nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒05‒09
fifteen papers chosen by
Roger Fouquet
Imperial College, UK

  1. A fair price for motor fuel in the United States By Kitov, Ivan; Kitov, Oleg
  2. Benchmarking and Firm Heterogeneity in Electricity Distribution : A Latent Class Analysis of Germany By Astrid Cullmann
  3. Conflict Resolution in the Electricity Sector - The Experts Panel of Chile By R. Fischer; R. Palma-Behnke; J. Guevara-Cedeño
  4. Energy Demand in Pakistan: A Disaggregate Analysis By Arshad , Muhammad Khan; Ahmed, Usman
  5. Natural Gas markets:How Sensitive to Crude Oil Price Changes? By Onour, Ibrahim
  6. On Coase and Hotelling By Juan Pablo Montero; Matti Liski.
  7. Attitudes to Personal Carbon Allowances: The effect of trust in politicians, perceived fairness and ideology By Jagers, Sverker C.; Löfgren, Åsa; Stripple, Johannes
  8. Price volatility and risk exposure: on the interaction of quota and product markets By Baldursson, Fridrik M.; von der Fehr, Nils-Henrik M.
  9. The impact of the European Union Emission Trading Scheme on electricity generation sectors By Djamel Kirat; Ibrahim Ahamada
  10. Greenhouse-Gas Emission Controls and International Carbon Leakage through Trade Liberalization By ISHIKAWA Jota; OKUBO Toshihiro
  11. EU Climate Change Policy 2013-2020: Thoughts on Property Rights and Market Choices By Gorecki, Paul; Lyons, Sean; Tol, Richard S. J.
  12. Towards an Integrated Global Agricultural Greenhouse Gas Model: Greenhouse Gases from Agriculture Simulation Model (GreenAgSiM) By Dumortier, Jerome; Hayes, Dermot J.
  13. CBDR Principle and Recent Developments at the UNFCCC Ensuring Fairness to Developing Countries By Sanjay Vashist
  14. Intra- and Extra-Union Flexibility in Meeting the European Union's Emission Reduction Targets By Tol, Richard S. J.
  15. Towards Regional Environmental Accounts for Ireland By Tol, Richard S. J.; Commins, Nicola; Crilly, Niamh; Lyons, Sean; Morgenroth, Edgar

  1. By: Kitov, Ivan; Kitov, Oleg
    Abstract: In the United States, there exist robust linear trends in the differences between headline (or core) CPI and price indices for individual subcategories of goods and services such as energy, food, housing, etc. Chiefly these differences can be represented by a piece-wise straight line. The periods of the transition from one trend to another are characterized by an elevated volatility. The difference between the core CPI and the price index for motor fuel can be also accurately approximated by several straight lines. In 2008, the negative trend was replaced with a positive one, and thus, a very high volatility in motor fuel price was observed, with an extension into 2009. The change in the trend was accompanied by an “overshoot” in the price for motor oil, which dropped much lower than that expected from the new trend. Therefore, the difference has to return to the new positive trend in 2009. During the recovery period, the index for motor fuel will grow by 90 units or 50%. The price for motor fuel in the US will also grow by 50% by the end of 2009. Oil price is expected to rise by ~50% as well, from its current value of ~$50 per barrel. Therefore, the fair price is not a fixed value but a linear function of time.
    Keywords: CPI; motor fuel price; prediction; US
    JEL: E31 E37
    Date: 2009–05–05
  2. By: Astrid Cullmann
    Abstract: In January 2009 Germany introduced incentive regulation for the electricity distribution sector based on results obtained from econometric and nonparametric benchmarking analysis. One main problem for the regulator in assigning the relative efficiency scores are unobserved firm-specific factors such as network and technological differences. Comparing the efficiency of different firms usually assumes that they operate under the same production technology, thus unobserved factors might be inappropriately understood as inefficiency. To avoid this type of misspecification in regulatory practice estimation is carried out in two stages: in a first stage observations are classified into two categories according to the size of the network operators. Then separate analyses are conducted for each sub-group. This paper shows how to disentangle the heterogeneity from inefficiency in one step, using a latent class model for stochastic frontiers. As the classification is not based on a priori sample separation criteria it delivers more robust, statistical significant and testable results. Against this backround we analyze the level of technical efficiency of a sample of 200 regional and local German electricity distribution companies for a balanced panel data set (2001-2005). Testing the hypothesis if larger distributors operate under a different technology than smaller ones we assess if a single step latent class model provides new insights to the use of benchmarking approaches within the incentive regulation schemes.
    Keywords: Stochastic frontiers, latent class model, electricity distribution, incentive regulation
    JEL: C24 C81 D24 L94
    Date: 2009
  3. By: R. Fischer; R. Palma-Behnke; J. Guevara-Cedeño
    Abstract: One of the main challenges facing the electricity sector worldwide is the design of efficient markets. In particular, the mechanisms used to solve regulatory conflicts are a crucial element of a regulatory regime and a major determinant of the risks borne by private investors. We use the Chilean experience to analyze the evolution of mechanisms for conflict resolution within the electricity sector. We propose a theoretical framework based on bargaining theory to explain the behavior of market agents. This methodological approach is used to explain the evolution of conflict resolution following the introduction of the Experts Panel in 2004, as well as to explain the reduction in the number of conflicts. The results can also be applied to other electricity markets, leading to future market design proposals and governance improvements.
    Date: 2009
  4. By: Arshad , Muhammad Khan; Ahmed, Usman
    Abstract: This study examines the demand for energy at disaggregate level (gas, electricity and coal) for Pakistan over the period 1972-2007. Over main results suggest that electricity and coal consumption responds positively to changes in real income per capita and negatively to changes in domestic price level. The gas consumption responds negatively to real income and price changes in the shortrun, however, in the long-run real income exerts positive effect on gas consumption, while domestic price remains insignificant. Furthermore, in the short-run the average elasticities of price and real income for gas consumption (in absolute terms) are greater than that of electricity and coal consumption. The differences in elasticities of each component of energy have significant policy implications for income and revenue generation.
    Keywords: Pakistan; Energy Demand
    JEL: Q42
    Date: 2009
  5. By: Onour, Ibrahim
    Abstract: This paper investigates sensitivity of U.S. natural gas price to crude oil price changes, using time-varying coefficient models. Identification of the range of variation of the sensitivity of natural gas price to oil price change allows more accurate assessment of upper and minimum risk levels that can be utilized in pricing natural gas derivatives such as gas futures and option contracts, and gas storage facility contracts.
    Keywords: Natural gas; Sensitivity; GARCH; Volatility; Skewness; Kurtosis
    JEL: C22 C01
    Date: 2009–04–25
  6. By: Juan Pablo Montero (Instituto de Economía. Pontificia Universidad Católica de Chile.); Matti Liski.
    Abstract: It has been long recognized that an exhaustible-resource monopsonist faces a commitment problem similar to that of a durable-good monopolist. Indeed, H¨orner and Kamien (2004) demonstrate that the two problems are formally equivalent under full commitment. We show that there is no such equivalence in the absence of commitment. The existence of a choke price at which the monopsonist adopts the substitute (backstop) supply divides the surplus between the buyer and the sellers in a way that is unique to the resource model. Resource sellers receive a surplus share independently of their cost heterogeneity; a result in sharp contrast with the durable-good monopoly logic. The resource buyer can distort the equilibrium through delayed purchases, but the Coase conjecture arises under extreme patience (zero discount rate).
    Keywords: durable goods, exhaustible resources, Coase conjecture
    JEL: D42 L12 Q30
    Date: 2009
  7. By: Jagers, Sverker C. (Department of Political Science, Göteborg University); Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University); Stripple, Johannes (Department of Political Science, Lund University)
    Abstract: The idea of Personal Carbon Allowances (PCAs) was presented by the British Environment Secretary David Miliband in 2006. Although no state is seriously developing proposals for them, they have been heavily debated within academia, NGOs and policy making circles. PCAs can be seen as a logical extension of market efficiency underpinning emissions trading schemes, so far only applied at the firm level, to individuals. The purpose of this paper is to analyse some critical aspects of the public’s support for a PCA scheme. We focus on the relations between attitude towards a PCA scheme and trust in politicians, perceived fairness and ideology, respectively. We also analyse the relation between the respective attitudes towards an increase in the current tax rate and towards an implementation of a PCA scheme. We base our study on a mail questionnaire sent out to a random, representative sample in Sweden.<p>
    Keywords: personal carbon allowances; attitudes; trust; fairness; ideology
    JEL: Q54 Q58
    Date: 2009–05–04
  8. By: Baldursson, Fridrik M.; von der Fehr, Nils-Henrik M.
    Abstract: We consider an industry with firms that produce a final good emitting pollution to different degree as a side effect. Pollution is regulated by a tradable quota system where some quotas may have been allocated at the outset, i.e. before the quota market is opened. We study how volatility in quota price affects firm behaviour, taking into account the impact of quota price on final-good price. The impact on the individual firm differs depending on how polluting it is - whether it is `clean' or `dirty'- and whether it has been allocated quotas at the outset. In the absence of long-term or forward contracting, the optimal initial quota allocation turns out to resemble a grandfathering regime: clean firms are allocated no quotas - dirty firms are allocated quotas for a part of their emissions.With forward contracts and in the absence of wealth effects initial quota allocation has no effect on firm behaviour.
    Keywords: regulation; effluent taxes; tradable quotas; uncertainty; risk aversion; environmental management
    JEL: Q38 D81 L51 Q28 D9 H23
    Date: 2009–04
  9. By: Djamel Kirat (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Ibrahim Ahamada (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: In order to comply with their commitments under the Kyoto Protocol, France and Germany participate to the European Union Emission Trading Scheme (EU ETS) which concerns predominantly electricity generation sectors. In this paper we seek to know if the EU ETS gives appropriate economic incentives for an e¢ cient and strong system in line with Kyoto commitments. Because if so electricity producers in these countries should include the price of carbon in their costs functions. After identifying the di¤erent sub periods of the EU ETS during its pilot phase (2005-2007), we model the prices of various electricity contracts and look at their volatilities around their fundamentals while evaluating the correlation between the electricity prices in the two countries. We finnd that electricity producers in both countries were constrained to include the carbon price in their cost functions during the …rst two years of operation of the EU ETS. During this period, German electricity producers were more constrained than their French counterparts and the inclusion of the carbon price in the cost function of electricity generation has been so much more stable in Germany than in France. Furthermore, the European market for emission allowances has increased the market power of the historical French electricity producer and has greatly contributed to the partial alignment of the wholesale price of electricity in France with those of Germany. .
    Keywords: Carbon Emission Trading, Multivariate GARCH models, Structural break, Non Parametric Approach, Energy prices.
    Date: 2009–04–10
  10. By: ISHIKAWA Jota; OKUBO Toshihiro
    Abstract: This paper studies greenhouse-gas (GHG) emission controls in the presence of carbon leakage through international firm relocation. The Kyoto Protocol requires developed countries to reduce GHG emissions by a certain amount. Comparing emission quotas with emission taxes, we show that taxes coupled with lower trade costs facilitate more firm relocations than quotas do, causing more international carbon leakage. Thus, if a country is concerned about global emissions, emission quotas would be adopted to mitigate the carbon leakage. Firm relocation entails a trade-off between trade liberalization and emission regulations. Emission regulations may be hampered by trade liberalization, and vice versa.
    Date: 2009–04
  11. By: Gorecki, Paul (ESRI); Lyons, Sean (ESRI); Tol, Richard S. J. (ESRI)
    Abstract: Under 2013 to 2020 European Union proposals for CO2 emission reduction, a Member State can transfer to another Member State ?part? of their allowed emission allocation in the non-Emission Trading Sector (?ETS?). The paper addresses three questions in relation to these Transfer Emission Units or TEUs. First, what mechanism should be used to facilitate the exchange of TEUs? The preferred mechanism is a uniform price auction, preferably EU-wide. Second, what ?part? of the non-ETS emission limit of a Member State should be classed as TEUs ? 10%, 20% or no limit? The proportion of the non-ETS emission limit that should be traded should be maximised. Third, who should realise the value of TEUs ? the State, existing polluters? The value of TEUs should accrue to the State.
    Date: 2009–04
  12. By: Dumortier, Jerome; Hayes, Dermot J.
    Abstract: The Greenhouse Gases from Agriculture Simulation Model (GreenAgSiM) presented in this paper aims to quantify emissions from agricultural activity on a global scale. The model takes emissions into account that are directly attributable to agricultural production, such as enteric fermentation (methane), manure management (methane and nitrous oxide), and agricultural soil management (nitrous oxide). Furthermore, carbon stock differences from land-use change (carbon dioxide) induced by agriculture are included in the model. The model will provide policy makers with information about the greenhouse gas implications of policy changes.
    Keywords: agriculture, greenhouse gas emissions, land-use change, methane, nitrous oxide, soil carbon.
    Date: 2009–05–04
  13. By: Sanjay Vashist
    Abstract: This paper on the CBDR deals with these issues of equity, development and climate change in a holistic way to address the problem from the global south perspective keeping the South Asian requirements in particular. [Working paper No. 10]
    Keywords: Climate Change, Greenhouse Gases (GHGs), Adaptation, Mitigation, Kyoto Protocol, United Nations Framework Convention on Climate Change, Kyoto Protocol, United Nations Framework, UNFCCC
    Date: 2009
  14. By: Tol, Richard S. J. (ESRI)
    Abstract: The EU has proposed four flexibility mechanisms for the regulation of greenhouse gas emissions in the period 2013-2020: (1) the Emissions Trade Scheme (ETS), a permit market between selected companies; (2) trade in non-ETS allotments between Member States; (3) the Clean Development Mechanism (CDM) to purchase offsets in developing countries; and (4) trade in CDM warrants between Member States. This paper shows that aggregate abatement costs fall as flexibility increases. However, limited flexibility creates rents so that increasing flexibility raises costs in some Member States. Costs are reduced more by the CDM than by non-ETS trade. The CDM warrants market reduces costs by a small amount only; market power is a real issue. However, the warrants market is obsolete in case there is non-ETS trade. The CDM leads to price convergence between the ETS and non-ETS market. There would be one price for carbon in the European Union if the proposed limits on CDM access are relaxed slightly
    Date: 2009–04
  15. By: Tol, Richard S. J. (ESRI); Commins, Nicola (ESRI); Crilly, Niamh (ESRI); Lyons, Sean (ESRI); Morgenroth, Edgar (ESRI)
    Abstract: Existing environmental accounts for the Republic of Ireland are at the national level. This is fine for continental and global environmental problems, but information at a finer spatial scale is needed for local environmental problems. Furthermore, the impact of environmental policy may differ across space. We therefore construct regional estimates of the environmental pressures posed by Irish households and the environmental problems faced by them. The basic unit of analysis is the electoral district, and the prime data source is the CSO?s Small Area Statistics, a product of the Census. We use the results of classifying regressions of the Household Budget Survey to impute domestic energy use. We use engineering relations to impute transport fuel use, and secondary data on household behaviour to impute waste arisings. We use EPA data on drinking water use and quality per county. The results show marked regional differences. Electricity use and waste arisings are higher in the East and in the cities and towns. Transport fuel use is highest in the commuter belts around the cities and towns. Other energy is relatively uniform. There is no clear pattern in estimated drinking water use, which may be due to data quality. Drinking water quality is poor across much of the country, but different counties suffer from different problems. The regional estimates are constructed using data in the public domain. However, various government agencies hold data that would allow for the construction of more detailed, more accurate, and more extensive regional environmental accounts.
    Date: 2009–04

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