nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒02‒05
thirty-six papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Decarbonization of the U.S. electricity sector: Are state energy policy portfolios the solution? By Sanya, Carley
  2. Economic Evaluation of IGCC Plants with Hot Gas Cleaning By Melchior, Tobias; Madlener, Reinhard
  3. The economic impact of electricity conservation policies: A case study of Ireland By Nyamdash, Batsaikhan; Denny, Eleanor
  4. An Examination of Frank Wolak’s Model of Market Power and its Application to the New Zealand Electricity Market By Lewis Evans; Graeme Guthrie
  5. A Critique of Wolak’s Evaluation of the NZ Electricity Market: The Incentive to Exercise Market Power with Elastic Demand and Transmission Loss By Seamus Hogan; Peter Jackson
  6. A Critique of Wolak’s Evaluation of the NZ Electricity Market: Introduction and Overview By Lewis Evans; Seamus Hogan; Peter Jackson
  7. The impact of power market reforms on electricity price-cost margins and cross-subsidy levels: a cross country panel data analysis By Erdogdu, Erkan
  8. Revisiting the Electricity Consumption-Growth Nexus for Portugal: Evidence from a Multivariate Framework Analysis By Tang, Chor Foon; Shahbaz, Muhammad
  9. Application of a structural model to a wholesale electricity market: The Spanish market from January 1999 to June 2007 By Vítor Marques; Adelino Fortunato; Isabel Soares
  10. On the Economics of Ramping Rate Restrictions at Hydro Power Plants: Balancing Profitability and Environmental Costs By Shilei Niu; Margaret Insley
  11. French energy policy within the European Union framework : From black sheep to model ?. By Méritet, Sophie
  12. Enchancing the democratic legitimacy of EU governance? The impact of online public consultations in energy policy-making By Radostina Primova
  13. Does Energy Consumption Respond to Price Shocks? Evidence from a Regression-Discontinuity Design By Paulo Bastos; Lucio Castro; Julian Cristia; Carlos Scartascini
  14. Financial development and energy consumption nexus in Malaysia: A multivariate time series analysis By Islam, Faridul; Shahbaz, Muhammad; Alam, Mahmudul
  15. Going beyond energy intensity to understand the energy metabolism of nations: The case of Argentina By Marina Recalde; Jesus Ramos-Martin
  16. Final energy demand in Portugal: How persistent it is and why it matters for environmental policy* By Alfredo Marvão Pereira; José Manuel Belbute
  17. On the environmental, economic and budgetary impacts of fossil fuel prices: A dynamic general equilibrium analysis of the Portuguese case By Alfredo Marvão Pereira; Rui M. Pereira
  18. Oil to Cash: Fighting the Resource Curse through Cash Transfers By Todd Moss
  19. Standard Oil as a Technological Innovator By Scherer, F. M.
  20. Legislating on car emissions: What drives standards in EU environmental policy? By Deters, Henning
  21. Economic impacts of development of road transport for Aquitaine region for the period 2007-2013 subject to a climate plan By Jean-Christophe MARTIN (GREThA, CNRS, UMR 5113); Patrick POINT (GREThA, CNRS, UMR 5113)
  22. Rule of law and the Environmental Kuznets Curve: evidence for carbon emissions By Concetta Castiglione; Davide Infante; Janna Smirnova
  23. Environmental and Climate Innovation: Limitations, Prices and Policies By Jeroen C.J.M. van den Bergh
  24. Marginal abatement cost curves and the budgetary impact of CO2 taxation in Portugal By Alfredo Marvão Pereira; Rui M. Pereira
  25. Decoupling: Is there a Separate Contribution from Environmental Taxation By Muller, Adrian; Åsa, Löfgren; Thomas, Sterner
  26. Carbon Emission Trading Scheme and the Aviation Sector: An experimental analysis on allocation of allowances By Anthony T H Chin; Zhang Peng
  27. The Effects of Global Warming on Fisheries By Medel, Carlos A.
  28. Aversion to Extreme Temperatures, Climate Change, and Quality of Life By David Albouy; Walter Graf; Ryan Kellogg; Hendrik Wolff
  29. Financing greener and climate-resilient infrastructure in developing countries - challenges and opportunities By Fay, Marianne; Iimi, Atsushi; Perrissin-Fabert, Baptiste
  30. Adapting to Climate Change Through Local Municipal Planning: Barriers and Opportunities By Thomas G Measham; Benjamin L Preston; Cassandra Brooke; Tim F Smith; Craig Morrison; Geoff Withycombe; Russell Gorddard
  31. Beyond Cancún: Market Opportunities Trump Multilateral Discourse By Caio Koch Weser
  32. Pollution Control Instruments in the Presence of an Informal Sector By Sudeshna Chattopadhyay; Sarmila Banerjee; Katrin Millock
  33. Strategic behavior in IEAs: When and why countries joined the Kyoto Protocol By Christian Almer; Ralph Winkler
  34. Irreversibility and Optimal Timing of Climate Policy By Justin Caron; Markus Ohndorf
  35. A Cost-Benefit Analysis of the EU 20/20/2020 Package By Tol, Richard S. J.
  36. Modified Ramsey Discounting for Climate Change By Tol, Richard S. J.

  1. By: Sanya, Carley
    Abstract: State governments have taken the lead on U.S. energy and climate policy. It is not yet clear, however, whether state energy policy portfolios can generate results in a similar magnitude or manner to their presumed carbon mitigation potential. This article seeks to address this lack of policy evidence and contribute empirical insights on the carbon mitigation effects of state energy portfolios within the U.S. electricity sector. Using a dynamic, long-term electricity dispatch model with U.S. power plant, utility, and transmission and distribution data between 2010 and 2030, this analysis builds a series of state-level policy portfolio scenarios and performs a comparative scenario analysis. Results reveal that state policy portfolios have modest to minimal carbon mitigation effects in the long run if surrounding states do not adopt similar portfolios as well. The difference in decarbonization potential between isolated state policies and larger, more coordinated policy efforts is due in large part to carbon leakage, which is the export of carbon intensive fossil fuel-based electricity across state lines. Results also confirm that a carbon price of $50/metric ton CO2e can generate substantial carbon savings. Although both policy options—an energy policy portfolio or a carbon price—are effective at reducing carbon emissions in the present analysis, neither is as effective alone as when the two strategies are combined.
    Keywords: Electricity markets; Energy policy; Carbon dioxide; Climate policy
    JEL: H70 C61 L94
    Date: 2010–01
  2. By: Melchior, Tobias (RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: This paper investigates whether coal- or biomass-fired Integrated Gasification Combined-Cycle (IGCC) power plants can serve as an economically viable future technology for providing clean electricity and heat in Germany. In the context of CO2 emission reduction in power generation, energy conversion technologies that enable the implementation of Carbon Capture and Storage (CCS) need to be considered. IGCC is one such technology, as it utilizes coal or biomass but does not necessarily emit CO2. We therefore investigate whether IGCC plants can, from an economic perspective, be an alternative to nuclear and/or conventional coal-fired power plants. Our research is undertaken with the help of scenario analysis. The possible shut-down of nuclear power stations as well as of outdated coal-fired power plants, together with the evolution of CO2 prices, provides the starting point of our study. The option of hot gas cleaning in IGCC plants is of particular interest, as it is expected to significantly enhance the efficiency of IGCC technology and allows for combined heat and power production (CHP). Corresponding supplementary earnings (incl. subsidies) are compared with an increase in specific investment costs. Besides the hot gas cleaning advancement, we also investigate the injection of pure CO2 (separated from the IGCC process) into oilfields, as it reduces the costs of CO2 transport and storage through Enhanced Oil Recovery (EOR). Based on the results, a judgement on the ability of IGCC technology to replace nuclear power stations and/or conventional coal-fired power plants in Germany is made. Net present values calculated provide decision-support for energy suppliers about the if and when to invest in IGCC plants. We find that only a partial substitution of current power plants by IGCC facilities is reasonable, e.g. for locational reasons, whereas a complete abandonment of IGCC technology seems to be unlikely from the current point of view.
    Keywords: IGCC; Economic evaluation; Hot gas cleaning
    Date: 2010–12
  3. By: Nyamdash, Batsaikhan; Denny, Eleanor
    Abstract: As electricity is an essential input in almost every production process, it is essential to quantify the impact of economic policies aimed at electricity conservation on the output. This research investigates the e®ect of unanticipated shocks in electricity consumption, technical e±ciency, and electricity price on the value added in the heterogenous service and industrial sectors, under a demand side model. Ireland is utilized as a case study as it is pursuing ambitious electricity conservation targets while in the midst of a severe economic recession. Given the important role of electricity as an input in both the services and industrial sectors, it was feared that these energy conservation targets may adversely impact on these sectors and as a result worsen the national economic situation. Findings show that value added, electricity consumption, electricity price and technical e±ciency are co-integrated for both the service and industrial sectors. However, impulse response functions show that positive technical e±ciency and consumption shocks have persistent negative e®ects on the value added of both sectors. Therefore, a direct electricity conservation policy, that puts a constraint on electricity consumption, should not have an adverse e®ect on sector speci¯c value added.
    Keywords: Electricity consumption; Value added; Granger Causality; Impulse response
    JEL: Q43
    Date: 2011–01–24
  4. By: Lewis Evans; Graeme Guthrie
    Abstract: This paper is the second in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. In this paper, we discuss the Report’s measures of the ability and incentives of generators to exercise unilateral market power. We show that the construction and interpretation of these measures are highly sensitive to some key assumptions, particularly those concerning the elasticity of demand for electricity in the wholesale market and the amount of transmission loss on the national grid.
    Keywords: Electricity markets; market power
    JEL: L41 L13
    Date: 2011–01–23
  5. By: Seamus Hogan (University of Canterbury); Peter Jackson
    Abstract: This paper is the second in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. In this paper, we discuss the Report’s measures of the ability and incentives of generators to exercise unilateral market power. We show that the construction and interpretation of these measures are highly sensitive to some key assumptions, particularly those concerning the elasticity of demand for electricity in the wholesale market and the amount of transmission loss on the national grid.
    Keywords: Wolak Report; electricity markets; market power
    JEL: L41 L13
    Date: 2011–01–01
  6. By: Lewis Evans; Seamus Hogan (University of Canterbury); Peter Jackson
    Abstract: This paper is the first in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. The Wolak report concluded that there had been a cumulative total of $4.3b (NZD) of overcharging in the New Zealand wholesale market over a period of seven years. In this paper, we introduce the Wolak findings in the context of the salient features of the New Zealand market, and explain that this headline figure is highly sensitive to some (quite unrealistic) assumptions about the structure of this market. The papers that follow this introduction (Hogan and Jackson, 2011, and Evans and Guthrie, 2011) examine Wolak’s methodology and its empirical application.
    Keywords: Wolak Report; electricity markets; market power
    JEL: L41 L13
    Date: 2011–01–01
  7. By: Erdogdu, Erkan
    Abstract: One of the main expectations from power market reform has been a reduction in price-cost margins and cross-subsidy levels between industrial and residential consumers. This paper focuses on this issue by looking at the impact of the electricity industry reforms on residential and industrial electricity price-cost margins and their effect on cross-subsidy levels between consumer groups. Using panel data for 63 developed and developing countries covering the period 1982–2009, empirical models are developed and analyzed. The research findings suggest that there isn’t a uniform pattern for the impact of reform process as a whole on price-cost margins and cross-subsidy levels. Each individual reform step has different impact on price-cost margins and cross subsidy levels for each consumer and country group. Our findings imply that reform steps have different impacts in different countries, which supports the idea that reform prescription for a specific country cannot easily be transferred to another one. So, transferring the formal and economic structure of a successful power market in a developed country to developing countries is not a sufficient condition for good economic performance of the electricity industries in developing countries. Furthermore, the study suggests that power consumption, income level and country specific features constitute other important determinants of electricity price-cost margins and cross-subsidy levels.
    Keywords: Models with Panel Data; Power Market Reform; Electricity Prices
    JEL: C51 L11 Y40 L94
    Date: 2011
  8. By: Tang, Chor Foon; Shahbaz, Muhammad
    Abstract: The aim of present paper is to re-investigate the long-run and causal relationship between electricity consumption, income, financial development, population and foreign trade in Portugal using the bounds testing approach to cointegration within the unrestricted error-correction model (UECM). The Granger causality test within the Vector Error-Correction Model (VECM) was conducted to examine the direction of causality. This study covered the annual sample of 1971 to 2009. Our empirical evidence supports the presence of a long-run relationship between the variables in Portugal. Moreover, the results indicate that increase in real income, financial development, population and foreign trade has positive impact on electricity consumption in Portugal. In addition, the overall Granger causality results exhibit bi-directional causal relationship between electricity consumption, real income, and population while uni-directional causality is running from financial development to electricity consumption. In this respect, Portugal is an energy dependent country, thus energy conservation policy (growth policy) may adversely affect the economic growth (environment or pollution) in Portugal. Ultimately, the Portuguese government should encourage research and development on technological innovation for energy savings without affecting economic development in Portugal.
    Keywords: Causality; electricity consumption; financial development; Portugal
    JEL: C32 Q20 O52 Q43
    Date: 2011–01–25
  9. By: Vítor Marques (Entidade Reguladora dos Serviços Energéticos); Adelino Fortunato (University of Coimbra); Isabel Soares (University of Oporto)
    Abstract: The aim of this work is to analyse the agents’ behaviour in highly concentrated and strongly regulated electricity wholesale markets with rigid demand. In order to accomplish this aim, the analysis was based on the former Spanish electricity generation market, between January 1999 and June 2007, before the MIBEL (Iberian Electricity Market) has started. The analysis is carried out in the theoretical framework of the structural models. The result of the structural model supports the apparently competitive nature of the market analysed for the period 1999 to 2003, despite than fact that the Lerner index average was high during this period. It will therefore be important in future work to analyse whether the high average mark-up verified accords with the CTCs (stranded costs compensation which have the characteristics of contracts for difference) which frame the activities of the electricity producers.
    Keywords: electricity market, rigid demand, structural model, market power
    JEL: L13
    Date: 2010–12
  10. By: Shilei Niu (Department of Economics, University of Waterloo); Margaret Insley (Department of Economics, University of Waterloo)
    Abstract: This paper examines the impact of ramping rate restrictions imposed on hydro operations to protect aquatic ecosystems. A dynamic optimization model of the profit maximizing decisions of a hydro operator is solved for various restrictions on water flow, using data for a representative hydro operation in Ontario. Profits are negatively affected, but for a range of restrictions the impact is not large. Ramping restrictions cause a redistribution of hydro production over a given day, which can result in an increase in total hydro power produced. This affects the need for power from other sources with consequent environmental impacts.
    Date: 2010–12
  11. By: Méritet, Sophie
    Keywords: Politiques publiques; Union européenne; France; Energie;
    JEL: Q48 Q4
    Date: 2011
  12. By: Radostina Primova
    Abstract: With the White Paper on European Governance (2001) the European Commission has introduced a new approach to European policy-making and civil society making public consultations an essential tool for improving governance and policy outputs. The present study seeks to explore the role of online public consultations in enhancing democratic legitimacy at the policy preparation stage for the empirical case of the EU energy policy. First, the paper looks at different concepts of legitimacy and discusses the role of civil society as a cure for the democratic deficit of European policy-making. Second, it examines civil society participation and input in the consultation on the Green paper A European Strategy for sustainable, competitive and secure energy and evaluates its impact on policy outputs by analysing two major legislative packages in the energy sector. Finally, it draws implications about the democratic quality of the consultation mechanism and its contribution to legitimising EU governance.
    Keywords: civil society; energy policy; European public space; governance; legitimacy
    Date: 2011–01–15
  13. By: Paulo Bastos; Lucio Castro; Julian Cristia; Carlos Scartascini
    Abstract: Este trabajo forma parte de una serie de estudios realizados en el marco del proyecto “La efectividad de las redes de protección social: El rol de los sistemas integrados de información social”. Los estudios de caso fueron realizados en el período 2007-08. Se agradecen los comentarios de Amélia Cohn, Lúcia Maria Modesto Pereira y Paulo de Martino Jannuzzi. El texto fue traducido y editado en español por Juan Ernesto O. S. Alonso.
    Keywords: Energy consumption, Elasticity of demand, Regulation of public utilities, Regression discontinuity design, Public policy
    JEL: H83 I38
    Date: 2011–01
  14. By: Islam, Faridul; Shahbaz, Muhammad; Alam, Mahmudul
    Abstract: Despite a bourgeoning literature on the existence of a long-run relationship between energy consumption and economic growth, the findings have failed to establish clearly the direction of causation. A growing economy needs more energy, which is exacerbated by growing population. Evidence suggests that financial development can reduce overall energy consumption by achieving energy efficiency. Economic growth and energy consumption in Malaysia have been rising in tandem over the past several years. The three public policy objectives of Malaysia are: economic progress, population growth and financial development. It is of interest to the policymakers to understand the dynamic interrelation among the stated objectives. The paper implements Auto Regressive Distributed Lag (ARDL) approach to cointegration to examine the existence of a long-run relationship among the series: energy consumption, population, aggregate production, and financial development for Malaysia; and tests for Granger causality within the Vector Error Correction Model (VECM). The results suggest that energy consumption is influenced by economic growth and financial development, both in the short and the long-run, but the population-energy relation holds only in the long run. The findings have important policy implications for balancing economic growth vis-à-vis energy consumption for Malaysia, as well as other emerging nations.
    Keywords: Financial development; Energy consumption; ARDL; Economic growth
    JEL: C32 Q20 O52 Q43
    Date: 2011–01–19
  15. By: Marina Recalde (Departamento de Economía, Universidad Nacional del Sur and GEPAMA-UBA, Buenos Aires, Argentina); Jesus Ramos-Martin (Departament d’Economia i d’Història Econòmica, Universitat Autònoma de Barcelona, Spain)
    Abstract: The link between energy consumption and economic growth has been widely studied in the economic literature. Understanding this relationship is important from both an environmental and a socio-economic point of view, as energy consumption is crucial to economic activity and human environmental impact. This relevance is even higher for developing countries, since energy consumption per unit of output varies through the phases of development, increasing from an agricultural stage to an industrial one and then decreasing for certain service based economies. In the Argentinean case, the relevance of energy consumption to economic development seems to be particularly important. While energy intensity seems to exhibit a U-Shaped curve from 1990 to 2003 decreasing slightly after that year, total energy consumption increases along the period of analysis. Why does this happen? How can we relate this result with the sustainability debate? All these questions are very important due to Argentinean hydrocarbons dependence and due to the recent reduction in oil and natural gas reserves, which can lead to a lack of security of supply. In this paper we study Argentinean energy consumption pattern for the period 1990-2007, to discuss current and future energy and economic sustainability. To this purpose, we developed a conventional analysis, studying energy intensity, and a non conventional analysis, using the Multi-Scale Integrated Analysis of Societal and Ecosystem Metabolism (MuSIASEM) accounting methodology. Both methodologies show that the development process followed by Argentina has not been good enough to assure sustainability in the long term. Instead of improving energy use, energy intensity has increased. The current composition of its energy mix, and the recent economic crisis in Argentina, as well as its development path, are some of the possible explanations.
    Keywords: Argentina, energy intensity; energy mix; economic development; societal metabolism, integrated analysis
    JEL: O11 O13 O54 Q01 Q57 Q58
    Date: 2011–01
  16. By: Alfredo Marvão Pereira (Department of Economics, The College of William and Mary); José Manuel Belbute (Department of Economics, University of Evora)
    Abstract: The objective of this paper is to analyze the degree of persistence of final energy demand in Portugal. Our results suggest the presence of a strong level of persistence for aggregate final energy demand.inal demand for gas is the most persistent component of energy demand, while the final demand for coal is the least persistent. In turn, final demand for petroleum and biomass tend to have levels of persistence similar to aggregate final demand. The case of final demand for electricity is inconclusive. These results have the important implication for the design of environmental policies. First, the fact that final energy demand is highly persistent is good news in that environmental policies in Portugal can be implemented in a favorable setting in which their effects will tend to be long lasting. Second, the high persistence of gas and the fact that biomass and petroleum have levels of persistence that are similar suggests that fuel switching policies will be relatively easy to implement in these cases. The case of coal is somewhat different in that switching away from coal may not be easy. In turn, the case of electricity is somewhat ambiguous. While the fact that it is also highly persistent suggests that shocks to its final demand will produce long lasting effects, it is not clear, however, how they compare to the effects on the other final demand components and therefore we can make no statements about fuel switching.
    Keywords: Persistence, final energy demand, fuel switching, environmental policy, Portugal
    JEL: C14 C22 O13 Q41
    Date: 2011–01–23
  17. By: Alfredo Marvão Pereira (Department of Economics, The College of William and Mary); Rui M. Pereira (Department of Economics, University of the Algarve)
    Abstract: This paper examines the environmental, economic and budgetary impacts of fuel prices using a dynamic general equilibrium model of the Portuguese economy which highlights the mechanisms of endogenous growth and includes a detailed modeling of the public sector. The fuel price scenarios are based on forecasts by the DOE-US, the IEA-OECD and IHS Global Insight Inc., and represent a wide range of projections for absolute and relative fossil fuel prices. The dramatic differences in relative prices lead to substantially different environmental impacts. Our results suggest that higher fuel prices in the DOE-US scenario would lead to a reduction in emissions that account for 10.2% of the implicit emissions deficit for EU 2020 emissions targets, while relative price changes, led by lower prices for coal, result in a 19.2% increase for the IEA-OECD scenario. Under the IHS scenario, declining fuel prices would increase the emissions deficit by 95.9%. In terms of the long term economic impact, our results suggest a 2.2% drop in GDP in the DOE-US scenario and of 1.9% in the IEA-OECD scenario and an increase of 1.4% in the IHS scenario, which reflect the absolute change in energy costs. As to the budgetary impact, higher fuel prices lead to lower tax revenues, which, coupled with a reduction in public spending translates to lower public deficits. In addition, and from a methodological perspective, our results highlight the importance of endogenous growth mechanisms. A scenario of higher fuel prices would, under exogenous economic growth assumptions, result in larger baseline emissions growth scenarios, substantially smaller economic effects, and rather different budgetary effects. Finally, and from a policy perspective, our results highlight the impact of fossil fuel prices in defining the level of policy intervention required for compliance with international and domestic climate change legislation. As a corollary, we argue that it is critical for both international comparisons and international policy negotiations to define baseline emission targets in function of steady state economic projections under stable price assumptions.
    Keywords: Fuel Prices, Endogenous Growth, Budgetary Consolidation, Climate Policy, Dynamic
    JEL: Q40 Q43 Q54 C68 D58 H50 H68
    Date: 2011–01–23
  18. By: Todd Moss
    Abstract: Many of the world’s poorest and most fragile states are joining the ranks of oil and gas producers. These countries face critical policy questions about managing and spending new revenue in a way that is beneficial to their people. At the same time, a growing number of developing countries have initiated cash transfers as a response to poverty, and these programs are showing some impressive results. Here it is proposed putting these two trends together: countries seeking to manage new resource wealth should consider distributing income directly to citizens as cash transfers. Beyond serving as a powerful and proven policy intervention, cash transfers may also mitigate the corrosive effect natural resource revenue often has on governance. [Working Paper no. 237].
    Keywords: policy intervention, governance, cash transfers, poverty, wealth, developing countries, natural resource
    Date: 2011
  19. By: Scherer, F. M. (Harvard Kennedy School)
    Abstract: A century ago, in 1911, the U.S. Supreme Court issued its path-breaking decision in the monopolization case against the Standard Oil Companies. Standard pleaded inter alia that its near-monopoly position was the result of superior innovation, citing in particular the Frasch-Burton process for refining the high-sulphur oil found around Lima, Ohio. This paper examines the role of Hermann Frasch in inventing and developing the desulphurization process, showing that Standard failed to recognize his inventive genius when he was its employee and purchased his rights and services only after he had applied the technique in his own Canadian company.
    Date: 2011–01
  20. By: Deters, Henning
    Abstract: The working paper examines the decision-making process of what has most likely been the most contentious European environmental policy-item in 2009: the regulation 443/2009 setting carbon dioxide emission performance standards for new passenger cars. In contrast to the empirical trend of rather stringent protection levels, where environmental front-runner countries, encouraged by the Commission and the European Parliament, are able to set the pace, the regulation in question was largely shaped by the most reluctant member state's Germany with its high-volume, premium car manufacturers.By process-tracing the legislative decision-making, the paper accounts for this lowest-common-denominator outcome. Commission and EP had 'greener' preferences than the Council. Yet, both actors suffered from a of lack internal consistency, with national differences leading to strong in-fights between Commissioners and limiting the voting coherence of EP party-groups. The issue was therefore already highly politicized at the agenda-setting stage. This, and the fact that the dossier was handled in a fast-track procedure, curtailed Commission influence. In the Council negotiations, Germany was able to muster a potential blocking minority together with those, mostly east-European countries, were subsidiaries of German car companies are located. 'Greener' member states were, however, not prepared to veto down the regulation although they criticized its lack of ambition. -- Dieses Arbeitspapier untersucht den Entscheidungsprozess eines der am stärksten umstrittenen Gegenstände europäischer Umweltpolitik der vergangenen Jahre: Die Verordnung 443/2009 zur Verringerung der CO2-Emissionen von Personenkraftwagen. Im Gegensatz zu dem empirischen Trend eher strenger Schutzniveaus, bei dem die umweltpolitischen Spitzenreiter, unterstützt von Kommission und Europäischem Parlament (EP), die Leitlinien vorgeben, war die hier untersuchte Verordnung stark von den Vorstellungen des am wenigsten ambitionierten Mitgliedstaates geprägt, in diesem Fall Deutschland, mit seiner volkswirtschaftlich bedeutsamen und stark am Premium-Markt orientierten Automobilindustrie. Das Papier führt eine Prozessanalyse der Politikformulierung durch, um dieses Ergebnis aufzuklären. Obwohl Kommission und EP tatsächlich eine ambitionierte Verordnung befürworteten, konnten sie sich im interinstitutionellen Entscheidungsprozess letztlich nicht durchsetzen. Beide Akteure litten unter der geringen internen Kohärenz ihrer Positionen. Die nationalen Positionsunterschiede führten zu intensiven Konflikten zwischen den involvierten Generaldirektionen auf der einen, und schwacher Parteigruppendisziplin auf der anderen Seite. In den Ratsverhandlungen vermochte Deutschland gemeinsam mit den vorwiegend osteuropäischen Ländern, in denen Tochtergesellschaften und Produktionspartner deutscher Automobilhersteller ansässig sind, eine potentielle Sperrminorität herzustellen. Die 'grüneren' Mitgliedstaaten waren hingegen nicht bereit, die Verordnung abzulehnen, obwohl sie deren Anspruchsniveau als zu gering kritisierten. Der intensive Verteilungskonflikt im Lager der Automobilherstellerländer konnte mittels einer raffinierten Regelung zur Lastenteilung gemindert werden, machte aber dennoch eine Entscheidung auf höchster politischer Ebene notwendig.
    Date: 2010
  21. By: Jean-Christophe MARTIN (GREThA, CNRS, UMR 5113); Patrick POINT (GREThA, CNRS, UMR 5113)
    Abstract: The region of Aquitaine, located in south-west of France, has implemented a climate plan for the period 2007-2013 in order to avoid 2 883 ktCO2eq per year for 2013. But this region is an important place of transit’s flow between northern Europe and southern Europe. The share of goods transport represents about 30% of road traffic of the Aquitaine region. Moreover, traffic from road transport will not be stabilized according to Becker’s report (2001). As a result, the region council of Aquitaine has planned some road projects in order to increase traffic capacities to avoid too much congestion costs. But, investments decision concerning construction of road infrastructure is performed by cost-benefit analysis. A project leading to an increase of greenhouse gas (GHG) emissions could have also a positive net social benefit. If regional council of Aquitaine wants to realize their road projects, it has to implement some GHG offsetting projects. The computation of opportunity cost of projects of road infrastructure construction must be a useful indicator to determine the maximum budget for GHG offsetting projects. This analysis, far away from substituting to cost-benefit analysis, is however complementary to it. We calculated, for Aquitaine region, the budget of opportunity cost of road projects: it was estimated by €2001 1 920 M and €2001 3 592M respectively for a moderate and high increase of traffic for 2007-2013.
    Keywords: Input-output analysis, minimum disruption approach, eco-environmental impacts, opportunity cost, road transport, greenhouse gas emissions
    JEL: C61 C67 D57 D61 H54 Q54
    Date: 2011
  22. By: Concetta Castiglione (Department of Economics, Trinity College Dublin (Ireland)); Davide Infante (Department of Economics and Statistics, University of Calabria (Italy)); Janna Smirnova (Department of Economics and Statistics, University of Calabria (Italy))
    Abstract: In response to recently growing literature investigating the relationship between environment and institutions, this study investigates how rule of law influences the level of income at the turning point of the Environmental Kuznets Curve (EKC). Using an alternative specification of EKC that avoids nonlinear transformation of potentially nonstationary regressors, investigated by Bradford et al. (2005) and Leitao (2010), we find the evidence for the EKC in European countries for carbon emissions. Our results find a negative relationship between pollution and rule of law, demonstrating that when rule of law is strong, the turning point of the EKC occurs at a lower level of income per capita, thus, decreasing emissions. In terms of policy implication, our study suggests that institutional reinforcement should deserve close attention in designing and enforcing policies that limit environmental degradation.
    Keywords: Environmental Kuznets Curve, Rule of law, Panel data, Turning point
    JEL: O43 Q53 Q58
    Date: 2011–01
  23. By: Jeroen C.J.M. van den Bergh
    Abstract: There is currently much hope about environmental innovation and green technologies, notably as a response to the threat of climate change. This paper offers a critical perspective on the role of technological innovation to solving environmental problems, based on considering empirical economic studies, energy and environmental rebound, the energy return on energy investment (EROEI) of alternative energy technologies, and various crowding out effects. Features of green technologies and motives of green innovators are briefly discussed. This is followed by an examination of the desirable mix of environmental and innovation policies to stimulate environmental innovation, to escape current and to evade early new lock-ins, and to avoid the occurrence of a “green paradoxâ€. This involves an evaluation of specific policy instruments from an environmental innovation angle. An extended argument is offered to clarify that environmental (CO2) pricing is crucial – even though insufficient – for environmental innovation to deliver definite solutions. In other words, environmental innovation (policy) is no substitute for environmental regulation (through prices). The paper also discusses the importance for environmental innovation of international agreements for regulation of greenhouse gas emissions and international coordination of innovation efforts.
    Keywords: climate change; environmental regulation; EROEI; green paradox; rebound; sustainability transition; technological diversity Length 25 pages
    Date: 2011–01
  24. By: Alfredo Marvão Pereira (Department of Economics, The College of William and Mary); Rui M. Pereira (Department of Economics, University of the Algarve, Faro, Portugal)
    Abstract: The objective of this paper is to study CO2 taxation in its dual role as a climate and a fiscal policy instrument. It develops marginal abatement cost curves for CO2 emissions associated with CO2 taxation using a dynamic general equilibrium model of the Portuguese economy which highlights the mechanisms of endogenous growth and includes a detailed modeling of the public sector. It also considers a pair of complementary cost curves corresponding to the impact of CO2 taxes on GDP and on the public budget. Simulation results show that a tax of 17.00 Euros per tCO2 has the technical capacity to limit emissions growth to 62.6 Mt CO2 in 2020, consistent with the existing climate policy target for Portugal. In turn, changes in tax revenues together with reductions in public spending, lead to a decline of 2.7% in the public debt. These desirable outcomes, however, come at the cost of a 0.7% reduction in GDP relative to steady state baseline levels. In general, we find that stricter emission targets imply greater equilibrium CO2 tax levels and larger GDP losses, although these are accompanied by greater reductions in public debt. Finally, the paper highlights the importance of public spending behavior when projecting the net impact of CO2 taxes on public revenue and the public account and in the designing of policies to promote fiscal consolidation.
    Keywords: Marginal Abatement Costs, Economic Effects, Budgetary Effects, Carbon Taxation, Dynamic General Equilibrium, Portugal.
    JEL: Q41 Q43 Q54 Q58 C68 D58 H20 H50 H60
    Date: 2011–01–23
  25. By: Muller, Adrian (Socioeconomic Institute University of Zurich, Switzerland); Åsa, Löfgren (Department of Economics, School of Business, Economics and Law, Göteborg University); Thomas, Sterner (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Decoupling is a crucial topic in the analysis of sustainable development. Without decoupling, continuing and increasing economic growth in developed and developing countries would come with ever increasing environmental pressures, unavoidably destroying the carrying capacity of ecosystems with corresponding detrimental effects on the environment and societies. The prime example today is climate change. If we do not succeed in drastically decoupling greenhouse gas emissions from economic growth, the mitigation goals necessary to avoid catastrophic impacts will never be reached. Due to this importance of decoupling, it is thus essential to know how different policy instruments may support its achievement. The aim of this paper is to address the question whether there is a separate contribution from environmental taxation to decoupling and to offer researchers some guidance on how to optimally address this question.<p>
    Keywords: decoupling; environmental taxation; pollution
    JEL: O40 Q50 Q58
    Date: 2011–01–26
  26. By: Anthony T H Chin (Department of Economics, National University of Singapore); Zhang Peng (Department of Economics, National University of Singapore)
    Abstract: The European Union has proposed a Directive to include aviation activities in the Emission Trading Scheme (ETS) in 2012. The allowance allocation method which will be put in place is relatively easy to implement with low administration cost. However, careful scrutiny suggests that the allocation method does not favor airlines with high energy efficiency. This study proposes an alternative allowance allocation method which is fairer in that it rewards energy efficient airlines. Further, the new method is easy to implement with low administrative cost. The Cournot model serves as the theoretical foundation upon which the experiments are designed to simulate the aviation industry under the ETS. The equilibrium is calculated for each allowance allocation method. Results from experiments suggest consistency with theoretical outcomes.
    Date: 2011–01
  27. By: Medel, Carlos A.
    Abstract: This paper develops two fisheries models in order to estimate the effect of global warming (GW) on firm value. GW is defined as an increase in the average temperature of the earth's surface because of CO₂ emissions. It is assumed that (i) GW exists, and (ii) higher temperatures negatively affect biomass. The literature on biology and GW supporting these two crucial assumptions is reviewed. The main argument presented is that temperature increase has two effects on biomass, both of which have an impact on firm value. First, higher temperatures cause biomass to oscillate. To measure the effect of biomass oscillation on firm value Pindyck's (1984) model is modified to include water temperature as a variable. The results indicate that a 1 to 20% variation in biomass causes firm value to fall from 6 to 44%, respectively. Second, higher temperatures reduce biomass, and a modification of the Smith's (1968) model reveals that an increase in temperature anomaly between +1 and +8°C causes fishery's value to decrease by 8 to 10%.
    Keywords: fisheries; fisheries economics; global warming; climate change
    JEL: Q22 Q54
    Date: 2011–01–24
  28. By: David Albouy; Walter Graf; Ryan Kellogg; Hendrik Wolff
    Date: 2010–02
  29. By: Fay, Marianne (The World Bank); Iimi, Atsushi (The World Bank); Perrissin-Fabert, Baptiste (The World Bank)
    Abstract: Developing countries are faced with a substantial and persistent infrastructure deficit. Climate change complicates this challenge, affcting the way we design and manage infrastructure (defined here as transport, power, water and sanitation) and increasing costs. But all s not negative: Climate change affects both the economic and financial analysis of infrastructure projects in a way that could help achieve long-pursued but elusive goals, such as better maintenance and greener, more efficient design. Further, climate finance could bring additional financing, although that will require increasing the scale of available resources and addressing the fact that climate finance tends to provide ex post financing, ill-suited to a sector characterized by a need for substantial ex ante funding.
    Keywords: Infrastructure finance; Developing countries; Climate change; Adaptation; Mitigation; Inertia; Uncertainty
    JEL: D81 H54 H81 Q54
    Date: 2010–12–17
  30. By: Thomas G Measham; Benjamin L Preston; Cassandra Brooke; Tim F Smith; Craig Morrison; Geoff Withycombe; Russell Gorddard (CSIRO Ecosystem Sciences, Australia)
    Abstract: Municipal planning represents a major avenue for achieving adaptation at local and regional scales, however significant constraints need to be acknowledged and addressed if adaptation is likely to advance through this mechanism. This paper considers the role of municipal (local government) planning and in particular the key constraints which currently limit this avenue for adaptation. The paper reviews the constraints recognised in the adaptation literature including lack of information, institutional limitations and lack of resources. We further identify additional constraints which affect local government planning drawing on the field of community-based environmental planning. In relating these constraints to practical attempts towards adaptation, the paper considers planning based on a case study of three municipalities in Sydney, Australia. In doing so, we draw attention to factors thus far under-acknowledged in the climate adaptation literature. These include leadership, institutional context and competing planning agendas. These factors can serve as constraints or enabling mechanisms for achieving climate adaptation depending upon how they are exploited in any given situation. The paper concludes that, through addressing these issues, local, place-based planning can play a greater role in achieving climate adaptation
    Keywords: institutional capacity, place-based planning, community engagement
    JEL: Q54 P48
    Date: 2010–12
  31. By: Caio Koch Weser
    Abstract: Despite low expectations, the UN climate change negotiations in Cancún made important progress thanks to decisive Mexican diplomacy and a renewed conviction that reducing emissions can drive green growth. Reflecting on the outcome of Cancún, two results clearly stand out: first, the collaborative and inclusive – yet decisive – approach by the Mexicans that gave multilateralism another chance; and second, a new narrative of emissions reductions as an important driver for green growth.
    Keywords: UN, climate change, cancun, emissions, gree growth, Maxican diplomacy, market opportunities, global warming, Copenhagen, developing countries
    Date: 2011
  32. By: Sudeshna Chattopadhyay (Bidhannagar College - EB-2 Sector - I); Sarmila Banerjee (University of Calcutta - Kolkata); Katrin Millock (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: We examines the challenges faced by the regulator in managing pollution when there is a linkage between a formal and an informal industrial sector across the stages of production. The formal sector is more productive than the informal sector and the latter saves cost by evading pollution regulation due to incomplete monitoring. This creates a natural tendency for the more polluting processes to be concentrated in the informal sector. We show the unintended effects of the standard Pigouvian tax (emission fee), which might lead to further deterioration by encouraging the shift of stages in favour of the informal sector. Instead, we propose a second-best hybrid instrument, comprised of a tax on polluting input and a subsidy on proper disposal of residual waste.
    Keywords: Emissions tax, informal sector, pollution control, vertical production.
    Date: 2010–12
  33. By: Christian Almer; Ralph Winkler
    Abstract: We empirically analyze the formation of international environmental agreements within a political economy framework. We develop a theoretical model of state dependent net benefits of ratification predicting (i) strategic behavior with respect to the timing of ratification and (ii) that ratification per se is not necessarily a stronger signal of support compared to signature. Analyzing the signature and ratification process via generalized binary and ordered response models, we find significant evidence for our theoretical predictions. In addition, we show that a wide selection of determinants including economic and political factors influences the decision whether to sign and when to ratify.
    Keywords: Climate Change; Generalized Response Models; International Environmental Agreements; Kyoto Protocol
    JEL: Q54 F53 C25
    Date: 2010–11
  34. By: Justin Caron (Centre for Energy Policy and Economics, ETH Zurich); Markus Ohndorf (Chair of Economics, Institute for Environmental Decisions IED, ETH Zurich)
    Abstract: We focus on the optimal timing of climate change mitigation policies, a decision which is complicated by multiple sources of irreversibility or inertia. The pertinence of Real Option Theory in understanding the optimal amount of necessary precautionary behavior is explored, as are the results from modeling exercises. Generally, it appears that irreversibility associated with sunk abatement capital is stronger than that from accumulating greenhouse gas emissions, implying an "option value" to delaying climate change mitigation. The inclusion of tipping points, or non-linearities in environmental damages, could nevertheless lead to the opposite conclusion. These effects are however not easily quantifiable and are not generally included in modeling exercises. The timing decision will therefore have to be made by policy makers after having subjectively evaluated the importance of potential tipping points. It is for this reason that policy-makers need to be able to themselves understand the intuition behind Real Option theory - the interplay between irreversibility and uncertainty. Many climate-economic modeling exercises have implicitly recognized this fact by integrating strict environmental targets which serve as hard constraints and represent precautionary behavior.
    Keywords: irreversibility, inertia, uncertainty, optimal timing, climate policy, real options
    JEL: D61 Q54 Q58
    Date: 2010–12
  35. By: Tol, Richard S. J.
    Abstract: The European Commission did not publish a cost-benefit analysis for its 2020 climate package. This paper fills that gap, comparing the marginal costs and benefits of greenhouse gas emission reduction. The uncertainty about the marginal costs of climate change is large and skewed, and estimates partly reflect ethical choices (e.g., the discount rate). The 2010 carbon price in the ETS can readily be justified by a cost-benefit analysis. Emission reduction is not expensive provided that policy is well-designed, a condition not met by planned EU policy. It is probably twice as expensive as needed, costing one in ten years of economic growth. The EU targets for 2020 are unlikely to meet the benefit-cost test. For a standard discount rate, the benefit-cost ratio is rather poor (1/30). Only a very low discount rate would justify the 20% emission reduction target for 2020.
    Keywords: cost-benefit analysis/cost/Greenhouse Gas emission reduction/uncertainty/Climate change/Policy/growth/emission reduction target
    Date: 2011–01
  36. By: Tol, Richard S. J.
    Abstract: The Ramsey rule for the consumption rate of discount assumes a transfer of money of a (representative) agent at one point in time to the same agent at another point in time. Climate policy (implicitly) transfers money not just over time but also between agents. I propose three alternative modifications of the Ramsey rule to account for this. Taking the Ramsey rule as given, I derive an intuitively clear but ad hoc modification. Using the assumptions underlying the Ramsey rule, I derive a consistent but more elaborate modification. If the discount rate is differentiated by victim, the consistent modified Ramsey rule is simpler and identical to regional equity weights. I apply the modified Ramsey rules to estimates of the marginal damage costs of carbon dioxide emissions. The results confirm that optimal climate policy has differentiated carbon taxes. Results also show that the standard Ramsey rule drastically underestimates the social cost of carbon.
    Keywords: Climate change/discount rate/equity/Ramsey rule/Social cost of carbon
    Date: 2011–01

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