|
on Energy Economics |
|
Issue of 2010‒01‒23
thirty-one papers chosen by Roger Fouquet Basque Climate Change Centre, Bilbao, Spain |
| By: | Pollitt, M.G. |
| Abstract: | It is around 5 years since my colleague, Tooraj Jamasb, and I reviewed the EU’s progress with electricity reform (Jamasb and Pollitt, 2005). At that time many countries were still struggling to implement elements of the EU wide policy on electricity sector liberalisation that they had signed up to. In this short update paper we review the latest evidence on progress with electricity liberalisation in the EU. We begin with a short review of the legislative background. We continue with a look at the evolution of markets and trading in electricity across the EU. Next we outline progress with the key reform elements and their impact on market structure issues within the EU. We look at the performance of the whole sector and company level performance. We proceed to discuss progress in reducing emissions and promoting renewables. In closing we note recent developments in electricity reform. |
| Keywords: | Single European Electricity Market, Electricity Directive |
| JEL: | L11 L22 L Q48 |
| Date: | 2009–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0953&r=ene |
| By: | Lawrence M. Ausubel (Economics Department, University of Maryland); Peter Cramton (Economics Department, University of Maryland) |
| Abstract: | Forward markets, both medium term and long term, complement the spot market for wholesale electricity. The forward markets reduce risk, mitigate market power, and coordinate new investment. In the medium term, a forward energy market lets suppliers and demanders lock in energy prices and quantities for one to three years. In the long term, a forward reliability market assures adequate resources are available when they are needed most. The forward markets reduce risk for both sides of the market, since they reduce the quantity of energy that trades at the more volatile spot price. Spot market power is mitigated by putting suppliers and demanders in a more balanced position at the time of the spot market. The markets also reduce transaction costs and improve liquidity and transparency. Recent innovations to the Colombia market illustrate the basic elements of the forward markets and their beneficial role. |
| Keywords: | Auctions, electricity auctions, market design, forward markets |
| JEL: | D44 C78 L96 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pcc:pccumd:09ufm&r=ene |
| By: | Schlüter, Stephan |
| Abstract: | The wavelet transform is used to identify a biannual and an annual seasonality in the Phelix Day Peak and to separate the long-term trend from its short-term motion. The short-term/long-term model for commodity prices of Schwartz & Smith (2000) is applied but generalised to account for weekly periodicities and time-varying volatility. Eventually we find a bivariate SARMA-CCC-GARCH model to fit best. Moreover it surpasses the goodness of fit of an univariate GARCH model, which shows that the additional effort of dealing with a two-factor model is worthwile. -- |
| Keywords: | Wavelets,Seasonal Filter,Relative Wavelet Energy,Multivariate GARCH,Energy Price Modelling |
| JEL: | C32 C51 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwqwdp:042009&r=ene |
| By: | Lawrence M. Ausubel (Economics Department, University of Maryland); Peter Cramton (Economics Department, University of Maryland) |
| Abstract: | Since their advent in 2001, virtual power plant (VPP) auctions have been implemented widely. In this paper, we describe the simultaneous ascending-clock auction format that has been used for virtually all VPP auctions to date, elaborating on other design choices that most VPP auctions have had in common as well as discussing a few aspects that have varied significantly among VPP auctions. We then evaluate the various objectives of regulators in requiring VPP auctions, concluding that the auctions have been effective devices for facilitating new entry into electricity markets and for developing wholesale power markets. |
| Keywords: | Auctions, electricity auctions, market design, virtual power plant auctions, clock auction, combinatorial auction |
| JEL: | D44 C78 L96 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pcc:pccumd:09vpp&r=ene |
| By: | Massimiliano Caporin (Università di Padova); Juliusz Pres (Szczecin University of Technology) |
| Abstract: | The modelling of wind speed is a traditional topic in meteorological research, where the main interest is on the short-term forecast of wind speed intensity and direction. More recently, this theme has received some interest in the quantitative finance literature for its relationship with electricity production by wind farms. In fact, electricity producers are interested in long-range forecasts and simulation of wind speed for two main reasons: to evaluate the profitability of building a wind farm in a given location and to offset the risks associated with the variability of wind speed for an already operating wind farm. In this paper, we contribute to the increasing literature regarding environmental finance by comparing three approaches that are capable of forecasting and simulating the long run evolution of wind speed intensity (direction is not a concern, given that the recent turbines can rotate to follow wind direction): the Auto Regressive Gamma process, the Gamma Auto Regressive process, and the ARFIMA-FIGARCH model. We provide both in-sample and out-of-sample comparisons of the models, as well as some examples for the pricing of wind speed derivatives using a model-based Monte Carlo simulation approach. |
| Keywords: | Gamma Auto Regressive, Auto Regressive Gamma, ARFIMA-FIGARCH, wind speed modelling, wind speed simulation |
| JEL: | C22 C53 G13 G22 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0106&r=ene |
| By: | Bleischwitz, Raimund; Andersen, Lars-Morten |
| Abstract: | This BEER addresses informational barriers to energy efficiency. It is a widely acknowledged result that an energy efficiency gap exists implying that the level of energy efficiency is at an inefficiently low level. Several barriers to energy efficiency create this gap and the presence of asymmetric information is likely to be one such barrier. In this article a theoretical framework is presented addressing the issues of moral hazard and adverse selection related to energy efficiency. Based on the theoretical framework, European policies on energy efficiency are evaluated. The article is divided into two main parts. The first part presents the theory on information asymmetries and its consequences on energy efficiency focusing on the problems of moral hazard and adverse selection. Having established a theoretical framework to understand the agency barriers to energy efficiency, the second part evaluates the policies of the European Union on energy efficiency. The BEER finds that problems of moral hazard and adverse selection indeed can help explain the seemingly low levels of energy. In both presented models the cost to the principal from implementing high energy efficiency outcome is increased with the informational asymmetries. The theory reveals two implications to policies on energy efficiency. First, the development of measures to enable contractual parties to base remuneration on energy performance must be enhanced, and second, the information on technologies and the education of consumers and installers on energy efficiency must be increased. This could be complemented with certification of installers and energy efficiency advisors to enable consumers to select good agents. Finally, it is found that the preferred EU policy instrument on energy efficiency, so far, seems to be the use of minimum requirements. Less used in EU legislation is the use of measuring and verification as well as the use of certifications. Therefore, it is concluded that the EU should consider an increased use of these instruments, and in particular focus on a further development of standards on measurability and verification as well as an increased focus on education of consumers as well as installers and advisors on energy efficiency. |
| Keywords: | Energy efficiency; Informational barriers; European policies |
| JEL: | Q56 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19937&r=ene |
| By: | Amigues, Jean-Pierre (Toulouse School of Economics); Chakravorty, Ujjayant (University of Alberta, Department of Economics); Moreaux, Michel (Toulouse School of Economics) |
| 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. |
| Keywords: | dynamics; environmental regulation; externalities; nonrenewable resources; pollution |
| JEL: | Q12 Q32 Q41 |
| Date: | 2009–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2010_002&r=ene |
| By: | Iimi, Atsushi |
| Abstract: | Recent volatility in international energy prices has revealed South Eastern Europe as one of the most vulnerable regions to such external shocks. Under the current global economic downturn, in addition, the region’s energy-intensive industries are faced with the challenge of the weakening demand for their outputs. This paper casts light on the relationship between the price and the demand for energy. Based on firm level data, it is shown that the price elasticity of industrial energy demand is about -0.4 on average. There are a number of data issues to interpret the results correctly. But Albania and Macedonia are systematically found to have a relatively elastic demand for energy on the order of -0.7 to -0.8. In these countries, therefore, price adjustments would be one of the effective policy options to balance demand with supply during the period of energy crisis. In other countries, the demand response would be much weaker; pricing cannot be the only solution. Other policy measures, such as facilitation of firm energy efficiency and improvements in the quality of infrastructure services, may be required. |
| Keywords: | Energy Production and Transportation,Markets and Market Access,Economic Theory&Research,Energy Demand,Environment and Energy Efficiency |
| Date: | 2010–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5167&r=ene |
| By: | Giuseppe Travaglini (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino (Italy)) |
| Abstract: | In this paper we address the question whether fiscal incentives and regulation are the most appropriate tools to increase productivity in energy sector. Doubts exist about whether these are the most effective tools for improving productivity since changes in productivity are usually related to changes in technological progress. We use a vector autoregressive model to study this problem. Our purpose is to identify the shocks which induce movements in productivity, and to measure the productivity response to each shock separately. We use economic theory about long run impacts of different shocks to identify the empirical model. The key indentifying restriction is that the level of productivity is determined in the long run by shocks to technology. We find that productivity responds positively to technological shocks, leading to a transition from one equilibrium to another. Yet, non technological shocks play a minor and transitory role in explaining productivity growth. All these evidences cast doubt on the effectiveness of the current European community policy for development and innovation in energy sector based mainly on fiscal incentives and regulations. |
| Keywords: | Energy Sector, SVAR, Productivity, Shocks. |
| JEL: | C32 O47 Q4 Q43 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:urb:wpaper:10_01&r=ene |
| By: | Daniel Mirza; Habib Zitouna |
| Abstract: | This paper studies the effect of oil prices on the geography of international trade. We model transport costs as a function of variable and fixed costs. By affecting the first cost component, oil prices can then modify the structure of transportation costs across partners. This, we argue, acts as a factor of distortion in relative prices, thereby creating a reallocation of trade at the expense of remote countries. In that respect, an increase in oil prices should favor regionalism. This mechanism is empirically tested using data on US bilateral imports and transportation costs. The empirical results are consistent with the theoretical intuition. But, the elasticity of freight rates to oil prices, directly linked to geographical distance, appears to be low: between 0.088 for close to US countries and 0.103 for faraway ones. We then estimate the contribution of the dramatic increase in oil prices, in recent years, to relative changes in the countries’ probability to export to the US (extensive margins) along with their relative market shares (intensive margins). We find that the recent oil price increases that took place after 1999 have had only a maigre contribution: the last oil shock had contributed marginally to increase Canada and Mexico’s relative performance. |
| Keywords: | Regionalism; oil prices; geography; transport |
| JEL: | F15 F19 F20 L91 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2009-26&r=ene |
| By: | Plourde, André (University of Alberta, Department of Economics) |
| Abstract: | This paper provides an overview of key governance issues of relevance to the upstream oil and gas industry in Canada. The focus is on implications of Canada’s constitutional organization as a federation of ten provinces and three territories. Regulatory structures and provisions are described, as are revenue-sharing arrangements. Challenges for the environmental regulation of activities relating to oil and gas exploration, development, and production are highlighted. Implications of the evolving understanding of the rights of Canada’s aboriginal peoples are discussed. Special attention is paid to issues of importance to the federation as a whole and to the potential for the emergence of inter-governmental tensions and conflicts. |
| Keywords: | Canadian oil and gas policy; federalism; energy revenue-sharing |
| JEL: | H10 L78 Q48 |
| Date: | 2010–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2010_001&r=ene |
| By: | Victoria Dobrynskaya; Edouard Turkish |
| Abstract: | Despite impressive economic growth between 1999 and 2007, there is a fear that Russia may suffer the Dutch disease, which predicts that a country with large natural resource rents may experience a de-industrialisation and a lower long term economic growth. We study whether there are symptoms of the Dutch disease in Russia. Using Rosstat and CHELEM databases, we analyse the trends in production, wages and employment in the Russian manufacturing industries, and we study the behaviour of Russian imports and exports. We find that, while Russia exhibited some symptoms of the Dutch disease, e.g. a real appreciation of the rouble, a rise in real wages, a decrease in employment in manufacturing industries and the development of the services sector, manufacturing production nonetheless increased, contradicting the theory of the Dutch disease. These trends can be explained by the gains in productivity and the recovery after the disorganisation in the 1990s, by new market opportunities for Russian products in the European Union and in CIS countries, by a growing Chinese demand for some products and by a booming internal market. Finally, investments in many manufacturing industries were largely encouraged, whereas those in the energy sector were strongly regulated, which contributed to economic diversification. |
| Keywords: | Russia; Dutch disease; competitiveness; monetary policy |
| JEL: | E23 E58 F43 P24 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepidt:2009-20&r=ene |
| By: | Crespo Cuaresma, Jesus (Department of Economics, University of Innsbruck); Oberhofer, Harald (University of Salzburg); Raschky, Paul (Department of Economics, Monash University) |
| Abstract: | This paper studies empirically the relationship between oil endowment and the duration of autocratic leaders. A simple theoretical setting shows how the relationship between oil endowment and the duration of the dictatorial regime is mediated by the price of oil. Using a dataset on 106 dictators, our empirical analysis supports the predictions of the theoretical model and indicates that dictators in countries which are relatively better endowed in terms of oil stay longer in office. This result is robust to changes in the definition of dictatorial regimes, as well as to controlling for other economic and political variables. |
| Keywords: | Natural resources; dictatorship; political economy; duration |
| JEL: | D72 H11 Q34 |
| Date: | 2010–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:ris:sbgwpe:2010_003&r=ene |
| 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: | This paper investigates the conditional correlations and volatility spillovers between crude oil returns and stock index returns. Daily returns from 2 January 1998 to 4 November 2009 of the crude oil spot, forward and futures prices from the WTI and Brent markets, and the FTSE100, NYSE, Dow Jones and S&P500 index returns, are analysed using the CCC model of Bollerslev (1990), VARMA-GARCH model of Ling and McAleer (2003), VARMAAGARCH model of McAleer, Hoti and Chan (2008), and DCC model of Engle (2002). Based on the CCC model, the estimates of conditional correlations for returns across markets are very low, and some are not statistically significant, which means the conditional shocks are correlated only in the same market and not across markets. However, the DCC estimates of the conditional correlations are always significant. This result makes it clear that the assumption of constant conditional correlations is not supported empirically. Surprisingly, the empirical results from the VARMA-GARCH and VARMA-AGARCH models provide little evidence of volatility spillovers between the crude oil and financial markets. The evidence of asymmetric effects of negative and positive shocks of equal magnitude on the conditional variances suggests that VARMA-AGARCH is superior to VARMA-GARCH and CCC. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2010cf706&r=ene |
| By: | Mamatzakis, E; Remoundos, P |
| Abstract: | This paper, using a threshold vector error-correction (TVECM) model, examines whether BRENT crude spot and futures oil prices are cointegrated. By employing this methodology we are able to evaluate the degree and dynamics of transaction costs resulting from various market imperfections. TVECM model is applied on daily spot and futures oil prices covering the period 1990-2009. The hypothesis we test is to what extent BRENT crude is indeed an integrated oil market in terms of threshold effects and adjustment costs. Our findings support that market follows a gradual integration path. We find that BRENT crude spot and futures are cointegrated, though two regimes are clearly identified. This implies that a threshold exists and it is indeed significant. Adjustment costs in the error correction are present, and they are valid at the typical regime that is the dominant, and as a result should not be ignored. |
| Keywords: | Threshold Cointegration; BRENT crude futures; Non-normality; ML Estimation. |
| JEL: | C53 E27 E37 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19978&r=ene |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2010cf704&r=ene |
| By: | Hooi Hooi Lean (School of Social Sciences, Universiti Sains Malaysia); Michael McAleer (Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute); Wing-Keung Wong (Department of Economics, Hong Kong Baptist University) |
| Abstract: | This paper examines the market efficiency of oil spot and futures prices by using a stochastic dominance (SD) approach. As there is no evidence of an SD relationship between oil spot and futures, we conclude that there is no arbitrage opportunity between these two markets, and that both market efficiency and market rationality are not rejected in the oil spot and futures markets. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2010cf705&r=ene |
| By: | Kosnik, Lea; Lange, Ian |
| Abstract: | Policy shocks affect the rent distribution in long-term contracts, which can lead to such contracts being renegotiated. We seek an understanding of what aspects of contract design, in the face of a substantial policy shock, affect the propensity to renegotiate. We test our hypotheses using data on U.S. coal contracts after the policy shock of the 1990 Clean Air Act Amendments. This law altered the regulation of emissions of sulfur dioxide from coal-fired electric power plants, initiating a tradable permit system for a subset of coal-fired power plants which had previously been unregulated at the federal level. Contracts are divided into two categories, those that were renegotiated following the shock and those that were not and their characteristics are used to determine how they influence whether or not a contract was ultimately renegotiated. The number of years until the contract expires, a larger allowable sulfur content upper bound for plants regulated immediately by the tradable permit scheme, and the minimum quantity are all associated with a contract being renegotiated. |
| Keywords: | Acid Rain; Coal Contracts; Contract Renegotiation |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2009-25&r=ene |
| By: | Song, Feng; Zhao, Jinhua; Swinton, Scott |
| Abstract: | We study a farmerâs decision to convert traditional crop land into growing dedicated energy crops, taking in account sunk conversion costs, uncertainties in traditional and energy crop returns, and learning. The optimal decision rules differ significantly from the expected net present value rule, which ignores learning, and from real option models that allow only one way conversions into energy crops. These models also predict drastically different patterns of land conversions into and out of energy crops over time. Using corn-soybean rotations and switchgrass as examples, we show that the model predictions are sensitive to assumptions about stochastic processes of the returns. Government policies might have unintended consequences: subsidizing conversion costs into switchgrass reduces proportions of land in switchgrass in the long run. |
| Keywords: | real options, irreversibility, sunk costs, land conversion, biofuel, cellulosic biomass, dynamic modeling, stochastic process, biofuel policy, Land Economics/Use, Resource /Energy Economics and Policy, Risk and Uncertainty, Q42, Q24, |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:midasp:56195&r=ene |
| By: | Thornton, Philip K.; Herrero, Mario |
| Abstract: | Livestock systems globally are changing rapidly in response to human population growth, urbanization, and growing incomes. This paper discusses the linkages between burgeoning demand for livestock products, growth in livestock production, and the impacts this may have on natural resources, and how these may both affect and be affected by climate change in the coming decades. Water and land scarcity will increasingly have the potential to constrain food production growth, with adverse impacts on food security and human well-being. Climate change will exacerbate many of these trends, with direct effects on agricultural yields, water availability, and production risk. In the transition to a carbon-constrained economy, livestock systems will have a key role to play in mitigating future emissions. At the same time, appropriate pricing of greenhouse gas emissions will modify livestock production costs and patterns. Health and ethical considerations can also be expected to play an increasing role in modifying consumption patterns of livestock products, particularly in more developed countries. Livestock systems are heterogeneous, and a highly differentiated approach needs to be taken to assessing impacts and options, particularly as they affect the resource-poor and those vulnerable to global change. Development of comprehensive frameworks that can be used for assessing impacts and analyzing trade-offs at both local and regional levels is needed for identifying and targeting production practices and policies that are locally appropriate and can contribute to environmental sustainability, poverty alleviation, and economic development. |
| Keywords: | Livestock&Animal Husbandry,Wetlands,Wildlife Resources,Agricultural Knowledge&Information Systems,Rural Development Knowledge&Information Systems |
| Date: | 2010–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5178&r=ene |
| By: | Strand, Jon |
| Abstract: | This paper develops a global model of climate policy, focusing on the choice between tax and cap-and-trade solutions. The analysis assumes that the world can be split into two regions, with two fuels that both lead to carbon emissions. Region A consumes all fuels, and is responsible for defining and implementing climate policy. Region B produces all of fuel 1 (oil), while fuel 2 (interpreted as coal, natural gas, or renewables) is both produced and consumed in region A. The paper studies three model variants. All involve full policy coordination in each country block, but no coordination across blocks; and all involve an optimal producer tax on fuel 1 by region B. In model 1, region A sets two fuel consumption taxes, one for each fuel. The optimal region A tax on fuel 1 then exceeds the Pigou level as defined by the region; the tax set on fuel 2 is Pigouvian. The presence of a second fuel in region A reduces region B’s optimal tax on fuel 1. In model 2, region A sets a common carbon tax, which is lower (higher) for fuel 1 (2) than in model 1. In model 3, region A sets a carbon emissions cap. This enhances region B’s strategic position via the trade-off between fuels 1 and 2 in region A, following from the cap. In realistic cases, this leaves region A strategically weaker under a cap policy than under a tax policy, more so the less carbon-intensive the local fuel (2) is. In conclusion, a fuel-consuming and importing region that determines a climate policy will typically prefer to set a carbon tax, instead of setting a carbon emissions cap. The main reason is that a tax is more efficient than a cap at extracting rent from fuel (oil) exporters. |
| Keywords: | Climate Change Mitigation and Green House Gases,Transport Economics Policy&Planning,Environment and Energy Efficiency,Energy and Environment,Climate Change Economics |
| Date: | 2010–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5171&r=ene |
| By: | Peter Cramton (Economics Department, University of Maryland); Steven Stoft |
| Abstract: | Developing countries justifiably reject meaningful emission targets. This prevents the Kyoto Protocol from establishing a global price for greenhouse gas emissions, and leaves almost all new emissions unpriced. This paper proposes a new pair of commitments—a commitment to a binding carbon-price target and to a Green Fund financed by a form of carbon pricing. The result is global carbon pricing that neither requires developing countries to accept emission caps nor requires industrial countries to accept carbon taxes. The cost of complying with these commitments is subject to far less risk than the cost of an emissions cap, and the combined cost of a $30/ton price target and the Green Fund is only 23 cents per person per day for the United States and is negative for India. The combined advantages should significantly increase the chance that developing countries will commit to a substantial carbon price, and this should increase the chance of cap and trade passing the U.S. Senate. |
| Keywords: | Climate change, carbon pricing, cap and trade, carbon auctions |
| JEL: | Q54 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pcc:pccumd:10pbcc&r=ene |
| By: | Peter Cramton (Economics Department, University of Maryland); Steven Stoft |
| Abstract: | Developing countries reject meaningful emission targets (recent intensity caps are no exception), while many industrialized countries insist that developing countries accept them. This impasse has prevented the Kyoto Protocol from establishing a global price for greenhouse gas emissions. This paper presents a solution to this dilemma—allow countries to commit to a binding global carbon-price target. This commitment could be met by cap and trade, a carbon tax, or any combination. This would allow developing countries to accept the same carbon price as the most advanced countries instead of accepting a cap that is as low as U.S. emissions in the 1800s. And it would allow the U.S. and the E.U. to keep their cap and trade schemes. The paper defines a carbon-price target, and shows how compliance could be induced using both carrots and sticks. We also demonstrate that carbon pricing can be guaranteed to be inexpensive under a carbon-price target. A Green Fund is suggested that reinforces rather than subverts cooperation on global carbon pricing. The combined cost of a $30/ton price target and the Green Fund is only 23 cents per person per day for the United States and is negative for India. Together, these advantages should greatly increase the chance that developing countries will commit to a substantial carbon price, and this should increase the chance of cap and trade passing the U.S. Senate. Such a policy would also reduce the world oil price. For China and the United States, this savings might well cover the full cost of the proposed initial climate agreement. |
| Keywords: | Climate change, carbon pricing, cap and trade, carbon auctions |
| JEL: | Q54 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pcc:pccumd:09gcp&r=ene |
| By: | Rolf Golombek, Mads Greaker, Sverre A.C Kittelsen, Ole Røgeberg and Finn Roar Aune (Statistics Norway) |
| Abstract: | We examine the potential of Carbon Capture and Storage (CCS) technologies in the European electricity markets, assessing whether CCS technologies will reduce carbon emissions substantially in the absence of investment subsidies, and how the availability of CCS technologies may affect electricity prices and the amount of renewable electricity. To this end we augment a multi-market equilibrium model of the European energy markets with CCS electricity technologies. The CCS technologies are characterized by costs and technical efficiencies synthesized from a number of recent cost estimates and CCS technology reviews. Our simulations indicate that with realistic values for carbon prices, new CCS coal power plants become profitable, totally replacing non-CCS coal power investments and to a large extent replacing new wind power. New CCS gas power also becomes profitable, but does not replace non-CCS gas power fully. Substantially lower CCS costs, through subsidies on technological development or deployment, would be necessary to make CCS modification of old coal and gas power plants profitable. |
| Keywords: | Carbon capture and storage; fossil fuels; energy; carbon emissions; abatement. |
| JEL: | H23 Q40 Q54 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:603&r=ene |
| By: | ZhongXiang Zhang (East-West Center); ; |
| Abstract: | To date, border adjustment measures in the form of emissions allowance requirements (EAR) under the U.S. proposed cap-and-trade regime are the most concrete unilateral trade measure put forward to level the carbon playing field. If improperly implemented, such measures could disturb the world trade order and trigger a trade war. Because of these potentially far-reaching impacts, this paper focuses on this type of unilateral border adjustment, which requires importers to acquire and surrender emissions allowances corresponding to the embedded carbon contents in their goods from countries that have not taken climate actions comparable to that of home country. This discussion is mainly on the legality of unilateral EAR under the WTO rules. Given that the inclusion of border carbon adjustment measures is widely considered essential to secure passage of any U.S. legislation capping its greenhouse gas emissions, the paper argues that, on the U.S. side, in designing such trade measures, WTO rules need to be carefully scrutinised, and efforts need to be made early on to ensure that the proposed measures comply with them. After all, a conflict between the trade and climate regimes, if it breaks out, helps neither trade nor the global climate. The U.S. needs to explore, with its trading partners, cooperative sectoral approaches to advancing low-carbon technologies and/or concerted mitigation efforts in a given sector at an international level. Moreover, to increase the prospects for a successful WTO defence of the Waxman-Markey type of border adjustment provision, there should be: 1) a period of good faith efforts to reach agreements among the countries concerned before imposing such trade measures; 2) consideration of alternatives to trade provisions that could be reasonably expected to fulfill the same function but are not inconsistent or less inconsistent with the relevant WTO provisions; and 3) trade provisions that can refer to the designated special international reserve allowance pool, but should allow importers to submit equivalent emission reduction units that are recognized by international treaties to cover the carbon contents of imported products. The paper concludes by arguing that the major developing countries being targeted by such border carbon adjustment measures should make the best use of the forums provided under the United Nations Framework Convention on Climate Change and its Kyoto Protocol to effectively deal with the proposed border adjustment measures to their advantage. |
| JEL: | F18 Q48 Q54 Q56 Q58 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:ewc:wpaper:wp105&r=ene |
| By: | Carlos Gustavo Machicado (Institute for Advanced Development Studies) |
| Abstract: | El presente estudio analiza los efectos del cambio climático sobre el sector de energía eléctrica en Bolivia durante los próximos 100 años tomando como base las proyecciones realizadas por el Modelo de Equilibrio General Computable (MEGC) de Jemio y Andersen (2009). Este modelo provee los insumos necesarios en términos de tendencias y magnitudes de las variables a ser usadas en las proyecciones. Se parte de la hipótesis que el cambio climático afectará a la generación de energía hidroeléctrica a través del efecto sobre los caudales de los ríos que suministran agua a las centrales hidroeléctricas del Sistema Interconectado Nacional (SIN). Concretamente, se espera una disminución en las precipitaciones con la consecuente disminución en el caudal, lo que reduciría la oferta de energía hidroeléctrica. Inicialmente se proyecta la demanda de energía eléctrica para los próximos 100 años, en base a la información de consumo de energía por sectores del Balance Energético Nacional (BEN). A partir de los consumos de los sectores residencial, industrial, comercial, minería y otros se proyecta la demanda en base a las tasas de crecimiento del consumo provistas por el modelo MEGC. Se empleó el supuesto que este es un mercado que siempre esta en equilibrio, es decir oferta es igual a demanda. Asimismo, se supone que en el escenario base, mitad de la oferta de energía eléctrica es termoeléctrica y la otra mitad es hidroeléctrica, tal como sucedía el año 1999 que es el año base para las proyecciones. Luego se proyecta la oferta según los escenarios A2 y B2 explotando la relación caudal de agua y potencia efectiva, diferenciando entre centrales hidroeléctricas de pasada y de embalse. Para las centrales de pasada se emplea una relación lineal entre potencia y caudal, mientras que para las centrales de embalse se emplean estimaciones de Mínimos Cuadrados Ordinarios (MCO) usando información semanal que nos permite relacionar el volumen embalsado con el caudal y luego con la generación de energía. El impacto económico del cambio climático en el sector se lo estima como el costo de producir la energía termoeléctrica adicional necesaria para cubrir la brecha generada por una menor oferta de energía hidroeléctrica y que permita cubrir la demanda del escenario base. Los resultados indican que producto del cambio climático habrá una reducción de energía hidroeléctrica de 18% según el escenario A2 y de 20% según el escenario B2, hacia el año 2100. El costo de cubrir estas brechas con energía termoeléctrica será de 0.05% y 0.06% del PIB en el año 2100, según los escenarios A2 y B2 respectivamente. Potencial hidroeléctrico, Bolivia tiene de sobra, lo que hace falta es invertir en una mayor generación de energía hidroeléctrica, no solo para cubrir la demanda creciente, sino también para mitigar los efectos del cambio climático a través de la disminución de los caudales en el occidente del país. |
| Keywords: | Cambio Climático, Bolivia, Energía |
| JEL: | Q54 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:adv:wpaper:200912&r=ene |
| By: | Oscar Molina (Universidad Privada Boliviana) |
| Abstract: | Bolivia es en uno de los países con mayor vulnerabilidad a enfermedades en Latinoamérica. De los 327 municipios que se tenían el 2003, gran parte de ellos presentaron altos grados de vulnerabilidad en lo que se refiere a las Enfermedades Diarreicas Agudas (EDA’s) e Infecciones Respiratorias Agudas (IRA’s) en el occidente del país y alta vulnerabilidad en Malaria y Dengue en los municipios del oriente. A partir de la construcción de una base de datos a nivel municipal, en este estudio se ha modelado la relación entre factores climáticos (temperatura promedio, precipitación promedio, variabilidad de temperaturas, variabilidad de precipitación) y el nivel de vulnerabilidad de las cuatro enfermedades mencionadas anteriormente, y se ha usado el modelo estimado para simular los efectos del cambio climático previsto por el modelo PRECIS hasta el 2100. La modelación se realizó a nivel municipal para poder tomar en cuenta la gran heterogeneidad de Bolivia. Los resultados de los modelos sugieren que los cambios climáticos previstos por el modelo PRECIS hasta el año 2100 y los cambios esperados en las variables socioeconómicas y demográficas tendrán impactos positivos sobre el grado de riesgo de las enfermedades analizadas; sin embargo, dichas impactos positivos no pueden atribuirse al cambio climático en el caso de las EDA’s y la Malaria, sino a mejoras en variables de orden socioeconómico y demográfico como son la tasa de urbanización y los años de educación que se esperan sucedan para el 2100. De hecho en el escenario sin cambio climático los resultados serían mucho más favorables para estas enfermedades. En lo que se refiere a las EDA’s, en el año base se tienen 99 municipios en Bolivia que tiene un nivel muy alto de vulnerabilidad. Los departamentos más vulnerables son Oruro, Potosí y La Paz, mientras que los menos vulnerables son Santa Cruz, Tarija y Beni. En el escenario sin cambio climático, solamente 11 municipios tendrían este nivel de vulnerabilidad el año 2100, mientras que en el escenario A2 con cambio climático, 89 tendrían un nivel muy alto de vulnerabilidad el año 2100. Esto muestra un efecto adverso del cambio climático sobre las EDAs a nivel nacional. Para el caso de las IRA’s, en el año base existen 103 municipios con un nivel muy alto de vulnerabilidad, para el 2100 sin cambio climático se esperaría que la situación se mantenga. Sin embargo en el escenario con cambio climático se tendrían 76 municipios, lo que sugiere que los cambios climáticos tendrán un efecto beneficioso sobre la vulnerabilidad de esta enfermedad, lo cual es atribuible a que estas enfermedades tienen mayor propensión en zonas frías, las cuales aumentarían su temperatura según el modelo PRECIS. En el caso del Dengue, en el año base se tienen 87 municipios que presentaron brotes de la enfermedad, concentrados principalmente en los departamentos de Santa Cruz y Beni. Los modelos predicen que los cambios climáticos disminuirán el riesgo de la enfermedad en estos departamentos, pero la incrementarán en los municipios que en el año base no presentaron casos. Por ejemplo, el Departamento de Cochabamba pasa de 2 municipios en el año base a 11 en el 2100. Esta situación puede ser atribuida al incremento en la temperatura en zonas frías y por el otro lado a que el excesivo calor de otras zonas provoquen que estas no sean las ideales para el desarrollo de la enfermedad. Finalmente, para la malaria en el año base se tienen 135 municipios de alta vulnerabilidad a la enfermedad, para el 2100 sin cambio climático se espera que sólo 1 municipio tenga vulnerabilidad alta (Presto en Chuquisaca). En el escenario A2 con cambio climático la situación sería exactamente lo mismo, lo que nos muestra que en general no son las variables climáticas que son importantes para la malaria, sino el desarrollo socio-económico de los municipios. En el documento también se estiman las pérdidas económicas que las poblaciones locales sufrirían por el incremento de estas enfermedades atribuible al cambio climático y se llega a la conclusión que los costos económicos sobre la salud son muy modestas. Finalmente se recomienda que aunque, aparentemente los cambios climáticos y los cambios en las variables socioeconómicas y demográficas muestran efectos relativamente positivos sobre la salud en Bolivia es esencial implementar políticas que estén enfocadas a la educación y a la implementación de servicios de salud (relacionadas a la urbanización) que cuando se hicieron presentes sobrepasaron los efectos negativos que pueden tener los cambios climáticos. |
| Keywords: | Bolivia, cambio climático, salud |
| JEL: | I18 Q54 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:adv:wpaper:200914&r=ene |
| By: | Andersen, Lykke E.; Verner, Dorte |
| Abstract: | This paper uses municipality level data to estimate the general relationship between climate, income, and life expectancy in Chile. The analysis finds that incomes are negatively related to temperature, while life expectancy is not significantly related to average temperatures. Both incomes and life expectancy are greater in areas with either very little rain or a lot of rain. The authors use the estimated relationships to simulate the effects of both past (1958-08) and future (2008-58) climate change. The findings indicate that past climate change has been favorable for the central, and most populous, part of Chile, and it has contributed to reduced poverty and reduced inequality of health outcomes. Whereas temperatures in the past have shown a downward trend for most of the Chilean population, climate models suggest that they will increase in the future, and that there will be a reduction in precipitation in the central part of Chile. The analysis simulates the likely effects of these projected climate changes over the next 50 years. The findings suggest that expected future climate will tend to reduce incomes across the whole country, with an average reduction of about 7 percent, all other things equal. |
| Keywords: | Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Economics,Global Environment Facility,Regional Economic Development |
| Date: | 2010–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5170&r=ene |
| By: | Hallegatte, Stephane; Dumas, Patrice; Hourcade, Jean-Charles |
| Abstract: | This note highlights a major reason to limit climate change to the lowest possible levels. This reason follows from the large increase in uncertainty associated with high levels of warming. This uncertainty arises from three sources: the change in climate itself, the change’s impacts at the sector level, and their macroeconomic costs. First, the greater the difference between the future climate and the current one, the more difficult it is to predict how local climates will evolve, making it more difficult to anticipate adaptation actions. Second, the adaptive capacity of various economic sectors can already be observed for limited warming, but is largely unknown for larger changes. The larger the change in climate, therefore, the more uncertain is the final impact on economic sectors. Third, economic systems can efficiently cope with sectoral losses, but macroeconomic-level adaptive capacity is difficult to assess, especially when it involves more than marginal economic changes and when structural economic shifts are required. In particular, these shifts are difficult to model and involve thresholds beyond which the total macroeconomic cost would rise rapidly. The existence of such thresholds is supported by past experiences, including economic disruptions caused by natural disasters, observed difficulties funding needed infrastructure, and regional crises due to rapid economic shifts induced by new technologies or globalization. As a consequence, larger warming is associated with higher cost, but also with larger uncertainty about the cost. Because this uncertainty translates into risks and makes it more difficult to implement adaptation strategies, it represents an additional motive to mitigate climate change. |
| Keywords: | Climate Change Economics,Science of Climate Change,Climate Change Mitigation and Green House Gases,Adaptation to Climate Change,Transport Economics Policy&Planning |
| Date: | 2010–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5179&r=ene |
| By: | Addison, Tony; Arndt, Channing; Tarp, Finn |
| Abstract: | The global economy is passing through a period of profound change. The immediate concern is with the financial crisis, originating in the North. The South is affected via reduced demand and lower prices for their exports, reduced private financial flows, and falling remittances. This is the first crisis. Simultaneously, climate change remains unchecked, with the growth in greenhouse gas emissions exceeding previous estimates. This is the second crisis. Finally, malnutrition and hunger are on the rise, propelled by the recent inflation in global food prices. This constitutes the third crisis. These three crises interact to undermine the prosperity of present and future generations. Each has implications for international aid and underline the need for concerted action. |
| Keywords: | financial crisis, global food prices, climate change |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2010-01&r=ene |
| By: | Brophy Haney, A.; Jones, I.W.; Pollitt, M.G. |
| Abstract: | More and more companies in the UK are developing strategies to address the challenges of climate change. We focus on the UK retail sector and explore the role of partnership in shaping the climate change commitments and actions taken by retail companies. We use a social capital approach to firstly measure best practice in the climate strategies of a sample of 60 companies. We then measure the differences in engagement with partner organisations across the same set of companies. Using our best practice and partnership indices, we investigate how committed companies are to climate strategies; how partnerships have an impact on best practice; and we try to understand the distinction between companies that are more and less highly engaged in partnering. We find that partnership has an important role to play; and specifically that higher levels of partner diversity and greater depth of engagement improve the impact of partnership on best practice. |
| Keywords: | Corporate Responsibility, Carbon Reduction Commitment, energy efficiency, social capital |
| JEL: | M14 Z13 |
| Date: | 2009–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0950&r=ene |