nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒10‒23
37 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Low Carbon Electricity Investment: The Limitations of Traditional Approaches and a Radical Alternative By Laing, T.; Grubb, M.
  2. A non-technical introduction to the ANEMMarket model of the Australian National Electricity Market (NEM) By Phillip Wild; John Foster
  3. Investigating the Impacts of Distributed Generation on Transmission Expansion Cost: An Australian Case Study By Junhua Zhao; John Foster
  4. Flexible Transmission Network Planning Considering the Impacts of Distributed Generation By Junhua Zhao; John Foster
  5. Revealed Preference Tests of the Cournot Model By Andres Carvajal; Rahul Deb; James Fenske; John K.-H. Quah
  6. A structural risk-neutral model for pricing and hedging power derivatives By René Aid; Luciano Campi; Nicolas Langrené
  7. Does environmental leadership pay off for Swed-ish industry? - Analyzing the effects of environ-mental investments on efficiency By Broberg, Thomas; Marklund, Per-Olov; Samakovlis, Eva; Hammar, Henrik
  8. Factors influencing energy efficiency in the German and Colombian manufacturing industries By Clara Inés Pardo Martínez
  9. Toward Efficient Urban Form in China By Webster, Douglas; Bertaud, Alain; Jianming,Cai; Zhenshan, Yang
  10. Investments and energy efficiency in Colombian manufacturing industries By Clara Inés Pardo Martínez
  11. The Economics of Green Building By Eichholtz, Piet; Kok, Nils; Quigley, John M.
  12. Energy efficiency in the automotive industry evidence from Germany and Colombia By Clara Inés Pardo Martínez
  13. Effects of Retrofitting Emission Control Systems on In-Use Heavy Diesel Vehicles By Millstein, Dev E.; Harley, Robert A
  14. Eco-Driving: Pilot Evaluation of Driving Behavior Changes Among U.S. Drivers By Boriboonsomsin, Kanok; Vu, Alexander; Barth, Matthew
  15. An Activity-Based Assessment of the Potential Impacts of Plug-In Hybrid Electric Vehicles on Energy and Emissions Using One-Day Travel Data By Recker, W. W.; Kang, J. E.
  16. Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives By Anderson, Soren; Parry, Ian; Sallee, James M.; Fischer, Carolyn
  17. Experimental Economics in Transportation: A Focus on Social Influences and the Provision of Information By Gaker, David; Zheng, Yanding; Walker, Joan
  18. Governance of Energy System Transition: Theoretical Framework and Empirical Analysis By TOTTI KÖNNÖLÄ; JAVIER CARRILLO
  19. Passenger Road Transport in India: Major Challenges in Reducing Energy Consumption and CO2 Emissions and Ways Ahead By Bandyopadhyay, Kaushik; Thukral, K L
  20. Long-Term Oil Price Forecasts: A New Perspective on Oil and the Macroeconomy By J. Isaac Miller; Shawn Ni
  21. How do unanticipated discoveries of oil fields affect the oil price? By Lisa Leinert
  22. Comment on Benjamin Smith (2004): “Oil Wealth and Regime Survival in the Developing World, 1960-1999” By Hlavac, Marek
  23. Stabilization and Savings Funds to Manage Natural Resource Revenues: Kazakhstan and Azerbaijan vs. Norway By Matthias Lücke
  25. Does Education Really Matter for Environmental Quality? By Somlanaré Romuald KINDA
  26. Pollution Abatement as a Source of Stabilisation and Long-Run Growth By Theodore Palivos; Dimitrios Varvarigos
  27. Climate Change - A Research Agenda for Latin America and the Caribbean By Omar Chisari; Sebastian Galiani
  28. Marginal Cost of Indirect Taxation in the presence of a Demerit Externality with an Application to Carbon Dioxide Emissions in Belgium By B. DEFLOOR
  29. Explaining European Emission Allowance Price Dynamics: Evidence from Phase II By Wilfried Rickels; Dennis Görlich; Gerrit Oberst
  30. Plan or React?: Analysis of Adaptation Costs and Benefits Using Integrated Assessment Models By Shardul Agrawala; Francesco Bosello; Carlo Carraro; Kelly de Bruin; Enrica De Cian; Rob Dellink; Elisa Lanzi
  31. Short-Term Impact of Cap-and-Trade Climate Policy and Agricultural Adjustment By Jiang, Yong; Koo, Won W.
  32. How Volatile is ENSO? By LanFen Chu; Michael McAleer; Chi-Chung Chen
  33. Costs, Revenues, and Effectiveness of the Copenhagen Accord Emission Pledges for 2020 By Rob Dellink; Gregory Briner; Christa Clapp
  34. On interactions of optimal climate policy and international trade. An assessment of border carbon measures. By Schenker, Oliver; Bucher, Raphael
  35. Leaders, Followers and Laggards: Adoption of the U.S. Conference of Mayors Climate Protection Agreement in California By Wang, Rui
  36. Environmental Policy and Economic Growth: Empirical Evidence from Europe By Morley, Bruce
  37. Enhancing Developing Country Access to Eco-Innovation: The Case of Technology Transfer and Climate Change in a Post-2012 Policy Framework By David Ockwell; Jim Watson; Alexandra Mallett; Ruediger Haum; Gordon MacKerron; Anne-Marie Verbeken

  1. By: Laing, T.; Grubb, M.
    Abstract: Moving to a very low carbon electricity system is central to meeting the goals of UK energy policy, and indeed to the wider global challenge of tackling climate change. This will require massive investment in low carbon electricity sources. This working paper identifies four key difficulties with the current mainstream approach of relying on the impact of a carbon price in the present liberalised electricity market, supplemented with additional incentive mechanisms like renewable obligation certificates and feed-in tariffs. We then summarise alternate mechanisms and propose a new approach, aimed at harnessing the potential interest and capital of electricity consumers, large and small, directly in funding low carbon electricity investments, in the form of longterm ‘Green Power’ contracts that operate in a separate, differentiated contract market.
    Keywords: Electricity, Renewables, Climate Change, Green Power
    JEL: Q41
    Date: 2010–10–01
  2. By: Phillip Wild; John Foster (School of Economics, The University of Queensland)
    Abstract: In this paper, we provide an accessible introduction to our agent-based ANEMMarket simulation model of the Australian National Electricity Market. This model has been purpose built to assess the impacts of emissions trading schemes, carbon taxes and the introduction of significant new suppliers of electricity generated from low or zero carbon emitting generators. We provide an illustrative example that involves the simulation of the impacts of a range of carbon prices on the dispatch of power from different types of generators in different regional locations. From these we compute the resultant carbon reduction effects. However, these remain only illustrative simulations because they do not include a range of operative constraints that exist in reality.
    Date: 2010
  3. By: Junhua Zhao; John Foster (School of Economics, The University of Queensland)
    Abstract: Distributed generation (DG) is rapidly increasing its penetration level in Australia, and is expected to play a more important role in the power industry. An important benefit of DG is its ability to defer transmission investments. In this paper, a simulation model is implemented to conduct quantitative analysis on the effect of DG on transmission investment deferral. The transmission expansion model is formulated as a multi-objective optimization problem with comprehensive technical constraints, such as AC power flow and system security. The model is then applied to study the Queensland electricity market in Australia. Simulation results show that, DG does show the ability to reduce transmission investments. This ability however is greatly influenced by a number of factors, such as the locations of DG, the network topology, and the power system technical constraints.
    Date: 2010
  4. By: Junhua Zhao; John Foster (School of Economics, The University of Queensland)
    Abstract: The restructuring of global power industries has introduced a number of challenges, such as conflicting planning objectives and increasing uncertainties,to transmission network planners. During the recent past, a number of distributed generation technologies also reached a stage allowing large scale implementation, which will profoundly influence the power industry, as well as the practice of transmission network expansion. In the new market environment, new approaches are needed to meet the above challenges. In this paper, a market simulation based method is employed to assess the economical attractiveness of different generation technologies, based on which future scenarios of generation expansion can be formed. A multi-objective optimization model for transmission expansion planning is then presented. A novel approach is proposed to select transmission expansion plans that are flexible given the uncertainties of generation expansion, system load and other market variables. Comprehensive case studies will be conducted to investigate the performance of our approach. In addition, the proposed method will be employed to study the impacts of distributed generation, especially on transmission expansion planning.
    Date: 2010
  5. By: Andres Carvajal; Rahul Deb; James Fenske; John K.-H. Quah
    Abstract: We consider an observer who makes a finite number of observations of an industry producing a homogeneous good, where each observation consists of the market price and firm specific production quantities. We develop a revealed preference test (in the form of a linear program) for the hypothesis that the firms are playing a Cournot game, assuming that they have convex cost functions that do not change and the observations are generated by the demand function varying across observations. Extending this basic result, we develop tests for the case where (in addition to changes to demand) firms’ cost functions may vary across observations. We also develop tests of Cournot interaction in cases where there are multiple products and where cost functions may be non-convex. Applying these results to the crude oil market, we show that Cournot behavior is strongly rejected.
    Keywords: Nonparametric test, Observable restrictions, Linear programming, Multi-product Cournot oligopoly, Collusion, Crude oil market
    JEL: C14 C61 C72 D21 D43
    Date: 2010
  6. By: René Aid (FiME - Laboratoire de Finance des Marchés d'Energies - Université Paris Dauphine - Paris IX, EDF R&D - EDF); Luciano Campi (FiME - Laboratoire de Finance des Marchés d'Energies - Université Paris Dauphine - Paris IX, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris Dauphine - Paris IX); Nicolas Langrené (FiME - Laboratoire de Finance des Marchés d'Energies - Université Paris Dauphine - Paris IX, PMA - Laboratoire de Probabilités et Modèles Aléatoires - CNRS : UMR7599 - Université Pierre et Marie Curie - Paris VI - Université Paris-Diderot - Paris VII)
    Abstract: We develop a structural risk-neutral model for energy market modifying along several directions the approach introduced in Aid et al. (2009). In particular a scarcity function is introduced to allow important deviations of the spot price from the marginal fuel price, producing price spikes. We focus on pricing and hedging electricity derivatives. The hedging instruments are forward contracts on fuels and electricity. The presence of production capacities and electricity demand makes such a market incomplete. We follow a local risk minimization approach to price and hedge energy derivatives. Despite the richness of information included in the spot model, we obtain closed-form formulae for futures prices and semi-explicit formulae for spread options and European options on electricity forward contracts. An analysis of the electricity price risk premium is provided showing the contribution of demand and capacity to the futures prices. We show that when far from delivery, electricity futures behave like a basket of futures on fuels.
    Keywords: Electricity spot and forward prices ; Fuels ; Capacity ; Electricity demand ; Scarcity function ; Local risk minimization ; Minimal martingale measure ; Power derivatives ; Spread options ; Extended incomplete Goodwin-Staton integral
    Date: 2010–10–12
  7. By: Broberg, Thomas (National Institute of Economic Research); Marklund, Per-Olov (Centre for Regional Science); Samakovlis, Eva (National Institute of Economic Research); Hammar, Henrik (Centre for Regional Science)
    Abstract: <p>Swedish environmental policy often emphasizes the importance of “taking the lead”. For example, Sweden has chosen a more ambitious climate policy target than required by the European Union (EU), namely a reduction of Swedish emissions of greenhouse gases by 40 percent by 2020 compared to the 1990 level. Government Bill 2008/09:162 emphasizes Sweden’s role as a good example in making an effort to re-duce climate change by showing that an offensive climate policy can indeed be com-bined with high economic growth. This view of environmental policy is, however, the subject of constant debate. <p>A common argument is that environmental requirements induce private costs by forc-ing firms to make investments that crowd out other more productive investments, which hampers productivity growth and therefore competitiveness. Professor Mi-chael E. Porter of Harvard questioned this argument, and his view has become known as the Porter hypothesis (Porter, 1991). This hypothesis implies that levying stringent environmental regulations on firms enhances their productivity compared to competi-tors not subject to, or subject to lax, environmental regulations. A central message is that the connection between environmental regulation and competitiveness should be scrutinized within a dynamic framework (Porter and van der Linde, 1995). <p>The main objective of this paper is to test the Porter hypothesis by assessing static and dynamic effects of environmental policy on productivity within the Swedish manufac-turing industry, specifically on the component total efficiency. The paper adds mainly to previous literature by using unique data on environmental protection investments, divided into investments in pollution control and pollution prevention, as a proxy for envi-ronmental regulation. The distinction between these types of investments is crucial to the understanding of the outcomes anticipated by the Porter hypothesis. <p>The international literature studying the Porter hypothesis is extensive. A comprehen-sive review reveals that neither theoretical nor empirical literature gives general sup-port for the hypothesis (Brännlund and Lundgren, 2009). We argue that, to some ex-tent, the Porter hypothesis has not yet been given a fair chance in the empirical litera-ture, as dynamic effects are often neglected in empirical tests. Two exceptions are Managi et al. (2005) and Lanoie et al. (2008), who first estimate Total Factor Produc-tivity (TFP) scores that then are used as dependent variables in regression analyses where explanatory lagged environmental stringency measures model dynamic effects. A disadvantage with these studies is, however, that environmental stringency is ap-proximated by the cost of complying with environmental command- and-control regulations, such regulations are not emphasized by the Porter hypothesis. <p>The empirical test of the Porter hypothesis is performed as a two-step procedure, where total efficiency scores are first estimated by adopting a stochastic production frontier function approach. In the second step, the efficiency scores are used as the dependent variable in random effects regression analyses, where the independent vari-ables are, e.g., investment in pollution control and pollution prevention. In order to assess whether these investments have dynamic effects on total efficiency these vari-ables are also lagged. If positive effects are established we cannot reject the claim that environmental leadership will benefit the Swedish industry. The estimations are based on firm level data from five Swedish industries for the period 1999-2004, and carried out for the pooled data as well as for the industries separately.
    Date: 2010–06
  8. By: Clara Inés Pardo Martínez
    Abstract: Improved Energy-Efficiency (EE) helps not only in enhancing competitiveness through cost reduction but also in minimising environmental degradation. A good understanding of factors influencing EE, however, is essential for EE improvement. This chapter attempts to determine these factors in the German and Colombian manufacturing industries. Based on the primary data from German and Colombian industrial associations and representative industries, the factors that could influence energy efficiency performance are studied. These factors are classified a priori under three categories: Economic Factors (EF), Production Technology Factors (TF), and Political Factors (PF). Based on the primary data, the results in both countries should indicate that energy management for the industrial sector is important within business strategy and that the quantification and assessment of energy consumption and energy efficiency are input indicators to improve and optimise processes within a sustainability development. Moreover, the results show that in German industry, an adequate combination of economical, technical and political factors is important to achieve better energy efficiency performance, whereas in the Colombian case, improvements in energy efficiency are closely related with economic and production technology factors. The results suggest that policy strategies in the industrial sector have to comprise legal and fiscal instruments and voluntary agreements to generate supporting framework conditions to improve energy efficiency. Moreover, it is important to strengthen international cooperation for scaling up of sustainable energy solutions in developing countries.
    Date: 2010–10–09
  9. By: Webster, Douglas; Bertaud, Alain; Jianming,Cai; Zhenshan, Yang
    Abstract: Land efficiency in urban China is examined, using Tianjin as a case study, from the perspective of agricultural land conservation; reduction in energy use, conventional pollution, and greenhouse gas emissions; and human time savings. Issues addressed include increased scatter on the periphery, over-consumption of industrial land, over fiscal dependence on land sales, and loss of valuable agricultural and environmental services land. Policy implications discussed include the need for greater variation in urban densities (leveraging already high densities in urban China – one-third the global median), less broad-brush agricultural land conservation policies, higher floor area ratios near rapid transit stations, etc.
    Keywords: China, land conversion, land efficiency, land use policy, urban density
    Date: 2010
  10. By: Clara Inés Pardo Martínez
    Abstract: This paper investigates the effects of investments on energy efficiency performance using data from Colombian manufacturing industries. These industries were analysed as a whole and as energy intensive sectors and non-energy intensive sectors between 1998 and 2005. Using a simple factor demand model, we estimate the structural parameters of the model using both time-series and cross-sectional dimensions of the data, and we include the effect that investments have on energy efficiency in Colombian manufacturing industries. The results showed that in Colombian manufacturing industries overall, as well as in non-energy intensive sectors, the main variables that determine energy efficiency performance are energy prices, machinery and equipment investments and foreign investments. Whereas electricity prices show lower significance levels, investments in research and development (R&D) are not statistically significant. In contrast, for energy intensive sectors, only energy prices and foreign investments are statistically significant. Therefore, these results demonstrate the close relationship between energy prices and investments with respect to energy efficiency improvements in Colombian manufacturing industries. These findings have important implications for policy makers aiming to encourage governments to adopt strategies that combine energy prices and technological change, as well as those policy makers wishing to strengthen foreign investment in order to improve technology development, productivity and energy efficiency in manufacturing industries.
    Date: 2010–10–09
  11. By: Eichholtz, Piet; Kok, Nils; Quigley, John M.
    Abstract: Research on climate change suggests that small improvements in the "sustainability" of buildings can have large effects on greenhouse gas emissions and on energy efficiency in the economy. This paper analyzes the economics of "green" building. First, we analyze a panel of office buildings "certified" by independent rating agencies, finding that large recent increases in the supply of green buildings and the unprecedented volatility in property markets have not significantly affected the relative returns to green buildings. Second, we analyze a large cross section of office buildings, demonstrating that economic premiums in rent and asset values are substantial. Third, we relate the economic premiums for green buildings to their sustainability, confirming that the attributes rated for both thermal efficiency and sustainability contribute to premiums in rents and asset values. Even among green buildings, increased energy efficiency is fully capitalized into rents and asset values.
    Date: 2010–09–15
  12. By: Clara Inés Pardo Martínez
    Abstract: This paper presents an analysis of energy efficiency performance in the automotive industry from evidence of Germany and Colombia in order to show important features in energy use between countries with the different income between 1998 and 2007. We found that the automotive industry improved its energy efficiency in each country. In order to understand the driving forces behind these trends, the concept of the production function is used to obtain the elasticities of substitutions and the relationships between several variables and energy efficiency performance in German and Colombian motor vehicle industries. In both countries, we found that the variables of energy prices and sizes of companies each have a positive influence on the efficiency of the gross production/energy ratio. These results show that, in the motor vehicle industry, energy efficiency performance depends on different factors. Hence, variables such as energy prices, energy taxes, economies of scale and technology changes have played a crucial role in the improvements in productivity and rational energy use.
    Date: 2010–10–09
  13. By: Millstein, Dev E.; Harley, Robert A
    Abstract: Diesel engines are now the largest source of nitrogen oxides (NOx) and fine particulate black carbon (soot) emissions in California. The California Air Resources Board recently adopted a rule requiring that by 2014 all in-use heavy trucks and buses meet current (2007) exhaust particulate matter (PM) emission standards. Also by 2023 all in-use heavy-duty vehicles will have to meet current NOx emission standards, with significant progress in achieving the requirements for NOx control expected by 2014. This will require retrofit or replacement of older in-use engines. Diesel particle filters (DPF) reduce PM emissions but may increase the NO2/NOx emission ratio to ∼35%, compared to ∼5% typical of diesel engines without particle filters. Additionally, DPF with high oxidative capacity reduce CO and hydrocarbon emissions. We evaluate the effects of retrofitting trucks with DPF on air quality in southern California, using an Eulerian photochemical air quality model. Compared to a 2014 reference scenario without the retrofit program, black carbon concentrations decreased by 12 ( 2% and 14 ( 2% during summer and fall, respectively, with corresponding increases in ambient ozone concentrations of 3 ( 2% and 7 ( 3%. NO2 concentrations decreased by 2-4% overall despite the increase in primary NO2 emissions because total NOx emissions were reduced as part of the program to retrofit NOx control systems on in-use engines. However, in some cases NO2 concentrations may increase at locations with high diesel truck traffic.
    Date: 2010–08–01
  14. By: Boriboonsomsin, Kanok; Vu, Alexander; Barth, Matthew
    Abstract: Among several strategies to reduce greenhouse gas emissions from motor vehicles, “eco-driving†is one that had not received much attention in the United States (U.S.) until recently. The core of eco-driving programs is to provide drivers with a variety of advice and feedback to minimize fuel consumption while driving. The advice and feedback can be provided through various means including website or brochure, class or training, and in-vehicle driving aids. This study evaluated how an on-board eco-driving device that provides instantaneous fuel economy feedback affects driving behaviors, and consequently fuel economy, of gasoline-engine vehicle drivers in the U.S. under real-world driving conditions. The results from 20 samples of drivers in Southern California show that on average the fuel economy on city streets improves by 6% while the fuel economy on highways improves by 1%. According to responses to the questionnaire at the end of the study period, this group of drivers is willing to adopt eco-driving practices in the near future (mean score of 7.4 out of 10). In fact, 40% of them have already practiced ecodriving, and that penetration rate could go up to 95% if the gasoline price increases to $4.4 per gallon.
    Date: 2010–08–01
  15. By: Recker, W. W.; Kang, J. E.
    Abstract: With the success of Hybrid Electric Vehicles (HEVs) in the automobile market, Plug-In Hybrid Electric Vehicles (PHEVs) are emerging as the next evolution of this attractive alternative. PHEV market penetration is expected to lead to lower gasoline consumption and less emission. The main objective of this research is to assess PHEVs’ energy profile impacts based on simulation of vehicles used in activity and travel patterns drawn from the 2000-2001 California Statewide Household Travel Survey. Simulations replicating reported continuous one day data are used to generate realistic energy impact assessment of PHEV market penetration. A secondary objective is to estimate the decreased gasoline consumption and increased electricity demand in California. This will involve testing various scenarios involving battery charging to develop policies and strategies to mitigate the recharging demands placed on the grid during periods of peak consumption.
    Date: 2010–08–01
  16. By: Anderson, Soren; Parry, Ian (Resources for the Future); Sallee, James M.; Fischer, Carolyn (Resources for the Future)
    Abstract: This paper discusses fuel economy regulations in the United States and other countries. We first describe how these programs affect fuel use and other dimensions of the vehicle fleet. We then review different methodologies for assessing the costs of fuel economy regulations and discuss the policy implications of the results. We also compare the welfare effects of fuel economy standards with those of fuel taxes and assess whether these two policies complement each other. Finally, we review arguments in favor of a “feebate” system, which imposes fees on inefficient vehicles and provides rebates for efficient vehicles.
    Keywords: fuel economy regulations, costs, welfare effects, climate change, feebates
    JEL: Q48 Q58 H21 R48
    Date: 2010–10–13
  17. By: Gaker, David; Zheng, Yanding; Walker, Joan
    Abstract: A major aspect of transportation planning is understanding behavior: how to predict it and how to influence it over the long term. Behavioral models in transportation are predominantly rooted in the classic microeconomic paradigm of rationality. However, there is a long history in behavioral economics of raising serious questions about rationality. Behavioral economics has made inroads in transportation in the areas of survey design, prospect theory, and attitudinal variables. Further infusion into transportation could lead to significant benefits in terms of increased ability to both predict and influence behavior. The aim of this research is to investigate the transferability of findings in behavioral economics to transportation, with a focus on lessons regarding personalized information and social influences. We designed and conducted three computer experiments using UC Berkeley students: one on personalized-information and route choice, one on social influences and auto ownership, and one combining information and social influences and pedestrian safety. Our findings suggest high transferability of lessons from behavioral economics and great potential for influencing transport behavior. We found that person- and trip-specific information regarding greenhouse gas emissions has significant potential for increasing sustainable behavior, and we are able to quantify this Value of GREEN at around $0.24/pound of greenhouse gas avoided. Congruent with lessons from behavioral economics, we found that information on peer compliance of pedestrian laws had a stronger influence on pedestrian safety behavior than information on the law, citation rates, or accident statistics. We also found that social influences positively impact the decision to buy a hybrid car over a conventional car or forgo a car altogether.
    Date: 2010–08–01
  18. By: TOTTI KÖNNÖLÄ (Instituto de Empresa); JAVIER CARRILLO (Instituto de Empresa)
    Abstract: This paper addresses system transition as a valuable perspective and develops and applies a framework for analysing energy system research and governance. This paper is based on an extensive literature review, expert consultations and empirically based-theory building. The developed framework is applied in the analysis of a selected case study of the European hydrogen energy system governance. The main result of the paper is that different governance and funding models with their practices and experiences can play an important role in the transition, but even more important may be the combined use of different modes that contribute to the development of the energy system transition
    Date: 2010–07
  19. By: Bandyopadhyay, Kaushik; Thukral, K L
    Abstract: The shift of the Indian economy to a higher trajectory of growth over the last two decades has been primarily associated with urbanisation and rapid motorisation both as a cause and as an effect. Motorised passenger transport is now being considered as a fulcrum for inclusive growth in India. Thus putting a cap on its growth may be difficult. Given the key challenge to decouple the economic and social development from the inherent growth in energy consumption and CO2 emissions, the paper takes cue from the Bellagio Declaration 2009 and essentially argues for an integrated and multi-pronged Avoid-Shift-Improve approach to steer passenger road transport growth in India towards a sustainable low carbon path.
    Keywords: Passenger; road transport; challenges; energy consumption; CO2 emission
    JEL: R0 R4
    Date: 2010
  20. By: J. Isaac Miller (Department of Economics, University of Missouri-Columbia); Shawn Ni (Department of Economics, University of Missouri-Columbia)
    Abstract: We examine how future real GDP growth relates to changes in the forecasted long-term average of discounted real oil prices and to changes in unanticipated fluctuations of real oil prices around the forecasts. Forecasts are conducted using a state-space oil market model, in which global real economic activity and real oil prices share a common stochastic trend. Changes in unanticipated fluctuations and changes in the forecasted long-term average of discounted real oil prices sum to real oil price changes. We find that these two components have distinctly different relationships with future real GDP growth. Positive and negative changes in the unanticipated fluctuations of real oil prices correlate with asymmetric responses of future real GDP growth. In comparison, changes in the forecasted long-term average are smaller in magnitude but are more influential on real GDP. Persistent upward revisions of forecasts in the 2000s had a substantial negative impact on real GDP growth, according to our estimates..
    Keywords: oil price and the macroeconomy, oil market fundamental, oil price forecasts, Kalman filter
    JEL: E31 E32 Q43
    Date: 2010–10–11
  21. By: Lisa Leinert (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: The Hotelling rule argues that the price for a nonrenewable resource adjusts to the shadow value of the resource, reflecting the remaining availability of the resource. We empirically test the Hotelling rule on the effect of unanticipated oil field discoveries. We do not find evidence for a significant adjustment of the price of crude oil to news about greater resource availability and therefore conclude that the price for crude oil does not follow the theoretically optimal price path.
    Keywords: Nonrenewable Resource, Oil Price, Exhaustible Resources, Information Acquisition
    JEL: Q31 Q41 G14
    Date: 2010–10
  22. By: Hlavac, Marek
    Abstract: In “Oil Wealth and Regime Survival in the Developing World, 1960-1999“ Benjamin Smith examines the effects of oil wealth, as well as of sudden changes in oil prices, on regime failure, political protest and civil war. He finds that oil wealth is robustly associated with more durable regimes, and significantly related to lower levels of anti-state protest and civil war. In this comment, I discuss Smith's empirical approach - especially his treatment of possible reverse causality between conflict and economic performance, his use of the Polity democracy index, and his choice of the resource dependence variable - and provide suggestions for improvement.
    Keywords: oil wealth; regime survival; political economy; democracy; natural resource curse
    JEL: D74 O13 Q33
    Date: 2010–09–10
  23. By: Matthias Lücke
    Abstract: Do the sovereign wealth funds of Kazakhstan and Azerbaijan promote the sustainable use of government oil revenues? We review the operational rules and performance of the two funds and compare them to Norway’s Government Pension Fund Global. The key challenges are to stabilize government expenditures despite volatile resource prices, build up a capital stock to draw on after the resource is depleted, and to save and spend resource revenues transparently. We conclude that the institutional framework of a resource fund may indeed enhance transparency and public scrutiny, limit discretionary control, and sustain public support for long-term savings of resource revenues
    Keywords: resource-based development, sovereign wealth fund
    JEL: O13 Q32 L71
    Date: 2010–10
  24. By: Pan, Suwen; Hudson, Darren; Ethridge, Don; Mutuc, Maria
    Abstract: This analysis uses a residual demand elasticity model to measure market power of the international cotton market. The results indicate that China dominates the cotton price with a significant market power in China compared to all the cotton exporters. Those test results combined with a partial equilibrium model of the international cotton market are used to study the welfare consequences of U.S. cotton subsidy policies for major cotton exporters under alternative assumptions about global market structure. The results indicate that the effects of U.S. subsidies on world cotton price are much smaller under imperfectly competitive international markets than those under completely competitive market scenarios.
    Keywords: International Relations/Trade,
    Date: 2010–01
  25. By: Somlanaré Romuald KINDA (Centre d'Etudes et de Recherches sur le Développement International)
    Abstract: This paper investigates the impact of education on the growth of carbon dioxide emissions per capita over the period 1970-2004 in 85 countries. Using panel data and applying GMM-System estimations, our results suggest that education has no impact on the growth of air pollution for the whole sample. Nonetheless, this effect is sensitive to the sampling of countries according to their level of development. Indeed, while the effect remains insignificant in the developing countries sub-sample, education does matter for air pollution growth in the developed countries. More interestingly, when controlling for the quality of political institutions, the positive effect of education on air pollution growth is mitigated in the developed countries while being insignificant in the developing countries.
    Keywords: Carbon dioxide per Capita; Education; Democratic institutions (043)
    JEL: I2 Q53
    Date: 2010
  26. By: Theodore Palivos; Dimitrios Varvarigos
    Abstract: In a two-period overlapping generations model with production, we consider the damaging impact of environmental degradation on health and, consequently, life expectancy. The government’s involvement on policies of environmental preservation proves crucial for both the economy’s short-term dynamics and its long-term prospects. Particularly, an active policy of pollution abatement emerges as an important engine of long-run economic growth. Furthermore, by eliminating the occurrence of limit cycles, pollution abatement is also a powerful source of stabilisation.
    Keywords: Growth; Cycles; Environmental quality; Pollution abatement
    JEL: O41 Q56
    Date: 2010–10
  27. By: Omar Chisari; Sebastian Galiani
    Abstract: The objective of this research agenda is to outline the issues that need to be investigated in order to produce an informed assessment of what strategies and policies Latin America and its international organizations should pursue with respect to climate change. This report makes the three following potential contributions: i) identifying actions that could be valuable but have not been highlighted; ii) advising on actions that could be ineffective and costly, given limited resources; and iii) recommending an evaluation of what elements require further analysis before objectives are translated into action. After introducing the issues involved, the report presents a simplified model to help explain the interaction of climate change with the economy. The discussion then turns to several of the most important relevant issues in terms of the model. Finally, individual items are discussed in order to construct an agenda.
    Keywords: Climate change, Mitigation, Adaptation, Latin America and the Caribbean
    JEL: Q54
    Date: 2010–10
  28. By: B. DEFLOOR
    Abstract: This paper aims to calculate marginal costs of funds (MCF) in the presence of an externality with demerit properties by using a utility scaling approach. It is an extension of a model put forward by Schroyen (2010). In the empirical section the MCF of indirect taxes in Belgium are calculated taking into account the existence of carbon dioxide emissions as demerit externality. The results reveal that scaling has a significant impact on switches in the ranking of the MCF.
    JEL: D12 H21 H23
    Date: 2010–06
  29. By: Wilfried Rickels; Dennis Görlich; Gerrit Oberst
    Abstract: In 2005, the European Emission Trading Scheme (EU-ETS) established a new commodity: the right to emit a ton of CO2 (EUA). Since its launch, the corresponding price has shown rather turbulent dynamics, including nervous reactions to policy announcements and a price collapse after a visible over-allocation in Phase I. As a consequence, the question whether fundamental factors (fossil fuel prices, economic activity, weather) affect the EUA price remained partially unresolved. Today, being halfway through Phase II (2008–2012) and relying on a more mature market, we use more reliable data to investigate the extent to which allowance price dynamics can be explained by market fundamentals. We empirically test for the influence of fuel prices, economic activity, and weather variations. Fuel prices allow to test for fuel switching from coal to gas, the most important short-term abatement option for most installations in the EU-ETS. The empirical results show a significant influence of gas, coal, and oil prices, of economic activity and of some weather variations. When including the relative price of coal to gas on a forward level, we found evidence of a switching effect. Yet, on a spot level the demand effect seems to dominate. However, when including the absolute coal price the coefficient is positive, contradicting theory with respect to both the switching and the demand effect. The significant weather variations suggest that their influence on EUA prices is less driven by their effect on energy demand but more by their effect on the provision of carbon-free renewable energy. Overall, our results show that the price dynamics are much better explained by a model based on fundamentals than by a purely autoregressive model. However, the results also show that fundamentals alone cannot fully explain price dynamics and that forecasting is improved by the inclusion of time series characteristics
    Keywords: Carbon emission trading, EU ETS, Carbon price influence factors, Fuel switching
    JEL: C22 G14 Q54
    Date: 2010–09
  30. By: Shardul Agrawala; Francesco Bosello; Carlo Carraro; Kelly de Bruin; Enrica De Cian; Rob Dellink; Elisa Lanzi
    Abstract: Financing for adaptation is a core element in the ongoing international negotiations on climate change. This has motivated a number of recent global estimates of adaptation costs. While important from an agenda setting perspective, many of these estimates nevertheless have a number of limitations. They are typically static (i.e. estimated for one specific year), do not differentiate between investments in various types of adaptation or quantify the resulting benefits, and are delinked from policies and investments in greenhouse gas mitigation.<BR>Le financement de l’adaptation est un élément essentiel dans les négociations internationales qui se poursuivent concernant le changement climatique. C’est ce qui explique pourquoi un certain nombre d’estimations des coûts de l’adaptation au niveau mondial ont été établies récemment. En dépit de leur importance pour la définition de programmes d’action, beaucoup d’entre elles présentent toutefois plusieurs carences. Elles sont généralement statiques (c’est-à-dire calculées pour une année précise), elles ne font pas de différence entre les investissements en fonction du type de solution d’adaptation ou ne chiffrent pas les avantages qui en découlent, comme elles ne se rattachent pas non plus à des politiques ou à des investissements visant l’atténuation des émissions de gaz à effet de serre.
    Keywords: climate change, integrated assessment modelling, adaptation, Adaptive Capacity, changement climatique, adaptation, Capacité d’adaptation, Modélisation de l’évaluation intégrée
    JEL: Q50 Q54 Q59
    Date: 2010–08–10
  31. By: Jiang, Yong; Koo, Won W.
    Keywords: Environmental Economics and Policy, International Relations/Trade,
    Date: 2010–09
  32. By: LanFen Chu (Institute of Economics, Academia Sinica); Michael McAleer (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University); Chi-Chung Chen (Department of Applied Economics, National Chung Hsing University)
    Abstract: The El Niños Southern Oscillations (ENSO) is a periodical phenomenon of climatic interannual variability, which could be measured through either the Southern Oscillation Index (SOI) or the Sea Surface Temperature (SST) Index. The main purpose of this paper is to analyze these two indexes in order to capture the volatility inherent in ENSO. The empirical results show that both the ARMA(1,1)-GARCH(1,1) and ARMA(3,2)-GJR(1,1) models are suitable for modelling ENSO volatility accurately. The empirical results show that 1998 is a turning point, which indicates that the ENSO strength has increased since 1998. Moreover, the increasing ENSO strength is due to the increase in greenhouse gas emissions. The ENSO strengths for SST are predicted for the year 2030 to increase from 29.62% to 81.5% if global CO2 emissions increase by 40% to 110%, respectively. This indicates that we will be faced with an even stronger El Nino or La Nina in the future if global greenhouse gas emissions continue to increase unabated.
    Keywords: ENSO, SOI, SOT, Greenhouse Gas Emissions, Volatility, GARCH, GJR, EGARCH.
    Date: 2010–10
  33. By: Rob Dellink; Gregory Briner; Christa Clapp
    Abstract: Tackling the problem of global climate change requires a high level of international cooperation. Many countries have pledged targets or actions to reduce greenhouse gas emissions in the Appendices to the Copenhagen Accord. This analysis examines the costs and effectiveness of these pledges, using the OECD’s ENV-Linkages computable general equilibrium model. Several scenarios are analysed to evaluate the impacts of the range of pledges, the use of offsets, and linking emission trading systems. The results show that while the emission targets currently pledged by a wide range of countries under the Accord are an important and welcome start to a global solution, the pledges are not ambitious enough to put us on a pathway to limit average global temperature increase to below 2°C. This paper also analyses the economic impacts of the pledges, and estimates the costs of action at around 0.3% of GDP for both Annex I and non- Annex I countries and 0.5-0.6% of global real income (not taking into consideration the economic benefits from avoided damages from climate change). Furthermore, the analysis reveals that the potential for increased fiscal revenue or proceeds are substantial and for the Annex I group of countries can exceed 1% of GDP (or 400 billion USD) if mitigation actions are achieved through market instruments such as carbon taxes or cap-and-trade emission schemes with auctioned emission allowances.<BR>Pour parer au changement climatique planétaire, une coopération internationale poussée s’impose. Beaucoup de pays se sont engagés à réaliser des objectifs ou à mettre en oeuvre des actions de réduction des émissions de gaz à effet de serre dans les appendices à l’Accord de Copenhague. La présente analyse vise à examiner les coûts et l’efficacité de ces engagements au moyen du modèle d’équilibre général calculable ENV-Linkages de l’OCDE. Elle porte sur plusieurs scénarios, de manière à évaluer les incidences qu’entraînent les divers engagements pris, l’utilisation de formules de compensation, ainsi que les liens entre les systèmes d’échange de droits d’émission. Les résultats montrent que si les objectifs d’émission actuellement annoncés par un large éventail de pays dans le cadre de l’Accord sont un premier pas important et fort apprécié dans le sens d’une solution mondiale, les engagements ne sont pas suffisamment ambitieux pour nous placer sur une trajectoire permettant de maintenir l’élévation moyenne de la température du globe au-dessous de 2°C. Ce document concerne aussi les répercussions économiques des engagements, les coûts de l’action étant estimés à 0.3 % environ du PIB, que les pays soient visés ou non à l’Annexe I, et à 0.5-0.6 % du revenu réel mondial (compte non tenu des avantages économiques liés aux atteintes évitées du changement climatique). Par ailleurs, l’analyse fait ressortir des perspectives non négligeables d’augmentation des recettes budgétaires qui, pour les pays de l’Annexe I, pourraient représenter plus de 1 % du PIB (400 milliards USD) si les mesures d’atténuation passent par des instruments de type marché tels que les taxes carbone ou les systèmes de plafonnement et d’échange dans lesquels des quotas d’émission sont attribués par voie d’enchères.
    Keywords: climate change, computable general equilibrium model, Copenhagen accord, Greenhouse gas mitigation, modèle d'équilibre général calculable, changement climatique, Accord de Copenhague, atténuation des émissions de gaz à effet de serre
    JEL: F53 H23 H87 Q54 Q58
    Date: 2010–08–04
  34. By: Schenker, Oliver; Bucher, Raphael
    Abstract: Not only after the failure of the Copenhagen climate conference 2009, border carbon adjustment (BCA) has received growing attention in the climate policy debate as a measure to combat "carbon leakage" and force non-abating countries to tighter climate policies. In this paper, we study the strategic interactions between international trade and climate policy with a focus on the effectiveness of border measures. First, we analyze the main principles of unilateral climate policy with international trade in a small analytical model. Second, we examine welfare effects of WTO compatible carbon import tariffs in a stylized numerical integrated assessment model with explicit trade in commodities and analyze if BCA is a credible threat to force non-abating countries to implement stricter climate policies. We show that the terms of trade effects can, depending on trade patterns, ease or boost the prisoners dilemma of mitigating greenhouse gases. We further demonstrate that WTO conform BCA increases the effectiveness of climate policy and forces trading partners to reduce emissions. But as the results of the numerical model illustrate, welfare effects are depended on trade flows and are negative for realistic parameter values.
    Keywords: International Trade; Environmental Policy; Border Tax Adjustment
    JEL: F18 D58 Q54
    Date: 2010–07–22
  35. By: Wang, Rui
    Abstract: Little quantitative research has been devoted to voluntary climate actions at the local level in comparison to those at federal and state levels. It is unclear why some cities act as leaders in the fight against climate change, some act as followers, while others remain laggards. This study empirically tests some hypotheses about local political will to mitigate climate change. Applying a survival analysis to California cities’ adoption of the U.S. Conference of Mayors Climate Protection Agreement, this study examines the association between cities’ adoption of the Mayors Agreement and a broad range of characteristics, such as: local demographics, jurisdiction size, government structure, political preference and environmentalism, local air quality and congestion level, and behavior of neighboring jurisdictions. Results support the importance of income level, political preference and environmentalism of the local communities, as well as a city’s administrative capacity and autonomy. Congestion relief seems to be an important cobenefit motivating cities to reduce greenhouse gas emissions.
    Date: 2010–08–01
  36. By: Morley, Bruce
    Abstract: The aim of this study is to determine whether environmental policies affect economic growth. Using a standard model of economic growth and a panel of European data, there is evidence that environmental taxes have had a negative effect on economic growth over the last ten years, indicating the ‘double dividend’ does not hold. This effect is particularly evident when other distortionary taxes are included in the model. A second contribution of this study is to incorporate the complimentary measure of renewable energy provision into the model. Again the results indicate a negative relationship between renewable energy and economic growth, offering support for the curse of natural resources.
    Keywords: Environmental policy; economic growth; renewable energy; natural resources
    Date: 2010–10
  37. By: David Ockwell; Jim Watson; Alexandra Mallett; Ruediger Haum; Gordon MacKerron; Anne-Marie Verbeken
    Abstract: The deployment of eco-innovations in developing countries is a key driver of their contribution to efficiently addressing global environmental challenges. It is also a key driver of markets for eco-innovation and sustainable economic development. This report explores the barriers developing countries face in accessing markets for eco-innovation. It outlines the key considerations policy needs to address to overcome these barriers and discusses the extent to which selected existing policy mechanisms and organisation have achieved this. The key finding of the report is that the majority of existing policy mechanisms fails to recognise the critical importance of developing indigenous eco-innovation capabilities amongst developing country firms. Indigenous eco-innovation capabilities are essential to facilitating both the diffusion of existing ecoinnovations within developing countries and sustainable economic development based on the adoption, adaption and development of environmentally sound technologies that fit with the bespoke conditions faced by developing countries. Building up eco-innovation capabilities in developing countries requires a shift away from the current focus on large project based approaches which emphasise the transfer of the hardware aspects of clean technologies, towards approaches that emphasise flows of codified knowledge (know-how and know-why) and tacit knowledge. Policy also needs to be improved to better respond to the context-specific technological and cultural requirements which vary inter- and intra-nationally.<BR>La diffusion des éco-innovations dans les pays en développement est un facteur clé de la contribution de ces pays à une lutte effective contre les grands enjeux environnementaux. C’est aussi un déterminant essentiel des marchés pour l’éco-innovation et le développement durable. Le présent rapport identifie les barrières auxquels les pays en développement sont confrontés pour accéder aux éco-innovations. Il souligne les enjeux clés que les politiques publiques doivent prendre en compte pour contourner ces barrières. Il évalue la réussite dans ce domaine de certains des mécanismes et organisations existants. La principale conclusion de ce rapport est que la majorité des mécanismes existants n’accordent pas suffisamment d’importance au développement des capacités locales à innover dans le domaine de l’environnement. Ces capacités, dans les pays concernés, contribuent de manière décisive à la fois à la diffusion des éco-innovations dans les pays en développement et à un développement durable fondé sur l’adoption, l’adaptation et le développement de technologies favorables à l’environnement qui soient adaptées aux contextes particuliers des pays en développement. Renforcer la capacité à innover dans les pays en développement suppose de renoncer partiellement à la priorité accordée actuellement au soutien aux grands projets ; cette priorité met l’accent sur le transfert des aspects purement technologiques. Le rapport plaide pour des approches qui mettent l’accent sur les flux de connaissance codifiés (pourquoi, comment) et tacites. Il convient également d’améliorer les politiques publiques de sorte qu’elles prennent mieux en compte les besoins technologiques et culturels propres aux contextes et qui varient au sein d’un même pays et entre les pays.
    Keywords: technology transfer, green technologies, eco-innovation, absorptive capabilities, innovation capabilities, multilateral environmental agreements
    JEL: O19 O31 O33 O34 O38 Q54 Q55 Q56 Q58
    Date: 2010–05–18

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