nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒01‒03
28 papers chosen by
Roger Fouquet
Imperial College, UK

  1. Emissions Trading: Impact on Electricity Prices and Energy-Intensive Industries By Manuel Frondel; Christoph M. Schmidt; Colin Vance
  2. Revenue-Neutral Tax-Subsidy Policy for Carbon Emission Reduction By Gregmar I. Galinato; Jon K. Yoder
  3. Forecasting Economic Impact of Climate Policy (in Finnish with an English abstract/summary) By Olavi Rantala
  4. Thermodynamics and the Economic Process By John Bryant
  5. The Economics of Climate Change Mitigation: Policies and Options for the Future By Jean-Marc Burniaux; Jean Château; Romain Duval; Stéphanie Jamet
  6. Energy-Saving Technological Change and Household Energy Demand in the U.S. By Kurt Kratena; Michael Wüger
  7. Is it fair to treat China as a Christmas tree to hang everybody’s complaints? putting its own energy saving into perspective By Zhang, ZhongXiang
  8. Pricing Strategies under Emissions Trading: An Experimental Analysis By Wråke, Markus; Myers, Erica; Mandell, Svante; Holt, Charles; Burtraw, Dallas
  9. Auctioning of CO2 Emission Allowances in Phase 3 of the EU Emissions Trading Scheme By Benz, Eva; Löschel, Andreas; Sturm, Bodo
  10. Russian and Caspian hydrocarbons: energy supply stakes for the European Union By Catherine Locatelli
  12. Rethinking Global Climate Change Governance By Barrett, Scott
  13. Representing GASPEC with the World Gas Model By Ruud Egging; Franziska Holz; Christian von Hirschhausen; Steven A. Gabriel
  14. Tradable Permits in Developing Countries: Evidence from Air Pollution in Santiago, Chile By Coria, Jessica; Sterner, Thomas
  15. Asian Energy and Environmental Policy: Promoting Growth While Preserving the Environment By Zhang, ZhongXiang
  16. Incentives for merger in a noncompetitive permit market By Cathrine Hagem
  17. Uniform Price Market and Behaviour Pattern: What Does the Iberian Electricity Market Point Out? By Vítor Marques; Isabel Soares; Adelino Fortunato
  18. Cenários de mudanças climáticas e agricultura no Brasil: impactos econômicos na Região Nordeste By Edson Paulo Domingues; Aline Souza Magalhães; Ricardo Machado Ruiz
  19. Impact of Carbon Price Policies on U.S. Industry By Ho, Mun S.; Morgenstern, Richard; Shih, Jhih-Shyang
  20. A Small Quarterly Multi-Country Projection Model with Financial-Real Linkages and Oil Prices By Ondra Kamenik; Ioan Carabenciov; Igor Ermolaev; Charles Freedman; Dmitry Korshunov; Jared Laxton; Douglas Laxton; Michel Juillard
  21. Energy Crop Production Costs and Breakeven Prices Under Minnesota Conditions By Lazarus, William F,
  22. Global Manufacturing SO2 Emissions: Does Trade Matter? By Jean Marie Grether; Nicole A. Mathys; Jaime de Melo
  23. Futures Markets, Oil Prices and the Intertemporal Approach to the Current Account By Elif C. Arbatli
  24. How far can developing country commitments go in an immediate post-2012 climate regime? By Zhang, ZhongXiang
  25. Washington Biofuel Feedstock Crop Supply Analysis By Qiujie Zheng; C. Richard Shumway
  26. Optimal Nuclear Waste Burial Policy under Uncertainty By Alain Ayong Le Kama; Mouez Fodha
  27. Impact of Service Station Networks on Purchase Decisions of Alternative-fuel Vehicles By Achtnicht, Martin; Bühler, Georg; Hermeling, Claudia
  28. Power Sector Reform: Some Lessons for Kerala By Pillai N., Vijayamohanan

  1. By: Manuel Frondel; Christoph M. Schmidt; Colin Vance
    Abstract: The EU-wide Emission Trading Scheme (ETS), established in 2005, is a key pillar of Europe’s strategy to attain compliance with the Kyoto Protocol. Under this scheme, CO2 allowances have thus far been allocated largely free of charge. This paper demonstrates that such cost-free allocation, commonly called grandfathering, implies an increase in electricity prices even when strong competition prevails on electricity markets.As our estimations for Germany’s power sector show, these price increases result in substantial windfall profits, giving rise to public skepticism and calls for an auctioning of certificates in the future.While empirical evidence on the ETS’ impacts is scant, the findings reviewed here indicate that even in the absence of certificate auctioning, energy-intensive industry sectors, such as primary aluminum production, may suffer heavily from the ETS-induced electricity price increases.We therefore argue that an abrupt transition to a complete auctioning system may endanger the competitive position of energy-intensive industries in Europe, unless all other major industrial and transition countries are integrated into a global emissions trading system.
    Keywords: Grandfathering, auctioning, competition
    JEL: Q41 Q48
    Date: 2008–12
  2. By: Gregmar I. Galinato; Jon K. Yoder (School of Economic Sciences, Washington State University)
    Abstract: The most widely used policies for promoting biofuels as a component of motor fuels are (1) renewable fuel standards requiring a minimum biofuel consumption level or blend rate and (2) tax credits (subsidies) for biofuels. Although one of the primary potential benefits of biofuel use is a reduction in greenhouse gas emissions relative to fossil fuels, carbon-based instruments have been slow to develop. In light of the political unpopularity of carbon taxes, we consider a twist on this idea by developing a model for a revenue neutral price instrument that taxes high net-carbon fuels (e.g. unfinished gasoline blendstock) and subsidizes lower net-carbon renewable blendstock (e.g. pure ethanol) such that the net revenues are fixed. This approach has the capacity to substantially change the relative price of the low-carbon and high-carbon components of blended fuel, while limiting increases in taxes and reducing motor fuel price increases relative to pure carbon taxes.
    Keywords: Non-renewable resources, carbon tax, carbon dioxide emissions
    JEL: Q32 Q54 D62 H21
    Date: 2008–11
  3. By: Olavi Rantala
    Abstract: ABSTRACT : This paper describes the main features of a model developed for forecasting economic developments, energy demand and greenhouse gas emissions in the EU area and Finland as well as for simulating the economic impacts of EU climate policy. Climate policy analysis necessitates a model of the whole EU area, because CO2 emissions of the EU area emission trading sector determine the demand and price of emission allowances. The main conclusion from model simulations is that output and employment losses induced by EU climate policy in 2008-2012 will be more severe in a small open energy intensive economy like Finland than in the rest of the EU area. The negative impacts of EU climate policy on export competitiveness, exports and output volume in Finland will be strongest in the energy intensive industrial sec-tors which belong to the EU emission trading sector.
    Keywords: greenhouse gas emissions, economic impacts of emission reduction
    JEL: C5 E3 Q4 Q5
    Date: 2008–12–19
  4. By: John Bryant (Vocat International)
    Abstract: This paper develops further a model of the economic process, first set out as part of a paper by the author in 2007, concerning the application of thermodynamic laws to economics. The paper sets out relationships between economic output and capital, labour, resource and waste stocks, with specific reference to energy, and is backed up analysis of data of world energy resources and climate change. The paper conculdes that both energy resource availability and climate change will have significant, limiting effects on the forward path of world economic developoment.
    Keywords: Thermodynamics, economics, entropy, energy, exergy, peak oil, gas, coal, climate change
    Date: 2008–12
  5. By: Jean-Marc Burniaux; Jean Château; Romain Duval; Stéphanie Jamet
    Abstract: Considering the costs and risks of inaction, ambitious action to reduce greenhouse gas emissions is economically rational. However, success in abating world emissions will ultimately require a least-cost set of policy instruments that is applied as widely as possible across all emission sources (countries, sectors and greenhouse gases). The main purpose of this paper is to explore feasible ways to meet these two basic requirements for successful future climate policies. Using a range of modelling frameworks, it analyses cost-effective policy mixes to reduce emissions, the implications of incomplete coverage of policies for the costs of mitigation action and carbon leakage, the role of technology-support policies in lowering future emissions and policy costs, as well as the incentives –and possible options to enhance them – for emitting countries to take action against climate change. <P>L’économie de l’atténuation du changement climatique : : Politiques et options futures <BR>Eu égard aux coûts et aux risques de l’inaction, une action ambitieuse visant à réduire les émissions de gaz à effet de serre est économiquement rationnelle. Cependant, tout succès en matière de réduction des émissions nécessitera in fine qu’un ensemble d’instruments de politiques à moindre coût s’applique à un ensemble aussi vaste que possible de sources d’émissions (pays, secteurs et gaz à effet de serre). L’objectif principal de cet article est d’explorer les moyens concrets de satisfaire à ces deux conditions de base d’un succès des futures politiques climatiques. Sur la base d’un éventail de modèles, il analyse différents ensembles de politiques à moindre coût, l’impact d’une couverture incomplète des politiques sur les coûts de la réduction des émissions et les fuites carbone, la contribution des politiques de soutien à la technologie à la baisse des émissions futures et au coût des politiques, ainsi que les incitations – et les options possibles pour les améliorer – des pays émetteurs à agir contre le changement climatique.
    Keywords: climate change, changement climatique, burden sharing, carbon Leakage, climate policy, co-benefits, energy R&D, bénéfices annexes, fuites de carbone, partage de la charge, politique climatique
    JEL: H23 H41 O13 O3 Q32 Q43 Q54
    Date: 2008–12–17
  6. By: Kurt Kratena (WIFO); Michael Wüger (WIFO)
    Abstract: This paper deals with energy saving technical change in U.S. households' energy demand. The framework applied represents a model of demand for non-durables taking into account the durable stock and 'services' (heating/lighting and transport) that result from energy use. Embodied technical change is implemented by the average energy efficiency of the stock of energy using durables, which has been taken from a new data set compiled for this study. The efficiency has a double link with prices. On the one hand higher energy prices result in higher efficiency of installed equipment (price induced technical change). On the other hand increases in efficiency lower the corresponding service price and lead to the well known 'rebound effect'. The model makes these complex links explicit and comprises all energy relevant household consumption (transport, heating and electricity). Simulation exercises show the role of energy prices and investment in efficient appliances for policies aiming at energy saving in U.S. households.
    Keywords: household energy demand, embodied and induced technical change, rebound effect
    Date: 2008–08–29
  7. By: Zhang, ZhongXiang
    Abstract: China has been the world’s second largest carbon emitter for years. Recent studies show that China had overtaken the U.S. as the world’s largest emitter in 2007. This has put China on the spotlight, just at a time when the world community starts negotiating a post-Kyoto climate regime under the Bali Roadmap. China seems to become such a Christmas tree on which everybody can hang his/her complaints. This paper will first discuss whether such a critics is fair by examining China’s own efforts towards energy saving, the widespread use of renewable energy and participation in clean development mechanism. Next, the paper puts carbon reductions of China’s unilateral actions into perspective by examining whether the estimated greenhouse gas emission reduction from meeting the country’s national energy saving goal is achieved from China’s unilateral actions or mainly with support from the clean development mechanism projects. Then the paper discusses how far developing country commitments can go in an immediate post-2012 climate regime, thus pointing out the direction and focus of future international climate negotiations. Finally, emphasizing that China needs to act as a large and responsible developing country and take due responsibilities and to set a good example to the majority of developing countries, the paper articulates what can be expected from China to illustrate that China can be a good partner in combating global climate change.
    Keywords: Energy saving; Post-Kyoto climate negotiations; Clean development mechanism; China; USA
    JEL: Q48 Q53 Q42 Q54 Q58
    Date: 2008–10–10
  8. By: Wråke, Markus; Myers, Erica; Mandell, Svante; Holt, Charles; Burtraw, Dallas (Resources for the Future)
    Abstract: An important feature in the design of an emissions trading program is how emissions allowances are initially distributed into the market. In a competitive market the choice between an auction and free allocation should, according to economic theory, not have any influence on firms’ production choices nor on consumer prices. However, many observers expect the method of allocation to affect product prices. This paper reports on the use of experimental methods to investigate behavior with respect to how prices will be determined under a cap-and-trade program. Participants initially display a variety of pricing strategies. However, given a simple economic setting in which earnings depend on this behavior, we find that subjects learn to consider the value of allowances and overall behavior moves toward that predicted by economic theory.
    Keywords: carbon dioxide, climate change, emissions trading, distributional effects, electricity, allocation, auctions
    JEL: C91 D44
    Date: 2008–12–23
  9. By: Benz, Eva; Löschel, Andreas; Sturm, Bodo
    Abstract: The “Climate action and renewable energy package” proposed by the European Commission in the beginning of 2008 suggests auctioning as basic principle for allocation for the upcoming third trading phase of the EU Emissions Trading Scheme that runs from 2013 to 2020. Overall, it is estimated that at least two third of the total quantity of allowances will be auctioned in 2013, to be increased to 100 % by 2020. In this paper, we emphasize the importance of a properly chosen auction design as the significantly higher auction share, compared to the past and current trading phase, is expected to yield a thin secondary market for CO2 allowances. We elaborate main criteria that a viable auction design is supposed to fulfil and propose a specific auction design for the third trading phase. The auction we recommend is a simultaneous dynamic uniform double auction. Die Europäische Kommission hat in ihrem „Klima- und Energiepaket“ vom Januar 2008 eine Weichenstellung für den europäischen Emissionshandel vorgeschlagen. Bislang wurden die Zertifikate an die betroffenen Unternehmen aus den energieintensiven Sektoren kostenfrei vergeben. Nach den Plänen der Kommission sollen Stromproduzenten ab 2013 alle benötigten Zertifikate ersteigern müssen. Unternehmen aus anderen energieintensiven Branchen sollen zunächst nur 20 % ersteigern, in 2020 dann 100 %. Da insgesamt mindestens zwei Drittel aller Zertifikate versteigert werden, ist zu erwarten, dass der freie Markt für Zertifikate ab 2013 deutlich dünner sein wird als dies bisher der Fall ist. Aus diesem Grund gewinnt das Design der Auktion an Bedeutung, denn vom Auktionspreis, der die Knappheit an Zertifikaten signalisieren soll, werden wichtige Investitionsentscheidungen in CO2-arme Technologien abhängen. Eventuelle Fehler im Auktionsdesign können, wenn die Zertifikate überwiegend versteigert werden, nicht mehr durch einen liquiden freien Markt „geheilt“ werden.
    Keywords: climate policy, emissions trading, auction design
    JEL: D44 Q48 Q54 Q58
    Date: 2008
  10. By: Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The crisis between Russia and Georgia in August 2008 highlights the fragility and instability of transporting gas from the Caspian and Central Asia to Europe via the "Caucasus transit corridor". The feasibility of one of the EU's possible strategies for diversifying its energy supplies might now be called into question. The aim of this article is to examine the new strategies that could emerge in the producing countries as well as those of international oil companies, and then look at what the consequences might be as far as the EU's diversification strategy is concerned.
    Date: 2008–12
  11. By: NWAOBI, GODWIN (Quantitative Economics Research Bureau)
    Abstract: Technological progress is considered as a source of growth and productivity gains for national economies. Thus,understanding the factors that determine the diffusion of new technologies across african countries is important to understanding the process of economic development. And whereas, energy is linked with the capacity to perform, the rate at which energy is consumed for the accerelation of the pace of socio-economic activities is regarded as power. Consequently, it will be obvious that the magnitude of the standard of living in any society; the growth and development of such an economy ; and its ability to affect the course of events(such as ICT revolution) will be a function of the extent to which its energy(power)resources are developed and utilised. This paper therefore argued for the need to provide assistance in reducing vulnerability and building the capacity of african countries to more widely reap the benefits of the clean development mechanism in areas such as the development of cleaner and renewable energies.Inevitably, this is the critical condition for the sustainability of the emergent e-learning platforms and digital networks in africa.
    Keywords: ict; learning; elearning; development; energy; power; information; communication; solar; electricity; wind; governance; africa; electronics; telecommunications; internet; digitalsatellite; renewableenergy; gasturbine; powerplants; bandwidth; coal; hydro; biomass; steam; transmission; distribution; utilization
    JEL: A20 D80 I20 O30 O33 Q30 Q40 R38
    Date: 2008–12–16
  12. By: Barrett, Scott
    Abstract: This paper explains why the approach taken so far to mitigate global climate change has failed. The central reason is an inability to enforce targets and timetables. Current proposals recommending even stricter emission limits will not help unless they are able to address the enforcement deficit. Trade restrictions are one means for doing so, but trade restrictions pose new problems, particularly if they are applied to enforce economy-wide emission limitation agreements. This paper sketches a different approach that unpacks the climate problem, addressing different gases and sectors using different instruments. It also explains how a failure to address the climate problem fundamentally will only create incentives for different kinds of responses, posing different challenges for climate change governance
    Keywords: Climate change, Kyoto protocol, enforcement, trade restrictions, R&D
    JEL: F18 F51 F53 Q54
    Date: 2008
  13. By: Ruud Egging; Franziska Holz; Christian von Hirschhausen; Steven A. Gabriel
    Abstract: This paper presents results of simulating a more collusive behavior of a group of natural gas producing and exporting countries, sometimes called GASPEC. We use the World Gas Model, a dynamic, strategic representation of world gas production, trade, and consumption between 2005 and 2030. In particular, we simulate a closer cooperation of the GASPEC countries when exporting pipeline gas and liquefied natural gas; we also run a more drastic scenario where GASPEC countries deliberately withhold production. The results shows that compared to a Base Case, a gas cartel would reduce total supplied quantities and induce price increases in gas importing countries up to 22%. There is evidence that the natural gas markets in Europe and North America would be affected more than other parts of the world. Lastly, the vulnerability of gas importers worldwide on gas exporting countries supplies is further illustrated by the results of a sensitivity case in which price levels are up to 87% higher in Europe and North America, but non-GEC countries increase production by a mere 10%.
    Keywords: natural gas, trade, cartel, collusion, World Gas Model
    Date: 2008
  14. By: Coria, Jessica; Sterner, Thomas
    Abstract: Santiago was one of the first cities outside the OECD to implement a tradable permit program to control air pollution. This paper looks closely at the program’s performance over the past ten years, stressing its similarities and discrepancies with trading programs implemented in developed countries, and analyzing how it has reacted to regulatory adjustments and market shocks. Studying Santiago’s experience allows us to discuss the drawbacks and advantages of applying tradable permits in less developed countries.
    Keywords: air pollution, environmental policy, tradable permits, developing countries
    JEL: Q53 Q58
    Date: 2008–12–18
  15. By: Zhang, ZhongXiang
    Abstract: Asia has truly experienced spectacular economic growth over the past 15 years. However, this economic progress has come at a high cost. It has led to unprecedented environmental consequences. The ecological footprint shows that, despite the fact that one-fifth of the population in Asia still lives on less than US$ 1 per day (PPP-adjusted), the region is already living beyond its ecological carrying capacity. The region is facing a dilemma. On the one hand, continued economic growth is needed to alleviate the poverty of the two-thirds of the world’s poor living in this region. On the other hand, that economic growth will further place tremendous strains on the natural environment. In order to extricate itself from this difficult position, the region needs to shift the conventional pattern of “develop first and then treat the pollution” to a different trajectory of sustainable development. To that end, this paper examines a variety of policy responses at national, regional and international levels to deal with growing concerns about the environmental challenges in Asia in order to help to put the region on a more sustainable development path. In the context of national responses, special attention is paid to the following issues: coordination between the central and local governments, market-based environmental instruments and industrial policies, tougher emissions standards for mobile and stationary sources and for fuel quality, policies to promote energy efficiency and the use of clean energy and biofuels, the integration of environmental policies with economic and sectoral policies, and engagement of the private sector through e.g., ecolabelling, green government procurement, corporate ratings and disclosure programs, and drawing the support of financial institutions to promote improved corporate environmental performance. It is concluded that having the right policy mix, coupled with strengthened cooperation at national, local and regional levels, will ensure continuing economic growth in the region without compromising its limited ecological carrying capacity and environmental quality.
    Keywords: Energy policy; Market-based environmental instruments; Asia
    JEL: Q48 Q28 Q42 Q43 Q58
    Date: 2008–01
  16. By: Cathrine Hagem (Statistics Norway)
    Abstract: A group of small competitive permits traders facing an imperfectly competitive permit market may consider cooperation (merger) to act strategically in the permit market. It is a well-known result in the literature that the horizontal merger of Cournot players may be unprofitable because of the response of nonmerging agents (a negative strategic effect). We show that the strategic effect of a merger among competitive agents substantially differs from the strategic effect of a merger among Cournot players. Furthermore, we show how the profitability of a merger depends on whether the merged agents are on the same side of the market as the preexisting dominant agent(s). These results show how the expected competitive environment in the permit market may determine how potentially large traders such as the US, and group of small, competitive traders, such as the EU countries, organize their permit trade in any follow-up agreement to the Kyoto protocol.
    Keywords: Emission permits; strategic permit trading; mergers; climate agreement; market power.
    JEL: D43 Q54
    Date: 2008–12
  17. By: Vítor Marques (ERSE); Isabel Soares (Faculdade de Economia, Universidade do Porto); Adelino Fortunato (Faculdade de Economia and GEMF, Universidade de Coimbra)
    Abstract: The electricity spot markets can be considered as capacity constrained markets (Kreps and Scheinkman, 1983), where market price definition depends on the quantity strategies. In this theoretical framework, the main target of the present paper is to show to what extent a spot market organized like a Uniform Price Auction (UPA) is naturally inclined to develop anti-competitive practices, in particular through quantity strategies. To achieve this objective, multivariable models are defined for each daily demand period of the Iberian electricity market. Each model correlates the hourly market price change and the bid quantities of the two main Iberian producers (Endesa and Iberdrola), for every summer between 2001 and 2004. To apply those models one has to solve the endogeneity problem. This exercise is also useful to highlight any anti-competitive behaviour. Quantities produced by the producers with infra marginal bids should not be endogenous when there is no risk that they will not be dispatched, unless producers have some expectations about the system marginal price. In addition, this kind of endogeneity reinforces the model’s theoretical assumption that change in the system marginal price stems from quantity strategies. The models present some expectable but interesting results. Those results show that even base load units’ bids may depend on expectations about the system marginal price evolution. Those expectations can reflect market strategies. Therefore, in a market where the main companies own base load and peak load units, like the Iberian wholesale electricity market, the UPA is an open window to anti-competitive practices based on quantity strategies, such as the raising of the system marginal price through the capacity withdrawal from base load units.
    Keywords: oligopoly, electricity, endogeneity, uniform-price market
    JEL: L13
    Date: 2008–12
  18. By: Edson Paulo Domingues (Cedeplar-UFMG); Aline Souza Magalhães (Cedeplar-UFMG); Ricardo Machado Ruiz (Cedeplar-UFMG)
    Abstract: This article examines the impact of climate change in the Northeast from estimates of the availability of land suitable for agricultural activity in a range of cultures. This information, based on global warming scenarios from the International Panel of Climate Change (IPCC), are introduced in an inter-regional computable general equilibrium model for Brazil, which allows analysis on various aspects of regional economic implications of this phenomenon. Our results indicate a high potential for economic losses in the Northeast, especially in poorer states, pointing to the need for policies to mitigate and control Greenhouse Gases (GHG) emissions. In the absence of such policies, the effects on employment can cause significant impacts on migratory flows, creating, for example, more pressure on infrastructure urban services in the metropolitan areas on the Northeast and other regions of the country.
    Keywords: climate change, general equilibrium, regional economics Brazil
    JEL: Q54 R13
    Date: 2008–10
  19. By: Ho, Mun S.; Morgenstern, Richard (Resources for the Future); Shih, Jhih-Shyang (Resources for the Future)
    Abstract: This paper informs the discussion of carbon price policies by examining the potential for adverse impacts on domestic industries, with a focus on detailed sector-level analysis. The assumed policy scenario involves a unilateral economy-wide $10/ton CO2 charge without accompanying border tax adjustments or other complementary policies. Four modeling approaches are developed as a proxy for the different time horizons over which firms can pass through added costs, change input mix, adopt new technologies, and reallocate capital. Overall, we find that a readily identifiable set of industries experience particularly adverse impacts as measured by reduced output and that the relative burdens on different industries are remarkably consistent across the four time horizons. Output rebounds considerably over longer time horizons, and the adverse impacts on profits diminish even more rapidly in most cases. Over the short term employment losses mirror output declines, while gains in other industries fully offset the losses over the longer horizons. At the same time, leakage abroad is considerable in some sectors, particularly when reductions in exports are considered.
    Keywords: carbon price, competitiveness, input-output analysis
    JEL: F14 D D57 D58 H23
    Date: 2008–12–15
  20. By: Ondra Kamenik; Ioan Carabenciov; Igor Ermolaev; Charles Freedman; Dmitry Korshunov; Jared Laxton; Douglas Laxton; Michel Juillard
    Abstract: This is the third of a series of papers that are being written as part of a larger project to estimate a small quarterly Global Projection Model (GPM). The GPM project is designed to improve the toolkit for studying both own-country and cross-country linkages. In this paper, we estimate a small quarterly projection model of the US, Euro Area, and Japanese economies that incorporates oil prices and allows us to trace out the effects of shocks to oil prices. The model is estimated with Bayesian techniques. We show how the model can be used to construct efficient baseline forecasts that incorporate judgment imposed on the near-term outlook.
    Keywords: Economic forecasting , United States , Euro Area , Japan , Oil prices , Monetary policy , External shocks , Forecasting models ,
    Date: 2008–12–10
  21. By: Lazarus, William F,
    Abstract: Production costs and breakeven prices were calculated for four energy crops plus corn stover. The energy crop breakeven prices were calculated under two different scenarios regarding land costs and the opportunity costs of not utilizing the land for some other competing land use. One scenario is that the competing land use is pasture. The other is that the energy crops would compete with grain crops on more expensive land, and would need to provide a return over land costs equal to returns on the grain crops. Corn stover would be the cheapest of the energy biomass sources considered, at $50/ton to cover the additional machinery costs to shred, rake, bale, and transport 25 miles to a processing plant. Aside from stover, a grassland crop under high fertilization with a 4-ton yield has the lowest cost at $77/ton of dry matter. A grassland crop under low fertilization with a 2-ton yield but a longer stand life has the highest cost at $110/ton. Hybrid poplar comes in at $81/ton. Willow is at an early stage of development in Minnesota, but it would be the cheapest energy crop at $72/ton if it achieves a 5-ton yield with a 23-year stand life that has been reported in New York. These costs are based on the pasture land rental rate of $40/acre. The more expensive grain crop land translates directly into higher energy crop breakeven prices which are also presented in the paper.
    Keywords: Crop Production/Industries,
    Date: 2008–12
  22. By: Jean Marie Grether (University of Neuchatel); Nicole A. Mathys (University of Neuchatel); Jaime de Melo (University of Geneva, CERDI and CEPR)
    Abstract: A growth-decomposition (scale, technique and composition effect) covering 62 countries and 7 manufacturing sectors over the 1990-2000 period shows that trade, through reallocations of activities across countries, has contributed to a 2-3 percent decrease in world SO2 emissions. However, when compared to a constructed counterfactual no-trade benchmark, depending on the base year, trade would have contributed to a 3-10 percent increase in emissions. Finally adding emissions coming from trade-related transport activities, global emissions are increased through trade by 16 percent in 1990 and 13 percent in 2000, the decline being largely attributable to a shift of dirty activities towards cleaner countries.
    Keywords: embodied emissions in trade, environment, growth decomposition, transport, world trade
    JEL: F18 Q56
    Date: 2008–10–27
  23. By: Elif C. Arbatli
    Abstract: The intertemporal approach to the current account suggests modeling movements in the current account in a forward-looking, dynamic framework. In this framework, the current account reflects consumption smoothing of agents that lend and borrow from the rest of the world in the face of transitory shocks to income. As in permanent income models of consumption, the marginal propensity to consume out of transitory shocks is predicted to be significantly smaller which implies that a permanent income shock has a smaller effect on the current account than a transitory income shock. I use the term structure of petroleum futures to identify permanent and transitory innovations to petroleum prices. Then, I formulate a test of the intertemporal approach to the current account based on how a group of nineteen small petroleum exporters respond to each type of income shock. This market-based identification of income shocks and their perceived persistence offers a transparent framework for investigating the empirical evidence for the intertemporal approach. As the theory predicts, petroleum exporters have a significantly higher marginal propensity to consume out of permanent oil price shocks than out of transitory oil price shocks.
    Keywords: Balance of payments and components
    JEL: C22 F21 F32 G13
    Date: 2008
  24. By: Zhang, ZhongXiang
    Abstract: To point out the direction and focus of future international climate negotiations, this paper discusses how far developing country commitments can go in an immediate post-2012 climate regime. The paper argues that developing country commitments are most unlikely to go beyond the defined polices and measures in this timeframe. On this basis, the paper suggests that, rather than attempting the unrealistic goal, international climate negotiations may instead need to initially frame the post-2012 developing country participation in terms of certain policies and policies that I envisioned a decade ago. This conclusion does not change, as Barack Obama becomes the U.S. President and the Democrats have regained control of both U.S. House of Representatives and Senate. However, it should be emphasized that his stance on climate issues and how ambitious U.S. commitments would be under his administration are going to be critical for developing countries to take bold steps themselves and to even agree to reflect those national commitments in a global deal.
    Keywords: Post-Kyoto climate negotiations; Policies and measures; Developing countries
    JEL: Q48 Q42 Q53 Q54 Q58
    Date: 2008–10–28
  25. By: Qiujie Zheng; C. Richard Shumway (School of Economic Sciences, Washington State University)
    Abstract: Biofuels, as alternative transportation fuels, are now being used globally. Taking advantage of in-state feedstock supply is an efficient way to stimulate in-state biofuel industries and the local economy. This paper uses several models to estimate supply equations for major biofuel feedstock crops in Washington. We estimate expected utility maximization models, expected profit maximization models, and several pragmatic models. We examine the comparative statics results of the models, and use the results to draw important implications for Washington policy makers and for farmers who are considering production of biofuel feedstocks.
    Keywords: biofuel feedstock, output uncertainty, price uncertainty, profit maximization, supply
    Date: 2008–12
  26. By: Alain Ayong Le Kama (EQUIPPE - Université de Lille I); Mouez Fodha (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The aim of this paper is to study the optimal nuclear waste burial policy under an uncertainty : the possibility that an accident might occur in the future. The framework is an optimal growth model with pollution disutility. We show, under some conditions on the waste burial policy, that nuclear power may be a long-term solution for the world energy demand. Under uncertainty on the future safety of the buried waste, the social planner will decide to decrease the rate of waste burying, but the evolution of consumption and hence the evolution of the level of buried waste, are ambiguous. Depending on some simple conditions on the balanced growth rate of the economy and on the preference parameters of the households, the optimal amount of buried waste may increase, even if there is a risk of accident in the future.
    Keywords: Nuclear waste, pollution, growth, uncertainty.
    Date: 2008–07
  27. By: Achtnicht, Martin; Bühler, Georg; Hermeling, Claudia
    Abstract: In this paper we analyze the impact of service station availability on the demand for alternative-fuel vehicles and the consumers’ willingness to pay for an enlarged fueling infrastructure. We examine a stated preferences choice experiment conducted as a CAPI survey with about 600 interviews of potential car buyers in Germany and estimate the coefficients of a discrete choice model. We simulate different scenarios and analyze how individual choice probabilities for alternative fuel-types are changing with a modified fueling infrastructure. In our scenarios hybrids, LPG/CNG and hydrogen will be real alternatives to the existing conventional technologies. However, biofuels and electric power trains are well behind even in a situation where their infrastructure is equally developed. Moreover, on the basis of our model we compute what increases in fixed or variable costs consumers of different income groups are willing to accept for an increasing station density.
    Keywords: Fueling Infrastructure, Alternative Fuels, Automobile Market, Stated Preferences, Discrete Choice, Network Effects
    JEL: C51 L62 R41
    Date: 2008
  28. By: Pillai N., Vijayamohanan
    Abstract: Electric power is so vital to both our economic and personal wellbeing that the erstwhile state policy in most of the developing countries, including India, had vested the power industry in the hands of the state as a promotional agency for subsidized supply. However, with the onset of the neo-liberalism in the wake of the fall (of the threat) of socialist alternative, the promotional orientation in the state policy had to give way to efficiency considerations in the sense of a neoclassical market economy. Thus has started the infamous power sector restructuring, the technical term for ultimate privatization. Radical policy changes were legislated in India and so far 13 States have reorganized their power sector; in Orissa, Delhi and Noida in Uttar Pradesh power distribution was entirely privatized. Kerala with a militant trade union presence has so far been dragging her feet, even in the face of the stern legislative requirement, portending an ultimate surrender. In this context the present paper attempts to draw some lessons from actual experiences elsewhere.
    Keywords: Power sector; restructuring; privatization; welfare; corruption; Kerala;
    JEL: H54 H40 Q48 L94
    Date: 2008–12–20

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