nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒10‒16
34 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. New Models of Public Ownership in Energy By Brophy Haney, A.; Pollitt, M.G.
  2. Climate change and energy perspectives. By Eyckmans, Johan; Pepermans, Guido; Proost, Stefan; [no author]
  3. Health Satisfaction and Energy Spending By Meier, H.
  4. The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries By David Coady; Javier Arze del Granado
  5. Poverty and firewood consumption : A case study of rural households in northern China By Sylvie Démurger; Martin Fournier
  6. Energy efficiency in China: The local bundling of interests and policies By Kostka, Genia; Hobbs, William
  7. The Electric Revolution in Latin America By Xavier Tafunell
  8. Industrial Electricity Demand for Turkey: A Structural Time Series Analysis By Zafer Dilaver; Lester C Hunt
  9. Electricity Demand Analysis and Forecasting- The Tradition is Questioned By N. Vijayamohanan Pillai
  10. Estimating Marginal Cost of Quality Improvements: The Case of the UK Electricity Distribution Companies By Jamasb, T.; Orea, L.; Pollitt, M.G.
  11. Efficiency Effects of Quality of Service and Environmental Factors: Experience from Norwegian Electricity Distribution By Growitsch, C.; Jamasb, T.; Wetzel, H.
  12. The Direct Costs and Benefits of US Electric Utility Divestitures By Triebs, T.P.; Pollitt, M.G.; Kwoka, J.E.
  13. Is the level of financial sector development a key determinant of private investment in the power sector? By Gasmi, Farid; Lika, Ba; Noumba Um, Paul
  14. Is there a future for nuclear energy?. By Eyckmans, Johan; Pepermans, Guido
  15. COALMOD-World: A Model to Assess International Coal Markets until 2030 By Clemens Haftendorn; Franziska Holz; Christian von Hirschhausen
  16. Global steam coal supply costs in the face of Chinese infrastructure investment decisions By Paulus, Moritz; Trueby, Johannes
  17. The effects of transport regulation on the oil market. Does market power matter? By Snorre Kverndokk and Knut Einar Rosendahl
  18. Have Prices of Internationally Traded Steam Coal been Marginal Cost Based? By Trueby, Johannes; Paulus, Moritz
  19. The effect of gasoline prices on household location By Raven Molloy; Hui Shan
  20. The Economics of the Nord Stream Pipeline System By Chyong, C.K.; Noël, P.; Reiner, D.M.
  21. Cost Curves for Gas Supply Security: The Case of Bulgaria By Silve, F.; Reiner, D.M.
  22. Implementing the EU renewable target through green certificate markets By Finn Roar Aune, Hanne Marit Dalen and Cathrine Hagem
  23. Adoption of a clean technology using a renewable energy By Ben Youssef, Slim
  24. Positive multi-criteria models in agriculture for energy and environmental policy analysis By Stelios Rozakis
  25. Impact of Global Recession on Sustainable Development and Poverty Linkages By Venkatachalam Anbumozhi; Armin Bauer
  26. Optimal Pollution Regulation in a Dynamic Stochastic Model By Sudhir A. Shah
  27. Local Environmental Regulation and Plant-Level Productivity By Randy Becker
  28. The Effect of CO2 Pricing on Conventional and Non-Conventional Oil Supply and Demand By Méjean, A.; Hope, C.
  29. Unintended Consequences of Price Controls: An Application to Allowance Markets By Stocking, Andrew
  30. Statistical evidence of tax fraud on the carbon allowances market By Marius-Cristian Frunza; Dominique Guegan; Antonin Lassoudière
  31. The European emissions trading system in Belgium. By Eyckmans, Johan; Rousseau, Sandra
  32. Missing trader fraud on the emissions market By Marius-Cristian Frunza; Dominique Guegan; Fabrice Thiebaut
  33. Norway - Sustainable Development: Climate Change and Fisheries Policies By Paul O'Brien
  34. Climate change and the language of human security By Gasper, D.R.

  1. By: Brophy Haney, A.; Pollitt, M.G.
    Abstract: This paper discusses some of the new and continuing ways in which the public sector is involved in the electricity / energy sector around the world. This involvement continues to be significant in spite of the longrunning trend towards privatisation, competition and independent regulation in the energy sector. We discuss why the theoretical case for public ownership might be more attractive now than in the recent past. We then discuss six case studies of modern public ownership drawn from the UK (Great Britain and Northern Ireland), Denmark, New Zealand, Finland and Chile. The investments covered include wind and nuclear power, LNG facilities, electricity and gas distribution investments and energy service companies for combined heat and power. We conclude with some outstanding questions raised by the apparently favourable conditions for increased public involvement in energy.
    Keywords: Public ownership, electricity, gas
    JEL: L32 L94 L95
    Date: 2010–10–01
  2. By: Eyckmans, Johan; Pepermans, Guido; Proost, Stefan; [no author]
    Date: 2010
  3. By: Meier, H.
    Abstract: This study explores the link between energy spending and health satisfaction. We aim to show that energy spending is a driver of health satisfaction and therefore of the overall quality of life of individuals. This has important implications for policy makers especially in the context of fuel poor and low-income households. The analysis tests the hypothesis that health satisfaction decreases with increasing energy spending per room. Households with high energy spending tend to live in inefficiently insulated homes that are not heated adequately. We use a British panel household survey dataset with more than 60,000 observations covering the period 1997 to 2007. We apply a fixed effects econometric model which enables us to take unobservable heterogeneity between households into account.
    Keywords: Health satisfaction, energy spending
    JEL: C23 D1 P36 Q41
    Date: 2010–10–01
  4. By: David Coady; Javier Arze del Granado
    Abstract: This paper reviews evidence on the impact of fuel subsidy reform on household welfare in developing countries. On average, the burden of subsidy reform is neutrally distributed across income groups; a $0.25 decrease in the per liter subsidy results in a 6 percent decrease in income for all groups. More than half of this impact arises from the indirect impact on prices of other goods and services consumed by households. Fuel subsidies are a costly approach to protecting the poor due to substantial benefit leakage to higher income groups. In absolute terms, the top income quintile captures six times more in subsidies than the bottom. Issues that need to be addressed when undertaking subsidy reform are also discussed, including the need for a new approach to fuel pricing in many countries.
    Keywords: Developing countries , Income distribution , Oil prices , Oil pricing policy , Oil subsidies , Price increases , Private consumption , Welfare ,
    Date: 2010–09–03
  5. By: Sylvie Démurger (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Martin Fournier (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    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
    Date: 2010
  6. By: Kostka, Genia; Hobbs, William
    Abstract: With the end of China's 11th Five-Year Plan approaching, this paper analyzes sub-national governments' implementation strategies to meet national energy efficiency targets. Previous research focuses on the way governance practices and decision-making structures shape implementation outcomes, yet very little attention has been given to what strategies local leaders actually employ to bridge national priorities with local interests. To illustrate how leaders work politically, this paper highlights specific implementation mechanisms officials use to strengthen formal incentives and create effective informal incentives to fulfill their energy efficiency mandates. The analysis is drawn from fifty-three interviews conducted in June and July 2010 in Shanxi, a major coal-producing and energy-intensive province. Findings suggest that local government leaders conform to the national directives by 'bundling' the energy efficiency policy with policies of more pressing local importance or by 'bundling' with the interests of groups with significant political influence. Ultimately, officials take national policies and then frame them in ways that give them legitimacy at the local level. --
    Keywords: China,local state,policy implementation,energy policy,governance
    JEL: D73 D78 O18 R58 Q48 Q58
    Date: 2010
  7. By: Xavier Tafunell
    Abstract: Latin America participated in the electric revolution which profoundly transformed the most developed Western economies between 1880 and 1930. The electrification of Latin America began relatively soon after these economies, but it was incapable of keeping up with them. Public electric lighting was introduced early in the big Latin American cities, where electric trams started running at almost the same time as in Europe, and electricity spread rapidly in the mining sector. In the most advanced countries or areas in the region, the manufacturing industry substituted the steam engine with the electric motor, following the example of industry in the United States and Europe. Nevertheless, towards 1930 electricity consumption per inhabitant for Latin America was far below that of the more advanced economies, and only the Latin American countries which lead the process of electrification had reached levels of electric consumption that were similar to those of the late industrialised European countries. One of the most striking features of the electric revolution in Latin America is rooted precisely in the enormous national differences. These differences are indicative of the great economic inequalities existing in the heart of the region and these nations’ highly diverse capacity for economic modernisation.
    Keywords: Latin American Growth, Comparative Development, Technological Progress, Energy Transition, Electricity.
    JEL: N76 N16 O33 L94
    Date: 2010–09
  8. By: Zafer Dilaver (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey); Lester C Hunt (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)
    Abstract: This research investigates the relationship between Turkish industrial electricity consumption, industrial value added and electricity prices in order to forecast future Turkish industrial electricity demand. To achieve this, an industrial electricity demand function for Turkey is estimated by applying the structural time series technique to annual data over the period 1960 to 2008. In addition to identifying the size and significance of the price and industrial value added (output) elasticities, this technique also uncovers the electricity Underlying Energy Demand Trend (UEDT) for the Turkish industrial sector and is, as far as is known, the first attempt to do this. The results suggest that output and real electricity prices and a UEDT all have an important role to play in driving Turkish industrial electricity demand. Consequently, they should all be incorporated when modelling Turkish industrial electricity demand and the estimated UEDT should arguably be considered in future energy policy decisions concerning the Turkish electricity industry. The output and price elasticities are estimated to be 0.15 and -0.16 respectively, with an increasing (but at a decreasing rate) UEDT and based on the estimated equation, and different forecast assumptions, it is predicted that Turkish industrial electricity demand will be somewhere between 97 and 148 TWh by 2020.
    Keywords: Turkish Industrial Electricity Demand; Energy Demand Modelling and Forecasting; Structural Time Series Model (STSM); Future Scenarios.
    JEL: C22 Q41 Q48
    Date: 2010–09
  9. By: N. Vijayamohanan Pillai
    Abstract: The present paper seeks to cast scepticism on the validity and value of the results of all earlier studies in India on energy demand analysis and forecasting based on time series regression, on three grounds. (i) As these studies did not care for model adequacy diagnostic checking, indispensably required to verify the empirical validity of the residual whiteness assumptions underlying the very model, their results might be misleading. (ii) As the time series regression approach of these studies did not account for possible non-stationarity (i.e., unit root integratedness) in the series, their significant results might be just the misleading result of spurious regression. (iii) These studies, by adopting a methodology suitable to a developed power system in advanced economies, sought to correlate the less correlatables in the context of an underdeveloped power system in a less developed economy. [Working Paper No. 312]
    Keywords: India, Kerala, demand analysis, forecasting, non-stationarity
    Date: 2010
  10. By: Jamasb, T.; Orea, L.; Pollitt, M.G.
    Abstract: The main aim of this paper is to develop an econometric approach to estimation of marginal costs of improving quality of service. We implement this methodology by way of applying it to the case of the UK electricity distribution networks. The estimated marginal costs allow us to shed light on the effectiveness of the current UK incentive regulation to improve quality, and to derive optimal quality levels and welfare losses due to sub-optimal quality levels. The proposed method also allows us to measure the welfare effect of the observed quality improvements in the UK between 1995 and 2003. Our results suggest that while the incentive schemes established by the regulator to encourage utilities to reduce network energy losses leads to improvement in sector performance, they do not provide utilities with sufficient incentives to avoid power interruptions. We find that the observed improvements in quality during the period of this study only represented 30% of the potential customer welfare gains, and hence there was still significant scope for quality improvements.
    Keywords: Electricity distribution cost, marginal cost, quality service, and social welfare
    JEL: L51 L94
    Date: 2010–10–01
  11. By: Growitsch, C.; Jamasb, T.; Wetzel, H.
    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. 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 multi-collinearity. 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. 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: 2010–10–01
  12. By: Triebs, T.P.; Pollitt, M.G.; Kwoka, J.E.
    Abstract: This paper studies the impact of divestiture on the efficiency and costs of electric utilities. The empirical literature shows that there exist economies of scope for electric utilities and that divestiture decreases distribution efficiency but increases generation efficiency. This paper is to bring together these different results. Our analysis covers distribution, transmission, and power sourcing. Our data is an unbalanced panel of about 138 US electric utilities for the years 1994 to 2006 over which we observe 30 divestitures between 1997 and 2003. First, we regress firmlevel efficiencies for distribution and power sourcing on various divestiture indicators. Second, we compare the weighted cost between divested and non-divested firms and calculate a net present value for the entire sample of divestitures. Last, we regress net benefits from divestiture on the distribution side on the net benefit for power sourcing to see whether individual firms successfully off-set any costs of divestiture. We find that divestiture reduces distribution efficiency but increases power sourcing efficiency. Both effects depend on the amount of own nuclear generation output but not fossil-fuel or hydro output. The net present value for all divestitures in our sample is $11.3 billion. It seems that relatively lower costs of power outweigh losses in economies of scope as well as other restructuring costs. However, lower costs of power might be the result of favourable contracts put in place at the time of divestiture. Our study complements traditional studies of economies of scope and shows that divestitures might well be worth it.
    Keywords: Electric utilities, divestiture, economies of scope, net present value
    JEL: L25 L51 L94
    Date: 2010–10–01
  13. By: Gasmi, Farid (Toulouse School of Economics (ARQADE & IDEI)); Lika, Ba (Ecole des Hautes Etudes en Sciences Sociales, Paris); Noumba Um, Paul (The World Bank,Washington DC)
    Abstract: TThis paper seeks to assess the extent to which a country’s overall level of development and that of its financial sector, in particular, are factors that attract private capital into infrastructure projects. The authors investigate these effects in a 1990–2007 dataset on the power sector in 37 developing countries. The results suggest that economic growth is a key determinant of private investors’ investment in infrastructure projects, and that investors tend to take countries’ governance quality into account in their decisions to invest. The empirical results highlight that the development of the financial sector also plays a significant role in private investors’ decisions to enter infrastructure sectors. In particular, the degree of country risk and exchange rate volatility is found to be negatively This paper—a product of the Sustainable Development Department, Middle East and North Africa Region—is part of a larger effort in the department to promote infrastructure development in client countries through applied research targeting cutting-edge policy, regulatory and infrastructure finance issues. Policy Research Working Papers are also posted on the Web at The author may be contacted at related to the volume of private sector investment in power projects. Furthermore, when the banking sector and the capital market are separately treated in the analysis, the existence of a well functioning capital market is the main attracting factor. In addition, the existence of an independent energy regulatory authority significantly improves the level of private investors’ implication in energy projects. When accounting for the interactions between the overall economic development and the financial sector development variables, the effects of these variables are still significant and the results also confirm the importance of an independent energy sector regulator.
    Keywords: Infrastructure sectors, Public-private partnership, Power sector, Financial development, Economic growth
    JEL: L33 L38 L94 L97 C23
    Date: 2010–07
  14. By: Eyckmans, Johan; Pepermans, Guido
    Date: 2010
  15. By: Clemens Haftendorn; Franziska Holz; Christian von Hirschhausen
    Abstract: Coal continues to be an important fuel in many countries' energy mix and, despite the climate change concerns, it is likely to maintain this position for the next decades. In this paper a numerical model is developed to investigate the evolution of the international market for steam coal, the coal type used for electricity generation. The main focus is on future trade ows and investments in production and transport infrastructure until 2030. "COALMOD-World" is an equilibrium model, formulated in the complementarity format. It includes all major steam coal exporting and importing countries and represents the international trade as one globalized market. Some suppliers of coal are at the same time major consumers, such as the USA and China. Therefore, domestic markets are also included in the model to analyze their interaction with the international market. Because of the different qualities of steam coal, we include different heating values depending on the origin of the coal. At the same time we observe the mass-specific constraints on production, transport and export capacity. The time horizon of our analysis is until 2030, in 5-year steps. Production costs change endogenously over time. Moreover, endogenous investments are included based on a net present value optimization approach and and the shadow prices of capacities constraints. Investments can be carried out in production, inland freight capacities (rail in most countries), and export terminals. The paper finishes with an application of the model to a base case scenario and suggestions for alternative scenarios.
    Keywords: coal, energy, numerical modeling, investments, international trade
    JEL: L11 L72 C69
    Date: 2010
  16. By: Paulus, Moritz (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Trueby, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: In this work we demonstrate the effects of different Chinese transport infrastructure investment strategies on long run marginal costs of steam coal supply in Europe. <p> Increasing Chinese demand for steam coal will lead to a growing need for additional domestic infrastructure in China as production hubs and demand centers are spatially separated. If domestic transport capacity is only available at elevated costs, Chinese power generators could turn to the global trade markets and increase steam coal imports. <p> Increased Chinese imports could significantly influence global trade market price levels which would especially affect nations mainly relying on imports, like for example Europe. We analyze the scope of this effect under different assumptions for Chinese transport infrastructure developments. <p> For this purpose, we develop a spatial equilibrium model for the global steam coal market. For our assumption regarding production and transport cost evolutions, we rely on an input factor-based cost calculation methodology. We found out that the investigated Chinese infrastructure decisions have a modest impact on long run marginal costs of supply for Europe and the US but significant effects for China.
    Keywords: Steam coal; MCP; non-linear optimization; China; Europe; transport infrastructure
    JEL: C61 L92 L94 Q30
    Date: 2010–09–01
  17. By: Snorre Kverndokk and Knut Einar Rosendahl (Statistics Norway)
    Abstract: Popular instruments to regulate consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel efficiency. Their impacts on oil consumption and price vary. One important factor is the market setting. We show that if market power is present in the oil market, the directions of change in consumption and price may contrast those in a competitive market. As a result, the market setting impacts not only the effectiveness of the policy instruments to reduce oil consumption, but also terms of trade and carbon leakage. In particular, we show that under monopoly, reduced oil consumption due to increased fuel efficiency will unambiguously increase the price of oil.
    Keywords: Transport regulations; oil market; monopoly; terms-of-trade effects; carbon leakage
    JEL: D42 Q54 R48
    Date: 2010–09
  18. By: Trueby, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Paulus, Moritz (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: During 2007 and 2008 steam coal prices soared to unprecedented levels. Since then much has been speculated about the drivers of these price peaks. This paper is concerned with the costs of steam coal allocation in the seaborne market and their influence on the price equilibrium. It presents an optimisation model that differentiates between mining technologies and therefore allows to analyse the effects of input price escalation on marginal costs in detail. Since 2005 input prices of commodities used in coal mining and bulk carrier freight rates increased significantly, causing marginal costs to rise. However, this affected suppliers along the global supply curve differently. We find that low-cost intramarginal suppliers experienced higher cost increases than marginal suppliers due to the different production technologies applied. Based on our results we conclude that prices of internationally traded steam coal are generally marginal cost based. However, the all time price spike of 2008 was not caused by cost escalation. We suppose that short-run capacity scarcity was responsible for the soaring prices in this year. Hence, marginal costs are a major determinant of the price equilibrium in the seaborne steam coal market given that capacity is not scarce.
    Keywords: Steam coal; Marginal Costs; Mining Technologies; Cost Escalation; Price Peak
    JEL: C61 L11 L71 Q31
    Date: 2010–10–06
  19. By: Raven Molloy (Federal Reserve Board); Hui Shan (Federal Reserve Board)
    Abstract: By raising commuting costs, an increase in gasoline prices should reduce the demand for housing in areas far from employment centers relative to locations closer to jobs. Using annual panel data on a large number of ZIP codes and municipalities from 1981 to 2008, we find that a 10 percent increase in gas prices leads to a 10 percent decrease in construction in locations with a long average commute relative to other locations, but to no significant change in house prices. Thus, the supply response may prevent the change in housing demand from capitalizing in house prices.
    Keywords: Gasoline price, household location, housing, commuting
    JEL: Q31 R21 R23
    Date: 2010
  20. By: Chyong, C.K.; Noël, P.; Reiner, D.M.
    Abstract: We calculate the total cost of building Nord Stream and compare its levelised unit transportation cost with the existing options to transport Russian gas to western Europe. We find that the unit cost of shipping through Nord Stream is clearly lower than using the Ukrainian route and is only slightly above shipping through the Yamal-Europe pipeline.<br><br> Using a large-scale gas simulation model we find a positive economic value for Nord Stream under various scenarios of demand for Russian gas in Europe. We disaggregate the value of Nord Stream into project economics (cost advantage), strategic value (impact on Ukraine’s transit fee) and security of supply value (insurance against disruption of the Ukrainian transit corridor). The economic fundamentals account for the bulk of Nord Stream’s positive value in all our scenarios.
    Keywords: Nord Stream, Russia, Europe, Ukraine, Natural gas, Pipeline, Gazprom
    JEL: L95 H43 C63
    Date: 2010–10–01
  21. By: Silve, F.; Reiner, D.M.
    Abstract: We evaluate the cost-effectiveness of various policy options and infrastructure investment proposals to improve the security of gas supply in Bulgaria, one of the most gas insecure countries in the European Union. We do this by computing ‘security of supply cost curve’ for different gas supply disruption scenarios. The curves show the cumulative amount of security of supply on the horizontal axis and the unit cost of security on the vertical axis. Measures should be implemented by order or rising unit cost until the public authorities’ preferred level of security is achieved. Our results show that a costeffective gas supply security policy for Bulgaria would concentrate on two measures: (1) allowing reverse-flow transactions on the transit pipelines to Greece and Turkey to access the LNG terminals in these countries in case of disruption in Russian gas supplies and, (2) ensuring effective dual-fuel capability for Bulgaria’s heat generation plants. The infrastructure options actually considered by the Bulgarian authorities and gas industry (expanding the withdrawal rate of the Chiren underground gas storage and building a new gas interconnector pipeline with Greece) appear to be much more costly.
    Keywords: Natural Gas, Security of Supply, Energy Policy, Bulgaria, EU
    JEL: L38 Q48 L5 L95 L98
    Date: 2010–10–01
  22. By: Finn Roar Aune, Hanne Marit Dalen and Cathrine Hagem (Statistics Norway)
    Abstract: The EU Parliament has agreed on a target of a 20 % share of renewables in the EU’s total energy consumption by 2020. To achieve the target, the Council has adopted mandatory differentiated national targets for each of the Member States. In this paper we consider the potential for cost reductions by allowing for trade in green certificates across Member States. We show that differentiated national targets cannot ensure a cost effective implementation of the overall target for EU’s green energy consumption. Trade in green certificates can ensure a cost effective distribution of green energy production, but the national targets prevents a cost effective distribution of energy consumption. Nevertheless, our numerical model indicates that EU-wide trade in green certificates may cut the EU’s total cost of fulfilling the renewable target by as much as 70 % compared to a situation with no trade. However, the design of green certificate markets may have large impact on the distribution of costs across countries.
    Keywords: Energy policy; green certificate markets; renewable targets
    JEL: Q48 Q54 Q58
    Date: 2010–09
  23. By: Ben Youssef, Slim
    Abstract: We consider a monopolistic firm producing a good while polluting and using a fossil energy. This firm can adopt a clean technology by incurring an investment cost decreasing exponentially with the adoption date. This clean technology does not pollute and has a lower production cost because it uses a renewable energy. We determine the optimal adoption date for the firm in the cases where it is regulated at each period of time and when it is not regulated. Interestingly, the regulated firm adopts the clean technology earlier than what is socially-optimal. However, the non-regulated firm adopts later than what is socially desired. The regulator can compensate the regulated firm for the loss incurred if he wants that it delays its adoption date to the socially-optimal one. Nevertheless, the regulator may be interested in letting the firm adopts earlier to encourage the diffusion of the use of green technologies in other industries.
    Keywords: regulation; clean technology; renewable energy; adoption date.
    JEL: H57 D62 Q55 Q42
    Date: 2010–09
  24. By: Stelios Rozakis (Agricultural Economics and Rural Development Department, Agricultural University of Athens)
    Abstract: Environmental consciousness and accompanying actions have been paralleled by the evolution of multi-criteria methods which have provided tools to assist policy makers in discovering compromises in order to muddle through. This paper recalls the development of multi-criteria methods in agriculture, focusing on their contribution to produce input or output functions useful for environmental and/or energy policy. Response curves generated by MC models can more accurately predict farmers’ response to market and policy parameters compared with classic profit maximizing behavior. Concrete examples from recent literature illustrate the above statements and ideas for further research are provided.
    Keywords: multi-criteria models, interval programming, supply curves, bio-energy, policy analysis
    JEL: C61 Q11 Q18
    Date: 2010
  25. By: Venkatachalam Anbumozhi; Armin Bauer
    Abstract: The global financial crisis and the resulting economic slowdown may be assumed to have at least the benefit of also reducing environmental degradation in the individual countries. This paper discusses the consequences of the crisis for energy use, pollution prevention, and land use in Asia and the associated emissions of greenhouse gases—the principal global warming pollutants—as well as their linkage with poverty. [ADBI Working Paper 227]
    Keywords: global financial crisis, economic, environmental, energy use, pollution prevention, greenhouse gases, Asia, poverty
    Date: 2010
  26. By: Sudhir A. Shah
    Abstract: The context for this paper is the interaction between a rm that produces and processes durable pollution and a regulator charged with the tasks of (a) employing a mandated technology to process the public stock of pollution, and (b) designing a contract that induces the rm to adopt a socially desirable technology for processing its private pollution stock. [Working Paper No. 84]
    Keywords: context, processes, pollution, technology, private
    Date: 2010
  27. By: Randy Becker
    Abstract: This paper examines the impact of environmental regulation on the productivity of manufacturing plants in the United States. Establishment-level data from three Censuses of Manufactures are used to estimate 3-factor Cobb-Douglas production functions that include a measure of the stringency of environmental regulation faced by manufacturing plants. In contrast to previous studies, this paper examines effects on plants in all manufacturing industries, not just those in “dirty” industries. Further, this paper employs spatial-temporal variation in environmental compliance costs to identify effects, using a time-varying county-level index that is based on multiple years of establishment-level data from the Pollution Abatement Costs and Expenditures survey and the Annual Survey of Manufactures. Results suggest that, for the average manufacturing plant, the effect on productivity of being in a county with higher environmental compliance costs is relatively small and often not statistically significant. For the average plant, the main effect of environmental regulation may not be in the spatial and temporal dimensions.
    Keywords: environmental regulation, productivity, U.S. manufacturing
    Date: 2010–09
  28. By: Méjean, A.; Hope, C.
    Abstract: What would be the effect of CO2 pricing on global oil supply and demand? This paper introduces a model describing the interaction between conventional and non-conventional oil supply in a Hotelling framework and under CO2 constraints. The model assumes that nonconventional crude oil enters the market when conventional oil supply alone is unable to meet demand, and the social cost of CO2 is included in the calculation of the oil rent at that time. The results reveal the effect of a CO2 tax set at the social cost of CO2 on oil price and demand and the uncertainty associated with the time when conventional oil production might become unable to meet demand. The results show that a tax on CO2 emissions associated with fuel use would reduce oil demand despite the effect of lower future rents, and would delay the time when conventional oil supply is unable to satisfy demand. More precisely, between 81 and 99% of the CO2 tax is carried into the oil price despite the counter-balancing effect of the reduced rent. A CO2 tax on fuel use set at the social cost of CO2 would delay by 25 years the time when conventional oil production is unable to meet oil demand, from 2019 to 2044 (mean value). The results show that this date is very sensitive to the price elasticity of demand and the demand growth rate, which shows the great potential of demand-side measures to smooth the transition towards low-carbon liquid fuel alternatives.
    Keywords: Oil supply and demand; Conventional and non-conventional oil; CO2 pricing; Social cost of CO2.
    JEL: Q41 Q42 Q54
    Date: 2010–10–01
  29. By: Stocking, Andrew
    Abstract: Price controls established in an emissions allowance market to constrain allowance prices between a ceiling and a floor offer a mechanism to reduce cost uncertainty in a cap-and-trade program; however, they could provide opportunities for strategic actions by firms that would result in lower government revenue and greater emissions than in the absence of controls. In particular, when the ceiling price is supported by introducing new allowances into the market, firms could choose to buy allowances at the ceiling price, regardless of the prevailing market price, in order to lower the equilibrium price of all allowances. Those purchases could either be transacted by a group of firms intending to manipulate the market or be induced through the introduction of inaccurate information about the cost of emissions abatement that causes firms to purchase allowances at the ceiling. Theory and simulations using estimates of the elasticity of allowance demand for U.S. firms suggest that the manipulation could be profitable under the stylized setting and assumptions evaluated in the paper, although in practice many other conditions will determine its use.
    Keywords: cap-and-trade; climate change; price controls; price ceiling; manipulation; allowance market; carbon market
    JEL: D21 H41 Q54 D43
    Date: 2010–09
  30. By: Marius-Cristian Frunza (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Sagacarbon - Sagacarbon SA); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Antonin Lassoudière (Sagacarbon - Sagacarbon SA)
    Abstract: The aim of this paper is to show evidence and to quantify with forensic econometric methods the impact of the Value Added Tax fraud on European carbon allowances markets. This fraud mainly occurred at the beginning of between the end of 2008 and the beginning of 2009. In this paper, we explore the financial mechanisms of the fraud and the impact on the market behavior as well as the reflexion on its econometric features. In a previous work, we showed that the European carbon market is strongly influenced by fundamentals factors as oil, energy, gas, coal and equity prices. Therefore, we calibrated Arbitrage Pricing Theory-like models and showed that they have a good forecast capacity. Those models enabled us to quantify the impact of each factor on the market. In this study, we focused more precisely on the benchmark contract for European carbon emissions prices over 2008 and 2009. We observed that during the first semester of 2009, there is a significant drop in our model performances and robustness and that the part of market volatility explained by fundamentals reduced. Therefore, we identified the period where the market was driven by VAT fraud movements and we were able to measure the value of this fraud. Soon after governments passed a law that cut the possibility of fraud occurrence the performance of the model improved rapidly. We estimate the impact of the VAT extortion on the carbon market at 1.3 billion euros.
    Keywords: Carbon, EUA, energy, Arbitrage Pricing Theory, Switching regimes, hidden Markov Chain Model, forecast.
    Date: 2010–06
  31. By: Eyckmans, Johan; Rousseau, Sandra
    Date: 2010
  32. By: Marius-Cristian Frunza (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Sagacarbon - Subsidiary of Caisse des Dépôts et Consignations); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Fabrice Thiebaut (Sagacarbon - Subsidiary of Caisse des Dépôts et Consignations)
    Abstract: The aim of this paper is to show evidence and to quantify with forensic econometric methods the impact of the missing trader fraud on European carbon allowances markets. This fraud occurred mainly between the end of 2008 and the beginning of 2009. In this paper, we explore the financial mechanisms of the fraud and the impact on the market behaviour as well as the consequences on its econometric features.
    Keywords: COE, Econometrie, fraud.
    Date: 2010–08
  33. By: Paul O'Brien
    Abstract: Sustainable development is a key theme in policy making in Norway. Although it owes a considerable part of its wealth to the carbon-based economy, Norway gives priority to the objectives embodied in the OECD Green Growth Strategy and sees itself as a pioneer in some areas. The sustainable development strategy, an integral part of the documentation for the 2008 budget, spelt out the key principles that were intended to guide policymaking and a set of quantitative indicators that are intended to give an indication of progress. Its focus on preserving natural capital and the precautionary principle can indeed be seen to be reflected in Norway’s policy aims on climate change and on fisheries, two otherwise rather different problems. Another principle is the use of costefficient means to achieve these policy objectives. In many ways Norway has pioneered the use of such measures, introducing a CO2 tax early on and adopting individual quotas in fisheries. But in other ways policy prevents them from playing their full role, exempting significant sectors from the CO2 tax and now from the emission trading system, and restricting the tradability of quotas in fishing. This document explores these issues, noting that some potential conflicts between sustainable development objectives could be given fuller recognition, and that Norway can and should follow through more strongly the logic of its pioneering use of economic incentives to further sustainability goals. This Working Paper relates to the 2010 Economic Survey of Norway. (<P>Développement durable : changement climatique et politique de la pêche<BR>Le développement durable occupe une place de premier plan dans l’élaboration de l’action publique en Norvège. Le pays doit une partie considérable de sa richesse à l’économie carbonée, mais il accorde la priorité aux objectifs de la Stratégie de l’OCDE pour une croissance verte et se considère comme un pionnier dans certains domaines. Partie intégrante de la documentation se rapportant au budget 2008, la stratégie de développement durable définissait les principes clés censés guider l’élaboration des politiques, ainsi qu’une série d’indicateurs quantitatifs destinés à donner une idée des progrès réalisés. L’importance qu’elle accorde à la préservation du capital naturel et au principe de précaution se reflète au demeurant dans les buts assignés à l’action publique en ce qui concerne le changement climatique et les pêches, deux domaines par ailleurs assez différents. Le recours à des instruments présentant un bon rapport coût-efficacité, dans l’optique d’atteindre les objectifs, est aussi au nombre des principes retenus. A beaucoup d’égards, la Norvège a en l’occurrence fait oeuvre de pionnière en créant très tôt une taxe sur le CO2 et des quotas individuels de pêche. Quoi qu’il en soit, certaines mesures empêchent ces instruments de jouer tout leur rôle. En effet, des secteurs importants sont exonérés du paiement de la taxe sur le CO2 et, pour l’instant, exclus du système d’échange de quotas d’émission, et l’échangeabilité des quotas de pêche est soumise à des restrictions. Le présent document est consacré à ces questions. Il en ressort qu’il serait possible de prendre acte plus clairement de certains antagonismes potentiels entre objectifs de développement durable, et que la Norvège peut et devrait poursuivre plus résolument dans la voie des incitations économiques, qu’elle a contribué à ouvrir, de manière à favoriser la réalisation des objectifs de durabilité. Ce document de travail se rapporte à l’Étude économique de l’OCDE de la Norvège 2010 (
    Keywords: Norway, sustainable development, climate change, fisheries, Norvège, développement durable, changement climatique
    JEL: Q01 Q22 Q28 Q48 Q54 Q58
    Date: 2010–10–06
  34. By: Gasper, D.R.
    Abstract: The language of ‘human security’ arose in the 1990s, including from UN work on ‘human development’. What contributions can it make, if any, to the understanding and especially the valuation of and response to the impacts of climate change? How does it compare and relate to other languages used in describing the emergent crises and in seeking to guide response, including languages of ‘externalities’, public goods and incentives, cost-benefit and cost-effectiveness analysis? The paper examines in particular the formulations in those terms in Stiglitz’s Making Globalization Work and Stern’s The Economics of Climate Change and Blueprint for a Safer Planet, and how they are left groping for frameworks to motivate the changes required for global sustainability. It undertakes comparison also with the languages of human development and human rights, and suggests that, not least through enriching our skills of ‘narrative imagination’, the human security framework supports a series of essential changes in orientation—in our conceptions of selfhood, well-being and situatedness in Nature—and contributes towards a required greater solidarity and greater awareness of our inter-connectedness.
    Keywords: climate change;human security;incentives;motivation;global public goods;global public spiritedness;economic cost-benefit analysis;narrative imagination;solidarity
    Date: 2010–06–05

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