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

  1. Sustainability, resource substitution in energy inputs and learning By Ingmar Schumacher; Pierre-André Jouvet
  2. Regulatory Agencies: Impact on Firm Performance and Social Welfare By Antonio Estache; Martin A. Rossi
  3. Current Account Determinants for Oil-Exporting Countries By Hanan Morsy
  4. Growth in an oil abundant economy: The case of Venezuela By Bety Agnany; Amaia Iza
  5. Petrodollars and Imports of Oil Exporting Countries. By Roland Beck; Annette Kamps
  6. They Ain’t Making Any More of It: Agricultural Land Use, Conservation, Conflicts, Development and Energy (PowerPoint) By Richardson, Jesse J. Jr.
  7. The Effects of BioFuels Policies on Global Commodity Trade Flows By Fridfinnson, Brooke; Rude, James
  8. The Impacts of Biofuel Production on Food Prices: a review By Gerber, Nicolas; Von Eckert, Manfred; Breuer, Thomas
  9. Assessing the environmental externalities from biofuels in Australia By Cuevas-Cubria, Clara
  10. An analysis of the spatial and temporal patterns of greenhouse gas emissions by agriculture in Western Australia and the opportunities for agroforestry offsets By Kingwell, Ross; Harris'Adams, Keely
  11. Climate Change and the Asia-Pacific Food System By Armbruster, Walt; Coyle, William
  13. Low Emission Farming Systems: A whole-farm analysis of the potential impacts of greenhouse policy By Kingwell, Ross; Metcalf, Tess
  14. Household perceptions of climate change and preferences for mitigation action: the case of the Carbon Pollution Reduction Scheme in Australia By Akter, Sonia; Bennett, Jeff
  15. Climate Change and the Australian Agricultural and Resource Industries By Garnaut, Ross
  16. When nature rebels: international migration, climate change and inequality By Luca Marchiori; Ingmar Schumacher
  17. Capacity decisions with demand fluctuations and carbon leakage By Guy Meunier; Jean-Pierre Ponssard
  18. Food Miles, Carbon Footprinting and their potential impact on trade By Saunders, Caroline; Barber, Andres; Sorenson, Lars-Christian
  19. The new Dutch timetable: The OR revolution By Kroon, L.G.; Huisman, D.; Abbink, E.J.W.; Fioole, P-J.; Fischetti, M.; Maroti, G.; Schrijver, A.; Steenbeek, A.; Ybema, R.
  20. Saving the World but Saving Too Much? Time Preference and Productivity in Climate Policy Modelling By Smith, Kathryn
  22. Environmental policy and profitability. Evidence from Swedish industry By Brännlund, Runar; Lundgren, Tommy
  23. A cognitive psychological approach of analyzing preference uncertainty in contingent valuation By Akter, Sonia; Bennett, Jeff
  24. Grandfathering and greenhouse: the role of compensation and adjustment assistance in the introduction of a carbon emissions trading scheme for Australia By Menezes, Flavio; Quiggin, John; Wagner, Liam
  25. The role of real options analysis in the design of a greenhouse gas emissions trading scheme By Lambie, N. Ross

  1. By: Ingmar Schumacher (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, Department of Economics - University of Trier); Pierre-André Jouvet (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre)
    Abstract: We assess the impact of the existence of a costly energy substitute (like wind, solar) for a non-renewable resource (like oil, coal) on the sustainability of consumption. The prospects for sustainability depend crucially on the costs of this substitute. If one can reduce the costs of the resource substitute via learning-by-using then we find that still this does not guarantee sustainability. Also, the poorer a country the less it will take the learning-by-using effect into account and the more likely it will be unsustainable.
    Keywords: Renewable resource, non-renewable resource, substitution, sustainability, learningby- using.
    Date: 2009–01
  2. By: Antonio Estache; Martin A. Rossi
    Abstract: We explore the relation between the establishment of a regulatory agency and the performance of the electricity sector. We exploit a dataset comprising firmlevel information on a representative sample of 220 electric utilities from 51 development countries for the period 1985 to 2005. Our results indicate that regulatory agencies are associated with more efficient firms and with higher social welfare.
    Keywords: Regulatory agency, performance, electricity, private ownership.
    JEL: D21 D24 L51 L94
    Date: 2009
  3. By: Hanan Morsy
    Abstract: The paper aims at characterizing the main determinants of the medium-term current account balance for oil-exporting countries using dynamic panel estimation techniques. Previous studies included a very limited number of oil-exporting countries in their samples, raising concerns about the applicability of the estimated coefficients for oil countries. Furthermore, current approaches are not specifically tailored to oil-producing countries because they fail to capture the effects of oil wealth and the degree of maturity in oil production. This paper explores the underlying determinants of the current account balance for a large sample of oilexporting countries, and extends the specifications commonly used in the literature to include an oil wealth variable, as well as a proxy for the degree of maturity in oil production. The paper therefore contributes to the existing literature both in terms of the sample studied as well as the variables considered. The results reveal that factors that matter in determining the equilibrium current account balance of oil-exporting counties are the fiscal balance, the oil balance, oil wealth, age dependency, and the degree of maturity in oil production.
    Keywords: Current account balances , Oil exporting countries , Oil production , Oil revenues , Economic growth , Economic models , Cross country analysis ,
    Date: 2009–02–19
  4. By: Bety Agnany (Department of Economic Theory and Economic History, University of Granada.); Amaia Iza (DFAEII - The University of the Basque Country)
    Abstract: Venezuela´s growth experience over the past fifty years is characterised by a high economic growth rate from 1950 to 1977 and a low economic growth rate over the 1977-2003 period. In particular, we show that the country has been in a ‘great depression’ since the late seventies. We also show that although Venezuela has an oil abundant economy, this growth experience is largely due to the evolution of its real non-oil GDP. We perform a growth accounting exercise to quantify the extent to which the growth experience in the non-oil sector is a result of physical capital accumulation, finding that non-oil sector behavior can largely be explained by the evolution of TFP. Finally, we also make some correlations to determine whether the oil sector has affected the non-oil sector, either through its capital accumulation or through its TFP. We find that the correlation between oil revenues and capital per worker or non-oil TFP is always negative.
    Keywords: non-renewable resources, growth accounting, TFP, oil rents.
    JEL: O47 Q32
    Date: 2008–12–31
  5. By: Roland Beck (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Annette Kamps (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: This paper investigates the empirical determinants of import demand in oil exporting countries. Using a new dataset including a large cross section of oil exporting countries, we show with a panel cointegration analysis that import demand in these countries depends positively on domestic demand and exports, the real exchange rate and the price of oil. Fiscal surpluses, on the other hand, tend to reduce the demand for imports. More specifically, our import elasticities estimated for oil exporting countries are not far from estimates found in the literature on industrial countries. In particular, we conclude that the import elasticity with respect to domestic activity is larger than one – a finding which is in contrast to standard theoretical predictions but in line with most empirical findings for other countries. These results are robust over a wide set of alternative specifications. JEL Classification: F14, F01, Q43.
    Keywords: Import equation, oil exporting countries, panel cointegration.
    Date: 2009–02
  6. By: Richardson, Jesse J. Jr.
    Abstract: Presented to USDA Economists Group, Washington, DC, March 11, 2009
    Keywords: Agriculture, land use, smart growtn, Environmental Economics and Policy, Land Economics/Use, Q,
    Date: 2009–03–11
  7. By: Fridfinnson, Brooke; Rude, James
    Abstract: In terms of the global situation, trade is biofuels is small relative to world-wide production; however, given ambitious consumption mandates in many developed countries as well as increasing energy consumption, this will not likely remain the case in the long-run. Although biodiesel has been classified as an industrial good, ethanol is currently marketed as an agricultural product, though not specifically for fuel use. The removal of trade barriers, particularly in the developed countries, would not only ease pressure on the traditional feedstocks and lower world ethanol prices, but allow countries with a comparative advantage to capitalize on the opportunity to produce low-cost biofuel. Whether the removal of these trade barriers on biofuels would affect their efficacy as a political tool remains to be seen.
    Keywords: biofuel, commodity, trade, Agricultural and Food Policy, Demand and Price Analysis, International Relations/Trade,
    Date: 2009–02
  8. By: Gerber, Nicolas; Von Eckert, Manfred; Breuer, Thomas
    Abstract: The various calculations of the impacts of biofuel production on the mid-term projections of food and agricultural commodity prices are difficult to reconcile. This is largely due to the intricate set of assumptions, the differences in the baseline scenario and in the projection horizon they are built upon. For similar reasons, studies evaluating the impact of biofuel production on food and commodity prices to date do not provide a clear consensus. Rather than discussing the merits of the different assumptions and methodologies, this paper focuses on the global trends that can be extracted from the different sources. Agreed upon by all sources is the fact that between 2005 and 2007 many agricultural commodity prices increased sharply, especially nominal prices. The impact of commodity prices on final food prices affecting household food expenditures is less clear. Nonetheless, many food price indices (national CPIs, WB food price index and FAO food price index) have also risen over the same period. It is a fact that the increasing demand for feedstocks from the biofuel sector is one among several factors impacting on agricultural commodity prices. Other factors cited include poor harvests, the structural change in food demand in certain countries, population growth, high oil prices, or the devaluation of the US dollar. To calculate the longer term projected commodity prices, these factors are integrated in the simulations, which are then subjected to different biofuel production scenarios. These scenarios largely determine the extent of the biofuels’ impact on food and commodity prices. Despite considerable differences in projection results, methodologies and assumptions, some common trends can be observed. The latest EU and US biofuel programs and legislations are expected to have the largest impact on vegetable oils over the mid term, increasing world real prices by more than 30% between 2011 and 2016. The impacts on prices are generally projected as lesser (+3 to 15%) for commodities such as wheat, corn and soybean, whilst the price of oilseed meals (an important part of fodder markets and a by-product of vegetable oil production) is predicted to decline (-11 to -17%) due to the increase in vegetable oil production. A (hypothetical) freezing of biofuel production at the 2007 levels predicts a decline in cassava, oils, sugar and wheat prices by less than 10% between 1997 and 2020. The price decreases would reach 10 to 20% had biofuel production completely stopped in 2007. The magnitude of the impacts is more contrasted when looking at real regional prices, but across all given regions biofuel mandates and targets are projected to impact oilseed prices most strongly (+25 to +72%), followed by grain prices (+5 to +21%).
    Keywords: Agricultural and Food Policy, Crop Production/Industries, Food Consumption/Nutrition/Food Safety,
    Date: 2008–10
  9. By: Cuevas-Cubria, Clara
    Abstract: In Australia, as in other countries, the environmental costs and benefits of biofuel production and use have been found to vary greatly according to the production method and feedstocks used. In general, the use of biodiesel produced in Australia has been found to provide greater environmental benefits than ethanol, both in terms of reduced greenhouse gas (GHG) emissions and reduced air pollutant emissions. In this paper, estimates of GHG and air pollutant emissions arising from biofuels and petroleum fuels production and use are employed to calculate the change in environmental externalities when substituting biofuels for petroleum fuels in Australia. These estimates of externalities highlight the need to better understand the environmental implications of biofuel production and use.
    Keywords: biofuels, environmental policy, greenhouse gas emissions, air pollutants, externalities, Australia,
    Date: 2009
  10. By: Kingwell, Ross; Harris'Adams, Keely
    Abstract: If agriculture is included in an Australian emissions trading scheme then it may face from 2015 at the earliest, a price for its greenhouse gas emissions; and thereby have incentives to offset and lessen its emissions. Yet because there is currently little understanding of the spatial pattern of emissions in agricultural regions of Australia, the extent of the challenge the sector faces in reducing its emissions is not fully recognised. To improve our understanding, this study uses the National Greenhouse Accounts methodology to estimate the spatial and temporal patterns of agricultural emissions since 1990 in the key agricultural region in Australia’s southwest. This region generates almost 40 percent of the nation’s winter crop production and supports over a quarter of the nation’s sheep. The quantity and trajectory of emissions from each shire in this region are reported, thereby identifying where emission problems may be worsening or easing. The composition and causes of changes in emissions are discussed. This study also generates spatial estimates of sequestration costs by drawing on land and forestry cost and tree growth data. Many relatively low cost sites for carbon sequestration, based on permanent reforestation, are identified with the implication that agriculture may be able to cost-effectively offset its emissions, as well as some of those from other sectors. However, an implication of this study’s findings is that in some shires eventually there may be strong land use competition between farming and forestry.
    Keywords: greenhouse gas emissions, spatial analysis, agriculture, offsets, sequestration,
    Date: 2009
  11. By: Armbruster, Walt; Coyle, William
    Date: 2009
  12. By: Thomas, Cameron
    Abstract: The Australian government’s proposed Carbon Pollution Reduction Scheme (CPRS) is likely to have a significant impact on the price of farm inputs (diesel, fertiliser, water and electricity). Furthermore, offsets (reduction or removal of greenhouse gas emissions that counterbalances emissions elsewhere in the economy) are a potential area of expansion under the scheme with particular interest in the agricultural sector. Agrichar is one of the new technologies and farming practices being investigated to counteract CPRS-imposed costs. Its two claimed benefits which relate both to the profitability of cane growers as well as to climate change are: the reduction in fertiliser application; and the carbon which agrichar can store in the soil for hundreds to thousands of years. This study drew on the Farm Economics Analysis Tool (FEAT) developed by the Queensland Department of Primary Industries and Fisheries specifically for the sugarcane industry. An analysis was conducted for a typical sugarcane farming enterprise in the Herbert Region of North Queensland. The scenarios included in the analysis recognised the change in input prices due to an emissions trading scheme, the change in farm practices when agrichar is included in operations and the potential to trade in offsets from that additional carbon stored by the use of agrichar. The sugarcane grower was found to benefit from the inclusion of agrichar into the operations. Agrichar is seen as a potential and viable option for sugarcane growers and should be considered as an alternative under the emissions trading scheme to minimise the impact of the rise in input costs. Further scientific and policy development could see the possibility for stored carbon to be traded in the offsets market, providing additional, although minor, cash flow to the grower.
    Keywords: CPRS, sugarcane profitability, carbon offsets, agricultural adaptation,
    Date: 2009
  13. By: Kingwell, Ross; Metcalf, Tess
    Abstract: The Australian government is introducing a Carbon Pollution Reduction Scheme in 2010, as part of its climate change policy. After 2015 agriculture may be covered by this scheme. This paper examines how different broadacre farming systems may be affected by the policy settings of this scheme. Using the bio-economic farming systems model MIDAS (Model of an Integrated Dryland Agricultural System) the impacts of the Carbon Pollution Reduction Scheme on the profitability of different broadacre farming systems in the southwest of Australia are investigated. Results show a range of profit and enterprise impacts across the various farm types. In a scenario where agriculture is not covered by the scheme, reductions in profit range from 7 to 12 percent, attributable to more expensive ‘covered’ inputs such as fuel and fertiliser; and farmers reduce their use of expensive energy inputs such as chemicals and fertilisers. In a covered scenario profits decline by 15 to 25 percent of ‘business-as-usual’ profit and optimal farm plans involve a combination of reduced livestock numbers, the introduction of permanent woody perennial plantations on marginal lands and other changes to the farm enterprise mix to reduce emissions.
    Keywords: agriculture, greenhouse gases, economic modelling, abatement,
    Date: 2009
  14. By: Akter, Sonia; Bennett, Jeff
    Abstract: The study aims to reveal Australian households’ perceptions of climate change and their preferences for climate change mitigation actions. A web-based survey was conducted in November 2008 in which about 600 New South Wales households were asked for their willingness to bear extra household expenditure to support the ‘Carbon Pollution Reduction Scheme (CPRS)’ as proposed by the Australian government. The Contingent Valuation Method (CVM), a widely used non-market valuation technique, was applied using the single bounded dichotomous choice elicitation format. Results of the study demonstrate that, currently, there is a positive demand for climate change mitigation action in Australia. The main motivation for this positive demand stems from a desire to avoid climate change. However, society’s willingness to pay (WTP) for climate change mitigation is shown to be significantly curbed by uncertainties regarding the extent of climate change and the effectiveness of climate change policy. Global cooperation (major greenhouse gas emitting countries implementing similar scheme) plays an important role in determining Australian households’ support for the CPRS. Only when cooperation is assumed, do the benefits of the CPRS, as estimated by respondents’ WTP, exceed its costs.
    Keywords: Contingent valuation, climate change, Carbon Pollution Reduction Scheme, willingness to pay, uncertainty, Australia,
    Date: 2009
  15. By: Garnaut, Ross
    Date: 2009–02
  16. By: Luca Marchiori (IRES - Université Catholique de Louvain); Ingmar Schumacher (Department of Economics - University of Trier, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: This article analyzes the link between climate change and international migration. We use a two-country overlapping generations model with endogenous climate change, in which the production in the North generates climate change which negatively affects the productivity of the South. Our main findings are: (i) climate change will increase migration; (ii) small impacts of climate change have significant impacts on the number of migrants; (iv) a laxer immigration policy increases long- run migration, reduces climate change, increases North-South inequality if DRTS are significant; (v) a greener technology reduces long-run migration, provides a double- dividend in favor of the environment, reduces inequality if the migrants' impact to overall climate change is large. The preference over the policies thus depends on whether the policy maker targets inequality, wealth, the number of migrants or the environment, but the qualitative ranking between the policies does not change if the policies are costly.
    Keywords: climate change, migration, North-South model, overlapping generations, inequality.
    Date: 2009–01
  17. By: Guy Meunier (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, 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); Jean-Pierre Ponssard (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: This paper investigates the optimal mix between home capacity and imports to face an uncertain demand. It is proved that, if the difference between the home variable cost and the import price is large, the optimal home capacity increases as uncertainty increases, while it decreases if it is small. The model is calibrated using data from the cement sector to study the impact of a unilateral high CO2 price in Europe. The results suggest a higher carbon leakage rate and more relocation of the industry than deterministic models would.
    Keywords: capacity decisions, demand uncertainty, relocation, climate policy, carbon leakage.
    Date: 2008–12
  18. By: Saunders, Caroline; Barber, Andres; Sorenson, Lars-Christian
    Abstract: To obtain market access for NZ food exports to high value developed country markets exporters are having to comply and consider environmental factors such as carbon footprinting. This growth in demand for environmental attributes is shown in the rise of the food miles debate or concept. Food miles is a concept which has gained traction with the popular press arguing that the further food travels the more energy is used and therefore carbons emissions are greater. This paper assesses, using the same methodology, whether this is the case by comparing NZ production shipped to the UK with a UK source. The study found that due to the different production systems even when shipping was accounted for NZ dairy products used half the energy of their UK counterpart and in the case of lamb a quarter of the energy. In the case of apples the NZ source was 10 per cent more energy efficient. In case of onions whilst NZ used slightly more energy in production the energy cost of shipping was less than the cost of storage in the UK making NZ onions more energy efficient overall. The paper then explores other developments in market access to developed markets especially the rise in demand for products to be carbon footprinted and the introduction of carbon labelling. A review of latest methodology in carbon footprinting the PAS from the UK is reviewed and implications for trade assessed.
    Date: 2009
  19. By: Kroon, L.G.; Huisman, D.; Abbink, E.J.W.; Fioole, P-J.; Fischetti, M.; Maroti, G.; Schrijver, A.; Steenbeek, A.; Ybema, R. (Erasmus Econometric Institute)
    Abstract: In December 2006, Netherlands Railways introduced a completely new timetable. Its objective was to facilitate the growth of passenger and freight transport on a highly utilized railway network, and improve the robustness of the timetable resulting in less train delays in the operation. Further adjusting the existing timetable constructed in 1970 was not option anymore, because further growth would then require significant investments in the rail infrastructure. Constructing a railway timetable from scratch for about 5,500 daily trains was a complex problem. To support this process, we generated several timetables using sophisticated operations research techniques, and finally selected and implemented one of these timetables. Furthermore, because rolling-stock and crew costs are principal components of the cost of a passenger railway operator, we used innovative operations research tools to devise efficient schedules for these two resources. The new resource schedules and the increased number of passengers resulted in an additional annual profit of 40 million euros ($60 million) of which about 10 million euros were created by additional revenues. We expect this to increase to 70 million euros ($105 million) annually in the coming years. However, the benefits of the new timetable for the Dutch society as a whole are much greater: more trains are transporting more passengers on the same railway infrastructure, and these trains are arriving and departing on schedule more than they ever have in the past. In addition, the rail transport system will be able to handle future transportation demand growth and thus allow cities to remain accessible. Therefore, people can switch from car transport to rail transport, which will reduce the emission of greenhouse gases.
    Date: 2008–11–10
  20. By: Smith, Kathryn
    Abstract: Discounting the distant future has periodically been a controversial topic in welfare economics but the evaluation of climate change policy and particularly the Stern Review have given the debate a new relevance. The parameters in a standard social welfare function that determine the path for the discount rate are also important in determining the time path of saving, and several prominent economists have criticised the values used in the Review specifically because they imply excessively high optimal saving rates, from either a positive or normative perspective. The fact that near-zero rates of pure time preference do not necessarily lead to absurdly high saving rates has been known for some time. However, in the context of climate change policy, this point has been made using inappropriate models or specific numerical examples with a rather arbitrary value for the rate of growth of total factor productivity (TFP). Given the attention that the ‘unreasonable saving rates’ debate has received in the climate change literature, there is a role for a rigorous presentation of the determinants of saving rates in models used to evaluate climate change policy, using values for TFP growth informed by recent historical experience. I show that both in theory and practice, optimal saving rates in the presence of near-zero pure time preference are far from the near-100 per cent ones obtained from simpler models. In the widely used Dynamic Integrated model of Climate and the Economy (DICE) model, optimal rates are close to 30 per cent for a range of values of the elasticity of marginal utility of consumption, and for Stern’s revised central value for that parameter they do not exceed 31 per cent. While the role of TFP growth in lowering optimal saving rates in the presence of near-zero rates of pure time preference may have been overplayed in some previous work, TFP growth is a key determinant of output and hence emissions and climate damage, so working with realistic values of TFP growth remains crucial.
    Date: 2009
  21. By: Dobes, Leo
    Abstract: Scientists consider that some climate change is already inevitable, even if anthropogenic greenhouse emissions are stabilised immediately. Adaptation measures are therefore needed, irrespective of any mitigation action. But policy discussion is focussed on deterministic responses, generally risk-based "worst case‟ scenarios. An example is the development of more stringent standards for buildings and for coastal development. Such "climate proofing‟ is misconceived in the face of the huge uncertainties involved. Economists need to promote more rational policy frameworks that draw on cost-benefit analysis, including the use of "real options‟ to minimise the cost to society of adapting to climate change.
    Date: 2009
  22. By: Brännlund, Runar (Umeå University); Lundgren, Tommy (Umeå School of Business)
    Abstract: The purpose of this paper is to investigate the existence of a “Porter effect” using firm level data on output and inputs from Swedish industry between 1990 and 2004. By utilizing a factor demand modeling approach, and specifying a profit function which has a technology component dependent upon firm specific effective tax on CO2, we are able to separate out the effect of regulatory pressure on technological progress. The results indicate that there is evidence of a reversed “Porter effect” in most industrial sectors, specifically energy intensive industries.
    Keywords: CO2 tax; factor demands; induced technological change; Porter argument
    Date: 2009–03–21
  23. By: Akter, Sonia; Bennett, Jeff
    Abstract: The sources of preference uncertainty in contingent valuation (CV) studies have rarely been investigated from a theoretical standpoint. This paper proposes a holistic theoretical framework of preference uncertainty that combines microeconomic theory with the theories of cognitive psychology. Empirical testing of the proposed theoretical model was carried out in Australia in the context of a national ‘Carbon Pollution Reduction Scheme (CPRS)’ to be introduced in 2010. Two separate ordered probit models for a certainty score associated with CV ‘Yes’ and ‘No’ responses were estimated. The results of the estimated regression models provide evidence supporting the hypotheses drawn from the theoretical model.
    Keywords: Contingent valuation, preference uncertainty, cognitive uncertainty, climate change, Australia,
    Date: 2009
  24. By: Menezes, Flavio; Quiggin, John; Wagner, Liam
    Abstract: The terms ‘grandfather clause’ and ‘grandfathering’ describe elements of a policy program in which existing participants in an activity are protected from the impact of regulations, restrictions or charges applied to new entrants. In this paper, the role of grandfathering in the design of a carbon emissions trading scheme in Australia is assessed. It is argued that adjustment assistance policies such as those adopted in conjunction with previous microeconomic reform programs are preferable to policies based on the free issue of emissions permits.
    Keywords: grandfathering, emissions trading, compensation, adjustment assistance.,
    Date: 2009
  25. By: Lambie, N. Ross
    Abstract: Analysing the effect of a greenhouse gas emissions trading scheme (ETS) on energy-intensive industries using a simple model of the long-run equilibrium fails to fully capture the design implications of a scheme. When we allow for imperfect market structures and uncertainty, it is more useful to focus on how an industry is affected by the scheme’s design in moving to its long-run equilibrium. A real options modelling approach that analyses how firms in these industries are likely to respond to an ETS through their investment behaviour is proposed as a more insightful method for public policy analysis.
    Keywords: climate change policy, emissions trading, investment, real options,
    Date: 2009

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