nep-ene New Economics Papers
on Energy Economics
Issue of 2010‒12‒11
forty-four papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. The Role of Energy in Economic Growth By David I. Stern
  3. The Formation of Preferences in Two-level Games: An Analysis of India’s Domestic and Foreign Energy Policy By Joachim Betz; Melanie Hanif
  4. Inequality across countries in energy intensities: an analysis of the role of energy transformation and final energy consumption By Juan Antonio Duro; Emilio Padilla
  5. Cartelization in gas markets. Studying the potential for a “Gas OPEC” By Steve A. Gabriel, Knut Einar Rosendahl, Ruud G. Egging, Hakob Avetisyan and Sauleh Siddiqui
  6. Gas Release and Transport Capacity Investment as Instruments to Foster Competition in Gas Markets By Chaton, Corinne; Gasmi, Farid; Guillerminet, Marie-Laure; Oviedo, Juan Daniel
  7. Natural Gas in India By Anne-Sophie Corbeau
  8. Russie-Caspienne : l'enjeu de la diversification gazière de l'UE By Catherine Locatelli
  9. Too Many Resources or Too Few? What Drives International Conflicts? By Georg Strüver
  10. "Disaggregating the Resource Curse: Is the Curse More Difficult to Dispel in Oil States than in Mineral States?" By Timothy Azarchs; Tamar Khitarishvili
  11. Analysing Alternative Policy Response to High Oil Prices, Using an Energy Integrated CGE Microsimulation Approach for South Africa By Albert Touna Mama; Jacques Ewoudou
  12. Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH By Chia-Lin Chang; Michael McAleer; Roengchai Tansuchat
  13. Destabilization of the Crude Oil Market and Efforts Toward Price Stabilization By Yoshikazu Kobayashi
  14. New Buyback Program for Photovoltaic Generation: Issues in the view of Electric Utilities Industry Policy By Yoko Ito
  15. Electric Vehicles in Imperfect Electricity Markets: A German Case Study By Wolf-Peter Schill
  16. Modelling Load Shifting Using Electric Vehicles in a Smart Grid Environment By Shin-ichi Inage
  17. The Electric Energy-Water Nexus: Managing the Seasonal Linkages of Fresh Water Use in Energy Sector for Sustainable Future By Perini Praveena Sri
  18. Econometric Approach to Water Use Estimation in Power Plants By Perini Praveena Sri
  19. U.S., European and South Korean Efforts to Raise Nuclear Power Plant Utility factors - What Japan Should Learn from These Efforts By Yu Nagatomi; Yuji Matsuo; Tomoko Murakami
  20. Modeling the effects of nuclear fuel reservoir operation in a competitive electricity market By Maria Lykidi; Jean-Michel Glachant; Pascal Gourdel
  21. Use of wood fuels from boreal forests will create a biofuel carbon debt with a long payback time By Bjart Holtsmark
  22. How Market Efficiency and the Theory of Storage Link Corn and Ethanol Markets By Mindy L. Mallory; Dermot J. Hayes; Scott H. Irwin
  23. Split Incentives and Energy Efficiency in Canadian Multi-Family Dwellings By Young, Denise; Maruejols, Lucie
  24. Is Regulation by Milestones Efficiency Enhancing? - An Experimental Study of Environmental Protection - By Andreas Freytag; Werner Güth; Hannes Koppel; Leo Wangler
  25. Environmental Policy Design Characteristics and Technological Innovation: Evidence from Patent Data By Nick Johnstone; Ivan Hascic; Margarita Kalamova
  26. CO2 Emissions and Economic Activity: heterogeneity across countries and non stationary series By Matías Piaggio; Emilio Padilla
  27. Is there a more effective way to reduce carbon emissions? By Lynette Molyneaux; John Foster; Liam Wagner
  28. Cost-effectiveness Analysis of CO2 Reduction in the Automobile Sector By Shigeru Suehiro; Ryoichi Komiyama; Yuji Matsuo; Yu Nagatomi; Yuji Morita; Zhongyuan Shen
  29. ChinaÕs Low Carbon Transformation: Drivers, Challenges, and Paths By Jiahua Pan
  30. Do environmental benefits matter? A choice experiment among house owners in Germany By Achtnicht, Martin
  31. Some Basic Economics of Carbon Taxes By Harry Clarke
  32. The Economic Geography of European Carbon Market Trading By Eric Knight
  33. Comparing the Copenhagen Emissions Targets By Frank Jotzo
  34. Cost pass-through of the EU emissions allowances: Examining the European petroleum markets By Alexeeva-Talebi, Victoria
  35. Cutting Costs of Catching Carbon. Intertemporal effects under imperfect climate policy By Michael Hoel and Svenn Jensen
  36. Responding to Threats of Climate Change Mega-Catastrophes By Kousky, Carolyn; Rostapshova, Olga; Toman, Michael; Zeckhauser, Richard J.
  37. Climate Change and India: A 4*4 Assessment: A Sectoral and Regional Analysis for 2030s By Ministry of Environment and Forests GOI
  38. Notes on Applying ÔReal OptionsÕ to Climate Change Adaptation Measures, with Examples from Vietnam By Leo Dobes
  39. Natural disasters and household welfare : evidence from Vietnam By Thomas, Timothy; Christiaensen, Luc; Do, Quy Toan; Trung, Le Dang
  40. Tajikistan : key priorities for climate change adaptation By Barbone, Luca; Reva, Anna; Zaidi, Salman
  41. Policy Diffusion in a simple Stackelberg Game By Peter Michaelis; Thomas Ziesemer
  42. Climate Change and Game Theory: A Mathematical Survey By Peter J. Wood
  43. Behavioral economics, neuroeconomics, and climate change policy: baseline review for the garrison institute initiative on climate change By John M. Gowdy
  44. A Role for the G-20 in Addressing Climate Change? By Trevor Houser

  1. By: David I. Stern (Arndt-Corden Department of Economics, Crawford School of Economics and Government, The Australian National University)
    Abstract: Physics shows that energy is necessary for economic production and, therefore, economic growth but the mainstream theory of economic growth, except for specialized resource economics models, pays no attention to the role of energy. This paper reviews the relevant biophysical theory and mainstream, resource economics, and ecological economics models of growth. A possible synthesis of energy-based and mainstream models is presented. This model shows that when energy is scarce it imposes a strong constraint on the growth of the economy but when energy is abundant its effect on economic growth is much reduced. This explains the industrial revolution as a releasing of the constraints on economic growth due to the development of methods of using coal and the discovery of new fossil fuel resources. Time series analysis shows that energy and GDP cointegrate and energy use Granger causes GDP when capital and other production inputs are included in the vector autoregression model. There are, however, various mechanisms that can weaken the links between energy and growth. The empirical literature finds that energy used per unit of economic output has declined in developed and some developing countries, due to both technological change and to a shift from poorer quality fuels such as coal to the use of higher quality fuels, and especially electricity. Substitution of other inputs for energy and sectoral shifts in economic activity play smaller roles.
    Keywords: Energy, Economic Growth, Survey
    JEL: N70 O40 Q43
    Date: 2010–10
  2. By: B.Sudhakara Reddy; Hippu Salk Kristle Nathan (Indira Gandhi Institute of Development Research)
    Abstract: Presently India is facing the twin challenge of energy universalization as well as emission reduction. Nearly 0.4 billion people in India– mostly residing in rural areas– do not have access to electricity and more than 0.8 billion people do not use modern cooking fuels. Provision of energy services however needs to take into account the global temperatures rise, which if to be limited to 2°C more from its pre-industrial value, Green House Gas (GHG) emissions must be halved by 2050 from its 1990 level. Energy infrastructure plays a key role to meet this dual challenge of universalization of energy services and reduction of energy-induced emissions. Assessing India’s infrastructure, this study presents the high humane (Energy universalization) and low carbon scenarios and discusses investment needs, financing mechanisms and the key policy issues.
    Keywords: Energy climate nexus, Energy universalization, Infrastructure Investments, Financing mechanisms, Energy efficiency.
    JEL: P28 Q41 Q42 Q48
    Date: 2010
  3. By: Joachim Betz; Melanie Hanif
    Abstract: This paper examines the formation of India’s energy-policy strategy as an act of doubleedged diplomacy. After developing an analytical framework based on the two-level game approach to international relations (IR), it focuses on the domestic context of policy preference formation. India’s energy strategy is shaped by a shortage of energy and the scarcity of indigenous reserves; these problems have together resulted in a growing import dependence in order to sustain economic growth rates, outdated cross-subsidies, overregulation, and nontransparent bureaucratic structures which are adverse to private investment. The Indian government still dominates the energy sector, but large electoral constituencies within the country exert a considerable indirect influence. The paper analyzes how all these domestic necessities combine with India’s general foreign policy goals and traditions to form an overall energy strategy. We finally discuss how this strategy plays out in a competitive international environment where global resources are shrinking (with most claims already distributed) and environmental concerns are on the rise.
    Keywords: preferences in two-level games, Indian foreign policy, energy security
    Date: 2010–09
  4. By: Juan Antonio Duro (Departament d'Economia, Universidad Rovira i Virgili); Emilio Padilla (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: This paper analyzes the role of the energy transformation index and of final energy consumption per GDP unit in the disparities in energy intensity across countries. In that vein, we use a Theil decomposition approach to analyze global primary energy intensity inequality as well as inequality across different regions of the world and inequality within these regions. The paper first demonstrates the pre-eminence of divergence in final energy consumption per GDP unit in explaining global primary energy intensity inequality and its evolution during the 1971–2006 period. Secondly, it shows the lower (albeit non negligible) impact of the transformation index in global primary energy inequality. Thirdly, the relevance of regions as unit of analysis in studying crosscountry energy intensity inequality and their explanatory factors is highlighted. And finally, how regions around the world differ as to the relevance of the energy transformation index in explaining primary energy intensity inequality.
    Keywords: Energy efficiency, energy intensities, energy transformation, Theil index
    JEL: C69 D39 Q43
    Date: 2010–12
  5. By: Steve A. Gabriel, Knut Einar Rosendahl, Ruud G. Egging, Hakob Avetisyan and Sauleh Siddiqui (Statistics Norway)
    Abstract: Natural gas is increasingly important as a fuel for electric power generation as well as other uses due to its environmental advantage over other fossil fuels. Using the World Gas Model, a large-scale energy equilibrium system based on a complementarity formulation, this paper analyzes possible future gas cartels and their effects on gas markets in a number of regions across the world. In addition, scenarios related to lower transport costs and decreased unconventional gas supply in the United States are considered.
    Keywords: natural gas; market equilibrium; complementarity model; energy
    JEL: Q41 D43
    Date: 2010–12
  6. By: Chaton, Corinne (Laboratoire de Finance des Marchés d'Energies); Gasmi, Farid (Toulouse School of Economics (ARQADE & IDEI)); Guillerminet, Marie-Laure (Hamburg University (FNU)); Oviedo, Juan Daniel (Universidad del Rosario)
    Abstract: Motivated by recent policy events experienced by the European natural gas industry, this paper develops a simple model for analyzing the interaction between gas release and capacity investment programs as tools to improve the performance of imperfectly competitive markets. We consider a regional market in which a measure that has an incumbent release part of its gas to a marketer complements a program of investment in transport capacity dedicated to imports by the marketer, at a regulated transport charge, of competitively-priced gas. First, we examine the case where transport capacity is regulated while gas release is not, i.e., the volume of gas released is determined by the incumbent. We then analyze the effect of the "artifcial" duopoly created by the regulator when the latter regulates both gas release and transport capacity. Finally, using information on the French industry, we calibrate the basic demand and cost elements of the model and perform some simulations of these two scenarios. Besides allowing us to analyze the economic properties of these scenarios, a policy implication that comes out of the empirical analysis is that, when combined with network expansion investments, gas-release measures applied under regulatory control are indeed effective short-term policies for promoting gas-to-gas competition.
    Keywords: Natural gas, Gas release, Regulation, Competition
    JEL: L51 L95
    Date: 2010–11
  7. By: Anne-Sophie Corbeau
    Abstract: The Indian gas market is expected to be one of the fastest growing in the world over the next two decades. This paper analyses this market, highlighting the current challenges. It first looks at the industry structure, presents the main players from industry as well as government, and gives an overview of the regulatory framework. The issue of pricing remaining crucial for both upstream and downstream development, the paper looks at both supply - domestic production and LNG imports - and demand.
    Keywords: natural gas
    Date: 2010–09
  8. By: Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Les crises gazières entre la Russie et l'Ukraine ont mis au premier plan des politiques énergétiques de l'Europe la question de sa sécurité gazière. Dans le même temps, la libéralisation des marchés gaziers de l'UE est susceptible à terme de profondément changer les relations entre fournisseurs et consommateurs jusque là organisées autour des contrats Take or Pay. C'est dans ce contexte qu'est envisagée par l'UE l'ouverture d'un 4e corridor d'approvisionnement en gaz naturel. Ce dernier se présente tout à la fois comme une diversification des routes et des sources d'approvisionnement en gaz naturel. Mais différentes variables mettent plus ou moins en question cette stratégie. La crise d'août 2008 entre la Géorgie et la Russie a démontré la fragilité et l'instabilité d'un approvisionnement de l'Europe par la « voie caucasienne » à partir du gaz de la Caspienne. La matérialisation du « corridor Sud » dépendra de facteurs économiques mais aussi de facteurs plus géopolitiques ayant trait à des incertitudes politiques régionales majeures.
    Date: 2010
  9. By: Georg Strüver
    Abstract: International conflicts over natural resources are frequently cited as the most prominent threat to global peace in the decades ahead. However, this subject has not yet been adequately tackled in the academic literature. This paper contributes to filling the gap by, first, proposing a four-class typology of resource conflicts and by, second, testing these conflict types against data on fossil fuels and interstate conflicts derived from two major conflict datasets: the Militarized Interstate Dispute Dataset (1960–2001) and the UCDP/PRIO Armed Conflicts Dataset (1960–2008). The findings, although preliminary, suggest that resource scarcity may play a less prominent role in the aggression of belligerent countries than is often assumed and that the existence of large oil deposits and high resource-rent incomes are better predictors of conflict involvement.
    Keywords: resource scarcity, resource abundance, interstate conflicts, military intervention
    Date: 2010–10
  10. By: Timothy Azarchs; Tamar Khitarishvili
    Abstract: The hypothesis of the natural resource curse has captivated the economics profession, and since the mid-1990s has generated a large body of policymaking initiatives aimed at dispelling the curse. In this paper, we evaluate how the effect of resource abundance on economic growth has changed since these policies were first introduced by comparing the periods 1970–89 and 1996–2008. We disaggregate resources into oil, gas, coal, and nonfuel mineral resources, and find that disaggregation unmasks diverse effects of resources on concurrent economic and institutional outcomes, as well as on the ability of countries to transform their economic and institutional infrastructure. We consider resource dependence and institutional quality as two channels linking resource abundance to economic growth in the context of an instrumental variables (IV) model. In addition to exploring these channels, the IV framework enables us to test for the endogeneity of the measures of resource dependence and institutional quality in the growth regressions, paying particular attention to the weakness of the instruments.
    Keywords: Resource Curse; Resource Stocks; Resource Dependence; Rule of Law; Institutions; Economic Growth; Growth Regressions; Instrumental Variables
    JEL: O11 O13 O4 Q3
    Date: 2010–12
  11. By: Albert Touna Mama; Jacques Ewoudou
    Abstract: Since the seminal work of Jappelli (1990), it has become standard to identify as liquidity-constrained, borrowers who were either turned down for credit or did not apply because they might be turned down. In this paper, we show that the so-called “denied or discouraged” proxy does not capture accurately consumers’ credit access when consumers seek credit to finance expenditure on durable goods. Our sample is drawn from the Panel Study of Income Dynamics. We document systematic misclassification of unconstrained households as constrained. We argue that: for durables, this proxy captures best the intensity put forth by the borrower when shopping for a loan.
    Keywords: Borrowing constraints; Mortgage loans; Consumer search
    JEL: E21 D12
    Date: 2010
  12. By: Chia-Lin Chang (Department of Applied Economics, Department of Finance, National Chung Hsing University); Michael McAleer (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University); Roengchai Tansuchat (Faculty of Economics, Maejo University)
    Abstract: The paper examines the performance of four multivariate volatility models, namely CCC, VARMA-GARCH, DCC, BEKK and diagonal BEKK, for the crude oil spot and futures returns of two major benchmark international crude oil markets, Brent and WTI, to calculate optimal portfolio weights and optimal hedge ratios, and to suggest a crude oil hedge strategy. The empirical results show that the optimal portfolio weights of all multivariate volatility models for Brent suggest holding futures in larger proportions than spot. For WTI, however, DCC, BEKK and diagonal BEKK suggest holding crude oil futures to spot, but CCC and VARMA-GARCH suggest holding crude oil spot to futures. In addition, the calculated optimal hedge ratios (OHRs) from each multivariate conditional volatility model give the time-varying hedge ratios, and recommend to short in crude oil futures with a high proportion of one dollar long in crude oil spot. Finally, the hedging effectiveness indicates that diagonal BEKK (BEKK) is the best (worst) model for OHR calculation in terms of reducing the variance of the portfolio.
    Keywords: Multivariate GARCH, conditional correlations, crude oil prices, optimal hedge ratio, optimal portfolio weights, hedging strategies.
    JEL: C22 C32 G11 G32
    Date: 2010–11
  13. By: Yoshikazu Kobayashi (The Institute of Energy Economics, Japan)
    Abstract: With crude oil price largely fluctuating, both oil producing and consuming countries have come to identify the challenges brought by the destabilization of crude oil price. Among those, there have been discussions on fair price, that is, the price level which both consuming and oil producing countries can accept. It is, however, difficult to specify a particular price level as a fair price. It is reasonable to understand that a fair price is determined by the price level obtained as a result of the pursuit of stabilization of the crude oil market by both oil producing and consuming countries. As measures for stabilization of the crude oil market, it is important to form a mechanism that provides the market with balanced information that will avoid unnecessary price fluctuation, taking into account the recently increasing importance of “market sentiments” and “information” in price formation. It is furthermore meaningful that both oil producing and consuming countries ensure enough flexibility to absorb the occurrence of unexpected phenomena in terms of supply and demand. It is also important to ensure a diversity of market players and design a system where the market mechanism is exerted to the utmost extent.
    Keywords: crude oil, price level, price stabilisation, oil consumption, oil supply
    JEL: Q30 Q38
    Date: 2010
  14. By: Yoko Ito (The Institute of Energy Economics, Japan)
    Abstract: This paper examines the background, the anticipated effects and the issues raised with regards to the New Buyback Program for Photovoltaic Generation, which was introduced based on the enactment of the "Bill on the Promotion of the Use of Nonfossil Energy Sources and Effective Use of Fossil Energy Source Materials by Energy Suppliers" and "Bill to Amend the Act on the Promotion of the Development and Introduction of Alternative Energy"(passed in August 2009). The New Buyback Program is a system whereby general electric power companies are required to purchase excess electric power generated by photovoltaic generating equipment installed mainly in domestic buildings for a period of 10 years at a fixed tariff. Reducing the cost of power generation is the key to achieve the widespread adoption of photovoltaic generation in Japan. This paper therefore pays attention to the acceleration of cost reductions accompanying the introduction of the new Program, and the subsequent anticipated increase in international competitiveness within related industries. It also touches upon a recent trend that the negative impact of the financial crisis may imply the perspective for the photovoltaic industry is not always positive. Against this background, this paper seeks to consider, with regard to the introduction of the new Program, the problems arising from changes in policy focus from reducing dependence on oil and the liberalization of the utilities, to the climate change mitigations. It argues that the implementation of the new Program requires a well-defined policy coordination considering the compatibility with existing policies and frameworks. Namely, those issues such as the passing on of the cost of the buyback tariff against the liberalization policy as well as energy competition in ever increasing environmental pressures need to be reviewed in a wider picture of long-term utility policy that are to be build upon a balance between the three pillars of energy, economy and the environment.
    Keywords: photovoltaic energy, buyback, energy policy, Japan
    JEL: Q42 Q48
    Date: 2010
  15. By: Wolf-Peter Schill
    Abstract: We analyze the impacts of a hypothetical fleet of plug-in electric vehicles on the imperfectly competitive German electricity market with a game-theoretic model. Electric vehicles bring both additional demand and additional storage capacity to the market. We determine their effects on prices, welfare, and electricity generation for various cases with different players being in charge of vehicle operations. We find that vehicle loading increases generator profits, but decreases consumer surplus. If excess vehicle batteries can be used for storage, welfare results are reversed: generating firms suffer from the price-smoothing effect of additional storage, whereas consumers benefit despite increasing overall demand. Results however depend on the player being in charge of storage operations, and on battery degradation costs. Strategic players tend to underutilize the storage capacity of the vehicle fleet, which may have negative welfare implications. In contrast, we find a small market power mitigating effect of electric vehicle recharging on oligopolistic generators. Overall, electric vehicles are unlikely to be a relevant source of market power in Germany.
    Keywords: Electric Vehicles, Vehicle-to-Grid, Arbitrage, Electric Power Markets, Market power
    JEL: Q40 Q41 L13 D43
    Date: 2010
  16. By: Shin-ichi Inage
    Abstract: Electric vehicles (EVs) represent both a new demand for electricity and a possible storage medium that could supply power to utilities. The "load shifting" and “vehicle-to-grid” concepts could help cut electricity demand during peak periods and prove especially helpful in smoothing variations in power generation introduced to the grid by variable renewable resources such as wind and solar power. This paper proposes a method for simulating the potential benefits of using EVs in load shifting and "vehicle-to-grid" applications for four different regions – the United States, Western Europe, China and Japan – that are expected to have large numbers of EVs by 2050.
    Keywords: technology
    Date: 2010–08
  17. By: Perini Praveena Sri (Indira Gandhi Institute of Development Research)
    Abstract: The fast growing demand for fresh water-coupled with the need to protect the environment has made many areas of India and the rest of the World vulnerable to water shortages for various uses of the economy. As they interact with Electricity Industry, water availability is critical to power generation. With out access to adequate amounts of water for steam generation and cooling, power plants that rely on heat energy to generate electricity cannot operate. Seasonal anomalies in water systems and electricity production are inextricably linked. A change in one of these systems induces a change in the other. Therefore, there is an imperative need to better understand the interrelationship of Electric Energy- water for effective management of serious water related power generation issues. This paper gauges the effects of the some of overlaps and gaps between seasonal anomalies in water availability and growth of power generation in rainy, summer, winter and post monsoon season for power plants of different energy types (Both non-renewable and renewable sources)
    Keywords: Andhra Pradesh (AP), Electric-Energy Water Nexus, Water Withdrawals (WD), Loss of generation (LG), Water Shortage, Seasonal Variation Index, cooling effectiveness
    JEL: C43 Q25 Q40 Q42 Q43 Q54 Q55
    Date: 2010
  18. By: Perini Praveena Sri (Indira Gandhi Institute of Development Research)
    Abstract: The purpose of this paper is to examine water use estimation in hydel and thermal electric power plants in selected regions i.e. Coastal, Rayalaseema and Telangana regions of Andhra Pradesh. The study primarily focuses on the realistic fundamental premise that thermal electric and hydro electric energy generation is responsible for the largest monthly volume of water withdrawals in four seasons (i.e. summer, rainy, winter and post monsoon season) of a year. These enormous water withdrawals by these hydel and thermal power plants can have significant influence on local surface water resources. However there are very few studies of determinants of water use in hydel and thermal electric generation. Analysis of hydel and thermal electric water use data in the existing power plants clearly indicates that there is wide variability in unitary hydel and thermal electric water use within the system. The multivariate regression procedures were used to identify the significant determinants of thermal and hydel water withdrawals in various power plants i.e. five hydel and four thermal power plants. The estimated regression coefficients indicate that the best explanatory variables for the total quantity of hydel water withdrawals are storage capacity, tail water level and actual generation and thermal water withdrawals are condenser cooling and ash disposal. The unit variability of unit water usage indicates that there is significant potential for water conservation in existing power plants. Apart from this as water is no longer available as a free good; it calculates the real value of water in selected power plants using Water Valuation Techniques such as Residual Value and Opportunity costs.
    Keywords: Thermal water withdrawals, hydel water withdrawals, storage capacity, tail water level, actual generation, condenser cooling and ash disposal.
    JEL: C C C
    Date: 2010
  19. By: Yu Nagatomi; Yuji Matsuo; Tomoko Murakami (The Institute of Energy Economics, Japan)
    Abstract: Japan has recently been urged to implement measures to increase utility factors for nuclear power plants in order to address energy security and greenhouse gas emission cuts. The average utility factor for Japan's nuclear power plants in 2009 rose from 58.0% in 2008 to 64.7%, still below levels in other major nuclear power generation countries including South Korea and the United States. Some major foreign nuclear power generation countries have kept their utility factors for nuclear plants at high levels at or above 90% since 1990, while others including the United States and South Korea have raised their respective factors since 2000 following the 1990s when their factors were close to the Japanese level. The latter group made ambitious efforts to raise these factors. Specifically, the United States has shortened planned outage time for periodic maintenance and repairs of nuclear power plants year by year as the nuclear industry and the Nuclear Regulatory Commission have tried to take advantage of risk information for optimizing instrument-by-instrument inspection frequencies and for expanding the scope for preventive maintenance during operation (PMO). Unplanned outage time to solve nuclear plant instrument issue has also been shortened substantially thanks to the reduction of the trouble incidence rate and shorter repair and restart times. The United States has also tried to lengthen operational cycle periods, adopting 18-to-24-month cycles for many plants. In a bid to shorten plant outage time, South Korea has promoted not only the improvement of operational skills and the introduction of sophisticated instruments but also the enhancement of maintenance know-how including the reform of maintenance and repair processes and the improvement of inspection work steps. Overseas cases for the restart of nuclear plant operations from an unplanned plant outage include those in multiple countries in which thorough investigations into minor troubles or measures for their future prevention were not necessarily required for restarting plants. As far as our analysis generally indicates, local governments are not authorized to examine nuclear plant safety in foreign countries. An apparent dominant view in foreign countries is that it would be reasonable to utilize infrastructure as much as possible once safety regulation authorities conclude that a plant restart would have no safety problems. As existing nuclear power plants have been required to be effectively utilized under the top priority on safety, some countries have continuously achieved high utility factors for nuclear plants, between 85% and 95% over 10 to 20 years while meeting safety standards at the same level as in Japan. In considering specific measures to effectively utilize existing nuclear reactors, Japan should take full account of these overseas efforts and promote discussions on overall Japanese nuclear energy and safety approaches.
    Keywords: nuclear power, Japan, utility factor
    JEL: Q40 Q54
    Date: 2010
  20. By: Maria Lykidi (ADIS-GRJM - Département d'Economie); Jean-Michel Glachant (ADIS-GRJM - Département d'Economie, European University Institute - Department of Economics); Pascal Gourdel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: In many countries, the electricity systems are quitting the vertically integrated monopoly organization for an operation framed by competitive markets. In such a competitive regime one can ask what the optimal operation/management of the nuclear generation set is. We place ourselves in a medium-term horizon of the management in order to take into account the seasonal variation of the demand level between winter (high demand) and summer (low demand). A flexible nuclear set is operated to follow a part of the demand variations. In this context, nuclear fuel stock can be analyzed like a reservoir since nuclear plants stop periodically (every 12 or 18 months) to reload their fuel. The operation of the reservoir allows different profiles of nuclear fuel uses during the different seasons of the year. We analyze it within a general deterministic dynamic framework with two types of generation : nuclear and non-nuclear thermal. We study the optimal management of the production in a perfectly competitive market. Then, we build a very simple numerical model (based on data from the French market) with nuclear plants being not operated strictly as base load power plants but within a flexible dispatch frame (like the French nuclear set). Our simulations explain why we must anticipate future demand to manage the current production of the nuclear set (myopia can not be total). Moreover, it is necessary in order to ensure the equilibrium supply-demand, to take into account the non-nuclear thermal capacities in the management of the nuclear set. They also suggest that non-nuclear thermal may remain marginal during most of the year including the months of low demand.
    Keywords: Nuclear technology, non-nuclear thermal technology, electricity, nuclear fuel "reservoir", perfect competition, merit order, follow-up of load, seasonal demand.
    Date: 2010–11
  21. By: Bjart Holtsmark (Statistics Norway)
    Abstract: Owing to the extensive critique of food-crop-based biofuels, attention and hopes have turned toward second-generation wood-based biofuels. An important question is therefore whether wood from boreal forests could serve as a source for biofuels. However, in a typical boreal forest, it takes 70–120 years before a stand of trees is mature. If this time lag and the real dynamics of the carbon stock of boreal forests more generally are taken into account, it becomes necessary to reconsider the potential mitigation effects of the increased use of wood fuels from boreal forests. This paper finds that the increased harvest of a boreal forest creates a biofuel carbon debt that takes 150–230 years to repay.
    Keywords: forestry; greenhouse gas emissions; bioenergy; carbon neutrality
    JEL: Q23 Q42 Q54 Q58
    Date: 2010–11
  22. By: Mindy L. Mallory; Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Scott H. Irwin
    Abstract: In this article we use the theories of market efficiency and supply of storage to develop a conceptual link between the corn and ethanol markets and explore statistical evidence for the link. We propose that a long-run no-profit condition is established in distant futures markets for ethanol, corn, and natural gas and then use the theory of storage to define an inter-temporal equilibrium among these prices. The relationship shows that under certain conditions, future price expectations will influence current spot prices and that a short-term relationship between input and output prices will exist. This short-term relationship will contain fixed costs. We demonstrate validity of the theory using a structural price model and then by means of time-series techniques.
    Keywords: arbitrage, cointegration, corn, energy, ethanol, futures, price-analysis, storage.
    Date: 2010–12
  23. By: Young, Denise (University of Alberta, Department of Economics); Maruejols, Lucie (University of Alberta, Department of Economics)
    Abstract: This paper examines the energy-related behaviour of occupants and owners of multi-family dwellings in Canada, some of whom do not pay directly for electricity or heat, but instead have these costs included in their rent or condo fees. Using data from the 2003 Survey of Household Energy Use, we look at the extent to which split incentives that result from bill-paying arrangements effect a variety of activities including the setting of temperatures at various times of the day and the use of eco-friendly options in basic household tasks. Findings suggest that these split incentives do indeed impact some aspects of occupant behaviour, with households who do not pay directly for their heat opting for increased thermal comfort and being less sensitive to whether or not somebody is at home and the severity of the climate when deciding on temperature settings. Regardless of who pays for utilities, Canadian households who live in multi-family dwellings are generally unresponsive to fuel prices. Our empirical results suggest that the possibility of environmental benefits from policies aimed at improving energy-efficiency in this sector, especially if targeted at reducing the impacts of the behaviour of those who do not pay directly for energy use.
    Keywords: energy efficiency; agency effects; household behaviour
    JEL: D12 Q41
    Date: 2010–11–01
  24. By: Andreas Freytag (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Hannes Koppel (Max Planck Institute of Economics, Jena); Leo Wangler (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: Viewing individual contributions as investments in emission reduction we rely on the familiar linear public goods- game to set global reduction targets which, if missed, imply that all payoffs are destroyed with a certain probability. Regulation by milestones does not only impose a final reduction target but also intermediate ones. In our leading example the regulating agency is Mother Nature but our analysis can, of course, be applied to other regulating agencies as well. We are mainly testing for milestone effects by varying the size of milestones in addition to changing the marginal productivity of individual contributions and the probability to lose.
    Keywords: Cumulative Public Goods, Milestones, Climate Change, Experiment.
    JEL: C92 D78 H41 Q54
    Date: 2010–12–02
  25. By: Nick Johnstone; Ivan Hascic; Margarita Kalamova
    Abstract: This paper focuses on the issue of innovation and technology transfer in the areas of air pollution abatement, wastewater effluent treatment, solid waste management, and climate change mitigation. The paper describes the trends in innovative activity related to selected areas of pollution abatement and control technologies and their transfer internationally. It also discusses characteristics of environmental policy regimes that are amenable to encouraging innovation of environmental technologies, and provides empirical evidence on the role of various determinants (including general characteristics of countries' environmental policy regimes) in encouraging innovation.<BR>Ce document se concentre sur la question du transfert d’innovation et de technologie dans les domaines de la réduction de pollution atmosphérique, du traitement d’effluent d’eau usagée, de la gestion de déchets solides, et de l’atténuation de changement climatique. Il décrit les tendances dans l’activité innovatrice relative aux technologies de réduction de la pollution et de leur transfert international. Il identifie également les caractéristiques des régimes de politique environnementale favorables à l’innovation environnementale, et établit le lien empirique sur le rôle des diverses causes déterminantes (y compris les caractéristiques générales de la politique environnementale des pays) dans l’innovation environnementale.
    Keywords: environmental policy, innovation, technology, politique environnementale, innovation, technologie
    JEL: O31 O33 Q55 Q56 Q58
    Date: 2010–03–16
  26. By: Matías Piaggio (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Emilio Padilla (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: This paper explores the homogeneity of the functional form, the parameters, and the turning point, when appropriate, of the relationship between CO2 emissions and economic activity for 31 countries (28 OECD, Brazil, China, and India) during the period 1950 to 2006 using cointegration analysis. With a sample highly overlapped over time between countries, the result reveals that the homogeneity across countries is rejected, both in functional form and in the parameters of long term relationship. This confirms the relevance of considering the heterogeneity in exploring the relationship between air pollution and economic activity to avoid spurious parameter estimates and infer a wrong behavior of the functional form, which could lead to induce that the relationship is reversed when in fact it is direct.
    Keywords: Bound testing, cointegration, CO2 emissions, environmental Kuznets curve, heterogeneity
    JEL: C32 O13 Q53 Q56
    Date: 2010–12
  27. By: Lynette Molyneaux (School of Economics, The University of Queensland); John Foster (School of Economics, The University of Queensland); Liam Wagner (School of Economics, The University of Queensland)
    Abstract: Whilst emissions trading systems are widely held to be able to deliver lowest-cost abatement, uncertainty reduces their effectiveness. We consider a new scheme, the Tender-Price Allocation Mechanism, which focuses carbon factor cost expenditure on abatement rather than just revenue transfers. It is a scheme that reduces uncertainty and the costs of uncertainty for both firms and regulators. It also incorporates a suite of incentives that compensates for the externalities associated with abatement investment.
    Date: 2010
  28. By: Shigeru Suehiro; Ryoichi Komiyama; Yuji Matsuo; Yu Nagatomi; Yuji Morita; Zhongyuan Shen (The Institute of Energy Economics, Japan)
    Abstract: Various problems relating to energy and the environment clearly exist, such as global warming and a steep rise in the price fossil fuels, and resources. These problems should be addressed in the medium term or long run. As for the abatement of greenhouse gas emission, active discussions have been held on the stage of world politics to achieve the long-term goal. Although various approaches have been proposed by several research institutions and countries, sufficient studies have not yet been conducted on the roles of individual countries and sectors. Specifically, in the automotive transportation sector wherein oil demand and CO2 emissions are estimated to rise in the future with the marked progress of motorization in developing countries, it is increasingly important to study these subjects. We focused on the automotive transportation sector and studied the CO2 abatement potential and its cost performance in this sector. This article reports the results of the study.
    Keywords: energy and the environment, climate change, automotive transportation
    JEL: Q40 Q52 Q54
    Date: 2010
  29. By: Jiahua Pan (Institute of Urban and Environmental Studies Chinese Academy of Social Science, Beijing)
    Abstract: National climate change mitigation actions and objectives could be taken from both active and passive considerations. China has multiple objectives to develop a low carbon economy and to decrease carbon dioxide emission per unit of GDP, including mitigation of global climate change, security of energy supply, promotion of sustainable development (environmental protection, poverty alleviation, employment and natural conservation). In this regard, ChinaÕs actions are more at the active side than from a pressure outside. However, there are some suspicions in the international society about whether China has the determination and efficiency in mitigation actions. The author demonstrates that ChinaÕs low carbon transformation is largely driven from domestic considerations. For china the question is not to make the transformation into a low carbon economy, but how to accelerate the process. In the meantime, low carbon transformation in China has to face many serious challenges. A dilemma exists that a higher carbon may actually help raise necessary resources for promoting low carbon solutions. Understanding and international cooperation are essential for ChinaÕs low carbon transformation.
    Keywords: low carbon transformation, sustainable development, mitigation of climate change, carbon dilemma, China
    JEL: Q54 Q56 O53
    Date: 2010–10
  30. By: Achtnicht, Martin
    Abstract: Residential buildings strongly contribute to global CO2 emissions due to the high energy demand for electricity and heating, particularly in industrialised countries. Within the EU, decentralised heat generation is of particular relevance for future climate policy, as its emissions are not covered by the EU ETS. We conducted a choice experiment concerning energy retrofits for existing houses in Germany. In the experiment, the approximately 400 sampled house owners could either choose a modern heating system or an improved thermal insulation for their home. We used standard and mixed logit specifications to analyse the choice data. We found environmental benefits to have a significant impact on choices of heating systems. However, they played no role in terms of insulation choices. Based on the estimated mixed logit model, we further obtained WTP measures for CO2 savings. --
    Keywords: Choice experiment,CO2 emissions,Energy efficiency,Energy saving,Mixed logit,Residential buildings,Willingness to pay
    JEL: C25 D12 Q40 Q51
    Date: 2010
  31. By: Harry Clarke (School of Economics and Finance, La Trobe University, Melbourne)
    Abstract: This paper asks three questions. First, how do carbon taxes drive economic and environmental outcomes? Second, what is the appropriate economic base on which carbon taxes should be levied? Finally, how well does a carbon tax deliver economic-environmental outcomes compared to a comparable emissions trading scheme.
    Keywords: Climate change, tax, carbon
    JEL: Q54 H23
    Date: 2010–10
  32. By: Eric Knight (Department of Geography and the Environment, University of Oxford)
    Abstract: The European Union Emissions Trading Scheme (EU ETS) is the world’s first regional 10 carbon trading market. This article is a quantitative attempt to examine the temporal and spatial geography of European carbon trading. We show that carbon markets are especially sensitive to two factors: staging across time (Phase I versus II of the EU ETS) and across space (energy market structures in Europe). Carbon markets serve as a vehicle to better understand the economic geography of financial markets. Building on the theoretical vocabulary of the geography of finance, the article suggests that certain national factors (market structure) and institutional factors (regulatory phases) better explain how carbon markets operate than company level differences. These findings indicate that geographers have a key role to play in highlighting the local ramifications of carbon markets if and when the world moves towards its ambition for a global carbon market.
    Keywords: Climate change, tradable permits, European Union
    JEL: Q54 R12
    Date: 2010–10
  33. By: Frank Jotzo (Crawford School of Economics and Government, The Australian National University)
    Abstract: Following the Copenhagen climate Accord, developed and developing countries have pledged to cut their greenhouse gas emissions, emissions intensity or emissions relative to baseline. This analysis puts the targets for the major countries on a common footing, and compares them across different metrics. Targeted changes in absolute emissions differ markedly between countries, with continued strong increases in some developing countries but significant decreases in others including Indonesia, Brazil and South Africa, provided reasonable baseline projections are used. Differences are smaller when emissions are expressed in per capita terms. Reductions in emissions intensity of economies implicit in the targets are remarkably similar across developed and developing countries, with ChinaÕs emissions intensity target spanning almost the same range as the implicit intensity reductions in the United States, EU, Japan, Australia and Canada. Targeted deviations from business-as-usual are also remarkably similar across countries, and the majority of total global reductions relative to baselines may originate from China and other developing countries. The findings suggest that targets for most major countries are broadly compatible in important metrics, and that while the overall global ambition falls short of a two degree trajectory, the targets by key developing countries including China can be considered commensurate in the context of what developed countries have pledged.
    Keywords: Climate Change, mitigation, developing countries, emissions intensity
    JEL: Q54
    Date: 2010–10
  34. By: Alexeeva-Talebi, Victoria
    Abstract: This paper explores the ability of European refineries to pass-through costs associated with the introduction of the EU Emissions Trading Scheme (EU ETS). We estimated a sequence of vector error correction models (VECM) within a multi-national setting which covers 14 EU member states. Using weekly data at the country level, this paper finds a significant influence of prices for European Union Allowances (EUAs) on unleaded petrol retail prices during the trial phase of the EU ETS from 2005 to 2007. Petrol prices are found to be elastic with respect to crude oil prices and exchange rates but rather inelastic with respect to carbon costs. The long-run elasticity of petrol prices with respect to the EUA prices typically ranges between 0.01% and 0.09%. Furthermore, by computing the variance decomposition our analysis shows that a significant fraction of petrol price changes in Austria, Germany, France and Spain can be explained by changes in allowances prices (between 10% and 20%). --
    Keywords: Cost Pass-Through,Emissions Trading Scheme,Refineries
    JEL: F18 C22 L11
    Date: 2010
  35. By: Michael Hoel and Svenn Jensen (Statistics Norway)
    Abstract: We use a two-period model to investigate intertemporal effects of cost reductions in climate change mitigation technologies for the power sector. With imperfect climate policies, cost reductions related to carbon capture and storage (CCS) may be more desirable than comparable cost reductions related to renewable energy. The finding rests on the incentives fossil resource owners face. With regulations of emissions only in the future, cheaper renewables speed up extraction (the `green paradox'), whereas CCS cost reductions make fossil resources more attractive for future use and lead to postponement of extraction.
    Keywords: climate change; exhaustible resources; carbon capture and storage; renewable energy; green paradox
    JEL: Q30 Q42 Q54
    Date: 2010–12
  36. By: Kousky, Carolyn; Rostapshova, Olga; Toman, Michael; Zeckhauser, Richard J.
    Abstract: There is a low but uncertain probability that climate change could trigger “mega-catastrophes,” severe and at least partly irreversible adverse effects across broad regions. This paper first discusses the state of current knowledge and the defining characteristics of potential climate change mega-catastrophes. While some of these characteristics present difficulties for using standard rational choice methods to evaluate response options, there is still a need to balance the benefits and costs of different possible responses with appropriate attention to the uncertainties. To that end, we present a qualitative analysis of three options for mitigating the risk of climate mega-catastrophes—drastic abatement of greenhouse gas emissions, development and implementation of geoengineering, and large-scale ex ante adaptation—against the criteria of efficacy, cost, robustness, and flexibility. We discuss the composition of a sound portfolio of initial investments in reducing the risk of climate change mega-catastrophes.
    Date: 2010–11
  37. By: Ministry of Environment and Forests GOI
    Abstract: The report provides an assessment of impact of climate change in 2030s on four key sectors in four climate sensitive regions of India.
    Keywords: environment, economy, forests, climae change, India, himalayan region, water resources,
    Date: 2010
  38. By: Leo Dobes (Crawford School of Economics and Government, The Australian National University)
    Abstract: A factor common to all adaptation measures is the uncertainty that is the hallmark of climate change. The timing, intensity and location of climate change impacts is not known to any degree of precision. Because most deterministic analyses and policy prescriptions ignore this uncertainty, their recommendations are likely to waste community resources. Except by chance, adaptation measures will either be over-engineered, or they will be inadequate and result in harm. Applying real options thinking allows an incremental and flexible approach. Adaptation measures are implemented only as better knowledge becomes available over time. Several examples are given of real options in the Mekong Delta, with a comparison of net present values of two housing alternatives. It is essential to undertake net present value calculations when comparing different projects to ensure that the value of any options is weighed against other costs and benefits.
    Keywords: real options, Vietnam, climate change, adaptation
    JEL: Q54 Q56
    Date: 2010–11
  39. By: Thomas, Timothy; Christiaensen, Luc; Do, Quy Toan; Trung, Le Dang
    Abstract: As natural disasters hit with increasing frequency, especially in coastal areas, it is imperative to better understand how much natural disasters affect economies and their people. This requires disaggregated measures of natural disasters that can be reliably linked to households, the first challenge this paper tackles. In particular, a methodology is illustrated to create natural disaster and hazard maps from first hand, geo-referenced meteorological data. In a second step, the repeated cross-sectional national living standard measurement surveys (2002, 2004, and 2006) from Vietnam are augmented with the natural disaster measures derived in the first phase, to estimate the welfare effects associated with natural disasters. The results indicate that short-run losses from natural disasters can be substantial, with riverine floods causing welfare losses of up to 23 percent and hurricanes reducing welfare by up to 52 percent inside cities with a population over 500,000. Households are better able to cope with the short-run effects of droughts, largely due to irrigation. There are also important long-run negative effects, in Vietnam mostly so for droughts, flash floods, and hurricanes. Geographical differentiation in the welfare effects across space and disaster appears partly linked to the functioning of the disaster relief system, which has so far largely eluded households in areas regularly affected by hurricane force winds.
    Keywords: Natural Disasters,Hazard Risk Management,Disaster Management,Climate Change Mitigation and Green House Gases,Adaptation to Climate Change
    Date: 2010–12–01
  40. By: Barbone, Luca; Reva, Anna; Zaidi, Salman
    Abstract: How should Tajikistan adapt to ongoing and future climate change, in particular given the many pressing development challenges it currently faces? The paper argues that for developing countries like Tajikistan, faster economic and social development is the best possible defense against climate change. It presents some key findings from a recent nationally representative household survey to illustrate the strong public support for more climate change related spending on better management of water resources, disaster management, agriculture, and public health--four key sectors that the government's latest poverty reduction strategy identifies as being especially important from a climate change perspective. Finally, the paper argues that, as important as project-based adaptation measures may be, it is imperative that they be supported by an overall policy framework that provides a truly enabling environment to facilitate faster climate change adaptation.
    Keywords: Science of Climate Change,Climate Change Mitigation and Green House Gases,Climate Change Economics,Water Supply and Sanitation Governance and Institutions,Population Policies
    Date: 2010–11–01
  41. By: Peter Michaelis (University of Augsburg, Department of Economics); Thomas Ziesemer (University of Augsburg, Department of Economics)
    Abstract: Strategic environmental policy games are usually based on simultaneous decision making and reach the conclusion that the policy choices are strategic substitutes. Empirical evidence, however, shows that the introduction of a regulatory instrument usually follows a consecutive pattern that is best described as policy diffusion. To introduce policy diffusion into to a strategic environmental policy game we transform the typical model setup into a Stackelberg game in which we analyze the policy decisions of two governments when one can commit to its choice. We find that the well-known trade-off between rent-seeking and the internalisation of negative externalities from pollution is mitigated when policy diffusion takes place.
    Keywords: strategic environmental policy, policy diffusion, emission tax
    JEL: F18 D62 Q58
    Date: 2010–12
  42. By: Peter J. Wood (Resource Management in Asia-Pacific Program, Crawford School of Economics and Government, The Australian National University)
    Abstract: This paper examines the problem of achieving global cooperation to reduce greenhouse gas emissions. Contributions to this problem are reviewed from noncooperative game theory, cooperative game theory, and implementation theory. We examine the solutions to games where players have a continuous choice about how much to pollute, and games where players make decisions about treaty participation. The implications of linking cooperation on climate change with cooperation on other issues, such as trade, is also examined. Cooperative and non-cooperative approaches to coalition formation are investigated in order to examine the behaviour of coalitions cooperating on climate change. One way to achieve cooperation is to design a game, known as a mechanism, whose equilibrium corresponds to an optimal outcome. This paper examines some mechanisms that are based on conditional commitments, and their policy implications. These mechanisms could make cooperation on climate change mitigation more likely.
    Keywords: Climate change, negotiations, game theory, implementation theory
    JEL: Q54 C70
    Date: 2010–10
  43. By: John M. Gowdy (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA)
    Abstract: In spite of the increasing scientific certainty that the earth's climate is warming and that human activity is partially responsible, public willingness to take steps to reduce greenhouse gas emissions seems to be decreasing. How can the scientific consensus as to the urgency of the climate change problem be conveyed to the general public in such a way as to support greenhouse gas abatement policies and to actually change behavior? This essay explores the standard economic approach to environmental pollution and discusses findings from behavioral economics and neuroscience that could lead to a more fruitful understanding of the relationship between economic policy and human psychology. This essay is a background paper prepared for the Garrison Institute's "Climate, Mind and Behavior" initiative.
    JEL: A10 A11 P48
    Date: 2010–11
  44. By: Trevor Houser (Peterson Institute for International Economics)
    Abstract: Following the chaotic Copenhagen conference of the UN Framework Convention on Climate Change (UNFCCC), policymakers and pundits have discussed the G-20 as an alternative forum for advancing climate change diplomacy. This paper assesses the risks and rewards of tackling climate change in the G-20 and finds that despite its seeming attractiveness, the G-20, as structured, is not a suitable replacement for the UN-led process and has limited ability, at present, to advance climate change negotiations. There is much, however, that the G-20 can do to contribute to the goals of the climate negotiations outside of wading into the negotiations themselves. Building on its existing agenda the G-20 has the power to significantly reduce global greenhouse gas emissions, accelerate the deployment of clean energy technology, and help vulnerable countries adapt to a warmer world through the mobilization of public and private finance. Following through on the existing G-20 pledge to phase out and rationalize inefficient fossil fuel subsidies, establishing new green guidelines for multilateral development banks, coordinating green stimulus exit strategies, promoting open markets for environmental goods and services, and rebalancing global economic growth all fall well within the G-20's mandate and help meet the climate challenge.
    Keywords: climate change, carbon, climate finance, UNFCCC, G20, green stimulus, macroeconomic imbalances, environmental goods and services, multilateral development banks, climate finance, fossil fuel subsidies
    JEL: Q00 Q27 Q48 Q54 F18 F35 F50 F51 F52 F53
    Date: 2010–10

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