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on Energy Economics |
| By: | Finon, Dominique (Centre International de Recherche sur l'Environnement et le Developpement, France) |
| Abstract: | Following a brief review of the rationale for promoting renewable energy sources, this paper compares alternative policies to promote the production of renewable electricity. The focus is on feed-in tariffs (used in Germany, Spain, and France - for instance) and tradable green certificate (TGC) systems (United Kingdom and Italy, for instance). Considering economic theory and practical experience, the criteria for comparing these two alternatives are: cost-effectiveness, environmental effectiveness, and compatibility with market liberalisation. The paper argues that economic theory does not suggest a clear-cut advantage of one instrument over the other and it emphasises that, in any event, the choice of instrument depends on the relative importance attached to these criteria and on cultural factors such as faith - or lack thereof - in markets to help solve environmental problems. In this context, the paper questions the practical usefulness of a European-wide TGC system. |
| Keywords: | Renewable energy sources; feed-in tariffs; green certificates |
| JEL: | L52 Q40 Q42 Q48 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_011&r=ene |
| By: | Geoffrey Heal |
| Abstract: | Greater use of renewable energy is seen as a key component of any move to combat climate change, and is being aggressively promoted as such by the new U.S. administration and by other governments. Yet there is little economic analysis of renewable energy. This paper surveys what is written and adds to it. The conclusion is that the main renewables face a major problem because of their intermittency (the wind doesn't always blow nor the sun always shine) and that this has not been adequately factored into discussions of their potential. Without new storage technologies that can overcome this intermittency, much of the decarbonization of the economy will have to come from nuclear, carbon capture and storage (CCS) and energy efficiency (geothermal and biofuels can make small contributions). Nuclear and CCS are not without their problems. New energy storage technologies could greatly increase the role of renewables, but none are currently in sight. |
| JEL: | Q3 Q4 Q5 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15081&r=ene |
| By: | Corbu, Ion (Universitatea Spiru Haret, Facultatea de Finante si Banci) |
| Abstract: | Actual energetic paradigm, excessively pollutant, has as consequence the climatic changes, which will affect greater and greater regions of the planet. The fossil combustibles exhaustion will confront the world with a great energetic crisis. Concomitantly, in the world's seas and oceans there are zones in which permanently the waves amplitude is higher than 1,5 m. An immense quantity of energy is lost every second. Within the frame of this work is presented a solution, based on an invention that will assure the recovery of a great part of this energy and, in the future will provide sure and clean energy. |
| Keywords: | marine ecological electro- central; waves energy; regenerative energy; energetic paradigm; electric energy; mechanical energy; pneumatic energy; water electrolysis. |
| JEL: | O21 |
| Date: | 2009–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:sphedp:2009_018&r=ene |
| By: | Kenneth Gillingham; Richard G. Newell; Karen Palmer |
| Abstract: | Energy efficiency and conservation are considered key means for reducing greenhouse gas emissions and achieving other energy policy goals, but associated market behavior and policy responses have engendered debates in the economic literature. We review economic concepts underlying consumer decision making in energy efficiency and conservation and examine related empirical literature. In particular, we provide an economic perspective on the range of market barriers, market failures, and behavioral failures that have been cited in the energy efficiency context. We assess the extent to which these conditions provide a motivation for policy intervention in energy-using product markets, including an examination of the evidence on policy effectiveness and cost. Although theory and empirical evidence suggests there is potential for welfare-enhancing energy efficiency policies, many open questions remain, particularly relating to the extent of some key market and behavioral failures. |
| JEL: | H23 Q41 Q48 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15031&r=ene |
| By: | Awerbuch, Shimon (was Senior Fellow, Sussex Energy Group, SPRU, University of Sussex); Yang, Spencer (Sussex Energy Group - SPRU - University of Sussex - Brighton) |
| Abstract: | This paper applies portfolio-theory optimisation concepts from the field of finance to produce an expository evaluation of the 2020 projected EU-BAU (business-as-usual) electricity generating mix. We locate optimal generating portfolios that reduce cost and market risk as well as CO2 emissions relative to the BAU mix. Optimal generating portfolios generally include greater shares of wind, nuclear, and other nonfossil technologies that often cost more on a standalone engineering basis, but overall costs and risks are reduced because of the portfolio diversification effect. They also enhance energy security. The benefit streams created by these optimal mixes warrant current investments of about Euro 250 - Euro 500 billion. The analysis further suggests that the optimal 2020 generating mix is constrained by shortages of wind, especially offshore, and possibly nuclear power, so that even small incremental additions of these two technologies will provide sizeable cost and risk reductions. |
| Keywords: | Efficient electricity portfolios; electricity generation; investment |
| JEL: | G11 L52 Q40 Q49 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_007&r=ene |
| By: | Schleich, Joachim (Fraunhofer Institute for Systems and Innovation Research, Karlsruhe, Germany) |
| Abstract: | Improving energy efficiency is seen as a core strategy for a sustainable energy system, because it may contribute to cost savings for companies and private households, cost-effectively reduces greenhouse gas emissions and other pollutants, increases security of supply for required energy services. The thrust of engineering-economic analyses suggests that there is a large potential for energy efficiency measures that are also profitable, but - because of barriers to energy efficiency - are not being adopted. This paper presents a taxonomy of these barriers, distinguishing between barriers that would warrant policy intervention and those that do not. As a case study, barriers to energy efficiency in the German higher education sector and measures to overcome those barriers are discussed. |
| Keywords: | Energy efficiency; barriers; energy policy |
| JEL: | G31 Q40 Q49 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_010&r=ene |
| By: | Ambra POGGI; Massimo FLORIO |
| Abstract: | In the late 1990s many European countries started comprehensive restructuring of their energy industries. The typical ingredients of the reforms are full or partial privatization, vertical disintegration, liberalization. In this paper we focus on the way in which energy sector reforms affect social affordability. The aim of this paper is to analyze the effects of energy reforms on the household probability of experiencing utilities deprivation (that is, to be unable to pay scheduled utility bills) in seven European Countries: Denmark, Belgium, France, Ireland, Italy, Netherlands and Spain. The period of analysis is 1994-2001. We also explore the dynamics of utilities deprivations focusing on the causes behind deprivation persistence. We differentiate between household heterogeneity and true state dependence. Then, controlling for observed and unobserved heterogeneity, we use the magnitude of average partial effects to investigate the relevance of any state dependence and the impact of energy sector reforms on the probability of experiencing utilities deprivations and on state dependence. We find evidence that vertical disintegration in the energy sector and privatization increase the household probability of experiencing utilities deprivation. Moreover, vertical disintegration also increases the household persistence in the status of deprivation. |
| Keywords: | Deprivation, utilities, privatization, liberalization, vertical disintegration, true state persistence |
| JEL: | L97 I31 C23 C25 |
| Date: | 2008–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:mil:wpdepa:2008-20&r=ene |
| By: | Theologos Dergiades (Department of Economics, University of Macedonia); Lefteris Tsoulfidis (Department of Economics, University of Macedonia) |
| Abstract: | This article reexamines the long-run and short-run determinants of the aggregate residential demand for electricity in Greece using data spanning the period 1964-2006 and the recently advanced ARDL cointegrating procedure that has not been hitherto tried to Greek data. The results of the econometric analysis show the presence of an equilibrium relationship between the variables involved in both the long-run and short-run periods. These findings may shed new light on the contemplation of policies, which direct the residential demand for electricity to desired goals. |
| Keywords: | Electricity Demand, ARDL, Cointegration. |
| JEL: | C22 Q41 Q43 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2009_12&r=ene |
| By: | Lidia CERIANI; Raffaele DORONZO; Massimo FLORIO |
| Abstract: | In this paper we examine the emergence over the last two decades in the EU of a dominant policy paradigm on the reform of network industries. We consider the broad recommendations by the OECD and the European Commission, and the Directives adopted by the European Union on the reform of some public services, such as electricity, gas, and telecom. These recommendations, in their strongest form, advocate the divestiture of public ownership (openly by the OECD, but not by the EC), unbundling (by both organizations, but with differences across sectors), liberalization (again by both organization, but with variations in the role of market regulation). We contrast the predictions and prescriptions of the paradigm, with a theoretical discussion of the welfare impact of the reforms. This discussion, based on a review of some standard microeconomic assumptions on the role of ownership, economies of scale and scope, governance, and market forms, shows that the dominant policy paradigm oversimplifies a very complex story. We suggest that the actual success of the reform is conditional to a large number of economic and institutional factors, and that it is far from obvious that the adoption of the same policy pattern in any and all the EU countries is always welfare improving. Empirical analysis does not support the paradigm. |
| Keywords: | Privatization, unbundling, liberalization, network industries |
| JEL: | L10 L22 L32 L51 |
| Date: | 2009–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:mil:wpdepa:2009-09&r=ene |
| By: | Lidia CERIANI; Massimo FLORIO |
| Abstract: | Starting from an industry where production is provided by a public monopolist, we look at the effects on the consumers' surplus of a sequence of reforms in network industry. Using a simple comparative statics framework, we find indifference conditions in consumers' surplus between respectively public monopoly, unregulated private monopoly, regulated private monopoly, vertically disintegrated monopoly, duopoly and liberalized market. The results are determined by the relative size of the x-inefficiencies of the public monopolist, allocative inefficiencies of private monopoly, the cost of unbundling and costs related to establishing a competitive market. |
| Keywords: | Privatization, unbundling, liberalization, network industries |
| JEL: | D40 L51 L32 L33 |
| Date: | 2008–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:mil:wpdepa:2008-23&r=ene |
| By: | Vazquez, Miguel; Barquín, Julián |
| Abstract: | Most popular approaches for modeling electricity prices rely at present on microeconomics rationale. They aim to study the interaction between decisions of agents in the market, and usually represent the impact of uncertainty in such decisions in a simplified way. The usual methodology of microeconomics models is the study of the interaction between the profit-maximization problems faced by each of the firms. On the other hand, there is a growing literature that describes the power price dynamics from the financial standpoint, through the statement of a more or less complex stochastic process. However, this theoretical framework is based on the assumption of perfect competition, and therefore the stochastic process may not capture important features of price dynamics. In this paper, we suggest a mixed approach, in the sense that the price is thought of as the composition of a long-term component, where the strategic behavior is represented, and a short-term source of uncertainty that agents cannot take into account when deciding their strategies. The complex distributional implications of the oligopolistic behavior of market players are then given by the long-term-component dynamics, whereas the short-term component captures the uncertainty related to the operation of power systems. In addition, this modeling approach allows for a direct description of the long-term volatility of power markets, which is usually hard to estimate through statistical models. |
| Keywords: | power markets; pricing models; market power; long-term/short-term decomposition |
| JEL: | C32 L13 Q40 C15 G13 C72 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15629&r=ene |
| By: | Carlo Vittorio FIORIO; Massimo FLORIO |
| Abstract: | The research question addressed by this paper is a simple one: are European consumers happy with the electricity supply services after two decades of reforms? We focus on self-assessed consumers’ satisfaction with electricity prices as reported in three waves of Eurobarometer survey, 2000-2002-2004, conditioning on some indicators of public ownership, vertical integration and entry regulation across the EU-15. Our results do not support a systematic association between consumers’ satisfaction and the complete reform package made of privatisation, vertical disintegration and liberalisation. These results, which have been extensively tested for robustness, raise various concerns about the way the reform processes have been undertaken and provides some warnings about possible effects on public support for public utility reforms. |
| Keywords: | Consumers’ satisfaction, electricity, privatisation, vertical disintegration, liberalisation |
| JEL: | L94 L95 L96 L50 |
| Date: | 2008–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:mil:wpdepa:2008-12&r=ene |
| By: | Jaccard, Mark (School of Resource and Environmental Management at Simon Fraser University, Vancouver) |
| Abstract: | Many people believe we must quickly wean ourselves from fossil fuels to save the planet from environmental catastrophe, wars and economic collapse. However, we have the technological capability to use fossil fuels without emitting climate-threatening greenhouse gases or other pollutants. The natural transition from conventional oil and gas to unconventional oil, unconventional gas and coal for producing electricity, hydrogen and cleaner-burning fuels will decrease energy dependence on politically unstable regions. In addition, our vast fossil fuel resources, perhaps especially coal, are likely to remain among the cheapest sources of clean energy for the next century and perhaps longer, which is critical for the economic and social development of the world's poorer countries. By buying time for increasing energy efficiency, developing renewable energy technologies and making nuclear power more attractive, fossil fuels will play a key role in humanity's quest for a sustainable energy system. |
| Keywords: | Sustainable energy systems; clean fossil fuels |
| JEL: | Q40 Q42 Q55 Q56 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_004&r=ene |
| By: | Yangbo Du; John E. Parsons |
| Abstract: | We update the cost of nuclear power as calculated in the MIT (2003) Future of Nuclear Power study. Our main focus is on the changing cost of construction of new plants. The MIT (2003) study provided useful data on the cost of then recent builds in Japan and the Republic of Korea. We provide similar data on later builds in Japan and the Republic of Korea as well as a careful analysis of the forecasted costs on some recently proposed plants in the US. Using the updated cost of construction, we calculate a levelized cost of electricity from nuclear power. We also update the cost of electricity from coal- and gas-fired power plants and compare the levelized costs of nuclear, coal and gas. The results show that the cost of constructing a nuclear plant have approximately doubled. The cost of constructing coal-fired plants has also increased, although perhaps just as importantly, the cost of the coal itself spiked dramatically, too. Capital costs are a much smaller fraction of the cost of electricity from gas, so it is the recent spike in the price of natural gas that have contributed to the increased cost of electricity. These results document changing prices leading up to the current economic and financial crisis, and do not incorporate how this crisis may be currently affecting prices. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0904&r=ene |
| By: | Matti Liski; Juan-Pablo Montero |
| Abstract: | It has been long recognized that an exhaustible-resource monopsonist faces a commitment problem similar to that of a durable-good monopolist. Indeed, Hörner and Kamien (2004) demonstrate that the two problems are formally equivalent under full commitment. We show that there is no such equivalence in the absence of commitment. The existence of a choke price at which the monopsonist adopts the substitute (backstop) supply divides the surplus between the buyer and the sellers in a way that is unique to the resource model. Sellers receive a surplus share independently of their cost heterogeneity; a result in sharp contrast with the durable-good monopoly logic. The resource buyer can distort the equilibrium through delayed purchases, but the Coase conjecture arises under extreme patience (zero discount rate). |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0903&r=ene |
| By: | Reitz, Stefan; Ruelke, Jan; Stadtmann, Georg |
| Abstract: | We use oil price forecasts from the Consensus Economic Forecast poll to analyze how forecaster build their expectations. Our findings point into the direction that the extrapolative as well as the regressive expectation formation hypothesis play a role. Standard measures of forecast accuracy reveal forecasters' underperformance relative to the random-walk benchmark. However, it seems that this result might be biased due to peso problems. |
| Keywords: | Oil price; survey data; forecast bias; peso problem |
| JEL: | D84 |
| Date: | 2009–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15607&r=ene |
| By: | Harb, Nasri |
| Abstract: | This paper studies the long and short-run relationship between oil exports, non oil GDP and investment in five major oil exporting countries. Its goal is to verify the effect of natural resources exports on the economic performance. It considers the effect of cross sectional correlations and uses the corresponding panel unit root tests to study the long-run characteristics of our series. The results show that resources' exports have no long-run relationship with the macro variables. A VAR analysis is used to estimate the short-run dynamics and shows that the effect of oil exports on those variables depends on local policies. |
| Keywords: | GCC; Natural Resources; Oil; Productivity; Investment; Labor Force; Unit root; Growth; Cointegration; VAR. |
| JEL: | O43 C23 C22 O40 F43 |
| Date: | 2008–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15576&r=ene |
| By: | Paul D. Sclavounos; Per Einar Ellefsen |
| Abstract: | An arbitrage free multi-factor model is developed of the correlated forward curves of the crude oil, gasoline, heating oil and tanker shipping markets. Futures contracts trading on public exchanges are used as the primary underlying securities for the development of a multi-factor Gaussian Heath-Jarrow-Morton (HJM) model for the dynamic evolution of the correlated forward curves. An intra- and inter-commodity Principal Component Analysis (PCA) is carried out in order to isolate seasonality and identify a small number of independent factors driving each commodity market. The cross-commodity correlation of the factors is estimated by a two step PCA. The factor volatilities and cross-commodity factor correlations are studied in order to identify stable parametric models, heteroskedasticity and seasonality in the factor volatilities and correlations. The model leads to explicit stochastic differential equations governing the short term and long term factors driving the price of the spot commodity under the risk neutral measure. Risk premia are absent, consistently with HJM arbitrage free framework, as they are imbedded in the factor volatilities and correlations estimated by the PCA. The use of the model is described for the pricing of derivatives written on inter- and intra-commodity futures spreads, Asian options, the valuation and hedging of energy and shipping assets, the fuel efficient navigation of shipping fleets and use in corporate risk management. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0902&r=ene |
| By: | Francesco Caselli; Tom Cunningham |
| Abstract: | We discuss political economy mechanisms which can explain the resource curse, in which anincrease in the size of resource rents causes a decrease in the economy's total value added.We identify a number of channels through which resource rents will alter the incentives of apolitical leader. Some of these induce greater investment by the leader in assets that favourgrowth (infrastructure, rule of law, etc.), others lead to a potentially catastrophic drop in suchactivities. As a result, the effect of resource abundance can be highly non-monotonic. Weargue that it is critical to understand how resources affect the leader's "survival function", i.e.the reduced-form probability of retaining power. We also briefly survey decentralisedmechanisms, in which rents induce a reallocation of labour by private agents, crowding outproductive activity more than proportionately. We argue that these mechanisms cannot befully understood without simultaneously studying leader behaviour. |
| Keywords: | Natural resource endowment, resource curse, political economy |
| JEL: | O11 O13 P26 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0913&r=ene |
| By: | Fan, Qinbin; Jahan-Parvar, Mohammad R. |
| Abstract: | This paper takes a closer look at the puzzle uncovered by Driesprong et al. (2008) and finds empirical support for the "oil effect" in equity returns. Using forty nine US industry-level returns series and changes in oil spot and future prices, we address whether industry-level returns are predictable. We find that using changes in oil spot prices, the answer is yes; but for just under a fifth of industries in our sample. We find weak support for the predictability of industry-level returns based on changes in oil futures prices. Our findings are consistent with the delayed reaction to new information, a variant of Hong and Stein (1996)'s "underreaction" hypothesis. |
| Keywords: | Industry-level returns; Oil prices; Return predictability; Underreaction |
| JEL: | G14 G11 G12 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15670&r=ene |
| By: | Fattouh, Bassam (School of Oriental and African Studies (SOAS), University of London, and Senior Research Fellow at the Oxford Institute for Energy Studies (OIES).) |
| Abstract: | This paper discusses three main approaches for analysing oil prices: non-structural models, the supplydemand framework, and the informal approach. Each approach emphasises a certain set of drivers of oil prices. While non-structural models rest on the theory of exhaustible resources, the supply-demand framework uses behavioural equations that link oil demand and supply to its various determinants. The informal approach focuses on the specifics of oil market history in explaining oil prices. Although all approaches provide useful insights on how the world oil market functions, they suffer from major limitations especially when used for long-term projections. Thus, pushing hard for policies based on such projections defeats the purpose of such models and may result in misguided policies. |
| Keywords: | Oil prices; forecasting models |
| JEL: | C53 Q40 Q41 Q43 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_006&r=ene |
| By: | Roald A.A. Suurs; Marko P. Hekkert; Sander Kieboom; Ruud E.H.M. Smits |
| Abstract: | This study contributes to insights into mechanisms that influence the successes and failures of emerging energy technologies. It is assumed that for an emerging technology to fruitfully develop, it should be fostered by a Technological Innovation System (TIS), which is the network of actors, institutions and technologies in which it is embedded. For an emerging technology a TIS has yet to be built up. The research focuses on the dynamics of this build-up process by mapping the development of seven key activities: so-called system functions. The main contribution revolves around the notion of cumulative causation, or the phenomenon that the build-up of a TIS may accelerate due to system functions reinforcing each other over time. As an empirical basis, an analysis is provided of the historical development of the TIS around automotive natural gas technology in the Netherlands (1970-2007). The results show that this TIS undergoes a gradual build-up in the 1970s, followed by a breakdown in the 1980s and, again, a build-up from 2000-2007. It is shown that, underlying these trends, there are different forms of cumulative causation, here called motors of innovation. The study provides strategic insights for practitioners that aspire to support such motors of innovation. |
| Keywords: | functions of technological innovation systems; cumulative causation; automotive natural gas. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:uis:wpaper:0909&r=ene |
| By: | Hubert, Franz (Humboldt Universitat zu Berlin) |
| Abstract: | This paper provides a quantitative analysis of power relations and strategic investment in the transport system for Russian gas. First, we analyse how the architecture of the transport system determines Russia's bargaining power vis-a-vis (potential) transit countries. By applying the Shapley value as a solution for multilateral bargaining we find that competition between transit countries is of little strategic importance compared to direct Russian access to its customers in Western Europe. Second, we develop a dynamic model of strategic investment. We find that the failure to include Belarus and Ukraine into a framework for international contract enforcement resulted in underinvestment in cheap pipelines and overinvestment in expensive ones. As capacities are increased to gain leverage over transit countries, customers in Western Europe benefit in terms of lower prices and higher supply security. |
| Keywords: | Strategic investment; gas pipilenes; coalition formation |
| JEL: | C71 E40 L14 L95 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_009&r=ene |
| By: | Dey, Dipankar |
| Abstract: | In 21st century, as energy and food supplies are increasingly becoming dependent on each other, any strategy to manage these two basic human needs should be formulated collectively –not in isolation. The ‘green revolution’ of 1950s paved the way for ascertaining corporate control on food and water. Through the enactment and subsequent ratification of Kyoto Protocol, the corporate hegemony on air and energy has been established firmly. During last hundred and fifty odd years, a symbiotic relationship between the state and large corporations was developed. The transnational corporations are trying to break away from such dependence on state and emerge as the dominant force to control and manage the global market. This study tries to explain the consequences of this changing relation between the ‘state’ and ‘corporations’ on the food and energy needs of the citizens. It also analyses various issues pertaining to the energy supplies during the next few decades of the 21st century. The paper concludes that in future, the civil society organizations (CSOs) will play an important role in steering the course of society especially in the allocation and distribution of basic human necessities like food and energy. |
| Keywords: | Electricity retailing; food retailing; renewable energy; decentralized generation; civil society; multilateral organization; small and micro enterprise (sme); SMEs |
| JEL: | L30 O13 Q01 O1 O30 N70 Q40 L94 |
| Date: | 2009–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15517&r=ene |
| By: | Alario, Juan (European Investment Bank, Projects Directorate) |
| Abstract: | EU energy policies have changed focus in the last few years with a view to substantially reducing energy import dependency and greenhouse gas emissions. The EU Commission has played a leading role in defining the new orientations. The implementation of the EU policy objectives approved by the Council of March 2007 will require a substantial expansion of energy investments. However, the degree of uncertainty affecting investment decisions remains high, notably in relation to the pricing of CO2 and high energy-price volatility. To make the necessary investment in lowcarbon technologies happen, energy policies need to establish a credible long-term framework that reduces uncertainties. |
| Keywords: | EU policy objectives; energy investments |
| JEL: | Q40 Q48 Q49 Q58 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_005&r=ene |
| By: | Mulder, Machiel (CE Delft.); ten Cate, Arie (CPB Netherlands Bureau for Economic Policy Analysis); Zwart, Gijsbert Zwart (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | This paper analyses the welfare effects of two policies directed at the security of energy supply: investments in strategic petroleum reserves and a cap on the production of gas from the largest Dutch gas field. Market failures can justify such policies, in particular failure of individual consumers to account for their impact on energy prices and import dependency and, hence, the vulnerability of a country to geopolitical conflicts. But as the costs of investing in strategic reserves and capping gas production are not negligible, these options are welfare enhancing only in specific circumstances. Generally, measures to improve the functioning of energy markets promise to achieve more than investment-intensive measures or those restricting options of profit-maximising agents. However, policy makers might find it politically expedient to adopt rather than reject inefficient security-of-supply policies. |
| Keywords: | Strategic reserve; energy policy; cost-benefit analysis |
| JEL: | Q40 Q43 Q48 Q49 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_008&r=ene |
| By: | Okey, Mawussé Komlagan Nézan |
| Abstract: | This paper analyze the causal relationship between energy consumption and economic growth,as well as the relationship between energy sources for a panel of four WAEMU countries; Benin, Côte d’Ivoire, Senegal and Togo, for the period 1970-2005. Econometric analysis results indicate that there are: a bi-directional causality between oil consumption and economic growth, for the panel as a whole, but no causality between electricity and economic growth, and no substitution between energy sources at the short run. At the long run, there is a bi-directional causality between economic growth and both the energy sources which become substitutable. These results not only underline the energy dependence of the economic growth, and the rigidity of energy consumption behaviors of these four countries at the short run, but also support regional energy policies which must take account some countries specificities. |
| Keywords: | energy consumption; economic growth; panel; WAEMU |
| JEL: | O13 Q40 C33 |
| Date: | 2009–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15521&r=ene |
| By: | Dorothée Boccanfuso (GREDI, Faculte d'administration, Université de Sherbrooke); Antonio Estache (European Centre for Advanced Research in Economics and Statistics at the Free University of Brussels); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke) |
| Abstract: | In this paper we present an analysis of distributional impact analysis of climate change policies envisaged or implemented to reduce greenhouse gasses emissions on Senegal. We consider policies implemented in developed countries (namely the ones engaged in the Kyoto protocol) and their impact on a developing country. Moreover, we simulate a diminishing productivity of land used in agriculture as a potential result of CC for Senegal. This country is exposed to the direct consequences of CC and is vulnerable to changes in world prices of energy given is lack of substitution capacity. According to Winters et al (1998), countries with this profile will bear the greatest burden of CC and its mitigating policies. Our results reveal slight increases in poverty when world price of fossil fuels increase and the negative impact are amplified with decreases in land productivity. However, subsidizing electricity consumption to protect consumers for price world price increases in fossil fuels provides a weak cushion to poverty increase. |
| Keywords: | Global warming, environmental policies, income distribution, developing countries |
| JEL: | Q53 D58 Q54 Q58 I32 |
| Date: | 2009–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:09-11&r=ene |
| By: | Gilbert E. Metcalf |
| Abstract: | The U.S. tax code provides a number of subsidies for low-carbon technologies. I discuss the difficulties of achieving key policy goals with subsidies as opposed to using taxes to raise the price of pollution-related activities. In particular, subsidies lower the cost of energy (on average) rather than raising it. Thus consumer demand responses work at cross purposes to the goal of reducing emissions (especially as average cost pricing is used for electricity). Second, it is difficult to achieve technology neutrality with subsidies -- here defined as an equal subsidy cost per ton of CO2 avoided. Third, many subsidies are inframarginal. Finally, subsidies often suffer from unintended interactions with other policies. I conclude with some observations on the use of price-based instruments. In particular I discuss how a carbon tax could be designed to achieve environmental goals of emission caps over a control period. |
| JEL: | H23 Q48 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15054&r=ene |
| By: | Benjamin Dachis (C.D. Howe Institute) |
| Abstract: | In pursuit of greenhouse gas (GHG) emissions reductions, policymakers in some Canadian provinces are contemplating a low-carbon fuel standard (LCFS), a regulation that would require transportation fuel providers to distribute a mix of fuel that, on average, emitted a declining amount of GHG per unit of energy produced. This report examines the drawbacks of the LCFS concept and suggests that economy-wide measures would be a better way to reduce GHG emissions. |
| Keywords: | economic growth and innovation, cap-and-trade, transportation fuel providers |
| JEL: | Q4 Q55 L91 Q48 Q54 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cdh:ebrief:80&r=ene |
| By: | Kolev, Atanas (European Investment Bank, Economic and Financial Studies); Riess, Armin (European Investment Bank, Economic and Financial Studies) |
| Abstract: | Recognising that environmental and technology externalities affect the development of renewable energy technologies, this paper illustrates how environmental policies induce technological change and how market failures that hinder technological progress weaken the impact of environmental policies on technological change; examines the rationale for and type of policies in support of renewables at an early stage of their commercialisation; analyses to what extent so-called experience curves enlighten the debate on the rationale of such policies; and - assuming that early-stage renewables cannot establish themselves in the market - develops a method for assessing the economics of renewable energy projects based on new technologies. |
| Keywords: | Environmental externalities; learning; renewables |
| JEL: | L52 O38 Q40 Q48 |
| Date: | 2007–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2007_012&r=ene |
| By: | Meredith Fowlie; Stephen P. Holland; Erin T. Mansur |
| Abstract: | A perceived advantage of cap-and-trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible. However, increased compliance flexibility can also result in an inequitable distribution of pollution. We investigate these issues in the context of Southern California's RECLAIM program. We match facilities in RECLAIM with similar California facilities also located in non-attainment areas. Our results indicate that emissions fell approximately 24 percent, on average, at RECLAIM facilities relative to our counterfactual. Furthermore, we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics. |
| JEL: | L5 Q52 Q53 R20 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15082&r=ene |
| By: | Andrew Leach; Charles F. Mason; Klaas van't Veld |
| Abstract: | In this paper, we present what is to our knowledge the first theoretical economic analysis of CO2- enhanced oil recovery (EOR). This technique, which has been used successfully in a number of oil plays (notably in West Texas, Wyoming, and Saskatchewan), entails injection of CO2 into mature oil fields in a manner that reduces the oil's viscosity, thereby enhancing the rate of extraction. As part of this process, significant quantities of CO2 remain sequestered in the reservoir. If CO2 emissions are regulated, oil producers using EOR should therefore be able to earn sequestration credits in addition to oil revenues. We develop a theoretical framework that analyzes the dynamic co-optimization of oil extraction and CO2 sequestration, through the producer's choice at each point in time of an optimal CO2 fraction in the injection stream (the control variable). We find that the optimal fraction is likely to decline monotonically over time, and reach zero before the optimal termination time. Numerical simulations, based on an ongoing EOR project in Wyoming, confirm this result. They show also that cumulative sequestration is positively related to the oil price, and is in fact much more responsive to oil-price increases than to increases in the carbon tax. Only at very high taxes does a tradeoff between oil output and sequestration arise. |
| JEL: | Q32 Q40 Q54 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15035&r=ene |
| By: | Joseph E. Aldy; Alan J. Krupnick; Richard G. Newell; Ian W.H. Parry; William A. Pizer |
| Abstract: | This paper provides an exhaustive review of critical issues in the design of climate mitigation policy by pulling together key findings and controversies from diverse literatures on mitigation costs, damage valuation, policy instrument choice, technological innovation, and international climate policy. We begin with the broadest issue of how high assessments suggest the near and medium term price on greenhouse gases would need to be, both under cost-effective stabilization of global climate and under net benefit maximization or Pigouvian emissions pricing. The remainder of the paper focuses on the appropriate scope of regulation, issues in policy instrument choice, complementary technology policy, and international policy architectures. |
| JEL: | H23 Q48 Q54 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15022&r=ene |
| By: | Marius-Cristian Frunza (Centre d'Economie de la Sorbonne et Sagacarbon); Dominique Guegan (Centre d'Economie de la Sorbonne - Paris School of Economics) |
| 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:mse:cesdoc:09038&r=ene |
| By: | Ralf Martin; Ulrich J. Wagner; Laure B. de Preux |
| Abstract: | We estimate the impacts of an energy tax - the Climate Change Levy (CCL) - on the manufacturing sectorusing panel data from the UK production census. Our identification strategy builds on the comparison of trendsin outcomes between plants subject to the CCL and plants that were granted an 80% discount on the levy afterjoining a so-called Climate Change Agreement (CCA). Since the CCAs stipulate specific targets for energyusage or carbon emissions, this comparison yields a lower bound on the impact of the discount. To address alikely selection endogeneity in CCA participation, we adopt an IV approach that exploits exogenous variation inpollution discharges that determined eligibility for CCA participation. We find robust evidence that CCAparticipation had a strong positive impact on growth in both energy intensity and energy expenditures. Ananalysis of fuel choices at the plant level reveals that this effect is mainly driven by stronger growth inelectricity use and translates into a positive impact on CO2 emissions. We do not find any statisticallysignificant impacts of the tax on employment, gross output or total factor productivity. We conclude that, hadthe CCL been implemented at full rate for all businesses, further cuts in energy use of substantial magnitudecould have been achieved without jeopardizing economic performance. |
| Keywords: | Climate change, Climate Change Levy (CCL), Climate Change Agreement (CCA), trends, firmbehaviour |
| JEL: | Q41 Q48 Q54 D21 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0917&r=ene |
| By: | Eliza M. Lis (WHU - Otto Beisheim School of Management, Chair of Macroeconomics, Burgplatz 2, D-56179 Vallendar, Germany.); Christiane Nickel (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper explores implications of climate change for fiscal policy by assessing the impact of large scale extreme weather events on changes in public budgets. We apply alternative measures for large scale extreme weather events and conclude that the budgetary impact of such events ranges between 0.23% and 1.1% of GDP depending on the country group. Developing countries face a much larger effect on changes in budget balances following an extreme weather event than do advanced economies. Based on these findings, we discuss implications for fiscal policy and publicly-provided disaster insurance. Our policy conclusions point to the enhanced need to reach and maintain sound fiscal positions given that climate change is expected to cause an increase in the frequency and severity of natural disasters. JEL Classification: Q54, Q58, F59, H87. |
| Keywords: | Global warming, climate change, fiscal sustainability, disasters. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901055&r=ene |
| By: | Zhang, ZhongXiang |
| Abstract: | Given that China is already the world’s largest carbon emitter and its emissions continue to rise rapidly in line with its industrialization and urbanization, there is no disagreement that China eventually needs to take on binding greenhouse gas emissions caps. However, the key challenges are when that would occur and what credible interim targets China would need to take on during this transition period. This paper takes these challenges by mapping out the roadmap for China’s specific commitments towards 2050. Specifically, I suggest that China make credible quantified domestic commitments during the second commitment period, commit to voluntary no lose targets during the third commitment period, adopt binding carbon intensity targets during the fourth commitment period, and take on binding emissions caps starting the fifth commitment period and aimed for the global convergence of per capita emissions by 2050. These proposed commitments should be viewed as China’s political commitments, not necessarily China’s actual takings in the ongoing international climate change negotiations, in order to break the current political impasse between developed and developing countries. It is worthwhile China considering these political commitments either on its own or through a joint statement with U.S. and other major countries, provided that a number of conditions can be worked out. These commitments are principles, and still leave flexibility for China to work out details as international climate change negotiations move on. But in the meantime, they signal well ahead that China is seriously committed to addressing climate change issues, alleviate, if not completely remove, U.S. and other industrialized country’s concerns about when China would get in, an indication that the whole world has long awaited from China, help U.S. to take on long-expected emissions commitments, and thus pave the way for reaching an international climate agreement at Copenhagen. |
| Keywords: | Carbon intensity target; Binding emissions caps; Post-Kyoto climate negotiations; Energy saving; Renewable energy; Clean development mechanism; China; USA; India |
| JEL: | Q52 Q48 O53 Q42 Q54 Q58 |
| Date: | 2009–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15587&r=ene |