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on Energy Economics |
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Issue of 2010‒10‒09
twenty-six papers chosen by Roger Fouquet Basque Climate Change Centre, Bilbao, Spain |
| By: | Biswa Nath Bhattacharyay |
| Abstract: | This paper estimates the need for infrastructure investment, including energy, transport, telecommunications, water, and sanitation during 2010-2020, in order to meet growing demands for services and facilitate further rapid growth in the region. By using “top-down†and “bottom-up†approaches, this paper provides a comprehensive estimate of Asia’s need for infrastructure services. The estimates show that developing countries in Asia require financing of US$776 billion per year for national (US$747 billion) and regional (US$29 billion) infrastructure during 2010-2020 to meet growing demand. [ADBI Working Paper 248] |
| Keywords: | investment, energy, transport, telecommunications, water, infrastructure |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2911&r=ene |
| By: | Alexandra Niez |
| Abstract: | Brazil, China, India and South Africa have each worked to improve access to electricity services. While many of the challenges faced by these countries are similar, the means of addressing them varied in their application and effectiveness. This report analyses the four country profiles, determining the pre-requisites to successful rural electrification policies. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ieaaaa:2010/3-en&r=ene |
| By: | Gampert, Markus (Institute for Combustion Technology (ITV), RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | Today’s European utilities not only focus on electricity supply, but also offer exchange-traded “structured products” or portfolio management for unbundling financial and physical risk positions. Many utilities are only able to provide these services inside of their home markets, but in the globalized economy, the need for a centrally organized pan-European portfolio management has arisen. In this paper, we analyze the problems to be overcome for establishing a European-wide bundling of electricity contracts. For this purpose, a case study based on the business perspective of RWE Supply & Trading in Central and Eastern Europe is carried out. |
| Keywords: | Portfolio management; Risk management; Electricity market liberalization |
| JEL: | L53 L94 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2010_009&r=ene |
| By: | Lang, Joachim (E.ON AG, Controlling / Corporate Planning); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | The aim of this study is to analyze the impact of credit risk mitigation via margining on the optimal portfolio selection for power plants. We develop a model to estimate margining cashflows that is based on the clearing framework of the European Commodity Clearing AG (ECC), on stochastic commodity price tracks, and on a pre-defined hedging strategy. To evaluate an assumed set of power plants, we calculate the discounted cashflow for each power plant in conjunction with a market model and a Monte Carlo simulation on commodity price tracks. The valuation of the power plants is done with and without credit risk mitigation by means of margining. The resulting differences in the values, with and without margining, are analyzed with the mean-variance portfolio approach of Markowitz, to specify the consequences of margining on the efficient frontier of possible power plant portfolios. We find that the consideration of margining for power plant portfolio selection is relevant, as it can markedly change the composition of efficient portfolios on the efficient frontier. |
| Keywords: | Margin@Risk; credit risk mitigation; margining; collateralization; risk capital; power plant valuation; portfolio optimization; cashflow planning |
| JEL: | G11 G32 L94 O16 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2010_011&r=ene |
| By: | Yu, Nanpeng; Liu, Chen-Ching; Tesfatsion, Leigh |
| Abstract: | Bilateral contracts are important risk-hedging instruments constituting a major component in the portfolios held by many electric power market participants. However, bilateral contract negotiation is a complicated process because it involves risk management, strategic bargaining, and multi-market participation. This study analyzes a financial bilateral contract negotiation process between a generating company and a load-serving entity in a wholesale electric power market with congestion managed by locational marginal pricing. Nash bargaining theory is used to model a Pareto-efficient settlement point. The model predicts negotiation results under varied conditions and identifies circumstances in which the two parties might fail to reach an agreement. Both analysis and simulation are used to gain insight regarding how relative risk aversion and biased price estimates influence negotiated outcomes. These results should provide useful guidance to market participants in their bilateral contract negotiation processes. |
| Keywords: | Wholesale electric power markets; locational marginal price; financial bilateral contract; negotiation; Nash bargaining theory; risk aversion; conditional-value-at-risk |
| JEL: | C6 C63 D4 D6 L1 L2 L94 Q4 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:32005&r=ene |
| By: | Gustavo A. Marrero; Luis A. Puch; Francisco Javier Ramos-Real |
| Abstract: | Buena parte del diseño de política energética actual se centra en el estudio individual de los costes de las diferentes opciones tecnológicas de generación de electricidad. En este artículo mostramos que el riesgo asociado a los costes de generación para las distintas tecnologías constituye una variable relevante en la valoración de la eficiencia del mix energético. Dicho riesgo se mide por la incertidumbre asociada a los distintos tipos de costes y la correlación entre ellos a través de las distintas tecnologías. Los resultados sugieren que una cartera eficiente supondría al menos una disminución del 2% en el coste medio, del 30% en el riesgo de costes y de un 17% en emisiones de CO2 respecto a cierta cartera representativa del mix energético europeo para los próximos años. La complementariedad de las energías renovables con las energías fósiles y la nuclear es crucial para poder alcanzar ganancias en las tres dimensiones anteriores. En particular, incorporar el riesgo de costes en el análisis hace compatible una reducción de las emisiones y unos menores costes de generación. Los resultados sugieren algunas reflexiones relevantes de política energética y medioambiental, relacionadas con el mercado de emisiones, los problemas de interrumpibilidad de las renovables y la necesidad de reducir el factor descuento de las tecnologías más intensivas en inversión inicial, que resultan ser las menos contaminantes. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdacee:13-2010&r=ene |
| By: | Christoph Hornych; Matthias Brachert |
| Abstract: | The article examines the determinants of the number of cooperation partners and the share of regional cooperations of firms in the German photovoltaic industry. Based on an overview about possible effects of the cooperation of firms with partners inside and outside their region, we derive hypotheses on the relationship between both firm-specific and region-specific variables and the cooperative behavior of firms. The hypotheses are tested with regression models using a data set of 178 firms of the German photovoltaic industry. The results show that in particular large firms and firms with a high absorptive capacity have significantly more co-operation partners. Furthermore, firms cooperate within their region especially when a large number of potential partners are located in the same region. Regarding foreign-owned firms, the results show that these firms tend to cooperate in particular with partners, inside the region where they are located. |
| Keywords: | renewable energy, cooperation, networks, photovoltaic |
| JEL: | D85 L14 Q42 R11 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:20-10&r=ene |
| By: | Chen, P.-Y.; Chang, C-L.; Chen, C-C.; McAleer, M.J. |
| Abstract: | The main purpose of this paper is to evaluate the effect of crude oil price on global fertilizer prices in both the mean and volatility. The endogenous structural breakpoint unit root test, the autoregressive distributed lag (ARDL) model, and alternative volatility models, including the generalized autoregressive conditional heteroskedasticity (GARCH) model, Exponential GARCH (EGARCH) model, and GJR model, are used to investigate the relationship between crude oil price and six global fertilizer prices. Weekly data for 2003-2008 for the seven price series are analyzed. The empirical results from ARDL show that most fertilizer prices are significantly affected by the crude oil price, which explains why global fertilizer prices reached a peak in 2008. We also find that that the volatility of global fertilizer prices and crude oil price from March to December 2008 are higher than in other periods, and that the peak crude oil price caused greater volatility in the crude oil price and global fertilizer prices. As volatility invokes financial risk, the relationship between oil price and global fertilizer prices and their associated volatility is important for public policy relating to the development of optimal energy use, global agricultural production, and financial integration. |
| Keywords: | volatility;global fertilizer price;crude oil price;non-renewable fertilizers;structural breakpoint unit root test |
| Date: | 2010–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureir:1765020788&r=ene |
| By: | Caporin, Massimiliano; Pres, Juliusz; Torro, Hipolit |
| Abstract: | Weather derivatives have become very popular tools in weather risk management in recent years. One of the elements supporting their diffusion has been the increase in volatility observed on many energy markets. Among the several available contracts, Quanto options are now becoming very popular for a simple reason: they take into account the strong correlation between energy consumption and certain weather conditions, so enabling price and weather risk to be controlled at the same time. These products are more efficient and, in many cases, significantly cheaper than simpler plain vanilla options. Unfortunately, the specific features of energy and weather time series do not enable the use of analytical formulae based on the Black-Scholes pricing approach, nor other more advanced continuous time methods that extend the Black-Scholes approach, unless under strong and unrealistic assumptions. In this study, we propose a Monte Carlo pricing framework based on a bivariate time series model. Our approach takes into account the average and variance interdependence between temperature and energy price series. Furthermore, our approach includes other relevant empirical features, such as periodic patterns in average, variance, and correlations. The model structure enables a more appropriate pricing of Quanto options compared to traditional methods. |
| Keywords: | weather derivatives; Quanto options pricing; derivative pricing; model simulation; forecast |
| JEL: | L94 G13 Q54 |
| Date: | 2010–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25538&r=ene |
| By: | Salazar Soares, Vasco (Isvouga); Lima, Antonieta (Isvouga) |
| Abstract: | Considering the few studies about the coupled relation between oil and gold prices and the exchange market, the purpose of this article is to explore this line of investigation. So, combining different approaches on oil and gold prices, stock indexes and exchange market (among others, Dooley, Isard and Taylor (1992), Sadorsky (1999), Park and Ratti (2007), Afshar (2008), Miller and Ratti (2008), Abdelaziz, Chortareas and Cipollini (2008) studies), our model, an unrestricted VAR and a VECM model, mixed all these variables applied to the European market, in order to explain the exchange market variation, from 1999:01 to 2010:05. We innovate by considering both gold and crude prices as explaining variables, differently from the above-mentioned authors, who only consider either gold or crude prices. Our results suggested that the model explains the long-run relationship between usd/eur and the mentioned variables, being consistent with the results previously found. Differently from the authors mentioned, in our model unrestricted VAR works better than VECM, with a R2 of 45,66% faces to 34,34%. |
| Keywords: | Exchange rate; crude price; gold price; stock index; inflation rate |
| JEL: | E44 F37 |
| Date: | 2010–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:cigewp:2010_013&r=ene |
| By: | van Leeuwen, Nico; Robert McDougall |
| Abstract: | In recent GTAP data releases, in transforming energy volumes data from the IEA extended energy balances to an input-output format, we record inflows into the energy balances flow "international marine bunkers" as exports, but record no corresponding imports. Here, we revise the energy module to balance the trade flows by recording international marine bunker usage as imports into the country of residence of the ship operator, and as usage by that country’s transport industry. We allocate usage across countries in proportion to the money value of their water transport services exports. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gta:resmem:3445&r=ene |
| By: | Scott K. Shriver (Stanford University Graduate School of Business) |
| Abstract: | This paper investigates the importance of network effects in the demand for ethanol-compatible vehicles and the supply of ethanol fuel retailers. An indirect network effect, or positive feedback loop, arises in this context due to spatially-dependent complementarities in the availability of ethanol fuel and the installed base of ethanol-compatible vehicles. Marketers and social planners are interested in whether these effects exist, and if so, how policy might accelerate adoption of the ethanol fuel standard within a targeted population. To measure these feedback effects, I develop an econometric framework that considers the simultaneous determination of ethanol-compatible vehicle demand and ethanol fuel supply in local markets. The demand-side of the model considers the automobile purchase decisions of consumers and fleet operators, and the supply-side model considers the ethanol market entry decisions of competing fuel retailers. I propose new estimators that address the endogeneity induced by the co-determination of alternative fuel vehicle demand and alternative fuel supply. I estimate the model using zip code level panel data from six states over a six year period. I find the network effect to be highly significant, both statistically and economically. Under typical market conditions, entry of an additional ethanol fuel retailer leads to a 12% increase in consumer demand for ethanol-compatible vehicles. The entry model estimates imply that a monopolist requires a local installed base of at least 204 ethanol-compatible vehicles to be profitable. As an application, I demonstrate how the model estimates can inform the promotional strategy of a vehicle manufacturer. Counterfactual simulations indicate that subsidizing fuel retailers to offer ethanol can be an effective policy to indirectly increase ethanol-compatible vehicle sales. |
| Keywords: | ethanol, flex-fuel vehicles, indirect network e¤ects, market entry |
| JEL: | C33 C73 D12 L11 L14 L91 M31 O32 Q21 Q42 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1020&r=ene |
| By: | Sylvie Démurger (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France); Martin Fournier (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France) |
| Abstract: | This paper discusses the determinants of firewood consumption in a poor township in rural northern China, with a special focus on the relationship between households’ economic wealth and firewood consumption. We find strong support for the poverty-environment hypothesis since household economic wealth is a significant and negative determinant of firewood consumption. Firewood can therefore be considered as an inferior good for the whole population in the rural area under study, although further evidence shows that at the top of the wealth distribution, there might be a floor effect in the decreasing firewood consumption. Besides economic wealth, our analysis also shows that the own-price effect is important in explaining firewood consumption behavior, the price effect gaining importance with rising incomes. Finally, increasing education is also found to be a key factor in energy consumption behavior, especially when dealing with energy source switching behavior. |
| Keywords: | firewood consumption, poverty, natural resources protection, China |
| JEL: | Q23 Q28 I31 O12 C3 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1020&r=ene |
| By: | Trefon, Theodore; Hendriks,Thomas; Kabuyaya, Noël; Ngoy, Balthazar |
| Abstract: | Charcoal use in urban Congo expanded significantly in the early 1990s. While recourse to charcoal (makala) as cooking fuel existed during the early independence period, most urban households had access to electricity for domestic use. Population, pressure, poorly maintained infrastructures and state crisis combined to force people to rely on makala for their daily cooking needs. Trade networks developed to make the link between makala producers and consumers. This can be considered as a popular response to state failure and is the subject of this working paper. Our research followed the trade network that includes charcoal producers, transporters, middlemen, wholesalers and retailers and a host of other peripheral supporting actors who claim to „live miraculously? from the network. The main conclusion of the research is that this informal trade network thrives, despite hassles from state agents, because it provides a vital service to Congo's urban poor. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iob:wpaper:2010003&r=ene |
| By: | Katja Coneus; C. Katharina Spieß |
| Abstract: | This paper examines the impact of outdoor and indoor pollution on children¿s health from birth until the age of three years in Germany. We use representative data from the German Socio-Economic Panel (SOEP), combined with five air pollution levels. These data come from the Federal Environment Agency and cover the years 2002-2007. Our work offers three important contributions. Firstly, we use accurate measures for five different pollutants (CO, NO2, SO2, O3, and PM10) on a (half-)hourly basis. Secondly, we are able to follow the effect of pollution exposure on a child¿s health during the first three years of life, accounting for time-invariant and unobserved neighborhood and mother-specific characteristics. Thirdly, we calculate different pollution intensity measures. Instead of relying solely on mean pollution levels, we are able to use (half-)hourly pollution levels as well as indoor pollution as meas-urements for the total latent pollution exposure. Our results suggest a significantly negative impact for some pollutants on infant health during early childhood. In comparison to outdoor pollution, indoor pollution seems to be more harmful directly after birth, while the relation-ship between indoor and outdoor pollution changes later in childhood. Since smoking is one source of producing carbon monoxide and thus affects child health negatively, our results further support the advice to parents of young children not to smoke. |
| Keywords: | Indoor and outdoor pollution, health, early childhood |
| JEL: | I12 Q53 J13 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp312&r=ene |
| By: | Jonathan M. Harris |
| Abstract: | Serious discussion has begun of policies to promote the goal of increasing well-being without material growth. Moving towards this goal requires a profound reorientation of macroeconomic theory. Importantly, the call by ecological economists to move away from traditional growth-oriented models comes at a moment when standard macroeconomics is in considerable turmoil. The financial crisis of 2008/2009 seriously undermined the basis for mainstream macroeconomics and brought renewed attention to various forms of Keynesian analysis and policy previously regarded as outdated. There is a close complementarity between new Keynesian and ecological perspectives. While older Keynesian analysis was oriented towards promoting growth, a true Keynesian analysis of the relationship between investment and consumption does not depend on a growth orientation. What this analysis has in common with an ecological perspective is the rejection of market optimality assumed in classical models. Moving away from the neoclassical goal of inter-temporal utility maximization allows for different, pluralistic economic goals: full employment, provision of basic needs, social and infrastructure investment, and income equity. These goals are compatible with environmental preservation and resource sustainability, whereas indefinite growth is not. But they require a revitalization of the sphere of social investment, seriously neglected (indeed often omitted completely) in standard models. Reintroducing this perspective allows the development of an economic theory suitable for the transition to a stable-population, low-carbon, resource-conserving global economy. The barriers to this transition are primarily political and institutional, not economic. Specifically, an eco-Keynesian perspective emphasizes new macroeconomic categories including: * human-capital-intensive services * investment in energy-conserving capital * investment in natural and human capital The expansion of these categories provides a basis for growth in wellbeing without growth in throughput, while preserving full employment and economic stability. This paper explores some of the implications of this altered macroeconomic perspective for development in both the global "North" and "South". It is suggested that the problems following the global financial crisis cannot be resolved by a return to traditional growth patterns, and will require large-scale practical policies based on eco-Keynesianism. |
| URL: | http://d.repec.org/n?u=RePEc:dae:daepap:10-05&r=ene |
| By: | Keith Maskus |
| Abstract: | Prior to the Copenhagen meeting on developing a new framework for climate-change policy there were sharp differences between the positions of developed and developing countries regarding the role of intellectual property rights (IPRs) in fostering international technology transfer (ITT). Expanding effective ITT is central to meeting needs for acquiring and adapting environmentally sound technologies (ESTs) in poor nations. Policymakers in developed economies generally view IPRs, particularly patents and trade secrets, as positive and critical inducements to ITT, while those in developing countries often describe them as sources of market power that impede access to new technology. This report reviews the economic logic of these positions and reviews available empirical evidence. The relationships among IPRs, innovation, ITT and local adaptation are complex and neither of the basic views described captures them well. Policy should be based on a more nuanced view. In that regard, to date there is little systematic evidence that patents and other IPRs restrict access to ESTs, which largely exist in sectors based on mature technologies in which there are numerous substitutes among global competitors. This situation may change as new technologies based on biotechnologies and synthetic fuels, which are likely to be more dependent on patent protection, become more prominent. At present, however, there is little evidence to support significant limitations on the issuance and use of IPRs in this area. In particular, it is unlikely that an international agreement on a compulsory licensing regime could achieve significant ITT benefits, while it may raise considerable costs. However, there may be scope for beneficial differentiation in patent rights, which is the primary subject of the report. Among these elements include ex ante extensions of patent terms tied to licensing commitments, expedited patent examinations in ESTs, investments in patent transparency and landscaping efforts, and facilitation of voluntary patent pools. The report argues that such changes are unlikely to achieve significant gains in innovation and ITT unless they are accompanied by broader policy approaches, including publicly financed fiscal supports for local technology needs and adaptation. Perhaps most important are finding means to raise the global costs of using carbon-based energy resources and improving the climate for investments in poor countries.<BR>Avant le Sommet de Copenhague sur l’élaboration d’un nouveau cadre d’action pour la lutte contre le changement climatique, pays développés et pays en développement nourrissaient des conceptions divergentes quant à l’incidence des droits de propriété intellectuelle (DPI) sur la promotion du transfert international de technologies. Or, pour répondre aux besoins d’acquisition et d’adaptation de technologies écologiquement rationnelles dans les pays pauvres, il est indispensable d’accroître l’efficacité de ces transferts. Les décideurs des pays développés considèrent généralement les DPI, en particulier les brevets et les secrets de fabrique, comme des incitations positives essentielles pour le transfert international de technologies, tandis que ceux des pays en développement les présentent souvent comme des sources de pouvoir de marché qui les empêchent d’accéder aux nouvelles technologies. Le présent rapport examine la logique économique de ces positions et passe en revue les données empiriques disponibles. Entre les DPI, l’innovation, le transfert international de technologies et l’adaptation locale, il existe une relation complexe dont aucune des deux conceptions très générales évoquées précédemment ne rend véritablement compte. Les politiques publiques doivent se fonder sur un point de vue plus nuancé. A ce jour, on ne dispose guère d’éléments solides attestant que les brevets et autres DPI restreignent l’accès aux technologies écologiquement rationnelles, car ces droits concernent essentiellement des secteurs basés sur des technologies matures pour lesquelles la concurrence mondiale offre de nombreux produits de substitution. La donne pourrait changer au fur et à mesure de la montée en puissance de nouvelles technologies faisant appel aux biotechnologies et aux carburants de synthèse, qui risquent d’être davantage protégés par des brevets. Pour l’heure toutefois, il n’y a guère d’arguments incitant à limiter notablement l’attribution et l’utilisation des DPI dans ce domaine. En particulier, un accord international sur un régime de licences obligatoires ne serait probablement pas très efficace en termes de transfert international de technologies, alors qu’il risquerait d’imposer des coûts considérables. En revanche, il serait possible d’apporter diverses modifications aux conditions attachées aux brevets, ce qui constitue le principal thème de ce rapport. Parmi les possibilités figurent la prolongation ex ante de la durée de validité du brevet assortie d’engagements en matière d’octroi de licences, l’examen accéléré des demandes de brevets visant les technologies écologiquement rationnelles, les investissements dans les efforts de transparence et de cartographie des brevets, les incitations à créer des communautés volontaires de brevets. D’après le rapport, des changements de ce type ne sauraient procurer des avantages significatifs en termes d’innovation et de transfert international de technologies s’ils ne s’accompagnent pas de stratégies publiques plus larges, comprenant des aides publiques pour répondre aux besoins en technologies et assurer leur adaptation à l’échelle locale. Mais l’essentiel est peut-être de trouver les moyens d’augmenter le coût d’utilisation des ressources énergétiques à base de carbone et d’améliorer le climat de l’investissement dans les pays pauvres. |
| Keywords: | environment, innovation, intellectual property rights, technology, climate change, environnement, innovation, droit de propriété intellectuelle, changement climatique, technologies |
| JEL: | O31 O34 Q27 Q56 |
| Date: | 2010–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:17-en&r=ene |
| By: | Jorgen Christensen; Klaus Peter Glaeser; Terry Shelton; Barry Moore; Loes Aarts |
| Abstract: | This paper, extracted from the forthcoming report on “Moving Freight with Better Trucks” describes the innovations in truck engine and vehicle technology which aim to: i)improve fuel efficiency and reduce emissions of CO2; ii) improve truck efficiency by increasing payload capacity; iii) improve compliance with regulations; iv) improve safety and truck operation through the adotiopn of driver support and communication systems. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaaa:2010/10-en&r=ene |
| By: | Fraas, Arthur G. (Resources for the Future); Richardson, Nathan (Resources for the Future) |
| Abstract: | The history of emissions-trading markets in the United States is marked by change. Since cap-and-trade programs were first implemented on a large scale after the 1990 Amendments to the Clean Air Act, the U.S. Environmental Protection Agency (EPA) has repeatedly revised and replaced emissions-trading markets for nitrous oxides and sulfur dioxide. In each transition, the agency has had to decide what to do with emissions allowances banked in the earlier program. These banked allowances represent early reductions in emissions, with corresponding environmental benefits, but also the expectation on the part of regulated entities that they will continue to hold value in the future. Unsettling these expectations can lead to price volatility, instability in markets, and erosion of buy-in from regulated entities and the credibility of regulators. The paper discusses EPA’s mixed record regarding these transitions and implications for the future of cap and trade as a policy tool. |
| Keywords: | cap and trade, nitrous oxides, sulfur dioxide, banking, borrowing, CAIR, NOx SIP Call, Transport Rule, Clean Air Act, EPA |
| Date: | 2010–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-10-42.pdf&r=ene |
| By: | Cassimon, Danny; Prowse, Martin; Essers, Dennis |
| Abstract: | The vital role of forests in limiting the likelihood of dangerous climate change has precipitated renewed interest in debt-for-nature swaps. This article uses evidence on past debt-for-nature swaps and similar debt mechanisms to assess the recent second wave of debt swaps. It outlines five typical shortcomings of this form of financial transaction: that they often fail to deliver additional resources to the debtor country; often fail to deliver more resources for conservation/climate purposes; often have a negligible effect on overall debt burdens, and, as such, do not generate more ‘indirect’ benefits; and are often in conflict with the new aid delivery paradigm’s emphasis on alignment with government policy and systems. Our analysis is applied to a recent debt-for-nature swap initiative between the United States and Indonesia. We show that this case, which we consider as a litmus test for current swap practice, performs unevenly across the five shortcomings identified. On the one hand, the swap does not create additional resources for the Government of Indonesia, is too insignificant to create indirect (positive) economic effects, and appears at odds with the new aid delivery paradigm’s insistence on system alignment. On the other hand, the swap does not reduce Government of Indonesia resources, and is very much in line with current national policy. The extent to which the resources provided by the swap are additional to other donor support and reserved domestic budget lines for conservation goals is unclear. Whilst a second generation of debt-for-nature swaps should clearly be avoided, there is a need to debate broader ways of linking debt service repayments to forest conservation. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:iob:wpaper:2009007&r=ene |
| By: | Devitt, Conor; Tol, Richard S. J. |
| Abstract: | We construct a model of development, civil war, and climate change. There are multiple interactions. Economic growth reduces the probability of civil war and the vulnerability to climate change. Climate change increases the probability of civil war. The impacts of climate change, civil war, and civil war in the neighbouring countries reduce economic growth. The model has two potential poverty traps ? a climate-change-induced one and a civil-war-induced one ? and the two poverty traps may reinforce one another. We calibrate the model to Sub-Saharan Africa and conduct a double Monte Carlo analysis accounting for both parameter uncertainty and stochasticity. We find the following. Although we use the SRES scenarios as our baseline, and thus assume rapid economic growth in Africa and convergence of African living standards to the rest of the world, the impact of civil war and climate change (ignored in SRES) are sufficiently strong to keep a number of countries in Africa in deep poverty with a high probability. Other countries enjoy exponential growth; and some countries may either be trapped in poverty or experience rapid growth. The SRES scenarios were wrong to ignore the impact of climate change and civil war on economic development. |
| Keywords: | civil war/climate change/economic development/Climate change/growth/Impacts of climate change/poverty/scenarios/uncertainty |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp351&r=ene |
| By: | Omar Chisari |
| Abstract: | A strategy of inclusion of adaptation and mitigation expenses in a model of optimal growth under threat of climate change calamities is discussed in these exploratory notes. Calamity is the result of a shock that reduces the utility level (even to extinction forever) and/or triggers a fundamental change of the economic structure. Mitigation expenses reduce the long-run probability of a calamity or the speed of convergence to it; adaptation expenses help to improve the standard of living after the calamity. The willingness to contribute to those expenses and the effects on the long-run capital stock of the economy depend on perceptions on how they will modify the law of evolution of probabilities of the shock and the standard of living after the shock. The choice between a clean technology and one that increases GHG emissions is also discussed. |
| Keywords: | Climate Change, Growth, Adaptation, Mitigation |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4685&r=ene |
| By: | Wayne B. Gray; Ronald J. Shadbegian; Ann Wolverton |
| Abstract: | In this paper, we examine the large and expanding area of Environmental Justice (EJ). The research in this area has developed from examining relatively simple comparisons of current demographic characteristics near environmental nuisances to performing multiple regression analysis and considering demographics at the time of siting. One area that has received considerably less attention is the identification of potential mechanisms that could be driving observed EJ correlations. We extend the current literature by examining one possible mechanism: the intensity of regulatory enforcement activity. If regulators pay less attention to the environmental performance of plants located near poor and minority areas, those plants might feel less pressure to pursue pollution abatement projects, increasing environmental hazards in those areas. We perform our analysis on a sample of manufacturing plants located near four large U.S. cities: Los Angeles, Boston, Columbus, and Houston. Our analysis of regulatory activity found little evidence that demographic variables have a significant impact on the allocation of regulatory activity. In particular, regulatory activity does not seem to be less intense in plants located near particular demographic groups. It is true that plants located in minority neighborhoods are inspected less often and face fewer enforcement actions, but these effects are nearly always small and insignificant, and plants located in lower-income areas seem to face (surprisingly) more regulatory activity. In a separate analysis, we also find very little evidence that demographic variables significantly influence pollution emissions. . In summary, the results presented here do not show much evidence to support EJ concerns about either regulatory activity or pollution emissions, at least within the set of plants, pollutants, and time periods covered in our analysis. |
| Keywords: | environmental justice, regulatory activity, enforcement, political, poor, minority |
| JEL: | D21 Q52 Q56 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:nev:wpaper:wp201010&r=ene |
| By: | Goerlich Gisbert Francisco J. (Ivie; Universidad de Valencia) |
| Abstract: | This working paper translates the global database of the Climate Research Unit from the University of East Anglia (<http://www.cru.uea.ac.uk/>), known as CRU TS 2.1, into regional data for Spain. This transform is carried out at the level of both autonomous regions (comunidades autónomas, NUTS 2) and provinces (NUTS 3). The original database, in grid form, is not suitable for social scientists and historians. On the one hand, they are not yet familiar with the GIS (geographical information system) techniques needed to manage such data structures. On the other, and more importantly, GIS data in grid form cannot be directly combined with the kind of data which they normally have available. Hence the above transformation allows us to perform a double task: firstly, to compare the database directly with statistics from meteorological stations and examine the consistency between data sources; and, secondly, to combine the transformed database with demographic and socioeconomic data normally available in formats that depend on a country's administrative and political structure. |
| Keywords: | Climatology, database, historical statistics. |
| JEL: | Q54 Y10 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:fbb:wpaper:20109&r=ene |
| By: | de Melo, Jaime; Mathys, Nicole Andréa |
| Abstract: | The outcome of the 15th conference of the Parties to the UNFCC showed a shift from a top-down approach with a collective target favoring environmental objectives to a bottom-up accord favoring political feasibility with no meaningful binding agreement in sight as the global climate regime and the global trade policy regime represented by the WTO appear to be on a collision course. Following a review of the alternative architectures for the next Climate Change Agreement, the paper outlines four areas in which trade will play a role: as a purveyor of technological transfer; as a mechanism to separate where abatement takes place from who bears the cots of abatement; as a participation mechanism; and as a way to address the pressures for border adjustments. Political-economy considerations are invoked to predict that a target system with a carbon credit system will be preferable to a carbon tax or to a portfolio system of treaties. A review of evidence on the extent of pollution haven effects suggests that these should be small under climate mitigation policies, especially if efforts are undertaken to raise the price of energy. A discussion of border measures to complement mitigation policies suggests that they are unlikely to be found compatible with the environmental exceptions allowed under article XX of the GATT. The review concludes that an umbrella agreement with leeway where much initial mitigation would first take place unilaterally as under the early days of the GATT might be the most promising way ahead while preserving an open World Trading System and environmental integrity. |
| Keywords: | Climate Change; WTO |
| JEL: | F18 Q56 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8032&r=ene |
| By: | Tol, Richard S. J. |
| Abstract: | The Intergovernmental Panel on Climate Change has a monopoly on the provision of climate policy advice at the international level and a strong market position in national policy advice. This may have been the intention of the founders of the IPCC. I argue that the IPCC has a natural monopoly, as a new entrant would have to invest time and effort over a longer period to perhaps match the reputation, trust, goodwill, and network of the IPCC. The IPCC is a not-for-profit organization, and it is run by nominal volunteers; it therefore cannot engage in the price-gouging that is typical of monopolies. However, the IPCC has certainly taken up tasks outside its mandate; the IPCC has been accused of haughtiness; innovation is slow; quality may have declined; and the IPCC may have used its power to hinder competitors. There are all things that monopolies tend to do, against the public interest. The IPCC would perform better if it were regulated by an independent body which audits the IPCC procedures and assesses its performance; if outside organizations would be allowed to bid for the production of reports and the provision of services under the IPCC brand; and if policy makers would encourage potential competitors to the IPCC. |
| Keywords: | Climate change/IPCC/natural monopoly/regulation/policy advice/Climate change/Climate policy/Policy |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp350&r=ene |