nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒11‒20
35 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Renewable energy policy in the presence of innovation: does government pre-commitment matter? By Reinhard Madlener; Ilja Neustadt
  2. Solar Energy Cost Efficiency: A Simulated Case Study in the Egyptian Context By Dina El Bassiouny; Ehab Mohamed
  3. Towards the Resilient Region?: Policy Activism and Peripheral Region Development By Stuart Dawley; Andy Pike; John Tomaney
  4. Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income By Anna Alberini; Gans Will; Daniel Lopez-Velez
  5. Demand for electricity: evidence of cointegration and causality from Sri Lanka By Wasantha Athukorala; Clevo Wilson
  6. The Economics of Transition in the Power Sector By William Blyth
  7. Efficient estimation of Markov regime-switching models: An application to electricity wholesale market prices By Weron, Rafal; Janczura, Joanna
  8. Supply Function Equilibria with Capacity Constraints and Pivotal Suppliers By Talat S. Genc; Stanley S. Reynolds
  9. Investment in Electricity Markets with Asymmetric Technologies By Talat S. Genc; Henry Thille
  10. Libéralisation et dépôts de brevets verts des utilités électriques en Europe By Evens Salies; Lionel Nesta
  11. Phasing Out Energy Subsidies in Indonesia By Annabelle Mourougane
  12. The Dynamics of Global Crude Oil Production By Aleksandar Zaklan; Georg Zachmann; Anne Neumann
  13. Time-varying spot and futures oil price dynamics By Guglielmo Caporale; Davide Ciferri; Alessandro Girardi
  14. Analysing Alternative Policy Response to High Oil Prices, Using an Energy Integrated CGE Microsimulation Approach for South Africa By Margaret Chitiga; Ismail Fofana; Ramos Mabugu
  15. Rapacious Resource Depletion, Excessive Investment and Insecure Property Rights: A Puzzle.. By Ploeg, Frederick van der
  16. The Economic Feasibility of Sugarbeet Biofuel Production in Central North Dakota By Maung, Thein; Gustafson, Cole
  17. A coherent agri-energy policy to foster social inclusion for peasant families: the role of Petrobras on the João Câmara and Ceará-Mirim sites (state of Rio Grande do Norte) By C.M Drouvot; H. Drouvot; P.M Perluss
  18. What Sustainable Road Transport Future?: Trends and Policy Options By Stef Proost; Kurt Van Dender
  19. Transport Outlook 2010: The Potential for Innovation By OECD
  21. Measuring the external health cost of particulate matter from road traffic and other sources in Stockholm, Sweden. By Nerhagen, Lena; Bergström, Robert; Forsberg, Bertil; Johansson, Christer; Eneroth, Kristina
  22. The Truth, the Whole Truth, and Nothing but the Truth A Multiple Country Test of an Oath Script By Fredrik Carlsson; Mitesh Kataria; Alan Krupnick; Elina Lampi; Asa Löfgren; Ping Qin; Thomas Sterner; Susie Chung
  23. Market integration, environmental policy, and transboundry pollution from consumption By Kenji Fujiwara
  24. Accounting for CO2 Emissions from International Shipping: Burden Sharing under Different UNFCCC Allocation Options and Regime Scenarios By Nadine Heitmann; Setareh Khalilian
  25. U.S. State-Level Carbon Dioxide Emissions: a Spatial-Temporal Econometric Approach of the Environmental Kuznets Curve By Burnett, J. Wesley; Bergstrom, John
  26. Construction of abatement cost curves: The case of F-gases By Halkos, George
  27. Tax-Versus-Trading and Free Emission Shares as Issues for Climate Policy Design By Jack Pezzey; Frank Jotzo
  28. Voluntary Carbon Markets: How can they Serve Climate Policies? By Pierre Guigon
  29. Towards Global Carbon Pricing: Direct and Indirect Linking of Carbon Markets By Rob Dellink; Stéphanie Jamet; Jean Chateau; Romain Duval
  30. Buying and Cancelling Allowances as an Alternative to Offsets for the Voluntary Market: A Preliminary Review of Issues and Options By Anja Kollmuss; Michael Lazarus
  32. Tackling climate change through adaptation finance in the Least Developed Countries: Is the LDC Fund still fit for purpose? By Davis, Junior; Tan, Celine
  33. Climate proofing infrastructure in Bangladesh : the incremental cost of limiting future inland monsoon flood damage By Dasgupta, Susmita; Huq, Mainul; Khan, Zahirul Huq; Masud, Md. Sohel; Ahmed, Manjur Murshed Zahid; Mukherjee, Nandan; Pandey, Kiran
  34. Individual Adaptation to Climate Change: The Role of Information and Perceived Risk By Osberghaus, Daniel; Finkel, Elyssa; Pohl, Max
  35. Assessing China's Carbon Intensity Pledge for 2020: Stringency and Credibility Issues and Their Implications By ZhongXiang Zhang; ;

  1. By: Reinhard Madlener (Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University); Ilja Neustadt (Socioeconomic Institute, University of Zurich)
    Abstract: In a perfectly competitive market with a possibility of technological innovation we contrast guaranteed feed-in tariffs for electricity from renewables and tradable green certificates from a dynamic efficiency and social welfare point of view. Specifically, we model decisions about the technological innovation with convex costs within the framework of a game-theoretic model, and discuss implications for optimal policy design under different assumptions regarding regulatory pre-commitment. We find that for the case of technological innovation with convex costs subsidy policies are preferable over quota-based policies. Further, in terms of dynamic efficiency, no pre-commitment policies are shown to be at least as good as the pre-commitment ones. Thus, a government with a preference for innovation being performed if the achievable cost reduction is high should be in favor of the no pre-commitment regime.
    Keywords: Renewable electricity, Feed-in tariffs, Regulatory pre-commitment, Tradable green certificates, Quota target, Innovation, Energy policy
    JEL: Q42 Q48
    Date: 2010–09
  2. By: Dina El Bassiouny (Faculty of Management Technology, The German University in Cairo); Ehab Mohamed (Faculty of Management Technology, The German University in Cairo)
    Abstract: In Egypt, electric energy coming from fossil fuels represents around 85% of total electricity requirements. However, the supply of energy in the Arab world is expected to run dry in the coming 30-50 years. With the increase in energy needs, rise in fossil fuel prices, and the swelling of green house gas emissions, the use of renewable and more environment-friendly energy sources to supply power is gaining increased attention. Being a country on the Sunbelt, Egypt has great potential in utilizing solar energy to generate energy products and electricity. However, solar energy is still abandoned in Egypt due to its high costs. This paper first aims to examine the relative significance of several accounting and economic related variables to reduce solar energy costs. To be more specific, the paper seeks to examine the effect of using accounting and finance-based factors, related to depreciation schemes and financing options, to decrease solar energy costs. These factors are considered as a substitute for direct subsidies which are difficult to implement because of the narrow financial scope of the Egyptian government. The results of the study provide a number of policy implications that can be applied to make solar energy closer to cost-competitiveness and contribute to solve the energy problem in Egypt.
    Keywords: Solar Energy, Cost Efficiency, Government Incentives
    JEL: Q48 Q42
    Date: 2010–11
  3. By: Stuart Dawley; Andy Pike; John Tomaney
    Abstract: Discussions of local and regional development have recently broadened from apreoccupation with growth to one which captures the notion of resilience. This papermakes two main contributions to these debates. First, the paper critiques staticequilibrium-based notions of resilience and instead advances a more dynamicevolutionary approach to explain local and regional resilience. Second, we seek toaddress the widening gap between resilience thinking and its transfer to practical policyprescription. To do this, we explore the notions of adaptability, adaptive capacity andnew path creation in developing local and regional resilience. We then focus upon whatthis might mean for local and regional strategies and draw on the case study of theRenewable Energy sector in North East England to demonstrate the enduring role ofpolicy intervention in stimulating change and building resilience in peripheral regions.
    Keywords: Resilience, adaptability, adaptation
    JEL: O10 R00
    Date: 2010–09
  4. By: Anna Alberini (AREC, University of Maryland, US and Centre for Energy Policy and Economics (CEPE), ETH Zurich, Switzerland); Gans Will (AREC, University of Maryland); Daniel Lopez-Velez (AREC, University of Maryland)
    Abstract: We study residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997-2007. Our dataset is a mixed panel/multi-year cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. To our knowledge, this is the most comprehensive set of data for examining household residential energy usage at the national level, containing the broadest geographical coverage, and with the longest longitudinal component (up to 6 observations per dwelling). We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the -0.860 to -0.667 range, while the own price elasticity of gas demand is -0.693 to -0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.
    Keywords: residential electricity and gas demand, price elasticity of energy demand, static model, dynamic panel data model, partial adjustment model
    JEL: D D2 Q4 Q41 Q48
    Date: 2010–11
  5. By: Wasantha Athukorala (QUT); Clevo Wilson (QUT)
    Abstract: This study examines the cointegration and causality relationship between the demand for residential electricity and real income, average real electricity prices, real kerosene prices and real gas prices using annual data for the period, 1960-2007 in Sri Lanka. Error correction (EC) techniques and the Granger-causality (GC) approaches are employed. The long run income elasticity of demand, price elasticity of demand and kerosene price were estimated to be 0.78, -0.62, and 0.14 respectively. The short run elasticities for the same variables were 0.32, -0.16 and 0.10 respectively. The GC results detect bi-directional causality between electricity consumption and real income as well as electricity prices and its consumption. This suggests that these variables are determined jointly. Furthermore, one-way causality running from kerosene price to electricity demand was also found.
    Keywords: Electricity demand, causality, cointegration analysis
    JEL: O13 O16 Q41 Q43 Q28
    Date: 2010–07–30
  6. By: William Blyth
    Abstract: Power generation from fossil fuel is one of the largest sources of greenhouse gas emissions, representing 41% of global energy-related CO2 emissions. Combined with the fact that there are a number of low-carbon technologies available for generating electricity, the sector is therefore a key policy target for delivering near-term and long-term reductions in emissions. This report identifies the importance of these risk factors in the economics of transition by illustrating the case of investment in the power sector. To a great extent, the transition to a lowcarbon power sector means dealing with coal plants, which is the largest contributor, accounting for 73% of global power sector CO2 emissions, and particularly those from the United States, Europe and China, which contribute 17%, 9% and 24% respectively of global power sector CO2 emissions.
    Date: 2010–01
  7. By: Weron, Rafal; Janczura, Joanna
    Abstract: In this paper we discuss the calibration issues of models built on mean-reverting processes combined with Markov switching. Due to the unobservable switching mechanism, estimation of Markov regime-switching (MRS) models requires inferring not only the model parameters but also the state process values at the same time. The situation becomes more complicated when the individual regimes are independent from each other and at least one of them exhibits temporal dependence (like mean reversion in electricity spot prices). Then the temporal latency of the dynamics in the regimes as to be taken into account. In this paper we propose a method that greatly reduces the computational burden induced by the introduction of independent regimes in MRS models. We perform a simulation study to test the efficiency of the proposed method and apply it to a sample series of wholesale electricity spot prices from the German EEX market. The proposed 3-regime MRS model fits this data well and also contains unique features that allow for useful interpretations of the price dynamics.
    Keywords: Markov regime-switching; heteroskedasticity; EM algorithm; independent regimes; electricity spot price
    JEL: C51 C13 Q40
    Date: 2010–11
  8. By: Talat S. Genc (Department of Economics,University of Guelph); Stanley S. Reynolds (Department of Economics,University of Arizona)
    Abstract: The concept of a supply function equilibrium (SFE) has been widely used to model generators’ bidding behavior and market power issues in wholesale electricity markets. Observers of electricity markets have noted how generation capacity constraints may contribute to market power of generation firms. If a generation firm’s rivals are capacity constrained then the firm may be pivotal; that is, the firm could substantially raise the market price by unilaterally withholding output. However the SFE literature has not properly analyzed the impact of capacity constraints and pivotal firms on equilibrium predictions. We characterize the set of symmetric supply function equilibria for uniform price auctions when firms are capacity constrained and show that this set is increasing as capacity per firm rises. We provide conditions under which asymmetric equilibria exist and characterize these equilibria. In addition, we compare results for uniform price auctions to those for discriminatory auctions, and we compare our SFE predictions to equilibrium predictions of models in which bidders are constrained to bid on discrete units of output.
    Keywords: supply function equilibrium, pivotal firm, wholesale electricity market
    JEL: D43 L11 L94
    Date: 2010
  9. By: Talat S. Genc (Department of Economics,University of Guelph); Henry Thille (Department of Economics, University of Guelph)
    Abstract: We study competition between hydro and thermal electricity generators under de- mand uncertainty. Producers compete in quantities and each is constrained: the ther- mal generator by capacity and the hydro generator by water availability. We analyze a two-period game emphasizing the incentives for capacity investments by the ther- mal generator. We characterize both Markov perfect and open-loop equilibria. In the Markov perfect equilibrium, investment is discontinuous in initial capacity and higher than it is in the open-loop equilibrium. However, since there are two distortions in the model, equilibrium investment can be either higher or lower than the ecient investment.
    Keywords: Electricity markets; Dynamic game; Duopoly; Capacity investment.
    JEL: D24 L13 L94
    Date: 2009
  10. By: Evens Salies (Observatoire Français des Conjonctures Économiques); Lionel Nesta (Observatoire Français des Conjonctures Économiques)
    Abstract: Les réformes qui ont conduit à la libéralisation des marchés de l’énergie ont considérablement influencé le comportement d’innovation des utilités électriques dans certains pays. Aux Etats-Unis, elles ont provoqué une diminution de l’investissement en R&D environnementale de ces entreprises, mais aussi des dépôts de brevets des équipementiers. En ce qui concerne l’Europe, l’existence d’une influence ou pas de ces réformes sur les dépôts de brevets verts n’a pas été clairement démontrée. L’objet de cet article est précisément de répondre à cette question à partir d’un échantillon des principales utilités électriques ayant déposé leurs brevets à l’Office Européen des Brevets sur la période 1980-2005.
    Keywords: Libéralisation, Utilités électriques, Europe, Innovation, Environnement, Brevet
    JEL: L43 L94 O31 O52
    Date: 2010–10
  11. By: Annabelle Mourougane
    Abstract: The oil price hike in 2007-08 underlined the vulnerability of Indonesia’s energy subsidy policy to oil price volatility. In addition to entailing significant economic and environmental costs, energy subsidies put pressure on the public budget and benefit mostly rich households. Phasing them out would benefit both the economy and the environment. At the same time, past experience in Indonesia and elsewhere suggests that such a reform is likely to face stiff opposition and will therefore need to be carefully designed and communicated. Compensation in the form of targeted cash transfers will help to shield low-income households from attendant rise in energy prices. This Working Paper relates to the 2010 OECD Economic Review of Indonesia (<P>Éliminer progressivement les subventions à l’énergie en l’Indonésie<BR>La flambée des prix du pétrole de 2007-08 a montré que la politique de subventions à l’énergie de l’Indonésie était sensible à la volatilité des prix du pétrole. En plus d’entraîner des coûts économiques et environnementaux importants, les subventions à l’énergie pèsent sur les finances publiques et profitent essentiellement aux ménages aisés. Leur suppression progressive aurait donc des effets positifs sur l’économie comme sur l’environnement. Toutefois, l’expérience de l’Indonésie et d’autres pays montre qu’une telle réforme risque de rencontrer une vive opposition et qu’il importe donc d’accorder une grande attention à la façon dont elle est conçue et expliquée. Des mécanismes de compensation sous forme de transferts monétaires ciblés contribueront à protéger les ménages à faible revenu de la hausse des prix de l’énergie induite par la réforme. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Indonésie 2010 (
    Keywords: Indonesia, biofuels, energy subsidies, bio-carburants, Indonésie, subventions d'énergie
    Date: 2010–10–26
  12. By: Aleksandar Zaklan; Georg Zachmann; Anne Neumann
    Abstract: We analyze the dynamic effect of prices and price volatility on current oil production, both on the level of country groups and the major individual producer countries. A comprehensive dataset at monthly frequency allows us to include a rich lag structure while controlling for key global and local determinants as well as seasonality. Our set of explanatory variables also includes real economic activity, investment, the strength of the U.S. dollar and institutional quality. We provide a naïve regression analysis using a broad model to show that lagged explanatory variables are important determinants of current oil production. We find that the reaction of oil production is heterogeneous across both country groups and the major individual producer countries.
    Keywords: Crude oil, prices and production, dynamic time series
    JEL: D43 L13 Q43
    Date: 2010
  13. By: Guglielmo Caporale; Davide Ciferri; Alessandro Girardi
    Abstract: We investigate the role of crude oil spot and futures prices in the process of price discovery by using a cost-of-carry model with an endogenous convenience yield and daily data over the period from January 1990 to December 2008. We provide evidence that futures markets play a more important role than spot markets in the case of contracts with shorter maturities, but the relative contribution of the two types of market turns out to be highly unstable, especially for the most deferred contracts. The implications of these results for hedging and forecasting crude oil spot prices are also discussed.
    Keywords: Cointegration, Oil market, Futures prices, Price Discovery.
    JEL: C32 C51 G13 G14
    Date: 2010–07–01
  14. By: Margaret Chitiga; Ismail Fofana; Ramos Mabugu
    Abstract: An energy-focused integrated CGE microsimulation approach is used to assess the implications of differential government policy responses in South Africa, to increases in international oil prices. The first scenario assumes that increases in world oil and petroleum products are passed through to end users with no changes in government tax/subsidy instruments. The second scenario assumes that the world price increases are nullified by a full price subsidy by government in one scenario, while, in the third scenario, revenues generated from a 50 percent tax on the windfall profit of the synthetic petroleum industry, help to minimize the loss in government revenue. Overall output falls by between 2.2 and 2.5 percent, while the government deficit varies from a worsening of 12 to 22 percent under the three scenarios. Synthetic petroleum, coal, and electricity benefit under the floating price scenario, while none expands its output when a 50 percent tax is levied on the profit of the synthetic petroleum industry. Unemployment increases among medium and low-skilled workers, while skilled workers witness a substantial fall in their remuneration, particularly in rural areas. In both rural and urban areas, women are adversely affected relative to men. The poverty headcount ratio and inequality increase slightly more in the price-setting scenarios relative to the floating-price scenario. Thus, allowing the prices to be passed through to end users probably has a less adverse impact at a macroeconomic level, although there may be adverse distributional consequences.
    Date: 2010
  15. By: Ploeg, Frederick van der
    Abstract: For a country fractionalized in competing factions, each owning part of the stock of natural exhaustible resources, or with insecure property rights, we analyze how resources are transformed into productive capital to sustain consumption. We allow property rights to improve as the country transforms natural resources into capital. The ensuing power struggle about the control of resources is solved as a non-cooperative differential game. Prices of resources and depletion increase faster than suggested by the Hotelling rule, especially with many competing factions and less secure property rights. As a result, the country substitutes away from resources to capital too rapidly and invests more than predicted by the Hartwick rule. The power struggle boosts output but depresses aggregate consumption and welfare, especially in highly fractionalized countries with less secure property rights. Genuine saving evaluated with welfare-based accounting prices is zero in this game, but biased upwards if calculated with the lower market prices.
    JEL: Q01 E20 O13 Q32 F32
    Date: 2010
  16. By: Maung, Thein; Gustafson, Cole
    Abstract: This study examines the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel from sugar beets uniquely qualifies as an âadvanced biofuelâ. EISA mandates production of 15 billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model was calibrated with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses, account for more than 70% of total production expenses. The estimated breakeven ethanol price for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the most important factors that affect investment success is the price of ethanol. At an ethanol price of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the 10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and utilities have a relatively minor effect on investment viability.This study examines the financial feasibility of producing ethanol biofuel from sugar beets in central North Dakota. Under the Energy Independence and Security Act (EISA) of 2007, biofuel from sugar beets uniquely qualifies as an âadvanced biofuelâ. EISA mandates production of 15 billion gallons of advanced biofuels annually by 2022. A stochastic simulation financial model was calibrated with irrigated sugar beet data from central North Dakota to determine economic feasibility and risks of production for a 10MGY (million gallon per year) and 20MGY ethanol plant. Study results indicate that feedstock costs, which include sugar beets and beet molasses, account for more than 70% of total production expenses. The estimated breakeven ethanol price for the 20MGY plant is $1.52 per gallon and $1.71 per gallon for the 10MGY plant. Breakeven prices for feedstocks are also estimated and show that the 20MGYplant can tolerate greater ethanol and feedstock price risk than the 10MGY plant. Our results also show that one of the most important factors that affect investment success is the price of ethanol. At an ethanol price of $1.84 per gallon, and assuming other factors remain unchanged, the estimated net present value (NPV) of the 20MGY plant is $41.54 million. By comparison, the estimated NPV of the 10MGY plant is only $8.30 million. Other factors such as changes in prices of co-products and utilities have a relatively minor effect on investment viability.
    Keywords: Agribusiness, Crop Production/Industries, Production Economics,
    Date: 2010–07
  17. By: C.M Drouvot (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II); H. Drouvot (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II); P.M Perluss (IAE de Grenoble - IAE de Grenoble)
    Abstract: This article depicts the improvement in living conditions for those families of peasants (the “landless peasants”) who have benefited from agrarian reform (termed “assentamentos” i.e. homesteads) through the creation of farming cooperatives. The farming cooperative examined herein was supported by the Petrobas group following the guidelines of the Brazilian National Biofuels Program. This program seeks to foster biofuels production among peasant farmers in Brazil's semi arid regions. The present research project comprises a field study which describes the aforesaid program's evolution and, more critically, ascertains the conditions requisite for success. Several crucial conditions stand forth: 1) First, convincing peasants to join the project; in this regard, a charismatic leader sharing the same social origins as the farming families has played a major role in gaining their confidence. 2) Second, developing a coherent set of value-adding activities that incorporate a range of by-products and waste products (from sunflower crops grown for biofuels, a number of corollary activities have arisen: honey, animal feed and fish farming). 3) Finally Petrobas's essential role as a partially state-owned corporation which has implemented a policy of social and environmental responsibility (assigning of a full-time engineer to oversee the project, providing farm equipment rentals needed for the crops as well as paying the salaries for two agronomic technicians working for the cooperative)
    Keywords: biofuel ; family-based farming ; cooperatives ; social and environmental responsibility ; social inclusion
    Date: 2010
  18. By: Stef Proost; Kurt Van Dender
    Abstract: A brief review of long run projections of demand for road transport suggests that problems related to road network congestion and greenhouse gas emissions are likely to become more pressing than they are now. Hence we review, from a macroscopic perspective, popular policy measures to address these problems: stimulating modal shift, regulating land use to reduce car use, and boosting low carbon technology adoption to reduce greenhouse gas emissions. We find that these policies can produce tangible results, but that they may have unintended consequences that drive up costs considerably.
    Date: 2010–11
  19. By: OECD
    Abstract: This paper provides evidence on and discussion of recent developments in global transport markets and analyzes what policies look most promising for stabilizing CO2- emissions from light-duty vehicles. In the aftermath of the economic crisis, recovery is uncertain and unevenly spread across the globe. This has potential impacts on global trade patterns and commodity flows, and hence on key freight transport flows. For the management of future greenhouse gas emissions from transport, our analysis strongly suggests that technologies to improve fuel economy and ultimately transform the energy basis of transport are the key, as there are very strong upward pressures on demand volumes. This of course does not mean that demand…
    Date: 2010–11
  20. By: Nerhagen, Lena (VTI); Li, Chuan-Zhong
    Abstract: Emissions from traffic impose negative effects on human health, and recent evidence indicates that particulate matters (PM) are the detrimental air pollutant that causes most life years lost. To improve the efficiency of resource allocation, various mitigation measures have been proposed for reducing these emissions. However, whether or not the policy instruments are welfare improving, and if yes, how much more efficient they can be remain to be studied. To answer the questions, we need to both assess the economic cost of emission control and the health benefit due to the reduced PM emission by all proposed control instruments. This paper focuses on the cost efficiency for reaching pre-determined emission targets. We are concerned with reducing the concentrations of PM in Stockholm by local policy measures. Contrary to other cost-efficiency studies we have in this study included adaptations in behaviour in addition to the conventional technical measures alone. <p> Since there are different emissions of PM, targeting PM10 may not be a good indicator of the health benefits. We therefore compare the performance of targeting PM and of targeting years of life lost (YOLL) and found interesting differences. We find that if the ultimate objective is to save lives or say life-years, it should be more appropriate to target YOLL, provided that YOLL can be properly predicted. Moreover, since the collected data on the effectiveness and cost of the policy instruments involve large uncertainty, we have employed a stochastic control model to explore the implications of the degree of uncertainty. We find that the higher fulfilment probability, the larger the marginal cost as expected. Also, for a given fulfilment probability, the more uncertain we are about the true effectiveness parameters, the larger the marginal costs.
    Keywords: emission control; cost-effective analysis; human health; uncertainty; stochastic control
    JEL: D62
    Date: 2010–11–11
  21. By: Nerhagen, Lena (VTI); Bergström, Robert; Forsberg, Bertil; Johansson, Christer; Eneroth, Kristina
    Abstract: This paper measures the external health cost due to emissions from different sources in the Stockholm area using the Impact pathway approach. The estimated health impact is the result of detailed dispersion modelling with high spatial resolution. We make separate calculations for the impact that occur within the Stockholm area, the surrounding region and the rest of Europe. The pollutants considered are combustion and secondary particulate matter (PM) from the burning of fuels and also road wear (non-exhaust PM) that makes a large contribution to measured concentrations of PM locally in Stockholm. We also investigate the influence of assumptions made regarding the exposure-response functions used in these calculations since PM of different origin are expected to have different health impacts. According to the results road traffic makes important contributions to the external health cost both on a local and a regional scale compared to other sources. This is in part due to emissions being released in close proximity to where people live but also because of the amount of pollutants emitted. Although non-exhaust PM makes a large contribution to local population exposure within Stockholm the external health cost is relatively small which is due to other health impact being relevant for this emission source. Residential heating also makes an important contribution to exposure and external health cost on a local scale while power plants have a large influence regionally.
    Keywords: Health cost; particulate matter; dispersion modelling; exposure-response functions; value of life year lost
    JEL: D62
    Date: 2010–11–10
  22. By: Fredrik Carlsson (Department of Economics, University of Gothenburg); Mitesh Kataria (Max Planck Institute of Economics, Jena); Alan Krupnick (Resources for the Future, Washington); Elina Lampi (Department of Economics, University of Gothenburg); Asa Löfgren (Department of Economics, University of Gothenburg); Ping Qin (Peking University, College of Environmental Sciences and Engineering); Thomas Sterner (Department of Economics, University of Gothenburg); Susie Chung (Resources for the Future, Washington)
    Abstract: Hypothetical bias is one of the main issues bedeviling the field of nonmarket valuation. The general criticism is that survey responses reflect how people would like to behave, rather than how they actually behave. In our study of climate change and emissions reductions, we took advantage of the increasing bulk of evidence from psychology and economics that addresses the effects of making promises, in order to investigate the effect of an oath script in a contingent valuation survey. The survey was conducted in Sweden and China, and its results indicate that an oath script has significant effects on respondent behavior in answering willingness-to-pay (WTP) questions, some of which vary by country. In both countries, the share of zero WTP responses and extremely high WTP responses decreases when an oath script is used, which also results in lower variance. In China, the oath script also reduces the average WTP, cutting it by half in certain instances. We also found that the oath script has different impacts on various respondent groups. For example, without the oath script, Communist party members in China are more likely than others to have a positive WTP for emissions reductions, but with the oath script, there is no longer any difference between the groups.
    Keywords: Oath script, hypothetical bias, willingness to pay
    JEL: D61 Q5
    Date: 2010–11–09
  23. By: Kenji Fujiwara (Kwansei Gakuin University)
    Abstract: Recent empirics report that transport cost reductions signicantly contribute to rapidly growing world trade. This paper develops a reciprocal market model of intra-industry trade with transboundary pollution from consumption to consider how market integration in the form of transport cost reductions aects the noncooperative choice of an environmental policy and the equilibrium welfare. I show that market integration can improve welfare locally, but that welfare under any non-prohibitive trade cost can not be higher than welfare under autarky. This possibility of trade losses exhibits a sharp contrast to the case of production-generated pollution.
    Keywords: transboundary pollution, consumption-generated pollution, gains from trade; environmental policy
    Date: 2010–11
  24. By: Nadine Heitmann; Setareh Khalilian
    Abstract: CO2 emissions from international shipping, which are currently unregulated, are predicted to rise from 2.7% today to 18% in 2050. International bunker fuel emissions have been excluded from any commitment in the Kyoto Protocol; the UNFCCC conference in Copenhagen also failed to bring about clear directions on how to proceed with these emissions. In this paper we investigate the various options suggested by the Subsidiary Body for Scientific and Technological Advice (SBSTA) of the UNFCCC for allocating CO2 emissions from international shipping to individual countries. We discuss economic and regulatory issues related to these options and the consequences of applying them. We evaluate the various options on the basis of environmental effectiveness, possibility of legal implementation, and fairness of burden sharing. We conclude that an allocation of international shipping emissions should be conducted on the basis of the operating company
    Keywords: climate change, international shipping, CO2 emissions
    JEL: Q52 Q54 Q56
    Date: 2010–10
  25. By: Burnett, J. Wesley; Bergstrom, John
    Abstract: One of the major criticisms of past environmental Kuznets curve (EKC) studies is that the spatiotemporal aspects within the data have largely been ignored. By ignoring the spatial aspect of pollution emissions past estimates of the EKC implicitly assume that a regionâs emissions are unaffected by events in neighboring regions (i.e., assume there are no transboundary pollution emissions between neighbors). By ignoring the spatial aspects within the data several past estimates of the EKC could have generated biased or inconsistent regression results. By ignoring the temporal aspect within the data several past estimates of the EKC could have generated spurious regression results or misspecified t and F statistics. To address this potential misspecification we estimate the relationship between state-level carbon dioxide emissions and income (GDP) accounting for both the spatiotemporal components within the data. Specifically, we estimate a dynamic spatiotemporal panel model using a newly proposed robust, spatial fixed effects model. This new estimation scheme is appropriate for panels with large N and T. Consistent with the EKC hypothesis we find the inverted-U shaped relationship between CO2 emissions and income. Further, we find adequate evidence that carbon dioxide emissions and state-level GDP are temporally and spatially dependent. These findings offer policy implications for both interstate energy trade and pollution emission regulations. These implications are particularly important for the formulation of national policies related to the 2009 Copenhagen Treaty in which the U.S. has committed to significantly reduce greenhouse gas emissions over the next twenty years.
    Keywords: Environmental Kuznets Curve, Carbon Dioxide, Spatial Econometrics, Panel Data Econometrics, Time Series Analysis, Environmental Economics, Pollution Economics, Environmental Economics and Policy, Q50, Q53, Q43, C01, C33,
    Date: 2010–09
  26. By: Halkos, George
    Abstract: Most of scientific research on Greenhouse Gases (GHG) focuses on CO2 emissions. But non-CO2 gases (mainly F-gases in the form of HFCs, PFCs, and SF6) are more potent at trapping heat within the atmosphere. Currently, F-gases constitute a small proportion of GHG emissions but they are extremely high Global Warming Potential gases. At the same time, they are expected to increase massively due to the expansion of some emitting industries, while the atmospheric lifetimes of PFCs and SF6 are very long. This study analyzes the economic and technical assumptions in abatement cost calculation in the case of the F-gases. The important factors for differences among countries in average mitigation costs are discussed and the least cost curve of F-gases control for the EU-27 and for the year 2020 is derived. It seems that it is more cost-effective to start abating SF6 first, and then moving to PFCs and then applying control methods to HFCs.
    Keywords: F-gases; control methods; emissions; GWP
    JEL: Q00 L95 Q53 L52 Q01
    Date: 2010
  27. By: Jack Pezzey (Fenner School of Environment and Society at the Australian National University); Frank Jotzo (Resource Management in Asia-Pacific Program in the Crawford School of Economics and Government at the Australian National University)
    Abstract: We give empirical welfare results for global greenhouse gas emission control, using the first multiparty model to combine tax-versus-trading under uncertainties with revenue recycling. Including multiple parties greatly reduces the welfare advantage of an emissions tax over emissions (permit) trading in handling abatement-cost uncertainties, from that shown by existing, single-party literature. But a tax has a different, much bigger advantage, from better handling uncertainties in business-as-usual emissions. Either mechanism's free emissions share, from tax thresholds or free permits, which lowers its possible welfare gain from revenue recycling, may however dominate any tax-versus-trading advantage. Moreover, political and practical constraints, such as the political unacceptability of no free emissions, the institutional unavailability of efficient emissions tax thresholds, and the unpopularity of recycling revenue as conventional tax cuts, make ideal welfare maximisation a poor guide for mechanism choice; and at optimal prices, trading currently tends to outperform taxation.
    Date: 2010–09
  28. By: Pierre Guigon
    Abstract: In this paper, we aim to examine how voluntary carbon markets can provide a valuable contribution to strengthening domestic and international climate policies. Voluntary markets are defined as small and unregulated segments of an established carbon market that are driven by voluntary offsetting of GHG emissions.<BR>Ce document vise à examiner comment les marchés volontaires du carbone peuvent contribuer utilement à renforcer les politiques climatiques nationales et internationales. Il s’agit de petits segments non réglementés d’un marché du carbone bien établi qui reposent sur la compensation volontaire des émissions de GES.
    Keywords: climate change, emissions trading systems, changement climatique, système d’échange de droits d’émissions
    JEL: Q54 Q58
    Date: 2010–08–03
  29. By: Rob Dellink; Stéphanie Jamet; Jean Chateau; Romain Duval
    Abstract: Emissions trading systems (ETS) can play a major role in a cost-effective climate policy framework. Both direct linking of ETSs and indirect linking through a common crediting mechanism can reduce costs of action. We use a global recursive-dynamic computable general equilibrium model to assess the effects of direct and indirect linking of ETS systems across world regions. Linking of domestic Annex I ETSs leads to moderate aggregate cost savings, as differences in domestic permit prices are limited. However, the economy of the main seller, Russia, is negatively affected by the real exchange rate appreciation that is induced by the large export of permits. The cost-saving potential for developed countries of well-functioning crediting mechanisms appears to be very large. Even limited use of credits would nearly halve mitigation costs; cost savings would be largest for carbon-intensive economies. However, one open issue is whether these gains can be fully reaped in reality, given that direct linking and the use of crediting mechanisms both raise complex system design and implementation issues. The analysis in this paper shows, however, that the potential gains to be reaped are so large, that substantial efforts in this domain are warranted.<BR>Les systèmes d’échange de droits d’émission peuvent jouer un rôle considérable dans le cadre d’une politique climatique efficace par rapport aux coûts. Le couplage direct de ces systèmes, aussi bien qu’indirect à travers un mécanisme commun d’attribution de crédits, peut réduire les coûts de l’action. Nous utilisons un modèle mondial dynamique récursif d’équilibre général calculable pour évaluer les effets du couplage direct et indirect des systèmes d’échange de droits d’émission dans les différentes régions du monde. Le couplage des systèmes d’échange nationaux des pays visés à l’annexe I entraîne de faibles économies dans l’ensemble, car les différences de prix entre permis nationaux sont limitées. Cela étant, l’économie du principal vendeur - la Russie - est mise à mal par l’appréciation du taux de change réel due aux fortes exportations de permis. Les économies que pourraient réaliser les pays développés grâce à des mécanismes efficaces d’attribution de crédits d’émission semblent très importantes. Un recours même limité à ces crédits permettrait en gros de réduire de moitié les coûts de l’atténuation ; les économies à forte intensité de carbone sont celles qui feraient le plus d’économies. Il reste à savoir cependant si, concrètement, ces avantages pourraient être exploités en totalité, compte tenu des problèmes complexes de conception et de mise en oeuvre que posent tant le couplage direct que les mécanismes d’attribution de crédits. L’analyse présentée dans ce rapport montre toutefois que les avantages à en tirer peuvent être si grands qu’il se justifie de déployer des efforts considérables dans ce domaine.
    Keywords: emissions trading systems, Climate mitigation policy, general equilibrium models, système d’échange de droits d’émissions, Politique d’atténuation du changement climatique, modèles d’équilibre général
    JEL: H23 O41 Q54
    Date: 2010–08–04
  30. By: Anja Kollmuss; Michael Lazarus
    Abstract: In recent years, businesses, local governments and individuals have set goals for reducing their emissions of greenhouse gases. In addition to directly reducing their own emissions, many of these entities have purchased carbon offsets to help achieve their mitigation goals. Yet establishing offset quality can be difficult, due to issues such as additionality, measurement, leakage, permanence, and verification. This paper explores scenarios under which, as an alternative to offsets, voluntary buyers could instead buy and cancel allowances from compliance markets. The purchase and cancellation of allowances reduces the available allowances in a cap-and-trade system, “tightening the cap” and, in principle, reducing the emissions that can be produced by covered sources. By this logic, purchasing and cancelling an allowance compels covered sources to achieve additional mitigation. Opportunities for voluntary buyers to purchase and cancel tradable compliance units currently exist in several markets, but in small quantities. If the practice of cancelling allowances remains limited to individuals and voluntary corporate buyers, it is likely to remain small and is unlikely to send a strong price signal. In the medium and long-term this might change if large numbers of sub-national actors came into play and chose to cancel allowances.<BR>Depuis quelques années, des entreprises, des collectivités locales et des particuliers s’attachent à ramener leurs émissions de gaz à effet de serre à un niveau donné. Indépendamment de la réduction directe des quantités qu’elles émettent, beaucoup de ces entités ont acquis des crédits de compensation carbone pour contribuer à la réalisation de leurs objectifs d’atténuation. Toutefois, la réalité de la compensation peut être difficile à établir, compte tenu des problèmes d’additionnalité, de mesure, de fuite, de permanence et de vérification. Ce document porte sur des scénarios selon lesquels, à la place des formules de compensation, les acteurs volontaires pourraient acheter des quotas sur le marché réglementé du carbone puis les annuler. L’achat et l’annulation de quotas reviennent à diminuer les quotas disponibles dans un système de plafonnement et d’échange, puisqu’il s’agit d’« abaisser le plafond » et, en principe, de réduire les émissions susceptibles d’être produites par les sources prises en compte. Logiquement, l’achat et l’annulation d’un quota obligent les sources en question à aller plus loin dans l’atténuation. Des possibilités d’achat et d’annulation d’unités négociables s’offrent actuellement aux acquéreurs volontaires sur plusieurs marchés, mais les quantités sont peu importantes. Si la pratique de l’annulation de quotas demeure limitée à des acteurs isolés et à des entreprises volontaires, elle n’a guère de chances d’envoyer un signal de prix fort. À moyen et long termes, la situation pourra évoluer si un grand nombre de collectivités infranationales entrent en jeu et décident d’annuler des quotas.
    Keywords: climate change, emissions trading systems, changement climatique, système d’échange de droits d’émissions
    JEL: Q54 Q58
    Date: 2010–08–04
    Abstract: We present a global agricultural greenhouse gas model that assesses emissions from land-use change. In addition to evaluating shifts in and out of crop production, we develop a pasture model to assess extensification and intensification of global livestock production based on herd size and stocking rate. We apply the model to a scenario that introduces a tax on me-thane emissions from cattle in the United States. The resulting expansion of pasture in the rest of the world leads to substantially higher emissions than without the tax. The yearly average emissions from the tax are 260 metric tons of CO2-equivalent.
    Keywords: Land-use change, greenhouse gas emissions, pasture expansion, pasture extensification, Land Economics/Use, Q15, Q17, Q18, Q54,
    Date: 2010–06–27
  32. By: Davis, Junior; Tan, Celine
    Abstract: This paper considers the challenges confronting LDCs in meeting the adaptation and mitigation requirements brought on by the climate crisis and addresses the question as to whether the Least Developed Country Fund (LDCF), which is a key source of LDC climate adaptation finance, is still fit for purpose?
    Keywords: climate change; least developed countries; climate finance; adaptation; mitigation; sustainable development
    JEL: Q56 Q01 Q54
    Date: 2010–11
  33. By: Dasgupta, Susmita; Huq, Mainul; Khan, Zahirul Huq; Masud, Md. Sohel; Ahmed, Manjur Murshed Zahid; Mukherjee, Nandan; Pandey, Kiran
    Abstract: Two-thirds of Bangladesh is less than 5 meters above sea level, making it one of the most flood prone countries in the world. Severe flooding during a monsoon causes significant damage to crops and property, with severe adverse impacts on rural livelihoods. Future climate change seems likely to increase the destructive power of monsoon floods. This paper examines the potential cost of offsetting increased flooding risk from climate change, based on simulations from a climate model of extreme floods out to 2050. Using the 1998 flood as a benchmark for evaluating additional protection measures, the authors calculate conservatively that necessary capital investments out to 2050 would total US$2,671 million (at 2009 prices) to protect roads and railways, river embankments surrounding agricultural lands, and drainage systems and erosion control measures for major towns. With gradual climate change, however, required investments would be phased. Beyond these capital-intensive investments, improved policies, planning and institutions are essential to ensure that such investments are used correctly and yield the expected benefits. Particular attention is needed to the robustness of benefits from large-scale fixed capital investments. Investments in increased understanding of risk-mitigation options and in economic mobility will have especially high returns.
    Keywords: Hazard Risk Management,Transport Economics Policy&Planning,Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Economics
    Date: 2010–11–01
  34. By: Osberghaus, Daniel; Finkel, Elyssa; Pohl, Max
    Abstract: Given that many of the predicted effects of climate change are considered imminent and unavoidable, the need to mainstream adaptation as a viable coping measure among private households is becoming a topic of increasing importance. However, little research to date has assessed the factors influencing the motivation to autonomously adapt, nor any successful measures for instigating this behavioural change. This study investigates whether providing locally-focused vs. globally-focused information about the effects of climate change influences the personal perceived risk (PPR) of individual people. Based on a socio-psychological model, Protection Motivation Theory (PMT), it is hypothesized that a higher PPR will lead to a higher motivation to adapt. While this hypothesis has been empirically confirmed by the study, it has been found that providing information on climate change effects that is more personally relevant to the individual and is concerned with his local surroundings does not significantly increase PPR. This may be due to a trade-off between spatial-temporal distance and the comparably low severity of predicted effects in the study region. Interestingly, providing any kind of information, irrespective of having a global or local focus, also did not increase PPR as compared to receiving no information. These results suggest that the sole provision of information about expected climate change impacts, even if tailored to one‟s individual context, does not significantly increase PPR and consequently the motivation to adapt. Another necessary factor might be increasing the knowledge about concrete coping options to allow people to weigh up their personal options.
    Keywords: individual adaptation; perceived risk; adaptation motivation; spatial-temporal distance; information; protection motivation theory
    JEL: D83 Q54 Q58
    Date: 2010–07–01
  35. By: ZhongXiang Zhang (East-West Center); ;
    Abstract: Just prior to the Copenhagen climate summit, China pledged to cut its carbon intensity by 40-45% by 2020 relative to its 2005 levels to help reach an international climate change agreement at Copenhagen or beyond. This raises the issue of whether such a pledge is ambitious or just represents business as usual. To put China's climate pledge into perspective, this paper examines whether this proposed carbon intensity goal for 2020 is as challenging as the energy-saving goals set in the current 11th five-year economic blueprint, to what extent it drives China's emissions below its projected baseline levels, and whether China will fulfill its part of a coordinated global commitment to stabilize the concentration of greenhouse gas emissions in the atmosphere at the desirable level. Given that China's pledge is in the form of carbon intensity, the paper shows that GDP figures are even more crucial for determining impacts on energy or carbon intensity than are energy consumption and emissions data by examining the revisions of China's GDP figures and energy consumption in recent years. Moreover, the paper emphasizes that China's proposed carbon intensity target not only needs to be seen as ambitious, but more importantly it needs to be credible. Finally, it is concluded with a suggestion that international climate change negotiations need to focus on 2030 as the targeted date to cap the greenhouse gas emissions of the world's two largest emitters in a legally binding global agreement.
    JEL: Q42 Q43 Q48 Q52 Q53 Q54 Q58
    Date: 2010–10

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