nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒02‒27
twenty-two papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. What drives gasoline taxes?. By Dunkerley, Fay; Glazer, Amihai; Proost, Stefan
  2. A Note on the Oil Price Trend and GARCH Shocks By Jing, Li; Thompson, Henry
  3. The Natural Resource Curse: A Survey By Frankel, Jeffrey
  4. On Properties of Royalty and Tax Regimes in Alberta's Oil Sands By Plourde, André
  5. Entrepreneurial Activity and Civil War in Colombia: Exploring the Mutual Determinants between Armed Conflict and the Private Sector By Rettberg, Angelika; Leiteritz, Ralf; Nasi, Carlo
  6. The United Arab Emirates: Some Lessons in Economic Development By Nyarko, Yaw
  7. The expenditure experience of older households. By Leicester, A.; O'Dea, C.; Oldfield, Z.
  8. Die deutschen Ausbauziele für erneuerbare Energien: Eine Effizienzanalyse By Sebastian Schröer; Ulrich Zierahn
  9. Economic and Technical Analysis of Road Transport Emissions (Economische en technische analyse van uitstoot van wegvervoer). By Knockaert, Jasper
  10. Do the selected Trans European transport investments pass the cost benefit test?. By Proost, Stefan; Dunkerley, Fay; van der Loo, Saskia; Adler, Nicole; Bröcker, Johannes; Korzhenevych, Artem
  11. Metropolitan Cities under Transition: The Example of Hamburg/Germany By Amelie Boje; Ingrid Ott; Silvia Stiller
  12. Are
 friendly? By Carl Gaigné; Stéphane Rioux; Jacques-François Thisse
  13. Long-term Nexus of Industrial Pollution and Income in China By Duo Qin
  14. Access to Justice for the Private Sector in Joint Implementation Projects under the Kyoto Protocol: A Brief Study of Possible Disputes and Remedies Available to Private Participants in International Carbon Emission Reduction Projects By Sander Simonetti
  15. Climate change mitigation and ecosystem services : A stochastic analysis By Thomas S. Lontzek; Daiju Narita
  16. Bio-economics of Conservation Agriculture and Soil Carbon Sequestration in Developing Countries By Akpalu, Wisdom; Anders, Ekbom
  17. Cap-and-Trade Properties under Different Scheme Designs By Georg Grüll; Luca Taschini
  18. Incidence of Climate on Emerging Economies: Lessons from English's Past By Stéphane Auray; Aurélien Eyquem; Frédéric Jouneau-Sion
  19. Micro-level practices to adapt to climate change for African small-scale farmers: By Below, Till; Artner, Astrid; Siebert, Rosemarie; Sieber, Stefan
  20. A Copenhague, la Chine infléchira le devenir des politiques climatiques By Michel Damian; Nathalie Rousset
  21. Climate cost uncertainty, retrofit cost uncertainty, and infrastructure closedown : a framework for analysis By Strand, Jon; Miller, Sebastian
  22. Modeling the Impact of Warming in Climate Change Economics By Robert S. Pindyck

  1. By: Dunkerley, Fay; Glazer, Amihai; Proost, Stefan
    Abstract: Gasoline taxes are the most important tax on car use. The question naturally arises as to what tax would be adopted by a government that responds to the preferences of the public. To address that issue, we begin with the standard Downsian model, where policy is determined by the median voter. This model predicts that as long as the median voter is not a car user, he wants high taxes on road use and a road capacity that maximizes net tax revenues. When he becomes a driver himself, he wants road user taxes that are lower and only increase to control congestion, as well as more road capacity. We then use panel data for 28 countries and find support for our theory. When the median voter becomes a driver, the gasoline tax drops on average by 20%.
    Date: 2010
  2. By: Jing, Li; Thompson, Henry
    Abstract: This paper investigates the trend in the monthly real price of oil between 1990 and 2008 with a generalized autoregressive conditional heteroskedasticity (GARCH) model. Trend and volatility are estimated jointly with the maximum likelihood estimation. There is long persistence in the variance of oil price shocks, and a GARCH unit root (GUR) test can potentially yield a significant power gain relative to the augmented Dickey-Fuller (ADF) test. After allowing for nonlinearity, the evidence supports a deterministic trend in the price of oil. The deterministic trend implies that influence of a price shock is transitory and policy efforts to restore a predictable price after a shock would be unwarranted in the long run.
    Keywords: Oil Price; Volatility; Trend; GARCH; Fourier Form
    JEL: C53 Q31 C12
    Date: 2010
  3. By: Frankel, Jeffrey (Harvard University)
    Abstract: It is striking how often countries with oil or other natural resource wealth have failed to grow more rapidly than those without. This is the phenomenon known as the Natural Resource Curse. The principle is not confined to individual anecdotes or case studies, but has been borne out in econometric tests of the determinants of economic performance across a comprehensive sample of countries. The paper considers six aspects of commodity wealth, each of interest in its own right, but each also a channel that some have suggested could lead to sub-standard economic performance. They are: long-term trends in world commodity prices, volatility, crowding out of manufacturing, civil war, poor institutions, and the Dutch Disease. The paper concludes with a consideration of promising ideas for institutions that could help a country that is rich in, say, oil overcome the pitfalls of the Curse and achieve good economic performance. They include indexation of oil contracts, hedging of export proceeds, denomination of debt in terms of oil, Chile-style fiscal rules, a monetary target that emphasizes product prices, transparent commodity funds, and lump-sum distribution.
    Date: 2010–02
  4. By: Plourde, André (University of Alberta, Department of Economics)
    Abstract: Simulation models of stylized oil sands projects that include detailed representations of different royalty and tax regimes are developed. These models are then used to examine the distribution between developers and governments of net returns associated with the development and production of Alberta’s oil sands deposits. A specific focus is to assess the estimated effects on the level and distribution of net revenues associated with a number of changes in assumed revenue and expenditure conditions. The results suggest that developers, and especially surface mine operators, typically bear a greater share of the consequences of variations in capital expenditures than they do of changes in operating expenditures, prices, and exchange rates. A comparison across royalty and tax regimes suggests, among other things, that there is a positive relationship between the level of net revenues estimated to accrue to either developers or governments and the share of the consequences of changes in revenue and expenditure conditions borne by that party. Some differences in royalty and tax treatment and the distribution of the consequences of changes in revenue and expenditure conditions are noted across production technologies. It is also clear that the role of the federal government as a fiscal player in oil sands development has shrunk over time. In contrast, under the regime currently in effect, the Government of Alberta captures a higher share of net returns and typically bears a greater proportion of the consequences of changes in conditions than at any time since the introduction of an explicit oil sands royalty and tax regime in 1997.
    Keywords: oil sands; fiscal systems; risk incidence
    JEL: H25 L71 Q48
    Date: 2010–02–01
  5. By: Rettberg, Angelika; Leiteritz, Ralf; Nasi, Carlo
    Abstract: TAs elsewhere, the Colombian private sector has been accused of promoting or profiting from violence in the country. However, the private sector’s role in the armed conflict and the impact of conflict on entrepreneurial activity vary, as reflected by differences in political activism, in peacebuilding strategies and in costs endured according to company size, sector, and region of operations. At the same time, accounts of regional variation in conflict intensity suggest that an understanding of the Colombian confrontation requires a subnational approach. This paper explores whether and how differences in regional armed armed conflict can be attributed to differences in entrepreneurial make-up and activity associated with five natural resources, produced in different regions (oil, coffee, bananas, emeralds, and flowers). This paper suggests that company-specific traits, institutions of production, and the nature of international markets have a significant impact on the link between entrepreneurial activity and armed conflict in Colombian regions.
    Keywords: Colombia, armed conflict, entrepreneurship, private sector, natural resources, multinational companies
    Date: 2010
  6. By: Nyarko, Yaw
    Abstract: Oil was discovered in the United Arab Emirates (UAE) just 50 years ago. During that time, UAE has been able to transform itself into a rapidly modernizing country, which is fast becoming a major economic hub and a key player on the international economic landscape. This paper discusses a number of aspects of the development strategy of the UAE that contributed to its phenomenal development: (i) the political system, which has resulted in a perception of stability and minimal political risk, encouraging investment; (ii) oil; (iii) development strategies that have resulted in a very dynamic business environment; (iv) open importation of foreign skills and management; (v) labour policies that have enabled the immigration of vast numbers of foreign lower-skilled workers. There are, of course, also concerns for the future, and indeed each of the five positive attributes listed above has a flip side which is a potential major challenge for the future.
    Keywords: role models, United Arab Emirates, success
    Date: 2010
  7. By: Leicester, A.; O'Dea, C.; Oldfield, Z.
    Abstract: This commentary examines detailed trends in expenditure patterns between 1995 and 2007, with a particular focus on the pensioner population. Pensioners are not a homogeneous group, but differ widely in both their levels and patterns of spending, and so we look not just at pensioners as a whole but also at pensioners according to age, income, household composition and so on. Spending may tell us something about household welfare that other, often-used measures like incomes do not. In particular, it may be that spending is informative about long-run well-being whereas income is more about current, short-run living standards. Using data from the Family Expenditure Survey/Expenditure and Food Survey, an annual, cross-sectional study of the spending patterns of 6,000-7,000 households, we look in depth at changes in the level of real expenditures and how spending patterns have changed over time. Then, using data from two waves of the English Longitudinal Study of Ageing, we examine household fuel expenditures in detail. Fuel is clearly of great current policy concern given recent large increases in the price of domestic fuel that may impact particularly severely on poorer and older households.
    Date: 2009–08
  8. By: Sebastian Schröer (Hamburgisches WeltWirtschaftsInstitut – HWWI); Ulrich Zierahn (Universität Kassel und Hamburgisches WeltWirtschaftsInstitut – HWWI)
    Abstract: The German Renewable Energy Law (EEG) has been a very successful instrument in raising the share of the renewable energies that are not yet competitive. However, a detrimental consequence of this policy is that, through specific feed-in tariffs, it hinders the competition among particular renewable energies. Within the framework of the “Lead Study 2008” the German Government set targets both for renewable energies and related technologies and hence affects the particular feed-in tariff. By means of a static model, we analyse in this article the efficiency of the targets for 2020 regarding renewable energies and show that they can be achieved at lower costs.
    Date: 2010
  9. By: Knockaert, Jasper
    Abstract: Wegvervoer is een hoeksteen van het economisch systeem. De bijdrage die het levert aan het functioneren van de economie, en de daarmee verbonden maatschappelijke welvaart, is onbetwist. Door het wegvervoer veroorzaak te uitstoot brengt echter ongewenste schade toe aan de leefomgeving. Het beheersen van deze negatieve gevolgen is een integraal onderdeel van ve rkeersbeleid. Uit het verlangen om tot een effectief en efficiënt uitstootbeleid te ko men ontstaat de vraag naar modellen die aangeven wat de impact op uitsto ot en maatschappelijke kost is van technologische en andere maatregelen. Dergelijke modellen identificeren de belangrijkste met wegvervoer verbo nden gedragsdimensies, en waarderen de ermee verbonden impact op maatsch appij en leefomgeving. Het gepresenteerde onderzoek vertrekt uit bestaande modellen en geeft aa n hoe deze uitgebreid worden om uitstoot van het gebruik van nieuwe voer tuigtechnologieën te bestuderen. Vervolgens simuleren en analyseren we e en reeks vervoersscenarios. Met behulp van discrete keuzetheorie bestuderen we de voorkeuren van aut okopers voor nieuwe voertuigtechnologieën op basis van een stated prefer ence experiment. De analyse omvat een groot aantal gedragsvariabelen en technologieën en gebruikt daarvoor diverse gemengde logit specificaties. Vervolgens geven we aan hoe de geïdentificeerde keuzepatronen kunnen ver taald worden naar een genest logitmodel dat kan gebruikt worden voor sim ulatie van maatregelen. Bij het simuleren van scenarios voor autovervoer maken we een ondersche id tussen klimaatverandering en impact op de leefomgeving. Klimaatverand ering is nauw verbonden met brandstofefficiëntie (en CO2 uitstoot) terwi jl de impact op leefomgeving afhangt van de totale uitstoot. Deze uitsto ot is sterk afhankelijk van de gebruikte voertuigtechnologie. Als refere ntie voor een maatschappelijk verkiesbaar scenario maken we hierbij gebr uik van beprijzingsscenarios. Aansluitend simuleren we de bijdrage van openbaar busvervoer tot vermind ering van impact op de stedelijke leefomgeving. De beschouwde beleidsvar iabelen worden daartoe uitgebreid met het OV-aanbod. We bestuderen teven s hoe oudere voertuigen kunnen aangepast worden met het oog op afname va n uitstoot. De belangrijkste inzichten van het onderzoek duiden het verband tussen b estaande of vernieuwende beleidsinitiatieven voor afname van uitstoot en de vraag naar vervoersactiviteit en de daarmee gepaard gaande impact op leefomgeving en welvaart.
    Date: 2010–02–11
  10. By: Proost, Stefan; Dunkerley, Fay; van der Loo, Saskia; Adler, Nicole; Bröcker, Johannes; Korzhenevych, Artem
    Abstract: This paper assesses the economic justification for the selection of priority projects defined under the auspices of the Trans-European transport network. In analyzing the current list of 30 priority projects, we apply three different transport models to undertake a cost-benefit comparison. We find that many projects do not pass the cost-benefit test and only a few of the economically justifiable projects would need European subsidies to make them happen. Two remedies are proposed to minimize the inefficiencies in future project selection. The first remedy obliges each member state or group of states to perform a cost-benefit analysis (followed by a peer review) and to make the results public prior to ranking priority projects. The second remedy would require federal funding to be available only for projects with important spillovers to other countries, in order to avoid pork barrel behaviour.
    Date: 2010
  11. By: Amelie Boje (University of Aberdeen); Ingrid Ott (Institute of Economics, Leuphana University of Lüneburg, Germany); Silvia Stiller (Hamburg Institute of International Economics (HWWI))
    Abstract: In the intermediate and long run energy prices and hence transportation costs are expected to increase significantly. According to the reasoning of the New Economic Geography this will strengthen the spreading forces and thus affect the economic landscape. Other influencing factors on the regional distribution of economic activity include the general trends of demographic and structural change. In industrialized countries, the former induces an overall reduction of population and labor force whereas the latter implies an ongoing shift to the tertiary sector and increased specialization. Basically, cities provide better conditions to cope with these challenges than rural regions. Since the general trends affect all economic spaces similarly, city-specific factors also have to be considered in order to derive the impact of rising energy costs on future urban development. With respect to Hamburg regional peculiarities include the overall importance of the harbor as well as the existing composition of the industry and the service sector. The analysis highlights that rising energy and transportation costs will open up a range of opportunities for the metropolitan region.
    Keywords: urban development; regional specialization; structural change; demographic change; transportation costs.
    JEL: R11 J11
    Date: 2010–02
  12. By: Carl Gaigné (INRA-ESR - Unité d'économie et de sociologie rurales - INRA); Stéphane Rioux (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Jacques-François Thisse (CORE - Université Catholique de Louvain)
    Abstract: There is a large consensus among international institutions and national governments to favor urban-containment policies - the compact city - as a way to reduce the ecological footprint of cities. This approach overlooks the following basic trade-off: the concentration of activities decreases the ecological footprint stemming from commodity shipping between cities, but it increases emissions of greenhouse gas by inducing longer worktrips. What matters for the ecological footprint of cities is the mix between urban density and the global pattern of activities. As expected, when both the intercity and intraurban distributions of activities are given, a higher urban density makes cities more environmentally friendly and raises global welfare. However, once we account for the fact that cities may be either monocentric or polycentric as well as for the relocation of activities between cities, the relationship between density and the ecological footprints appears to be much more involved. Indeed, because changes in urban density affect land rents and wages, firms are incited to relocate, thus leading to new commuting patterns. We show policies that favor the decentralization of jobs in big cities may reduce global pollution and improve global welfare.
    Keywords: greenhouse gas; commuting costs; transport costs; cities; urban containment policy
    Date: 2010
  13. By: Duo Qin (Queen Mary, University of London)
    Abstract: This study examines the long-run relationship between industrial pollution and income in China using provincial panel data. Four types of pollutants are modelled: waste water, solid wastes, soot and SO<sub>2</sub> emission. Two types of income effects are considered: the scale and growth effects. The study finds little evidence of inverse U shape curves as postulated by EKC models; pollutant emissions may go positively or negatively with income irrespective of income levels whereas certain sign of alleviation in pollutant concentration due to income growth is discernible; trade is found to be insignificant while the hazardous nature of pollutants appears to be an important factor for heterogeneity in the income effect estimates; the heterogeneity cautions us against simple panel model specification.
    Keywords: Environmental Kuznets curve, Pollution, Economic growth, Trade, Heterogeneity
    JEL: C51 O53 Q53 Q56
    Date: 2010–02
  14. By: Sander Simonetti
    Abstract: The Kyoto Protocol has not only created carbon emission reduction obligations for industrialized countries, but also opportunities for the private sector to participate in its 'flexible mechanisms'. One of these mechanisms is Joint Implementation, which allows private legal entities to engage in international emission reduction projects that generate tradable emission rights. Private parties can act as verifiers of the emission reductions achieved by such projects, or as buyers of the generated emission rights (which can be used, e.g., for compliance under the European Union Emissions Trading Scheme). During the Joint Implementation project cycle, these private parties can become involved in several types of disputes with various counterparties. This paper explores the legal remedies available to such private parties. Long-term private sector investment and contribution to the objectives of the Kyoto Protocol are more likely to occur in a stable regulatory environment, which requires a certain degree of legal protection. This includes proper access to justice in case disputes arise.
    Date: 2010–01–15
  15. By: Thomas S. Lontzek; Daiju Narita
    Abstract: Degradation of ecosystem services may be a major component of climate change damage, and incorporation of this factor could significantly alter the significance of uncertainty in climate-economy modeling. However, this aspect has been little investigated by economic analyses of climate change and uncertainty. We apply standardized numerical techniques of stochastic optimization to this research question. The model results show that the effects of uncertainty are different with different levels of agent’s risk aversion. Also, uncertainty exhibits different effects on mitigation policy and capital investment according to the availability of ecosystem services. Importantly, both the risk aversion and the availability of ecosystem services can change the effects of uncertainty on mitigation not only in level but also in sign. In other words, mitigation could both increase and decrease with climatic uncertainty. The model would provide hints for policymaking in finding a balance between economic growth, climate protection, and the conservation of ecosystems
    Keywords: climate change, decision making under uncertainty, stochastic control, renewable resource, ecosystem services
    JEL: C63 Q54 D81
    Date: 2010–01
  16. By: Akpalu, Wisdom (Department of History, Economics and Politics (HEP), State University of New York-Farmingdale); Anders, Ekbom (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Improvement in soil carbon through conservation agriculture in developing countries may generate some private benefits to farmers as well as sequester carbon emissions, which is a positive externality to society. Leaving crop residue on the farm has become an important option in conservation agriculture practice. However, in developing countries, using crop residue for conservation agriculture has the opportunity cost of say feed for livestock. In this paper, we model and develop an expression for an optimum economic incentive that is necessary to internalize the positive externality. A crude value of the tax is calculated using data from Kenya. We also empirically investigated the determinants of the crop residue left on the farm and found that it depends on cation exchange capacity (CEC) of the soil, the prices of maize, whether extension officers visit the plot or not, household size, the level of education of the household head and alternative cost of soil conservation.<p>
    Keywords: conservation agriculture; soil carbon; climate change; bioeconomics; Kenya
    JEL: C61 Q18 Q24 Q54 Q56
    Date: 2010–02–15
  17. By: Georg Grüll; Luca Taschini
    Abstract: This paper examines the key design mechanisms of existing and proposed cap-and-trade markets. First, it is shown that the hybrid systems under investigation (safety-valve with offsets, price floor using a subsidy, price collar, allowance reserve, and options offered by the regulator) can be decomposed into a combination of an ordinary cap-and-trade scheme with European- or American-style call and put options. Then, we quantify and discuss the advantages and disadvantages of the proposed hybrid schemes by investigating whether pre-set objectives (enforcement of permit price bounds and reduction of potential costs for relevant companies) can be accomplished while maintaining the original environmental targets.
    Date: 2009–11
  18. By: Stéphane Auray (Université Lille 3 (GREMARS), Université de Sherbrooke (GREDI) and CIRPÉE); Aurélien Eyquem (GATE, UMR 5824, Université de Lyon and Ecole Normale Supérieure Lettres et Sciences Humaines, France); Frédéric Jouneau-Sion (Universites Lille Nord de France)
    Abstract: Evidence from English real wages and real land rents for the period 1500-1800 are used to evaluate the impact of temperature and precipitations on under-developed economies. Estimating key parameters of an AK-growth model, we extract Total Factor Productivity (TFP hereafter) shocks and estimate the impact of temperature and extreme precipitation events (droughts and and flood) on TFP. We produce evidence that a two degree reduction of temperature lowers TFP by 0.1 (one standard deviation of TFP shocks). We also show that, conditionally on temperatures, the impact of floods on TFP is statistically significant while the impact of droughts is not. We consider these results as a useful benchmark to measure the impact of global warming and/or measures intended to contain it on developing economies.
    Keywords: Economic growth, Climate, Real wages, Land rents
    JEL: C22 N13 O41 O47 Q54
    Date: 2010–01–04
  19. By: Below, Till; Artner, Astrid; Siebert, Rosemarie; Sieber, Stefan
    Abstract: This paper discusses micro-level practices for adapting to climate change that are available to small-scale farmers in Africa. The analysis is based on a review of 17 studies about practices that boost small-scale farmers' resilience or reduce their vulnerability to observed or expected changes in climate; it includes data from more than 16 countries in Africa, the Americas, Europe, and Asia. The review shows that African smallholders are already using a wide variety of creative practices to deal with climate risks; these can be further adjusted to the challenge of climate change by planned adaptation programs. We found 104 different practices relevant to climate change adaptation and organized them in five categories: farm management and technology; farm financial management; diversification on and beyond the farm; government interventions in infrastructure, health, and risk reduction; and knowledge management, networks, and governance. We conclude that adaptation policies should complement farmers' autonomous response to climate change through the development of new drought-resistant varieties and improved weather forecasts, the provision of financial services, improvement of rural transportation infrastructure, investments in public healthcare and public welfare programs, and policies that improve local governance and coordinate donor activities.
    Keywords: Climate change, adaptation practices, content analysis, Small-scale farmers, climate risks, Farm management, diversification, risk reduction, government interventions, public welfare programs
    Date: 2010
  20. By: Michel Damian (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Nathalie Rousset (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: La montée du grand capitalisme émergent qu'est la Chine est déterminante dans les négociations climatiques et la construction de l'architecture post-Kyoto sur quatre plans: 1) l'économie mondiale est en train de basculer à l'Est, et la géo-économie du carbone vers la Chine, 2) lëconomie chinoise demeurera fortement carbonée pour au moins le prochain demi-siècle, 3) la Chine est engagée dans une réduction conséquente de ses émissions de gaz à effet de serre, avec une volonté de s'inscrire dans les grandes orientations internationales en matière d'environnement, 4) le premier pas pour débloquer les négociations post-Kyoto passe nécessairement par un co-engagement Chine - États-Unis, qui pourrait être annoncé à Copenhague. De tels accords recentreraient la lutte contre les émissions de gaz à effet de serre sur les nations et les politiques nationales, ébranlant la pierre d'angle du protocole de Kyoto, c'est-à-dire la fixation d'un cap, d'une limite globale sur les émissions.
    Date: 2009–09
  21. By: Strand, Jon; Miller, Sebastian
    Abstract: Large and energy-intensive infrastructure investments with long life times have substantial implications for climate policy. This study focuses on options to scale down energy consumption and carbon emissions now and in the future, and on the costs of doing so. Two ways carbon emissions can be reduced post-investment include retrofitting the infrastructure, or closing it down. Generally, the presence of bulky infrastructure investments makes it more costly to reduce emissions later. Moreover, when expected energy and environmental costs are continually rising, inherent biases in the selection processes for infrastructure investments lead to excessive energy intensity in such investments. Thus great care must be taken when choosing the energy intensity of the infrastructure at the time of investment. Simulations indicate that optimally exercising the retrofit option, when it is available, reduces ex ante expected energy consumption relative to the no-option case. Total energy plus retrofit costs can also be substantially reduced, the more so the larger is ex ante cost uncertainty. However, the availability of the retrofit option also leads to a more energy intensive initial infrastructure choice; this offsets some, but usually not all, of the gains from options for subsequent retrofitting.
    Keywords: Energy Production and Transportation,Transport Economics Policy&Planning,Climate Change Mitigation and Green House Gases,Climate Change Economics,Environment and Energy Efficiency
    Date: 2010–02–01
  22. By: Robert S. Pindyck
    Abstract: Any economic analysis of climate change policy requires some model that describes the impact of warming on future GDP and consumption. Most integrated assessment models (IAMs) relate temperature to the level of real GDP and consumption, but there are theoretical and empirical reasons to expect temperature to affect the growth rate rather than level of GDP. Does this distinction matter in terms of implications for policy? And how does the answer depend on the nature and extent of uncertainty over future temperature change and its impact? I address these questions by estimating the fraction of consumption society would be willing to sacrifice to limit future increases in temperature, using probability distributions for temperature and impact inferred from studies assembled by the IPCC, and comparing estimates based on a direct versus growth rate impact of temperature on GDP.
    Date: 2010–01

This nep-ene issue is ©2010 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.