nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒10‒24
27 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Energy demand and energy efficiency in the OECD countries: a stochastic demand frontier approach By Massimo Filippini; Lester Hunt
  2. Energy and Natural Resource Dependency in Europe, 1600-1900 By Paul Warde
  3. Where Does Energy R&D Come From? Examining Crowding Out from Environmentally-Friendly R&D By David Popp; Richard G. Newell
  4. Increasing energy and resource efficiency through innovation: an explorative analysis using innovation survey data By Rennings, Klaus; Rammer, Christian
  5. LEDs and the lighting fixtures worldwide market By Aurelio Volpe
  6. Investment in Energy Infrastructure and the Tax Code By Gilbert E. Metcalf
  7. Investment Options and Bargaining Power the Eurasian Supply Chain for Natural Gas By Hubert, Franz; Ikonnikova , Svetlana
  8. Are "Flexible" Taxation Mechanisms Effective in Stabilizing Fuel Prices? An Evaluation Considering the Italian Fuel Markets By Marina Di Giacomo; Massimiliano Piacenza; Gilberto Turati
  9. Asymmetries in the adjustment of motor diesel and gasoline pump prices in Europe By Jorge Rodrigues
  10. Gasoline Prices and Traffic Safety: Age and Gender Variations By Guangqing Chi; Arthur Cosby; Paul Gilbert; David Levinson
  11. Saving Ghana from Its Oil: The Case for Direct Cash Distribution By Todd Moss; Lauren Young
  12. Oil Exports and the Iranian Economy By Esfahani, H.S.; Mohaddes, K.; Pesaran, M.H.
  13. Modelling the potential supply of energy crops in Ireland: results from a probit model examining the factors affecting willingness to adopt By Breen, J.; Clancy, D.; Moran, B.; Thorne, F.
  14. Resource Rent Taxation and Benchmarking – A New Perspective for the Swiss Hydropower Sector By Massimo Filippini; Silvia Banfi
  15. Pricing externalities from passenger transportation in Mexico city By Parry, Ian W.H.; Timilsina, Govinda R.
  16. Market Power and Windfall Profits in Emission Permit Markets By Beat Hintermann
  17. Allowance Price Drivers in the First Phase of the EU ETS By Beat Hintermann
  18. An Options Pricing Approach for CO2 Allowances in the EU ETS By Beat Hintermann
  19. Carbon trading thickness and market efficiency: A non-parametric test By de Vries, Frans; Montagnoli, Alberto
  20. Disposition in the Carbon Market and Institutional Constraints By Leon Vinokur
  21. Subsidising carbon capture. Effects on energy prices and market shares in the power market By Finn Roar Aune, Gang Liu, Knut Einar Rosendahl and Eirik Lund Sagen
  22. Optimal Carbon Capture and Storage policies By Alain Ayong Le Kama; Mouez Fodha; LAFFORGUE Gilles
  23. Growth and the pollution convergence hypothesis: a nonparametric approach By Carlos Ordás Criado; Simone Valente; Thanasis Stengos
  24. Emissions Trends, Labour Productivity Dynamics and Time-Related Events - Sector Heterogeneous Analyses of Decoupling/Recoupling on a 1990-2006 NAMEA By Marin, Giovanni; Mazzanti, Massimiliano
  25. The economics of adaptation to climate change: the case of Germany By Dannenberg, Astrid; Mennel, Tim; Osberghaus, Daniel; Sturm, Bodo
  26. Discounting Arduousness By Jesus Marin-Solano; Concepcio Patxot
  27. Self-Enforcing Climate Change Treaties: A Generalized Differential Game Approach with Applications By Pedro, de Mendonça

  1. By: Massimo Filippini (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland); Lester Hunt (Surrey Energy Economics Centre (SEEC) and Research Group on Lifestyles Values and Environment (RESOLVE), Department of Economics, University of Surrey, UK)
    Abstract: This paper attempts to estimate a panel ‘frontier’ whole economy aggregate energy demand function for 29 countries over the period 1978 to 2006 using stochastic frontier analysis (SFA). Consequently, unlike standard energy demand econometric estimation, the energy efficiency of each country is also modelled and it is argued that this represents a measure of the underlying efficiency for each country over time, as well as the relative efficiency across the 29 OECD countries. This shows that energy intensity is not necessarily a good indicator of energy efficiency, whereas by controlling for a range of economic and other factors, the measure of energy efficiency obtained via this approach is. This is, as far as is known, the first attempt to model energy demand and efficiency in this way and it is arguably particularly relevant in a world dominated by environmental concerns with the subsequent need to conserve energy and/or use it as efficiently as possible. Moreover, the results show that although for a number of countries the change in energy intensity over time might give a reasonable indication of efficiency improvements; this is not always the case. Therefore, unless this analysis is undertaken, it is not possible to know whether the energy intensity of a country is a good proxy for energy efficiency or not. Hence, it is argued that this analysis should be undertaken to avoid potentially misleading advice to policy makers.
    Keywords: Energy demand; OECD; efficiency and frontier analysis; energy efficiency
    JEL: D D2 Q Q4 Q5
    Date: 2009–10
  2. By: Paul Warde
    Abstract: This paper takes a historical perspective on the role of resource endowment in economic development, examining the leading economies of the early modern era, the Netherlands and England; the first case largely dependent on imports for raw materials, while the second enjoyed the boon of much larger indigenous energy reserves. It argues that locational advantages were an essential part of the story of early modern growth: in the Dutch case, access to factor markets and trade routes; in the English, these combined with natural resources. There is little evidence that the benefits of growth were spread to the periphery, but neither did inequities in growth patterns contribute significantly to institutional backwardness and rent-seeking in the periphery.
    Date: 2009
  3. By: David Popp; Richard G. Newell
    Abstract: Recent efforts to endogenize technological change in climate policy models demonstrate the importance of accounting for the opportunity cost of climate R&D investments. Because the social returns to R&D investments are typically higher than the social returns to other types of investment, any new climate mitigation R&D that comes at the expense of other R&D investment may dampen the overall gains from induced technological change. Unfortunately, there has been little empirical work to guide modelers as to the potential magnitude of such crowding out effects. This paper considers both the private and social opportunity costs of climate R&D. Addressing private costs, we ask whether an increase in climate R&D represents new R&D spending, or whether some (or all) of the additional climate R&D comes at the expense of other R&D. Addressing social costs, we use patent citations to compare the social value of alternative energy research to other types of R&D that may be crowded out. Beginning at the industry level, we find some evidence of crowding out in sectors active in energy R&D, but not in sectors that do not perform energy R&D. This suggests that funds for energy R&D do not come from other sectors, but may come from a redistribution of research funds in sectors that are likely to perform energy R&D. Given this, we proceed with a detailed look at climate R&D in two sectors – alternative energy and automotive manufacturing. Linking patent data and financial data by firm, we ask whether an increase in alternative energy patents leads to a decrease in other types of patenting activity. We find crowding out for alternative energy firms, but no evidence of crowding out for automotive firms. Finally, we use patent citation data to compare the social value of alternative energy patents to other patents by these firms. Alternative energy patents are cited more frequently, and by a wider range of other technologies, than other patents by these firms, suggesting that their social value is higher.
    JEL: O33 Q4 Q42 Q55
    Date: 2009–10
  4. By: Rennings, Klaus; Rammer, Christian
    Abstract: Energy and resource efficiency innovations (EREIs) are often seen as win-win opportunities for both the economic and the environmental performance of firms. It is thus worth asking how the innovation activities and performance of firms with regard to energy and resource efficiency look like: Do EREI firms follow distinct innovation strategies? Do EREIs spur or limit innovation success? And what are the particular features of EREI firms compared to conventional innovators? Using German innovation data, we find that EREIs are determined by a larger set of technology-push and market-pull factors. On the supply side, R&D budgets, research infrastructure and networking with other firms are important factors of influence, while on the demand side increased productivity and cost reductions are decisive, as well as improved product quality. On the other hand, EREIs are complex activities which also need regulatory incentives. Although EREIs are not more successful compared to conventional innovations, they contribute substantially to the economic success of firms.
    Keywords: Resource efficiency,energy efficiency,environmental innovations,innovation surveys
    JEL: Q01 Q55 O31 O33
    Date: 2009
  5. By: Aurelio Volpe (CSIL Centre for Industrial Studies)
    Abstract: This report offers an overview of the use of LEDS within the lighting fixtures industry worldwide. The size of LEDS market is provided, countries covered: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Russia, Japan, Turkey, China, India, Middle East, Australia, USA. A breakdown of the LED lighting fixtures market by kind of application (residential lighting, commercial indoor, entertainment lighting, emergency lighting, Christmas lighting, outdoor architectural lighting) is included. The consumption of LEDS lighting sources is given together with an estimate of the demand for other lighting sources (incandescence, fluorescence and gas discharge). The top players in the LED based lighting fixtures sector worldwide are listed, with figures on their sales. A section containing background technological information on LEDS is provided at the end of this research.
    JEL: L11 L22 L68
    Date: 2009–07
  6. By: Gilbert E. Metcalf
    Abstract: Federal tax policy provides a broad array of incentives for energy investment. I review those policies and construct estimates of marginal effective tax rates for different energy capital investments as of 2007. Effective tax rates vary widely across investment classes. I then consider investment in wind generation capital and regress investment against a user cost of capital measure along with other controls. I find that wind investment is strongly responsive to changes in tax policy. Based on the coefficient estimates the elasticity of investment with respect to the user cost of capital is in the range of -1 to -2. I also demonstrate that the federal production tax credit plays a key role in driving wind investment over the past eighteen years.
    Keywords: electricity, wind power, production tax credits, tax subsidies
    JEL: H2 Q4
    Date: 2009
  7. By: Hubert, Franz; Ikonnikova , Svetlana
    Abstract: We use cooperative game theory to analyze how the architecture of the pipeline network determines the power structure in the supply chain for Russian gas. If the assessment is narrowly focused on the abilities to obstruct flows in the existing system, the main transit countries, Belarus and Ukraine, appear to be strong. If investment options are accounted for, however, Russia achieves clear dominance. We show that options to bypass one of the transit countries are of little strategic importance compared to Russia's direct access to its customers through the Baltic Sea. Comparing the results of our calibrated model with empirical evidence obtained from transit and import agreements we find that the Shapley value explains the power of major transit countries better than the core and the nucleolus.
    Keywords: Bargaining Power; Supply Chain; Shapley Value; Gas Transport
    JEL: F50 C71 F51 D43
    Date: 2009–09
  8. By: Marina Di Giacomo (Department of Economics and Public Finance "G. Prato", University of Torino); Massimiliano Piacenza (Department of Economics and Public Finance "G. Prato", University of Torino); Gilberto Turati (Department of Economics and Public Finance "G. Prato", University of Torino)
    Abstract: In this paper we study the incidence of specific taxes in the Italian fuel markets, and exploit these findings to simulate the effects of fiscal policies aimed at mitigating oil price fluctuations. We estimate several reduced-form specifications, using as dependent variables the equilibrium wholesale prices for gasoline and motor diesel over the period 1996-2007. In particular, we assess the impact on wholesale gasoline and motor diesel prices stemming from the creation of an automatic fiscal mechanism consisting of reductions in specific taxes matching the rise in oil prices. Our simulations suggest that “flexible” taxation mechanisms could not be a proper policy for stabilizing price levels in fuel markets. A more effective control on prices can be obtained by focusing on the market structure of these industries, where Antitrust Authority could play a significant role.
    Keywords: fuel markets, specific taxes, tax incidence, sterilization policy, antitrust policy
    JEL: H22 H32 L40 L71 Q48
    Date: 2009–10
  9. By: Jorge Rodrigues (Autoridade da Concorrência)
    Abstract: Gasoline prices are said to take longer to decrease and at a slower rate when crude oil prices fall than they do to increase when crude oil prices rise. In this paper I analyze to what extent this asymmetry phenomenon can be identified across all EU15 Member States, plus the EU15 average, and I allow for a comparative analysis between IO95 gasoline and motor diesel. I follow previous approaches by disentangling between the two major channels of pump price formation in Europe, namely the international channel from Brent to Platts (ex-refinery) prices and the domestic channels from Platts to average pump prices before tax. I consider weekly data over the period 2004-2008 and follow a previously proposed co-integration based econometric approach. Results strongly suggest the existence of asymmetries in the international channel for diesel, where there is also evidence of overshooting, but not for gasoline. On the domestic channels, the evidence in favour of asymmetries depends on the considered Member State and type of fuel.
    Date: 2009–07
  10. By: Guangqing Chi; Arthur Cosby; Paul Gilbert; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Gasoline prices have significant effects on traffic safety. However, existing literature has failed to adequately investigate the effects: the literature has examined only fatal incidents rather than total traffic incidents. This study analyzes the effects of gasoline prices on total traffic incidents and on the incidents by age and gender. The results suggest that gasoline prices have negative short-term effects on traffic safety: as gasoline prices increase, overall traffic incident rates decrease. Gasoline prices have disproportionate effects in reducing traffic incident rates for young drivers and female drivers, longer-term effects on drivers who are 24 years and older, and no effects on male drivers. This study fills the gap in the literature by contributing to the understanding of gasoline price effects on traffic incidents by examining all traffic incidents instead of only fatal incidents and by examining incidents by age and gender.
    Keywords: gasoline prices, traffic incidents, traffic safety, age, gender
    JEL: R41 R48 Q41 R51
    Date: 2009
  11. By: Todd Moss; Lauren Young
    Abstract: Ghana can be considered a relative success story in Africa. We cite six variables—peace and stability, democracy and governance, control of corruption, macroeconomic management, poverty reduction, and signs of an emerging social contract—to suggest the country’s admirable political and economic progress. The expected arrival of sizeable oil revenues beginning in 2011–13, however, threatens to undermine that progress. In fact, numerous studies have linked natural resources to negative outcomes such as conflict, authoritarianism, high corruption, economic instability, increased poverty, and the destruction of the social contract. The oil curse thus threatens the very outcomes that we consider signs of Ghana’s success. This paper draws lessons from the experiences of Norway, Botswana, Alaska, Chad, and Nigeria to consider Ghana’s policy options. One common characteristic of the successful models appears to be their ability to encourage an influential constituency with an interest in responsible resource management and the means to hold government accountable. The Alaska model in particular, which was designed explicitly to manufacture citizen oversight and contain oil-induced patronage, seems relevant to Ghana’s current predicament. We propose a modified version of Alaska’s dividend program. Direct cash distribution of oil revenues to citizens is a potentially powerful approach to protect and accelerate Ghana’s political and economic gains, and a way to strengthen the country’s social contract. We show why Ghana is an ideal country to take advantage of this option, and why the timing is fortuitous. We conclude by confronting some of the common objections to this approach and suggest that new technology such as biometric ID cards or private mobile phone networks could be utilized to implement the scheme.
    Keywords: Ghana; resource curse; oil; resource management; direct cash distribution
    Date: 2009–10
  12. By: Esfahani, H.S.; Mohaddes, K.; Pesaran, M.H.
    Abstract: This paper develops a long run growth model for a major oil exporting economy and derives conditions under which oil revenues are likely to have a lasting impact. This approach contrasts with the standard literature on the "Dutch disease" and the "re- source curse", which primarily focus on short run implications of a temporary resource discovery. Under certain regularity conditions and assuming a Cobb Douglas production function, it is shown that (log) oil exports enter the long run output equation with a coeficient equal to the share of capital. The long run theory is tested using a new quarterly data set on the Iranain economy over the period 1979Q1-2006Q4. Building an error correction specification in real output, real money balances, inflation, real exchange rate, oil exports, and foreign real output, the paper finds clear evidence for two long run relations: an output equation as predicted by the theory and a standard real money demand equation with inflation acting as a proxy for the (missing) market interest rate. Real output in the long run is shaped by oil exports through their impact on capital accumulation, and the foreign output as the main channel of technological transfer. The results also show a significant negative long run association between inflation and real GDP, which is suggestive of economic ineficiencies. Once the effects of oil exports are taken into account, the estimates support output growth convergence between Iran and the rest of the world. We also find that the Iranian economy adjusts quite quickly to the shocks in foreign output and oil exports, which could be partly due to the relatively underdeveloped nature of Iran's financial markets.
    Keywords: Growth models, long run relations, Iranian economy, oil price and foreign output shocks, and error correcting relations
    JEL: C32 C53 E17 F43 F47 Q32
    Date: 2009–10–15
  13. By: Breen, J.; Clancy, D.; Moran, B.; Thorne, F.
    Abstract: Numerous studies exist reporting estimates of the theoretical potential for growing energy crops in the Ireland; however a knowledge gap exists on the extent to which Irish farmers would actually choose to grow these crops. We investigated the influence of selected individual and farm characteristics on willingness to consider growing energy crops among farm operators in Ireland. A sample of 958 operators selected by stratified sampling technique was used. A probit model was used to determine the extent to which selected individual and farm characteristics influence the willingness of farmers to consider alternative cropping systems. The results showed that willingness to adopt energy crops in Ireland was significantly influenced by the agricultural educational level of farmers, farm size, and farm system. In the final model specification, farm profit, land tenancy, general education level of the farm operator, contact with extension agents, solvency and age of the operator were not significant variables affecting willingness to adopt. The policy implications of the research findings are discussed.
    Keywords: Farm Level Decision Making, Energy Crops, Adoption, Innovation, Probit, Agribusiness, Agricultural and Food Policy, Environmental Economics and Policy,
    Date: 2009
  14. By: Massimo Filippini (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland); Silvia Banfi (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland)
    Abstract: The electricity generation in Switzerland is mainly based on hydropower (55% of total production). The exploitation of water in the hydropower sector can generate significant so-called resource rents. These are defined by the surplus return above the value of capital, labor, materials and energy used to exploit hydropower. In Switzerland, hydropower producers pay to the State a fixed fee per kW gross capacity. With this system the substantial differences in costs, revenues and in the production characteristics of the hydropower plants are not taken into account. In this context, the following paper has two main goals: 1) To discuss the introduction in the Swiss hydropower sector of a new payment system based on a resource rent tax; 2) To propose a combination of a RRT system with a benchmarking analysis of the production cost obtained through the estimation of a stochastic frontier variable cost function. We estimate a true random effects stochastic frontier variable cost function using panel data in order to overcome the asymmetric information problem. In addition, using the information on cost efficiency of the single companies, we show how to introduce in the RRT scheme a benchmark system which gives incentives to minimize the production costs.
    Keywords: Resource Rent Taxation, Hydropower, Efficiency
    Date: 2009–08
  15. By: Parry, Ian W.H.; Timilsina, Govinda R.
    Abstract: The Mexico City Metropolitan Area has been suffering severely from transportation externalities such as accidents, air pollution, and traffic congestion. This study examines pricing instruments to reduce these externalities using an analytical and numerical model. The study shows that the optimal levels of a gasoline tax and a congestion toll on automobiles could generate social benefits, measured in terms of welfare gain, of US$132 and US$109 per capita, respectively, through the reduction of externalities. The largest component of the welfare gains comes from reduced congestion, followed by local air pollution reduction. The optimal toll and tax would, however, double the cost of driving and could be politically sensitive. Still, more than half of those welfare gains could be obtained through a more modest tax or toll, equivalent to $1 per gallon of gasoline. The welfare gains from reforming the pricing of public transportation are small relative to those from reforming the taxation of automobiles. Although the choice among travel modes depends on specific circumstances, in the absence of road travel pricing that accounts for externalities, there will be potential for higher investment in roads relative to mass transit. Given the rapidly increasing demand for transportation infrastructure in Mexico City, careful efforts should be made to include the full social costs of travel in evaluating alternative infrastructure investments.
    Keywords: Transport Economics Policy&Planning,Roads&Highways,Energy Production and Transportation,Transport and Environment,Transport in Urban Areas
    Date: 2009–10–01
  16. By: Beat Hintermann (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland)
    Abstract: Although market power in permit markets has been examined in some detail following the seminal work of Hahn (1984), the effect of free allocation on price manipulation with market power in both output and permit market has not specifically been addressed. I show that in this case, the threshold for free allocation above which dominant firms will increase the permit price is below their emissions. In addition to being of general economic interest, this issue is relevant in the context of the EUETS. I find that European power generators received free allowances in excess of the derived threshold.
    Keywords: Market power, emissions permit markets, air pollution, EU ETS, CO2, electricity generation, permit allocation, windfall profits, cost pass-through
    JEL: H23 L11 L12 L13 L94 L98 Q48 Q52 Q53 Q54 Q58
    Date: 2009–02
  17. By: Beat Hintermann (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland)
    Abstract: In the first phase of the EU Emissions Trading Scheme (EU ETS), the price per ton of CO2 rose to over €30 before decreasing to zero by mid 2007. I examine to what extent this variation can be explained by marginal abatement costs by deriving a structural model of the allowance price under the assumption of efficient markets. I then gradually relax the model by allowing for delayed adjustment of price to fundamentals, as well as by introducing lagged LHS variables. The pattern of the results suggests that prices were not initially driven by marginal abatement costs, but that this inefficiency was largely corrected by the first round of emission verifications.
    Keywords: Emissions permit markets, air pollution, climate change, bubble, speculation, CO2, asset pricing, EU ETS
    JEL: D84 G12 G14 Q52 Q53 Q54
    Date: 2009–05
  18. By: Beat Hintermann (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland)
    Abstract: If firms are unable to fully control their emissions, the cap in a permit market may be exceeded. Using stochastic aggregate emissions as the underlying I derive an options pricing formula that expresses the permit price as a function of the penalty for noncompliance and the probability of a binding cap. I apply my model to the EU ETS, where rapid market setup made it difficult for firms to adjust their production technology in time for phase 1. The model fits the data well, implying that the permit price was driven by firms hedging against stochastic emissions rather than marginal abatement costs.
    Keywords: Permit markets, air pollution, climate change, CO2, options pricing, EU ETS
    JEL: G12 G14 G18 Q52 Q53 Q54
    Date: 2009–06
  19. By: de Vries, Frans; Montagnoli, Alberto
    Abstract: This note tests for the efficient market hypothesis (EMH) in the market for CO2 emission allowances in Phase I and Phase II of the European Union Emissions Trading Scheme (EU ETS). As usually is the case in emerging and non-competitive markets such as the EU ETS, trading often not occurs on a frequent basis. This has adverse implications for both the gains from permit trade as well as biases the EMH tests. Variance ratio tests are employed to adjust for the thin trading effect. The results indicate that Phase I - the trial and learning period - was inefficient, whereas the first period under Phase II shows signs of restoring market effic iency.
    Keywords: variance ratio tests; thin trading; efficient market hypothesis; carbon trading; pollution markets
    Date: 2009–10
  20. By: Leon Vinokur (Queen Mary, University of London)
    Abstract: This paper investigates the impact of banking and submission constraints, set by the EU Emission Trading Scheme, on the efficiency of the carbon permits spot market using intra-daily data. My aim is to identify whether there is a Disposition effect in the spot market. I will examine a data set that includes spot prices for the First and Second Phases of the Scheme from 24 June 2005 to 07 August 2009. I find that the Disposition effect is significantly high at the beginning of each Phase and decreases close to the first compliance event. In the light of these results I propose a lifting of the ban on banking between Phases and an increased emissions information disclosure in order to increase the efficiency of the Scheme.
    Keywords: Carbon market, Psychological biases, Institutional constraints
    JEL: G11 G18 D84 Q48
    Date: 2009–10
  21. By: Finn Roar Aune, Gang Liu, Knut Einar Rosendahl and Eirik Lund Sagen (Statistics Norway)
    Abstract: This paper examines how ambitious climate policies and subsidies to carbon capture may affect international energy prices and market shares in the power market. A detailed numerical model of the international energy markets is used. We first conclude that an ambitious climate policy alone will have substantial effects in the power market, with considerable growth in renewable power production and eventually use of carbon capture. Gas power production will also benefit from such a policy. Subsidising carbon capture and storage (CCS) will significantly accelerate the use of this technology. Nevertheless, total production of coal and gas power (with or without CCS) is only marginally increased, as the subsidy mainly leads to installation of CCS equipment on existing plants, reducing the efficiency from these plants. Consequently, electricity prices are almost unchanged, and the substantial growth in renewable power production is hardly affected by the subsidies to CCS.
    Keywords: Energy markets; Climate policy; Carbon capture
    JEL: H23 Q40 Q54
    Date: 2009–10
  22. By: Alain Ayong Le Kama; Mouez Fodha; LAFFORGUE Gilles
    Date: 2009–10
  23. By: Carlos Ordás Criado (Center for Energy Policy and Economics CEPE, Department of Managment, Technology and Economics, ETH Zurich, Switzerland); Simone Valente (Center of Economic Research CER, Department of Managment, Technology and Economics, ETH Zurich, Switzerland); Thanasis Stengos (Department of Economics, University of Guelph, Guelph, ON, Canada)
    Abstract: The pollution-convergence hypothesis is formalized in a neoclassical growth model with optimal emissions reduction: pollution growth rates are positively correlated with output growth (scale effect) but negatively correlated with emission levels (defensive effect). This dynamic law is empirically tested for two major and regulated air pollutants - nitrogen oxides (NOX) and sulfur oxides (SOX) - with a panel of 25 European countries spanning over years 1980-2005. Traditional parametric models are rejected by the data. However, more flexible regression techniques - semiparametric additive specifications and fully nonparametric regressions with discrete and continuous factors - confirm the existence of the predicted positive and defensive effects. By analyzing the spatial distributions of per capita emissions, we also show that cross-country pollution gaps have decreased over the period for both pollutants and within the Eastern as well as the Western European areas. A Markov modeling approach predicts further cross-country absolute convergence, in particular for SOX. The latter results hold in the presence of spatial non-convergence in per capita income levels within both regions.
    Keywords: Air pollution, convergence, economic growth, mixed nonparametric regressions, distribution dynamics
    JEL: C14 C23 Q53
    Date: 2009–09
  24. By: Marin, Giovanni; Mazzanti, Massimiliano
    Abstract: This paper provides new empirical evidence on Environmental Kuznets Curves (EKC) for CO2 and air pollutants at sector level. A panel dataset based on the Italian NAMEA (National Accounting Matrix including Environmental Accounts) over 1990-2006 is analysed, focusing on both emissions efficiency (EKC model) and total emissions (IPAT model). Results show that, looking at sector evidence, both decoupling and also eventually re-coupling trends could emerge along the path of economic development. The overall performance on here CO2, is not compliant with Kyoto targets. SOx and NOx show decreasing patterns, though the shape is affected by some outlier sectors with regard to joint emission-productivity dynamics. Services tend to present stronger delinking patterns across emissions than manufacturing. Trade expansion validates the pollution haven in some cases, but also show negative signs when only EU15 trade is considered: this may due to technology spillovers and a positive ‘race to the top’ rather than the bottom among EU15 trade partners. General R&D expenditure show weak correlation with emissions efficiency. EKC and IPAT derived models provide similar conclusions overall. Finally, we used SUR estimators (Seemingly Unrelated Regressions) for EKC models on manufacturing to have more efficient panel estimates (constrained model) and to test for slope heterogeneity (unconstrained model): the empirical evidence for CO2 and SOx emissions suggests that of manufacturing the slope varies across sectors. Further research should be directed towards deeper investigation of trade relationship at sector level and increased research into and efforts to produce specific sectoral data on ‘environmental innovations’.
    Keywords: NAMEA; trade openness; labour productivity; STIRPAT; SURE
    JEL: Q55 C23 Q56 O40
    Date: 2009–10–16
  25. By: Dannenberg, Astrid; Mennel, Tim; Osberghaus, Daniel; Sturm, Bodo
    Abstract: Given the ubiquitous scarcity of resources an economic approach is necessary in order to determine an optimal strategy of adaptation to climate change. In this paper we develop an economic framework for the study of adaptation which allows us to distinguish between decentralized adaptation by private agents on the one hand and centralized adaptation measures by public authorities on the other. The approach is based on the paradigm of market failure and is complemented by two further grounds of government action, equity concerns and security of supply. We identify open research questions in the nascent field of adaptation to climate change requiring further empirical investigation. The economic framework is applied to adaptation in Germany by analyzing impacts and adaptation options for climate-sensitive fields such as agriculture, energy, water, and public health.
    Keywords: Climate change,adaptation,market failure,insurance
    JEL: Q54 Q58
    Date: 2009
  26. By: Jesus Marin-Solano; Concepcio Patxot (Universitat de Barcelona)
    Abstract: There is a growing literature considering deviations from standard constant discounting. In this paper we combine time-inconsistent (non-constant discounting) preferences with recursive utilities. We apply this setting to the demand side properties of what we call arduous goods. The rational for a non-standard discounting is that production and consumption are not separable in these kinds of goods. The necessary effort implies that individuals discount consumption of these goods in a special way: both biased preferences and dynamic recursive adjustment are present. In this way, willingness to make an effort, modeled as a discount factor, becomes endogenous.
    Keywords: time-consistent solution, arduous and easy goods, non-constant discounting, continuous-time, recursive utility
    JEL: D83 D99 C61
    Date: 2009
  27. By: Pedro, de Mendonça
    Abstract: Based on recent proposals on non cooperative dynamic games for analysing climate negotiation outcomes, such as Dutta and Radner (2004, 2006a), we generalize a specific framework for modelling differential games of this type and describe the set of conditions for the existence of closed loop dynamics and its relation to adaptive evolutionary dynamics. We then show that the Dutta and Radner (2004, 2006a) discrete time dynamic setup is a specific case of that generalization and describe the dynamics both analytically and numerically for closed loop feedback and perfect state patterns. Our discussion is completed with the introduction of a cooperative differential framework for welfare analysis purposes, within our non cooperative proposal for climate negotiations.
    Keywords: Differential Game Theory; Environmental Economics; Evolutionary Dynamics; Climate Change Treaties
    JEL: Q56 C61 C73 C72
    Date: 2009–11

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