nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒10‒30
twenty-six papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. On The Portents of Peak Oil (And Other Indicators of Resource Scarcity) By James L. Smith
  2. Resource Abundance and Resource Dependence in China By Ji, K.; Magnus, J.R.; Wang, W.
  3. Nigeria: A Prime Example of the Resource Curse? Revisiting the Oil-Violence Link in the Niger Delta By Daniel Flemes; Thorsten Wojczewski
  4. Fuel for Conflict or Balm for Peace? Assessing the Effects of Hydrocarbons on Peace Efforts in Algeria By Miriam Shabafrouz
  5. MONETARY POLICY AND OIL PRICES By Hošek, Jan; Komárek, Luboš; Motl, Martin
  6. Can carpooling clean the air? The economics of HOV lanes, hybrid cars and the Clean Air Act. By Shewmake, Sharon
  7. Analysing Bioenergy and Land Use Competition in a Coupled Modelling System: The Role of Bioenergy in Renewable Energy Policy in Germany By Ruth Delzeit; Horst Gömann; Karin Holm-Müller; Peter Kreins; Bettina Kretschmer; Julia Münch; Sonja Peterson
  8. Subsidizing Renewable Energy under Capital Mobility By Marco Runkel; Thomas Eichner
  9. A panel estimation of the relationship between income, electric power consumption and CO2 emissions By Bellla, Gianni; Massidda, Carla; Etzo, Ivan
  10. Crossed Glances on the Perception of Consumer Competencies within the Energy Sector: The Case of a French Energy Supplier By Wided Batat; Audrey Bonnemaizon
  11. The Porter Hypothesis and Hyperbolic Discounting By Prabal Roy Chowdhury
  12. Incorporating jurisdiction issues into regional carbon accounts under production and consumption accounting principles By Christa D. Jensen; Max Munday; Stuart Mcintyre; Karen Turner
  13. Carbon Prices and Automobile Greenhouse Gas Emissions: The Extensive and Intensive Margins By Christopher R. Knittel; Ryan Sandler
  14. Statistical evidence of tax fraud on the carbon allowances market. By Marius-Cristian Frunza; Dominique Guegan; Antonin Lassoudière
  15. Towards an Emissions Trading Scheme for Air Pollutants in India By Esther Duflo; Michael Greenstone; Rohini Pande; Nicholas Ryan
  16. Missing trader fraud on the emissions market. By Marius-Cristian Frunza; Dominique Guegan; Fabrice Thiebaut
  17. Relating R&D and Investment Policies to CCS Market Diffusion Through Two-Factor Learning By Lohwasser, Richard; Madlener, Reinhard
  18. The Health Effects of Climate Change: A Survey of Recent Quantitative Research By Margherita Grasso; Matteo Manera; Aline Chiabai; Anil Markandya
  19. Adapting to Climate Change An Integrated Biophysical and Economic Assessment for Mozambique By Arndt, Channing; Strzepeck, Kenneth; Tarp, Finn; Thurlow, James; Fant, Charles; Wright, Len
  20. Waterfowl Harvest Benefits in Northern Aboriginal Communities and Potential Climate Change Impacts By Emina Krcmar; G. Cornelis van Kooten; Ann Chan-McLeod
  21. The Quest for Hegemony Among Countries and Global Pollution By KAKEU, Johnson; GAUDET, Gérard
  22. Environmental and Trade Policies for Oligopolistic Industry in the Presence of Consumption Externalities By Jota Ishikawa; Toshihiro Okubo
  23. Local and Global Externalities, Environmental Policies and Growth By Karen Pittel; Dirk Rübbelke
  24. The Global Effects of Subglobal Climate Policies By Böhringer, Christoph; Fischer, Carolyn; Rosendahl, Knut Einar
  25. What Are the Costs of Meeting Distributional Objectives for Climate Policy? By Ian W.H. Parry; Roberton C. Williams III
  26. Fat Tails, Thin Tails, and Climate Change Policy By Robert S. Pindyck

  1. By: James L. Smith
    Abstract: Although economists have studied various indicators of resource scarcity (e.g., unit cost, resource rent, and market price), the phenomenon of “peaking” has largely been ignored due to its connection to non-economic theories of resource exhaustion (the Hubbert Curve). I take a somewhat different view, one that interprets peaking as a reflection of fundamental economic determinants of an intertemporal equilibrium. From that perspective, it is reasonable to ask whether the occurrence and timing of the peak reveals anything useful regarding the state of resource exhaustion. Accordingly, I examine peaking as an indicator of resource scarcity and compare its performance to the traditional economic indicators. I find the phenomenon of peaking to be an ambiguous indicator, at best. If someone announced that the peak would arrive earlier than expected, and you believed them, you would not know whether the news was good or bad. Unfortunately, the traditional economic indicators fare no better. Their movements are driven partially by long-term trends unrelated to changes in scarcity, and partially but inconsistently driven by actual changes in scarcity. Thus, the traditional indicators provide a signal that is garbled and unreliable.
    Date: 2010–08
  2. By: Ji, K.; Magnus, J.R.; Wang, W. (Tilburg University, Center for Economic Research)
    Abstract: This paper reconsiders the ‘curse of resources’ hypothesis for the case of China, and distinguishes between resource abundance, resource rents, and resource dependence. Resource abundance and resource rents are shown to be approximately equivalent, and their association with resource dependence varies with institutional quality. Resource abundance/rents has a positive impact on economic growth, while resource dependence has a negative impact. The impact of the ‘West China Development Drive’ policy, started in 2000, is substantial, and this is investigated through a comparative analysis based on cross-section samples, and through a panel-data timevarying coefficient approach for West and East provinces. Resource effects do change after the policy shock.
    Keywords: Natural resource curse;Economic growth;China;Institutional quality;Resource abundance;Resource dependence;Regional differences;Policy change.
    JEL: O11 O13 O53 C21 Q0 Q33
    Date: 2010
  3. By: Daniel Flemes (GIGA German Institute of Global and Area Studies); Thorsten Wojczewski (GIGA German Institute of Global and Area Studies)
    Abstract: Given the importance of the assertion or prevention of regional leadership for the future global order, this paper examines the strategies and resources being used to assert regional leadership as well as the reactions of other states within and outside the respective regions. Secondary powers play a key role in the regional acceptance of a leadership claim. In this article we identify the factors motivating secondary powers to accept or contest this claim. Three regional dyads, marked by different degrees of “contested leadership,” are analyzed: Brazil vs. Venezuela, India vs. Pakistan, and South Africa vs. Nigeria. The research outcomes demonstrate that the strategies of regional powers and the reactions of secondary powers result from the distribution of material capabilities and their application, the regional powers’ ability to project ideational resources, the respective national interests of regional and secondary powers, and the regional impact of external powers.
    Keywords: Brazil, India, South Africa, regional powers, regional and global order, leadership
    Date: 2010–02
  4. By: Miriam Shabafrouz (GIGA German Institute of Global and Area Studies)
    Abstract: This paper explores the use of hydrocarbon revenues in post-conflict Algeria. While the bloody years of the 1990s now seem to be over, recurring terror attacks and the ongoing state of emergency leave room for doubt that a situation of stable peace has been achieved yet. It is therefore necessary to evaluate the effectiveness of post-conflict peace-building efforts in Algeria and identify ways of improving these measures. The resources, which are mainly controlled by the central state, can have positive and negative effects on the political economy: they can enhance growth and possibilities for the distribution of wealth, but the dependency on them makes the whole economy vulnerable to crises. Analysing the economic (and other) causes of the outbreak of the intra-state war in 1992 and the reasons for its escalation and its fading out can be revealing when assessing the extent to which critical conditions have or have not been addressed by recent and current peace-building efforts. The author’s analysis reveals that the measures taken by the government—such as implementing a programme of national reconciliation, the stimulation of certain sectors of the economy and the resolute reduction of foreign debt—all aim at stabilization and have all been driven by hydrocarbon income to a large extent. However, the recent rise and sudden drop in the price of oil and gas have both had an effect on the scope of these measures and reveal their limits. Moreover, some of the critical causes of the civil war such as the unfair distribution of revenue, the lack of political participation and destabilizing demographic changes still persist and have largely remained unaddressed. One of the author’s concluding assumptions therefore is that it is very likely that the use of resource revenues for conflict prevention and peace-building will only lead to sustainable results when embedded in full-fledged reforms of Algeria’s entire economic and political system.
    Keywords: Algeria, violent conflict, terrorism, peace-building, resource management,socio-economic development, natural resources, oil, gas
    JEL: F23 L14 O14
    Date: 2010–04
  5. By: Hošek, Jan (Czech National Bank); Komárek, Luboš (Czech National Bank,); Motl, Martin (Czech National Bank,)
    Abstract: This article discusses the relationship between monetary policy and oil prices and, in a broader sense, commodity prices. Firstly, it focuses on describing the relationship between key macroeconomic variables, gas prices and other commodity prices relative to oil prices. Subsequently, it discusses the existence of “transmission channels” through which monetary policy can be propagated to oil prices (or prices of commodities). It then provides an insight into the CNB’s forecasting process, both by looking retrospectively at the oil price outlook in the past and by analysing a transitory and a permanent shock (a rise in the oil price of USD 30/b). The simulated oil price shock is calculated from the average level of Brent oil prices in the first quarter of 2010, i.e. USD 77.50/b.
    Keywords: oil price ; monetary policy ; real interest rate ; oil price shock JEL Classification: G12 ; G14 ; D53
    Date: 2010
  6. By: Shewmake, Sharon
    Abstract: Private vehicles are a significant source of air pollution in many areas of the United States. Areas with already high levels of air pollution are required by the Clean Air Act to take steps to reduce automobile use and the associated emissions. The behavioral implications of many travel demand management techniques are poorly understood. In this dissertation I focus on carpooling. Policy makers encourage commuters to carpool through High Occupancy Vehicle (HOV) Lanes, free parking for carpoolers, attempts to connect carpoolers, and casual carpoolers (often called slugging). Despite these e
    Keywords: hybrid cars; HOV Lanes; Clean Air Act; Economics
    JEL: Q50 Y40 L91 Q53 R41
    Date: 2010–09–02
  7. By: Ruth Delzeit; Horst Gömann; Karin Holm-Müller; Peter Kreins; Bettina Kretschmer; Julia Münch; Sonja Peterson
    Abstract: In the context of energy security and climate protection, biomass is given high importance. Nevertheless, land-use conflicts resulting from the cultivation of biomass and their economy-wide effects are yet to be fully understood. To shed light on this issue we link three distinctive models; a global, multi-regional general equilibrium model (DART), a regionalised agricultural sector model for Germany (RAUMIS) and a location model for biogas plants. The DART model allows capturing international and national feedback effects of an increased use of bioenergy such as increased agricultural prices. The interaction of DART and RAUMIS links global markets and connects them to the detailed specification of agricultural land use in Germany. Finally, we link this system to the newly developed location model ReSI-M that accounts for the location choices of biogas plants in Germany and the resulting regional markets for energy crop demand. As a first application of the modelling system we analyse the effects of the German Renewable Energy Source Act on German biogas production and of the EU 10%-biofuel target on German agriculture and world agricultural prices. A main result of the simulations is that accounting for existing land-use restrictions and land-use competition has a significant effect on model results
    Keywords: Bioenergy, land use, renewable energy policy, coupled models, agricultural-sector models, CGE
    JEL: C61 C68 Q15 Q42 Q48
    Date: 2010–10
  8. By: Marco Runkel (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Thomas Eichner (Department of Economics, University of Hagen)
    Abstract: This paper provides a rationale for subsidizing green (renewable) energy production. Within a multi-country model where energy is produced with mobile capital in green and dirty production, we investigate the countries' decentralized choice of emissions taxes and green energy subsidies. Without green subsidies, the emissions tax is set inefficiently low, since each country ignores the environmental externality in icted on other countries and since the emissions tax leads to a capital out ow to other countries. When the green subsidy is available, countries choose a positive subsidy rate since this reduces the overall distortion of the tax-subsidy system. In doing so, each country internalizes a larger part of the environmental externality. As consequence capital is relocated from the dirty into the clean sectors and reduces global pollution. Hence, the subsidy is not only bene cial for the country which imposes it but for all countries.
    Keywords: renewable energy, capital mobility, green subsidy, emissions regulation
    JEL: H71 Q42 Q58
    Date: 2010–09
  9. By: Bellla, Gianni; Massidda, Carla; Etzo, Ivan
    Abstract: This paper aims to give a contribution on the still questioned bell-shaped relationship between carbon dioxide polluting emissions and economic growth, which is commonly known in the literature as the Environmental Kuznets Curve hypothesis. In particular, it develops a panel analysis for a group of 77 countries, including 22 OECD and 55 NON-OECD units, over the period 1971-2006. We specify the estimated model by taking into account the role of electric power consumption and compare the performance of alternative panel estimators for a quadratic and cubic specification of the empirical model. Our findings seem to go in favor of the EKC relationship for the entire sample. However, this outcome is not confirmed when moving the analysis at sub-sample level where results highlight a non homogeneous picture across different groups of nations.
    Keywords: Panel analysis; Environmental Kuznets Curve; CO2 emissions and Energy use
    JEL: C33 Q54 Q43
    Date: 2010–09
  10. By: Wided Batat (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne); Audrey Bonnemaizon (EA 4120 - LISAA - Université Paris Est Marne-La-Vallée)
    Abstract: This paper discusses the concept of “consumption competence” at the heart of Service-Dominant Logic and the co-creation process of value. In order to examine the issues related to this emerging concept, the research methodology was divided in two parts. In the first one, we introduced a longitudinal ethnography research (2005-2007) based on participant observation and in-depth interviews with employees in a French business energy supplier called “Utility X”. This choice was the best means to understand how do managers in the energy sector consider their customers: are clients represented as active actors or as passive actors within their own consumption experiences. The second part of this research based on in-depth interviews conducted in 2009, involved a group of 10 customers of “Utility X”. The objective of these interviews was to emphasize the consumer's activation of his competencies in the energy sector. This methodology was applied in order to get crossed glances on the concept of the “consumption competencies” emerging in the energy sector.
    Keywords: Competence, energy sector, company representation, consumer education, operant resources
    Date: 2010–06–30
  11. By: Prabal Roy Chowdhury
    Abstract: We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.
    Keywords: Porter hypothesis, abatement tax, R&D, hyperbolic discounting.
    JEL: H2 L1 L2 L5
    Date: 2010–10–22
  12. By: Christa D. Jensen (West Virginia Univeristy); Max Munday (Cardiff University); Stuart Mcintyre (University of Strathclyde); Karen Turner (Univeristy of Strathclyde)
    Abstract: Despite increased public interest, policymakers have been slow to enact targets based on limiting emissions under full consumption accounting measures (such as carbon footprints). This paper argues that this may be due to the fact that policymakers in one jurisdiction do not have control over production technologies used in other jurisdictions. The paper uses a regional input-output framework and data derived on carbon dioxide emissions by industry (and households) to examine regional accountability for emissions generation. In doing so, we consider two accounting methods that permit greater accountability of regional private and public (household and government) final consumption as the main driver of regional emissions generation, while retaining focus on the local production technology and consumption decisions that fall under the jurisdiction of regional policymakers. We propose that these methods permit an attribution of emissions generation that is likely to be of more use to regional policymakers than a full global footprint analysis.
    Keywords: pollution attribution; regional economy; input-output analysis; Wales
    JEL: C67 Q01 Q53 R15
    Date: 2010–08
  13. By: Christopher R. Knittel; Ryan Sandler
    Abstract: The transportation sector accounts for nearly one third of the United States' greenhouse gas emissions. While over the past number of decades, policy makers have avoided directly pricing the externalities from vehicles, both in terms of global and more local pollutants and Corporate Average Fuel Standards have changed little since the mid-1980s, there is now considerable interest in reducing greenhouse gas emissions form the transportation sector. Many have argued that the unique features of the sector imply that pricing mechanisms would have little affect on emissions. This paper analyzes how pricing carbon through either a cap and trade system or carbon tax might affect greenhouse gas emissions from the transportation sector by estimating how changes in gasoline prices alter consumer behavior. We analyze their effect on both the intensive (e.g., vehicle miles travelled) and extensive (e.g., vehicle scrapping) margins. We find large effects on both margins.
    JEL: L0 Q5
    Date: 2010–10
  14. By: Marius-Cristian Frunza (Centre d'Economie de la Sorbonne et Sagacarbon - Caisse des Dépôts); Dominique Guegan (Centre d'Economie de la Sorbonne - Paris School of Economics); Antonin Lassoudière (Sagacarbon - Caisse des Dépôts)
    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: 2010–07
  15. By: Esther Duflo; Michael Greenstone; Rohini Pande; Nicholas Ryan
    Abstract: Emissions trading schemes have great potential to lower pollution while minimizing compliance costs for firms in many areas now subject to traditional command-and-control regulation. This paper connects experience with emissions trading, from programs like the U.S. Acid Rain program, to lessons for implementation of a Trading Pilot Scheme in India. This experience suggests that four areas are especially important for successful implementation of an emissions trading scheme: setting the cap, allocating permits, monitoring and compliance. The introduction of emissions trading would position India as a clear leader in environmental regulation amongst emerging economies.
    Date: 2010–08
  16. By: Marius-Cristian Frunza (Centre d'Economie de la Sorbonne et Sagacarbon - Caisse des Dépôts); Dominique Guegan (Centre d'Economie de la Sorbonne - Paris School of Economics); Fabrice Thiebaut (Sagacarbon - Caisse des Dépôts)
    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
  17. By: Lohwasser, Richard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: Carbon capture and storage (CCS) technologies have the potential to play a major role in the stabilization of anthropogenic greenhouse gases. To develop the capture technology from its current early pilot phase towards commercial maturity, significant public and private funding is directed towards R&D projects and pilot power plants. However, we know little about how this funding relates to the economics of CCS power plants and their market diffusion. This paper addresses that question. We initially review past learning effects from both capacity installations and R&D efforts for a similar technology, flue-gas desulfurization, using the concept of two-factor learning, and estimate the learning curve. We apply the obtained learning-by-doing rate of 7.1% and the learning-by-researching rate of 6.6% to CCS in the electricity market model HECTOR, which simulates 19 European countries hourly until 2040, to understand the impact of learning and associated policies on the market diffusion of CCS. Simulation results show that the individual impact of learning is similar for both learning rates, regardless of the CO2 price. We then evaluate the effectiveness of policies subsidizing CCS investment costs (addressing learning-by-doing) and of policies providing R&D grants (addressing learning-by-researching) by relating the policy budget to the realized CCS capacity. We find that policies promoting diffusion through subsidies are, at lower policy cost, about equally effective as policies providing R&D funding. At higher spending levels, diffusion-promoting policies are more effective. Overall, policy effectiveness increases in low CO2 price scenarios, but the CO2 price still remains the key prerequisite for the economic competitiveness of CCS, even with major policy support.
    Keywords: Policy effectiveness; CCS; two-factor learning; electricity market
    JEL: C63 O30
    Date: 2010–06
  18. By: Margherita Grasso; Matteo Manera; Aline Chiabai; Anil Markandya
    Abstract: In recent years there has been a large scientific and public debate on climate change and its direct as well as indirect effects on human health. According to World Health Organization (WHO, 2006), some 2.5 million people die every year from non-infectious diseases directly attributable to environmental factors such as air pollution, stressful conditions in the workplace, exposure to chemicals such as lead, and exposure to environmental tobacco smoke. Changes in climatic conditions and climate variability can also affect human health both directly and indirectly, via changes in biological and ecological processes that influence the transmission of several infectious diseases (WHO, 2003). In the past fifteen years a large amount of research on the effects of climate changes on human health has addressed two fundamental questions (WHO, 2003). First, can historical data be of some help in revealing how short-run or long-run climate variations affect the occurrence of infectious diseases? Second, is it possible to build more accurate statistical models which are capable of predicting the future effects of different climate conditions on the transmissibility of particularly dangerous infectious diseases? The primary goal of this paper is to review the most relevant contributions which have directly tackled those questions, both with respect to the effects of climate changes on the diffusion of non-infectious and infectious diseases. Specific attention will be drawn on the methodological aspects of each study, which will be classified according to the type of statistical model considered. Additional aspects such as characteristics of the dependent and independent variables, number and type of countries investigated, data frequency, temporal period spanned by the analysis, and robustness of the empirical findings are examined. <br />
    Keywords: Climate change; Health; Statistical models; Non-infectious diseases; Infectious diseases; Malaria; Cardiovascular diseases
    Date: 2010–10
  19. By: Arndt, Channing; Strzepeck, Kenneth; Tarp, Finn; Thurlow, James; Fant, Charles; Wright, Len
    Abstract: Mozambique, like many African countries, is already highly susceptible to climate variability and extreme weather events. Climate change threatens to heighten this vulnerability. In order to evaluate potential impacts and adaptation options for Mozambique, we develop an integrated modelling framework that translates atmospheric changes from general circulation model projections into biophysical outcomes via detailed hydrologic, crop, hydropower and infrastructure models. These sector models simulate a historical baseline and four extreme climate change scenarios. Sector results are then passed down to a dynamic computable general equilibrium model, which is used to estimate economy-wide impacts on national welfare, as well as the total cost of damages caused by climate change. Potential damages without changes in policy are significant; our discounted estimates range from US$2.3 to US$7.4 billion during 2003– 50. Our analysis identifies improved road design and agricultural sector investments as key ‘no-regret’ adaptation measures, alongside intensified efforts to develop a more flexible and resilient society. Our findings also support the need for cooperative river basin management and the regional coordination of adaptation strategies.
    Keywords: entrepreneurship, gender, women entrepreneurs, Africa
    Date: 2010
  20. By: Emina Krcmar; G. Cornelis van Kooten; Ann Chan-McLeod
    Abstract: Migratory waterfowl are important to the diets of residents in Canada’s northern communities. Contrary to recreational hunters, indigenous peoples have rights to harvest wildlife for subsistence needs without permits. As a result, migratory waterfowl are an important component of diets of Aboriginal peoples in northern Canada, substituting for expensive beef transported from the south. Wild geese and duck provide many benefits to native people, including improved nutrition and health. In this paper, scaled-down data from global climate models are used in a wildlife model to project potential migratory waterfowl abundance in the Northwest Territories for three future periods up to 2080. The models project potential future harvests of geese and ducks by Aboriginal hunters and the financial and nutritional benefits. It turns out that northern Aboriginal peoples can benefit significantly as a result of climate change that affects migratory waterfowl, but likely at the expense of hunters and recreationists in other regions of North America.
    Keywords: subsistence harvests by indigenous peoples; diet and nutrition; climate change
    JEL: Q54 O13
    Date: 2010–10
  21. By: KAKEU, Johnson; GAUDET, Gérard
    Abstract: This paper builds on the assumption that countries behave in such a way as to improve, via their economic strength, the probability that they will attain the hegemonic position on the world stage. The quest for hegemony is modeled as a game, with countries being differentiated initially only by some endowment which yields a pollution free ow of income. A country's level of pollution is assumed directly related to its economic strength, as measured by its level of production. Two types of countries are distinguished: richly-endowed countries, for whom the return on their endowment is greater than the return they can expect from winning the hegemony race, and poorly-endowed countries, who can expect a greater return from winning the race than from their endowment. We show that in a symmetric world of poorly-endowed countries the equilibrium level of emissions is larger than in a symmetric world of richly-endowed countries: the former, being less well endowed to begin with, try harder to win the race. In the asymmetric world composed of both types of countries, the poorly-endowed countries will be polluting more than the richly endowed countries. Numerical simulations show that if the number of richly-endowed countries is increased keeping the total number of countries constant, the equilibrium level of global emissions will decrease; if the lot of the poorly-endowed countries is increased by increasing their initial endowment keeping that of the richly-endowed countries constant, global pollution will decrease; increasing the endowments of each type of countries in the same proportion, and hence increasing the average endowment in that proportion, will decrease global pollution; redistributing from the richly-endowed in favor of the poorly-endowed while keeping the average endowment constant will in general result in an increase in the equilibrium level of global pollution.
    Keywords: Hegemony, global pollution, dynamic games
    JEL: Q54 Q50 F5
    Date: 2010
  22. By: Jota Ishikawa (Hitotsubashi University, and RIETI); Toshihiro Okubo (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: We explore the effects of environmental and trade policies with negative consumption externalities when a domestic firm and a foreign rival produce imperfect substitutes and compete in the domestic market. Consumption of the foreign product generates more emissions than that of the domestic product. Emission taxes reduce emissions, harm the foreign firm, but may benefit the domestic firm. Tariffs could mitigate externalities more "effectively" than emission taxes. Consumption subsidies provided to the domestic product may raise emissions and worsen domestic welfare. Stringent environmental policies may induce the foreign firm to produce an environmentally friendly good, though environmental damages may increase.
    Keywords: environmental policies, trade policies, consumption externalities, international oligopoly, differentiated products
    JEL: F13 F18
    Date: 2010–10
  23. By: Karen Pittel; Dirk Rübbelke
    Abstract: The paper analyzes the implications of local and global pollution when two types of abatement activities can be undertaken. One type reduces solely local pollution (e.g., use of particulate matter filters) while the other mitigates global pollution as well (e.g., application of fuel saving technologies). In the framework of a 2-country endogenous growth model, the implications of different assumptions about the degree to which global externalities are internalized are analyzed. Subsequently, we derive policy rules adapted to the different scenarios. Special attention is paid to pollution, growth and optimal policy in the case of asymmetric internalization.<br />
    Keywords: economic growth, global and local externalities, government policies
    Date: 2010–10
  24. By: Böhringer, Christoph; Fischer, Carolyn (Resources for the Future); Rosendahl, Knut Einar
    Abstract: Individual countries are in the process of legislating responses to the challenges posed by climate change. The prospect of rising carbon prices raises concerns in these nations about the effects on the competitiveness of their own energy-intensive industries and the potential for carbon leakage, particularly leakage to emerging economies that lack comparable regulation. In response, certain developed countries are proposing controversial trade-related measures and allowance allocation designs to complement their climate policies. Missing from much of the debate on trade-related measures is a broader understanding of how climate policies implemented unilaterally (or subglobally) affect all countries in the global trading system. Arguably, the largest impacts are from the targeted carbon pricing itself, which generates macroeconomic effects, terms-of-trade changes, and shifts in global energy demand and prices; it also changes the relative prices of certain energy-intensive goods. This paper studies how climate policies implemented in certain major economies (the European Union and the United States) affect the global distribution of economic and environmental outcomes, and how these outcomes may be altered by complementary policies aimed at addressing carbon leakage.
    Keywords: cap-and-trade, emissions leakage, border carbon adjustments, output-based allocation, general equilibrium model
    JEL: Q2 Q43 H2 D61
    Date: 2010–10–18
  25. By: Ian W.H. Parry; Roberton C. Williams III
    Abstract: This paper develops an analytical model to quantify the costs and distributional effects of various fiscal options for allocating the (large) rents created under prospective cap-and-trade programs to reduce domestic, energy-related CO2 emissions. The trade-off between cost effectiveness and distribution is striking. The welfare costs of different policies, accounting for linkages with the broader fiscal system, range from negative $6 billion/year to $53 billion/year in 2020, or between minus $12 to almost $100 per ton of CO2 reductions! The least costly policy involves auctioning all allowances with revenues used to cut proportional income taxes, while the most costly policies involve recycling revenues in lump-sum dividends or grandfathering emissions allowances. The least costly policy is regressive, however, while the dividend policy is progressive, and grandfathering permits is both costly and regressive. A distribution-neutral policy entails costs of $18 to $42 per ton of CO2 reductions.
    JEL: H22 H23 Q48 Q54 Q58
    Date: 2010–10
  26. By: Robert S. Pindyck
    Abstract: Climate policy is complicated by the considerable compounded uncertainties over the costs and benefits of abatement. We don’t even know the probability distributions for future temperatures and impacts, making cost-benefit analysis based on expected values challenging to say the least. There are good reasons to think that those probability distributions are fat-tailed, which implies that if social welfare is based on the expectation of a CRRA utility function, we should be willing to sacrifice close to 100% of GDP to reduce GHG emissions. I argue that unbounded marginal utility makes little sense, and once we put a bound on marginal utility, this implication of fat tails goes away: Expected marginal utility will be finite even if the distribution for outcomes is fat-tailed. Furthermore, depending on the bound on marginal utility, the index of risk aversion, and the damage function, a thin-tailed distribution can yield a higher expected marginal utility (and thus a greater willingness to pay for abatement) than a fat-tailed one.
    Date: 2010–09

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