nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒07‒10
23 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. Energy markets and the euro area macroeconomy By Rolf Strauch; Aidan Meyler; Roland Beck; Agostino Consolo; Riccardo Costantini; Michael Fidora; Luca Gattini; Bettina Landau; Ana Lima; David Lodge; Marco Lombardi; Ricardo Mestre; Matthias Mohr; Moreno Roma; Frauke Skudelny; Michal Slavik; Michel Soudan; Martin Spitzer; Melina Vasardani; Vanessa Baugnet; David Cornille; Christin Hartmann; Ulf Slopek; Derry O’Brien; Laura Weymes; Zacharias Bragoudakis; Pinelopi Zioutou; Ángel Estrada; María de los Llanos Matea; Noelia Jiménez; Anton Nakov; Galo Nuño; Erwan Gautier; Delphine Irac; Nicolas Maggiar; Ivan Faiella; Fabrizio Venditti; Lena Cleanthous; Muriel Bouchet; Amela Hubic; Brian Micallef; Guido Schotten; Andreas Breitenfellner; João Amador; Monika Tepina; Mikulas Car; Milan Donoval
  3. Why is the US so Energy Intensive? Evidence from US Multinationals in the UK By Ralf Martin
  5. Why is Dead DEDA Still Alive? By Arjun Bhattacharya; O’Neil Rane
  6. Rural Electrification and Manufacturing Firm Performance in Benin – An Ex-Ante Impact Assessment By Jörg Peters; Colin Vance; Marek Harsdorff
  7. Rural Electrification and Fertility – Evidence from Côte d’Ivoire By Jörg Peters; Colin Vance
  8. Incentives for Transmission Investment in the PJM Electricity Market: FTRs or Regulation (or Both?) By Juan Rosellón; Zdenka Mysliková; Eric Zenón
  9. Follow the Sun! How investments in solar power plants in Sicily can generate high returns of investments and help to prevent global warming By Jan Christian Schinke
  10. Latvijas energosektora sistēmdinamikas prognozēšanas modeļa izstrāde By Skribans, Valerijs
  11. Toward a Combined Merchant-Regulatory Mechanism for Electricity Transmission Expansion By William Hogan; Juan Rosellón; Ingo Vogelsang
  12. Lumpy Investment in Regulated Natural Gas Pipelines: An Application of the Theory of the Second Best By Dagobert L. Brito; Juan Rosellón
  13. Security of supply in the European Gas Market A model-based analysis By Ibrahim Abada; Olivier Massol
  14. A Net Present Value Model of Natural Gas Exploitation in Northern Alberta: An Analysis of Land Values in Woodland Caribou Ranges By Hauer, Grant; Adamowicz, Wiktor; Jagodinski, Robert
  15. The changing pattern in international trade and capital flows of the Gulf cooperation council countries in comparison with other oil-exporting countries By Peeters, Marga
  16. Willingness to pay for environmental attributes of non-food products : a real choice experiment By Michaud, C.; Llerena, D.; Joly, I.
  17. Dynamic Econometric Testing of Climate Change and of its Causes By Travaglini, Guido
  18. Limiting Emissions and Trade: Some Basic Ideas By Kala Krishna
  19. Quelle intégration des pays en développement dans le régime climatique ? Le mécanisme de développement propre en Asie By Pauline Lacour; Jean-Christophe Simon
  20. Climate Policy and Profit Efficiency By Lundgren, Tommy; Marklund, Per-Olov
  21. Copenhagen and Beyond: Reflections on China's Stance and Responses By ZhongXiang Zhang; ;
  22. Spillovers from Climate Policy By Stephen P. Holland
  23. Climate Policy under Fat-Tailed Risk: An Application of FUND By Tol, Richard S. J.; Anthoff, David

  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 errorcorrection models; Granger causality
    JEL: C33 O13 Q43
    Date: 2010–04
  2. By: Rolf Strauch (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Aidan Meyler (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Roland Beck (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Agostino Consolo (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Riccardo Costantini; Michael Fidora (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Luca Gattini (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Bettina Landau (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Ana Lima (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); David Lodge (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Marco Lombardi (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Ricardo Mestre (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Matthias Mohr (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Moreno Roma (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Frauke Skudelny (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Michal Slavik (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Michel Soudan (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Martin Spitzer (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Melina Vasardani (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Vanessa Baugnet (National Bank of Belgium, boulevard de Berlaimont 14, 1000 Brussels, Belgium.); David Cornille (National Bank of Belgium, boulevard de Berlaimont 14, 1000 Brussels, Belgium.); Christin Hartmann (Deutsche Bundesbank, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Germany.); Ulf Slopek (Deutsche Bundesbank, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Germany.); Derry O’Brien (Central Bank and Financial Services Authority of Ireland,Dame Street, Dublin 2, Ireland.); Laura Weymes (Central Bank and Financial Services Authority of Ireland,Dame Street, Dublin 2, Ireland.); Zacharias Bragoudakis (Bank of Greece, 21, E. Venizelos Avenue, P. O. Box 3105, GR-10250 Athens, Greece.); Pinelopi Zioutou (Bank of Greece, 21, E. Venizelos Avenue, P. O. Box 3105, GR-10250 Athens, Greece.); Ángel Estrada (Banco de España, Alcalá 50, E-28014 Madrid, España.); María de los Llanos Matea (Banco de España, Alcalá 50, E-28014 Madrid, España.); Noelia Jiménez (Banco de España, Alcalá 50, E-28014 Madrid, España.); Anton Nakov (Banco de España, Alcalá 50, E-28014 Madrid, España.); Galo Nuño (Banco de España, Alcalá 50, E-28014 Madrid, España.); Erwan Gautier (Banque de France, 39, rue Croix-des-Petits-Champs, F-75049 Paris Cedex 01, France.); Delphine Irac (Banque de France, 39, rue Croix-des-Petits-Champs, F-75049 Paris Cedex 01, France.); Nicolas Maggiar (Banque de France, 39, rue Croix-des-Petits-Champs, F-75049 Paris Cedex 01, France.); Ivan Faiella (Banca d’Italia, Via Nazionale 91, I-00184 Rome, Italy.); Fabrizio Venditti (Banca d’Italia, Via Nazionale 91, I-00184 Rome, Italy.); Lena Cleanthous (Central Bank of Cyprus, 80, KENNEDY AVENUE, CY-1076 NICOSIA, Cyrpus); Muriel Bouchet (Banque centrale du Luxembourg; 2, boulevard Royal; L-2983 Luxembourg, Luxembourg.); Amela Hubic (Banque centrale du Luxembourg; 2, boulevard Royal; L-2983 Luxembourg, Luxembourg.); Brian Micallef (Central Bank of Malta, Pjazza Kastilja, Valletta, VLT 1060, MALTA.); Guido Schotten (De Nederlandsche Bank, Westeinde 1, 1017 ZN Amsterdam, the Netherlands.); Andreas Breitenfellner (Oesterreichische Nationalbank, Otto-Wagner-Platz 3, POB-61, A-1011 Vienna, Austria.); João Amador (Banco de Portugal, Av. Almirante Reis, 71 – 8°, 1150-012 Lisboa, Portugal.); Monika Tepina (BANK OF SLOVENIA, Slovenska 35, 1505 Ljubljana, Slovenija); Mikulas Car (Narodna banka Slovenska, Imricha Karvasa 1, 813 25 Bratislava); Milan Donoval (Narodna banka Slovenska, Imricha Karvasa 1, 813 25 Bratislava)
    Abstract: This report aims to analyse euro area energy markets and the impact of energy price changes on the macroeconomy from a monetary policy perspective. The core task of the report is to analyse the impact of energy price developments on output and consumer prices. Nevertheless, understanding the link between energy price fluctuations, inflationary pressures and the role of monetary policy in reacting to such pressure requires a deeper look at the structure of the economy. Energy prices have presented a challenge for the Eurosystem, as the volatility of the energy component of consumer prices has been high since the creation of EMU. At the same time, a look back into the past may not necessarily be very informative for gauging the likely impact of energy price changes on overall inflation in the future. For instance, the reaction of HICP inflation to energy price fluctuations seems to have been more muted during the past decade than in earlier periods such as the 1970s. JEL Classification: E20, E30, E50, Q43
    Keywords: energy, pass-through, inflation, macroeconomy, monetary policy
    Date: 2010–06
  3. By: Ralf Martin
    Abstract: At present the USA is - in per capita terms - the top greenhouse gas polluter among the world's majoreconomies. This is mirrored by the high energy intensity of all sectors of the US economy includingmanufacturing industries. A potential explanation for the higher energy intensity is lower US energyprice levels. However, common price elasticity estimates are not high enough to explain the observeddifferences between countries. Alternative explanations include firstly geographic or other locationaldifferences and secondly firm specific technology differences between US firms and others. Thisstudy explores this latter possibility by comparing establishments of US firms in Britain with othercomparable firms thereby ruling out locational differences. The findings are that on average US firmsare not more energy intensive when operating in Britain. However, US firms that have only recentlyentered the UK market are found to be significantly more energy intensive at an order of magnitudecorresponding to the between country US-UK gap. This difference vanishes with an increasedduration of stay in the UK; however, with a considerable time lag. This suggests firstly, that barriersto knowledge diffusion are an important concern and secondly, that the long term response to asustained price increase might be stronger than common price elasticity estimates suggest. The studyalso provides, for the first time, estimates of energy price elasticities for the UK on the basis ofrepresentative plant level panel data for the manufacturing sector.
    Keywords: Energy efficiency, multinationals, energy demand elasticity, climate change
    JEL: Q41 Q48 Q54 D21
    Date: 2010–01
  4. By: Decker, Thomas; Zapilko, Marina; Menrad, Klaus
    Abstract: Paper prepared for presentation at the Energy Engineering, Economics and Policy (EEEP) Conference Orlando (USA), 13th July 2009
    Keywords: Consumer behaviour, Germany, Heating systems, Demand and Price Analysis, Q41, R20, M39,
    Date: 2009–07
  5. By: Arjun Bhattacharya; O’Neil Rane
    Abstract: Delhi Energy Development Agency (DEDA) was established by the Delhi Administration in February 1984 under the Societies Registration Act, 1860. The objective of this agency was to implement different energy schemes both in the rural as well as urban areas of Delhi. It has been five years since the Comptroller and Auditor General (CAG) of India pulled up the Government of National Capital Territory (NCT) of Delhi for its lax management of the Delhi Energy Development Agency. It recommended its closure after it came out with its Annual Audit Report for the year ending 31 March 1997, in which it pointed out the gross mismanagement of resources, rampant corruption and wasteful expenditure. However, the agency continues to exist albeit all the charges levied. It continues to enjoy Rs 2 crore (2003-2004) as planned outlay towards payment of salaries for its huge staff which sits in office doing nothing.[Working Paper No.0042]
    Keywords: Delhi Energy Development Agency, Societies Registration Act, Comptroller and Auditor General, Government of National Capital Territory, Annual Audit,
    Date: 2010
  6. By: Jörg Peters; Colin Vance; Marek Harsdorff
    Abstract: Productive electricity use is widely believed to contribute to positive impacts of electrification projects. This paper investigates these impacts by comparing the performance of micro manufacturing enterprises in grid-covered and non-covered villages in Northern Benin. Using firm-level data, the empirical analysis employs a Propensity Score Matching. While beneficial impacts are found from firm creation after electrification, firms that existed before actually show a non-significantly inferior performance to their matched counterparts from a non-electrified region. Complementary measures that sensitize firms about the implications of a grid connection are recommended as important features of program design.
    Keywords: Mobility; Impact evaluation; propensity score matching; productive electricity use
    JEL: C21 O14 O22 L69
    Date: 2010–04
  7. By: Jörg Peters; Colin Vance
    Abstract: Using household-level survey data from Côte d’Ivoire, this paper investigates the determinants of fertility with a particular focus on the effect of electrification. Based on count data regression models, our analysis suggests a highly significant relationship between fertility and electricity, but one that is only revealed when the model distinguishes between rural and urban areas. Specifically, we find a positive association between electricity and fertility for urban households, contrasted by a negative relationship for rural households. This dichotomy is suggested to reflect the influences of electricity in facilitating child care, off set by its modernizing impacts through the provision of information.
    Keywords: Rural development; energy access; demography; count data
    JEL: O12 O33 J13
    Date: 2010–04
  8. By: Juan Rosellón; Zdenka Mysliková; Eric Zenón
    Abstract: This paper presents an application of a mechanism that provides incentives to promote transmission network expansion in the area of the US electric system known as PJM. The applied mechanism combines the merchant and regulatory approaches to attract investment into transmission grids. It is based on rebalancing a two-part tariff in the framework of a wholesale electricity market with locational pricing. The expansion of the network is carried out through the sale of financial transmission rights for the congested lines. The mechanism is tested for 14-node and 17-node geographical coverage areas of PJM. Under Laspeyres weights, it is shown that prices converge to the marginal cost of generation, the congestion rent decreases, and the total social welfare increases. The mechanism is shown to adjust prices effectively given either non-peak or peak demand.
    Keywords: Electricity transmission expansion, incentive regulation, PJM
    JEL: L51 L91 L94 Q40
    Date: 2010
  9. By: Jan Christian Schinke
    Abstract: Germany could have reached Kyoto protocol obligations earlier if German solar investments would be relocated to Sicily. Additional benefits of emission savings and energy production should rise up to 72%. Nevertheless German solar power plants 2008 counted for 20 % of the financial benefits through support mechanisms EEG for renewable energies while the share at produced green energy was not more than 4,8%. The system seems absurd from an economical view, but is adopted in many other countries. Firstly, the paper will analyse general economic theories to underline the importance of financial supports for renewable energies and why policy maker can justify the subsidies for selected technologies through social costs effected by carbon exhaust. Secondly, place does matter and physics are the limit: the following chosen approach for expected final yield shrinks the additional benefits of the theoretical relocated south solar investments to +37%. Thirdly, the conclusions give political recommendations for the design of further subsidies of solar energies in Europe.
    Keywords: Photovoltaics; Renewable energies, feed in tariffs; Carbon exhausts; global warming; European energy policies
    JEL: Q42 Q48 Q54 L51 H23
    Date: 2010–06–28
  10. By: Skribans, Valerijs
    Abstract: One of the most pressing problems in the Latvian economy is related to the energy sector. The most characteristic feature is coupled with the low efficiency of thermal energy consumption of households as a result of poor insulation of existing buildings in Latvia. Solving energy sector problems requires a comprehensive decision, both in energy production and consumption. It is therefore necessary to develop energy sector model to be able to evaluate not only the energy consumption growth and the factors affecting it directly, but also the feedback caused by the increase of the efficiency growth. The model shown in the article has been developed using system dynamic method. Latvian energy sector model consists of resources, production and consumption blocks. A separate place is taken by electricity generation hydroelectric power plants (HPP), net imports of electricity and so on. Resource blocks consist of primary energy resource blocks: petroleum products, solid fuel, wood and gas blocks. Primary energy resources are used for production of other energy forms, i.e. heat or electricity production, they are shown in the production blocks. Both the primary energy and produced energy (and electricity generated by HPP) are passed on to final consumers, who make consumer unit blocks. It consists of: transport, agriculture, households and other (industrial and services sectors) blocks. The model key role is to forecast energy consumption by separate groups, both consumers and energy resources groups; to estimate energy sector impact on environment. The model has been developed to estimate the impact of buildings thermo insulation program on Latvian economy.
    Keywords: energoefektivitāte; patēriņš; sistēmdinamika; modelēšana un imitācija; ēku siltināšana un renovācija; CO2 emisijas un kvotas
    JEL: Q00 C68 Q41 C00 Q01 C60 Q30 C53 Q52 C50 Q40 C30 Q20
    Date: 2010
  11. By: William Hogan; Juan Rosellón; Ingo Vogelsang
    Abstract: Electricity transmission pricing and transmission grid expansion have received increasing regulatory and analytical attention in recent years. Since electricity transmission is a very special service with unusual characteristics, such as loop flows, the approaches have been largely tailor-made and not simply taken from the general economic literature or from the more specific but still general incentive regulation literature. An exception has been Vogelsang (2001), who postulated transmission cost and demand functions with fairly general properties and then adapted known regulatory adjustment processes to the electricity transmission problem. A concern with this approach has been that the properties of transmission cost and demand functions are little known but are suspected to differ from conventional functional forms. The assumed cost and demand properties in Vogelsang (2001) may actually not hold for transmission companies (Transcos). Loop-flows imply that certain investments in transmission upgrades cause negative network effects on other transmission links, so that capacity is multidimensional. Total network capacity might even decrease due to the addition of new capacity in certain transmission links. The transmission capacity cost function can be discontinuous. There are two disparate approaches to transmission investment: one employs the theory based on long-run financial rights (LTFTR) to transmission (merchant approach), while the other is based on the incentive-regulation hypothesis (regulatory approach). An independent system operator (ISO) could handle the actual dispatch and operational pricing. The transmission firm is regulated through benchmark or price regulation to provide long-term investment incentives while avoiding congestion. In this paper we consider the elements that could combine the merchant and regulatory approaches in a setting with price-taking electricity generators and loads.
    Keywords: Electricity transmission, Incentive regulation, Financial transmission rights, Loop-flow problem
    JEL: D24 L51 L94
    Date: 2010
  12. By: Dagobert L. Brito; Juan Rosellón
    Abstract: We address investment in regulated natural gas pipelines when investment is lumpy and the demand for gas is stochastic. This is a problem that can be solved in theory as a dynamic program, but a practical solution depends on functions and parameters that are either subjective or cannot be estimated. We then reformulate the problem from the standpoint of consumers that face incomplete markets. It is shown that for reasonable parameter values consumers prefer to pay for excess capacity rather than bear the risk of congestion. These strategies can be implemented with reasonably straightforward policies. Since the demand for gas is very inelastic, the welfare losses associated from small deviations from a first best optimum are minimal. This implies that the gas pipeline system can be regulated with a relatively simple set of transparent rules without any significant loss of welfare.
    Keywords: Transmission investment, Natural-gas regulation, Congestion management, Gas pipelines, Second-best theory.
    JEL: L51 L95
    Date: 2010
  13. By: Ibrahim Abada; Olivier Massol
    Abstract: This paper introduces a general static Cournot-game model to study the Natural Gas market, taking into account disruption risks from suppliers. In order to most realistically describe the economical situation, our representation divides the market into two stages: the upstream market that links -by means of long-term contracts- local producers in exporting countries (Russia, Algeria, etc.) to foreign retailers who bring gas to the consuming countries to satisfy local demands in the downstream market. Thanks to short-run demand functions, we are able to introduce disruption costs to be paid to the consumers should disruption occur. First we mathematically develop our general model and write the associated KKT conditions, then we propose some case studies -under iso-elasticity assumptions- for the long-short-run inverse-demand curves in order to predict qualitatively and quantitatively the impacts of supply disruptions on Western European gas trade. In the second part, we study in detail the German gas market of the 80 to explain the supply choices of Germany, and we derive interesting conclusions and insights concerning the amounts and prices of Natural Gas brought to the market. The last part of the paper is dedicated to a study of the Bulgarian gas market, which is greatly dependent on the Russian gas supplies and hence very sensitive to interruption risks. Some thought-provoking conclusions are derived concerning the necessity to economically regulate the market, by means of gas amounts control, if the disruption probability is high enough.
    Date: 2010
  14. By: Hauer, Grant; Adamowicz, Wiktor; Jagodinski, Robert
    Abstract: This report was prepared for the purpose of providing background documentation of inputs to be used in mathematical programming models and papers, which are being prepared for our research project: Ecological and economic tradeoff analysis of conservation strategies for woodland caribou. The report presents a simple net present value model of resource and land value for natural gas in northern Alberta. The variables in the model include costs (drilling, seismic, operating and capital); geological variables (stratigraphic intervals, booked reserves, future reserves); drilling variables (well densities, drilling success rates, and drilling depths); production data and prices. Each variable is described in detail and methods of derivation are provided. A map of net present values for natural gas at a spatial resolution of 250ha sections is provided and overlaid on top of caribou ranges to provide a spatial representation of where the most valuable reserves are in relation to caribou ranges.
    Keywords: Net present value, energy reserves, natural gas, caribou, Environmental Economics and Policy, Land Economics/Use, Resource /Energy Economics and Policy, Q49, Q32, Q57,
    Date: 2010
  15. By: Peeters, Marga
    Abstract: During the past decade the Gulf cooperation council countries have achieved a remarkably high degree of trade and financial integration in the world economy. Before the global crisis began, they invested their abundant oil income which resulted from high energy prices and high world demand, in return abundantly abroad. Thanks to policies that are geared towards opening up borders, the Gulf cooperation council countries have imparted a significant stimulus to the world economy, to a much greater extent than other oil exporting countries in similar conditions. The development of the gross capital flows in view of the recent global crisis and their composition are the main focus of this study. It aims at providing a comprehensive overview of the pattern of the current and capital account of the balance of payments of the group of six Gulf cooperation council countries, and benchmarks this group with the other OPEC countries that have a comparable size of natural resources. Aspects of globalization, trade and financial integration, such as the dependence on oil, “Dutch disease”, regional integration, foreign direct investment and cross-border assets and loans are addressed. The impact of the crisis is found to have reverted international capital flows of the GCC, in particular cross-border bank loans and deposits.
    Keywords: Gulf countries; trade; capital flows; balance of payments; oil-exports;
    JEL: F4 P33
    Date: 2010
  16. By: Michaud, C.; Llerena, D.; Joly, I.
    Abstract: The supply and demand of products associated with environmental characteristics have grown considerably over the last decade. We propose to study how consumers value the environmental attributes of a product when no private health benefits are at stake. Individual willingness to pay for roses are measured by means of an economic experiment using the discrete choice frame and real economic incentives. The estimates from a mixed logit model show that consumers are willing to pay not only for an eco-label certifying environmentally sound cultivation practices but also for a lower carbon footprint.Classification-JEL: D12;C25;C91
    Date: 2010
  17. By: Travaglini, Guido
    Abstract: The goal of this paper is to empirically test for structural breaks of world mean temperatures that may have ignited at some date the phenomenon known as “Climate Change” or “Global Warming”. Estimation by means of the dynamic Generalized Method of Moments is conducted on a large dataset spanning the recordable period from 1850 until present, and different tests and selection procedures among competing model specifications are utilized, such as Principal Component and Principal Factor Analysis, instrument validity, overtime changes in parameters and in shares of both natural and anthropogenic forcings. The results of estimation unmistakably show no involvement of anthropogenic forcings and no occurrence of significant breaks in world mean temperatures. Hence the hypothesis of a climate change in the last 150 years, suggested by the advocates of Global Warming, is rejected. Pacific Decadal Oscillations, sunspots and the major volcanic eruptions play the lion’s share in determining world temperatures, the first being a dimmer and the others substantial warmers.
    Keywords: Generalized Method of Moments; Global Warming; Principal Component and Factor Analysis; Structural Breaks.
    JEL: C51 C22 Q54
    Date: 2010–06–30
  18. By: Kala Krishna
    Abstract: The computable general equilibrium models used in the literature tend to be a bit of a black box. This paper provides some intuition behind what goes on in these black boxes by laying out a simple general equilibrium model and intuitively explaining what lies behind the demand for emissions. It traces out how a reduction in total emissions allowed in one country aspects the general equilibrium and the determinants of the extent of leakage in the model as well as more generally. It concludes with some implications for policy.
    JEL: F18
    Date: 2010–07
  19. By: Pauline Lacour (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Jean-Christophe Simon (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: A partir d'une analyse de la mise en œuvre du Mécanisme de Développement Propre, ce papier vise à préciser les modalités d'intégration des pays en développement dans le régime climatique, et en particulier à mettre en évidence une différenciation entre les pays, entre les grandes régions (première partie). Ceci permet de s'interroger sur deux aspects peu évoqués jusqu'à présent : d'une part la possible dimension régionale dans les politiques climatiques nationales et internationales (deuxième partie) et d'autre part la pertinence des projets MDP face au défi d'une bonne articulation entre les efforts des politiques climatiques et la soutenabilité des stratégies de développement. Ces aspects sont analysés plus particulièrement dans le cas de pays d'Asie orientale. (troisième partie). Finalement, on s'interroge sur les enjeux de la transition du régime climatique dans une perspective post-2012.
    Keywords: pays en développement ; pays émergent ; régime climatique ; politique climatique ; politique d'atténuation ; mécanisme de développement propre
    Date: 2010–06–02
  20. By: Lundgren, Tommy (Umeå School of Business at Umeå University, Umeå, Sweden); Marklund, Per-Olov (Centre for Environmental and Resource Economics (CERE), Umeå University and Swedish University of Agricultural Science, Umeå Sweden)
    Abstract: As widely recognized, human mankind stands before the most challenging problem of preventing anthropogenic climate change. As a response to this, the European Union advocates an ambitious climate policy mix. However, there is no consensus concerning the impact of stringent environmental policy on firms’ competitiveness and profitability. From the traditional ‘static’ point of view there are productivity losses to be expected. On the other hand, the so called Porter hypothesis suggests the opposite; i.e., due to ‘dynamic’ effects, ambitious climate and energy policies within the EU could actually be beneficial to firms in terms of enhanced profitability and competitiveness. Based on Sweden’s manufacturing industry, our main purpose is to specifically assess the impact of the CO2 tax scheme of Sweden on firms’ profit efficiency. The empirical methodology is based on stochastic frontier estimations and, in general, the results suggest we can neither reject nor confirm the Porter hypothesis across industry sectors. Therefore, we do not generally confirm the argument of stringent environmental policies having positive dynamic effects that potentially offset costs related to environmental policy.
    Keywords: CO2 tax; efficiency; stochastic frontier analysis; Swedish industry
    Date: 2010–06–28
  21. By: ZhongXiang Zhang (East-West Center); ;
    Abstract: China had been singled out by Western politicians and media for dragging its feet on international climate negotiations at Copenhagen, the accusations previously always targeted on the U.S. To put such a criticism into perspective, this paper provides some reflections on China's stance and reactions at Copenhagen. While China's reactions are generally well rooted because of realities at home, some reactions could have been handled more effectively for a better image of China. The paper also addresses the reliability of China's statistics on energy and GDP, the issue crucial to the reliability of China's carbon intensity commitments. The paper discusses flaws in current international climate negotiations and closes with my suggestion that international climate negotiations need to focus on 2030 as the targeted date.
    JEL: Q41 Q43 Q48 Q52 Q54 Q58 Q53
    Date: 2010–06
  22. By: Stephen P. Holland
    Abstract: Climate policy spillovers can be either positive or negative since firms change their production processes in response to climate policies, which may either increase or decrease emissions of other pollutants. Understanding these ancillary benefits or costs has important implications for climate policy design, modeling, and benefit-cost analysis. This paper shows how spillovers can be decomposed into output effects (which have ancillary benefits) and substitution effects (which may have ancillary benefits or ancillary costs). The ambiguous net effect highlights the importance of polluters' responses to climate policy. I then test for climate policy spillovers in electricity power generation. The estimates are consistent with ancillary benefits from climate policy arising primarily from reductions in output (primarily at older plants) rather than from changes in emissions rates.
    JEL: H23 Q0
    Date: 2010–07
  23. By: Tol, Richard S. J.; Anthoff, David
    Abstract: We apply four alternative decision criteria, two old ones and two new, to the question of the appropriate level of greenhouse gas emission reduction. In all cases, we consider a uniform carbon tax that is applied to all emissions from all sectors and all countries; and that increases over time with the discount rate. For a one per cent pure rate of the time preference and a rate of risk aversion of one, the tax that maximises expected net present welfare equals $120/tC in 2010. However, we also find evidence that the uncertainty about welfare may well have fat tails so that the expectation exists only by virtue of the finite number of runs in our Monte Carlo analysis. This confirms Weitzman's Dismal Theorem. We therefore consider minimax regret as a decision criterion. As regret is defined on the positive real line, we in fact consider large percentiles instead of the ill-defined maximum. Depending on the percentile used, the recommended tax lies between $100 and $170/tC. Regret is a measure of the slope of the welfare function, while we are in fact concerned about the level of welfare. We therefore minimise the tail risk, defined as the expected welfare below a percentile of the probability density function without climate policy. Depending of the percentile used, the recommended tax lies between $20 and $330/tC. We also minimise the fatness of the tails, as measured by the p-value of the test of the hypothesis that recursive mean welfare is stationary in the number of Monte Carlo runs. We cannot reject the null hypothesis of non-stationary at the 5% confidence level, but come closest for an initial tax of $50/tC. All four alternative decision criteria rapidly improve as modest taxes are introduced, but gradually deteriorate if the tax is too high. That implies that the appropriate tax is an interior solution. In stark contrast to some of the interpretations of the Dismal Theorem, we find that fat tails by no means justify arbitrarily large carbon taxes.
    Keywords: Climate change/integrated assessment/decision making under uncertainty/deep uncertainty/fat-tailed risk/dismal theorem
    Date: 2010–07

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