nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒08‒06
35 papers chosen by
Roger Fouquet
Imperial College, UK

  1. Modeling Macro-Critical Energy Sectors in Low-Income Countries: A General Framework and an Application to Côte d'Ivoire By Holger Fabig
  2. The Economics of Geological CO2 Storage and Leakage By Bob van der Zwaan; Reyer Gerlagh
  3. Abatement Cost Uncertainty and Policy Instrument Selection under a Stringent Climate Policy. A Dynamic Analysis By Valentina Bosetti; Alexander Golub; Emanuele Massetti; Massimo Tavoni
  4. The Use of CCS in Global Carbon Management: Simulation with the DICE Model By Daiju Narita
  5. Asymmetric Price Transmission in Supply Function Equilibrium, Carbon Prices and the German Electricity Spot Market By Wölfing, Nikolas
  6. SHORT-TERM CO2 Abatement in the European Power Sector By Erik D. Delarue; A. Denny Ellerman; William D. D’haeseleer
  7. Carbon Emissions and Economic Growth: Homogeneous Causality in Heterogeneous Panels By David Maddison; Katrin Rehdanz
  8. Optimal Global Carbon Management with Ocean Sequestration By Wilfried Rickels; Thomas Lontzek
  9. Africa's Oil Abundance and External Competitiveness: Do Institutions Matter? By Mahvash Saeed Qureshi
  10. The Factors Behind CO2 Emission Reduction in Transition Economies By Katrin Millock; Natalia Zugravu; Gérard Duchene
  11. The Gulf Cooperation Council countries – economic structures, recent developments and role in the global economy By Michael Sturm; Jan Strasky; Petra Adolf; Dominik Peschel
  12. The Oil Price Really Is A Speculative Bubble By R.S. Eckaus
  13. Regional decomposition of CO2 emissions in the world: a cluster analysis. By Vicent Alcántara; Rosa Duarte; Teresa Obis
  14. Determinants of residential space heating expenditures in Great Britain By Helena Meier; Katrin Rehdanz
  15. Bank Recycling of Petro Dollars to Emerging Market Economies During the Current Oil Price Boom By Johannes Wiegand
  16. Sticks and Carrots for the Design of International Climate Agreements with Renegotiations By Hans-Peter Weikard; Rob Dellink
  17. Water Misallocation and Environmental Externalities in Electricity Generation By Etienne BILLETTE DE VILLEMEUR; Annalisa VINELLA
  18. Imperfect Enforcement of Emissions Trading and Industry Welfare: A Laboratory Investigation By John K. Stranlund; James J. Murphy; John M. Spraggon
  19. A Note on Emissions Taxes and Incomplete Information By Carlos A. Chavez; John K. Stranlund
  20. Natural Resource Endowments, Governance, and the Domestic RevenueEffort: Evidence from a Panel of Countries By Fabian Bornhorst; Sanjeev Gupta; John Thornton
  21. Accountability in Government and Regulatory Policies: Theory and Evidence By Carmine Guerriero
  22. Do the Gulf Oil-Producing Countries Influence Regional Growth? the Impact of Financial and Remittance Flows By Nadeem Ilahi; Riham Shendy
  23. Dynamic Models for International Environmental Agreements By Michèle Breton; Lucia Sbragia; Georges Zaccour
  24. A Global Realignment by 2020: U.S. Decline, Emerging Economies Rise By Francis Cripps; Terry McKinley
  25. How Well Does the Price of Unleaded Gasoline Predict the Price of Ethanol? By Swenson, David A.
  26. Risk,inequality and time in the welfare economics of climate change: is the workhorse model underspecified? By Hakon Saelen; Giles Atkinson; Simon Dietz; Jennifer Helgeson; Cameron Hepburn
  27. Participatory Modelling and Decision Support for Natural Resources Management in Climate Change Research By Carlo Giupponi; Jaroslav Mysiak; Alessandra Sgobbi
  28. Optimal control of pollutants with delayed stock accumulation By Ralph Winkler
  29. Macroeconomic Consequences of International Commodity Price Shocks By Claudia S. Gómez-López; Luis A.Puch
  30. Relación entre el PIB per capita y las emisiones de CO2 y azufre: análisis gráfico para el período 1950-99. By Diaz-Vazquez, M. Rosario; Cancelo, M. Teresa
  31. Bolivia: The Hydrocarbons Boom and the Risk of Dutch Disease By Mario Mansilla; Eugenio Cerutti
  32. Investment spikes and uncertainty in the petroleum refining industry By Timothy Dunne; Xiaoyi Mu
  33. Community watershed management in semi-arid India: The state of collective action and its effects on natural resources and rural livelihoods By Shiferaw, Bekele; Kebede, Tewodros; Ratna Reddy, V.
  34. A Proposal for a New Prescriptive Discounting Scheme: The Intergenerational Discount Rate By Stéphane Hallegatte

  1. By: Holger Fabig
    Abstract: This paper proposes a general framework for monitoring macro-critical energy sectors in low-income countries, defined as consisting of the three subsectors of crude oil and natural gas production, refinery, and electricity production. It aims to derive consistent information on physical and financial flows in the sector, including on interlinkages between the subsectors. It then applies this framework to Côte d'Ivoire. While being an important source of growth, the Ivoirien energy sector is found to have important shortcomings, in particular as regards transparency, efficiency and contribution to fiscal revenue. Among the key problems are partially intransparent production sharing arrangements for hydrocarbon production, price distortions for natural gas, administered prices for refined petroleum products, underfunding and lack of investment in the electricity sector, and inefficient government subsidies in the latter two subsectors.
    Keywords: Working Paper , Côte d'Ivoire , Energy sector , Oil production , Natural gas , Electric power , Hydrocarbons , Transparency ,
    Date: 2008–06–25
  2. By: Bob van der Zwaan (ECN); Reyer Gerlagh (University of Manchester)
    Abstract: The economics of CO2 capture and storage in relation to the possibility of significant leakage of CO2 from geological reservoirs once this greenhouse gas has been stored artificially underground will be among the main determinants of whether CCS can significantly contribute to a deep cut in global CO2 emissions. This paper presents an analysis of the economic and climatic implications of the large-scale use of CCS for reaching a stringent climate change control target, when geological CO2 leakage is accounted for. The natural scientific uncertainties regarding the rates of possible leakage of CO2 from geological reservoirs are likely to remain large for a long time to come. We present a qualitative description, a concise analytical inspection, as well as a more detailed integrated assessment model, proffering insight into the economics of geological CO2 storage and leakage. Our model represents three main CO2 emission reduction options: energy savings, a carbon to non-carbon energy transition and the use of CCS. We find CCS to remain a valuable option even with CO2 leakage of a few %/yr, well above the maximum seepage rates that we think are likely from a geo-scientific point of view.
    Keywords: Climate Change, Carbon Dioxide Emission Reduction, Technological Innovation, CO2 Capture and Storage (CCS), Geological Leakage
    JEL: H21 D58 C61 O33 Q40
    Date: 2008–02
  3. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Alexander Golub (Environmental Defense); Emanuele Massetti (Fondazione Eni Enrico Mattei and Università Cattolica del Sacro Cuore); Massimo Tavoni (Fondazione Eni Enrico Mattei and Università Cattolica del Sacro Cuore)
    Abstract: This paper investigates the relative economic and environmental outcomes of price versus quantity mechanisms to control GHG emissions when abatement costs are uncertain. In particular, we evaluate the impacts on policy costs, CO2 emissions and energy R&D for a stringent mitigation target of 550 ppmv CO2 equivalent (i.e. 450 for CO2 only) concentrations. The analysis is performed in an optimal growth framework via Monte Carlo simulations of the integrated assessment model WITCH (World Induced Technical Change Hybrid). Results indicate that the price instrument stochastically dominates the quantity instrument when a stringent stabilization policy is in place.
    Keywords: Abatement Costs, Climate Policy
    JEL: H2 C6 Q5
    Date: 2008–02
  4. By: Daiju Narita
    Abstract: This study attempts a numerical simulation of potential CCS (carbon dioxide capture and storage) use by using a modified version of the DICE (Dynamic Integrated model on Climate and Economy) model (Nordhaus, 1994; Nordhaus and Boyer, 2000). In DICE, CO2 emissions are controlled to the extent in which a hypothetical optimal carbon tax justifies CO2 reduction by firms: in our analysis, CCS is used when the optimal tax level is higher than the price of CCS. The analysis assesses the economic optimality of CCS use with a range of different assumptions. The simulation particularly focuses on the difference of results originating from two sets of general assumptions on climate change modeling, reflecting the current debate on the economics of climate change (see for example, Heal, 2008): (1) Parameterization of the standard DICE; (2) Alternative assumptions whose hints are drawn from Stern (2007). In the standard DICE cases, the model calculation shows that at the price level of $25/tCO2 ($92/tC), CCS is introduced around in the middle of the twenty-first century. With the alternative assumptions (e.g., near-zero discount rate), CCS begins to be utilized massively earlier in the century. The two sets of results lead to contrasting policy implications on the future CCS use; this is particularly problematic in the CCS context since its benefits are not always clear-cut (e.g., limitedness of secondary benefits besides CO2 reduction, uncertainties about the validity of technology itself). Settlement of the current intellectual debate on the economics of climate change would greatly benefit the debate on the role of CCS as well
    Keywords: Carbon capture and storage (CCS), climate change, energy, integrated assessment models, dynamic optimization
    JEL: Q32 Q43 Q54
    Date: 2008–08
  5. By: Wölfing, Nikolas
    Abstract: In January 2007, first evidence of an asymmetric pass-through of CO2 emission allowance prices was reported for the German electricity spot market. This paper explores the theoretical basis for such an asymmetry in the context of a supply function bidding duopoly. It interprets fluctuating carbon prices as a coordination mechanism for tacitly colluding firms and studies incentive compatibility in the repeated game. It is new in its attempt to model asymmetric behaviour in a spot market without relevant frictions, and gives a reasoning why the asymmetry shows up for emission allowances only. The paper concludes with a theorem: that asymmetric price transmission is sustained up to a certain maximum level which might include the monopoly solution and that this mechanism is always preferred to non-cooperation.
    Keywords: Asymmetric price transmission, Electricity spot markets, Emission allowances
    JEL: C73 D82 L13 Q41
    Date: 2008
  6. By: Erik D. Delarue; A. Denny Ellerman; William D. D’haeseleer
    Abstract: This paper focuses on the possibilities for short term abatement in response to a CO2 price through fuel switching in the European power sector. The model E-Simulate is used to simulate the electricity generation in Europe as a means of both gaining insight into the process of fuel switching and estimating the abatement in the power sector during the first trading period of the European Union Emission Trading Scheme. Abatement is shown to depend not only on the price of allowances, but also and more importantly on the load level of the system and the ratio between natural gas and coal prices. Estimates of the amount of abatement through fuel switching are provided with a lower limit of 35 million metric tons in 2005 and 19 Mtons in 2006.
    Date: 2008–06
  7. By: David Maddison; Katrin Rehdanz
    Abstract: This paper introduces the concept of homogeneous non-causality in heterogeneous panels. This concept is used to examine a panel of data for evidence of a causal relationship between GDP and carbon emissions. The technique is compared to the standard test for homogeneous non-causality in homogeneous panels and heterogeneous non-causality in heterogeneous panels. In North America, Asia and Oceania the homogeneous non-causality hypothesis that CO2 emissions does not Granger cause GDP cannot be rejected if heterogeneity is allowed for in the data-generating process. In North America the homogeneous non-causality hypothesis that GDP does not cause CO2 emissions cannot be rejected either
    Keywords: Energy; Carbon Emissions; Granger Causality; and Heterogeneous Panels
    JEL: C12 O13 Q54
    Date: 2008–07
  8. By: Wilfried Rickels; Thomas Lontzek
    Abstract: We investigate the socially optimal anthropogenic intervention into the global carbon cycle. The limiting factor for this intervention is the accumulation of carbon in the atmosphere, which causes global warming. We apply a simplified two-box model to incorporate aspects of the global carbon cycle in a more appropriate way than a simple proportional decay assumption does. Anthropogenic intervention into the global carbon cycle enters the model as the amount of CO2 emitted into the atmosphere and the amount of CO2 injected into the deep ocean for purposes of sequestration. We derive a critical cost level for sequestration above which sequestration is just a temporary option or below which it is the long-run option allowing extended use of fossil fuels. The second option involves higher atmospheric stabilization levels, whereby the efficiency of sequestration depends on the time preference and the inertia of the carbon cycle
    Keywords: Climate Change, Global Carbon Cycle, CO2 Emissions, Sequestration
    JEL: Q30 Q54
    Date: 2008–07
  9. By: Mahvash Saeed Qureshi
    Abstract: This paper examines the structural competitiveness of oil-rich economies in sub-Saharan Africa relative to other major oil-exporting developing countries, and investigates reasons for systematic differences in the non-oil export performance across these economies. The analysis reveals that oil-rich Africa lags behind other oil-exporters in terms of diversification, global market share and the overall investment climate. The poor performance of their nonoil sector can be largely attributed to weak infrastructure and institutional quality. The results also show that institutional quality is a significant determinant of the extent to which oil abundance affects the competitiveness of the non-oil sector; thereby explaining the divergent experiences of oil-rich economies across the world. This implies that oil wealth does not necessarily weaken the non-oil tradable sector; countries may mitigate the impact of Dutch disease and benefit from oil booms if revenues are used prudently to reduce oil dependence.
    Keywords: Sub-Saharan Africa , Oil producing countries , Oil exporting countries , Competition , Financial institutions , Terms of trade , Export diversification , Foreign investment ,
    Date: 2008–07–10
  10. By: Katrin Millock (University Paris 1 Panthéon-Sorbonne); Natalia Zugravu (University Paris 1 Panthéon-Sorbonne); Gérard Duchene (ERUDITE, University Paris 12)
    Abstract: The Central and Eastern European countries significantly reduced their carbon dioxide (CO2) emissions between 1995 and 2003. Was this emission reduction just the fortuitous result of the major economic transformation undergone by countries in the transition? Or is it rather a result of more stringent environmental policy? The objective of the article is to answer this question through a simultaneous equation model of the demand (emissions) and supply (environmental stringency) of pollution. The supply equation takes into account the institutional quality of the country as well as consumer preferences for environmental quality. The results indicate that, all else equal, output growth would have increased industrial CO2 emissions in the Central and Eastern European countries in our sample by 31% between 1995 and 2003, and the composition effect corresponded to an increase of 8.4% of emissions. Nevertheless, the technique effect, induced by more stringent environmental policy, reduced industrial CO2 emissions by 58%, and allowed for a final beneficial result for the environment, i.e., -18% of industrial CO2 emissions in 2003 compared to 1995. Finally, our study confirms the importance of institutional factors in the explanation and further prediction of pollution reduction in transition economies.
    Keywords: Transition, CO2 Emissions, Environmental Policy, Scale, Composition and Technique Effects
    JEL: C33 D72 P5 P27 Q53 Q58
    Date: 2008–07
  11. By: Michael Sturm (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Jan Strasky (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Petra Adolf (Deutsche Bundesbank, Wilhelmp-Epstein-Strasse 14, 60431 Frankfurt am Main.); Dominik Peschel (Deutsche Bundesbank, Wilhelmp-Epstein-Strasse 14, 60431 Frankfurt am Main.)
    Abstract: In the wake of high and rising oil prices since 2003, the member states of the Gulf Cooperation Council (GCC) have seen dynamic economic development, enhancing their role in the global economy as investors and trade partners. Real GDP growth has been buoyant, with non-oil activity expanding faster than oil GDP. Macroeconomic developments have also been characterised by large fiscal and current account surpluses as a result of rising oil revenues, notwithstanding fiscal expansion and rapid import growth. The most significant macroeconomic challenge faced by GCC countries is rising inflation in an environment in which the contribution of monetary policy to containing inflationary pressure is constrained by the exchange rate regimes. The overall favourable macroeconomic backdrop of recent years has provided GCC countries with an opportunity to tackle long-standing structural challenges, such as the diversification of oil-centred economies and reform of the labour markets. In a global context, apart from developing into a pole of global economic growth, GCC countries – together with other oil-exporting countries – have become a major net supplier of capital in global markets, second only to East Asia. As a result, they have become part of the international policy debate on global imbalances. Furthermore, GCC countries are home to some of the world’s largest sovereign wealth funds, which raises several financial stability issues. Their role as trade partners has also increased, with the European Union being the only major region in the world maintaining a significant surplus in bilateral trade with the GCC. GCC countries are also key players in global energy markets in terms of production, exports and the availability of spare capacity. Their role is likely to become even more pivotal in the future as they command vast oil and gas reserves and benefit from relatively low costs in exploiting oil reserves. JEL Classification: F40, F30, F14, E60, N15, O53, Q40.
    Keywords: Gulf Cooperation Council, global imbalances, sovereign wealth funds, financial stability, oil markets.
    Date: 2008–07
  12. By: R.S. Eckaus
    Abstract: The oil price really is a speculative bubble. Yet only recently has the U.S. Congress, for example, showed recognition that this might even be a possibility. In general there seems to be a preference for the claim that the price increases are the result of basic economic forces: rapid growth in consumption, pushed particularly by the oil appetites of China and India, the depreciation of the U.S. dollar, real supply limitations, current and prospective and the risks of supply disruption, especially in the Middle East. These “explanations” will be taken up one by one, but first a view of what has happened to oil prices over recent years.
    Date: 2008–06
  13. By: Vicent Alcántara; Rosa Duarte; Teresa Obis
    Abstract: REVISTA SOCIEDAD Y ECONOMIA # 9 : TEMA CENTRAL: Economía ambiental aplicada
    Date: 2008–06–25
  14. By: Helena Meier; Katrin Rehdanz
    Abstract: In Great Britain several policy measures have been implemented in order to increase energy efficiency and to reduce carbon emissions. In the domestic sector, these targets can be achieved by improving space heating efficiency and, hence, decrease heating expenditures. However, before implementing policy measures it is necessary to better understand determinants of heating expenditures. In this paper, we examine determinants of heating expenditures which include socio-economic and building characteristics as well as heating technologies and meteorological observations. In contrast to most other studies, we use Panel data for investigating household’s demand for heating in Great Britain. Our analysis covers 15 years, starting in 1991, and more than 5,000 households that have been re-interviewed annually; altogether our sample covers more than 64,000 households. Our empirical findings suggest that in Great Britain owners generally have higher heating expenditures than renters. These differences in expenditures can be explained by building characteristics. Renters mainly live in flats and most of the owners live in detached/semi-detached houses. Generally, flats are more energy efficient than houses. Our results also imply that a number of socio-economic criteria have a significant influence on heating expenditures, independent from the central heating fuel type. Policy measures should not only focus on insulation standards but also on different household types. Especially elderly people and households with children should be target groups
    Keywords: Great Britain, Space Heating, Income elasticity, Price Elasticity
    JEL: C23 D12 Q4
    Date: 2008–07
  15. By: Johannes Wiegand
    Abstract: High oil prices have once again led to large external surpluses of oil exporting countries, similar to the 1970s and 1980s. This paper analyzes the extent to which (i) oil exporters use bank deposits to invest these surpluses, and (ii) banks are lending on these funds to emerging market economies. Bank recycling of petro dollars to emerging market economies is found to be almost as important as in the 1970s and 1980s, even though during the current boom, petro dollar bank flows tend to originate in countries like Russia, Libya, or Nigeria rather than in the Middle East. As one consequence, a fall in oil prices could yet again disrupt financing flows to emerging economies. Especially at risk could be countries that rely heavily on bank loans to finance external deficits, many of them in Emerging Europe.
    Keywords: Recycling process , Oil producing countries , Oil exports , Capital flows , Emerging markets , Bank credit , International trade ,
    Date: 2008–07–18
  16. By: Hans-Peter Weikard (Wageningen University); Rob Dellink (VU University Amsterdam)
    Abstract: This paper examines stability of international climate agreements for carbon abatement under an optimal transfer rule and renegotiations. The optimal transfer rule suggested to stabilise international environmental agreements (Weikard 2005, Carraro, Eyckmans and Finus 2006) is no longer optimal when agreements are renegotiated. We determine the conditions for optimal self-enforcing sequences of agreements. If these conditions are met, then transfer payments can be arranged such that no country wants to change its membership status at any stage. In order to demonstrate the applicability of our condition we use the STACO model, a 12-regions global model, to assess the impact of welldesigned transfer rules on the stability of an international climate agreement. Although there are strong free-rider incentives, we find a stable grand coalition in the first commitment period in a game with one round of renegotiations.
    Keywords: Stability of Coalitions, International Environmental Agreements, Partition Function Approach, Sharing Rules, Optimal Transfers, Renegotiations
    JEL: C72 D62 H41 H77
    Date: 2008–03
    Abstract: We explore the interactions between environmental externalities and intertemporal market power in electricity generation industries where thermal operators imperfectly compete with operators using scarce water stored in dams. Relying upon a two-period model, we show that, in countries where demand peaks at the first (, second) period after water renewal, dynamic market power worsens (, ameliorates) resource allocation and environmental health. We then address policy issues. We show that, in general, second best is not decentralized by means of standard tools such as price cap. We argue that the hydraulic process requires specific regulation. We put forward a quantity-based version of the contracts for price difference increasingly used in power pools, to be adopted jointly with either a flexible form of taxation or an intertemporal price cap.
    Keywords: power generation; water allocation; externalities; price cap; contracts for water difference.
    JEL: L13 L51 L94 D62 H23
    Date: 2008–07–29
  18. By: John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); James J. Murphy (Department of Economics, University of Alaska Anchorage, Anchorage, Alaska); John M. Spraggon (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: This paper uses laboratory experiments to investigate the performance of emission permit markets when compliance is imperfectly enforced. In particular we examine deviations in observed aggregate payoffs and expected penalties from those derived from a model of risk-neutral payoff-maximizing firms. We find that the experimental emissions markets were reasonably efficient at allocating individual emission control choices despite imperfect enforcement and significant noncompliance. However, violations and expected penalties were lower than predicted when these are predicted to be high, but were about the same as predicted values when these values were predicted to be low. Thus, although a standard model of compliance with emissions trading programs tends to predict significantly higher violations than we observe when subjects have strong incentives to violate their emissions permits, individual emissions control responsibilities are distributed among firms as predicted.
    Keywords: enforcement, compliance, emissions trading, permit markets, pollution, laboratory experiments
    JEL: C91 L51 Q58
    Date: 2008–07
  19. By: Carlos A. Chavez (Departamento de Economia, Universidad de Concepcion, Concepcion, Chile); John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: In contrast with what we perceive is the conventional wisdom about setting emissions taxes under uncertainty, we demonstrate that setting a uniform tax equal to expected marginal damage is not generally efficient under incomplete information about firms’ abatement costs and damages from pollution. We show that efficient taxes will deviate from expected marginal damage if there is uncertainty about the slopes of the marginal abatement costs of regulated firms. Moreover, efficient emissions tax rates will vary across firms if a regulator can use observable firm-level characteristics to gain some information about how the firms’ marginal abatement costs vary.
    Keywords: Emissions Taxes, Incomplete Information, Uncertainty
    JEL: L51 Q28
    Date: 2008–07
  20. By: Fabian Bornhorst; Sanjeev Gupta; John Thornton
    Abstract: The recent development literature stresses that countries that receive large revenues from natural resource endowments typically raise less revenue from domestic taxation, and that this creates governance problems because the lower domestic tax effort reduces the incentive for the public scrutiny of government. Our results from a panel of 30 hydrocarbon producing countries indicate that the offset between hydrocarbon revenues and revenues from other domestic sources is about 20 percent but that it is invariant to governance indicators.
    Keywords: Hydrocarbons , Revenues , Oil revenues , Taxation , Governance , Corruption ,
    Date: 2008–07–10
  21. By: Carmine Guerriero (University of Cambridge)
    Abstract: This paper analyzes the political economy of regulatory and judicial appointment rules. I study a model of price-setting by a political principal faced with a firm with unknown costs, and endowed with an information-gathering technology whose efficiency rises with the effort exerted by two accountable supervisors (a regulator and a judge). This set-up captures the institutions of several international markets. The model predicts that reforms toward election rather than appointment of regulators are more likely the less efficient is the information-gathering technology, the less stringent are the investment concerns of society, the stronger are regulators’ revolving-door motivations, and the closer is political competition. These predictions are consistent with US electric power market data. Moreover, in accordance with the model, electricity rates are lower and respond less to shock in input costs in states that elect their regulators or their High Court judges.
    Keywords: Election, Agency, Judges, Regulation, Electricity
    JEL: K23 L51 Q43
    Date: 2008–06
  22. By: Nadeem Ilahi; Riham Shendy
    Abstract: This paper tests the association between the Gulf Cooperation Council (GCC) countries' financial and remittance outflows and regional growth in the Middle East. The findings, based on 35-year panel data, indicate that growth rates of real GDP, private consumption and private investment in regional countries are strongly associated with remittance outflows from and the accumulation of financial surpluses in the GCC. Unlike in other developing and emerging market countries, growth in regional countries is not influenced by growth in the North, and is not export led. Linkages with the GCC could help sustain output growth in the regional countries in the face of the global economic slowdown and oil price shocks and could provide diversification gains to international capital seeking markets uncorrelated with Northern and emerging market countries.
    Keywords: Middle East , Oil producing countries , Cooperation Council for the Arab States of the Gulf , Economic growth , Capital flows , Gross domestic product , Private consumption , Private investment , Outward remittances , Regional shocks , Oil prices , Capital markets , Business cycles , Emerging markets ,
    Date: 2008–07–09
  23. By: Michèle Breton (GERAD, CREF and HEC Montréal); Lucia Sbragia (GERAD and HEC Montréal); Georges Zaccour (GERAD and Chair in Game Theory & Management HEC Montréal)
    Abstract: In this paper we develop a model to analyze, in a dynamic framework, how countries join international environmental agreements (IEAs). In the model, where countries suffer from the same environmental damage as a result of the total global emissions, a non-signatory country decides its emissions by maximizing its own welfare, whereas a signatory country decides its emissions by maximizing the aggregate welfare of all signatory countries. Signatory countries are assumed to be able to punish the non-signatories at a cost. When countries decide on their pollution emissions they account for the evolution of the pollution over time. Moreover, we propose a mechanism to describe how countries reach a stable IEA. The model is able to capture situations with partial cooperation in an IEA stable over time. It also captures situations where all countries participate in a stable agreement, or situations where no stable agreement is feasible. When more than one possibility coexists, the long-term outcome of the game depends on the initial conditions (i.e. the size of the initial group of signatory countries and the pollution level).
    Keywords: International Environmental Agreements, Non-Cooperative Dynamic Game, Coalition Stability
    JEL: C73 Q53
    Date: 2008–03
  24. By: Francis Cripps (Alphametrics Co.); Terry McKinley (International Poverty Centre)
    Abstract: In IPC?s One Pager #62, we projected until 2015 the impact on the global economy of rising oil prices, a falling dollar and a U.S. recession, and then the additional effect of the monetary and fiscal stimulus that the U.S. Government implemented in response to the crisis. In the process, we discovered that the long-term prospects of the U.S. economy were projected to worsen after 2015. (...)
    Keywords: A Global Realignment by 2020: U.S. Decline, Emerging Economies Rise
    Date: 2008–07
  25. By: Swenson, David A.
    Abstract: This paper looks at the historical relationship of unleaded gasoline prices relative to ethanol prices. It uses several basic measures to determine the usefulness of wholesale unleaded gasoline price as a determinant of ethanol price, and it looks at the stability of that simple model over this decade.
    JEL: Q4
    Date: 2008–07–31
  26. By: Hakon Saelen; Giles Atkinson; Simon Dietz; Jennifer Helgeson; Cameron Hepburn
    Abstract: In the workhorse model of welfare economics, the elasticity of marginal utility, often denoted as @#019E, serves simultaneously to represent aversion to risk, aversion to spatial inequality, and preferences for intertemporal substitution. While Kreps-Porteus-Selden and Epstein-Zin preferences enable risk to be separated from intertemporal substitution, no model enables all tlhree concepts to be disentangled. This theoretical lacuna is important, particularly for the economics of climate change, which is a global, long-run, uncertain externality. Much debate, for instance in the wake of the Stern Review (Stern, 2007a) has focused on the appropriate value for @#019E. This paper tests the suitability of the workhorse model for climate change economics, by surveying the attitudes of over 3000 people to risk, time, and income inequality. The results show that individual attitudes to the three are only weakly correlated. This suggests that because the three concepts are captured by a single parameter, the model is underspecified and a richer model should be considered.
    Keywords: Climate Change, Discounting, Cost-Benefit Analysis, Risk Aversion, Intertemporal Substitution, Inequality Aversion, Intergenerational Equity
    JEL: D01 D63 C90 Q51
    Date: 2008
  27. By: Carlo Giupponi (Universita' Ca’Foscari di Venezia); Jaroslav Mysiak (Fondazione Eni Enrico Mattei); Alessandra Sgobbi (Fondazione Eni Enrico Mattei)
    Abstract: The ever greater role given to public participation by laws and regulations, in particular in the field of environmental management calls for new operational methods and tools for managers and practitioners. This paper analyses the potentials and the critical limitations of current approaches in the fields of simulation modelling (SM), public participation (PP) and decision analysis (DA), for natural resources management within the context of climate change research. The potential synergies of combining SM, PP and DA into an integrated methodological framework are identified and a methodological proposal is presented, called NetSyMoD (Network Analysis – Creative System Modelling – Decision Support), which aims at facilitating the involvement of stakeholders or experts in policy - or decision-making processes (P/DMP). A generic P/DMP is formalised in NetSyMoD as a sequence of six main phases: (i) Actors analysis; (ii) Problem analysis; (iii) Creative System Modelling; (iv) DSS design; (v) Analysis of Options; and (vi) Action taking and monitoring. Several variants of the NetSyMoD approach have been adapted to different contexts such as integrated water resources management and coastal management, and, recently it has been applied in climate change research projects. Experience has shown that NetSyMoD may be a useful framework for skilled professionals, for guiding the P/DMP, and providing practical solutions to problems encountered in the different phases of the decision/policy making process, in particular when future scenarios or projections have to be considered, such as in the case of developing and selecting adaptation policies. The various applications of NetSyMoD share the same approach for problem analysis and communication within the group of selected actors, based upon the use of creative thinking techniques, the formalisation of human-environment relationships through the DPSIR framework, and the use of multi-criteria analysis through a Decision Support System (DSS) software.
    Keywords: Modelling, Public Participation, Natural Resource Management, Policy, Decision-Making, Governance, DSS
    JEL: Q5
    Date: 2008–02
  28. By: Ralph Winkler (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We study the optimal control of a pollutant that accumulates with a delay.We find that optimal paths are, in general, non-monotonic and oscillatory, but monotonic if the objective function is additively separable. Hence, using additively separable objective functions as an approximation to a general objective function may be a misspecification. With a numerical example we illustrate that an additively separable approximation performs considerably worse in delayed compared to instantaneous stock accumulation.
    Keywords: additively separable objective, approximated objective, delayed optimal control, optimal pollution control
    JEL: Q50 C61
    Date: 2008–07
  29. By: Claudia S. Gómez-López; Luis A.Puch
    Abstract: Chile and Mexico, two Latin American countries that shared similar economic conditions in early’ 80s are studied in order to shed light about the role commodities play. In a general equilibrium growth accounting framework over the period 1980-2000 we show that Adjusted Total Factor Productivity net of oil and copper, has correspondingly decreased and increased less than TFP, suggesting that commodities are a relevant growth factor. Previous works have shown that Chile recovered more quickly than Mexico did. However, when commodity price changes are taken into account, we show that copper and oil have played a major role in the depressions and recoveries for both economies. We propose a neoclassical growth model where we distinguish between the role of commodities and the rest of the economy. The results complement the findings in Bergoeing et al.(2002).
    Date: 2008–07
  30. By: Diaz-Vazquez, M. Rosario; Cancelo, M. Teresa
    Date: 2008
  31. By: Mario Mansilla; Eugenio Cerutti
    Abstract: The hydrocarbons sector has become one of the most dynamic economic activities in the Bolivian economy and the main driver of improved export performance and international reserve accumulation. The central role of the hydrocarbons sector in the economy is attributable to the high levels of investment made in the late 1990s, which permitted much higher production levels, particularly of natural gas. However those positive developments in the hydrocarbons sector have given rise to the possibility of a new case of "Dutch disease." While Bolivia's economy has already seen many benefits from its higher gas exports, especially in terms of lower external vulnerability and improved fiscal stance, the new resources could also limit the development of other economic sectors in terms of output and factor income. This paper explores the transmission channels of Dutch disease, as well as its main symptom, the appreciation of the real exchange rate
    Keywords: Hydrocarbons , Bolivia , Natural resources , Exports , Manufacturing sector , Real effective exchange rates ,
    Date: 2008–06–25
  32. By: Timothy Dunne; Xiaoyi Mu
    Abstract: This paper investigates the effect of uncertainty on the investment decisions of petroleum refineries in the US. We construct uncertainty measures from commodity futures market and use data on actual capacity changes to measure investment episodes. Capacity changes in US refineries occur infrequently and a small number of investment spikes account for a large fraction of the change in industry capacity. Given the lumpy nature of investment adjustment in this industry, we empirically model the investment process using hazard models. An increase in uncertainty decreases the probability a refinery adjusts its capacity. The results are robust to various investment thresholds. Our findings lend support to theories that emphasize the role of irreversibility in investment decisions.
    Date: 2008
  33. By: Shiferaw, Bekele; Kebede, Tewodros; Ratna Reddy, V.
    Abstract: "Spatial and temporal attributes of watersheds and the associated market failures that accelerate degradation of agricultural and environmental resources require innovative institutional arrangements for coordinating use and management of resources. Effective collective action (CA) allows smallholder farmers to jointly invest in management practices that provide collective benefits in terms of economic and sustainability gains. The Government of India takes integrated watershed management (IWM) as a key strategy for improving productivity and livelihoods in the rain-fed and drought-prone regions. This study investigates the institutional and policy issues that limit effective participation of people in community watershed programs and identifies key determinants for the degree of CA and its effectiveness in achieving economic and environmental outcomes. We use empirical data from a survey of 87 watershed communities in semi-arid Indian villages to identify a set of indicators of CA and its performance in attaining desired outcomes. Factor analysis is used to develop aggregate indices of CA and its effectiveness. Regression methods are then employed to test the effects of certain policy relevant variables and to determine the potential effects of CA in achieving desired poverty reduction and resource improvement outcomes. We find a positive and highly significant effect of CA on natural resource investments, but no evidence of its effects on household assets and poverty reduction outcomes. This may be attributable to longer gestation periods for realizing indirect effects from collective natural resource investments and the lack of institutional mechanisms to ensure equitable distribution of such gains across the community, including the landless and marginal farmers." authors' abstract
    Keywords: Collective action, Institutions, Property rights, Watershed management, Poverty, Environmental impacts,
    Date: 2008
  34. By: Stéphane Hallegatte (CIRED)
    Abstract: Cost-benefit analyses require comparing costs and benefits that occur at different points in time. Doing so, however, creates conflicts between short-term considerations — a discounting scheme has to be consistent with observed behaviours — and long-term ethical issues — a discounting scheme must not favour the current generation over future ones. To overcome this conflict, the present article proposes a prescriptive consumption discounting scheme that applies different discount rates (i) for various incomes in the lifetime of a unique individual and (ii) for various incomes that affect different individuals. Practically, any income flux is first discounted to the birth date of all individuals using a discount rate with a non-zero pure preference for the present; then these individual discounted values are discounted to the present with a discount rate with no preference for the present and finally summed up. The aim of this prescriptive discount rate is to be consistent with observed individual behaviour (descriptive discount rate) without favouring current generations. Consequences are discussed and compared with the UK Green Book and the Stern Review discounting schemes.
    Keywords: Discount Rate, Intergenerational Equity
    JEL: H4
    Date: 2008–05
  35. By: Hasssan Benchekroun; Cees Withagen
    Abstract: We revisit the seminal growth model with exhaustible resources, the so called Dasgupta-Heal- Stiglitz-Solow model (DHSS). For this optimal control problem with two state variables, we explicitly characterize the dynamics of all the variables in the model and from all possible initial values of the stocks. We determine the condition under which consumption is initially increasing with time and the condition under which initial investment is positive implying that overshooting of man-made capital ocurs. We show that the initial consumption under a utilitarian criterion starts below the maximin rate of consumption if and only the resource is abundant enough and that under a utilitarian criterion, it is not necessarily the present generation that benefits most from a windfall of resources.
    JEL: E20 Q30 C61 C65
    Date: 2008–07

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