nep-ene New Economics Papers
on Energy Economics
Issue of 2008‒12‒07
twenty-one papers chosen by
Roger Fouquet
Imperial College, UK

  1. Wind Power Development: Opportunities and Challenges By G. Cornelis van Kooten; Govinda R. Timilsina
  2. Biological Carbon Sinks: Transaction Costs and Governance By G. Cornelis van Kooten
  3. Carbon Lorenz Curves By Loek Groot
  4. The competitiveness effects of the EU climate policy By Sonja Peterson; Gernot Klepper
  5. Climate change mitigation policies: Are R&D subsidies preferable to a carbon tax? By GRIMAUD André; LAFFORGUE Gilles
  6. Decentralized Equilibrium Analysis in a Growth Model with Directed Technical Change and Climate Change Mitigation By GRIMAUD, André; LAFFORGUE, Gilles; MAGNE, Bertrand
  7. Assessing Available Transfer Capacity on a Realistic European Network: Impact of Assumptions on Wind Power Generation By Vincent Rious; Julio Usaola; Marcelo Saguan; Jean-Michel Glachant; Philippe Dessante
  8. Intra-Country Distributional Impact of Policies to Fight Climate Change: A Survey By Dorothée Boccanfuso; Antonio Estache; Luc Savard
  9. Second Best Analysis in a General Equilibrium Climate Change Model By GRIMAUD, André; LAFFORGUE, Gilles
  10. Do energy prices respond to U.S. macroeconomic news? a test of the hypothesis of predetermined energy prices By Lutz Kilian; Clara Vega
  11. The Case for International Emission Trade in the Absence of Cooperative Climate Policy By Jared C. Carbone; Carsten Helm; Thomas F. Rutherford
  12. Carbon Storage in a Growth Model with Climate and R&D Policy By GRIMAUD, André; MAGNE, Bertrand; ROUGÉ, Luc
  13. Global Climate Change and the Funding of Adaptation By Seraina Buob; Gunter Stephan
  14. Anticipation for Efficient Electricity Transmission Network Investments By Vincent Rious; Jean-Michel Glachant; Yannick Perez; Philippe Dessante
  15. The efficiency of short run and long run locational signals to coordinate generation location with lumpy transmission investments By Vincent Rious; Yannick Perez; Philippe Dessante
  16. Bioenergy and Rural Development in Developing Countries: a review of existing studies By Gerber, Nicolas
  17. Welfare Changes from the U.S. Ethanol Tax Credit: The Role of Uncertainty and Interlinked Commodity Markets By Baker, Mindy
  18. Est-ce que les subsides d'électricité diminuent la pauvreté en Guinée ? By Saikou Amadou Diallo; Paul Makdissi
  19. The Impacts of Food- and Oil Price Shocks on the Namibian Economy: the Role of Water Scarcity By Sahlén, Linda
  20. Gazprom’s export strategies under the institutional constraint of the Russian gas market By Catherine Locatelli
  21. L'insertion des énergies renouvelables intermittentes dans les systèmes électriques : les contributions de l’analyse économique à une problématique d’ingénieur By Philippe Menanteau; Cédric Clastres

  1. By: G. Cornelis van Kooten; Govinda R. Timilsina
    Abstract: In this study, the prospects of wind power at the global level are reviewed. Existing studies indicate that the earth’s wind energy supply potential significantly exceeds global energy demand. Yet, only 1% of the global electricity demand is currently derived from wind power despite 40% annual growth in wind generating capacity over the last 25 years. More than 98% of total current wind power capacity is installed in the developed countries plus China and India. Existing studies estimate that wind power could supply 7% to 34% of global electricity needs by 2050. Wind power faces a large number of technical, financial, institutional, market and other barriers. To overcome these, many countries have employed various policy instruments, including capital subsidies, tax incentives, tradable energy certificates, feed-in tariffs, grid access guarantees and mandatory standards. Besides these policies, climate change mitigation initiatives resulting from the Kyoto Protocol (e.g., CO2-emission reduction targets in developed, the Clean Development Mechanism in developing countries) have played a pivotal role in promoting wind power.
    Keywords: wind energy, renewable energy, electricity grids
    JEL: Q25 Q32 Q42 Q48
    Date: 2008–11
  2. By: G. Cornelis van Kooten
    Abstract: Activities that remove CO2 from the atmosphere and store it in forest and agricultural ecosystems can generate CO2-offset credits that can thus substitute for CO2 emissions reduction. Are biological CO2-uptake activities competitive with CO2 offsets from reduced fossil fuel use? In this paper, it is argued that transaction costs impose a formidable obstacle to direct substitution of carbon uptake offsets for emissions reduction in trading schemes, and that separate caps should be set for emissions reduction and sink-related activities. While a tax/subsidy scheme is preferred to emissions trading for incorporating biologically-generated CO2 offsets, contracts that focus on the activity and not the amount of carbon sequestered are most likely to lead to the lowest transaction costs.
    Keywords: carbon sequestration; transaction costs; climate change
    JEL: Q54 Q23 Q42 H23 D23
    Date: 2008–11
  3. By: Loek Groot
    Abstract: The purpose of this paper is twofold. First, it exhibits that standard tools in the measurement of income inequality, such as the Lorenz curve and the Gini-index, can successfully be applied to the issues of inequality measurement of carbon emissions and the equity of abatement policies across countries. These tools allow policy-makers and the general public to grasp at a single glance the impact of conventional distribution rules such as equal caps or grandfathering, or more sophisticated ones, on the distribution of greenhouse gas emissions. Second, using the Samuelson rule for the optimal provision of a public good, the Pareto-optimal distribution of carbon emissions is compared with the distribution that follows if countries follow Nash-Cournot abatement strategies. It is shown that the Pareto-optimal distribution under the Samuelson rule can be approximated by the equal cap division, represented by the diagonal in the Lorenz curve diagram.
    Keywords: carbon emission, climate change, Gini, global warming, Lorenz curve, Samuelson rule
    JEL: D63 H3 Q01 Q4 Q5
    Date: 2008–11
  4. By: Sonja Peterson; Gernot Klepper
    Abstract: To show global leadership and to foster the international negotiations for a long term international climate regime the EU has decided to reduce its GHG emissions by 20% relative to 1990 until the year 2020. These reductions will even rise to 30% “if there is an international agreement committing other developed countries to comparable emission reductions and economically more advanced developing countries to contributing adequately according to their responsibilities and respective capabilities”. At the same time, the European council started in 2000 the so-called Lisbon process which established the issue of competitiveness as a priority area for EU policy and there is some concern about the competitiveness effects of EU climate policy. We use the multi-sector, multi-region computable general equilibrium model DART to assess the impacts of the recent EU climate policy proposals for the competitiveness of the European economies and specific sectors. There are three general insights. First, the effects of EU climate policies on competitiveness are relatively small if one leaves out the fossil fuels themselves the consumption of which is supposed to be reduced anyway. The losses of the energy intensive industries are compensated by gains in other manufacturing sectors. Secondly, there is no uniform effect across the member states of the EU. It is the special circumstances in side the different sectors within the member states that determine whether a sector wins or looses competitiveness. And finally, the changes in competitiveness are strongly influenced by the choice of the particular policy design. A more efficient instrument choice not only reduces the competitiveness effects it also distributes the burden more equally
    Keywords: Post Kyoto, EU, emission trading, competitiveness
    JEL: D58 Q48 Q54
    Date: 2008–11
  5. By: GRIMAUD André; LAFFORGUE Gilles
    Date: 2008–12
  6. By: GRIMAUD, André; LAFFORGUE, Gilles; MAGNE, Bertrand
    Date: 2008–02
  7. By: Vincent Rious (SUPELEC-Campus Gif - SUPELEC); Julio Usaola (Universidad Carlos III de Madrid - Universidad Carlos III de Madrid); Marcelo Saguan (ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Jean-Michel Glachant (ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Philippe Dessante (SUPELEC-Campus Gif - SUPELEC)
    Abstract: This paper aims at assessing the impact of massive wind power penetration on the calculation of Available Transfer Capacity (ATC) for the interconnections between European countries. Calculations are made for the ATC between France and Belgium and are realized on a realistic European Electricity Network. We find that the German wind power production make this ATC vary depending on the total wind power production and its geographical distribution in Germany. Wind power production and the nodes involved in cross-border exchange must then be forecast precisely so that the cross-border exchange can be maximal without breaching network security.
    Date: 2008–11–10
  8. By: Dorothée Boccanfuso; Antonio Estache; Luc Savard
    Abstract: In this paper we present a survey of distributional impact analysis of environmental policies envisaged or implemented to reduce greenhouse gaz emissions. The implementation of these policies usually aim at reducing greenhouse gases directly or indirectly. However, these policies can also produce important changes in factor allocation, relative prices in specific countries as well as on world markets when these policies are adopted by a large number of countries. The changes in welfare can be important for vulnerable groups of population in developing countries. This survey reviews the evidence on the incidence of these policies. In the process, it shows that the computable general equilibrium (CGE) microsimulation approach has not been fully exploited in the context of distributional impact analysis of CC policies.
    Keywords: Global warming, environmental policies, income distribution, developing countries
    JEL: D58 D60 H23 O13 Q52
    Date: 2008
  9. By: GRIMAUD, André; LAFFORGUE, Gilles
    Date: 2008–04
  10. By: Lutz Kilian; Clara Vega
    Abstract: Models that treat innovations to the price of energy as predetermined with respect to U.S. macroeconomic aggregates are widely used in the literature. For example, it is common to order energy prices first in recursively identified VAR models of the transmission of energy price shocks. Since exactly identifying assumptions are inherently untestable, this approach in practice has required an act of faith in the empirical plausibility of the delay restriction used for identification. An alternative view that would invalidate such models is that energy prices respond instantaneously to macroeconomic news, implying that energy prices should be ordered last in recursively identified VAR models. In this paper, we propose a formal test of the identifying assumption that energy prices are predetermined with respect to U.S. macroeconomic aggregates. Our test is based on regressing cumulative changes in daily energy prices on daily news from U.S. macroeconomic data releases. Using a wide range of macroeconomic news, we find no compelling evidence of feedback at daily or monthly horizons, contradicting the view that energy prices respond instantaneously to macroeconomic news and supporting the use of delay restrictions for identification.
    Date: 2008
  11. By: Jared C. Carbone (University of Calgary); Carsten Helm (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Thomas F. Rutherford (ETH, Switzerland)
    Abstract: We evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self-interest. To do so, we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies. Countries' decisions about their participation in a trading system and about their initial permit endowment are made noncooperatively; so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains. Despite this, we find that emission trade agreements can be effective; that smaller groupings pairing developing and developed-world partners often perform better than agreements with larger rosters; and that general equilibrium responses play an important role in shaping these outcomes.
    Keywords: Global warming, coalitions, general equilibrium, tradable permits
    JEL: D7 F18 F42 Q58
    Date: 2008–10
  12. By: GRIMAUD, André; MAGNE, Bertrand; ROUGÉ, Luc
    Date: 2008–03
  13. By: Seraina Buob; Gunter Stephan
    Abstract: Mitigation and adaptation are the most important strategies in combating global climate change. It is expected that in a post Kyoto world industrialized countries have to engage in greenhouse gas abatement, and to support developing countries in adapting to climate change. Within the framework of a non-cooperative Nash game we analyze, whether funding adaptation is incentive compatible in the sense that it stipulates mitigation. In particular it is the aim of this paper to discuss: (1) How does foreign funding of adaptation affect mitigation and regional welfare? (2) Under which conditions is it economically rational to fund adaptation in developing regions? We find that, if strict complementarity between adaptation and mitigation exists, funding adaptation increases both global mitigation and the donors' welfare, but negatively affects the recipients' welfare. The later only benefit, if maladaptation or adaptation, which is neutral to mitigation, is funded, which, however, makes the donors worse off.
    Keywords: Climate change; mitigation and adaptation; funding of private goods
    JEL: C72 F51 Q54
    Date: 2008–11
  14. By: Vincent Rious (SUPELEC-Campus Gif - SUPELEC); Jean-Michel Glachant (ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Yannick Perez (ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Philippe Dessante (SUPELEC-Campus Gif - SUPELEC)
    Abstract: This paper proposes a model and preliminary results to evaluate the efficiency of anticipating the connection of power plants with shorter construction duration than the time needed to obtain the right to upgrade the network and finally to do this reinforcement. This evaluation is made in presence of a cost of anticipation related to the study of the project of network investment and to the administrative procedures needed to obtain the building agreement. This model compares a proactive TSO that anticipates the connection of new generators and then the required network reinforcement, with a reactive one that does not make any anticipation but that may then face greater congestion while the network is being reinforced. The efficiency of these behaviors is measured in terms of social cost. We find out that there exists a limit of probability for the connection of generators beyond which a proactive TSO is more efficient than a reactive one. Evaluated on a realistic case of connection, this limit of probability is found quite low, which indicates that the proactive behavior for a TSO shall generally be the optimal one.
    Date: 2008–11–10
  15. By: Vincent Rious (SUPELEC-Campus Gif - SUPELEC); Yannick Perez (ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Philippe Dessante (SUPELEC-Campus Gif - SUPELEC)
    Abstract: This paper addresses the problem of interaction between short run and long run locational signals and the coordination between generation investments and lumpy transmission investments. The short run locational signals we evaluate are sent by nodal pricing and the long run ones are sent by the average participation use-of-the-network tariff. Their joint implementation is also deemed. Numerical simulations are performed on a two-node network evolving during twenty years with increasing demand. The efficiency of these locational signals to coordinate the location of generation with lumpy transmission investments is measured. An independent Transmission System Operator invests to minimize the total cost of the network, that is to say the sum of the cost of congestion with the cost of transmission investments. And a unique generator behaving competitively chooses the location of her investments depending on two elements: the locational difference in generation investment costs and the costs of the network she may pay with short run nodal prices and with the long run average participation tariff. The network tariff varies with the transmission investments. And the transmission capacity greatly influences nodal prices. We find out that neither short run nodal prices nor long run average participation tariffs can thoroughly coordinate efficiently generation and transmission investments because of the lumpiness of transmission line capacities.
    Keywords: Bridging Energy Supply and Demand: Logistics, Competition Environment
    Date: 2008
  16. By: Gerber, Nicolas
    Abstract: Four broad types of studies on rural development and bioenergy technologies are identified. Within these four types, this discussion paper presents a number of existing studies which are most relevant in the context of developing a research focus on the role, feasibility and issues associated with bioenergy, and in particular biofuels, as engine for rural development in developing countries. The results and recommendations of the referenced studies, reflecting the global trends of the current literature, highlight the importance of bioenergy technologies in the development process of poor rural communities. The surge of biofuels and in particular of their feedstocks on the international agricultural markets has recently commended a lot of attention. However, whilst biofuels hold a huge economic potential as internationally traded commodities, the various issues and challenges facing biofuel production systems could indicate that in the context of developing economies, they are better suited for the domestic energy markets. In any case, the analysis necessary to formulate policy recommendations on how, where and when to implement which bioenergy technology calls for a differentiated €Ӡper region and/or technology €Ӡand integrated €Ӡwithin and alongside other rural production systems €Ӡapproach. In this context, this review of existing studies exposes some unanswered questions and research gaps.
    Keywords: International Development, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy,
    Date: 2008–06–30
  17. By: Baker, Mindy
    Abstract: A model of the corn, soybean, and wheat markets calculates welfare effects of the U.S. ethanol tax credit. Crop yields are uncertain, and demand consists of feed, food, energy, and exports. Modeling uncertainty in crop yields allows the valuation of deficiency payments as options. Disaggregating demand records who benefits from the tax credit and by how much; incorporating linked crop markets captures indirect effects important for determining the transfer from consumers to producers. There is $600 million in net welfare loss, increased taxpayer liability, and a large transfer from consumers to farmers. A brief comparison of recent literature is included.
    Keywords: biofuel, commodity, ethanol, tax credit, uncertainty, welfare.
    Date: 2008–12–02
  18. By: Saikou Amadou Diallo (Department of Economics, University of Ottawa); Paul Makdissi (Department of Economics, University of Ottawa)
    Abstract: In this paper, we use consumption dominance curves, a tool developed by Makdissi and Wodon (2002) in order to assess the redistributive impact of electricity subsidies in Guinea. The data in the 'Enquête Intégrée de Base pour l'Évaluation de la Pauvreté (EIBEP) 2002-2003’ show that subsidizing electricity is not consistent with a poverty reduction objective. Dans cet article, nous utilisons des courbes de dominance de consommation développées par Makdissi et Wodon (2002) afin d'analyser l'impact distributif des subsides d’électricité instaurées par le gouvernement guinéen. L'Enquête Intégrée de Base pour l'Évaluation de la Pauvreté (EIBEP) 2002-2003 nous permet de conclure que ces subsides ne peuvent être justifiés dans un contexte de lutte à la pauvreté.
    Keywords: Subsidy, Marginal Fiscal reform, Guinea
    JEL: D12 D63 I21 I32
    Date: 2008
  19. By: Sahlén, Linda (Department of Economics, Umeå University)
    Abstract: The recent increases in international food and oil prices have raised concerns about how these exogenous shocks will affect the economic activity as well as poverty in developing countries. In this paper, the effects of international food and oil price increases on the Namibian economy are studied by means of a Computable General Equilibrium model. As a corn and oil importing Sub-Saharan African country, Namibia is among the countries considered to be particularly vulnerable to these price shocks. Besides, since Namibia is also one of the driest Sub-Saharan countries, the role of water scarcity is explicitly addressed in this particular context. The results show that the Namibian economy will be negatively affected by the food and oil price increases. In the case where the supply of water is assumed to be constant, it is shown that there will be even less ability to adapt for the economy, thus resulting in a more significant decrease in GDP than in the case where additional water sources are assumed to be available.
    Keywords: computable general equilibrium model; food prices; oil prices; water scarcity
    JEL: D58 Q18 Q25
    Date: 2008–11–27
  20. By: Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Russia and its main gas company Gazprom, essential suppliers for the European gas market, are today at the centre of the debate surrounding the security of the European Union's gas supply. A variety of factors have focussed interest on the question of Gazprom's industrial strategies and more precisely :the Gazprom's ability to meet its future contractual commitments. The gas market liberalisation in Europe is bringing about some significant changes in the relations (especially contractual ones) that the EU had established with its main natural gas suppliers. The aim of this paper is to throw some light on how European gas market liberalisation is affecting and changing the strategies of one of the EU's essential gas suppliers, namely Russia. The export policies developed by Gazprom are however largely conditioned by the particular characteristics (essentially institutional) of its domestic market, not only in terms of supply and demand but also prices". It is important to take into account this aspect in order to understand the Russian gas export strategy.
    Date: 2008–09
  21. By: Philippe Menanteau (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Cédric Clastres (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II, G2ELAB - Grenoble Electrical Engineering - Institut National Polytechnique de Grenoble - INPG - Université Joseph Fourier - Grenoble I)
    Abstract: La communauté des ingénieurs est depuis de nombreuses années mobilisée sur la problématique de l’insertion des sources d'énergie renouvelables dans le système électrique du fait de leur caractère décentralisé et/ou intermittent mais l’apparition des économistes dans ce champ de recherche est plus récente. La question des coûts est restée un peu secondaire tant que la contribution des sources d'énergie renouvelables était modeste. Avec la fixation d’objectifs de production de plus en plus ambitieux, et des perspectives d’augmentation des coûts des politiques de soutien, de renforcement des réseaux ou d’équilibrage, la vision économique prend de l’importance, d’autant qu’elle intervient dans un contexte de libéralisation des marchés de l’électricité.
    Keywords: production intermittente ; production décentralisée ; énergies renouvelables ; système électrique
    Date: 2008–11

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