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on Energy Economics |
| By: | Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Enrica de Cian (FEEM; Department of Economics, University Of Venice Cà Foscari); Elisa Lanzi (FEEM) |
| Abstract: | This paper presents an empirical study of energy demand, in which demand for a series of energy goods (Gas, Oil Products, Coal, Electricity) is expressed as a function of various factors, including temperature. Parameter values are estimated econometrically, using a dynamic panel data approach. Unlike previous studies in this field, the data sample has a global coverage, and special emphasis is given to the dynamic nature of demand, as well as to interactions between income levels and sensitivity to temperature variations. These features make the model results especially valuable in the analysis of climate change impacts. Results are interpreted in terms of derived demand for heating and cooling. Non-linearities and discontinuities emerge, making necessary to distinguish between different countries, seasons, and energy sources. Short- and long-run temperature elasticities of demand are estimated. |
| Keywords: | Advertising, Media Industries, Broadcasting, Price Discrimination, Television, Radio, Differentiation.. |
| JEL: | L82 M37 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2007_06&r=ene |
| By: | Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Valentina Bosetti (Fondazione Eni Enrico Mattei); Emanuele Massetti (Fondazione Eni Enrico Mattei); Massimo Tavoni (Fondazione Eni Enrico Mattei) |
| Abstract: | The stabilisation of GHG atmospheric concentrations at levels expected to prevent dangerous climate change has become an important, global, long-term objective. It is therefore crucial to identify a cost-effective way to achieve this objective. In this paper we use WITCH, a hybrid climate-energy-economy model, to obtain a quantitative assessment of some cost-effective strategies that stabilise CO2 concentrations at 550 or 450 ppm. In particular, this paper analyses the energy investment and R&D policies that optimally achieve these two GHG stabilisation targets (i.e. the future optimal energy mix consistent with the stabilisation of GHG atmospheric concentrations at 550 and 450 ppm). Given that the model accounts for interdependencies and spillovers across 12 regions of the world, optimal strategies are the outcome of a dynamic game through which inefficiency costs induced by global strategic interactions can be assessed. Therefore, our results are somehow different from previous analyses of GHG stabilisation policies where a central planner or a single global economy are usually assumed. In particular, the effects of free-riding incentives in reducing emissions and in investing in R&D are taken into account. Technical change being endogenous in WITCH, this paper also provides an assessment of the implications of technological evolution in the energy sector of different stabilisation scenarios. Finally, this paper quantifies the net costs of stabilising GHG concentrations at different levels, for different allocations of permits and for different technological scenarios. In each case, the optimal long-term investment strategies for all available energy technologies are determined. The case of an unknown backstop energy technology is also analysed. |
| Keywords: | Climate Policy, Energy R&D, Investments, Stabilisation Cost |
| JEL: | H4 O3 Q4 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2007_22&r=ene |
| By: | Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Francesco Bosello (Department of Economics, University of Milan); Enrica De Cian (Scuola di Studi Avanzati, University of Venice Ca'Foscari) |
| Abstract: | Future energy demand will be affected by changes in prices and income, but also by other factors, like temperature levels. This paper draws upon an econometric study, disentangling the contribution of temperature in the determination of the annual regional demand for energy goods. Combining estimates of temperature elasticities with scenarios of future climate change, it is possible to assess variations in energy demand induced (directly) by the global warming. We use this information to simulate a change in the demand structure of households in a CGE model of the world economy, in a set of assessment exercises. The changing demand structure triggers a structural adjustment process, influencing trade flows, regional competitiveness of industries and regions, and welfare. We also consider the possible existence of imperfect competition in the energy markets, analyzing the impact of changes in energy demand with an alternative model version, in which energy industries are modeled as Cournot oligopolies. |
| Keywords: | Climate Change, Damage Function, Integrated Assessment, General Equilibrium. |
| JEL: | C68 D58 F18 Q51 Q54 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2007_09&r=ene |
| By: | Szymon Wlazlowski (Aston University, UK.); Monica Giulietti (Aston University, UK.); Jane Binner (Aston University, UK.); Costas Milas (Keele University, UK and The Rimini Centre for Economic Analysis, Rimini, Italy.) |
| Abstract: | Consumers complain that retail prices of petroleum products increase instantly whenever prices of crude oil increase but take a long time to fall after crude oil price decreases. This apparent discrepancy attracts significant attention in the applied literature, as it might imply a welfare transfer from individual consumers to big oil companies. Unfortunately, the way the “rocket and feathers” phenomena are modelled suffers from unrealistic assumptions. In this article we analyse the price transmission between energy products at different processing tiers in the European Union using innovative smooth transition models. We find previously missed patterns, consistent with transactional costs theories and casting some doubts on the negative welfare effect of asymmetric price transmission. |
| Keywords: | Oil Markets, Nonlinear Models, Price Transmission, Europe |
| JEL: | Q41 C22 D40 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:04-08&r=ene |
| By: | Ofir D. Rubin; Miguel Carriquiry; Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | Biofuel subsidies in the United States have been justified on the following grounds: energy independence, a reduction in greenhouse gas emissions, improvements in rural development related to biofuel plants, and farm income support. The 2007 energy act emphasizes the first two objectives. In this study, we quantify the costs and benefits that different biofuels provide. We consider the first two objectives separately and show that each can be achieved with a lower social cost than that of the current policy. Then, we show that there is no evidence to disprove that the primary objective of biofuel policy is to support farm income. Current policy favors corn production and the construction of corn-based ethanol plants. We find that favoring corn happens to be the best way to remove land from food and feed production, thus providing higher commodity prices and income to farmers and landowners. Next, we calculate two sets of alternative biofuel subsidies that are targeted to meeting income transfer objectives and either greenhouse gas emission reductions or fuel energy reductions. The first of these assumes that greenhouse gas emissions and high crop prices are joint objectives, and the second assumes that fuel independence and high crop prices are the joint objectives. Finally, we infer the social willingness to pay for biofuel services. This, in turn, allows us to propose a subsidy schedule that maintains (inferred) social preferences and provides a higher incentive for farmers to choose production of cellulosic materials. This is particularly relevant since the 2007 energy act sets a renewable fuels standard that relies heavily on cellulosic biofuel but does not specify a higher "per gallon" incentive to producers. |
| Keywords: | biofuels, biofuel subsidies, energy security, feedstock, greenhouse gas emissions, social preferences, value-added agriculture. |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:08-wp459&r=ene |
| By: | Rubin, Ofir; Carriquiry, Miguel A.; Hayes, Dermot J. |
| Abstract: | Biofuel subsidies in the United States have been justified on the following grounds: energy independence, a reduction in greenhouse gas emissions, improvements in rural development related to biofuel plants, and farm income support. The 2007 energy act emphasizes the first two objectives. In this study, we quantify the costs and benefits that different biofuels provide. We consider the first two objectives separately and show that each can be achieved with a lower social cost than that of the current policy. Then, we show that there is no evidence to disprove that the primary objective of biofuel policy is to support farm income. Current policy favors corn production and the construction of corn-based ethanol plants. We find that favoring corn happens to be the best way to remove land from food and feed production, thus providing higher commodity prices and income to farmers and landowners. Next, we calculate two sets of alternative biofuel subsidies that are targeted to meeting income transfer objectives and either greenhouse gas emission reductions or fuel energy reductions. The first of these assumes that greenhouse gas emissions and high crop prices are joint objectives, and the second assumes that fuel independence and high crop prices are the joint objectives. Finally, we infer the social willingness to pay for biofuel services. This, in turn, allows us to propose a subsidy schedule that maintains (inferred) social preferences and provides a higher incentive for farmers to choose production of cellulosic materials. This is particularly relevant since the 2007 energy act sets a renewable fuels standard that relies heavily on cellulosic biofuel but does not specify a higher “per gallon” incentive to producers. |
| Keywords: | biofuels, biofuel subsidies, energy security, feedstock, greenhouse gas emissions, social preferences, value-added agriculture |
| Date: | 2008–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12866&r=ene |
| By: | Valentina Bosetti (FEEM); Carlo Carraro (Department of Economics, University Of Venice Ca’ Foscari); Emanuele Massetti (FEEM; FEEM) |
| Abstract: | This paper explores how international knowledge flows affect the dynamics of the domestic R&D sector and the main economic and environmental variables. The analysis is performed using WITCH, a dynamic regional model of the world economy, in which energy technical change is endogenous. The focus is on disembodied energy R&D international spillovers. The knowledge pool from which regions draw foreign ideas differs between High Income and Low Income countries. Absorption capacity is also endogenous in the model. The basic questions are as follows. Do knowledge spillovers enhance energy technological innovation in different regions of the world? Does the speed of innovation increase? Or do free-riding incentives prevail and international spillovers crowd out domestic R&D efforts? What is the role of domestic absorption capacity and of policies designed to enhance it? The new specification of the WITCH model presented in this paper enables us to answer these questions. Our analysis shows that international knowledge spillovers tend to increase free-riding incentives and decrease the investments in energy R&D. We also analyze the implication of a policy mix in which climate policy is combined with a technology policy designed to enhance absorption capacity in developing countries. Significant positive impacts on the costs of stabilising GHG concentrations are singled out. |
| Keywords: | Climate Policy, Energy R&D, International R&D Spillovers, Stabilization |
| JEL: | H0 H2 H3 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2007_11&r=ene |
| By: | Stéphane Dées (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Audrey Gasteuil (Société Générale, 52 Place de l’Ellipse, 92972 Paris La Défense Cedex, France.); Robert K. Kaufmann (Center for Energy & Environmental Studies, Department of Geography and Environment, Boston University, Boston, MA 02215, United States.); Michael Mann (Department of Geography and Environment, Boston University, Boston, MA 02215, United States.) |
| Abstract: | The rapid rise in the price of crude oil between 2004 and the summer of 2006 are the subject of debate. This paper investigates the factors that might have contributed to the oil price increase in addition to demand and supply for crude oil, by expanding a model for crude oil prices to include refinery utilization rates, a non-linear effect of OPEC capacity utilization, and conditions in futures markets as explanatory variables. Together, these factors allow the model to perform well relative to forecasts implied by the far month contracts on the New York Mercantile Exchange and are able to account for much of the $26 rise in crude oil prices between 2004 and 2006. JEL Classification: C53, Q41. |
| Keywords: | Oil prices, Refinery industry, OPEC. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080855&r=ene |
| By: | Matti Liski; Juan Pablo Montero (Instituto de Economía. Pontificia Universidad Católica de Chile.) |
| Abstract: | Motivated by the structure of existing pollution permit markets, we study the equilibrium path that results from allocating an initial stock of storable permits to a large polluting agent and a competitive fringe. A large agent selling permits in the market exercises market power no differently than a large supplier of an exhaustible resource. However, whenever the large agent’s endowment falls short of its efficient endowment –allocation profile that would exactly cover its emissions along the perfectly competitive path– the market power problem disappears, much like in a durable-good monopoly. We illustrate our theory with two applications: the carbon market that may eventually develop under the Kyoto Protocol and beyond and the US sulfur market. |
| Keywords: | Exhaustible resources, market power, pollution markets, durable-good monopoly |
| JEL: | L51 Q28 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:329&r=ene |
| By: | Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Francesco Bosello (Department of Economics, University of Milan) |
| Abstract: | A Climate Change Damage Function (CCDF) is a reduced form relationship linking macroeconomic aggregates (e.g., potential GDP) to climate indicators (e.g., average temperature levels). This function is used in a variety of studies about climate change impacts and policy analysis. However, despite the fact that this function is key in determining results in many integrated assessment models, it is not typically calibrated in a consistent and rigorous way. This paper presents a novel approach, in which several different impacts of climate change are first assessed by means of a full-fledged computable general equilibrium model of the world economy, then results are interpolated to get a simple relationship of the CCDF type. The estimated CCDF is compared with other popular functions used in the literature, to highlight the possible implications associated with the alternative adoption of this functional relationship. |
| Keywords: | Climate Change, Damage Function, Integrated Assessment, General Equilibrium. |
| JEL: | C68 D58 F18 Q51 Q54 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2007_08&r=ene |
| By: | Marcelo Sánchez (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper estimates a linearised DSGE model for the euro area. The model is New Keynesian and allows for a role for oil usage and endogenous price markups. We find that the price markup reacts positively to the ratio of expected discounted profits to current output, which is normally seen to give rise to a "countercyclical" markup. The importance of shocks to monetary policy and oil prices is estimated to have declined in the post-1990 period, in line with the higher predictability of policy and the fall in the persistence and - to a lesser extent - variability of oil disturbances. Counterfactual exercises show that oil efficiency gains would alleviate the inflationary and contractionary consequences of oil shocks, while higher wage flexibility would help ease the impact on real output at the expense of wider fluctuations in inflation. Finally, the rise in price markups induced by an oil disturbance is not found to considerably amplify the inflationary and contractionary effects of the shock. JEL Classification: C15, E31, E32, E37. |
| Keywords: | Estimated DSGE models, euro area, oil shocks, endogenous markup. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080860&r=ene |
| By: | Patrice Dumas (LMD - Laboratoire de Météorologie Dynamique - CNRS : UMR8539 - INSU - Université Pierre et Marie Curie - Paris VI - Polytechnique - X - Ecole Normale Supérieure de Paris, CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts); Minh Ha-Duong (CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts) |
| Abstract: | Many economic sectors, like housing or transportation, are exposed to climate and likely to suffer efficiency losses when climate changes. The global economy is far from dematerialized yet, these sectors represent a significant fraction of the existing capital stock. Using an optimal growth model with perfect knowledge, we examine the balance between these efficiency losses and investment in adaptation measures, which can become sunk costs when climate changes even more. Simulations remind that adaptation should be proactive rather than reactive: protection measures installed today are not designed for today's climate only, but anticipate future warmer conditions over their lifetime. While there is an over-investment compared with a no climate change baseline, the overall cost to adapt is relatively low in front of the potential losses from misadaptation. This allows to stay almost always well adapted to climate. |
| Keywords: | Climate change; adaptation; optimal growth; integrated assessment model |
| Date: | 2008–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00207621_v1&r=ene |
| By: | Pillai N, Vijayamohanan |
| Abstract: | By virtue of the vital nature of electric power, both to our economic and personal well being, a power system is expected to supply electrical energy as economically as possible, and with a high degree of quality and reliability. The developed countries in general place higher reliability standards on the performance of electricity supply. However, there has been no significant study in the context of the Indian power sector to analyze reliability in terms of loss of load probability; the technical appraisal of the State power systems in general is confined to examining the plant load factor (PLF) as a measure of capacity utilization only. The present study is a modest attempt to evaluate the reliability of the Kerala power system in the framework of a theory-informed methodology – the first of its kind. |
| Keywords: | Loss of load probability; reliability; power system; Kerala |
| JEL: | Q41 C44 |
| Date: | 2008–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:6953&r=ene |
| By: | Pantelis Kalaitzidakis (University of Crete, Greece and The Rimini Centre for Economic Analysis, Rimini, Italy.); Theofanis P. Mamuneas (University of Cyprus, Cyprus and The Rimini Centre for Economic Analysis, Rimini, Italy.); Thanasis Stengos (University of Guelph, Canada and The Rimini Centre for Economic Analysis, Rimini, Italy.) |
| Abstract: | In this paper we examine the effect of pollution, as measured by CO2 emissions, on economic growth among a set of OECD countries during the period 1981-1998. We examine the relationship between total factor productivity (TFP) growth and pollution using a semiparametric smooth coefficient model that allow us to directly estimate the output elasticity of pollution. The results indicate that there exists a nonlinear relationship between pollution and TFP growth. The output elasticity of pollution is small with an average sample value of 0.008. In addition we find an average contribution of pollution to productivity growth of about 1 percent for the period 1981-1998. JEL Classifications: C14, O13, O40 |
| Keywords: | TFP Growth, Pollution, Semiparametric Estimation. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:06-08&r=ene |
| By: | John Fitz Gerald (Economic and Social Research Institute (ESRI)); Susan Scott (Economic and Social Research Institute (ESRI)); Mary Keeney (Economic and Social Research Institute (ESRI)) |
| Abstract: | This paper investigates pricing power, an important criterion for identifying sectors that would be vulnerable under environmental tax reform. Environmental tax reform, defined here as introduction of carbon taxes alongside reductions in labour taxes, could bear heavily on sectors that are energy intensive and highly traded, in particular if their options for adapting technology are limited. However, a sector with pricing power has less to fear as, rather than having to conform to the world price, it can set its price to accommodate a tax mark-up. To assess pricing power, a model of long-run price setting is specified and tested. Significant and plausible results emerged from this exercise, indicating that pricing power as a major aspect of a sector’s relative vulnerability can be assessed. Of the six sectors analysed, the Basic metals sector had least pricing power and the Non-metallic minerals sector had most. As proxies for the world price, the German price tended to matter more than the US price. Thus, competitiveness fears are reduced not just where there is good potential for adapting technology but also if application of environmental tax reform is EU-wide. |
| Keywords: | price-setting behaviour, competitiveness, environmental tax reform |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp222&r=ene |
| By: | Steven J. Davis; Cheryl Grim; John Haltiwanger; Mary Streitwieser |
| Abstract: | We develop a large customer-level database to study electricity pricing to U.S. manufacturing plants from 1963 to 2000. We document tremendous dispersion in price per kWh, trace that dispersion to quantity discounts and spatial differentials, estimate the role of cost factors in quantity discounts, and test whether marginal price schedules conform to marginal cost and Ramsey pricing conditions. Our cost analysis and pricing tests rely on a novel empirical approach that exploits utility-level differences in the customer size distribution to estimate how supply costs vary with purchase quantity.<br> <br>The results reveal that annual supply costs per kWh fall by more than half in moving from smaller to bigger purchasers, providing a clear cost-based rationale for quantity discounts. Before the mid 1970s, marginal price and marginal cost schedules are nearly identical, in line with efficient pricing. In later years, marginal supply costs exceed marginal prices for smaller manufacturing customers by 10% or more. In contrast to a clear role for cost factors, our evidence provides no support for a standard Ramsey-pricing interpretation of quantity discounts. Spatial dispersion in retail electricity prices among states, counties and utility service territories is large and rises over time for smaller purchasers. |
| JEL: | L60 L94 Q40 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13778&r=ene |
| By: | Cees A. Withagen; Raymond J.G.M. Florax; Abay Mulatu |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:0701&r=ene |
| By: | AMIGUES Jean-Pierre; MOREAUX Michel |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ler:wpaper:08.01.245&r=ene |