nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒02‒02
seventeen papers chosen by
Roger Fouquet
Imperial College, UK

  1. Using Tax Expenditures to Achieve Energy Policy Goals By Gilbert E. Metcalf
  2. Energy and climate policies to 2020 : the impacts of the european " 20/20/20 " approach By Loreta Stankeviciute; Patrick Criqui
  3. Mitigation of CO2 emissions in 2020 : impacts of the " 20/20/20 " European policy By Loreta Stankeviciute
  4. Modelling Electricity Prices with Forward Looking Capacity Constraints By Alvaro Cartea; Marcelo G. Figueroa; Helyette Geman
  5. How do Spot prices affect aggregate electricity demand? By Torstein Bye and Petter Vegard Hansen
  6. An Overview of Carbon Markets and Emissions Trading: Lessons for Canada By Michael R. King
  7. Different trajectories of exosomatic energy metabolism for Brazil, Chile and Venezuela: using the MSIASM approach By Jesús Ramos-Martín; Nina Eisenmenger; Heinz Schandl
  8. Electricity Portfolio Management: Optimal Peak / Off-Peak Allocations By Huisman, R.; Mahieu, R.J.; Schlichter, F.
  9. Renewable Energy Policies And Technological Innovation: Evidence Based On Patent Counts By Nick Johnstone; Ivan Hascic; David Popp
  10. Regulatory governance and sector performance : methodology and evaluation for Electricity distribution in Latin America By Azumendi, Sebastian Lopez; Guasch, Jose Luis; Andres, Luis
  11. An application of MSIASM to Chinese exosomatic energy metabolism By Mario Giampietro; Kozo Mayumi; Jesús Ramos-Martín
  12. A Typical Case of Weak Institutional Complementarity in Institution Building : The Design of Transmission Network Monopoly in Competitive Electricity Markets By Jean-Michel Glachant; Vincent Rious
  13. "Financing Job Guarantee Schemes by Oil Revenue The Case of Iran" By Zahra Karimi
  14. Are current levels of air pollution in England too high? The impact of pollution on population mortality By John Henderson; Katharina Janke; Carol Propper
  15. A Micro-econometric Analysis of Climate Change Impacts on Livestock Management in African Agriculture By Seo, S. Niggol
  16. Weetman Pearson in Mexico and the Emergence of a British Oil Major, 1901-1919 By Andrew Godley; Lisa Bud Frierman; Judith Wale
  17. Actividad económica y emisiones de CO2 derivadas del consumo de energía en Cataluña, 1990-2005. Análisis mediante el uso de los balances energéticos desde una perspectiva input-output By Vicent Alcantara Escolano; Emilio Padilla Rosa; Jordi Roca Jusmet

  1. By: Gilbert E. Metcalf
    Abstract: Tax expenditures are a major source of support for energy related activities in the federal budget exceeding direct budget support for energy by a factor of nearly six. Focusing on the policy goals of reducing greenhouse gas emissions and petroleum consumption, I find these tax expenditures highly cost ineffective at best and counterproductive at worse. The tax credit for ethanol is an example of a cost ineffective subsidy. The cost of reducing CO2 emissions through this subsidy exceeded $1,700 per ton of CO2 avoided in 2006 and the cost of reducing oil consumption over $85 per barrel.
    JEL: H2 H23 H24 Q42 Q48
    Date: 2008–01
  2. By: Loreta Stankeviciute (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Patrick Criqui (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Purpose :<br />The study aims to quantify the possible interactions between the three European objectives in the horizon of 2020 : (i) the reduction of 20% of greenhouse gas emissions (GHG) (2) the saving of 20% of the European energy consumption and (3) a share of 20% of renewable energies in the overall energy consumption. Particular focus is, however, placed on the influence of the CO2 emission reduction targets and on their consequences on the carbon price in 2020. <br /><br />Design/methodology/approach :<br />In order to explore the interactions among the three European objectives and their induced effects, a number of scenarios are tested within a combination of two modeling tools : the POLES world energy model and ASPEN, an auxiliary model dedicated to the analysis of quota trading systems. With reasonable assumptions for the burden sharing among the Member States, the energy efficiency objectives and the renewable energy targets are achieved using national quota systems in each European country (white and green certificate systems and their implicit prices), while the CO2 emission reduction is carried out within the European Emissions Trading Scheme (ETS) in line with the objective of 20% emission reduction.<br /><br />Findings :<br />The paper shows, in particular, that the two quota policies (WC and GC) decrease significantly the European marginal emission reduction cost and consequently, the compliance costs for ETS participants. The high renewable target compliance cost could be reduced significantly if carbon price signal and energy saving policies are in place. The paper also shows that the sole carbon price signal has a limited influence for stimulating renewable energies and energy savings and thus concludes on the need for specific policies targeting these two areas.
    Keywords: CO2 emissions ;carbon price ; white certificate price ; green certificate price ; European Union
    Date: 2008–01–30
  3. By: Loreta Stankeviciute (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The study aims to quantify the interactions between the three European objectives in the horizon of 2020: (1) the reduction of 20% of greenhouse gas emissions (GHG) (2) the saving of 20% of the energy consumption and (3) the share of 20% of renewables energies in the overall energy consumption. Particular focus is, however, placed on the influence of the environmental policies on the<br />CO2 emission reduction and the carbon price in 2020.<br />The national objectives for the energy savings and renewables energies in our study are realized with the quota systems in every country: white and green certificate systems, while the CO2 emission reduction is carried out at the European level within the ETS in the<br />context of international carbon market. In order to exploit the interactions among the different<br />environmental policies, a number of scenarios are tested within a combination of two powerful<br />modeling tools: POLES world energy model and ASPEN, dedicated for the analysis of quota systems.<br />The paper shows, in particular, that the order of environmental policies does not affect significantly the reduction of emissions and the carbon price. On the other hand, the presence of these policies diminishes highly the marginal European reduction cost and, consequently, the compliance costs for ETS participants.
    Keywords: CO2 emissions ; carbon price ; white certificate price ; green certificate price ; European objectives in 2020
    Date: 2007–11
  4. By: Alvaro Cartea (School of Economics, Mathematics & Statistics, Birkbeck); Marcelo G. Figueroa; Helyette Geman (School of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We present a spot price model for wholesale electricity prices which incorporates forward looking information that is available to all market players. We focus on information that measures the extent to which the capacity of the England and Wales generation park will be constrained over the next 52 weeks. We propose a measure of ‘tight market conditions’, based on capacity constraints, which identifies the weeks of the year when price spikes are more likely to occur. We show that the incorporation of this type of forward looking information, not uncommon in the electricity markets, improves the modeling of spikes (timing and magnitude) and the different speeds of mean reversion.
    Keywords: capacity constraints, mean reversion, electricity indicated demand, electricity indicated generation, regime switching model.
    Date: 2008–02
  5. By: Torstein Bye and Petter Vegard Hansen (Statistics Norway)
    Abstract: All participants in power exchanges are interested in market responses when electricity prices change because this influences the profitability of actions. Contrary to most econometric work in this field, which uses annual time series or panel data, we exploit high-frequency data from a power exchange to estimate the spot price elasticities of the total market and of different market segments. The use of such data requires a simultaneous market model including both behavioral and control variables to capture short-term shifts in both demand and supply. Compared with Wolfram (1999) our short-term responses to spot market prices are not straightforward because the picture is confused by differences in production flexibilities in a complex and heterogeneous supply side, demand technologies and a combination of different end-user contracts. We show that short- and long-run price effects on demand differ significantly among hours, weekdays, seasons, and countries.
    Keywords: Electricity demand; Simultaneous markets; High Frequent data; Electricity Exhange
    JEL: Q41 D01 D51
    Date: 2008–01
  6. By: Michael R. King
    Abstract: The author provides an overview of carbon markets and explains how emissions trading can be important in encouraging the reduction of CO2 emissions in an efficient manner. He describes the key steps in establishing a cap-and-trade system, and reviews the European experiences with emissions trading. He highlights the lessons learned from the EU Emissions Trading System on how to design a market that operates efficiently and effectively. By learning from the experience of other countries, Canada can avoid the uncertainty and volatility witnessed in carbon markets abroad while benefiting from an efficient trading mechanism that contributes to the welfare of all Canadians.
    Keywords: International topics; Market structure and pricing
    JEL: D4 N50 Q21
    Date: 2008
  7. By: Jesús Ramos-Martín (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Nina Eisenmenger (IFF Social Ecology, University of Klagenfurt, Schottenfeldgasse); Heinz Schandl (CSIRO Sustainable Ecosystems, Gunghalin Homestead)
    Abstract: Economic development goes hand in hand with an increase in the consumption of natural resources. Some analysts use material flows to describe such relationship [Eurostat 2001, Weisz et al., 2006], or exergy [Ayres et al., 2003]. Instead this paper will use a characterisation of the exosomatic energy metabolism based on expected benchmark values to describe possible constraints to economic development posed by available human time and energy. The aim of the paper is to identify types of exosomatic energy metabolism of different societies to interpret its consequences for economic development. This is done with the application of the accounting methodology called Multi-Scale Integrated Analysis of Societal Metabolism (MSIASM) to the particular case of energy metabolism for the analysis of the economies of Brazil, Chile and Venezuela.
    Keywords: Development, Energy, Social Metabolism, MSIASM, Brazil, Chile, Venezuela
    JEL: O11 O13 O54 Q01 Q57 Q58
    Date: 2008–01
  8. By: Huisman, R.; Mahieu, R.J.; Schlichter, F. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Electricity purchasers manage a portfolio of contracts in order to purchase the expected future electricity consumption profile of a company or a pool of clients. This paper proposes a mean-variance framework to address the concept of structuring the portfolio and focuses on how to allocate optimal positions in peak and off-peak forward contracts. It is shown that the optimal allocations are based on the difference in risk premiums per unit of day-ahead risk as a measure of relative costs of hedging risk in the day-ahead markets. The outcomes of the model are then applied to show 1) whether it is optimal to purchase a baseload consumption profile with a baseload forward contract and 2) that, under reasonable assumptions, risk taking by the purchaser is rewarded by lower expected costs.
    Keywords: optimal electricity sourcing;hedge ratio;forward risk premiums;electricity portfolio management
    Date: 2007–12–07
  9. By: Nick Johnstone; Ivan Hascic; David Popp
    Abstract: This paper examines the effect of environmental policies on technological innovation in the specific case of renewable energy. The analysis is conducted using patent data on a panel of 25 countries over the period 1978-2003. It is found that public policy plays a significant role in determining patent applications. Different types of policy instruments are effective for different renewable energy sources.
    JEL: O34 O38 Q55 Q58
    Date: 2008–01
  10. By: Azumendi, Sebastian Lopez; Guasch, Jose Luis; Andres, Luis
    Abstract: This paper contributes to the literature that explores the link between regulatory governance and sector performance. The paper develops an index of regulatory governance and estimates its impact on sector performance, showing that indeed regulation and its governance matter. The authors use two unique databases: (i) the World Bank Performance Database, which contains detailed annual data for 250 private and public electricity companies in Latin America and the Caribbean; and (ii) the Electricity Regulatory Governance Database, which contains data on several aspects of the governance of electricity agencies in the region. The authors run different models to explain the impacts of change in ownership and different characteristics of the regulatory agency on the performance of the utilities. The results suggest that the mere existence of a regulatory agency, regardless of the utilities ' ownership, has a significant impact on performance. Furthermore, after controlling for the existence of a regulatory agency, the ownership dummies are still significant and with the expected signs. The authors propose an experience measure in order to identify the gradual impact of the regulatory agency on utility performance. The results confirm this hypothesis. In addition, the paper explores two different measures of governance, an aggregate measure of regulatory governance, and an index based on principal components, including autonomy, transparency, and accountability. The findings show that the governance of regulatory agencies matters an d has significant effects on performance.
    Keywords: National Governance,Infrastructure Regulation,Governance Indicators,Banks & Banking Reform,Emerging Markets
    Date: 2008–01–01
  11. By: Mario Giampietro (ICREA Institut de Ciencia i Tecnologia Ambientals, Universitat Autonoma de Barcelona); Kozo Mayumi (University of Tokushima); Jesús Ramos-Martín (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: The methodology of Multi-Scale Integrated Analysis of Societal Metabolism (MSIASM) is applied to analyze the Chinese economy. This paper presents four tasks: (i) identifying a set of benchmarks that makes it possible to compare various characteristics of the Chinese economy with those of other country groups and the world (level) average; (ii) explaining the differences over the selected set of benchmarks, by looking at the characteristics of the various sub-sectors of the Chinese economy; (iii) understanding existing trends and future feasible future development paths for China by studying the existence of reciprocal constraints between the whole economy and its sub-sectors; and
    Keywords: China, Energy, Multi-Scale Integrated Analysis, Societal Metabolism,
    JEL: O11 O13 O53 Q01 Q57 Q58
    Date: 2008–01
  12. By: Jean-Michel Glachant (ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Vincent Rious (SUPELEC-Campus Gif - SUPELEC)
    Abstract: In a “Weak institutional complementarity” type of institution building it is typically the less replaceable institutional characteristic which dictates the path of change for the institution as a whole. We will show it is exactly what explains the diversity and imperfection of actual transmission monopoly designs in competitive electricity markets. Firstly we argue that transmission monopoly in competitive electricity markets has to be analysed within an industry modular frame. Transmission is a set of several modules which have to be distinguished and separated in any design analysis and comparison. At least three modules make the core of transmission design: 1° the short run management of network externality; 2° the short run management of cross border trade; and 3° the long run management of network investment. Second in a new-institutional economics perspective we say that 1°monopoly design in a competitive policy cannot handle these three modules irrespective of the “institutional” definition and allocation of property rights on transmission; while 2°definition and allocation of property rights on transmission cannot ignore the existing electrical industry and transmission network structure: they basically have to complement each other. Third we apply this frame to compare PJM (USA) and NGC (UK) and we show it remarkably illuminates the reality.
    Keywords: TSO; weak institutional complementarity; modular analysis
    Date: 2007–06–21
  13. By: Zahra Karimi
    Abstract: Iran's constitution emphasizes social justice and obliges government to provide a job for every citizen. But in fact, the government’s duty to provide jobs has shifted to government support for a measure designed to create new employment opportunities through subsidized loans to the private sector. This policy has not been successful to date, and the current stock of unemployed workers is about three million--12.75 percent of the country's labor force. To realize the desire of the Iranian people to achieve full employment and social justice, the government must implement employment guarantee schemes, or EGS, in the most deprived areas. Elected town and village councils can design and manage the public works with the help of other government, as well as nongovernment, institutions. Programs can be financed using less than 10 percent of the annual oil-exporting revenue that is deposited in the Oil Stabilization Fund.
    Date: 2008–01
  14. By: John Henderson; Katharina Janke; Carol Propper
    Abstract: We examine the relationship between common sources of airborne pollution and population mortality in present day England. The current air quality limit values are low by both historical and international standards, and these are set at levels which are believed not to be harmful to health. We assess whether this view is correct. We use data at local authority level for the period 1998 to 2004 to examine whether current levels of airborne pollution, as measured by annual mean concentrations of carbon monoxide, nitrogen dioxide, particulate matter less than 10 µm in diameter (PM10) and ozone, are associated with excess deaths. We examine all cause mortality and deaths from specific cardiovascular and respiratory causes that are known to be exacerbated by air pollution. We exploit the panel nature of our data to control for any unobserved time-invariant associations at local authority level between high levels of pollution and poor population health and estimate multi-pollutant models to allow for the fact that three of the pollutants are closely correlated. We find higher levels of PM10 and ozone are associated with higher mortality rates. The size of the effects we find translates into around 4,500 deaths per annum.
    Keywords: airborne pollutants, adult mortality, geographical analysis
    JEL: I12 I18
    Date: 2007–12
  15. By: Seo, S. Niggol
    Abstract: This paper develops a new analysis to measure climate change impacts on livestock management taking into account the interactions between crops and livestock. A micro-econometric analysis on the choice of agricultural system and on the conditional income for each system is used. The paper used African data collected from 9000 farmers across 11 countries in Africa. The results indicate that when climate is hot, farmers prefer mixed farms over specialized farms on either crops or livestock. When climate is wet, they often choose crops over livestock. Half a century later, livestock only farms are predicted to decrease by 2% under CCC, 5% under CCSR, and 7% under PCM. On the other hand, livestock farms with also crops are predicted to increase by 5% under CCC and CCSR, and 11% under PCM. Livestock only farm profit also falls by 40% under CCC, 250% under CCSR, and 600% under PCM. The profit of livestock farm with crops, however, increases by 17% under PCM. Under the CCC, expected farm income falls by 12%. On the other hand, farm income increases by 13% under the PCM scenario. The damage estimate (benefit estimate) on agriculture as a whole with the transition to the best system is lower (higher) than that without system switch.
    Keywords: Climate Change; Livestock; Joint Analysis; Micro-econometrics
    JEL: Q1 Q5
    Date: 2008–01–27
  16. 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
  17. By: Vicent Alcantara Escolano (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Emilio Padilla Rosa (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Jordi Roca Jusmet (Departament de Teoria Econòmica, Universitat de Barcelona)
    Abstract: A lo largo del trabajo hemos analizado, tanto desde una perspectiva agregada, como posteriormente con todo el detalle posible, la evolución experimentada por estas emisiones, teniendo en cuenta las limitaciones de información . Para hacerlo se han utilizado conceptos y precisiones metodológicas ampliamente utilizadas en la literatura científica sobre el tema. Del estudio realizado en la primera parte del trabajo resulta evidente que el importante crecimiento de las emisiones en Cataluña durante el periodo considerado, de un 60.1%, muy superior a la media española (50,5%), se explica como principal factor por el aumento en el PIB per cápita, con un crecimiento del 33,35% . El crecimiento demográfico también habría contribuido de forma importante al incremento en las emisiones totales, con un aumento del 10,5% de la población; sobre todo a partir de 1999, ya que en la década de los noventa la población se mantuvo estable con pocas
    Date: 2007–11

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.