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on Energy Economics |
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Issue of 2010‒11‒06
twenty papers chosen by Roger Fouquet Basque Climate Change Centre, Bilbao, Spain |
| By: | Lopez, Ramon E.; Palacios, Amparo |
| Keywords: | Environmental Economics and Policy, Public Economics, Resource /Energy Economics and Policy, |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:ags:umdrwp:94795&r=ene |
| By: | Henry Thompson |
| Abstract: | Energy proves an essential input with robust comparative static effects in a factor proportions model of production for the US. Energy has a robust marginal product and significant substitution in a novel production function motivated by the definition of physical work. In this physical production function, energy and labor inputs interact separately with capital. The present data cover the years 1951 to 2008. One version of the model assumes an endogenous price of energy, and another endogenous energy imports at the world price. These comparative static models of production and trade have an array of policy implications. |
| Keywords: | Energy, Substitution, Production, Trade |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2010-06&r=ene |
| By: | Qiaosheng Wu; Svetlana Maslyuk; Valerie Clulow |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2010-43&r=ene |
| By: | K. Narayanan; Santosh Kumar Sahu |
| Abstract: | This paper is an attempt to understand the relationship between the labour and energy intensity for firms drawn from pulp and paper industries in Indian manufacturing. Pulp and paper industry accounts for a considerable share of the industrial enterprises, production, employment and exports in the Indian economy and, one of the energy intensive industries in Indian manufacturing. This paper uses data from the Center for Monitoring Indian Economy (CMIE), at the unit level for the period 1992 to 2000. Analysis from the cross-tabulation of energy and labour intensity of the firms in this industry suggests that energy intensity is higher for the BSE listed firms however, the labour intensity is found higher for the nonlisted firms. Further, energy and labour intensity is higher for the domestic when compared to foreign firms. The econometric analysis of the energy intensity and other firm specific characteristics suggests that labour intensity has a negative relationship with energy intensity, suggesting a substitution possibility between energy and labour for the pulp and paper industries in India. Further we found that higher labour intensive firms are more energy intensive. Profitability of the firm emerged negatively related to energy intensity. The listed firms are found to be more energy intensives as compared to the non-listed firms. More importantly, technology import is found negatively related to the energy intensity of the firms, suggesting that firms in these industries could be using technology import and knowledge sharing from their foreign collaborators for savings on energy. |
| Keywords: | Energy Intensity, technology import, India, labour intensity, Indian manufacturing industries, pulp industries, paper industries, panel data |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3101&r=ene |
| By: | Lucas Bretschger |
| Abstract: | The paper develops a theoretical model with different channels through which energy affects economic growth. The conditions for a crowding out of capital accumulation by intensive energy use are derived. In the empirical part, estimations using a system with five simultaneous equations for a sample of 37 developed countries with five-year average panel data over the period 1975-2004 are presented. It is shown that in the long run rising energy prices are not a threat to development. On the contrary, we find conditions under which decreasing energy input induces investments in physical and knowledge capital. A ten percent increase in energy prices is found to raise the growth rate by 0.4 percentage points. |
| Keywords: | Energy Prices and Growth, Endogenous Capital Accumulation, Structural Change, Panel Data |
| JEL: | Q43 O47 Q56 O41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:034&r=ene |
| By: | Silvana Musti; Viviana Fanelli |
| Abstract: | We present a methodology to model electricity price dynamics by applying the interest rate theory toolkit. We construct the electricity market following [16] and applying the Heath, Jarrow and Morton ([7]) model. The electricity returns forward curve evolution using the Regime Switching Volatility is the instrument chosen to reflect into a simulating model the natural seasonality of electricity prices. The model calibration and the volatility parameters estimation allow to simulate in a realistic way the future electricity prices. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:ufg:qdsems:06-2010&r=ene |
| By: | Radoslaw Stefanski |
| Abstract: | What part of the rising trend in the oil price is driven by structural transformation in China and India? Will continued structural transformation in these countries result in a permanently higher oil price? I identify an inverted-U shaped relationship in the data between aggregate oil intensity and the extent of structural transformation - countries in the middle stages of transition spend the highest fraction of their income on oil. A decomposition of aggregate oil intensity shows that only in the middle stages of transition are an economy's largest sectors also its most oil intensive ones. I construct a multi-sector, multi-country, general equilibrium growth model that accounts for these facts by generating endogenously falling aggregate elasticities of substitution between oil and non-oil inputs. The model is used to measure the impact of changing sectoral composition in China and India on world oil demand and the oil price in the OECD. Structural transformation in China and India accounts for up to a quarter of the oil price increase in the OECD between 1970 and 2007. However, continued structural transformation in China and India results in falling oil intensity and a drop in the oil price. Using a standard growth model misses this non-linearity and can give misleading implications about the long-term oil price. To understand the impact of growth on the oil price, it is necessary to take a more disaggregated view than is standard in macroeconomics. |
| Keywords: | structural transformation, China, India, oil price. |
| JEL: | O11 O41 O13 F1 F4 Q4 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:048&r=ene |
| By: | L'OEILLET, Guillaume; LICHERON, Julien |
| Abstract: | Monetary policy is usually perceived as an important transmission channel in the negative relationship between oil prices and economic performance. It may also constitute a short-term explanation of the non-linearity in this relationship, since Central Bankers may be more sensitive to the potential inflationary threats entailed by high oil price increases than to small increases or decreases. In this paper, we use an extended Taylor rule to investigate the role of oil prices in the ECB monetary policy strategy. A contemporaneous reaction function is estimated using both a GMM framework and an Ordered Probit model, and several oil indicators are constructed and tested. The main results suggest that oil prices play a key role in the ECB interest-rate setting, since it appears as a relevant indicator of future inflation. However, the ECB seems to react asymmetrically: only oil price increases influence its decision setting, not oil prices decreases. Monetary policy may thus transmit and amplify the asymmetry in the relationship between oil prices and activity in the euro area. Further investigations suggest that a preference for price stability provides an important explanation of this asymmetric behaviour of the ECB. |
| Keywords: | Oil prices ; Monetary policy ; Taylor rule ; Asymmetry ; ECB. |
| JEL: | E0 E58 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:26203&r=ene |
| By: | Naohiko Yahaba (Asia-Japan Research Centre) |
| Abstract: | The world's oil consumption has been increasing for more than a century with a few exceptions. However, there would be a possibility that the recent increase in oil consumption in developing countries such as China and India tighten the long term oil market. Since the exact amount of oil reserves is unknown, it is difficult to predict when the ultimate decrease in oil production will come. However, for the last two decades, the amount of oil consumption per year has surpassed the amount of oil reserves newly found. Therefore, the possibility of ultimate decrease in oil production may increase. This paper examines the impact of the decrease in oil production on major economies using a computable general equilibrium model. Under the simulations in this paper, the oil exporting economies increase their GDPs, the utilities and the terms of trade. The oil importing regions, especially in newly industrialised and developing regions, decrease their GDPs, utilities and the terms of trade. All industry sectors decrease their world output. Among industry sectors, oil industry affects most and the industry sectors which use large amount of oil such as petroleum industry and chemical industry decrease its outputs significantly. |
| Keywords: | oil consumption, oil reserves, oil shock, computable general equilibrium model |
| JEL: | Q30 Q43 C68 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:energy:2329&r=ene |
| By: | Lucas Bretschger |
| Abstract: | The paper considers an economy which is constrained by natural resource use and driven by knowledge accumulation. Resources are essential inputs in all the sectors. It is shown that population growth and poor input substitution are not detrimental but, on the contrary, even necessary for obtaining a sustainable consumption level. We find a new type of Hartwick rule defining the conditions for a constant innovation rate. The rule does not apply to capital but to labour growth, the crucial input in research. Furthermore, it relates to the sectoral structure of the economy and to demographic transition. The results continue to hold with a backstop technology and are extended for the case of minimum resource constraints. |
| Keywords: | Population growthm non-renewable resources, poor input substitution, technical change, sustainability |
| JEL: | Q32 Q55 Q56 O41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:037&r=ene |
| By: | Rick van der Ploeg; Steven Poelhekke |
| Abstract: | Brunnschweiler and Bulte (2008) provide cross-country evidence that the resource curse is a “red herring” once one corrects for endogeneity of resource exports and allows resource abundance affect growth. Their results show that resource exports are no longer significant while the value of subsoil assets has a significant positive effect on growth. But the World Bank measure of subsoil assets is proportional to current rents, and thus is also endogenous. Furthermore, their results suffer from an unfortunate data mishap, omitted variables bias, weakness of the instruments, violation of exclusion restrictions and misspecification error. Correcting for these issues and instrumenting resource exports with values of proven reserves at the beginning of the sample period, there is no evidence for the resource curse either and subsoil assets are no longer significant. However, the same evidence suggests that resource exports or rents boost growth in stable countries, but also make especially already volatile countries more volatile and thus indirectly worsen growth prospects. Ignoring the volatility channel may lead one to erroneously conclude that there is no effect of resources on growth. |
| Keywords: | resource curse, resource exports, resource rents, natural capital, subsoil assets, reserves, instrumental variables, volatility |
| JEL: | C12 C21 C82 F43 O11 O41 Q32 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:033&r=ene |
| By: | Bernard Gauthier; Albert Zeufack |
| Abstract: | Oil has been a curse for Cameroon, one of the potentially richest countries in Sub-Saharan Africa. While the discovery of oil in 1977 and initial prudent management accentuated hopes, Cameroon has become an example of growth collapse. GDP contracted by 5% on average per year, a combined 27% over the 8-year period, dropping per capita income in 1993 to half of its 1986 level. In 2007, Cameroon was still poorer than in 1985. Using recently available datasets on oil production, the World Bank’s Adjusted Savings data, and building on recent literature (Cossé 2006), this paper estimates the oil rent effectively captured by Cameroon since 1977 and analyzes factors explaining the aggregate savings and spending decisions from the oil rent that led to such poor development outcomes. The paper finds that Cameroon may have captured a sizeable portion of its oil rent – around 67%. However, only about 46% of total oil revenues accruing to the government between 1977 and 2006 may have been transferred to the budget. The remaining 54% are not properly accounted for. The paper argues that poor governance is the culprit. The decision to “save” Cameroon’s oil revenues abroad proves to have been sub-optimal given the lack of a transparent and accountable framework to manage them and the poor governance record of the country.The lack of transparency and accountability in oil revenues management has translated into a failure to engage in medium to long term development planning for the country. Donors have been pushing for improved governance and transparency in the oil sector for the past 20 years without significant success. The EITI, while a good initiative, is also in high risk of capture. The paper suggests changes in the incentives structure to reduce collusion and improve governance. |
| Keywords: | Cameroon, growth collapse, GDP, Adjusted Savings data, oil rent, poor governance |
| JEL: | Q32 O41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:038&r=ene |
| By: | Marjolein C.J. Caniëls; Henny Romijn |
| Abstract: | Biofuel production has recently attracted a great deal of attention. Some anticipate substantial social and environmental benefits, while at the same time expecting sound profitability for investors. Others are more doubtful, envisaging large trade-offs between the pursuit of social, environmental and economic objectives, particularly in poor countries in the tropics. The paper explores these issues in Tanzania, which is a forerunner in Africa in the cultivation of a bio-oil shrub called Jatropha curcas L. We trace how isolated Jatropha biofuel experiments developed since their inception in early 2005 towards a fully fledged sectoral production and innovation system; and investigate to what extent that system has been capable of developing ànd maintaining sustainable practices and producing sustainable outcomes. The application of evolutionary economic theory allows us to view the development processes in the sector as a result of evolutionary variation and selection on the one hand, and revolutionary contestation between different coalitions of stakeholders on the other. Both these processes constitute significant engines of change in the sector. While variation and selection is driven predominantly by localised learning, the conflict-driven dynamics are highly globalised. The sector is found to have moved some way towards a full sectoral innovation and production system, but it is impossible to predict whether a viable sector with a strong “triple bottom line” orientation will ultimate emerge, since many issues surrounding the social, environmental and financial sustainability still remain unresolved. |
| Keywords: | biofuels, evolutionary theory, innovation systems, sustainability, stakeholder conflict, learning, Tanzania. |
| JEL: | O30 R10 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:tuecis:wpaper:1004&r=ene |
| By: | Koji Miyawaki (National Institute for Environmental Studies); Yasuhiro Omori (Faculty of Economics, University of Tokyo); Akira Hibiki (National Institute for Environmental Studies) |
| Abstract: | The discrete/continuous choice approach is often used to analyze the demand for public utility services under block rate pricing, which is a nonlinear price system. Although a consumer's budget set is convex under increasing block rate pricing, a consumer's budget set is nonconvex under decreasing block rate pricing as is the case with the gas supply in Japan and the United Kingdom. The nonlinearity problem, which has not been examined in previous studies, arises under nonconvex budget sets in which the indirect utility function corresponding to the demand function becomes highly nonlinear. To address this problem, this article proposes a feasible, efficient method of demand on the nonconvex budget set and implements a case study using household-level data on Japanese residential gas consumption. The advantages of our method are as follows: (i) the construction of an efficient Markov chain Monte Carlo algorithm with an efficient blanket based on the Hermite-Hadamard integral inequality and the power-mean inequality, (ii) the explicit consideration of the (highly nonlinear) separability condition, which often makes numerical likelihood maximization difficult, and (iii) the introduction of normal disturbance into the discrete/continuous choice model. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2010cf770&r=ene |
| By: | Rick van der Ploeg; Cees Withagen |
| Abstract: | The Green Paradox states that, in the absence of a tax on CO2 emissions, subsidizing a renewable backstop such as solar or wind energy brings forward the date at which fossil fuels become exhausted and consequently global warming is aggravated. We shed light on this issue by solving a model of depletion of non-renewable fossil fuels followed by a switch to a renewable backstop, paying attention to timing of the switch and the amount of fossil fuels remaining unexploited. We show that the Green Paradox occurs for relatively expensive but clean backstops (such as solar or wind), but does not occur if the backstop is sufficiently cheap relative to marginal global warming damages (e.g., nuclear energy) as then it is attractive to leave fossil fuels unexploited and thus limit CO2 emissions. We show that, without a CO2 tax, subsidizing the backstop might enhance welfare. If the backstop is relatively dirty and cheap (e.g., coal), there might be a period with simultaneous use of the non-renewable and renewable fuels.If the backstop is very dirty compared to oil or gas (e.g., tar sands), there is no simultaneous use. The optimum policy requires an initially rising CO2 tax followed by a gradually declining CO2 tax once the dirty backstop has been introduced. We also discuss the potential for limit pricing when the non-renewable resource is owned by a monopolist. |
| Keywords: | Green Paradox, Hotelling rule, non-renewable resource, renewable backstop, global warming, carbon tax, limit pricing |
| JEL: | Q30 Q42 Q54 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:035&r=ene |
| By: | Radoslaw Stefanski |
| Abstract: | Brock and Taylor (2010) argue that the Environmental Kuznets Curve (EKC) - a hump shaped relationship between emissions and income per capita - is driven by falling GDP growth rates associated with Solow type convergence. I test the importance of their mechanism as a driver of emissions by performing a "pollution accounting" exercise that decomposes emissions data into pollution intensity and GDP growth eects. The "Green Solow" framework assumes that emission intensities decline at a constant rate and hence that all changes in emissions growth rates are driven by changes in GDP growth rates. Yet, in the data, emission intensities are hump shaped for a wide range of countries and pollutants, implying declining emission intensity growth rates. Furthermore, this decline in emission intensity growth rates is an order of magnitude larger than changes in GDP growth rates. The Green Solow model - which assigns all the weight to changing GDP growth and ig- nores changes in emission intensity growth in its explanation of emissions - cannot be the right way to think about emissions proles of countries. Models that aim to explain the EKC, must - first and foremost - explain the hump shape intensity curve and hence falling intensity growth rates. I suggest a simple model of structural transformation as one possible mechanism capable of generating both a hump shaped EKC curve and a hump shaped emission intensity curve. |
| Keywords: | The Green Solow Model, Environmental Kuznets Curve, EKC, Brock and Taylor. |
| JEL: | O14 O41 Q56 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:047&r=ene |
| By: | Zilberman, David D.; Hochman, Gal; Rajagopal, Deepak |
| Abstract: | Concern about the possible affects of biofuels on deforestation have led to assigning biofuel producers with the responsibility for greenhouse gas (GHG) emissions of the indirect land use changes (ILUC) associated with their activities when assessing their compliance with biofuel policies. We show that the computation of the ILUC is shrouded with uncertainty; they vary frequently, and are strongly affected by policy choices. It seems that its overall impact on GHGs is relatively minor. Once the ILUCs are introduced other indirect effects of biofuel may need to be considered which will increase the cost of biofuel regulations. Concentrating on direct regulation of biofuel and on efforts to reduce deforestation, wherever it occurs, may be more effective than debating and refining the ILUC. |
| Keywords: | land use, biofuels, greenhouse gas emissions, regulations |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:1618885&r=ene |
| By: | Thomas Eichner; Rüdiger Pethig |
| Abstract: | Scientific expertise suggests that mitigating extreme world-wide climate change damages requires avoiding increases in the world mean temperature exceeding 2 degrees Celsius. To achieve the two degree target, the cumulated global emissions must not exceed some limit, the so-called global carbon budget. In a two-period two country general equilibrium model with a finite stock of fossil fuels we compare the cooperative cost-effective policy with the unilateral cost-effective policy of restricting emissions to the global carbon budget. In its simplest form, the cost-effective global policy is shown to consist of a joint emission trading scheme in the first period (only). In sharp contrast, subglobal cost-effective regulation may require the abating country to tax its first-period consumption and to tax or subsidize its emissions in the first and/or second period. |
| Keywords: | carbon emissions, carbon budget, cooperative, unilateral, cost-effective regulation |
| JEL: | H21 H23 Q54 Q58 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:sie:siegen:143-10&r=ene |
| By: | Bas Jacobs; Rick van der Ploeg |
| Abstract: | We analyse optimal carbon taxes, optimal redistribution within and between non-overlapping generations, and optimal spending levels on climate abatement and adaptation. A positive probability of unexpected large increases in CO2 emissions results in a lower discount rate for global warming damages. More prudent governments set higher carbon taxes and spend more on abatement and sacrifice intra-generational for inter-generational redistribution. As long as households spend a constant fraction of their income on polluting goods, the carbon tax is not used for redistribution and is set at the modified Pigouvian rate, which is higher than the Pigouvian rate if governments are prudent. However, the carbon tax is set below the modified Pigouvian rate if poor households spend relatively more on polluting goods than rich households (Stone-Geary preferences). Policy simulations give insights into the effects of changes in the probability of climate disaster, degrees of intra- and inter-generational inequality aversion, ease of substitution between clean and dirty goods, elasticity of labour supply, productivity of abatement and adaptation, population growth and economic growth on the rates of discount, inequality, global warming and social welfare. |
| Keywords: | global warming, intra-generational and inter-generational redistribution, equally-distributed-equivalent utility, social discount rate, prudence, carbon tax, income tax, CO2 abatement, climate adaptation, non-homothetic preferences. |
| JEL: | H21 H23 Q54 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:049&r=ene |
| By: | Robert N. Stavins (John F. Kennedy School of Government, Harvard University, Resources for the Future and National Bureau of Economic Research) |
| Abstract: | The problem of the commons is more important to our lives and thus more central to economics than a century ago when Katharine Coman led off the first issue of the American Economic Review. As the U.S. and other economies have grown, the carrying-capacity of the planet - in regard to natural resources and environmental quality — has become a greater concern, particularly for common-property and open-access resources. The focus of this article is on some important, unsettled problems of the commons. Within the realm of natural resources, there are special challenges associated with renewable resources, which are frequently characterized by open access. An important example is the degradation of open-access fisheries. Critical commons problems are also associated with environmental quality. A key contribution of economics has been the development of market-based approaches to environmental protection. These instruments are key to addressing the ultimate commons problem of the twenty-first century - global climate change. |
| Keywords: | Common-Property Resource, Open-Access Resource, Fisheries, Global Climate Change |
| JEL: | Q22 Q28 Q50 Q54 Q58 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.131&r=ene |