nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒05‒23
thirty-two papers chosen by
Roger Fouquet
Imperial College, UK

  1. Why Worry about Climate Change? By Tol, Richard S. J.
  2. Climate Change at Times of Economic Crisis By Pablo del Río González; Xavier Labandeira Villot
  3. Global Imbalances and Petrodollars By Rabah Arezki; Fuad Hasanov
  4. Greenhouse gases emissions, growth and the energy mix in Europe: a dynamic panel data approach By Gustavo A. Marrero
  5. How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model By Lea Nicita; Carlo Carraro; Emanuele Massetti
  6. The External Cost of European Crude Oil Imports By Andrea Bigano; Mariaester Cassinelli; Fabio Sferra; Lisa Guarrera; Sohbet Karbuz; Manfred Hafner; Anil Markandya; Ståle Navrud
  7. The zero discounting and maximin optimal paths in a simple model of global warming. By Antoine d'Autume; John M. Hartwick; Katheline Schubert
  8. Zero discounting and optimal paths of depletion of an exhaustible resource with an amenity value. By Antoine d'Autume; Katheline Schubert
  9. The effects of rent seeking over tradable pollution permits By MacKenzie, Ian A.; Hanley, Nick
  10. The impact of the European Union emission trading scheme on electricity generation sectors. By Djamel Kirat; Ibrahim Ahamada
  11. The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the Witch Model By Valentina Bosetti; Carlo Carraro; Romain Duval; Alessandra Sgobbi; Massimo Tavoni
  12. Effects of Low-cost Offsets on Energy Investment -New Perspectives on REDD- By Sabine Fuss; Alexander Golub; Jana Szolgayova; Michael Obersteiner
  13. The Efficiency of Voluntary Pollution Abatement when Countries can Commit By Robin Boadway; Zhen Song; Jean-Francois Tremblay
  14. Driving Factors of Carbon Dioxide Emissions and the Impact from Kyoto Protocol By Nicole Grunewald; Inmaculada Martínez-Zarzoso
  15. CO2 e crescimento econômico: uma análise para as emissões dos combustíveis líquidos de origem fóssil no Brasil. By Andrade, André Luiz
  16. Agricultura y cambio climático: Una agenda para las negociaciones de Copenhague By Nelson, Gerald C.
  17. Agriculture et changements climatiques: Un programme pour les négociations de Copenhague By Nelson, Gerald C.
  18. Subsidies to Industry and the Environment By David Kelly
  19. A quick scan of climate policy services and of underlying data system approaches - Climate Bonus project report (WP1) By Adriaan Perrels; Mikko Hongisto; Kaarina Hyvönen; Juha-Matti Katajajuuri; Ari Nissinen
  20. Agricultural Impact of Climate Change: A General Equilibrium Analysis with Special Reference to Southeast Asia By Fan Zhai
  21. Climate Change, Humidity, and Mortality in the United States By Alan Barreca
  22. Energy Efficiency: Economics and Policy By Xavier Labandeira Villot; Pedro Linares
  23. Increasing Market Interconnection: An analysis of the Italian Electricity Spot Market By Federico Boffa; Viswanath Pingali; Davide Vannoni
  24. Productivity evolution and Scale effects in Brazilian Electricity Distribution Industry. Evidence from 1998-2005 period By Beatriz Tovar; Francisco Javier Ramos-Real; Edmar Fagundes de Almeida
  25. Do Money Or Oil And Crop Productivity Shocks Lead To Inflation: The Case Of Pakistan By Syed, Kanwar Abbas
  26. Oil and Growth in Transition Countries By Christa N. Brunnschweiler
  27. Speculation and Volatility Spillover in the Crude Oil and Agricultural Commodity Markets: A Bayesian Analysis By Du, Xiaodong (Sheldon); Yu, Cindy L.; Hayes, Dermot J.
  28. Managing Future Oil Revenues in Ghana - An Assessment of Alternative Allocation Options By Clemens Breisinger; Xinshen Diao; Rainer Schweickert; Manfred Wiebelt
  29. Exchange Rate Assessment for Oil Exporters By Klaus-Stefan Enders
  30. Modelling Asymmetric Dependence Using Copula Functions: An application to Value-at-Risk in the Energy Sector By Andrea Bastianin
  31. Bargaining and Networks in a Gas Bilateral Oligopoly By Matteo M. Galizzi
  32. Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions By Michael Hoel

  1. By: Tol, Richard S. J. (Economic and Social Research Institute (ESRI))
    Date: 2009–04
  2. By: Pablo del Río González; Xavier Labandeira Villot
    Abstract: The aim of this paper is to explore the implications of the current economic crisis for climate change trajectories and climate change policies. It is argued that, contrary to what many would expect, the economic recession negatively affects emissions reduction efforts through its discouraging effects on investments in low-carbon technologies. It is also argued that, although the growing climate change concerns justify public intervention even at times of economic hardship, there are reciprocal influences between the economic crisis and climate policy-making. Indeed, given the greater competition on scarce resources and short-term priorities for the use of those resources, the economic crisis strengthens the case for a suitable design of climate policies which leads to cost-effective emissions reductions in an intertemporal perspective. This calls for clear, long-term and stable policy frameworks in order to reduce the risks for investors. At the international level this requires more, and not less, collaboration between countries. There are also implications in terms of the choice of instruments. Traditional market-based climate policy instruments, such as taxes and emissions trading schemes are particularly attractive on their own for several reasons, but should be integrated with technology-policy instruments using the revenues of the former to fund the later. Furthermore, the economic crisis provides an opportunity to apply an environmental tax reform. Finally, the counter-cyclical effects of a low-carbon investment package should not be underestimated.
    Date: 2009–05
  3. By: Rabah Arezki; Fuad Hasanov
    Abstract: Oil exporters have run large current account surpluses. We explore oil exporters' role in our understanding and the resolution of global imbalances. Current account dynamics are estimated for oil-exporting countries and the rest of the world. We find that fiscal policy has a much stronger effect on current account of oil exporters than on current account of other countries. The current account adjustment of oil-exporting countries is also faster than that of other countries. We conclude that a change in fiscal policy of oil exporters can have significant and speedy impact on global imbalances.
    Keywords: Payments imbalances , Oil exporting countries , Oil prices , Oil revenues , Current account , Current account surpluses , Fiscal policy ,
    Date: 2009–04–23
  4. By: Gustavo A. Marrero
    Abstract: The 20/20/20 plan for Europe emphasizes the role of changing the energy model as a means to reach the objective of reducing emissions in 2020 by 20% with respect to 1990 levels. Most empirical emission models are found within the framework of the Environmental Kuznetz Curve (EKC), which focuses on the relationship between emissions and economic activity, ignoring energy aspects. However, the importance of energy on GHG emissions is reflected by the fact that 80% of said emissions in Europe are currently due to the use and production of energy. This paper includes energy variables in an EKC dynamic panel data (DPD) model and uses the one-step system GMM estimator of Blundell and Bond (1998), which should allow for endogeneity, measurement error and omitted variable problems. For a panel of 24 European countries between 1990 and 2006, results suggest the existence of conditional convergence in terms of GHG emissions, no evidence of the EKC hypothesis, a positive and lower than one emissions-energy elasticity and how merely shifting the energy mix toward renewable sources (and, to a lesser extent, nuclear) would yield significant reductions in per capita emissions.
    Date: 2009–04
  5. By: Lea Nicita (Fondazione Eni Enrico Mattei); Carlo Carraro (University of Venice, Fondazione Eni Enrico Mattei, CEPR, CEPS, CESifo and CMCC); Emanuele Massetti (Fondazione Eni Enrico Mattei)
    Abstract: This paper analyses whether and how a climate policy designed to stabilize greenhouse gases in the atmosphere is likely to change the direction and pace of technical progress. The analysis is performed using an upgraded version of WITCH, a dynamic integrated regional model of the world economy. In this version, a non-energy R&D Sector, which enhances the productivity of the capital-labor aggregate, has been added to the energy R&D sector included in the original WITCH model. We find that, as a consequence of climate policy, R&D is re-directed towards energy knowledge. Nonetheless, total R&D investments decrease, due to a more than proportional contraction of non-energy R&D. Indeed, when non-energy and energy inputs are weakly substitutable, the overall contraction of the economic activity associated with a climate policy induces a decline in total R&D investments. However, enhanced investments in energy R&D and in the energy sector are found not to “crowd-out” investments in non-energy R&D.
    Keywords: echnical Change, Climate Policy, Stabilization Cost, R&D Investments
    JEL: C72 H23 Q25 Q28
    Date: 2009–01
  6. By: Andrea Bigano (Fondazione Eni Enrico Mattei); Mariaester Cassinelli (Fondazione Eni Enrico Mattei); Fabio Sferra (Fondazione Eni Enrico Mattei); Lisa Guarrera (Observatoire Méditerranéen de l'Energie); Sohbet Karbuz (Observatoire Méditerranéen de l'Energie); Manfred Hafner (Fondazione Eni Enrico Mattei and Observatoire Méditerranéen de l'Energie); Anil Markandya (Fondazione Eni Enrico Mattei, University of Bath and Basque Centre for Climate Change Research); Ståle Navrud (Norwegian University of Life Sciences)
    Abstract: This paper is the first to assess operational and probabilistic externalities of oil extraction and transportation to Europe on the basis of a comprehensive evaluation of realistic future oil demand-supply scenarios, of the relative relevance of import routes, of the local specificities in terms of critical passages and different burdens and impacts along import routes. The resulting externalities appear reasonable both under the assumption of high future demand and under low demand. Estimates range from 2.32 Euro in 2030 in the low demand scenario to 2.60 Euro in 2010 in the high demand scenario per ton of imported oil.
    Keywords: Oil Transport, Externalities Oil Spills, Risk Analysis
    JEL: Q32 Q25 Q41 R40
    Date: 2009–02
  7. By: Antoine d'Autume (Centre d'Economie de la Sorbonne - Paris School of Economics); John M. Hartwick (Queen's University); Katheline Schubert (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: Following Stollery [1998], we extend the Solow, Dasgupta-Heal model to analyze the effects of global warning. The rise of temperature is caused by the use of fossil resources so that the temperature level can be linked to the remaining stock of these resources. The riise of temperature affects both productivity and utility. We characterize optimal solutions for the maximin and zero-discounting cases and present closed form solutions for the case where the production function and utility function are Cobb-Douglas, and the temperature level is an exponential function of the remaining stock of resources. We show that a greater weight of temperature in the preferences or a larger intertemporal elasticity of substitution both lead to postpone resource use.
    Keywords: Maximin, zero-discounting, global warming.
    JEL: Q32
    Date: 2009–02
  8. By: Antoine d'Autume (Centre d'Economie de la Sorbonne - Paris School of Economics); Katheline Schubert (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This paper studies the undiscounted utilitarian optimal paths of the canonical Dasgupta-Heal-Solow model when the stock of natural capital is a direct argument of well-being, besides consumption. We use a Keynes-Ramsey rule wich yields a generalization of Hartwick's rule : if society has a zero discount rate but is ready to accept intertemporal substitution, net investment should not be zero as in the maximin case but should be positive, its level depending on the distance between the current and the long run bliss level of utility. We characterize solutions in the Cobb-Douglas utility and production case, and analyse the influence of the intertemporal elasticity of substitution on the time profile of the optimal paths. We show that, in the Cobb-Douglas case, the ratio of the values of the resource and capital stocks remains constant along the optimal path, and is independent of initial conditions.
    Keywords: Exhaustible resources, Hartwick's rule, intertemporal substitution.
    JEL: D9 Q01 Q3
    Date: 2009–01
  9. By: MacKenzie, Ian A.; Hanley, Nick
    Abstract: The establishment of a tradable permit market requires the regulator to select a level of aggregate emissions and then distribute the associated permits (rent) to specific groups. In most circumstances, these decisions are often politically contentious and frequently influenced by rent seeking behaviour. In this paper, we use a contest model to analyse the effects of rent seeking effort when permits are freely distributed (grandfathered). Rent seeking behaviour can influence both the share of permits which an individual firm receives and also the total supply of permits. This latter impact depends on the responsiveness of the regulator to aggregate rent seeking effort. Using a three-stage game, we show that rent seeking can influence both the distribution of rents and the ex post value of these rents, whilst welfare usually decreases in the responsiveness of the regulator.
    Keywords: initial allocation; rent seeking; tradable permit market
    Date: 2009–05
  10. By: Djamel Kirat (Centre d'Economie de la Sorbonne - Paris School of Economics); Ibrahim Ahamada (Centre d'Economie de la Sorbonne - Paris School of Economics)
    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 efficient 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 different 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 find that electricity producers in both countries were constrained to include the carbon price in their cost functions during the first two years of operation of the EU ETS. During this period, German electricity producers were more constrained than their French conterparts 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.
    JEL: C14 C32 C51 Q49 Q58
    Date: 2009–04
  11. By: Valentina Bosetti (Fondazione Eni Enrico Mattei and CMCC); Carlo Carraro (FEEM, University of Venice, CEPR, CESIFO and CMCC); Romain Duval (OECD, Economics Department); Alessandra Sgobbi (Fondazione Eni Enrico Mattei and CMCC); Massimo Tavoni (Fondazione Eni Enrico Mattei and CMCC)
    Abstract: This paper uses the WITCH model, a computable general equilibrium model with endogenous technological change, to explore the impact of various climate policies on energy technology choices and the costs of stabilising greenhouse gas concentrations. Current and future expected carbon prices appear to have powerful effects on R&D spending and clean technology diffusion. Their impact on stabilisation costs depends on the nature of R&D: R&D targeted at incremental energy efficiency improvements has only limited effects, but R&D focused on the emergence of major new low-carbon technologies could lower costs drastically if successful – especially in the non-electricity sector, where such low-carbon options are scarce today. With emissions coming from multiple sources, keeping a wide range of options available matters for stabilisation costs more than improving specific technologies. Due to international knowledge spillovers, stabilisation costs could be further reduced through a complementary, global R&D policy. However, a strong price signal is always required.
    Keywords: Climate policy; Energy R&D; Fund; Stabilisation costs
    JEL: H0 H2 H3 H4 O3 Q32 Q43 Q54
    Date: 2009–02
  12. By: Sabine Fuss (International Institute of Systems Analysis); Alexander Golub (Environmental Defense Fund); Jana Szolgayova (International Institute of Systems Analysis and Comenius University); Michael Obersteiner (International Institute of Systems Analysis)
    Abstract: Tropical deforestation is one of the major sources of carbon emissions, but the Kyoto Protocol presently excludes avoiding these specific emissions to fulfill stabilization targets. Since the 13th Conference of the Parties (COP) to the UNFCCC in 2007, where the need for policy incentives for the reduction of emissions from deforestation and degradation (REDD) was first officially recognized, the focus of this debate has shifted to issues of implementation and methodology. One question is how REDD would be financed, which could be solved by integrating REDD credits into existing carbon markets. However, concern has been voiced regarding the effects that the availability of cheap REDD credits might have on energy investments and the development of clean technology. On the other hand, investors and producers are also worried that emissions trading schemes like the one installed in Europe might deter investment into new technologies and harm profits of existing plants due to fluctuations in the price of emissions permits. This paper seeks to contribute to this discussion by developing a real options model, where there is an option to invest in less carbon-intensive energy technology and an option to purchase credits on REDD, which you will exercise or not depending on the future evolution of CO2 prices. In this way, unresolved questions can still be addressed at a later stage, while producers and investors hold REDD options to maintain flexibility for later decisions. We find that investment in cleaner technology is not significantly affected if REDD options are priced as a derivative of CO2 permits. Indeed, the availability of REDD options helps to smooth out price fluctuations that might arise from permit trading and thus decreases risk for the producer - thereby being a complement to permit trading rather than an obstacle undermining cap-and-trade.
    Keywords: Real Options, Energy Investment, Cap-And-Trade, REDD
    JEL: Q23 Q28
    Date: 2009–03
  13. By: Robin Boadway (Queen's University); Zhen Song (Central University of Economics and Finance, Beijing); Jean-Francois Tremblay (University of Ottawa)
    Abstract: In this paper, we characterize a mechanism for reducing pollution emissions in which countries, acting non-cooperatively, commit to match each others' abatement levels and may subsequently engage in emissions quota trading. The analysis shows that the mechanism leads to efficient outcomes. The level of emissions is efficient, and if the matching abatements process includes a quota trading stage, the marginal benefits of emissions are also equalized across countries. Given the equilibrium matching rates, the initial allocation of emission quotas (before trading) reflects each country's marginal valuation for lower pollution relative to its marginal benefit from emissions. These results hold for any number of countries, in an environment where countries have different abatement technologies and different benefits from emissions, and even if the emissions of countries are imperfect substitutes in each country's damage function. In a dynamic two-period setting, the mechanism achieves both intra-temporal and inter-temporal efficiency. We extend the model by assuming that countries are voluntarily contributing to an international public good, in addition to undertaking pollution abatements, and find that the level of emissions may be efficient even without any matching abatement commitments, and the marginal benefits of emissions may be equalized across countries even without quota trading.
    Keywords: voluntary pollution abatement, matching commitments, emissions quota trading
    JEL: H23 H41 H87
    Date: 2009–05
  14. By: Nicole Grunewald (Georg-August-Universität Göttingen / Gemany); Inmaculada Martínez-Zarzoso (Georg-August-Universität Göttingen / Germany)
    Abstract: In the last two decades increasing attention has been paid to the relationship between environmental quality and economic development. According to the Environmental Kuznets Curve (EKC) hypothesis this relationship may be described by an inverted-U curve. However, recent evidence rejects the EKC hypothesis for GHG emissions in a broad sense. In this paper we aim to investigate whether the EKC behavior for CO2 emissions could be proved on the behalf of institutional regulations. We analyze the driving factors of Carbon Dioxide Emissions (CO2) for developed and developing countries to test the theory of the EKC in the context of environmental regulations using a static and dynamic panel data model. We consider the Kyoto Protocol and the Clean Development Mechanism (CDM). The results from this study indicate that the Kyoto obligations have a reducing effect on CO2 emissions in developed and developing countries and highlight the differences behind the driving forces of CO2 emissions for those two groups of countries. Finally, it is still too early to predict accurately the expected effects of CDM projects on emissions.
    Keywords: Environmental Kuznets Curve, Kyoto Protocol, CDM
    JEL: Q54 Q56
    Date: 2009–05–05
  15. By: Andrade, André Luiz
    Abstract: The relationship between economic growth and environmental degradation has been widely studied in recent years. Defenders of the Environmental Kuznets Curve (EKC) hypothesis argue that the environmental pressure coming from economic growth is growing at first and as the economy moves on its development stages, the relationship becomes decreasing. In this discussion, this paper aims to analyze the relationship between CO2 emissions, resulting from burning fossil fuels in liquid form, and the Brazilian economic growth, by means of per capita GDP, with a time series beginning at 1903. Additionally, it is discussed the avoided CO2 emissions arising from the Brazilian energy policy adopted from the 1970s to the transport sector. The evidence found indicates that the relationship between the two variables is linearly increasing, not allowing to conclude that there is an EKC for the case in study.
    Keywords: Emissões de CO2; PIB per capita; Transportes; Curva de Kuznets Ambiental.
    JEL: Q56 Q01
    Date: 2009–05–13
  16. By: Nelson, Gerald C.
    Keywords: Climate change, Copenhagen,
    Date: 2009
  17. By: Nelson, Gerald C.
    Keywords: Climate change, Copenhagen,
    Date: 2009
  18. By: David Kelly
    Abstract: Governments support particular firms or sectors by granting low interest financing, reduced regulation, tax relief, price supports, monopoly rights, and a variety of other subsidies. Previous work in partial equilibrium shows that subsidies to environmentally sensitive industries increases output and pollution emissions. We examine the environmental effects of subsidies in general equilibrium. Since all resources are used, whether or not subsidies increase emissions depends on the relative emissions intensity and incentives to emit of the subsidized industry versus the emissions intensity and the incentives to emit of the industry which would otherwise use the resources. Since subsidies must move resources to a less productive use, the economy wide marginal product of emissions falls with an increase in any subsidy, tending to decrease emissions. On the other hand, subsidies tend to move resources to more emissions intensive industries. Thus, subsidies increase pollution emissions if resources are moved to an industry for which emissions intensity is high enough to overcome the reduction in emissions caused by lower overall marginal product of emissions. We show that, under general conditions, subsidies also increase the interest rate, thus causing the economy to over-accumulate capital. Steady state emissions then rise, even if emissions fall in the short run. We also derive an optimal second best environmental policy given industrial subsidies. The results indicate that, under reasonable conditions, subsidies raise the opportunity cost of environmental quality in the long run. Finally, we examine the relationship between growth and the environment with subsidies. Under more restrictive conditions, reducing some subsidies may offer a path to sustainable development by raising income and at the same time improving the environment.
    JEL: H23 H25 Q28 Q5 Q53 Q56
    Date: 2009–05
  19. By: Adriaan Perrels; Mikko Hongisto; Kaarina Hyvönen; Juha-Matti Katajajuuri; Ari Nissinen
    Abstract: This report is the first of a series of reports produced by the Climate Bonus study. In this project is surveyed what are the possibilities and the effectiveness of the combined use of (1) verified carbon footprints (possibly visualised through labels), (2) personalised monitoring and feedback services to households regarding the greenhouse gas intensities of their purchases, (3) a reward system (bonuses) for consumers who manage to reduce the embodied emissions, and (4) a secondary reward system for retailers that successfully reduce the emission intensity of their sales. This first report is based on a quick scan of literature and internet sources as well as on a few interviews. It provides an overview of developments in the applications of the constituent elements of the above mentioned combination elsewhere in Europe. Particular attention is paid to retail client bonus systems, green credit cards, carbon offset services, and product chain ? emission data bases (notably specific emission attribution methodology and verification). In addition to a review of findings regarding experiences elsewhere the discussions include also theoretical or methodological considerations.
    Keywords: Bonus systems, carbon compensation, carbon footprints, carbon offset, embodied emissions, feedback, LCA, lifecycle analysis
    JEL: Q01 Q56 Q54 D10 D80
    Date: 2009–04–30
  20. By: Fan Zhai
    Abstract: Capitalizing on the most recent worldwide estimates of the impacts of climate change on agricultural production, this paper assesses the economic effects of climate change for Southeast Asian countries through 2080. The results suggest that the aggregate impacts of agricultural damages caused by climate change on the global economy are moderate.However, the uneven distribution of productivity losses across global regions would bring significant structural adjustments in worldwide agricultural production and trade, ultimately leaving the developing world as a net loser. With the anticipated declining agricultural share in the economy, a reduction in agricultural productivity would have small, but non-negligible negative impacts on Southeast Asia’s economic output. However, the expected increase of crop import dependence in the coming decades would make most Southeast Asian economies suffer more welfare losses through deteriorated terms of trade. Depending on a country’s economic structure, the negative effects are expected to be less for Singapore and Malaysia, but greater for Philippines, Indonesia, Thailand, and Viet Nam. For Southeast Asia to cope with the potential agricultural damages arising from the expected changes in climate the region must concentrate on reversing its current trend of declining agricultural productivity.[ADBI WP NO 131]
    Keywords: atmospheric concentration; Intergovernmental Panel of Climate Change; Green Revolution; computable general equilibrium; evaporation; precipitation; AEZ analysis; Ricardian cross-sectional approach; Agricultural Productivity; Linkage; An Implicitly Direct Additive Demand System; Global Trade Analysis Project; International Monetary Fund’s; Baseline Agricultural Productivity Growth; Global Trade Analysis Project; Global cross-country analysis; agricultural damages; counterfactual scenario
    Date: 2009
  21. By: Alan Barreca (Department of Economics, Tulane University)
    Abstract: Using data from the United States (c. 1968-2002), this paper estimates the effects of temperature and humidity on mortality rates in order to contribute insight into the potential costs of climate change. Previous research on the health effects of climate change has focused on the impact of temperature changes; this is the first research (that I know) to examine the potential consequences of humidity changes. This analysis leads to five important results: First, I find that failure to control for humidity overstates the importance of cold temperature as a determinant of mortality. Second, I find that there is a reverse-J shaped temperature-mortality relationship, and a reverse-J shaped humidity-mortality relationship. Third, the adverse effects from exposure to cold temperatures and low-humidity levels are both large and statistically significant. Fourth, interacted temperature-humidity models (e.g. ``hot and humid'') produce similar estimates to non-interacted models (e.g. ``hot'' or ``humid''). Fifth, the effects are largest for cardiovascular and respiratory deaths and for individuals over 45 years of age. On the whole, these results imply that climate change may actually reduce mortality rates in the U.S. by a small amount in the coming decades; however, I demonstrate that failing to control for humidity overstates the health benefits of climate change.
    Keywords: climate change, humidity, temperature, mortality, health
    JEL: I12 I18 Q40 Q54
    Date: 2009–05
  22. By: Xavier Labandeira Villot; Pedro Linares
    Abstract: Energy efficiency and conservation are major elements for the improvement of the environmental impact of the energy sector, particularly regarding climate change. Energy efficiency also contributes to reducing external dependence and vulnerabilities in the energy domain. In this paper we discuss the factors that influence energy efficiency and conservation decisions, and the most appropriate policies for their promotion. Although not all public policies seem justified, we argue that specific policies for promoting energy conservation may be required, preferably based on economic instruments or on the provision of information to consumers.
    Date: 2009–05
  23. By: Federico Boffa (Department of Legal and Economic Studies, University of Macerata); Viswanath Pingali (Senior Manager, Dr. Reddy’s Laboratories, Hyderabad, India); Davide Vannoni (Department of Economics and Public Finance "G. Prato", University of Torino)
    Abstract: In this paper we estimate the benefits resulting from interconnecting the Italian electricity spot market. The market is currently divided into two geographic zones – North and South – with limited interzonal transmission capacity that often induces congestion, and hence potential inefficiency. By simulating a fully interconnected market, we predict that the total spot market expenditure would reduce substantially. Moreover, since savings do not increase linearly with the size of new transmission capacity, even a slight increment to transmission capacity is found to bring substantial benefits to end users. Finally, our analysis shows that the (partly State owned) dominant firm in the market is not maximizing short-term profits.
    Keywords: Transmission constraints, zonal pricing, congestion, electricity industry
    JEL: H44 L21 L22 L50 L94
    Date: 2009–05
  24. By: Beatriz Tovar; Francisco Javier Ramos-Real; Edmar Fagundes de Almeida
    Abstract: This paper estimates the productivity evolution of the Brazilian electricity distribution industry decomposing it in terms of technical efficiency, scale-efficiency and technical change. This exercise aims to understand one important issue that has not been analyzed in previous papers, that is the impact of firm’s size in efficiency and productivity evolution. It employs stochastic frontier analysis on a panel of 18 Brazilian firms from 1998-2005. The results allow us to conclude that company size is an important issue in the evolution of the industry’s productivity and, therefore, a key aspect to consider when making decisions affecting the organization and composition of electricity distribution.
    Date: 2009–04
  25. By: Syed, Kanwar Abbas
    Abstract: The worst economic outcomes have been argued as a result of the mismanagement in money supply especially in 1929’s Great Depression, 1970’s Stagflation and 2008’s Economic depression in the global economy. However, economic recessions tend to appear after oil price phenomenon. In particular, the global inflationary pressures of 2008 became severe with the spikes up in oil prices as well as crop productivity shocks in the world economy including Pakistan. The object of the present paper is to discuss inflation in the framework of Monetary and external Oil Price Shocks, Crop Productivity Propositions, Inflation Inertia, and real GDP growth. The empirical studies broadly uphold the monetary explanation of inflation in the Pakistan’s economy. This paper offers the policy implication that the combination of monetary as well as productivity management is required to arrest inflationary pressures in the economy. In addition, we find the comprehensive evidence that food inflation is also a monetary phenomenon in the Pakistan’s economy. On the other hand, the continuous persistence in inflation inertia does not hold as a result of the absence of autocorrelation in money supply in AR (2) or higher process in the data. Oil prices in terms of domestic currency highlight the fact that the transmission channel of world shocks via exchange rate fluctuations leaves significant impacts upon domestic inflation in the economy.
    Keywords: Money; Inflation; Oil; Productivity
    JEL: B22
    Date: 2009–04–10
  26. By: Christa N. Brunnschweiler (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: This paper examines the impact of oil on economic growth in transition economies of the former Soviet Union (FSU) and Central and Eastern Europe (CEE). We use oil production and reserves data in a series of panel estimations to show that oil has had strong and robust positive growth effects between 1990-2006. This is confirmed when we consider the different oil ownership structures. Additionally, we find that privatization levels have had positive growth effects, while privatization speed has had negative effects on growth.
    Keywords: oil, resource curse, economic growth, transition countries, oil ownership
    JEL: Q32 O40 O13 P28
    Date: 2009–05
  27. By: Du, Xiaodong (Sheldon); 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 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.
    Date: 2009–05–15
  28. By: Clemens Breisinger; Xinshen Diao; Rainer Schweickert; Manfred Wiebelt
    Abstract: Contemporary policy debates on the macroeconomics of resource booms often concentrate on the short-run Dutch disease effects of public expenditure ignoring the possible long-term effects of alternative revenue-allocation options and the supply-side impact of royalty-financed public investments. In a simple model applied here, the government decides the level and timing of spending out of resource rents. This model also considers productivity spillovers over time, which may exhibit a sector bias toward domestic production or exports. A dynamic computable general equilibrium model is used to simulate the effect of temporary oil revenue inflows to Ghana. The simulations show that beyond the short-run Dutch disease effects, the relationship between windfall profits, growth and households’ welfare is less straightforward than what the simple model of the "resource curse" suggests. The CGE model results suggest that designing a rule to smoothing in and out of oil revenues between productivity enhancing investments and an oil fund is crucial to achieving both shared growth and macroeconomic stability
    Keywords: oil fund, public expenditures, growth, productivity spillovers, Ghana, CGE analysis
    JEL: H4 O5
    Date: 2009–05
  29. By: Klaus-Stefan Enders
    Abstract: While the underlying methodologies continue to be widely debated and refined, there is little consensus on how to assess the equilibrium exchange rate of economies dominated by production of finite natural resources such as the oil economies of the Middle East. In part this is due to the importance of intertemporal aspects (as the real exchange rate may affect the optimal/equitable rate of transformation of finite resource wealth into financial assets), as well as risk considerations given the relatively high volatility of commodity prices. The paper illustrates some important peculiarities of the exchange rate assessment for such natural resource producers by working through a simple two-period model that captures certain key aspects of many resource economies.
    Keywords: Exchange rate assessments , Oil exporting countries , Middle East , Cooperation Council for the Arab States of the Gulf , Oil exports , Private consumption , Private savings , Economic models ,
    Date: 2009–04–22
  30. By: Andrea Bastianin (Fondazione Eni Enrico Mattei)
    Abstract: In this paper I have used copula functions to forecast the Value-at-Risk (VaR) of an equally weighted portfolio comprising a small cap stock index and a large cap stock index for the oil and gas industry. The following empirical questions have been analyzed: (i) are there nonnormalities in the marginals? (ii) are there nonnormalities in the dependence structure? (iii) is it worth modelling these nonnormalities in risk- management applications? (iv) do complicated models perform better than simple models? As for questions (i) and (ii) I have shown that the data do deviate from the null of normality at the univariate, as well as at the multivariate level. When considering the dependence structure of the data I have found that asymmetries show up in their unconditional distribution, as well as in their unconditional copula. The VaR forecasting exercise has shown that models based on Normal marginals and/or with symmetric dependence structure fail to deliver accurate VaR forecasts. These findings confirm the importance of nonnormalities and asymmetries both in-sample and out-of-sample.
    Keywords: Copula functions, Forecasting, Value-At-Risk
    JEL: C32 C52 C53 Q43
    Date: 2009–04
  31. By: Matteo M. Galizzi
    Abstract: In the context of international gas markets, we investigate the interaction between price formation and communication networks in a bilateral duopoly with heterogeneous buyers. Given a particular buyers-sellers network graph, prices are formed as the outcome of dynamic decentralized negotiations among traders. We characterize, for any network structure, the full set of sub-game perfect Nash equilibria in pure and stationary strategies (PSSPNE) of the non-cooperative bargaining game with random order of proposals and simultaneous responses. Depending on the inter-temporal discount factor and the dispersion of reservation values across buyers, negotiations may lead, even in a completely connected buyers-sellers network, to multiple equilibria, co-existence of different prices, delays in trade and inefficient allocations. The endogenous bargaining power of each trader as a function of her position in the communication network is derived by comparing traders' payoffs across networks.
    Date: 2009
  32. By: Michael Hoel (University of Oslo)
    Abstract: Fossil fuels are non-renewable carbon resources, and the extraction path of these resources depends both on present and future demand. When this “Hotelling feature” is taken into consideration, the whole price path of carbon fuel will shift downwards as a response to the reduced cost of the renewable substitute. An implication of this is that greenhouse gas emissions in the near future may increase as a response to the reduced cost of the renewable substitute. If this is the case, increased climate costs may outweigh the benefits of reduced costs of a substitute, thus reducing overall social welfare.
    Keywords: Climate Change, Exhaustible Resources, Renewable Energy
    JEL: Q30 Q42 Q5
    Date: 2009–01

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