nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒08‒21
nineteen papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Current State and Prospects of the Russian Energy Sector By Vasily Astrov
  2. How Does A Decrease In Oil Production Affect The World Economy? By Naohiko Yahaba
  3. Exhaustible Resources, Technology Choice and Industrialization of Developing Countries By Färnstrand Damsgaard, Erika
  4. The relationship between oil prices and long-term interest rates By Christopher Reicher; Johannes Utlaut
  5. The Impact of Real Oil Price on Real Effective Exchange Rate: The Case of Azerbaijan By Fakhri Hasanov
  6. Oil price distortions and their short- and long-run impacts on the Nigerian economy By Chuku, Chuku; Effiong, Ekpeno; Sam, Ndifreke
  7. Statistical mechanics of money, debt, and energy consumption By Victor M. Yakovenko
  8. An Analysis of Energy Intensity in Indonesian Manufacturing By Tony Irawan; Djoni Hartono; Noer Azam Achsani
  9. M&A im Bereich Erneuerbarer Energien By Fritz-Morgenthal, Sebastian G.; Hach, Sebastian T.; Schalast, Christoph
  10. Implications of the Low Carbon Fuel Standard for State and National Ethanol Use By Kaufman, James; Thompson, Wyatt; Meyer, Seth
  11. Efficiency effects of quality of service and environmental factors: experience from Norwegian electricity distribution By Growitsch, Christian; Jamasb, Tooraj; Wetzel, Heike
  12. Climate change, economic growth, and health By Masako Ikefuji; Jan R. Magnus; Hiroaki Sakamoto
  13. Climate Change and Carbon Tax Expectations By Hoel, Michael
  14. Taxes, Permits, and Climate Change By Louis Kaplow
  15. Impacts of Greenhouse Gas Emission Regulations on the U.S. Sugar Industry By Taylor, Richard D.; Koo, Won W.
  16. Retributing forest carbon vs. stimulating fuelwood demand insights from the French forest sector model By Franck Lecocq; Sylvain Caurla; Philippe Delacote; Ahmed Barkaoui; Alexandre Sauquet
  17. A Framework for Monitoring and Evaluation of Climate Change Adaptation Interventions By . Vidhi; Parul Sharma
  18. Sharing the Cost of Global Warming By Etienne BILLETTE de VILLEMEUR; Justin Leroux
  19. Climate Policy without Commitment By Golombek, Rolf; Greaker, Mads; Hoel, Michael

  1. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Russia and four other CIS countries – Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan – are important energy producers and possess substantial reserves, particularly as far as natural gas is concerned. Russia alone accommodates about one quarter of the global gas reserves and has established itself – along with Saudi Arabia – as one of the world’s two leading oil exporters. However, Russia’s relations with OPEC so far have been largely a history of non-cooperation, and the prospects of future cooperation appear equally problematic. The prospects of the Russian energy sector are to be seen against the background of the newly adopted ‘Energy Strategy until 2030’. The key problems tackled in the Energy Strategy are the so far generally insufficient exploration and investments in the new hydrocarbon fields. This is due to a number of factors such as the rising state involvement in the oil sector, the confiscatory tax regime, and the low domestic tariffs for gas. Deposits in the traditional energy-producing regions are largely depleted, while the fields which would enable maintaining or raising production volumes in the years to come lie predominantly in remote and technologically and climatically challenging areas. Their development would require the creation of appropriate production, transport and social infrastructure. The related total investments over the period until 2030 are estimated at some USD 1 3 trillion, implying that a substantial boost from the current investment levels is needed. In addition, the development of offshore gas deposits would require the construction of LNG plants, the expertise for which within the Russian gas industry has been very limited so far. Therefore, attracting more foreign investment and related know-how, and more private capital in general, appears to be indispensable for the government plans to materialize. Intensifying the existing ‘Energy Dialogue’ between Russia and the EU and deepening the mutual investment penetration would be highly instrumental in achieving these goals. The government’s target is to increase, by the year 2030, oil production by 10% and gas production by some 40%, with half of the latter to be provided by the so-called ‘independent’ (from Gazprom) producers. The increase in the oil output would be largely channelled to domestic consumption, whereas half of the additionally produced gas should be exported: gas exports are to rise by about 50%. The rise in domestic gas consumption will be constrained by the planned tariff hikes, which should facilitate the substitution of gas by coal and nuclear energy, and induce energy-saving behaviour. The announced target is to lower the energy intensity of the economy by about three times and bring it close to the levels observed in developed countries with similar climatic conditions. Domestic gas savings resulting from higher energy efficiency, but also reduced flaring and leakages, should further improve Russia’s gas export prospects – along with the increased supplies from Central Asia and particularly Turkmenistan, where Russia has been recently successful in advancing its presence. The Russian government’s target of exporting up to 20-25% of energy to the potentially promising Asian-Pacific region (including China) by 2030 mirrors the EU’s stated objective of diversifying its energy supplies away from Russia. However, so far the results in this respect appear to have been mixed at best. While the geographical diversification of Russian oil exports has been slowly advancing, the diversification of gas exports has been constrained by the price disagreements with China and the limited progress with LNG. Given the envisaged sizeable overall increase in Russian gas exports, such diversification – even if successful – is unlikely to ‘crowd out’ Russian gas exports to Europe. This implies that Europe will almost certainly remain Russia’s biggest energy export market in the medium and long run.
    Keywords: Russia, country and industry studies of trade, international relations, hydrocarbon fuels, government policy, gas utilities, energy
    JEL: F14 F59 L71 L78 L95 Q4
    Date: 2010–06
  2. By: Naohiko Yahaba
    Abstract: The world's oil consumption has been increasing for more than a century with a few exceptions. However, there would be a possibility that the recent increase in oil consumption in developing countries such as China and India tighten the long term oil market. Since the exact amount of oil reserves is unknown, it is difficult to predict when the ultimate decrease in oil production will come. However, for the last two decades, the amount of oil consumption per year has surpassed the amount of oil reserves newly found. Therefore, the possibility of ultimate decrease in oil production may increase. This paper examines the impact of the decrease in oil production on major economies using a computable general equilibrium model. Under the simulations in this paper, the oil exporting economies increase their GDPs, the utilities and the terms of trade. The oil importing regions, especially in newly industrialised and developing regions, decrease their GDPs, utilities and the terms of trade. All industry sectors decrease their world output. Among industry sectors, oil industry affects most and the industry sectors which use large amount of oil such as petroleum industry and chemical industry decrease its outputs significantly.
    JEL: L72
    Date: 2010
  3. By: Färnstrand Damsgaard, Erika (Research Institute of Industrial Economics (IFN))
    Abstract: How should the world economy adapt to the increased demand for exhaustible resources from countries like China and India? To address that issue, this paper presents a dynamic model of the world economy with two technologies for production; a resource technology which uses an exhaustible resource as an input and an alternative technology, which does not. I find that both the time path of resource extraction and the adoption of the alternative technology depend on the optimal allocation of capital across the technologies, and the size of the capital stock in relation to the resource stock. In particular, if the capital stock is small, only the resource technology is used initally, and the alternative technology is adopted with a delay. Next, the model is calibrated to analyze the e¤ects of industrialization of developing countries on the extraction of oil and technology choice for energy production. As a result of industrialization, resource extraction increases and the alternative technology is adopted earlier.
    Keywords: Exhaustible resources; Technological change
    JEL: Q30 Q40
    Date: 2010–08–09
  4. By: Christopher Reicher; Johannes Utlaut
    Abstract: We estimate a seven-variable-VAR for the U.S. economy on postwar data using long-run restrictions, taking changes in long-run interest rates and inflation expectations into account. We find a strong connection between oil prices and long-run nominal interest rates which has lasted throughout the entire postwar period. We find that a simple off-the-shelf theoretical model of oil prices and monetary policy, where oil prices are flexible and other prices are sticky, in fact predicts a strong relationship if inflation and oil prices were driven by monetary policy. The observed magnitude of this relationship is still a bit of a puzzle, but this finding does call into question the identification techniques commonly used to identify oil shocks
    Keywords: Oil shocks, interest rates, inflation
    JEL: E31 E58 N50
    Date: 2010–07
  5. By: Fakhri Hasanov
    Abstract: Using quarterly data from 2000-2007 and applying Error Correction Model and Johansen Co-integration Approaches I estimate the impact of real oil price on the real exchange rate of Azerbaijani manat. Estimation outputs derived from these approaches are very close to each other and indicate that real oil price has statistically significant positive impact on real exchange rate in the long-run. Besides, revealed that relative price as a proxy for productivity has also explanatory power in explaining long-run behavior of real exchange rate. Estimated Error Correction Term indicates that half-life of adjustment toward long-run equilibrium level takes 3-4 quarters. Since findings of this study occur as results of high fiscal expansion my policy suggestions mainly related to Fiscal policy implementations.
    Keywords: Real effective exchange rate, Real oil price, Relative productivity, Azerbaijani manat, Dutch Disease, Oil-exporting Countries, Johansen Co-integration Approach, Error Correction Modeling, Half-life Speed.
    JEL: F31 F41 C32 P24 Q43
    Date: 2010
  6. By: Chuku, Chuku; Effiong, Ekpeno; Sam, Ndifreke
    Abstract: Given its economic structure, high energy intensity and simultaneity as an oil importing and exporting economy, Nigeria stands out as a special case to study the oil-price-macroeconomy relation. This paper studies the linear and asymmetric impacts of oil price shocks on the Nigerian economy between1970Q1and 2008Q4. Using the vector error correction mechanism and the Granger causality test, we investigate the long-run and short-run impacts of oil price shocks on the supply-side of the economy, wealth transfer effect, inflation effect and real balance effect. Overall, the results from the linear model show that oil price shocks are not a major determinant of macroeconomic activity in Nigeria, and macroeconomic activities in Nigeria do not Granger cause world oil prices. Further, the results from our non-linear specification reveals that the impact of world oil price shocks on the Nigerian economy are asymmetric. Hence, the common practise of national development planning premised on forecasts of international oil prices should be de-emphasized in Nigeria.
    Keywords: Oil price shocks; linear and asymmetric effects; transmission channels; Nigerian economy.
    JEL: Q43
    Date: 2010–08–15
  7. By: Victor M. Yakovenko
    Abstract: We briefly review statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents in payment for goods and services. We focus on conceptual foundations for this approach, on the issues of money conservation and debt, and present new results for the energy consumption distribution around the world.
    Date: 2010–08
  8. By: Tony Irawan (Department of Economics,Faculty of Economics and Management, Bogor Agricultural University;InterCAFE-LPPM, IPB); Djoni Hartono (Graduate Program in Economics, Faculty of Economics and Business, University of Indonesia); Noer Azam Achsani (Department of Economics,Faculty of Economics and Management, Bogor Agricultural University;InterCAFE-LPPM, IPB)
    Abstract: Many countries utilize their resources at optimal capacity in fostering countries’ economic growth without any concern on environmental impact. Even though the importance of environmental issue as one of the important aspects in sustainable development is fully understood, the economic growth still remained as the priority target. In Indonesia, industry is one of the important sectors both in term of its contribution to national output and national energy consumption. Based on Indonesian Statistic Bureau, industry is always at the top list of contributor of national energy consumption since 2000. This paper employs the decomposition analysis to calculate what factors contribute to the change in energy intensity. We also conduct a panel data analysis to investigate the determinants of energy intensity using firm level data. The result suggests that, even though the industrial sector’s energy intensity is higher than national level, it varied across sub sectors within the industry. Meanwhile, the econometric analysis suggests that wage, age, capital intensity and share of capital owned by private sector have positive impact on energy intensity, whereas size of firms, labor productivity and technology intensity has negative impact on energy intensity.
    Keywords: energy intensity, industry, firm, decomposition, panel data
    JEL: Q40
    Date: 2010–08
  9. By: Fritz-Morgenthal, Sebastian G.; Hach, Sebastian T.; Schalast, Christoph
    Abstract: Several top deals already closed, a still highly fragmented industry and strong pressure for further consolidation following the financial crisis - renewable energy certainly has become a red-hot topic in M&A. Surveying 220 companies in the solar photovoltaic, utility and financial sector as well as major technology corporations, which are identified as the key industries in the sector-specific takeover market, this working paper proves the common knowledge for the example of photovoltaics. With more than 93% of the respondents, a vast majority expects the M&A environment to further ameliorate and deals to increase. As for the fundamental market drivers, the survey suggests a shift from factors linked to the financial crises towards an increasing impact of general industry-related influences. In contrast, neither the industry sector nor other corporate characteristics are of significant importance. With respect to prevailing takeover strategies, the survey reveals a strong influence of general acquisition motives. However, an empirically significant connection can be determined between the industry sector of potential buyers and the most relevant motivation factors, which allows for the assumption of business-affected takeover strategies that are elaborated on more closely within the working paper. Examining an acquisition focus in terms of the targets' position in the photovoltaic value chain, no statistically valid connection can be observed with either the acquisition motivation or the industry sector of the potential buyer, leaving room for further research. --
    Keywords: Erneuerbare Energien,Renewable Energy,Solarenergie,Photovoltaik,M&A,Merger,Acquisition,Konsolidierung,Akquisitionsstrategie,Finanzkrise,EEG,Solarförderung,Energiewirtschaft,Versorgungssicherheit,Energieabhängigkeit,Nachhaltigkeit,Sustainability
    JEL: K12 K19 K22 K29
    Date: 2010
  10. By: Kaufman, James; Thompson, Wyatt; Meyer, Seth
    Keywords: Resource /Energy Economics and Policy,
    Date: 2009–08
  11. By: Growitsch, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Jamasb, Tooraj (Faculty of Economics University of Cambridge); Wetzel, Heike (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: Since the 1990s, efficiency and benchmarking analysis has increasingly been used in network utilities research and regulation. A recurrent concern is the effect of environmental factors that are beyond the influence of firms (observable heterogeneity) and factors that are not identifiable (unobserved heterogeneity) on measured cost and quality performance of firms. This paper analyses the effect of geographic and weather factors and unobserved heterogeneity on a set of 128 Norwegian electricity distribution utilities for the 2001-2004 period. <p> We utilize data on almost 100 geographic and weather variables to identify real economic inefficiency while controlling for observable and unobserved heterogeneity. We use the factor analysis technique to reduce the number of environmental factors into few composite variables and to avoid the problem of multicollinearity. We then estimate the established stochastic frontier models of Battese and Coelli (1992; 1995) and the recent true fixed effects models of Greene (2004; 2005) without and with environmental variables. <p> In the former models some composite environmental variables have a significant effect on the performance of utilities. These effects vanish in the true fixed effects models. However, the latter models capture the entire unobserved heterogeneity and therefore show significantly higher average efficiency scores.
    Keywords: Efficiency; Quality of service; Input distance function; Stochastic frontier analysis
    JEL: L15 L51 L94
    Date: 2010–08–11
  12. By: Masako Ikefuji; Jan R. Magnus; Hiroaki Sakamoto
    Abstract: This paper studies the interplay between climate, health, and the economy in a stylized world with four heterogeneous regions, labeled 'West' (cold and rich), 'China' (cold and poor), 'India' (warm and poor), and 'Africa' (warm and very poor). We introduce health impacts into a simple integrated assessment model where both the local cooling effect of aerosols as well as the global warming effect of CO2 are endogenous, and investigate how those factors affect the equilibrium path. We show how some of the important aspects of the equilibrium, including emission abatement rates, health costs, and economic growth, depend on the economic and geographical characteristics of each region.
    Date: 2010–08
  13. By: Hoel, Michael (Dept. of Economics, University of Oslo)
    Abstract: If investors fear that future carbon taxes will be lower than currently announced by policy makers, long-run investments in greenhouse gas mitigation may be smaller than desirable. On the other hand, owners of a non-renewable carbon resource that underestimate future carbon taxes will postpone extraction compared with what they would have chosen had the policymakers been able to commit to the optimal tax path. If extraction costs rise rapidly as accumulated extraction rises, near-term emissions increase as a consequence of a downward bias in the expected future carbon taxes. Whether investments in greenhouse gas mitigation go up or down due to the expectation error depends on the time pro…le of the returns to the investment.
    Keywords: climate change; exhaustible resources; carbon tax
    JEL: H23 Q30 Q42 Q54
    Date: 2010–03–24
  14. By: Louis Kaplow
    Abstract: This essay revisits the question of instrument choice for the regulation of externalities in the context of climate change. The central point is that the Pigouvian prescription to equate marginal control costs with the expected marginal benefits of damage reduction should guide the design of both carbon taxes and permit schemes. Because expected marginal damage rises nonlinearly, a corresponding nonlinear tax – or an equivalent price implemented through a quantity-adjusted permit scheme – is second best. Also considered are political factors, distinctive features of regulating a stock pollutant, and ex ante distortions due to the anticipation of transition relief (such as by receiving more free permits for greater emissions). Finally, distributive concerns are examined, with emphasis on the conceptual and practical benefits of addressing distributive issues with the tax and transfer system rather through adjustments to regulatory schemes that usually render them less effective.
    JEL: D61 D62 H21 H23 K32 Q52 Q54 Q58
    Date: 2010–08
  15. By: Taylor, Richard D.; Koo, Won W.
    Abstract: The objective of this study is to evaluate the changes in U.S. sugar production and Greenhouse Gas (GHG) emissions from the sugar industry if the United States regulates GHG emissions from domestic sugar processing facilities. A spatial equilibrium model is developed to optimize sugar production in the United States under a base scenario and three different levels of CO2e taxes or prices of carbon offsets. This research focuses on U.S. sugar production, both beet and cane sugar. In the model the United States is divided into 6 beet growing regions and 4 cane growing regions. The model also includes Mexico as a domestic sugar growing region as Mexico has the ability to export unlimited amount of sugar into the United States under NAFTA. A rest of the world region is included because the United States imports sugar from about 40 different nations. The results indicate that sugar production by the U.S. beet sugar industry will decrease substantially if carbon emissions are taxed in the United States. Production in the U.S. cane industry will also decrease, but only slightly. Sugar imports from Mexico will increase but the majority of the imported sugar will come from other countries as Mexicoâs ability to increase sugar production is limited. GHG emissions will decrease, but only slightly, because the GHG emissions that are reduced in the United States are replaced by GHG emission in other nations as U.S. sugar production is shipped overseas. However the impacts on the U.S. sugar industry would be substantial with GHG emission regulations.
    Keywords: GHG emissions, CO2e, Sugar, spatial equilibrium model, carbon tax, cap and trade, Agribusiness, Environmental Economics and Policy,
    Date: 2010–08
  16. By: Franck Lecocq (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Sylvain Caurla (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Philippe Delacote (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Ahmed Barkaoui (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Alexandre Sauquet (Laboratoire d'Economie Forestière, INRA - AgroParisTech)
    Abstract: Forests can contribute to climate mitigation by sequestrating carbon in forest biomass andby replacing fossil-fuel with fuelwood, with potentially conflicting implications for forest management.The present paper assesses the mitigation and the economic impacts of a "stock" policy(payment for sequestration in situ), a "substitution" policy (subsidy to fuelwood consumption),and a combination thereof on the French forest sector. The policies are consistent in that theyare based on the same social cost of carbon. To do so, we use the French Forest Sector Model(FFSM), which combines a dynamic model of French timber resource, and a dynamic partial equilibriummodel of the French forest sector. Simulations show that over the 2010-2020 period,the stock policy is the only one that performs better than Business As Usual (BAU) in terms ofcarbon. Over this period of time, the cumulative substitution benefits of the substitution policyare not sufficient to offset the loss of carbon in standing forests. However, the stock policy hasalso negative impacts on consumers welfare, and increasingly high costs as carbon in excess ofBAU is accumulated in forests. Combining both policies brings intermediate results and is thusless effective than focusing on a single policy.
    Keywords: carbon storage, biomass energy, forest sector modeling
    JEL: L52 Q23 Q42 Q54
    Date: 2010–06
  17. By: . Vidhi; Parul Sharma
    Abstract: Climate change has become one of the most important global issues of our time, with far- reaching natural, socio- economic, and political impacts. In order to equip the community to deal with the effects of climate changes, various adaptation interventions have been furthered. However, efficacy of these interventions varies in terms of their ability to address specific climate change vulnerabilities of human populations and the natural and economic systems. To understand the efficacy of the interventions towards envisaged climate change results, rigorous monitoring and evaluation of these interventions becomes imperative both for ensuring efficiency, results, cost-effectiveness and sustainability of the interventions. With these considerations, programme logic model can be an appropriate overarching Monitoring & Evaluation Framework. This paper takes programme logic model as the starting point and describes key principles that need to be factored in developing a monitoring and evaluation framework for climate change adaptation projects. The projects draws upon good practices of various adaptation interventions across the globe to propose established guiding principles. [Discussion Paper No.5]
    Keywords: global issue, natural, socio-economic, political impacts, climatic changes, efficacy, monitoring and evaluation
    Date: 2010
  18. By: Etienne BILLETTE de VILLEMEUR; Justin Leroux (IEA, HEC Montréal)
    Abstract: Due to meteorological factors, the distribution of the environmental damage due to climate change bears no relationship to that of global emissions. We argue in favor of offsetting this discrepancy, and propose a “global insurance scheme” to be financed according to countries’ responsibility for climate change. Because GHG decay very slowly, we argue that the actual burden of global warming should be shared on the basis of cumulated emissions, rather than sharing the expected costs of actual emissions as in a Pigovian taxation scheme. We characterize new versions of two well-known cost-sharing schemes by adapting the responsibility theory of Bossert and Fleurbaey (1996) to a context with externalities.
    Keywords: Climate Change, Cost Sharing, Responsibility, Compensation.
    JEL: D62 D63 Q54
    Date: 2010–08
  19. By: Golombek, Rolf (The Frisch Center for Economic Research); Greaker, Mads (Statistics Norway); Hoel, Michael (Dept. of Economics, University of Oslo)
    Abstract: Climate mitigation policy should be imposed over a long period, and spur development of new technologies in order to make stabilization of green house gas concentrations economically feasible. The government may announce current and future policy packages that stimulate current R&D in climate-friendly technologies. However, once climate-friendly technologies have been developed, the government may have no incentive to implement the pre-announced future policies, that is, there may be a time inconsistency problem. We show that if the government can optimally subsidize R&D today, there is no time inconsistency problem. Thus, lack of commitment is not an argument for higher current R&D subsidies. If the o¤ered R&D subsidy is lower than the optimal subsidy, the current (sub-game perfect) climate tax should exceed the …rst-best climate tax.
    Keywords: Time consistency; carbon tax; climate policy; R&D; endogenous technological change
    JEL: H21 O30 Q28 Q42
    Date: 2010–08–11

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