nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒01‒26
fourteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. Energy Efficiency and Renewable Energy Supply for the G-7 Countries, With Emphasis on Germany By Jon Strand
  2. EU Regulation and Competition Policy among the Energy Utilities By Richard Green
  3. Deliverability and regional pricing in U.S. natural gas markets By Stephen P.A. Brown; Mine K. Yucel
  4. Climate Change and Violent Conflict in Europe over the Last Millennium By Richard S.J. Tol; Sebastian Wagner
  5. Energy Savings via FDI? Empirical Evidence from Developing Countries By Michael Hübler; Andreas Keller
  6. Outcomes of a Swedish Kilometre Tax. An analysis of Economic Effects and Effects on NOx Emissions By Östblom, Göran; Hammar, Henrik
  7. Pollution Abatement in a Model of Capital Accumulation and Endogenous Longevity By Dimitrios Varvarigos
  8. A contribution of experimental economics toward characterization of the use of market power in oligopolisitc markets By Fabien Petit; Yannick Phulpin; Marcelo Saguan; Philippe Dessante
  9. Dedicated Technical Progress with a Non-renewable Resource : Efficiency and Optimality By AMIGUES Jean-Pierre; MOREAUX Michel
  10. Estimating the Future Economic Impact of Corn Ethanol Production in the U.S. By Swenson, David A.
  11. The Economic Impact of Ethanol Production in Iowa By Swenson, David A.
  12. Explaining adoption of end of pipe solutions and clean technologies By Hammar, Henrik; Löfgren, Åsa
  13. Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria By Boileau Loko; Kangni Kpodar; Oumar Diallo
  14. A note on the consequences of an endogenous discounting depending on the environmental quality By Katheline Schubert; Alain Ayong Le Kama

  1. By: Jon Strand
    Abstract: This paper discusses structure, impact, costs, and efficiency of renewable energy supply in the eight largest advanced economies (the G-7 plus Spain), with focus on Germany. Renewables production costs are compared to benefits, defined as reductions in net carbon emissions; technological innovation, and increased energy security. The latter part of the paper centers on Germany, the main European producer of non-traditional renewables. We question whether the level of subsidies can be justified, relative to other means to increase energy security and reduce carbon emissions. We also find an excessive emphasis on current productive activity, relative to development of new technologies.
    Keywords: Energy , Group of seven , Germany , Spain , Energy policy , Energy taxes ,
    Date: 2008–01–02
  2. By: Richard Green
    Abstract: The energy utilities – gas and electricity companies – were traditionally regulated monopolies, but once the EU decided to liberalise them, competition policy became applicable. The EU has used a series of Directives to set out the framework for a market-led energy sector, with third party access to the transmission and distribution networks, and a choice of retailer for all customers, although these depend upon the agreement of Member States. The Commission has been able to take action directly when ruling on mergers in the sector, and in several cases has obtained concessions that should increase the level of competition as a condition for allowing a merger. This is a reactive approach, however, and problems remain in the sector, as shown by the 2005-7 sector enquiry. The proposed third energy package may remove some of the barriers to effective liberalisation.
    Keywords: Competition Policy, mergers, electricity, gas, liberalisation
    JEL: L43 L94 L95
    Date: 2007–12
  3. By: Stephen P.A. Brown; Mine K. Yucel
    Abstract: During the 1980s and early '90s, interstate natural gas markets in the United States made a transition away from the regulation that characterized the previous three decades. With abundant supplies and plentiful pipeline capacity, a new order emerged in which freer markets and arbitrage closely linked natural gas price movements throughout the country. After the mid-1990s, however, U.S. natural gas markets tightened and some pipelines were pushed to capacity. We look for the pricing effects of limited arbitrage through causality testing between prices at nodes on the U.S. natural gas transportation system and interchange prices at regional nodes on North American electricity grids. Our tests do reveal limited arbitrage, which is indicative of bottlenecks in the U.S. natural gas pipeline system.
    Keywords: Natural gas ; Arbitrage ; Pricing
    Date: 2008
  4. By: Richard S.J. Tol (Economic and Social Research Institute); Sebastian Wagner
    Abstract: We investigate the relationship between a thousand-year history of violent conflict in Europe and various reconstructions of temperature and precipitation. We find that conflict was more intense during colder periods. This relationship is weakening over time, and is not robust to the details of the climate reconstruction or to the sample period. We thus confirm Zhang et al. (2006, Climatic Change, 76, 459-477) that, at least in temperate climates, global warming would, if anything, lead to reduced violent conflict.
    Keywords: history, violent conflict, Europe, climate change
    JEL: N43 Q54
    Date: 2008–01
  5. By: Michael Hübler; Andreas Keller
    Abstract: In this paper we examine the influence of foreign direct investment inflows on energy intensities of developing countries empirically. We first show that a simple OLS estimation, as it is found in the literature, suggests energy intensity reductions from FDI inflows, which is consistent with the hypothesis of energy saving technology transfer via FDI. However, such a regression turns out to be spurious and only a starting point for further research. Therefore, we use macro level data on 60 developing countries for the period 1975-2004 including other potential determinants of energy intensities and apply panel estimation techniques and tests. The results do not confirm the hypothesis that FDI inflows reduce energy intensities of developing countries in general. Interactions of FDI with country-specific characteristics do not show significant effects, either.
    Keywords: developing countries, energy intensity, FDI, technology transfer
    JEL: F18 F21 O13 O33 Q43 Q56
    Date: 2008–01
  6. By: Östblom, Göran (National Institute of Economic Research); Hammar, Henrik (National Institute of Economic Research)
    Abstract: By using an applied general equilibrium model of the Swedish economy, this paper examines how an in-troduction of a kilometre tax will affect economic growth (GDP), industry structure and emission levels of nitrogen oxides (NOx). According to our findings, the GDP will decrease by 0.1-0.3 per cent and NOx emissions by 0.4-0.8 per cent (assuming fixed emissions coefficients) during the 2006-2020 period. Thus, we find that economic growth and NOx emissions decouple due to an introduction of a kilometre tax. The projected reductions of NOx emissions are, however, minor relative to the Swedish objective for 2010. Road transports will overall be substituted by sea and rail transports and industry structure will change in favour of industries less dependent on heavy road transports. The emissions reductions will, however, be substantively larger if the kilometre tax also ends up inducing technological development able to expedite the adoption of cleaner vehicles. Consequently, this would reinforce the decoupling effect. Furthermore, we compare our findings with the results of others, who used partial equilibrium or bottom-up approaches to study the effects of a Swedish kilometre tax. The effects on production are more signifi-cant in the applied general equilibrium framework, but structural changes point in the same direction for all the studies compared.
    Keywords: static general equilibrium model; EMEC; partial equilibrium model; bottom-up models; kilometre tax; transport policy; environmental policy
    JEL: C68 D20 H23 R48
    Date: 2007–12–15
  7. By: Dimitrios Varvarigos
    Abstract: The effort to reduce pollution entails economic benefits because improved environmental quality advances the health status of the population and reduces mortality. Yet, there are also economic costs accruing from this effort because activities towards environmental improvement require resources to be extracted away from capital investment. This paper examines the extent to which pollution abatement policies may, ultimately, increase or decrease income. This is done in the context of a dynamic general equilibrium model, in which the interactions of the dynamics between capital accumulation and environmental quality occur through the flow of pollution generated by economic activity and the beneficial effect of environmental quality on longevity.
    Keywords: Pollution abatement; environmental quality; longevity; capital accumulation
    JEL: O13 O41 Q56
    Date: 2008–01
  8. By: Fabien Petit (SUPELEC-Campus Gif - SUPELEC); Yannick Phulpin (SUPELEC-Campus Gif - SUPELEC); Marcelo Saguan (SUPELEC-Campus Gif - SUPELEC); Philippe Dessante (SUPELEC-Campus Gif - SUPELEC)
    Abstract: Despite the numerous researches about imperfect competition, the market power remains difficult to quantify using traditional economics methods. In this paper, we propose an experimental economics design and outline some ways of analysis of its results toward characterization of the use of market power. A simple system with two regions and a limited interconnection transfer capacity allocated by an implicit auction is studied. Depending on the experiments two or three subjects share equitably the production capacity in one region, while the production capacity is equitably shared among 5 subjects leading to a more competitive situation in the second one. In both regions, we observe a market price that is different from the theoretical results allowing a quantification of the use of market power. Results are also analyzed based on a characterization of the subjects’ behaviour. Further the impact of subjects’ behaviour on the market price evolution is described.
    Keywords: experimental economics, market power, electricity markets, oligopolistic markets
    Date: 2007–06–13
  9. By: AMIGUES Jean-Pierre; MOREAUX Michel
    Date: 2008–01
  10. By: Swenson, David A.
    Abstract: This brief exercise assesses the potential economic impact value of ethanol production comparing current, 2007, estimates with a future level of production for 2016 and a long run equilibrium level (LRE) for 2025. The values for this estimate are driven by current Food and Agricultural Policy Research Institute (FAPRI) forecasts of corn and ethanol production. All of the estimates assume corn ethanol production only. No other kind of ethanol production is measured nor should be implied. By 2016, nearly 9,000 U.S. jobs will be directly linked to ethanol production, supporting in total nearly 47,200 jobs in the whole economy, given the assumptions in the analysis.
    JEL: L6
    Date: 2008–01–18
  11. By: Swenson, David A.
    Abstract: Iowa is the center of an ethanol production boom in the Midwest. The overall impact of that expansion is substantial and quite discernible, especially among the many communities in which plants are locating. In the year 2000, about 180 million bushels of Iowa corn were processed into ethanol. By 2005 that amount had grown to more than 400 bushels million bushels – an expansion of 122 percent. Iowa’s processing capacity is now closing in on 800 million bushels of Iowa corn into ethanol. The industry is growing very rapidly. This report documents the job economic impact of ethanol industrial production for 2007.
    JEL: H0
    Date: 2008–01–18
  12. By: Hammar, Henrik (National Institute of Economic Research); Löfgren, Åsa (Department of Economics, Göteborg University, P.O. Box 640, SE 405 30 Göteborg)
    Abstract: We estimate firms’ probability of technological adoption based on an unbalanced firm level panel data set from four major sectors during the 2000-2003 period. Technological adoption is measured by environ-mental protection investments (EPIs), and we focus particularly on differences between the decisions to adopt end of pipe solutions and clean technology. We find that the probability of a firm to undertake investments in clean technologies to reduce emissions to air increases if the firm has expenditures for R&D related to environmental protec-tion (green R&D). We also find that firm specific energy expenditures contribute in explaining investments in end of pipe solutions, while this factor is not significant for investments in clean technologies. Furthermore, the results show that the two types of technologies are complements with respect to the investment decision, which indicates that policies that stimulate investments in one type of technology tend to affect investment in the other positively as well. In conclusion, pol-icy makers might want to contemplate environmental policy measures that stimulate green R&D in order to stimulate technological adoption.
    Date: 2007–10–01
  13. By: Boileau Loko; Kangni Kpodar; Oumar Diallo
    Abstract: The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure-mostly nontradable goods-thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.
    Keywords: Government expenditures , Algeria , Oil , Real effective exchange rates ,
    Date: 2007–12–19
  14. By: Katheline Schubert (Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Alain Ayong Le Kama (Université de Lille - Université de Lille 1)
    Abstract: Our intention is to study, in the framework of a very simple optimal growth model, the consequences on the optimal paths followed by consumption and the environmental quality of an endogenous discounting. Consumption directly comes from the use of environmental services and so is a direct cause of environmental degradation. The environment is valued both as a source of consumption and as an amenity. For a sustainability concern, we introduce an endogenous discount rate growing with the environmental quality, and compare the optimal growth paths with the ones obtained in the usual case of exogenous and constant discounting. We show that the convergence of the environmental quality towards a steady state occurs only for a very special configuration of the parameters in the exogenous discounting case, while it occurs generically in the endogenous discounting one. This happens for a utility discount rate becoming suficiently high when the environmental quality is high and suficiently low when the environmental quality is poor. In this case then, endogenous discounting with a positive marginal discount rate allows us to avoid the depletion of the environment.
    Keywords: Endogenous discounting, Sustainability, Environment
    Date: 2007–04

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