nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒05‒15
27 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Why and How the European Union Can Get a (Near To) Carbon-Free Energy System in 2050? By Christopher Jones; Jean-Michel Glachant
  2. Income, resources, and electricity mix By Paul J. Burke
  3. Investment in Energy Infrastructure and the Tax Code By Gilbert E. Metcalf
  4. Renewable Energy Expansion and the Value of Balance Regulation Power By Försund, Finn; Hjalmarsson, Lennart
  5. Economic Growth, Energy demand and Atmospheric Pollution: Challenges and Opportunities for China in the future 30 years By Jie He; David Roland-Holst
  6. Ontario’s Green Energy “Fee”: The Trouble with Taxation through Regulation By Benjamin Alarie; Finn Poschmann
  7. Uncertainty and Energy Saving Investments By Matti Liski; Pauli Murto
  8. Taxes, Permits and Costly Policy Response to Technological Change By Coria, Jessica; Hennlock, Magnus
  9. Scarcity, regulation and endogenous technical progress By Raouf BOUCEKKINE; Natali HRITONENKO; Yuri YATSENKO
  10. Speculation without Oil Stockpiling as a Signature: A Dynamic Perspective By Axel Pierru; Denis Babusiaux
  11. Taxation and the Extraction of Exhaustible Resources: Evidence From California Oil Production By Nirupama S. Rao
  12. Technology Diffusion with Market Power in the Upstream Industry By Grischa Perino
  13. Oil dependency of the Russian economy: an econometric analysis By Andreas Benedictow, Daniel Fjærtoft and Ole Løfsnæs
  14. Crude oil and motor fuel: Fair price revisited By Ivan O. Kitov; Oleg I. Kitov
  15. Oil revenues for public investment in Africa: targeting urban or rural areas? By Marcus Böhme; Clemens Breisinger; Rainer Schweickert; Manfred Wiebelt
  16. Does the Canadian Economy suffer from Dutch Disease? By Michel Beine; Charles S. Bos; Serge Coulombe
  17. Asymmetric Price Responses of Gasoline Stations: Evidence for Heterogeneity of Retailers By Riemer P. Faber
  18. Market Efficiency of Oil Spot and Futures: A Mean-Variance and Stochastic Dominance Approach By Hooi Hooi Lean; Michael McAleer; Wing-Keung Wong
  19. Gasoline Prices, Fuel Economy, and the Energy Paradox By Hunt Allcott; Jean-Nathan Wozny
  20. Analyzing and Forecasting Volatility Spillovers, Asymmetries and Hedging in Major Oil Markets By Chia-Lin Chang,; Michael McAleer; Roengchai Tansuchat
  21. Renewable Resources, Pollution and Trade in a Small Open Economy By Horatiu Rus
  22. On the theory of a firm : The case of by-production of emissions. By Murty, Sushama
  23. Are compact cities environmentally friendly? By Carl Gaigné; Stéphane Riou; Jacques-François Thisse
  24. Combining emissions trading and emissions taxes in a multi-objective world By Lehmann, Paul
  25. The Economic Impact of the Little Ice Age By Morgan Kelly; Cormac Ó Gráda
  26. Is there an environmental benefit to being an exporter? Evidence from firm level data By Svetlana Batrakova; Ronald B Davies
  27. Climate Change Disaster Management: Mitigation and Adaptation in a Public Goods Framework By Reviva Hasson; Åsa Löfgren; Martine Visser

  1. By: Christopher Jones; 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.
    Date: 2010–03
  2. By: Paul J. Burke
    Abstract: This paper presents evidence on a national-level electricity ladder which sees countries transition toward coal and natural gas, and finally nuclear power and modern renewables such as wind power, for their electricity needs as they develop. The extent to which countries climb the electricity ladder is dependent on energy endowments. The results imply that the environmental implications of economic development differ in countries with different energy resource endowments. An effective global carbon mitigation strategy will require developing countries to leapfrog the middle rungs of the electricity ladder.
    Keywords: economic development, electricity mix, energy, substitution, transition
    JEL: O11 O13 Q43
    Date: 2010–02
  3. By: Gilbert E. Metcalf
    Abstract: Federal tax policy provides a broad array of incentives for energy investment. I review those policies and construct estimates of marginal effective tax rates for different energy capital investments as of 2007. Effective tax rates vary widely across investment classes. I then consider investment in wind generation capital and regress investment against a user cost of capital measure along with other controls. I find that wind investment is strongly responsive to changes in tax policy. Based on the coefficient estimates the elasticity of investment with respect to the user cost of capital is in the range of -1 to -2. I also demonstrate that the federal production tax credit plays a key role in driving wind investment over the past eighteen years.
    Date: 2009–10
  4. By: Försund, Finn (University of Oslo); Hjalmarsson, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: To achieve a stable and reliable electricity supply, efficient provision of reserve capacity or, more generally, ancillary services is crucial. Because of the expansion of wind power with random variation in supply, and expected environmental restrictions in hydropower operation causing reductions in regulated hydropower capacity, the balancing power and system reliability issues have become topical in Scandinavia. Moreover, there seems to be a wide-spread opinion that increase in wind-power generation will lead to increased demand for regulating power, much higher prices for reserves and a much higher value of regulated hydro power. Thus, this chapter deals with the value of balance regulation power, or electricity reserves, in the Nordic electricity market, and we will address the issue of the future value of electricity reserves, hydro capacity in particular, that could be used either for energy production or to balance power production, and more generally discuss the value of balancing power in the Nordic electricity system. In the first, theoretical, part of this study we will apply a simple dynamic electricity generation model, involving hydropower, thermal power and wind power to derive the value of the water in a dam of a hydropower plant. In the second, more empirically oriented, part we will address a number of issues related to balance regulation and the value of balancing power with focus on the Nordic electricity market and against the background of an expanding generation capacity of intermittent renewable electricity, especially wind power.<p>
    Keywords: Electricity; ancillary services; reserve capacity; regulating power; wind power
    JEL: L94 Q40 Q51
    Date: 2010–05–04
  5. By: Jie He (GREDI, Faculte d'administration, Université de Sherbrooke); David Roland-Holst (Mills College, UC Berkeley, and RDRC)
    Abstract: This paper uses a dynamic CGE model, calibrated to detailed Chinese emissions data, to assess two important questions. What can we reasonably expect Chinese emissions trends to look like over the next three decades? Secondly, what would be the appropriate policy interventions to flatten Chinese emissions trajectories and reduce the risk of local, regional, and even global adversity? This research is original in its direct use of the new industrial sector-level emissions and energy using data from China to estimate the energy-specific emission effluent rate and its detailed treatment of policies taking account of the three main determinants of pollution intensity: growth, output composition, and technological change. Our results indicate that, without further effective emission control measures, China’s economic growth over the next two decades will contribute significantly to SO2 emission problems, in which the emission firstly increase from the rapid expansion of the transportation service sectors until 2018, then from the heavy industrialization process after 2018. With the potential technical progress, the emission burden will be centralized back to two energy sectors: electricity generation and petrol and coke refining during these two periods. Detailed examination of the structural and technological components of pollution shows that efficient pollution mitigation can be realized by focused abatement activities, cleaner production, and advances in cleaner fuel products and their use technologies.
    Keywords: China, Global warming, CGE modeling
    JEL: Q53 D58 Q54 Q58
    Date: 2010–04–26
  6. By: Benjamin Alarie (University of Toronto); Finn Poschmann (C.D. Howe Institute)
    Abstract: Canadian provincial governments have broad authority to impose direct taxes by passing enabling legislation in their respective legislatures. Governments may also use regulation to set fees, for example, to recover the cost of services they provide, but cannot use regulation to impose taxes that raise general revenue. Doing so would be unconstitutional. Governments nonetheless sometimes attempt to raise revenue by imposing levies that are deliberately mislabelled as “fees” – past efforts to do so have exposed provincial governments to successful constitutional challenges. This e-brief examines problematic example: the Ontario government recently ordered the Ontario Energy Board to impose a “fee” to be used to fund activities of the Ministry of Energy and Infrastructure; this fee is quite likely an unconstitutional tax.
    Keywords: Governance and Public Institutions, Ontario Energy Board, Independent Electricity System Operator (IESO), taxation, regulation, unconstitutional tax
    JEL: H25 H41 H71 L94
    Date: 2010–04
  7. By: Matti Liski; Pauli Murto
    Abstract: Energy costs are notoriously uncertain but what is the effect of this on energysaving investments? We find that real-option frictions imply a novel equilibrium response to increasing but uncertain energy costs: early investments are cautious but ultimately real-option frictions endogenously vanish, and the activity affected by higher energy costs fully recovers. We use electricity market data for counterfactual analysis of the real-option mark-ups and policy experiments. Uncertainty alone implies that the early compensation to new technologies exceeds entry costs by multiple factors, and that uncertainty-reducing subsidies to green energy can benefit the consumer side at the expense of the old capital rents, even in the absence of externalities from energy use.
    Date: 2010–03
  8. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Hennlock, Magnus (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In this paper we analyze the eects of the choice of price (taxes) versus quantity (tradable permits) instruments on the policy response to technological change. We show that if policy responses incur transactional and political adjustment costs, environmental targets are less likely to be adjusted under tradable per- mits than under emission taxes. This implies that the total level of abatement over time might remain unchanged under tradable permits while it will increase under emission taxes.<p>
    Keywords: Environmental Taxes; Tradable Permits; Technology Adoption; Policy Adjustment; Regulatory Costs
    JEL: H82 O32 O33 Q52 Q55 Q58
    Date: 2010–05–10
  9. By: Raouf BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics and Core, Univerity of Glasgow, Department of Economics); Natali HRITONENKO (Prairie View A&M University, USA); Yuri YATSENKO (Houston Baptist University, USA)
    Abstract: This paper studies to which extent a firm using a scarce resource input and facing environmental regulation, can still manage to have a sustainable growth of output and profits. The firm has a vintage capital technology with two complementary factors, capital and a resource input subject to quota, the latter being increasingly scarce through an exogenously rising price. The firm can scrap obsolete capital and invest in adoptive and/or innovative R&D resource-saving activities. We show that there exists a threshold level for the growth rate of the resource price above which the firm will collapse. Below this threshold, two important properties are found. In the long-run, a sustainable growth is possible at a growth rate which is independent of the resource price. In the short-run, not only will the firms respond to increasing resource price by increasing R&D on average, but they will also reduce capital expenditures and speed up the scrapping of older capital goods. Finally, we identify optimal intensive Vs extensive transitional growth regimes depending on the history of the firms.
    Keywords: Vintage capital, technological progress, dynamic optimization, Sustainability, scarcity, environmental regulation
    JEL: C61 D21 D92 O33 Q01
    Date: 2010–03–19
  10. By: Axel Pierru; Denis Babusiaux
    Abstract: According to the standard analysis of commodity prices, stockpiling is a necessary signature of speculation. This paper develops an approach suggesting that speculation may temporarily push crude oil prices above the level justified by physical-market fundamentals, without necessarily resulting in a significant increase in oil inventories. Looking beyond debate on the value of oil-demand price-elasticity, showing a demand curve makes sense only if we consider a fixed time horizon (e.g. short-run). The scenario of oil demand slowly but continuously adjusting to a price fuelled by speculation implies that price elasticity of demand is an increasing function of the time horizon considered. Short- and long-run elasticities can then be used to calibrate this function. A very low very-short-run price elasticity suggests that an exogenously-driven rise in crude oil price has a very slight impact on demand in the very short run and therefore, with supply constant, leads to a minimal increase in inventories. This interpretation differs from the traditional view, according to which storage of just a few barrels is enough to raise prices when elasticity is very low. We present several analytical and numerical illustrations (with oil-demand adjustment following Gompertz, logistic and exponential paths). The role that speculation may have played in recent movements in oil prices is also discussed.
    Date: 2010–04
  11. By: Nirupama S. Rao
    Abstract: Rapid increases in oil prices in 2008 led some to call for special taxes on the oil industry. Because oil is an exhaustible resource, however, the effects of excise taxes on production or on reported producer profits may be more complex than in many other markets. This paper uses well-level production data on California oil wells for the period 1977-2008, along with the rich variation in producer prices induced by federal oil taxes and pre-1980 price controls, to estimate how temporary taxes affect oil production decisions. Theory suggests that temporary taxes could lead producers to shut wells, and more generally that they create strong incentives for retiming production to minimize tax burdens. The empirical estimates suggest small estimates of extensive responses to after-tax prices, meaning that wells are rarely shut, but they also suggest substantial retiming of production for operating wells. While the estimates vary with specifications, the elasticity of oil production with respect to the after-tax price is estimated to fall between 0.208 and 0.261. The estimates are used to calibrate a simple model of the efficiency cost of tax-induced distortions relative to the no-tax optimal extraction path. These calculations suggest that a 15 percent temporary excise tax on California oil producers reduces the present value of producer surplus by between one and five percent of the no-tax surplus or between 113 and 166 percent of the government revenue raised, depending on the original life of the well and the duration of the temporary tax.
    Date: 2010–04
  12. By: Grischa Perino (School of Economics, University of East Anglia)
    Abstract: This paper compares taxes and tradable permits when used to regulate a competitive and polluting downstream industry that can purchase an abatement technology from a monopolistic upstream industry. Second-best policies are derived for the full range of the abatement technology's emission intensities and marginal abatement costs. The second-best permit quantity can be both above or below the socially optimal emission level. Explicit consideration of the output market provides further insights on how market power distorts the allocation in the downstream industry. The ranking between permits and taxes is ambiguous in general, but taxes weakly dominate permits if full diffusion is socially optimal. In addition, it is analysed how a cap on the permit price affects the diffusion of an abatement technology.
    Keywords: diffusion, market power, price bounds, taxes, tradable permits
    JEL: D40 L10
    Date: 2010–04–21
  13. By: Andreas Benedictow, Daniel Fjærtoft and Ole Løfsnæs (Statistics Norway)
    Abstract: A macro econometric model of the Russian economy is developed, containing 13 estimated equations – covering major national account variables, government expenditures and revenues, interest rates, prices and the labour market. The model is tailored to analyze effects of changes in the oil price and economic policy variables. The model has good statistical properties and tracks history well over the estimation period, which runs from 1995Q1 to 2008Q1. Model simulations indicate that the Russian economy is vulnerable to large fluctuations in the oil price, but we also find evidence of significant economic growth capabilities in the absence of oil price growth.
    Keywords: Russia; macro econometric model; oil price dependency; fiscal and monetary policy
    JEL: C51 E17 E52 E63 Q43
    Date: 2010–05
  14. By: Ivan O. Kitov; Oleg I. Kitov
    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.
    Date: 2010–05
  15. By: Marcus Böhme; Clemens Breisinger; Rainer Schweickert; Manfred Wiebelt
    Abstract: This paper investigates the effects of oil financed public investment on poverty using a dynamic multisectoral general equilibrium model featuring inter-temporal productivity spillovers, which may exhibit a sector-specific and regional bias. In general, the results bear out the expectation that a surge of oil revenues leads to a real appreciation, distorting incentives which favor nontradable activities over export agriculture and manufacturing thereby increasing rural and national poverty. Whereas this result is familiar from other recent studies, the simulations show that beyond the short run, when conventional demand-side Dutch disease effects are present, the relationship between resource-rent flows and real exchange rates, output growth, and poverty is less straightforward than simple models of the "resource curse" suggest. Taking Ghana as a stylized agriculture-based economy with poverty most pronounced in a region with home biased agricultural production, a policy mix of smoothing the real exchange rate shock and an allocation of infrastructure spending in rural areas seems to be the most promising public investment strategy to enhance growth and reduce poverty
    Keywords: oil revenue, public investment, productivity, Africa, agricultural development, poverty
    JEL: H4 O5 Q3
    Date: 2010–05
  16. By: Michel Beine (University of Luxembourg, Luxembourg, CESifo); Charles S. Bos (VU University Amsterdam); Serge Coulombe (University of Ottawa, Canada)
    Abstract: We argue that the failure to disentangle the evolution of the Canadian currency from the U.S. currency leads to potentially incorrect conclusions regarding the case of Dutch disease in Canada. We propose a new approach that is aimed at extracting both currency components and energy- and commodity-price components from observed exchange rates and prices. We first analyze the separate influence of commodity prices on the Canadian and the U.S. currency components. We then estimate the separate impact of the two currency components on the shares of manufacturing employment in Canada. We show that 42 per cent of the manufacturing employment loss that was due to exchange rate developments between 2002 and 2007 is related to the Dutch disease phenomenon. The remaining 58 per cent of the employment loss can be ascribed to the weakness of the U.S. currency.
    Keywords: Dutch disease; Natural resources; Exchange rates; Currency components; Bayesian econometrics
    JEL: C11 F31 O13 O51
    Date: 2009–11–11
  17. By: Riemer P. Faber (Erasmus University Rotterdam)
    Abstract: This paper studies asymmetric price responses of individual firms, via daily retail prices of almost all gasoline stations in the Netherlands and suggested prices of the five largest oil companies over more than two years. I find that 38% of the stations respond asymmetrically to changes in the spot market price. Hence, asymmetric pricing is not a feature of the market as a whole, but of individual firms. For asymmetrically pricing stations, the asymmetry is substantial directly after a change but disappears after one or two days. I study station-specific characteristics and conclude that asymmetric pricing seems to be a phenomenon that is randomly distributed across stations. I also find that none of the five largest oil companies adjust their suggested prices asymmetrically.
    Keywords: price setting; asymmetric price responses; gasoline markets
    JEL: D40 E31 L11 L81
    Date: 2009–11–19
  18. By: Hooi Hooi Lean; Michael McAleer (University of Canterbury); Wing-Keung Wong
    Abstract: This paper examines the market efficiency of oil spot and futures prices by using both mean-variance (MV) and stochastic dominance (SD) approaches. Based on the West Texas Intermediate crude oil data for the sample period 1989-2008, we find no evidence of any MV and SD relationships between oil spot and futures indices. This infers that there is no arbitrage opportunity between these two markets, spot and futures do not dominate one another, investors are indifferent to investing in spot or futures, and the spot and futures oil markets are efficient and rational. The empirical findings are robust to each sub-period before and after the crises for different crises, and also to portfolio diversification.
    Keywords: Stochastic dominance; risk averter; oil futures market; market efficiency
    JEL: C14 G12 G15
    Date: 2010–04–01
  19. By: Hunt Allcott; Jean-Nathan Wozny
    Abstract: It is often asserted that consumers purchasing automobiles or other goods and services underweight the costs of gasoline or other "add-ons." We test this hypothesis in the US automobile market by examining the effects of time series variation in gasoline price expectations on the prices and market shares of vehicles with different fuel economy ratings. When gas prices rise, demand for high fuel economy vehicles increases, pushing up their relative prices. Market share changes - increased production of high fuel economy vehicles and scrappage of low fuel economy vehicles - attenuate these price changes. Intuitively, the less that equilibrium vehicle prices and shares respond to changes in expected gasoline prices, the less that consumers appear to value gasoline costs. We estimate a nested logit discrete choice model using a remarkable dataset that includes market shares, characteristics, expected usage, and transaction price microdata for all new and used vehicles available between 1999 and 2008. To address simultaneity bias, we introduce a new instrument for used vehicle market shares, based on the fact that gasoline prices cause variation in new vehicle shares that then persists over time as the vehicles move through resale markets. Our results show that US auto consumers are willing to pay just $0.61 to reduce expected discounted gas expenditures by $1. We incorporate the estimated parameters into a new discrete choice approach to behavioral welfare analysis, which suggests with caution that a paternalistic energy efficiency policy could generate welfare gains of $3.6 billion per year.
    Date: 2010–03
  20. By: Chia-Lin Chang,; Michael McAleer (University of Canterbury); Roengchai Tansuchat
    Abstract: Crude oil price volatility has been analyzed extensively for organized spot, forward and futures markets for well over a decade, and is crucial for forecasting volatility and Value-at-Risk (VaR). There are four major benchmarks in the international oil market, namely West Texas Intermediate (USA), Brent (North Sea), Dubai/Oman (Middle East), and Tapis (Asia-Pacific), which are likely to be highly correlated. This paper analyses the volatility spillover and asymmetric effects across and within the four markets, using three multivariate GARCH models, namely the constant conditional correlation (CCC), vector ARMA-GARCH (VARMA-GARCH) and vector ARMA-asymmetric GARCH (VARMA-AGARCH) models. A rolling window approach is used to forecast the 1-day ahead conditional correlations. The paper presents evidence of volatility spillovers and asymmetric effects on the conditional variances for most pairs of series. In addition, the forecast conditional correlations between pairs of crude oil returns have both positive and negative trends. Moreover, the optimal hedge ratios and optimal portfolio weights of crude oil across different assets and market portfolios are evaluated in order to provide important policy implications for risk management in crude oil markets.
    Keywords: Volatility spillovers; multivariate GARCH; conditional correlation; asymmetries; hedging
    JEL: C22 C32 G32
    Date: 2010–04–01
  21. By: Horatiu Rus (Department of Economics, University of Waterloo)
    Abstract: Industrial pollution often exerts negative spillovers on resource-based productive sectors. International trade creates conditions for the overexploitation of an open-access renewable resource, but also provides opportunities for separating the productive sectors spatially. The existing literature suggests that a diversified exporter of the renewable resource good tends to lose from trade due to over-depletion, while the exporter of the non-resource good gains. This paper shows that, depending on the relative damage inflicted by the two industries on the environment, it is possible that the production externality will persist and that specialization in the manufacturing/dirty good may not be the optimal choice from a welfare perspective. In addition, the resource exporter does not necessarily have to lose from trade even when specializing incompletely, due to the partially offsetting external effects.
    JEL: Q27 Q22 Q53
    Date: 2010–05
  22. By: Murty, Sushama (Department of Economics, University of Warwick)
    Abstract: Five attributes of emission generating technologies are identified and a concept of byproduction is introduced, which implies these five attributes. Murty and Russell [2010] characterization of technologies, which requires distinguishing between intended production of firms and nature's laws of emission generation, is shown to be both necessary and sufficient for by-production. While intended production could be postulated to satisfy standard input and output free-disposability, these will necessarily be violated by nature's emission generation mechanism, which satisfies costly disposability of emission as defined in Murty [2010]. Marginal technical and economic costs of abatement are derived for technologies exhibiting by-production. A simple model of by-production illustrates that, while common abatement paths considered in the literature do involve a technological trade off between emission reduction and intended production, there also almost always exist abatement paths where it is possible to have both geater emission reductions and greater intended outputs. Further, marginal abatement costs will usually be decreasing in the initial level of emissions of firms. Counterintuitive as these results may sound in the rst instance, they are intuitively obvious in the by-production approach as it is rich enough to incorporate both standard economic assumptions with respect to intended production of firms and the rules of nature that govern emission generation.
    Keywords: theory of a firm ; technology ; input and output free-disposability ; diminishing returns to inputs ; joint production ; emission-generation ; marginal abatement cost
    Date: 2010
  23. By: Carl Gaigné (INRA, UMR1302, 4 Allée Bobierre, F-35000 Rennes, France); Stéphane Riou (UMR CNRS 5824 GATE Lyon-Saint-Etienne, Université de Saint-Etienne; Department of Econometrics and Tinbergen Institute, Free University, The Netherlands); Jacques-François Thisse (CORE, Université Catholique de Louvain (Belgium), Université du Luxembourg, and CEPR)
    Abstract: There is a large consensus among international institutions and national governments to favor urban-containment policies - the compact city - as a way to reduce the ecological footprint of cities. This approach overlooks the following basic trade-off : the concentration of activities decreases the ecological footprint stemming from commodity shipping between cities, but it increases emissions of greenhouse gas by inducing longer worktrips. What matters for the ecological footprint of cities is the mix between urban density and the global pattern of activities. As expected, when both the intercity and intraurban distributions of activities are given, a higher urban density makes cities more environmentally friendly and raises global welfare. However, once we account for the fact that cities may be either monocentric or polycentric as well as for the relocation of activities between cities, the relationship between density and the ecological footprints appears to be much more involved. Indeed, because changes in urban density affect land rents and wages, firms are incited to relocate, thus leading to new commuting patterns. We show policies that favor the decentralization of jobs in big cities may reduce global pollution and improve global welfare.
    Keywords: greenhouse gas, commuting costs, transport costs, cities; urban-containment policy
    JEL: D61 F12 Q54 Q58 R12
    Date: 2010
  24. By: Lehmann, Paul
    Abstract: The combination of emissions trading and emissions taxes is usually rejected as redundant or inefficient. This conclusion is based on the restrictive assumption that both policies are exclusively meant to control pollution. However, particularly taxes may pursue a variety of other policy objectives as well, such as raising fiscal revenues or promoting equity. Multiple objectives may justify multiple policies. In this case, welfare losses with respect to pollution control may be traded off by benefits from attaining other policy objectives. Consequently, pragmatic policy recommendations have to be based on an in-depth understanding of interactions in the policy mix. This article makes three contributions that are relevant in this respect. (1) The most important factors distorting pollution abatement under the policy mix are identified. This insight is required to estimate the actual extent of inefficiency in controlling pollution, and to compare it with benefits of attaining other objectives of the tax. (2) The policy mix is not only compared to the unrealistic ideal of an efficient single emissions trading scheme but also to a suboptimal heterogeneous emissions tax. It is shown that if the tax is required to address multiple policy objectives, the implementation of an emissions trading scheme in addition may in fact increase the efficiency of pollution control. (3) It is demonstrated that welfare losses can be minimized within a policy mix by modifying emissions trading design.
    Keywords: policy mix; emissions trading; emissions tax; efficiency
    JEL: H23 H32 Q58
    Date: 2010–04
  25. By: Morgan Kelly (University College Dublin); Cormac Ó Gráda (University College Dublin)
    Abstract: We investigate by how much the Little Ice Age reduced the harvests on which pre-industrial Europeans relied for survival. We find that weather strongly affected crop yields, but can find little evidence that western Europe experienced long swings or structural breaks in climate. Instead, annual summer temperature reconstructions between the fourteenth and twentieth centuries behave as almost independent draws from a distribution with a constant mean but time varying volatility; while winter temperatures behave similarly until the late nineteenth century when they rise markedly, consistent with anthropogenic global warming. Our results suggest that the existing consensus about a Little Ice Age in western Europe stems from a Slutsky effect, where the standard climatological practice of smoothing data prior to analysis induces spurious cyclicality in uncorrelated data.
    Date: 2010–04–19
  26. By: Svetlana Batrakova (University College Dublin); Ronald B Davies (University College Dublin)
    Abstract: One of the greatest concerns over globalisation is its impact on the environment. This paper contributes to this debate by analysing the consequences of becoming an exporter on a firm's energy consumption. We show both theoretically and empirically that for low fuel intensity firms exporting status is associated with higher fuel consumption while for high fuel intensity firms exporting is results in decreased fuel consumption. Further analysis reveals that higher fuel consumption of low fuel intensity firms occurs after exporting, perhaps as a response to increased production. In contrast, firms using relatively large quantities of fuel decrease their energy use after exporting, perhaps by adopting more fuel-efficient technology. These results indicate that the use of aggregate data, as is the case in almost all studies of trade and the environment, is likely to conceal important connections between the two.
    Keywords: Exporting, Energy, Heterogeneity, Quantiles, Matching
    Date: 2010–03–31
  27. By: Reviva Hasson; Åsa Löfgren; Martine Visser
    Abstract: This paper explores the collective action problem as it relates to climate change and develops two models that capture the mitigation/adaptation trade-off. The first model presents climate change as a certain disaster, while the second models climate change as a stochastic event. A one-shot public goods experiment with students reveals a relatively low rate of mitigation for both models. The effect of vulnerability towards climate change is also examined by varying the magnitude of the disaster across treatments. Our results find no significant difference between the high and low-vulnerability environments. This research contributes to the literature concerning public goods experiments as well as the analysis of climate change policy.
    Keywords: Public good; climate change; mitigation; adaptation; experiment; risk
    JEL: I21
    Date: 2010

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