nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒05‒17
eleven papers chosen by
Roger Fouquet
Imperial College, UK

  1. The EU Emissions Trading Scheme : Disentangling the Effects of Industrial Production and CO2 Emissions on Carbon Prices By Emilie Alberola; Benoît Chèze; Julien Chevallier
  2. Steering the European transport greenhouse gas emissions under uncertainty By Mandell, Svante
  4. Analysis of U.S. Greenhouse Gas Tax Proposals By Gilbert E. Metcalf; Sergey Paltsev; John Reilly; Henry Jacoby; Jennifer F. Holak
  6. Indexed Regulation By Richard G. Newell; William A. Pizer
  7. Measuring market power in the Iberian electricity wholesale market through the residual demand curve By Vitor Marques; Isabel Soares; Adelino Fortunato
  8. Does Trade Liberalization Reduce Pollution Emissions? By MANAGI Shunsuke; HIBIKI Akira; TSURUMI Tetsuya
  9. Socio-metabolic Transitions in Developing Asia By Heinz Schandl; Marina Fischer-Kowalski; Clemens Grunbuhel; Fridolin Krausmann
  10. Facteur 4 et mobilité des personnes et des marchandises By Hector G. Lopez-Ruiz
  11. Hartwick's rule and maximin paths when the exhaustible resource has an amenity value. By Antoine d'Autume; Katheline Schubert

  1. By: Emilie Alberola; Benoît Chèze; Julien Chevallier
    Abstract: This article critically examines the impact of industrial production for sectors covered by the EU Emissions Trading Scheme (EU ETS) on emissions allowance spot prices during Phase I (2005-2007). Using sector production indices and CO2 emissions compliance positions dened by a ratio of allowance allocation relative to baseline emissions, we show that the effect of industrial activity on EU carbon price changes shall be analysed in conjunction with production peaks and compliance net short/long positions at the sector level. The results extend previous literature by showing that carbon price changes react not only to energy prices forecast errors and extreme temperatures events, but also to industrial production in three sectors covered by the EU ETS: combustion, paper and iron.
    Keywords: EU ETS, Emissions Trading, Carbon Pricing, CO2 Emissions, Industrial Production
    JEL: L11 L16 Q48 Q54
    Date: 2008
  2. By: Mandell, Svante (Swedish National Road & Transport Research Institute (VTI))
    Abstract: This paper addresses how to regulate greenhouse gas emissions from the transport sector when abatement costs are uncertain. In an EU context, it is shown that a combination of a cap-and-trade system and emission taxes is preferable as it minimizes the expected efficiency loss. The optimal design will depend on the relative cost structure within and outside the transport sector. It is argued that the optimal regime for the transport sector has similarities, but is not identical to, a pure emissions tax.
    Keywords: Transport; policy; climate change; tradable permits
    JEL: Q54 Q58
    Date: 2008–05–06
  3. By: Sarah C. Brechbill; Wallace E. Tyner (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: With cellulosic energy production from various forms of biomass becoming popular in renewable energy research, agricultural producers may be called upon to plant and harvest switchgrass or collect corn stover to supply such energy production to nearby facilities. Determining the entire production and transportation cost to the producer of switchgrass or corn stover and the amount available within a given distance of the plant will result in a per ton cost the plant will need to pay producers in order to be supplied with sufficient quantities of biomass. This research computes up-to-date biomass production costs using recent prices for all important cost components including seed, fertilizer and herbicide application, mowing/shredding, raking, baling, storage, handling, and transportation. The cost estimates also include nutrient replacement for corn stover. The total per ton cost for either switchgrass or corn stover is a combination of these cost components depending on whether equipment is owned or custom hired, what baling options are used, the size of the farm, and the distance that biomass must be transported. Total per ton costs for transporting biomass 30 miles range between $39 and $46 for corn stover and $57 and $63 for switchgrass. Using the county quantity data and this cost information, we then estimated biomass supply curves for three Indiana coal-fired electric utility. This supply framework can be applied to plants of any size, location, and type. Finally, we estimated the greenhouse gas emissions reduction from using biomass instead of coal for part of the utility energy and also the carbon tax required to make the biomass cost equivalent to coal.
    Keywords: Cellulosic biomass, corn stover, switchgrass, biomass supply, GHG reduction
    JEL: Q12 Q42 Q54
    Date: 2008
  4. By: Gilbert E. Metcalf; Sergey Paltsev; John Reilly; Henry Jacoby; Jennifer F. Holak
    Abstract: The U.S. Congress is considering a set of bills designed to limit the nation's greenhouse gas (GHG) emissions. This paper complements the analysis by Paltsev et al. (2007) of cap-and-trade bills and applies the MIT Emissions Prediction and Policy Analysis (EPPA) model to carry out an analysis of the tax proposals. Several lessons emerge from this analysis. First, a low starting tax rate combined with a low rate of growth in the tax rate will not reduce emissions significantly. Second, the costs of GHG reductions are reduced with the inclusion of non-CO2 gases in the carbon tax scheme. Third, welfare costs of the policies can be affected by the rate of growth of the tax, even after controlling for cumulative emissions. Fourth, a carbon tax -- like any form of carbon pricing -- is regressive. However, general equilibrium considerations suggest that the short-run measured regressivity may be overstated. Additionally, the regressivity can be offset with a carefully designed rebate of some or all of the revenue. Finally, the carbon tax bills that have been proposed or submitted are for the most part comparable to many of the carbon cap-and-trade proposals that have been suggested. Thus the choice between a carbon tax and cap-and-trade system can be made on the basis of considerations other than their effectiveness at reducing emissions over some control period.
    JEL: H23 Q54
    Date: 2008–05
  5. By: Al-Amin, Abul Quasem; Abdul Hamid , Jaafar; Chamhuri , Siwar
    Abstract: This study analyzes the macroeconomic effects of limiting carbon emissions using computable general equilibrium (CGE) model in the Malaysian economy. Doing so, we developed an environmental computable general equilibrium model and investigate carbon tax policy responses in the economy applying exogenously different degrees of carbon tax into the model. Three simulations were carried out using a Malaysian Social Accounting Matrix. The carbon tax policy illustrates that a 1.21% reduction of carbon emission reduces the nominal GDP by 0.82% and exports by 2.08%; a 2.34% reduction of carbon emission reduces the nominal GDP by 1.90% and exports by 3.97%and a 3.40% reduction of carbon emission reduces the nominal GDP by 3.17% and exports by 5.71%. Imposition of successively higher carbon tax results in increased government revenue from baseline by 26.67%, 53.07% and 79.28% respectively. However, fixed capital investment increased in scenario 1a (1st) by 0.43% but decreased in scenarios 1b (2nd) and 1c (3rd) by 0.26% and 1.79% respectively from the baseline. According to our findings policy-makes should consider initial (1st) carbon tax policy. This policy results in achieving reasonably good environmental impacts without losing the investment, fixed capital investment, investment share of nominal GDP and government revenue.
    Keywords: Emission; Environmental General Equilibrium; Malaysian Economy
    JEL: C68 Q56 B22
    Date: 2008–05–12
  6. By: Richard G. Newell; William A. Pizer
    Abstract: Seminal work by Weitzman (1974) revealed prices are preferred to quantities when marginal benefits are relatively flat compared to marginal costs. We extend this comparison to indexed policies, where quantities are proportional to an index, such as output. We find that policy preferences hinge on additional parameters describing the first and second moments of the index and the ex post optimal quantity level. When the ratio of these variables' coefficients of variation divided by their correlation is less than approximately two, indexed quantities are preferred to fixed quantities. A slightly more complex condition determines when indexed quantities are preferred to prices. Applied to climate change policy, we find that the range of variation and correlation in country-level carbon dioxide emissions and GDP suggests the ranking of an emissions intensity cap (indexed to GDP) compared to a fixed emission cap is not uniform across countries; neither policy clearly dominates the other.
    JEL: C68 D81 H41 Q54 Q58
    Date: 2008–05
  7. By: Vitor Marques (Entidade Reguladora dos Serviços Energéticos, Lisboa); Isabel Soares (CETE, Faculdade de Economia, Universidade do Porto); Adelino Fortunato (Faculdade de Economia da Universidade de Coimbra)
    Abstract: The existence of market power in the electricity market is a recurrent issue. Measuring and understanding market power practices in the Iberian electricity market turn out to be interesting: though a liberalized market, two integrated firms control 80% of total demand and there is a strong - often direct - intervention of government in the market. For various reasons, among which the difficulty in obtaining reliable, extensive data stands out, market power in the Iberian electricity market has rarely been measured. This work aims to contribute to a better knowledge of the way market power occurs. We calculate the elasticity of residual demand to evaluate the two dominant firm’s market power, using hourly bides in the Spanish spot market for the period July-August 2004 to 2006. Although our approach was highlighted by Frank Wolak work on the electricity sector, we extend it and discuss its constraints. We discuss the results obtained in the light of the evolution of the electricity sector during that period.
    Keywords: Market power, wholesale market, residual demand curve elasticity, government intervention
    JEL: L13
    Date: 2008–05
  8. By: MANAGI Shunsuke; HIBIKI Akira; TSURUMI Tetsuya
    Abstract: Literature on trade liberalization, economic development, and the environment is largely inconclusive about the environmental consequences of trade. This study treats trade and income as endogenous and estimates the overall impact of trade openness on environmental quality using the instrumental variables technique. Trade is found to benefit the environment using a globally representative sample. A 1% increase in trade openness causes a decrease of 0.344%, 0.754%, and 1.909% for SO2, CO2, and BOD emissions, respectively, in the long term. Our results also show composition and scale-technique effects contribute differently to the overall effect in the short and long term.
    Date: 2008–05
  9. By: Heinz Schandl; Marina Fischer-Kowalski; Clemens Grunbuhel; Fridolin Krausmann (CSIRO Sustainable Ecosystems, Australia)
    Abstract: A possible sustainability transition in developing Asia needs to complement the ongoing transition from an agrarian to an industrial socio-ecological regime. As is known from other world regions, an agrarian-industrial transition involves a major increase in material and energy flows (corresponding to a 2-4 fold increase in the demand for raw materials and energy). The socio-metabolic profile of the South-East Asian region still shows relatively low material and energy consumption per capita, suggesting that major growth may follow. Infrastructures that are closely bound-up in bulk material flows (transport, energy and food sectors) will be critical to future developments. The paper illustrates the challenge and potential solutions from a number of case studies.
    Keywords: socio-ecological regime, metabolic profile, industrial transformation, developing Asia, sustainability transition
    JEL: Q01 Q56 N50 O11
    Date: 2008–05
  10. By: Hector G. Lopez-Ruiz (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat)
    Abstract: Afin de limiter les impacts du changement climatique sur la planète, les experts du GIEC préconisent une division par deux des émissions mondiales de gaz à effet de serre à l’horizon 2050. Cet objectif impose une division par quatre (i.e. facteur 4) des émissions de gaz à effet de serre des pays industrialisés comme la France. Le secteur des transports peut-il se plier à cette exigence ?<br />A l’aide du modèle TILT (Transport Issues in the Long Term), centré sur les relations macroéconomiques entre croissance économique, technologies, mobilité et émissions de C02, ce papier recherche les conditions à réunir pour que soit atteint, en France, le « facteur 4 ». Si les progrès techniques annoncés par les ingénieurs sont au rendez-vous, nous pouvons atteindre un facteur 2. L’autre moitié du chemin doit donc être réalisée par une modification des comportements des individus et des entreprises. Trois familles de scénarios sont proposées pour en illustrer le contenu de ces évolutions qui, pour certaines, constituent de véritables bouleversements.
    Keywords: Changement climatique; émission de CO2; facteur 4; transport; mobilité des personnes; mobilité des marchandises; backcasting
    Date: 2008–03
  11. By: Antoine d'Autume (Centre d'Economie de la Sorbonne et Paris School of Economics); Katheline Schubert (Centre d'Economie de la Sorbonne et Paris School of Economics)
    Abstract: This paper studies the maximin paths of the canonical Dasgupta-Heal-Solow model when the stock of natural capital is a direct argument of well-being, besides consumption. Hartwick's rule then appears as an efficient tool to characterize solutions in a variety of settings. We start with the case without technical progress. We obtain an explicit solution of the mmaximin problem in the case where production and utility are Cobb-Douglas. When the utility function is CES with a low elasticity of substitution between consumption and natural capital, we show taht it is optimal to preserve forever a critical level of natural capital, determined endogeneously. We then study how technical progress affects the optimal maximin paths, in the Cobb-Douglas utility case. On the long run path of the economy capital, production and consumption grow at a common constant rate, while the resource stock decreases at a constant rate and is therefore completely depleted in the very long run. A higher amenity value of the resource stock leads to faster economic growth, but to a lower long run rate of depletion. We then develop a complete analysis of the dynamics of the maximin problem when the sole source of well-being is consumption, and provide a numerical resoultion of the model with resource amenity. The economy consumes, produces and invests less in the short run if the resource has an amenity value than if doesn't whereas it is the contrary in the medium and long runs. However, and without surprise, the resource stock remains for ever higher with resource amenity than without.
    Keywords: Exhaustible resources, sustainability, Hartwick's rule.
    JEL: D9 Q01 Q3
    Date: 2008–04

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