nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒02‒16
nineteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. Do High Oil Prices Justify an Increase in Taxation in a Mature Oil Province? The Case of the UK Continental Shelf By Carole Nakhle
  2. Oil and Gas Dependence of EU-15 Countries By Edward Christie
  3. The Costs of Kyoto Adjustments for Spanish Households By Xavier Labandeira; José María Labeaga; Miguel Rodríguez
  4. Energy consumption and economic development:a semiparametric panel analysis By Phu Nguyen Van
  5. Oil Price Movements and the Global Economy: A Model-Based Assessment By Selim Elekdag; Rene Lalonde; Douglas Laxton; Dirk Muir; Paolo Pesenti
  6. Food and oil prices By Katsushi Imai; Raghav Gaiha; Ganesh Thapa
  7. Can the North Sea Still Save Europe? By Carole Nakhle
  8. Electricity Demand for Sri Lanka: A Time Series Analysis By Himanshu A. Amarawickrama; Lester C. Hunt
  9. Regulatory agencies : impact on firm performance and social welfare By Rossi, Martin A.; Estache, Antonio
  10. Trade in the greenhouse: efficient policy in a global model By Geraint Johnes
  11. Impact of a Lower Oil Subsidy on Indonesian Macroeconomic Performance, Agricultural Sector and Poverty Incidences: a Recursive Dynamic Computable General Equilibrium Analysis By Rina Oktaviani; Dedi Budiman Hakim; Hermanto Siregar; Sahara Sahara
  12. The Economic Value of Iowa’s Natural Resources By Otto, Daniel; Monchuk, Dan; Jintanakul, Kanlaya; Kling, Catherine L.
  13. Adapting to Climate Change in Reindeer Herding: The Nation-State as Problem and Solution. By Erik S. Reinert; Iulie Aslaksen; Marie G. Eira; Svein Mathiesen; Hugo Reinert; Ellen Inga Turi
  14. The Biophysical Perspective of a Middle Income Economy: Material Flows in Mexico By Ana C. Gonzalez-Martinez; Heinz Schandl
  15. Estimating the Impact of Climate Change on Crop Yields: The Importance of Nonlinear Temperature Effects By Wolfram Schlenker; Michael Roberts
  16. Marchés de permis d’émissions de CO2 dans le transport : une analyse prospective dans le cas des automobilistes et du fret By Charles Raux
  17. Konzessionsabgaben und Länderfinanzausgleich : Probleme und Lösungsansätze der Einbeziehung der kommunalen Konzessionsabgaben in den Länderfinanzausgleich am Beispiel der Stadtstaaten By Michael Broer
  18. Tracking Global Factor Inputs, Factor Earnings, and Emissions Associated with Consumption in a World Modeling Framework By Faye Duchin; Stephen H. Levine
  19. Climat et générations futures - Un examen critique du débat académique suscité par le Rapport Stern By Olivier Godard

  1. By: Carole Nakhle (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)
    Abstract: In response to the structural shift in oil price coupled with greater import dependency, concerns about security of supply have once again emerged as a major policy issue. The UK, the largest producer of oil and natural gas in the European Union, became a net importer of natural gas in 2004, and, according to Government estimates, will become a net importer of oil by the end of the decade. A weakened North Sea performance means extra reliance, both for the UK and Europe as a whole, on global oil and gas network and imports. In 2002, the UK Government introduced a 10 per cent supplementary charge and in 2005, doubled the charge to 20 per cent in an attempt to capture more revenues from the oil industry because of the increase in the price of crude oil. However, higher tax rates do not necessarily generate higher fiscal revenue and in the long term may result in materially lower revenues if investment is discouraged. It is therefore argued that the increase in the fiscal take came at the wrong time for the UK Continental Shelf and that the UK Government’s concern should have been to encourage more oil production from its declining province, especially in the light of the rising concern surrounding the security of supply.
    Keywords: Petroleum Taxation, Energy Security, Oil Price
    Date: 2007–02
  2. By: Edward Christie (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This study seeks to answer two questions: first, which countries and industries within the EU-15 group of countries are most vulnerable to possible supply shocks with respect to crude oil and with respect to natural gas and, second, what is the current state of the EU's debate on Europe's energy security. The most vulnerable countries with respect to petroleum products are Finland, Belgium and Greece, while the most vulnerable countries with respect to natural gas are Finland, Austria and Italy. The least vulnerable countries in both cases are first and foremost those with currently high North Sea extraction levels such as the UK, Denmark and, in the case of gas only, the Netherlands. Leaving those countries aside (while bearing in mind that their resources are running out), the least vulnerable countries are Spain and France in the case of petroleum products, and France and Ireland in the case of natural gas. The focal point of the EU's energy security debate is its relationship with Russia and the Russian gas monopoly exporter, Gazprom. The EU is already quite strongly dependent on Russian resources, and this dependence is set to rise if current trends continue. Furthermore, Gazprom's very active corporate expansion strategy, both downstream within the EU and upstream in Central Asia and elsewhere, further heightens the EU's energy security problem. The European Commission, which was previously seeking to achieve a fully competitive internal energy market through unbundling of supply and distribution, has responded to this challenge by proposing new legislation that would effectively impose unbundling on EU companies and on non-EU companies that operate inside the EU, Gazprom included. The legislation that the European Commission proposes is, from an economic point of view, possibly the best response to the EU's current energy challenges. It would limit (and, in theory, possibly reverse) Gazprom's downstream penetration in the EU, in addition to contributing to a better functioning of the EU's internal energy market. Moreover, the Commission's approach implicitly leaves an open door for Russia to choose between a first-best solution and a second-best solution with respect to EU-Russian energy relations. If liberalization were to occur bilaterally, both entities would be able to invest in each other's energy markets, leading to improved efficiency and security for all concerned. If Russia were to refuse, the EU would have in place a mechanism that would enable it to prevent Gazprom from entering the EU's downstream market, thus contributing to improving the EU's energy security at the expense of Gazprom profits.
    Keywords: energy dependence, energy security, EU-Russia relations
    JEL: Q32 Q34 Q38
    Date: 2007–12
  3. By: Xavier Labandeira; José María Labeaga; Miguel Rodríguez
    Abstract: In this paper we present a microsimulation model to calculate the effects of a tax levied on Spanish energy-related CO2 (carbon dioxide) emissions in order to comply with EU (Kyoto-mandated) targets. The model uses the results of our prior estimation of a demand system with Spanish household data from 1973 to 1995, which is especially designed for simultaneous analysis of different energy goods. Our objective is to obtain in-depth information on the behavioural responses by different types of households, which will allow us to determine the welfare effects of tax-induced price changes, their distribution across society and the environmental consequences within the residential sector. The results show a significant response by households, sizeable emission reductions, important tax revenues, moderate welfare changes and distributional effects. The simulated policy can therefore be considered a feasible option for tackling some of the current and severe inefficiencies in Spanish energy and environmental domains.
    Date: 2008–01
  4. By: Phu Nguyen Van (THEMA,CNRS and Université de Cergy-Pontise)
    Abstract: This paper proposes a semiparametric analysis for the study of the relationship between energy consumption per capita and income per capita for an international panel data. It shows little evidence for the existence of an environmental Kuznets curve for energy consumption. Energy consumption increases with income at an increasing rate for low income levels and then stabilizes for higher income levels. Changes in energy structure have no significant effect on energy consumption.
    Keywords: Energy consumption,environmental Kuznets curve,semiparametric panel model, nonparametric tests
    JEL: C14 C23 Q40
    Date: 2008
  5. By: Selim Elekdag; Rene Lalonde; Douglas Laxton; Dirk Muir; Paolo Pesenti
    Abstract: We develop a five-region version (Canada, a group of oil exporting countries, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices. In the presence of real adjustment costs that reduce the short- and medium-term responses of oil supply and demand, our simulations can account for large endogenous variations of oil prices with large effects on the terms of trade of oil-exporting versus oil-importing countries (in particular, emerging Asia), and result in significant wealth transfers between regions. This is especially true when we consider a sustained increase in productivity growth or a shift in production technology towards more capital- (and hence oil-) intensive goods in regions such as emerging Asia. In addition, we study the implications of higher taxes on gasoline that are used to reduce taxes on labor income, showing that such a policy could increase world productive capacity while being consistent with a reduction in oil consumption.
    JEL: E66 F32 F47
    Date: 2008–02
  6. By: Katsushi Imai; Raghav Gaiha; Ganesh Thapa
    Date: 2008
  7. By: Carole Nakhle (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)
    Abstract: In the 1980s and 1990s the North Sea emerged as a key non-OPEC oil producing province. Yet today overall production is declining, in both the British and Norwegian sectors and the big oil companies and investors are losing interest in what they now see as a mature province. But apparent maturity is not a bar to new prospects and new possibilities. This paper analyses not merely the still significant potential of the North Sea, but also the wider and increasingly attractive prospects offered by the opening up of the High North, the Barents Sea and part of the Arctic region – all areas of rapidly growing interest which are on Europe’s doorstep. Success will depend heavily on key questions such as the world oil price trend, technological advance and the structure of fiscal regimes for oil and gas extraction. But the opportunities are there and they could be to Europe’s great advantage.
    Keywords: North Sea, High North, Fiscal Regime, Oil Price, Mature Oil Province
    Date: 2007–10
  8. By: Himanshu A. Amarawickrama (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey & Infrastructure Advisory, Ernst and Young LLP, London); Lester C. Hunt (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)
    Abstract: This study estimates electricity demand functions for Sri Lanka using six econometric techniques. It shows that the preferred specifications differ somewhat and there is a wide range in the long-run price and income elasticities with the estimated long-run income elasticity ranging from 1.0 to 2.0 and the long run price elasticity from 0 to –0.06. There is also a wide range of estimates of the speed with which consumers would adjust to any disequilibrium, although the estimated impact income elasticities tended to be more in agreement ranging from 1.8 to 2.0. Furthermore, the estimated effect of the underlying energy demand trend varies between the different techniques; ranging from being positive to zero to predominantly negative. Despite these differences the forecasts generated from the six models up until 2025 do not differ significantly. Thus on one hand it is encouraging that the Sri Lanka electricity authorities can have some faith in econometrically estimated models used for forecasting. However, by the end of the forecast period in 2025 there is a variation of around 452MW in the base forecast peak demand; which, in relative terms for a small electricity generation system like Sri Lanka’s, represents a considerable difference.
    Keywords: Developing Countries, Electricity Demand Estimation, Sri Lanka
    JEL: Q48 Q41
    Date: 2007–10
  9. By: Rossi, Martin A.; Estache, Antonio
    Abstract: The authors explore the relation between the establishment of a regulatory agency and the performance of the electricity sector. The authors exploit a unique dataset comprising firm-level information on a representative sample of 220 electric utilities from 51 development and transition countries for the years 1985 to 2005. Their results indicate that regulatory agencies are associated with more efficient firms and with higher social welfare.
    Keywords: Infrastructure Regulation,Privatization,Energy Production and Transportation,Emerging Markets,Regulatory Regimes
    Date: 2008–02–01
  10. By: Geraint Johnes
    Abstract: The impact of environmental Kuznets curve (EKC) effects is evaluated in the context of a full model of production and trade within and between rich and poor economies. The shape of iso-emissions curves, defined in tariff and emissions tax space, is evaluated both in the presence and in the absence of an EKC. Gains in the income of developing countries are possible without compromising on emissions where there are inefficiencies in policy. However, where policy is efficient there exists an important trade-off, evaluated here, between emissions and developing country income.
    Keywords: Trade, Environment
    Date: 2008
  11. By: Rina Oktaviani; Dedi Budiman Hakim; Hermanto Siregar; Sahara Sahara
    Abstract: Budget deficit, exchange rate fluctuation and high fuel world price provides a pressure on budget capacity to stimulate the Indonesian economy. The government has designed several fiscal policies, including reducing the fuel subsidy. The study objective is to analyse the impact of reducing fuel subsidy on macroeconomic variables, agricultural sector, and income distribution. The modification on the basic model, which is a recursive-dynamic CGE model, is made in this study. The data used in the model is of the Indonesian I-O Table 2000, The Indonesian Social Accounting Matrix 2000, National Household Survey data and parameter from some other sources. The results show that the reduction in fuel price subsidy tends to increase prices of industrial outputs that highly depend on fuel, such as transportation and fishery sectors. In contrast, the change in fuel price does not influence the price of paddy. Wage of skilled labor, land rent, and capital rent decline steadily in response to the change in fuel price. Households will lose their income following the reduction in fuel subsidy, which then decreases the welfare of households. Incomes are not evenly distributed within the society (household groups). An increased fuel price at consumer level declines the Indonesian real GDP. The government should give the compensation of reducing the fuel subsidy directly to the poor people. The compensation can also be given directly to the poor people through the development of infrastructure, which may solve some supply side bottlenecks in the economy.
    Keywords: Fuel subsidy, income distribution, recursive dynamic CGE
    JEL: C68 D63 I32 I38 O13
    Date: 2007
  12. By: Otto, Daniel; Monchuk, Dan; Jintanakul, Kanlaya; Kling, Catherine L.
    Abstract: In a time of changing demographics, an increasing demand for renewable energy sources and a growing concern for the environment, policy makers in Iowa are faced with the challenge of identifying strategies for economic development that balances the needs of the changing population with economic and resource sustainability.
    Date: 2008–02–14
  13. By: Erik S. Reinert; Iulie Aslaksen; Marie G. Eira; Svein Mathiesen; Hugo Reinert; Ellen Inga Turi
    Abstract: This paper discusses the role of nation-states and their systems of gover- nance as sources of barriers and solutions to adaptation to climate change from the point of view of Saami reindeer herders. The Saami, inhabiting the northernmost areas of Fennoscandia, is one of more than twenty ethnic groups in the circumpolar Arctic that base their traditional living on reindeer herding. Climate change is likely to affect the Saami regions severely, with winter temperatures predicted to increase by up to 7 centigrade. We argue that the pastoral practices of the Saami herders are inherently better suited to handle huge natural variation in climatic con- ditions than most other cultures. Indeed, the core of their pastoral practices and herding knowledge is skillful adaptation to unusually frequent and rapid change and variability. This paper argues that the key to handle permanent changes successfully is that herders themselves have sufficient degrees of freedom to act. Considering the similarities in herding practices in the fours nation-states between which Saami culture is now divided . Norway, Sweden, Finland, and Russia . the systems of governance are surprisingly different. Indeed, the very definition of what is required to be defined as an ethnic Saami is very different in the three Nordic countries. We argue that timely adjust- ments modifying the structures of governance will be key to the survival of the Saami reindeer herding culture. Since the differences in governance regimes . and the need to change national governance structures . are so central to our argument, we spend some time tracing the origins of these systems.
    Date: 2008–01
  14. By: Ana C. Gonzalez-Martinez; Heinz Schandl (CSIRO Sustainable Ecosystems, Australia)
    Abstract: In this paper we analyse natural resource use dynamics in the Mexican economy during the last three decades. Despite low and uneven economic growth, the extraction and use of materials in the Mexican economy has continuously increased over the last 30 years. During this time, population growth, rather than economic growth, has been the main driving force for biophysical growth. In addition, a fundamental change in the primary sectors, in manufacturing as well as in household consumption, has taken place and is reflected in an increasing importance of fossil fuel and construction materials use. Mexico’s economy is strongly influenced by international trade since the country has opened up for competition on international markets. In the 1970s, Mexico’s main export was primary resources. This has changed and manufactured goods now have much greater importance due to a boom in assembling industries. Mexico, unlike other Latin American countries, has achieved a diversification of production moving towards technology intensive products and now has a better mix in its export portfolio. However, crude oil exports still represent the single most important export commodity. Mexico’s material consumption is still well bellow the OECD average but is growing fast and the current resource use patterns may well present serious social and environmental problems for the medium and long term sustainability of Mexico’s economy and communities. Information on natural resource use and resource productivity could provide valuable information to guide economic policy planning for Mexico’s future.
    Keywords: physical accounting, material flows, resource productivity, Mexico
    JEL: Q43 O11
    Date: 2007–12
  15. By: Wolfram Schlenker; Michael Roberts
    Abstract: The United States produces 41% of the world's corn and 38% of the world's soybeans, so any impact on US crop yields will have implications for world food supply. We pair a panel of county-level crop yields in the US with a fine-scale weather data set that incorporates the whole distribution of temperatures between the minimum and maximum within each day and across all days in the growing season. Yields increase in temperature until about 29C for corn, 30C for soybeans, and 32C for cotton, but temperatures above these thresholds become very harmful. The slope of the decline above the optimum is significantly steeper than the incline below it. The same nonlinear and asymmetric relationship is found whether we consider time series or cross-sectional variation in weather and yields. This suggests limited potential for adaptation within crop species because the latter includes farmers' adaptations to warmer climates and the former does not. Area-weighted average yields given current growing regions are predicted to decrease by 31-43% under the slowest warming scenario and 67-79% under the most rapid warming scenario by the end of the century.
    JEL: C23 Q54
    Date: 2008–02
  16. By: Charles Raux (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat)
    Abstract: Les avantages théoriques des marchés de permis montrent leur pertinence pour limiter les émissions de CO2 des transports. Ce type d’instrument permet d’atteindre l’objectif quantitatif de limitation des émissions à moindre coût, et assure, à travers l’allocation initiale des quotas, la séparation entre les questions d’efficacité et celles, plus complexes, d’équité.<br />L’équivalence entre contenu en carbone du carburant consommé et CO2 émis, permet de concevoir des systèmes simples où l’unité d’échange est le permis attaché à chaque litre de carburant consommé. La décentralisation des permis au niveau des consommateurs finaux de carburant crée de fortes incitations à la réduction des consommations, du fait de l’avantage palpable perçu par ceux qui réduiront leurs émissions au-delà de leur allocation initiale.<br />Pour les automobilistes, l’allocation gratuite des permis favoriserait l’acceptabilité du système de quotas contrairement à une nouvelle taxe grevant le carburant déjà lourdement taxé. Pour le transport de marchandises, les quotas ne pourraient pas être alloués gratuitement et seraient vendus aux chargeurs par une autorité régulatrice. Une allocation forfaitaire annuelle par véhicule serait attribuée aux transporteurs pour en améliorer l’acceptabilité.
    Keywords: Marchés de permis d'émission négociables ; redevance de pollution ; quotas d'émission de CO2 ; politique de l'environnement (aspect économique) ; permis et obligations négociables (analyse prospective) ; échange de droits d'émission ; facteur 4 ; secteur des transports ; acceptabilité ; équité
    Date: 2007
  17. By: Michael Broer
    Abstract: Local authorities charge supply companies with concession dues on gas, water and electricity (Konzessionsabgaben), which are similar to some local taxes (local business tax, real property tax). These taxes have already been included in the fiscal equalization system and in the future concession dues should be treated alike. Its importance in revenue terms is an additional reason for this: concession dues amount to 1.8 bl. € compared to real property tax of typ A of 0.3 bl. If concession dues are treated as mentioned above, payments in the fiscal equalization system may be strategically manipulated. First concession dues and their effects of the payments in the fiscal equalization system will be described. Then I will have a look at the aforementioned strategic policy and its effects on the payments and the arrangements to contain this strategic policy, which is exemplified by the so called city-states (Stadtstaaten).
    JEL: H29 H71 H77
    Date: 2008
  18. By: Faye Duchin (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA); Stephen H. Levine (Department of Environmental Engineering, Tufts University, Boston, MA, USA)
    Abstract: Abstract. This paper presents a new approach for estimating the amount of carbonembodied in a product consumed in a given economy, taking account of where the inputsto that product were extracted and processed all along the supply chain. The method isgeneralized to apply to all factor inputs, including materials and energy, as well as pollutant emissions and can track not only the flows of factors and goods as imports andexports along the global supply chain but also the payments for these inputs made by ultimate consumers along the global value chain. The new method makes use ofabsorbing Markov chains that track downstream and upstream flows. These chains are first described in terms of the mathematics of a one-region input-output model and thengeneralized to the global framework of a multiregional world economy. The paper also describes the standard way of solving this problem, which we call the Big A method, andindicates the main advantages of the Markov chain approach, namely that it is implemented without loss of information using a more compact database and can addressa wider range of questions, especially ones related to the recycling of materials. Finally,the paper discusses the parameter requirements distinguishing this type of ex-postanalysis from model-based exploration of alternative scenarios about the future and makes the case for combining the two.
    JEL: C63 C67 F18 Q56 Q57
    Date: 2008–01
  19. By: Olivier Godard (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)
    Abstract: Approuvé par plusieurs prix Nobel (Mirrlees, Sen, Solow, Stiglitz) le Rapport Stern sur l’économie du changement climatique a également été vivement critiqué par plusieurs économistes de renom, en particulier nord-américains. Le cœur des critiques concerne les choix en matière de taux d’actualisation, le traitement de l’incertitude et celui de l'adaptation des générations futures à la nouvelle donne climatique. L’équipe Stern est globalement accusée d’avoir manipulé la méthodologie économique afin de pouvoir dresser un tableau catastrophiste du problème. De l’examen du débat, il ressort que le rapport Stern n’est pas à l’abri de tout reproche mais qu’il a raison sur l’essentiel contre ses critiques si l’on reste dans le cadre de la philosophie utilitariste dont procède l'analyse coûts-avantages. Comme un boomerang, ce débat a permis de révéler le lot d’hypothèses contestables ou mal fondées qui sous-tendaient les évaluations avancées par nombre d’économistes prisonniers de concepts et de conventions de méthode inadaptées au problème du changement climatique planétaire. L’approche séquentielle de la décision, plus en phase, n’a jusqu’à présent pas recueilli l’audience qu’elle mérite, elle aussi prisonnière d’un débat théorique largement décalé. Plus radicales, les alternatives non-utilitaristes rencontrent des difficultés non négligeables, en particulier autour de l'idée de droits des générations futures. Les débats sur le climat mettent en évidence une relation difficile et confuse entre éthique et économie. Ainsi, l'habillage en termes d'efficacité économique dont est revêtu le débat critique sur le rapport Stern est largement trompeur, car le problème abordé est dominé par le statut éthique à reconnaître aux générations futures et la légitimité de transferts imposés de coûts en contexte asymétrique, deux questions qui échappent à l’analyse économique.
    Keywords: Changement climatique;Actualisation;Equité intergénérationnelle;Analyse coûts avantages;Approche séquentielle;Adaptation;Rapport Stern
    Date: 2007

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