nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒01‒16
72 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Cost-Effectiveness of Electricity Energy Efficiency Programs By Arimura, Toshi H.; Newell, Richard G.; Palmer, Karen
  2. At Home and Abroad: An Empirical Analysis of Innovation and Diffusion in Energy-Efficient Technologies By Elena Verdolini; Marzio Galeotti
  3. Testing Institutional Arrangements via Agent-Based Modeling: A U.S. Electricity Market Example By Li, Hongyan; Sun, Junjie; Tesfatsion, Leigh S.
  4. A paper on the unsettled question of Turkish electricity market: Balancing and settlement system (Part I) By Erdogdu, Erkan
  5. Obstacles to Private Power Investments in India By Vishvanath V. Desai
  6. Environmentally Damaging Electricity Trade By De Villemeur, Étienne; Pineau, Pierre-Olivier
  7. The Integration of Wind Generation within the South Australian Region of the Australia National Electricity Market By Nicholas Cutler; Hugh Outhred; Iain MacGill
  8. The Likely Economic Impact of Increasing Investment in Wind on the Island of Ireland By Devitt, Conor; Diffney, Seán; Fitz Gerald, John; Lyons, Seán; Malaguzzi Valeri, Laura
  9. On the Wind Energy in Turkey By Erdogdu, Erkan
  10. A Snapshot of Geothermal Energy Potential and Utilization in Turkey By Erdogdu, Erkan
  11. Barriers to the adoption of renewable and energy-efficient technologies in the Vietnamese power sector By Nhan Thanh Nguyen; Minh Ha-Duong; Thanh C. Tran; Ram M. Shrestha; Franck Nadaud
  12. Will Washington Provide Its Own Feedstocks for Biofuels? By Suzette P. Galinato; Douglas L. Young; Craig S. Frear; Jonathan K. Yoder
  13. Fuel for the Clean Energy Debate – A Study of Fuelwood Collection and Purchase in Rural India By ARABINDA MISHRA
  14. Ethanol and a Changing Agricultural Landscape By Malcolm, Scott A.; Aillery, Marcel; Weinberg, Marca
  15. The Taxation of Motor Fuel: International Comparison By Ley, Eduardo; Boccardo , Jessica
  16. Do Oil Windfalls Improve Living Standards? Evidence from Brazil By Francesco Caselli; Guy Michaels
  17. Oil Rents, Corruption, and State Stability: Evidence From Panel Data Regressions By Rabah Arezki; Markus Bruckner
  18. Oilgopoly: A General Equilibrium Model Of The Oil-Macroeconomy Nexus By Anton Nakov; Galo Nuño
  19. "Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH" By Roengchai Tansuchat; Chia-Lin Chang; Michael McAleer
  20. Fuel Tax Incidence in Developing Countries: The Case of Costa Rica By Blackman, Allen; Osakwe, Rebecca; Alpizar, Francisco
  21. Fixing Detroit: how far, how fast, how fuel-efficient By Kleinbaum, Rob; McManus, Walter
  22. Overcoming Data Limitations in Nonparametric Benchmarking: Applying PCA-DEA to Natural Gas Transmission By Maria Nieswand; Astrid Cullmann; Anne Neumann
  23. A Review of Turkish Natural Gas Distribution Market By Erdogdu, Erkan
  24. Natural gas demand in Turkey By Erdogdu, Erkan
  25. Estimating Historical Landfill Quantities to Predict Methane Emissions By Lyons, Seán; Murphy, Liam; Tol, Richard S. J.
  26. Neoclassical Growth, Environment and Technological Change: The Environmental Kuznets Curve By S.J. Rubio; J.R. García; J.L. Hueso
  27. Health-enhancing Activities and the Environment: How Competition for Resources Makes the Environmental Policy Beneficial By Xavier Pautrel
  28. Environmental policy in a differentiated market with a green network effect By Dorothée Brécard
  29. A managerial perspective on the Porter hypothesis The case of CO2 emissions By Diane-Laure Arjaliès; Jean-Pierre Ponssard
  30. Level versus Equivalent Intensity Carbon Mitigation Commitments By Huifang Tian; John Whalley
  31. The potential for mitigation of CO2 emissions in Vietnam's power sector By Nhan T. Nguyen; Minh Ha-Duong
  32. Nuclear versus Coal plus CCS: A Comparison of Two Competitive Base-load Climate Control Options By Massimo Tavoni; Bob van der Zwaan
  33. Literature Review of Recent Trends and Future Prospects for Innovation in Climate Change Mitigation By Richard G. Newell
  34. Market Impact of Domestic Offset Programs By Brown, Tristan R.; Elobeid, Amani; Dumortier, Jerome; Hayes, Dermot J.
  35. Market Impact of Domestic Offset Programs By Tristan Brown; Amani Elobeid; Jerome Dumortier; Dermot J. Hayes
  36. Ocean iron fertilization: Why further research is needed By Kerstin Güssow; Alexander Proelss; Andreas Oschlies; Katrin Rehdanz; Wilfried Rickels
  37. Accounting aspects of ocean iron fertilization By Wilfried Rickels; Katrin Rehdanz; Andreas Oschlies
  38. Economics prospects of ocean iron fertilization in an international carbon market By Wilfried Rickels; Katrin Rehdanz; Andreas Oschlies
  39. Allowance Allocation in a CO2 Emissions Cap-and-Trade Program for the Electricity Sector in California By Palmer, Karen; Burtraw, Dallas; Paul, Anthony
  40. U.S. Emissions Trading Markets for SO2 and NOx By Burtraw, Dallas; Szambelan, Sarah Jo
  41. Distributional Impacts of Carbon Pricing Policies in the Electricity Sector By Last Name, First Name
  42. Price Floors for Emissions Trading By Peter John Wood; Frank Jotzo
  43. How Large are the Impacts of Carbon Motivated Border Tax Adjustments? By Yan Dong; John Whalley
  44. On the Realized Volatility of the ECX CO2 Emissions 2008 Futures Contract: Distribution, Dynamics and Forecasting By Julien Chevallier; Benoît Sévi
  45. Emissions Targets and the Real Business Cycle: Intensity Targets versus Caps or Taxes By Fischer, Carolyn; Springborn, Michael R.
  46. Responding to Threats of Climate Change Mega-Catastrophes By Kousky, Carolyn; Rostapshova, Olga; Toman, Michael; Zeckhauser, Richard
  47. Allocation of New Zealand Units within Agriculture in the New Zealand Emissions Trading System By Suzi Kerr; Wei Zhang
  48. The Unholy Trinity: Fat Tails, Tail Dependence, and Micro-Correlations By Kousky, Carolyn; Cooke, Roger M.
  49. Adaptation to Climate Change in Marine Capture Fisheries By Quentin Grafton
  50. Assessing household vulnerability to climate change: The case of farmers in the Nile Basin of Ethiopia By Deressa, Temesgen T.; Hassan, Rashid M.; Ringler, Claudia
  51. People versus planners: Social Preferences for Adaptation to Climate Change By Leo Dobes
  52. Soil fertility, fertilizer, and the maize green revolution in East Africa By Matsumoto, Tomoya; Yamano, Takashi
  53. Cambio Climático en Bolivia hasta 2100: Análisis de los Impactos sobre el Sector Agropecuario By Horacio Valencia; Lykke E. Andersen
  54. Cambio Climático en Bolivia: Impactos sobre Bosque y Biodiversidad By Lykke E. Andersen
  55. Think Globally, Act Locally? Stock vs Flow Regulation of a Fossil Fuel By Jean-Pierre Amigues; Ujjayant Chakravorty; Michel Moreaux
  56. Carbon Revenue Recycling - Opportunities and Challenges By Elena Simonova; Rock Lefebvre
  57. Simulating a Sequential Coalition Formation Process for the Climate Change Problem: First Come, but Second Served? By Michael Finus; Bianca Rundshagen; Johan Eyckmans
  58. An Expanded Three-Part Architecture for Post-2012 International Climate Policy By Olmstead, Sheila M.; Stavins, Robert N.
  59. REDD in Design: Assessment of Planned First-Generation Activities in Indonesia By Myers Madeira, Erin
  60. Turkish support to Kyoto Protocol: A reality or just an illusion By Erdogdu, Erkan
  61. "green stimulus,"economic recovery, and long-term sustainable development By Strand, Jon; Toman, Michael
  62. A Clean Canada in a Dirty World: The Cost of Climate-Related Border Measures By Benjamin Dachis
  63. Strategies to mitigate greenhouse gas and nitrogen emissions in Swiss agriculture: the application of an integrated sector model By Michael Hartmann; Robert Huber; Simon Peter; Bernard Lehmann
  64. Think Globally, Act Locally? Stock vs Flow Regulation of a Fossil Fuel By Amigues, Jean-Pierre; Chakravorty, Ujjayant; Moreaux, Michel
  65. An Integrated Assessment of Climate Change, Air Pollution, and Energy Security Policy By Bob van der Zwaan; Johannes Bollen; Sebastiaan Hers
  66. Saving the World but Saving Too Much? Pure Time Preference and Saving Rates in Integrated Assessment Modelling By Kathryn Smith
  67. Towards a Better Understanding of Disparities in Scenarios of Decarbonization: Sectorally Explicit Results from the RECIPE Project By Gunnar Luderer; Valentina Bosetti; Michael Jakob; Henri Waisman; Jan Steckel; Ottmar Edenhofer
  68. Contrasting future paths for an evolving global climate regime By Barrett, Scott; Toman, Michael
  69. Policies for the Development and Transfer of Eco-Innovations: Lessons from the Literature By David Popp
  70. Global Climate Policy Architecture and Political Feasibility: Specific Formulas and Emission Targets to Attain 460 ppm CO2 Concentrations By Valentina Bosetti; Jeffrey Frankel
  71. How Should the Distant Future be Discounted When Discount Rates are Uncertain? By Gollier, Christian; Weitzman, Martin
  72. Imperfections in the Economics of Public Policy, Imperfections in Markets, and Climate Change By Nicholas Stern

  1. By: Arimura, Toshi H.; Newell, Richard G.; Palmer, Karen (Resources for the Future)
    Abstract: We analyze the cost-effectiveness of electric utility rate payer–funded programs to promote demand-side management (DSM) and energy efficiency investments. We develop a conceptual model that relates demand growth rates to accumulated average DSM capital per customer and changes in energy prices, income, and weather. We estimate that model using nonlinear least squares for two different utility samples. Based on the results for the most complete sample, we find that DSM expenditures over the last 18 years have resulted in a central estimate of 1.1 percent electricity savings at a weighted average cost to utilities (or other program funders) of about 6 cents per kWh saved. Econometrically-based policy simulations find that incremental DSM spending by utilities that had no or relatively low levels of average DSM spending per customer in 2006 could produce 14 billion kWh in additional savings at an expected incremental cost to the utilities of about 3 cents per kWh saved.
    Keywords: energy efficiency, demand-side management, negawatt cost
    JEL: Q38 Q41
    Date: 2009–11–16
  2. By: Elena Verdolini (Fondazione Eni Enrico Mattei and Catholic University of Milan); Marzio Galeotti (University of Milan and IEFE-Bocconi)
    Abstract: This paper contributes to the induced innovation literature by extending the analysis of supply and demand determinants of innovation in energy-efficient technologies to account for international knowledge flows and spillovers. In the first part of the paper we select a sample of 38 innovating countries and we study how knowledge related to energy-efficient technologies flows across geographical and technological space. We demonstrate that higher geographical and technological distances are associated with a lower probability of knowledge flow. In the second part of the paper, we use our previous estimates to construct stocks of internal and external knowledge for a panel of 17 countries and present an econometric analysis of the supply and demand determinants of innovation accounting for international knowledge spillovers. Our results confirm the role of demand-pull effects, as proxied by energy prices, as well as that of technological opportunity, as proxied by the knowledge stocks. In particular, this paper provides evidence that spillovers between countries have a significant positive impact on further innovation in energy-efficient technologies.
    Keywords: Innovation, Technology Diffusion, Knowledge Spillovers, Energy-Efficient Technologies
    JEL: O33 Q55 C13
    Date: 2009–12
  3. By: Li, Hongyan; Sun, Junjie; Tesfatsion, Leigh S.
    Abstract: Many critical goods and services in modern-day economies are produced and distributed through complex institutional arrangements. Agent-based computational economics (ACE) modeling tools are capable of handling this degree of complexity. In concrete support of this claim, this study presents an ACE test bed designed to permit the exploratory study of restructured U.S. wholesale power markets with transmission grid congestion managed by locational marginal prices (LMPs). Illustrative findings are presented showing how spatial LMP cross-correlation patterns vary systematically in response to changes in the price responsiveness of wholesale power demand when wholesale power sellers have learning capabilities. These findings highlight several distinctive features of ACE modeling: namely, an emphasis on process rather than on equilibrium; an ability to capture complicated structural, institutional, and behavioral real-world aspects (micro-validation); and an ability to study the effects of changes in these aspects on spatial and temporal outcome distributions.
    Keywords: Institutional Design, Agent-Based Computational Economics, U.S. Electricity Market, Locational Marginal Pricing, Spatial Cross-Correlations, AMES Test Bed
    JEL: B4 C0 C6 C7 C9 D4 L1 Q4 R1
    Date: 2010–01–11
  4. By: Erdogdu, Erkan
    Abstract: Turkish electricity market law (EML) came into force in 2001 aiming at establishing a financially strong, stable, transparent and competitive electricity market based on bilateral contracts. Also, a balancing and settlement system (BSS) was put into practice in November 2004 to create a market where uncontracted generation can be traded, and actual implementation of the BSS started on August, 1st 2006 following a 21-month virtual implementation period. However, BSS has always been criticized from its beginning as transferring excessive profits to private generation companies. The present paper analyzes the implementation of BSS and argues that current BSS not only undermines the healthy development of the electricity market in Turkey but also prevents power investments due to uncertainties it created. It concludes that since the inconsistency between the objectives of EML and results of BSS in practice is obvious, Turkish policy makers need to modify current electricity market policy in line with suggestions presented in the paper.
    Keywords: Balancing and settlement; Turkey; Electricity wholesale market
    JEL: O13 Q4
    Date: 2010
  5. By: Vishvanath V. Desai
    Abstract: This paper aims to highlight the critical importance of cost recovery in attracting and sustaining private investment for power development. Based on a brief review of Indian experience, it suggests that in the absence of requisite cost recovery, reform of sector policies and institutions alone, is unlikely to mobilise private investment for power development. The paper also suggests that far more focused attention and efforts than in the past need to be given to achieving adequate cost recovery as well as to implications of failure in achieving it. [ADBI DP No. 20].
    Keywords: private investment, India, development, sector, cost recovery, policies, institutions, India, Electricity Laws, power sector, finances, SEBs
    Date: 2009
  6. By: De Villemeur, Étienne; Pineau, Pierre-Olivier
    Abstract: Electricity trade across regions is often considered welfare enhancing. We show in this paper that this could be reconsidered if environmental externalities are taken into account. We consider two cases where trade is beneficial, before accounting for environmental damages: first, when two regions with the same technology display some demand heterogeneity; second when one region endowed with hydropower arbitrages with its "thermal" neighbor. Our results show that under reasonable demand and supply elasticities, trade comes with an additional environmental cost. This calls for integrating environmental externalities into market reforms when redesigning the electricity sector. Two North American applications illustrate our results: trade between Pennsylvania and New York, and trade between hydro-rich Quebec and New York.
    Keywords: Electricity trade, hydropower, greenhouse gas emissions
    Date: 2009–11
  7. By: Nicholas Cutler (School of Electrical Engineering and Telecommunications at the University of New South Wales, Sydney, Australia.); Hugh Outhred (School of Electrical Engineering and Telecommunications at the University of New South Wales, Sydney, Australia.); Iain MacGill (School of Electrical Engineering and Telecommunications at the University of New South Wales, and Centre for Energy and Environmental Markets (CEEM), University of New South Wales )
    Abstract: This working paper aims to improve our understanding of wind integration issues for the Australian National Electricity Market (NEM) in the South Australian context by assessing the interaction of wind generation, electricity demand and regional spot prices over the most recent year of market data. The analysis is intended to provide insights into the potential implications of a greater expansion of installed wind generation in South Australia and across the other regions of the NEM under the recently legislated expanded Renewable Energy Target. With the current installed wind generation in South Australia, our results suggest that while electricity demand currently has the greatest influence on spot prices, fluctuating South Australian wind generation levels have a significant secondary influence.
    Date: 2009–11
  8. By: Devitt, Conor; Diffney, Seán; Fitz Gerald, John; Lyons, Seán; Malaguzzi Valeri, Laura
    Abstract: Like most countries Ireland faces the double target of decreasing emissions and keeping energy costs low to maintain competitiveness of the economy. The two goals are not always compatible. This study measures the effect of increasing wind in electricity generation on the total electricity costs for the Island of Ireland for the year 2020 under a variety of scenarios on fuel and carbon costs, generating plant portfolio mixes and electricity demand growth. We find that with high levels of interconnection 6000MW of installed wind capacity are likely to reduce overall costs, especially if the price of natural gas stays high. The sensitivity of the results to the level of interconnection suggests that it is important for interconnection to be operated and governed as efficiently as possible. We also find that the deregulated all-island system will face major challenges moving into the future since returns to traditional fossil-fuelled plants might not be sufficient to create new (needed) investment when wind penetration is high.
    Keywords: electricity/growth/Interconnection/investment/Ireland/returns to investment/wind generation
    Date: 2009–12
  9. By: Erdogdu, Erkan
    Abstract: Increase in negative effects of fossil fuels on the environment has forced many countries, including Turkey, to use renewable energy sources. Today, clean, domestic and renewable energy is commonly accepted as the key for future life, not only for Turkey but also for the world. As wind energy is an alternative clean energy source compared to the fossil fuels that pollute the atmosphere, systems that convert wind energy to electricity have developed rapidly. Turkey is an energy importing country, more than half of the energy requirement has been supplied by imports. Turkey's domestic fossil fuel resources are extremely limited. In addition, Turkey's geographical location has several advantages for extensive use of wind power. In this context, renewable energy resources appear to be one of the most efficient and effective solutions for sustainable energy development and environmental pollution prevention in Turkey. Since wind energy will be used more and more in the future, its current potential, usage, and assessment in Turkey is the focus of the present study. The paper not only presents a review of the potential and utilization of the wind power in Turkey but also provides some guidelines for policy makers.
    Keywords: Wind power; Renewable energy; Turkey
    JEL: Q42 O13 Q4
    Date: 2009
  10. By: Erdogdu, Erkan
    Abstract: Turkey is one of the countries with significant potential in geothermal energy. It is estimated that if Turkey utilizes all of her geothermal potential, she can meet 14% of her total energy need (heat and electricity) from geothermal sources. Therefore, today geothermal energy is an attractive option in Turkey to replace fossil fuels. Besides, increase in negative effects of fossil fuels on the environment has forced many countries, including Turkey, to use renewable energy sources. Also, Turkey is an energy importing country; more than two-thirds of her energy requirement is supplied by imports. In this context, geothermal energy appears to be one of the most efficient and effective solutions for sustainable energy development and environmental pollution prevention in Turkey. Since geothermal energy will be used more and more in the future, its current potential, usage, and assessment in Turkey is the focus of the present study. The paper not only presents a review of the potential and utilization of the geothermal energy in Turkey but also provides some guidelines for policy makers.
    Keywords: Geothermal energy; Renewable sources; Turkey
    JEL: Q42 O13 Q4
    Date: 2009
  11. 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, Institute of Energy of Vietnam - Institute of Energy of Vietnam); 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); Thanh C. Tran (Institute of Energy of Vietnam - Institute of Energy of Vietnam, Department of Physics - The Royal Institute of Technology); Ram M. Shrestha (Energy Program - Asian Institute of Technology); Franck Nadaud (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 paper examines the major barriers to the deployment of geothermal, small hydro and advanced coal power generation technologies in Vietnam. It ranks their severity by applying the analytical hierarchy process to data from a survey of 37 domestic experts and stakeholders. Key barriers to a wider penetration of small hydro generation technologies are insufficient capital, a lack of domestic suppliers and unsatisfactory government policies. Barriers to geothermal power are related to information and awareness problems, a lack of R&D and industrial capability, a weak policy framework and the remoteness of geothermal sites. For advanced coal power technologies, the barriers are weak industrial capability, high cost and a lack of technical knowledge. The experts consulted in this study view changes in government actions as the key to overcoming the abovementioned barriers. They recommend investing more in R&D activities, improving R&D capacity through joint-venture schemes and reforming investment policy/legislation for the electric power industry as the most appropriate solutions.
    Keywords: analytical hierarchy process; renewables; energy efficient technologies.
    Date: 2010–01–07
  12. By: Suzette P. Galinato; Douglas L. Young; Craig S. Frear; Jonathan K. Yoder (School of Economic Sciences, Washington State University)
    Abstract: The study finds that Washington State’s field corn, sugar beet and canola production could satisfy only a small percentage of the State’s annual gasoline or diesel consumption. Linear programming projections for 2008 showed a relatively close match between projected and actual production. Projections for 2009-2011 showed no increase in the State’s capacity to increase biofuel crop feedstocks. In comparison to crop feedstocks, Washington’s total annual lignocellulosic biomass is abundant. However, only a fraction of the biomass could be converted to biofuel due to high costs of collection and processing, competing markets for some biomass, and limitations in current technology.
    Keywords: biofuels, biofuel feedstocks, canola, cellulosic inventories, grain corn, linear programming, Washington State
    JEL: C61 Q15 Q42
    Date: 2009–12
    Abstract: In many parts of rural India the use of wood for fuel is the cause of significant environmental and health problems. Efforts to help people switch to cleaner fuels have not been effective and fuelwood use remains high in the countryside. To help find a solution to this challenge, the study in the districts of Orissa has looked at the factors that influence fuelwood use amongst village people.
    Keywords: India, Orissa, rural, health problems, environmental, fuelwood, village people, forest degradation, indian, kerosene, family labour, government’s, household, districts, LPG
    Date: 2009
  14. By: Malcolm, Scott A.; Aillery, Marcel; Weinberg, Marca
    Abstract: The Energy Independence and Security Act (EISA) of 2007 established specifi c targets for the production of biofuel in the United States. Until advanced technologies become commercially viable, meeting these targets will increase demand for traditional agricultural commodities used to produce ethanol, resulting in land-use, production, and price changes throughout the farm sector. This report summarizes the estimated effects of meeting the EISA targets for 2015 on regional agricultural production and the environment. Meeting EISA targets for ethanol production is estimated to expand U.S. cropped acreage by nearly 5 million acres by 2015, an increase of 1.6 percent over what would otherwise be expected. Much of the growth comes from corn acreage, which increases by 3.5 percent over baseline projections. Water quality and soil carbon will also be affected, in some cases by greater percentages than suggested by changes in the amount of cropped land. The economic and environmental implications of displacing a portion of corn ethanol production with ethanol produced from crop residues are also estimated.
    Keywords: Biofuels, corn ethanol, regional crop mix, regional environmental effects, water quality, water use, cellulosic ethanol, crop residues, livestock, Regional Environment and Agriculture Programming (REAP) Model, renewable fuel standard, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies,
    Date: 2009–11
  15. By: Ley, Eduardo; Boccardo , Jessica
    Abstract: We apply the Parry-Small (2005) framework to asses whether the level taxation of motor fuel is broadly appropriate in a group of countries (OECD, BRICs and South Africa) accounting for more than 80 percent of world greenhouse gas (GHG) emissions. This paper deals with emissions from oil combustion in transport, which accounts for about 40 percent of CO2 emissions. In the benchmark specification, we find that six countries (accounting, in turn, for more than 40 percent of motor-fuel GHG world emissions) would be undertaxing motor fuel. We evaluate the sensitivity of the results to the values of the elasticities and externalities that we use. We find that varying the values of these parameters (within the level of uncertainty reasonably associated with them) significantly affects the results. This implies that, while informative, the results must be taken as indicative. Further analysis for a particular country must rely in a well-informed choice for the values of their country-specific parameters.
    Keywords: Fuel taxation, corrective taxation, climate change, greenhouse gas emissions
    JEL: H21 Q48 H87 H23 Q58
    Date: 2009–12–19
  16. By: Francesco Caselli; Guy Michaels
    Abstract: We use variation in oil output among Brazilian municipalities to investigate the effects of resourcewindfalls. We find muted effects of oil through market channels: offshore oil has no effect onmunicipal non-oil GDP or its composition, while onshore oil has only modest effects on non-oil GDPcomposition. However, oil abundance causes municipal revenues and reported spending on a range ofbudgetary items to increase, mainly as a result of royalties paid by Petrobras. Nevertheless, surveybasedmeasures of social transfers, public good provision, infrastructure, and household incomeincrease less (if at all) than one might expect given the increase in reported spending. To explain whyoil windfalls contribute little to local living standards, we use data from the Brazilian media andfederal police to document that very large oil output increases alleged instances of illegal activitiesassociated with mayors.
    Keywords: Brazil, corruption, Dutch disease, fiscal windfalls, natural resources and oil
    JEL: E62 H11 H40 H71 H72 H75 H76 O11 O13 O32 O33
    Date: 2009–12
  17. By: Rabah Arezki; Markus Bruckner
    Abstract: We examine the effects of oil rents on corruption and state stability exploiting the exogenous within-country variation of a new measure of oil rents for a panel of 31 oil-exporting countries during the period 1992 to 2005. We find that an increase in oil rents significantly increases corruption, significantly deteriorates political rights while at the same time leading to a significant improvement in civil liberties. We argue that these findings can be explained by the political elite having an incentive to extend civil liberties but reduce political rights in the presence of oil windfalls to evade redistribution and conflict. We support our argument documenting that there is a significant effect of oil rents on corruption in countries with a high share of state participation in oil production while no such link exists in countries where state participation in oil production is low.
    Keywords: Corruption , Economic models , Fiscal policy , Fiscal transparency , Governance , Oil exporting countries , Oil production , Oil revenues , Political economy , Public enterprises ,
    Date: 2009–12–04
  18. By: Anton Nakov (Banco de España); Galo Nuño (Banco de España)
    Abstract: Saudi Arabia Is The Largest Player In The World Oil Market. It Maintains Ample Spare Capacity, Restricts Investment In Developing Reserves, And Its Output Is Negatively Correlated With Other Opec Producers. While This Behavior Does Not F T Into The Perfect Competition Paradigm, We Show That It Can Be Rationalized As That Of A Dominant Producer With Competitive Fringe. We Build A Quantitative General Equilibrium Model Along These Lines Which Is Capable Of Matching The Historical Volatility Of The Oil Price, Competitive And Non-Competitive Oil Output, And Of Generating The Observed Comovement Among The Oil Price, Oil Quantities, And U.S. Gdp. We Use Our Framework To Answer Questions On Which Available Models Are Silent: (1) What Are The Proximate Determinants Of The Oil Price And How Do They Vary Over The Cycle? (2) How Large Are Oil Prof Ts And What Losses Do They Imply For Oil-Importers? (3) What Do Different Fundamental Shocks Imply For The Comovement Of Oil Prices And Gdp? (4) What Are The General Equilibrium Effects Of Taxes On Oil Consumption Or Oil Production? We F Nd, In Particular, That The Existence Of An Oil Production Distortion Does Not Necessarily Justify An Oil Consumption Tax Different From Zero.
    Keywords: Oil Price, Oil Shocks, Dominant F Rm, Competitive Fringe, Pigovian Tax.
    JEL: D43 E32 E62 Q43
    Date: 2009–12
  19. By: Roengchai Tansuchat (Faculty of Economics, Maejo University); Chia-Lin Chang (Department of Applied Economics, National Chung Hsing University); Michael McAleer (Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute)
    Abstract: The paper examines the performance of four multivariate volatility models, namely CCC, VARMA-GARCH, DCC and BEKK, for the crude oil spot and futures returns of two major benchmark international crude oil markets, Brent and WTI, to calculate optimal portfolio weights and optimal hedge ratios, and to suggest a crude oil hedge strategy. The empirical results show that the optimal portfolio weights of all multivariate volatility models for Brent suggest holding futures in larger proportions than spot. For WTI, however, DCC and BEKK suggest holding crude oil futures to spot, but CCC and VARMA-GARCH suggest holding crude oil spot to futures. In addition, the calculated optimal hedge ratios (OHRs) from each multivariate conditional volatility model give the time-varying hedge ratios, and recommend to short in crude oil futures with a high proportion of one dollar long in crude oil spot. Finally, the hedging effectiveness indicates that DCC (BEKK) is the best (worst) model for OHR calculation in terms of reducing the variance of the portfolio.
    Date: 2010–01
  20. By: Blackman, Allen (Resources for the Future); Osakwe, Rebecca; Alpizar, Francisco
    Abstract: Although fuel taxes are a practical means of curbing vehicular air pollution, congestion, and accidents in developing countries--all of which are typically major problems--they are often opposed on distributional grounds. Yet few studies have investigated fuel tax incidence in a developing country context. We use household survey data and income-outcome coefficients to analyze fuel tax incidence in Costa Rica. We find that the effect of a 10 percent fuel price hike through direct spending on gasoline would be progressive, its effect through spending on diesel--both directly and via bus transportation--would be regressive (mainly because poorer households rely heavily on buses), and its effect through spending on goods other than fuel and bus transportation would be relatively small, albeit regressive. Finally, we find that although the overall effect of a 10 percent fuel price hike through all types of direct and indirect spending would be slightly regressive, the magnitude of this combined effect would be modest. We conclude that distributional concerns need not rule out using fuel taxes to address pressing public health and safety problems, particularly if gasoline and diesel taxes can be differentiated.
    Keywords: fuel tax incidence, transportation, Costa Rica
    JEL: Q52 Q56 Q48 R48 H23
    Date: 2009–10–20
  21. By: Kleinbaum, Rob; McManus, Walter
    Abstract: The Automotive Industry Crisis of 2009 is the worst the industry has ever experienced. This paper helps resolve the debate on how much and fast it should change and how it should it respond to demands for increased fuel efficiency. Looking at the actions of successful corporate turnarounds, the lessons are very clear: implement broad, deep, fast change, replace the management team, and transform the culture. We modeled the impacts of different fuel economy standards on profitability and sales, using the most accepted estimates of all the key parameters, and conducted an extensive sensitivity analysis on the key parameters. The impact of higher fuel economy standards on industry profits is very clear: increasing fuel economy 30% to 50% (35 mpg to 40.5 mpg) would increase the Detroit 3’s gross profits by roughly $3 billion per year, and increase sales by the equivalent of two large assembly plants. The sensitivity analysis showed our findings are very robust. The overall risk and reward profile is very positive, with only a small chance of losing and a very large probability of gain.
    Keywords: Automotive Industry Crisis of 2009; business culture change; consumer demand; consumer value of fuel economy; costs of improving fuel economy; Detroit Three; direct cost of improving fuel economy; fuel economy standards; indirect costs; management; product portfolio; profits; scenarios; sensitivity analysis; turnaround
    JEL: L62 Q55 Q58
    Date: 2009–06
  22. By: Maria Nieswand; Astrid Cullmann; Anne Neumann
    Abstract: This paper provides an empirical demonstration for a practical approach of efficiency evaluation against the background of limited data availability in some regulated industries. Here, traditional DEA may result in a lack of discriminatory power when high numbers of variables but only limited observations are available. We apply PCA-DEA for radial efficiency measurement to US natural gas transmission companies in 2007. This allows us to reduce dimensions of the optimization problem while maintaining most of the variation in the original data. Our results suggest that the PCA-DEA methodology reduces the probability of over-estimation of the individual firm-specific performance. It also allows for a large number of original variables without substantially reducing the discriminatory power of the model.<br />
    Keywords: Efficiency analysis, DEA, PCA, company regulation, natural gas transmission
    JEL: C14 L51 L95
    Date: 2009
  23. By: Erdogdu, Erkan
    Abstract: In Turkey, natural gas consumption started at 0.5 bcm (billion cubic meters) in 1987 and reached approximately 35 bcm in 2007. Turkish natural gas usage is projected to further increase remarkably in coming years. In 2001, a reform process was started to create and strengthen a competitive natural gas market. However, the reform has not worked out as expected so far. The present article discusses the application of auctions in Turkish natural gas distribution zones. After presenting a short summary of current literature, natural gas utilization and recent developments in Turkish natural gas market, we draw attention to our main focus, namely city natural gas tenders. Having described the tenders, we present problems associated with them. In the end, we touch upon some regulatory issues and provide some suggestions for improvement.
    Keywords: Natural gas distribution; Auction; Turkey
    JEL: O13 Q4
    Date: 2009
  24. By: Erdogdu, Erkan
    Abstract: On average, energy demand of Turkey is mounting by 8% annually, one of the highest rates in the world. Among primary energy sources, natural gas is the fastest growing one in Turkey. Gas consumption started at 0.5 bcm (billion cubic meters) in 1987 and reached approximately 35 bcm in 2007. Turkish natural gas usage is projected to further increase remarkably in coming years. The present paper focuses the characteristics of this demand and estimates short and long-run price and income elasticities of sectoral natural gas demand in Turkey. The future growth in this demand is also forecasted using an ARIMA modelling and the results are compared with official projections. The paper reveals that natural gas demand elasticities are quite low, meaning that consumers do not respond possible abusive price increases by decreasing their demand or substituting natural gas with other energy sources. Since consumers are prone to monopoly abuse by incumbent, there is a need for market regulation in Turkish natural gas market. Based on forecasts obtained, it is clear that the current official projections do not over/under-estimate natural gas demand although past official projections highly overestimated it.
    Keywords: Turkish natural gas demand; Elasticity; ARIMA modelling
    JEL: O13 Q4
    Date: 2009
  25. By: Lyons, Seán; Murphy, Liam; Tol, Richard S. J.
    Abstract: We estimate Irish historical landfill quantities from 1960 -2008 and Irish methane emissions from 1968-2006. A model is constructed in which waste generation is a function of income, price of waste disposal and, household economies of scale. A transformation ratio of waste to methane is also included in the methane emissions model. Our results contrast significantly with the Irish Environmental Protection Agency's (EPA) figures due to the differences in the underlying assumptions. The EPA's waste generation and methane emission figures are larger than our estimates from the early 1990s onwards. Projections of the distance to target show that the EPA overestimates the required policy effort.
    Keywords: landfill/methane emissions/modelling
    Date: 2009–12
  26. By: S.J. Rubio (University of Valencia); J.R. García (University of Valencia); J.L. Hueso (University of Valencia)
    Abstract: The paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, the environmental quality affects positively not only to utility but also to production. However, cleaner technologies can be used in the economy whether a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low then the shadow price of a cleaner technology is low relative to the cost of developing it given by the marginal utility of consumption and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulation of capital with a decreasing environmental quality until the moment that pollution is great enough to make profitable the investment in R&D. After this turning point, if the new technologies are efficient enough, the economy can evolve along a balanced growth path with an increasing environmental quality. The result is that the optimal investment pattern supports an environmental Kuznets curve.
    Keywords: Neoclassical Growth Model, Endogenous Technological Progress, External Effects, Environmental Kuznets Curve
    JEL: O33 O41 Q55 Q56
    Date: 2009–12
  27. By: Xavier Pautrel (Institut d’Economie et de Management de Nantes-IAE, Université de Nantes)
    Abstract: In a two-period overlapping generations model, this paper demonstrates that the relationship between the environmental taxation and the economic activity (level- and growth-output) becomes inverted-U shaped, when the detrimental impact of pollution on health and the private decision of each working-age agent to improve her health are taken into account. Especially, a tighter environmental tax is more likely to promote (rather than to harm) output-level and –growth when health is very sensitive to pollution, the weight of health in preferences is high, the polluting capacity of the production technology is high and the rate of natural purification of pollutants is low. The inverted-U shaped relationship between the environmental tax and the economic activity is due to a positive effect arising from the competition for resources between the final output sector and the health-enhancing activities that offsets the conventional detrimental “drag-down effect” for low values of the environmental tax. We also demonstrate that the link between the environmental tax and the lifetime welfare is inverted-U shaped as well. Finally, we investigate the social optimum and the determinants of the optimal environmental tax.
    Keywords: Growth, Environment, Health, Overlapping Generations
    JEL: Q5
    Date: 2009–12
  28. By: Dorothée Brécard (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: We examine the impact of a “green network effect” in a market characterized by consumers' environmental awareness and competition between firms in both environmental quality and product prices. The unique aspect of this model comes from the assumption that an increase in the number of consumers of the green product increases the satisfaction of each green consumer. We show that this externality raises the consumption of the green product, reduces the environmental quality of products and improves welfare, even if it doesn't affect the overall level of pollution. The externality correction requires using three optimal fiscal policies: an ad valorem tax on products, an emission tax, and a subsidy of the green purchase. A second-best optimum can also be reached through the green taxation.
    Date: 2009–12–23
  29. By: Diane-Laure Arjaliès (ESSEC Business School - ESSEC Business School, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Jean-Pierre Ponssard (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: investors and companies are increasingly aware that climate change and its associated needs for reducing CO2 emissions are likely to impact structurally many areas of the economy. This paper offers a contribution to understand these impacts on companies' strategy, by studying management systems. A typology is introduced based upon a two stage model. At stage one, the firm becomes aware of the risk and CO2 is a compliance issue. At stage two, the firm is involved in a more global re-assessment of its business portfolio including its relationship with suppliers and clients. The construction is based on three case studies: DuPont (chemicals), Lafarge (building materials) and Unilever (consumer goods). The implications of the analysis for investors are drawn.
    Keywords: Corporate Social Responsibility – CO2 emissions – Management Systems – Strategy
    Date: 2010
  30. By: Huifang Tian (University of Western Ontario); John Whalley (University of Western Ontario)
    Abstract: Large population / rapidly growing economies such as China and India have argued that in the upcoming UNFCCC negotiations in Copenhagen, any emission reduction targets they take on should be based on their intensity of emissions (emissions/$GDP) on a target date not the level of emissions. They argue that this will allow room for their continued high growth, and level commitments in the presence of sharply differential growth between OECD and non-OECD economies represent asymmetric and unacceptable arrangements. Much of the policy literature agrees with this position, also arguing that while there is equivalence between commitments if growth rates are certain, where growth rates are uncertain equivalence breaks down. However, no explicit models or experimental design are used to support this claim. Here we use a modeling framework in which countries face a business as usual (BAU) growth profile under no mitigation, and can mitigate (reduce consumption) and lower temperature change but with a utility loss. International trade enters through trade in country differentiated goods, and the impact of mitigation on country welfare depends critically on the assumed severity of climate related damage. We then consider cases where country growth rates are uncertain, and compare the impacts of levels versus intensity commitments, with the latter made equivalent in the sense that expected emissions are the same. There are different senses of this equivalence; global equivalence with differing country impacts, or strict country by country equivalence. Under intensity commitments there is more variation in both consumption and emissions than is the case with level commitments, and we show cases where level commitments are preferred to intensity commitments by all countries. Whether this is the case also depends upon how growth rate uncertainty is specified. We are also able to consider packages of mixed level and intensity commitments by country which might be the outcome of UNFCCC negotiations. Outcomes can thus be opposite to prevailing opinion, but it depends on how the equivalent targets are specified.
    Date: 2009
  31. By: Nhan T. Nguyen (Centre International de Recherche suur l'Environnement et le Développement (CIRED), France); Minh Ha-Duong (Centre International de Recherche suur l'Environnement et le Développement (CIRED), France)
    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 $/t CO2, 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.
    Date: 2009
  32. By: Massimo Tavoni (Fondazione Eni Enrico Mattei); Bob van der Zwaan (Energy research Centre of the Netherlands and Lenfest Center for Sustainable Energy at Columbia University)
    Abstract: In this paper we analyze the relative importance and mutual behavior of two competing base-load electricity generation options that each are capable of contributing significantly to the abatement of global CO2 emissions: nuclear energy and coal-based power production complemented with CO2 capture and storage (CCS). We also investigate how, in scenarios from an integrated assessment model that simulates the economics of a climate-constrained world, the prospects for nuclear energy would change if exogenous limitations on the spread of nuclear technology were relaxed. Using the climate change economics model WITCH we find that until 2050 the resulting growth rates of nuclear electricity generation capacity become comparable to historical rates observed during the 1980s. Given that nuclear energy continues to face serious challenges and contention, we inspect how extensive the improvements of coal-based power equipped with CCS technology would need to be if our model is to significantly scale down the construction of new nuclear power plants.
    Keywords: Economic Competition, Electricity Sector, Nuclear Power, Coal Power, CCS, Renewables, Climate Policy
    JEL: D8 D9 H0 O3 O4 Q4 Q5
    Date: 2009–11
  33. By: Richard G. Newell
    Abstract: The international discussion about global climate change now revolves around what the necessary set of policies and technologies will be needed to realize reduction goals. Stabilizing atmospheric carbon dioxide (CO2) concentrations at 450 to 550 parts per million will require policy changes along with innovation and large-scale adoption of GHG-reducing technologies throughout the global energy system. Innovations will need to be supported by international cooperation and behavioral changes to further realize the benefits of technological advances. Much discussion has therefore focused on policies that target technology directly, including research and development (R&D) activities and technology-specific incentives, as well as policies and agreements that increase diffusion and adoption. This paper reviews the recent literature on trends and prospects for innovation in climate change mitigation, to identify the most important international and domestic actions necessary to technologically alter energy systems in a direction that can achieve GHG stabilization targets while also meeting other societal goals. It provides an overview of key technical issues associated with the development, diffusion, and adoption of technologies that mitigate climate change. It examines the role of environment and innovation policy measures to encourage innovation, and it outlines the conditions that trigger these advances. The review highlights that establishing a GHG emission price is essential from a technology perspective. Such a price should be coupled with public R&D support. The review discusses policy features that impact on environmentally oriented R&D, the diffusion of environmental innovations, their deployment in developing countries. In particular, the paper outlines the positive role of international technology-oriented agreements as part of the architecture of an international climate change policy.<BR>Le débat international au sujet du changement climatique porte maintenant sur les politiques et les technologies qui devront être mises en œuvre pour atteindre les objectifs de réduction des émissions. Pour stabiliser les émissions de dioxyde de carbone dans l’atmosphère entre 450 et 550 particules par million, il faut de nouvelles politiques mais aussi des innovations et l’utilisation à grande échelle, dans l’ensemble du système énergétique global, de technologies qui réduisent les gaz à effet de serre. L’innovation devra être encouragée par la coopération internationale et des changements de comportements, pour que les bénéfices des avancées technologiques se matérialisent. Aussi, une part importante du débat a porté sur les politiques qui soutiennent directement le développement technologique, notamment les activités de recherche et développement (R&D) et les incitations spécifiques, mais aussi sur les politiques et les arrangements qui encouragent la diffusion et l’utilisation des technologies. Ce document analyse la littérature récente sur les tendances récentes et à venir relatives à l’innovation pour lutter contre le changement climatique. L’objectif est d’identifier les actions prioritaires, au niveau national et international, pour changer les systèmes énergétiques d’un point de vue technologique, selon une trajectoire qui permettra d’atteindre les objectifs de stabilisation des gaz à effet de serre tout en atteignant aussi d’autres objectifs sociétaux. Le papier présente une synthèse des principales questions techniques liées au développement, à la diffusion et à l’utilisation des technologies qui contribuent à la lutte contre le changement climatique. Il analyse le rôle des politiques d’environnement et d’innovation pour soutenir l’innovation et il met en évidence les conditions qui stimulent le progrès technologique. L’analyse souligne que, d’un point de vue technologique, il est essentiel de fixer un prix pour les émissions de gaz à effet de serre. Ce prix doit être accompagné d’une politique de soutien à la R&D. Le papier présente les attributs des politiques qui ont un impact sur la R&D liée à l’environnement, sur la diffusion des innovations environnementales et leur utilisation dans les pays en développement. En particulier, le papier souligne le rôle positif des accords internationaux qui portent sur les technologies dans le cadre de l’ensemble des politiques internationales de lutte contre le changement climatique.
    Keywords: climate change, environment & development, government policy, green technologies, sustainable development
    JEL: O33 O34 O38 Q55 Q58
    Date: 2009–12–17
  34. By: Brown, Tristan R.; Elobeid, Amani; Dumortier, Jerome; Hayes, Dermot J.
    Abstract: Three recent reports have estimated the market impacts of domestic offset programs, including afforestation, contained in the American Clean Energy and Security Act (ACES). The magnitude of these estimated impacts motivates this study. We show that with carbon prices as low as $30 per metric ton, a significant number of U.S. crop acres would be used to grow trees and this would cause price increases for some U.S. commodities. Although we present only one carbon price scenario, the modeling approach that we use suggests that the acreage and price impacts we describe here would increase at higher carbon prices.
    Keywords: afforestation, agricultural sector, commodity prices, land-use change.
    Date: 2010–01–11
  35. By: Tristan Brown; Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Jerome Dumortier (Center for Agricultural and Rural Development (CARD)); Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: Three recent reports have estimated the market impacts of domestic offset programs, including afforestation, contained in the American Clean Energy and Security Act (ACES). The magnitude of these estimated impacts motivates this study. We show that with carbon prices as low as $30 per metric ton, a significant number of U.S. crop acres would be used to grow trees and this would cause price increases for some U.S. commodities. Although we present only one carbon price scenario, the modeling approach that we use suggests that the acreage and price impacts we describe here would increase at higher carbon prices.
    Keywords: afforestation, agricultural sector, commodity prices, land-use change.
    Date: 2010–01
  36. By: Kerstin Güssow; Alexander Proelss; Andreas Oschlies; Katrin Rehdanz; Wilfried Rickels
    Abstract: Despite large uncertainties in the fertilization efficiency, natural iron fertilization studies and some of the purposeful iron enrichment studies have demonstrated that Southern Ocean iron fertilization can lead to a significant export of carbon from the sea surface to the ocean interior. From an economic perspective the potential of OIF is far from negligible in relation to other abatement options. Comparing the range of cost estimates to the range of estimates for forestation projects they are in the same order of magnitude, but OIF could provide more carbon credits even if high discount rates are used to account for potential leakage and non-permanence. However, the uncertainty about undesired adverse effects of purposeful iron fertilization on marine ecosystems and biogeochemistry has led to attempts to ban commercial and, to some extent, scientific experiments aimed at a better understanding of the processes involved, effectively precluding further consideration of this mitigation option. As regards the perspective of public international law, the pertinent agreements dealing with the protection of the marine environment indicate that OIF is to be considered as lawful if and to the extent to which it represents legitimate scientific research. In this respect, the precautionary principle can be used to balance the risks arising out of scientific OIF activities for the marine environment with the potential advantages relevant to the objectives of the climate change regime. As scientific OIF experiments involve only comparatively small negative impacts within a limited marine area, further scientific research must be permitted to explore the carbon sequestration potential of OIF in order to either reject this concept or integrate it into the flexible mechanisms contained in the Kyoto Protocol
    Keywords: climate change, geoengineering, ocean iron fertilization, international carbon market, public, international law, precautionary principle
    JEL: K33 Q51 Q54 Q56
    Date: 2009–12
  37. By: Wilfried Rickels; Katrin Rehdanz; Andreas Oschlies
    Abstract: Diminishing emission budgets and increasing risks of catastrophic damages from climate change require analyses of rapid response options including geoengineering options such as ocean iron fertilization (OIF). To decide whether or not OIF might be such an option an assessment of its potential as an abatement option as well as its possible side effects is required. To explore the potential of OIF knowledge on the change of carbon stocks over time is needed. However, economic aspects including accounting of carbon credits need to be considered as well. In our analysis we use data from OIF modeling experiments for different years and analyze how many carbon credits would be generated and could be used for compliance. The amount of credit varies with the accounting method applied. Applying an accounting method which measures the net effect of OIF for the duration of 100 years leads to an annual carbon uptake of 0.56 to 1.69 GtC. For a shorter fertilization period, e.g. ten years the upper range increases to 2.57 GtC per year. Offsets due to other GHGs, especially N2O, as well as operational carbon emissions can be addressed by a discount factor. Considering all experiments and all accounting methods we find a maximum discount factor of 15 percent and an average value of 9 percent. From an economic as well as from an environmental perspective issuing temporary carbon credits which have to be replaced in the next commitment period seems most appropriate for short-term OIF and would provide the largest amount of credits at an early stage. This is equivalent to the existing tCER regulation under the Kyoto Protocol.
    Keywords: climate change, ocean iron fertilization, permanence, carbon accounting
    JEL: Q51 Q54 Q56
    Date: 2009–12
  38. By: Wilfried Rickels; Katrin Rehdanz; Andreas Oschlies
    Abstract: To stay within the 2°C temperature increase target for climate change calls for ambitious emission reduction targets already for the 2012-2020 compliance period. Cost-efficiency is a crucial criterion for the enforcement of such ambitious targets, requiring analyses of all possible abatement options. Among others, enhancing the oceanic carbon sink by ocean iron fertilization (OIF) could be such an option but is currently not seriously considered due to its potentially adverse side effects. In our analysis we consider short-term large-scale OIF modeling experiments for a Post-Kyoto compliance problem to assess the economic prospects of OIF. Our analysis reveals that the critical unit costs per net ton of CO2 sequestered by OIF are in a range of 21.9 to 27.7 USD (price level 2000) assuming that the current limitations regarding the use of carbon credits generated in low cost countries and from forestation is completely relaxed. The critical unit costs are defined as those that would make an emitter indifferent between various abatement options. We are also able to show that already seven years of OIF in the area of 30° south provide the same amount of credits equivalent to a global forestation project for the duration of 20 years. Over all, our results indicate that OIF should be considered as an abatement option, but, further research, especially on adverse side effects, is needed
    Keywords: climate change, sink enhancement, ocean iron fertilization, CO2 market, emission trading
    JEL: Q52 Q54
    Date: 2009–12
  39. By: Palmer, Karen (Resources for the Future); Burtraw, Dallas (Resources for the Future); Paul, Anthony (Resources for the Future)
    Abstract: The regulation of greenhouse gas emissions from the electricity sector within a cap-and-trade system poses significant policy questions about how to allocate tradable emission allowances. Allocation conveys tremendous value and can have efficiency consequences. This research uses simulation modeling for the electricity sector to examine different approaches to allocation under a cap-and-trade program in California. The decision affects prices and other aspects of the electricity sector, as well as implications for the overall cost of climate policy. An important issue is the opportunity for emission reductions in California to be offset by emission increases in neighboring regions that supply electricity to the state. The amount of emission leakage (i.e. an increase in CO2 emissions outside of California as a result of the program) varies with the regulatory design of the program.
    Keywords: cap-and-trade, electricity generation, electricity sector, emissions, regulation, governance, allocation, California
    JEL: Q2 Q25 Q4 L94
    Date: 2009–10–07
  40. By: Burtraw, Dallas (Resources for the Future); Szambelan, Sarah Jo
    Abstract: The U.S. Clean Air Act Amendments of 1990 initiated the first large experiment in the use of market-based regulation to control environmental problems with the introduction of an emissions trading program for sulfur dioxide emissions. Later that decade the second large trading program began for control of nitrogen oxide emissions. Although these programs are widely viewed as successful, their development and the emergence of associated environmental markets took various turns that provide lessons for the development of new markets, including markets for greenhouse gas emissions. This paper reviews the history of these programs and provides a glimpse of their future given the introduction of new regulations affecting multiple pollutants and given the expected implementation of climate policy.
    Keywords: market-based regulation, Clean Air Act, electricity generation, air pollution, sulfur dioxide, nitrogen oxides
    JEL: H23 Q25 Q28 D78
    Date: 2009–10–15
  41. By: Last Name, First Name (Resources for the Future)
    Abstract: The introduction of a price on carbon dioxide will have important effects on the U.S. economy, and especially important effects on the electricity sector, which currently accounts for about 40 percent of carbon dioxide emissions. This paper examines alternative approaches to the distribution of allowance value to the sector, including free allocation to consumers through electricity and natural gas local distribution companies (LDCs). Recent proposals in the U.S. Congress, including H.R. 2454, have suggested this option as a way to address impacts on consumers and potential regional inequities. We compare allocation to electricity LDCs with a system in which allowances are auctioned and revenues returned to households as a per capita dividend. We evaluate the outcomes under alternative assumptions about how LDCs, which are regulated entities, pass through the allowance value to final residential, commercial, and industrial customers. Our results show that the LDC approach raises the price of allowances and imposes greater costs on households than the per capita dividend option. We also evaluate a more complete characterization of H.R. 2454 and show that an incremental reform to that bill would greatly reduce costs and have more balanced impacts across households in different income groups and regions.
    Keywords: cap and trade, allocation, distributional effects, cost burden, equity, regulation, local distribution companies
    JEL: H22 H23 Q52 Q54
    Date: 2009–12–11
  42. By: Peter John Wood (The Australian National University); Frank Jotzo (The Australian National University)
    Abstract: Price floors in greenhouse gas emissions trading schemes can have advantages for technological innovation, price volatility, and management of cost uncertainty, but implementation has potential pitfalls. We argue that the best mechanism for implementing a price floor is to have firms pay an extra fee or tax. This has budgetary advantages and is more compatible with international permit trading than alternative approaches that dominate the academic and policy debate. The fee approach can also be used to implement more general hybrid approaches to emissions pricing.
    Keywords: Price Floor, Price Ceiling, Carbon Tax, Emissions Trading, Carbon Pricing, Price and Quantity Controls, Waxman-Markey Bill
    JEL: Q58
    Date: 2009–12
  43. By: Yan Dong (University of Western Ontario); John Whalley (University of Western Ontario)
    Abstract: This paper discusses the size of impact of carbon motivated border tax adjustments on world trade. We report numerical simulation results which suggest that impacts on welfare, trade, and emissions will likely be small. This is because proposed measures use carbon emissions in the importing country in producing goods similar to imports rather than carbon content in calculating the size of barriers. Moreover, because border adjustments involve both tariffs and export rebates, it is the differences in emissions intensity across sector rather than emissions level which matters. Where there is no difference in emissions intensities across sectors, Lerner symmetry holds for the border adjustment and no relative effects occur. In our numerical simulation analyses border tax adjustments accompany carbon emission reduction commitments made either unilaterally , or as part of a global treaty and to be applied against non signatories. We use a four-region (US, EU, China, ROW) general equilibrium structure which captures energy trade and has endogenously determined energy supply so that global emissions can change with policy changes. We calibrate our model to 2006 data and analyze the potential impacts of both EU and US carbon pricing at various levels, either along with or without carbon motivated BTAs policies on welfare, emissions, trade flows and production. Results indicate only small impacts of these measures on global emissions, trade and welfare, but the signs of effects are as expected. BTAs alleviate leakage effects as expected. In trade impacts, compared with no BTAs, BTAs reduce imports of committing countries, and increase imports by other countries. EU and US BTAs against China reduce exports by China. With BTAs, the value of production in the country with carbon reduction measures are introduced increases, and other country’s production decreases compared with the case of no BTAs. With the contraction of world trade flows caused by the financial crisis, carbon motivated BTAs offer a prospect of a compounding effect in a world which is going protectionist and decarbonized at the same time, but the added effects of BTAs seems small.
    Date: 2009
  44. By: Julien Chevallier (Imperial College London); Benoît Sévi (University of Angers (GRANEM) and LEMNA)
    Abstract: The recent implementation of the EU Emissions Trading Scheme (EU ETS) in January 2005 created new financial risks for emitting firms. To deal with these risks, options are traded since October 2006. Because the EU ETS is a new market, the relevant underlying model for option pricing is still a controversial issue. This article improves our understanding of this issue by characterizing the conditional and unconditional distributions of the realized volatility for the 2008 futures contract in the European Climate Exchange (ECX), which is valid during Phase II (2008-2012) of the EU ETS. The realized volatility measures from naive, kernel-based and subsampling estimators are used to obtain inferences about the distributional and dynamic properties of the ECX emissions futures volatility. The distribution of the daily realized volatility in logarithmic form is shown to be close to normal. The mixture-of-distributions hypothesis is strongly rejected, as the returns standardized using daily measures of volatility clearly departs from normality. A simplified HAR-RV model (Corsi, 2009) with only a weekly component, which reproduces long memory properties of the series, is then used to model the volatility dynamics. Finally, the predictive accuracy of the HAR-RV model is tested against GARCH specifications using one-step-ahead forecasts, which confirms the HAR-RV superior ability. Our conclusions indicate that (i) the standard Brownian motion is not an adequate tool for option pricing in the EU ETS, and (ii) a jump component should be included in the stochastic process to price options, thus providing more efficient tools for risk-management activities.
    Keywords: CO2 Price, Realized Volatility, HAR-RV, GARCH, Futures Trading, Emissions Markets, EU ETS, Intraday data, Forecasting
    JEL: C5 G1 Q4
    Date: 2009–12
  45. By: Fischer, Carolyn (Resources for the Future); Springborn, Michael R.
    Abstract: For reducing greenhouse gas emissions, intensity targets are attracting interest as a flexible mechanism that would better allow for economic growth than emissions caps. For the same expected emissions, however, the economic responses to unexpected productivity shocks differ. Using a real business cycle model, we find that a cap dampens the effects of productivity shocks in the economy. An emissions tax leads to the same expected outcomes as a cap but with greater volatility. Certainty-equivalent intensity targets maintain higher levels of labor, capital, and output than other policies, with lower expected costs and no more volatility than with no policy.
    Keywords: emissions tax, cap-and-trade, intensity target, business cycle
    JEL: Q2 Q43 Q52 H2 E32
    Date: 2009–11–10
  46. By: Kousky, Carolyn (Resources for the Future); Rostapshova, Olga; Toman, Michael; Zeckhauser, Richard
    Abstract: There is a low but uncertain probability that climate change could trigger “mega-catastrophes,” severe and at least partly irreversible adverse effects across broad regions. This paper first discusses the state of current knowledge and the defining characteristics of potential climate change mega-catastrophes. While some of these characteristics present difficulties for using standard rational choice methods to evaluate response options, there is still a need to balance the benefits and costs of different possible responses with appropriate attention to the uncertainties. To that end, we present a qualitative analysis of three options for mitigating the risk of climate mega-catastrophes—drastic abatement of greenhouse gas missions, development and implementation of geoengineering, and large-scale ex ante adaptation— against the criteria of efficacy, cost, robustness, and flexibility. We discuss the composition of a sound portfolio of initial investments in reducing the risk of climate change mega-catastrophes.
    Keywords: climate change, catastrophe, risk, decisionmaking under uncertainty
    JEL: D81 Q54
    Date: 2009–11–17
  47. By: Suzi Kerr (Motu Economic and Public Policy Research); Wei Zhang (Motu Economic and Public Policy Research)
    Abstract: When agricultural emissions are included in the New Zealand Emission Trading System (ETS) the economics of farming will be significantly altered. Under the legislation current in October 2009, in the early years of the system the agricultural sector as a whole would have received NZ units equivalent to 90% of 2005 emissions to ease the transition. Amendments to the Bill passed in November have delayed the start date from 2013 to 2015 and extended the protection even further. This paper addresses one of the key issues for making an agricultural emissions trading system a success: how to use the allocation of NZ units to achieve equitable and acceptable cost sharing and a smoother transition. We first discuss the potential motivations for free allocation and the two extreme potential allocation options that could be associated with the two key motivations. The option finally chosen is likely to be somewhere between these two extremes. Empirical studies can inform assessment of options. Previous empirical studies have addressed a variety of questions, including what the economic impact of the system is and on whom, how much leakage is there likely to be, and what might be the adjustment costs. We discuss each of these, comparing different existing studies and addressing some current gaps in our understanding and knowledge with new empirical work on farm level impacts and on likely responses to the ETS. We conclude by laying out some key options for allocation design and drawing links between these and the empirical material.
    Keywords: New Zealand, emission trading, agriculture, free allocation, trade exposure
    JEL: Q12 Q52 Q54 Q58
    Date: 2009
  48. By: Kousky, Carolyn (Resources for the Future); Cooke, Roger M. (Resources for the Future)
    Abstract: Recent events in the financial and insurance markets, as well as the looming challenges of a globally changing climate point to the need to re-think the ways in which we measure and manage catastrophic and dependent risks. Management can only be as good as our measurement tools. To that end, this paper outlines detection, measurement, and analysis strategies for fat-tailed risks, tail dependent risks, and risks characterized by micro-correlations. A simple model of insurance demand and supply is used to illustrate the difficulties in insuring risks characterized by these phenomena. Policy implications are discussed.
    Keywords: risk, fat tails, tail dependence, micro-correlations, insurance, natural disasters
    JEL: Q54 G22 C02
    Date: 2009–11–09
  49. By: Quentin Grafton (Crawford School of Business and Government, College of Asia and Pacific, Australian National University)
    Abstract: This paper responds to the challenge of how and when to adapt marine capture fisheries to climate change by: (1) providing a set of fisheries policy options to climate change; (2) developing a risk and vulnerability assessment and management decision-making framework for adaptation; and (3) describing the possible strategies and tactics for ex ante and ex post climate adaptation in the marine environment. Its contributions include: (1) a discussion of how management objectives and instruments influence resilience and adaptation; (2) a decision-making process to assess vulnerabilities to climate change and to manage adaptation responses; (3) an inter-temporal framework to assist decision-makers when to adapt; (4) a risk and simulation approach to confront the uncertainties of the possible losses due to climate change and the net benefits of adaptation; (5) an explanation of how adaptive co-management can promote flexible adaptation responses and also strengthen adaptation capacity; and (6) a selection of possible ‘win-win’ management actions.
    Keywords: climate adaptation, climate change, fisheries
    Date: 2009–11
  50. By: Deressa, Temesgen T.; Hassan, Rashid M.; Ringler, Claudia
    Keywords: Vulnerability to climate extremes, Nile Basin of Ethiopia, Minimum daily income, Climate change,
    Date: 2009
  51. By: Leo Dobes (Crawford School of Economics and Government, College of Asia and Pacific, Australian National University)
    Abstract: Increasing attention is being given to adaptation of natural and human systems to climate change. The academic literature covers a wide spectrum of perspectives. Policy considerations, on the other hand, are driven largely by techno-scientific considerations, including in particular a risk-management approach. However, the inherent uncertainties of climate change mean that conventional risk-management approaches are inappropriate because the risks cannot be quantified. Economic theory, in the form of ‘real options’, offers a conceptual alternative for specifying least-cost adaptation strategies. But little, if any, work has been undertaken to identify individuals’ preferences and priorities, a necessary precondition to estimating the benefits of adaptation measures. It is therefore proposed to identify and compare the priorities and preferences of planners, communities and individuals as a first step towards estimating individuals’ willingness to pay for adaptation measures.
    Date: 2009–12
  52. By: Matsumoto, Tomoya; Yamano, Takashi
    Abstract: This paper investigates the reasons for the low application of external fertilizers on farms in Kenya and Uganda. The analysis uses a large panel of household data with rich soil fertility data at the plot level. The authors control for maize seed selection and household effects by using a fixed-effects semi-parametric endogenous switching model. The results suggest that Kenyan maize farmers have applied inorganic fertilizer at the optimal level, corresponding to the high nitrogen-maize relative price, in one of the two survey years and also responded to the price change over time. In Uganda, even the low application of inorganic fertilizer is not profitable because of its high relative price. The authors conclude that policies that reduce the relative price of fertilizer could be effective in both countries, while the efficacy of policies based on improving farmers'knowledge about fertilizer use will be limited as long as the relative price of fertilizer remains high.
    Keywords: Crops&Crop Management Systems,Climate Change and Agriculture,Climate Change Mitigation and Green House Gases,Fertilizers,Food Security
    Date: 2009–12–01
  53. By: Horacio Valencia (Institute for Advanced Development Studies); Lykke E. Andersen (Institute for Advanced Development Studies)
    Abstract: Bolivia es un país heterogéneo en todos los aspectos, incluyendo los aspectos climáticos, geográficos, culturales y económicos. Esto significa que los impactos del cambio climático también serán muy heterogéneos, brindando beneficios a unos y perjudicando a otros. Para poder captar toda esta heterogeneidad, el presente documento trabaja a nivel municipal, ya que dentro de cada municipio, las condiciones son mucho más homogéneas. El cambio climático afecta el sector agropecuario por cuatro vías principales: 1) Por cambios en temperatura, 2) por cambios en precipitación, 3) por cambios en la concentración de CO2 en el aire, y 4) por eventos extremos. El impacto de cada uno de estos efectos varía entre municipios. El modelo climático PRECIS prevé aumentos en temperaturas de 3.4 - 5.1ºC en el escenario A2 y de 2.4 - 3.7ºC en el escenario B2, con mayores aumentos en el norte del país y en el Altiplano. El impacto de estos aumentos dependerá del punto de partida, ya que los lugares actualmente fríos (el Altiplano) se beneficiarían por mayores temperaturas, mientras que áreas actualmente calientes (las tierras bajas) se verían perjudicados por temperaturas aún más altas. Los impactos de los cambios en precipitación generalmente son mayores que los impactos de cambios en temperatura, parcialmente porque los rendimientos agropecuarios son más sensibles a variaciones en precipitación, y parcialmente porque los cambios en precipitación previstos por el modelo PRECIS son mucho más grandes que los cambios en temperatura. Para el escenario A2, el modelo prevé un leve aumento en precipitación a nivel nacional (+4%), pero con enormes diferencias entre municipios (entre -50% y +51%). Para el escenario B2, el modelo prevé una leve disminución a nivel nacional (-1%), pero también con enormes diferencias entre municipios (entre -51% y +43%). En general, las áreas más secas se volverán aún más secas y las áreas más húmedas recibirán aún más precipitación, pero con excepciones importantes, sobre todo en Oruro y Santa Cruz donde se prevé aumentos en precipitación en áreas ahora relativamente secas. Dado que los niveles de precipitación tienden a volverse más extremos, esto causaría daños a las actividades agropecuarias en la mayoría de municipios (excepto en Oruro y Santa Cruz). La fertilización de CO2 tendría un efecto positivo en todas las áreas, pero más para cultivos C3, como soya, y menos para cultivos C4, como maíz. Para 2100 se espera aumentos en rendimientos por fertilización de CO2 de 20-27% en el escenario A2 y de 12-18% en el escenario B2. Estos aumentos son suficientes para convertir las pérdidas por cambios en temperatura y precipitación a ganancias totales en la gran mayoridad de municipios. Las excepciones son los municipios de Beni y Pando, donde el efecto negativo de los grandes aumentos en temperatura predominan, y en Chuquisaca, donde las grandes reducciones en precipitación predominan. Finalmente incluimos el efecto adverso de eventos extremos (sobre todo precipitaciones fuertes) cuya frecuencia aumentará sustancialmente de acuerdo al modelo PRECIS. En total, a nivel nacional, estos 4 componentes del cambio climático tendrían un efecto positivo sobre los ingresos rurales en 2100 de 4,8% en el escenario A2 y 1,5% en el escenario B2. El departamento que más se beneficiaría del cambio climático es Oruro, que se volvería menos frío y menos árido que ahora. En cambio, el departamento que más perdería sería Beni, que se volvería aún más caliente, más húmedo y con mayores perdidas como consecuencia de más inundaciones. Al nivel nacional, estos impactos corresponden a un efecto positivo del cambio climático en 2100 sobre el sector agropecuario de 0,51% y 0,15% del PIB, respectivamente. Estos porcentajes aumentarían casi linealmente desde 0% en 2000. Sin embargo, hay que interpretar estos datos con mucha precaución. Lo que más determinan los resultados son los cambios en precipitación previstos por el modelo PRECIS, y ellos tienen bastante incertidumbre.
    Keywords: Cambio Climático, Bolivia, Impactos, Agricultura
    JEL: Q54 Q56
    Date: 2009–12
  54. By: Lykke E. Andersen (Institute for Advanced Development Studies)
    Abstract: Bolivia tiene un nivel de biodiversidad extremadamente alto y pocos países del mundo tienen mayor diversidad de ecosistemas que Bolivia, cuyas características geográficas varían en altura (entre 200 y 6000 m.s.n.m), precipitación (entre 200 y 5000 mm/año), temperaturas (glacial hasta tropical) y topografía, y por lo tanto en tipos de vegetación. Los principales tipos de ecosistemas son representados en 22 diferentes áreas protegidas (APs) nacionales, y además existen numerosas APs departamentales o locales. Juntas, las APs cubren alrededor de 16% del territorio nacional. Sin embargo, esta diversidad se encuentra amenazada por el cambio climático y por la expansión de la frontera agrícola. En esto estudio se ha modelado la relación entre factores climáticos (temperatura promedio, precipitación promedio, variabilidad de temperaturas, variabilidad de precipitación) y nivel de biodiversidad, y se ha usado el modelo estimado para simular los efectos del cambio climático previsto por el modelo PRECIS hasta 2100. La modelación se ha hecho a nivel municipal para poder tomar en cuenta la gran heterogeneidad geográfica de Bolivia. El estudio también toma en cuenta que se espera un fuerte proceso de deforestación, cuyos efectos son mucho más dramáticos e inmediatos que los lentos procesos de cambio climático. Los resultados muestran que los cambios climáticos previstos por el modelo PRECIS hasta el año 2100 podrían tener impactos muy fuertes para la biodiversidad en Bolivia. Especialmente en el Altiplano, donde se prevé un acelerado proceso de desertificación debido a la reducción de precipitación y el aumento en variabilidad de temperaturas sugeridas por el modelo PRECIS. En las tierras bajas, el cambio climático no es la mayor amenaza para la biodiversidad, sino el avance de la frontera agrícola. En el escenario base (sin cambio climático) se puede prever la deforestación de 33 millones de hectáreas durante el siglo XXI, lo que deja solamente una cuarta parte del bosque original. En las áreas secas del Chaco y de la Chiquitanía en el departamento de Santa Cruz, los modelos indican un aumento en la precipitación, lo que podría tener un efecto positivo sobre la biodiversidad, si no se convierten las áreas a campos agropecuarios primero. En total, entre los procesos de deforestación y cambio climático, el nivel promedio de biodiversidad en cada lugar, se reduciría a solamente 40% del nivel original, de acuerdo con las estimaciones realizadas. Esto no significa que el 60% de las especies se extingan, ya que muchas especies probablemente sobrevivirán en áreas protegidas, pero significa que, en promedio, habrá sustancialmente menos diversidad de especies en un área dada. A nivel nacional, los procesos de deforestación son responsables del 95% de la reducción en el nivel de biodiversidad, mientras que el cambio climático solamente es responsable de 5%. Sin embargo, en las tierras altas, donde no hay deforestación significativa, el cambio climático sería responsable del 100% de las fuertes reducciones en biodiversidad previstas. Mientras que la gran biodiversidad y las ecosistemas únicas de Bolivia tienen un valor de existencia incuantificable, la biodiversidad también brindan beneficios tangibles a los comunidades locales, y estos beneficios sí se puede cuantificar, aunque de manera cruda. Por ejemplo, en muchas áreas rurales, la caza y pesca contribuye de manera importante al consumo de alimentos, y la población usa la vegetación local para materiales de construcción, medicina, alimentos, ceremonias, etcétera. La biodiversidad también juega un rol importante en las actividades agropecuarias proporcionando áreas naturales para pastoreo y servicios de polinización, control natural de pestes y variación genética en los cultivos. Además, la biodiversidad puede ser importante para actividades económicas, como ecoturismo, recolección de castañas y otros. Finalmente, la biodiversidad brinda servicios ambientales importantes, como regulación del suministro de agua, control de erosión, revitalización de suelos, y otros, que puede tener un efecto indirecto sobre el nivel de ingresos y consumo de los habitantes. Se demuestra una relación positiva entre el nivel de biodiversidad y el nivel de ingreso/consumo a nivel municipal, y se usa esta relación para estimar las pérdidas económicas que las poblaciones locales sufrirían por la reducción en biodiversidad atribuible al cambio climático (excluyendo las reducciones atribuibles a deforestación). Los cálculos indican pérdidas en el orden de 1.6% del PIB el año 2100 a nivel nacional, pero hasta 6% en el departamento de Potosí. Santa Cruz es el único departamento que podría verse beneficiado por un aumento en biodiversidad atribuible al cambio climático (el modelo PRECIS prevé más precipitación en las áreas secas de Santa Cruz), pero solamente en el orden de 0.2% del PIB. Aunque los costos del impacto del cambio climático sobre la biodiversidad son sustanciales, son de segundo orden en comparación con el impacto directo de la deforestación. Por eso, si el objetivo es conservar la biodiversidad - y los beneficios que esta brinda a Bolivia y el mundo - sería esencial implementar políticas para frenar la deforestación excesiva. La recomendación sería, entonces, apostar al mecanismo REDD, que tiene como objetivo transferir fondos de países ricos a países pobres, para ayudar a los últimos controlar los procesos de deforestación.
    Keywords: Cambio Climático, Bolivia, Bosque, Biodiversidad
    JEL: Q54 Q57
    Date: 2009–12
  55. By: Jean-Pierre Amigues; Ujjayant Chakravorty; Michel Moreaux
    Date: 2009–12
  56. By: Elena Simonova (Certified General Accountants Association of Canada); Rock Lefebvre (Certified General Accountants Association of Canada)
    Abstract: Environmental policy instruments that generate budget revenues may become an increasingly attractive policy option for Canada's federal government due to amplified fiscal pressures. If that is the case, revenue recycling is an essential element of pricing carbon. This paper present a brief overview of benefits of recycling carbon revenues and the challenges that may be encountered when choosing a specific option for revenue recycling. The analysis shows that the existing research leaves the open-ended question of which taxes should be used for revenue recycling unanswered; particularly in the Canadian context. Given this, the economic efficiency of different types of taxes could be used as a source of general guidance for revenue recycling. However, significant doubt exists that there is sufficient political will to recycle carbon revenue. Over the past two decades, the tax composition of the federal revenue continued shifting towards a higher reliance on economically distortive taxes instead of increasing use of more efficient taxes.
    Keywords: carbon emission reduction, carbon revenue recycling, double dividend, carbon pricing
    JEL: Q58 H25 H23 H32
    Date: 2009–09
  57. By: Michael Finus (University of Stirling); Bianca Rundshagen (University of Hagen); Johan Eyckmans (atholieke Universiteit Leuven, Centrum voor Economische Studiën and Hogeschool-Universiteit Brussels)
    Abstract: We analyze stability of self-enforcing climate agreements based on a data set generated by the CLIMNEG world simulation model (CWSM), version 1.2. We consider two new aspects which appear important in actual treaty-making. First, we consider a sequential coalition formation process where players can make proposals which are either accepted or countered by other proposals. Second, we analyze whether a moderator, like an international organization, even without enforcement power, can improve upon globally suboptimal outcomes through coordinating actions by making recommendations that must be Pareto-improving to all parties. We discuss the conceptual difficulties of implementing our algorithm.
    Keywords: International Climate Agreements, Sequential Coalition Formation, Coordination through Moderator, Integrated Assessment Model, Algorithm for Computations
    JEL: C79 H87 Q54
    Date: 2009–12
  58. By: Olmstead, Sheila M. (Yale University and Resources for the Future); Stavins, Robert N. (Harvard University and Resources for the Future)
    Abstract: We describe the major features of a post-2012 international global climate policy architecture with three essential elements: a means to ensure that key industrialized and developing nations are involved in differentiated but meaningful ways; an emphasis on an extended time path of targets; and inclusion of flexible market-based policy instruments to keep costs down and facilitate international equity. This architecture is consistent with fundamental aspects of the science, economics, and politics of global climate change; addresses specific shortcomings of the Kyoto Protocol; and builds upon the foundation of the United Nations Framework Convention on Climate Change.
    JEL: Q39 Q48 Q54 Q58
    Date: 2009–12
  59. By: Myers Madeira, Erin (Resources for the Future)
    Abstract: Much of the guidance about potential impacts of reduce emissions from deforestation and degradation (REDD) speculates how efforts would be implemented and draws lessons from other mechanisms, such as payments for ecosystem services (PES). However, with few REDD activities underway, little evidence indicates whether REDD projects are meeting these expectations. This article examines 17 REDD interventions under development in Indonesia, reports trends in project design, and assesses the extent to which interventions follow the model of pro-poor PES schemes. I find that a dominant type of REDD intervention follows a concession model and seeks to prevent large-scale conversion to plantations by outside actors. Although these projects fit the definition of PES at the scale at which the environmental service is transacted, PES characteristics are not a primary component of on-the-ground implementation. Small-holder actors are recognized as essential to the long-term success of the intervention, but are not the main focus.
    Keywords: climate, climate change, REDD, carbon, forests, deforestation, degradation, emissions, mitigation, forest carbon, Indonesia, Kalimantan, Borneo, avoided deforestation, UNFCCC, Kyoto Protocol, PES, concession
    JEL: Q23 Q28 Q27 Q54 Q56 Q57 Q58 Q01
    Date: 2009–12–03
  60. By: Erdogdu, Erkan
    Abstract: The long-term increase in Earth's temperature is known as the global warming or the greenhouse effect. Taking into account the fact that the ice age only involved a global temperature variation of around 4 °C, it is clear climate change is arguably one of the greatest environmental threats the world is facing today. The impacts of disruptive change leading to catastrophic events such as storms, droughts, sea level rise and floods are already being felt across the world. In this context, the signing of the Kyoto Protocol in 1997 has been argued to be a historic step in reversing the inexorable increase in the emission of the greenhouse gases. The primary achievement of the Protocol has been so-called commitment of countries referred in the Annex I of the Protocol to reduce their emission of GHGs some 5% below their country specific 1990 level. On February 5, 2009, Turkish Parliament ratified an agreement to sign the Kyoto Protocol after intense pressure from both the European Union and international environmental organizations; however, so far it has not taken any step to bring about real reductions in emissions. In short, Turkey simply signed but ignored the Protocol. Present paper investigates Turkish position vis-à-vis Kyoto Protocol and critically questions Turkish policies in that area.
    Keywords: Kyoto Protocol; Global warming; Turkey
    JEL: O13 Q4
    Date: 2009
  61. By: Strand, Jon; Toman, Michael
    Abstract: This paper discusses short-run and long-run effects of"green stimulus"efforts, and compares these effects with"non-green"fiscal stimuli. Green stimulus is defined here as short-run fiscal stimuli that also serve a"green"or environmental purpose in a situation of"crisis"characterized by temporary under-employment. A number of recently enacted national stimulus packages contain sizeable"green"components. The authors categorize effects according to their a) short-run employment effects, b) long-run growth effects, c) effects on carbon emissions, and d)"co-benefit"effects (on the environment, natural resources, and for other externalities). The most beneficial"green"programs in times of crisis are those that can stimulate employment in the short run, and lead to large"learning curve"effects via lower production costs in the longer term. The overall assessment is that most"green stimulus"programs that have large short-run employment and environmental effects are likely to have less significant positive effects for long-run growth, and vice versa, implying a trade-off in many cases between short-run and long-run impacts. There are also trade-offs for employment generation in that programs that yield larger (smaller) employment effects tend to lead to more employment gains for largely lower-skilled (higher-skilled) workers, so that the long-term growth effects are relatively small (large). Ultimately, the results reinforce the point that different instruments are needed for addressing different problems.
    Keywords: Environmental Economics&Policies,Energy Production and Transportation,Climate Change Mitigation and Green House Gases,Climate Change Economics,Transport Economics Policy&Planning
    Date: 2010–01–01
  62. By: Benjamin Dachis (C.D. Howe Institute)
    Abstract: As the federal government weighs policy options for reducing greenhouse gases, the question arises as to how to treat imported goods from countries with less stringent emission targets. One policy option is to impose a “carbon tariff” on imported goods from those countries.
    Keywords: economic growth and innovation, carbon tarriff, greenhouse gas reduction, WTO
    JEL: Q38 O24 O38
    Date: 2009–12
  63. By: Michael Hartmann (Agricultural Economics – Agri-food & Agri-environmental Economics Group, Institute for Environmental Decisions IED, ETH Zurich, Switzerland); Robert Huber (Agricultural Economics – Agri-food & Agri-environmental Economics Group, Institute for Environmental Decisions IED, ETH Zurich, Switzerland); Simon Peter (Agricultural Economics – Agri-food & Agri-environmental Economics Group, Institute for Environmental Decisions IED, ETH Zurich, Switzerland); Bernard Lehmann (Agricultural Economics – Agri-food & Agri-environmental Economics Group, Institute for Environmental Decisions IED, ETH Zurich, Switzerland)
    Abstract: Environmental impacts of agricultural production, such as greenhouse gas (GHG) and nitrogen emissions, are of major concern for scientists and policy makers throughout the world. Global agricultural activities account for about 60% of nitrous oxide and about 50% of methane emissions. From a global perspective, methane and nitrous oxide constitute crucial GHGs. They contribute substantially to climate change due to their high potential for effecting global warming compared to carbon dioxide. Emissions of these gases depend on the extent of agricultural production and applied technologies. Therefore, analysis of potential mitigation opportunities is challenging and requires an integrated approach in order to link agricultural economic perspectives to environmental aspects. In view of this, a mathematical programming model has been developed which enables assessment of cost-effective strategies for mitigating GHG and nitrogen emissions in the agricultural sector in Switzerland. This model is applied to improve understanding of the agricultural sector and its behavior with changing conditions in technology and policy. The presented recursive-dynamic model mimics the structure and inter- dependencies of Swiss agriculture and links that framework to core sources of GHG and nitrogen emissions. Calculated results for evaluation and application indicate that employed flexibility constraints provide a feasible approach to sufficiently validate the described model. Recursive-dynamic elements additionally enable adequate modeling of both an endogenous development of livestock dynamics and investments in buildings and machinery, also taking sunk costs into account. The presented findings reveal that the specified model approach is suitable to accurately estimate agricultural structure, GHG and nitrogen emissions within a tolerable range. The model performance can therefore be described as sufficiently robust and satisfactory. Thus, the model described here appropriately models strategies for GHG and nitrogen abatement in Swiss agriculture. The results indicate that there are limits to the ability of Swiss agriculture to contribute substantially to the mitigation of GHG and nitrogen emissions. There is only a limited level of mitigation available through technical approaches, and these approaches have high cost.
    Keywords: resource use, environmental economics, greenhouse gas emission, nitrogen emission, integrated modeling
    Date: 2009–10
  64. By: Amigues, Jean-Pierre (Toulouse School of Economics (INRA, IDEI and LERNA)); Chakravorty, Ujjayant (University of Alberta); Moreaux, Michel (Toulouse School of Economics (IUF, IDEI and LERNA))
    Abstract: Regulation of environmental externalities like global warming from the burning of fossil fuels (e.g., coal and oil) is often done by capping both emission flows and stocks. For example, the European Union and states in the Northeastern United States have introduced caps on flows of carbon emissions while the stated goal of the Intergovernmental Panel on Climate Change (IPCC) which provides the science behind the current global climate negotiations is to stabilize the atmospheric stock of carbon. Flow regulation is often local or regional in nature, while stock regulation is global. How do these multiple pollution control efforts interact when a nonrenewable resource creates pollution? In this paper we show that local and global pollution control efforts, if uncoordinated, may exacerbate environmental externalities. For example, a stricter cap on emission flows may actually increase the global pollution stock and hasten the date when the global pollution cap is reached.
    JEL: Q12 Q32 Q41
    Date: 2009–11
  65. By: Bob van der Zwaan (ECN, Energy research Centre of the Netherlands); Johannes Bollen (PBL, Netherlands Environmental Assessment Agency); Sebastiaan Hers (ECN, Energy research Centre of the Netherland)
    Abstract: This article presents an integrated assessment of climate change, air pollution, and energy security policy. Basis of our analysis is the MERGE model, designed to study the interaction between the global economy, energy use, and the impacts of climate change. For our purposes we expanded MERGE with expressions that quantify damages incurred to regional economies as a result of air pollution and lack of energy security. One of the main findings of our cost-benefit analysis is that energy security policy alone does not decrease the use of oil: global oil consumption is only delayed by several decades and oil reserves are still practically depleted before the end of the 21st century. If, on the other hand, energy security policy is integrated with optimal climate change and air pollution policy, the world’s oil reserves will not be depleted, at least not before our modeling horizon well into the 22nd century: total cumulative demand for oil then decreases by about 20%. More generally, we demonstrate that there are multiple other benefits of combining climate change, air pollution, and energy security policies and exploiting the possible synergies between them. These benefits can be large: for Europe the achievable CO2 emission abatement and oil consumption reduction levels are significantly deeper for integrated policy than when a strategy is adopted in which one of the three policies is omitted. Integrated optimal energy policy can reduce the number of premature deaths from air pollution by about 14,000 annually in Europe and over 3 million per year globally, by lowering the chronic exposure to ambient particulate matter. Only the optimal strategy combining the three types of energy policy can constrain the global average atmospheric temperature increase to a limit of 3ºC with respect to the pre-industrial level.
    Keywords: Climate Change, Air Pollution, Energy Security, Cost-Benefit Analysis
    JEL: H21 D58 C61 O33 Q40
    Date: 2009–11
  66. By: Kathryn Smith (Department of Climate Change, Commonwealth of Australia.)
    Abstract: Dasgupta and Weitzman have shown that the saving rates implied by the Stern Review’s values for the rate of pure time preference and the elasticity of the marginal utility of consumption are too high from either a normative (Dasgupta) or descriptive (Weitzman) perspective. Given the attention this debate has received in the literature, there is a need for a rigorous presentation of the determinants of saving rates in models actually used to evaluate climate change policy. This paper provides the first detailed investigation of the implications of Stern’s parameter choices for saving, firstly in standard neoclassical growth theory and then in a widely used climate policy model based on that theory, Nordhaus’s Dynamic Integrated model of Climate and the Economy (DICE). In theory and practice, optimal saving rates in the presence of near-zero pure time preference are far from the near100 per cent ones obtained from simpler models used by several of the Review’s critics. We show that in DICE, for the utility function used in the Stern Review, optimal saving rates do not exceed 32 per cent, and that this falls to 26 per cent when using Stern’s revised value for the elasticity of the marginal utility of consumption.
    Keywords: climate economics; integrated assessment models; economic models; social costs
    Date: 2009–10
  67. By: Gunnar Luderer (Potsdam Institute for Climate Impact Research); Valentina Bosetti (CMCC, FEEM and Princeton Environmental Institute); Michael Jakob (Potsdam Institute for Climate Impact Research); Henri Waisman (Centre International de Recherche sur l’ l'Environnement et le Développement); Jan Steckel (Potsdam Institute for Climate Impact Research); Ottmar Edenhofer (Potsdam Institute for Climate Impact Research)
    Abstract: This paper presents results from a model intercomparison exercise among regionalized global energy-economy models conducted in the context of the RECIPE project. The economic adjustment effects of long-term climate policy aiming at stabilization of atmospheric CO2 concentrations at 450 ppm are investigated based on the cross-comparison of the intertemporal optimization models REMIND-R and WITCH as well as the recursive dynamic computable general equilibrium model IMACLIM-R. The models applied in the project differ in several respects and the comparison exercise tracks differences in the business as usual forecasts as well as in the mitigation scenarios to conceptual differences in the model structures and assumptions. In particular, the models have different representation of the sectoral structure of the energy system. A detailed sectoral analysis conducted as part of this study reveals that the sectoral representation is a crucial determinant of the mitigation strategy and costs. While all models project that the electricity sector can be decarbonized readily, emissions abatement in the non-electric sectors, particularly transport, is much more challenging. Mitigation costs and carbon prices were found to depend strongly on the availability of low-carbon options in the non-electric sectors.
    Keywords: Decarbonization, Energy and Climate Policy
    JEL: Q48 Q58
    Date: 2009–12
  68. By: Barrett, Scott; Toman, Michael
    Abstract: This paper explores two different conceptions of how an emerging climate regime might evolve to strengthen incentives for more vigorous cooperation in mitigating global climate change. One is the paradigm that has figured most prominently in negotiations to this point: the establishment of targets and timetables for countries to limit their aggregate greenhouse gas emissions. The other approach consists of a variety of loosely coordinated smaller scale agreements, each one of which addresses a different aspect of the challenge, and is enforced in its own way. The primary conclusion is that an agreement of the first type may be more cost-effective, but that a system of agreements of the second type would likely sustain more abatement overall.
    Keywords: Climate Change Mitigation and Green House Gases,Climate Change Economics,Montreal Protocol,Environmental Economics&Policies,Transport Economics Policy&Planning
    Date: 2010–01–01
  69. By: David Popp
    Abstract: Along with the recent success of economic growth in the developing world comes more pollution. Reducing these emissions while still enabling these countries to grow requires the use of new technologies in these countries. In most cases, these technologies are first created in high-income countries. Thus, the challenge for environmental policy is to encourage the transfer of these environmentally-friendly technologies to the developing world. This paper reviews the economic literature on both the creation and transfer of environmental technologies, with an emphasis on how the development of new technologies in leading economies can lead to environmental improvements in developing countries. I begin by discussing the incentives for environmentally-friendly innovation, which occurs primarily in developed countries. I then review the literature on the transfer of these technologies to the developing world. A key point is that technology diffusion is gradual. Early adoption of policy by developed countries leads to the development of new technologies that make it easier for developing countries to reduce pollution as well. Globalization also plays an important role in moving clean technologies to developing countries. Since clean technologies are first developed in the world’s leading economies, international trade and foreign investments provide access to these technologies. Finally, the absorptive capacity of nations is important. The technological skills of the local workforce enable a country to learn from, and build upon, technologies brought in from abroad. I conclude by discussing the implication of these lessons for policy, focusing on three examples pertaining to climate change: the Clean Development Mechanism, the role of intellectual property, and government-sponsored R&D.<BR>La croissance économique récente dans les pays en développement s’accompagne d’un accroissement de la pollution. Pour réduire ces émissions tout en se développant, ces pays devront utiliser de nouvelles technologies. Le plus souvent, ces technologies émaneront de pays développés. Ainsi, un défi des politiques environnementales est d’encourager le transfert de technologies propres vers les pays en développement. Cet article passe en revue la littérature économique sur la création et le transfert des technologies environnementales. Il met l’accent sur les liens entre le développement de ces technologies dans les pays développés et l’amélioration de la performance environnementale des pays en développement. Je commence par discuter les incitations à l’innovation favorable à l’environnement, qui se situe essentiellement dans les pays développés. Ensuite, j’analyse la littérature qui traite du transfert de ces technologies vers les pays en développement. Un résultat majeur est que la diffusion de ces technologies est graduelle. Lorsque les pays développés adoptent une politique environnementale, cela peut induire le développement de nouvelles technologies qui vont rendre plus facile la réduction des pollutions dans les pays en développement. La mondialisation joue un rôle important dans le transfert de technologies vers les pays en développement. Dans la mesure où les technologies propres émanent d’abord des pays développés, le commerce international et les investissements internationaux donnent accès à ces technologies. Enfin, la capacité d’une économie à absorber le progrès technique est un facteur important. Les compétences technologiques de la main-d’œuvre locale permettent à un pays d’apprendre et d’exploiter des technologies importées de l’étranger. En guise de conclusion, je discute les conséquences de ces résultats pour les politiques publiques, en me focalisant sur trois exemples dans le domaine de la lutte contre le changement climatique : le mécanisme de développement propre, le rôle de la propriété intellectuelle et l’aide publique à la R&D.
    Keywords: Clean Development Mechanism, climate change, eco-innovation, environment & development, government policy, green technologies, intellectual property, changement climatique, éco-innovation, environnement et développement, mécanisme de développement propre, politiques publiques, propriété intellectuelle, technologies propres
    Date: 2009–12–17
  70. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Jeffrey Frankel (Harvard University)
    Abstract: Three gaps in the Kyoto Protocol most badly need to be filled: the absence of emission targets extending far into the future, the absence of participation by the United States, China, and other developing countries, and the absence of reason to think that members will abide by commitments. To be politically acceptable, any new treaty that fills these gaps must, we believe, obey certain constraints regarding country-by-country economic costs. We offer a framework of formulas that assign quantitative allocations of emissions, across countries, one budget period at a time. The two-part plan: (i) China and other developing countries accept targets at BAU in the coming budget period, the same period in which the US first agrees to cuts below BAU; and (ii) all countries are asked in the future to make further cuts in accordance with a formula which sums up a Progressive Reductions Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. An earlier proposal for specific parameter values in the formulas – Frankel (2009), as analyzed by Bosetti, et al (2009) – achieved the environmental goal that concentrations of CO2 plateau at 500 ppm by 2100. It succeeded in obeying our political constraints, such as keeping the economic cost for every country below the thresholds of Y=1% of income in Present Discounted Value, and X=5% of income in the worst period. In pursuit of more aggressive environmental goals, we now advance the dates at which some countries are asked to begin cutting below BAU, within our framework. We also tinker with the values for the parameters in the formulas. The resulting target paths for emissions are run through the WITCH model to find their economic and environmental effects. We find that it is not possible to attain a 380 ppm CO2 goal (roughly in line with the 2°C target) without violating our political constraints. We were however, able to attain a concentration goal of 460 ppm CO2 with looser political constraints. The most important result is that we had to raise the threshold of costs above which a country drops out, to as high as Y =3.4% of income in PDV terms, or X =12 % in the worst budget period. Some may conclude from these results that the more aggressive environmental goals are not attainable in practice, and that our earlier proposal for how to attain 500 ppm CO2 is the better plan. We take no position on which environmental goal is best overall. Rather, we submit that, whatever the goal, our approach will give targets that are more practical economically and politically than approaches that have been proposed by others.
    Keywords: International Climate Agreements
    JEL: Q Q40 Q54
    Date: 2009–11
  71. By: Gollier, Christian; Weitzman, Martin
    Abstract: It is not immediately clear how to discount distant-future events, like climate change, when the distant-future discount rate itself is uncertain. The so-called “Weitzman-Gollier puzzle” is the fact that two seemingly symmetric and equally plausible ways of dealing with uncertain future discount rates appear to give diametrically opposed results with the opposite policy implications. We explain how the “Weitzman-Gollier puzzle” is resolved. When agents optimize their consumption plans and probabilities are adjusted for risk, the two approaches are identical. What we would wish a reader to take away from this paper is the bottom-line message that the appropriate long run discount rate declines over time toward its lowest possible value.
    Date: 2009–11
  72. By: Nicholas Stern (IG Patel Professor of Economics and Government at the LSE and Chairman of the Grantham Research Institute on Climate Change and the Environment)
    Abstract: In the last twenty years economics has created much of lasting value and real potential: it has been a very fertile period. But economics has also suffered from what I shall term „collective amnesia? covering whole areas of public policy. And on policy and the role of government it has, embarrassingly in my view, swayed with the political winds to the detriment of both our profession and to outcomes. Both the amnesia and the political bending have contributed to the economic crisis of the last year or two and to hostility towards the profession. My purpose here is first to lament the amnesia on theories of public policy in imperfect economies, in short the subject of public economics, to describe the bending of public policy analysis to political vogue, and to indicate some of the consequences. I then describe some of the mechanics of the processes described, in terms of choice of models and patterns of teaching. Finally, I use the example of climate change to illustrate some of the consequences of the amnesia, as well as of the political influence.
    Keywords: Public Policy, Climate Change
    JEL: H
    Date: 2009–11

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