohn, Robert; Wang, Jinxia
  5. Energy Distribution, Power Laws, and Economic Growth By Dalgaard, Carl-Johan; Strulik, Holger
  6. Oil and Challenges of Trade Policy Making In Sudan in a Globalizing Arena By Shafaeddin, Mehdi
  7. Natural Resources and Violent Conflict: Resource Abundance, Dependence and the Onset of Civil Wars By Christa N. Brunnschweiler; Erwin Bulte
  8. Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes By R. J. Nicholls; S. Hanson; C. Herweijer; N. Patmore; S. Hallegatte; J. Corfee-Morlot; J. Château; R. Muir-Wood
  9. Weetman Pearson in Mexico and the Emergence of a British Oil Major, 1901-1919 By Andrew Godley; Lisa Bud Frierman; Judith Wale
  10. Optimal Resource Extraction Contracts under Threat of Expropriation By Eduardo Engel; Ronald Fischer

  1. By: Andreas Freytag (Friedrich-Schiller-University Jena); Leo Wangler (Friedrich-Schiller-University Jena)
    Abstract: This paper discusses the political economy of the climate change debate. The objective is to come to a better understanding of why at international levels (e. g. the G-8 summit in Heiligendamm) climate change was one of the main topics at the agenda, despite the fact that climate change cannot be solved by only eight participating countries, even if these eight countries are considered as the "biggest" in the world. The problem of climate change is a supranational one and needs supranational cooperation. Using a strategic trade policy framework, the paper theoretically and from a positive perspective explains why countries like Germany are more engaged in policies related to climate change than other industrial countries, which also have signed the Kyoto Protocol.
    Date: 2008–01–11
  2. By: RIEBER Arsène (Center for Analysis and Research in Economics (CARE), University of Rouen); TRAN Thi Anh-Dao (Economics Centre of University Paris-North (CEPN, University Paris 13) and Center for Analysis and Research in Economics (CARE), University of Rouen)
    Abstract: Relying on a North-South model of economic geography, our paper attempts to discuss the management of global pollution issues such as greenhouse gas emissions. As firms are increasingly mobile, they become sensitive to differences in environmental standards across countries and subject the regulatory power of a country to the rule of competition. In this context, we first evaluate the consequences of a passive ecological dumping from the South. We find that the Northern region undergoes a phenomenon of industrial relocation with a fall in its real income. In addition, the outcomes on global pollution abatement appear ambiguous. Globalization of the world economy, by changing the location decisions of firms, can make global pollution even worse. This calls for international cooperation between the North and the South. We then turn to investigate the outcomes of a harmonization of environmental policies. Although better from an ecological point of view, this second scenario harms the South both in terms of industrial relocation and real income.
    Keywords: Economic geography, Global pollution, Environmental competition
    JEL: F12 Q20 R10
    Date: 2008
  3. By: Jokisch, Sabine; Mennel, Tim
    Abstract: Hydrogen is often seen as a promising future energy carrier given the major reliance of today’s transport sector on finite fossil fuels. This working paper assesses the macroeconomic effects of introducing hydrogen as fuel in passenger transport within the framework of the computable general equilibrium (CGE) model PACE-T(H2). Our simulation results suggest small improvements in the macroeconomic performance in almost all European countries from the introduction of hydrogen. The magnitude of economic effects however depends on the assumed learning curve of hydrogen cars and on the future development of hydrogen infrastructure costs. The results presented in this paper build on data and projections developed in the EU funded ‘HyWays’ project.
    Date: 2007
  4. By: Zhang, Lijuan; Rozelle, Scott; Huang, Jikun; Dinar, Ariel; Mendelsohn, Robert; Wang, Jinxia
    Abstract: Several studies addressing the supply and demand for food in China suggest that the nation can largely meet its needs in the coming decades. However, these studies do not consider the effects of climate change. This paper examines whether near future expected changes in climate are likely to alter this picture. The authors analyze the effect of temperature and precipitation on net crop revenues using a cross section consisting of both rainfed and irrigated farms. Based on survey data from 8,405 households across 28 provinces, the results of th e Ricardian analysis demonstrate that global warming is likely to be harmful to China but the impacts are likely to be very different in each region. The mid latitude region of China may benefit from warming but the southern and northern regions are likely to be damaged by warming. More precipitation is beneficial to Chinese farmers except in the wet southeast. Irrigated and rainfed farmers have similar responses to precipitation but not to temperature. Warmer temperatures may benefit irrigated farms but they are likely to harm rainfed farms. Finally, seasonal effects vary and are offsetting. Although we were able to measure the direct effect of precipitation and temperature, we could not capture the effects of change in water flow which will be very important in China. Can China continue feeding itself if climate changes? Based on the empirical results, the likely gains realized by some farmers will nearly offset the losses that will occur to other farmers in China. If future climate scenarios lead to significant reductions in water, there may be large damages not addressed in this study.
    Keywords: Climate Change,Crops & Crop Management Systems,Global Environment Facility,Common Property Resource Development,Rural Development Knowledge & Information Systems
    Date: 2008–01–01
  5. By: Dalgaard, Carl-Johan; Strulik, Holger
    Abstract: The natural sciences have established a general scaling law that relates metabolism and body size of animals. Recently this association - known as Kleiber's law - has received deep theoretical foundation by network theory and has been fruitfully applied to explain various biological phenomena, in particular ontogenetic growth. Here we derive a similar power law for economic metabolism (energy consumption per capita) and economic size (capital per capita). Invoking the power law we provide a metabolic-energetic founded law of motion for capital per capita. Using data for the U.S. states we test the resulting structural model and find evidence in favor of a scaling parameter, between energy and capital per capita, of about 2/3.
    Keywords: Economic Growth, Energy, Metabolism, Power Laws, Networks
    Date: 2008–01
  6. By: Shafaeddin, Mehdi
    Abstract: Abstract The purpose of this study is to examine the potential impact of oil revenues on the economy of Sudan and the challenges facing the Government in policy making, particularly trade policy and allocation of oil revenues for long-run development and diversification of the production and export structure of the economy. The exploitation of oil resources has been accompanied by impressive liberalization of the economy by the Government of Sudan. Since then the country has been integrating into the world economy rapidly based on oil revenues. Yet, little has been achieved so far in integrating various sectors of the domestic economy despite relatively rapid GDP growth based on oil revenues. Rapid economic growth and diversification of the economy are among the main objectives of the Government. Therefore, the challenge facing the Government is to design and implement a long-term development strategy in order to build up a solid industrial and agricultural sector for sustainable development and expansion of non-oil exports. In such a strategy the design, and implementation, of trade and industrial policies and the way oil revenues are allocated, takes, inter alia, importance. Developing a conceptual framework of analysis, the author will argue that while export of petroleum provides financial resources for the acceleration of investment and growth, prospects for sustained growth and diversification will be still limited by some physical and institutional bottlenecks which can not be easily overcome by ample oil revenues. Trade in oil itself may have some detrimental socio-economic effects, including the attitude and policies of the Government, on the prospects for development and diversification of the economy in the long-run. Therefore, the Government policies, particularly trade policies, and the way oil revenues are allocated may not be necessarily conducive to long-run development and diversification of production and export structure. Proposing an alternative long-run trade and industrial policy for the country, the author will also outline the practical problems of its implementation under current international trade rules. ---------- *The author is a development economist with D.Phil from Oxford Univsity. He is currently an international consultant affiliated to the Institute of Economic Research, University of Neuchatel, Switzerland. He is the former Head, Macroeconomic and Development Policies Branch, UNCTAD and the author of a large number of articles, published in international journals, on trade and industrial policies, economic reform and other development policy issues. His latest book is: Trade Policy at the Crossroads; the recent experience of developing countries, Macmillan, 2005. This paper is developed on the basis of a part of a study undertaken for the World Bank under a DTSI project financed by the same Organization. The author benefited from interviews with Government authorities and comments from Mr. P. Shuler to whom goes his thanks. Comments are welcome and can be sent to author:
    Keywords: Oil economies; trade policy; Sudan; economic development; diversification
    JEL: F4 F0 O5 O2 Q2 Q4 Q1 F3 F1
    Date: 2007–10
  7. By: Christa N. Brunnschweiler (CER-ETH Center of Economic Research at ETH Zurich, Switzerland); Erwin Bulte (Development Economics Group, Wageningen University, and Department of Economics, Tilburg University, Netherlands)
    Abstract: In this paper we examine the claim that natural resources invite civil conflict, and challenge the main stylized facts in this literature. We find that the nature of causation between resource dependence and civil war is opposite to conventional wisdom. In particular, (i) civil war creates dependence on primary sector exports, but the reverse is not true, and (ii) resource abundance is associated with a reduced probability of the onset of war. These results are robust to a range of specifications and, considering the conflict channel, we conclude there is no reason to regard resources as a general curse to development.
    Keywords: Civil war, resource abundance, resource dependence, greed versus grievance, resource curse
    JEL: Q34 O11 N40 N50
    Date: 2008
  8. By: R. J. Nicholls; S. Hanson; C. Herweijer; N. Patmore; S. Hallegatte; J. Corfee-Morlot; J. Château; R. Muir-Wood
    Abstract: This global screening study makes a first estimate of the exposure of the world's large port cities to coastal flooding due to storm surge and damage due to high winds. This assessment also investigates how climate change is likely to impact each port city's exposure to coastal flooding by the 2070s, alongside subsidence and population growth and urbanisation. The study provides a much more comprehensive analysis than earlier assessments, focusing on the 136 port cities around the world that have more than one million inhabitants in 2005. The analysis demonstrates that a large number of people are already exposed to coastal flooding in large port cities. Across all cities, about 40 million people (0.6% of the global population or roughly 1 in 10 of the total port city population in the cities considered here) are exposed to a 1 in 100 year coastal flood event. For present-day conditions (2005), the top ten cities in terms of exposed population are estimated to be Mumbai, Guangzhou, Shanghai, Miami, Ho Chi Minh City, Kolkata, Greater New York, Osaka-Kobe, Alexandria and New Orleans; almost equally split between developed and developing countries. When assets are considered, the current distribution becomes more heavily weighted towards developed countries, as the wealth of the cities becomes important. The top 10 cities in terms of assets exposed are Miami, Greater New York, New Orleans, Osaka-Kobe, Tokyo, Amsterdam, Rotterdam, Nagoya, Tampa-St Petersburg and Virginia Beach. These cities contain 60% of the total exposure, but are from only three (wealthy) countries: USA, Japan and the Netherlands. The total value of assets exposed in 2005 is across all cities considered here is estimated to be US$3,000 billion; corresponding to around 5% of global GDP in 2005 (both measured in international USD)... <BR>Cette étude globale propose une première estimation de l'exposition des grandes villes portuaires aux inondations côtières, dues aux marées de tempête, et aux vents forts. Elle s'intéresse en particulier aux effets du changement climatique sur l'exposition de chacune de ces villes à l'horizon des années 2070. Cette évaluation comprend les 136 villes côtières qui ont plus d'un million d'habitants dans le monde en 2005. Elle est donc beaucoup plus exhaustive que les estimations disponibles jusqu'à présent. Cette analyse montre que la population des villes portuaires exposée aux inondations côtières est déjà très importante. Dans les villes considérées par cette étude, environ 40 millions de personnes (soit 0.6% de la population mondiale et environ un habitant sur dix de ces villes) sont exposés à l?inondation centennale (celle dont la probabilité annuelle est de 1% et le temps de retour 100 ans). Dans les conditions présentes (en 2005), les dix villes les plus exposées en termes de population sont Bombay, Canton, Shanghai, Miami, Ho Chi Minh Ville, Calcutta, l?agglomération New-yorkaise, Osaka- Kobe, Alexandrie et la Nouvelle Orléans. Ces villes sont également réparties entre pays développés et pays en développement. Quand on s'intéresse au patrimoine exposé, les pays développé deviennent beaucoup plus représentés, car le niveau de vie est alors un facteur essentiel. Les dix villes les plus exposées en terme de patrimoine sont Miami, l'agglomération New-yorkaise, la Nouvelle Orléans, Osaka-Kobe, Tokyo, Amsterdam, Rotterdam, Nagoya, Tampa-Saint-Petersbourg, et Virginia Beach. Ces villes représentent 60% de l'exposition totale, mais sont dans seulement trois pays riches : les USA, le Japon et la Hollande. La valeur totale du patrimoine exposé en 2005 est estimée à 3.000 milliards de dollars américains, ce qui correspond à environ 5% du PIB annuel mondial...
    Keywords: sustainable development, public policy, climate change, global warming, natural disasters, flood management, coastal zones, environment & development
    JEL: Q01 Q54 Q56 Q58
    Date: 2007–12–04
  9. By: Andrew Godley (Department of Management, University of Reading); Lisa Bud Frierman (Visiting research fellow at the Centre for International Business History, University of Reading); Judith Wale (Visiting research fellow at the Centre for International Business History, University of Reading)
    Abstract: British overseas investment was one of the most powerful forces contributing to rapid global integration before World War 1. Approaching half of this total was in the form of foreign direct investment, as British entrepreneurs increasingly located their activities away from the mature domestic economy to faster growing, less-developed regions. Weetman Pearson was one of the most successful of all Britain’s overseasbased entrepreneurs of the period. Using original financial records, the paper shows how the Pearson group of companies became one of Britain’s most valuable industrial enterprises by 1919 having diversified from international contracting into the Mexican oil industry from 1901. The Pearson group highlights how British entrepreneurs were technically competent in managing large, complex infrastructure projects, able to navigate their way through various political systems, and adept at turning to whichever organisational form best suited their business interests; characteristics far removed from the outdated stereotype of the incompetent Late Victorian entrepreneur
    Date: 2007
  10. By: Eduardo Engel (Cowles Foundation, Yale University); Ronald Fischer (University of Chile)
    Abstract: The government contracts with a foreign firm to extract a natural resource that requires an upfront investment and which faces price uncertainty. In states where profits are high, there is a likelihood of expropriation, which generates a social cost that increases with the expropriated value. In this environment, the planner's optimal contract avoids states with high probability of expropriation. The contract can be implemented via a competitive auction with reasonable informational requirements. The bidding variable is a cap on the present value of discounted revenues, and the firm with the lowest bid wins the contract. The basic framework is extended to incorporate government subsidies, unenforceable investment effort and political moral hazard, and the general thrust of the results described above is preserved.
    Keywords: Taxation, Mining, Rent extraction, Royalty, Non-renewable natural resource, Present-value-of-revenue auction
    JEL: Q33 Q34 Q38 H21 H25
    Date: 2008–01

This nep-ene issue is ©2008 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.