nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒05‒02
23 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Toward a zero carbon energy policy in Europe: Defining a feasible and viable solution. By Christopher Jones and Jean-Michel Glachant
  2. Regulatory instruments for deployment of clean energy technologies By Ignacio J. Pérez-Arriaga
  3. Estimating the Amount of a Global Feed-in Tariff for Renewable Electricity By Samantha DeMartino, David Le Blanc
  4. Domestic fuel price and economic sectors in Malaysia: a future of renewable energy? By Jee, Hui-Siang Brenda; Lau, Evan; Puah, Chin-Hong; Abu Mansor, Shazali
  5. Learning and Technology Adoptions By Scholz, Sebastian
  6. The Impact of Temperature Changes on Residential Energy Consumption By Sebastian Petrick; Katrin Rehdanz; Richard S. J. Tol
  7. The Emergence and Evolution of Regional Convergence Clusters in China’s Energy Markets By Hengyun Ma; Les Oxley
  8. Individual Characteristics and Stated Preferences for Alternative Energy Sources and Propulsion Technologies in Vehicles: A Discrete Choice Analysis By Andreas Ziegler
  9. Would Hotelling Kill the Electric Car? By Ujjayant Chakravorty; Andrew Leach; Michel MOREAUX
  10. Degree of coordination in market-coupling and counter-trading By Giorgia Oggioni and Yves Smeers
  11. Why (and how) to regulate Power Exchanges in the EU market integration context? By Leonardo Meeus
  12. The influence of taxation on energy products price and consequences on the global economy By Nicolau, Mihaela
  13. A Public Financial Management Framework for Resources-Producing Countries By Jean-Luc Hélis; Teresa Dabán Sánchez
  14. Boom-Bust Cycle, Asymmetrical Fiscal Response and the Dutch Disease By Rabah Arezki; Kareem Ismail
  15. Fiscal Adjustment in Sudan: Size, Speed and Composition By Kenji Moriyama; S. M. Ali Abbas; Abdul Naseer
  16. Between Estimates of the Environmental Kuznets Curve By David I. Stern
  17. The Efficiency of Voluntary Pollution Abatement when Countries can Commit By Boadway, Robin; Song, Zhen; Tremblay, Jean-François
  18. CCS from the gas-fired power station at Kårstø A commercial analysis By Osmundsen, Petter; Emhjellen, Magne
  19. Decision criteria for climate projects By Osmundsen, Petter; Emhjellen, Magne
  20. A Spatial Agent-Based Model to Explore Scenarios of Adaptation to Climate Change in an Alpine Tourism Destination By Stefano Balbi; Pascal Perez; Carlo Giupponi
  21. Long-Run Eects of Post-Kyoto Policies: Applying a Fully Dynamic CGE model with Heterogeneous Capital By Lucas Bretschger; Roger Ramer; Florentine Schwark
  22. Pollution Standards, Technology Investment and Fines for Non-Compliance By Arguedas, Carmen
  23. Greenhouse gas emissions and the role of the Kyoto Protocol By Iwata, Hiroki; Okada, Keisuke

  1. By: Christopher Jones and Jean-Michel Glachant
    Abstract: Reducing the European Union GHG emissions by at least 80% by 2050 will require a near zero carbon electricity, road and rail transport industry, and heating and cooling in buildings. As compared to "business as usual" the amount of energy required will basically vary according to the level of energy efficiency: it is the "system scale". Then it is the "system design" which will provide the needed carbon-free technologies consisting of renewable, nuclear and fossil fuels with carbon capture and storage. . A zero carbon energy system by 2050 is then demonstrated to be feasible. However it is far from easy and requires immediate and substantial policy action. The main policy implications are addressed in this paper. The 5 years 2010-2015 will be decisive in establishing a regulatory environment whereby the EU will be in a position, by 2020, to take the next steps to achieve the 2050 goal..
    Keywords: EU Energy Policy; Emission Rights; Carbon free electricity production; regulation of electricity industry
    Date: 2010–01–29
  2. By: Ignacio J. Pérez-Arriaga
    Abstract: Answering to the formidable challenge of climate change calls for a quick transition to a future economy with a drastic reduction in GHG emissions. And this in turn requires the development and massive deployment of new low-carbon energy technologies as soon as possible. Although many of these technologies have been identified, the critical issue is how to make them happen at the global level, possibly by integrating this effort into a global climate regime. This paper discusses the preferred approaches to foster low-carbon energy technologies from a regulatory point of view. Specific promotion policies for energy efficiency and conservation, renewable energy, carbon capture and sequestration, and nuclear power are examined, but the focus is on the regulatory instruments that will be needed for the deployment of enhancements to electricity grids and the associated control systems so that they are able to integrate intelligent demand response, distributed generation and storage in an efficient, reliable & environmentally responsible manner. The paper also comments on the interactions between technology and climate change policies and provides recommendations for policy makers.
    Keywords: Climate Change, Low-Carbon Energy Technologies, Regulatory Instruments, Smart Grids
    Date: 2010–01–29
  3. By: Samantha DeMartino, David Le Blanc
    Abstract: We present a simple model to estimate the subsidy cost embedded in a global feed-in tariff (GFIT) to simultaneously stimulate electrification and the take-up of renewable energy sources for electricity generation in developing countries. The GFIT would subsidize developing countries for investments they make in generation capacity for renewable electricity up to a threshold level of electricity consumption per capita. Between 2010 and 2025, countries below this threshold strive to bridge the gap by 2025, when subsidies—based on the difference between the costs of renewable technologies and conventional energy sources
    Keywords: feed-in tariff, renewable energy, electrification, low-carbon development
    JEL: H54 L52 O25 Q42 Q48 Q55
    Date: 2010–04
  4. By: Jee, Hui-Siang Brenda; Lau, Evan; Puah, Chin-Hong; Abu Mansor, Shazali
    Abstract: This study empirically examines the relation between the domestic fuel prices with the ten disaggregated economic sectors in Malaysia with the spanning of data from 1990:Q1 to 2007:Q4. We found that only three sectors (agriculture, trade and other services sectors) are cointegrated with the fuel price and fuel price does Granger cause these sectors. Despite the evidence of non-cointegrated in most of the economic sectors, fuel price able to influence these sectors over a longer period. Policy recommendation from this study includes the utilization of the renewable energy (RE) as a strategic plan is the long-term solution due to the high dependency and increasing demand of energy. While energy prices have experienced some correction in response to signs of slower global growth, sufficient government enforcement and support need to be established to facilitate successful renewable energy implementation in Malaysia.
    Keywords: Fuel price; Economic sector; Granger causality; Renewable Energy; Growth
    JEL: C32 E31 O53
    Date: 2010–01–24
  5. By: Scholz, Sebastian
    Abstract: This essay studies the optimal timing for a firm to adopt a new process innovation in the presence of learning. A policy that has been implemented by governments throughout the world to reduce the cost level of infant industries with positive externalities, is to either subsidize the research of these technologies or their distribution. This model demonstrates how government interventions can affect the optimal timing for adoption of a new technology. Furthermore this essay makes predictions on how the effects change, when the total quantity that can be produced is fixed; the installations of wind powered energy plants exemplify this point. Depending on whether producer rents, consumer rents or early implementation are more important to the government, the model offers the appropriate tools to attain its objective.
    Keywords: Learning; Process Innovation; Optimal Control; Infant industry
    JEL: C61 D42 H23 O12
    Date: 2010–01–31
  6. By: Sebastian Petrick; Katrin Rehdanz; Richard S. J. Tol
    Abstract: To investigate the link between rising global temperature and global energy use, we estimate an energy demand model that is driven by temperature changes, prices and income. The estimation is based on an unbalanced panel of 157 countries over three decades. We limit the analysis to the residential sector and distinguish four different fuel types (oil, natural gas, coal and electricity). Compared to previous papers, we have a better geographical coverage and consider non-linearities in the impact of temperature on energy demand as well as temperature-income interactions. We find that oil, gas and electricity use are driven by a non-linear heating effect: Energy use not only decreases with rising temperatures due to a reduced demand for energy for heating purposes, but the speed of that decrease declines with rising temperature levels. Furthermore we find evidence that the temperature elasticity of energy use is affected by the level of temperature as well as the level of income
    Keywords: Climate change, energy demand, heating and cooling effect, temperature
    JEL: Q41 Q43
    Date: 2010–04
  7. By: Hengyun Ma; Les Oxley (University of Canterbury)
    Abstract: Employing the new regression tests for Convergence, Club Convergence and Clustering proposed by Phillips and Sul (2007), this paper models and analyzes the behavior of China‘s energy sectors. Energy market =convergence clusters‘ are identified using new price data and their regional spatial distributions are mapped for four major fuel types; coal, gasoline, diesel and electricity. It is found that: i) as yet, there are no fully integrated national energy markets in China as more than one convergence cluster is identified for all four fuels; ii) some regional energy markets can be regarded as =quite mature‘ as evidenced by the existence of some highly concentrated convergence clusters connected geographically; iii) some regional markets remain in a =state of transition‘ as witnessed by convergence clusters that are scattered geographically and growing in membership; vi) it seems that there is more regional-based integration for coal and electricity than for gasoline and diesel as more convergent clusters were identified for coal and electricity than for gasoline and diesel v) Overall, China still appears to be in the process of energy market integration as demonstrated by the number and evolution of convergence clusters over time.
    Keywords: China; Energy market; Convergence cluster
    JEL: C33 L83 O10 O40 O57
    Date: 2010–04–20
  8. By: Andreas Ziegler (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: This paper empirically examines the determinants of the demand for alternative energy sources and propulsion technologies in vehicles. The data stem from a stated preference discrete choice experiment with 598 potential car buyers. In order to simulate a realistic automobile purchase situation, seven alternatives were incorporated in each of the six choice sets, i.e. hybrid, gas, biofuel, hydrogen, and electric as well as the common fuels gasoline and diesel. The vehicle types were additionally characterized by a set of attributes, such as purchase price or motor power. Besides these vehicle attributes, our study particularly considers a multitude of individual characteristics, such as socio-demographic and vehicle purchase variables. The econometric analysis with multinomial probit models identifies some population groups with a higher propensity for alternative energy sources or propulsion technologies in vehicles, which can be focused by policy and automobile firms. For example, younger people and people who usually purchase environment-friendly products have a higher stated preference to purchase biofuel, hydrogen, and electric automobiles than other population groups. Methodologically, our study highlights the importance of the inclusion of taste persistence across the choice sets. Furthermore, it suggests a high number of random draws in the Geweke-Hajivassiliou-Keane simulator, which is incorporated in the simulated maximum likelihood estimation and the simulated testing of statistical hypotheses.
    Keywords: Alternative energy sources and propulsion technologies in vehicles, stated preferences, discrete choice, multinomial probit models, unobserved heterogeneity, simulated maximum likelihood estimation
    JEL: R41 C25 C15 Q54 Q58
    Date: 2010–03
  9. By: Ujjayant Chakravorty; Andrew Leach; Michel MOREAUX
    Date: 2010–04
  10. By: Giorgia Oggioni and Yves Smeers
    Abstract: Cross-border trade remains a contentious issue in the restructuring of the European electricity market. Difficulties stem from the lack of a common market design, the separation between energy and transmission markets and the insufficient coordination between Transmission System Operators (TSOs). This paper analyzes the cross-border trade problem through a set of models that represent different degrees of coordination both between the energy and transmission markets and among national TSOs.. We first present the optimal organisation, not implemented in Europe, where energy and transmission are integrated according to the nodal price paradigm and Power Exchanges (PXs) and Transmission System Operators (TSOs) are integrated. This is our reference case. We then move to a more realistic representation of the European electricity market based on the so-called market-coupling design where energy and transmission are operated separately by PXs and TSOs. When considering different degrees of coordination of the national TSOs' activities, we unexpectedly find that some arrangements are more efficient than the lack of coordination might suggest. Specifically we find that even without a formal coordination of the TSOs' counter-trading operations, non discriminatory access to common counter-trading resources for all TSOs may lead to a partial implicit coordination of these TSOs. In other words, an internal market of counter-trading resources partially substitutes the lack of integration of the TSOs. While a full access to counter-trading resources is a weaker requirement than the horizontal integration of the TSOs, it is still quite demanding. We show that quantitative limitations to the access of these resources decrease the efficiency of counter-trading. The paper supposes price taking agents and hence leaves aside the incentive to game the system induced by zonal systems..
    Date: 2010–01–29
  11. By: Leonardo Meeus
    Abstract: Power Exchanges (PXs) are key market institutions in open and market-based electricity industries. This paper aims at contributing to the ongoing debate on why and how to regulate Power Exchanges in the EU market integration context. . The paper starts by stating that two different types of PXs have to be distinguished, i.e. "Merchant" PXs and the "Cost of Service Regulated" PXs. The paper continues by comparing the typical incentives of these two types of PXs to perform the basic PX tasks in an isolated national market and in a market integration context. The paper concludes by deriving from this analytical frame the most relevant regulatory actions..
    Keywords: Regulation, Exchanges, Grid access, Power Markets.
    Date: 2010–01–29
  12. By: Nicolau, Mihaela
    Abstract: The dynamic of energy prices influences the entire economic activity, both at macro and micro level. Unlike other economic goods price determination, based specially on offer-demand relationship, the energy price determination is strongly influenced by the taxation policy and political factor, mostly in the case of oil and gas prices. The aim of the paper is to present, using a descriptive approach, the level and the influence of fiscal policy on energy prices, the energy tax harmonization attempt and the consequences at macro and micro economy of the tax weight in the energy final price.
    Keywords: fiscal policy; energy taxation; energy prices; energy consumption; oil and natural gas price; energy tax harmonization
    JEL: Q41 Q48 H23 Q43
    Date: 2009–10–15
  13. By: Jean-Luc Hélis; Teresa Dabán Sánchez
    Abstract: This working paper overviews the challenges posed by resource revenues management and the policy prescriptions to meet them, and focuses on the Public Financial Management (PFM) framework and reforms that resource-producing countries should adopt. The paper outlines a PFM framework and reform path that take into account the institutional diversity of resource-producing countries. In the short term, the proposed reforms highlights the tools that could be implemented even where the PFM system is rather basic, while over the medium and long term they aim at converging with best international PFM practices.
    Keywords: Cross country analysis , Financial management , Fiscal policy , Fiscal reforms , Governance , Natural resources , Oil producing countries , Oil production , Public finance , Resource mobilization , Revenue sources , Transparency ,
    Date: 2010–03–22
  14. By: Rabah Arezki; Kareem Ismail
    Abstract: We examine the behavior of expenditure policy during boom-bust in commodity price cycles, and its implication for real exchange rate movements. To do so, we introduce a Dutch disease model with downward rigidities in government spending to revenue shock. This model leads to a decoupling between real exchange rate and commodity price movement during busts. We test our model's theoretical predictions and underlying assumptions using panel data for 32 oil-producing countries over the period 1992 to 2009. Results are threefold. First, we find that change in current spending have a stronger impact on the change in real exchange rate compared to capital spending. Second, we find that current spending is downwardly sticky, but increases in boom time, and conversely for capital spending. Third, we find limited evidence that fiscal rules have helped reduce the degree of responsiveness of current spending during booms. In contrast, we find evidence that fiscal rules are associated with a significant reduction in capital expenditure during busts while responsiveness to boosts is more muted. This raises concerns about potential adverse consequences of this asymmetry on economic performance in oil-producing countries.
    Keywords: Business cycles , Commodity price fluctuations , Economic models , Fiscal policy , Government expenditures , International trade , Natural resources , Oil exports , Oil producing countries , Political economy , Real effective exchange rates , Revenue mobilization ,
    Date: 2010–04–07
  15. By: Kenji Moriyama; S. M. Ali Abbas; Abdul Naseer
    Abstract: The paper aims to identify the optimal size, speed and composition of the medium-term fiscal adjustment in the context of Sudan's limited oil reserves. The permanently sustainable non-oil primary balance approach suggests the need for significant fiscal adjustment over the medium term, requiring a widening of the tax base. Cross-country comparisons highlight VAT and personal income tax (as well as tax administration) as key areas for reform. The paper also suggests the need for complementary expenditure-side measures in the areas of petroleum pricing and anchoring fiscal policy in non-oil indicators.
    Keywords: Cross country analysis , Economic models , Fiscal policy , Fiscal reforms , Government expenditures , Income taxes , Oil producing countries , Oil revenues , Oil sector , Pricing policy , Sudan , Tax administration , Tax systems , Value added tax ,
    Date: 2010–03–26
  16. By: David I. Stern
    Abstract: Recent papers by Wagner in this journal and Vollebergh et al. in the Journal of Environmental Economics and Management point out some fundamental econometric problems with traditional methods of estimating the environmental Kuznets curve (EKC) and propose alternative approaches that avoid these issues. Wagner notes that traditional methods do not take into account the presence of powers of unit root variables and cross-sectional dependence in the data while Vollebergh et al point out that the time effects are not uniquely identified in the EKC model. The between estimator is a simple estimator that also addresses the concerns of these authors. It makes no a priori assumption about the nature of the time effects and is likely to provide consistent estimates of long-run relationships in real world data situations. I apply several common panel data estimators including the between estimator to the datasets for carbon and sulfur emissions in the OECD and global sulfur emissions. The between estimates of the sulfur-income elasticity are 0.732 in the OECD and 1.067 in the global data set and the estimated carbon-income elasticity is 1.612 in the OECD and 1.509 globally.
    JEL: C23 Q53 Q56
    Date: 2010–02
  17. By: Boadway, Robin; Song, Zhen; Tremblay, Jean-François
    Abstract: We characterize a mechanism for reducing pollution emissions in which countries, acting non-cooperatively, commit to match each others’ abatement levels and may subsequently engage in emissions quota trading. The mechanism leads to an efficient level of emissions, and if the matching abatements process includes a quota trading stage, the marginal benefits of emissions are also equalized across countries. Given equilibrium matching rates, the initial allocation of emission quotas (before trading) reflects each country’s marginal valuation for lower pollution relative to its marginal benefit from emissions. These results hold for any number of countries, in an environment where countries have different abatement technologies and different benefits from emissions, and even if the emissions of countries are imperfect substitutes in each country’s damage function. In a dynamic twoperiod setting, the mechanism achieves both intra-temporal and inter-temporal efficiency. We extend the model by assuming that countries are voluntarily contributing to an international public good, in addition to undertaking pollution abatements, and find that the level of emissions may be efficient even without any matching abatement commitments, and the marginal benefits of emissions may be equalized across countries even without quota trading.
    Keywords: Voluntary pollution abatement, matching commitments, emissions quota trading
    JEL: H23 H41 H87
    Date: 2010–03
  18. By: Osmundsen, Petter (University of Stavanger); Emhjellen, Magne (PETORO)
    Abstract: .
    Keywords: Carbon Capture;
    JEL: A10
    Date: 2010–03–18
  19. By: Osmundsen, Petter (University of Stavanger); Emhjellen, Magne (PETORO)
    Abstract: .
    Keywords: Decision criteria; climate projects
    JEL: A10
    Date: 2010–03–18
  20. By: Stefano Balbi (Department of Economics, University Of Venice Cà Foscari); Pascal Perez (RMAP, Australian National University, Canberra); Carlo Giupponi (Department of Economics, University Of Venice Cà Foscari)
    Abstract: A vast body of literature suggests that the European Alpine region may be one of the most sensitive to climate change impacts. Adaptation to climate change of Alpine socio-ecosystems is increasingly becoming an issue of interest for the scientific community while the people of the Alps are often unaware of or simply ignore the problem. ClimAlpTour is a European research project of the Alpine Space Programme, bringing together institutions and scholars from all countries of the Alpine arch, in view of dealing with the expected decrease in snow and ice cover, which may lead to a rethinking of tourism development beyond the traditional vision of winter sports. The research reported herein analyses the municipality of Auronzo di Cadore (22,000 ha) in the Dolomites under the famous peaks of the “Tre Cime di Lavaredo”. The local economy depends on tourism which is currently focused on the summer season, while the winter season is weak. As a whole, the destination receives approximately 65,000 guests per year with a resident population of 3,600 inhabitants. Since recently the Community Council is considering options on how to stimulate a further development of the winter tourism. This paper refers to a prototype agent-based model, called AuronzoWinSim, for the assessment of alternative scenarios of future local development strategies, taking into account complex spatial and social dynamics and interactions. Different typologies of winter tourists compose the set of human agents. Climate change scenarios are used to produce temperature and snow cover projections. The model is mainly informed by secondary sources, including demographic and economic time series, and biophysical data which feed-in its spatial dimension. Primary data from field surveys are used to calibrate the main parameters. AuronzoWinSim is planned for use in a participatory context with groups of local stakeholders.
    Keywords: Alpine Winter Tourism, Spatial Agent-Based Model, Climate Change Adaptation
    JEL: Q
    Date: 2010
  21. By: Lucas Bretschger (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland); Roger Ramer (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland); Florentine Schwark (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: The paper develops a new type of CGE model to predict the effects of carbon policies on consumption, welfare, and sectoral development in the long run. Growth is fully endogenous, based on increasing specialization in capital varieties, and specic in each sector of the economy. The benchmark scenario is calculated based on the endogenous gains from specialization which carry over to policy simulation. Applying the model to the Swiss economy we nd that a carbon policy following the Copenhagen Accord entails a moderate but not negligible welfare loss compared to development without any negative eects of climate change. Energy extensive as well as capital and knowledge intensive sectors prot in the form of increased growth rates.
    Keywords: Carbon policy, CGE models, energy and endogenous growth, heterogeneous capital
    JEL: Q54 C63 O41 Q43 Q56
    Date: 2010–04
  22. By: Arguedas, Carmen (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: In this paper, we analyze whether it is socially desirable that fines for exceeding pollution standards depend not only on the degree of non-compliance but also on the firm's level of investment in environmentally friendly technologies. For that purpose, we consider a partial equilibrium framework where a representative firm chooses the pollution level and the investment effort in response to an environmental policy composed of a pollution standard, an inspection probability and a fine for non-compliance. We find that the fine should not depend on the firm's investment effort if the optimal policy induces compliance. However, the fine should strictly decrease with investment effort under non-compliance and positive social costs of sanctioning. Interestingly, the optimal fine considers the relative importance of monitoring and sanctioning costs in the enforcement problem.
    Keywords: pollution standards; costly inspections; environmentally friendly technologies; non-compliance; optimal fines.
    JEL: K32 K42 L51 Q28
    Date: 2010–04
  23. By: Iwata, Hiroki; Okada, Keisuke
    Abstract: Our study empirically investigates the effects of the Kyoto Protocol’s quantified emission limitation or reduction commitments on various greenhouse gas (GHG) emissions such as CO2, CH4, N2O and other greenhouse gases, consisting of HFCs, PFCs and SF6. These GHG emissions are considered to be the main source of global warming issues and 39 countries approved to meet the commitments by ratifying the Kyoto Protocol. Our empirical analysis is based on the STIRPAT model, the stochastic version of the IPAT model, using the data of 119 countries in 1990, 1995, 2000 and 2005. Our main findings are that the effects of the commitments to the Kyoto Protocol (1) are significantly negative for the cases of CO2 and CH4 emissions, (2) are not significant for the case of N2O emissions and (3) are significantly positive for the case of other greenhouse gas emissions. These results have important policy implications for global warming issues.
    Keywords: Greenhouse gas emissions; Kyoto Protocol; Sustainability; IPAT; Panel data
    JEL: Q56 O19 Q54
    Date: 2010–04–23

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