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on Energy Economics |
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Issue of 2009‒10‒10
nineteen papers chosen by Roger Fouquet Basque Climate Change Centre, Bilbao, Spain |
| By: | Sjoerd Bakker |
| Abstract: | The hydrogen hype of the last decade has passed and it is now seemingly substituted by the electric vehicle hype. A technological hype can have both positive as well as negative consequences. On the one hand it attracts sponsors for technology development but on the other hand the high expectations might result in disappointment and subsequent withdrawal of the sponsors. In this paper I ask the question to what extent the car industry has created the hype and how it has done so. The industry’s role is studied through their prototyping activities and accompanying statements on market entry. I conclude that the car industry has indeed inflated the hype, especially through its public statements on market release after the turn of the millennium. Furthermore, the industry has shown a double repertoire of both highly optimistic and more modest statements. From this I take that statements are used deliberately to serve the industry’s interests whenever needed. Without neglecting the positive outcomes of hype, public and private funding for R&D efforts, more modest promises could serve the development of sustainable mobility better. |
| Keywords: | Fuel cells, hydrogen, hype, automotive industry, electric vehicles |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:uis:wpaper:0914&r=ene |
| By: | Anas, Alex; Timilsina, Govinda R.; Zheng, Siqi |
| Abstract: | Using a nested multinomial logit model of car ownership and personal travel in Beijing circa 2005, this paper compares the effectiveness of different policy instruments to reduce traffic congestion and CO2 emissions. The study shows that a congestion toll is more efficient than a fuel tax in reducing traffic congestion, whereas a fuel tax is more effective as a policy instrument for reducing gasoline consumption and emissions. An improvement in car efficiency would also reduce congestion, fuel consumption, and CO2 emissions significantly; however, this policy benefits only richer households that own a car. Low-income households do better under the fuel tax policy than under the efficiency improvement and congestion toll policies. The congestion toll and fuel tax require the travel cost per mile to more than triple. The responsiveness of aggregate fuel and CO2 are, approximately, a 1 percent drop for each 10 percent rise in the money cost of a car trip. |
| Keywords: | Transport Economics Policy&Planning,Airports and Air Services,Roads&Highways,Transport and Environment,Transport in Urban Areas |
| Date: | 2009–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5068&r=ene |
| By: | Noufel Frikha (PMA - Laboratoire de Probabilités et Modèles Aléatoires - CNRS : UMR7599 - Université Pierre et Marie Curie - Paris VI - Université Denis Diderot - Paris VII); Vincent Lemaire (PMA - Laboratoire de Probabilités et Modèles Aléatoires - CNRS : UMR7599 - Université Pierre et Marie Curie - Paris VI - Université Denis Diderot - Paris VII) |
| Abstract: | The recent liberalization of the electricity and gas markets has resulted in the growth of energy exchanges and modelling problems. In this paper, we modelize jointly gas and electricity spot prices using a mean-reverting model which fits the correlations structures for the two commodities. The dynamics are based on Ornstein processes with parameterized diffusion coefficients. Moreover, using the empirical distributions of the spot prices, we derive a class of such parameterized diffusions which captures the most salient statistical properties: stationarity, spikes and heavy-tailed distributions. The associated calibration procedure is based on standard and efficient statistical tools. We calibrate the model on French for electricity and on UK market for gas, and then simulate some trajectories which reproduce well the observed prices behavior. Finally, we illustrate the importance of the correlation structure and of the presence of spikes by measuring the risk on a power plant portfolio. |
| Date: | 2009–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00421289_v1&r=ene |
| By: | Knetsch, Thomas A.; Molzahn, Alexander |
| Abstract: | The paper studies the short-term effects of energy price hikes on the supply of industrial goods and transport services including the repercussions on remuneration of input factors. While industry had suffered more strongly from the oil price shock of the late 1970s compared with the one of the early 1970s and the 2004-08 upsurge, evidence is reverse for transportation. Regarding the impact on the income distribution, both sectors share the pattern that in the recent episode rising energy costs were more than compensated by falling unit labor costs while in the 1970s cost structures had been strained by expansive wage policy in addition to the oil price shocks. |
| Keywords: | Energy prices,supply of goods and services,income distribution |
| JEL: | E23 E25 Q43 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:200926&r=ene |
| By: | Robert C. York; Zaijin Zhan |
| Abstract: | Over many years rises and fall of world oil prices have been repeatedly reflected in the boom-bust cycles in oil-exporting countries the world over. The recent spectacular rise and equally spectacular fall in prices provides an opportunity to inquire whether anything is different this time. In this paper we limit the analysis to the experience, outlook, and longterm fiscal policy considerations for eight of the world's oil-producing countries in sub- Saharan Africa. Because we are interested in gauging their fiscal vulnerability and sustainability from the angle of managing exhaustible oil wealth, we focus on the non-oil primary balance as the relevant indicator of how initial conditions and resource endowments can influence long-term considerations in several different models of fiscal rules. |
| Keywords: | Cross country analysis , Economic growth , Fiscal policy , Fiscal sustainability , National income , Oil prices , Oil producing countries , Oil production , Oil revenues , Oil sector , Sub-Saharan Africa , |
| Date: | 2009–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/174&r=ene |
| By: | Wojciech Maliszewski |
| Abstract: | The paper presents numerical simulations of various fiscal rules for oil-producing countries. Welfare implications are sensitive to the choice of the social welfare function, initial conditions, and non-oil growth prospects. The distribution of non-oil wealth is important for countries with relatively low oil reserves. Corrections for adjustment costs and uncertainty with respect to oil prices should be applied carefully. While avoiding sharp changes in the fiscal policy stance may be appealing, it is not necessarily optimal if the initial position is unsustainable. Ad hoc rules are shown to perform poorly. The analysis abstracts from several issues critical for developing a practical policy advice and should not be treated as a complete framework. |
| Keywords: | Debt sustainability , Economic growth , Economic models , Fiscal policy , Fiscal sustainability , Nonoil sector , Oil prices , Oil producing countries , Oil revenues , Welfare , |
| Date: | 2009–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/126&r=ene |
| By: | Rickne, Johanna (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Institutional and political characteristics affect the extent to which the real exchange rates of oil-exporting countries co-move with the oil price. In a simple theoretical model, good governance insulates real exchange rates from price volatility by generating a smoother pattern of fiscal spending over the resource price cycle. Empirical tests on a panel of 33 oil-exporting countries provide evidence that countries with high bureaucratic quality, strong and impartial legal systems, democratic governing systems, and more equal income distributions have real exchange rates which co-move less with the oil price. |
| Keywords: | Real Exchange Rate; Commodity Price; Governance; Cross-country Regression; Development |
| JEL: | F31 H11 Q48 |
| Date: | 2009–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0810&r=ene |
| By: | Nicoletta Batini; Eugen Tereanu |
| Abstract: | After a long period of global price stability, in 2008 inflation increased sharply following unprecedented increases in the price of oil and other commodities, notably food. Although inflation remained lower and growth higher in inflation targeting countries than elsewhere, almost everywhere price stability seemed in jeopardy as consumer prices kept surging and central banks struggled to maintain expectations anchored. The rapid drop in energy and food prices that later accompanied the world slowdown helped avert the worse, but inflation stayed high in many inflation targeting countries. This paper uses a small open-economy DSGE model to design the correct monetary policy response to a protracted supply shock of the kind observed today, and explains how to choose optimal policy horizons under such shock. Using a version of the model with Kalman learning, the paper also evaluates the implications of a loss of target credibility, showing how rules must be adjusted when the authorities' commitment to low inflation has been eroded. The appropriate response to future evolutions of the price of oil, including to a large downward correction as recently observed, is also evaluated. |
| Keywords: | Agricultural commodities , Agricultural prices , Central banks , Commodity price fluctuations , Consumer prices , Demand , Economic models , External shocks , Inflation , Inflation targeting , Monetary policy , Oil prices , Price stabilization , |
| Date: | 2009–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/101&r=ene |
| By: | Du, Xiaodong (Sheldon); Hayes, Dermot J.; Yu, Cindy |
| Abstract: | We use Bayesian Markov Chain Monte Carlo methods to investigate the linkage between the volatility of ethanol security prices and the uncertainty surrounding the profitability of ethanol production and the price variations of non-ethanol energy securities. The joint evolution of return and volatility is modeled as a stochastic process that incorporates jumps in both return and volatility. While a strong and significant correlation is found between the volatility of ethanol securities and profit uncertainty from June 2005 to July 2008, the dynamic pattern of ethanol stock volatility is strikingly similar to that of the S&P 500 energy sector index in the more recent period. Our evidence lends support to the findings in the literature on rational learning from uncertainty in determining the equity price and volatility during the adoption and development of a technological innovation. |
| Keywords: | jumps, rational learning, stochastic volatility, technological innovation. |
| Date: | 2009–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:13113&r=ene |
| By: | Xiaodong Du (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Cindy L. Yu |
| Abstract: | We use Bayesian Markov Chain Monte Carlo methods to investigate the linkage between the volatility of ethanol security prices and the uncertainty surrounding the profitability of ethanol production and the price variations of non-ethanol energy securities. The joint evolution of return and volatility is modeled as a stochastic process that incorporates jumps in both return and volatility. While a strong and significant correlation is found between the volatility of ethanol securities and profit uncertainty from June 2005 to July 2008, the dynamic pattern of ethanol stock volatility is strikingly similar to that of the S&P 500 energy sector index in the more recent period. Our evidence lends support to the findings in the literature on rational learning from uncertainty in determining the equity price and volatility during the adoption and development of a technological innovation. |
| Keywords: | jumps, rational learning, stochastic volatility, technological innovation. |
| JEL: | C11 G12 Q42 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:09-wp498&r=ene |
| By: | Francisco Peñaranda; Augusto Rupérez-Micola |
| Abstract: | Biofuels are becoming an alternative to non-renewable energy sources but we know little about the economic mechanisms influencing their prices. This paper studies the interrelationships between the spot prices of oil and those of agricultural commodities used as biofuel feedstocks. Using daily data since 1988, we identify a co-movement after 2005 that does not appear for other food-related commodities and is not due to general economic variables. We also find traces of the co-movement in the prices of a large biofuel stock. The results amount to the first systematic piece of empirical evidence linking spot oil and agricultural markets via the emergence of biofuels. |
| Keywords: | Biofuels, co-movement, ethanol, oil, structural breaks, threshold regressions |
| JEL: | G15 Q18 O13 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1174&r=ene |
| By: | Chatterji, Shurojit (Singapore Management University); Ghosal, Sayantan (University of Warwick); Walsh, Sean (Center for International Governance Innovation); Whalley, John (Center for International Governance Innovation, University of Western Ontario and NBER) |
| Abstract: | In this paper we discuss global climate change mitigation that builds on existing unilateral actions to deliver ever deepening emission cuts over time. A wide array of unilateral environmental measures have been documented. We discuss the rationale for such measures and argue that unilateral initiatives have the potential to generate positive spillover e¤ects both within and across countries. Using a simple dynamic model of learning, we show how global negotiations can accelerate convergence to a global low emissions regime by building on and strengthening the positive spillovers inherent in unilateral initiatives. |
| Keywords: | Unilateral initiatives ; mitigation ; technology ; cumulative ; emissions reduction ; learning ; global ; negotiations. |
| JEL: | Q54 F53 Q50 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:915&r=ene |
| By: | Knut Einar Rosendahl and Jon Strand (Statistics Norway) |
| Abstract: | The Clean Development Mechanism (CDM) is an offset mechanism designed to reduce the overall cost of implementing a given target for greenhouse gas (GHG) emissions in industrialized Annex B countries of the Kyoto Protocol, by shifting some of the emission reductions to Non-Annex B countries. This paper analyzes how CDM projects may lead to leakage of emissions elsewhere in Non-Annex B countries, taking into account also potential (negative) leakage effects from less emission reductions in Annex B. Leakage occurs because emissions reductions under a CDM project may affect market equilibrium in regional and/or global energy and product markets, and thereby increase emissions elsewhere. We find that overall leakage typically will be positive and sizeable, thus leading to an overall increase in global GHG emissions when CDM projects are undertaken. The leakage rate is greatest when the different fossil fuel markets are more segregated. |
| Keywords: | Carbon leakage; Clean Development Mechanism; Kyoto protocol |
| JEL: | F18 H23 Q41 Q54 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:591&r=ene |
| By: | Julien Chevallier (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre); Yannick Le Pen (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Benoît Sévi (GRANEM - Department of Law, Economics, and Management - Université d'Angers) |
| Abstract: | To improve risk management in the European Union Emissions Trading Scheme (EU ETS), the European Climate Exchange (ECX) has introduced option instruments in October 2006 after regulatory authorization. The central question we address is: can we identify a potential destabilizing effect of the introduction of options on the underlying market (EU ETS futures)? Indeed, the literature on commodities futures suggest that the introduction of derivatives may either decrease (due to more market depth) or increase (due to more speculation) volatility. As the identification of these effects ultimately remains an empirical question, we use daily data from April 2005 to April 2008 to document volatility behavior in the EU ETS. By instrumenting various GARCH models, endogenous break tests, and rolling window estimations, our results overall suggest that the introduction of the option market had no effect on the volatility in the EU ETS. These finding are robust to other likely influences linked to energy and commodity markets. |
| Date: | 2009–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00419339_v1&r=ene |
| By: | Dorothée Brécard (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272) |
| Abstract: | We examine the impact of an emission tax in a green market characterized by consumers' environmental awareness and competition between firms for both environmental quality and product prices. The unique aspect of this model comes from the assumption that the cost for an increase in quality is fixed. We show that the emission tax improves welfare, thanks to a decline in pollution and despite an accentuation of product differentiation. The higher the marginal environmental damage is, the higher the optimal tax will be. The optimal tax, however, becomes lower than the marginal damage when the market is not too large. Finally, when marginal environmental damage is not too low, the optimal tax leads to a green product monopoly. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00421176_v1&r=ene |
| By: | Sjögren, Tomas (Department of Economics, Umeå University) |
| Abstract: | This paper concerns optimal taxation and environmental policy in the presence of transboundary environmental damage and labour market distortions, where the latter gives rise to wage bargaining externalities between countries. I consider a decentralized economic federation where the federal government chooses emission targets to be implemented by the national governments. The results show that the labour market externality will influence the target levels for emissions chosen by the central government. I then proceed to characterize the optimal tax policy at the national level. The decentralized federation structure produces incentives for the national governments to use the tax policy to influence the policies chosen by the federal level. It is shown how these objectives interact with the additional objective to minimize the distortion on the national labour market. |
| Keywords: | Transboundary Externalities; Labour Market Distortions; Economic Federation; Optimal Taxation |
| JEL: | H21 H23 H77 J51 |
| Date: | 2009–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0785&r=ene |
| By: | Sebastian Sosa; Paul Cashin |
| Abstract: | This paper develops country-specific VAR models with block exogeneity restrictions to analyze how exogenous factors affect business cycles in the Eastern Caribbean. It finds that external shocks play a key role, explaining more than half of macroeconomic fluctuations in the region. Domestic business cycles are especially vulnerable to changes in climatic conditions, with a natural disaster leading to an immediate and significant fall in output-but the effects do not appear to be persistent. Oil price and external demand shocks also contribute significantly to domestic macroeconomic fluctuations. An increase in oil prices (external demand) is contractionary (expansionary), and the effects dissipate up to three years after the shock. |
| Keywords: | Business cycles , Caribbean , Climatic changes , Cross country analysis , Economic models , External shocks , Regional shocks , |
| Date: | 2009–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/159&r=ene |
| By: | Gary Clyde Hufbauer (Peterson Institute for International Economics); Jisun Kim (Peterson Institute for International Economics) |
| Abstract: | Trade and environment intersect in many ways. Aside from the broad debate as to whether economic growth and trade adversely affect the environment, there are linkages between existing rules of the World Trade Organization (WTO) and rules established in various multilateral environmental agreements. Controlling greenhouse gas emissions promises to be a top priority for both national and international agendas, and special attention must be given to the relationship between the WTO and the emerging international regime on climate change. This working paper examines the nexus of the WTO and climate change and discusses challenges and options. |
| Keywords: | World Trade Organization, WTO, climate change, global warming, border adjustments |
| JEL: | F13 F18 Q54 Q56 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp09-9&r=ene |
| By: | Freeman, Mark C. |
| Abstract: | In this paper the author proves that the Expected Net Future Value (ENFV) criterion can lead a risk neutral social planner to reject projects that increase expected utility. By contrast, the Expected Net Present Value (ENPV) rule correctly identifies the economic value of the project. While the ENFV increases with uncertainty over future interest rates, the expected utility decreases because of the planner's desire to smooth consumption across time. This paper therefore shows that Weitzman (1998) is right and that, within his economy, the far-distant future should be discounted at its lowest possible rate. |
| Keywords: | Discount rates,term structure,capital budgeting,interest rate uncertainty,environmental planning |
| JEL: | D61 E43 G12 G31 Q51 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:200942&r=ene |