nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒12‒11
thirty papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. The Supply Function Equilibrium and Its Policy Implications for Wholesale Electricity Auctions By Holmberg, Pär; Newbery, David
  2. Forecasting electricity spot market prices with a k-factor GIGARCH process By Abdou Kâ Diongue; Dominique Guegan; Bertrand Vignal
  3. It Should Be a Breeze: Harnessing the Potential of Open Trade and Investment Flows in the Wind Energy Industry By Lutz Weischer
  4. Refunding ETS-Proceeds to Spur the Diffusion of Renewable Energies: An Analysis Based on the Dynamic Oligopolistic Electricity Market Model EMELIE By Thure Traber; Claudia Kemfert
  5. Signaux-prix et équilibre de long-terme. Reconsidérer l’organisation des marchés électriques By Dominique Finon; Christophe Defeuilley; Frédéric Marty
  6. Determinants of Household Fuel Choice in Major Cities in Ethiopia By Mekonnen, Alemu; Köhlin, Gunnar
  7. Cost function for the natural gas transmission industry: further considerations By Olivier MASSOL
  8. The Effects of Oil Price Changes on the Industry-Level Production and Prices in the U.S. and Japan. By Ichiro Fukunaga; Naohisa Hirakata; Nao Sudo
  9. Do Oil Windfalls Improve Living Standards? Evidence from Brazil By Francesco Caselli; Guy Michaels
  10. Natural Resource Dependency and Quality of Government By Anthonsen, Mette; Löfgren, Åsa; Nilsson, Klas
  11. On the Feasibility of Perpetual Growth in a Decentralized Economy Subject to Environmental Constraints By Jean-Francois FAGNART; Marc GERMAIN
  12. Biofuel Subsidies: An Open-Economy Analysis By Bandyopadhyay, Subhayu; Bhaumik, Sumon K.; Wall, Howard J.
  13. La transition vers l'hydrogène est-elle bloquée par un verrouillage technologique au profit des énergies fossiles ? By Nuno Bento; Jean-Pierre Angelier
  14. Potentiale und Risiken der Nutzung von Methan aus Methanhydraten als Energieträger By Markus Groth
  15. Empirical Study on the Environmental Kuznets Curve for CO2 in France: The Role of Nuclear Energy By Iwata, Hiroki; Okada, Keisuke; Samreth, Sovannroeun
  16. Choosing a trading counterpart in the U.S. acid rain market By Maria Eugénia Sanin
  17. Controlling the international stock pollutant with policies depending on target values By Omar J. Casas; Rosario Romera
  18. Mathematization of risks and economic studies in global change modelling By Nicolas Bouleau
  19. La taxation énergie-climat en Suède By Katrin Millock
  20. Aviation and the EU ETS - Lessons learned from previous emissions trading schemes By Kopsch, Fredrik
  21. Optimal allocation of tradable emission permits under upstream-downstream strategic interaction By Joana Resende; Maria Eugénia Sanin
  22. Profiting from Regulation: An Event Study of the EU Carbon Market By James B. Bushnell; Howard Chong; Erin T. Mansur
  23. The U.S. proposed carbon tariffs, WTO scrutiny and China's responses By Zhang, ZhongXiang
  24. Damned if you do, Damned if you don't – Reduced Climate Impact vs. Sustainable Forests in Sweden By Geijer, Erik; Bostedt, Göran; Brännlund, Runar
  25. The Economics of Natural Disasters - A Survey By Eduardo Cavallo; Ilan Noy
  26. Kyoto Protocol Reference Manual on Accounting of Emissions and Assigned Amount By UN Framwork Convention on Climate Change UNFCCC
  27. Climate Change and India-Some Major Issues and Policy Implications By H A C Prasad
  28. Climate Conference in Copenhagen Success is a Political Must By Eric Heymann
  29. Un, deux trois, soleil By Nicolas Bouleau
  30. Commitment Contracts By Bryan, Gharad; Karlan, Dean; Nelson, Scott

  1. By: Holmberg, Pär (Research Institute of Industrial Economics (IFN)); Newbery, David (Faculty of Economics)
    Abstract: The supply function equilibrium provides a game-theoretic model of strategic bidding in oligopolistic wholesale electricity auctions. This paper presents an intuitive account of current understanding and shows how welfare losses depend on the number of firms in the market and their asymmetry. Previous results and general recommendations for divisible-good/multi-unit auctions provides guidance on the design of the auction format; setting the reservation price; the rationing rule; and restrictions on the offer curves in wholesale electricity auctions.
    Keywords: Wholesale Electricity Markets; Supply Function Equilibria; Competition Policy
    JEL: C62 D43 D44 L94
    Date: 2009–11–05
  2. By: Abdou Kâ Diongue (UFR SAT - Université Gaston Berger - Université Gaston Berger de Saint-Louis); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Bertrand Vignal (EDF - EDF - Recherche et Développement)
    Abstract: In this article, we investigate conditional mean and variance forecasts using a dynamic model following a k-factor GIGARCH process. We are particularly interested in calculating the conditional variance of the prediction error. We apply this method to electricity prices and test spot prices forecasts until one month ahead forecast. We conclude that the k-factor GIGARCH process is a suitable tool to forecast spot prices, using the classical RMSE criteria.
    Keywords: Conditional mean - conditional variance - forecast - electricity prices - GIGARCH process
    Date: 2009–04
  3. By: Lutz Weischer (World Resources Institute)
    Abstract: This working paper maps out the structure and value chains of the wind industry, analyzes the wind industry's increasing global integration via cross-border trade and investment flows, and offers recommendations to policymakers for the design of investment and trade policies to help realize wind energy's potential. We find that demand for wind energy through longterm government support policies creates the basis for local supply of wind capital equipment and services and associated local job creation; policies that put a price on carbon will further help to make wind energy more competitive and increase the overall demand for turbines and equipment. Cross-border investment rather than trade is the dominant mode of the wind industry's global integration. Principal barriers to global integration are nontariff trade barriers and formal and informal barriers that distort firms' investment decisions. These include local content requirements, divergent national industrial standards and licensing demands, and in particular political expectations. Intellectual property accounts for only a very small part of cost in the wind industry, and wind technology is widely available for licensing. Intellectual property rights are correspondingly not a major impediment for market participation. Credible long-term commitments coupled with a reduction or elimination of existing barriers to cross-border trade and investment are necessary to harness the full potential of global integration in reducing wind industry prices and increase worldwide deployment of wind energy.
    Keywords: Wind Energy, Renewable Energy Subsidies, Energy Policy, Global Industry Integration, Foreign Direct Investment, Carbon Emissions, Climate Change
    JEL: H23 L22 Q42 Q48 Q56
    Date: 2009–12
  4. By: Thure Traber; Claudia Kemfert
    Abstract: We use a quantitative electricity market model to analyze the welfare effects of refunding a share of the emission trading proceeds to support renewable energy technologies that are subject to experience effects. We compare effects of supporting renewable energies under both perfect and oligopolistic competition with competitive fringe firms and emission trading regimes that achieve 70 and 80 percent emission reductions by 2050. The results indicate the importance of market power for renewable energy support policy. Under imperfect competition welfare improvements is maximized by refunding ten percent of the emission trading proceeds, while under perfect competition the optimal refunding share is only five percent. However, under both behavioral assumptions we find significant welfare improvements due to experience effects which are induced by the support for renewable energy.
    Keywords: emission trading, renewable energy support, experience effects, imperfect competition
    Date: 2009
  5. By: Dominique Finon (CNRS-CIRED); Christophe Defeuilley (LARSEN); Frédéric Marty (Université de Nice Sophia-Antipolis; Observatoire Français des Conjonctures Économiques)
    Date: 2009–11
  6. By: Mekonnen, Alemu (Department of Economics, Addis Ababa University); Köhlin, Gunnar (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper looks at the fuel choice of urban households in major Ethiopian cities, using panel data collected in 2000 and 2004. It examines use of multiple fuels by households in some detail, a topic not much explored in the household fuel-choice literature in general, and in sub-Saharan Africa in particular. The results suggest that as households’ total expenditures rise, they increase the number of fuels used, even in urban areas, and they also spend more on the fuels they consume (including charcoal but not wood). The results also show that even fuel types such as wood are not inferior goods. The results support more recent arguments in the literature (using Latin American and Asian data) that multiple fuel use (fuel stacking) better describes fuel-choice behavior of households in developing countries, as opposed to the idea that households switch (completely) to other (more expensive but cleaner) fuels as their incomes rise. This study shows the relevance of fuel stacking (multiple fuel use) in urban areas in sub-Saharan Africa. While income is an important variable, the results of this study suggest the need to consider other variables such as cooking and consumption habits, dependability of supply, cost, and household preferences and tastes to explain household fuel choice, as well as to recommend policies that address issues associated with household energy use.<p>
    Keywords: Household fuel; urban; Ethiopia
    JEL: D11 O12
    Date: 2009–11–30
  7. By: Olivier MASSOL
    Abstract: This article studies the cost function for the natural gas transmission industry. 60 years ago, Hollis B. Chenery published an important contribution that demonstrated how, in that particular industry, the production function of microeconomic theory can be rewritten with engineering variables (Chenery, 1949). In 2008, an article published in The Engineering Economist (Yépez, 2008) provided a refreshing revival on Chenery's seminal thoughts. In addition to a tribute to the late H.B. Chenery, this document offers some further comments and extensions on Yépez (2008). It provides a statistically estimated characterisation of the long-run scale economies and a discussion on the short-run economics of the duplication of existing equipments. As a first extension, we study the optimal design for infrastructure that is planned to transport a seasonally-varying flow of natural gas. The second extension analyzes the optimal degree of excess capacity to be built into a new infrastructure by a firm that expects a random rise in its output during the infrastructure's lifetime.
    Keywords: natural gas transmission industry, cost function, optimal design for infrastructure
    Date: 2009
  8. By: Ichiro Fukunaga (Director, Research and Statistics Department, Bank of Japan.); Naohisa Hirakata (Deputy Director, Research and Statistics Department, Bank of Japan.); Nao Sudo (Associate Director, Institute for Monetary and Economic Studies, Bank of Japan.)
    Abstract: In this paper, we decompose oil price changes into their component parts following Kilian (2009) and estimate the dynamic effects of each component on industry-level production and prices in the U.S. and Japan using identified VAR models. The way oil price changes affect each industry depends on what kind of underlying shock drives oil price changes as well as on industry characteristics. Unexpected disruptions of oil supply act mainly as negative supply shocks for oil- intensive industries and act mainly as negative demand shocks for less oil- intensive industries. For most industries in the U.S., shocks to the global demand for all industrial commodities act mainly as positive demand shocks, and demand shocks that are specific to the global oil market act mainly as negative supply shocks. In Japan, the oil-specific demand shocks as well as the global demand shocks act mainly as positive demand shocks for many industries.
    Keywords: Oil price, Identified VAR, Industry-level data, Japan
    JEL: E30
    Date: 2009–10
  9. By: Francesco Caselli; Guy Michaels
    Abstract: We use variation in oil output among Brazilian municipalities to investigate the effects of resource windfalls. We find muted effects of oil through market channels: offshore oil has no effect on municipal non-oil GDP or its composition, while onshore oil has only modest effects on non-oil GDP composition. However, oil abundance causes municipal revenues and reported spending on a range of budgetary items to increase, mainly as a result of royalties paid by Petrobras. Nevertheless, survey-based measures of social transfers, public good provision, infrastructure, and household income increase less (if at all) than one might expect given the increase in reported spending. To explain why oil windfalls contribute little to local living standards, we use data from the Brazilian media and federal police to document that very large oil output increases alleged instances of illegal activities associated with mayors.
    JEL: E62 H11 H40 H71 H72 H75 H76 O11 O13 Q32 Q33
    Date: 2009–12
  10. By: Anthonsen, Mette (The Quality of Government Institute, Department of Political Science University of Gothenburg); Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University); Nilsson, Klas (Department of Political Science University of Gothenburg)
    Abstract: This paper introduces quality of government rather than regime type as dependent variable in studies of the political effects of natural resources. It consists of two parts. First, it theorizes the role of fiscal dependency of oil and gas rents in relation to three different dimensions of quality of government; low corruption, bureaucratic quality and legal impartiality. Second, it finds significant, negative effects of oil and gas rent dependency on all three dimensions of quality in a sample of 139 states in the period 1984 to 2006. The results hold for inclusion of control variables such as regime type, income, region and religion.<p>
    Keywords: Oil; gas; corruption; bureaucracy; legal impartiality; large-N
    JEL: N50 O13 O43 P48 Q34
    Date: 2009–12–04
  11. By: Jean-Francois FAGNART (CEREC, Facultes universitaires Saint-Louis, Brussels and Department of Economics, Universite catholique de Louvain, Louvain- la-Neuve.); Marc GERMAIN (EQUIPPE, Universite de Lille 3 and Department of Economics, Universite catholique de Louvain, Louvain-la-Neuve)
    Abstract: We propose an endogenous growth model of a decentralized economy subject to environmental constraints. In a basic version, we consider an economy where final production requires some material input and where research activities allow simultaneously productive firms to reduce the dependency of their production process on this input and to improve the quality of their output. We adopt a material balance approach and, in spite of the optimistic assumption that the material input is perfectly recyclable (and thus never exhausted), we show that material output growth is always a transitory phenomenon. When it exists, a balanced growth path is necessarily characterized by constant values of the material variables, long term economic growth taking exclusively the form of perpetual improvements in the quality of consumption goods. The material esource constraint is not solely a long term issue since it is also shown to affect the whole transitory dynamics of the (material) growth process. Renewable energy is introduced in an extension of our basic model. This extension does not affect qualitatively the features of a feasible balanced growth path but make its conditions of existence more restrictive.
    Keywords: material balance, endogenous growth, recycling
    JEL: E1 Q0 Q56
    Date: 2009–10–30
  12. By: Bandyopadhyay, Subhayu (Federal Reserve Bank of St. Louis); Bhaumik, Sumon K. (Brunel University); Wall, Howard J. (Federal Reserve Bank of St. Louis)
    Abstract: We present a general equilibrium analysis of biofuel subsidies in an open-economy context. In the small-country case, when a Pigouvian tax on conventional fuels such as crude is in place, the optimal biofuel subsidy is zero. When the tax on crude is not available as a policy option, however, a second-best biofuel subsidy (or tax) is optimal. In the large-country case, the optimal tax on crude departs from its standard Pigouvian level and a biofuel subsidy is optimal. A biofuel subsidy spurs global demand for food and confers a terms-of-trade benefit to the food-exporting nation. This might encourage the food-exporting nation to use a subsidy even if it raises global crude use. The food importer has no such incentive for subsidization. Terms-of-trade effects wash out between trading nations; hence, any policy intervention by the two trading nations that raises crude use must be jointly suboptimal.
    Keywords: optimal biofuel subsidy, Pigouvian tax, terms-of-trade, pollution externality
    JEL: F1 H2 O1
    Date: 2009–11
  13. By: Nuno Bento (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Jean-Pierre Angelier (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: La difficulté d'introduire l'hydrogène et les piles à combustible dans le marché découle du fait que ces technologies ne constituent pas une innovation évolutive, comme les biocarburants ou les voitures hybrides, mais plutôt une rupture technologique. La domination actuelle des technologies liées au pétrole crée un contexte socio-économique favorisant les acteurs impliqués dans le paradigme actuel, et donne moins de possibilités aux carburants alternatifs de se développer et de contester le statu quo. L'environnement institutionnel tend à reproduire les incitations économiques donnant lieu à un cycle vicieux, lequel rend la sortie du verrouillage au carbone difficile. Si cette hypothèse est correcte, les entreprises intéressées par l'économie de l'hydrogène peuvent se voir bloquées en l'absence d'un contexte stable ou en raison d'intérêts contradictoires. En passant en revue les actions et les annonces des principaux acteurs intéressés par l'hydrogène-énergie, nous cherchons les vrais verrous technologiques au carbone empêchant les entreprises de démarrer la transition. L'infrastructure, plus que la pile à combustible, semble être un facteur majeur de blocage au changement.
    Date: 2009–11
  14. By: Markus Groth (Leuphana Universität Lüneburg, Lehrstuhl für Nachhaltigkeitsökonomie)
    Abstract: Marine and permafrost-based methane hydrates are the largest existing fossil carbon resource, whereby the marine deposits far outweigh the terrestrial ones. Their broad geographic distribution, especially in comparison to oil and conventional gas, make them a promising future source of energy. However, there is a danger of forcing the greenhouse effect in the event of a release of methane into the atmosphere as well as causing the collapse of oceanic slope sediments. Also the technical difficulties in extracting methane from hydrates are not yet fully resolved. Nevertheless, research on methane hydrates has been forced both on political as well as economic considerations in recent years and methane hydrates have several practical advantages, which make them a transitional solution worth looking at on the way to a future renewable-based energy supply, not in the least in playing a role in carbon capture and sequestration. However, the knowledge of the potentials and risks of methane hydrates is still very poor, especially in the German-speaking public, administration and policies. This deficiency hopefully will be eased by this overview dealing with the current state of research and an outlook based on the most important findings.
    Keywords: CO2-Sequestrierung, Energiepolitik, Erdgas, fossile Energieträger, Klimawandel, Kohlenstoffpotential, Methan, Methanhydrate, Ökologische Ökonomik, Treibhausgas, Versorgungssicherheit
    JEL: H00 Q38 Q42 Q48 Q54
    Date: 2009–10
  15. By: Iwata, Hiroki; Okada, Keisuke; Samreth, Sovannroeun
    Abstract: This paper attempts to estimate the environmental Kuznets curve (EKC) in the case of France by taking the role of nuclear energy in electricity production into account. We adopt the autoregressive distributed lag (ARDL) approach to cointegration as the estimation method. Additionally, we examine the stability of the estimated models and investigate the Granger causality relationships between the variables in the system. The results from our estimation provide evidence supporting the EKC hypothesis and the estimated models are shown to be stable over the sample period. The uni-direction running from other variables to CO2 emissions are confirmed from the casualty tests. Specifically, the uni-directional causality relationship running from nuclear energy to CO2 emissions statistically provides evidence on the important role of nuclear energy in reducing CO2 emissions.
    Keywords: CO2; Environment; EKC; Nuclear; France; ARDL
    JEL: Q53 Q51 Q43
    Date: 2009–12
  16. By: Maria Eugénia Sanin (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, CORE - Center for Operations Research and Econometrics - Université Catholique de Louvain)
    Abstract: In this paper we study the determinants of the counterpart choice in the U.S. market for SO2 allowances. Counterparts can be chosen among three alternatives proved to be independent: market makers, brokers or private. Privates are mostly U.S. electricity generators. We find that the SO2 allowances market, as the electricity market, is regionalized. The national dimension only appears when there are local imbalances that give incentives to search for a better price outside of the region. Additionally, our results suggest that agents like counterpart differentiation i.e. they value positively the presence of few market makers, possibly with large stocks but they also value positively the presence of many brokers (and privates). In line with previous literature results, we also find agents prefer market makers when placing large size orders and that the preference for market makers increases on time due to the increase in the counterpart risk. Finally, we also identify the influence of the regulatory framework, i.e. the division in phases and the chosen allowance surrender date, in the counterpart choice. The previous results are robust to Enron's abnormal behavior during 2000-2001 and its posterior bankruptcy.
    Date: 2009–12–01
  17. By: Omar J. Casas; Rosario Romera
    Abstract: In this paper a stochastic dynamic game formulation of the economics of international environmental agreements on the transnational pollution control, when the environmental damage arises from stock pollutant that accumulates, for accumulating pollutants such as CO2 in the atmosphere is provided. To improve the non-cooperative equilibrium among countries, we propose a different criterion to the minimization of the expected discounted total cost. Moreover, we consider Cooperative versus Noncooperative Stochastic Dynamic Games formulated as Markov Decision Processes (MDP). We propose a new alternative where the decision-maker wants to maximize the probability that some total performance of the dynamical game does not exceed a target value during a fixed period of time. The task requirements are therefore formulated as probabilities rather than expectations. This approach is different from the standard MDP, which uses performance criteria based on the expected value of some index. We present properties of the optimal policies obtained under this new perspective.
    Keywords: Stochastic optimal control, Markov Decision Processes, Stochastic Dynamic Programming, Stochastic Dynamic Games, International pollutant control, Environmental economics, Sustainability, Probability criterion
    Date: 2009–09
  18. By: Nicolas Bouleau (CERMICS - Centre d'Enseignement et de Recherche en Mathématiques, Informatique et Calcul Scientifique - INRIA - Ecole Nationale des Ponts et Chaussées, CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et Forêts)
    Abstract: With respect to the climate change, and more generally to the energy problem, in the laboratories working on the subject, scientists contribute to clarify the situation and to help decision makers by yielding and updating factual physical informations, and also by modelling. This conceptual work is mainly done in the language of economics. This discipline, which appears therefore in the core of the reflecting process in action at present, is however rather peculiar is the sense that it uses mathematics in order to think social phenomena. It is on this methodological configuration that we hold a philosophical enquiry. Our analysis focuses on risks, incertitude and on the role of mathematics to represent them. It concludes on the importance of a certain type of modelization, investigation modelling, which reveals new significations. This study attempts to enlighten some part of the limit between mathematized knowledge, as economics, and interpretative meaning used in every day life and social and human sciences
    Keywords: risk; probability distribution; heavy tail; finance : value at risk; coherent measure of risk; boundary at risk; interpretation; meaning; investigation modelling
    Date: 2009–11–25
  19. By: Katrin Millock (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Ce texte résume l'expérience de la taxe carbone en Suède : son efficacité environnementale, ses effets distributifs, et les recettes générées par le dispositif.
    Keywords: taxe carbone, émissions de CO2, taxation énergie, politique environnementale, instruments économiques,
    Date: 2009–06–17
  20. By: Kopsch, Fredrik (Swedish National Road and Transport Research Institute)
    Abstract: <p>Designing an emissions trading scheme requires in-depth knowledge about several aspects. This paper attempts to clarify some important design points of the forthcoming emissions trading scheme for aviation under the EU ETS. Five general key points of system design are acknowledged and comparisons are made to previous and current emission trading schemes. Above all, it is argued that initial allocations of emission permits and the trade barrier between the aviation sector and EU ETS need to be carefully examined.<p>
    Keywords: Aviation; Tradable permits; System design; Policy
    JEL: L51 P48 Q52 Q53 Q58
    Date: 2009–12–01
  21. By: Joana Resende (CORE - Center for Operations Research and Econometrics - Université Catholique de Louvain, CETE - University of Porto); Maria Eugénia Sanin (CORE - Center for Operations Research and Econometrics - Université Catholique de Louvain, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: In this paper we account for the fact that Cournot equilibrium strategies in the sector under environmental regulation depend on firms'interaction in the permits market (and vice versa). In this context, we show that the cost-effective allocation of permits between firms must compensate the cost-rising strategies exercised by the stronger firm (in the output market). Then, taking into account the previous result, we use a simulation to obtain the optimal allocation of permits between firms as a function of output market characteristics, in particular as a function of goods substitutability that serves as an indicator for the de- gree of price competition. The simulation allows us to determine how output market characteristics affect differently optimal permit allocation depending on the regulator's objective.
    Date: 2009–12–01
  22. By: James B. Bushnell; Howard Chong; Erin T. Mansur
    Abstract: Tradable permit regulations have recently been implemented for climate change policy in many countries. One of the first mandatory markets was the EU Emission Trading System, whose first phase ran from 2005-07. Unlike taxes, permits expose firms to volatility in regulatory costs, but are typically accompanied by property rights in the form of grandfathered permits. In this paper, we examine the effect of this type of environmental regulation on profits. In particular, changes in permit prices affect: (1) the direct and indirect input costs, (2) output revenue, and (3) the carbon permit asset value. Depending on abatement costs, output price sensitivity, and permit allocation, these effects may vary considerably across industries and firms. We run an event study of the carbon price crash on April 25, 2006 by examining the daily stock returns for 90 stocks from carbon intensive industries and approximately 600 stocks in the broad EUROSTOXX index. In general, firms in industries that tended to be either carbon intensive, or electricity intensive, but not involved in international trade, were hurt by the decline in permit prices. In industries that were known to be net short of permits, the cleanest firms saw the largest declines in share value. In industries known to be long in permits, firms granted the largest allocations were most harmed.
    JEL: G14 H22 H23 Q50 Q54
    Date: 2009–12
  23. By: Zhang, ZhongXiang
    Abstract: With countries from around the world set to meet in Copenhagen to try to hammer out a post-2012 climate change agreement, no one would disagree that a U.S. commitment to cut greenhouse gas emissions is essential to such a global pact. However, despite U.S. president Obama’s recent announcement that he will push for a commitment to cut U.S. greenhouse gas emissions by 17% by 2020, in reality it is questionable whether U.S. Congress will agree to specific emissions cuts, although are not ambitious at all from the perspectives of both the EU and developing countries, without imposing carbon tariffs on Chinese products to the U.S. market, even given China’s own recent announcement to voluntarily seek to reduce its carbon intensity by 40-45% over the same period. This dilemma is partly attributed to flaws in current international climate negotiations, which have been focused on commitments on the two targeted dates of 2020 and 2050. However, if the international climate change negotiations continue their current course without extending the commitment period to 2030, which would really open the possibility for the U.S. and China to make the commitments that each wants from the other side, the inclusion of border carbon adjustment measures seems essential to secure passage of any U.S. legislation capping its greenhouse gas emissions. Moreover, the joint WTO-UNEP report indicates that border carbon adjustment measures might be allowed under the existing WTO rules, depending on specific design features and conditions for implementing them. Against this background, this paper argues that, on the U.S. side, there is a need to minimize the potential conflicts with WTO provisions in designing such border carbon adjustment measures. The U.S. also needs to explore with its trading partners cooperative sectoral approaches to advancing low-carbon technologies and/or concerted mitigation efforts in a given sector at an international level. Moreover, to increase the prospects for a successful WTO defence of the Waxman-Markey type of border adjustment provision, 1) there should be a period of good faith efforts to reach agreements among the countries concerned before imposing such trade measures; 2) WTO consistency also requires considering alternatives to trade provisions that could be reasonably expected to fulfill the same function but are not inconsistent or less inconsistent with the relevant WTO provisions; and 3) trade provisions should allow importers to submit equivalent emission reduction units that are recognized by international treaties to cover the carbon contents of imported products. Being targeted by such border carbon adjustment measures, China needs to, at a right time, indicate a serious commitment to address climate change issues to challenge the legitimacy of the U.S. imposing the carbon tariffs by signaling well ahead that it will take on binding absolute emission caps around the year 2030, and needs the three transitional periods of increasing climate obligations before taking on absolute emissions caps. The paper argues that there is a clear need within a climate regime to define comparable efforts towards climate mitigation and adaptation to discipline the use of unilateral trade measures at the international level. As exemplified by export tariffs that China applied on its own during 2006-08, the paper shows that defining the comparability of climate efforts can be to China’s advantage. Furthermore, given the fact that, in volume terms, energy-intensive manufacturing in China values 7-8 times that of India, and thus carbon tariffs impact much more on China than on India, the paper questions whether China should hold the same stance on this issue as India as it does now, although the two largest developing countries should continue to take the same positions on other key issues in international climate change negotiations.
    Keywords: Post-2012 climate negotiations; Border carbon adjustments; Carbon tariffs; Emissions allowance requirements; Cap-and-trade regime; Lieberman-Warner bill; Waxman-Markey bill; World Trade Organization; Kyoto Protocol; China; United States
    JEL: F18 Q48 Q56 Q54 Q43 Q58
    Date: 2009–09–01
  24. By: Geijer, Erik (Dept of Forest Economics); Bostedt, Göran (Dept of Forest Economics); Brännlund, Runar (Department of Economics, Umeå University)
    Abstract: The main objective of this paper is to analyze the potential goal conflict between two of Sweden’s environmental objectives: Sustainable Forests and Reduced Climate Impact – or, more precisely, the conflict between forest conservation and the supply of wood fuel. To accomplish this, we use a forest sector model that includes the suppliers and major users of roundwood. The econometric results, based on a data set that spans 40 years, show that all the own price elasticities have the expected signs. Among the three forestry products, the supply and (long-term) demand of forest fuel seems to be most sensitive to a price change. In a second step, the estimated model is used to simulate the effect of increased forest conservation -- the Sustainable Forest objective -- on the supply of wood fuel. If oil is used as a substitute, Swedish emissions of greenhouse gases will increase by almost 0.92 percent, which indicates a clear conflict with the Reduced Climate Impact objective.
    Keywords: Goal conflict; Wood fuels; Forest sector model; Roundwood markets; Forest conservation
    JEL: C30 L73 Q41 Q48
    Date: 2009–11–27
  25. By: Eduardo Cavallo (Research Department, Inter-American Development Bank); Ilan Noy (Department of Economics, University of Hawaii at Manoa)
    Abstract: Catastrophes caused by natural disasters are by no means new, yet our evolving understanding regarding their relevance to economic development and growth is still at its infancy. In order to facilitate further necessary research on this topic, we summarize the state of the economic literature that examines the aggregate impact of disasters. We review the main disaster data sources available, discuss the determinants of the direct effects of disasters, and distinguish between the short- and long-run indirect effects. After reviewing these literatures, we examine some of the relevant policy questions, and follow up with projections about the future likelihood of disasters, while paying particular attention to the projected climate change. We end by identifying several significant gaps in this literature.
    Date: 2009–11
  26. By: UN Framwork Convention on Climate Change UNFCCC
    Abstract: This manual is provided as a reference tool to assist Parties to the United Nations Framework Convention on Climate Change (hereafter referred to as the Convention) (Annex I Parties) in the implementation of their commitments related to the accounting of emissions and assigned amount under the Kyoto Protocol.
    Keywords: climate change, atmospheric concentrations, climate system, policies, GHGs, land use, forestry, United Nations, kyoto protocol, emissions,
    Date: 2009
  27. By: H A C Prasad
    Abstract: The paper examines the genesis of Climate Change which has been referred to as the defining human development issue of our generation. Also studied is the impact of this problem in the global as well as Indian context. India is not immune from the impact of global warming and climate change. Major international developments related to Climate Change including the UN Framework Convention on Climate Change(UNFCCC ), 1992 and Kyoto Protocol are described along with significant meetings like those at Bali and Bangkok and outcomes at these international exchanges. While comparing perspectives of developed and developing countries on Climate Change, a detailed examination is made of the issues involved and India’s view point, especially the arguments for India to take up GHG abatement and our response to each of these at the international forums. [Working Paper No.2/2009-DEA].
    Keywords: climate change, UNFCCC, kyoto protocaol, developing countries, internatinal exchanges, Bali, Bangkok, India, global warming, GHG, policy, environment, sustainable, emission reduction, technologies, technology
    Date: 2009
  28. By: Eric Heymann
    Abstract: This conference is one of the most important and most complex in the history of climate policy negotiations. The objective is to form a treaty as a successor for the Kyoto Protocol. To enable a breakthrough on climate policy to be made in Copenhagen particularly vigorous efforts should be made to reach agreement on some key issues
    Keywords: kyoto protocol, copenhagen, climate policy, conference, negotiations, greenhouse gases, poorer countries, technology, funding, emissions, agriculture, forestry
    Date: 2009
  29. By: Nicolas Bouleau (CERMICS - Centre d'Enseignement et de Recherche en Mathématiques, Informatique et Calcul Scientifique - INRIA - Ecole Nationale des Ponts et Chaussées, CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et Forêts)
    Abstract: Nous explicitons ce qui, dans la pensée économique, enfonce irrémédiablement dans le dilemme du prisonnier tel qu'il se pose à propos du changement climatique et de la crise des ressources. Le jeu "un, deux, trois, soleil" est pris comme exemple générique : une course où l'on dit à tout le monde de ralentir mais où le premier arrivé gagne quand même. Ceci permet de faire un tour assez complet des positions, des enjeux et des risques de la négociation post-Kyoto. Notre conclusion est fondée sur l'idée de base qu'il faut de l'argent pour faire bouger les choses. Cela va dans le sens du rapport de septembre 2009 de la Banque Mondiale.
    Keywords: GIEC; carbone; club de Rome; réduction; droits négociables; taxe; Cassandre; Keynes; traité de Versailles; pluralisme
    Date: 2009–11–25
  30. By: Bryan, Gharad (Yale University); Karlan, Dean (Yale University and Innovations for Poverty Action); Nelson, Scott (Yale University)
    Abstract: We review the theoretical and empirical literature on commitment devices. A commitment device is any arrangement, entered into by an individual, with the aim of making it easier to fulfill his or her own future plans. We argue that there is growing empirical evidence supporting the proposition that people demand commitment devices and that these devices can change behavior. We highlight the importance of further research exploring soft commitment--those involving only psychological costs--and the welfare consequences of hard commitments--those involving actual costs--especially in the presence of bounded rationality.
    JEL: D14
    Date: 2009–10

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