nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒04‒04
25 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Promoting renewables and discouraging fossil energy consumption in the European Union By Cathrine Hagem
  2. Short- and long-term allocation of power in liberalized electricity markets By Torgeir Ericson and Bente Halvorsen
  4. China's Growing Demand for Energy and Primary Inputs - Terms of trade Effects on Neighbouring Countries By Yinhua Mai; Philip Adams; Peter B. Dixon
  5. Energy Use in the U.S. Food System By Canning, Patrick; Charles, Ainsley; Huang, Sonja; Polenske, Karen R.; Waters, Arnold
  6. Natural Gas Import Dynamics and Russia's Role in the Security of Germany's Supply Strategy By Deniz Erdem; Kirsten Meyer
  7. Pricing an European gas storage facility using a continuous-time spot price model with GARCH diffusion By Schlüter, Stephan; Davison, Matt
  8. Resource Curse or Malthusian Trap? Evidence from Oil Discoveries and Extractions By Anca Cotet; Kevin K. Tsui
  9. Oil and Conflict: What Does the Cross-Country Evidence Really Show? By Anca Cotet; Kevin K. Tsui
  11. Taxes, Natural Resource Endowment, and the Supply of Labor: New Evidence By Razzak, Weshah; Labas, Belkacem
  12. Explaining oil price dynamics By Paul J.J. Welfens
  13. Time-Varying Spot and Futures Oil Price Dynamics By Guglielmo Maria Caporale; Davide Ciferri; Allessandro Girardi
  14. On the influence of oil prices on stock markets: Evidence from panel analysis in GCC countries. By Christophe Rault; Mohamed El Hedi AROURI
  15. Oil prices and stock markets: what drives what in the Gulf Corporation Council countries? By Christophe Rault; ohamed El Hedi AROURI
  16. Empirical Study on the Determinants of CO2 Emissions: Evidence from OECD Countries By Iwata, Hiroki; Okada, Keisuke; Samreth, Sovannroeun
  17. Adaptation, Mitigation and “Green” R&D to Combat Global Climate Change. Insights From an Empirical Integrated Assessment Exercise By Francesco Bosello
  18. Trading for the Future: Signaling in Permit Markets By Harstad, Bård; Eskeland, Gunnar S.
  19. Climate Change and Tourism Features in the Caribbean By Moore, Winston; Lewis-Bynoe, Denny; Howard, Stacia
  20. The Supply Side Effects of Climate Change on Tourism By Moore, Winston R.; Harewood , Leandra; Grosvenor, Tiffany
  21. A Participatory Approach to Assess the Effectiveness of Responses to Cope With Flood Risk By Lucia Ceccato; Valentina Giannini; Carlo Giupponi
  22. Fostering low carbon growth initiatives in Thailand By Patrick Criqui; Pierre-Olivier Peytral; Jean-Christophe Simon
  23. Global Economic Sustainability Indicator: Analysis and Policy Options for the Copenhagen Process By Paul J.J. Welfens; Jens K. Perret; Deniz Erdem
  24. Politics and Economics of Second-Best Regulation of Greenhouse Gases: The Importance of Regulatory Credibility By Valentina Bosetti; David G. Victor
  25. Climate Policy and the Optimal Balance between Mitigation, Adaptation and Unavoided Damage By Francesco Bosello; Carlo Carraro; Enrica De Cian

  1. By: Cathrine Hagem (Statistics Norway)
    Abstract: The European Union (EU) identified some positive and negative externalities related to energy production and consumption when adopting its Renewable Energy and Climate Change Package. Given these externalities, we derive the optimal combination of policy instruments. Thereafter, we explore the second-best outcome, given constraints on the use of some policy instruments, due to political considerations and international regulations. We show that the choice of policy instruments to promote renewable energy production (subsidies versus green certificates) affects the optimal level of energy consumption taxes. A second-best optimum for the EU cannot be achieved without a coordination of energy taxes and renewable energy policy instruments in each country, given the externalities addressed in this paper.
    Keywords: climate policy; energy policy; green certificates; energy subsidies; energy ta
    JEL: D62 H21 H23 Q48
    Date: 2010–03
  2. By: Torgeir Ericson and Bente Halvorsen (Statistics Norway)
    Abstract: The experience of liberalized electricity markets’ ability to allocate scarce energy resources has been mixed. In this paper, we analyze how liberalized markets allocate power in the short and long run through the interaction between the spot and end-user markets. We show that totally inelastic demand in the spot market does not necessarily result in market failure in a shortage situation, as long as price incentives are transferred to the end-user markets. We argue that the market does not have to run optimally to handle a shortage situation, and that problems with short- or long-run allocation of power arise when price restrictions in end-user markets results in a higher demand than that which may sustain the energy situation over time.
    Keywords: Liberalized electricity market; allocation of power; demand response
    JEL: D4 Q4
    Date: 2010–03
  3. By: Ana-Isabel Guerra; Ferran Sancho
    Abstract: In spite of having been first introduced in the last half of the ninetieth century, the debate about the possible rebound effects from energy efficiency improvements is still an open question in the economic literature. This paper contributes to the existing research on this issue proposing an unbiased measure for economy-wide rebound effects. The novelty of this economy-wide rebound measure stems from the fact that not only actual energy savings but also potential energy savings are quantified under general equilibrium conditions. Our findings indicate that the use of engineering savings instead of general equilibrium potential savings downward biases economy-wide rebound effects and upward-biases backfire effects. The discrepancies between the traditional indicator and our proposed measure are analysed in the context of the Spanish economy.
    Date: 2010–03–24
  4. By: Yinhua Mai; Philip Adams; Peter B. Dixon
    Abstract: In this study, we analysed the terms of trade effects of China's rapid growth on its neighbouring countries using a dynamic global CGE model, the MMC model. We first simulated a "real" or convergence scenario -showing how the economies of China and its neighbours might evolve based on historical data during 1997-2005 and on prevailing historical trends during 2005-2010. We then simulate a non-convergence scenario, in which it is assumed that technological progress in China proceeds in line with progress in the United States, rather than at the rate consistent with the convergence scenario. The simulation results show that, indeed, China's technological convergence leads to increased world prices for mining products and to lower world prices for manufactures, especially those it exports extensively. However, this study also identified positive effects that China's convergence has on the neighbouring countries' terms of trade. The rise in the prices of energy and primary inputs tends to increase the export price index of exporters of these products. The fall in the price of manufactured goods reduces the import price index for countries that source a significant share of their manufactured imports from China. Furthermore, China's convergence leads to expansion in world trade which, in turn, leads to increased demand for exports of transportation and insurance services. Consequently, China's convergence tends to have a positive impact on prices of services exports. Due to the offsetting factors, the overall impact of the convergence on terms of trade is small and varies depending on the economic structure of each of the neighbouring countries. The impact of China's rapid growth on most of the neighbouring countries' real GDP and GNP are positive.
    Keywords: terms of trade effects China's energy demand China's rapid growth Dynamic CGE modeling
    JEL: O10 O40 Q41 C68
    Date: 2009–08
  5. By: Canning, Patrick; Charles, Ainsley; Huang, Sonja; Polenske, Karen R.; Waters, Arnold
    Abstract: Energy is an important input in growing, processing, packaging, distributing, storing, preparing, serving, and disposing of food. Analysis using the two most recent U.S. benchmark input-output accounts and a national energy data system shows that in the United States, use of energy along the food chain for food purchases by or for U.S. households increased between 1997 and 2002 at more than six times the rate of increase in total domestic energy use. This increase in food-related energy flows is over 80 percent of energy flow increases nationwide over the period. The use of more energy-intensive technologies throughout the U.S. food system accounted for half of this increase, with the remainder attributed to population growth and higher real (inflation-adjusted) per capita food expenditures. A projection of food-related energy use based on 2007 total U.S. energy consumption and food expenditure data and the benchmark 2002 input-output accounts suggests that food-related energy use as a share of the national energy budget grew from 14.4 percent in 2002 to an estimated 15.7 percent in 2007.
    Keywords: energy use, energy technologies, food expenditures, input-output analysis, population change, structural decomposition analysis, supply chain analysis, Resource /Energy Economics and Policy,
    Date: 2010–03
  6. By: Deniz Erdem (Europäisches Institut für Internationale WIrtschaftsbeziehungen (EIIW)); Kirsten Meyer (Bergische Universität Wuppertal/ Schumpeter School of Business and Economics)
    Abstract: The aim of this paper is to explain the natural gas demand dynamics of Germany and to determine the factors affecting the import of natural gas from Russia. In the existing literature, there are several studies which investigate the demand structure of single sectors (like industry or households), but there is a lack of analysis that tries to explain import quantities as a whole. On the basis of a theoretical discussion, the components of natural gas import quantities have been tested through different time series analysis. We found that the European natural gas and oil prices are co integrated with a time lag of 7 months. We interpret this result as revealing that natural gas is a viable substitute for oil. The time series estimation results support our hypothesis and demonstrate a positive relationship between oil price and natural gas demand. Furthermore, we found that the German industry production level is also an important determinant for natural gas import. In the next step, we used a technological variable, energy intensity change over time, to explain the change in natural gas import. Then, a new variable was implemented within the analysis: The purpose of natural gas import which is a hybrid variable and indicates which purpose dominates, i.e. either heating or electricity production. After a positively resulted significance test, we made a simple forecast analysis using an AR-Process to show that the positive trend of natural gas import will continue, if all of the significant variables have the same development in the future. It is important to show this trend because this kind of development raises the increases the issue of dependence of both countries from each other. Against this background alternatives will be discussed as to how Germany could improve security of its natural gas supplies.
    Keywords: Determinants of natural gas import, Co-integration, AR Analysis, Energy Policy
    JEL: L95 F02 C32 Q43
    Date: 2009–12
  7. By: Schlüter, Stephan; Davison, Matt
    Abstract: In this article we present both a theoretical framework and a solved example for pricing an European gas storage facility and computing the optimal strategy for its operation. As a representative price index we choose the Dutch TTF day-ahead gas price. We present statistical evidence that the volatility of this index is time-varying, so we introduce a new continuous-time model by incorporating GARCH diffusion into an Ornstein-Uhlenbeck process. Based on this price process we use dynamic programming methods to derive partial differential equations for pricing a storage facility. As an example we apply our methodology to a storage site located in Epe at the German-Dutch border. In this context we investigate the effects of multiple contract types, and perform a sensitivity analysis for all model parameters. We obtain a value surface displaying the properties of a financial straddle. Both volatility and mean reversion influence the facility value - but only around the long-run mean of the gas price. The terminal condition, which includes information about the contract provisions, is of importance if it contains e.g. penalty terms for low inventory levels. Otherwise its influence is diminishing for increasing lease periods. --
    Keywords: TTF gas price,GARCH diffusion,natural gas storage,dynamic computing
    JEL: C31 C61
    Date: 2010
  8. By: Anca Cotet (Department of Economics, Ball State University); Kevin K. Tsui (The John E. Walker Department of Economics, Clemson University)
    Abstract: This paper studies the effects of oil rent on development using a unique panel dataset describing worldwide oil discoveries and extractions. First, we revisit the so-called curse of oil, which contends that oil rent hinders economic development. Exploiting cross-country variations in the timing of oil discoveries and the size of initial oil in place, we find that, contrary to the oil-curse hypothesis, there is little robust evidence of a negative relationship between oil endowment and economic performance, even after controlling for initial income. Second, based on both cross-country and panel evidence, we find a robust association between oil abundance and population growth, which might suggest a Malthusian effect which reduces the economic growth measured in per capita GDP. We find some evidence that oil abundance increases fertility. On an accounting basis, however, migration plays an even more prominent role in explaining the oil-induced population growth. Furthermore, we show that focusing on material gain may understate the welfare gain from oil abundance, because relative to non-oil countries, oil-rich countries gain more in health improvements. These results suggest that despite the positive oil effect on population growth, oil-rich countries do not suffer from the Malthusian trap, and overall oil abundance is an economic blessing rather than a curse.
    Keywords: resource curse, Malthusian trap, oil discoveries
    JEL: O13 O15 Q32 Q56
    Date: 2010–03
  9. By: Anca Cotet (Department of Economics, Ball State University); Kevin K. Tsui (The John E. Walker Department of Economics, Clemson University)
    Abstract: This paper examines the effect of oil abundance on political violence. First, we revisit one of the main empirical findings of the civil conflict literature that oil abundance causes civil war. Using a unique panel dataset describing worldwide oil discoveries and extractions, we show that simply controlling for country fixed effects removes the statistical association between oil reserves and civil war in a sample of more than 100 countries over the period 1930-2003. Other macro-political violence measures, such as coup attempts and irregular leader transitions, are not affected by oil reserves either. Rather, we find that oil-rich nondemocratic countries have a larger defense burden. To further address the problems of endogeneity and measurement error, we exploit randomness in the success or failure of oil explorations. We find that oil discoveries do not increase the likelihood of violent challenges to the state in the sample of country-years in which at least one exploratory well is drilled, and oil discoveries increase military spending in the subsample of nondemocratic countries. Similar results are obtained on a larger sample which includes country-years without oil exploration while controlling for selection based on the likelihood of exploration using propensity score matching. We suggest a possible explanation for our findings based on the idea that oil-rich nondemocratic regimes effectively expend resources to deter potential challengers.
    Keywords: resource curse, oil discoveries, civil conflict, defense burden
    JEL: H56 Q34
    Date: 2010–03
  10. By: Hassan Benchekroun; Cees Withagen
    Abstract: We provide the closed form solution to the Dasgupta-Heal-Solow-Stiglitz (DHSS) model. The DHSS model is based on the seminal articles Dasgupta and Heal (Rev. Econ. Stud., 1974), Solow (Rev. Econ. Stud., 1974) and Stiglitz (Rev. Econ. Stud., 1974) and describes an economy with two assets, man-made capital and a nonrenewable resource stock. We explicitly characterize, for such an economy, the dynamics along the optimal trajectory of all the variables in the model and from all possible initial values of the stocks. We use the analytical solution to prove several properties of the optimal consumption path. In particular, we show that the initial consumption under a utilitarian criterion starts below the maximin rate of consumption if and only the resource is abundant enough and that under a utilitarian criterion, it is not necessarily the present generation that benefits most from a windfall of resources.
    JEL: E20 Q30 C65
    Date: 2010–01
  11. By: Razzak, Weshah; Labas, Belkacem
    Abstract: Using the work – leisure choice model, this paper computes equilibrium hours-worked for a number of Arab, non-oil-producing and labor-abundant countries and major oil-producing, tax-free and labor-scarce countries, for which actual data are unavailable. We estimate hours-worked for the G7, and show that the model fits the data well. We use this evidence as a yardstick to evaluate the model for the Arab countries for which no actual data are available. The model explains hours-worked in Arab, non-oil-producing countries well, but it fails to explain hours-worked in the oil-producing – tax-free countries. With the effective marginal tax rate close to zero, hours-worked increase significantly. We show that natural resource endowment is a required predicting factor for the model in this case. It turned out that natural resource capital acts exactly as a tax. In other words, it increases the wedge between real wages and marginal productivity, hence, natural resource wedge. The higher the natural resource endowment the less hours people worked. Most importantly, we provide a wider support to the model and confirm that the labor supply is elastic in all Arab countries. This finding confirms previous research that workers respond to incentives, which has serious implications for tax and social security policies. We also provide some policy simulation pertinent to poverty and welfare.
    Keywords: Hours-worked; labor wedge; natural resource endowment; poverty; welfare
    JEL: E0 E62 J22 E01
    Date: 2010–03
  12. By: Paul J.J. Welfens (Europäisches Institut für Internationale WIrtschaftsbeziehungen (EIIW))
    Abstract: The price dynamics of oil and other non-renewables is a complex field of theoretical and empirical analysis. The Analysis takes the Hotelling rule as an analytical point of departure - basically relevant for the supply-side dynamics - and also considers resources demand, which is assumed to negatively depend on the price of oil and positively on net real wealth of the private sector (wealth and real income are, of course, related to each other through the interest rate). The net wealth variable is of particular interest in the approach presented, which emphasizes, that pricing of non-renewable resources should be considered in the context of portfolio analysis and the role of wealth, respectively. The fairly standard assumption, that the change in the price of natural resources per unit of time is a positive function of the excess demand in the oil market, implies a differential equation, which shows how crucial the role of oil inflation expectations are. If those expectations are below a critical level, there will be stable long run oil price. If, however, the expected oil inflation rate exceeds the critical value, there will be an ongoing increase of the oil price. From this perspective, it is clear that the long run price developments of natural (non-renewable) resources are strongly shaped by global expectation dynamics. To the extent that global real demand shocks or restrictive shifts in monetary or credit expansion dynamics occur, oil inflation expectations could switch from the range of above the critical inflation expectations to below such range, which then amounts to a price regime shift. Such a shift obviously has occurred during the transatlantic banking crisis and the following global recession. A somewhat alternative short-term analytical approach considers oil pricing in the context of a broader portfolio model - thus, oil and several standard financial assets are considered. Policy makers should consider both volatility issues and the challenges of sustainable growth.
    Keywords: Hotelling rule, price dynamic, oil, non-renewables resource
    JEL: G11 O40
    Date: 2009–05
  13. By: Guglielmo Maria Caporale; Davide Ciferri; Allessandro Girardi
    Abstract: We investigate the role of crude oil spot and futures prices in the process of price discovery by using a cost-of-carry model with an endogenous convenience yield and daily data over the period from January 1990 to December 2008. We provide evidence that futures markets play a more important role than spot markets in the case of contracts with shorter maturities, but the relative contribution of the two types of market turns out to be highly unstable, especially for the most deferred contracts. The implications of these results for hedging and forecasting crude oil spot prices are also discussed.
    Date: 2010
  14. By: Christophe Rault; Mohamed El Hedi AROURI
    Abstract: This paper implements recent bootstrap panel cointegration techniques and Seemingly Unrelated regression (SUR) methods to investigate the existence of a long-run relationship between oil prices and Gulf Corporation Countries (GCC) stock markets. Since GCC countries are major world energy market players, their stock markets are likely to be susceptible to oil price shocks. Using two different (weekly and monthly) datasets covering respectively the periods from 7 June 2005 to 21 October 2008, and from January 1996 to December 2007, our investigation shows that there is evidence for cointegration of oil prices and stock markets in GCC countries, while the SUR results indicate that oil price increases have a positive impact on stock prices, except in Saudi Arabia.
    Keywords: GCC stock markets, oil prices, panel cointegration analysis
    JEL: G12 F3 Q43
    Date: 2009–06–01
  15. By: Christophe Rault; ohamed El Hedi AROURI
    Abstract: In the empirical literature, only few studies have focused on the relationship between oil prices and stock markets in net oil-importing countries. In net oil-exporting countries this relationship has not been widely researched. This paper implements the panel-data approach of Kónya (2006), which is based on SUR systems and Wald tests with country-specific bootstrap critical values to study the sensitivity of stock markets to oil prices in GCC (Gulf Corporation Council) countries. Using two different (weekly and monthly) datasets covering respectively the periods from 7 June 2005 to 21 October 2008, and from January 1996 to December 2007, we show strong statistical evidence that the causal relationship is consistently bi-directional for Saudi Arabia. Stock market price changes in the other GCC member countries do not Granger cause oil price changes, whereas oil price shocks Granger cause stock price changes. Therefore, investors in GCC stock markets should look at the changes in oil prices, whereas investors in oil markets should look at changes in the Saudi stock market.
    Keywords: GCC stock markets, oil prices
    JEL: G12 F3 Q43
    Date: 2009–06–01
  16. By: Iwata, Hiroki; Okada, Keisuke; Samreth, Sovannroeun
    Abstract: This paper empirically investigates the environmental Kuznets curve (EKC) for CO2 emissions in the cases of 11 OECD countries by taking into account the role of nuclear energy in electricity production. The autoregressive distributed lag (ARDL) approach to cointegration is employed as the estimation method. Our results indicate that energy consumption has a positive impact on CO2 emissions in most countries in the study. However, the impact of trade is not statistically significant. The results provide evidence for a role of nuclear power in reducing CO2 emissions only in some countries. Additionally, although the estimated long-run coefficients of income and its square satisfy the EKC hypothesis in Finland, Japan, Korea and Spain, only Finland’s EKC turning point is inside the sample period of the study, providing poor evidence in support of the EKC hypothesis.
    Keywords: CO2; Environment; EKC; OECD; ARDL
    JEL: Q53 Q51 Q43
    Date: 2010–03
  17. By: Francesco Bosello (University of Milan, Fondazione Eni Enrico Mattei and Euromediterranean Center on Climate Change (CMCC))
    Abstract: This work develops a framework for the analysis at the macro-level of the relationship between adaptation and mitigation policies. The FEEM-RICE growth model with stock pollution, endogenous R&D investment and emission abatement is enriched with a planned-adaptation module where a defensive capital stock is built through adaptation investment. Within this framework the optimal path of planned adaptation, the optimal inter and intra temporal mix between adaptation, mitigation and investment in R&D, and the sensitivity of a strategy to each other is identified. The major conclusions of this research show that adaptation, mitigation and R&D are strategic complements as all concur together to the solution of the climate change problem; nonetheless the possibility to adapt reduces the need to mitigate and partly crowds out other forms of investment like those in R&D. The optimal intertemporal distribution of strategies is also described: it requires to anticipate mitigation effort that should start already when climate damages are low and postpone adaptation intervention until they are substantial. Thus the possibility to adapt is not a justification to delay abatement activities. A sensitivity analysis demonstrates the robustness of these results to different parameterizations, in particular to changes in expected climate-change damages and in the discount rates.
    Keywords: Climate Change Impacts, Mitigation, Adaptation, Integrated Assessment
    JEL: Q25 Q28
    Date: 2010–02
  18. By: Harstad, Bård (Kellogg School of Management, Northwestern University); Eskeland, Gunnar S. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: Permits markets are celebrated as a policy instrument since they allow (i) firms to equalize marginal costs through trade and (ii) the regulator to distribute the burden in a politically desirable way. These two concerns, however, may conflict in a dynamic setting. Anticipating the regulator's future desire to give more permits to firms that appear to need them, firms purchase permits to signal their need. This raises the price above marginal costs and the market becomes inefficient. If the social cost of pollution is high and the government intervenes frequently in the market, the distortions are greater than the gains from trade and non-tradable permits are better. The analysis helps to understand permit markets and how they should be designed.
    Keywords: Tradable permits; time inconsistency; the ratchet effect; rent-seeking; plan vs. market
    JEL: Q50
    Date: 2010–03–26
  19. By: Moore, Winston; Lewis-Bynoe, Denny; Howard, Stacia
    Abstract: The tourist industry is widely recognised as the key engine of growth in the Caribbean, representing a significant source of foreign exchange earnings and employment. The present study provides an assessment of how climate change could likely impact on regional tourism features. The analysis is undertaken by comparing historical tourism climatic indices to those obtained under the various climate change scenarios. The results suggest that the biggest losers, in terms of deteriorations in their climatic features, are likely to be the Caribbean, Central America and South America.
    Keywords: Tourism climate index; Climate Change; Caribbean
    JEL: Q50 C43 L83
    Date: 2009–12–12
  20. By: Moore, Winston R.; Harewood , Leandra; Grosvenor, Tiffany
    Abstract: Assuming nothing is done to address greenhouse gas emissions, sea levels across the world are anticipated to rise by between 0.2m and 1m over this century. Higher sea levels can be particularly devastating to small states. It is expected that rising sea levels will result in coastal squeezing and the loss of their main tourist attraction, beach tourism. Climate change is also forecasted to result in more severe storm activity, which could also lead to flooding and damage from storm force winds. This study attempts to quantify the potential supply-side effects of climate change on tourism in the small island state of Barbados. Using a database of 181 hotels, a model is employed to evaluate the effects of coastal squeezing and storm activity on accommodation establishments.
    Keywords: Climate Change; Tourism; Caribbean
    JEL: O54 L83 Q54
    Date: 2010–02–20
  21. By: Lucia Ceccato (Ca’ Foscari University); Valentina Giannini (Ca’ Foscari University and Fondazione Eni Enrico Mattei); Carlo Giupponi (Ca’ Foscari University and Fondazione Eni Enrico Mattei)
    Abstract: This work illustrates the preliminary findings of a participatory research process aimed at identifying responses for sustainable water management in a climate change perspective, in two river basins in Europe and Asia. The paper describes the methodology implemented through local workshops, aimed at eliciting and evaluating possible responses to flood risk. Participatory workshops allowed for the identification of four categories of possible responses and a set of nine evaluation criteria, three for each of the three pillars of sustainable development. The main outcome of such activities consists in the ranking of broad response categories instrumental to the objective of the Brahmatwinn research project, i.e. the identification of Integrated Water Resource Management Strategies (IWRMS) based upon the issues and preferences elicited from local experts. The mDSS tool was used to facilitate transparent and robust management of the information collected through Multi-Criteria Decision Analysis (MCDA) and communication of the outputs.
    Keywords: Participatory Process, Climate Change, Flood Risk, Decision Support System, Multi Criteria Analysis, MCA, Eliciting Responses, Evaluating Responses, Integrated Water Resources Management, IWRM, Mulino Decision Support System, mDSS
    JEL: C61 Q01 Q54 Q56 Q58
    Date: 2010–03
  22. By: Patrick Criqui (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Pierre-Olivier Peytral (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Jean-Christophe Simon (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The report is prepared with three main objectives: i/ Review of general information and scientific literature to be shared with members of the scientific committee and with other contributors to the seminar. ii/ Analysis of energy trends and carbon emission patterns, and identification of major issues related to low carbon scenarios analysis. iii/ Exploration of some topics for further debate and analysis : Overview on the dual climate change and development challenge, with emphasis on the scope for policy options related to the current debate on “Green Growth” ; retrospective analysis of CO2 emissions profiles in Thailand over 1990-2008 ; review of methodologies low carbon scenario The conclusion will address the rationale for Nationally Appropriate Mitigation Actions that could be implemented in the years to come. This report is built on documents and literature published prior to December 2009 and therefore does not deal with new issues considered as in a ‘post Copenhagen Conference' perspective.
    Keywords: climate policy ; carbon emissions ; scenario ; Thailand
    Date: 2010–03
  23. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Jens K. Perret (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Deniz Erdem
    Abstract: Summary: The traditional discussion about CO2 emissions and greenhouse gases as a source of global warming has been rather static, namely in the sense that innovation dynamics have not been considered much. Given the global nature of the climate problem, it is natural to develop a more dynamic Schumpeterian perspective and to emphasize a broader international analysis, which takes innovation dynamics and green international competitiveness into account: We discuss key issues of developing a consistent global sustainability indicator, which should cover the crucial dimensions of sustainability in a simple and straightforward way. The basic elements presented here concern genuine savings rates – covering not only depreciations on capital, but on the natural capital as well -, the international competitiveness of the respective country in the field of environmental ("green") goods and the share of renewable energy generation. International benchmarking can thus be encouraged and opportunities emphasized - an approach developed here. This new EIIW-vita Global Sustainability Indicator is consistent with the recent OECD requirements on composite indicators and thus, we suggest new options for policymakers. The US and Indonesia have suffered from a decline in their performance in the period 2000-07; Germany has improved its performance as judged by the new composite indicator whose weights are determined from factor analysis. The countries covered stand for roughly 91% of world GDP, 94% of global exports, 82% of global CO2 emissions and 68% of the population.
    Keywords: CO2 Emission, Global worming, Sustainability, International country competitiveness
    JEL: Q54 Q01 O57
    Date: 2010–02
  24. By: Valentina Bosetti (FEEM and CMCC, Italy. Visiting Fellow at Princeton Environmental Institute); David G. Victor (International Law & Regulation (ILAR) at UC San Diego, School of International Relations and Pacific Studies)
    Abstract: Modellers have examined a wide array of ideal-world scenarios for regulation of greenhouse gases. In this ideal world, all countries limit emissions from all economic sectors; regulations are implemented by intelligent, well-informed forward-looking agents; all abatement options, such as new energy technologies and forestry offsets, are available; trade in goods, services and emission credits is free and unfettered. Here we systematically explore more plausible second-best worlds. While analysts have given inordinate attention to which countries participate in regulation—what we call “variable geometry”—which has a strikingly small impact on total world cost of carbon regulations if international trade in emission credits allows economies to equilibrate. Limits on emission trading raise those costs, but by a much smaller amount than expected because even modest amounts of emission trading (less than 15% of abatement in a plausible scenario that varies the geometry of effort) have a large cost-reducing impact. Second best scenarios that see one sector regulated more aggressively and rapidly than others do not impose much extra burden when compared with optimal all-sector scenarios provided that regulations begin in the power sector. Indeed, some forms of trade regulation might decrease the financial flows associated to a carbon policy thus increasing political feasibility of the climate agreement. Much more important than variable geometry, trading and sectors is another factor that analysts have largely ignored: credibility. In the real world governments find it difficult to craft and implement credible international regulations and thus agents are unable to be so forward-looking as assumed in ideal-world modelling exercises. As credibility declines the cost of coordinated international regulation skyrockets—even in developing countries that are likely to delay their adoption of binding limits on emissions. Because international institutions such as treaties are usually weak, governments must rely on their own actions to boost regulatory credibility—for example, governments might “pre-commit” international regulations into domestic law before international negotiations are finally settled, thus boosting credibility. In our scenarios, China alone would be a net beneficiary of pre-commitment that advances its carbon limits two decades (from 2030, in our scenario, to today) if doing so would make international regulations more credible and thus encourage Chinese firms to invest with a clearer eye to the future. Overall, low credibility is up to 6 times more important in driving higher world costs for carbon regulations when compared with variable geometry, limits on emission trading and variable sectors. In this paper, we have not explored the other major dimension to the second-best: the lack of timely availability of the full range of abatement options, although our results suggest that even this will be less consequential than credibility.
    Keywords: Greenhouse Gases, Second-best Regulation
    JEL: Q5 Q58
    Date: 2010–03
  25. By: Francesco Bosello (Unversity of Milan and Fondazione Eni Enrico Mattei); Carlo Carraro (University of Venice, CEPR, CESifo and Fondazione Eni Enrico Mattei); Enrica De Cian (University of Venice and Fondazione Eni Enrico Mattei)
    Abstract: It has become commonly accepted that a successful climate strategy should compound mitigation and adaptation. The accurate combination between adaptation and mitigation that can best address climate change is still an open question. This paper proposes a framework that integrates mitigation, adaptation, and climate change residual damages into an optimisation model. This set-up is used to provide some insights on the welfare maximising resource allocation between mitigation and adaptation, on their optimal timing, and on their marginal contribution to reducing vulnerability to climate change. The optimal mix between three different adaptation modes (reactive adaptation, anticipatory adaptation, and investment in innovation for adaptation purposes) within the adaptation bundle is also identified. Results suggest that the joint implementation of mitigation and adaptation is welfare improving. Mitigation should start immediately, whereas adaptation somehow later. It is also shown that in a world where the probability of climate-related catastrophic events is small and where decision makers have a high discount rate, adaptation is unambiguously the preferred option. Adaptation needs, both in developed and developing countries, will be massive, especially during the second half of the century. Most of the adaptation burden will be on developing countries. International cooperation is thus required to equally distribute the cost of adaptation.
    Keywords: Climate Change Impacts, Mitigation, Adaptation, Integrated Assessment Model
    JEL: Q54 Q56 Q43
    Date: 2010–03

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