nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒11‒11
thirty-one papers chosen by
Roger Fouquet
Imperial College, UK

  1. Electricity Pricing and Market Power - Evidence from Germany By Janssen, Matthias; Wobben, Magnus
  2. Is electricity more important than natural gas? Partial liberalization of the Western-European energy markets By Brekke, Kjell Arne; Golombek, Rolf; Kittelsen , Sverre
  3. An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey By Halicioglu, Ferda
  4. Energy only, capacity market and security of supply. A stochastic equilibrium analysis By EHRENMANN, Andreas; SMEERS, Yves
  5. The Enhanced Use of Wood-biomass. Macroeconomic, Sectoral and Environmental Impacts By Balabanov, Todor; Schwarzbauer, Wolfgang
  6. Evaluating the impact of average cost based contracts on the industrial sector in the European emission trading scheme By OGGIONI, Giorgia; SMEERS, Yves
  7. Economic Growth and Electricity Consumption in 12 European Countries: A Causality Analysis Using Panel Data. By Aitor Ciarreta Antuñano; Ainhoa Zarraga Alonso
  8. The Clean Development Mechanism and Sustainable Development: A Panel Data Analysis By Yongfu Huang; Terry Barker
  9. Oil Price Shocks and Stock Market Booms in an Oil Exporting Country By Hilde C. Bjørnland
  10. Investment decisions in liberalized electricity markets: A framework of peak load pricing with strategic firms By ZOETTL, Gregor
  11. Market Power in the Nordic Wholesale Electricity Market: A Survey of the Empirical Evidence By Fridolfsson, Sven-Olof; Tangerås, Thomas
  12. Crude Oil Prices: Trends and Forecast By Noureddine Krichene
  13. Investment decisions in liberalized electricity markets : A framework of peak load pricing with strategic firms By Gregor, ZOETTL
  14. Market Structure and the Stability and Volatility of Electricity Prices By Bask, Mikael; Widerberg, Anna
  15. China's Participation in Global Environmental Negotiations By Huifang Tian; John Whalley
  16. Equilibria in markets with non-convexities and a solution to the missing money phenomenon in energy markets By MURATORE, Gabriella
  17. On investment decisions in liberalized electricity markets : the impact of price caps at the spot market By Gregor, ZOETTL
  18. Emissions Trading with Profit-Neutral Permit Allocations By Cameron Hepburn; John K.-H. Quah; Robert A. Ritz
  19. Constraints on the Design and Implementation of Monetary Policy in Oil Economies: The Case of Venezuela By Víctor Olivo; Mercedes da Costa
  20. Does Geography Matter for the Clean Development Mechanism? By Yongfu Huang; Terry Barker
  21. Global Governance: Old and New Issues By Gary Clyde Hufbauer
  22. Environmental Policy, Decentralized Leadership and Horizontal Commitment Power By Persson, Lars
  23. Cointegration and the Demand for Gasoline By B. Bhaskara Rao; Gyaneshwar Rao
  24. The Direct Impact of Climate Change on Regional Labour Productivity By Tord Kjellstrom; R. Sari Kovats; Simon J. Lloyd; Tom Holt; Tol, Richard S. J.
  25. Gas models and three difficult objectives By SMEERS, Yves
  26. How Do Gasoline Prices Affect Fleet Fuel Economy? By Shanjun Li; Roger von Haefen; Christopher Timmins
  27. Using Elicited Choice Probabilities to Estimate Random Utility Models: Preferences for Electricity Reliability By Asher A. Blass; Saul Lach; Charles F. Manski
  28. A Welfare Analysis of the U.S. Ethanol Subsidy By Du, Xiaodong (Sheldon); Hayes, Dermot J.; Baker, Mindy
  29. Maximin-optimal sustainable growth with nonrenewable resource and externalities By Andrei V. Bazhanov
  30. Russie-Caspienne : l'enjeu des hydrocarbures pour l'approvisionnement de l'UE By Catherine Locatelli
  31. Are children 'normal'? By Dan Black; Natalia Kolesnikova; Seth G. Sanders; Lowell J. Taylor

  1. By: Janssen, Matthias; Wobben, Magnus
    Abstract: The aim of this paper is to develop a methodology for measuring the exercise of potential market power in liberalized electricity markets. We therefore investigate producer behavior in the context of electricity pricing with respect to fundamental time-dependent marginal cost (TMC), i.e. CO2- and fuel cost. In doing so, we do not - in contrast to most current approaches to market power investigation - rely on an estimate of the entire generation cost, which inevitably suffers from the lack of appropriate available data. Applying an analytical model of a day-ahead electricity market, we derive work-on rates, which provide information about the impact of TMC variations on electricity prices in the market constellations of perfect competition, quasi-monopoly and monopoly. Comparing these model-based work-on rates with actual work-on rates, estimated by an adjusted first-differences regression model of German power prices on the cost for hard coal, natural gas and emission allowances, we find evidence of the exercise of market power in the period 2006 to 2008. However, our results reveal that German market competitiveness increases marginally. We confirm our results by simulating a TMC-driven diffusion model of futures power prices estimated by maximum-likelihood.
    Keywords: energy; electricity; market power analysis; spot-futuresprice relation
    JEL: C51 L13 L94 D43
    Date: 2008–08
  2. By: Brekke, Kjell Arne (Dept. of Economics, University of Oslo); Golombek, Rolf (Frisch Centre); Kittelsen , Sverre (Frisch Centre)
    Abstract: The European Union has introduced directives that aim to liberalize and integrate electricity and gas markets in Western Europe. While progress has been made, particularly in electricity markets, there have been setbacks: for example, because of concerns about national interests and security of supply. Thus it is possible that only part of the energy industry in Western Europe will be liberalized. We use a numerical model to assess what types of liberalization – electricity vs. natural gas; domestic markets vs. international trade – are most influential in decreasing prices and increasing welfare in Western Europe. We find that a partial liberalization of electricity markets has greater quantity and welfare effects than a partial liberalization of gas markets, and that liberalizations of domestic energy markets have (overall) greater effects than liberalizations of trade in energy between Western European countries. Finally, the shortrun effects primarily parallel the long-run effects, though they are significantly smaller.
    Keywords: energy markets; liberalization; price discrimination; resource rent
    JEL: C15 C68 Q40 Q48
    Date: 2008–10–30
  3. By: Halicioglu, Ferda
    Abstract: This study attempts to examine empirically dynamic causal relationships between carbon emissions, energy consumption, income, and foreign trade in the case of Turkey using the time series data for the period 1960-2005. This research tests the interrelationship between the variables using the bounds testing to cointegration procedure. The bounds test results indicate that there exist two forms of long-run relationships between the variables. In the case of first form of long-relationship, carbon emissions are determined by energy consumption, income and foreign trade. In the case of second long-run relationship, income is determined by carbon emissions, energy consumption and foreign trade. An augmented form of Granger causality analysis is conducted amongst the variables. The long-run relationship of CO2 emissions, energy consumption, income and foreign trade equation is also checked for the parameter stability. The empirical results suggest that income is the most significant variable in explaining the carbon emissions in Turkey which is followed by energy consumption and foreign trade. Moreover, there exists a stable carbon emissions function. The results also provide important policy recommendations.
    Keywords: CO2 emissions; energy consumption; income; EKC hypothesis; foreign trade.
    JEL: O43 O13 C22
    Date: 2008
  4. By: EHRENMANN, Andreas (Electrabel); SMEERS, Yves (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: Former generation capacity expansion models were formulated as optimization problems. These included a reliability criterion and hence guaranteed security of supply. The situation is different in restructured markets where investments need to be incentivised by the margin resulting from electricity sales after accounting for fuel costs. The situation is further complicated by the payments and charges on the carbon market. We formulate an equilibrium model of the electricity sector with both investments and operations. Electricity prices are set at the fuel cost of the last operating unit when there is no curtailment, and at some regulated price cap when there is curtailment. There is a CO2 market and different policies for allocating allowances. Todays situation is quite risky for investors. Fuel prices are more volatile than ever; the total amount of CO2 allowances and the allocation method will only be known after investments has been decided. The equilibrium model is thus one under uncertainty. Agents can be risk neutral or risk averse. We model risk aversion through a CVaR of the net margin of the industry. The CVaR induces a risk neutral probability according to which investors value their plants. The model is formulated as a complementarity problem (including the CVaR valuation of investment). An illustration is provided on a small problem that captures the essence of today electricity world: a choice restricted to coal and gas, a peaky load curve because of wind penetration, uncertain fuel prices and an evolving carbon market (EU-ETS). We show that we might have problem of security of supply if we do not implement a capacity market.
    Keywords: capacity adequacy, risk functions, stochastic equilibrium models
    Date: 2008–02
  5. By: Balabanov, Todor (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Schwarzbauer, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: The main objective of this paper is to identify fuel substitution potential by estimating potential price induced energy substitution and by considering available technological options. We consider the impacts of CO2 taxation on reduction of emissions until 2020, assuming CO2 neutrality of burning fuel wood. We finally address the macroeconomic, environmental and sectoral impacts of enhanced usages of fuel wood for energy. The main assumptions are a 1.5 times increase of fuel wood use by 2020 and achieving a share of renewables of 29.83 %. The main outcome for this scenario is that the Austrian economy could benefit from the double dividend of sustained economic growth and fulfilment of EU targets on renewables and CO2 reduction. The prospects for the energy intensive industries deteriorate – most of them would have to reconsider their technological options and face adverse conditions for their production sites.
    Keywords: Sustainable development, Aggregate supply and demand analysis, Demand and supply of renewable resources and conservation
    JEL: Q01 Q11 Q21
    Date: 2008–10
  6. By: OGGIONI, Giorgia (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); SMEERS, Yves (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: The inception of the Emission Trading System in Europe (EU-ETS) has made power price more expensive. This affects the competitiveness of electricity intensive industrial consumers and may force them to leave Europe. Taking up of a proposal of the industrial sector, we explore the possible application of special contracts, based on the average cost pricing system, which would mitigate the impact of CO2 cost on their electricity price. The model supposes fixed generation capacities. A companion paper treats the case with capacity expansion. We first consider a reference model representing a perfectly competitive market where all consumers (households and industries) are price-takers and buy electricity at the short-run marginal cost. We then change the market design assuming that large industrial consumers pay power either at a single or at a nodal average cost price. The analysis of these problems is conducted with simulation models applied to the Northwestern European market. The equilibrium models developed are implemented in the GAMS environment.
    Keywords: average cost pricing, complementarity conditions, EU-ETS, Northwestern Europe market.
    Date: 2008–01
  7. By: Aitor Ciarreta Antuñano (Dpto. de Fundamentos del Análisis Económico II (UPV/EHU)); Ainhoa Zarraga Alonso (Dpto. de Economía Aplicada III (UPV/EHU))
    Abstract: We apply recent panel methodology to investigate the relationship between electricity consumption and real GDP for a set of 12 European Union countries using annual data for the period 1970-2004. Recently developed tests for panel unit roots, cointegration in heterogeneous panels and panel causality are employed. The results show a long-run relationship between the series. We estimate this relationship and test for causality. We find no short-run causality in any direction. These results might help to design appropriate electricity consumption policies in the sample countries, as well as investment policies in interconnections to build a single European market for electricity.
    Keywords: Electricity consumption; economic growth; panel cointegration; panel causality
    JEL: C33 Q40
    Date: 2008–11–05
  8. By: Yongfu Huang (4CMR, Department of Land Economy, University of Cambridge); Terry Barker (4CMR, Department of Land Economy, University of Cambridge)
    Abstract: The Clean Development Mechanism (CDM) of the Kyoto Protocol is designed to allow the industrialised countries to earn credits by investing in greenhouse gas (GHG) emission reduction projects in developing countries, which contribute to sustainable development in the host countries. This research empirically investigates the long-run impacts of CDM projects on CO2 emissions for 18 CDM host countries over 1990-2007. By allowing for considerable heterogeneity across countries, this research provides strong evidence in support of a significant effect of CDM projects on CO2 emission reductions in the host countries. It offers ample recommendation for improving CDM development and serves to encourage the developing countries to strengthen their national capacity to effectively access the CDM for their sustainable development objectives.
    Keywords: Clean Development Mechanism; CO2 Emissions; Heterogeneous Dymanic Panels
    Date: 2008
  9. By: Hilde C. Bjørnland (Norges Bank (Central Bank of Norway) and Norwegian School of Management (BI))
    Abstract: This paper analyses the effects of oil price shocks on stock returns in Norway, an oil exporting country, highlighting the transmission channels of oil prices for macroeconomic behaviour. To capture the interaction between the different variables, stock returns are incorporated into a structural VAR model, as stock prices are an important transmission channel of wealth in an oil abundant country. I find that following a 10 percent increase in oil prices, stock returns increase by 2.5 percent, after which the effect eventually dies out. The results are robust to different (linear and non-linear) transformations of oil prices. The effects on the other variables are more modest. However, all variables indicate that the Norwegian economy responds to higher oil prices by increasing aggregate wealth and demand. The results also emphasize the role of other shocks; monetary policy shocks in particular, as important driving forces behind stock price variability in the short term.
    Keywords: VAR, oil price shocks, monetary policy, stock market.
    JEL: C32 E44 E52
    Date: 2008–10–03
  10. By: ZOETTL, Gregor
    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 Kleindorder (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: 2008–07
  11. By: Fridolfsson, Sven-Olof (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN))
    Abstract: We review the recent empirical research concerning market power on the Nordic wholesale market for electricity, Nord Pool. There is no evidence of blatant and systematic exploitation of system level market power on Nord Pool. However, generation companies seem from time to time able to take advantage of capacity constraints in transmission to wield regional market power. Market power can manifest itself in a number of ways which have so far escaped empirical scrutiny. We discuss investment incentives, vertical integration and buyer power, as well as withholding of base-load (nuclear) capacity.
    Keywords: Electricity Markets; Deregulation; Market Power; Hydro Power; Transmission Constraints
    JEL: L13 L94 Q41
    Date: 2008–10–22
  12. By: Noureddine Krichene
    Abstract: Following record low interest rates and fast depreciating U.S. dollar, crude oil prices became under rising pressure and seemed boundless. Oil price process parameters changed drastically in 2003M5-2007M10 toward consistently rising prices. Short-term forecasting would imply persistence of observed trends, as market fundamentals and underlying monetary policies were supportive of these trends. Market expectations derived from option prices anticipated further surge in oil prices and allowed significant probability for right tail events. Given explosive trends in other commodities prices, depreciating currencies, and weakening financial conditions, recent trends in oil prices might not persist further without triggering world economic recession, regressive oil supply, as oil producers became wary about inflation. Restoring stable oil markets, through restraining monetary policy, is essential for durable growth and price stability.
    Keywords: Working Paper , Oil prices , Commodity prices , Exchange rate depreciation , Inflation , Monetary policy ,
    Date: 2008–05–27
  13. By: Gregor, ZOETTL
    Abstract: In this article we analyze firms investment incentives in liberalized electricity markets. Since electricity is economically non storable, it is optional 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 have been analyzed in the peak load pricing literature (compare Crew and Kleindorder (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 Investic choices of strategic firms, and quantifiy the potential for market power and its impact on generation portfolios in restructured electricity markets in the long run.
    Date: 2008–08–27
  14. By: Bask, Mikael (Department of Economics, Stanford University); Widerberg, Anna (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: By using a novel approach in this paper,(lambda,sigma²)-analysis, we have found that electricity prices most of the time have increased in stability and decreased in volatility when the Nordic power market has expanded and the degree of competition has increased. That electricity prices at Nord Pool have been generated by a stochastic dynamic system that most often has become more stable during the step-wise integration of the Nordic power market means that this market is less sensitive to shocks after the integration process than it was before this process. This is good news.
    Keywords: Electricity Prices; GARCH Models; Lyapunov Exponents; Market Structure; Reconstructed Dynamics; Stability; Volatility
    JEL: C14 C22 D43
    Date: 2008–11–06
  15. By: Huifang Tian; John Whalley
    Abstract: In the paper we discuss China's participation in both the 2009 Copenhagen negotiations on a post-Kyoto global climate change regime currently under way and out beyond Copenhagen in further negotiations likely to follow. China is now both the largest and most rapidly growing carbon emitter, and has much higher emission intensity relative to GDP than OECD countries. In the Copenhagen negotiation, there will be strong pressure on China to take on emissions reduction commitments and China's concern will be to do so in ways that allow continuation of a high growth rate and fast development. Central to this will be maintaining access to OECD markets for manufactured exports in face of potential environmental protectionism. Thus the broad approach seems likely to be to take on environmental commitments in part in return for stronger guarantees of access to export markets abroad. This involves directly linked trade and environmental commitments although how linkage can be made explicit is a major issue. More narrowly, the issues that seem likely to dominate the climate change negotiating agenda from China's viewpoint are the interpretation of the common but differentiated responsibilities (CBDR) principle adopted in Kyoto, the choice of negotiating instruments and form of emission commitments, and the size (and form) of accompanying financial funds for adaptation and innovation. We suggest that a possible interpretation of CBDR reflecting China's desire to leave room to grow when undertaking emission reduction commitments might be for China to take on emission intensity commitments while OECD countries take on emission level commitments. Larger funds and flexibility in their use will also raise China's willingness to make commitments.
    JEL: Q54 Q56
    Date: 2008–10
  16. By: MURATORE, Gabriella (Technische Universiteit Eindhoven)
    Abstract: In this paper we address the issue of finding efficient partial equilibria in markets with non-convexities. This is a problem that has intrigued generation of economists. Beside its theoretical importance this issue is fundamental in energy markets which do not give the right price signals and incentives to maintain existing and invest in new generating capacity. By considering a competitive environment in which consumers maximize utility independently of other agents actions while suppliers are profit maximizers given other market agents actions, we are able to find efficient prices in markets with non-convexities. Based on this result we propose a design for an energy-only market able to give investors the correct price signals.
    Keywords: energy markets, equilibrium prices, non convex economies.
    Date: 2008–02
  17. By: Gregor, ZOETTL
    Abstract: We analyze the impact of a uniform price cap at electricity spot markets on firms investment decisions and on welfare. Since investment decisions for those markets are taken in the long run, fluctuating demand at the spot market eventually gives rise to high price spikes in case of binding capacities. Those price spikes are considered to send accurate signals for investment in generation capacities, limiting those spikes by price caps is thought to reduce firmsÕ investment incentives. We are able to show that this is not tre for the case of strategic investment behavior. More specifically we analyze a market game where firms choose capacities prior to a spot market which is subject to fluctuating or uncertain demand. We derive, that appropriately chosen price caps do always increase firms investment incentives under imperfect competition. We furthermore characterize the optimal price cap. Based on the theoretical framework, we empirically analyze the impact of uniform price caps on the German electricity market.
    Keywords: Investment incentives, price caps, fluctuating demand, electricity markets
    JEL: D43 L13 D41 D42 D81
    Date: 2008–08–27
  18. By: Cameron Hepburn (School of Enterprise and the Environment, Oxford University); John K.-H. Quah (Department of Economics, Oxford University); Robert A. Ritz (Department of Economics, Oxford University)
    Abstract: This paper examines the operation of an emissions trading scheme (ETS) in a Cournot oligopoly. We study the impact of the ETS on industry output, price, costs, emissions, and profits. In particular, we develop formulae for the number of emissions permits that have to be freely allocated to firms in order to neutralize any adverse impact the ETS may have on profits. These formulae tell us that the profit impact of the ETS is usually limited. Indeed, under quite general conditions, industry profits are preserved so long as firms are freely allocated a fraction of their total demand for permits, with this fraction being lower than the industry's Herfindahl index.
    Keywords: Emissions trading, permit allocation, profit-neutrality, cost pass-through, abatement, grandfathering
    Date: 2008–03–11
  19. By: Víctor Olivo; Mercedes da Costa
    Abstract: By definition, fiscal dominance impedes the effective implementation of any monetary strategy aimed at controlling inflation. Economies that exhibit oil dominance-a situation in which oil exports largely affect the main macroeconomic indicators-may also exhibit fiscal dominance. However, in this case, the standard indicators used to gauge the presence of fiscal dominance may fail to give the appropriate signals. The main purpose of this paper is twofold: i) to present a simple framework to analyze fiscal dominance in oil exporting countries and ii) to test the hypothesis of the presence of oil dominance/fiscal dominance (OD/FD) in the case of Venezuela. Using VAR and VEC models it is possible to conclude that there is relevant evidence supporting the validity of the OD/FD hypothesis.
    Keywords: Venezuela, Republica Bolivariana de , Oil exporting countries , Oil exports , Monetary policy , Fiscal policy ,
    Date: 2008–06–12
  20. By: Yongfu Huang (4CMR, Department of Land Economy, University of Cambridge); Terry Barker (4CMR, Department of Land Economy, University of Cambridge)
    Abstract: Under the Kyoto Protocol, the Clean Development Mechanism (CDM) is designed to serve the dual purposes of allowing the industrialised countries to earn credits by investing in project activities that reduce greenhouse gas (GHG) emissions, while contributing to sustainable development in developing countries via the flows of technology and capital. The fact that the geographic distribution of CDM projects is highly uneven motivates this research into whether certain geographic endowments matter for the CDM development. This research suggests that CDM credit flows in a country is positively affected by those in its neighbouring countries. Countries with higher absolute latitudes and elevations tend to initiate more CDM projects, whereas countries having richer natural resources do not seem to undertake more CDM projects. This finding sheds light on the geographic determinants of uneven CDM development across countries, and has implications for developing countries in terms of international cooperation and national capacity building to effectively access the CDM
    Keywords: Clean Development Mechanism; Geography; Natural Resources; Spatial Dependence
    Date: 2008
  21. By: Gary Clyde Hufbauer
    Abstract: This paper opens with a short recollection of the Kiel Week Conference of 2002, recorded in a volume edited by Horst Siebert, titled Global Governance: An Architecture for the World Economy. Assess-ments and forecasts made at that time are scored against subsequent developments. Security relations between the great powers are asserted to define the space for global economic governance. Over the next thirty years, the security context is not likely to provide the same inspiration for global economic institutions as the Cold War once did; instead, economic institutions will stand or fall on their own merits in meeting urgent challenges. The paper identifies and evaluates six challenges that are already with us, but which do not impose immediate acute costs on the great powers: climate change, financial crises, the world trading system, oil supplies, immigration, and economic responses to political chaos. A few of these, but not the majority, are seen as good candidates for global governance in the next decade. The paper concludes with speculation on four very low probability challenges that would im-pose acute costs (or present great opportunities) if they occur: pandemics, terrorism on the high seas, treasures from the deep seabed, and the prospect of a killer asteroid
    Keywords: climate change, financial crises, the world trading system, oil supplies, immigration
    JEL: Q54 F36 F13 Q41 F22
    Date: 2008–10
  22. By: Persson, Lars (Department of Economics, Umeå University)
    Abstract: This paper analyzes environmental policy in a decentralized economic federation comprising two countries, where a federal government decides upon environmental targets (maximum allowable emissions) for each country, which are implemented by the national governments. Both national governments have commitment power vis-à-vis the federal government, whereas one of the national governments (the horizontal Stackelberg leader) also has commitment power vis-à-vis the other country (the horizontal follower). The results show how the horizontal and vertical commitment power affect the horizontal leader’s use of income and production taxes, which are the tax instruments available at the national level.
    Keywords: Environmental policy; Optimal taxation; Economic federation; Horizontal commitment power
    JEL: D62 H21 H23 H70
    Date: 2008–11–03
  23. By: B. Bhaskara Rao; Gyaneshwar Rao
    Abstract: Since the early 1970s there has been a worldwide upsurge in the price of energy and in particular of gasoline. Therefore, demand functions for energy and its components like gasoline have received much attention. However, since confidence in the estimated demand functions is important for use in policy and forecasting, following Amarawickrama and Hunt (2008), this paper estimates the demand for gasoline is estimated with 6 alternative time series techniques with data from Fiji. Estimates with these 6 alternative techniques are very close and thus increase our confidence in them. We found that gasoline demand is both price and income inelastic.
    Keywords: Gasoline Demand, Income and price elasticities, Cointegration.
    JEL: Q40 Q41
    Date: 2008–10–23
  24. By: Tord Kjellstrom (Australian National University); R. Sari Kovats (London School of Hygiene and Tropical Medicine); Simon J. Lloyd (London School of Hygiene and Tropical Medicine); Tom Holt (University of East Anglia); Tol, Richard S. J. (Economic and Social Research Institute (ESRI))
    Abstract: Global climate change will increase outdoor and indoor heat loads, and may impair health and productivity for millions of working people. This study applies physiological evidence about effects of heat, climate guidelines for safe work environments, climate modelling and global distributions of working populations, to estimate the impact of two climate scenarios on future labour productivity. In most regions, climate change will decrease labour productivity, under the simple assumption of no specific adaptation. By the 2080s, the greatest absolute losses of population based labour work ability as compared with a situation of no heat impact (11-27%) are seen under the A2 scenario in South-East Asia, Andean and Central America, and the Caribbean. Climate change will significantly impact on labour productivity unless farmers, self-employed and employers invest in adaptive measures. Workers may need to work longer hours to achieve the same output and there will be economic costs of occupational health interventions against heat exposures.
    Keywords: Climate change, heat, work, labour productivity
    Date: 2008–10
  25. By: SMEERS, Yves (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: Competition, security of supply and sustainability are at the core of EU energy policy. The Commission argues that making the European gas market more competitive (completing the internal gas market) will be instrumental in the pursuit of these objectives. We examine the question through the eyes of existing models of the European gas market. Can model tell us anything on this problem? Do they confirm or infirm the analysis of the Commission appearing in fundamental documents such the Green Paper, the Sector Inquiry or the new legislation package? We argue that results of existing models contradict a fundamental finding (paragraph 77) of the Sector Inquiry. We further elaborate on the basis of the economic assumption underlying the models, that changing the assumptions implicitly contained in paragraph 77 cast doubts on a large part of the reasoning justifying the completion of the internal gas market. We also explain that models could help arriving at a better definition of the relevant market, which is so important in the reasoning of the Commission. Last we also find model results that question the effectiveness of ownership unbundling. As to security of supply, we explain that models can also contribute to assess the value of additional infrastructure in the context of security of supply, but this potential seems largely untapped. Last we note that sustainability has not yet penetrated models of gas markets. We conclude by suggesting other area of immediate concern, possibly of higher technical difficulty, that modellers could address in future research.
    Date: 2008–02
  26. By: Shanjun Li; Roger von Haefen; Christopher Timmins
    Abstract: Exploiting a rich data set of passenger vehicle registrations in twenty U.S. metropolitan statistical areas from 1997 to 2005, we examine the effects of gasoline prices on the automotive fleet's composition. We find that high gasoline prices affect fleet fuel economy through two channels: (1) shifting new auto purchases towards more fuel-efficient vehicles, and (2) speeding the scrappage of older, less fuel-efficient used vehicles. Policy simulations based on our econometric estimates suggest that a 10% increase in gasoline prices from 2005 levels will generate a 0.22% increase in fleet fuel economy in the short run and a 2.04% increase in the long run.
    JEL: H23 L62 Q31
    Date: 2008–10
  27. By: Asher A. Blass; Saul Lach; Charles F. Manski
    Abstract: When data on actual choices are not available, researchers studying preferences sometimes pose choice scenarios and ask respondents to state the actions they would choose if they were to face these scenarios. The data on stated choices are then used to estimate random utility models, as if they are data on actual choices. Stated choices may differ from actual ones because researchers typically provide respondents with less information than they would have facing actual choice problems. Elicitation of choice probabilities overcomes this problem by permitting respondents to express uncertainty about their behavior. This paper shows how to use elicited choice probabilities to estimate random utility models with random coefficients and applies the methodology to estimate preferences for electricity reliability in Israel.
    JEL: C25 C42 D12 L51 L94
    Date: 2008–10
  28. By: Du, Xiaodong (Sheldon); Hayes, Dermot J.; Baker, Mindy
    Abstract: Based on a transparent analytical model of multiple markets including corn, ethanol, gasoline, and transportation fuel, this study estimates the welfare changes for consumers and producers resulting from ethanol production and related support polices in 2007. The welfare estimation takes into account the second-best gain from eliminating loan deficiency payments. The results suggest the total social cost is about $0.78 billion for given market parameters. We validate the model’s underlying assumption and test for the results’ sensitivity to assumed parameters.
    Keywords: consumer surplus, deadweight loss, ethanol, subsidy, substitution.
    Date: 2008–11–04
  29. By: Andrei V. Bazhanov
    Abstract: I offer an approach linking a welfare criterion to the “sustainable development opportunities” of the economy. This implies a dependence of a criterion on the information about the current state. I consider the problem for the Dasgupta-Heal-Solow-Stiglitz model with externalities. The economy-linked criterion is constructed on an example of the maximin principle applied to a hybrid level-growth measure. This measure includes as special cases the conventional measures of consumption level and percent change as a measure of growth. The hybrid measure or geometrically weighted percent can be used for measuring sustainable growth as an alternative to percent. The closed form solutions are obtained for the optimal paths including the paths, dynamically consistent with the updates in reserve estimates.
    Keywords: Essential nonrenewable resource, modified Hotelling Rule, economy-linked criterion, geometrically weighted percent, normative resource peak.
    JEL: O13 O47 Q32 Q38
    Date: 2008–10–21
  30. By: Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: L'approvisionnement de l'Union européenne à partir du gaz naturel d'Asie centrale acheminé par la voie "caucasienne" est censé être une source de diversification importante des fournisseurs de l'Europe, et devrait contribuer à la sécurisation gazière de l'UE. Le conflit entre la Russie et la Géorgie en août 2008 a toutefois mis à jour les instabilités des pays de transit de ce corridor d'approvisionnement en gaz naturel et en pétrole. Ces dernières sont susceptibles de profondément modifier le comportement des acteurs en présence, compagnies pétrolières internationales, Etats d'Asie centrale. L'objectif de cet article est de tenter d'analyser les conséquences des changements de stratégies de ces acteurs sur la diversification gazière de l'UE.
    Date: 2008–11
  31. By: Dan Black; Natalia Kolesnikova; Seth G. Sanders; Lowell J. Taylor
    Abstract: In his classic work on the economics of fertility, Becker (1960) suggests that children are likely "normal." We examine this contention. Our first step is documenting an empirical regularity about the cross section of white married couples in the U.S.: when we restrict comparisons to households living in broadly similar locations (e.g., in expensive urban areas, or in rural areas), completed fertility is positively correlated with the husband's income. Two alternative models rationalize the data-one in which children are "normal" and a second in which the observed pattern emerges solely as a consequence of rational sorting by households. In an effort to sort out causal effects, we undertake a rather specialized empirical exercise to analyze the localized impact on fertility of the mid-1970s increase in world energy prices-an exogenous shock that substantially increased men's incomes in the Appalachian coal-mining region. We find that children are indeed "normal."
    Keywords: Demography
    Date: 2008

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