|
on Energy Economics |
| By: | François Lévêque; Jean-Michel Glachant; Marcelo Saguan; Gildas de Muizon |
| Abstract: | This article develops a theoretical framework to rank different electricity transmission organizations according five criteria (transaction cost saving, performance based regulation implementation, conflicts of interest, non-discriminatory access and benefits from regional integration). We demonstrate that ITSO is not always the first-best arrangement when taking into account the benefits from regional integration. |
| Keywords: | energy policy |
| Date: | 2009–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2009/15&r=ene |
| By: | René Aid (EDF R&D - EDF, FiME - Laboratoire de Finance des Marchés d'Energies - Université Paris Dauphine - Paris IX); Luciano Campi (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX); Adrien Huu Nguyen (EDF R&D - EDF, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX); Nizar Touzi (CMAP - Crentre de Mathématiques Appliquées - Ecole Polytechnique - Ecole Polytechnique) |
| Abstract: | The objective of this paper is to present a model for electricity spot prices and the corresponding forward contracts, which relies on the underlying fuels markets, thus avoiding the electricity non-storability restriction. The structural aspect of our model comes from the fact that the electricity spot prices depend on the dynamic of the electricity demand at the maturity $T$, and on the random available capacity of each production means. Our model allows to explain, in a stylized fact, how the different fuels prices together with the demand combine to produce electricity prices. This modeling methodology allows to transfer to electricity prices the risk-neutral probabilities of the fuels market and under the hypothesis of independence between demand, outages filtrations on one hand, and fuels prices filtration on the other hand, it provides a regression-type relation between electricity forward prices and fuels forward prices. Moreover, the model produces, by nature, the well-known peaks observed on electricity market data. In our model, spikes occur when the producer has to switch from one technology to the lowest cost available one. Numerical tests performed on a very crude approximation of the French electricity market using only two fuels (gas and oil) provide an illustration of the potential interest of this model. |
| Keywords: | energy markets; electricity prices; fuels prices; risk-neutral probability; no-arbitrage pricing; forward contracts |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00390690_v1&r=ene |
| By: | Vincent Rious; Philippe Dessante; Yannick Perez |
| Abstract: | This paper evaluates the opportunity and efficiency to introduce a two-part tariff to coordinate the location of power plants with lumpy transmission investments. Nodal pricing sends the short run component of such a two-part tariff and we study the case where the average participation tariff sends the long run one. We argue that this solution is helpful because the average participation tariff tackles lumpiness of transmission capacity while being as cost-reflective as possible. Our proposition is evaluated based on a double optimization model where a TSO minimizes the transmission cost while a generator minimizes its own cost that may take into account network constraints and include the average participation tariff. Numerical simulations are performed on a two-node network evolving during twenty years with increasing demand. The joint implementation of nodal pricing and the average participation tariff stays the best combination to coordinate as efficiently as possible the generation and transmission investments, although the optimal set of generation and transmission investments may not be reached because of transmission lumpiness. The simulations show also that implementing locational network tariffs is prioritary over implementing nodal pricing to coordinate more efficiently the location of generation with lumpy transmission investment. In the considered examples, the average participation tariff allows a more efficient location of generation even when the congestion management scheme being redispatch sends no short run locational signal. |
| Keywords: | Generation investment; Lumpy transmission investment; Long run coordination; Locational signals; Efficiency evaluation |
| JEL: | D61 H23 K23 L94 |
| Date: | 2009–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2009/14&r=ene |
| By: | Fabien Roques; Céline Hiroux; Marcelo Saguan |
| Abstract: | Geographic diversification of wind farms can smooth out the fluctuations in wind power generation and reduce the associated system balancing and reliability costs. The paper uses historical wind production data from five European countries (Austria, Denmark, France, Germany, and Spain) and applies Mean-Variance Portfolio theory to identify cross-country portfolios that minimize the total variance of wind production for a given level of production. Theoretical unconstrained portfolios show that countries (Spain and Denmark) with the best wind resource or whose size contributes to smoothing out the country output variability dominate optimal portfolios. The methodology is then elaborated to derive optimal constrained portfolios taking into account national wind resource potential and transmission constraints and compare them with the projected portfolios for 2020. Such constraints limit the theoretical potential efficiency gains from geographical diversification, but there is still considerable room to improve performance from actual or projected portfolios. These results highlight the need for more cross-border interconnection capacity, for greater coordination of European renewable support policies, and for renewable support mechanisms and electricity market designs providing locational incentives. Under these conditions, a mechanism for renewables credits trading could help aligning wind power portfolios with the theoretically efficient geographic dispersion. |
| Keywords: | wind power variability, geographic diversification, optimal portfolios, mean variance portfolio theory |
| Date: | 2009–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2009/17&r=ene |
| By: | Richard Meade; Seini O'Connor |
| Abstract: | Decentralised electricity systems require effective price and quantity risk management mechanisms, but the nature of such systems poses particular problems for satisfying those requirements. Among these problems are investment hold-up risks rooted in the competition facing both electricity retailers and large industrial firms. Additional problems include those of load profile, information and bargaining mismatches between generators and customers. Significantly, hold-up risks exist not only between retailers and generators, but also affect (e.g. fuel) suppliers upstream of generators. Contracts are one means of addressing such problems, and represent a particular improvement on spot market trading alone. However, we argue that market contracting in electricity systems is a costly approach to addressing hold-up and related problems, and that internal organisation (i.e. vertical integration) is a more efficient alternative, minimising the overall costs of market contracting and ownership. Not only does integration internalise wholesale market risks and market power costs to the integrated firm, thereby reducing their importance, it also reduces the need for and efficacy of regulation to constrain generator market power. It furthermore thins contract markets, reducing the threat of generator hold-up from competitive retail entry, and otherwise supports generation investment and hence supply security. While the reinstatement or retention of retail franchise areas is one possible solution to the problems of contracting, it is arguably unnecessary if there are other system features (such as transmission constraints) impeding retail entry. This is particularly so in systems involving vertical integration, although even then policy makers are confronted with a trade-off between promoting retail competition and facilitating generation investment and supply security, requiring judgement as to the optimal degree of retail market power. While vertical integration is a more natural and self-sustaining solution to electricity sector problems, it too is only a partial solution, leaving complementary roles for spot and long-term contract markets. |
| Keywords: | electricity, electricity markets, market contracting, spot market trading, vertical integration |
| Date: | 2009–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2009/16&r=ene |
| By: | Fabio Milani (Department of Economics, University of California-Irvine) |
| Abstract: | This paper estimates a structural general equilibrium model to investigate the changing relationship between the oil price and macroeconomic variables. The oil price, through the role of oil in production and consumption, affects aggregate demand and supply in the model. The assumption of rational expectations is relaxed in favor of learning. Oil prices, therefore, affect the economy through an additional channel, i.e. through their effect on the formation of agents' beliefs. The estimated learning dynamics indicates that economic agents' perceptions about the effects of oil prices on the economy have changed over time: oil prices were perceived to have large effects on output and inflation in the 1970s, but only milder effects after the mid-1980s. Since expectations play a large role in the determination of output and inflation, the effects of oil price increases on expectations can magnify the response of macroeconomic variables to oil price shocks. In the estimated model, in fact, the implied responses of output and inflation to oil price shocks were much more pronounced in the 1970s than in 2008. Therefore, through the time variation in the impact of oil prices on beliefs, the paper can successfully explain the observed weakening of the effects of oil price shocks on real activity and inflation. |
| Keywords: | Oil price; Inflation expectations; Learning; Monetary policy, Effect of energy shocks; Bayesian estimation |
| JEL: | E31 E52 E58 F43 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:080923&r=ene |
| By: | Lucia Helena Salgado |
| Abstract: | O texto tem como objetivo destacar a importância de um marco regulatório para o setor de gás natural no Brasil. Para tanto, são inicialmente expostas as razões para se regular as indústrias de rede de infra-estrutura e apresentados os mecanismos necessários para seu exercício eficiente. A partir da apresentação de dados do consumo por segmento, é ressaltada a relevância do gás natural no país e sua demanda potencial. Por fim, é feita uma análise do Projeto de Lei no 6.673/2006, em fase de votação, cuja redação final indica soluções para a maioria dos entraves à expansão da indústria. The essay intends to emphasize the importance of a regulatory framework for the natural gas industry in Brazil. For this purpose, it is initially expounded the reasons to regulate the infrastructure network system, and presented the essential mechanisms to its efficient exercise. Through the data presentation regarding consumption per sector, it is highlighted the relevance of natural gas in Brazil and its potential demand. Finally, the essay analyses the Proposed Law n. 6.673/2006, whose final edition indicates solutions to several obstacles to the industry’s expansion. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:1387&r=ene |
| By: | Jolian McHardy (Department of Economics, The University of Sheffield); Michael Reynolds; Stephen Trotter |
| Abstract: | We introduce a new regulatory concept: the independent profit-maximising agent, as a model for regulating a network monopoly. The agent sets prices on cross-network goods taking either a complete, or arbitrarily small, share of the associated profit. We examine welfare and profits with and without each agent type under both network monopoly and network duopoly. We show that splitting up the network monopoly (creating network duopoly) may be inferior for both firm(s) and society compared with a network monopoly "regulated" by an agent and that society always prefers any of the four agent regimes over network monopoly and network duopoly. |
| Keywords: | Network, Monopoly, Agent |
| JEL: | D43 L13 R48 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2009003&r=ene |
| By: | John Bryant (Vocat International) |
| Abstract: | Draft chapter from a forthcoming book entitled Thermoeconomics, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 covers historical research on the disciplines, the structural comparisons between of the ideal gas equation and the quantity theory. Chapter 2 concerns a general stock model that can be adapted to represent those of money, labour and economic output. Chapter 3 deals with economic representations of the first and second laws of thermodynamics, work done, internal value and entropic value, reversibility, entropy, particular economic processes and utility. Chapter 4 concerns a thermodynamic representation of production processes and reaction kinetics. Chapter 5 constructs a thermodynamic money system, using historical data of the UK and USA economies to provide empirical analysis. Particular aspects covered include elastic relationships, entropy, interest rates and yield. Chapter 6 describes aspect of labour and unemployment. Chapter 7 describes the principles of entropy and maximisation, the structure of economic cycles, efficiency criteria and measurement problems. Chapter 8 sets out analyses of world energy and climate change to illustrate empirically some of the principles covered by the book. |
| Keywords: | Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest |
| JEL: | A1 C02 C68 D5 E O1 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:voc:wpaper:tech12009&r=ene |
| By: | John Bryant (Vocat International) |
| Abstract: | Draft chapter from a forthcoming book entitled Thermoeconomics, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 covers historical research on the disciplines, the structural comparisons between of the ideal gas equation and the quantity theory. Chapter 2 concerns a general stock model that can be adapted to represent those of money, labour and economic output. Chapter 3 deals with economic representations of the first and second laws of thermodynamics, work done, internal value and entropic value, reversibility, entropy, particular economic processes and utility. Chapter 4 concerns a thermodynamic representation of production processes and reaction kinetics. Chapter 5 constructs a thermodynamic money system, using historical data of the UK and USA economies to provide empirical analysis. Particular aspects covered include elastic relationships, entropy, interest rates and yield. Chapter 6 describes aspect of labour and unemployment. Chapter 7 describes the principles of entropy and maximisation, the structure of economic cycles, efficiency criteria and measurement problems. Chapter 8 sets out analyses of world energy and climate change to illustrate empirically some of the principles covered by the book. |
| Keywords: | Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest |
| JEL: | A1 C02 C68 D5 E O1 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:voc:wpaper:tech22009&r=ene |
| By: | John Bryant (Vocat International) |
| Abstract: | Draft chapter from a forthcoming book entitled Thermoeconomics, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 covers historical research on the disciplines, the structural comparisons between of the ideal gas equation and the quantity theory. Chapter 2 concerns a general stock model that can be adapted to represent those of money, labour and economic output. Chapter 3 deals with economic representations of the first and second laws of thermodynamics, work done, internal value and entropic value, reversibility, entropy, particular economic processes and utility. Chapter 4 concerns a thermodynamic representation of production processes and reaction kinetics. Chapter 5 constructs a thermodynamic money system, using historical data of the UK and USA economies to provide empirical analysis. Particular aspects covered include elastic relationships, entropy, interest rates and yield. Chapter 6 describes aspect of labour and unemployment. Chapter 7 describes the principles of entropy and maximisation, the structure of economic cycles, efficiency criteria and measurement problems. Chapter 8 sets out analyses of world energy and climate change to illustrate empirically some of the principles covered by the book. |
| Keywords: | Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest |
| JEL: | A1 C02 C68 D5 E O1 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:voc:wpaper:tech32009&r=ene |
| By: | John Bryant (Vocat International) |
| Abstract: | Draft chapter from a forthcoming book entitled Thermoeconomics, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 covers historical research on the disciplines, the structural comparisons between of the ideal gas equation and the quantity theory. Chapter 2 concerns a general stock model that can be adapted to represent those of money, labour and economic output. Chapter 3 deals with economic representations of the first and second laws of thermodynamics, work done, internal value and entropic value, reversibility, entropy, particular economic processes and utility. Chapter 4 concerns a thermodynamic representation of production processes and reaction kinetics. Chapter 5 constructs a thermodynamic money system, using historical data of the UK and USA economies to provide empirical analysis. Particular aspects covered include elastic relationships, entropy, interest rates and yield. Chapter 6 describes aspect of labour and unemployment. Chapter 7 describes the principles of entropy and maximisation, the structure of economic cycles, efficiency criteria and measurement problems. Chapter 8 sets out analyses of world energy and climate change to illustrate empirically some of the principles covered by the book. |
| Keywords: | Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest |
| JEL: | A1 C02 C68 D5 E O1 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:voc:wpaper:tech42009&r=ene |
| By: | John Bryant (Vocat International) |
| Abstract: | Draft chapter from a forthcoming book entitled Thermoeconomics, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 covers historical research on the disciplines, the structural comparisons between of the ideal gas equation and the quantity theory. Chapter 2 concerns a general stock model that can be adapted to represent those of money, labour and economic output. Chapter 3 deals with economic representations of the first and second laws of thermodynamics, work done, internal value and entropic value, reversibility, entropy, particular economic processes and utility. Chapter 4 concerns a thermodynamic representation of production processes and reaction kinetics. Chapter 5 constructs a thermodynamic money system, using historical data of the UK and USA economies to provide empirical analysis. Particular aspects covered include elastic relationships, entropy, interest rates and yield. Chapter 6 describes aspect of labour and unemployment. Chapter 7 describes the principles of entropy and maximisation, the structure of economic cycles, efficiency criteria and measurement problems. Chapter 8 sets out analyses of world energy and climate change to illustrate empirically some of the principles covered by the book. |
| Keywords: | Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest, yield, rate, redemption |
| JEL: | A1 C02 C68 D5 E O1 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:voc:wpaper:tech52009&r=ene |
| By: | John Bryant (Vocat International) |
| Abstract: | Draft chapter from a forthcoming book entitled Thermoeconomics, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 covers historical research on the disciplines, the structural comparisons between of the ideal gas equation and the quantity theory. Chapter 2 concerns a general stock model that can be adapted to represent those of money, labour and economic output. Chapter 3 deals with economic representations of the first and second laws of thermodynamics, work done, internal value and entropic value, reversibility, entropy, particular economic processes and utility. Chapter 4 concerns a thermodynamic representation of production processes and reaction kinetics. Chapter 5 constructs a thermodynamic money system, using historical data of the UK and USA economies to provide empirical analysis. Particular aspects covered include elastic relationships, entropy, interest rates and yield. Chapter 6 describes aspect of labour and unemployment. Chapter 7 describes the principles of entropy and maximisation, the structure of economic cycles, efficiency criteria and measurement problems. Chapter 8 sets out analyses of world energy and climate change to illustrate empirically some of the principles covered by the book. |
| Keywords: | Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy |
| JEL: | A1 C02 C68 D5 E O1 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:voc:wpaper:tech62009&r=ene |
| By: | John Bryant (Vocat International) |
| Abstract: | Draft chapter from a forthcoming book entitled Thermoeconomics, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 covers historical research on the disciplines, the structural comparisons between of the ideal gas equation and the quantity theory. Chapter 2 concerns a general stock model that can be adapted to represent those of money, labour and economic output. Chapter 3 deals with economic representations of the first and second laws of thermodynamics, work done, internal value and entropic value, reversibility, entropy, particular economic processes and utility. Chapter 4 concerns a thermodynamic representation of production processes and reaction kinetics. Chapter 5 constructs a thermodynamic money system, using historical data of the UK and USA economies to provide empirical analysis. Particular aspects covered include elastic relationships, entropy, interest rates and yield. Chapter 6 describes aspect of labour and unemployment. Chapter 7 describes the principles of entropy and maximisation, the structure of economic cycles, efficiency criteria and measurement problems. Chapter 8 sets out analyses of world energy and climate change to illustrate empirically some of the principles covered by the book. |
| Keywords: | Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest |
| JEL: | A1 C02 C68 D5 E O1 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:voc:wpaper:tech72009&r=ene |
| By: | Davis, Kristin E. |
| Abstract: | Climate change will certainly affect agriculture, but agriculture can also be harnessed to mitigate greenhouse gas (GHG) emissions. A key element in supporting agriculture's role is information. The costs of adapting agriculture to climate change can be large and the methods not always well known. Mitigation efforts will require information, education, and technology transfer. Agricultural extension and advisory services, both public and private, thus have a major role to play in providing farmers with information, technologies, and education on how to cope with climate change and ways to contribute to GHG mitigation. This support is especially important for resource-scarce smallholders, who contribute little to climate change and yet will be among the most affected. Support from extension for farmers in dealing with climate change should focus on two areas: adaptation and mitigation, explained below. But first, it is important to define extension. |
| Keywords: | Climate change, Copenhagen, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(11)&r=ene |
| By: | Brita Bye and Karl Jacobsen (Statistics Norway) |
| Abstract: | We analyse welfare effects of supporting general versus emission saving technological development when carbon emissions are regulated by a carbon tax. We use a computable general equilibrium model with induced technological change (ITC). ITC is driven by two separate, economically motivated research and development (R&D) activities, one general and one emission saving specified as carbon capture and storage. We study public revenue neutral policy alternatives targeted towards general R&D and emission saving R&D. Support to general R&D is the welfare superior, independent of the level of international carbon price. However, the welfare gap between the two R&D policy alternatives is reduced if the carbon price increases. |
| Keywords: | Applied general equilibrium; Endogenous growth; Research and Development; Directed technological change; Carbon policy |
| JEL: | C68 E62 H32 O38 O41 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:584&r=ene |
| By: | GRIMAUD, André (Toulouse School of Economics (IDEI and LERNA)); MAGNE, Bertrand (International Energy Agency); ROUGE, Luc (Université de Toulouse, Toulouse Business School) |
| JEL: | O32 O41 Q20 Q32 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:11187&r=ene |
| By: | Smith, Pete |
| Abstract: | There is very significant cost-effective greenhouse gas (GHG) mitigation potential in agriculture. The mitigation potential at a range of future carbon prices is similar to the potential in the industry, energy, transport, and forestry sectors. Using economic mitigation potentials from the Intergovernmental Panel on Climate Change's Fourth Assessment Report (IPCC AR4), the yearly mitigation potential in agriculture is estimated to be worth between US$32 billion and US$420 billion at carbon prices between US$20 and US$100 (t CO2-eq.-1).1 From both a mitigation perspective and an economic perspective, we cannot afford to miss out on this opportunity. But many mitigation options also offer the promise of facilitating adaptation to climate change and contributing to sustainable development more generally. In this brief, synergies between mitigation, adaptation, and sustainable development are described so that multiple policy goals can be identified when considering how to include agriculture in the climate change negotiations in Copenhagen. |
| Keywords: | Climate change, Copenhagen, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(9)&r=ene |
| By: | Emilie Alberola (Mission Climat Caisse des Dépôts - Université Panthéon-Sorbonne - Paris I); Julien Chevallier (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre); Benoît Chèze (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre) |
| Abstract: | This chapter identifies the main price drivers of European Union Allowances (EUAs), valid for compliance under the European Union Emissions Trading Scheme (EU ETS) created in 2005 to regulate CO2 emissions of more than 10,000 high carbon-intensive installations across Member States. Based on key design features of the EU ETS, this chapter develops carbon pricing strategies based on allowances supply and demand, institutional decisions, and the influence of other energy markets and weather conditions. Finally, we discuss the likely effects on economic growth on CO2 emissions and carbon prices as a by product. The discussions developed in this chapter focus on Phase I (2005-2007) of the EU ETS, which may described as the “pilot” period for the future development of this environmental market scheme. |
| Keywords: | EU ETS; Cap-and-Trade Program; Climate Change Policy; CO2 Price; Energy Markets; Weather Influences; Institutional Influences; Energy Policy |
| Date: | 2009–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00389916_v1&r=ene |
| By: | Regina Betz; Stefan Seifert; Peter Cramton (Economics Department, University of Maryland); Suzi Kerr |
| Abstract: | The allocation of permits is an important design aspect of an emissions trading scheme. Traditionally, governments have favoured a free allocation of greenhouse gas permits based on individual historical emissions (“grandfathering”) or industry benchmark data. As, particularly in the EU, the free allocation of permits has proven complex and inefficient and the distributional implications are politically difficult to justify, auctioning emissions permits has become more popular. The EU is now moving to auctioning more than 50% of all permits in 2013 and in the U.S. the Regional Greenhouse Gas Initiative (RGGI) has started with auctioning 100%. Another case in point is the Austra-lian proposal for a Carbon Pollution Reduction Schemes (CPRS) which provides for auctioning a significant share of total permits. This paper discusses some important theoretical and practical aspects of designing an auction for allocating emissions per-mits in Australia. The specific design details proposed here have been adopted by the Australian Government in their CRPS White Paper. Particularly interesting is the pro-posed structure of auctioning multiple emissions units of different vintages simultane-ously. |
| Keywords: | Auctions, carbon auctions, greenhouse gas auctions |
| JEL: | D44 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pcc:pccumd:09aghg&r=ene |
| By: | Mandell, Svante (Swedish National Road & Transport Research Institute (VTI)); Holt, Chrles (Department of Economics, University of Virginia); Myers, Erica (Resources for the Future); Burtraw, Dallas (Resources for the Future); Wråke, Markus (IVL Swedish Environmental Institute) |
| Abstract: | This paper describes an individual choice experiment that can be used to teach students how to correctly account for opportunity costs in production decisions. Students play the role of producers who require a fuel input and an emissions permit for production. Given fixed market prices, they make production quantity decisions on the basis of their costs. Permits have a constant price throughout the experiment. In one treatment, students have to purchase both a fuel input and an emissions permit for each production unit. In a second treatment, they receive permits for free, and any unused permits are sold on their behalf at the permit price. If students correctly incorporate opportunity costs, they will have the same supply function in both treatments. This experiment motivates classroom discussion of opportunity costs and emissions permit allocation under cap-and-trade schemes. The European Union Emissions Trading Scheme provides a relevant example for classroom discussion, as industry earned significant windfall profits from free allocation of emissions allowances in the early phases of the program. |
| Keywords: | opportunity cost; emissions permits; allowance allocation; classroom experiments |
| JEL: | A22 C90 Q52 |
| Date: | 2009–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2009_006&r=ene |
| By: | Fischler, Franz |
| Abstract: | An open and flexible global trading environment plays a constructive role in both climate change mitigation and adaptation. A new international climate change regime and global trade rules should ideally be mutually reinforceable. |
| Keywords: | Climate change, Copenhagen, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(13)&r=ene |
| By: | Markelova, Helen; Meinzen-Dick, Ruth |
| Abstract: | Even with abundant evidence of the urgent need for action on climate change mitigation, there are still those who consider mitigation strategies a burden. In the agricultural sector, climate change mitigation calls for changing some agricultural and resource management practices and technologies and often requires additional investment. However, there is an opportunity in agriculture for net benefit streams from a variety of zero- or low-cost mitigation opportunities ranging from agroforestry practices and restoration of degraded soils to zero-till and other land-management practices. Momentum has been generated to incorporate agriculture into carbon markets, potentially allowing smallholder farmers to access benefit streams from such transactions. However, who will receive the benefits from mitigation funds by, for example, increasing carbon stocks or reducing greenhouse gas (GHG) emissions from land, will depend on the way different types of property rights are defined and dealt with in the upcoming climate change negotiations in Copenhagen. In many areas of the world, land tenure arrangements are complex. For example, in Africa, more than 90 percent of the land is formally claimed as state land, although millions of farming and pastoralist households use various customary and informal arrangements to access the land and other resources. Millions of hectares of forest and pastoral land in Asia and Latin America are similarly listed as state land, although used by communities, especially those of indigenous people or other marginalized ethnic groups. Often the same area may be under co-existing informal tenure systems, most of which are not recognized by formal land laws, but are instead accepted and enforced by the communities. Even where property rights are vested in a formal legal system with strong enforcement procedures, climate change mitigation measures raise new issues of who owns incremental carbon stocks and who should receive compensation for reductions in GHG emissions. |
| Keywords: | Climate change, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(10)&r=ene |
| By: | Julien CHEVALLIER; Benoît SEVI |
| Abstract: | The recent implementation of the EU Emissions Trading Scheme (EU ETS) in January 2005 created new financial risks for emitting firms. To deal with these risks, options are traded since October 2006. Because the EU ETS is a new market, the relevant underlying model for option pricing is still a controversial issue. This article improves our understanding of this issue by characterizing the conditional and unconditional distributions of the realized volatility for the 2008 futures contract in the European Climate Exchange (ECX), which is valid during Phase II (2008-2012) of the EU ETS. The realized volatility measures from naive, kernel-based and subsampling estimators are used to obtain inferences about the distributional and dynamic properties of the ECX emissions futures volatility. The distribution of the daily realized volatility in logarithmic form is shown to be close to normal. The mixture-of-distributions hypothesis is strongly rejected, as the returns standardized using daily measures of volatility clearly departs from normality. A simplified HAR-RV model (Corsi, 2009) with only a weekly component, which reproduces long memory properties of the series, is then used to model the volatility dynamics. Finally, the predictive accuracy of the HAR-RV model is tested against GARCH specifications using one-step-ahead forecasts, which confirms the HAR-RV superior ability. Our conclusions indicate that (i) the standard Brownian motion is not an adequate tool for option pricing in the EU ETS, and (ii) a jump component should be included in the stochastic process to price options, thus providing more efficient tools for risk-management activities. |
| Keywords: | CO2 price, realized volatility, HAR-RV, GARCH, futures trading, emissions markets, EU ETS, intraday data, forecasting |
| JEL: | C5 G1 Q4 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mop:credwp:09.05.84&r=ene |
| By: | Marius-Cristian Frunza (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Sagacarbon - Sagacarbon SA); Dominique Guegan (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: | The aim of this work is to bring an econometric approach upon the CO2 market. We identify the specificities of this market, and regarding the carbon as a commodity. We investigate the econometric particularities of CO2 prices behavior and their result of the calibration. We apprehend and explain the reasons of the non-Gaussian behavior of this market focusing mainly upon jump diffusion and generalized hyperbolic distributions. We test these results for the risk modeling of a structured product specific to the carbon market, the swap between two carbon instruments : The European Union Allowances and the Certiified Emission Reductions. We estimate the counterparty risk for this kind of transaction and evaluate the impact of different models upon the risk measure and the allocated capital. |
| Keywords: | Carbon, Normal Inverse Gaussian, CER, EUA, swap. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00390676_v1&r=ene |
| By: | Mourad Afif; Sandrine Spaeter |
| Abstract: | Dans cet article nous construisons un système de contrôle des émissions polluantes qui combine permis d’émission et taxes sur la base du modèle de Roberts et Spence (1976). Nous relâchons l’hypothèse de linéarité de la fonction de transferts monétaires entre le régulateur et les firmes. Le régulateur n’observe pas les technologies d’abattement des firmes. Chaque firme choisit son montant initial de permis et son niveau effectif d’émissions. Elles peuvent ensuite se tourner vers le régulateur pour solder leur demande nette excédentaire (positive ou négative). Nous montrons que le système combiné permis/taxe généralisé permet de répliquer parfaitement la fonction de dommage social estimée. Si l’estimation des coûts faite par le régulateur est parfaite, l’optimum social est atteint. Ce système apporte plus de souplesse au contrôle de la pollution et permet de réduire les coûts d’acquisition de l’information par le régulateur grâce à une autodifférenciation des firmes. Cette intervention du régulateur en dernier ressort constitue une soupape de sécurité contre une éventuelle demande (offre) élevée de permis. Il améliore la liquidité du marché des permis d’émission. |
| Keywords: | Taxes; Efficience; permis d’émission. |
| JEL: | H23 D82 Q52 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2009-20&r=ene |
| By: | David Parker; Donna Goodman; Yoko Akachi |
| Abstract: | This paper reviews the published evidence of pathways and impacts of global climate change on child health. The review was occasioned by the recognition that most of the work to date on climate change and health lacks clear focus on the children's dimension, while the climate change and children literature tends to be brief or imprecise on the complex health aspects. <br /> Studies were identified by searching the PubMed database for articles published before April 2009. Publications by agencies (e.g., UNICEF, WHO, IPPC) were also included based upon review. A list of references was developed that provide evidence to the linkages between climate change and health outcomes, and on specific health outcomes for children. The analysis explores the hypothesis of disproportionate vulnerability of children’s health to environmental factors, specifically those most closely related to climate change.<br /> Based upon scientific and policy research conducted to date there is found to be substantial evidence of disproportionate vulnerability of children in response to climate change. The diseases likely to be potentiated by climate change are already the primary causes of child morbidity and mortality, including vector-borne diseases, water-borne diseases and air-borne diseases. For this reason further research, assessment and monitoring of child health in respect to climate change is critical. Proposals are made for governments to integrate environmental health indicators into data collection in order to accurately assess the state of child health in relation to other age groups and its sensitivity to climate change.<br /> |
| Keywords: | child health; environmental degradation; environmental effects; malnutrition; |
| JEL: | Q25 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ucf:indipa:indipa09/5&r=ene |
| By: | Rabbinge, Rudy |
| Abstract: | Higher temperatures, more variable precipitation, and changes in the frequency and severity of extreme climate events will have significant consequences for food production and food security. However, the frequency of heat stress, drought, and flooding are also expected to increase, even though they cannot be modeled satisfactorily with current climate models. They will undoubtedly have adverse effects on crops and agricultural productivity over and above the effects due to changes in mean variables alone. The impacts of climate change on agriculture are likely to be regionally distinct and highly heterogeneous spatially, requiring sophisticated understanding of causes and effects and careful design and dissemination of appropriate responses. These changes will challenge the livelihoods of farmers, fishers, and forest-dependent people who are already vulnerable and food insecure. Adapting to these changes, while continuing to feed a world of 9 billion people, requires the formation of a global partnership in science, technology development, and dissemination of results to millions of smallholder farmers, bringing together research workers and resource managers from many fields. To take an international approach to climate change, new partnerships must be forged, linking the agricultural research and climate science communities. |
| Keywords: | Climate change, Science and technology, Agricultural research, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(2)&r=ene |
| By: | Lal, Rattan |
| Abstract: | Of the five principal global carbon pools, the ocean pool is the largest at 38.4 trillion metric tons (mt) in the surface layer, followed by the fossil fuels (4.13 trillion mt), soils (2.5 trillion mt to a depth of one meter), biotic (620 billion mt), and atmospheric pools (800 billion mt). If the fluxes among terrestrial pools are combined, annual total carbon flows across the pools average around 60 billion mt, with managed ecosystems (croplands, grazing lands, and plantations) accounting for 57 percent of that total. Thus, land managers have custody of more annual carbon flows than any other group. |
| Keywords: | Climate change, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(5)&r=ene |
| By: | Wassmann, Reiner; Hosen, Yasukazu; Sumfleth, Kay |
| Abstract: | Rice is grown on more than 140 million hectares worldwide and is the most heavily consumed staple food on earth. Ninety percent of the world's rice is produced and consumed in Asia, and 90 percent of rice land is—at least temporarily—flooded. The unique semiaquatic nature of the rice plant allows it to grow productively in places no other crop could exist, but it is also the reason for its emissions of the major greenhouse gas (GHG), methane. Methane emissions from rice fields are determined mainly by water regime and organic inputs, but they are also influenced by soil type, weather, tillage management, residues, fertilizers, and rice cultivar. Flooding of the soil is a prerequisite for sustained emissions of methane. Recent assessments of methane emissions from irrigated rice cultivation estimate global emissions for the year 2000 at a level corresponding to 625 million metric tons (mt) of carbon dioxide equivalent (CO2e). Midseason drainage (a common irrigation practice adopted in major rice growing regions of China and Japan) and intermittent irrigation (common in northwest India) greatly reduce methane emissions. Similarly, rice environments with an insecure supply of water, namely rainfed rice, have a lower emission potential than irrigated rice. Organic inputs stimulate methane emissions as long as fields remain flooded. Therefore, organic inputs should be applied to aerobic soil in an effort to reduce methane emission. In addition to management factors, methane emissions are also affected by soil parameters and climate. |
| Keywords: | Climate change, rice, Agricultural research, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(3)&r=ene |
| By: | Fernando Brito Soares |
| Abstract: | Panel unit root tests are used to identify convergence of Green House Gas (GHG) emissions among the agr icultural sectors of the European Union 27 member states. Although a clear cut conclusion on the existence of convergence could not be established, it looks like there is some evidence of convergence for EU 27 during the entire 1973-2007 period. This same evidence exists for EU15 but only for the shorter 1996-2006 time period. If emissions are to converge, then it will be easier to make EU members to accept policy measures aimed at reducing the negative impact on environment. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:07-2009&r=ene |
| By: | Nelson, Gerald C. |
| Abstract: | Table of Contents: •Overview by Gerald C. Nelson •Agricultural Science and Technology Needs for Climate Change Adaptation and Mitigation by Rudy Rabbinge •Reducing Methane Emissions from Irrigated Rice by Reiner Wassmann, Yasukazu Hosen, and Kay Sumfleth •Direct and Indirect Mitigation Through Tree and Soil Management by Brent M. Swallow and Meine van Noordwijk •The Potential for Soil Carbon Sequestration by Rattan Lal •Mitigating Greenhouse Gas Emissions from Livestock Systems by M. Herrero and P. K. Thornton •The Role of Nutrient Management in Mitigation by Helen C. Flynn •Monitoring, Reporting, and Verification Methodologies for Agriculture, Forestry, and Other Land Use by Sean Smukler and Cheryl Palm •Synergies Among Mitigation, Adaptation, and Sustainable Development by Pete Smith •The Importance of Property Rights in Climate Change Mitigation by Helen Markelova and Ruth Meinzen-Dick •The Important Role of Extension Systems by Kristin E. Davis •Adaptation to Climate Change: Household Impacts and Institutional Responses by Futoshi Yamauchi and Agnes Quisumbing •The Constructive Role of International Trade by Franz Fischler |
| Keywords: | Climate change, Copenhagen, Science and technology, rice, Soil fertility management, Greenhouse gas, Nutrients, Forestry resources, Land use, Sustainable development, International trade, extension activities, Household behavior, Institutional Impacts, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020fo:16&r=ene |
| By: | Herrero, M.; Thornton, P.K. |
| Abstract: | Livestock—poultry, small ruminants (such as goats and sheep), cattle, and pigs—provide many benefits for human well-being. Livestock production systems, especially in developing countries, are changing rapidly in response to population growth, urbanization, and growing demand for meat and milk. The need for action by all sectors to mitigate climate change adds additional complexity to the already considerable development challenges these systems face. Some livestock production systems use large quantities of natural resources and also produce significant amounts of greenhouse gas emissions (GHGs). Since the demand for meat and milk is increasing, the question is whether cost-effective mitigation options exist to meet them within equitably negotiated and sustainable GHG emission targets. In fact, emissions from livestock systems can be reduced significantly through technologies, policies, and the provision of adequate incentives for their implementation. The objective of this policy brief is to highlight options to mitigate GHGs from livestock industries and to suggest key negotiating outcomes for including livestock in the Copenhagen meetings. |
| Keywords: | Climate change, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(6)&r=ene |
| By: | Brad Stennes; Kurt Niquidet; G. Cornelis van Kooten |
| Abstract: | Energy has been produced from woody biomass in British Columbia for many decades, but it was used primarily within the pulp and paper sector, using residual streams from timber processing, to create heat and electricity for on-site use. More recently, there has been limited stand-alone electricity production and increasing capacity to produce wood pellets, with both using ‘waste’ from the sawmill sector. Hence, most of the low-cost feedstock sources associated with traditional timber processing is now fully employed. While previous studies model bioenergy production in isolation, we employ a transportation model of the BC forest sector with 24 regions to demonstrate that it is necessary to consider the interaction between utilization of woody feedstock for pellet production and electricity generation and its traditional uses (e.g., production of pulp, oriented strand board, etc). We find that, despite the availability of large areas of mountain pine beetle killed timber, this wood does not enter the energy mix. Further expansion of biofeedstock for energy is met by a combination of woody debris collected at harvesting sites and/or bidding away of fibre from existing users. |
| Keywords: | bioenergy production from wood fibre; mountain pine beetle; competition for fibre |
| JEL: | Q23 Q42 C61 Q54 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:rep:wpaper:2009-02&r=ene |
| By: | Smukler, Sean; Palm, Cheryl |
| Abstract: | Facilitating carbon sequestration in terrestrial ecosystems could provide a significant amount of atmospheric carbon dioxide (CO2) abatement, which is necessary to limit global temperature increases to only 2 degrees Celsius in the next century until more permanent mitigation strategies are instituted. With relatively small investments, greenhouse gas (GHG) emissions could be offset dramatically by management practices such as planting trees, reducing deforestation, midseason draining of irrigated rice, improving nitrogen fertilization efficiency, and increasing organic matter inputs to agricultural soils. Together these types of practices could add up to more than 25 percent of the combined near-term abatement strategies (including energy efficiency and low-carbon energy supply) required to stabilize emissions. While most terrestrial management potential is based on reduced deforestation and degradation (REDD), no one program can be effective in isolation. It is crucial to recognize that there are multiple competing uses for land and that maximizing GHG mitigation is not likely to be achieved with carbon-based financial incentives alone, particularly if incentives do not reach those most responsible for land management. Nearly 90 percent of the potential for terrestrial carbon capture can be found in the developing world, where land managers are largely poor farmers on small plots of land. It is imperative that these farmers be involved in carbon mitigation strategies, but dealing with numerous smallholders is an enormous challenge because planning, monitoring, reporting, and verifying mitigation creates transaction costs for carbon contracts that can be prohibitively expensive. It is therefore critical for the international community to immediately invest in the research and development of innovative methodologies to reduce transaction costs by increasing the effectiveness of monitoring, reporting, and verification for Agriculture, Forestry and Other Land Use (AFOLU) projects, particularly for smallholder agriculture in tropical regions. |
| Keywords: | Climate change, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(8)&r=ene |
| By: | Flynn, Helen C. |
| Abstract: | Nitrous oxide (N2O) emissions from soils are responsible for about 3 percent of greenhouse gas (GHG) emissions, which cause climate change, and contribute approximately one-third of non-CO2 agricultural GHG emissions. N2O is produced by microbial transformations of nitrogen in the soil, under both aerobic and anaerobic conditions. Therefore, emissions are often directly related to nutrients added to the soil in the form of mineral fertilizers and animal manure. These additions can be vital in maintaining soil fertility and crop production; about half of the world's population is dependent on food produced strictly because of mineral fertilizer inputs. However, the additions are also highly inefficient, leading to nitrogen losses via leaching, volatilization, and emissions to the atmosphere. By helping to maximize crop-nitrogen uptake, improved nutrient management has a significant and cost-effective role to play in mitigating GHG emissions from agriculture. Nutrient management can also help reduce methane (CH4) emissions from rice production and increase carbon sequestration in agricultural soils. |
| Keywords: | Climate change, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(7)&r=ene |
| By: | Swallow, Brent M.; van Noordwijk, Meine |
| Abstract: | Many opportunities exist for mitigating greenhouse gas (GHG) emissions through better management of trees and soils. There is potential for both direct mitigation through better management of carbon in agricultural landscapes and indirect mitigation through reduced pressure on carbon stored in forests, peatlands, and wetlands. Effectively harnessing these opportunities will take bold action in climate change negotiations. |
| Keywords: | Climate change, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:2020br:16(4)&r=ene |