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on Energy Economics |
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Issue of 2011‒01‒16
twenty papers chosen by Roger Fouquet Basque Climate Change Centre, Bilbao, Spain |
| By: | Strand, Jon; Miller, Sebastian; Siddiqui, Sauleh |
| Abstract: | Investments in large, long-lived, energy-intensive infrastructure investments using fossil fuels increase longer-term energy use and greenhouse gas emissions, unless the plant is shut down early or undergoes costly retrofit later. These investments will depend on expectations of retrofit costs and future energy costs, including energy cost increases from tighter controls on carbon emissions. Simulation analysis shows that the retrofit option can significantly reduce anticipated future energy consumption as of the time of initial investment, and total future energy plus retrofit costs. The more uncertain are the costs, the greater the value of this option. However, the future retrofit option also induces more energy-intensive infrastructure choices, partly offsetting the direct effect of having the option on anticipated energy use. Efficient, forward-looking infrastructure investments have high potential for reducing long-term energy consumption. Particularly if energy prices are expected to rise, however, the potential for reduced energy consumption will be eroded if expectations of energy prices do not include environmental costs or future retrofit possibilities and technologies are not adequately developed. |
| Keywords: | Energy Production and Transportation,Climate Change Economics,Climate Change Mitigation and Green House Gases,Environment and Energy Efficiency,Energy and Environment |
| Date: | 2011–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5516&r=ene |
| By: | Iimi, Atsushi |
| Abstract: | Albania is among the most vulnerable countries to external energy shocks and climatic conditions, because of its high dependency on hydropower for electricity. Given highly volatile international energy prices and expected global warming, it is becoming increasingly important to manage the demand for electricity. However, the country has long been faced with a significant problem of electricity metering. About one-third of total energy is lost for technical and nontechnical reasons. This paper estimates the residential demand function by applying a two-stage system equation method for an endogenous censored variable, because the lack of metering makes the electricity consumption partially observable for the econometrician. It is found that metering is important to curb non-essential electricity use by households. The electricity demand could also be reduced by raising the first block rate and lowering the second block rate and the threshold between the two blocks. In addition, weather conditions and home appliance ownership would affect the demand for electricity. But the latter looks more influential than the former. |
| Keywords: | Energy Production and Transportation,Climate Change Mitigation and Green House Gases,Climate Change Economics,Environment and Energy Efficiency,Energy and Environment |
| Date: | 2011–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5520&r=ene |
| By: | Alby, Philippe; Dethier, Jean-Jacques; Straub, Stephane |
| Abstract: | Many developing countries are unable to provide their industrial sector with reliable power and many enterprises have to contend with electricity that is insufficient and of poor quality. Because of these constraints, firms in developing countries opt for self-generation even though it is widely considered a second best solution. This paper develops a theoretical model of investment behavior in remedial infrastructure when physical and credit constraints are present. It then tests econometrically some implications from this model using a large sample of enterprises from 87 countries from the World Bank Enterprise Survey Database. After showing that these constraints interact and have non-linear effects depending on the industrial sector's degree of reliance on electricity and size of firms, the paper draws differentiated policy recommendations. Credit constraints appear to be the priority in sectors very reliant on electricity to spur entry and convergence to the technological frontier, while in other sectors, firms would benefit more widely from marginal improvements in electrical supply. |
| Keywords: | Energy Production and Transportation,Microfinance,Climate Change Mitigation and Green House Gases,Private Participation in Infrastructure,Access to Finance |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5497&r=ene |
| By: | Li, Hongyan; Tesfatsion, Leigh |
| Abstract: | This study uses an agent-based testbed to systematically study the weak emergence of co-learning patterns in wholesale electric power markets when profit-seeking generation companies (GenCos) are modeled as strategic traders with learning capabilities. By a "co-learning pattern" is meant any global market property that is supported by GenCo co-learning. Three strategic options are examined for the co-learning GenCos: economic capacity withholding (offering energy at higher-than-true marginal cost); physical capacity withholding (offering less-than-true maximum generation capacity); or some combination of the two. Heat maps are used to display and interpret co-learning pattern outcomes. One key finding is that co-learning matters in this market environment: GenCos that behave as Gode-Sunder budget-constrained zero-intelligence market sellers, randomly selecting their supply offers subject only to a break-even constraint, tend to realize substantially lower net earnings than co-learning GenCos that tacitly learn to correlate their daily supply offers for market power advantages. |
| Keywords: | Weak emergence; co-learning patterns; wholesale electric power market; capacity withholding; market power; AMES wholesale power market testbed |
| JEL: | C6 D4 D6 L1 L94 Q4 |
| Date: | 2010–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:32222&r=ene |
| By: | Janine De Fence (Department of Economics, University of Strathclyde); Karen Turner (Division Of Economics, University of Stirling) |
| Abstract: | This paper disaggregates a UK Input-Output (IO) table for 2004 based on household income quintiles from published survey data. In addition to the Input-Output disaggregation, the household components of a UK Income Expenditure (I-E) account used to inform a Social Accounting Matrix (SAM),have also been disaggregated by household income quintile. The focus of this paper is on household expenditure on the UK energy sector. |
| Keywords: | Disaggregated Household Expenditure, Energy Consumption, Input-Output, Income-Expenditure Accounts. |
| JEL: | Q48 Q41 Q56 J11 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1028&r=ene |
| By: | Johannes van Biesebroeck |
| Abstract: | This report organizes and discusses empirical estimates of the effects of fuel prices and fuel emission standards on consumer and firm behaviour. I touch only briefly on model-free estimates. The focus is on results based on explicit models, taken mostly from the industrial organization literature. First, I review studies that identify the willingness to pay for fuel efficiency using static and dynamic models of vehicle demand. Next, I take explicitly into account that firms will adjust their product portfolios and the characteristics of the vehicles they offer. These decisions will have an impact on the choice set from which consumer demand is estimated and on the trade-off that consumers face between fuel efficiency and other desirable characteristics. Finally, I discuss models where firms choose to invest in innovations to achieve fuel efficiency gains without sacrificing characteristics. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaaa:2010/9-en&r=ene |
| By: | Francisco Aguayo (El Colegio de México); Kelly Sims Gallagher (Harvard University); Kevin P. Gallagher (Boston University) |
| Abstract: | Ibero-America, just as the rest of the world, faces an increasing urgency to transform existing energy systems. In the past, incentives to develop energy systems were induced mainly by changes in demand (derived from industrialization and urbanization) and by price shocks in fuels. Diversification of energy sources followed a growing need of use of particular energy forms. For developing countries, innovating in energy systems meant fundamentally gaining control over natural resources and moving away from primary, export-oriented enclaves into industrial integration, as well as improving energy security. Today, however, environmental constraints and the pressing need to reduce energy poverty forge additional challenges and set new directions to change the ways in which we use and produce energy. Improving current technologies along the same trajectory is simply not enough. Fundamental changes must take place in our economic systems in order to combine energy efficiency with low-carbon, sustainable energy sources, for which new abilities and solutions need to be targeted. |
| Keywords: | energy innovation; Latin America |
| JEL: | Q53 Q42 Q56 N76 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:emx:ceedoc:2010-02&r=ene |
| By: | Raslan, R.M.S. |
| Abstract: | With the increasing international shift from prescriptive to performance-based regulations, a legislative call for the integration of predictive assessment tools in the design process has emerged. In relation to this, the requirements of Article 3 of the Directive on Energy Performance of Buildings (EPBD) were transposed into UK legislation with the introduction of the Building and Approved Inspectors (Amendment) Regulations 2006 (England and Wales) in April 2006. These introduced the ‘National Calculation Methodology’ (NCM), a unified compliance demonstration route for energy performance criteria specified in Approved Document Part L (Conservation of Fuel and Power), supported through the use of modelling-based building energy performance prediction (BEPP) tools accredited for the purposes of implementing associated calculations. This thesis presents an assessment of adopting the methodology, utilising a mixed-method research design to investigate key parameters identified as measures by which to quantify the success of this approach. Firstly, the adaptive capability of the UK construction industry is assessed through the analysis of primary data collected from a longitudinal survey. Secondly the applicability of the methodology is analysed through in-depth interviews examining the role of key actors and the varying dynamics of implementation and enforcement. Finally, a comparative evaluation is carried out to assess the adequacy of accredited BEPP tools. The main findings outline the shortcomings of the adaptation strategy adopted by industry and the inconsistent implementation and enforcement strategies employed. The results of the comparative tool study in particular highlight three important issues; a large degree of predictive variability between key compliance benchmarks, the lack of consistency in granting approval (a pass/fail result) between tools and limitations in the scope of their applicability. The research concludes that although a number of positive aspects can be associated with the introduction of a modelling-based approach for compliance demonstration, due to the aforementioned issues, considerable efforts are still required to extend its usefulness as a credible legislative support tool for performance-based regulations. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ucllon:http://discovery.ucl.ac.uk/134389/&r=ene |
| By: | Jefferson, Michael; Voudouris, Vlasios |
| Abstract: | Most executives know that overarching paints of plausible futures will profoundly affect the competitiveness and survival of their organisation. Initially from the perspective of Shell, this article discuses oil scenarios and their relevance for upstream investments. Scenarios are then incorporated into generative explanation and its principal instrument, namely agent-based computational laboratories, as the new standard of explanation of the past and the present and the new way to structure the uncertainties of the future. The key concept is that the future should not be regarded as ‘complicated’ but as ‘complex’, in that there are uncertainties about the driving forces that generate unanticipated futures, which cannot be explored analytically. |
| Keywords: | oil scenarios; Shell; ACEGES; agent-based computational economics |
| JEL: | C0 L1 |
| Date: | 2011–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27910&r=ene |
| By: | Al-mulali, Usama; Che Sab, Che Normee |
| Abstract: | This study examines the impact of oil shocks on Qatar’s gross domestic product using time series data from the period 1970-2007 covering all the oil shocks. The Johansen-Juselius (JJ) cointegration test and VECM Granger causality test are employed in this study. From the results we concluded that oil price has a positive effect on Qatar’s gross domestic product, but at the expense of higher inflation. Qatar seems to have suffered from financial surpluses and rapid economic growth caused by sharp increases in the oil price. At the same time, with a fixed exchange regime and tight monetary policy to deal with these events, this has caused the price of assets to increase sharply, leading to high levels of inflation in Qatar. Based on the results, we recommend that the Qatari currency (riyal) be pegged to a basket of currencies so as to increase the role of monetary policy to deal with the external shocks (oil shocks). |
| Keywords: | Qatar;Oil Shocks;GDP;VAR model |
| JEL: | E00 Q4 |
| Date: | 2010–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27822&r=ene |
| By: | Anselm Eisentraut |
| Abstract: | Global biofuel production has been increasing rapidly over the last decade, but the expanding biofuel industry has recently raised important concerns. In particular, the sustainability of many first-generation biofuels – which are produced primarily from food crops such as grains, sugar cane and vegetable oils – has been increasingly questioned over concerns such as reported displacement of food-crops, effects on the environment and climate change. In general, there is growing consensus that if significant emission reductions in the transport sector are to be achieved, biofuel technologies must become more efficient in terms of net lifecycle greenhouse gas (GHG) emission reductions while at the same time be socially and environmentally sustainable. It is increasingly understood that most first-generation biofuels, with the exception of sugar cane ethanol, will likely have a limited role in the future transport fuel mix. The increasing criticism of the sustainability of many first-generation biofuels has raised attention to the potential of so-called second-generation biofuels. Depending on the feedstock choice and the cultivation technique, second-generation biofuel production has the potential to provide benefits such as consuming waste residues and making use of abandoned land. In this way, the new fuels could offer considerable potential to promote rural development and improve economic conditions in emerging and developing regions. However, while second-generation biofuel crops and production technologies are more efficient, their production could become unsustainable if they compete with food crops for available land. Thus, their sustainability will depend on whether producers comply with criteria like minimum lifecycle GHG reductions, including land use change, and social standards. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ieaaaa:2010/1-en&r=ene |
| By: | Timilsina, Govinda R.; Beghin, John C.; van der Mensbrugghe, Dominique; Mevel, Simon |
| Abstract: | This study analyzes the long-term impacts of large-scale expansion of biofuels on land-use change, food supply and prices, and the overall economy in various countries or regions using a global computable general equilibrium model, augmented by a land-use module and detailed representation of biofuel sectors. The study finds that an expansion of global biofuel production to meet currently articulated or even higher national targets in various countries for biofuel use would reduce gross domestic product at the global level; however, the gross domestic product impacts are mixed across countries or regions. The expansion of biofuels would cause significant land re-allocation with notable decreases in forest and pasture lands in a few countries. The results also suggest that the expansion of biofuels would cause a reduction in food supply. Although the magnitude of the impact on food supply at the global level is not as large as perceived earlier, it would be significant in developing countries like India and those in Sub-Saharan Africa. Agricultural commodities such as sugar, corn, and oil seeds, which serve as the main biofuel feedstocks, would experience significant increases in their prices in 2020 compared with the prices at baseline due to the expansion of biofuels to meet the existing targets. |
| Keywords: | Agribusiness,Food&Beverage Industry,Wetlands,Crops&Crop Management Systems,Renewable Energy |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5513&r=ene |
| By: | Jussila Hammes, Johanna (Swedish National Road and Transport Research Institute, VTI) |
| Abstract: | One of the goals of transport policy in Sweden is to minimize the impact from transport on the environment. Using a database consisting of over 800 rail, road and maritime transport infrastructure projects, we estimate whether environmental factors, such as negative environmental effects arising from the project (noise and barrier effects), or emissions of five pollutants (NOx, VOC, CO2, SO2 and PM) affect the choice of which projects will be built. For a broader model including all three transport modes, we find that projects that cause negative environmental effects in fact have a greater probability of being included in the National or a Regional Transport Infrastructure Plan for 2010-2021. For a narrower model including only road investments, we find that if we include a measure for the Net Benefit/Investment Cost Ratio (NBIR), only the negative environmental effects matter and raise the probability of a project being included in a Plan. Excluding the NBIR measure reveals that what matters are the CO emissions and traffic safety measures. Thus, an increase in the emissions of CO lowers the project's probability of being included in a Plan, and traffic safety benefits increase the probability. |
| Keywords: | Transport infrastructure; Environment; Emissions |
| JEL: | D70 H54 Q58 |
| Date: | 2010–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2010_017&r=ene |
| By: | Francisco Aguayo (El Colegio de México) |
| Abstract: | Global emissions of greenhouse gases (GHG) have been accelerating in recent decades. Moreover, since the year 2000 global emissions have been growing far more rapidly than the worst scenarios projected by the Intergovernmental Panel on Climate Change (IPCC) (Rogner et al., 2007, Raupach, et al., 2007). This growth has been driven by the expansion of activity in the world economy and the reversal of earlier declining trends in both the energy intensity of gross domestic product and the carbon intensity of energy (measured respectively, as energy consumption per unit of gross domestic product and the CO2 emissions per unit of total primary energy supply). According to the last report of the Intergovernmental Panel on Climate Change (IPCC), during the period 1970 to 2004 global emissions have risen as the combined effect of global income growth (77%) and global population growth (69%), which have surpassed the general decrease in energy intensity of GDP (-33%) and the almost null reduction in carbon intensity of energy (-2%). In other words, “declining carbon and energy intensities have been unable to offset income effects and population growth” at a global scale, rising consequently carbon emissions (Rogner et al., 2007, p. 107). |
| Keywords: | CO2 emissions; energy intensity; environmental Kuznets curves |
| JEL: | Q53 Q42 Q56 N76 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:emx:ceedoc:2010-01&r=ene |
| By: | Frederick van der Ploeg; Cees Withagen |
| Abstract: | Optimal climate policy is studied in a Ramsey growth model. A developing economy weighs global warming less, hence is more likely to exhaust fossil fuel and exacerbate global warming. The optimal carbon tax is higher for a developed economy. We analyze the optimal time of transition from fossil fuel to renewables, amount of fossil fuel to leave in situ, and carbon tax. Subsidizing a backstop without an optimal carbon tax induces more fossil fuel to be left in situ and a quicker phasing in of renewables, but fossil fuel is depleted more quickly. Global warming need thus not be alleviated. |
| Keywords: | carbon tax, renewables, exhaustible resources, global warming, growth, intergenerational inequality aversion, second best, Green Paradox |
| JEL: | D90 E13 Q30 Q42 Q54 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:055&r=ene |
| By: | Maxensius Tri Sambodo (Economic Research Center-Indonesian Institute of Sciences (P2E-LIPI)) |
| Abstract: | Java-Bali power system dominates the national installed capacity and will contribute to about 76% of the national CO2 emissions from the electricity sector in the future. Thus, minimizing CO2 emission from the Java-Bali system can help Indonesia to reduce the national CO2 emissions level. We apply optimization approach to investigate this problem by including carbon tax into the cost function. We analyzed data based on electricity generating system in 2008. In general the optimization showed that diesel and gas turbine is not needed in the power plant system. Further, the simulation showed that if Indonesia adopted carbon tax by US$56/ton CO2 - USD 86/tCO2; it will lead to three major changing. First, carbon tax will increase the cost of power plant or equivalently increase tax revenue to about 2.1% of GDP in a year. Second, combine cycle has important role to offset decreasing output in steam power plant. Finally, by implementing carbon tax, daily CO2 can decrease by 77,586 ton per day. By applying sensitivity analysis, we also found a structural break in marginal cost when carbon tax is higher than US$ 50/tCO2. There are some weaknesses from this study such as not use strong assumption for availability factor and generating costs. This study proposed that government needs to optimize utilization of combine cycle power plan to offset steam power and implement carbon tax above US$ 50/ ton CO2, to reduce CO2 emissions significantly. |
| Keywords: | Power generation, Carbon tax, Optimization |
| JEL: | C6 Q4 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:unp:wpaper:201009&r=ene |
| By: | Christa Clapp; Alexia Leseur; Olivier Sartor; Gregory Briner; Jan Corfee-Morlot |
| Abstract: | The importance of cities in climate policy stems from the simple reality that they house the majority of the world’s population, two-thirds of world energy use and over 70% of global energy use emissions. At the international level, global carbon markets have become an important new source of financing for mitigation projects and programmes. Yet to date, the participation of urban authorities and of urban mitigation projects in the global carbon market remains extremely limited. The under-representation of urban carbon projects can be linked both to the difficulties to implement urban mitigation projects and to the difficulties for cities to access the carbon market. This paper reviews 10 in–depth case studies of urban projects proposed and operating within the realm of Joint Implementation (JI) and the Clean Development Mechanism (CDM) of the Kyoto Protocol. It explores the drivers of success for projects, examining in particular: types of projects that have been successful and their profitability; leadership and other roles of various actors in project initiation development and operation (i.e. local, regional and national governments as well as international, private sector or other non-governmental organisations); the role of local cobenefits; and project financial structure and risk management approaches. This paper also considers how these lessons learned may inform decisions in the future about how to best tap the potential for carbon markets to offer increased levels of financial support for urban mitigation projects or programmes.<BR>La place accordée aux villes dans la politique climatique découle d’un constat simple : elles abritent la majorité de la population mondiale, consomment les deux tiers de l’énergie mondiale et produisent plus de 70 % des émissions mondiales liées à cette consommation. Au niveau international, les marchés mondiaux du carbone sont devenus une nouvelle source importante de financement pour les projets et les programmes d’atténuation. Pourtant, à ce jour, la participation des autorités urbaines et des projets urbains d’atténuation au marché mondial du carbone reste encore extrêmement limitée. La sous-représentation des projets urbains dans le domaine du carbone est à mettre en rapport avec les difficultés inhérentes à la mise en oeuvre de projets urbains d’atténuation et avec les obstacles rencontrés par les villes pour accéder au marché du carbone. Ce rapport examine dix études de cas approfondies portant sur des projets urbains, envisagés ou existants, dans le domaine de la mise en oeuvre conjointe (MOC) ou du mécanisme pour un développement propre (MDP) du Protocole de Kyoto. Il explore les facteurs de succès des projets, en examinant plus particulièrement les types de projets qui ont réussi et leur rentabilité ; le rôle moteur des autorités et celui des différents acteurs dans le lancement des projets, leur développement et leur fonctionnement (autorités locales, régionales et nationales, et organisations internationales, non gouvernementales et du secteur privé) ; les avantages connexes locaux ; et les approches en matière de structure financière des projets et de gestion des risques. Cette étude envisage aussi comment les enseignements tirés de ces expériences pourront à l’avenir éclairer les décisions futures sur les moyens de mobiliser au mieux le potentiel des marchés du carbone au service de l’accroissement du soutien financier aux projets ou programmes urbains d’atténuation. |
| Keywords: | climate change, Kyoto protocol, cities, Greenhouse gas mitigation, Carbon finance, changement climatique, Protocole de Kyoto, atténuation des émissions de gaz à effet de serre, finance carbone, villes |
| JEL: | F30 F53 G15 H87 |
| Date: | 2010–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:29-en&r=ene |
| By: | Chen, Ping-Yu; Chang, Chia-Lin; Chen, Chi-Chung |
| Abstract: | The major contribution of this study is to combines both climatic and macroeconomic factors simultaneously in the estimation of mortality using the capital city of 22 OECD countries from the period 1990 to 2008. The empirical results provide strong evidences that higher income and a lower unemployment rate could reduce mortality rates, while the increases in precipitation and temperature variation have significantly positive impacts on the mortality rates. The effects of changing average temperature on mortality rates in summer and winter are asymmetrical and also depend on the location. Combining the future climate change scenarios with the estimation outcomes show that mortality rates in OECD countries in 2100 will be increased by 3.77% to 5.89%. |
| Keywords: | Climate change; mortality; panel data model |
| JEL: | I12 Q54 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27915&r=ene |
| By: | Hallegatte, Stephane; Przyluski, Valentin |
| Abstract: | Large-scale disasters regularly affect societies over the globe, causing large destruction and damage. After each of these events, media, insurance companies, and international institu-tions publish numerous assessments of the"cost of the disaster."However these assessments are based on different methodologies and approaches, and they often reach different results. Besides methodological differences, these discrepancies are due to the multi-dimensionality in disaster impacts and their large redistributive effects, which make it unclear what is included in the estimates. But most importantly, the purpose of these assessments is rarely specified, although different purposes correspond to different perimeters of analysis and different definitions of what a cost is. To clarify this situation, this paper proposes a definition of the cost of a disaster, and emphasizes the most important mechanisms that explain and determine this cost. It does so by first explaining why the direct economic cost, that is, the value of what has been damaged or destroyed by the disaster, is not a sufficient indicator of disaster seriousness and why estimating indirect losses is crucial to assess the consequences on welfare. The paper describes the main indirect consequences of a disaster and the following reconstruction phase, and discusses the economic mechanisms at play. It proposes a review of available methodologies to assess indirect economic consequences, illustrated with examples from the literature. Finally, it highlights the need for a better understanding of the economics of natural disasters and suggests a few promising areas for research on this topic. |
| Keywords: | Natural Disasters,Disaster Management,Economic Theory&Research,Hazard Risk Management,Climate Change Economics |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5507&r=ene |
| By: | Peter McGregor (Fraser of Allander Institute, University of Strathclyde.); Kim Swales (Department of Economics, University of Strathclyde.); Matthew Winning (Department of Economics, University of Strathclyde.) |
| Abstract: | Domestic action on climate change is increasingly important in the light of the difficulties with international agreements and requires a combination of solutions, in terms of institutions and policy instruments. One way of achieving government carbon policy goals may be the creation of an independent body to advise, set or monitor policy. This paper critically assesses the Committee on Climate Change (CCC), which was created in 2008 as an independent body to help move the UK towards a low carbon economy. We look at the motivation for its creation in terms of: information provision, advice, monitoring, or policy delegation. In particular we consider its ability to overcome a time inconsistency problem by comparing and contrasting it with another independent body, the Monetary Policy Committee of the Bank of England. In practice the Committee on Climate Change appears to be the ‘inverse’ of the Monetary Policy Committee, in that it advises on what the policy goal should be rather than being responsible for achieving it. The CCC incorporates both advisory and monitoring functions to inform government and achieve a credible carbon policy over a long time frame. This is a similar framework to that adopted by Stern (2006), but the CCC operates on a continuing basis. We therefore believe the CCC is best viewed as a “Rolling Stern plus” body. There are also concerns as to how binding the budgets actually are and how the budgets interact with other energy policy goals and instruments, such as Renewable Obligation Contracts and the EU Emissions Trading Scheme. The CCC could potentially be reformed to include: an explicit information provision role; consumption-based accounting of emissions and control of a policy instrument such as a balanced-budget carbon tax. |
| Keywords: | Climate change, Carbon policy, Independent body, Time Inconsistency |
| JEL: | Q48 Q54 Q58 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1031&r=ene |