nep-ene New Economics Papers
on Energy Economics
Issue of 2009‒12‒19
forty-five papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. The Challenges of Climate for Energy Markets By Brennan, Timothy J.
  2. A Partial Adjustment Model of U.S. Electricity Demand by Region, Season, and Sector By Paul, Anthony; Myers, Erica; Palmer, Karen
  3. Energy Efficiency Economics and Policy By Gillingham, Kenneth; Newell, Richard G.; Palmer, Karen
  4. Energy Needs and Efficiency, Not Emissions: Re-framing the Climate Change Narrative By Nancy Birdsall; Arvind Subramanian
  5. Energy Efficiency: Efficiency or Monopsony? By Brennan, Timothy J.
  6. Lose Some, Save Some: Obesity, Automobile Demand, and Gasoline Consumption in the U.S. By Li, Shanjun; Liu, Yanyan; Zhang, Junjie
  7. Pain at the Pump: The Differential Effect of Gasoline Prices on New and Used Automobile Markets By Meghan R. Busse; Christopher R. Knittel; Florian Zettelmeyer
  8. Monetary effects on nominal oil prices By Max Gillman; Anton Nakov
  9. How Changes in Oil Prices Affect the Macroeconomy By Brian DePratto; Carlos de Resende; Philipp Maier
  10. Does the Fed Respond to Oil Price Shocks? By Kilian, Lutz; Lewis, Logan
  11. Recent Oil Price Movements: Forces and Policy Issues By Eckhard Wurzel; Luke Willard; Patrice Ollivaud
  12. Asymmetric Effects of Oil Prices on the Manufacturing Sector in Turkey By C. Emre Alper; Orhan Torul
  13. Investment in Intangible Assets in Canada: R&D, Innovation, Brand, and Mining, Oil and Gas Exploration Expenditures By Baldwin, John R.; Gu, Wulong; Lafrance, Amélie; Macdonald, Ryan
  14. The Impact of Nationalization and Insecure Property Rights on Oil and Gas Developments in Russia's Asia Pacific By Judith Thornton
  15. On Resource Extraction Under the Threat of a Climate Change By Eric Fesselmeyer; Marc Santugini
  16. The Production of Biofuels: Welfare and Environmental Consequences for Asia By Tisdell, Clem
  17. Conflicting Goals: Energy Security vs. GHG Reductions under the EISA Cellulosic Ethanol Mandate By Fraas, Arthur; Johansson, Robert
  18. The Emergence of a Dominant Design – a study on hydrogen prototypes By Sjoerd Bakker
  19. Economic Impacts from the Promotion of Renewable Energy Technologies - The German Experience By Manuel Frondel; Nolan Ritter; Christoph M. Schmidt; Colin Vance
  20. U.S. Venture Capital Meets Clean-Technology By Emanuel Shachmurove; Yochanan Shachmurove
  21. Can Global De-Carbonization Inhibit Developing-Country Industrialization? By Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
  22. International Differences in Emissions Intensity and Emissions Content of Global Trade By Stratford Douglas; Shuichiro Nishioka
  23. Determinantes del crecimiento de las emisiones de gases de efecto invernadero en España (1990-2007) By Vicent Alcantara Escolano; Emilio Padilla Rosa
  24. The Brave New World of Carbon Trading By Spash, Clive L.
  25. An Experimental Study of Auctions Versus Grandfathering to Assign Pollution Permits By Goeree, Jacob K.; Holt, Charles A.; Palmer, Karen; Shobe, William; Burtraw, Dallas
  26. Teaching Opportunity Cost in an Emissions Permit Experiment By Holt, Charles; Myers, Erica; Wråke, Markus; Mandell, Svante; Burtraw, Dallas
  27. Alternative Approaches to Cost Containment in a Cap-and-Trade System By Fell, Harrison; Morgenstern, Richard
  28. Output and Abatement Effects of Allocation Readjustment in Permit Trade By Muller, Adrian; Sterner, Thomas
  29. Foreign ownership, sales to multinationals, and firm efficiency: The Case of Brazil, Morocco, Pakistan, South Africa, and Vietnam By Kinda, Tidiane
  30. The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction By Burtraw, Dallas; Sweeney, Richard; Walls, Margaret
  31. Combining Rebates with Carbon Taxes: Optimal Strategies for Coping with Emissions Leakage and Tax Interactions By Fischer, Carolyn; Fox, Alan K.
  32. German car buyers' willingness to pay to reduce CO2 emissions By Achtnicht, Martin
  33. What Do Financial Markets Reveal about Global Warming? By Ron Balvers; Ding Du; Xiaobing Zhao
  34. Climate Change and Risk Management: Challenges for Insurance, Adaptation, and Loss Estimation By Kousky, Carolyn; Cooke, Roger
  35. Variable Capacity Utilization, Ambient Temperature Shocks and Generation Asset Valuation By Chung-Li; Wei Zhu; Alexandre Dmitriev
  36. Market Responses to Climate Stress: Rice in Java in the 1930s By Pierre van der Eng
  37. Alternative Pollution Control Policies in Developing Countries: Informal, Informational, and Voluntary By Blackman, Allen
  38. Cities, Climate Change and Multilevel Governance By Jan Corfee-Morlot; Lamia Kamal-Chaoui; Michael G. Donovan; Ian Cochran; Alexis Robert; Pierre-Jonathan Teasdale
  39. Risk-Adjusted Gamma Discounting By Martin L. Weitzman
  40. Reconciling Climate Change and Trade Policy By Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
  41. Climate Change in a Public Goods Game: Investment Decision in Mitigation versus Adaptation By Hasson, Reviva; Löfgren, Åsa; Visser, Martine
  42. Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment By Hennlock, Magnus
  43. Reconciling Climate Change and Trade Policy By Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
  44. Improving the Policy Framework in Japan to Address Climate Change By Randall S. Jones; Byungseo Yoo
  45. Designing Climate Mitigation Policy By Aldy, Joseph E.; Krupnick, Alan J.; Newell, Richard G.; Parry, Ian W.H.; Pizer, William A.

  1. By: Brennan, Timothy J. (Resources for the Future)
    Abstract: Among the many complex issues of technology, governance, and market design affecting the electricity sector, climate policy has become dominant. From the perspective of a nonspecialist looking at this changing dominance, a quiz illuminates some of the peculiar uses of language one can find in climate change and energy efficiency policy. Six economic challenges are then examined: cap-and-trade vs. taxes, non-price regulations, energy efficiency policies, mitigation vs. adaptation, trade effects, and transmission planning. Three additional challenges affect not just the means to the climate policy end but also the end itself: the “fat tails” problem, discount rates, and whether environmental protection should be evaluated by aggregating willingness to pay across persons. Planners in the public and private sectors need to be aware of not only the economic policy challenges but also arguments that may influence the intensity of the climate policies with which they have to cope.
    Keywords: climate cahnge, energy policy, electricity
    JEL: Q54 Q48 L94
    Date: 2009–09–03
  2. By: Paul, Anthony (Resources for the Future); Myers, Erica (Resources for the Future); Palmer, Karen (Resources for the Future)
    Abstract: Identifying the factors that influence electricity demand in the continental United States and mathematically characterizing them are important for developing electricity consumption projections. The price elasticity of demand is especially important, since the electricity price effects of policy implementation can be substantial and the demand response to policy-induced changes in prices can significantly affect the cost of policy compliance. This paper estimates electricity demand functions with particular attention paid to the demand stickiness that is imposed by the capital-intensive nature of electricity consumption and to regional, seasonal, and sectoral variation. The analysis uses a partial adjustment model of electricity demand that is estimated in a fixed-effects OLS framework. This model formulation allows for the price elasticity to be expressed in both its short-run and long-run forms. Price elasticities are found to be broadly consistent with the existing literature, but with important regional, seasonal, and sectoral differences.
    Keywords: electricity, demand elasticities, energy demand, partial adjustment
    JEL: L94
    Date: 2009–04–01
  3. By: Gillingham, Kenneth; Newell, Richard G.; Palmer, Karen (Resources for the Future)
    Abstract: Energy efficiency and conservation are considered key means for reducing greenhouse gas emissions and achieving other energy policy goals, but associated market behavior and policy responses have engendered debates in the economic literature. We review economic concepts underlying consumer decisionmaking in energy efficiency and conservation and examine related empirical literature. In particular, we provide an economic perspective on the range of market barriers, market failures, and behavioral failures that have been cited in the energy efficiency context. We assess the extent to which these conditions provide a motivation for policy intervention in energy-using product markets, including an examination of the evidence on policy effectiveness and cost. While theory and empirical evidence suggest there is potential for welfare-enhancing energy efficiency policies, many open questions remain, particularly relating to the extent of some of the key market and behavioral failures.
    Keywords: energy efficiency, appliance standards, energy policy, market failures, behavioral failures
    JEL: Q38 Q41
    Date: 2009–04–04
  4. By: Nancy Birdsall; Arvind Subramanian
    Abstract: The basic narrative on climate change between the rich and poor worlds has been problematic. The focus on emissions has made industrial countries inadequately sensitive to the unmet energy needs in developing countries. And it has led developing countries to adopt the rhetoric of recrimination and focus on the legacy of historical emissions by industrial countries. The ensuing blame game has led to the current gridlock. As a way out, we suggest some simple principles for determining equitable distribution of emission cuts between developed and developing countries to meet global targets. These principles emphasize basic energy needs and the equality of access to energy opportunities rather than emissions, taking account of development levels, as well as energy efficiency in creating such opportunities. To apply these principles, we develop a new data set to distinguish between energy needs and emissions-intensity for major developing- and developed-country emitters and quantify the relationship between these variables and changes in income (or development). This quantification allows us to project emissions levels in 2050. Our main finding is that meeting global emissions targets equitably requires very large, probably revolutionary, improvements in the carbon intensity of production and consumption, much larger than seen historically. We conclude that a new shared narrative that places equality of energy opportunities at the forefront would naturally shift the focus of international cooperation from allocating emissions “rights” or reductions and blame to maximizing efforts to achieving technology gains and rapidly transferring them worldwide. Abandoning the setting of emissions targets for developing counries and creating instead a framework where all countries contribute to maximizing technology creation and diffusion is what Copenhagen should be about.
    Keywords: equity; emissions; climate change
    Date: 2009–11
  5. By: Brennan, Timothy J. (Resources for the Future)
    Abstract: The cliché in the electricity sector, the “cheapest power plant is the one we don’t build,” seems to neglect the benefits of the energy that plant would generate. Those overall benefits could be countered by benefits to consumers if “not building that plant” was the result of monopsony. A regulator acting as a monopsonist may need to avoid rationing demand at monopsony prices. Subsidizing energy efficiency to reduce electricity demand at the margin can solve that problem, if energy efficiency and electricity use are substitutes. We may not observe these effects if the regulator can set price as well as quantity, lacks buyer-side market power, or is legally precluded from denying generators a reasonable return on capital. Nevertheless, the possibility of monopsony remains significant in light of the debate as to whether antitrust enforcement should maximize consumer welfare or total welfare.
    Keywords: energy efficiency, monopsony, consumer welfare, total welfare, electricity
    JEL: L51 L94 L12
    Date: 2009–05–21
  6. By: Li, Shanjun (Resources for the Future); Liu, Yanyan; Zhang, Junjie
    Abstract: This paper examines the unexplored link between the prevalence of overweight and obesity and vehicle demand in the United States. Exploring annual sales data of new passenger vehicles at the model level in 48 U.S. counties from 1999 to 2005, we find that a 10 percentage point increase in the rate of overweight and obesity reduces the average MPG of new vehicles demanded by 2.5 percent: an effect that requires a 30 cent increase in gasoline prices to counteract. Our findings suggest that policies to reduce overweight and obesity can have additional benefits for energy security and the environment.
    Date: 2009–08–31
  7. By: Meghan R. Busse; Christopher R. Knittel; Florian Zettelmeyer
    Abstract: The dramatic increase in gasoline prices from close to $1 in 1999 to $4 at their peak in 2008 made it much more expensive for consumers to operate an automobile. In this paper we investigate whether consumers have adjusted to gasoline price changes by altering what automobiles they purchase and what prices they pay. We investigate these effects in both new and used car markets. We find that a $1 increase in gasoline price changes the market shares of the most and least fuel-efficient quartiles of new cars by +20% and -24%, respectively. In contrast, the same gasoline price increase changes the market shares of the most and least fuel-efficient quartiles of used cars by only +3% and -7%, respectively. We find that changes in gasoline prices also change the relative prices of cars in the most fuel-efficient quartile and cars in the least fuel-efficient quartile: for new cars the relative price increase for fuel-efficient cars is $363 for a $1 increase in gas prices; for used cars it is $2839. Hence the adjustment of equilibrium market shares and prices in response to changes in usage cost varies dramatically between new and used markets. In the new car market, the adjustment is primarily in market shares, while in the used car market, the adjustment is primarily in prices. We argue that the difference in how gasoline costs affect new and used automobile markets can be explained by differences in the supply characteristics of new and used cars.
    JEL: L10 L50 L62
    Date: 2009–12
  8. By: Max Gillman (Cardiff University Business School); Anton Nakov (Banco de España)
    Abstract: The paper presents a theory of nominal asset prices for competitively owned oil. Focusing on monetary effects, with flexible oil prices the US dollar oil price should follow the aggregate US price level. But with rigid nominal oil prices, the nominal oil price jumps proportionally to nominal interest rate increases. We find evidence for structural breaks in the nominal oil price that are used to illustrate the theory of oil price jumps. The evidence also indicates strong Granger causality of the oil price by US inflation as is consistent with the theory.
    Keywords: oil prices, infl ation, cash-in-advance, multiple structural breaks, Granger causality
    JEL: E31 E4
    Date: 2009–12
  9. By: Brian DePratto; Carlos de Resende; Philipp Maier
    Abstract: We estimate a New Keynesian general-equilibrium open economy model to examine how changes in oil prices affect the macroeconomy. Our model allows oil price changes to be transmitted through temporary demand and supply channels (affecting the output gap), as well as through persistent supply side effects (affecting trend growth). We estimate this model for Canada, the United Kingdom, and the United States over the period 1971-2008, and find that it matches the data very well in terms of first and second moments. We conclude that (i) energy prices affect the economy primarily through the supply side, whereas we do not find substantial demand-side effects; (ii) higher oil prices have temporary negative effects on both the output gap and on trend growth, which translates into a permanent reduction in the level of potential and actual output. Also, results for the United States indicate that oil supply shocks have more persistent negative effects on trend growth than oil demand shocks. These effects are statistically significant; however, our simulations also indicate that the effects are economically small.
    Keywords: Economic models; Interest rates; Transmission of monetary policy; Productivity; Potential output
    JEL: F41 Q43
    Date: 2009
  10. By: Kilian, Lutz; Lewis, Logan
    Abstract: Since Bernanke, Gertler and Watson (1997), a common view in the literature has been that systematic monetary policy responses to the inflation triggered by oil price shocks are an important source of aggregate fluctuations in the U.S. economy. We show that there is no evidence of systematic monetary policy responses to oil price shocks after 1987 and that this lack of a policy response is unlikely to be explained by reduced real wage rigidities. Prior to 1987, according to standard VAR models, the Federal Reserve was not responding to the inflation triggered by oil price shocks, as commonly presumed, but rather to the oil price shocks directly, consistent with a preemptive move by the Federal Reserve to counteract potential inflationary pressures. There are indications that this response is poorly identified, however, and there is no evidence that this policy response in the pre-1987 period caused substantial fluctuations in the Federal Funds rate or in real output. Our analysis suggests that the traditional monetary policy reaction framework explored by BGW and incorporated in subsequent DSGE models should be replaced by DSGE models that take account of the endogeneity of the real price of oil and that allow policy responses to depend on the underlying causes of oil price shocks.
    Keywords: Counterfactual; Oil; Recessions; Systematic Monetary Policy; Temporal Instability
    JEL: E31 E32 E52 Q43
    Date: 2009–12
  11. By: Eckhard Wurzel; Luke Willard; Patrice Ollivaud
    Abstract: Crude oil prices have trended up since the end of the 1990s, peaking at a historic high in mid-2008 that was followed by a steep price correction with a subsequent rebound. This paper considers major forces behind the evolution of the oil price, using a simple model of supply and demand elasticities as a benchmark, highlights implications for inflation and economic activity and draws some conclusions for macroeconomic policy. The analysis suggests that the run-up in crude oil prices since 2003 was due to both vigorous oil demand growth by emerging markets and, from the middle of the decade onward, a weaker than expected oil supply response to rising prices. Prices are unlikely to fall back to levels seen in the first years of the decade either over the short or medium term.<P>Évolution récente du prix du pétrole : Facteurs explicatifs et questions de politiques économiques<BR>Les prix du pétrole brut ont crû régulièrement depuis la fin des années 90, jusqu’à atteindre un plus haut historique à la mi-2008 et ont ensuite été suivi par une baisse significative puis un nouveau rebond. Ce document met en exergue les forces principales derrière cette évolution des prix du pétrole en utilisant comme référence un modèle simple d’élasticités de l’offre et de la demande. Ensuite sont mis en évidence les implications pour l’inflation et l’activité économique. Enfin des conclusions sont tirées pour la politique macroéconomique. L’analyse suggère que l’augmentation des prix du pétrole depuis 2003 provient à la fois d’une croissance dynamique de la demande de pétrole en provenance des marchés émergents, et depuis la seconde moitié de la décennie d’une réaction plus faible que prévue de l’offre de pétrole face à des prix en hausse. Il est peu probable que les prix retombent à des niveaux prévalant les premières années de cette décennie que ce soit dans le court ou le moyen terme.
    Keywords: crude oil price, macroeconomic issues, oil demand, oil supply, demande de pétrole, offre de pétrole, prix du pétrole brut, questions macroéconomiques
    JEL: Q41 Q43
    Date: 2009–12–04
  12. By: C. Emre Alper; Orhan Torul
    Date: 2009–06
  13. By: Baldwin, John R.; Gu, Wulong; Lafrance, Amélie; Macdonald, Ryan
    Abstract: This paper presents estimates of intangible investment in Canada for the purpose of innovation, advertising and resource extraction. It first expands upon work by Beckstead and Gellatly (2003), Baldwin and Hanel (2003), Beckstead and Gellatly (2003), Beckstead and Vinodrai (2003) and Baldwin and Beckstead (2003) who argue that the scope of innovative activity extends beyond research and development (R&D) as defined by the Frascati Manual. It extends the definition of innovative activities to include all scientific and engineering expenditures - regardless of whether they are market-based or produced with a firm. The paper also considers expenditures on intangible items such as brands or resource exploration. The paper contributes to the existing literature by creating intangible investment estimates (science and engineering knowledge, advertising, mineral exploration by industry) using Statistics Canada's high quality and internally consistent databases. It produces estimates that accord with other intangibles studies (Corrado, Hulten and Sichel 2005, 2006; Jalava, Ahmavarra and Alanen 2007) and shows that traditional R&D type investment estimates account for about a quarter of intangible science and engineering investments.
    Keywords: Science and technology, Innovation, Research and development
    Date: 2009–12–02
  14. By: Judith Thornton
    Date: 2009–11
  15. By: Eric Fesselmeyer; Marc Santugini (IEA, HEC Montréal)
    Abstract: A wide spectrum of scientific evidence on climate change and its impact on natural resources has generated more risk in the minds of many people and, thus, has altered the general perception of the future. We study how this risk - modeled as changes in the characteristics of natural resources - has an effect on the behavior of agents extracting a common resource in a dynamic Cournot-Nash game. We show that the risk of a deterioration of the quality of a resource induces agents to extract more today, while the risk of a less renewable resource induces agents to extract less today. The overall effect of both sources of risk is ambiguous. We also show that the anticipation of a climate change has an ambiguous effect on the tragedy of the commons.
    Keywords: Climate change, Dynamic games, Resource extraction, Tragedy of the Commons.
    JEL: C72 C73 D43 D90 L13 Q20 Q54
    Date: 2009–12
  16. By: Tisdell, Clem
    Abstract: The production of biofuels has been supported by many conservationists and environmentalists on the grounds that it reduces greenhouse gas emissions and is a renewable energy substitute for non-renewable fossil fuels, mainly oil. More recently the domestic production of biofuels (and the domestic supply of other forms of alternative energy) have been welcomed by several nations as ways to reduce their oil imports and increase their energy self-sufficiency, as for example, has happened in the United States. India also which is very dependent on oil imports has also begun to produce biofuels in Kerala and elsewhere. However, doubts have been raised about the effectiveness of biofuel use as a means to reduce the accumulation of greenhouse gases and elementary economics teaches us that it is likely to have opportunity costs. For example, increased cropping to provide biofuels can be at the expense of the production of food and natural fibres thereby adding to their prices. It may also increase the conversion of natural areas to agricultural use and consequently, add to biodiversity loss and an increase in greenhouse gas in the atmosphere. For example, in Borneo, forests are being converted to grow oil palm, partly used for biodiesel production in developing countries. These issues are discussed generally and their economic welfare implications are given particular attention in relation to Asian nations. Amongst the different situations examined from economic welfare and environmental points of view are the following: 1. Asian nations producing biofuels for their own use from home-grown crops, as is the case of India and China. 2. The external trade of Asian countries in feedstock for biofuels, such as palm oil in Indonesia and Malaysia and in biofuel itself. 3. Possible Asian ventures to grow crops for biofuels abroad or import biofuels. 4. The economic consequences for Asian countries of decisions by higher income countries, such as the United States (which also happens to be a major global exporter of food and natural fibre), to raise their production of biofuels. Analysis is provided that casts doubts on the likelihood that the introduction of biofuels will reduce greenhouse gas accumulation in the atmosphere.
    Keywords: Biofuels, conservation, Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Land Economics/Use,
    Date: 2009–09
  17. By: Fraas, Arthur (Resources for the Future); Johansson, Robert
    Abstract: Increasing energy security and lowering greenhouse gas (GHG) emissions have been prominent goals in recent energy and environmental policies. While these goals are often complementary, there may also be cases where they conflict. A case in point is the Energy Independence and Security Act of 2007 (EISA). The goals of EISA are to increase the United States' energy independence and security as well as to increase the production of clean renewable fuels. Title II of EISA establishes mandates for increasing the use of low carbon fuels to replace gasoline. While the Title II mandates will meet the energy security goal of EISA, the mandate for the use of at least 16 billion gallons of cellulosic ethanol by 2022 may conflict with efforts to reduce substantially the nation's GHG emissions over the next 20 years. The nation's production capacity for biomass is likely to be limited and the use of biomass to replace coal in generating electricity yields 2 to 3 times the GHG reduction associated with using cellulosic ethanol to displace gasoline. Thus, there is a trade-off between the energy security gains of the biofuels mandate under EISA and the more effective (in terms of GHG emission reductions) use of biomass in the electric utility sector. One means of evaluating this trade-off is to examine the factors that affect the costeffectiveness of diverting biomass from electricity production to cellulosic ethanol production. This paper identifies some of the key factors that affect the cost-effectiveness of the energy security and climate change goals of EISA. The cost-effectiveness of EISA will depend on (1) constraints on biomass production, that is, the extent to which the EISA mandate may crowd out the use of biomass to generate electricity; (2) the world oil price (and the cost of production of cellulosic ethanol); and (3) the social cost of carbon.
    Keywords: energy security, cost-effective policy, cellulosic ethanol
    JEL: Q42 Q48 Q52
    Date: 2009–08–24
  18. By: Sjoerd Bakker
    Abstract: The notion of dominant designs deals with dominance in the market and the dominant design is thought to be dominant because of market selection forces. The notion thus ignores the possible selection that takes place in pre-market R&D stages of technological trajectories. In this paper we ask the question whether pre-market selection takes place and if this can lead to an early dominant design. Furthermore we study what selection criteria apply during this phase, in the absence of actual market criteria. We do so through an analysis of prototyping trajectories for hydrogen vehicles. Prototypes are used by firms in their internal search process towards new designs and at the same time they are means of communicating technological expectations to outsiders. In both senses, prototypes can be taken as indicators of technological trajectories in the ongoing search process of an industry for the dominant prototype design of the future. Using prototypes as representation of intermediate outcomes of the search process, a dominant design can possibly be recognized also in a pre-market phase of development. We analyzed the designs of prototypes of hydrogen passenger cars from the 1970s till 2008. In our analysis we try to show to what extent the designs configurations of the technological components, converge or diverge over time. For this we compiled a database of 224 prototypes of hydrogen passenger cars. The database describes: the car’s manufacturer, year of construction, type of drivetrain, fuel cell type, and capacity of its hydrogen storage system. We draw conclusions with regard to the convergence/divergence of the prototypes’ designs and the role of diverse performance criteria therein. We conclude that there is convergence towards a dominant design in the prototyping phase; the PEM fuel cell combined with high pressure storage. Performance played a role as selection criterion, but so did regulation and strategic behaviour of the firms. Especially imitation dynamics, with industry leaders and followers, seems to be the major explanatory factor.
    Keywords: Dominant design, expectations, prototypes, hydrogen, fuel cell
    Date: 2009–11
  19. By: Manuel Frondel; Nolan Ritter; Christoph M. Schmidt; Colin Vance
    Abstract: The allure of an environmentally benign, abundant, and cost-effective energy source has led an increasing number of industrialized countries to back public financing of renewable energies. Germany's experience with renewable energy promotion is often cited as a model to be replicated elsewhere, being based on a combination of far-reaching energy and environmental laws that stretch back nearly two decades. This paper critically reviews the current centerpiece of this effort, the Renewable Energy Sources Act (EEG), focusing on its costs and the associated implications for job creation and climate protection. We argue that German renewable energy policy, and in particular the adopted feed-in tariff scheme, has failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country's energy portfolio. To the contrary, the government's support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security.
    Keywords: Energy policy, energy security, climate, employment
    JEL: Q28 Q42 Q48
    Date: 2009–11
  20. By: Emanuel Shachmurove (Emanuel Shachmurove, Esq.); Yochanan Shachmurove (Department of Economics, University of Pennsylvania)
    Abstract: Public concern over global climate change, resource depletion, and environmental degradation has amplified over the last several years, leading to increased demand for environmentally friendly products. Additionally, the price of Clean-Technology products has fallen. This paper examines venture capital investment in the Clean-Technology industry of the U.S. in 1995-2008. The paper explores the effects of macroeconomic variables, national venture capital investment and geography on Clean-Technology investment. The conclusion indicates the importance of geographical location in affecting Clean-Technology investment. A weak correlation between national venture capital and Clean-Technology investments raises the possibility of a more diversified investment portfolio.
    Keywords: Venture Capital; Clean-Technology Industry; Economic Geography; Location; Environmental Economics; Sustainability; Industrial Sector
    JEL: C12 D81 D92 E22 G12 G24 G3 M13 M21 O16 O3
    Date: 2009–04–01
  21. By: Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
    Abstract: Most economic analyses of climate change have focused on the aggregate impact on countries of mitigation actions. We depart first in disaggregating the impact by sector, focusing particularly on manufacturing output and exports because of the potential growth consequences. Second, we decompose the impact of an agreement on emissions reductions into three components: the change in the price of carbon due to each country’s emission cuts per se; the further change in this price due to emissions tradability; and the changes due to any international transfers (private and public). Manufacturing output and exports in low carbon intensity countries such as Brazil are not adversely affected. In contrast, in high carbon intensity countries, such as China and India, even a modest agreement depresses manufacturing output by 6-7 percent and manufacturing exports by 9-11 percent. The increase in the carbon price induced by emissions tradability hurts manufacturing output most while the Dutch disease effects of transfers hurt exports most. If the growth costs of these structural changes are judged to be substantial, the current policy consensus, which favors emissions tradability (on efficiency grounds) supplemented with financial transfers (on equity grounds), needs re-consideration.
    Keywords: trade; environment; climate change; emissions trading
    JEL: F13 F18 H23 Q56
    Date: 2009–11
  22. By: Stratford Douglas (Department of Economics, West Virginia University); Shuichiro Nishioka (Department of Economics, West Virginia University)
    Abstract: Understanding international differences in the emissions intensity of trade and production is essential to understanding the effects of greenhouse gas limitation policies. We develop data on emissions from 48 industrial sectors in 32 countries and estimate the CO2 emissions intensity of production and trade. We find no evidence that developing countries specialize in emissions-intensive sectors; instead, emissions intensities differ systematically across countries because of differences in production techniques. Northern and Western European countries have the lowest emissions-intensity, while Southern and Eastern European countries and China have the highest emissions-intensity. Developed countries such as Japan and the United States whose trading partners are mostly developing countries import the most emissions.
    Keywords: Heckscher-Ohlin; Emissions Technique; CO2 Emissions; Environment
    JEL: F18 Q27 Q56
    Date: 2009
  23. By: Vicent Alcantara Escolano (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Emilio Padilla Rosa (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: La evolución de los gases de efecto invernadero en España se está distanciando notablemente del objetivo marcado por el Protocolo de Kyoto. En el presente trabajo se analizan los diferentes factores que han contribuido al importante aumento experimentado en las emisiones de gases de efecto invernadero provenientes del consumo de energía en España en el período 1990-2007. La metodología de descomposición factorial utilizada permite hacer una distribución exacta (sin residuos) de la variación de emisiones en diferentes efectos (efecto carbonización, efecto transformación, efecto intensidad y efecto escala). Los resultados muestran claramente que el efecto escala -la variación en el nivel de producción- ha sido determinante en explicar el aumento de emisiones, mientras que la contribución de los otros efectos, que deberían ser los que cambiaran la tendencia de crecimiento de emisiones, no ha permitido moderar su aumento. Una contribución especialmente negativa es la atribuible al efecto intensidad, que refleja la variación en la intensidad energética final del PIB, ya que incluso habría contribuido a aumentar las emisiones. En sentido opuesto, el efecto transformación, el impacto atribuible a la transformación energética, habría contribuido a moderar el aumento de las emisiones totales. El trabajo discute las implicaciones de los resultados obtenidos.
    Keywords: descomposición factorial, eficiencia energética, gases de efecto invernadero, intensidad energética, índice de carbonización, transformación energética.
    JEL: Q43 Q53 Q56
    Date: 2009–11
  24. By: Spash, Clive L.
    Abstract: Human induced climate change has become a prominent political issue, at both national and international levels, leading to the search for regulatory ‘solutions’. Emission trading has risen in popularity to become the most broadly favoured government strategy. Carbon permits have then quickly been developed as a serious financial instrument in markets turning over billions of dollars a year. In this paper, I show how the reality of permit market operation is far removed from the assumptions of economic theory and the promise of saving resources by efficiently allocating emission reductions. The pervasiveness of Greenhouse Gas emissions, strong uncertainty and complexity combine to prevent economists from substantiating their theoretical claims of cost effectiveness. Corporate power is shown to be a major force affecting emissions market operation and design. The potential for manipulation to achieve financial gain, while showing little regard for environmental or social consequences, is evident as markets have extended internationally and via trading offsets. At the individual level, there is the potential for emissions trading to have undesirable ethical and psychological impacts and to crowd out voluntary actions. I conclude that the focus on such markets is creating a distraction from the need for changing human behaviour, institutions and infrastructure.
    Keywords: Emissions trading; Climate change
    JEL: G18 Q54 Q58
    Date: 2009–12
  25. By: Goeree, Jacob K.; Holt, Charles A.; Palmer, Karen; Shobe, William; Burtraw, Dallas (Resources for the Future)
    Abstract: We experimentally study auctions versus grandfathering in the initial assignment of pollution permits that can be traded in a secondary spot market. Low and high emitters compete for permits in the auction, while permits are assigned for free under grandfathering. In theory, trading in the spot market should erase inefficiencies due to initial mis-allocations. In the experiment, high emitters exercise market power in the spot market and permit holdings under grandfathering remain skewed towards high emitters. Furthermore, the opportunity costs of “free” permits are fully “passed through.” In the auction, the majority of permits are won by low emitters, reducing the need for spot-market trading. Auctions generate higher consumer surplus and slightly lower product prices in the laboratory arkets. Moreover, auctions eliminate the large “windfall profits” that are observed in the treatment with free, grandfathered permit allocations.
    Keywords: market-based regulation, emissions trading, allocation, auctions, grandfathering, climate policy, windfall profits
    JEL: C92 D43 D44 Q58
    Date: 2009–09–29
  26. By: Holt, Charles; Myers, Erica (Resources for the Future); Wråke, Markus; Mandell, Svante; Burtraw, Dallas (Resources for the Future)
    Abstract: This paper describes an individual choice experiment that can be used to teach students how to correctly account for opportunity costs in production decisions. Students play the role of producers who require a fuel input and an emissions permit for production. Given fixed market prices, they make production quantity decisions on the basis of their costs. Permits have a constant price throughout the experiment. In one treatment, students have to purchase both a fuel input and an emissions permit for each production unit. In a second treatment, they receive permits for free, and any unused permits are sold on their behalf at the permit price. If students correctly incorporate opportunity costs, they will have the same supply function in both treatments. This experiment motivates classroom discussion of opportunity costs and emissions permit allocation under cap-and-trade schemes. The European Union Emissions Trading Scheme provides a relevant example for classroom discussion, as industry earned significant windfall profits from free allocation of emissions allowances in the early phases of the program.
    Keywords: opportunity cost, emissions permits, allowance allocation, classroom experiments
    JEL: A22 C90 Q52
    Date: 2009–05–21
  27. By: Fell, Harrison (Resources for the Future); Morgenstern, Richard (Resources for the Future)
    Abstract: We compare several emissions reduction instruments, including quantity policies with banking and borrowing, price policies, and hybrid policies (safety valve and price collar), using a dynamic model with stochastic baseline emissions. The instruments are compared under the design goal of obtaining the same expected cumulative emissions across all options. Based on simulation analysis with the model parameterized to values relevant to proposed U.S. climate mitigation policies, we find that restrictions on banking and borrowing, including the provision of interest rates on the borrowings, can severely limit the value of the policy, depending on the regulator-chosen allowance issuance path. Although emissions taxes generally provide the lowest expected abatement costs, a cap-and-trade system combined with either a safety valve or a price collar can be designed to provide expected abatement costs near those of a tax, but with lower emissions variance than a tax. Consistently, a price collar is more cost-effective than a safety valve for a given expected cumulative emissions outcome because it encourages inexpensive abatement when abatement costs decline.
    Keywords: cost containment, safety valve, price collar, climate change
    JEL: Q55
    Date: 2009–04–13
  28. By: Muller, Adrian (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In permit trading systems, free initial allocation is common practice. A recent example is the European Union Greenhouse Gas Emission Trading Scheme (EU-ETS). We investigate effects of different free allocation schemes on incentives and identify significant perverse effects on abatement and output employing a simple multi-period model. Firms have incentives for strategic action if allocation in one period depends on their actions in previous ones and thus can be influenced by them. These findings play a major role where trading schemes become increasingly popular as environmental or resource use policy instruments. This is of particular relevance in the EU-ETS, where the current period is a trial-period before the first commitment period of the Kyoto protocol. Finally, this paper fills a gap in the literature by establishing a consistent terminology for initial allocation.<p>
    Keywords: -
    JEL: D62 D78 Q50
    Date: 2009–12–08
  29. By: Kinda, Tidiane
    Abstract: Using a one-step stochastic frontier model for five developing countries (Brazil, Morocco, Pakistan, South Africa, and Vietnam), we show that foreign firms benefit from a better investment climate, which significantly explains why they are more efficient than local firms. Unlike former studies, this paper uses the share of each firm’s sales to multinationals located in the country to assess the importance of vertical spillovers, and it controls for the direct impact of the investment climate on efficiency. The results show that firms (particularly small local firms) that sell more of their production to multinationals are more efficient.
    Keywords: Foreign ownership; firm-level efficiency; vertical spillovers; investment climate; developing countries
    JEL: F23 F21 D24 O14
    Date: 2009
  30. By: Burtraw, Dallas (Resources for the Future); Sweeney, Richard (Resources for the Future); Walls, Margaret (Resources for the Future)
    Abstract: This paper evaluates the costs to households of a carbon dioxide (CO2) cap-and-trade program. We find important variation in the distribution of costs of the policy across 11 regions of the country and income deciles. The introduction of a price on CO2 is regressive, but this may be outweighed by the distribution value of CO2 emissions allowances. We evaluate five alternatives: three are progressive (expansion of the Earned Income Tax Credit and cap-and-dividend approaches), while the others are neutral (reduction in payroll tax) or amplify the regressivity (reduction in income tax). Regional differences are most substantial for low-income households.
    Keywords: cap-and-trade, allocation, distributional effects, cost burden, equity
    JEL: H22 H23 Q52 Q54
    Date: 2009–04–09
  31. By: Fischer, Carolyn (Resources for the Future); Fox, Alan K.
    Abstract: Emissions regulations like carbon pricing raise the price of covered sector goods and thus can interact with and exacerbate other preexisting distortions in the economy. One such distortion is labor taxes. Another is emissions “leakage” due to the lack of comparable emissions pricing abroad or among other emitting sectors at home. A potential response is to combine the emissions tax with a rebate to production to mitigate the price increases. We use an optimal tax framework to solve for the optimal emissions tax and output rebate, given these distortions. We then employ a multisector computable general equilibrium model based on the GTAP framework to simulate the effects of a $50 per-ton carbon tax on the major emissions-intensive sectors in the U.S. economy and estimate optimal rebates by sector.
    Keywords: carbon tax, tax interaction, carbon leakage
    JEL: Q2 Q43 H2 D58 D61
    Date: 2009–05–19
  32. By: Achtnicht, Martin
    Abstract: Motorised individual transport strongly contributes to global CO2 emissions, due to its intensive usage of fossil fuels. Current political efforts addressing this issue (i.e. emission performance standards in the EU) are directed towards car manufacturers. This paper focuses on the demand side. It examines whether CO2 emissions per kilometre is a relevant attribute in car choices. Based on a stated preference experiment among potential car buyers from Germany, different mixed logit specifications are estimated. In addition, distributions of willingness to pay measures for an abatement of CO2 emissions are obtained. The results suggest that the emissions performance of a car matters substantially, but its consideration varies heavily across the sampled population. In particular, some evidence on gender, age and education effects on climate concerns is provided. --
    Keywords: CO2 emissions,Willingness to pay,Passenger cars,Stated preferences,Mixed logit
    JEL: C25 D12 Q51
    Date: 2009
  33. By: Ron Balvers (Department of Economics, West Virginia University); Ding Du (Northern Arizona University); Xiaobing Zhao (Northern Arizona University)
    Abstract: Financial market information can provide an objective assessment of expected losses due to global warming. In a Merton-type asset pricing model, with asset prices affected by changes in investment opportunities caused by global warming, the risk premium is significantly negative and growing over time, loadings for most assets are negative, and asset portfolios in more vulnerable industries have stronger negative loadings on the global warming factor. Required returns are 0.11 percent higher due to global warming, implying a present value loss of 4.18 percent of wealth. These costs complement and exceed previous estimates of the cost of global warming.
    Keywords: Asset Pricing, Global Warming, Cost of Capital, Tracking Portfolios.
    JEL: G12 Q54
    Date: 2009
  34. By: Kousky, Carolyn (Resources for the Future); Cooke, Roger (Resources for the Future)
    Abstract: Adapting to climate change will not only require responding to the physical effects of global warming, but will also require adapting the way we conceptualize, measure, and manage risks. Climate change is creating new risks, altering the risks we already face, and also, importantly, impacting the interdependencies between these risks. In this paper we focus on three particular phenomena of climate related risks that will require a change in our thinking about risk management: global micro-correlations, fat tails, and tail dependence. Consideration of these phenomena will be particularly important for natural disaster insurance, as they call into question traditional methods of securitization and diversification.
    Keywords: tail dependence, micro-correlations, fat tails, damage distributions, climate change
    JEL: Q54 G22 C02
    Date: 2009–02–03
  35. By: Chung-Li (Australian School of Business, The University of New South Wales); Wei Zhu (First Choice Power Inc.); Alexandre Dmitriev (School of Economics, The University of New South Wales)
    Abstract: This paper discusses generation asset valuation in a framework where capital utilization decisions are endogenous. We use real options approach for valuation of natural gas fuelled turbines. Capital utilization choices that we explore include turning on/off the unit, operating the unit at increased firing temperatures (overfiring), and conducting preventive maintenance. Overfiring provides capacity enhancement which comes at the expense of reduced maintenance interval and increased costs of part replacement. We consider the costs and benefits of overfiring in attempt to maximize the asset value by optimally exercising the overfire option. In addition to stochastic processes governing prices, we incorporate an exogenous productivity shock: ambient temperature. We consider how variation in ambient temperature affects the asset value through its effect on gas turbine’s productivity.
    Keywords: Electricity generation asset valuation; overfire option; price uncertainty
    JEL: D81 Q40
    Date: 2009–11
  36. By: Pierre van der Eng
    Abstract: Do markets in less-developed countries abate consequences of climate stress? Rainfall is an important factor in rice production in Indonesia. This paper uses changes in regional rice prices across the 19 residencies in less-developed Java to assess how rice markets responded to variations in rainfall during 1935-1940. It finds that rice markets were highly integrated across Java. The El Niño-induced episodes of lower than usual rainfall in 1935 and 1940 did not have a negative effect on levels and variations in regional rice prices, nor did they have adverse consequences for the supply of rice. Adaptive responses of firms specialising in the trade of rice are likely to have mitigated regional deficiencies in food production caused by climate stress.
    JEL: N55 O13 Q13 Q54
    Date: 2009–12
  37. By: Blackman, Allen (Resources for the Future)
    Abstract: In developing countries, weak environmental regulatory institutions often undermine conventional command-and-control policies. As a result, these countries are increasingly experimenting with alternative approaches that aim to leverage nonregulatory “green” pressures applied by local communities, capital markets, and consumers. This article reviews three strands of the empirical literature on this trend. The first strand examines the direct impact of nonregulatory pressures on developing country firms’ environmental performance. The second and third strands analyze policy innovations reputed to leverage these pressures -- public disclosure and voluntary regulation. I find that the econometric evidence that nonregulatory pressures have had a direct impact on firms’ environmental performance is thin, at least partly because disentangling such impacts is inherently difficult. Nevertheless, existing empirical research suggests that public disclosure programs have spurred emissions reductions by particularly dirty firms. The evidence on voluntary regulatory policies is far more mixed. Taken as a whole, the literature suggests that policymakers would do well to exercise caution in promoting and implementing alternative pollution control tools: they are only likely to be effective in some incarnations and situations.
    Keywords: developing country, pollution control, informal regulation, public disclosure, voluntary regulation
    JEL: Q52 Q56 Q58 O13
    Date: 2009–05–26
  38. By: Jan Corfee-Morlot; Lamia Kamal-Chaoui; Michael G. Donovan; Ian Cochran; Alexis Robert; Pierre-Jonathan Teasdale
    Abstract: Cities represent a challenge and an opportunity for climate change policy. As the hubs of economic activity, cities generate the bulk of GHG emissions and are thus important to mitigation strategies. Urban planning will shape future trends and the concentration of population, socio-economic activity, poverty and infrastructure in urban areas translates into particular vulnerability to increased climate hazards. City governments and urban stakeholders will therefore be essential in the design and delivery of cost-effective adaptation policies. Further, by empowering local governments, national policies could leverage existing local experiments, accelerate policy responses, foster resource mobilization and engage local stakeholders. This paper presents a framework for multilevel governance, showing that advancing governance of climate change across all levels of government and relevant stakeholders is crucial to avoid policy gaps between local action plans and national policy frameworks (vertical integration) and to encourage cross-scale learning between relevant departments or institutions in local and regional governments (horizontal dimension). Vertical and horizontal integration allows two-way benefits: locally-led or bottom-up where local initiatives influence national action and nationally-led or top-down where enabling frameworks empower local players. The most promising frameworks combine the two into hybrid models of policy dialogue where the lessons learnt are used to modify and fine-tune enabling frameworks and disseminated horizontally, achieving more efficient local implementation of climate strategies.
    Keywords: climate change, global warming, government policy, regional economics, Regional, Urban and rural Analyses
    JEL: Q51 Q54 Q56 Q58 R00
    Date: 2009–12–02
  39. By: Martin L. Weitzman
    Abstract: It is widely recognized that the economics of distant-future events, like climate change, is critically dependent upon the choice of a discount rate. Unfortunately, it is unclear how to discount distant-future events when the future discount rate itself is unknown. In previous work, an analytically-tractable approach called "gamma discounting" was proposed, which gave a declining discount rate schedule as a simple closed-form function of time. This paper extends the previous gamma approach by using a Ramsey optimal growth model, combined with uncertainty about future productivity, in order to "risk adjust" all probabilities by marginal utility weights. Some basic numerical examples are given, which suggest that the overall effect of risk-adjusted gamma discounting on lowering distant-future discount rates may be significant. The driving force is a "fear factor" from risk aversion to permanent productivity shocks representing catastrophic future states of the world.
    JEL: Q54
    Date: 2009–12
  40. By: Aaditya Mattoo; Arvind Subramanian; Dominique van der Mensbrugghe; Jianwu He
    Abstract: There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. A key factor affecting the impact of these taxes is whether they are based on the carbon content of imports or the carbon content in domestic production. Our quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. For example, China’s manufacturing exports would decline by one-fifth and those of all low- and middle-income countries by 8 percent; the corresponding declines in real income would be 3.7 percent and 2.4 percent. In contrast, border tax adjustment based on the carbon content in domestic production, especially if applied to both imports and exports, would broadly address the competitiveness concerns of producers in high income countries without seriously damaging developing-country trade. Therefore, as part of a comprehensive agreement on climate change, new WTO rules could be negotiated that would prohibit the extreme form of action while possibly allowing trade actions based on domestic carbon content as a safety valve.
    Keywords: trade; trade policy; environment; climate change
    JEL: F13 F18 H23 Q56
    Date: 2009–11
  41. By: Hasson, Reviva (Department of Economics, Faculty of Commerce, University of Cape Town); Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University); Visser, Martine (Department of Economics, Faculty of Commerce, University of Cape Town)
    Abstract: We use behavioral and experimental economics to study a particular aspect of the economics of climate change: the potential tradeoff between countries’ investments in mitigation versus adaptation. While mitigation of greenhouse gases can be viewed as a public good, adaptation to climate change is a private good, benefiting only the country or the individual that invests in adaptation. We use a one-shot public-goods game that deviates from the standard public-goods game by introducing a stochastic term to account for probabilistic destruction in a climate-change setting. Probability density function is mapped to within-group levels of mitigation. We compare low-vulnerability and high-vulnerability treatments by varying the magnitude of disaster across treatments. Our results show that there is no significant difference in the level of mitigation across these treatments. Further, our results emphasize the important role of trust in enhancing cooperation.<p>
    Keywords: Public good; climate change; mitigation; adaptation; experiment; risk
    JEL: H41 Q54
    Date: 2009–12–08
  42. By: Hennlock, Magnus
    Abstract: Imperfect measurement of uncertainty (deeper uncertainty) in climate sensitivity is introduced in a two-sectoral integrated assessment model (IAM) with endogenous growth, based on an extension of DICE. The household expresses ambiguity aversion and can use robust control via a `shadow ambiguity premium' on social carbon cost to identify robust climate policy feedback rules that work well over a range such as the IPCC climate sensitivity range (IPCC, 2007a). Ambiguity aversion, in combination with linear damage, increases carbon cost in a similar way as a low pure rate of time preference. However, ambiguity aversion in combination with non-linear damage would also make policy more responsive to changes in climate data observations. Perfect ambiguity aversion results in an infinite expected shadow carbon cost and a zero carbon consumption path. Dynamic programming identifies an analytically tractable solution to the IAM.
    Keywords: climate policy, carbon cost, robust control, Knightian uncertainty, ambiguity aversion, integrated asssessment
    JEL: C73 C61 Q54
    Date: 2009–05–04
  43. By: Aaditya Mattoo (World Bank); Arvind Subramanian (Peterson Institute for International Economics); Dominique van der Mensbrugghe; Jianwu He
    Abstract: There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. While this paper confirms the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects, output and exports of energy-intensive manufactures are projected to decline, potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. The paper's quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.
    Keywords: trade, trade policy, environment, climate change
    JEL: F13 F18 H23 Q56
    Date: 2009–12
  44. By: Randall S. Jones; Byungseo Yoo
    Abstract: Japan, a relatively energy-efficient country, has been active in combating climate change. Under the Kyoto Protocol, Japan is committed to reducing greenhouse gas emissions by 6% relative to 1990 over the period 2008-12. As of 2007, however, its emissions were up by 9%. Japan has relied primarily on voluntary measures, which are monitored by the government, without binding commitments or price signals on carbon. It is essential to improve the policy framework to achieve its ambitious longer-term target of a 60% to 80% emission reduction by 2050 in a cost-effective manner. Japan should shift from voluntary measures to market-based instruments, notably a mandatory and comprehensive emission trading scheme, supplemented if necessary, by carbon taxes in areas not covered by trading, which minimise abatement costs and promote innovation to reduce emissions. Trading schemes should be linked to those in other countries, while expanding Japan’s use of a well-functioning Clean Development Mechanism. Continued public support for R&D in emission reduction technology, particularly in basic research, is important.<P>Améliorer le cadre d’action au Japon pour lutter contre le changement climatique<BR>Le Japon, pays où l’efficacité énergétique est relativement élevée, lutte activement contre le changement climatique. En vertu du Protocole de Kyoto, il s’est engagé à réduire les émissions de gaz à effet de serre de 6 % par rapport à 1990 sur la période 2008-12. En 2007, toutefois, ses émissions avaient augmenté de 9 %. Le Japon s’appuie essentiellement sur des mesures volontaires, qui sont contrôlées par le gouvernement, sans engagements contraignants ni signal-prix sur le carbone. Il doit absolument améliorer son cadre d’action pour pouvoir réaliser son objectif ambitieux à long terme d’une réduction des émissions de 60 à 80 % d’ici à 2050 de manière efficace par rapport au coût. Le Japon devrait passer de mesures volontaires à des instruments de marché, notamment un système d’échange de droits d’émissions obligatoire et complet, complété si nécessaire par des taxes carbone dans les secteurs non couverts, de façon à minimiser les coûts de dépollution et à encourager l’innovation dans la réduction des émissions. Le système d’échange devrait être relié à ceux d’autres pays, alors que le recours par le Japon à un Mécanisme pour un développement propre fonctionnant correctement devrait se développer. L’aide publique continue à la R-D en matière de technologies de réduction des émissions, particulièrement dans la recherche fondamentale, est importante.
    Keywords: carbon sinks, carbon tax, Clean Development Mechanism, Cool Earth 50, COP 15, emissions trading systems, energy efficiency, greenhouse gas emissions, Kyoto protocol, renewable energy, Top Runner Programme, changement climatique, Cool Earth 50, COP 15, efficacité énergétique, émissions de gaz à effet de serre, énergies renouvelables, Mécanisme pour un développement propre, programme Top Runner, Protocole de Kyoto, puits de carbone, système d’échange de droits d’émissions, taxes carbone
    JEL: Q28 Q54 Q56 Q58
    Date: 2009–12–04
  45. By: Aldy, Joseph E. (Resources for the Future); Krupnick, Alan J. (Resources for the Future); Newell, Richard G.; Parry, Ian W.H. (Resources for the Future); Pizer, William A.
    Abstract: This paper provides an exhaustive review of critical issues in the design of climate mitigation policy by pulling together key findings and controversies from diverse literatures on mitigation costs, damage valuation, policy instrument choice, technological innovation, and international climate policy. We begin with the broadest issue of how high assessments suggest the near and medium term price on greenhouse gases would need to be, both under cost-effective stabilization of global climate and under net benefit maximization or Pigouvian emissions pricing. The remainder of the paper focuses on the appropriate scope of regulation, issues in policy instrument choice, complementary technology policy, and international policy architectures.
    Keywords: global warming damages, mitigation cost, climate policy, instrument choice, technology policy
    JEL: Q54 Q48 H23
    Date: 2009–05–06

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