nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒01‒03
thirty-six papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Short- and Long-Run Electricity Demand Elasticities at the Subsectoral Level: A Cointegration Analysis for German Manufacturing Industries By Bernstein, Ronald; Madlener, Reinhard
  2. The determinants of rural electrification in Bihar, India By Oda, Hisaya; Tsujita, Yuko
  3. What happens when it's Windy in Denmark? An Empirical Analysis of Wind Power on Price Volatility in the Nordic Electricity Market By Mauritzen, Johannes
  4. Energy Evaluation and Economic Impact Analysis of Green Roofs Applied to a Pilot Region in Aegean Coast of Turkey By Serdar Çelik; William Retzlaff; Susan Morgan; Ayla Ogus Binatli; Cemil Ceylan
  5. Modeling the deployment of plug-in hybrid and electric vehicles and their effects on the Australian National Electricity Market. By Liam Wagner; Luke Reedman
  6. Optimal Battery Size for Serial Plug-in Hybrid Vehicles: A Model-Based Economic Analysis for Germany By Ernst, Christian-Simon; Lunz, Benedikt; Hackbarth, André; Sauer, Dirk Uwe; Eckstein, Lutz; Madlener, Reinhard
  7. Corporate average fuel economy standards and the market for new vehicles By Thomas H. Klier; Joshua Linn
  8. Dynamics of Urban Mobility: A Comparative analysis of megacities of India By B. Sudhakara Reddy; P. Balachandra
  9. Distance matters – The environmental impact of regional and national supply chains of canned tomatoes By Gerardo Marletto; C. Silling
  10. Optimal Management of Strategic Reserves of Nonrenewable Natural Resources By Eric Bahel
  11. Analysis of Current Situation of Oil Distribution and Pricing Mechanisms in Asia By Tadashi Maekawa; Michitoshi Kawamura
  12. The Economics of Oil, Biofuel and Food Commodities By Eric Bahel; Walid Marrouch
  13. WTO Regulations and Bioenergy Sustainability Certification – Synergies and Possible Conflicts By Robert Ackrill; Adrian Kay
  14. Asymmetric Adjustments in the Ethanol and Grains Markets By Chia-Lin Chang; Li-Hsueh Chen; Shawkat Hammoudeh; Michael McAleer
  15. Will Biofuel Mandates Raise Food Prices? By Chakravorty, Ujjayant; Hubert, Marie-Hélène; Moreaux, Michel; Nostbakken, Linda
  16. 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
  17. Present and Projected Australian Coal Supply Capacity: Impacts of Global Recession and Expansion in Coal Exports to China By Koichi Koizumi; Hisaki Yokogoshi
  18. Valuing the Non-Market Impacts of Underground Coal Mining in New South Wales, Australia By Gillespie, Rob; Kragt, Marit Ellen
  19. Globalization and Emissions in Europe By Naughton, Helen Tammela
  20. How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms By Iwata, Hiroki; Okada, Keisuke
  21. CO2 emissions and economic activity: heterogeneity across countries and non stationary series By Matías Piaggio; Emilio Padilla
  22. Tipping points and ambiguity in the integrated assessment of climate change By Lemoine, Derek M.; Traeger, Christian P.
  23. NIAM: National Integrated Assessment Model - Proof-of-concept development and application By Kevin Hanslow
  24. An n-country model of strategic emissions abatement: feedback strategies and cooperation By Eric Bahel
  25. Hedging with CO2 allowances: the ECX market By Carlos Pinho; Mara Madaleno
  26. CO2 spot and futures price analysis for EEX and ECX By Carlos Pinho; Mara Madaleno
  27. European Union emission trading scheme (ETS). An analysis of its impact for Romanian economy ant its effectiveness By Drumea, Cristina
  28. How Would Cap-and-Trade Climate Policy Affect Agricultural Producers in North Dakota? An Economic Analysis By Jiang, Yong; Koo, Won W.
  29. Theory and Identification of Marginal Land and Factors Determining Land Use Change By James, Laura
  30. Cost Effectiveness of Carbon Capture-Ready Coal Power Plants with Delayed Retrofit By Rohlfs, Wilko; Madlener, Reinhard
  31. Hot Stuff: Would Climate Change Alter Transboundary Water Sharing Treaties? By Ambec, Stefan; Dinar, Ariel
  32. The International Effects of Climate Change on Agricultural Commodity Prices, and the Wider Effects on New Zealand By Adolf Stroombergen
  33. Climate Policy and Technological Innovation and Transfer: An Overview of Trends and Recent Empirical Results By Ivan Hašcic; Nick Johnstone; Fleur Watson; Chris Kaminker
  34. Partial privatization and environmental policies By Kato, Kazuhiko
  35. Climate policies for road transport revisited (I): Evaluation of the current framework By Felix Creutzig; Emily McGlynn; Jan Minx; Ottmar Edenhofer
  36. Climate policies for road transport revisited (II): Closing the policy gap with cap-and-trade By Christian Flachsland; Steffen Brunner; Ottmar Edenhofer; Felix Creutzig

  1. By: Bernstein, Ronald (E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University)
    Abstract: In this paper we use multivariate cointegration analysis to estimate electricity demand elasticities at the subsectoral industry level. This enables us to reap the benefits of lower heterogeneity within the electricity-consuming sectors investigated and of retaining additional information otherwise blurred by aggregation. The annual data set used covers eight subsectors of the German economy for the period 1970-2007. By employing a cointegrated VAR model specification and accounting for structural breaks we find cointegration relationships for five of the eight subsectors studied. The long-run elasticities range between 0.70 and 1.90 for economic activity and between –0.52 and zero for the price of electricity. The short-run elasticities are estimated by single-equation error-correction modeling and found to be between 0.17 to 1.02 for economic activity and –0.57 to zero for electricity price. Granger-causality tests indicate that in the long term causality runs from both economic activity and electricity price to electricity consumption, while Granger-causality from electricity price and electricity consumption to economic activity is detected in only two subsectors. Electricity price is found to be Granger-caused neither in the long nor the short run. Finally, an impulse response analysis yields plausible results confirming the usefulness of the approach adopted.
    Keywords: Disaggregated data; Elasticities; Cointegration; VECM; Granger-causality; Impulse responses; Structural breaks; Germany
    JEL: Q41 Q43
    Date: 2010–11
  2. By: Oda, Hisaya; Tsujita, Yuko
    Abstract: This paper explores intra-state disparity in access to electricity and examines the determinants of electrification at the village level in Bihar, one of the underdeveloped states in India. Our field survey of 80 villages in 5 districts conducted in 2008-09 found that 48 villages (60%) are electrified when using the definition of electrification that a village is electrified if any one household in the village is connected to electricity. The degrees of “electrification†in terms of the proportion of household connection and available hours of electricity remain by and large low, and at the same time differ across districts, villages and seasons. In the processes of electrification, approximately 40% of villages have been electrified in recent years. Based on the basic findings of the survey, this paper examines the electrification processes and how it has changed in recent years. The econometric analyses demonstrate that location is the most important determinant of a village’s electricity connection. Another important finding is that with the rapid progress of rural electrificationunder the recent government programme and the tendency to connect the villages which are easily accessible, the collective bargaining power of the village, which used to significantly affect the process of electrification, has lost influence. This adversely affects remote villages. In order to extend electricity supplies to remote and geographically disadvantaged villages, the government needs to consider seriously other options for sustainable electricity supply, such as decentralized distribution of electricity rather than the conventional connection through the national/local grids.
    Keywords: India, Electric power generation, Rural societies, Rural electrification
    JEL: H41 O20 Q40
    Date: 2010–09
  3. By: Mauritzen, Johannes (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: This paper attempts to empirically test the effect that wind power production in Denmark has on volatility of the nordpool wholesale electricity prices. The main result is that wind power tends to significantly reduce intraday volatility but increases volatility over larger time windows. The negative elasticity for intraday volatility is likely due to a larger-in-magnitude price effect of wind power on peak hours then off-peak hours. I suggest that this in turn is due to a steeper supply schedule at peakloads. The positive elasticities in the wider time windows can be intuitively explained by the greater variability of the supply when large amounts of wind power are present. These finding have ramifications for investment in power generation, balancing as well as transmission capacity.
    Keywords: Wind Power; Nordic Electricity Market
    JEL: Q00
    Date: 2010–12–28
  4. By: Serdar Çelik (Department of Mechanical Engineering, Southern Illinois University Edwardsville); William Retzlaff (Department of Biological Sciences, Southern Illinois University Edwardsville); Susan Morgan (Department of Civil Engineering, Southern Illinois University Edwardsville); Ayla Ogus Binatli (Department of Economics, Izmir University of Economics); Cemil Ceylan (Department of Industrial Engineering, Istanbul Technical University)
    Abstract: This paper examines the energy savings, environmental benefits, and economic impact of green roof systems applied to a “micro” region in Western Turkey. This subdivision (Artur) in Karaaðaç, Izmir, consists of 1729 residential units, mostly used as summer homes. The units are in 45m2, 60m2, 90m2, and 105m2 sizes. Five different plant types were considered to be blended and planted in two different choices of growth media. Thermal benefits of the vegetated roofs to the pilot site were evaluated using appropriate heat transfer equations. For analyzing the impact of use of such systems on the local economy, monetary injection into the local economy was calculated and a multiplier effect of 2.66 was assumed. Net present value (NPV) of the generated income for the first 10 years was calculated to be approximately $14.5 million. In addition, approximately 300 new local jobs over a period of 10 years were estimated to be created.
    Keywords: Green roofs, Economic impact, Energy conservation, Turkey
    JEL: Q2 Q4 Q5
    Date: 2010–09
  5. By: Liam Wagner (School of Economics, The University of Queensland); Luke Reedman (Carbon Futures, CSIRO, Energy Transformed Flagship)
    Abstract: The development of hybrid and fully electric vehicles could deliver significant reductions of emissions from the Australian transportation sector by shifting its major energy source from internal combustion to electricity. This shift towards the the use of electricity shifts the point source emissions to one which has a lower emissions intensity. Changes in load behaviour as a result of the consumer uptake of these vehicles will have significant consequences for network and central planners for the future of Australia’s electricity supply industry. This paper investigates the effects on the security of supply of energy during these previously unseen demand patterns, while also examining changes to spot market prices and changes in emissions rates. The simulation results indicate that wholesale prices during the off-peak period will increase slowly over time with controlled charging. While uncontrolled charging increases the incidence of extreme price events and a considerable number of hours with un-served energy within the network. This increase in spot prices may have consequences for regulated retail electricity tariffs. We also discuss the implementation of possible changes to the retail tariff structure to accommodate the charging of these vehicles.
    Keywords: Electricity Markets, Hybrid Vehicle, Transportation Economics.
    JEL: Q40 L91 R40
    Date: 2010–12
  6. By: Ernst, Christian-Simon (Institut für Kraftfahrzeuge (ika), RWTH Aachen University); Lunz, Benedikt (E.ON Energy Research Center, Power Generation and Storage Systems (PGS), RWTH Aachen University); Hackbarth, André (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Sauer, Dirk Uwe (E.ON Energy Research Center, Power Generation and Storage Systems (PGS), RWTH Aachen University); Eckstein, Lutz (Institut für Kraftfahrzeuge (ika), RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: The battery size of a Plug-in Hybrid Electric Vehicle (PHEV) is decisive for the pure electrical range of the vehicle and crucial for the cost-effectiveness of this particular vehicle concept. Based on the energy consumption of a conventional reference car and a PHEV, we introduce a comprehensive total cost of ownership model for the average car user in Germany for both vehicle types. The model takes into account the purchase price, fixed annual costs and operating costs. The amortization time of a PHEV also depends on the recharging strategy (once a day, once a night, after each trip), the battery size as well as the battery costs. We find that PHEVs with a 4 kWh battery and at current lithium-ion battery prices reach the breakeven point after about six years (five years when using the lower night-time electricity tariffs). With higher battery capacities the amortization time becomes significantly longer. Even with the small battery size and assuming the EU-15 electricity mix, a PHEV is found to emit only around 60% of the CO2 emissions of a comparable conventional car. Thus, with the PHEV concept a cost-effective introduction of electric mobility and reduction of greenhouse gas emissions can be reached.
    Keywords: PHEV; e-mobility; total cost of ownership
    Date: 2010–10
  7. By: Thomas H. Klier; Joshua Linn
    Abstract: This paper presents an overview of the economics literature on the effect of Corporate Average Fuel Economy (CAFE) standards on the new vehicle market. Since 1978, CAFE has imposed fuel economy standards for cars and light trucks sold in the U.S. market. This paper reviews the history of the standards, followed by a discussion of the major upcoming changes in implementation and stringency. It describes strategies that firms can use to meet the standards and reviews the CAFE literature as it applies to the new vehicle market. The paper concludes by highlighting areas for future research in light of the upcoming changes to CAFE.
    Keywords: Fuel ; Energy consumption ; Automobiles - Prices
    Date: 2011
  8. By: B. Sudhakara Reddy; P. Balachandra (Indira Gandhi Institute of Development Research)
    Abstract: This paper aims to analyse urban mobility patterns and consequent impacts on energy and environment in India. We investigate the quantity of energy use in 23 metropolitan regions for the period 1981–2005 and present empirical results obtained using national and urban data sets. It explores the underlying relationship among three dependent variables—energy intensity, type of mode and passenger km. Patterns of energy consumption and CO2 emissions in private and public transport are examined. Some policy recommendations are outlined to reduce urban transport energy use and greenhouse gases and provide suggestions to achieve sustainable urban mobility.
    Keywords: Energy, Environment, Intensity, Transport, Urban
    JEL: Q4 L94 L95 L98
    Date: 2010
  9. By: Gerardo Marletto; C. Silling
    Abstract: The environmental impact of food transportation depends on the trade-off between (increased) distances and the efficiency of modern logistics procedures. The relevant literature points out that such a trade-off is place and product specific, thus supporting the broadening of “food miles” research to new territories and product categories. Here we analyze the environmental impact – in terms of global warming, local pollution and traffic congestion – of two different canned tomatoes brands produced in Italy and consumed in Sassari (Sardinia, Italy). The supply chain of the first brand extends over the whole continental Italian territory, while the second one is mainly located in Sardinia. Different distribution patterns (modern vs. independent retail) and shopping modalities (foot vs. car) are also considered. The case study shows that the national supply chain contributes to global warming much more than the regional one, and therefore supports the view that shorter supply chains can be more sustainable than efficient logistics. The case study also confirms the very high impact of shopping by car, both in terms of global warming and local pollution.
    Keywords: food miles; transportation; logistics; environmental impact; Italy; canned tomatoes
    JEL: Q51 L99 Q56
    Date: 2010
  10. By: Eric Bahel
    Abstract: This paper studies the stockpiling issue for an oil importing country that is likely to suffer embargoes, the occurrence and duration of which are uncertain. I show the existence of a decreasing reserves path that the country wants to attain in order to hedge against these disruptions. Allowing the importing country to invest in R&D in order to free itself from the embargo threat, I determine the optimal effort that should be engaged in research. The incentive to develop a backstop is shown to increase with the depletion of the reserves.
    Keywords: imports, nonrenewable resource, random embargoes, strategic reserves.
    Date: 2010
  11. By: Tadashi Maekawa; Michitoshi Kawamura (The Institute of Energy Economics, Japan)
    Abstract: The demand for oil products in Asia, particularly in China and India, is now growing strongly. The demand is estimated to rise to 29.9 million b/d by 2015, demonstrating growth of 15% (approximately 3.9 million b/d) compared to 26 million b/d in 2009. As for supply, until 2008, Asian countries had strived to upgrade their refining capacities only proportionate to demand. Contrary to this, large-scale projects to upgrade facilities undertaken by China and India in 2009 pushed up the refining capacity to 28 million b/d, outpacing demand by 2 million b/d. China and India have plans to upgrade their refining capacities by 3.3 million b/d and 1.2 million b/d by 2015, respectively, which means that supply will surpass demand (29.9 million b/d) by 3 million b/d by 2015. These facts reveal the issue of overcapacity of refining facilities. It is important for the Japanese oil refining sector to curtail such overcapacity so as to achieve an optimal supply-demand balance, to promote trading of products with an emphasis on Japan's advantages, and thereby to reinforce its international competitiveness. Major Asian countries can be divided into two categories in accordance with their oil pricing mechanisms: i.e. countries where oil price is determined based on the free market mechanism, such as Japan, South Korea, etc; and countries where the oil pricing mechanism is regulated by the government, such as China, Taiwan, India, etc. It is important to keep a close watch on the countries with a regulated pricing mechanism, as the recent trend shows that these countries will take steps for deregulation in the future. Oil pricing is closely connected to demand. The climate of demand is the key factor for determining a profitable price. The Japanese oil sectors will need to strive to eliminate the factors which would be obstacles to fair pricing, by means of addressing the overcapacity so as to achieve an optimal supply-demand balance and coming up with effective frameworks to ensure a sound market. In addition, in order for the Japanese oil sectors to sustain their supply chains while maintaining an optimal supply-demand balance, they would need to move ahead to take restructuring steps including a new pricing mechanism so as to attain both "adequate refining margin" and "shortening time lags."
    Keywords: oil demand, Asia, oil refining sector
    JEL: O13 Q41
    Date: 2010
  12. By: Eric Bahel; Walid Marrouch
    Abstract: In this paper we study the effects on the food market of the introduction of biofuels as a substitute for fossil fuel in the energy market. We consider a world economy with an oil cartel and a competitive fringe of farmers producing energy in the form of biofuels. Farmers also produce food and sell it on the world food market. We determine the resulting relationship between prices in the energy and food markets and characterize the cartel's extraction path and the price path of energy. We show that the price of food will be growing as long the oil stock is being depleted, whether population is growing or not, and that it will keep growing after the oil stock is exhausted if population is growing.
    Keywords: biofuel, oil depletion, population growth, energy price, food price
    Date: 2010
  13. By: Robert Ackrill; Adrian Kay
    Abstract: Biofuels are increasingly being produced and consumed as a partial substitute to fossil-fuel based transport fuels in the fight against climate change. One policy introduced recently by some countries to help ensure biofuels perform better than fossil fuels environmentally is sustainability criteria. These, typically, require lower greenhouse gas emissions than fossil fuels, considering not only their use but also production. Concerns have been expressed from various quarters that such criteria could represent WTO-incompatible barriers to trade. The present paper addresses two specific issues. First, it argues that biofuels should be treated like any other traded product under WTO law, in particular the GATT agreement. Thus an importing country could not impose different trade measures dependent on whether the biofuel was produced according to its sustainability criteria. Second, the TBT Agreement provides guidance on how to draw up international standards that can help ensure WTO compatibility. This cannot guarantee such compatibility, but it can help reduce significantly the chances of WTO Members bringing actions against a fellow Member’s biofuels sustainability criteria. There is little direct case law to draw upon, but it is argued that, if the TBT guidance is followed, in the long term the absence of case law can be taken as an indication that sustainability criteria are WTO-compatible.
    Keywords: biofuels, sustainability, WTO
    JEL: F13 F18 Q16
    Date: 2010–12
  14. By: Chia-Lin Chang (National Chung Hsing University); Li-Hsueh Chen (California State University-Los Angeles); Shawkat Hammoudeh (Drexel University); Michael McAleer (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University)
    Abstract: This paper examines the long- and short-run asymmetric adjustments for nine pairs of spot and futures prices, itemized as three own pairs for three different bio-fuel ethanol types, three own pairs for three related agricultural products, namely corn, soybeans and sugar, and three cross pairs that included hybrids of the spot price of each of the agricultural products and an ethanol futures price. Most of the spreads' asymmetric adjustments generally happen during narrowing. The three ethanol pairs that contain the eCBOT futures with each of Chicago spot, New York Harbor spot and Western European (Rotterdam) spot show different long- run adjustments, arbitrage profitable opportunities and price risk hedging capabilities. The asymmetric spread adjustments for the three grains are also different, with corn spread showing the strongest long-run widening adjustment, and sugar showing the weakest narrowing adjustment. Among others, the empirical analysis indicates the importance of potentially hedging the spot prices of agricultural commodities with ethanol futures contracts, which sends an important message that the ethanol futures market is capable of hedging price risk in agricultural commodity markets. The short-run asymmetric adjustments for individual prices in the nine pairs (with exception of the corn own pair underscore the importance of futures prices in the price discovery and hedging potential, particularly for ethanol futures.
    Keywords: Long-run and short-run asymmetric adjustments, ethanol, agricultural products, arbitrage opportunities, hedging, widening and narrowing adjustment.
    JEL: E43 Q11 Q13
    Date: 2010–12
  15. By: Chakravorty, Ujjayant; Hubert, Marie-Hélène; Moreaux, Michel; Nostbakken, Linda
    Date: 2010–12
  16. 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
  17. By: Koichi Koizumi; Hisaki Yokogoshi (The Institute of Energy Economics, Japan)
    Abstract: Australia’s coal exports in 2008 totaled 252 million tons, accounting for 26.9% of global coal trade (in terms of exports) at 938 million tons. Although Indonesia has expanded its coal exports over recent years and reported exports in 2008 at 203 million tons, Australia has remained unshaken as the world’s largest coal exporter. Coal demand in Japan and European industrial countries has plunged on the global financial/economic crisis since the autumn of 2008. Their coal imports have thus declined. But China has expanded coal demand on the strength of high economic growth and increased coal imports more rapidly than earlier due to high domestic coal prices. Australia’s coal exports have maintained an upward trend even amid the global recession. In response to growing coal demand, new coalfield development and other projects are planned to expand production in Australia. This report considers the past results and future projections of Australia’s coal production and exports and its future coal supply capacity including estimated output under new coalmine development projects. It also covers the realities of a sharp increase in Australia’s coal exports to China in 2009.
    Keywords: coal exports, Australia, Japan
    JEL: O13
    Date: 2010
  18. By: Gillespie, Rob; Kragt, Marit Ellen
    Abstract: A strategic inquiry into underground coal mining in the Southern Coalfield of New South Wales, Australia, identified the need for non-market valuation studies and recommended increased use of benefit cost analysis in assessing individual mining proposals. This paper reports on the results of a choice experiment undertaken for a colliery in the Southern Coalfield. Results from the study are used to aid the New South Wales Government in evaluating alternative proposals to continue underground coal mining operations. Results show that community wellbeing declines with increases in the kilometres of streams, the hectares of swamp, and the number of Aboriginal sites affected by mine subsidence. Community wellbeing increases with the length of time that the Colliery provides 320 jobs. Implicit price estimates from the choice experiment were incorporated into a benefit cost analysis of continued mining at the Colliery to assess the economic efficiency of a range of environmental restrictions on the proposed mining operations. Even though the Colliery generates negative environmental externalities, the continuation of mining at the Colliery was found to be economically efficient under a range of policy scenarios.
    Keywords: Australia, benefit cost analysis, coal mining, choice experiments, natural resource management, non-market valuation, Environmental Economics and Policy, Resource /Energy Economics and Policy, D61, Q32, Q38, Q51,
    Date: 2010–12–24
  19. By: Naughton, Helen Tammela
    Abstract: This paper examines the impact of five globalization variables on sulfur dioxide and nitrogen oxides emissions in Europe from 1980-2000 in the framework of one empirical model. The spatial autoregressive regression model is estimated using 2SLS. The five variables of interest are trade, foreign direct investment, neighboring countries wealth, cross-border pollution and participation in international environmental treaties. I then omit each of the globalization effects one at a time and find that omitted variable bias would be significant for four of the globalization variables, the exception being neighbors' wealth.
    Keywords: globalization; environment; spatial econometrics
    JEL: F18 Q53 Q58
    Date: 2010–12–25
  20. By: Iwata, Hiroki; Okada, Keisuke
    Abstract: This paper examines the effects of environmental performance on financial performance using the data of Japanese manufacturing firms from 2004 to 2008. As the environmental performance, our study considers the two different environmental issues of waste and greenhouse gas emissions in capturing the effects of corporate environmental management on financial performance. In addition, to clarify how each financial performance responds to a firm’s effort in dealing with different environmental issues, we utilize many financial performance indices reflecting various market evaluations. Our estimation results show the different effects of each environmental performance on financial performances. For example, while an increase in waste emissions generally improves financial performance, their reduction ameliorates financial performance in dirty industries. In addition, while greenhouse gas reduction leads to an increase in return on equity, it does not have a significant effect on return on sales which reflects the evaluation in the goods market, and it leads to a decrease in the natural logarithm of Tobin’s q, which indicates the value of intangible assets.
    Keywords: Environmental Performance; Financial Performance; Japanese Manufacturing Firms; Waste Emissions; Greenhouse Gas Emissions
    JEL: D21 Q56 Q53
    Date: 2010–12–28
  21. By: Matías Piaggio (Department d’Economia Aplicada, Universitat Autònoma de Barcelona); Emilio Padilla (Department d’Economia Aplicada, Universitat Autònoma 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
  22. By: Lemoine, Derek M.; Traeger, Christian P.
    Abstract: The threat of crossing tipping points in the climate system often serves as an argument for more stringent greenhouse gas emission reductions. We introduce such regime shifts into a recursive relative of the DICE integrated assessment model for determining optimal climate policies. Each period's carbon dioxide concentration determines the probability of crossing a tipping point, and the policymaker re-optimizes once a tipping point occurs. The probability, timing, and knowledge of tipping points are endogenous. Our policymaker can also display ambiguity aversion in assessing tipping point uncertainty. We fi�nd that tipping points increase the near-term social cost of carbon by 50-100% when they raise climate sensitivity or make damages more convex. They have less of an e�ffect when they increase the atmospheric lifetime of CO2 or the quantity of non-CO2 greenhouse gases. Uncertainty about tipping points can reduce their e�ffect on policy. The possibility of tipping points is more important for the social cost of carbon than is the ambiguity attitude used in their evaluation.
    Keywords: climate change, tipping points, ambiguity aversion, uncertainty, integrated assessment, risk aversion, intertemporal substitution, recursive utility, dynamic programming
    Date: 2010–12–21
  23. By: Kevin Hanslow
    Abstract: This paper describes the initial development of a national integrated assessment model, based on the MMRF model used to analyse the CPRS. The initial development was geared towards delivering a proof of concept simulation to demonstrate the feasibility of the development of such a model. In consultation with the CSIRO, it was decided that a reduction in water availability would be an appropriate simulation, being of relevance and interest, especially in the context of climate change, and entailing a realistic load of model development in the timeframe allowed.
    Keywords: CGE models, water, climate change
    JEL: C68
    Date: 2010–11
  24. By: Eric Bahel
    Abstract: The present paper proposes a dynamic framework for the analysis of emissions abatement by different countries. Unlike many related works, it emphasizes the non-cooperative aspects of this issue. We derive the feedback Nash equilibrium as well as the cooperative emissions paths. Under the cooperative scenario, pollution is always lower: the international agency imposes lower emissions to the countries in early periods. Surprisingly enough, emissions might be higher in very distant periods under the cooperative scenario. A transfer scheme allowing to achieve global effciency is proposed.
    Keywords: emissions, strategic abatement, pollution stock, feedback (closed-loop) Nash equilibrium, cooperation, transfers.
    Date: 2010
  25. By: Carlos Pinho (Departamento de Economia e Gestão Industrial, Universidade de Aveiro, GOVCOPP); Mara Madaleno (Departamento de Economia e Gestão Industrial, Universidade de Aveiro, GOVCOPP)
    Abstract: We investigate and empirically estimate optimal hedge ratios, for the first time, in the EU ETS carbon market. Minimum variance hedge ratios are conditionally estimated with multivariate GARCH models, and unconditionally by OLS and the naïve strategy for the European Climate Exchange (ECX) market in the period 2005-2009. Also, utility gains are considered in order to take into account risk-return considerations. Empirical results indicate that dynamic hedging provides superior gains (in reducing the variance portfolio) compared to those obtained from static hedging, when adjustment costs are not taken into account. Moreover, results improve when the leptokurtic characteristics of the data are into consideration through distributions. Results are always compared in and out of sample, suggesting also that utility gains increase with investor's increased preference over risk.
    Keywords: CO2 Emission Allowances; Dynamic Hedging; Futures Prices; Risk Management; Spot Prices
    JEL: C32 G19 G32 Q54
    Date: 2010–12
  26. By: Carlos Pinho (Departamento de Economia e Gestão Industrial, Universidade de Aveiro, GOVCOPP); Mara Madaleno (Departamento de Economia e Gestão Industrial, Universidade de Aveiro, GOVCOPP)
    Abstract: In this work we analyze, explore and measure two of the most important concepts for the theory of storable commodity markets. After analyzing the statistical properties of spot and futures EU ETS allowances for Germany and France, we model and test the risk premium and convenience yield for CO2 contracts accordingly to previous economic theories, for the period 2005-2009. Results indicate that convenience yields are positively related to the spot CO2 return while being negatively influenced by the spot volatility. This negative impact of spot volatility is also verified for the risk premium, with the latter varying positively with time to maturity. Contradicting previous empirical findings, we found only a positive influence of the convenience yield on the risk premium for the ECX French market and for Phase II contracts, leading us to conclude that results are Phase, market and data span dependent. Moreover, results are independent on the volatility forecast used and important for risk management purposes for allowances markets participants. Moreover, day-ahead markets for CO2 are in "normal contango" for the entire data period under analysis, contrary to previous empirical findings for the allowances market.
    Keywords: CO2 Emission Allowances; Volatility; Volume; Maturity; Convenience Yield; Risk Premium; Spot Prices; Futures Prices
    JEL: C22 C32 G12 G14 Q51
    Date: 2010–12
  27. By: Drumea, Cristina
    Abstract: The world is allegedly warming in a detrimental way because our industrial activity is increasingly emitting the putative culprit for the warming which is the carbon dioxide. The preferred way to deal with the issue is to force an emission reduction by, among others, imposing quotas, creating a sophisticated system of allowances, cap and trade and technology transfers. The European Union, as well as several member States had, at times, pledged various reductions which became law. These pledges come at a cost to the industrial activity. Romania duly signed and ratified all the EU decisions taken after her accession but no clear bill was presented to the taxpayer. In the light of the Copenhagen accord and in preparation of the 2010 Mexican summit on the environment there’s a need to know what are the modeled benefits of limiting the carbon dioxide emissions, and at what costs to the Romanian economy. This paper attempts to shed a light on those issues and to make it easier for the public to follow the intricate details of the trading scheme and its effects.
    Keywords: ETS; Copenhagen accord; Kyoto target; Carbon credit
    JEL: Q50 F42 F36
    Date: 2010
  28. By: Jiang, Yong; Koo, Won W.
    Abstract: The purpose of this study is to examine the possible impacts of cap-and-trade climate policy on agricultural producers in North Dakota. In this study, we focused on carbon sequestration potential and production cost impacts of carbon prices, and explicitly considered farmer preferences and adaptation behavior to estimate the benefits and costs of greenhouse gas cap-and-trade. Based on empirically estimated farmer behavior models, a policy simulation with agricultural census data identified farmer acreage allocation for carbon sequestration, carbon offset supplies and revenues, the production cost impacts of carbon prices, and impacts on net farm income and their distributions among heterogeneous farmers. Our analysis found that: 1) farmer ex ante preferences in general were biased against carbon sequestration participation although farmer involvement increased with carbon prices; 2) with the fertilizer industry exempted from cap-and-trade regulation, the production cost impact would be small, and more than half of the farms would gain with a carbon price possibly greater than $10 per metric ton of carbon; and 3) the production cost impact with a caped fertilizer industry would be 2 times higher, and more than half of the farms or farmland would lose unless the carbon price could reach more than $55 per metric ton of carbon.
    Keywords: cap-and-trade, climate change, agricultural impacts, economics, carbon sequestration, Agricultural Finance, Financial Economics,
    Date: 2010–08
  29. By: James, Laura
    Abstract: Biomass is being researched as a possible alternative to fossil sources of energy, in order to avoid externalities from fossil fuel use that affect the environment and the economy. Some biomass-based energy production systems may produce unwanted externalities in their own right, such as increasing the production pressure on the agricultural land base, resulting in a rise in prices of food commodities. Using marginal land for biomass production has been suggested as a solution. However, the definition of what constitutes marginal land is poorly understood. This paper provides a theoretical foundation for identification of marginal lands, and analyzes recent literature to assess how current usage of the term marginal correspond to the theoretical framework. Then, the paper devises empirical models that test possible methods of identification of the extensive margin of agricultural land in 19 counties in the state of Michigan. The models find that dynamic variables such as price changes have a statistically significant effect on land use change into and out of cropland. Land quality and regional effects are also statistically significant.
    Keywords: biomass, biofuel, marginal lands, extensive margin, Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Crop Production/Industries, Environmental Economics and Policy, Production Economics, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy, Q15 Land Ownership and Tenure, Land Reform, Land Use, Irrigation, Agriculture and Environment, Q28 Government Policy, Q42 Alternative Energy Sources, Q48 Government Policy, R14 Land Use Patterns, R52 Land Use and Other Regulations,
    Date: 2010
  30. By: Rohlfs, Wilko (Chair of Heat and Mass Transfer, Faculty of Mechanical Engineering, RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University)
    Abstract: In this paper we investigate the cost effectiveness of coal-fired CCS plants. Two different model approaches are used. First, we consider marginal costs to determine the impact of fuel and CO2 certificate prices on electricity generation cost. Second, we apply a net present value evaluation to identify the main factors influencing the NPV, using projections for the price of electricity and CO2 as well as the costs of capturing, transporting and storing CO2. The NPV assessment shows that the threshold price of CO2 is highly sensitive with respect to the electricity price. Incorporating the possibility to postpone the CCS investment leads to much higher threshold prices, rendering the investment less attractive from today’s perspective. Finally, with a risk-adjusted discount rate for all CCS options it turns out to be more attractive than with a predefined discount rate of 10%, providing evidence that typical practitioner’s assumtions may indeed be too pessimistic.
    Keywords: CCS; Capture-ready; Coal combustion; Retrofit
    JEL: C63 O30
    Date: 2010–08
  31. By: Ambec, Stefan; Dinar, Ariel
    Date: 2010–09
  32. By: Adolf Stroombergen (Infometrics Ltd)
    Abstract: This research takes a closer look at the effects of climate change on New Zealand agriculture and on the wider economy, including indirect international effects such as changes in the prices of goods exported from and imported to New Zealand, as well as carbon prices and policies. Economic loss from short term catastrophic events such floods and landslides is not investigated. Infometrics (2007) presented an initial quantitative analysis of some of the above issues. In this paper they update the part of that report that looked at the effect of climate change on agricultural commodity prices, by considering some new scenarios based on international research since 2007, and expand the time-period from 2025 to 2070.
    Keywords: agricultural commodity prices, GE modelling
    JEL: F18 Q1 Q54
    Date: 2010–12
  33. By: Ivan Hašcic; Nick Johnstone; Fleur Watson; Chris Kaminker
    Abstract: Technological innovation can lower the cost of achieving environmental objectives. As such, understanding the linkages between environmental policy and technological innovation in achieving environmental objectives is important. This is particularly true in the area of climate change, where the economic costs of slowing the rate of change are affected to a great extent by the rate of innovation. This paper provides evidence on the generation and international diffusion of selected climate change mitigation technologies (CCMTs) and their respective links to key policies. The data covers a selection of technology fields (renewable energy and ‘clean’ coal) and all countries over the last 30-35 years.<BR>L’innovation technologique peut abaisser le coût de la réalisation des objectifs environnementaux. A ce titre, il importe de comprendre les liens entre politique de l’environnement et innovation technologique dans la mise en oeuvre des objectifs, notamment dans le domaine du changement climatique, où le taux d’innovation a une forte incidence sur les coûts économiques du ralentissement du phénomène. Le présent ouvrage fournit des données sur la création et la diffusion internationale de certaines technologies d’atténuation du changement climatique, et sur leurs liens avec les principales initiatives des pouvoirs publics. Les données portent sur un éventail de domaines technologiques (énergies renouvelables et charbon propre) et, pour tous les pays, sur les 30 à 35 dernières années.
    Keywords: environmental policy, innovation, technology transfer, climate change, politique environnementale, innovation, changement climatique, transfert de technologie
    JEL: O31 O33 Q42 Q54 Q55
    Date: 2010–12–15
  34. By: Kato, Kazuhiko
    Abstract: The paper compares emission tax and emission quota in a mixed duopoly when the partial privatization of a public firm is allowed. Furthermore, we consider the following two cases with regard to the objective of the public firm: (1) the public firm maximizes the weighted average of its profit and wefare and (2) the public firm maximizes the weighted average of its profit and the sum of consumer surplus and producer surplus. We show that emission tax is welfare superior to emission quota regardless of the degree of partial privatization in (1), whereas the former is inferior to the latter when the degree of partial privatization is high in (2).
    Keywords: environment; mixed duopoly; quota; tax
    JEL: L33 Q58
    Date: 2010–12–21
  35. By: Felix Creutzig (Department of Economics of Climate Change, TU Berlin); Emily McGlynn; Jan Minx; Ottmar Edenhofer
    Abstract: The global rise of greenhouse gas (GHG) emissions and its potentially devastating consequences require a comprehensive regulatory framework for reducing emissions, including those from the transport sector. Alternative fuels and technologies have been promoted as means for reducing the carbon intensity of the transport sector. However, the overall transport policy framework in major world economies is geared towards the use of conventional fossil fuels. This paper evaluates the effectiveness and efficiency of current climate policies for road transport that (1) target fuel producers and/or car manufacturers, and (2) influence use of alternative fuels and technologies. With diversifying fuel supply chains, carbon intensity of fuels and energy efficiency of vehicles cannot be regulated by a single instrument. We demonstrate that vehicles are best regulated across all fuels in terms of energy per distance. We conclude that price-based policies and a cap on total emissions are essential for alleviating rebound effects and perverse incentives of fuel efficiency standards and low carbon fuel standards. In tandem with existing policy tools, cap and price signal policies incentivize all emissions reduction options. Design and effects of cap and trade in the transport sector are investigated in the companion article (Flachsland et al., 2010).
    Keywords: Fuel efficiency standards, low carbon fuel standards, climate change
    JEL: Z0 Z1
    Date: 2010–12
  36. By: Christian Flachsland; Steffen Brunner; Ottmar Edenhofer; Felix Creutzig
    Abstract: Current policies in the road transport sector fail to deliver consistent and efficient incentives for greenhouse gas abatement (see companion article by Creutzig et al., 2010a). Market-based instruments such as cap-and-trade systems close this policy gap and are complementary to traditional policies which are required where specific market failures arise. Even in presence of strong existing non-market policies, cap-and-trade delivers additional abatement and efficiency by incentivizing demand side abatement options. This paper analyzes generic design options and economic impacts of including the European road transport sector to the EU ETS. The point of regulation in a road transport cap-and-trade system should be upstream in the fuel chain to ensure effectiveness (cover all life-cycle emissions and avoid double-counting), efficiency (incentivize all abatement options) and low transaction costs. Based on year 2020 marginal abatement cost curves from different models and current EU climate policy objectives we show that in contrast to conventional wisdom road transport inclusion would not change the EU ETS allowance price. This puts concerns over industrial carbon leakage as a consequence of adding road transport to the EU ETS into perspective.
    Keywords: Climate Policy, Road Transport, Cap-and-trade
    JEL: Z0 Z1
    Date: 2010–12

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