nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒04‒21
seventeen papers chosen by
Roger Fouquet
Imperial College, UK

  1. China’s Energy Economy: Technical Change, Factor Demand and Interfactor/Interfuel Substitution By John Gibson; Bongguen Kim; Hengyun Ma; Les Oxley
  2. How Pakistan is coping with the Challenge of High Oil Prices By Malik, Afia
  3. Agglomerative Magnets and Informal Regulatory Networks: Electricity Market Design Convergence in the USA and Continental Europe By Jens Weinmann
  4. Multinational Electricity Market Integration and Electricity Price Dynamics By Lundgren, Jens; Hellström, Jörgen; Rudholm, Niklas
  5. Capture and Corruption in Public Utilities: the Cases of Water and Electricity in Sub-Saharan Africa By AURIOL, Emmanuelle; BLANC, Aymeric
  6. The future of EU coal policy after the end of the ECSC Treaty By G. Rabanal, Nuria
  7. Russie - Caspienne : la concurrence des voies d'exportation pour l'approvisionnement gazier de l'Europe By Catherine Locatelli
  8. Gain Seeking in a “Double Security Dilemma”: The Case of OPEC By Ellinor Zeino-Mahmalat
  9. Oil Price Shocks and Exchange Rate Management: The Implications of Consumer Durables for the Small Open Economy By Michael Plante
  10. A percolation model of eco-innovation diffusion: the relationship between diffusion, learning economies and subsidies By Simona Cantono; Gerald Silverberg
  11. Monetary Values for Air Pollution Risk of Death: A Contingent Valuation Survey By Olivier Chanel; Stephane Luchini
  12. l faut réévaluer la place de l’adaptation dans la politique climatique By Michel Damian
  13. Strategic Partitioning of Emissions Allowances. Under the EU Emission Trading Scheme By Christoph Böhringer and Knut Einar Rosendahl
  14. Emission trading and labor market rigidity in<br />an international duopoly model By Tarik Tazdaït; Alejandro Caparros; Jean-Chrsitophe Péreau
  15. Biological Carbon Sequestration and Carbon Trading Re-visited By G. Cornelis van Kooten
  16. Second Best Analysis in a General Equilibrium Climate Change Model By GRIMAUD André; LAFFORGUE Gilles
  17. Climate change mitigation options and directed technical change: A decentralized equilibrium analysis By GRIMAUD André; LAFFORGUE Gilles; MAGNE Bertrand

  1. By: John Gibson; Bongguen Kim; Hengyun Ma; Les Oxley (University of Canterbury)
    Abstract: With its rapid economic growth, China’s primary energy consumption has exceeded domestic energy production since 1994, leading to a substantial expansion in energy imports, particularly of oil. China’s energy demand has an increasingly significant impact on global energy markets. In this paper Allen partial elasticities of factor and energy substitution, and price elasticities of energy demand, are calculated for China using a two-stage translog cost function approach. The results suggest that energy is substitutable with both capital and labour. Coal is significantly substitutable with electricity and complementary with diesel while gasoline and electricity are substitutable with diesel. China’s energy intensity is increasing during the study period (1995-2004) and the major driver appears to be due to the increased use of energy intensive technology.
    Keywords: China; Interfactor/interfuel substitution; Technology; Energy intensity decomposition
    JEL: D24 O33 Q41
    Date: 2008–03–01
  2. By: Malik, Afia
    Abstract: The paper is a review of possible consequences and challenges presented by high oil prices in Pakistan. Pakistan is heavily dependent on imported fuels and this dependence is expected to increase even further in future given the depleting gas resources. The rising oil prices in the international market has had effected negatively balance of payment position as well as on the budgetary position of the country and contributed in creating inflationary pressures in the economy. For long run development oil will remain an important source of energy. The government should chalk out strategies for ensuring efficiency in use; and development, adequacy and reliability of supply. Unless appropriate steps are taken this trend of rising oil prices will further aggravate the negative impacts on the economy.
    Keywords: Oil; Prices; Deregulation; Pakistan; Macro-economy.
    JEL: L16 Q41 Q48 Q43
    Date: 2008–02–20
  3. By: Jens Weinmann
    Abstract: The absence of one broadly accepted design template for liberalised electricity markets induces regulatory competition and institutional diversity. Focussing on continental Europe and the USA, this analysis explores how agents and structures accelerate or impede the move to one standard market design in the electricity sector. It reveals that market design convergence in Europe is driven by the 'Florence Consensus,' a tripartite coalition between the European Commission fostering European integration and the internal market, informal regulatory networks between grid operators, standardisation authorities and regulators, who have been coordinating their actions in the 'Florence Forum,' and epistemic communities exemplified in the Florence School of Regulation. In contrast, the United States' Federal Energy Regulatory Commission lacks support among politicians, many states' public utility commissions, the neo-liberal intelligentsia and even industrial lobbying groups to effectively push for a standardised market design. However, design convergence in the USA may be induced by the gradual expansion of multi-state markets operated by regional transmission organisations.
    Keywords: Electricity, Deregulation, Regulatory Competition, Policy Diffusion
    JEL: K23 L16 L43 L51 L94 Q48
    Date: 2007–04–04
  4. By: Lundgren, Jens (Department of Economics); Hellström, Jörgen (Department of Economics); Rudholm, Niklas (The Swedish Retail Institute)
    Abstract: The paper empirically explores the electricity price dynamics in the Nordic electricity market, Nord Pool. In particular, the focus is on determining what effect the multinational market integration, during the years 1996-2006, has had on the conditional mean electricity price, its volatility, the price jump-intensity and the price jump size. Empirically the study reveals that the conditional mean electricity price increased when Finland joined the Nord Pool exchange, and the price remained at the higher level when Denmark also joined. Turning to the price volatility, this increased when Finland joined, mainly due to an increase in jump size, and decreased when Denmark also joined Nord Pool. However, the price jump-intensity decreased both when Finland and Denmark joined the market. This means that a large electricity market integration in Scandinavia seems to reduce the probability of sudden price jumps. That is, the multinational electricity market integration in Scandinavia seems to have created a market that handles external shocks to supply and demand better than the separate national electricity markets previous did.
    Keywords: Electricity price; market integration; jump risk; EGARCH; Exponential Autoregressive conditional Jump Intensity
    JEL: C22 L10 L69
    Date: 2008–04–15
  5. By: AURIOL, Emmanuelle; BLANC, Aymeric
    Date: 2008–01
  6. By: G. Rabanal, Nuria
    Abstract: The aim of this paper is the analysis of coal normative framework from the beginning of the European Community to the end of the ECSC Treaty. The paper shows the uncertainty about coal restructuration after the end of the Treaty and also the complexity of coal decline in European countries.
    Keywords: coal in European Union; normative framework in coal industry; energy in Europe.
    JEL: K23 L52 Q49 L72
    Date: 2006
  7. By: Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Les questions de sécurité gazière de l'UE, notamment suite aux démêlés de la Russie avec l'Ukraine, émergent comme une des questions majeures de sa politique énergétique. Face aux fournisseurs traditionnels de l'Europe que sont l'Algérie et la Russie, les pays de la Caspienne nés de l'effondrement de l'Union soviétique, sont aujourd'hui des sources potentielles de diversification en raison de l'importance de leurs réserves gazières. Leur concrétisation reste cependant étroitement conditionnée par la réalisation d'un certain nombre de voies d'exportation. Ces dernières sont l'enjeu d'une concurrence exacerbée avec la Russie qui entend promouvoir ses propres logiques en matière de routes d'exportation. De ce point de vue, les accords passés entre d'un coté la Russie et de l'autre la Chine avec le Kazakhstan et le Turkménistan pourraient redessiner la carte gazière de la zone et rendre plus difficile l'approvisionnement de l'Europe à partir de la Caspienne.
    Date: 2008–04
  8. By: Ellinor Zeino-Mahmalat (GIGA Institute of Middle East Studies)
    Abstract: The remarkable stability of the cooperation among the members of the Organization of Petroleum Exporting Countries (OPEC) has generally been explained by these members’ mutual dependency on high and stable oil revenues. Since the OPEC countries, however, face the double security dilemma of both domestic and external security threats, they are not simply eager to secure (absolute) oil revenues for the sake of domestic stability; they are also sensitive to the (relative) oil revenues of their competing or even conflicting partners. The existing approaches of rational egoism and defensive positionalism have proven to be rather inadequate in explaining this kind of gain-seeking behavior. This paper therefore develops the new theoretical approach of “gain-seeking mentalities,” with the objective of tracing variations in OPEC members’ gain-seeking behaviors. Using this approach, the empirical assessment of Iran and Iraq during the Iran-Iraq War and Iraq during the Gulf War of 1990/91 shows the extent to which Iran and Iraq altered their gain-seeking behavior as a result of a changing constellation of threats.
    Keywords: OPEC, cooperation gains, relative gains, distributional conflict, rational egoism, positionalism
    Date: 2008–03
  9. By: Michael Plante (Indiana University Bloomington)
    Abstract: This paper examines exchange rate management issues when a small open economy is hit by an exogenous oil price shock. In this model consumer durables play an important role in the demand for oil and oil based products as opposed to the traditional role of oil as a factor of production. When prices are sticky, oil price shocks lead to reduced output, lower inflation, and real exchange rate deprecation. These recessionary effects occur whether or not oil is in the production function because of the close relationship between consumer durables and oil. Tentative results suggest that flexible exchange rates produce smaller output losses and less volatile inflation in the non-tradables sector than fixed exchange rates but at the cost of front-loading real exchange rate movements.
    Keywords: oil, durables, exchange rates
    JEL: E31 F41 E52
    Date: 2008–04
  10. By: Simona Cantono (Department of Economics, University of Turin); Gerald Silverberg (UNU-MERIT)
    Abstract: An obstacle to the widespread adoption of environmentally friendly energy technologies such as stationary and mobile fuel cells is their high upfront costs. While much lower prices seem to be attainable in the future due to learning curve cost reductions that increase rapidly with the scale of diffusion of the technology, there is a chicken and egg problem, even when some consumers may be willing to pay more for green technologies. Drawing on recent percolation models of diffusion by Solomon et al. [7], Frenken et al. [8] and Höhnisch et al. [9], we develop a network model of new technology diffusion that combines contagion among consumers with heterogeneity of agent characteristics. Agents adopt when the price falls below their random reservation price drawn from a lognormal distribution, but only when one of their neighbors has already adopted. Combining with a learning curve for the price as a function of the cumulative number of adopters, this may lead to delayed adoption for a certain range of initial conditions. Using agent-based simulations we explore when a limited subsidy policy can trigger diffusion that would otherwise not happen. The introduction of a subsidy policy seems to be highly effective for a given high initial price level only for learning economies in a certain range. Outside this range, the diffusion of a new technology either never takes off despite the subsidies, or the subsidies are unnecessary. Perhaps not coincidentally, this range seems to correspond to the values observed for many successful innovations.
    Keywords: Innovation diffusion, learning economies, percolation, networks, heterogeneous agents, technology subsidies, environmental technologies
    JEL: C61 H23 O32 O33
    Date: 2008
  11. By: Olivier Chanel (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579)
    Abstract: In this paper, we extend the individual dynamic model of life-time resource allocation to assess the monetary value given to the increase in survival probabilities of every member of a household induced by improved air quality. We then interpret this monetary value as a flow of Value of Life Years Lost (VOLY), and estimate the corresponding Value of a Prevented Fatality (VPF) for different ages and different household members. Using French contingent valuation data on air pollution, we estimate a mean VOLY of Euros 150,000 and a mean VPF<br />of Euros 2.15 million. In addition, we find an inverse U-shaped relationship between age and VPF.
    Keywords: Value of statistical life, Air pollution, Familial Altruism, Contingent Valuation
    Date: 2008–04–11
  12. By: Michel Damian (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Les réponses au changement climatique au cours de la dernière décennie ont négligé les enjeux relatifs à l’adaptation. Cette position n’est plus tenable une fois admise l’inéluctabilité du réchauffement climatique. Reconnaître les besoins d’adaptation contribuerait à mieux faire accepter le renforcement des politiques de réduction des émissions de gaz à effet de serre.
    Date: 2007–12
  13. By: Christoph Böhringer and Knut Einar Rosendahl (Statistics Norway)
    Abstract: The EU Emission Trading Scheme (ETS) is breaking new ground in the experience with emission trading regimes across multiple jurisdictions. Since the EU ETS covers only some industries, it implies a hybrid emission control scheme where EU member states must apply complementary domestic emissions regulation for the non-trading sectors of their economies in order to comply with their national emission reduction targets. The EU ETS thus opens up for strategic partitioning of national emissions budgets by the member states between trading and non-trading sectors. In this paper we examine the potential effects of such strategic behavior on compliance cost and emissions prices. We show that concerns on efficiency losses from strategic partitioning are misplaced if all the member states behave in a Nash-Cournot manner. However, if a single country takes the official partitioning of the other countries as a reference point, there is substantial scope for exploiting market power.
    Keywords: Emissions Trading; Allocation of Quotas; Strategic Behavior
    JEL: C61 C72 Q25
    Date: 2008–04
  14. By: Tarik Tazdaït; Alejandro Caparros; Jean-Chrsitophe Péreau (OEP - Organisation, Efficacité, Production - CNRS : EA2550)
    Abstract: Emission trading systems have been recently proposed in diffrerent regions to reduce polluting emissions (e.g. in the European Union for carbon dioxide). One of the objectives of these systems is to encourage firms to adopt advanced abatement technologies. However permits create an incentive to reduce production, which may be seen as negative by policy makers. Combining the emission trading system<br />with a more rigid labour market, we show conditions under which it is possible to avoid this impact keeping the incentives to improve abatement technologies. The analysis is done for oligopolistic firms engaged<br />in international rivalry.
    Keywords: emission trading, labor market, international rivalry
    Date: 2007–09–20
  15. By: G. Cornelis van Kooten
    Abstract: Under Kyoto, biological activities that sequester carbon can be used to create CO2 offset credits that could obviate the need for lifestyle-changing reductions in fossil fuel use. Credits are earned by storing carbon in terrestrial ecosystems and wood products, although CO2 emissions are also mitigated by delaying deforestation, which accounts for one-quarter of anthropogenic CO2 emissions. However, non-permanent carbon offsets from biological activities are difficult to compare with each other and with emissions reduction because they differ in how long they prevent CO2 from entering the atmosphere. This is the duration problem; it results in uncertainty and makes it difficult to determine the legitimacy of biological activities in mitigating climate change. While there is not doubt that biological sink activities help mitigate climate change and should not be neglected, in this paper we demonstrate that these activities cannot be included in carbon trading schemes.
    Keywords: carbon offset credits from biological activities, climate change, duration of carbon sinks
    JEL: Q54 Q56
    Date: 2008–02
  16. By: GRIMAUD André; LAFFORGUE Gilles
    Date: 2008–04
  17. By: GRIMAUD André; LAFFORGUE Gilles; MAGNE Bertrand
    Date: 2008–04

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