nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒07‒05
ten papers chosen by
Roger Fouquet
Imperial College, UK

  2. The effect of energy efficiency on Swedish carbon dioxide emissions 1993-2004 By Löfgren, Åsa; Muller, Adrian
  3. Petroleo y gas en Africa: viejas realidades, nuevos escenarios By Aurelia Mane Estrada
  4. Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis By GRIMAUD, André; MAGNE, Bertrand
  6. Game-theoretical, Strategic forward Contracting in the Electricity Market By Holmberg, Pär
  7. Impacts of Ethanol on Planted Acreage in Market Equilibrium By Hongli Feng; Bruce A. Babcock
  8. Climate Change and Economic Growth: Evidence from the Last Half Century By Melissa Dell; Benjamin F. Jones; Benjamin A. Olken
  9. Data files for "Energy Prices and the Expansion of World Trade" By Benjamin Bridgman
  10. Multiple instruments to change energy behaviour: The emperor’s new clothes? By Torstein Bye and Annegrete Bruvoll

  1. By: Warwick McKibbin; Peter Wilcoxen; Wing Thye Woo
    Abstract: Under reasonable assumptions, China could achieve parity in living standard with Western Europe by 2100, and India by 2150. Climate change, however, may be a key obstacle preventing such a convergence. The business-as-usual (BAU) growth path of the world might increase concentration of atmospheric to unsafe levels and cause significant negative environmental feedback before China achieves parity in living standards with the OECD countries. We use a dynamic multi-country general equilibrium model (the G-Cubed Model) to project a realistic BAU trajectory of CO2 emissions, and we find it to be even above the CO2 emissions from the high-growth scenario estimated by the Energy Information Agency in 2007. This outcome is a reminder that it has been usual so far to underestimate the growth in China energy consumption. We compare the merits of the different market-based CO2 reduction mechanisms like a carbon tax, a cap-and-trade scheme, and the McKibbin-Wilcoxen Hybrid (MWH) approach. Unexpected developments cause the different CO2 reduction mechanisms to create very different costs. Both the international carbon tax and the MWH approach are more economically efficient responses to uncertainty than the cap-and-trade scheme of the Kyoto Protocol. We use the G-Cubed Model to study the economic outcomes under each CO2 reduction mechanism, and under the deployment of advanced green energy. The reduction of CO2 emissions would only delay, not stop, the increase in CO2 concentrations toward the “danger level”. As the only long-term solution is likely to be shifting to non-fossil emitting energy, it is important to combine a market-based CO2 reduction mechanism with an ambitious program to accelerate the development of green technology. Such a program would probably have a higher chance of success if some important parts of it were based on international collaboration. We conclude the paper with recommendations about the form of future international climate agreements and how China could be encouraged to participate.
    JEL: O11 Q43 Q48 Q54 Q56
    Date: 2008–06
  2. By: Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University); Muller, Adrian (Socioeconomic Institute, University of Zürich)
    Abstract: Observed decoupling of emissions from output on the aggregate may not only occur due to increased efficiency on sectoral level, but also in case the sectoral composition signi cantly changes from emissions intensive industries towards others, by relocation of emission intensive sectors to foreign countries, by substitution to cleaner types of energy, or by a contraction of the whole economy - all without changes in effciencies. In this paper, we undertake a decomposition analysis using the logarithmic-mean Divisia Index method (LMDI) to investigate the overall change in CO2 emissions from 1993-2004 in the Swedish business and industry sectors, and to identify the most important factors explaining this change. We find that only four sectors (agriculture; pulp and paper; basic metal; land transportation), out of the eight sectors that each contribute with more than 5% of total CO2 emissions, contributed to a decrease in CO2 emissions through increased energy efficiency. Even more striking is the result that on the aggregate level for the whole economy and summarizing over the whole period 1993-2004, a slightly positive effect of energy effciency on CO2 emissions can be identified, while changes in relative size, i.e. overall structural change, and substitution to cleaner fuels have been more important regarding reductions in aggregate emissions.<p>
    Keywords: carbon emissions; energy efficiency; decomposition
    JEL: C02 Q40 Q54
    Date: 2008–06–24
  3. By: Aurelia Mane Estrada (Universitat de Barcelona)
    Abstract: This year a lot has been said about the new role of the hydrocarbons of Africa. The mainstream discourse talks about an oil rush or an African oil scramble, which will unavoidably lead to a bipolar confrontation between China and the United States, for the control of the oils resources in the African subsoil continent. Thus, the purpose of this text is, in first place, to carry out a descriptive analysis that will help to test the hypothesis of this African oil scramble. Secondly, with the obtained results, the text will show the pros and the cons for this phenomenon leading to a Chinese- American confrontation. Finally, this speculation will lead us to conclude that there is enough evidence to argue that the African hydrocarbons game might take place in a scenario featured by the multilateralism.
    Keywords: oil and gas majors, african oil scramble, geo-energy
    JEL: F23 Q33 Q34 F59
    Date: 2008
  4. By: GRIMAUD, André; MAGNE, Bertrand
    Date: 2008–06
  5. By: Warwick McKibbin; Peter Wilcoxen
    Date: 2008–06
  6. By: Holmberg, Pär (Research Institute of Industrial Economics (IFN))
    Abstract: Forward sales is a credible commitment to aggressive spot market bidding, and it mitigates producers’ market power in electricity markets. Still it can be profitable for a producer to make such a commitment if it results in a soft response from competitors in the spot market (strategies are substitutes). The optimal contracting level of a risk-neutral producer is determined by the extent to which strategies are substitutes and the slope of the residual demand in the forward market. Conditions under which strategies are substitutes are identified for a two-stage game with supply function competition and capacity constrained producers.
    Keywords: Supply Function Equilibrium; Forward Market; Strategic Contracting; Arbitrage; Strategic Substitutes; Oligopoly; Electricity Market
    JEL: C72 D43 D44 G13 L13 L94
    Date: 2008–06–24
  7. By: Hongli Feng (Center for Agricultural and Rural Development (CARD)); Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: Land use impacts of biofuel expansion have attracted a tremendous amount of attention because of the implications for the climate, the environment, and the food supply. To examine these impacts, we set up an economic framework that links input use and land allocation decisions with ethanol and agricultural commodity markets. Crops can be substitutes or complements in supply depending on the relative magnitude of three effects of crop prices: total cropland effect, land share effect, and input use effect. We show that with unregulated free markets, total cropland area increases with corn prices whether crops are substitutes or complements in supply. Similarly, higher corn yields from exogenous technical changes lead to cropland expansion. The impacts of yield increases for other crops are ambiguous. With a quantity mandate for ethanol, higher mandates mean larger cropland area if corn and other crops are substitutes in demand. For a given mandate, yield improvement causes total cropland to expand if crop demand is elastic enough, or to contract under a very general condition if crop demand is sufficiently inelastic.
    Keywords: biofuels, complements in supply, ethanol, (in)direct land use changes, substitutes in supply, yield increases.
    Date: 2008–06
  8. By: Melissa Dell; Benjamin F. Jones; Benjamin A. Olken
    Abstract: This paper uses annual variation in temperature and precipitation over the past 50 years to examine the impact of climatic changes on economic activity throughout the world. We find three primary results. First, higher temperatures substantially reduce economic growth in poor countries but have little effect in rich countries. Second, higher temperatures appear to reduce growth rates in poor countries, rather than just the level of output. Third, higher temperatures have wide-ranging effects in poor nations, reducing agricultural output, industrial output, and aggregate investment, and increasing political instability. Analysis of decade or longer climate shifts also shows substantial negative effects on growth in poor countries. Should future impacts of climate change mirror these historical effects, the negative impact on poor countries may be substantial.
    JEL: O11 O13 O40 Q54
    Date: 2008–06
  9. By: Benjamin Bridgman (Bureau of Economic Analysis)
    Abstract: The Excel spreadsheet contains the data used in Figure 2 as well as the calibration exercice.
    Date: 2008–06
  10. By: Torstein Bye and Annegrete Bruvoll (Statistics Norway)
    Abstract: Over the last few decades, several instruments have evolved to deal with similar energy and environmental challenges. For instance, the economic literature prescribes separate tax or cap-and-trade systems to internalize negative environmental externalities and subsidies to internalize positive externalities such as R&D. However, policy is not straightforward because of the influence on cost and competition and concerns for regional employment, economic activity within certain industries, and any distributional effects. Tax discrimination, subsidies and regulations then undermine the efficiency of energy instruments. To balance any environmental concerns, other instruments, including green and white certificates, have been created. While innovative, these work as simple combinations of taxes and subsidies. While the extant literature thoroughly analyzes the partial effects of these instruments, there has been little focus on their basics and the effects of aggregate taxes and subsidies. This complexity calls for research on the efficiency of each instrument, including the administration and transaction costs associated with holding a large set of instruments. We should consider the coordination and simplification of policy tools before complicating the system further by introducing new, primarily equivalent, instruments.
    Keywords: energy instruments; taxes; subsidies; green certificates; white certificates; carbon taxes
    Date: 2008–06

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