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on Energy Economics |
| By: | Eyal Dvir (Boston College); Ken Rogoff (Harvard University) |
| Abstract: | We test for changes in price behavior in the longest crude oil price series available (1861-2008). We find strong evidence for changes in persistence and in volatility of price across three well defined periods. We argue that historically, the real price of oil has tended to be highly persistent and volatile whenever rapid industrialization in a major world economy coincided with uncertainty regarding access to supply. We present a modified commodity storage model that fully incorporates demand, and further can accommodate both transitory and permanent shocks. We show that the role of storage when demand is subject to persistent growth shocks is speculative, instead of its classic mitigating role. This result helps to account for the increased volatility of oil price we observe in these periods. |
| Keywords: | Oil Price, Oil Shocks, Storage, Structural Change |
| JEL: | E0 Q4 L7 N5 |
| Date: | 2009–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:706&r=ene |
| By: | Kilian, Lutz; Vigfusson, Robert J. |
| Abstract: | A common view in the literature is that the effect of energy price shocks on macroeconomic aggregates is asymmetric in energy price increases and decreases. We show that widely used asymmetric vector autoregressive models of the transmission of energy price shocks are misspecified, resulting in inconsistent parameter estimates, and that the implied impulse responses have been routinely computed incorrectly. As a result, the quantitative importance of unanticipated energy price increases for the U.S. economy has been exaggerated. In response to this problem, we develop alternative regression models and methods of computing responses to energy price shocks that yield consistent estimates regardless of the degree of asymmetry. We also introduce improved tests of the null hypothesis of symmetry in the responses to energy price increases and decreases. An empirical study reveals little evidence against the null hypothesis of symmetry in the responses to energy price shocks. Our analysis also has direct implications for the theoretical literature on the transmission of energy price shocks and for the debate about policy responses to energy price shocks. |
| Keywords: | Asymmetry; Energy price; Impulse response; Net increase; Oil price; Propagation; Shock; Transmission; Vector autoregression |
| JEL: | C32 E37 Q43 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7284&r=ene |
| By: | Peter Cramton (Economics Department, University of Maryland) |
| Abstract: | I study the design of auctions of natural resources, such as oil or mineral rights. A good auction design promotes both an efficient assignment of rights and competitive revenues for the seller. The structure of bidder preferences and the degree of competition are key factors in determining the best design. With weak competition and simple value structures, a simultaneous first-price sealed-bid auction may suffice. With more complex value structures, a dynamic auction with package bids likely is needed to promote efficiency and revenue objectives. Bidding on production shares, rather than bonuses, typically increases government take by reducing oil or mining company risk. |
| Keywords: | Auctions, natural resource auctions, oil auctions |
| JEL: | D44 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pcc:pccumd:09anr&r=ene |
| By: | Michael Rauscher (University of Rostock) |
| Abstract: | The paper looks at a model of directed technical change in an environmental-economics context. Firms can do conventional or "green" R&D or they can abate emissions at the end of pipe. The paper has two main foci. On the one hand, it investigates the impact of environmental regulation on the allocation of resources to conventional R&D, green R&D, and end- of-pipe abatement. On the other hand, it addresses the question whether stricter emission standards should be used to support green R&D and/or economic growth. |
| Keywords: | economic growth and the environment, directed technical change |
| JEL: | Q55 O41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ros:wpaper:106&r=ene |
| By: | Tsur, Yacov; Zemel, Amos |
| Abstract: | Energy market prices ignore external effects, hence miss-allocate energy generation between (polluting) fossil fuels and (clean) solar technologies. Correcting the failure requires understanding the market allocation forces at hand. An important feature of solar energy is that its cost of supply is predominantly due to upfront investments in capital infrastructure (rather than to the actual supply rate) and this feature has far reaching implications for the market allocation outcome. Studying the market allocation process, we specify the conditions under which solar technologies penetrate the energy sector. The framework is then used to analyze policy regulation in the form of taxing fossil energy and subsidizing investments in solar energy. The first policy measure addresses undesirable environmental effects associated with the use of fossil fuels and the second internalizes the benefits of learning by doing in the solar industry. Under certain conditions, a temporary subsidy on solar energy investments gives rise to a flourishing, self-sustained solar industry that will (eventually) drive fossil energy out of production. |
| Keywords: | energy, solar technologies, fossil fuels, price thresholds, regulation, environmental damage, learning by doing, C61, Q42, Q58, |
| Date: | 2009–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:ags:huaedp:47174&r=ene |
| By: | Serra, Teresa; Zilberman, David |
| Abstract: | Our paper looks at how price volatility in the Brazilian ethanol industry changes over time and across markets by using a new methodological approach suggested by Seo (2007). The main advantage of Seoâs proposal over previously existing methods is that it allows to jointly estimate the cointegration relationship between the price series investigated and the multivariate GARCH process. Our results suggest that crude oil prices not only influence ethanol price levels, but also their volatility. Increased volatility in crude oil markets results in increased volatility in ethanol markets. Ethanol prices, on the other hand, influence sugar price levels and an increase in their volatility levels also impacts, though less strongly, on sugar markets. |
| Keywords: | volatility, ethanol, GARCH, cointegration, Demand and Price Analysis, Resource /Energy Economics and Policy, Risk and Uncertainty, Q11, C32, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49188&r=ene |
| By: | de Gorter, Harry; Tsur, Yacov |
| Abstract: | Sustainability standards for biofuel production calculated via life cycle accounting (LCA) require a certain reduction in greenhouse gas (GHG) emissions relative to gasoline. Recently it has been shown that LCA gives biased results and should be extended to incorporate indirect land use change (iLUC). We show that even including iLUCs, LCA is still biased and distorted because it is based on GHG emission and uptake calculations, which assume economic values only if (i) the environmental price of carbon is constant over time and (ii) the social discount rate (SDR) equals zero. We offer a sustainability standard free of these restrictions, expressed in terms of a range of SDRs and a maximal GHG payback period. Applying our methodology to Brazilian and U.S. data, we find that in Brazil conversion to biofuel production of two land types is genuinely sustainable, i.e., satisfies our sustainability standard, whereas in the United States no land type satisfies our criterion. Furthermore, the social value of CO2e savings by having the ethanol production from 12.8 million hectares of U.S. corn be produced in Brazil instead may be as high as $817.7 bil. |
| Keywords: | Sustainability, Biofuel Production, Environmental Economics and Policy, International Development, International Relations/Trade, Political Economy, |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cudawp:48927&r=ene |
| By: | von Witzke, Harald; Noleppa, Steffen; Schwarz, Gerald |
| Keywords: | Global agricultural market, trends energy prices, biofuel production, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Crop Production/Industries, |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:huiawp:48596&r=ene |
| By: | Daria Zakharova; Paulo A. Medas |
| Abstract: | This paper proposes an integrated approach to fiscal policy analysis in oil producing countries (OPCs) geared towards addressing their unique and complex policy challenges. First, an accurate assessment of the fiscal stance in OPCs can be obscured by large and volatile oil revenue flows. Second, uncertain and volatile oil revenue flows can complicate the management of macroeconomic policies in these countries. Third, given the exhaustibility of oil reserves, OPCs need to address longer-term sustainability and intergenerational equity issues. The use of non-oil fiscal indicators, stress tests, medium-term frameworks, and permanent oil income models can greatly aid in addressing these challenges. |
| Keywords: | Fiscal policy , Oil producing countries , Oil revenues , Commodity price fluctuations , Nonoil sector , Revenue sources , Cross country analysis , |
| Date: | 2009–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/56&r=ene |
| By: | Alain Ayong Le Kama (EQUIPPE - Université de Lille 1); Mouez Fodha (Paris School of Economics - Centre d'Economie de la Sorbonne) |
| 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. |
| JEL: | D90 Q53 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:v08092&r=ene |
| By: | Okajima, Shigeharu |
| Abstract: | After great improvements in energy efficiency in the 1970âs, Japan has made little progress in reducing energy consumption since 1990, the base year for the Kyoto Protocol. This study is motivated by the recent growing demands among policy makers to find all possibilities for saving energy. To make informed decisions on how to save energy, policy makers need detailed information on energy consumption structures within each jurisdiction. First, in this article, I decompose national level energy intensity into efficiency and activity effects with the Fisher Ideal index, and then estimate regressions on prefecture level residential electricity demand between 1990 and 2003. It is found that national level energy intensity declined by seventy three percent from 1970 to 2003; sixty three percent of the decline may be attributed to improvement in energy efficiency.ã Energy intensity, however, has slightly increased since early 1990âs. Secondly, this paper explores the impact of reduction of carbon emission on the economy. I find that the Japanese government needs to enact the environmental taxes on a $12/ton in order to meet the Kyoto Protocol. It is also found that imposing a $12/ton environmental tax reduces Japanese GDP by around six percent and equivalent variations in urban regions fall while equivalent variations in rural regions rise. |
| Keywords: | Fisher index, Energy intensity, Regional Computable General Equilibrium, Environmental taxes, Environmental Economics and Policy, Resource /Energy Economics and Policy, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49118&r=ene |