nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒04‒17
68 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. To what extent can non-price/income instruments influence the demand for energy? By Olutomi I Adeyemi; David C Broadstock
  2. The Slow Search for Solutions: Lessons from Historical Energy Transitions by Sector and Service By Roger Fouquet
  3. Energy Security in the EU and Beyond By Richard Pomfret
  4. The Optimal Depletion of Exhaustible Resources : A Complete Characterization By BENCHEKROUN, Hassan; WITHAGEN, Cees
  5. With Exhaustible Resources, Can A Developing Country Escape From The Poverty Trap? By Cuong Le Van; Katheline Schubert; Tu-Anh Nguyen
  6. What Drives Gasoline Prices? By Fay Dunkerley; Amihai Glazer; Stef Proost
  7. The taxation of motor fuel : international comparison By Ley, Eduardo; Boccardo, Jessica
  9. Oil Price Shocks and Stock Return Predictability By Sørensen, Lars Qvigstad
  10. Time Varying Risk Aversion: An Application to Energy Hedging By John Cotter; Jim Hanly
  11. Cross-Country Differences in the Effects of Oil Shocks By G. PEERSMAN; I. VAN ROBAYS;
  12. Down the non-linear road from oil to consumer energy prices: no much asymmetry along the way By Fabrizio Venditti
  13. Testing for Asymmetric Pricing Behaviour in Irish and UK Petrol and Diesel Markets By Bermingham, Colin; O’ Brien, Derry
  14. Asymmetric effects of oil price fluctuations in international stock markets By Sofía B. Ramos; Helena Veiga
  15. Oil Volatility and the Option Value of Waiting: An analysis of the G-7 By Don Bredin; John Elder; Stilianos Fountas
  16. Sources of the Volatility Puzzle in the Crude Oil Market By C. BAUMEISTER; G. PEERSMAN;
  17. Long-term fiscal risks and sustainability in an oil-rich country : the case of Russia By Bogetic, Zeljko; Smits, Karlis; Budina, Nina; van Wijnbergen, Sweder
  18. Impacts of the triple global crisis on growth and poverty in Yemen By Breisinger, Clemens; Collion, Marie-Helen; Diao, Xinshen; Rondot, Pierre
  19. Implications of the Biofuels Boom for the Global Livestock Industry: A Computable General Equilibrium Analysis By Taheripour, Farzad; Hertel, Thomas; Tyner, Wally
  20. Commodity Price Volatility in the Biofuel Era: An Examination of the Linkage between Energy and Agricultural Markets By Hertel, Thomas; Beckman, Jayson
  21. Do Americans Consume Too Little Natural Gas? An Empirical Test of Marginal Cost Pricing By Lucas W. Davis; Erich Muehlegger
  22. Export restraints on russian natural gas and raw timber : what are the economic impacts ? By Tarr, David G.
  23. The dynamics of hourly electricity prices By Wolfgang Karl Härdle; Stefan Trück
  24. Selecting effective divestments in electricity generation markets By Federico, Giulio; Lopez, Angel
  25. Identifying options for regulating the coordination of network investments with investments in distributed electricity generation By Eva Niesten
  26. The regional electricity generation mix in Scotland: A portfolio selection approach By Grant Allan; Igor Eromenko; Peter Mcgregor; Kim Swales
  27. Relevance of Risk Capital and Margining for the Valuation of Power Plants: Cash Requirements for Credit Risk Mitigation By Lang, Joachim; Madlener, Reinhard
  28. Improving the energy efficiency of buildings,The impact of environmental policy on technological innovation By Joëlle Noailly
  29. Managing Water Shortages in the Western Electricity Grids By Hugh Scorah; Amy Sopinka; G. Cornelis van Kooten
  30. Simulation of the European Electricity Market and CCS Development with the HECTOR Model By Lohwasser, Richard; Madlener, Reinhard
  31. Combining Policies for Renewable Energy: Is the Whole Less than the Sum of Its Parts? By Fischer, Carolyn; Preonas, Louis
  32. Supply of Renewable Energy Sources and the Cost of EU Climate Policy By Stefan Boeters; Joris Koornneef
  33. Market performance and distributional effects on renewable energy markets By Paul Koutstaal; Michiel Bijlsma; Gijsbert Zwart; Xander van Tilburg; Özge Özdemir
  34. The economics of renewable energy expansion in rural Sub-Saharan Africa By Deichmann, Uwe; Meisner, Craig; Murray, Siobhan; Wheeler, David
  35. The Benefit of Regional Diversification of Cogeneration Investments in Europe: A Mean-Variance Portfolio Analysis By Westner, Günther; Madlener, Reinhard
  36. Development of Cogeneration in Germany: A Dynamic Portfolio Analysis Based on the New Regulatory Framework By Westner, Günther; Madlener, Reinhard
  37. Home, green home, A case study of inducing energy-efficient innovations in the Dutch building sector By Joelle Noailly; Svetlana Batrakova; Ruslan Lukach
  38. The Rebound Effect with Energy Production: A Partial Equilibrium Analysis By Grant Allan; Peter McGregor; Kim Swales; Karen Turner
  39. The Full Impact of Energy Efficiency on Households' Energy Demand By Kurt Kratena; Michael Wüger
  40. Modeling International Trends in Energy Efficiency and Carbon Emissions By David I.Stern
  41. How Ambitious and China and India’s Emissions Intensity Targets By David I Stern; Frank Jotzo
  42. Convergence in per capita CO2 emissions: a robust distributional approach By Carlos Ordás Criado; Jean-Marie Grether
  43. Does experience eliminate the effect of a default option? - A field experiment on CO2-offsetting for air transport By Löfgren, Åsa; Martinsson, Peter; Hennlock, Magnus; Sterner, Thomas
  44. Gouvernance des activités de R&D à l’étranger par les firmes multinationales:contribution de la théorie fondée sur les ressource By Dhikra Chebbi Nekhili; Mehdi Nekhili; Frédéric Nlemvo
  45. Discounting investments in mitigation and adaptation, a dynamic stochastic general equilibrium approach of climate change By Rob Aalbers
  46. The Double Dividend Hypothesis in a CGE Model: Specific Factors and Variable Labour Supply By Iain Fraser; Robert Waschik
  47. Tax or no tax? Preferences for climate policy attributes By Brännlund, Runar; Persson, Lars
  48. A Safety Valve for Emissions Trading By John Stranlund
  49. Optimal Emission Pricing in the Presence of International Spillovers: Decomposing Leakage and Terms-of-Trade Motives By Christoph Boehringer; Andreas Lange; Thomas F. Rutherford
  50. The effects of rent seeking over tradable pollution permits By Hanley, Nick; MacKenzie, Ian A.
  51. Impact of emissions pricing on New Zealand manufacturing: A short-run analysis By Bartleet, Matthew; Iyer, Kris; Lawrence, Gillian; Numan-Parsons, Elisabeth; Stroombergen, Adolf
  52. Additional Action Reserve: A proposed mechanism to facilitate additional voluntary and policy emission reductions efforts in emissions trading schemes By Paul Twomey; Regina Betz; Iain MacGill; Robert Passey
  53. Tradable Permits vs Ecological Dumping. By Fabio Antoniou; Panos Hatzipanayotou; Phoebe Koundouri
  54. To Trade or Not to Trade: Firm-Level Analysis of Emissions Trading in Santiago, Chile By Coria, Jessica; Löfgren, Åsa; Sterner, Thomas
  55. Trade in'virtual carbon': empirical results and implications for policy By Atkinson, Giles; Hamilton, Kirk; Ruta, Giovanni; Van Der Mensbrugghe, Dominique
  56. The EU Emission Trading Scheme. Insights from the First Trading Years with a Focus on Price Volatility By Claudia Kettner; Angela Köppl; Stefan Schleicher
  57. An Analysis of the EU Emission Trading Scheme By Don Bredin; Cal Muckley
  58. Optimal capture and sequestration from the carbon emission flow and from the atmospheric carbon stock with heterogeneous energy consuming sectors By Jean Pierre Amigues; Gilles Lafforgue; Michel Moreaux
  59. Climate change, mitigation and adaptation: the case of the Murray–Darling Basin in Australia By John Quiggin; David Adamson; Sarah Chambers; Peggy Schrobback
  60. Turning Water into Carbon: Carbon sequestration vs. water flow in the Murray-Darling Basin By Peggy Schrobback; David Adamson; John Quiggin
  61. Assessing the financial vulnerability to climate-related natural hazards By Mechler, Reinhard; Hochrainer, Stefan; Pflug, Georg; Lotsch, Alexander; Williges, Keith
  62. The Poverty Implications of Climate-Induced Crop Yield Changes by 2030 By Hertel, Thomas; Burke, Marshall; Lobell, David
  63. Climate Risks, Seasonal Food Insecurity and Consumption Coping Strategies: Evidences from a Micro-level Study from Northern Bangladesh By Ahamad, Mazbahul Golam; Khondker, Rezai Karim
  64. Hydro-economic modeling of climate change impacts in Ethiopia By You, Gene Jiing-Yun; Ringler, Claudia
  65. Assessing Investment in Future Landsat Instruments: The Example of Forest Carbon Offsets By Macauley, Molly K.; Shih, Jhih-Shyang
  66. Un, deux trois, soleil By Nicolas Bouleau
  67. Second Best Environmental Policies under Uncertainty. By Fabio Antoniou; Panos Hatzipanayotou; Phoebe Koundouri
  68. Impact Evaluation and Interventions to Address Climate Change: A scoping study By Prowse, Martin; Snilstveit, Birte

  1. By: Olutomi I Adeyemi (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey); David C Broadstock (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)
    Abstract: The demand for energy is not simply a function of price and income, but can be shown also to be a function also of the underlying energy demand trend (UEDT). The UEDT captures behavioural responses to non-fiscal instruments, including technological change, but also encapsulating attitudinal responses/changes in demand that might result for instance from increased public awareness of how environmentally damaging energy use can be, hence reflecting underlying consumer preferences. This study estimates a longitudinal econometric model for the aggregate demand functions of a sample of 17 OECD countries for the period 1960-2005. This approach to modelling will enable UEDT’s to be observed for each of the countries, as well as the normal price and income elasticities. The model results will provide an indication of the extent to which price/income based instruments can be used to reduce the demand for energy, as well as indicating the extent to which consumers have responded to non-price/income instruments.
    Keywords: OECD Aggregate energy demand; Asymmetry; Exogenous non-economic factors.
    JEL: C33 Q41
    Date: 2009–08
  2. By: Roger Fouquet
    Keywords: energy transition; low carbon economy; technological innovation and diffusion
  3. By: Richard Pomfret
    Abstract: Past episodes of energy insecurity have been fleeting and the fears have been assuaged by market forces or technical change. This paper analyses the nature of the EU's current energy security problems, emphasising the increased importance of natural gas and high level of dependence on Russian supplies through a small number of pipelines. Building alternative pipeline routes is expensive and with finite reserves in any gas field pipelines may be mutually exclusive; especially since China has entered the market for Central Asian gas, new non-Russian pipelines to the EU may not be economically feasible. However, global gas reserves are large, and high energy prices in the 2000s encouraged investment in alternative delivery modes, notable liquefied natural gas (LNG). As a spot market for LNG emerges EU energy-importing countries may face volatile prices, but will not be exposed to insecurity of supply.
    Keywords: natural gas, pipelines, energy security
    JEL: Q34 L71 N74
    Date: 2010–01
  4. By: BENCHEKROUN, Hassan; WITHAGEN, Cees
    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.
    Keywords: Exhaustible resources, Dasgupta-Heal-Solow-Stiglitz economy, exponential integral
    JEL: E20 Q30 C65
    Date: 2010
  5. By: Cuong Le Van (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, University of Exeter Business School - University of Exeter Business School); Katheline Schubert (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Tu-Anh Nguyen (Central Insitute of Economic Management - Central Insitute of Economic Management)
    Abstract: This paper studies the optimal growth of a developing non-renewable natural resource producer. It extracts the resource from its soil, and produces a single consumption good with man-made capital. More- over, it can sell the extracted resource abroad and use the revenues to buy an imported good, which is a perfect substitute of the domes- tic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We show that the extent to which the country will escape from the poverty trap depends, besides the interactions between its technology and its impatience, on the characteristics of the resource revenue function, on the level of its initial stock of capital, and on the abundance of the natural resource.
    Keywords: optimal growth, non-renewable resource, convex-concave technology, poverty trap, resource curse.
    Date: 2010
  6. By: Fay Dunkerley (Center for Economic Studies, KULeuven); Amihai Glazer (Department of Economics, University of California-Irvine); Stef Proost (Center for Economic Studies, KULeuven)
    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%.
    Keywords: Gasoline taxes; Median voter theory; Political economy
    JEL: H23 R48 Q48 L98 Q52
    Date: 2010–01
  7. By: Ley, Eduardo; Boccardo, Jessica
    Abstract: This paper assesses whether the level of taxation of motor fuel is broadly appropriate in a group of countries (OECD, BRICs and South Africa) accounting for more than 80 percent of world greenhouse gas emissions. The analysis deals with emissions from oil combustion in transport, which account for about 40 percent of carbon dioxide emissions. In the benchmark specification, six countries (responsible, in turn, for more than 40 percent of worldwide motor-fuel greenhouse gas world emissions) would be undertaxing motor fuel. The authors evaluate the sensitivity of the results to the values of the elasticities and externalities that used in the analysis. They find that varying the values of these parameters (within the level of uncertainty reasonably associated with them) significantly affects the results. This implies that, while informative, the results must be taken as indicative. Further analysis for a particular country must rely on a well-informed choice for the values of the country-specific parameters.
    Keywords: Transport Economics Policy&Planning,Energy Production and Transportation,Taxation&Subsidies,Climate Change Mitigation and Green House Gases,Climate Change Economics
    Date: 2010–02–01
  8. By: Kitov, Ivan; Kitov, Oleg
    Abstract: In April 2009, we introduced a model representing the evolution of motor fuel price (a subcategory of the consumer price index of transportation) relative to the overall CPI as a linear function of time. Under our framework, all price deviations from the linear trend are transient and the price must promptly return to the trend. Specifically, the model predicted that “the price for motor fuel in the US will also grow by 50% by the end of 2009. Oil price is expected to rise by ~50% as well, from its current value of ~$50 per barrel.” The behavior of actual price has shown that this prediction is accurate in both amplitude and trajectory shape. Hence, one can conclude that the concept of price decomposition into a short-term (oscillating) and long-term (linear trend) components is valid. According to the model, the price of motor fuel and crude oil will be falling to the level of $30 per barrel during the next 5 to 8 years.
    Keywords: CPI; PPI; crude oil; motor fuel; price; prediction; USA
    JEL: E3
    Date: 2010–04–06
  9. By: Sørensen, Lars Qvigstad (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: Recent research has documented that oil price changes lead the aggregate market in most industrialized countries, and has argued that it represents an anomaly - an underreaction to information that investors can profit from. I identify oil price changes that are caused by exogenous events and show that it is only these oil price changes that predict stock returns. The exogenous events usually correspond to periods of extreme turmoil - either military conflicts in the Middle East or OPEC collapses. Given the source of the predictability, I question its usefulness as a trading strategy and its representation as an anomaly.
    Keywords: Oil Price; Stock Markets
    JEL: G11 G12
    Date: 2009–11–11
  10. By: John Cotter (School of Business, University College Dublin); Jim Hanly (School of Accounting and Finance, Dublin Institute of Technology)
    Abstract: Risk aversion is a key element of utility maximizing hedge strategies; however, it has typically been assigned an arbitrary value in the literature. This paper instead applies a GARCH-in-Mean (GARCH-M) model to estimate a time-varying measure of risk aversion that is based on the observed risk preferences of energy hedging market participants. The resulting estimates are applied to derive explicit risk aversion based optimal hedge strategies for both short and long hedgers. Out-of-sample results are also presented based on a unique approach that allows us to forecast risk aversion, thereby estimating hedge strategies that address the potential future needs of energy hedgers. We find that the risk aversion based hedges differ significantly from simpler OLS hedges. When implemented in-sample, risk aversion hedges for short hedgers outperform the OLS hedge ratio in a utility based comparison.
    Keywords: Energy, Hedging, Risk Management, Risk Aversion, Forecasting
    JEL: G10 G12 G15
    Date: 2010–01–01
    Abstract: We compare the economic consequences of several types of oil shocks across a set of industrialized countries that are structurally very diverse with respect to the role of oil and other forms of energy in their economy. We find considerably different effects across countries, which crucially depend on the underlying source of the oil price shift. For oil demand shocks driven by global economic activity and oil-specific demand shocks, all countries experience respectively a temporary increase and transitory decline of real GDP following the oil price increase. The role of oil and other forms of energy seems not to matter to explain cross-country differences for the consequences of both shocks. This role, however, is very important to explain asymmetries in the effects of exogenous oil supply shocks. Whereas net oil and energy-importing countries all face a permanent fall in economic activity, the impact is insignificant or even positive in net energy-exporting countries. In addition, countries that improved their net energy-position the most over time, became less vulnerable to oil supply and oil-specific demand shocks, relative to other countries.
    Keywords: Oil prices, vector autoregressions, cross-country differences
    JEL: E31 E32 Q43
    Date: 2009–12
  12. By: Fabrizio Venditti (Bank of Italy)
    Abstract: In the past decade changes in oil prices have played a significant role in shaping inflation dynamics in the US and in the euro area, largely through their direct effect on fuels prices, reviving the controversy over whether the prices of petroleum products respond more promptly to positive than to negative oil price shocks. This paper provides fresh evidence on this issue for the US, the euro area and the four largest euro area countries (Germany, France, Italy and Spain), both for petrol and diesel prices. Inference is based on the dynamic response of downstream prices to upstream shocks, rather than on tests on the regression slopes as in the majority of existing studies, taking into account the non-linearity of the impulse response function in models with asymmetric adjustment, so far ignored in this literature. The empirical analysis shows that fuels prices respond very promptly to oil price shocks, with some heterogeneity across countries, and that no systematic evidence of asymmetries emerges. This result is robust across periods of high and low oil price volatility and holds both for standard and large shocks.
    Keywords: energy, oil prices, asymmetry, inflation
    JEL: C52 Q43 E31
    Date: 2010–03
  13. By: Bermingham, Colin (Central Bank and Financial Services Authority of Ireland); O’ Brien, Derry (Central Bank and Financial Services Authority of Ireland)
    Abstract: This paper empirically tests whether Irish and UK petrol and diesel markets are characterised by asymmetric pricing behaviour. The econometric assessment uses threshold autoregressive models and a dataset of monthly refined oil and retail prices covering the period 1997 to mid-2009. A methodological note is included on the importance of the specification of the number of possible regimes. In particular, the possibility of conflicting price pressures arising from short-run dynamics in retail prices and responses to disequilibrium errors needs to be explicitly modelled. For both the Irish and UK liquid fuel markets at national levels, the paper concludes that there is no evidence to support the “rockets and feathers” hypothesis that retail prices rise faster than they fall in response to changes in oil prices. It is still possible that a lack of competition at a more local level may accommodate asymmetric pricing behaviour.
    Date: 2010–02
  14. By: Sofía B. Ramos; Helena Veiga
    Abstract: New evidence on the way oil price fluctuations affect international stock markets is provided in analysis of the exposure of 43 stock markets. Oil price spikes depress international stock markets, but oil price drops do not necessarily increase stock market returns. Moreover, the volatility of oil prices has a negative impact on international stock market returns. Both these effects apply only to stock markets of developed countries. Emerging market returns are not sensitive to oil price variations. In addition, the asymmetry of oil price changes impacts oil volatility; i.e., when oil prices soar, oil volatility also increases, while negative oil price changes dampen volatility. Finally, oil price fluctuations are a factor in creating downside risk for international country investment.
    Keywords: Asymmetry, Multifactor asset pricing Models, Oil prices, Panel data, Quantile regression, Volatility
    Date: 2010–02
  15. By: Don Bredin (University College Dublin); John Elder (Colorado State University); Stilianos Fountas (University of Macedonia)
    Abstract: There has recently been considerable interest in the potential adverse effects associated with excessive uncertainty in energy futures markets. Theoretical models of investment under uncertainty predict that increased uncertainty will tend to induce firms to delay investment. These models are widely utilized in capital budgeting decisions, particularly in the energy sector. There is relatively little empirical evidence, however, on whether such channels have industry-wide effects. Using a sample of G7 countries we examine whether uncertainty about a prominent commodity — oil — affects the time series variation in manufacturing activity. Our primary result is consistent with the predictions of real options theory — uncertainty about oil prices has had a negative and significant effect on manufacturing activity in Canada, France, UK and US.
    Keywords: Oil, Volatility, Vector autoregression, Multivariate GARCH-in-Mean VAR
    JEL: G1 G3 F3
    Date: 2010–01–01
    Abstract: A remarkable but unnoticed feature of the crude oil market is that the dramatic rise in oil price volatility over time has been accompanied by a substantial fall in oil production volatility. We investigate the reasons for this opposite evolution of both oil market variables. Our main finding is that the observed volatility puzzle can be rationalized by the fact that the price elasticities of both oil supply and oil demand have decreased considerably over time. This implies that small disturbances on either side of the oil market currently generate large price reactions but only modest quantity adjustments. We further document that the variance of innovations which shift oil demand and supply has even become smaller in the more recent past thereby mitigating oil price fluctuations.
    Keywords: Oil prices, volatility, time variation, price elasticities
    JEL: E31 E32 Q43
    Date: 2010–01
  17. By: Bogetic, Zeljko; Smits, Karlis; Budina, Nina; van Wijnbergen, Sweder
    Abstract: Russia entered the global crisis with strong fiscal position, low public debt, and large fiscal and monetary reserves, which helped it cushion the crisis shocks. But the rise in the non-oil fiscal deficit in 2007-08 and, more importantly, the massive impact of the global crisis in late 2008 and 2009 have dramatically altered Russia's medium-term and long-term economic and fiscal outlook. While Russia is emerging from this crisis on a much stronger footing than during the 1998-09 crisis thanks to its strong-pre crisis fundamentals, large fiscal reserves and solid management of the crisis, it will nevertheless need to implement sustained fiscal adjustment in the coming years. Both revenue and expenditure measures will be needed. This will require 2-3 percentage points of GDP in fiscal adjustment for about five years in addition to keeping total expenditure levels at a relatively low 31.5 percent of GDP, consistent with long-term social expenditure needs and requirements of long-term fiscal sustainability. Following a period of adjustment, if Russia would restrain its long-term non-oil deficits to the permanent income (PI) equivalent of its oil revenues as proposed in this paper, its fiscal policy will return to long-term sustainable path. The long-term, sustainable level of non-oil fiscal deficit is estimated at about 4.3 percent of GDP. With the 2009 actual non-oil fiscal deficit of about 14 percent of GDP, this implies significant and sustained fiscal adjustment over the medium term. The expenditure needs of the social security system as well as a reduction in key non-oil taxes represent a major fiscal risk to all scenarios.
    Keywords: Debt Markets,Public Sector Expenditure Policy,Environmental Economics&Policies,Economic Stabilization,Currencies and Exchange Rates
    Date: 2010–03–01
  18. By: Breisinger, Clemens; Collion, Marie-Helen; Diao, Xinshen; Rondot, Pierre
    Abstract: Yemen is an oil-exporting and food-importing country on the Arabian Peninsula with persistently high levels of poverty. The impacts of the food, fuel, and financial global crises are likely to further complicate preexisting conditions of internal conflicts, decreasing oil revenues, and governance failure. The latest official growth numbers date back to precrisis levels; new estimates are subject to much debate; and the current state of poverty in Yemen remains unclear. In this paper, a consistent economic framework is presented to help close this information gap and to better understand growth and poverty dynamics during crises. Results show that economic growth in Yemen accelerated during the food and fuel crises in 2008 because oil-driven growth dominated the negative growth impacts of the food crisis. However, this oil-driven growth has not been pro-poor; in fact, poverty in both rural and urban areas rises sharply in 2008. The financial crisis in 2009 impacts Yemen mainly through the drop in oil prices and a reduction in remittances and thereby sharply slows growth, including agricultural growth. This growth decline hits households hard and compounds the poverty effects of the food crisis. Model results indicate that poverty has increased to 42.8 percent in 2009, an increase of 8 percentage points from 2005–2006, when it was 34.8 percent. Poverty continues to be much higher in rural areas, where almost half of all people lived in poverty in 2009, compared with 29.9 percent in urban areas. These estimates can be considered conservative because we do not account for conflicts and natural disasters that recently hit the country.
    Keywords: Conflict, Development strategies, global economic crises, Growth, Poverty,
    Date: 2010
  19. By: Taheripour, Farzad; Hertel, Thomas; Tyner, Wally
    Abstract: The past decade has seen rapid growth in the global biofuels sector - particularly in the US and the EU. This has had important implications for the global livestock industry - both by raising the cost of feed grains and oilseeds and by forcing onto the market a large supply of biofuel by-products, many of which end up in livestock feed rations. This paper systematically investigates the impact of an expanding biofuels industry on the mix and location of global livestock production. Our results suggest that the impacts on specific livestock sectors in individual countries are quite varied. We estimate that growth in the US and EU biofuels industries actually results in larger absolute reductions in livestock production overseas, as opposed to in the biofuel producing regions themselves. This is due to the relatively greater transmission of grains prices into the overseas markets, as compared to the transmission of byproduct prices. We also find that the non-ruminant industry curtails its production more than other livestock industries, because it is less able to take advantage of low cost biofuel byproducts in its feed rations. Implementing biofuel mandates in the US and EU increases cropland area within the biofuel and non-biofuel producer regions. A large portion of this increase will be obtained from reduced grazing lands. The biofuel producing regions are expected to reduce their coarse grains exports and increase imports of oilseeds and vegetable oils, while they increase their exports of processed feed materials. Though biofuel mandates have important consequences for the livestock industry, they do not severely curtail these industries. This is largely due to the important role of byproducts in substituting for higher priced feedstuffs.
    Date: 2010
  20. By: Hertel, Thomas; Beckman, Jayson
    Abstract: Agricultural and energy commodity prices have traditionally exhibited relatively low - even negative correlation. However, the recent increases in biofuel production have altered the agriculture-energy relationship in a fundamental way. The amount of corn utilized for ethanol production in the US has increased from 5% in 2001 to over one-third by the end of the decade. This increase has drawn corn previously sold to other uses (exports, food, feed), as well as acreage devoted to other crops (e.g., oilseeds and other grains). In addition, there has been an increase in the demand for production inputs, especially fertilizers, which are heavily energy-intensive. In short, the previous "biofuel decade" has led to significant changes in the US, and indeed the global economy.
    Date: 2010
  21. By: Lucas W. Davis; Erich Muehlegger
    Abstract: This paper measures the extent to which prices exceed marginal costs in the U.S. natural gas distribution market during the period 1991-2007. We find large departures from marginal cost pricing in all 50 states, with residential and commercial customers facing average markups of over 40%. Based on conservative estimates of the price elasticity of demand these distortions impose hundreds of millions of dollars of annual welfare loss. Moreover, current price schedules are an important pre-existing distortion which should be taken into account when evaluating carbon taxes and other policies aimed at addressing external costs.
    JEL: D42 L50 L95 Q48 Q54
    Date: 2010–04
  22. By: Tarr, David G.
    Abstract: Export restraints by the Russian Federation on natural gas and timber have been the source of major controversy between the European Union and the Russian Federation. The analysis of this paper suggests that the export restraints in natural gas very substantially benefit Russia. On the other hand, in raw timber the analysis suggests that a substantial reduction of Russian export taxes would increase Russian welfare. The paper explains that Gazprom has failed to invest adequately, resulting in little development of new gas supplies. The result has been progressively increasing use by Gazprom of Central Asian gas supplies, at progressively higher prices for Russia. The increased prices of gas for Russian consumers have shown that it is crucial for Russia to allow new entrants and to introduce competition in the Russian domestic market. Without export restraints, however, competition among multiple gas suppliers from Russia would erode or eliminate the monopoly profits of the Russian Federation on gas exports. Thus, with a more competitive domestic market, the Russian government would be expected to grant exclusive exporting rights to a single entity (as it presently does with Gazprom) or impose export taxes. Thus, Europe should not expect to achieve cheaper Russian gas as a result of structural reforms within the Russian gas market. A more promising avenue for European energy diversification is new pipeline construction to open up new sources of supply independent of Russia (especially the Nabucco pipeline), and liquefied natural gas purchases.
    Keywords: Markets and Market Access,Transport Economics Policy&Planning,Energy Production and Transportation,Economic Theory&Research,Oil Refining&Gas Industry
    Date: 2010–01–01
  23. By: Wolfgang Karl Härdle; Stefan Trück
    Abstract: The dynamics of hourly electricity prices in day-ahead markets is an important element of competitive power markets that were only established in the last decade. In electricity markets, the market microstructure does not allow for continuous trading, since operators require advance notice in order to verify that the schedule is feasible and lies within transmission constraints. Instead agents have to submit their bids and offers for delivery of electricity for all hours of the next day before a specified market closing time. We suggest the use of dynamic semiparametric factor models (DSFM) for the behavior of hourly electricity prices. We find that a model with three factors is able to explain already a high proportion of the variation in hourly electricity prices. Our analysis also provides insights into the characteristics of the market, in particular with respect to the driving factors of hourly prices and their dynamic behavior through time.
    Keywords: Power Markets, Dynamic Semiparametric Factor Models, Day-ahead Electricity Prices
    JEL: G12 C19 C13
    Date: 2010–02
  24. By: Federico, Giulio (IESE Business School); Lopez, Angel (IESE Business School)
    Abstract: We study the impact of electricity divestments in a stylised model where a dominant producer faces a competitive fringe with the same cost structure and is forced to sell some of its capacity. For a given demand level, the divestment which achieves the greatest reduction in prices can be several times more effective in reducing prices than a divestment of base load (or low-cost) plants. We extend this theoretical result to the case with variable electricity demand by considering a numerical example based on data from the Italian market.
    Keywords: Divestments; market power; electricity; antitrust remedies;
    Date: 2010–02–03
  25. By: Eva Niesten
    Abstract: The increase in the distributed generation of electricity, with wind turbines and solar panels, necessitates investments in the distribution network. The current tariff regulation in the Dutch electricity industry, with its ex post evaluation of the efficiency of investments and the frontier shift in the x-factor, delays these investments. In the unbundled electricity industry, the investments in the network need to be coordinated with those in the distributed generation of electricity to enable the DSOs to build enough network capacity. The current Dutch regulations do not provide for a sufficient information exchange between the generators and the system operators to coordinate the investments. This paper analyses these two effects of the Dutch regulation, and suggests improvements to the regulation of the network connection and transportation tariffs to allow for sufficient network capacity and coordination between the investments in the network and in the generation of electricity. These improvements include locally differentiated tariffs that increase with an increasing concentration of distributed generators.
    Keywords: Distributed electricity generation; network investments; regulation
    JEL: L51 L94 Q42
    Date: 2010–02
  26. By: Grant Allan (Department of Economics, University of Strathclyde); Igor Eromenko (Department of Economics, University of Strathclyde); Peter Mcgregor (Department of Economics, University of Strathclyde); Kim Swales (Department of Economics, University of Strathclyde)
    Abstract: Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22% and 38% higher than the portfolio cost of electricity in 2007. These scenarios prove to be “inefficient” in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.
    Keywords: Electricity generation mix, portfolio theory, regional energy policy
    JEL: D81 L94 R15
    Date: 2010–03
  27. By: Lang, Joachim (E.ON AG, Controlling / Corporate Planning); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: In the electricity sector, most of the trades are still done in the OTC market without direct mitigation of credit risk. Newer discussions fuelled by the European Commission (EUCOM 2009a,b) show that there is a political will to enforce a stronger collateralization policy on all European derivatives markets, including the OTC markets. This is meant to secure the markets and prohibit arbitrage on regulatory regimes as a consequence of the financial crisis. However, collateralization does not come for free. In this study, we analyze the capital needs for margining based on commodity prices of 2007-2009 in conjunction with the clearing rules for margining of the European Commodity Clearing AG (ECC). We apply different hedging scenarios to state-of-the-art coal- and gas-fired power plants, and the sale of outright power in the German market. Based on the set-up of our analysis, we show that in absolute terms especially outright power has quite significant cash needs for trading, whereas coaland gas-fired power plants have less than half the needs of outright power. In relative terms for the fossil-fired power plants, we find that coal-fired power plants have a relative advantage in comparison to gas-fired plants. The need for risk capital per MWhth of coal-fired power plants is comparably lower. A major reason for this is the standard notation of coal in US-$ per ton: As one ton of coal contains approx. 7 MWh of thermal energy (which is the relevant unit for the calculation of the fuel consumption), the price change for coal in US-$ (or €) per MWh is only approximately one seventh compared to the notation in metric tons. This translates into comparably lower margining needs for the fuel variation margin of a coal-fired power plant vs. a gas-fired power plant, offering a variety of further research questions.
    Keywords: Credit risk mitigation; margining; collateralization; risk capital; power plant valuation; portfolio optimization
    JEL: G12 G32 L94 O16
    Date: 2010–02
  28. By: Joëlle Noailly
    Abstract: This paper investigates the impact of alternative environmental policy instruments on technological innovations aiming to improve energy efficiency in buildings. The empirical analysis focuses on three main types of policy instruments, namely regulatory energy standards in buildings codes, energy taxes as captured by energy prices and specific governmental energy R&D expenditures. Technological innovation is measured using patent counts for specific technologies related to energy efficiency in buildings (e.g. insulation, high-efficiency boilers, energy-saving lightings). The estimates for seven European countries over the 1989-2004 period imply that a strengthening of 10% of the minimum insulation standards for walls would increase the likelihood to file additional patents by about 3%. In contrast, energy prices have no significant effect on the likelihood to patent. Governmental energy R&D support has a small positive significant effect on patenting activities.
    Keywords: Innovation; technological change; patents; energy-efficiency; buildings; environmental policy
    JEL: O31 O34 Q55
    Date: 2010–01
  29. By: Hugh Scorah; Amy Sopinka; G. Cornelis van Kooten
    Abstract: British Columbia’s electricity grid is comprised primarily of hydroelectric generating assets. The ability to store water in reservoirs is a significant advantage for the province allowing it to import from Alberta when prices are favourable. Alberta, has a heavily fossil-fuel based electricity portfolio, but has seen substantial growth in its wind energy capacity. However this variable energy technology impacts the province’s grid operations. Wind energy is both variable and uncertainty. However, wind energy in Alberta can be stored via BC’s reservoir systems. In this paper, we examine the extent that drought impacts the both overall operating costs as well as the cost of reducing CO2 emissions. We model the Alberta and BC interconnected grids varying both the impact of the drought and the transmission capacity between the provinces. We determine that storing wind energy leads to an overall cost reduction and that emission costs are between $20 and $60 per tonne of CO2.
    Keywords: Wind power, carbon costs, electrical grids, mathematical programming
    JEL: Q54 Q41 C61
    Date: 2010–03
  30. By: Lohwasser, Richard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: In this paper we introduce HECTOR, a new and advanced long-term electricity market model that simulates market behavior bottom-up through opportunistic, variable cost-based bidding of individual power plants into auction-based national markets with international interconnection capacities. Unlike most other approaches, we implement the objective function on an hourly level. This allows for a reduction of the solution space, and enables a higher modeling resolution, including opportunistic bidding behavior of power plants based on expected supply scarcity, and ex-post investment decisions based on NPV considerations. The model simulates the electricity markets of 19 European countries, with over 400 groups of power plants, and is able to closely approximate historic electricity prices. The average base load price computed by the model for 2006-2008 and across the largest regions in Europe is 54.5 €/MWh, compared to 54.8 €/MWh in reality, using 2005 as training period. In a projection until 2040, we find that conventional fossil fuel-fired power plants are replaced both by renewable energy technologies and large quantities of CCS, the latter of which almost fully utilize available CO2 storage capacities in some of the regions studied.
    Keywords: Electricity market; simulation; model; forecast; CCS
    JEL: C63 O30
    Date: 2009–11
  31. By: Fischer, Carolyn (Resources for the Future); Preonas, Louis (Resources for the Future)
    Abstract: Since the energy crisis in the 1970s and later the growing concern for climate change in the 1990s, policymakers at all levels of government and around the world have been enthusiastically supporting a wide range of incentive mechanisms for electricity from renewable energy sources (RES-E). Motivations range from energy security to environmental preservation to green jobs and innovation, and measures comprise an array of subsidies to mandates to emissions trading. But do these policies work together or at cross-purposes? To evaluate RES-E policies, one must understand how specific policy mechanisms interact with each other and under what conditions multiple policy levers are necessary. In this article, we review the recent environmental economics literature on the effectiveness of RES-E policies and the interactions between them, with a focus on the increasing use of tradable quotas for both emissions reduction and RES-E expansion.
    Keywords: environment, technology, externality, policy, climate change, renewable energy
    JEL: Q21 Q28 Q48 O38
    Date: 2010–03–12
  32. By: Stefan Boeters; Joris Koornneef
    Abstract: What are the excess costs of a separate 20% target for renewable energy as a part of the EU climate policy for 2020? We answer this question using a computable general equilibrium model, WorldScan, which has been extended with a bottom-up module of the electricity sector. The model set-up makes it possible to directly use available estimates of costs and capacity potentials for renewable energy sources for calibration. In our base case simulation, the costs of EU climate policy with the renewables target are 6% higher than those of a policy without this target. As information on the supply of renewable energy is scarce and uncertain, we perform an extensive sensitivity analysis with respect to the level and steepness of the supply curves for wind energy and biomass. In the range we explore, the excess costs vary from zero (when the target is not binding) to 23% (when the cost progression and the initial cost disadvantage for renewables are doubled).
    Keywords: EU climate policy; renewable energy; computable general equilibrium model
    JEL: Q42 Q54 D58
    Date: 2010–02
  33. By: Paul Koutstaal; Michiel Bijlsma; Gijsbert Zwart; Xander van Tilburg; Özge Özdemir
    Abstract: A renewable obligation combined with tradable renewable energy certificates is a market-based instrument used to promote the production of electricity from renewable energy sources. A renewable obligation is an alternative for subsidies. A renewable obligation will only be an efficient instrument if certificate markets are efficient. This requires that there is no market power and no anti-competitive behaviour on the certificate market. If the current developments in Dutch renewable energy production continue, market power on a future renewable certificate market in the Netherlands will probably not be an issue, even if the RO should only rest on the retail market instead of on the whole electricity market. A renewable obligation will raise the retail price for consumers, thereby reducing consumer surplus. Simulations show that the retail electricity price increases with € 30 per MWh to a level of € 104 per MWh in case of a 30% renewable target. Consumer surplus is reduced with 19% compared to the baseline scenario. In contrast, a subsidy such as the Dutch SDE which is financed from the state budget has the effect to (slightly) lower the retail electricity price, thereby increasing consumer surplus. It should however be realised that the costs of the subsidy will indirectly affect electricity consumers through their tax payments.
    Keywords: renewable energy; renewable obligation; subsidy; market power
    JEL: Q42 Q48
    Date: 2009–08
  34. By: Deichmann, Uwe; Meisner, Craig; Murray, Siobhan; Wheeler, David
    Abstract: Accelerating development in Sub-Saharan Africa will require massive expansion of access to electricity -- currently reaching only about one-third of households. This paper explores how essential economic development might be reconciled with the need to keep carbon emissions in check. The authors develop a geographically explicit framework and use spatial modeling and cost estimates from recent engineering studies to determine where stand-alone renewable energy generation is a cost effective alternative to centralized grid supply. The results suggest that decentralized renewable energy will likely play an important role in expanding rural energy access. But it will be the lowest cost option for a minority of households in Africa, even when likely cost reductions over the next 20 years are considered. Decentralized renewables are competitive mostly in remote and rural areas, while grid connected supply dominates denser areas where the majority of households reside. These findings underscore the need to de-carbonize the fuel mix for centralized power generation as it expands in Africa.
    Keywords: Energy Production and Transportation,Climate Change Mitigation and Green House Gases,Transport Economics Policy&Planning,Power&Energy Conversion,Carbon Policy and Trading
    Date: 2010–01–01
  35. By: Westner, Günther (E.ON Energy Projects GmbH); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: The EU Directive 2004/8/EC, concerning the promotion of cogeneration, established principles on how EU member states can support combined heat and power generation (CHP). Up to now, the implementation of these principles into national law has not been uniform, and has led to the adoption of different promotion schemes for CHP across the EU member states. In this paper, we first give an overview of the promotion schemes for CHP in various European countries. In a next step, we take two standard CHP technologies, combined-cycle gas turbines (CCGT-CHP) and engine-CHP, and apply exemplarily four selected support mechanisms used in the four largest European energy markets: feed-in tariffs in Germany; energy efficiency certificates in Italy; benefits through tax reduction in the UK; and purchase obligations for power from CHP generation in France. For contracting companies, it could be of interest to diversify their investment in new CHP facilities regionally over several countries in order to reduce country and regulatory risk. By applying Mean-Variance Portfolio (MVP) theory, we derive characteristic return-risk profiles of the selected CHP technologies in different countries. The results show that the returns on CHP investments differ significantly depending on the country, the support scheme, and the selected technology studied. While a regional diversification of investments in CCGT-CHP does not contribute to reducing portfolio risks, a diversification of investments in engine-CHP can decrease the risk exposure.
    Keywords: Combined heat and power; CHP promotion scheme; Portfolio optimization
    JEL: C15 D81 G11 Q48
    Date: 2009–11
  36. By: Westner, Günther (E.ON Energy Projects GmbH); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: The Integrated Energy and Climate Protection Program of the German government includes the political target of doubling the share of combined heat and power generation (CHP) in Germany from currently about 12% to 25% by 2020. In order to reach this goal, a new CHP law was enacted to improve the framework conditions for CHP generation. In this paper, we tackle the political CHP target stipulated by the German government, and aim at identifying which CHP technologies are most likely to be installed in the near future. By applying Mean-Variance Portfolio (MVP) theory, we consider return- and risk-related aspects. In our model, we pay tribute to specific characteristics of CHP generation, such as promotion via feed-in tariffs, additional revenues from heat sales, specific operational features, and specifics concerning allocation of CO2 allowances. The investigation is carried out on the basis of four generic standard CHP technologies currently available on a commercial basis. These technologies are: large coal-fired CHP plants, combined-cycle gas turbines (CCGT-CHP), engine-CHP and micro-turbine CHP. The portfolio investigation includes a projection of fuel cost and prices for heat and power according to the BMU Leitstudie 2008. As selection criteria for the portfolio performance we take, independently from each other, the net present value (NPV) of investment in CHP and the expected annual portfolio return, and compare the results obtained from both approaches with each other. Irrespective of the chosen selection criteria, the analysis shows that CCGT-CHP and engine-CHP are the most attractive CHP technologies from a return perspective. A diversification of the portfolio with other kinds of CHP technologies can contribute to stabilizing portfolio returns. The application of the results obtained on the further development of CHP generation in Germany leads to the conclusion that a large portion of additional new CHP capacity will probably be built in the industrial sector. We conclude further that the ambitious political target of 25% CHP generation by 2020 is not realistic under the given framework.
    Keywords: Combined heat and power; CHP technology; Portfolio optimization; Germany
    JEL: C15 D81 G11 Q49
    Date: 2009–11
  37. By: Joelle Noailly; Svetlana Batrakova; Ruslan Lukach
    Abstract: This document provides a case study of policies aiming to foster technological innovations for ‘green’ buildings in the Netherlands. The study aims to provide 1) a detailed overview of the policy framework over the last thirty years, and 2) a picture of the level of innovations related to energy efficiency in buildings in the Netherlands. The analysis shows an intensification of environmental policy in the Dutch building sector in the mid-1990s, followed by a slight decline after 2001. A striking feature of environmental policy in this sector is the large number of policy programs implemented successively for short periods of time. This might affect the stability and continuity of the policy framework and be damaging for innovation. Faced with high levels of uncertainty about future policies, firms may prefer to postpone risky investments in innovative activities. Finally, governmental R&D support for green innovations in general remains very low in the Netherlands. Descriptive data on patenting activities show that Dutch firms file nowadays about 150 patents annually in the field of energy efficiency in buildings. The Netherlands have a clear comparative advantage in the field of energy-saving lighting technologies, mainly due to intensive patenting activities by Philips. High-efficiency boilers also represent a substantial share of Dutch innovation activities in this domain over the last decades. In many other fields (such as insulation, heat-pumps and co-generation, solar boilers, etc), however, Germany, Austria and Scandinavian countries rank much higher than the Netherlands.
    Date: 2010–01
  38. By: Grant Allan (Department of Economics, University of Strathclyde); Peter McGregor (Department of Economics, University of Strathclyde); Kim Swales (Department of Economics, University of Strathclyde); Karen Turner (Department of Economics, University of Strathclyde)
    Abstract: Rebound is the extent to which improvements in energy efficiency fail to translate fully into reductions in energy use because of the implicit fall in the price of energy, when measured in efficiency units. This paper discusses aspects of the rebound effect that are introduced once energy is considered as a domestically produced commodity. A partial equilibrium approach is adopted in order to incorporate both energy use and production in a conceptually tractable way. The paper explores analytically two interesting results revealed in previous numerical simulations. The first is the possibility that energy use could fall by more than the implied improvement in efficiency. This corresponds to negative rebound. The second is the finding that the short-run rebound value can be greater than the corresponding long-run value.
    Keywords: Energy demand, energy efficiency, rebound, partial equilibrium
    JEL: Q41 Q43 Q55 Q56
    Date: 2009–11
  39. By: Kurt Kratena (WIFO); Michael Wüger (WIFO)
    Abstract: This paper deals with technical progress in the energy efficiency of US households' capital stock (appliances and passenger cars) and its potential for energy saving. An increase in the energy efficiency of households can only be achieved via a different capital stock. The link between the average energy efficiency and the stock of energy-using durables is econometrically estimated based on a new data set of household appliances and passenger cars. This relationship complements a Quadratic Almost Ideal Demand System (QUAIDS) for six consumption categories (non-durables), including heating, electricity and transport. Any increase in energy efficiency lowers the corresponding "service" price and leads to a "rebound effect". A simulation exercise shows how the ceteris paribus-rebound effect is changed by taking into account the capital costs and other interdependencies and feedbacks that can only be captured by a full model of household demand.
    Keywords: household energy demand, embodied and induced technical change, rebound effect
    Date: 2010–02–18
  40. By: David I.Stern (Arndt-Corden Division of Economics, Crawford School of Economics and Government, the Australian National University)
    Abstract: This study uses a stochastic production frontier to model trends in energy efficiency over time in a panel of 85 countries. No a priori structure is imposed on technological change over time though differences in the level of technology across countries are modeled as a stochastic function of explanatory variables. These variables are selected on the basis of a literature survey and theoretical model of the choice of energy efficiency technology. An improvement in a country’s energy efficiency is measured as a reduction in energy intensity while holding constant the input and output structure of that economy. The country using the least energy per unit output, ceteris paribus, is on the global best practice frontier. The model is used to derive decompositions of energy intensity and carbon emissions and to examine the whether there is a convergence across countries. I find that energy efficiency rises with increasing general total factor productivity but is also higher in countries with more undervalued exchange rates in PPP terms. Higher fossil fuel reserves are associated with lower energy efficiency. Energy efficiency converges over time across countries and technological change was the most important factor mitigating the global increase in energy use and carbon emissions due to economic growth.
    Keywords: Energy, efficiency, carbon, emissions, technological change, between estimator
    JEL: O13 O33 O47 Q43 Q54 Q55 Q56
    Date: 2010–03
  41. By: David I Stern (Arndt-Corden Division of Economics, Crawford School of Economics and Government, the Australian National University); Frank Jotzo (ANU Climate Change Institute, Crawford School of Economics and Government, The Australian National University)
    Abstract: the negotiating process for a post-Kyoto climate policy regime. China and India’s commitments are framed as reductions in the emissions intensity of the economy by 40-45% and 20-25% respectively between 2005 and 2020. How feasible are the proposed reductions in emissions intensity for China and India, and how do they compare with the targeted reductions in the US and the EU? In this paper, we use a stochastic frontier model of energy intensity to decompose energy intensity into input and output mix, climate, and a residual technology variable. We use the model to produce emissions projections for China and India under a number of scenarios regarding the pace of technological change and changes in the share of non-fossil energy. We find that China is likely to need to adopt ambitious carbon mitigation policies in order to achieve its stated target, and that its targeted reductions in emissions intensity are on par with those implicit in the US and EU targets. India’s target is less ambitious, and might be met with only limited or even no dedicated mitigation policies.
    Keywords: carbon emissions, climate change, developing countries, projections
    JEL: O13 Q54 Q56 Q58
    Date: 2009–12
  42. By: Carlos Ordás Criado (Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerland); Jean-Marie Grether (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland)
    Abstract: This paper investigates the convergence hypothesis for per capita CO2 emissions with a panel of 166 world areas covering the period 1960-2002. The analysis is based on the evolution of the spatial distributions over time. Robust measures of dispersion, asymmetry, peakedness and two nonparametric distributional tests - shape equality and multimodality - are used to assess spatial time differences. A robust normal reference bandwidth is also applied to estimate Markov’s transition laws and its subsequent ergodic (long-run) distributions. Our results point toward non-stationary, flattening and rightskewed spatial distributions before the oil price shocks of the 1970s and more stable shapes between 1980 and 2000 at the world level and for many country groupings (similar income, geographic neighbors, institutional partners). In the latter period, group-specific convergence patterns emerge with the clearest single-peaked and compact density shapes being reached in the wealthy, well-integrated and European countries during the last years of the panel. No significant multimodality is formally detected in the world distribution over the whole period. The Markov analysis suggests more divergence and larger per capita emissions for the world before stabilization occurs. A variety of steady state distributions are identified in the country subsets.
    Keywords: carbon dioxide emissions, air pollution, convergence, distribution dynamics, stochastic kernels, robustness
    JEL: C14 D30 Q53 Q56
    Date: 2010–02
  43. By: Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Hennlock, Magnus (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Earlier research has shown that using a default option has a decisive effect on individuals’ choices. In many cases, however, the low proportion of subjects who switch from the pre-set default option might partly explained by inexperience with the goods or services offered, and high transaction costs for switching. By conducting a natural field experiment when environmental economists registered on the web to a conference, the default option to offset CO2 emissions was randomly pre-set. Either the participants had to opt-in to offset, opt-out to offset or there was no default option, i.e. an active choice had to be made with no implicit “guidance” from the default. We used experienced subjects and had low transaction costs of switching. Our findings show that the default has no significant effect on the decision to offset.<p>
    Keywords: CO2-offsetting; Default option; Field experiment; Public goods
    JEL: C93 D62 Q53
    Date: 2009–10–23
  44. By: Dhikra Chebbi Nekhili (Université de Bourgogne); Mehdi Nekhili (Université de Reims Champagne Ardennes); Frédéric Nlemvo (Groupe ESC Troyes)
    Abstract: (VF)L’objectif de cet article est d’expliquer le choix des modes de gouvernance des activités de R&D entreprises par les firmes multinationales à l’étranger. Principalement, trois modes de gouvernance sont identifiés : l’internalisation totale des activités de R&D au sein d’une filiale (créée ou acquise) à l’étranger, les alliances en R&D (avec ou sans prise de participation) et l’externalisation totale de ces activités. Dans la perspective de la théorie fondée sur les ressources, le choix d’un mode par rapport à un autre s’explique par le souhait des firmes multinationales de construire un avantage concurrentiel en comblant l’écart entre les ressources réellement détenues et les ressources qu’elles souhaitent acquérir. A travers une étude quantitative de 67 firmes multinationales européennes et nord-américaines, nous montrons que les licences unilatérales sont utilisées en cas de non-disponibilité des ressources en interne et que les alliances sans prise de participation, par opposition aux alliances avec prise de participation, sont choisies lorsque les connaissances à transférer sont codifiables.(VA)The objective of this paper is to explain the choice of governance modes of foreign R&D activities by multinational firms. Mainly, three governance modes are identified: the complete internalization of R&D activities in a wholly owned subsidiary (created or acquired), the R&D alliances (equity alliances or non-equity alliances) and the complete externalization. According to the Resource Based View (RBV), the choice of a mode over another is due to the desire of multinational firms to build a competitive advantage in bridging the gap between resources actually held and resources that they wish to acquire. Through a study of 67 European and North-American multinational firms, our article shows that the unilateral licensing agreements are used in the case of the lack of internal resources. However, non-equity alliances, conversely to equity alliances, are chosen when the knowledge to be transferred is codified.
    Keywords: R&D;externalisation;théorie fondée sur les ressources;externalization;ressource based view.
    JEL: F23 L22
    Date: 2009–05
  45. By: Rob Aalbers
    Abstract: We use a dynamic stochastic general equilibrium model to determine efficient discount rates for climate (mitigation and adaptation) and non-climate investment in the face of climate change. Our main result is that the non-diversifiable risk in the economy may be related to both shocks in aggregate wealth and shocks in global average temperature. Therefore, both aggregate wealth and global average temperature will carry a risk premium reflecting their contribution to the total amount of non-diversifiable risk. We characterize both climate and non-climate investments by means of a contingent claim and show that climate and non-climate investments will in general be discounted at different rates. We discuss the conditions under which the discount rates of climate investments will be lower than the discount rate of non-climate investments.
    Keywords: discounting; adaptation; mitigation; climate change; risk premia; dynamic stochastic general equilibrium model
    JEL: G12 H43 Q5 Q54
    Date: 2009–05
  46. By: Iain Fraser; Robert Waschik
    Abstract: Employing a CGE model we examine the Double Dividend (DD) hypothesis for Australia and UK. Following Bento and Jacobsen (2007), we analyze specific factors in the production of energy goods and the impact on the DD. By incorporating endogenous labour supply we examine the labour market effect of targeted abatement policies. For Australia the DD is significantly larger with the specific factor characterisation of the economy when recycling revenue through reductions in consumption taxes, but there is no evidence of a DD when employing income tax. We find minimal evidence of a DD for UK for either recycling instrument.
    Keywords: Environmental Taxes, Double Dividend, Specific Factors.
    JEL: Q52 Q48 C68
    Date: 2010–04
  47. By: Brännlund, Runar (Department of Economics, Umeå University); Persson, Lars (Department of Economics, Umeå University)
    Abstract: Today, many countries around the world respond to the global warming and its consequences with various policy instruments such as e.g. taxes, subsidies, emission permit trading, regulations and information campaigns. In the economic literature, policy instruments have typically been analyzed with respect to efficiency, while little effort has been put on public preferences for these instruments. In this paper, an Internet-based choice experiment is conducted where respondents are asked to choose between two alternative policy instruments that both reduce the emissions of CO2 by the same amount. The policy instruments are characterized by a number of attributes; a technology-effect, an awareness-effect, cost distribution, geographic distribution and private cost (presented in more detail in the paper). By varying the levels of each of the attributes, respondents indirectly reveal their preferences for these attributes. Half of the respondents are faced with instruments labeled by ‘tax’ and ‘other’, whereas the other half are faced with unlabeled instruments. As for the label, the results show that people dislike the ‘tax’. The results also show that people prefer instruments with a positive effect on environmentally-friendly technology and climate awareness. A progressive-like cost distribution is preferred to a regressive cost distribution, and the private cost is negatively related to the choice. Finally, the results indicate that Swedes want the reduction to take place in Europe but not necessarily in Sweden.
    Keywords: preferences; climate policy measures; choice experiment; web-survey
    JEL: H20 H31 Q48 Q50
    Date: 2010–04–06
  48. By: John Stranlund (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: This paper considers the optimal design of an emissions trading program that includes a safety valve tax that allows pollution sources to escape the emissions cap imposed by the aggregate supply of emissions permits. I demonstrate that an optimal hybrid emissions trading/emissions tax policy involves a permit supply that is strictly less than under a pure emissions trading scheme and a safety valve tax that exceeds the optimal pure emissions tax as long as expected marginal damage is an increasing function. While the expected level of emissions under a hybrid policy may be more or less than under pure emissions trading or a pure emissions tax, under the assumption that uncertainty about aggregate marginal abatement costs is symmetric the most likely outcome is that emissions will turn out to be less under the hybrid. Finally, a steeper expected marginal damage function calls for higher permit supply and safety valve, which reduces expected aggregate emissions and the probability that the safety valve will be employed.
    Keywords: Emissions Taxes, Emissions Trading, Uncertainty, Safety Valve, Hybrid Emissions Control
    JEL: L51 Q28
    Date: 2009–08
  49. By: Christoph Boehringer; Andreas Lange; Thomas F. Rutherford
    Abstract: Carbon control policies in OECD countries commonly differentiate emission prices in favor of energy-intensive industries. While leakage provides a efficiency argument for differential emission pricing, the latter may be a disguised beggar-thy-neighbor policy to exploit terms of trade. Using an optimal tax framework, we propose a method to decompose the leakage motive and the terms-of-trade motive for emission price differentiation. We illustrate our method with a quantitative impact assessment of unilateral climate policies for the U.S. and EU economies. We conclude in these instances that complex optimal emission price differentiation does not substantially reduce the overall economic costs of carbon abatement compared with a simple rule of uniform emission pricing.
    JEL: D58 H21 Q43 R13
    Date: 2010–04
  50. By: Hanley, Nick; MacKenzie, Ian A.
    Abstract: The establishment of a tradable permit market requires the regulator to select a level of aggregate emissions and then distribute the associated permits (rent) to specific groups. In most circumstances, these decisions are often politically contentious and frequently influenced by rent seeking behaviour. In this paper, we use a contest model to analyse the effects of rent seeking effort when permits are freely distributed (grandfathered). Rent seeking behaviour can influence both the share of permits which an individual firm receives and also the total supply of permits. This latter impact depends on the responsiveness of the regulator to aggregate rent seeking effort. Using a three-stage game, we show that rent seeking can influence both the distribution of rents and the ex post value of these rents, whilst welfare usually decreases in the responsiveness of the regulator.
    Keywords: initial allocation; rent seeking; tradable permit market
    Date: 2010–01
  51. By: Bartleet, Matthew (Ministry of Economic Development, New Zealand); Iyer, Kris (Ministry of Economic Development, New Zealand); Lawrence, Gillian (Ministry of Economic Development, New Zealand); Numan-Parsons, Elisabeth (Ministry of Economic Development, New Zealand); Stroombergen, Adolf (Infometrics)
    Abstract: An orderly transition to lower emission intensity in a small open economy requires a careful balance of exposing the economy to emissions costs but at a manageable level and pace. What is considered manageable for the economy is subject to debate, as is the size and distribution of impacts on emissions intensive industry. This study bridges existing long run, economy wide models and individual firm case studies by exploring the emissions intensity and short-run implications of emissions pricing for 51 manufacturing industry groups.
    Keywords: Greenhouse gas emissions pricing; industry emissions intensity; trade exposed; maximum value-at-stake
    JEL: Q52 Q58
    Date: 2009–10
  52. By: Paul Twomey (Australian School of Business and member of the Centre for Energy and Environmental Markets at UNSW); Regina Betz (School of Economics, UNSW and member of the Centre for Energy and Environmental Markets at UNSW); Iain MacGill (Centre for Energy and Environmental Markets at UNSW and the School of Electrical Engineering and Telecommunications, UNSW); Robert Passey (Centre for Energy and Environmental Markets at UNSW)
    Abstract: An Additional Action Reserve (AAR) is proposed as a mechanism to allow for initiatives by government and voluntary private interests to make additional emissions reductions beyond a nationally set cap. The key idea of the AAR is to annually set aside a proportion of the Australian Emission Units (AEUs) which can then be retired if state or local government, businesses or individuals take specific emission reduction measures which go beyond those expected to be driven by the CPRS. AEUs allocated to the reserve that are not retired through additional activities would then be made available to CPRS participants. By providing an upper bound to such actions, the scheme would limit the uncertainty as to the quantity of available permits for emitters and provide a limit to the potential losses of auctioning revenue from AEU retirements. Compared to some other options to allow for additional action (such as buying-and-retiring of permits or future reductions of the national cap) the scheme combines the favorable features of accounting for tangible, psychologically-satisfying actions (such as installing a home solar PV system) with a transparent process that assures the participant that such actions are having an immediate effect in reducing national emissions. Elements of this approach have already been seen in the Regional Greenhouse Gas Initiative (RGGI), an inter-state emissions trading scheme which began in the United States in 2009.
    Date: 2010–01
  53. By: Fabio Antoniou; Panos Hatzipanayotou; Phoebe Koundouri
    Abstract: In this paper we examine an alternative policy scenario, where governments allow polluting firms to trade permits in a strategic environmental policy model. We demonstrate, among other things, that with no market power in the permits market, governments of the exporting firms do not have an incentive to under-regulate pollution in order to become more competitive. This strategic effect is reversed and leads to a welfare level closer to the cooperative one and strictly higher to that when permits are non-tradable. Allowing for market power in the permits market, the incentive to underregulate pollution re-appears regardless of whether permits are tradable or not. With tradable permits, however, the incentive to under-regulate pollution is comparatively weaker relative to the case of non-tradable permits. This entails potential benefits for the exporting firms and countries since the prisoners’ dilemma is moderated.
    Keywords: Strategic environmental policy, Tradable permits, Race to the top.
    JEL: F12 F18 Q58
    Date: 2010
  54. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Whether tradable permits are appropriate for use in transition and developing economies—given special social and cultural circumstances, such as the lack of institutions and lack of expertise with marketbased policies—is much debated. We conducted interviews and surveyed a sample of firms subject to emissions trading programs in Santiago, Chile, one of the first cities outside the OECD that has implemented such trading. The information gathered allow us to study what factors affect the performance of the trading programs in practice and the challenges and advantages of applying tradable permits in less developed countries.<p>
    Keywords: Tradable Permits; Developing Countries; Environmental Policy; Environmental Institutions
    JEL: Q56 Q58 R52
    Date: 2009–10–23
  55. By: Atkinson, Giles; Hamilton, Kirk; Ruta, Giovanni; Van Der Mensbrugghe, Dominique
    Abstract: The fact that developing countries do not have carbon emission caps under the Kyoto Protocol has led to the current interest in high-income countries in border taxes on the"virtual"carbon content of imports. The authors use Global Trade Analysis Project data and input-output analysis to estimate the flows of virtual carbon implicit in domestic production technologies and the pattern of international trade. The results present striking evidence on the wide variation in the carbon-intensiveness of trade across countries, with major developing countries being large net exporters of virtual carbon. The analysis suggests that tax rates of $50 per ton of virtual carbon could lead to very substantial effective tariff rates on the exports of the most carbon-intensive developing nations.
    Keywords: Climate Change Mitigation and Green House Gases,Environmental Economics&Policies,Climate Change Economics,Economic Theory&Research,Environment and Energy Efficiency
    Date: 2010–01–01
  56. By: Claudia Kettner (WIFO); Angela Köppl (WIFO); Stefan Schleicher (WIFO)
    Abstract: The EU Emission Trading Scheme (EU ETS) is a key instrument in European climate policy. Evidence from the first trading period (2005-2007) and the first year of the Kyoto period 2008 dampened, however, ex-ante enthusiasm: because of substantial over-allocation of emissions allowances in the first trading period the overall emissions cap was not stringent which caused a sharp drop in carbon prices. In 2008 a more stringent cap but still high price volatility was observed. Based on experience from the first years of the EU ETS the design of the EU ETS will be changed for the post-Kyoto period (2013-2020) including an EU-wide cap and the use of auctioning as the main allocation principle. So far, no measures to control price volatility are envisaged. This issue however gains in importance in the political and economic debate as prices are an important signal for investment decisions. More or less stable price signals are essential for the environmental effectiveness of an emissions trading scheme. As evidence shows, this is not necessarily guaranteed by the market process. Based on an analysis of the first trading years the paper provides an argumentation for the implementation of price stabilisation measures in the post-Kyoto period.
    Keywords: climate policy, emissions trading, EU Emission Trading Scheme
    Date: 2010–04–06
  57. By: Don Bredin (University College Dublin); Cal Muckley (University College Dublin)
    Abstract: The European Union’s Emissions Trading Scheme (ETS) is the key policy instrument of the European Commission’s Climate Change Program aimed at reducing green- house gas emissions to eight percent below 1990 levels by 2012. A critically important element of the EU ETS is the establishment of a market determined price for EU allowances. This article examines the extent to which several theoretically founded factors including, energy price movements, economic growth, temperature and stock market activity determine the expected prices of the European Union CO2 allowances during the 2005 through to the 2009 period. The novel aspect of our study is that we examine the heavily traded futures instruments that have an expiry date in Phase 2 of the EU ETS. Our study adopts both static and recursive versions of the Johansen multivariate cointegration likelihood ratio test as well as a variation on this test with a view to controlling for time varying volatility effects. Our results are indicative of a new pricing regime emerging in Phase 2 of the market and point to a maturing market driven by the fundamentals. These results are valuable both for traders of EU allowances and for those policy makers seeking to improve the design of the European Union ETS.
    Keywords: CO2 prices, EU ETS, Energy, Kyoto Protocol, Weather
    JEL: Q49 G12 G15
    Date: 2010–01–01
  58. By: Jean Pierre Amigues; Gilles Lafforgue; Michel Moreaux
    Date: 2010–02
  59. By: John Quiggin (Risk and Sustainable Management Group, University of Queensland); David Adamson (Risk and Sustainable Management Group, University of Queensland); Sarah Chambers (Risk & Sustainable Management Group, School of Economics, University of Queensland); Peggy Schrobback (Risk & Sustainable Management Group, School of Economics, University of Queensland)
    Abstract: Climate change is likely to have substantial effects on irrigated agriculture. It is anticipated that many areas that are already dry will become drier, while areas that already receive high rainfall may experience further increases. Extreme climate events such as droughts are likely to become more common. These patterns are evident in projections of climate change for the Murray–Darling Basin in Australia. To understand the effects of climate change, as modified by mitigation and adaptation, active management responses designed to improve returns in particular states of nature, such as in the case of drought must be considered. A change in the frequency of drought will induce a change in the allocation of land and water between productive activities. Even with action to stabilize atmospheric concentrations of CO2 at or near current levels, climate change will continue for some decades and adaptation will therefore be necessary. Conversely, most adaptation strategies are feasible only if the rate and extent of climate change is limited by mitigation. In this paper, a simulation model of state-contingent production is used to analyze these issues.
    Keywords: Irrigation, Uncertainty, Climate Change
    JEL: Q25 Q54
    Date: 2009–09
  60. By: Peggy Schrobback (Risk & Sustainable Management Group, School of Economics, University of Queensland); David Adamson (Risk and Sustainable Management Group, University of Queensland); John Quiggin (Risk & Sustainable Management Group, School of Economics, University of Queensland)
    Abstract: Large scale forest plantations in the Murray-Darling Basin may be embraced as a carbon sequestration mechanism under a Carbon Pollution Reduction Scheme. However, increased tree plantation will be associated with reduced inflows to river systems because of increased transpiration, interception and evaporation. Therefore, an unregulated change in land management is most likely to have a dramatic impact on the water availability. This will exacerbate the impacts of climate change projected in the Garnaut Review. This paper examines the implications of unrestricted changes in land use. These results should suggest the true costs to society from carbon sequestration by determining the tradeoffs between timber production and agricultural products.
    Keywords: Murray Darling Basin, water, environmental flows
    Date: 2009–01
  61. By: Mechler, Reinhard; Hochrainer, Stefan; Pflug, Georg; Lotsch, Alexander; Williges, Keith
    Abstract: National governments are key actors in managing the impacts of extreme weather events, yet many highly exposed developing countries -- faced with exhausted tax bases, high levels of indebtedness, and limited donor assistance -- have been unable to raise sufficient and timely capital to replace or repair damaged infrastructure and restore livelihoods after major disasters. Such financial vulnerability hampers development and exacerbates poverty. Based on the record of the past 30 years, this paper finds many developing countries, in particular small island states, to be highly financially vulnerable, and experiencing a resource gap (net disaster losses exceed all available financing sources) for events that occur with a probability of 2 percent or higher. This has three main implications. First, efforts to reduce risk need to be ramped-up to lessen the serious human and financial burdens. Second, contrary to the well-known Arrow-Lind theorem, there is a case for country risk aversion implying that disaster risks faced by some governments cannot be absorbed without major difficulty. Risk aversion entails the ex ante financing of losses and relief expenditure through calamity funds, regional insurance pools, or contingent credit arrangements. Third, financially vulnerable (and generally poor) countries are unlikely to be able to implement pre-disaster risk financing instruments themselves, and thus require technical and financial assistance from the donor community. The cost estimates of financial vulnerability -- based on today's climate -- inform the design of"climate insurance funds"to absorb high levels of sovereign risk and are found to be in the lower billions of dollars annually, which represents a baseline for the incremental costs arising from future climate change.
    Keywords: Hazard Risk Management,Debt Markets,Insurance&Risk Mitigation,Banks&Banking Reform,Climate Change Economics
    Date: 2010–03–01
  62. By: Hertel, Thomas; Burke, Marshall; Lobell, David
    Abstract: Accumulating evidence suggests that agricultural production could be greatly affected by climate change, but there remains little quantitative understanding of how these agricultural impacts would affect economic livelihoods in poor countries. Here we consider three scenarios of agricultural impacts of climate change by 2030 (impacts resulting in low, medium, or high productivity) and evaluate the resulting changes in global commodity prices, national economic welfare, and the incidence of poverty in a set of 15 developing countries. Although the small price changes under the medium scenario are consistent with previous findings, we find the potential for much larger food price changes than reported in recent studies which have largely focused on the most likely outcomes. In our low productivity scenario, prices for major staples rise 10-60% by 2030. The poverty impacts of these price changes depend as much on where impoverished households earn their income as on the agricultural impacts themselves, with poverty rates in some non-agricultural household groups rising by 20-50% in parts of Africa and Asia under these price changes, and falling by equal amounts for agriculture-specialized households elsewhere in Asia and Latin America. The potential for such large distributional effects within and across countries emphasizes the importance of looking beyond central case climate shocks and beyond a simple focus on yields - or highly aggregated poverty impacts.
    Date: 2010
  63. By: Ahamad, Mazbahul Golam; Khondker, Rezai Karim
    Abstract: This paper presents the food insecurity status and coping strategies among the households in the Northern Bangladesh. A three stage stratified random sampling followed by a structured questionnaire was employed to collect primary data from nine different primary sampling units. Locally adjusted reduced consumption coping strategy index is used to quantify the food security status, especially for mainland and flood affected riverbanks of the study areas. Nine explanatory variables are considered for an interval regression to assess the impacts of these predictors on changing reduced consumption coping strategy index score. Moreover, body mass index of household heads and dependency ratio of respective households are analyzed to compare strata-wise food insecurity.
    Keywords: Food Insecurity; Climate Risks; Consumption Coping Strategy Index; Interval Regression; Northern Bangladesh.
    JEL: Q54 Q58
    Date: 2010–03
  64. By: You, Gene Jiing-Yun; Ringler, Claudia
    Abstract: Ethiopia is susceptible to frequent climate extremes such as disastrous droughts and floods. These disastrous climatic events, which have caused significant adverse effects on the country’s economy and society, are expected to become more pronounced in the future under climate change. To identify the potential threat of climate change to the Ethiopian economy, this study analyzes three major factors that are changing under global warming: water availability under higher temperatures and changing precipitation patterns, the impact of changing precipitation patterns on flooding, and the potential impact on crop production of the carbon dioxide (CO2) fertilization effect. These issues are analyzed based on an existing multi-market-sector model for the Ethiopian economy, with a focus on agriculture. Our analysis finds that the major impact of climate change on Ethiopia’s economy will result from more frequent occurrence of extreme hydrologic events, which cause losses in both the agricultural and nonagricultural sectors. To adapt to these long-term changes, Ethiopia should invest in enhanced water control to expand irrigation and improve flood protection.
    Keywords: carbon dioxide (CO2) fertilization effect, Climate change, Droughts, floods, Global warming, hydro-economic modeling, hydrologic events,
    Date: 2010
  65. By: Macauley, Molly K. (Resources for the Future); Shih, Jhih-Shyang (Resources for the Future)
    Abstract: We extend the theory of quality-adjusted expenditure indices to estimate benefits from public investment. In particular, we model the selection of new instruments (in the form of remote-sensing devices) to enhance the longest-operating U.S. satellite-based land-observing program, Landsat. We then apply the model to the use of Landsat in measuring global forest carbon sequestration. Improving measurement of the role of forests in storing carbon has become a prominent concern in climate policy. By characterizing the value of Landsat data in forest measurement, the expenditure function allows us to help inform public investment decisions in the satellite system. The expenditure function also makes explicit the sensitivity of the selection of instruments for the satellites to the value of Landsat information, thus linking instrument choice explicitly to policy design.
    Keywords: value of information, satellite data, forests, carbon, sequestration, Landsat
    JEL: Q0 Q2 O3
    Date: 2010–03–22
  66. By: Nicolas Bouleau (CERMICS - Centre d'Enseignement et de Recherche en Mathématiques, Informatique et Calcul Scientifique - INRIA - Ecole Nationale des Ponts et Chaussées, CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et Forêts)
    Abstract: Nous explicitons ce qui, dans la pensée économique, enfonce irrémédiablement dans le dilemme du prisonnier tel qu'il se pose à propos du changement climatique et de la crise des ressources. Le jeu "un, deux, trois, soleil" est pris comme exemple générique : une course où l'on dit à tout le monde de ralentir mais où le premier arrivé gagne quand même. Ceci permet de faire un tour assez complet des positions, des enjeux et des risques de la négociation post-Kyoto. Notre conclusion est fondée sur l'idée de base qu'il faut de l'argent pour faire bouger les choses. Cela va dans le sens du rapport de septembre 2009 de la Banque Mondiale.
    Keywords: GIEC; carbone; club de Rome; réduction; droits négociables; taxe; Cassandre; Keynes; traité de Versailles; pluralisme
    Date: 2009–12
  67. By: Fabio Antoniou; Panos Hatzipanayotou; Phoebe Koundouri
    Abstract: We construct a strategic trade model of an international duopoly, whereby production by exporting firms generates a local pollutant. Governments use environmental policies, i.e., an emissions standard or a tax, to control pollution and for rent shifting purposes. Contrary to their firm, however, governments are unable to perfectly foresee the actual level of demand, the cost of abatement and the damage caused from pollution. Under these modes of uncertainty we derive sufficient conditions under which the governments optimally choose an emissions tax over an emissions standard.
    Keywords: Strategic Environmental Policy, Pollution, Choice of Policy Instrument, Uncertainty.
    JEL: F12 F18 Q58
    Date: 2010
  68. By: Prowse, Martin (International Initiative for Impact Evaluation); Snilstveit, Birte (International Initiative for Impact Evaluation)
    Abstract: Substantial and increasing amounts of funding are available for climate change interventions. This paper argues that to ensure effective allocation of these resources, the selection and design of climate change mitigation and adaptation interventions should be based on evidence of what works, what doesn’t, under what circumstances and at what cost. Currently the evidence base for bringing about behaviour change in the context of climate change interventions is minimal and there is a need for wider application of rigorous impact evaluation (IE) in the field. Climate change interventions have much to learn from experiences in the related fields of international development and conservation. The paper highlights some of the challenges faced when conducting IEs of climate change interventions and how these can be tackled. We argue that there are ample opportunities to conduct IE of climate change interventions. Increased financing of climate change interventions is urgently needed to mitigate global warming and enable countries and communities to adapt to its impact. However, if calls for increasing financing of climate change mitigation and adaptation by hundreds of billions of dollars a year are to remain credible, and gain and maintain support, evidence of the effectiveness of current spending is essential.
    Keywords: Climate change; Impact evaluation; Mitigation; Adaptation; and Clean Development Mechanism
    Date: 2010–03–19

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