nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒05‒16
28 papers chosen by
Roger Fouquet
Imperial College, UK

  1. Fuel versus Food By Chakravorty, Ujjayant; Hubert, Marie-Helene; Nostbakken, Linda
  2. How Increased Food and Energy Prices Affect Consumer Welfare By Huang, Kuo S.; Huang, Sophia Wu
  3. The Impact of the Crude Oil Price on the Livestock Sector under a Regime of Integrated Energy and Grain Markets By Fabiosa, Jacinto F.
  4. Speculation and Volatility Spillover in the Crude Oil and Agricultural Commodity Markets: A Bayesian Analysis By Du, Xiaodong; Yu, Cindy L.; Hayes, Dermot J.
  5. A Spatial Equilibrium Model of the Impact of Bio-Fuels Energy Policy on Grain Transportation Flows By Ahmedov, Zafarbek; Power, Gabriel; Vedenov, Dmitry; Fuller, Stephen; McCarl, Bruce; Vadali, Sharada
  6. Price Transmission Channels of Energy and Exchange Rate on Food Sector: A Disaggregated Approach based on Stage of Process By Kwon, Dae-Heum; Koo, Won
  7. Technical, Environmental and Economic Efficiency of Ethanol Plants in the US North-Central Region By Sesmero, Juan P.; Perrin, Richard K.; Fulginiti, Lilyan E.
  8. A Comparison of Pricing Strategies for Cellulosic Ethanol Processors: A Simulation Approach By Mark, Tyler; Darby, Paul; Salassi, Michael
  9. The Volatility Spillover Effects and Optimal Hedging Strategy in the Corn Market By Wu, Feng; Guan, Zhengfei
  10. Choice of optimum feedstock portfolio for a cellulosic ethanol plant â A dynamic linear programming solution By Kumarappan, Subbu; Ivanic, Rasto
  11. What are the long-term drivers of food prices? Investigating improvements in the accuracy of prediction intervals for the forecast of food prices By Benjamin, Catherine; Houee-bigot, Magalie; Tavera, Christophe
  12. Supporting Cellulosic Ethanol Biomass Production and its Impact on Land Use Conversion By Wu, Feng; Guan, Zhengfei
  13. Basis Volatilities of Corn and Soybean in Spatially Separated Markets: The Effect of Ethanol Demand By Bekkerman, Anton; Pelletier, Denis
  14. The Spatial Effect of Ethanol Biorefinery Locations on Local Corn Prices By Katchova, Ani L.
  15. The Price Shock Transmission during the 2007-2008 Commodity Bull Cycle: A Structural Vector Auto-Regression Approach to the "Chicken-or-Egg" Problem By Power, Gabriel J.; Vedenov, Dmitry V.
  16. Assessing the Uncertainty of Land Based Carbon Sequestration: A Parameter Uncertainty Analysis with a Global Land Use Model By Kim, Yoon Hyung; Sohngen, Brent
  17. The Relative Role of Land in Climate Policy By Golub, Alla; Hertel, Thomas; Rose, Steven; Sohngen, Brent; Avetisyan, Misak
  18. The Economic Potential of Second-Generation Biofuels: Implications for Social Welfare, Land Use and Greenhouse Gas Emissions in Illinois By Chen, Xiaoguang; Khanna, Madhu; Onal, Hayri
  19. The Economy-wide Greenhouse Gas Impacts of the Biofuels Boom (or Bust) By Birur, Dileep K.; Golub, Alla A.; Hertel, Thomas W.; Rose, Steven K.
  20. Economic Growth and Carbon Emission Control -A case study of power industry in China By Zhang, Zhenyu; Schoengold, Karina
  21. Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production By Michael I. Cragg; Matthew E. Kahn
  22. How big is leakage from forestry carbon credits? Estimates from a Global Model By Acosta, Montserrat; Sohngen, Brent
  23. Groundwater Management in the Presence of Greenhouse Gas Mitigation Incentives for Agriculture By Baker, Justin; Murray, Brian
  24. The Cost Structure of Emissions Abatement through the Clean Development Mechanism By Rahman, Shaikh Mahfuzur; Larson, Donald; Dinar, Ariel
  26. The Effect of Climate Change over Agricultural Factor Productivity: Some Econometric Considerations By McCarl, Bruce; Villavicencio, Xavier; Wu, Ximing
  27. Адекватность закрытой модели для российской экономики в задаче сравнительного анализа Энергетической стратегии России By Bazhanov, Andrei; Belyaev, Alexander
  28. Paying the price for unreliable power supplies : in-house generation of electricity by firms in Africa By Foster, Vivien; Steinbuks, Jevgenijs

  1. By: Chakravorty, Ujjayant (University of Alberta, Department of Economics); Hubert, Marie-Helene (University of Alberta School of Business); Nostbakken, Linda (University of Alberta School of Business)
    Abstract: Many countries are actively encouraging the supply of biofuels as a low carbon alternative to the use of fossil fuels for transportation. To what extent do these trends imply a reallocation of scarce land away from food to fuel production? This paper critically reviews the small but growing literature in this area. We find that an increase in biofuel production may have a significant effect on food prices and in certain parts of the world, in speeding up deforestation through land conversion. However, more work needs to be done to examine the effect of newer generation biofuel technologies that are less land-intensive as well as the effect of environmental regulation and trade policies on land allocation between fuel and food.
    Keywords: agricultural production; biofuel economics; climate policy; environmental regulation; land allocation
    Date: 2009–04–01
  2. By: Huang, Kuo S.; Huang, Sophia Wu
    Abstract: We analyze the consumer welfare effects of increased food and energy prices and find that the own-price elasticities of both food and energy are relatively inelastic, which explain well the dynamics of the recent soaring food and energy prices. The estimated demand elasticities are then used to analyze the consumer welfare effects of price changes in food and energy. The results indicate that an increase of food and energy prices would incur a substantial consumer welfare loss, which is a heavy burden for low income households.
    Keywords: Demand elasticity, compensating variation, consumer welfare, Demand and Price Analysis,
    Date: 2009
  3. By: Fabiosa, Jacinto F.
    Abstract: The study finds that the emergence and expansion of the ethanol sector was associated with a fundamental transformation of the integration of the energy and agricultural sectors. In particular, the correlation structure between crude oil and grain prices increased dramatically, becoming more statistically significant, and with all anomalous signs corrected. Before the ethanol boom, the correlation of the crude oil price and corn was -0.117. It increased to 0.876 in the ethanol boom period. Soymeal correlation increased from 0.182 to 0.909, and distillers dried grains with solubles increased from -0.252 to 0.834. As a result, the energy market is also now impacting the livestock sector through feed costs, which account for more than half of total costs. From a weak correlation of the crude oil price and feed cost of 0.02, correlation increased to 0.89 during the ethanol boom period. Hence, any variability originating from the energy sector will also now have stronger ripple effects in the livestock sector.
    Keywords: Energy sector, agricultural sector, least-cost feed ration, biofuel, Livestock Production/Industries, Production Economics, Q12, Q13, Q18,
    Date: 2009–04
  4. By: Du, Xiaodong; Yu, Cindy L.; Hayes, Dermot J.
    Abstract: This paper assesses the roles of various factors influencing the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets. Stochastic volatility models are applied to weekly crude oil, corn and wheat futures prices from November 1998 to January 2009. Model parameters are estimated using Bayesian Markov chain Monte Carlo methods. The main results are as follows. Speculation, scalping, and petroleum inventories are found to be important in explaining oil price variation. Several properties of crude oil price dynamics are established including mean-reversion, a negative correlation between price and volatility, volatility clustering, and infrequent compound Poisson jumps. We find evidence of volatility spillover among crude oil, corn and wheat markets after the fall of 2006. This could be largely explained by tightened interdependence between these markets induced by ethanol production.
    Keywords: Gibbs sampling, Merton jump, leverage effect, stochastic volatility, Demand and Price Analysis, Financial Economics, Resource /Energy Economics and Policy, G13, Q4,
    Date: 2009
  5. By: Ahmedov, Zafarbek; Power, Gabriel; Vedenov, Dmitry; Fuller, Stephen; McCarl, Bruce; Vadali, Sharada
    Abstract: Traffic flows in the U.S. have been affected by the substantial increase and, as of January 2009, decrease in biofuel production and use. This paper considers a framework to study the effect on grain transportation flows of the 2005 Energy Act and subsequent legislation, which mandated higher production levels of biofuels, e.g. ethanol and biodiesels. Future research will incorporate changes due to the recent economic slowdown.
    Keywords: ethanol, biodiesel, spatial equilibrium, quadratic programming, Agricultural and Food Policy, Crop Production/Industries, Resource /Energy Economics and Policy,
    Date: 2009–04
  6. By: Kwon, Dae-Heum; Koo, Won
    Keywords: Demand and Price Analysis, Resource /Energy Economics and Policy,
    Date: 2009
  7. By: Sesmero, Juan P.; Perrin, Richard K.; Fulginiti, Lilyan E.
    Abstract: Continuation of policy support for the U.S. corn ethanol industry will depend upon the greenhouse gas (GHG) effects of the industry, and its economic viability. The environmental and economic performance of ethanol plants is determined by the productivity of new technologies and, in addition, by the efficiency with which technologies are used (technical efficiency) and output and inputs are combined (economic efficiency). This study estimates the technical and economic efficiencies of seven recentlyâconstructed ethanol plants in the North Central region of the US during 2006-2007 using a nonparametric, data envelopment analysis (DEA) and investigates both the drivers and implications of inefficiencies. In terms of drivers, our results are consistent with the hypothesis that economic (profit) efficiency of productive units tends to be positively correlated with their size. Regarding implications of inefficiencies, results show that, in average, the maximum feasible reduction in Greenhouse Gases (GHG) emissions that can be achieved by ethanol plants is very limited (7,769 milligrams). Second, we calculate a potential increase in returns over operating costs per gallon of ethanol produced (through elimination of technical and allocative inefficiency) of about 12 cents a gallon (17%). Therefore, plants can significantly increase their returns over operating costs improving their economic viability and probably, the effectiveness of public policies supporting them.
    Keywords: Ethanol, Efficiency, DEA, Production Economics, Resource /Energy Economics and Policy,
    Date: 2009
  8. By: Mark, Tyler; Darby, Paul; Salassi, Michael
    Keywords: Resource /Energy Economics and Policy,
    Date: 2009
  9. By: Wu, Feng; Guan, Zhengfei
    Abstract: This article examines the volatility spillovers from energy market to corn market. Using a volatility spillover model from the finance literature, we found significant spillovers from energy market to corn cash and futures markets, and the spillover effects are time-varying. The business cycle proxied by crude oil prices is shown to affect the magnitude of spillover effects over time. Based on the strong informational linkage between energy market and corn market, a cross hedge strategy is proposed and its performance studied. The simulation outcomes show that compared to alternative strategies of no hedge, constant hedge, and GARCH hedge, the cross hedge does not yield superior risk-reduction performance.
    Keywords: Volatility Spillover, GARCH, Optimal Hedge Ratio, Energy Price, Corn Price, Risk and Uncertainty,
    Date: 2009–04
  10. By: Kumarappan, Subbu; Ivanic, Rasto
    Abstract: When the lignocellulosic biofuels industry reaches maturity and many types of biomass sources become economically viable, management of multiple feedstock supplies â that vary in their yields, density (tons per unit area), harvest window, storage and seasonal costs, storage losses, transport distance to the production plant â will become increasingly important for the success of individual enterprises. The managerâs feedstock procurement problem is modeled as a multi-period sequence problem to account for dynamic management over time. The case is illustrated with a hypothetical 53 million annual US gallon cellulosic ethanol plant located in south west Kansas that requires approximately 700,000 metric dry tons of biomass. The problem is framed over 40 quarters (10 years), where the production manager minimizes cumulative costs by choosing the land acreage that has to be contracted with for corn stover collection, or dedicated energy production and the amount of biomass stored for off-season. The sensitivity of feedstock costs to changes in yield patterns, harvesting and transport costs, seasonal costs and the extent of area available for feedstock procurement are studied. The outputs of the model include expected feedstock cost and optimal mix of feedstocks used by the cellulosic ethanol plant every year. The problem is coded and solved using GAMS software. The analysis demonstrates how the feedstock choice affects the resulting raw material cost for cellulosic ethanol production, and how the optimal combination varies with two types of feedstocks (annual and perennial).
    Keywords: Cellulosic ethanol, feedstock, switchgrass, miscanthus, corn stover, optimization, biofuels, biomass, energy, renewable, Agribusiness,
    Date: 2009
  11. By: Benjamin, Catherine; Houee-bigot, Magalie; Tavera, Christophe
    Abstract: Over the last few years, the prices of the main agricultural raw materials have been highly volatile. The situation is unprecedented, both in the magnitude of the upward and downward volatility observed, and in the number of agricultural commodities affected. Various factors are contributing to these contrasting shifts: the role of emerging countries, changing dietary habits, an increase in energy demand related to the boom in biofuels, adverse weather conditions and speculation. In this paper we try to capture long-term relationships between crop prices and crude oil price using a partial equilibrium and times series method. The study finds little empirical evidence that the crude oil price have a significant influence on the variation of major vegetable crops prices
    Keywords: Partial equilibrium modeling, Forecasting cointegration, Demand and Price Analysis, Q11, Q13, Q42,
    Date: 2009–05
  12. By: Wu, Feng; Guan, Zhengfei
    Abstract: One of the problems facing the cellulosic ethanol industry is the cellulose material supply. The U.S. forestlands have considerable potential to become one of the main sources of biomass to meet the 2022 renewable fuel target. Focusing on the land exiting the Conservation Reserve Program (CRP), the article finds that few landowners are willing to convert their land to forestland after the CRP contract is expired. Our econometric estimates show the choice decision is responsive to net returns of land use alternatives, especially cropland. Two policy initiatives are suggested to provide direct incentives for land use change. The nested logit estimates are used to simulate landownersâ responses to policy mechanism. The results show that subsidies can substantially increase forestland, although a spillover effect exists.
    Keywords: Cellulosic Ethanol, Biomass, Land Use, the CRP, Forestland, Environmental Economics and Policy,
    Date: 2009–04
  13. By: Bekkerman, Anton; Pelletier, Denis
    Abstract: The 2006 spike in corn-based ethanol demand has contributed to the increase in basis volatility in corn and soybean markets across the United States, which has, to a significant degree, led to the observed large jumps in the prices of the two commodities. Despite the overall rise in basis volatility, there remain differences in the degree of volatility that exists across spatially separated markets, which might be caused by factors such as transportation costs, seasonality, and time-to-delivery. The focus of this study is threefold first, this work models basis data for six corn and soybean markets by using a multivariate GARCH model that incorporates the spatial linkages of these markets; next, the model is used to investigate whether the increase in ethanol demand has significantly aided in the rise of basis volatilities; and last, the spatio-temporal linkages among basis volatilities in different markets are examined under various scenarios of spot-price shocks.
    Keywords: basis, spatially separated markets, multivariate GARCH, volatility, Agricultural Finance, Demand and Price Analysis, Q11, Q14, G13,
    Date: 2009
  14. By: Katchova, Ani L.
    Abstract: This study examines whether the local competition for corn to produce ethanol has lead to significantly higher prices for farmers located close to ethanol plants. If any, such price premiums for spatial closeness would be in addition to the general level of corn price changes experienced by farmers throughout the U.S. The difference-in-differences estimation method is used to account for both time and location differences in order to measure the interaction of time and location effects. Using the USDAâs ARMS data, the results show that while prices in real terms have risen over time, farmers located close to ethanol plants have not received significantly higher prices than farmers living farther away from plants. These findings indicate that there is a lack of evidence for price premiums due to the spatial closeness to ethanol plants.
    Keywords: corn prices, ethanol, ethanol plant location, difference-in-differences., Agribusiness, Marketing, Q13,
    Date: 2009–07
  15. By: Power, Gabriel J.; Vedenov, Dmitry V.
    Abstract: Commodity and energy prices have exhibited an unprecedented increase between October 2006 and July 2008, only to fall sharply during the last months of 2008. Many explanations have been offered to this phenomenon, including steadily increasing demand from China and India, large mandated increases in ethanol production, droughts in some key agricultural producer countries, production plateaus in some major oil-producing countries, refinery capacity limits, demand pressure from the derivatives market owing to the diversification properties of commodities, etc. Clearly, agricultural input, output, and energy products are closely related economically. In addition to biofuels, the connection points include nitrogen-based solution liquid fertilizers, fossil fuels used in agricultural production, limited acreage available for field crops, etc. While all these price variables are, evidently, closely connected, it is not entirely clear how exogenous price shocks are transmitted through the system, and whether particular commodities drive up the prices of other commodities. The proposed paper attempts to address this "chicken-or-egg" problem by applying the Structural Vector Autoregression (SVAR) framework to the analysis of a wide range of commodity prices. The purpose of this paper is to model and estimate an SVAR model of multiple commodity prices in order to: (i) Investigate the transmission mechanism of the price shocks associated with the commodity boom of 2006-2008 and subsequent bust and identify changes (if any) relative to earlier time periods (e.g. 2004-2006), (ii) Evaluate the possibly asymmetrical relationship between different commodity and energy price variables and (iii) Test hypotheses of causality in a time series definition (Granger and graph-theoretic). The methodology consists of defining and estimating a structural VAR model, studying impulse response functions and the variance decomposition, and testing for the direction of causality. Given that a longstanding problem is the sensitivity of the results to identifying assumptions, graph analysis is used here as it is a promising approach to identify the structure of the variance-covariance matrix and therefore overcome the observational equivalence of various reduced-form models implied by different identification approaches. The main contribution of this paper is to provide a tentative answer to the question of how agricultural input, output and energy product prices are related and whether this relationship has changed in recent years.
    Keywords: Commodity prices, commodity bull cycle, energy prices, Granger-causality, graph theory, structural VAR., Agribusiness, Agricultural and Food Policy, Agricultural Finance, Demand and Price Analysis, Financial Economics, Research Methods/ Statistical Methods,
    Date: 2009–05–01
  16. By: Kim, Yoon Hyung; Sohngen, Brent
    Abstract: This paper analyzes the effect of uncertainty in several key parameters on the marginal costs of carbon sequestration in forests. These parameters include the land supply elasticity, which governs the conversion of land from agriculture to forests and vice versa; parameters of the forest biomass yield function; parameters of the forest carbon density function; and parameters of the costs functions for accessing inaccessible land. Monte Carlo techniques are thus used to turn the global forest model with no probability (e.g., Sohngen & Mendelsohn, 2003; 2007) into a proper probability model through Latin hypercube sampling. For this paper, we have restricted our analysis to consideration of probability distributions for only two of the parameters described above. Specifically, these are the parameters of the forest biomass yield function and the land supply elasticity. The importance index and the least square linearization are used to determine the relative contribution of input parameters to the model results. Five hundred model runs in one simulation were performed with covariability among the parameters. The Monte Carlo simulations indicated that most of the uncertainty in forest area in developed countries relates to uncertainty in parameters of the biomass function while in developing countries, where deforestation is more important (e.g., Brazil), the simulation showed the parameters of land supply elasticity to have the most important implications for carbon supply. These results are perhaps not too surprising but they do point to the need to empirically estimate land supply elasticities in regions like Brazil, where such estimates are not currently available in the literature. The results also provide information that can be used to estimate uncertainty intervals for carbon sequestration cost functions.
    Keywords: Uncertainty Analysis, Global Land Use Model, Carbon Sequestration, Monte Carlo simulations, Resource /Energy Economics and Policy,
    Date: 2009
  17. By: Golub, Alla; Hertel, Thomas; Rose, Steven; Sohngen, Brent; Avetisyan, Misak
    Abstract: Land-based activities are responsible for a large part of global greenhouse gas (GHG) emissions, yet the economics of land-use decisions have rarely been explicitly modeled in global mitigation studies. This paper integrates the analysis of land use related non-CO2 emissions and carbon forest sequestration with more conventional analyses of CO2 emissions from fossil fuel combustion to provide a comprehensive assessment of the relative role of land in global GHG emissions and mitigation. For this paper, we utilize a new general equilibrium framework which effectively captures the opportunity costs of land-use decisions in agriculture and forestry, the implications of these decisions for GHG emissions, as well as mitigation options in agriculture and forestry. By combining this with a more conventional analysis of fossil fuel-based CO2 emissions mitigation, we are able to analyze trade-offs and feedbacks between GHG emissions reductions in land-based and fossil fuel combustion intensive sectors. We explore the general equilibrium effects when land rents are endogenous and large-scale adoption of mitigation technologies produces feedbacks across sectors and regions.
    Keywords: Climate policy, land use related emissions, carbon forest sequestration, CGE, Environmental Economics and Policy,
    Date: 2009
  18. By: Chen, Xiaoguang; Khanna, Madhu; Onal, Hayri
    Abstract: This paper develops a dynamic micro-economic land use model that maximizes social welfare and internalizes externality from greenhouse gas emissions to obtain the optimal land use allocation for traditional row crops and bioenergy crops (corn stover, miscanthus and switchgrass), the mix of cellulosic feedstocks and fuel and food prices. We use this carbon tax policy as a benchmark to compare the implications of existing biofuel policies on land use, social welfare and the environment for the 2007-2022 period. The model is operationalized using yields of perennial grasses obtained from a biophysical model, county level data on yields of traditional row crops and production costs for row crops and bioenergy crops in Illinois. We show that a carbon tax policy that is directly related to carbon intensity of fuels can generate the highest social welfare among alternative policy scenarios. The existing ethanol tax credits result in substantial deadweight losses and higher GHG emissions as compared to the baseline. Ethanol blending mandates with subsidies lead to further welfare losses and higher GHG emissions. To meet advanced biofuel blending mandates, corn stover and miscanthus are used but the mix of viable cellulosic feedstocks varies spatially and temporally. Corn stover is viable mainly in central and northern Illinois while miscanthus acres are primarily concentrated on southern Illinois. The blending mandates lead to a significant shift in acreage from soybeans and pasture to corn and a change in crop rotation and tillage practices.
    Keywords: cellulosic ethanol, land use, social welfare, greenhouse gas emissions, Land Economics/Use, Resource /Energy Economics and Policy, Q42, Q24,
    Date: 2009
  19. By: Birur, Dileep K.; Golub, Alla A.; Hertel, Thomas W.; Rose, Steven K.
    Abstract: Several studies in the recent past have offered a contrasting and wide range of perspectives on economic and environmental implications of biofuels. In this study we develop a comprehensive and consistent framework for analyzing the global economic interactions and the direct and indirect impacts of biofuels production on greenhouse gas (GHG) emissions. We utilize a global Computable General Equilibrium (CGE) model which consists of interaction of energy commodities with explicit biofuels and their by-product sectors, land endowment classified by agro-ecological zones, and emission of four major GHGs - carbon dioxide, methane, nitrous oxide, fluorinated gases from agricultural and economic activities, including emissions associated with biofuel feedstock, crop conversion to fuel, and land cover conversion through change in ecosystem carbon stock. This study also pays special attention to pasture-crop and Conservative Reserve Program land due to their potential sectoral competition for land. In this paper, we examine the proposed policies for biofuels expansion in the US, EU and Brazil, as well as alternative potential trajectories of larger and smaller growth, including a collapse of the traditional biofuels market. The impact on GHG emissions are decomposed and associated with the individual drivers behind the biofuels boom, including: changes in subsidies, rising oil prices, and other major policy drivers.
    Keywords: Biofuels, Renewable Energy, Computable General Equilibrium (CGE), Agro Ecological Zones (AEZs), Land use change, Greenhouse Gas Emission., Environmental Economics and Policy, International Relations/Trade, Land Economics/Use, Resource /Energy Economics and Policy, C68, Q18, Q42, R14,
    Date: 2009
  20. By: Zhang, Zhenyu; Schoengold, Karina
    Abstract: Many countries have achieved moderate to dramatic growth during the last few decades, and the world-widely continued economic growth results in increased wealth and deteriorated environment. The relationship between economic growth and environmental quality has received great attention in empirical and theoretical studies. But results are mixed: some find that economic development inevitably leads to environmental deterioration due to resource depletion and pollution, while others find that continued economic development helps to improve environmental quality. Further works are required in a specific context to answer the question whether environmental improvement is compatible with continued economic growth. We intend to provide insight on the potential for carbon emissions control within one nation in the absence of international agreement. The electricity generation sector in China was chosen to demonstrate the economic impact of possible emissions control on the production of power industry in this study. The important economic questions include: What are the optimal policies to provide firms with the incentive to abate carbon emission? Does taxation or subsidy work? What are the impacts of emission control on economic growth? An endogenous growth model is set to represent a regulated power industry , and a Coub-Douglas production function is used to describe the joint production of electricity and carbon emissions. The modified Hamilton approach is employed to solve the model under three possible polices: emission fee, coal tax and abatement subsidy. The theoretical analysis suggests that firms have no incentive to abate in the absence of regulation, and finds that the ratio of emissions to desired output is not a constant, but a function of productive capital and other parameters. The non-constant ratio provides the theoretical grounds to choose the appropriate policies for emissions control. And the sustainable growth could be achieved when appropriate environmental instruments are chosen. Moreover, the optimal conditions derived from the model, rather than ad hoc specification, are used to examine the relationship between desired output and emissions for empirical analysis. Data comes from the China Statistical Yearbook and China Electric Power Yearbook, providing the provincial information for the period 1993-2003. Joint estimation of emissions and output is done using full information maximum likelihood (FIML) method. The optimal emission tax rates are estimated as 59.78%, 13.78% and 6.88% corresponding to abatement efficiencies of 1%, 5% and 10%, respectively. The optimal input tax rates ( ) are 54.05%, 56.13%, 57.55% 65.11% corresponding to discount rate ( ) of 0.05, 0.08, 0.10, 0.20 respectively. The results suggest that the sustainable growth could be achieved when appropriate environmental instruments are chosen, and emission tax is preferred to input tax in the sense of social cost, whenever detection of emissions is not costly and abatement technology allows removing at least 5% of total emissions at pipe end.
    Keywords: Economic growth, carbon emission control, power generation, China, Environmental Economics and Policy,
    Date: 2009
  21. By: Michael I. Cragg; Matthew E. Kahn
    Abstract: Stringent regulation for mitigating greenhouse gas emissions will impose different costs across geographical regions. Low-carbon, environmentalist states, such as California, would bear less of the incidence of such regulation than high-carbon Midwestern states. Such anticipated costs are likely to influence Congressional voting patterns. This paper uses several geographical data sets to document that conservative, poor areas have higher per-capita carbon emissions than liberal, richer areas. Representatives from such areas are shown to have much lower probabilities of voting in favor of anti-carbon legislation. In the 111th Congress, the Energy and Commerce Committee consists of members who represent high carbon districts. These geographical facts suggest that the Obama Administration and the Waxman Committee will face distributional challenges in building a majority voting coalition in favor of internalizing the carbon externality.
    JEL: Q4 Q54 R1
    Date: 2009–05
  22. By: Acosta, Montserrat; Sohngen, Brent
    Abstract: There is widespread recognition that forestry carbon credits can reduce the net emissions of carbon into the atmosphere. Designing systems to sequester carbon, however, has proven difficult due to a number of efficiency issues, including leakage. Leakage occurs when policy makers develop carbon projects in specific places which protect some parcels of land, but leave other parcels of land unprotected. This analysis uses a newly developed model of global land use change from an established forestry and land use model, described in Sohngen et al. (1999); Sohngen and Mendelsohn (2003); and Kindermann et al. (2008). To assess leakage we estimate carbon under storage under one scenario where the world is awarded carbon credits and another where tropical developing nations are awarded the credits. We focus our results on several regions, namely Brazil, the rest of South America, Sub-Saharan Africa and Southeast Asia. Carbon prices are assumed to be constant, and range from US$0 tC to US$900 tC. The model adjusts global land uses to these specific policies, and leakage is assessed by comparing carbon gains within the project areas to net global changes in carbon. A number of policy relevant results emerge. First, the estimates indicate that leakage ranges from 2% to more than 14%. Second, as carbon credits increase, leakage decreases across the world.
    Keywords: Carbon Sequestration, Leakage, Carbon Credits, Environmental Economics and Policy, Land Economics/Use,
    Date: 2009
  23. By: Baker, Justin; Murray, Brian
    Abstract: This study explores the interactions of groundwater extraction, quality, and greenhouse-gas (GHG) emissions within a productive agricultural region. Two conceptual models are proposed. In the first, GHG emissions are managed at the local level, and an efficient level of abatement is solved for endogenously to the system. Here, regional management of GHG emissions offers an alternative policy tool for managing quantity/quality by internalizing the costs of a common externality associated with both groundwater extraction and nitrogen fertilizer application. A simple numerical simulation is used to illustrate the potential groundwater co-benefits of managing agricultural GHG emissions within the system. The second model reflects the reality that GHG mitigation efforts will occur at the national or international level; agricultural markets and production will respond according to the scope of the policy mechanism and the anticipated effect on agricultural markets and input costs. For this scenario, the impacts of GHG mitigation on regional groundwater supplies are ambiguous. A set of scenarios is derived in which groundwater co-benefits or co-costs can be expected within a region. Groundwater managers should be cognizant of the indirect market pressures created by agricultural GHG mitigation and bioenergy development, and should adapt conservation and quality protection measures accordingly.
    Keywords: Groundwater, GHG Mitigation, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q25, Q53, Q54,
    Date: 2009
  24. By: Rahman, Shaikh Mahfuzur; Larson, Donald; Dinar, Ariel
    Abstract: This paper examines the cost structure of emissions abatement through different types of Clean Development Mechanism (CDM) projects. Alternative models for abatement costs are specified and estimated using CDM project-specific data. Empirical results indicate that there exist economies of scale in emission abatement through the CDM projects, and that the marginal cost of abatement significantly varies across different types of projects. The distribution of various CDM project types corresponds to the relative attractiveness of the types, in terms of the structure of the estimated marginal cost function. Thus, empirical results suggest that the CDM market operates efficiently and sends the right signals to the investors, which further explains the shying away from costly carbon sequestration projects funded by many international development agencies, such as the World Bank. Contrary to the hypothesis that that the marginal costs of abatement through CDM decrease over time due to experience or learning by doing, empirical results show non-decreasing marginal cost of abatement over time. This finding suggests that there may be other incentives to invest in certain types of CDM projects in specific locations, thus implying location-specificity of various investment opportunities. While non-decreasing marginal cost of abatement over time implies a tougher prospect for CDM in future commitment periods, the current growth pattern of the CDM suggests that this flexibility provision of the Kyoto Protocol is still highly attractive for the host and investor countries.
    Keywords: Cost Emissions Abatement Clean Development Mechanism, Environmental Economics and Policy,
    Date: 2009–04–30
  25. By: Nicolas Drouin Deziel (GREDI, Faculte d'administration, Université de Sherbrooke); Jie He (GREDI, Faculte d'administration, Université de Sherbrooke); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke)
    Abstract: L’estimation des coûts liés à l’imposition de limites aux émissions de gaz à effet de serre (GES) a fait l’objet de beaucoup d’attention médiatique dernièrement. La Chine étant un des plus grands émetteurs de GES, l’évaluation des coûts pour l’économie chinoise est donc primordiale. Dans ce travail, nous évaluons le coût de l’imposition d’une taxe sur les émissions de CO2 à l’aide d’un modèle d’équilibre général calculable de l’économie chinoise. Le modèle permet la substitution des intrants énergétiques. L’intrant énergie est décomposé en quatre sources à savoir l’électricité, le pétrole, le charbon et le gaz. Les émissions de CO2 sont directement liées à la consommation des combustibles fossiles. Le cadre chinois est particulier par son utilisation intensive du charbon comme source d’énergie. La question est évaluée à travers des taxes sur les émissions de CO2. La taxe sur les émissions de CO2 permettrait d’abaisser les émissions chinoises totales de 5,2%, l’objectif général de réduction des émissions du Protocole de Kyoto. Nous analysons aussi un choc sur les prix mondiaux du pétrole ainsi qu’une combinaison de ces deux chocs. Les possibilités de substitution particulières au contexte chinois permettraient de réduire les émissions à relativement peu de coûts.
    Keywords: China, Global warming, environmental tax, CGE modeling
    JEL: Q53 D58 Q54 Q58
    Date: 2009–05–08
  26. By: McCarl, Bruce; Villavicencio, Xavier; Wu, Ximing
    Abstract: This paper examines the role that climate change might be playing in the declining returns to agricultural research. For this purpose, we estimate a cross-section time-series model of agricultural total factor productivity for the U.S. states over the period 1970â1999, with the inclusion of climatic variables, and controlling for non stationarity of the data. Our findings suggest that after controlling for climatic variables and non stationarity, the effect of Public Agricultural Research Capital over Total Factor Productivity is reduced.
    Keywords: Climate Change, Factor Productivity, Returns to Research, Panel Data, Environmental Economics and Policy, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy, C33, O13, Q16,
    Date: 2009
  27. By: Bazhanov, Andrei; Belyaev, Alexander
    Abstract: We compare the short- and the long-run consequences of Russia's Energy Strategy to 2020 and of the project of the Strategy to 2030 with a hypothetical scenario of the weak-sustainable oil extraction, starting from 2008 and providing asymptotically constant per capita consumption in the long run. The problem was examined by Andreeva, Bazhanov (2007) and Bazhanov, Tyukhov (2008) for the closed Dasgupta-Heal-Solow-Stiglitz model. In this paper, we show that the open-economy assumptions do not change the qualitative results of comparative analysis, which are not in favor of the Strategy in the long run.
    Keywords: weak sustainability; nonrenewable essential resource; Russia's Energy Strategy; open economy
    JEL: Q38 Q32 O22 Q01 O21 Q43
    Date: 2009–05–07
  28. By: Foster, Vivien; Steinbuks, Jevgenijs
    Abstract: This paper documents the prevalence of in-house generation of electric power by firms in Sub-Saharan Africa and attempts to identify the underlying causes. The analysis is based on two data sources. The UDI World Electric Power Plants Data Base (WEPP), a global inventory of electric power generating units, provides a detailed inventory of in-house generation at the country level. The World Bank's Enterprise Survey Database captures business perceptions of the obstacles to enterprise growth for 8,483 currently operating firms in 25 African countries. Overall, so-called own generation by firms-which has been on the rise in recent years-accounts for about 6 percent of installed generation capacity in Sub-Saharan Africa (equivalent to at least 4,000 MW of installed capacity). However, this share doubles to around 12 percent in the low-income countries, the post-conflict countries, and more generally on the Western side of the continent. In a handful of countries own generation represents more than 20 percent of capacity. Rigorous empirical analysis shows that unreliable public power supplies is far from being the only or even the largest factor driving generator ownership. Firm characteristics have a major influence-in particular, the probability of owning a generator doubles in large firms relative to small ones. Our model predicts that the prevalence of own generation would remain high (at around 20 percent) even if power supplies were perfectly reliable, suggesting that other factors, such as emergency back-up and export regulations, play a critical role in the decision to own a generator.
    Keywords: Energy Production and Transportation,Infrastructure Economics,Power&Energy Conversion,E-Business,Energy Technology&Transmission
    Date: 2009–04–01

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