nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒01‒17
23 papers chosen by
Roger Fouquet
Imperial College, UK

  1. Linkage of Tradable Permit Systems in International Climate Policy Architecture By Robert N. Stavins; Judson Jaffe
  2. Technology Diffusion, Abatement Cost, and Transboundary Pollution By Geoffrey Heal; Nori Tarui
  3. International Technology Transfer for Climate Policy By David Popp
  4. Absolute Abundance and Relative Scarcity: Announced Policy, Resource Extraction, and Carbon Emissions By Corrado Di Maria; Sjak Smulders; Edwin van der Werf
  5. Changing the Allocation Rules in the EU ETS: Impact on Competitiveness and Economic Efficiency By Philippe Quirion; Damien Demailly
  6. Effects of the CDM on Poverty Eradication and Global Climate Protection By Dirk T.G. Rübbelke; Nathan Rive
  7. Enforcement and Environmental Quality in a Decentralized Emission Trading System By Edilio Valentini; Edilio Valentini
  8. Working Paper 19-08 - Quantifying environmental leakage for Belgium By Adja Awa Sissoko; Guy Vandille
  9. The Relationship Between Environmental Efficiency and Manufacturing Firm’s Growth By Massimiliano Mazzanti; Giulio Cainelli; Roberto Zoboli
  10. The added value from adopting a CGE approach to analyse changes in environmental trade balances By Karen Turner; Michelle Gilmartin; Peter McGregor; Kim Swales
  11. Environmental Kuznets curves for carbon emissions: A critical survey By Aslanidis Nektarios
  12. Economic Costs of Extratropical Storms Under Climate Change: An Application of FUND By Narita, Daiju; Tol, Richard S. J.; Anthoff, David
  13. Working Paper 21-08 - Impact of the EU Energy and Climate Package on the Belgian energy system and economy - Study commissioned by the Belgian federal and three regional authorities By Francis Bossier; Danielle Devogelaer; Dominique Gusbin; Frédéric Verschueren
  14. Efficiency and Distributional Impacts of Tradable White Certificates Compared to Taxes, Subsidies and Regulations By Philippe Quirion; Louis-Gaëtan Giraudet
  15. Rebound and disinvestment effects in oil consumption and supply resulting from an increase in energy efficiency in the Scottish commercial transport sector By Sam Anson; Karen Turner
  16. Negative rebound and disinvestment effects in response to an improvement in energy efficiency in the UK economy By Karen Turner
  17. Did Improvements in Household Technology Cause the Baby Boom? Evidence from Electrification, Appliance Diffusion, and the Amish By Martha J. Bailey; William J. Collins
  18. Industrial Coal Demand in China: A Provincial Analysis By Matteo Manera; Cristina Cattaneo; Elisa Scarpa
  19. Energy Consumption and Economic Growth: Evidence from COMESA Countries By Chali, Nondo; Mulugeta, Kahsai
  20. Modeling Electricity Prices: From the State of the Art to a Draft of a New Proposal By Matteo Manera; Massimiliano Serati; Michele Plotegher
  21. On the Effects of Suggested Prices in Gasoline Markets By Riemer P. Faber; Maarten C.W. Janssen
  22. Strategic Investment in International Gas-Transport Systems : A Dynamic Analysis of the Hold-up Problem By Franz Hubert; Irina Suleymanova
  23. Integrating Bioenergy into Computable General Equilibrium Models – A Survey By Bettina Kretschmer; Sonja Peterson

  1. By: Robert N. Stavins (Harvard University); Judson Jaffe (Analysis Group)
    Abstract: Cap-and-trade systems have emerged as the preferred national and regional instrument for reducing emissions of greenhouse gases throughout the industrialized world, and the Clean Development Mechanism — an international emission-reduction-credit system — has developed a substantial constituency, despite some concerns about its performance. Because linkage between tradable permit systems can reduce compliance costs and improve market liquidity, there is great interest in linking cap-and-trade systems to each other, as well as to the CDM and other credit systems. We examine the benefits and concerns associated with various types of linkages, and analyze the near-term and long-term role that linkage may play in a future international climate policy architecture. In particular, we evaluate linkage in three potential roles: as an independent bottom-up architecture, as a step in the evolution of a top-down architecture, and as an ongoing element of a larger climate policy agreement. We also assess how the policy elements of climate negotiations can facilitate or impede linkages. Our analysis throughout is both positive and normative.
    Keywords: Linkage, Cap-and-Trade, Tradable Permits, Global Climate Change
    JEL: F50 Q20 Q40 Q50
    Date: 2008–10
  2. By: Geoffrey Heal (Columbia University); Nori Tarui (University of Hawaii at Manoa)
    Abstract: This paper studies countries’ incentives to develop advanced pollution abatement technology when technology may spillover across countries and pollution abatement is a global public good. We are motivated in part by the problem of global warming: a solution to this involves providing a global public good, and will surely require the development and implementation of new technologies. We show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case.
    Keywords: International Environmental Agreement, Pollution Abatement Costs, Endogenous Technological Change
    JEL: Q50 H87 D70
    Date: 2008–11
  3. By: David Popp (Center for Policy Research, Maxwell School of Citizenship and Public Affairs, 426 Eggers Hall, Syracuse University, Syracuse, New York USA 13244-1020)
    Abstract: While the developed world is starting to limit emissions of greenhouse gases, emissions from the developing world are increasing as a result of economic growth. Reducing these emissions while still enabling developing countries to grow requires the use of new technologies. In most cases, these technologies are first created in high-income countries. Thus, the challenge for climate policy is to encourage the transfer of these climate-friendly technologies to the developing world. This policy brief reviews the economic literature on environmental technology transfer. It then discusses the implications of this literature for climate policy, focuing on the Clean Developmenht Mechanism (CDM) ofthe Kyoto Protocol. It concludes by asking whether the current structure of the CDM provides sufficient incentives for technology transfer. Are CDM projects providing real emissions reductions, or are developed countries simply receiving credit for reductions that developing countries could have achieved on their own? What lessons can we learn from recent experience that may guide the development of the CDM (or other similar policy tools) during the next round of international climate policy negotiations?
    Keywords: Kyoto Protocol, greenhouse gases, global warming, clean development mechanism, carbon dioxide, GHG emissions, sustainability
    JEL: D43 F23 K32 L24 L71 O3 Q5
    Date: 2008–10
  4. By: Corrado Di Maria (University College Dublin); Sjak Smulders (Tilburg University); Edwin van der Werf (University of Oldenburg)
    Abstract: We study the effectiveness of climate change policy in a model with multiple non-renewable resources that differ in their carbon content. We find that, when allowing some time between announcement and implementation of a cap on carbon dioxide emissions, emissions from non-renewable energy sources increase at the time of announcement. There are two channels behind this effect. First, since a binding constraint on emissions restricts energy use during some period of time, more must be extracted during other periods. Second, since low carbon energy sources are relatively more valuable when the policy is implemented, it is optimal to conserve them ahead of enforcement. This might induce a switch to high-carbon resources before the policy is implemented.
    Keywords: Climate Policy, Non-renewable Resources, Announcement Effects, Scarcity, Order of Extraction
    JEL: Q31 Q41 Q54 Q58
    Date: 2008–11
  5. By: Philippe Quirion (CIRED); Damien Demailly (CIRED)
    Abstract: We assess five proposals for the future of the EU greenhouse gas Emission Trading Scheme (ETS): pure grandfathering allocation of emission allowances (GF), output-based allocation (OB), auctioning (AU), auctioning with border adjustments (AU-BA), and finally output-based allocation in sectors exposed to international competition combined with auctioning in electricity generation (OB-AU). We look at the impact on production, trade, CO2 leakage and welfare. We use a partial equilibrium model of the EU 27 featuring three sectors covered by the EU ETS – cement, steel and electricity – plus the aluminium sector, which is indirectly impacted through a rise in electricity price. The leakage ratio, i.e. the increase in emissions abroad over the decrease in EU emissions, ranges from around 8% under GF and AU to -2% under AU-BA and varies greatly among sectors. Concerning the overall economic cost, OB appears to be the least efficient policy, even when taking into account its ability to prevent CO2 leakage. On the other hand, this policy minimises production losses and wealth transfers among stakeholders, which is likely to soften oppositions. GF and AU are the most efficient policies from an EU perspective, even when leakage is accounted for. From a world welfare perspective and whatever the emission reductio
    Keywords: Emission Trading, Allowance Allocation, Leakage, Spillover, Climate Policy, Kyoto Protocol, Border Adjustment
    JEL: Q5
    Date: 2008–10
  6. By: Dirk T.G. Rübbelke (Center for International Climate and Environmental Research Oslo (CICERO)); Nathan Rive (Center for International Climate and Environmental Research Oslo (CICERO))
    Abstract: In an impure public good model we analyze the effects of CDM transfers on poverty as well as on the global climate protection level. We construct an analytical model of a developing and an industrialized region, both of which independently seek to maximize their utility – a function of private consumption, domestic air quality, and global climate protection. They do so by distributing their finite expenditures across (1) the aggregate consumption good, (2) end-of-pipe pollution control technologies, and (3) greenhouse gas abatement. Based on our analytical findings, we develop two sets of simulations for China in which we vary the rate of the CDM transfer. The simulations differ by the assumption of China’s domestic air quality policy – the first assumes a technology-standards policy which fixes a level of end-of-pipe SO2 control, whereas the second assumes a technology-neutral policy which simply fixes the level of total SO2 emissions.
    Keywords: Ancillary Benefits, CDM, Climate Policy, Impure Public Goods, Transfers, Abatement Technology
    JEL: Q54 H23 H41 O33
    Date: 2008–11
  7. By: Edilio Valentini (Università "G. D'Annunzio" di Chieti-Pescara); Edilio Valentini (Università "G. D'Annunzio" di Chieti-Pescara)
    Abstract: This paper addresses the issue of whether the powers of monitoring compliance and allocating tradeable emissions allowances within a federation of countries should be appointed to a unique federal regulator or decentralized to several local regulators. To this end, we develop a two stage game played by environmental regulator(s) and the polluting industries of two countries. Regulator(s) choose the amount of emission allowances to be issued and set the level of monitoring effort to achieve full compliance, while regulated firms choose actual emissions and the number of permits to be held. We identify various, possibly conflicting, spillovers among states in a decentralized setting. We show that cost advantage in favor of local regulators is not sufficient to justify decentralization. Nevertheless, cost differential in monitoring violations can imply lower emissions and greater welfare under a decentralized institutional setting than under a centralized one. However, while a better environmental quality under decentralization is a sufficient condition for higher welfare under the same regime, it is not also a necessary condition.
    Keywords: Emissions Trading, Environmental Federalism, Enforcement, Monitoring Cost
    JEL: F18 K42 Q53
    Date: 2008–12
  8. By: Adja Awa Sissoko; Guy Vandille
    Abstract: This paper illustrates the deficiency of the production approach as a tool to measure a country's responsibility for international environmental impacts. A use approach is presented as a more suitable tool. The difference between the two approaches is determined by a better grasp of international trade, which can lead to environmental leakage when a country specialises in the production of environmentally friendly products and has the environmentally unfriendly products which it consumes produced abroad. We show that in the period 1995-2002 Belgium was on average a provider of air emission intensive products for the rest of the world. Environmental leakage was mostly negative. However, the evolution of the Belgian environmental terms of trade shows that by 2002 its imports had become considerably more air emission intensive with respect to its exports than in 1995. There are indications that this evolution is due to a considerable increase of extra-EU imports of air emission intensive products. This in turn could point to environmentally inspired offshoring. However, the currently available data do not allow us to test this hypothesis.
    JEL: F18
    Date: 2008–10–30
  9. By: Massimiliano Mazzanti (University of Ferrara); Giulio Cainelli (University of Bari); Roberto Zoboli (Catholic University of Milan & CERIS CNR)
    Abstract: This paper investigates the empirical link between emission intensity and economic growth, using a very large data set of 61,219 Italian manufacturing firms over the period 2000-2004. As a measure of lagged environmental performance (efficiency) at firm level we exploit NAMEA sector for CO2, NOx, SOx data over 1990-1999. The paper tests the extent to which (past) environmental efficiency/intensity, which is driven by structural features and firm strategic actions, including responses to policies, influences firms growth. Our results show, first, a typical trade off generally appearing for the three core environmental emissions we analyse: lower environmentally efficiency in the recent past allows higher degrees of freedom to firms and relax the constraints for growth, at least in this short/medium term scenario. Nevertheless, the size of the estimated coefficients is not large. Trade off are significant for two emission indicators out of two, but quite negligible in terms of impacts, besides the case of CO2. For example, growth is reduced by far less than 0.1% in association to a 1% increase of environmental efficiency. Environmental efficiency does not seem a primary cost factor and constraint to growth if compared to other factors affecting firm targets and firm competitiveness. In addition, non-linearity seems to characterise the economic growth-environmental performance relationship. Signals of inverted U shape appears: this may be a signal that both firm strategies and recent policy efforts are affecting the dynamic relationship between environmental efficiency and economic productivity, turning it from an usual trade off to a possible joint complementary/co-dynamics, where bad environmental performances hamper firm growth and investments in greener technologies may be associated to positive economic performances of firms and sectors.
    Keywords: Firm growth, Manufacturing, Emission intensity, Economic performance, Environmental performance
    JEL: C23 D21 O32 Q55
    Date: 2008–12
  10. By: Karen Turner (Department of Economics, University of Strathclyde); Michelle Gilmartin (Department of Economics, University of Strathclyde); Peter McGregor (Department of Economics, University of Strathclyde); Kim Swales (Department of Economics, University of Strathclyde)
    Abstract: The application of multi-region environmental input-output (IO) analysis to the problem of accounting for emissions generation (and/or resource use) under different accounting principles has become increasingly common in the ecological and environmental economics literature in particular, with applications at the international and interregional subnational level. However, while environmental IO analysis is invaluable in accounting for pollution flows in the single time period that the accounts relate to, it is limited when the focus is on modelling the impacts of any marginal change in activity. This is because a conventional demand-driven IO model assumes an entirely passive supply-side in the economy (i.e. all supply is infinitely elastic) and is further restricted by the assumption of universal Leontief (fixed proportions) technology implied by the use of the A and multiplier matrices. Where analysis of marginal changes in activity is required, extension from an IO accounting framework to a more flexible interregional computable general equilibrium (CGE) approach, where behavioural relationships can be modelled in a more realistic and theory-consistent manner, is appropriate. Our argument is illustrated by comparing the results of introducing a positive demand stimulus in the UK economy using IO and CGE interregional models of Scotland and the rest of the UK. In the case of the latter, we demonstrate how more theory consistent modelling of both demand and supply side behaviour at the regional and national levels effect model results, including the impact on the interregional CO2 ‘trade balance’.
    Keywords: modelling, MRIO, CO2 trade balance, environmental responsibility
    JEL: D57 D58 R15 Q56
    Date: 2009–01
  11. By: Aslanidis Nektarios
    Abstract: The empirical finding of an inverse U-shaped relationship between per capita income and pollution, the so-called Environmental Kuznets Curve (EKC), suggests that as countries experience economic growth, environmental deterioration decelerates and thus becomes less of an issue. Focusing on the prime example of carbon emissions, the present article provides a critical review of the new econometric techniques that have questioned the baseline polynomial specification in the EKC literature. We discuss issues related to the functional form, heterogeneity, “spurious” regressions and spatial dependence to address whether and to what extent the EKC can be observed. Despite these new approaches, there is still no clear-cut evidence supporting the existence of the EKC for carbon emissions.
    Date: 2009–01
  12. By: Narita, Daiju (ESRI); Tol, Richard S. J. (ESRI); Anthoff, David (ESRI)
    Abstract: Extratropical cyclones have attracted some attention in climate policy circles as a possible significant damage factor of climate change. This study conducts an assessment of economic impacts of increased storm activities under climate change with the integrated assessment model FUND 3.4. In the base case, the direct economic damage of enhanced storms due to climate change amounts to $2.4 billion globally (approximately 35% of the total economic loss of storms at present) at the year 2100, while its ratio to the world GDP is 0.0007%. The paper also shows various sensitivity runs exhibiting up to 4 times the level of damage relative to the base run.
    Keywords: policy
    Date: 2009–01
  13. By: Francis Bossier; Danielle Devogelaer; Dominique Gusbin; Frédéric Verschueren
    Abstract: In order to prepare for the negotiations on the EU Energy and Climate Package, the Federal Planning Bureau was asked by the Belgian federal and regional authorities to conduct a study on the impact of the January 2008 European Commission's proposal. In the course of this study, various scenarios were run. Next to a baseline, two main alternative scenarios were scrutinised: the 20/20 and 30/20 target scenarios, standing for an EU reduction of respectively 20% and 30% of GHG emissions in the year 2020 compared to the level of 1990 and a 20% mandatory EU share of RES in Gross Final Energy Demand in 2020. The report then includes an analysis of the impact of both scenarios on the Belgian energy system and economy as well as on GHG emissions.
    JEL: Q4 C6 O2
    Date: 2008–12–15
  14. By: Philippe Quirion (CIRED); Louis-Gaëtan Giraudet (CIRED, ENPC)
    Abstract: Tradable White Certificates (TWC) schemes, also labelled Energy-Efficiency Certificates schemes, were recently implemented in Great Britain, Italy and France. Energy suppliers have to fund a given quantity of energy efficiency measures, or to buy so-called "white certificates" from other suppliers who exceed their target. We develop a partial equilibrium model to compare TWC schemes to other policy instruments for energy efficiency, i.e., energy taxes, subsidies on energy-saving goods and regulations fixing a minimum level of energy-efficiency. The model features an endogenous level of energy service and we analyse the influence of the substitutability between energy and energy-saving goods to produce the energy service, as well as the influence of the elasticity of demand for the energy service. We show that if the level of energy service consumption is fixed, a TWC scheme is as efficient as an energy tax, but that it is much less otherwise because it does not provide the optimal incentive to reduce the consumption of energy service. This inefficiency is worsened if energy suppliers' targets are fixed rather than proportional to the suppliers' current output. On the other hand, compared to taxes, a TWC scheme allows reaching a given level of energy savings with a lower increase in the consumers' energy price, which may ease its implementation.
    Keywords: Energy Saving Policies, Energy-Efficiency Certificates, White Certificates, Rebound Effect
    JEL: Q38 Q48 Q58
    Date: 2008–10
  15. By: Sam Anson (Scottish Government Transport Directorate); Karen Turner (Department of Economics, University of Strathclyde)
    Abstract: In this paper we use an energy-economy-environment computable general equilibrium (CGE) model of the Scottish economy to examine the impacts of an exogenous increase in energy augmenting technological progress in the domestic commercial Transport sector on the supply and use of energy. We focus our analysis on oil, as the main type of energy input used in commercial transport activity. We find that a 5% increase in energy efficiency in the commercial Transport sector leads to rebound effects in the use of oil-based energy commodities in all time periods, in the target sector and at the economy-wide level. However, our results also suggest that such an efficiency improvement may cause a contraction in capacity in the Scottish oil supply sector. This ‘disinvestment effect’ acts as a constraint on the size of rebound effects. However, the magnitude of rebound effects and presence of the disinvestment effect in the simulations conducted here are sensitive to the specification of key elasticities of substitution in the nested production function for the target sector, particularly the substitutability of energy for non-energy intermediate inputs to production.
    Keywords: general equilibrium, energy efficiency, rebound effects, disinvestment
    JEL: D57 D58 R15 Q41 Q43
    Date: 2009–01
  16. By: Karen Turner (Department of Economics, University of Strathclyde)
    Abstract: This paper uses a computable general equilibrium (CGE) framework to investigate the conditions under which rebound effects may occur in response to increases in energy efficiency in the UK national economy. Previous work for the UK has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero. The research reported in this paper involves carrying out a systematic sensitivity analysis, where relative price sensitivity is gradually introduced into the system, focusing specifically on elasticities of substitution in production and trade parameters, in order to determine conditions under which rebound effects become a likely outcome. The main result is that, while there is positive pressure for rebound effects even where (direct and indirect) demands for energy are very price inelastic, this may be partially or wholly offset by negative income, competitiveness and disinvestment effects, which also occur in response to falling energy price. The occurrence of disinvestment effects is of particular interest. These occur where falling energy prices reduce profitability in domestic energy supply sectors, leading to a contraction in capital stock in these sectors, which may in turn lead to rebound effects that are smaller in the long run than in the short run, a result that runs contrary to the predictions of previous theoretical work in this area.
    Keywords: general equilibrium, energy efficiency, rebound effects, disinvestment
    JEL: D57 D58 R15 Q41 Q43
    Date: 2009–01
  17. By: Martha J. Bailey; William J. Collins
    Abstract: More than a half century after its peak, the baby boom's causes remain a puzzle. A novel argument posits that rapid changes in household technology from 1940 to 1960 account for this large increase in fertility. We present new empirical evidence that is inconsistent with this claim. Rapid advances in household technology began long before 1940 while fertility declined, and differences and changes in appliance ownership and electrification in U.S. counties are negatively correlated with fertility rates from 1940 to 1960. Finally, the Amish, a group strictly limiting the use of modern technologies, experienced a coincident and sizable baby boom.
    JEL: E0 J1 N3
    Date: 2009–01
  18. By: Matteo Manera (University of Milano-Bicocca); Cristina Cattaneo (Fondazione Eni Enrico Mattei, Milan and University of Sussex); Elisa Scarpa (Edison Trading)
    Abstract: In recent years, concerns regarding the environmental implications of the rising coal demand have induced considerable efforts to generate long-term forecasts of China’s energy requirements. Nevertheless, none of the previous empirical studies on energy demand for China has tackled the issue of modelling coal demand in China at provincial level. The aim of this paper is to fill this gap. In particular, we model and forecast the Chinese demand for coal using time series data disaggregated by provinces. Moreover, not only does our analysis account for heterogeneity among provinces, but also, given the nature of the data, it captures the presence of spatial autocorrelation among provinces using a spatial econometric model. A fixed effects spatial lag model and a fixed effects spatial error model are estimated to describe and forecast industrial coal demand. Our empirical results show that the fixed effect spatial lag model better captures the existing interdependence between provinces. This model forecasts an average annual increase in coal demand to 2010 of 4 percent.
    Keywords: Energy demand, Coal demand, China, Spatial econometrics, Panel data, Forecasting
    JEL: C23 E6 Q31 Q41
    Date: 2008–02
  19. By: Chali, Nondo; Mulugeta, Kahsai
    Abstract: This study applies panel data techniques to investigate the long-run relationship between energy consumption and GDP for a panel of 19 African countries (COMESA) based on annual data for the period 1980-2005. In the first step, we examine the degree of integration between GDP and energy consumption by employing three panel unit root tests and find that the variables are integrated of order one. In the second step, we investigate the long-run relationship between energy consumption and GDP. Results overwhelming show that GDP and energy consumption move together in the long-run. In the third step, we estimate the long-run relationship and test for causality using panel-based error correction models. The results indicate that long-run and short-run causality is unidirectional, running from energy consumption to GDP.
    Keywords: Energy consumption, GDP, Panel Causality tests, International Development, Resource /Energy Economics and Policy, O13, O55,
    Date: 2009–01–31
  20. By: Matteo Manera (University of Milano-Bicocca); Massimiliano Serati (Institute of Economics, Cattaneo University – LIUC, Castellanza); Michele Plotegher (ENI SPA)
    Abstract: In the last decades a liberalization of the electric market has started; prices are now determined on the basis of contracts on regular markets and their behaviour is mainly driven by usual supply and demand forces. A large body of literature has been developed in order to analyze and forecast their evolution: it includes works with different aims and methodologies depending on the temporal horizon being studied. In this survey we depict the actual state of the art focusing only on the recent papers oriented to the determination of trends in electricity spot prices and to the forecast of these prices in the short run. Structural methods of analysis, which result appropriate for the determination of forward and future values are left behind. Studies have been divided into three broad classes: Autoregressive models, Regime switching models, Volatility models. Six fundamental points arise: the peculiarities of electricity market, the complex statistical properties of prices, the lack of economic foundations of statistical models used for price analysis, the primacy of uniequational approaches, the crucial role played by demand and supply in prices determination, the lack of clearcut evidence in favour of a specific framework of analysis. To take into account the previous stylized issues, we propose the adoption of a methodological framework not yet used to model and forecast electricity prices: a time varying parameters Dynamic Factor Model (DFM). Such an eclectic approach, introduced in the late ‘70s for macroeconomic analysis, enables the identification of the unobservable dynamics of demand and supply driving electricity prices, the coexistence of short term and long term determinants, the creation of forecasts on future trends. Moreover, we have the possibility of simulating the impact that mismatches between demand and supply have over the price variable. This way it is possible to evaluate whether congestions in the network (eventually leading black out phenomena) trigger price reactions that can be considered as warning mechanisms.
    Keywords: Electricity Spot Prices, Autoregressive Models, GARCH Models, Regime Switching Models, Dynamic Factor Models
    JEL: C2 C3 Q4
    Date: 2008–02
  21. By: Riemer P. Faber (Erasmus School of Economics, Erasmus University Rotterdam); Maarten C.W. Janssen (University of Vienna, and Erasmus School of Economics, Erasmus University Rotterdam)
    Abstract: This article analyzes the role of suggested prices in the Dutch retail market for gasoline. Suggested prices are announced by large oil companies with the suggestion that retailers follow them. There are at least two competing rationales for the existence of suggested prices: they may either help retailers translate changes in international gasoline spot market prices into retail prices, or they may coordinate retail prices. We show that there is, next to the international spot market prices, additional information in suggested prices that explains retail prices. Therefore, we conclude that suggested prices help to coordinate retail prices.
    Keywords: gasoline markets; collusion; price setting; suggested prices
    JEL: L11 L42 L65
    Date: 2008–12–01
  22. By: Franz Hubert; Irina Suleymanova
    Abstract: We develop a dynamic model of strategic investment in a transnational pipeline system. In the absence of international contract enforcement, countries may distort investment in order to increase their bargaining power, resulting in overinvestment in expensive and underinvestment in cheap pipelines. With repeated interaction, however, there is a potential to increase efficiency through dynamic collusion. In the theoretical part we establish a fundamental asymmetry: it is easier to avoid overinvestment than underinvestment. Calibrating the model to fit the Eurasian pipeline system for natural gas, we find that the potential to improve efficiency through dynamic cooperation is large. In reality, however, only modest improvements over the non-cooperative solution have been achieved.
    Keywords: Multilateral bargaining, Hold-up, irreversible investment, collusion
    JEL: L95 L14 C71
    Date: 2008
  23. By: Bettina Kretschmer; Sonja Peterson
    Abstract: In the past years biofuels have received increased attention since they were believed to contribute to rural development, energy security and to fight global warming. It became also clear, though, that bioenergy cannot be evaluated independently of the rest of the economy and that national and international feedback effects are important. Computable general equilibrium (CGE) models have been widely employed in order to study the effects of international climate policies. The main characteristic of these models is their encompassing scope: Global models cover the whole world economy disaggregated into regions and countries as well as diverse sectors of economic activity. Such a modelling framework unveils direct and indirect feedback effects of certain policies or shocks across sectors and countries. CGE models are thus well suited for the study of bioenergy/biofuel policies. One can currently find various approaches in the literature of incorporating bioenergy into a CGE framework. This paper intends to give an overview of existing approaches and to critically assess their respective power. Grouping different approaches into categories and highlighting their advantages and disadvantages is important for giving a structure to this rather recent and rapidly growing research area and to provide a guidepost for future work
    Keywords: biofuels, CGE model, climate policy
    JEL: D58 Q42 Q48 Q54
    Date: 2008–12

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