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on Energy Economics |
| By: | Richard Schmalensee |
| Abstract: | This paper provides an overview of the use of renewable energy sources to generate electricity in the United States and a critical analysis of the federal and state policies that have supported the deployment of renewable generation. Particular attention is paid to the use of wind energy and to the contrasting experiences in Texas and California. |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0917&r=ene |
| By: | Ignacio J. Pérez-Arriaga |
| Abstract: | Answering to the formidable challenge of climate change calls for a quick transition to a future economy with a drastic reduction in GHG emissions. And this in turn requires the development and massive deployment of new low-carbon energy technologies as soon as possible. Although many of these technologies have been identified, the critical issue is how to make them happen at the global level, possibly by integrating this effort into a global climate regime. This paper discusses the preferred approaches to foster low-carbon energy technologies from a regulatory point of view. Specific promotion policies for energy efficiency and conservation, renewable energy, carbon capture and sequestration, and nuclear power are examined, but the focus is on the regulatory instruments that will be needed for the deployment of enhancements to electricity grids and the associated control systems so that they are able to integrate intelligent demand response, distributed generation and storage in an efficient, reliable & environmentally responsible manner. The paper also comments on the interactions between technology and climate change policies and provides recommendations for policy makers. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0909&r=ene |
| By: | Fitz Gerald, John; Lyons, Seán; Malaguzzi Valeri, Laura |
| Keywords: | electricity/Ireland |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2009/4/2&r=ene |
| By: | Hunt Allcott |
| Abstract: | Most US consumers are charged a near-constant retail price for electricity, despite substantial hourly variation in the wholesale market price. This paper evaluates the .rst program to expose residential consumers to hourly real time pricing (RTP). I .nd that enrolled households are statistically signi.cantly price elastic and that consumers responded by conserving energy during peak hours, but remarkably did not increase average consumption during o¤-peak times. Welfare analysis suggests that program households were not su¢ ciently price elastic to generate efficiency gains that substantially outweigh the estimated costs of the advanced electricity meters required to observe hourly consumption. Although in electricity pricing, congestion pricing, and many other settings, economists.intuition is that prices should be aligned with marginal costs, residential RTP may provide an important real-world example of a situation where this is not currently welfare-enhancing given contracting or information costs. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0915&r=ene |
| By: | Sandro Sapio |
| Abstract: | This paper fits the empirical density functions of daily price growth rates in some of the main European day-ahead electricity markets (NordPool, APX, Powernext), after filtering and rescaling the raw data to account for autocorrelations and volatility patterns. The Exponential Power, Asymmetric Exponential Power, and alpha-stable classes of distributions are all considered. Estimates reveal that the Asymmetric Exponential Power family is best-performing according to goodness-of-fit criteria. |
| Keywords: | electricity prices, exponential power distribution, asymmetric exponential power distribution, alpha-stable distribution, goodness-of-fit |
| JEL: | C16 D4 L94 |
| Date: | 2009–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2009/21&r=ene |
| By: | Guillaume De Roo; John E. Parsons |
| Abstract: | We analyze the levelized cost of electricity (LCOE) for three different fuel cycles: a Once-Through Cycle, in which the spent fuel is sent for disposal after one use in a reactor, a Twice-Through Cycle, in which the spent fuel is recycled for a second use in a light water reactor after which the spent fuel is sent for disposal, and a Fast Reactor Recycle in which all of the transuranics are repeatedly recycled in fast reactors. We carefully define the LCOE and provide a simple solution method that involves simultaneously calculating the value of the recycled materials, whether plutonium or the transuranics. We parameterize our formulas and calculate the LCOEs. Earlier reports do not provide general formulas and solution methods for calculating the LCOE. We contrast our methodology with the definitions and solution methods employed in various prior reports, and we compare our parameter inputs and resulting LCOEs. For example, we show that the ‘equilibrium cost’ of fast reactor systems as calculated in other studies exaggerates the LCOE. Our calculations show that, based on current estimates of the costs for the various activities, recycling increases the LCOE by between 1.7 and 2.8 mills/kWh. This is an approximately 20-34% increase in the fuel cycle cost of the Once-Through Cycle, which we estimate at 8.28 mill/kWh. This is an approximately 2-4% increase in the total LCOE of the Once-Through Cycle, which we estimate at 75.32 mill/kWh. For the Twice- Through Cycle, the separated plutonium has a negative value, meaning that a reactor will have to be paid to take the recycled plutonium. For the Fast Reactor Cycle, the separated transuranics have a negative value, meaning that a fast reactor will have to be paid to take the transuranics. |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0908&r=ene |
| By: | Luis Olmos; Ignacio J. Pérez-Arriaga |
| Abstract: | This paper presents a comprehensive design of electricity transmission charges that are meant to recover regulated network costs. In addition, these charges must be able to meet a set of inter-related objectives. Most importantly, they should encourage potential network users to internalize transmission costs in their location decisions, while interfering as least as possible with the short-term behaviour of the agents in the power system, since this should be left to regulatory instruments in the operation time range. The paper also addresses all those implementation issues that are essential for the sound design of a system of transmission network charges: stability and predictability of the charges; fair and efficient split between generation and demand charges; temporary measures to account for the low loading of most new lines; number and definition of the scenarios to be employed for the calculation and format of the final charges to be adopted: capacity, energy or per customer charges. The application of the proposed method is illustrated with a realistic numerical example that is based on a single scenario of the 2006 winter peak in the Spanish power system. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0910&r=ene |
| By: | Erkko Etula |
| Abstract: | This paper shows that the risk-bearing capacity of securities brokers and dealers is a strong determinant of risk premia and the volatility of returns in commodity markets. I measure risk-bearing capacity as the fraction of broker-dealer financial assets relative to the total financial assets of broker-dealers and households. This variable has particularly strong power to forecast energy returns, both in sample and out of sample: It forecasts approximately 30 percent of the variation in quarterly crude oil returns. These findings are rationalized in a simple asset-pricing model where the economic role of broker-dealers is to provide insurance against commodity price fluctuations. I estimate cross-sectional prices of risk using an arbitrage-free asset-pricing approach and show that broker-dealer risk-bearing capacity forecasts commodity returns because of its association with the price of risk. |
| Keywords: | Commodity futures ; Brokers ; Risk ; Rate of return ; Asset pricing ; Intermediation (Finance) ; Households |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:406&r=ene |
| By: | Block, C.A.; Collins, J.; Ketter, W.; Weinhardt, C. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University) |
| Abstract: | The energy sector will undergo fundamental changes over the next ten years. Prices for fossil energy resources are continuously increasing, there is an urgent need to reduce CO2 emissions, and the United States and European Union are strongly motivated to become more independent from foreign energy imports. These factors will lead to installation of large numbers of distributed renewable energy generators, which are often intermittent in nature. This trend conflicts with the current power grid control infrastructure and strategies, where a few centralized control centers manage a limited number of large power plants such that their output meets the energy demands in real time. As the proportion of distributed and intermittent generation capacity increases, this task becomes much harder, especially as the local and regional distribution grids where renewable energy generators are usually installed are currently virtually unmanaged, lack real time metering and are not built to cope with power flow inversions (yet). All this is about to change, and so the control strategies must be adapted accordingly. While the hierarchical command-and-control approach served well in a world with a few large scale generation facilities and many small consumers, a more flexible, decentralized, and self-organizing control infrastructure will have to be developed that can be actively managed to balance both the large grid as a whole, as well as the many lower voltage sub-grids. We propose a competitive simulation test bed to stimulate research and development of electronic agents that help manage these tasks. Participants in the competition will develop intelligent agents that are responsible to level energy supply from generators with energy demand from consumers. The competition is designed to closely model reality by bootstrapping the simulation environment with real historic load, generation, and weather data. The simulation environment will provide a low-risk platform that combines simulated markets and real-world data to develop solutions that can be applied to help building the self-organizing intelligent energy grid of the future. |
| Keywords: | energy trading;market simulation;market design;multi-agent systems;complex networks;trading agent competition |
| Date: | 2009–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureri:1765017337&r=ene |
| By: | Arnold, Steven; Markandya, Anil; Hunt, Alistair |
| Abstract: | Energy Security is of increasing importance in today’s world, yet little research has been carried out on the costs or benefits of energy security policies. This paper looks at the period after the 1970s to estimate the cost premium of electricity generation due to energy security policies. The cost premium is estimated for France, Germany, Italy and Spain for the period 1980-2000 by estimating actual versus hypothetical lowest cost generation mixes. The cost premium is estimated to be lowest for France, which had a clear energy security policy based around developing nuclear power and reducing reliance on oil and coal. |
| Keywords: | Energy security; electric energy; historic cost estimation |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:13/09&r=ene |
| By: | Hunt Allcott |
| Abstract: | This paper evaluates a pilot program run by a company called OPOWER, previously known as Positive Energy, to mail home energy reports to residential utility consumers. The reports compare a household’s energy use to that of its neighbors and provide energy conservation tips. Using data from randomized natural field experiment at 80,000 treatment and control households in Minnesota, I estimate that the monthly program reduces energy consumption by 1.9 to 2.0 percent relative to baseline. In a treatment arm receiving reports each quarter, the effects decay in the months between letters and again increase upon receipt of the next letter. This suggests either that the energy conservation information is not useful across seasons or, perhaps more interestingly, that consumers’ motivation or attention is malleable and non-durable. I show that “profiling,” or using a statistical decision rule to target the program at households whose observable characteristics suggest larger treatment effects, could substantially improve cost effectiveness in future programs. The effects of this program provide additional evidence that non-price “nudges” can substantially affect consumer behavior. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0914&r=ene |
| By: | Mills, Bradford; Schleich, Joachim |
| Abstract: | The EU appliance energy consumption labeling scheme is a key component of efforts to increase the diffusion of energy-efficient household appliances. In this paper, the determinants of consumer knowledge of the energy label for house-hold appliances and the choice of class-A energy-efficient appliances are jointly estimated using data from a large survey of more than 20,000 German house-holds. The results for five major appliances suggest that lack of knowledge of the energy label can generate considerable bias in both estimates of rates of uptake of class-A appliances and in estimates of the underlying determinants of choice of class-A appliance. Simulations of the choice to purchase a class-A appliance, given knowledge of the labeling framework, reveal that residence characteristics and, in several cases, regional electricity prices strongly increase the propensity to purchase a class-A appliance, but socio-economic characteristics have surprisingly little impact on appliance energy-class choice. -- |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:s12009&r=ene |
| By: | Abdullah, Sabah; Mariel, P |
| Abstract: | Modern forms of energy are an important vehicle towards poverty alleviation in rural areas of developing countries. Most developing countries’ households heavily rely on wood fuel which impact their health and social–economic status. To ease such a dependency, other modern forms of energy, namely electricity, need to be provided. However, the quality of the electricity service, namely reliability, is an important factor in reducing this dependency. This paper discusses a choice experiment valuation study conducted among electrified rural households located in Kisumu, Kenya, in which the willingness to pay (WTP) to avoid power outages or blackouts was estimated. A mixed logit estimation was applied to identify the various socio-economic and demographic characteristics which determine preferences to reduce power outages among a household’s users. In conclusion, several of the socio-economic and demographic characteristics outlined in this paper were identified and can assist service differentiation to accommodate the diverse households’ preferences towards the improvement of the electricity service. |
| Keywords: | developing country; rural; power outages; willingness to pay; random parameter logit |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:15/09&r=ene |
| By: | Jaume Rosselló Nadal (Centre de Recerca Econòmica (UIB · Sa Nostra)); Mohcine Bakhat (Balearic Islands University) |
| Abstract: | Tourism has started to be acknowledged as a significant contributor to the increase in environmental externalities, especially to climate change. Various studies have started to estimate and compute the role of different tourism sectors’ contributions to greenhouse gas (GHG) emissions. These estimations have been made from a sectoral perspective, assessing the contribution of air transport, the accommodation sector, or other tourism-related economic sectors. In this paper, the contribution of tourism to electricity consumption is investigated using the case study of the Balearic Islands (Spain). Using a conventional daily electricity demand model, including data for daily stocks of tourists, the impact of different tourist policy measures on electricity loads is also investigated. The results show that, in terms of electricity consumption, tourism cannot be considered a very energy-intensive sector. |
| Keywords: | Electricity demand, tourism contribution, sustainable tourism, daily data |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pdm:wpaper:2009/6&r=ene |
| By: | Abdullah, Sabah; Jeanty, P.W. |
| Abstract: | A modern form of energy, in particular electricity for household use, is an important vehicle in alleviating poverty in developing countries. However, access and costs of connecting to this service for most poor in these countries is inconceivable. Policies promoting electricity connection in rural areas are known to be beneficial in improving the socio-economic and health well-being for households. This paper examines willingness to pay (WTP) for rural electrification connection in Kisumu district, Kenya, using the contingent valuation method (CVM). A nonparametric and a parametric model are employed to estimate WTP values for two electricity products: grid electricity (GE) and photovoltaic (PV) electricity. The results indicate that respondents are willing to pay more for GE services than PV and households favoured monthly connection payments over a lump sum amount. Some of the policies suggested in this paper include: subsidizing the connection costs for both sources of electricity, adjusting the payment periods, and restructuring the market ownership of providing rural electricity services. |
| Keywords: | Contingent valuation; Double bounded; Electricity connection; Rural; Willingness to pay (WTP) |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:26/09&r=ene |
| By: | Abdullah, Sabah; Markandya, Anil |
| Abstract: | Developing countries have struggled with low electrification rates in the rural areas. This study investigates one major issue impeding the rural electrification programmes in rural Kenya: high connection payments. The paper uses estimates obtained from a stated preference study, namely a contingent valuation method completed in 2007, to examine the willingness to pay to connect to grid-electricity and photovoltaic services. Expanding rural electrification will need subsidies, but the study shows that some forms of subsidy are more effective than others. The key findings suggest that the government needs to reform the energy subsidies, increase market ownership and performance of private suppliers, establish financial schemes and create markets that vary according to social-economic and demographic groups. |
| Keywords: | Sub-Saharan Africa; willingness to pay (WTP); affordability; energy; rural electrification |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:25/09&r=ene |
| By: | Jorn Altmann; Juthasit Rohitratana (Technology Management, Economics and Policy Program(TEMEP), Seoul National University) |
| Abstract: | Despite the fact that Software-as-a-Service (SaaS) adoption increases, the question whether SaaS is the right choice for an organization is still open. The main objective of this study is to propose the Software Licensing Selection Support (SL2S) model for selecting a SaaS Licensing (SaaSL) model or a Perpetual Software Licensing (PSL) model. The SL2S model considers different types of criteria under Green IT policies and sustainable IT resource conditions proposed in the literature. Based on the criteria that influence the selection of the software licensing type, we perform a sensitivity analysis, to understand the dependencies between explicit cost, implicit cost, and energy consumption. To validate the model, we constructed a scenario, in which a medium-sized company has to decide on a software licensing model. The scenario and its parameters were populated with data about CRM solutions of Salesforce.com and Microsoft, the SME definition of the European Commission, and several case studies. The results show that implicit cost criteria (25% of SaaSLM) are major decision factors. It suggests that a sustainable IT policy cannot only consider lowering cost (as a mean for lowering energy consumption) but also has to re-evaluate its relation to implicit cost criteria. |
| Keywords: | Software-as-a-Service (SaaS), Software Selection, Decision Support System, Sensitivity Analysis, Perpetual Software License Model, Green IT, Energy Consumption, Decision Factor Analysis, Cost Modeling, IT Resource Management competitiongrade, willingness to pay, relative importance |
| JEL: | C13 C44 L86 M21 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:snv:dp2009:200936&r=ene |
| By: | María Mendiluce; Ignacio J. Pérez-Arriaga; Carlos Ocaña |
| Abstract: | Energy intensity in Spain has increased since 1990, while the opposite has happened in the EU15. Decomposition analysis of primary energy intensity ratios has been used to identify which are the key sectors driving the Spanish evolution and those responsible for most of the difference with the EU15 energy intensity levels. It is also a useful tool to quantify which countries and economic sectors have had most influence in the EU15 evolution. The analysis shows that the Spanish economic structure is driving the divergence in energy intensity ratios with the EU15, mainly due to the strong transport growth, but also because of the increase of activities linked to the construction boom, and the convergence to EU levels of household energy demand. The results can be used to pinpoint successful EU strategies for energy efficiency that could be used to improve the Spanish metric. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0911&r=ene |
| By: | Valeria Costantini; Chiara Martini |
| Abstract: | The increasing attention given to global energy issues and the international policies needed to reduce greenhouse gas emissions have given a renewed stimulus to research interest in the linkages between the energy sector and economic performance at country level. In this paper, we analyse the causal relationship between economy and energy by adopting a Vector Error Correction Model for non-stationary and cointegrated panel data with a large sample of developed and developing countries and four distinct energy sectors. The results show that alternative country samples hardly affect the causality relations, particularly in a multivariate multi-sector framework |
| Keywords: | Energy Sector, Panel Unit Roots, Panel Cointegration, Vector Error Correction Models, Granger Causality |
| JEL: | C01 C32 C33 O13 Q43 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:rtr:wpaper:0102&r=ene |
| By: | Théo Naccache |
| Abstract: | Many papers have been documenting and analysing the asymmetry and the weakening of the oil price – macroeconomy relationship as off the early eighties. While there seems to be a consensus about the factors causing the asymmetry, namely adjustment costs which offset the benefits of low energy prices, the debate about the weakening of the relationship is not over yet. Moreover, the alternative oil price specifications which have been proposed by Mork (1989), Lee et al. (1995), and Hamilton (1996) to restore the stability of the relationship fail to Granger cause output or unemployment in post-1980 data. By using the concept of accelerations of the oil price, we show that the weakening of this relationship corresponds to the appearance of slow oil price increases, which have less impact on the economy. When filtering out these slow oil price variations from the sample, we manage to rehabilitate the causality running from the oil price to the macroeconomy and show that far from weakening, the oil price accelerations – GDP relationship has even been growing stronger since the early eighties. |
| Keywords: | Oil prices, Gross Domestic Product, recursive causality tests. |
| JEL: | Q43 C22 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2009-43&r=ene |
| By: | Chang Seob Kim; Yoonmo Koo; Ie-jung Choi; Junhee Hong; Jongsu Lee (Technology Management, Economics and Policy Program(TEMEP), Seoul National University) |
| Abstract: | Recently, increases in energy prices have made energy conservation and efficiency improvements even more essential than in the past. With the rising cost of oil, specifically, energy efficiency has become one of the principal factors relevant to the choice of an automobile. However, due to the difficulty experienced by general consumers in obtaining reliable information regarding energy efficiency, in many countries around the world energy efficiency label regulations have been implemented which enforce a system of energy efficiency grade labeling. In this study, consumer preferences regarding energy efficiency grade were analyzed by estimating the marginal willingness to pay and the relative importance of energy efficiency grade using several discrete choice methods, including the multinomial logit, mixed logit, and mixed multiple discrete-continuous extreme value models. |
| Keywords: | multinomial logit, mixed logit, multiple discrete-continuous extreme value, energy efficiency grade, willingness to pay, relative importance |
| JEL: | C13 H21 H23 O33 O53 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:snv:dp2009:200932&r=ene |
| By: | Thomas H. Klier; Joshua Linn |
| Abstract: | This paper uses a unique data set of monthly new vehicle sales by detailed model from 1978- 2007, and implements a new identification strategy to estimate the effect of the price of gasoline on consumer demand for fuel economy. We control for unobserved vehicle and consumer characteristics by using within model-year changes in the price of gasoline and vehicle sales. We find a significant demand response, as nearly half of the decline in market share of U.S. manufacturers from 2002-2007 was due to the increase in the price of gasoline. On the other hand, an increase in the gasoline tax would only modestly affect average fuel economy. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-09-15&r=ene |
| By: | Walz, Rainer; Helfrich, Nicki; Enzmann, Alexander |
| Abstract: | For knowledge-intensive goods, foreign trade performance also depends on the quality of the technology. Important factors to consider are technological capa-bilities, various market factors which influence the chances of a country devel-oping a lead-market position, innovation-friendly regulation and the existence of internationally competitive complementary industry clusters. In order to model these aspects, various feedback mechanisms between these factors have to be taken into account, among them knowledge spillovers from the export success which lead to an erosion of a lead-market position over time. A system dynam-ics framework is used for a first implementation of a simulation model for wind energy technology exports from Germany. The empirical results show the ex-pected dynamics of the system and underline the importance of the various feedback loops. -- |
| Keywords: | Renewable energy technologies,exports,first-mover advantage,lead markets |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:s32009&r=ene |
| By: | Satoshi Mizobata (Institute of Economic Research, Kyoto University) |
| Abstract: | It is now clear that the global economic crisis has hit the Russian economy. The resulting shock clearly shows not only the global economic imbalance but also the distinct characteristics of emerging Russian markets. The Russian economy already changed its structure under the high economic growth of the early to mid-2000s, and has since then become too sensitive to the global market and the oil price. However, the Russian markets involve the strong hand of the government, and the anti-crisis policy gives this hand constancy. The crisis process and the anti-crisis measures characterize the Russian market institutions. The current paper investigates the characteristics of the Russian markets under both the economic growth period and the crisis period, and offers perspective on the market transition. |
| Keywords: | economic crisis, oil dollar, foreign capital, government, marketisation, transition, debts |
| JEL: | P50 P16 F02 F34 O52 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:688&r=ene |
| By: | Osmundsen, Petter (University of Stavanger); Roll, Kristin Helen (University of Stavanger); Tveterås , Ragnar (University of Stavanger) |
| Abstract: | . |
| Keywords: | exploration; drilling; productivity; econometrics |
| JEL: | L70 |
| Date: | 2009–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2009_034&r=ene |
| By: | John E. Parsons |
| Abstract: | This paper addresses the question of whether the oil price spike of 2003-2008 was a bubble. We document and discuss what is known about the level of speculation in the paper oil market. We then analyze the dynamics of the term structure of futures prices, both during the earlier period of 1985-2002 and during the spike. The dynamics of the term structure changed in important ways during this latter period, and we explain how this may have contributed to generating a bubble. We also explain how this answers the puzzle of the lack of accumulating above-ground inventories. Finally, we discuss the implications for regulatory reform of the paper oil markets. |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0913&r=ene |
| By: | Sofía B. Ramos; Helena Veiga |
| Abstract: | This paper analyzes the exposure of the oil and gas industry of 34 countries to oil prices. Using a multifactor panel model to estimate the oil and gas excess stock returns, our results strongly support the view that oil price is a globally priced factor for the oil industry. In particular, the response of the oil and gas sector to changes oil prices is positive and larger for developed countries than for emerging markets. The industry response is asymmetric, with positive oil price changes having a greater impact on the oil sector returns than negative changes. Furthermore, local market index returns, currency rates and oil price volatility also have a significant impact on oil industry's excess returns. Finally, industry local sensitivities seem to vary with stock market activity and with levels of appropriation of industry revenues by governments. Results are robust to a battery of tests. |
| Keywords: | Multifactor asset pricing models, Panel Data, Oil industry |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:ws096920&r=ene |
| By: | Ruud Egging; Franziska Holz; Steven A. Gabriel |
| Abstract: | We provide the description and illustrative results of the World Gas Model, a multi-period complementarity model for the global natural gas market. Market players include producers, traders, pipeline and storage operators, LNG liquefiers and regasifiers as well as marketers. The model data set contains more than 80 countries and regions and covers 98% of world wide natural gas production and consumption. We also include a detailed representation of cross-border natural gas pipelines and constraints imposed by long-term contracts in the LNG market. The Base Case results of our numerical simulations show that the rush for LNG observed in the past years will not be sustained throughout 2030 and that Europe will continue to rely on pipeline gas for a large share of its imports and consumption. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp959&r=ene |
| By: | Aleksandar Zaklan; Astrid Cullmann; Anne Neumann; Christian von Hirschhausen |
| Abstract: | In this paper, we provide a comprehensive multivariate cointegration analysis of three parts of the steam coal value chain - export, transport and import prices. The analysis is based on a rich dataset of international coal prices; in particular, we combine data on steam coal prices with freight rates, covering the period December 2001 until August 2009 at weekly frequency. We then test whether the demand and supply side components of steam coal trade are consistently integrated with one another. In addition, export and import prices as well as freight rates for individual trading routes, across regions and globally are combined. We find evidence of significant yet incomplete integration. We also find heterogeneous short-term dynamics of individual markets. Furthermore, we examine whether logistics enter coal price dynamics through transportation costs, which are mainly determined by oil prices. Our results suggest that this is generally not the case. |
| Keywords: | Steam coal, market integration, multivariate cointegration |
| JEL: | L11 Q41 C22 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp956&r=ene |
| By: | Eggert, Håkan (Department of Economics, School of Business, Economics and Law, Göteborg University); Greaker, Mads (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | The transport sector is a major contributor to green house gas (GHG) emissions and its share is increasing. Biofuels may provide an option to replace fossil fuels and generate an increasing worldwide interest. Rich countries like the US and the European Union ha idies for domestic producers, while applying tariffs for some of the foreign producers. Mid income and poor countries do not have binding restrictions on carbon emissions in the Kyoto treaty, but may have great potential for producing biofuels both for domestic and foreign use. In this paper we study trade policies for biofuels. We find that only by combining an import standard with border tax adjustment the government can ensure cost efficient production of biofuels from a global point of view. We also consider a blending mandate. This fundamentally alters the way the market works. For instance, if domestic biofuels production is subsidized, the optimal BTA may be negative.<p> |
| Keywords: | Biofuels; Border tax adjustment; Carbon Leakage; Trade policy |
| JEL: | F10 H20 Q50 |
| Date: | 2009–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0422&r=ene |
| By: | Markandya, Anil; Chou, Wan Jung |
| Abstract: | This paper reviews the environmental record of the transition countries of Eastern Europe and Central Asia since the fall of the Berlin Wall, with a focus on areas of key concern to public policy at the present time. With the impacts of environment on public health being given the highest priority, we examined several associated health indicators at the national level, as well as looking at important environmental issues at the local level. In this respect, we focus on environmental problems related to air and water quality, land contamination, and solid waste management. Despite showing a highly differentiated performance across the region, the results suggest that inadequate environmental management seen in several of the transition countries in the past 20 years has put people’s health and livelihood under huge threats. Moreover, this paper looks at the development of policy responses and resources, i.e. environmental expenditures, in these countries, during the process of transiting from centrally planned economies to market-based one. Similarly, we identify various degrees of progress across the region. The findings reinforce the need for better coherence between national environmental expenditure and international environmental assistance, as well as the actual enforcement of national regulations and international agreements in those non-EU transition countries. |
| Keywords: | transition countries; environmental issues; public health; land contamination; air pollution; water pollution; policy; environmental expenditure |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:21/09&r=ene |
| By: | Masako Ikefuji; Jun-ichi Itaya; Makoto Okamura |
| Abstract: | This paper explores optimal environmental tax policy under which duopoly firms strategically choose the location of their plants in a simple three-stage game. We examine how the relationship between the optimal emission tax and the choice of location of duopoly firms affects the welfare of the home country. We characterize the relationship between the optimal emission tax and the fixed cost, depending on the degree of environmental damage from production. Finally, we show the existence of asymmetric equilibrium in which either firm chooses relocation of its plant even if the duopoly firms are identical ex ante. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0762&r=ene |
| By: | Ana Espinola-Arredondo; Felix Munoz-Garcia (School of Economic Sciences, Washington State University) |
| Abstract: | This paper examines the two externalities that a country?s environmental regulation imposes on other country's welfare: an environmental externality, due to transboundary pollution, and a competitive advantage externality, as regulations a¤ect domestic ?rms?abatement costs, which impact the pro?ts of their foreign competitors. We ?rst analyze the emission standards that countries independently set under di¤erent market structures and then compare them with the standards set under international environmental agreements that internalize one or both types of externalities. The paper hence disentangles the e¤ect of each externality. We show that ?rms?pro?ts increase when countries participate in international treaties if the environmental damage from pollution is relatively low and such pollution is not signi?cantly transboundary. We hence demonstrate that international environmental agreements can serve as cooperative devices ?rms use to ameliorate overproduction and increase pro?ts, without the need to form collusive agreements. |
| Keywords: | Transboundary pollution, strategic environmental policy, international envi- ronmental agreement, market structure |
| JEL: | C72 F12 H23 Q28 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:wsu:wpaper:munoz-5.rdf&r=ene |
| By: | Lamia Kamal-Chaoui; Alexis Robert |
| Abstract: | Cities are part of the climate change problem, but they are also a key part of the solution. This report offers a comprehensive analysis of how cities and metropolitan regions can change the way we think about responding to climate change. Cities consume the vast majority of global energy and are therefore major contributors of greenhouse gas emissions. At the same time, the exposed infrastructure and prevalent coastal location of many cities makes them common targets for climate change impacts such as sea level rise and fiercer storms. This report illustrates how local involvement through ?climate-conscious? urban planning and management can help achieve national climate goals and minimise tradeoffs between environmental and economic priorities. Six main chapters analyse the link between urbanisation, energy use and CO2 emissions; assess the potential contribution of local policies in reducing global energy demand and the trade-offs between economic and environmental objectives at the local scale; discuss complementary and mutually reinforcing policies such as the combination of compact growth policies with those that improve mass transit linkages; and evaluate a number of tools, including the ?greening? of existing fiscal policies, financing arrangements to combat climate change at the local level, and green innovation and jobs programmes. One of the main messages of this report is that urban policies (e.g. densification or congestion charges) can complement global climate policies (e.g. a carbon tax) by reducing global energy demand, CO2 emissions and the overall abatement costs of reducing carbon emissions. To inform the groundswell of local climate change action planning, the report highlights best practices principally from OECD member countries but also from certain non-member countries. |
| Keywords: | cities, climate change, global warming, government policy, planning, regional economics, regional, sustainable development, territorial, urban sustainability, urban |
| JEL: | Q42 Q48 Q54 Q55 Q58 R00 |
| Date: | 2009–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaab:2009/2-en&r=ene |
| By: | Bushnell, James; Chong, Howard G; Mansur, Erin T |
| 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. |
| Keywords: | Climate Change, Cap-and-Trade, Event Study |
| Date: | 2009–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:13139&r=ene |
| By: | Annegrete Bruvoll (Statistics Norway) |
| Abstract: | The purpose of environmental taxes is to correct the market when it fails to take environmental damages into account, i.e. to internalize the Pigouvian element. In addition, fiscal taxes are levied on both polluting and clean goods, which may follow the Ramsey principle. In practical policy, environmental and fiscal taxes are conceptually intertwined. This mixture complicates the calculation of the extent and the evaluation of the effects of environmental taxes. Eurostat, OECD and IEA include all taxes related to energy, transport and pollution, and most resource taxes in their international measurement of environmentally related taxes. Consequently, numerous fiscal taxes are added together with the environmental taxes. This article discusses the distinctions between the Pigouvian and the fiscal taxes in light of tax theory. The revenues following the Eurostat et al. statistical basis deviate significantly from the revenues from the environmental taxes defined on the basis of theory. Steps should be taken to harmonize the international statistics of environmental taxes with economic tax theory. |
| Keywords: | Environmental taxes; Fiscal taxes; Pigou taxes; Ramsey taxes |
| JEL: | H23 Q58 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:599&r=ene |
| By: | Chiara Martini |
| Abstract: | The distributive incidence of environmental policies has not been widely investigated whereas more attention has been focused on the efficiency of environmental reforms. According to the Kyoto Protocol, domestic policies aimed at reducing carbon emissions can include carbon/energy taxes, emission trading, command-and-control regulations and other policies. Until now, only a few European countries have implemented energy or carbon taxes: Nordic countries have been the firstcomers, suggesting a tight link between institutional environment and the potential for policy adoption. In my analysis I assume that carbon taxation is fully shifted forward to consumers. The estimation of a complete demand system can clarify the impact of ecological tax reforms, help government to select appropriate fiscal policy and give producers the ability to forecast market demand. The demand systems underlying the simulation are represented by extensions of the Almost Ideal Demand System of Deaton and Muellbauer (1980b) and the Quadratic Almost Ideal Demand System (Banks et al., 1997). The different taxation scenarios I simulate is modelled by referring to the Financial Law for 1999 and the DPCM 15/1/1999; The output of the demand system estimation will allow to calculate the compensating and equivalent variations and to estimate the revenue raised by carbon taxation introduction. |
| Keywords: | carbon tax, regressivity, demand system, welfare measures |
| JEL: | D12 H23 H31 Q48 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:rtr:wpaper:0103&r=ene |
| By: | Juan-Pablo Montero |
| Abstract: | As with other commodity markets, markets for trading pollution permits have not been immune to market power concerns. In this paper, I survey the existing literature on market power in permit trading but also contribute with some new results and ideas. I start the survey with Hahn’s (1984) dominant-firm (static) model that I then extend to the case in which there are two or more strategic firms that may also strategically interact in the output market, to the case in which current permits can be stored for future use (as in most existing and proposed market designs), to the possibility of collusive behavior, and to the case in which permits are auctioned off instead of allocated for free to firms. I finish the paper with a review of empirical evidence on market power, if any, with particular attention to the U.S. sulfur market and the Southern California NOx market. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0906&r=ene |
| By: | Bushnell, James; Chen, Yihsu |
| Abstract: | The allocation of emissions allowances is among the most contentious elements of the design of cap-and-trade systems. In this paper we develop a detailed representation of the US western electricity market to assess the potential impacts of various allocation proposals. Several proposals involve the "updating'' of permit allocation, where the allocation is tied to the ongoing output, or input use, of plants. These allocation proposals are designed with the goals of limiting the pass-through of carbon costs to product prices, mitigating leakage, and of mitigating costs to high-emissions firms. However, some forms of updating can also inflate permit prices, thereby limiting the benefits of such schemes to high emissions firms. Rather than mitigating the impact on high carbon producers, the net operating profit of such firms can actually be lower under input-based updating than under auctioning. This is due to the fact that product prices (and therefore revenues) are lower under input-based updating, but overall compliance costs are relatively comparable between auctioning and input-based updating. In this way, the anticipated benefits from allocation updating are reduced and further distortions are introduced into the trading system. |
| Date: | 2009–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:13131&r=ene |
| By: | Mourad Ali; Patrick Rio |
| Abstract: | In this article we treat the problemof nonpoint source pollution as a problem of moral hazard in group. To solve this kind of problem we consider a group performance based tax coupled to tradable permits market. The tax is activated if the group fails to meet the ambient standard. So the role of the tax is to provide an incentive to ensure that the agents provide the abatement level necessary to achieve the standard. The role of the tradable permits market is to distribute effectively this abatement level through the price of the permits which rises with the exchange of the permits. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:09-21&r=ene |
| By: | Mallard, Graham |
| Abstract: | A political economy model is presented that proposes an effective explanation as to why national allocation plans in the emissions trading scheme of the European Union have taken the form they have. The influence of the national bureaucracy, which is omitted in the majority of the related political economy literature, is shown to be potentially significant and costly – particularly through its interaction with the influence of the affected industrialists. The analysis suggests that the role of the national bureaucracy in the design of environmental policy should be carefully considered and structured, and suggests an avenue of potentially important and fruitful future research. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:22/09&r=ene |
| By: | Denny Ellerman |
| Abstract: | No Abstract Available |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0916&r=ene |
| By: | Athena Ballesteros |
| Abstract: | This brief seeks to address questions on how the funds are collected, dsitributes at the international level, mechanisms to ensure that the recipient countries are managing the funds in a transparent manner based on an examination of existing and proposed climate change finance mechanisms and the findings of the International Budget Partnership’s Open Budget Survey 2008. |
| Keywords: | funds, climate change, finance, international budget, Transparency, Accountability, Copenhagen, developing countries, financial flows, institutions, civil society |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2339&r=ene |
| By: | Rogge, Karoline; Hoffmann, Volker |
| Abstract: | This paper provides an overview of early changes in the sectoral innovation system for power generation technologies which have been triggered by the European Emission Trading Scheme (EU ETS). Based on a broad definition of the sector, our research analyses the impact of the EU ETS on the four building blocks knowledge and technologies, actors and networks, institutions and demand by combining two streams of literature, namely systems of innovation and environmental economics. Our analysis is based on 42 exploratory inter-views with German and European experts in the field of the EU ETS, the power sector and technological innovation. We find that the EU ETS mainly affects the rate and direction of the technological change of power generation technologies within the large-scale, coal-based power generation technological regime to which carbon capture technologies are added as a new technological trajectory. While this impact can be interpreted as defensive behaviour of incumbents, the observed changes should not be underestimated. We argue that the EU ETS' impact on corporate CO2 culture and routines may prepare the ground for the transition to a low carbon sectoral innovation system for power generation tech-nologies. -- |
| Keywords: | EU emission trading scheme (EU ETS),innovation system,power sector |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisisi:s22009&r=ene |
| By: | Nhan Thanh Nguyen (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); Minh Ha-Duong (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: | This manuscript examines CO2 emissions from Vietnam's power sector using an expanded Integrated Resource Planning model. The potential effects of the following alternative policy options are examined: energy efficiency, favorably imported generation fuels, nuclear energy, renewable energy, and an internalized positive carbon value. The baseline in terms of cumulative CO2 emissions over 2010-2030 is 3.6 Gt. Lighting energy efficiency improvements offers 14% of no-regret abatement of CO2 emissions. Developing nuclear and renewable energy could help meet the challenges of the increases in electricity demand, the dependence on imported fuels for electricity generation in the context of carbon constraints applied in a developing country. When CO2 costs increase from 1 $/t to 30 $/t, building 10 GW of nuclear generation capacity implies an increase in abatement levels from 24% to 46%. Using renewable energy abates CO2 levels by between 14% and 46%. At 2 $/tCO2, the model predicts an abatement of 0.77 Gt from using wind power at prime locations as well as energy from small hydro, wood residue and wood plantations, suggesting Clean Development Mechanism opportunities. At 10 $/tCO2, the model predicts an abatement of 1.4 Gt when efficient gas plants are substituted for coal generation and when the potential for wind energy is economically developed further than in the former model. |
| Keywords: | integrated resource planning, carbon value, abatement of CO2 emissions, Vietnam, electricity generation |
| Date: | 2009–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00441085_v1&r=ene |
| By: | Rodica Loisel (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: | This study simulates a CO2 permit market in Romania using a dynamic general equilibrium model. The carbon constraint is set at 20.7% below the reference emissions level for sectors eligible according to the EU-ETS (European Union Emission Trading Scheme). Free permit distribution enhances growth despite a severe emissions cap, because environmental regulation stimulates structural changes (Porter, 1991). That is, grandfathering allows sectors additional resources to invest in developing technologies, but it also raises the CO2 abatement costs because of energy rebound effects from enhanced growth. Results under endogenous growth (Romer, 1990) are very similar to those obtained under an exogenous growth scenario (Ramsey, 1928), as the substitution effects are responsible for the majority of variations; in addition, Romanian research activities are too modest to significantly impact this system. The abatement cost per unit of GDP is higher under endogenous growth, as spillover effects reduce incentives to invest. Technological diffusion continues to have a positive impact on economic growth, which counterbalances the free-riding attitude adopted by some energy-intensive sectors, such as glass and cement. |
| Keywords: | tradable permits, Romania, endogenous/exogenous growth, spillover effects. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00441491_v1&r=ene |
| By: | John Freebairn |
| Abstract: | Arguments for, and then the form and level of, compensation of households and businesses for the additional costs of an emissions trading scheme to lower greenhouse gas (GHG) emissions are evaluated. With most of the costs passed forward to households as higher consumer prices, a sequential set of direct income transfers to all households is proposed to meet equity and macroeconomic stability objectives. In the event that Australia proceeds with a scheme before some of the other global polluters, to avoid carbon leakage and unnecessary industrial restructuring a consumption base system of taxing the GHG component of imports and compensating the GHG component of exports is proposed. |
| Keywords: | Macroeconomics: Consumption; Saving; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance |
| JEL: | E21 G34 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1071&r=ene |
| By: | Eduardo Cavallo; Ilan Noy |
| Abstract: | Catastrophes caused by natural disasters are by no means new, yet the evolving understanding of their relevance to economic development and growth is still in its infancy. In order to facilitate further necessary research on this topic, this paper summarizes the state of the economic literature examining the aggregate impact of disasters. The paper reviews the main disaster data sources available, discusses the determinants of the direct effects of disasters, and distinguishes between short- and long-run indirect effects. The paper then examines some of the relevant policy questions and follows up with projections about the likelihood of future disasters, while paying particular attention to climate change. The paper ends by identifying several significant gaps in the literature. |
| Keywords: | Natural disasters, Climate change, Growth |
| JEL: | O11 O40 Q54 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4649&r=ene |
| By: | Robert S. Pindyck |
| Abstract: | What is the likelihood that the U.S. will experience a devastating catastrophic event over the next few decades – something that would substantially reduce the capital stock, GDP and wealth? What does the possibility of such an event imply for the behavior of economic variables such as investment, interest rates, and equity prices? And how much should society be willing to pay to reduce the probability or likely impact of such an event? We address these questions using a general equilibrium model that describes production, capital accumulation, and household preferences, and includes as an integral part the possible arrival of catastrophic shocks. Calibrating the model to average values of economic and financial variables yields estimates of the implied expected mean arrival rate and impact distribution of catastrophic shocks. We also use the model to calculate the tax on consumption society would accept to reduce the probability or impact of a shock. |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0912&r=ene |
| By: | Caio Koch-Weser |
| Abstract: | Climate change is one of the most important issues of the next decades and has the potential to severely impact societies, economies and human wellbeing. |
| Keywords: | Copenhagen, climate change, societies, economies, human, wellbeing, customers, shareholders, employees, industrial, economic growth, Denmark, developing world, sustainable agriculture, forestry, solar power, energy efficiency, global warming, Public-private, Germany, carbon growth |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2343&r=ene |
| By: | Narita, Daiju; Tol, Richard S. J.; Anthoff, David |
| Abstract: | We impute a global social welfare function that is consistent with the burden sharing in the Kyoto Protocol and in two proposals for a post-Kyoto treaty. The Kyoto Protocol favored the EU. The Frankel proposal for a post-Kyoto treaty continues the favorable treatment of the EU, while the EU proposal puts more weight on the wellbeing of other OECD countries at the expense of its own residents. Ignoring income differences, the EU proposal for a post-Kyoto treaty favors developing countries. However, if income differences are taken into account, the EU proposal is not at all generous to developing countries. |
| Keywords: | burden sharing/Climate policy/income equality |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp332&r=ene |
| By: | Sergey Paltsev; John M. Reilly; Henry D. Jacoby; Jennifer F. Morris |
| Abstract: | We consider the cost of meeting emissions reduction targets consistent with a G8 proposal of a 50 percent global reduction in emissions by 2050, and an Obama Administration proposal of an 80 percent reduction over this period. We apply the MIT Emissions Prediction and Policy Analysis (EPPA), modeling these two policy scenarios if met by applying a national cap-and-trade system, and compare results with an earlier EPPA analysis of reductions of this stringency. We also test results to alternative assumptions about program coverage, banking behavior, and cost of technology in the electric power sector. Two main messages emerge from the exercise. First, technology uncertainties have a huge effect on the generation mix but only a moderate effect on the emissions price and welfare cost of achieving the assumed targets. Measured in terms of changes in economic welfare, the economic cost of 80 percent reduction by 2050 is in the range of 2 to 3% by 2050, with CO2 prices between $48 and $67 in 2015 rising to between $190 and $266 by 2050. Second, implementation matters. When an idealized economy-wide cap-and-trade is replaced by coverage omitting some sectors, or if the credibility of long-term target is weak (limiting banking behavior) prices and welfare costs change substantially. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0905&r=ene |
| By: | Robert S. Pindyck |
| Abstract: | Focusing on tail effects, I incorporate distributions for temperature change and its economic impact in an analysis of climate change policy. I estimate the fraction of consumption w_(_ ) that society would be willing to sacrifice to ensure that any increase in temperature at a future point is limited to _ . Using information on the distributions for temperature change and economic impact from studies assembled by the IPCC and from “integrated assessment models” (IAMs), I fit displaced gamma distributions for these variables. Unlike existing IAMs, I model economic impact as a relationship between temperature change and the growth rate of GDP as opposed to its level, so that warming has a permanent impact on future GDP. The fitted distributions for temperature change and economic impact generally yield values of w_(_ ) below 2%, even for small values of _ , unless one assumes extreme parameter values and/or substantial shifts in the temperature distribution. These results are consistent with moderate abatement policies. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0907&r=ene |