nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒06‒18
fourteen papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Energy Consumption and Economic Growth: New Insights into the Cointegration Relationship By Ansgar Belke; Christian Dreger; Frauke de Haan
  2. Power to the people of Europe By Georg Zachmann
  3. Households’ Willingness to Pay for Undergrounding Electricity and Telecommunications Wires By McNair, Ben J.; Bennett, Jeff; Hensher, David A.
  4. Which “Greenness” is Valued? Evidence from Green Condominiums in Tokyo By Yoshida, Jiro; Sugiura, Ayako
  5. Welfare Impacts of Alternative Biofuel and Energy Policies By Cui, Jingbo; Lapan, Harvey; Moschini, GianCarlo; Cooper, Joseph
  6. Oil and the macroeconomy: A quantitative structural analysis By Francesco Lippi; Andrea Nobili
  7. Les enjeux UE-Russie à l'aune du nouveau contexte gazier By Catherine Locatelli
  8. Referenda under Oath By Nicolas Jacquemet; Alexander James; Stephane Luchini; Jason Shogren
  9. Cost-Effectiveness Analysis of Ground-Level Ozone Control in and Around Beijing By Xie Xuxuan; Wu Dan
  10. The GHG Balance of Biofuels Taking into Account Land Use Change By Mareike Lange
  11. Paying for Mitigation: A Multiple Country Study By Carlsson, Fredrik; Kataria, Mitesh; Krupnick, Alan; Lampi, Elina; Lofgren, Asa; Qin, Ping; Chung, Susie; Sterner, Thomas
  12. Price Discovery in Emissions Permit Auctions By Burtraw, Dallas; Goeree, Jacob; Holt, Charles; Myers, Erica; Palmer, Karen; Shobe, William
  13. Climate Change, Total Factor Productivity, and the Tanzanian Economy: A Computable General Equilibrium Analysis By Bezabih, Mintewab; Chambwera, Muyeye; Stage, Jesper
  14. The Hartwell Paper: a new direction for climate policy after the crash of 2009. By Prins, Gwyn; Galiana, Isabel; Green, Christopher; Grundmann, Reiner; Korhola, Atte; Laird, Frank; Nordhaus, Ted; Pielke Jnr, Roger; Rayner, Steve; Sarewitz, Daniel; Shellenberger, Michael; Stehr, Nico; Tezuko, Hiroyuki

  1. By: Ansgar Belke; Christian Dreger; Frauke de Haan
    Abstract: This paper examines the long-run relationship between energy consumption and real GDP, including energy prices, for 25 OECD countries from 1981 to 2007. The distinction between common factors and idiosyncratic components using principal component analysis allows to distinguish between developments on an international and a national level as drivers of the long-run relationship. Indeed, cointegration between the common components of the underlying variables indicates that international developments dominate the long-run relationship between energy consumption and real GDP. Furthermore, the results suggest that energy consumption is price-inelastic. Causality tests indicate the presence of a bi-directional causal relationship between energy consumption and economic growth.
    Keywords: Energy consumption, panel unit roots, panel cointegration, vector error-correction models, Granger causality
    JEL: C33 O13 Q43
    Date: 2010
  2. By: Georg Zachmann
    Abstract: Bruegel Research Fellow Georg Zachmann explains the challenges that arise in creating an efficient single electricity market in Europe. This Policy Brief proposes that the European Commission continues to push for binding European network planning based on technical and cost-benefit analyses, while member states should move away from the artificial setting of single national prices.
    Date: 2010–06
  3. By: McNair, Ben J.; Bennett, Jeff; Hensher, David A.
    Abstract: Underground telecommunications and low-voltage electricity networks have several advantages over overhead networks including reliability of supply, safety and improved visual amenity. The economic viability of replacing existing overhead networks with new underground networks depends on the value of these benefits to households, but no complete value estimates are available in the literature. This paper represents a contribution towards addressing this research gap. A stated choice survey is used to estimate willingness-to-pay for undergrounding in established residential areas in Canberra. Average willingness-to-pay is at least $6,838 per household and there is significant variation in preferences over the population. The results suggest that benefits would be highest in areas with higher household income and older residents where visual amenity, safety, tree trimming or restrictions on the use of yard space are of concern.
    Keywords: Stated preference; willingness-to-pay; undergrounding; supply reliability
    JEL: L94 Q51
    Date: 2010–05
  4. By: Yoshida, Jiro; Sugiura, Ayako
    Abstract: This is one of the first researches on price differentials of green buildings in Asia. Using a rich set of data on condominium transactions and mandatory evaluation of environmental performance in Tokyo, we estimate the effects of itemized green scores on transaction prices. Although green condominiums are on average traded at a premium, the premium is mainly attributed to the building age and quality. After controlling for relevant attributes, we find significant price discounts for newly constructed green condominiums. However, green condominiums experience little depreciation at least during the initial years. Using itemized scores, we find that the long-life design mitigates price discounts, but other factors such as the use of eco-friendly materials, renewable energy, water reuse, and greening exacerbate discounts. Several possibilities are discussed including high future maintenance costs of green condominiums.
    Keywords: sustainability; green building; hedonic pricing; transaction price; residential real estate; Japan
    JEL: Q51 R31 R21
    Date: 2010–03–26
  5. By: Cui, Jingbo; Lapan, Harvey; Moschini, GianCarlo; Cooper, Joseph
    Abstract: We employ an open economy general equilibrium model to investigate the effects of government energy policy, with an emphasis on corn-based ethanol, on the U.S. economy. The model specification incorporates world and domestic markets, assumes pollution costs from fuel consumption, and allows endogenous determination of equilibrium quantities and prices for oil, corn and ethanol. The model is calibrated to represent a recent benchmark data set for 2009 and is used to simulate the positive and normative effects of alternative policies. We find that a second best policy of a fuel tax and ethanol subsidy approximates fairly closely the welfare gains associated with the first-best policy of an optimal carbon tax and tariffs on traded goods. The largest economic gains to the U.S. economy from these energy policies arise from the impact of the policies on U.S. terms of trade, particularly in the oil market. We also find that, conditional on the current fuel tax, an optimal ethanol mandate is superior to an optimal ethanol subsidy. In the benchmark case, the optimal ethanol mandate is about 18 billion gallons.
    Keywords: Biofuel policies; carbon tax; ethanol subsidy; gasoline tax; Greenhouse gas emissions; Mandates; renewable fuel standard; Second best; welfare.
    JEL: F1 H2 Q2
    Date: 2010–06–09
  6. By: Francesco Lippi (University of Sassary, EIEF); Andrea Nobili (Bank of Italy)
    Abstract: We model an economy where the cost of the oil input, industrial production, and other macroeconomic variables fluctuate in response to fundamental oil supply shocks, as well as aggregate demand and supply shocks generated domestically and in the world economy. We estimate the effects of these structural shocks on US monthly data over 1973.1-2007.12, using robust sign restrictions suggested by the model. It is shown that the interplay between the oil market and the US economy goes in both ways. First, US output falls below the baseline for a prolonged period of time after a negative oil supply shock. However, oil-supply shocks explain a relatively modest part of overall output fluctuations (about 10%). Second, most variations of (real) oil prices occur in response to shocks originated in the global economy and in the US. In particular, supply shocks in the rest of the world and in the US explain more than half of the variance of oil price fluctuations. Finally, the correlation between oil prices and the US business cycle depends on the nature of the fundamental shock: a negative correlation emerges in periods when oil-supply shocks or global demand shocks occur, while a positive correlation emerges in periods of supply shocks in the global economy or the US. The unconditional correlation between oil prices and US production over a long sample period is tenuous because it blends conditional correlations with different signs.
    JEL: C32 E3 F4
    Date: 2010
  7. By: Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Les relations gazières entre la Russie et l'UE sont façonnées par de fortes interdépendances. Mais à ce jour d'importantes incompréhensions caractérisent ces relations et rendent difficile la signature d'un nouveau partenariat énergétique entre les deux partenaires. Les oppositions se focalisent aujourd'hui autour de deux approches de la sécurité gazière, celle de l'offre versus celle de la demande. Celles-ci tendent à structurer le dialogue entre l'UE et la Russie dans un environnement marqué par de profonds changements institutionnels, par la libéralisation du marché gazier européen et d'importants surplus gaziers. L'objectif de cet article est d'examiner les enjeux économiques de la relation gazière entre l'UE et la Russie, et leurs conséquences sur la négociation entre la Russie et l'UE.
    Keywords: marche international ; gaz naturel ; partenariat ; Russie ; Union européenne
    Date: 2010–06
  8. By: Nicolas Jacquemet (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); Alexander James (University of Wyoming - Department of Economics and Finance); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Jason Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming)
    Abstract: Herein we explore whether a solemn oath can eliminate hypothetical bias in a voting referenda, a design commonly promoted in nonmarket valuation exercises for its incentive compatibility properties. First, we reject the null hypothesis that a hypothetical bias does not exist. Second, we cannot reject the hypothesis that people who sign an oath are as likely to vote for the public good (e.g., wind energy R&D) in a hypothetical referenda as in a real one. This result opens interesting avenues for improving the elicitation of preferences in the lab.
    Keywords: Dichotomous Choice Mechanism; Hypothetical bias; Oath; Preference revelation
    Date: 2010–06–08
  9. By: Xie Xuxuan (Beijing University, China); Wu Dan (Beijing University, China)
    Abstract: This study assesses a number of policy options that could help reduce ground level ozone pollution in Beijing. Ground level ozone pollution is one of the most significant air pollution problems in big cities in China. Because of the complex way in which ozone is formed, it is difficult for policy makers to identify optimal control options on a cost-effective basis. The study assesses a range of options to address this problem. It compares the effectiveness and economic costs of these options, and then recommends the most effective sequence in which the options should be adopted to realize pollution control at the lowest cost. The study finds that the installation of oil gas recovery systems at Beijing's 1446 gasoline stations would be the most cost-effective option. Overall, it is found that options to reduce ozone pollution by cutting vehicular emissions are much more cost-effective than options to "clean-ip" coal-fired plants. A series of options for controlling vehicular emissions have been introduced, including substituting gasoline buses with clean fuel buses and phasing out high emission vehicles (those with low emission standards) in Beijing. The study also highlights that cost-effective pollution control can be achieved by, for example, better practices when refueling vehicles. The results of this research are expected to help decision makers to bate ozone pollution in a cost-effective way.
    Keywords: pollution, China
    Date: 2010–03
  10. By: Mareike Lange
    Abstract: The contribution of biofuels to the saving of greenhouse gas (GHG) emissions has recently been questioned because of emissions resulting from land use change (LUC) for the bioenergy feedstock production. We investigate how an expanding biofuel feedstock production impacts on land use dynamics if LUC is included into the biofuel carbon accounting framework as scheduled by the European Commission. We first illustrate the change in carbon balances of different biofuels, using methodology and data from the IPCC Guidelines for National Greenhouse Gas Inventories. It turns out that the conversion of natural land except for grassy savannahs impedes meeting the EU’s 35% minimum emissions reduction target for biofuels. We show that the current accounting method promotes biofuel feedstock production mainly on former cropland, thus increases the competition between food and fuel production on the currently available cropland area. We further discuss whether it is profitable to use degraded land for commercial bioenergy production as requested by the European Commission to avoid undesirable LUC and conclude that the current regulation sets little incentives to use such land. The exclusive consideration of LUC for bioenergy production minimizes direct LUC at the expense of increasing indirect LUC but a convincing approach to implement indirect LUC into the framework does not exist. To overcome this problem, we propose the inclusion of all agricultural activities into a regulatory framework for carbon accounting, thus eliminating the indirect LUC risk
    Keywords: land use change emissions, bioenergy, biofuels, European policy, land use dynamics, indirect land use change (ILUC)
    JEL: Q58 Q42 Q24 Q17
    Date: 2010–04
  11. By: Carlsson, Fredrik; Kataria, Mitesh; Krupnick, Alan (Resources for the Future); Lampi, Elina; Lofgren, Asa; Qin, Ping; Chung, Susie; Sterner, Thomas
    Abstract: Unique survey data from a contingent valuation study conducted in three different countries (China, Sweden, and the United States) were used to investigate the ordinary citizen’s willingness to pay (WTP) for reducing CO2 emissions. We found that a large majority of the respondents in all three countries believe that the mean global temperature has increased over the last 100 years and that humans are responsible for the increase. A smaller share of Americans, however, believes these statements, when compared to the Chinese and Swedes. A larger share of Americans is also pessimistic and believes that nothing can be done to stop climate change. We also found that Sweden has the highest WTP for reductions of CO2, while China has the lowest. Thus, even though the Swedes and Chinese are similar to each other in their attitudes toward climate change, they differ considerably in their WTP. When WTP is measured as a share of household income, the willingness to pay is the same for Americans and Chinese, while again higher for the Swedes.
    Keywords: climate change, willingness to pay, multi-country, China, United States, Sweden
    JEL: Q51 Q54
    Date: 2010–05–25
  12. By: Burtraw, Dallas (Resources for the Future); Goeree, Jacob; Holt, Charles; Myers, Erica; Palmer, Karen (Resources for the Future); Shobe, William
    Abstract: Auctions are increasingly being used to allocate emissions allowances (“permits”) for cap and trade and common-pool resource management programs. These auctions create thick markets that can provide important information about changes in current market conditions. This paper reports a laboratory experiment in which half of the bidders experienced unannounced increases in their willingness to pay for permits. The focus is on the extent to which the predicted price increase due to the demand shift is reflected in sales prices under alternative auction formats. Price tracking is good for uniform-price, sealed-bid auctions and for multiround clock auctions, with or without end-of-round information about excess demand. Price inertia is observed for “pay as bid” (discriminatory) auctions, especially for a continuous discriminatory format in which bids could be changed at will during a prespecified time window, in part because “sniping” in the final moments blocked the full effect of the demand shock.
    Keywords: auction, greenhouse gases, price discovery, cap-and-trade, emissions allowances, laboratory experiment
    JEL: C92 D44 Q5
    Date: 2010–06–03
  13. By: Bezabih, Mintewab; Chambwera, Muyeye; Stage, Jesper
    Abstract: This paper analyzes the economic impacts of climate change-induced adjustments on the performance of the Tanzanian economy, using a countrywide CGE (computable general equilibrium) model. The general equilibrium framework enables comparison of the effects of climate change to the overall growth of the economy because responsiveness to shocks is likely to depend on the macroeconomic structure of the economy. Effect of overall climate change on agricultural productivity is projected to be relatively limited until approximately 2030 and become worse thereafter. Our simulation results indicate that, despite the projected reduction in agricultural productivity, the negative impacts can potentially be quite limited. This is because the time scales involved and the low starting point of the economy leave ample time for factor substitutability (i.e., replacing reduced land productivity with increased use of capital and labor) and increased overall productivity. This indicates that policies that give farmers opportunity to invest in autonomous climate adaptation, as well as policies that improve the overall performance of the economy, can be as important for reducing the impacts of climate change in the economy as direct government policies for climate adaptation. The study results can inform policymakers when choosing between direct climate-change adaptation policies or measures aimed at strengthening the fundamentals of the economy, as ways of insulating against external shocks.
    Keywords: climate change, agriculture, total factor productivity, Tanzania, CGE model
    JEL: Q18 C02
    Date: 2010–06–08
  14. By: Prins, Gwyn; Galiana, Isabel; Green, Christopher; Grundmann, Reiner; Korhola, Atte; Laird, Frank; Nordhaus, Ted; Pielke Jnr, Roger; Rayner, Steve; Sarewitz, Daniel; Shellenberger, Michael; Stehr, Nico; Tezuko, Hiroyuki
    Date: 2010–04

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