nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒03‒22
seventeen papers chosen by
Roger Fouquet
Imperial College, UK

  1. China's Energy Economy: Technical Change, Factor Demand and Interfactor/Interfuel Substitution By Hengyun Ma; Les Oxley; John Gibson; Bongguen Kim
  2. Energy demand models for policy formulation : a comparative study of energy demand models By Bhattacharyya, Subhes C.; Timilsina, Govinda R.
  3. Time variation in the inflation passthrough of energy prices By Todd E. Clark; Stephen J. Terry
  4. Wind power development : economics and policies By van Kooten, G. Cornelis; Timilsina, Govinda R.
  5. Russia Agriculture Policy Review By Melvukhina, Olga; Tanguay, Luc; Vaughan, Odette; Jotanovic, Aleksandar
  6. Welfare impacts of rural electrification : a case study from Bangladesh By Khandker, Shahidur R.; Barnes, Douglas F.; Samad, Hussain A.
  7. What if energy decoupling of emerging economies were not so spontaneous? An illustrative example on India By Sandrine Mathy; Céline Guivarch
  8. Climate policies : what if emerging country baseline were not so optimistic? – a case study related to India By Sandrine Mathy; Céline Guivarch
  9. Promoting clean technologies under imperfect competition By Théophile T. Azomahou; Raouf Boucekkine; Phu Nguyen-Vanc
  10. The Feasibility of Low Concentration Targets: An Application of FUND By Tol, Richard S. J.
  11. Climate Policy Integration: Towards Operationalization By Imran Habib Ahmad
  12. Policy Options to Reduce Ireland's GHG Emissions [Instrument choice: the pros and cons of alternative policy instruments] By Legge, Thomas; Scott, Susan
  13. International Trade in Used Vehicles: The Environmental Consequences of NAFTA By Lucas W. Davis; Matthew E. Kahn
  14. A review of regulatory instruments to control environmental externalities from the transport sector By Timilsina, Govinda R.; Dulal, Hari B.
  15. The Zero discounting and maximin optimal paths in a simple model of global warming By Antoine D'Autume; John M. Hartwick; Katheline Schubert
  16. Zero discounting and optimal paths of depletion of an exhaustible resource with an amenity value By Antoine D'Autume; Katheline Schubert
  17. Des politiques environnementales au système de permis d’émission négociables : Etats des lieux en France sous des éclairages théoriques By Jules-Eric Tchachet Tchouto; Anaïs Delbosc; Luc Savard

  1. By: Hengyun Ma (University of Canterbury); Les Oxley (University of Canterbury); John Gibson (Motu Economic and Public Policy Research and The University of Waikato); Bongguen Kim (The University of Waikato)
    Abstract: With its rapid economic growth, China's primary energy consumption has exceeded domestic energy production since 1994, leading to a substantial expansion in energy imports, particularly of oil. China's energy demand has an increasingly significant impact on global energy markets. In this paper Allen partial elasticities of factor and energy substitution, and price elasticities of energy demand, are calculated for China using a two-stage translog cost function approach. The results suggest that energy is substitutable with both capital and labour. Coal is significantly substitutable with electricity and complementary with diesel while gasoline and electricity are substitutable with diesel. China's energy intensity is increasing during the study period (1995-2004) and the major driver appears to be due to the increased use of energy intensive technology.
    Keywords: China, Interfactor/interfuel substitution, Technology, Energy intensity decomposition
    JEL: D24 O33 Q41
    Date: 2009–02
  2. By: Bhattacharyya, Subhes C.; Timilsina, Govinda R.
    Abstract: This paper critically reviews existing energy demand forecasting methodologies highlighting the methodological diversities and developments over the past four decades in order to investigate whether the existing energy demand models are appropriate for capturing the specific features of developing countries. The study finds that two types of approaches, econometric and end-use accounting, are used in the existing energy demand models. Although energy demand models have greatly evolved since the early 1970s, key issues such as the poor-rich and urban-rural divides, traditional energy resources, and differentiation between commercial and non-commercial energy commodities are often poorly reflected in these models. While the end-use energy accounting models with detailed sector representations produce more realistic projections compared with the econometric models, they still suffer from huge data deficiencies especially in developing countries. Development and maintenance of more detailed energy databases, further development of models to better reflect developing country context, and institutionalizing the modeling capacity in developing countries are the key requirements for energy demand modeling to deliver richer and more reliable input to policy formulation in developing countries.
    Keywords: Energy Production and Transportation,Energy Demand,Environment and Energy Efficiency,Energy and Environment,Economic Theory&Research
    Date: 2009–03–01
  3. By: Todd E. Clark; Stephen J. Terry
    Abstract: From Bayesian estimates of a vector autoregression (VAR) which allows for both coefficient drift and stochastic volatility, we obtain the following three results. First, beginning in approximately 1975, the responsiveness of core inflation to changes in energy prices in the United States fell rapidly and remains muted. Second, this decline in the passthrough of energy inflation to core prices has been sustained through a recent period of markedly higher volatility of shocks to energy inflation. Finally, reduced energy inflation passthrough has persisted in the face of monetary policy which quickly became less responsive to energy inflation starting around 1985.
    Date: 2009
  4. By: van Kooten, G. Cornelis; Timilsina, Govinda R.
    Abstract: This study reviews the prospects of wind power at the global level. Existing studies indicate that the earth's wind energy supply potential significantly exceeds global energy demand. Yet, only 1 percent of the global electricity demand is currently derived from wind power despite 40 percent annual growth in wind generating capacity over the past 25 years. More than 98 percent of total current wind power capacity is installed in the developed countries plus China and India. It has been estimated that wind power could supply 7 to 34 percent of global electricity needs by 2050. However, wind power faces a large number of technical, economic, financial, institutional, market, and other barriers. To overcome these barriers, 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 countries and the Clean Development Mechanism in developing countries) have played a significant role in promoting wind power.
    Keywords: Energy Production and Transportation,Carbon Policy and Trading,Windpower,Environment and Energy Efficiency,Energy and Environment
    Date: 2009–03–01
  5. By: Melvukhina, Olga; Tanguay, Luc; Vaughan, Odette; Jotanovic, Aleksandar
    Abstract: In recent years, as a result of a strong demand for energy and other natural resources, Russia's economy has experienced impressive growth. Russia's re-emergence as a political and, particularly, economic power have allowed it to increase policy support to its agricultural sector. Russia's size, improving prospects, and growing policy support make developments in its agricultural sector of interest to Canada.
    Keywords: Russia, agricultural policy, regionalization, ruble, energy demand, transparency, Agricultural and Food Policy, Institutional and Behavioral Economics, International Relations/Trade, Livestock Production/Industries, Resource /Energy Economics and Policy,
    Date: 2008–03
  6. By: Khandker, Shahidur R.; Barnes, Douglas F.; Samad, Hussain A.
    Abstract: Lack of access to electricity is one of the major impediments to growth and development of the rural economies in developing countries. That is why access to modern energy, in particular to electricity, has been one of the priority themes of the World Bank and other development organizations. Using a cross-sectional survey conducted in 2005 of some 20,000 households in rural Bangladesh, this paper studies the welfare impacts of households'grid connectivity. Based on rigorous econometric estimation techniques, this study finds that grid electrification has significant positive impacts on households'income, expenditure, and educational outcomes. For example, the gain in total income due to electrification can be as much as 30 percent and as low as 9 percent. Benefits go up steadily as household exposure to grid electrification (measured by duration) increases and eventually reach a plateau. This paper also finds that rich households benefit more from electrification than poor households. Finally, estimates also show that income benefits of electrification on an average exceed cost by a wide margin.
    Keywords: Energy Production and Transportation,Access to Finance,Engineering,Electric Power,Rural Poverty Reduction
    Date: 2009–03–01
  7. By: Sandrine Mathy (CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts); Céline Guivarch (CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts)
    Abstract: Reference GHG emissions scenarios are critical for estimates of the costs of stabilization and for climate policy recommendations. But recently, existing reference scenarios, notably the SRES, have been the target of criticisms that question their relevance in the light of current emissions trends, dispute the suitability, for developing countries, of the modeling methodologies used and suggest they convey too optimistic views on spontaneous energy decoupling of emerging countries economies. This article focuses on an illustrative example on India. It proposes an alternative reference scenario built with a modeling framework representing as realistically as possible the processes driving energy intensity and carbon intensity changes, in particular accounting for the interactions between energy systems and economic constraints and capturing the sub-optimalities of the energy sector. The mechanisms leading to moderate energy decoupling in this alternative scenario are analysed. From a methodological point of view, our results call for the improvement of the realism of modeling tools for scenarios elaboration. From a mitigation point of view, it appears that the challenge for climate policies to lift the barriers to the diffusion of energy efficiency improvement in India is considerable, but we identify a potential for synergies between development policies and climate policies.
    Keywords: India; energy-GDP decoupling; investment constraint; power sector; reference scenario
    Date: 2009–02–06
  8. By: Sandrine Mathy (CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts); Céline Guivarch (CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts)
    Abstract: One of the current main objective of international negotiations on climate change aims at enlarging the coordination regime to developing countries (DCs), and particularly to emerging countries. The international coordination system built at the Kyoto Conference relies on a coordination system based on a purely climate centric approach which shows irreconcilable contradictions between climate and development issues. This article aims at evaluatingpossible pathways implementing synergies between climate policies and development policies in order to create an incentive towards DCs to take part in climate mitigation. We focus on an illustrative example on India.When most reference scenarios postulate rapid energy decoupling of the GDP and rapid decarbonisation of DCs economies in the future, this article elaborates, with the IMACLIM-R model, a baseline taking into account weaknesses and current disequilibria of the Indian technico-economic system such as the high dependency on imported energy, or the structural shortage in electricity. We show why a purely climate centric approach (quota allocation), adopted to commit with a world objective of tabilization to 550ppm, induce very high transition costs in spite of significant financial transfers. On the contrary, a strategy based on the research of synergies between the reduction of these disequilibria, and the mitigation of GHG emissions is investigated in the power sector, which presents the biggest potential of no-regret measures. This permits to drop down transition costs applied to the Indianeconomy by improving the overall energy efficiency. An economic and environmental evaluation of this alternative scenario is lead.
    Keywords: India, domestic policies and measures, climate policies, long term scenarios, international egotiations, power sector, climate regime, policies and measures, energy efficiency, realistic baselines, peak-oil
    Date: 2009–03–02
  9. By: Théophile T. Azomahou; Raouf Boucekkine; Phu Nguyen-Vanc
    Abstract: We develop a general equilibrium multi-sector vintage capital model with energy-saving technological progress and an explicit energy market to study the impact of investment subsidies on investment and output. Energy and capital are assumed to be complementary in the production process. New machines are less energy consuming and scrapping is endogenous. The intermediate inputs sector is modelled à la Dixit-Stiglitz (1977). Two polar market structures are considered for the energy market, free entry and natural monopoly. The impact of imperfect competition on the outcomes of the decentralized equilibria are deeply characterized. We identify an original paradox: adoption subsidies may induce a larger investment into cleaner technologies either under free entry or natural monopoly. However, larger diffusion rates do not necessarily mean lower energy consumption at equilibrium, which may explain certain empirical puzzles.
    Keywords: Energy-saving technological progress; vintage capital; market imperfections; natural monopoly; investment subsidies
    JEL: O40 E22 Q40
    Date: 2009–02
  10. By: Tol, Richard S. J. (ESRI)
    Keywords: International climate policy; greenhouse gas emission reduction
    JEL: Q54
    Date: 2009–03
  11. By: Imran Habib Ahmad
    Abstract: The climate change debate raises the issue of often identified, but as yet little explored, requirement to incorporate climate policy into other policy sectors, often termed climate “mainstreaming” or climate policy integration (CPI). This paper explores the imperative for CPI, the state of current understanding, and proposals for implementation at the crucial national policy scale. The paper draws on the longer-standing field of environmental policy integration, noting that literature’s scant coverage of climate issues but its greater focus on policy and administrative structures and processes, and concludes that more attention needs to be given to these implementation mechanisms for CPI.
    Keywords: Climate change, public policy, environment, sustainable development, international cooperation
    JEL: F59 H11 Q54 Q56 Q58
    Date: 2009–03
  12. By: Legge, Thomas (German Marshall Fund of the United States); Scott, Susan (ESRI)
    Date: 2009–03
  13. By: Lucas W. Davis (University of Michigan); Matthew E. Kahn (University of California, Los Angeles)
    Abstract: Previous studies of trade and the environment overwhelmingly focus on how trade affects where goods are produced. However, trade also affects where goods are consumed. In this paper we describe a model of trade with durable goods and non-chomothetic preferences. In autarky, used goods are relatively inexpensive in high-income countries and free trade causes these goods to be exported to low-income countries. We then evaluate the environmental consequences of this pattern of trade using evidence from the North American Free Trade Agreement. Since trade restrictions were eliminated in 2005, over 2.5 million used cars have been exported from the United States to Mexico. Using a unique, vehicle-level dataset, we find that traded vehicles are dirtier than the stock of vehicles in the United States and cleaner than the stock in Mexico, so trade leads average vehicle emissions to decrease in both countries. Total greenhouse gas emissions increase, primarily because trade gives new life to vehicles that otherwise would have been scrapped.
    Keywords: trade, environment, NAFTA, consequences
    Date: 2009–01
  14. By: Timilsina, Govinda R.; Dulal, Hari B.
    Abstract: This study reviews regulatory instruments designed to reduce environmental externalities from the transport sector. The study finds that the main regulatory instruments used in practice are fuel economy standards, vehicle emission standards, and fuel quality standards. Although industrialized countries have introduced all three standards with strong enforcement mechanisms, most developing countries have yet to introduce fuel economy standards. The emission standards introduced by many developing countries to control local air pollutants follow either the European Union or United States standards. Fuel quality standards, particularly for gasoline and diesel, have been introduced in many countries mandating 2 to 10 percent blending of biofuels, 10 to 50 times reduction of sulfur from 1996 levels, and banning lead contents. Although inspection and maintenance programs are in place in both industrialized and developing countries to enforce regulatory standards, these programs have faced several challenges in developing countries due to a lack of resources. The study also highlights several factors affecting the selection of regulatory instruments, such as countries'environmental priorities and institutional capacities.
    Keywords: Transport Economics Policy&Planning,Transport and Environment,Energy Production and Transportation,Environmental Economics&Policies,Environment and Energy Efficiency
    Date: 2009–03–01
  15. By: Antoine D'Autume (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); John M. Hartwick (Queen's University - Queen's University, Kingston, Ontario); Katheline Schubert (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: Following Stollery [1998], we extend the Solow, Dasgupta-Heal model to analyze the effects of global warning. The rise of temperature is caused by the use of fossil resources so that the temperature level can be linked to the remaining stock of these resources. The rise of temperature affects both productivity and utility. We characterize optimal solutions for the maximin and zero-discounting cases and present closed form solutions for the case where the production function and utility function are Cobb-Douglas, and the temperature level is an exponential function of the remaining stock of resources. We show that a greater weight of temperature in the preferences or a larger intertemporal elasticity of substitution both lead to postpone resource use.
    Keywords: Maximin ; zero discounting ; global warming
    Date: 2009–02
  16. By: Antoine D'Autume (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); Katheline Schubert (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: This paper studies the undiscounted utilitarian optimal paths of the canonical Dasgupta-Heal-Solow model when the stock of natural capital is a direct argument of well-being, besides consumption. We use a Keynes-Ramsey rule wich yields a generalization of Hartwick's rule : if society has a zero discount rate but is ready to accept intertemporal substitution, net investment should not be zero as in the maximin case but should be positive, its level depending on the distance between the current and the long run bliss level of utility. We characterize solutions in the Cobb-Douglas utility and production case, and analyse the influence of the intertemporal elasticity of substitution on the time profile of the optimal paths. We show that, in the Cobb-Douglas case, the ratio of the values of the resource and capital stocks remains constant along the optimal path, and is independent of initial conditions.
    Keywords: Exhaustible resources ; Hartwick's rule ; intertemporal substitution
    Date: 2009–02
  17. By: Jules-Eric Tchachet Tchouto (Centre d'Analyse et de Recherche en Économie (CARE), Université de Rouen, France); Anaïs Delbosc (Mission Climat de la Caisse des Dépôts et Consignations (CDC) – Paris.- France); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke)
    Abstract: Cette étude porte sur l’analyse de la réglementation applicable dans le cadre des politiques environnementales en France, à la lumière de la théorie économique. Elle dresse un bilan de l’évolution des pratiques et se focalise d’avantage sur le fonctionnement du système de permis d’émission négociables. La réalisation de cet état des lieux a exigé une démarche complémentaire en réponse à la nécessité de rigueur attendue dans un tel exercice : à savoir le déplacement sur le terrain. En effet, pour un sujet d’une telle envergure, la compréhension de la pratique, les retours d’expériences peuvent apporter d’avantage de précisions dans l’appréhension du fonctionnement des instruments mis en place. Ainsi, l’initiation de nombreux entretiens, rencontres et échanges avec certains acteurs institutionnels clés en activité au cœur des politiques environnementales développées dans cette étude se sont avérées – à posteriori – indispensables, et par ailleurs très fructueuses.
    Keywords: Global warming, environmental policies, tradable permits.
    JEL: Q52 Q54 Q58
    Date: 2009

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