nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒11‒07
eighteen papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Wind Power: The Economic Impact of Intermittency By G. Cornelis van Kooten
  2. Liberalisation in a world of second best: evidence on European network industries By Ugur, Mehmet
  3. Barriers to competition in Croatia : the role of government regulation By De Rosa, Donato; Madzarevic-Sujster, Sanja; Boromisa, Ana-Maria; Sonje, Velimir
  4. Infrastructure and economic growth in the Middle East and North Africa By Um, Paul Noumba; Straub, Stephane; Vellutini, Charles
  5. Natural resources, economic growth and institutions – a panel approach By Nuno Torres; Óscar Afonso; Isabel Soares
  6. South Dakot Grain Elevators: Manage Characteristics and Impact of Ethanol By Yonas Hamda; Bashir Qasmi; Scott Fausti
  7. Analyzing Factors Affecting U.S. Food Price Inflation. By Baek, Jungho; Koo, Won
  8. Characterizing Uncertainty in Air Pollution Damage Estimates By Nicholas Z. Muller; Yan N. Oak
  9. (In)Efficient Management of Interacting Environmental Bads By Kuosmanen, Timo; Laukkanen, Marita
  10. Strategic interactions and heterogeneity in a overlapping generations model with negative environmental externalities By Antoci, Angelo; Naimzada, Ahmad; Sodini, Mauro
  11. Can Carbon Based Import Tariffs Effectively Reduce Carbon Emissions? By Michael Hübler
  12. Impacts of policy instruments to reduce congestion and emissions from urban transportation : the case of Sao Paulo, Brazil By Anas, Alex; Timilsina, Govinda R.
  13. Why have CO2 emissions increased in the transport sector in Asia ? underlying factors and policy options By Timilsina, Govinda R.; Shrestha, Ashish
  14. Achieving urban climate adaptation in Europe and Central Asia By Carmin, JoAnn; Zhang, Yan
  15. Social impacts of climate change in Bolivia : a municipal level analysis of the effects of recent climate change on life expectancy, consumption, poverty and inequality By Andersen, Lykke E.; Verner, Dorte
  16. Social impacts of climate change in Peru : a district level analysis of the effects of recent and future climate change on human development and inequality By Andersen, Lykke E.; Suxo, Addy; Verner, Dorte
  17. A polycentric approach for coping with climate change By Ostrom, Elinor
  18. Intergenerational justice when future worlds are uncertain By Humberto Llavador; John E. Roemer; Joaquim Silvestre

  1. By: G. Cornelis van Kooten
    Abstract: Wind is the fastest growing renewable energy source for generating electricity, but economic research lags behind. In this study, therefore, we examine the economics of integrating large-scale wind energy into an existing electrical grid. Using a simple grid management model to investigate the impact of various levels of wind penetration on grid management costs, we show that costs of reducing CO2 emissions by relying more on wind power depend on the generation mix of the existing electricity grid and the degree of wind penetration, with costs ranging from $21 to well over $1000 per tonne of CO2 reduced. Costs are lowest if wind displaces large amounts of fossil fuel production and there is some hydroelectric power to act as a buffer. Hydro capacity has the ability to store wind generated power for use at more opportune times. If wind does nothing more than replace hydro or nuclear power then the environmental benefits (reduced CO2 emissions) of investing in wind power are small.
    Keywords: Wind power, carbon costs, electricity grids, mathematical programming
    JEL: Q54 Q41 C61
    Date: 2009–06
  2. By: Ugur, Mehmet
    Abstract: This article reports mixed results about the impacts of liberalisation in European network industries. Telecommunications prices have fallen and converged across EU-15, but electricity and gas prices have either increased or diverged. Productivity has increased, but mainly as a result of falling employment in absolute and relative terms. Liberalised industries are still characterised by high levels of market concentration and low levels of transparency and market integration. These findings are in line with the predictions of the theory of second best and suggest that the case for liberalisation of network industries has been oversold.
    Keywords: Liberalisation; network industries; second-best; public policy; European Union
    JEL: D02 D78 D24 D4
    Date: 2009–02–27
  3. By: De Rosa, Donato; Madzarevic-Sujster, Sanja; Boromisa, Ana-Maria; Sonje, Velimir
    Abstract: This paper examines product market policies in Croatia by benchmarking them to OECD countries and highlighting how policies that are more conducive to competition would stimulate a more efficient allocation of resources and, in consequence, facilitate convergence to higher income levels. OECD indicators of overall regulation in product markets indicate that Croatia’s policies in 2007 were generally more restrictive of competition than were the policies in OECD countries. This is especially true for policies concerned with the degree of state control of the economy and with barriers to entrepreneurship. Regulatory obstacles to trade and foreign direct investment, by contrast, are in line with those of pre-accession EuropeanUnion countries (Czech Republic, Hungary, Slovak Republic, and Poland in 2003, as well as Bulgaria and Romania in 2006), albeit well above the OECD average. Regulation of post, electricity, gas, telecoms, air, rail, and road transport, as estimated by the OECD energy transport and communication sectors indicator, is also less liberal than in the OECD, highlighting the positive knock-on effects for the rest of the economy that could derive from further liberalization of network industries.
    Keywords: Transport Economics Policy&Planning,Public Sector Regulation,Markets and Market Access,Regulatory Regimes,Emerging Markets
    Date: 2009–10–01
  4. By: Um, Paul Noumba; Straub, Stephane; Vellutini, Charles
    Abstract: This paper analyzes the impact of infrastructure on growth of total factor productivity and per capita income, using both growth accounting techniques and cross-country growth regressions. The two econometric techniques yield some consistent and some different results. Regressions based in the growth accounting framework suggest that electricity production helps explain cross-country differences in total factor productivity growth in the Middle East and North Africa region. Growth regressions support that conclusion, while also stressing an effect of telecommunications infrastructure. Finally, growth regressions also indicate quite consistently that the returns to infrastructure have been lower in the Middle East and North Africa region than in developing countries as a whole.
    Keywords: Transport Economics Policy&Planning,Achieving Shared Growth,Economic Growth,E-Business,Energy Production and Transportation
    Date: 2009–10–01
  5. By: Nuno Torres (Faculdade de Economia, Universidade do Porto); Óscar Afonso (CEF.UP and Faculdade de Economia, Universidade do Porto); Isabel Soares (CEF.UP and Faculdade de Economia, Universidade do Porto)
    Abstract: This study re-evaluates the impact of natural resources on growth using panel data and a factor-efficiency accounting framework. The resource-curse thesis is dismissed as capital efficiency is improved by geographically-concentrated natural resources, which hinder institutional quality in recent cross-section studies. This consensus does not hold in our case even when we use unadjusted resource proxies and the standard institutional approach, as both concentrated and diffuse resources show negative effects in low institutional-quality countries. Adequate fiscal policy seems to prevent the curse in that case, but reduces the positive effect of concentrated resources found with our adjusted proxy.
    Keywords: Natural resources, Economic growth, Institutions, Country Studies, Panel data
    JEL: C23 N50 O13 O40 O50
    Date: 2009–10
  6. By: Yonas Hamda (Deparment of Economics, South Dakota State University); Bashir Qasmi (Deparment of Economics, South Dakota State University); Scott Fausti (Deparment of Economics, South Dakota State University)
    Date: 2009–09
  7. By: Baek, Jungho; Koo, Won
    Abstract: Since the summer of 2007, U.S. food price has increased dramatically. Given public anxiety over fast-rising food prices in recent years, this paper attempts to analyze the effects of market factors â prices of energy and agricultural commodities and exchange rate â on U.S. food prices using a co-integration analysis. Results show that the agricultural commodity price and exchange rate play key roles in determining the short- and long-run movement of U.S. food prices. It is also found that in recent years, the energy price has been a significant factor affecting U.S. food prices in the long-run, but has little effect in the short-run. This implies the strong long-run linkage between energy and agricultural markets has emerged through production of commodity-based ethanol in the recent years.
    Keywords: Agricultural commodity price, Energy price, Exchange rate, Food price inflation, Time-series analysis, Agribusiness,
    Date: 2009–09
  8. By: Nicholas Z. Muller; Yan N. Oak
    Abstract: This study uses Monte Carlo methods to characterize the uncertainty associated with per-ton damage estimates for 100 power plants in the contiguous United States (U.S.) This analysis focuses on damage estimates produced by an Integrated Assessment Model (IAM) for emissions of two local air pollutants: sulfur dioxide (SO2) and .ne particulate matter (PM2:5). For each power plant, the Monte Carlo procedure yields an empirical distribution for the damage per ton of SO2 and PM2:5:For a power plant in New York, one ton of SO2 produces $5,160 in damages with a 90% percentile interval between $1,000 and $14,090. A ton of PM2:5 emitted from the same facility causes $17,790 worth of damages with a 90% percentile interval of $3,780 and $47,930. Results for the sample of 100 fossil-fuel .red power plants shows a strong spatial pattern in the marginal damage distributions. The degree of variability increases by plant location from east to west. This result highlights the importance of capturing uncertainty in air quality modeling in the empirical marginal damage distributions. Further, by isolating uncertainty at each module in the IAM we .nd that uncertainty associated with the dose-response parameter, which captures the in.uence of exposure to PM2:5 on adult mortality rates, the mortality valuation parameter, and the air quality model exert the greatest in.uence on cumulative uncertainty. The paper also demonstrates how the marginal damage distributions may be used to guide regulators in the design of more efficient market-based air pollution policy in the U.S.
    Keywords: Monte Carlo, Air Pollution, Market-based Pollution Policy
    Date: 2009
  9. By: Kuosmanen, Timo; Laukkanen, Marita
    Abstract: Many environmental problems involve the transformation of multiple harmful substances into one or more damage agents much in the same way as a firm transforms inputs into outputs. Yet environmental management differs from a firmâs production in one important respect: while a firm seeks efficient input allocation to maximize profit, an environmental planner allocates abatement efforts to render the production of damage agents as inefficient as possible. We characterize a solution to the hmultiple pollutants problem and show that the optimal policy is often a corner solution, in which abatement is focused on a single pollutant. Corner solutions may arise even in well-behaved problems with concave production functions and convex damage and cost functions. Furthermore, even concentrating on a wrong pollutant may yield greater net benefits than setting uniform abatement targets for all harmful substances. Our general theoretical results on the management of flow and stock pollutants are complemented by two numerical examples illustrating the abatement of eutrophying nutrients and greenhouse gases.
    Keywords: climate change, cost-benefit analysis, eutrophication, multiple pollutants, optimal environmental policy, pollution control, Environmental Economics and Policy,
    Date: 2009–10
  10. By: Antoci, Angelo; Naimzada, Ahmad; Sodini, Mauro
    Abstract: We analyze an overlapping generations model where individuals’ welfare depends on the stock of a free access environmental good E and on the consumption C of a private good. We assume that the production process of the private good depletes the natural resource but that specific investments alleviate these damages. In such context, we show that strategic behaviour and heterogeneity in preferences may be a source of complex dynamics.
    Keywords: Heterogeneous agents; environmental externalities; overlapping generations models.
    JEL: C61 Q20
    Date: 2009
  11. By: Michael Hübler
    Abstract: We estimate CO2 implicitly contained in traded commodities based on the GTAP 7 data: While net carbon imports into the industrialized countries amount to 15% of their total emissions, net carbon exports of the developing countries amount to 12% of their total emissions, and net carbon exports of China amount to 24% of China's total emissions. We also analyze policies under a global per capita emissions based contraction and convergence regime with emission trading: When China joins the regime, the developing countries will benefit, while the industrialized countries will be almost unaffected. When China does not join the regime and instead a carbon content based border tax is imposed, the industrialized countries will significantly benefit, while China will be significantly worse off. The effect of the border tax adjustment on the global carbon price and on global emissions seems negligible
    Keywords: carbon content of trade, border tax adjustment, climate policy, contraction and convergence, China
    JEL: F13 F18 Q54
    Date: 2009–10
  12. By: Anas, Alex; Timilsina, Govinda R.
    Abstract: This study examines impacts on net social benefits or economic welfare of alternative policy instruments for reducing traffic congestion and atmospheric emissions in São Paulo, Brazil. The study shows that expanding road networks, subsidizing public transit, and improving automobile fuel economy may not be as effective as suggested by economic theories because these policies could cause significant rebound effects. Although pricing instruments such as congestion tolls and fuel taxes would certainly reduce congestion and emissions, the optimal level of these instruments would steeply increase the monetary cost of travel per trip and are therefore politically difficult to implement. However, a noticeable finding is that even smaller tolls, which are more likely to be politically acceptable, have substantial benefits in terms of reducing congestion and emissions. Among the various policy instruments examined in the study, the most socially preferable policy option for São Paulo would be to introduce a mix of congestion toll and fuel taxes on automobiles and use the revenues to improve public transit systems.
    Keywords: Transport Economics Policy&Planning,Climate Change Economics,Roads&Highways,Climate Change Mitigation and Green House Gases,Transport and Environment
    Date: 2009–10–01
  13. By: Timilsina, Govinda R.; Shrestha, Ashish
    Abstract: Rapidly increasing emissions of carbon dioxide from the transport sector, particularly in urban areas, is a major challenge to sustainable development in developing countries. This study analyzes the factors responsible for transport sector CO2 emissions growth in selected developing Asian countries during 1980-2005. The analysis splits the annual emissions growth into components representing economic development; population growth; shifts in transportation modes; and changes in fuel mix, emission coefficients, and transportation energy intensity. The study also reviews existing government policies to limit CO2 emissions growth, particularly various fiscal and regulatory policy instruments. The study finds that of the six factors considered, three - economic development, population growth, and transportation energy intensity - are responsible for driving up transport sector CO2 emissions in Bangladesh, the Philippines, and Vietnam. In contrast, only economic development and population growth are responsible in the case of China, India, Indonesia, Republic of Korea, Malaysia, Pakistan, Sri Lanka, and Thailand. CO2 emissions exhibit a downward trend in Mongolia due to decreasing transportation energy intensity. The study also finds that some existing policy instruments help reduce transport sector CO2 emissions, although they were not necessarily targeted for this purpose when introduced.
    Keywords: Transport Economics Policy&Planning,Climate Change Mitigation and Green House Gases,Energy Production and Transportation,Climate Change Economics,Transport and Environment
    Date: 2009–10–01
  14. By: Carmin, JoAnn; Zhang, Yan
    Abstract: Many cities across Europe and Central Asia are experiencing the impacts of climate change, but most have not integrated climate adaptation into their agendas. This paper examines the threats faced and measures that can be taken by cities in the region to protect buildings, heritage sites, municipal functions, and vulnerable urban populations. In general, local governments must be proactive in ensuring that existing buildings are climate ready, paying particular attention to emerging technologies for retrofitting the prefabricated, panel style buildings that dominate the landscape while assessing the viability of homes situated in flood plains, coastal areas, and steep slopes. They also must ensure that new developments and buildings are designed in ways that account for climatic fluctuations. Although the resilience of all populations needs to be considered, historical patterns of discrimination require that special provisions are made for the poor and for ethnic minorities such as the Roma because these groups will be most at risk, but are least likely to have access to adequate resources. Urban climate adaptation requires national-level support and local commitment. However, centralized planning and expert-led decision-making under the former regimes may affect the ability of cities to pursue programmatic approaches to adaptation. Therefore, while national governments need to make adaptation a policy priority and ensure that municipalities have adequate resources, local government agencies and departments must be transparent in their actions and introduce participatory and community-based measures that demonstrate respect for diverse stakeholders and perspectives.
    Keywords: Wetlands,Climate Change Mitigation and Green House Gases,Environmental Economics&Policies,Science of Climate Change,Climate Change Economics
    Date: 2009–10–01
  15. By: Andersen, Lykke E.; Verner, Dorte
    Abstract: This paper analyzes the direct evidence of climate change in Bolivia during the past 60 years, and estimates how these changes have affected life expectancy and consumption levels for each of the 311 municipalities in Bolivia. Contrary to the predictions of most general circulation models, the evidence shows a consistent cooling trend of about 0.2°C per decade over all highland areas, slight and scattered evidence of warming in the lowlands, and no systematic changes in precipitation. The estimations indicate that the 1°C cooling experienced in the already cold highlands over the past five decades likely has reduced consumption possibilities by about 2-3 percent in these areas. Since the much richer population in the lowlands have benefitted slightly from recent climate change, the simulations suggest that recent climate change has contributed to an increase in inequality and poverty in Bolivia. Poor and indigenous peoples in the highlands are among the most severely affected populations. No statistically significant effect on life expectancy was found.
    Keywords: Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Economics,Global Environment Facility,Population Policies
    Date: 2009–10–01
  16. By: Andersen, Lykke E.; Suxo, Addy; Verner, Dorte
    Abstract: This paper uses district level data to estimate the general relationship between climate, income and life expectancy in Peru. The analysis finds that both incomes and life expectancy show hump-shaped relationships, with optimal average annual temperatures around 18-20ºC. These estimated relationships were used to simulate the likely effects of both past (1958-2008) and future (2008-2058) climate change. At the aggregate level, future climate change in Peru is estimated to cause a small reduction in average life expectancy of about 0.2 years. This average, however, hides much larger losses in the already hot areas as well as substantial gains in currently cold areas. Similarly, the average impact on incomes is a modest reduction of 2.3 percent, but with some districts experiencing losses of up to 20 percent and others gains of up to 13 percent. Future climate change is estimated to cause an increase in poverty (all other things equal), but to have no significant effect on the distribution of incomes.
    Keywords: Science of Climate Change,Climate Change Mitigation and Green House Gases,Climate Change Economics,Population Policies,Global Environment Facility
    Date: 2009–10–01
  17. By: Ostrom, Elinor
    Abstract: This paper proposes an alternative approach to addressing the complex problems of climate change caused by greenhouse gas emissions. The author, who won the 2009 Nobel Prize in Economic Sciences, argues that single policies adopted only at a global scale are unlikely to generate sufficient trust among citizens and firms so that collective action can take place in a comprehensive and transparent manner that will effectively reduce global warming. Furthermore, simply recommending a single governmental unit to solve global collective action problems is inherently weak because of free-rider problems. For example, the Carbon Development Mechanism (CDM) can be ‘gamed’ in ways that hike up prices of natural resources and in some cases can lead to further natural resource exploitation. Some flaws are also noticeable in the Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD) program. Both the CDM and REDD are vulnerable to the free-rider problem. As an alternative, the paper proposes a polycentric approach at various levels with active oversight of local, regional, and national stakeholders. Efforts to reduce global greenhouse gas emissions are a classic collective action problem that is best addressed at multiple scales and levels. Given the slowness and conflict involved in achieving a global solution to climate change, recognizing the potential for building a more effective way of reducing green house gas emissions at multiple levels is an important step forward. A polycentric approach has the main advantage of encouraging experimental efforts at multiple levels, leading to the development of methods for assessing the benefits and costs of particular strategies adopted in one type of ecosystem and compared to results obtained in other ecosystems. Building a strong commitment to find ways of reducing individual emissions is an important element for coping with this problem, and having others also take responsibility can be more effectively undertaken in small- to medium-scale governance units that are linked together through information networks and monitoring at all levels. This paper was prepared as a background paper for the 2010 World Development Report on Climate Change.
    Keywords: Climate Change Mitigation and Green House Gases,Environmental Economics&Policies,Climate Change Economics,Transport Economics Policy&Planning,Environment and Energy Efficiency
    Date: 2009–10–01
  18. By: Humberto Llavador; John E. Roemer; Joaquim Silvestre
    Abstract: We study the problem of intergenerational welfare maximization when the existence of future worlds is uncertain. One of the major examples of this problem today concerns global warming, and how to structure resource use intertemporally in its presence. The theoretical issues raised by uncertainty are quite complex, and in the interest of clarity, we will study only two simple models in this article – and neither of them explicitly models the effect of production on the biosphere and global temperature. In a companion paper (Llavador, Roemer, and Silvestre, 2009), we study a more complex version of the second model of this article, which does take into account the biosphere as a renewable resource: but that paper studies only the case with no uncertainty concerning the existence of future generations. The conclusions of the present paper suggest some inferences for the more complex problem. We study several (intergenerational) social welfare functions: utilitarian, Rawlsian, ‘extended Rawlsian,’ and ‘Rawlsian with growth.’ The Rawlsian function is identified with the view of sustainability, in a model with production.1 Sustainability, in our parlance, means sustaining human welfare over time at the highest possible level. This is often called ‘weak sustainability,’ to be contrasted with ‘strong sustainability’, which advocates sustaining the physical stock of bio-resources – species variety, forests, and so on. (See, for instance, Neumayer, 2003, and the articles in Asheim, 2007.) In another dimension, it is to be contrasted with the discountedutilitarian approach, which does not advocate sustaining human welfare over time, but rather the maximization of a weighted sum of generational welfare levels.
    Keywords: Discounted utilitarianism, Rawlsian, sustainability, maximin, uncertainty, expected utility, von Neumann-Morgenstern, dynamic welfare maximization
    JEL: D63 D81 O40 Q54 Q56
    Date: 2009–10

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