nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒06‒07
nine papers chosen by
Roger Fouquet
Imperial College, UK

  1. Returns and Volatility of Eurozone Energy Stocks By Oberndorfer, Ulrich
  2. Reducing Deforestation and Trading Emissions: Economic Implications for the post-Kyoto Carbon Market By Anger, Niels; Sathaye, Jayant A.
  3. Forecasting Demand for Electricity: Some Methodological Issues and an Analysis By Pillai N., Vijayamohanan
  4. Rapid Economic Growth & Industrialization in India, China & Brazil: At What Cost? By KRISHNA CHAITANYA V.
  5. On the Influence of Oil Prices on Economic Activity and Other Macroeconomic and Financial Variables By François Lescaroux; Valerie Mignon
  6. Investment decisions in Liberalized Electricity Markets: A framework of Peak Load Pricing with strategic firms By Gregor Zoettl
  7. Maximizing the discounted tax revenue in a mature oil province By Lars Lindholt
  8. Rules for the Global Environment By Horst Siebert
  9. Localized Innovation, Localized Diffusion and the Environment: An Analysis of CO2 Emission Reductions by Passenger Cars, 2000-2007 By Bart Los; Bart Verspagen

  1. By: Oberndorfer, Ulrich
    Abstract: This paper constitutes a first analysis on stock returns and stock return volatility of energy corporations from the Eurozone. According to our results, the gas market does not play a role for the pricing of Eurozone energy stocks. However, changes in the Euro to U.S. Dollar exchange rate as well as developments at the money and especially at the oil market strongly affect returns of the energy stock portfolios analyzed. While oil price hikes negatively impact on stock returns of European utilities, they lead to an appreciation of oil and gas stocks. Most importantly, we show that oil market volatility negatively affects European oil and gas stocks. In contrast, energy stock volatility is not driven by volatility of the resource market, but only by its own dynamics.
    Keywords: Energy stocks, resource prices, volatility, asset pricing
    JEL: C13 G12 Q40 Q43
    Date: 2008
  2. By: Anger, Niels; Sathaye, Jayant A.
    Abstract: This paper quantitatively assesses the economic implications of crediting carbon abatement from reduced deforestation for the emissions market in 2020 by linking a numerical equilibrium model of the global carbon market with a dynamic partial equilibrium model of the forestry sector. We find that integrating avoided deforestation in international emissions trading considerably decreases the costs of post-Kyoto climate policy – even when accounting for conventional abatement options of developing countries under the CDM. At the same time, tropical rainforest regions receive substantial net revenues from exporting carbon-offset credits to the industrialized world. Moreover, reduced deforestation can increase environmental effectiveness by enabling industrialized countries to tighten their carbon constraints without increasing mitigation costs. Regarding uncertainties of this future carbon abatement option, we find both forestry transaction costs and deforestation baselines to play an important role for the post-Kyoto carbon market.
    Keywords: Climate Change, Kyoto Protocol, Emissions Trading, Deforestation
    JEL: C60 D61 Q23 Q58
    Date: 2008
  3. By: Pillai N., Vijayamohanan
    Abstract: Electricity demand projection is of utmost importance as electricity has become a vital input to the wellbeing of any society, driving the demand for it from an ever-expanding set of diverse needs to grow on an increasing rate, which in turn places increasing demands on scarce resources of capital investment, material means, and man-power. More specifically, the continuing ‘energy crisis’ has made crucial the need for accurate projection of electricity demand; hence the importance of the forecasting methods. The present paper critically evaluates the electricity demand forecasting methodology and proposes a methodology in the classical time series framework.
    Keywords: Electricity demand; Forecasting; Kerala; Time series analysis
    JEL: C32 L94
    Date: 2008–05–29
    Abstract: The purpose of this paper is to examine whether the decline in environmental quality in India, China and Brazil is due to release of toxic gases which is an effect of high energy consumption? If so, the increase in energy consumption is due to rapid economic growth led by industrialization? Also examined is what effect does excessive economic growth rates have on energy consumption levels in these countries.
    Keywords: CO2 Emission, Energy Consumption, Economic Growth & Industrialization
    JEL: O13 O14 Q40 Q41 Q43
    Date: 2007–11–01
  5. By: François Lescaroux; Valerie Mignon
    Abstract: The aim of this paper is to investigate the links between oil prices and various macroeconomic and financial variables for a large set of countries, including both oilimporting and exporting countries. Both short-run and long-run interactions are analyzed through the implementation of causality tests, evaluation of cross-correlations between the cyclical components of the series in order to identify lead/lag relationships and cointegration analysis. Our results highlight the existence of various relationships between oil prices and macroeconomic variables and, especially, an important link between oil and share prices on the short run. Turning to the long run, numerous long-term relationships are detected, the causality generally running from oil prices to the other variables. An important conclusion is relating to the key role played by the oil market on stock markets.
    Keywords: Oil prices; economic activity; causality; cyclical correlations; cointegration; VAR processes
    JEL: C22 C23 Q43
    Date: 2008–04
  6. By: Gregor Zoettl
    Abstract: In this article we analyze firms investment incentives in liberalized electricity markets. Since electricity is economically non storable, it is optimal for firms to invest in a differentiated portfolio of technologies in order to serve strongly fluctuating demand. Prior to the Liberalization of electricity markets, for regulated monopolists, optimal investment and pricing strategies haven been analyzed in the peak load pricing literature (compare Crew and Kleindorfer (1986)). In restructured electricity markets regulated monopolistic generators have often been replaced by competing and potentially strategic firms. This article aims to respond to the changed reality and model investment decisions of strategic firms in those markets. We derive equilibrium investment for strategic firms and compare to the benchmark cases of perfect competition and monopoly outcomes. We find that strategic firms have an incentive to overinvest in base-load technologies but choose total capacities too low from a welfare point of view. By fitting the framework to a specific electricity market (Germany) we are able to empirically analyze Investment choices of strategic firms, and quantify the potential for market power and its impact on generation portfolios in restructured electricity markets in the long run.
    Keywords: Investment Decisions, Technology Choice, Restructured Electricity Markets, Peak Load Pricing, Strategic Firms
    Date: 2008–05–26
  7. By: Lars Lindholt (Statistics Norway)
    Abstract: Using a partial equilibrium model for the global oil market, we search for the producer tax that maximizes the government’s discounted tax revenue in Norway. The oil market model explicitly accounts for reserves, development and production in 4 field categories across 15 regions. The oil companies optimize their profit and we study how different tax rates influence their investment and production profiles over time. Our results show that a net tax rate in the range of 83 to 87 percent gives the highest tax revenue over a wide range of oil prices and government’s discount rates. However, to avoid premature policy recommendations based on assumptions that are more or less uncertain, we carry out various sensitivity analysis in the favor of lower taxes. These analysis show that it is generally never optimal to reduce the prevailing net tax rate of 78 percent. Only in a very pessimistic scenario regarding costs and exploration is it optimal with a minor reduction in the tax rate. Hence, even if many regard Norway as a high tax province, a robust conclusion seem to be that reducing the present tax level on oil production will not boost investment and production to such a degree that discounted tax revenue increases. We emphasize that such a conclusion holds whether the oil companies are constrained by credit or not.
    Keywords: oil market; tax revenue; equilibrium model
    JEL: H21 Q31 Q38
    Date: 2008–05
  8. By: Horst Siebert
    Abstract: The paper looks at the global environment as a public good and as a sink for CO2-emissions. It discusses problems to be solved in institutional arrangements to protect global environmental media and looks at criteria for allocating the costs of emission reduction and emission rights. It analyzes institutional mechanisms that stabilize CO2-agreements and reviews the Kyoto Protocol, the perspectives for its successor and EU emission trading. The paper also reviews arrangements for biodiversity and existing multilateral arrangements.
    Keywords: Public good, Global warming, Emission reduction, Emission rights, Institutional Mechanisms, Kyoto Protocol, Post-Bali negotiations, EU emission trading, fauna and flora, existing multilateral arrangements
    JEL: D62 F02 H41 Q20 Q54
    Date: 2008–05
  9. By: Bart Los (Faculty of Economics and Business, University of Groningen); Bart Verspagen (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: We investigate technological change with regard to CO2 emissions by passenger cars, using a Free Disposal Hull methodology to estimate technological frontiers. We have a sample of cars available in the UK market in the period 2000 – 2007. Our results show that the rates of technological change (frontier movement) and diffusion (distance to frontier at the car brand level) differ substantial between segments of the car market. We conclude that successful policies should be aimed at diffusion of best-practice technology, and take account of the different potential for further progress between different segments of the market (e.g., diesel and gasoline engines, and small vs. large engines).
    Date: 2008–05

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