nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒07‒17
twelve papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. A structural risk-neutral model of electricity prices By René Aid; Luciano Campi; Adrien Nguyen Huu; Nizar Touzi
  2. A Dynamic Analysis of the Green Electricity Fund:Threshold Models Revisited By Nobuyuki Ito; Kenji Takeuchi; Takahiro Tsuge; Atsuo Kishimoto
  3. Pumped storage and energy saving By Claude Crampes; Michel Moreaux
  4. Technological Change and the Roaring Twenties: A Neoclassical Perspective By Sharon Harrison; Mark Weder
  6. The economic effects of oil prices shocks on the UK manufacturing and services sector By Guidi, Francesco
  7. The Responsiveness of Remittances to the Oil Price: The Case of the GCC By Naufal, George; Termos, Ali
  8. Regolamentazione e gestione del rischio nel settore agroalimentare. Alcune riflessioni sull'approccio economico al Principio di Precauzione By Alessio Cavicchi
  9. Emissions Trading: What Makes It Work? By Julien Chevallier
  10. Market Power in Pollution Permit Markets By Juan Pablo Montero
  11. International Entrepreneurship and Technology Transfer: The CDM´s Reality in China By Aleluia, João; Leitão, João
  12. Sensitivity of Carbon Emission Estimates from Indirect Land-Use Change By Jerome Dumortier; Dermot J. Hayes; Miguel Carriquiry; Fengxia Dong; Xiaodong Du; Amani Elobeid; Jacinto F. Fabiosa; Simla Tokgoz

  1. 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 Nguyen Huu (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 market of fuels, 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 dynamics of the electricity demand at the maturity $T$, and on the random available capacity of each production means. Our model explains, in a stylized fact, how the prices of different fuels together with the demand combine to produce electricity prices. This modeling methodology allows one to transfer to electricity prices the risk-neutral probabilities of the market of fuels and under the hypothesis of independence between demand and outages on one hand, and prices of fuels on the other hand, it provides a regression-type relation between electricity forward prices and forward prices of fuels. 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; fuel prices; risk-neutral probability; no-arbitrage pricing; forward contracts
    Date: 2009–06
  2. By: Nobuyuki Ito (Graduate School of Economics, Kobe University, Japan); Kenji Takeuchi (Graduate School of Economics, Kobe University); Takahiro Tsuge (Faculty of Economics, Konan University, Japan); Atsuo Kishimoto (National Institute of Advanced Industrial Science and Technology, Japan)
    Abstract: This study applies a threshold model proposed by Granovetter (1978) to analyze the dynamic diffusion process of donating behavior for renewable energy. Using data on people's willingness to donate for renewable energy under various predicted participation rates, we simulate how herd behavior spreads and the participation rate reaches the equilibrium. The participation rate at the equilibrium is estimated as 66.46% when the suggested donation is 500 yen, while it is 25.88% when the suggested amount is 1,000 yen. The influence of environmentalism and altruism is also examined, and we find that these motivations increase the participation rate 43.38% on average.
    Keywords: Green electricity fund; Dynamic analysis; Contingent Valuation; Threshold model
    JEL: H41 Q42 Q51
    Date: 2009–06
  3. By: Claude Crampes; Michel Moreaux
    Date: 2009–07
  4. By: Sharon Harrison (Barnard College, Columbia University); Mark Weder (University of Adelaide)
    Abstract: Annualized output growth in the United States was highest during the 1920s, as compared to any other of Fields (2003, 2009) growth cycles. This motivates us to address the causes of the Roaring Twenties in the United States. In particular, we use a version of the real business cycle model to test the hypothesis that an extraordinary pace of productivity growth was the driving factor. Our motivation comes from the abundance of evidence of signi…cant technological progress during this period, fed by innovations in manufacturing and the widespread introduction of electricity. Our estimated total factor productivity series generate arti…cial model output that shows high conformity with the data: the model economy successfully replicates the boom years from 1922-1929.
    Keywords: Real Business Cycles, Roaring Twenties.
    JEL: E32 N12
    Date: 2009–04
  5. By: Paresh Kumar Narayan; Russell Smyth
    Abstract: This paper applies univariate and panel data unit root tests to annual panel data for 182 countries over the period 1979-2000 to examine the stationarity properties of per capita energy consumption. The univariate unit root test can only reject the unit root null for 29 per cent of the countries at the 10 per cent level or better without a trend and 37 per cent of the countries at the 10 per cent level or better with a trend. However, it is often argued that unit root tests have low power with short spans of data and therefore failure to reject the unit root null should be treated with caution. When we apply the panel data unit root test we find overwhelming evidence that energy consumption is stationary. We discuss the implications of these findings for econometric modeling and policy formulation.
    Keywords: Energy consumption, Unit roots, Panel data
    Date: 2009–05
  6. By: Guidi, Francesco
    Abstract: This paper investigates the relationship between changes in oil prices and the UK’s manufacturing and services sector performances. Only a few studies have been conducted at the sector level: the goal of this paper is to contribute in that direction. After presenting review of existing literature about oil effects on the UK’s sectors of manufacturing and services, an econometric analysis is carried out. In a more detailed analysis, three sets of vector autoregressive (VAR) models are employed using linear and non-linear oil price specifications among several key macroeconomic variables. From the linear oil price specification VAR model, the impulse response function reveals that oil price movement causes positive effects in both the output of manufacturing and services sectors. The variance decomposition shows that oil prices are quite important as a cause of the variance of the UK services sector output, while they do not have such a large role in the variance of the UK’s manufacturing output. From the asymmetric specification, it has been found that positive oil price changes determine a consistent contraction in manufacturing output, while the services sector does not seem to be affected by increases. Alternatively, negative oil price changes, show that manufacturing output does not increase so much despite a decrease in oil prices. The services sector is much more affected by oil prices decreases than increases. Finally considering the net oil price increase (NOPI) specification, it has been found that the manufacturing sector is much more affected by oil price changes than the services sector.
    Keywords: Oil shock; VAR; impulse response function; variance decomposition;
    JEL: C32 L16
    Date: 2009
  7. By: Naufal, George (American University of Sharjah); Termos, Ali (American University of Sharjah)
    Abstract: We investigate the responsiveness of remittances from the Gulf Cooperation Council (GCC) countries to the changes in the price of crude oil. Most of the GCC countries rank in the top 20 remitting countries in the world. We find that oil price elasticity of remittances is around 0.4. While most studies have examined the impact of remittances on the real economic activities in the receiving countries, this study emphasises the impact of remittances on the remitting countries. We examine various policy implications with regard to macroeconomic shocks, monetary policy and fiscal policy of the GCC countries.
    Keywords: elasticity, remittances, oil price, GCC
    JEL: F24 P22 N15
    Date: 2009–07
  8. By: Alessio Cavicchi (Università di Macerata)
    Abstract: <div style="text-align: justify;">“Precautionary Principle” is a prominent concept in current scientific debate in the fields of food safety, environmental protection and climate change. In fact during last years, climate and environmental threats and food scares (global warming, BSE, Avian flu, GM foods, etc. . . ) contributed to increase the attention of public opinion and experts toward the application of this principle. The Rio Declaration in 1992 codified for the first time the precautionary approach: “in order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation”. Despite the clear meaning of this statement, its interpretation generated several controversies, mainly about the level of intensity of its application in national and international regulations. Thus, the aim of this work is to give some enlightenments on the economic approach to the problem, according to the framework built by Gollier and Treich in some recent works on economic interpretation of Precautionary Principle. Moreover, a discussion on risk regulatory institutions and strategies of risk management is presented.</div><div style="text-align: justify;"> </div>
    Keywords: rischio,principio di precauzione,valore di quasi-opzione,incertezza
    JEL: Q13 Q18 Q38
    Date: 2009–07
  9. By: Julien Chevallier (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre)
    Abstract: At the stage of international post-Kyoto negotiations, the adoption of ambitious public policies raises an increasing interest, as society has a whole is more concerned by the scale of damages and the potential irreversibilities linked to climate change. The introduction of a tradable permits market in Europe on January 1, 2005, in order to provide incentives to Member-States to take early abatement measures, may be seen as a decisive first step towards that direction. The creation of the EU ETS has indeed revealed the key role played by the European Union in the preservation of the global public good that constitutes the climate. Following a review of current climate policies, and of the negotiations under way at the international level, this article critically discusses the main advantages of introducing environmental regulation tools such as tradable permits markets.
    Keywords: climate change policy; emissions trading; banking borrowing; initial allocation; safety valve
    Date: 2009–07–04
  10. By: Juan Pablo Montero (Instituto de Economía. Pontificia Universidad Católica de Chile.)
    Abstract: As with other commodity markets, markets for trading pollution permits have not been immune to market power concerns. In this paper, I survey the existing literature on market power in permit trading but also contribute with some new results and ideas. <br><br>I start the survey with Hahn’s (1984) dominant-firm (static) model that I then extend to the case in which there are two or more strategic firms that may also strategically interact in the output market, to the case in which current permits can be stored for future use (as in most existing and proposed market designs), to the possibility of collusive behavior, and to the case in which permits are auctioned off instead of allocated for free to firms. <br><br>I finish the paper with a review of empirical evidence on market power, if any, with particular attention to the U.S. sulfur market and the Southern California NOx market.
    Keywords: Market power, emissions trading, pollution permits, storable permits.
    JEL: D40 L13 Q58
    Date: 2009
  11. By: Aleluia, João; Leitão, João
    Abstract: Entrepreneurship as a determinant of economic growth and innovation intensity has been increasingly used by governments for shaping public policies with sustainable development purposes. This chapter positions the Clean Development Mechanism as an example of an international technology transfer mechanism that can stimulate knowledge spillovers in the host economies. Taking as reference the Chinese context, a benchmarking approach is proposed to assess the performance of distinct mechanisms of climate friendly technology transfers. This is particularly relevant since it is an innovative attempt for addressing the caveat found in the literature of international entrepreneurship and technology transfer, especially focused in the need for developing both qualitative and quantitative analyses about distinct experiences in adopting technology transfer mechanisms into developing countries. This is useful not only in the scope of global efforts to mitigate the emission of greenhouse gases, but also in the accomplishment of sustainable development goals of host economies. Moreover, from the current proposal an operative tool is derived for guiding the action of policy makers, managers and practitioners engaged in the field of Energy Entrepreneurship.
    Keywords: Benchmarking; Clean Development Mechanism; CDM; International Entrepreneurship; Technology Transfer.
    JEL: O34 F23 L26 L24
    Date: 2009–06–15
  12. By: Jerome Dumortier; Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Miguel Carriquiry (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Fengxia Dong (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Xiaodong Du (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Simla Tokgoz
    Abstract: We analyze the sensitivity of greenhouse gas (GHG) emissions from land-use change to modifications in assumptions concerning crop area, yield, and deforestation. For this purpose, we run a modified version of the Center for Agricultural and Rural Development (CARD) Agricultural Outlook Model, which was used previously to assess the impacts of energy price increases and biofuel policy changes on land conversion. To calculate the GHG implications of agricultural activity, we use GreenAgSiM, a model developed to evaluate emissions from land conversion and agricultural production. Both models are applied to scenarios that lead to higher US ethanol production. The results are contrasted with the findings of Searchinger et al., and we explain the role of model assumptions to elucidate the differences. We find that the payback period of corn ethanol's carbon debt is sensitive to assumptions concerning land conversion and yield growth and can range from 31 to 180 years.
    Keywords: biofuel, crop yield, greenhouse gas emissions, indirect land-use change.
    Date: 2009–07

This nep-ene issue is ©2009 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.