nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒05‒31
thirteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. Aviation and the Environment in the Context of the EU-US Open Skies Agreement By Karen Mayor; Richard S. J. Tol
  2. Scenarios of Carbon Dioxide Emissions from Aviation By Karen Mayor; Richard S. J. Tol
  3. Russian Energy Strategy and development of renewable power industry By Bazhanov, Andrei; Tyukhov, Igor
  4. Oil and the Macroeconomy: A Structural VAR Analysis with Sign Restrictions By Lippi, Francesco; Nobili, Andrea
  5. European Climate Policy and Aviation Emissions By Karen Mayor; Richard S. J. Tol
  6. Pumping Water to Compete in Electricity Markets By CRAMPES, Claude; MOREAUX, Michel
  8. Carbon Motivated Border Tax Adjustments: Old Wine in Green Bottles? By Ben Lockwood; John Whalley
  9. Economic Growth, inequality and environment quality: An empirical analysis applied to developing and transition countries By Matthieu CLEMENT (GREThA-GRES); André MEUNIE (GREThA-GRES)
  10. Some New Approaches to Forecasting the Price of Electricity: A Study of Californian Market By Eduardo Mendes; Les Oxley; Marco Reale
  11. What Niklas Luhmann might have said of carbon trading By David Campbell; Matthias Klaes
  12. Consumer support for environmental policies: An application to purchases of green cars By Alex Coad; Peter de Haan; Julia Sophie Woersdorfer
  13. European Railway Deregulation: The Influence of Regulatory and Environmental Conditions on Efficiency By Heike Wetzel

  1. By: Karen Mayor (Economic and Social Research Institute (ESRI)); Richard S. J. Tol (Economic and Social Research Institute (ESRI))
    Abstract: We examine the impacts of the EU-US Open Skies agreement on the environment, in particular looking at the effect of the agreement on emissions from the aviation sector. We use the Hamburg Tourism Model, a model of domestic and international tourist numbers and flows, to estimate these impacts. The Open Aviation Area will result in increased competition between carriers and consequently falls in the cost of transatlantic flights. This will not only have implications for the size and structure of the industry but also for climate policy. The objectives of this paper are (1) to assess what effects the expected increases in passenger numbers will have on CO2 emissions and (2) to test whether this increase in travel will result in a corresponding rise in emissions. Model simulations show that passenger numbers arriving from the US to the EU will increase by between 1% and 14% depending on the magnitude of the price reductions. We find that because of substitution between destinations, the percentage increase in global emissions is much smaller (max. 1%) than the increase in cross-Atlantic traffic. In the current context of greenhouse gas control policies, any increase in emissions will make climate policy objectives more difficult to achieve and will attract more attention to aviation’s contribution to climate change.
    Keywords: International tourism; open skies agreement; carbon dioxide emissions; climate policy; externalities
    Date: 2008–05
  2. By: Karen Mayor (Economic and Social Research Institute (ESRI)); Richard S. J. Tol (Economic and Social Research Institute (ESRI))
    Abstract: We use a model of international and domestic tourist numbers and flows to forecast tourist numbers and emissions from international tourism out to 2100. We find that between 2005 and 2100 international tourism grows by a factor of 12. Not only do people take more trips but these also increase in length. We find that the growth in tourism is mainly fuelled by an increase in trips from Asian countries. Emissions follow this growth pattern until 2060 when emissions per passenger-kilometre start to fall due to improvements in fuel efficiency. Forecasted emissions are also presented for the four SRES scenarios and maintain the same growth pattern but the levels of emissions differ substantially. We find that the forecasts are sensitive to the period to which the model is calibrated, the assumed rate of improvement in fuel efficiency and the imposed climate policy scenario.
    Keywords: Carbon dioxide emissions, international tourism, long-term forecasting, aviation
    Date: 2008–05
  3. By: Bazhanov, Andrei; Tyukhov, Igor
    Abstract: We consider two scenarios of the development of renewable power industry in Russia on an example of the Dasgupta-Heal-Solow-Stiglitz model. We assume that the resource rent is being invested into capital in the form of renewable power technologies according to the standard Hartwick saving rule. We use the modified Hotelling rule that reflects externalities implying, in particular, growing rates of oil extraction. We have shown that the growing extraction, prescribed by the Russian Energy Strategy (RES), implies growth of capital and the corresponding growth of per capita consumption in the short run (about 13 years). However, this growth is not sustainable and follows the decline in per capita consumption in the long run. An alternative hypothetical scenario of sustainable extraction implies always growing per capita consumption with the higher level in the long run in comparison with the RES-scenario.
    Keywords: renewable energy; sustainable growth; Russian Energy Strategy
    JEL: Q32 O13 Q01 P28
    Date: 2008–05–21
  4. By: Lippi, Francesco; Nobili, Andrea
    Abstract: We consider an economy where the oil price, industrial production, and other macroeconomic variables fluctuate in response to a variety of fundamental shocks. We estimate the effects of different structural shocks using robust sign restrictions suggested by theory using US data for the 1973-2007 period. The estimates show that identifying the shock underlying the oil price change is important to predict the sign and the magnitude of its correlates with the US production. The results offer a natural explanation for the smaller correlation between oil prices and US production in the recent years compared to the seventies.
    Keywords: Business cycle; Oil prices; Sign Restrictions; Structural VAR
    JEL: C32 E3 F4
    Date: 2008–05
  5. By: Karen Mayor (Economic and Social Research Institute (ESRI)); Richard S. J. Tol (Economic and Social Research Institute (ESRI))
    Abstract: We use a model of international and domestic tourist numbers and flows to investigate the effect of various climate policy instruments implemented in Europe on arrivals and emissions for the countries concerned. We find that these schemes do not fulfil their desired effects. The introduction of aviation into the European Trading system results in a fall in the number of tourists travelling into the EU in favour of other destinations. It also causes a significant welfare loss with only a small reduction in emissions. The flight taxes in the Netherlands and the United Kingdom result in different substitution effects across destinations (depending on the zones being taxed) but both policies do have the same consequence of inducing welfare losses and also reducing visitor numbers to the countries. We find that when these policies are combined their effects are additive. Welfare impacts are robust to variations in the underlying assumptions and changes in the scope of the taxes examined have the expected effects.
    Keywords: Climate policy, carbon dioxide emissions, international tourism
    Date: 2008–05
  6. By: CRAMPES, Claude; MOREAUX, Michel
    Date: 2008–02
  7. By: Pillai N., Vijayamohanan
    Abstract: It goes without saying that the problems confronting the State Electricity Boards (SEBs) in India are just internal to them, and hence what the system requires is not any market-oriented restructuring, but an essence-specific reform that can remove the impediments that stand in the way of the SEBs’ improved performance. It is in this light that we propose some viable measures of reform meant for the Kerala power sector, covering all the stages of its functioning. Since the problems haunting the power sector start from the very first stage of capacity expansion planning itself, we suggest, to start with, a simple method of electricity demand projection for Kerala and discuss its implications. Then we discuss in detail some viable measures of reform for the Kerala power sector for its efficient functioning in the execution of expansion plans and operational performance.
    Keywords: Power sector reforms; Kerala; inefficiency; demand projection
    JEL: L94 L98 Q4
    Date: 2008–05–26
  8. By: Ben Lockwood; John Whalley
    Abstract: We discuss emerging proposals for border tax adjustments (BTAs) to accompany commitments to reduce carbon emissions in the EU, the US and other OECD economies. The rationale offered for such border adjustment is that various entities, such as the EU, if making commitments to reduce emissions which go beyond those undertaken in other regions of the world, impose added costs on domestic producers which create a competitive disadvantage for them. Some form of remedy is viewed as reasonable to maintain the competitiveness of domestic industries when responding to global environmental problems. In this paper, we argue that despite its current carbon manifestation, the issue of border tax adjustments and both their rationale and their effects on trade are not new and, despite the present debate (which seems to overlook older literature), have arisen before. Earlier debate on border tax adjustments occurred at the time of the adoption of the Value Added Tax (VAT) in the EU as a tax harmonization target in the early 1960’s. But academic literature of the time showed that a change between origin and destination basis in the VAT would be neutral and hence the use of a destination based tax in the EU to accompany the VAT offered no trade advantage to Europe. Here we argue that essentially the same arguments also apply for carbon motivated BTAs, and in the current debate there seems to be a misconception between price level effects and relative price effects stemming from a BTA, which needs correcting. We also argue that the impact of border tax adjustments should be viewed as independent of the motivation of the adjustments.
    JEL: F13 F18 Q56
    Date: 2008–05
    Abstract: This article aims at examining the relationship between social inequalities and pollution. On the one hand, it proposes a survey which shows that from a theoretical point of view, a decrease in inequality has an undetermined effect on environment. On the other hand, on the basis of these theoretical considerations, we propose an econometric analysis based on panel data for developing and transition countries during the period 1988-2003. More precisely, we examine the effect of income inequalities on the degree of local pollution (sulphur dioxide emissions and organic water pollution) by integrating Gini index in the formulation of environmental Kuznets curve. Then, two effects may be tested: (i) a direct effect of inequalities on pollution; (ii) an indirect effect by which the degree of inequality influence pollution by his negative impact on political freedoms.
    Keywords: pollution; inequality; environmental Kuznets curve; panel data
    JEL: C23 Q01 Q53 Q5
    Date: 2008
  10. By: Eduardo Mendes; Les Oxley (University of Canterbury); Marco Reale
    Abstract: In this paper we consider the forecasting performance of a range of semi- and non- parametric methods applied to high frequency electricity price data. Electricity price time-series data tend to be highly seasonal, mean reverting with price jumps/spikes and time- and price-dependent volatility. The typical approach in this area has been to use a range of tools that have proven popular in the financial econometrics literature, where volatility clustering is common. However, electricity time series tend to exhibit higher volatility on a daily basis, but within a mean reverting framework, albeit with occasional large ’spikes’. In this paper we compare the existing forecasting performance of some popular parametric methods, notably GARCH AR-MAX, with approaches that are new to this area of applied econometrics, in particular, Artificial Neural Networks (ANN); Linear Regression Trees, Local Regressions and Generalised Additive Models. Section 2 presents the properties and definitions of the models to be compared and Section 3 the characteristics of the data used which in this case are spot electricity prices from the Californian market 07/1999-12/2000. This period includes the ’crisis’ months of May-August 2000 where extreme volatility was observed. Section 4 presents the results and ranking of methods on the basis of forecasting performance. Section 5 concludes.
    Keywords: Electricty Time Series; Forecasting Performance; Semi- and Non- Parametric Methods
    JEL: C14 C45 C53
    Date: 2008–01–01
  11. By: David Campbell (University of Durham); Matthias Klaes (Keele University)
    Abstract: Ecological questions have proven particularly fruitful to illustrate Luhmann’s theory of society as an integrative perspective cutting across the scientific, economic, legal, and political domains. In this paper, we will discuss the development of carbon trading as a case study of how reflexive system rationality of the kind postulated by Luhmann becomes the defining characteristic of the spectacular failure of such trading as has taken place to date to even approximate any of it own stated goals. Paradoxically, regulatory attempts to provide for a market-based response to anthropogenic global warming have resulted in the emergence of carbon prices that are essentially planned at a level of ambition reminiscent of the twentieth century’s most extensive exercises in centralised command and control, due to structural couplings between the scientific, economic, political and legal systems and an ecology of organisations and institutions spread across them. As government-sponsored carbon trading is perhaps the most characteristic initiative of modern government, its discussion in Luhmann’s terms is significant for any evaluation of the relevance of his work.
    Keywords: globalisation, Luhmann, carbon trading, regulatory failure, Coase
    JEL: B41 B52 K0 Q5 Z1
    Date: 2008–06
  12. By: Alex Coad (Max Planck Institute of Economics, Evolutionary Economics Group); Peter de Haan (ETH Zurich, Institute for Environmental Decisions); Julia Sophie Woersdorfer (Max Planck Institute of Economics, Evolutionary Economics Group)
    Abstract: This paper focuses on how consumer motivation can be tapped in order to encourage the adoption of cleaner technologies. Consumers are heterogeneous they may be guided by intrinsic motivation or extrinsic motivation. While information provision policies (such as the energy label for cars) may be effective in encouraging certain consumers to adopt green cars, financial incentive schemes (such as subsidies or fines) may be more persuasive for extrinsically-motivated consumers. We develop a dynamic theory of adoption of environmental innovations, in which information-provision policies are followed by financial incentives (first 'carrot', then 'stick' incentives). Analysis of a survey dataset of Swiss households observes considerable heterogeneity in terms of support of information- provision or financial incentive policies, in line with our conjectures. Our results will be of particular interest to policymakers interested in guiding consumers towards cleaner technologies.
    Keywords: Environmental policy, Technology adoption, Technology diffusion, Intrinsic motivation, Financial incentives.
    JEL: Q53 Q57 O33
    Date: 2008–05–06
  13. By: Heike Wetzel (Institute of Economics, Leuphana University of Lüneburg)
    Abstract: The objective of this paper is to analyze the impact of regulatory and environmental conditions on technical effciency of European railways. Using a panel data set of 31 railway firms from 22 European countries from 1994 to 2005, a multioutput distance function model, including regulatory and environmental factors, is estimated using stochastic frontier analysis. The results obtained indicate positive and negative effciency effects of different regulatory reforms. Furthermore, estimating models with and without regulatory and environmental factors clearly indicates that the omission of environmental factors, such as network density, substantially changes parameter estimates and, hence, leads to biased estimation results.
    Keywords: European railways, technical effciency, stochastic frontier analysis
    JEL: L92 L51 L22
    Date: 2008–05

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