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on Energy Economics |
| By: | Reyer Gerlagh (Tilburg University, Netherlands); Nicole A. Mathys (Swiss Federal Office of Energy and University of Neuchâtel,) |
| Abstract: | We study the effect of countries’ energy abundance on trade and sector activity, conditional on sector’s energy intensity, using an unbalanced panel with 14 high-income countries from Europe, America and Asia, 10 broad sectors, and years 1970-1997. We find that (i) countries with large energy endowments have low energy prices, and are thus energy abundant both on micro and macro level. (ii) Energy abundant countries have a high level of energy embodied in exports relative to imports. (iii) Energy intensive sectors export from and (iv) have higher economic activity in energy abundant countries. (v) The trade and location effects increase with a sector’s exposure to international trade. In short, energy is a major driver for sector location through specialisation. We show that capital and energy are complements in the production function and use various controls in our analysis. The results give insights into delocalisation effects that may take place among rich countries with heterogeneous energy policy. |
| Keywords: | Trade and the Environment, Pollution Haven, Factor Endowments, Industry Location |
| JEL: | Q56 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.03&r=ene |
| By: | Nathalie Trudeau; Cecilia Tam; Dagmar Graczyk; Peter Taylor |
| Abstract: | For India to play its part in helping to realise deep cuts in global CO2 emissions by the middle of the 21st century, it will need to achieve rapid economic development over the next 40 years with only a very small increase in emissions. Currently there is no precedent for such a low-CO2 development path. The challenge for India will be to achieve strong economic growth while improving energy security, but without locking in high emissions. This information paper further develops the analysis presented in the India chapter of ‘Energy Technology Perspectives 2010’ and provides insights on the implications of achieving deep energy and CO2 emission cuts in the industrial sector both for India and globally. It investigates the least-cost combination of options that can significantly reduce energy and CO2 emissions in India’s industrial sector, while enabling the Indian economy to continue to grow and alleviate energy poverty. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ieaaaa:2011/2-en&r=ene |
| By: | Alfredo Marvão Pereira (Department of Economics, College of William and Mary, Williamsburg, VA, USA e CASEE, Portugal); José Manuel Belbute (Universidade de Évora, Departamento de Economia e CEFAGE-EU, Portugal) |
| 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. Final 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 |
| URL: | http://d.repec.org/n?u=RePEc:evo:wpecon:2_2011&r=ene |
| By: | Magazzino, Cosimo |
| Abstract: | The aim of this article is to assess the empirical evidence of the nexus between aggregate income and energy consumption for Italy during the period 1970-2009, using a time-series approach. After a brief introduction, a survey of the economic literature on this issue is shown, before discussing the data and intro-ducing some econometric techniques. Stationarity tests reveal that both series are non-stationary, or I(1). Moreover, we found a cointegration relationship between the two variables. The short-run dynamics of the variables show that the flow of causality runs from energy use to GDP, and there is a long-run bi-directional causal relationship (or feedback effect) between the two series. Consequently, we conclude that energy is a limiting factor to GDP growth in Italy. |
| Keywords: | Energy policies; energy consumption; GDP; stationarity; cointegration; causality; Italy. |
| JEL: | N54 B22 C22 Q43 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28494&r=ene |
| By: | Louis-Gaëtan Giraudet (ENPC/CIRED); Dominique Finon (CNRS/CIRED) |
| Abstract: | White certificates schemes mandate competing energy companies to promote energy efficiency with flexibility mechanisms, including the trading of energy savings. So far, stylized facts are lacking and outcomes are mainly country-specific. By comparing results of British, Italian and French experiences, we attempt to identify the core determinants of their performances. We show that (i) white certificates schemes are depicted in theoretical works as mandatory subsidies on energy efficiency goods recovered by an end-use energy tax, whereby white certificates exchanges are not a central feature; (ii) at current stages, existing schemes are cost-effective and economically efficient, with large discrepancies though; (iii) the hybrid subsidy-tax mechanism seems valid but conditional to cost pass through permissions; otherwise, obliged energy companies merely promote information on the “downstream” side (i.e. at the consumer level); (iv) although white certificates exchange between different types of actors involved can be important as in Italy, trade among obliged companies is negligible; instead, flexibility sustains vertical relationships between obliged parties and “upstream” partners (i.e. installers, energy service companies). In this respect, we support the view that white certificates schemes are a policy instrument of multi-functional nature (subsidisation, information, technology diffusion), whose static and dynamic efficiency depends upon the consistency between a proper definition of long-term energy savings, the appropriate cost-recovery permission and a fine coordination with other instruments. We finally propose a four stages deployment pattern, along which fragmented markets for energy efficient technologies get closer to create a unified market delivering energy efficiency as a homogeneous good. |
| Keywords: | White Certificates Schemes, Static Efficiency, Dynamic Efficiency, Vertical Organisation, Policy Coordination |
| JEL: | Q4 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.132&r=ene |
| By: | Nathalie Trudeau; Isabel Murray |
| Abstract: | Russia is sometimes referred to as “the Saudi Arabia of energy efficiency”; its vast potential to reduce energy consumption can be considered a significant “energy reserve”. Russia, recognising the benefits of more efficient use of energy, is taking measures to exploit this potential. The president has set the goal to reduce energy intensity by 40% between 2007 and 2020. In the past few years, the IEA has worked closely with Russian authorities to support the development of energy efficiency indicators in Russia, critical to an effective implementation and monitoring of Russia’s ambitious energy intensity and efficiency goals. The key findings of the IEA work with Russia on developing energy efficiency indicators form the core of this report. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ieaaaa:2011/1-en&r=ene |
| By: | Hassan Benchekroun (Department of Economics, CIREQ McGill University); Amrita Ray Chaudhuri (Department of Economics, CentER and TILEC Tilburg University) |
| Abstract: | We show that a technological breakthrough that reduces CO2 emissions per output can exacerbate the climate change problem: countries may respond by raising their emissions resulting in an increase of the stock of pollution that may reduce welfare. Using parameter values based on empirical evidence we obtain that any 'new technology' that reduces the emissions of CO2 per dollar of GDP by less than 76% from their current level is welfare reducing. Developing clean technologies as well as transferring “cleaner” technologies to developing countries make a global post-Kyoto agreement over the control of emissions all the more urgent. |
| Keywords: | Transboundary Pollution, Renewable Resource, Climate Change, Clean Technologies, Differential Games |
| JEL: | Q20 Q54 Q55 Q58 C73 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.05&r=ene |
| By: | Elisa Lanzi (Fondazione Eni Enrico Mattei); Elena Verdolini (Fondazione Eni Enrico Mattei and Università Cattolica di Milano); Ivan Hašcic (OECD Environment Directorate) |
| Abstract: | This paper studies innovation dynamics in efficiency improving electricity generation technologies as an important means of mitigating climate change impacts. Relevant patents are identified and used as an indicator of innovation. We find that patenting in efficiency improving technologies has mostly been stable over time, with a recent decreasing trend. We also find that majority of patents are first filed in OECD countries and only then in non-OECD or BRIC countries. Conversely, non-OECD and BRIC countries apply for patents that are mostly marketed domestically. This result shows that there is significant technology transfer in the field of efficiency improving technologies for electricity production. This flow of know-how is likely to contribute to mitigation of greenhouse gases emissions in emerging economies in the long run. |
| Keywords: | Climate Change, Technological Innovation, Energy, Patents, Fossil Fuels |
| JEL: | Q32 Q4 Q55 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.10&r=ene |
| By: | Zafer Dilaver (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey); Lester C Hunt (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey) |
| Abstract: | This research investigates the relationship between Turkish residential electricity consumption, household total final consumption expenditure and residential electricity prices by applying the structural time series model to annual data over the period 1960 to 2008. Household total final consumption expenditure, real energy prices and an underlying energy demand trend are found to be important drivers of residential electricity demand with the estimated short run and the long run total final consumption expenditure elasticities being 0.38 and 1.57 respectively and the estimated short run and long run price elasticities being -0.09 and -0.38 respectively. Moreover, the estimated underlying energy demand trend, (which, as far as is known, has not been investigated before for the Turkish residential sector) should be of some benefit to Turkish decision makers in terms of energy planning. It provides information about the impact of the implementation of past policies, the influence of technical progress, the changes in consumer behaviour and the effects of energy market structure. Furthermore, based on the estimated equation, and different forecast assumptions, it is predicted that Turkish residential electricity consumption will be somewhere between 48 and 80 TWh by 2020 compared to 40 TWh in 2008. |
| Keywords: | Turkish Residential Electricity Demand, Structural Time Series Model (STSM), Future Scenarios, Energy Demand Modelling and Forecasting. |
| JEL: | C22 Q41 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:sur:seedps:131&r=ene |
| By: | OGGIONI, Giorgia (University of Brescia, Department of Quantitative Methods, I-25122 Brescia, Italy); SMEERS, Yves (CORE and School of Engineering (INMA), Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium) |
| Abstract: | The horizontal integration of the energy market and the organization of transmission services remain two open issues in the restructured European electricity sector. The coupling of the French, Belgian and Dutch electricity markets (the trilateral market) in November 2006 was a real success that the inclusion of Germany to the trilateral market should soon prolong. But the extension of market coupling whether in Central Western Europe or in other European regions encounters several difficulties and the future remains far from clear. The highly meshed grid of continental Europe complicates things and it is now sometimes recognized that the penetration of wind will further exacerbate these difficulties. The nodal system could go a long way towards solving these problems, but its implementation is not yet foreseen in the EU. This paper analyzes versions of market coupling that differ by the organization of counter- trading. While underplayed in current discussions, counter-trading will become a key element of market coupling as its geographic coverage expands and wind penetration develops. We consider a stylized six node example found in the literature and simulate market coupling for different assumptions of zonal decomposition and coordination of TSOs. We show that these assumptions matter: market coupling can be quite vulnerable to the particular situation on hand; counter-trading can work well or completely fail depending on the case and it is not clear beforehand what will prevail. Our analysis relies on standard economic notions such as social welfare, Nash and Generalized Nash equilibrium. But the use of these notions is probably novel. We also simplify matters by assuming away strategic behaviour. The nodal organization is the reference first best scenario: different zonal decompositions and degrees of coordinations are then studied with respect to this first best solution. |
| Keywords: | D52, D58, Q40 |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010053&r=ene |
| By: | SMEERS, Yves (CORE and School of Engineering (INMA), Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium); OGGIONI, Giorgia (University of Brescia, Department of Quantitative Methods, I-25122 Brescia, Italy); ALLEVI, Elisabetta (University of Brescia, Department of Quantitative Methods, I-25122 Brescia, Italy); SCHAIBLE, Siegfried (Chung Yuan Christian University, Department of Applied Mathematics, 32023 Chung-Li, Taiwan) |
| Abstract: | “Market Coupling” is currently seen as the most advanced market design in the restructuring of the European electricity market. Market coupling, by construction, introduces what is generally referred to as an incomplete market: it leaves several constraints out of the market and hence avoids pricing them. This may or may not have important consequences in practice depending on the case on hand. Quasi-Variational Inequality problems and the associated Generalized Nash Equilibrium can be used for representing incomplete markets. Recent papers propose methods for finding a set of solutions of Quasi-Variational Inequality problems. We apply one of these methods to a subproblem of market coupling namely the coordination of counter-trading. This problem is an illustration of a more general question encountered for instance in hierarchical planning in production management. We first discuss the economic interpretation of the Quasi-Variational Inequality problem. We then apply the algorithmic approach to a set of stylized case studies in order to illustrate the impact of different organizations of counter-trading. The paper emphazises the structuring of the problem. A companion paper considers the full problem of market coupling and counter-trading and presents a more extensive numerical analysis. |
| Keywords: | Generalized Nas Equilibrium, Quasi-Variational Inequalities, market coupling, counter-trading, European electricity market |
| JEL: | D52 D58 Q40 |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010052&r=ene |
| By: | ZhongXiang Zhang (East-West Center) |
| Abstract: | Just prior to the Copenhagen climate summit, China pledged to cut its carbon intensity by 40-45% by 2020 relative to its 2005 levels to help to reach an international climate change agreement at Copenhagen or beyond. This raises the issue of whether such a pledge is ambitious or just represents business as usual. To put China’s climate pledge into perspective, this paper examines whether this proposed carbon intensity goal for 2020 is as challenging as the energy-saving goals set in the current 11th five-year economic blueprint, to what extent it drives China’s emissions below its projected baseline levels, and whether China will fulfill its part of a coordinated global commitment to stabilize the concentration of greenhouse gas emissions in the atmosphere at the desirable level. Given that China’s pledge is in the form of carbon intensity, the paper shows that GDP figures are even more crucial to the impacts on the energy or carbon intensity than are energy consumption and emissions data by examining the revisions of China’s GDP figures and energy consumption in recent years. Moreover, the paper emphasizes that China’s proposed carbon intensity target not only needs to be seen as ambitious, but more importantly it needs to be credible. Finally, it is concluded with a suggestion that international climate change negotiations need to focus on 2030 as the targeted date to cap the greenhouse gas emissions of the world’s two largest emitters in a legally binding global agreement. |
| Keywords: | Carbon Intensity, Post-Copenhagen Climate Change Negotiations, Climate Commitments, China |
| JEL: | Q42 Q43 Q48 Q52 Q53 Q54 Q58 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.158&r=ene |
| By: | BRECHET, Thierry (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics and Management, B-1348 Louvain-la-Neuve, Belgium); JOUVET, Pierre - André (EconomiX, Université de Paris Ouest, Nanterre – La Défense, France); ROTILLON, Gilles (EconomiX, Université de Paris Ouest, Nanterre – La Défense, France) |
| Abstract: | In this paper we study the optimal growth path and its decentralization in a two-sector overlapping- generations model with pollution. One sector (power generation) is polluting and the other (final good) is not. Pollution is regulated by tradable emission permits. The issue is whether the optimal growth path can be replicated in equilibrium with pollution permits, given that some permits must be issued free of charge for the sake of political acceptability. We provide a policy rule that allows optimality and acceptability to be reconciled. |
| Keywords: | general equilibrium, optimal growth, pollution, tradable emission permits, acceptability |
| JEL: | D61 D9 Q28 |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010056&r=ene |
| By: | Jean-Christophe MARTIN (GREThA, CNRS, UMR 5113); Patrick POINT (GREThA, CNRS, UMR 5113) |
| Abstract: | This paper proposes to construct linkage indicators of greenhouse gas (GHG) emissions for the Aquitaine region of France by using the notion of vertical integration with a presentation of results in the form of block. Because of poor regional accounting in France, we had to construct an input-output table for the Aquitaine region with a GHG emissions inventory associated. Method of construction of input-output table will affect both reliability and richness of results. |
| Keywords: | regionalized input-output table, quotients of localization, greenhouse gas emissions, linkage indicators |
| JEL: | C67 R15 E2 Q4 Q54 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2011-05&r=ene |
| By: | Julien Daubanes; Pierre Lasserre |
| Abstract: | Optimum commodity taxation theory asks how to raise a given amount of tax revenue while minimizing distortions. We reexamine Ramsey’s inverse elasticity rule in presence of Hotelling-type non-renewable natural resources. Under standard assumptions borrowed from the non-renewable-resource-extraction and from the optimum-commodity-taxation literatures, we show that a non-renewable resource should be taxed in priority whatever its demand elasticity and whatever the demand elasticity of regular commodities. It should also be taxed at a higher rate than other commodities having the same demand elasticity and, while the tax on regular commodities should be constant, the resource tax should vary over time. The appropriate taxation rule depends on the government’s revenue needs; the higher these needs, the closer the consumer price to the monopoly price. Reserves are a form of capital and royalties tax its income; our results contradict Chamley’s conclusion that capital should not be taxed at all in the very long run. When reserves to be extracted are responsive to the taxation of extraction, in the absence of any subsidy to reserve discoveries, the optimal tax rate on extraction obeys an inverse elasticity rule almost identical to that of a commodity whose supply is perfectly elastic. As a matter of fact, there is a continuum of optimal combinations of extraction taxes and subsidies. When the government cannot commit, extraction rents are completely expropriated and subsidies are maximum. In general the optimum Ramsey tax not only causes a distortion of the extraction path, as happens when reserves are given, but also distorts the level of reserves developed for extraction. When that distortion is the sole effect of the tax, it is determined by a rule reminiscent of the inverse elasticity rule applying to elastically-supplied commodities. <P>La taxation optimale des biens cherche à lever des revenus fiscaux donnés en minimisant les distorsions. Nous réexaminons la règle de l’élasticité inverse de Ramsey en présence de ressources non-renouvelables à la Hotelling. Sous les hypothèses standard des littératures de l’extraction des ressources non-renouvelables et de la taxation optimale, une ressource non-renouvelable doit être taxée en priorité, quelles que soient l’élasticité de sa demande et l’élasticité de la demande pour les autres biens. Elle doit l’être à un taux plus élevé qu’un autre bien dont la demande est aussi élastique et, contrairement au taux s’appliquant aux biens conventionnels, ce taux doit varier dans le temps. La taxe dépend des besoins en revenus fiscaux; plus ils sont élevés, plus le prix correspondant s’approche du prix de monopole. Les réserves minérales constituent une forme de capital que taxent les royalties; Chamley a montré qu’il est néfaste de taxer le capital à très long terme. Au contraire, même lorsque les réserves à extraire dépendent du traitement fiscal de l’extraction, en l’absence de toute subvention à l’exploration, le taux optimal de la taxe obéit à la même règle d’élasticité inverse que les biens conventionnels dont l’offre est parfaitement élastique. En fait, il y a une infinité de combinaisons optimales de taxes à l’extraction et de subventions à la constitution de réserves. Si le gouvernement n’est pas en mesure de s’engager à s’abstenir de taxer les producteurs, ces derniers sont entièrement expropriés et ce sont des subventions qui doivent financer la constitution de réserves. En général, la taxe optimale de Ramsey cause une distorsion tant sur le profil d’extraction (comme lorsque les réserves sont données) que sur le volume des réserves lorsque celles-ci sont endogènes. Lorsque cette dernière distorsion est le seul effet de la taxe, elle obéit à une règle proche de celle qui s’applique aux biens conventionnels dont l’offre est élastique. |
| Keywords: | Optimum commodity taxation, inverse elasticity rule, non-renewable resources, hotelling resource, supply elasticity, demand elasticity, capital income taxation., Taxation optimale des biens, règle de l’élasticité inverse, ressources non-renouvelables, ressource hotellienne, élasticité de l’offre, élasticité de la demande, taxation du capital. |
| JEL: | Q31 Q38 H21 |
| Date: | 2011–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-05&r=ene |
| By: | Adkins, Liwayway; Garbaccio, Richard; Ho, Mun (Resources for the Future); Moore, Eric (Resources for the Future); Morgenstern, Richard (Resources for the Future) |
| Abstract: | The effects of a carbon price on U.S. industries are likely to change over time as firms and customers gradually adjust to new prices. The effects will also depend on the number of countries implementing the policy as well as offsetting policies to compensate losers. We examine the effects of a $15/ton CO2 price, including Waxman-Markey-type allocations to vulnerable industries, over four time horizons -- the very short-, short-, medium-, and long-runs -- distinguished by the ability of firms to raise output prices, change their input mix, and reallocate capital. We find that if firms cannot pass on higher costs, the loss in profits in a number of industries will indeed be large. When output prices can rise to reflect higher energy costs, the reduction in output and profits is substantially smaller. Over the medium- and long-terms, however, when more adjustments occur, the impact on output is more varied due to general equilibrium effects. The use of the H.R. 2454 rebates can substantially offset the output losses over all four time frames considered. We also consider competitiveness and leakage effects—changes in trade flows and changes in emissions in the rest of the world. We examine two measures of leakage: “trade-related” leakage that accounts for both the increased volume of net imports into the U.S. as well as the higher carbon intensity of these imports, and a broader leakage measure that includes the effect of increased fossil fuel consumption in countries not undertaking a carbon-pricing policy. |
| Keywords: | carbon price, competitiveness, input-output analysis, output-based allocations, carbon leakage |
| JEL: | F14 D D57 D58 H23 |
| Date: | 2010–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-10-47&r=ene |
| By: | Simone Borghesi (University of Siena) |
| Abstract: | This paper discusses the merits and limits of the recent European energy policy aimed at reducing carbon emissions, devoting particular attention to the European Trading System of carbon permits and to the measures that the European Union has adopted to promote renewable energy sources. From the comparison of past goals and present results, it is argued that more credible targets for carbon emission reductions and renewable shares would probably help the transition towards an alternative energy system and the necessary reduction of greenhouse gases. |
| Keywords: | Pollution, Sustainable Development, Climate Change, Fossil Fuels, Energy Policy, European Union, European Trading System (ETS), Cap-And-Trade, Renewable Energy Sources, Credibility |
| JEL: | L11 Q28 Q38 Q42 Q43 Q48 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.141&r=ene |
| By: | Alex L. Marten; Stephen C. Newbold |
| Abstract: | Many estimates of the social cost of CO2 emissions (SCCO2) can be found in the climate economics literature. However, to date far fewer estimates of the social costs of other greenhouse gases have been published, and many of those that are available are not directly comparable to current estimates of the SCCO2. In this paper we use a simplified integrated assessment model that combines MAGICC and (elements of) DICE to estimate the social costs of the three most important greenhouse gases—CO2, CH4, and N2O—for the years 2010 through 2050. Insofar as possible, we base our model runs on the assumptions and input parameters of the recent U.S. government inter-agency SCC working group. We compare our estimates of the social costs of CH4 and N2O emissions to those that would be produced by using the SCCO2 to value the "CO2-equivalents" of each of these gases, as calculated using their global warming potentials (GWPs). We examine the estimation error induced by valuing non-CO2 greenhouse gas emission reductions using GWPs and the SCCO2 for single- and multi-gas abatement policies. In both cases the error can be large, so estimates of the social costs of these gases, rather than proxies based on GWPs, should be used whenever possible. However, if estimates of the social cost are not available the value of non-CO2 GHG reductions estimated using GWPs and the SCCO2 will typically have lower absolute errors than default estimates of zero. |
| Keywords: | social cost of carbon, global warming potential, integrated assessment |
| JEL: | Q54 Q58 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:nev:wpaper:wp201101&r=ene |
| By: | Massimiliano Mazzanti (University of Ferrara (DEIT) and National Research Council (CERIS Milan)); Antonio Musolesi (INRAE Dijon, France and LSE department of Geography and the Environment) |
| Abstract: | We study the eventual structural differences of climate change leading ‘actors’ such as Northern EU countries, and ‘lagging actors’ - southern EU countries and the ‘Umbrella group’ - with regard to long run (1960-2001) carbon-income relationships. Parametric and semi parametric panel models show that the groups of countries that were in the Kyoto arena less in favour of stringent climate policy, have yet to experience a turning point, though they at least show relative delinking in their monotonic carbon-income relationship. Northern EU instead robustly shows bell shapes across models, which seem to depend on time related (policy) events. Time related effects are more relevant than income effects in explaining the occurrence of robust Kuznets curves. The reaction of northern EU to exogenous policy events such as the 1992 climate change convention that gave earth to the Kyoto era, and even the second oil shock that preceded it in the 80’s are among the causes of the observed structural differences. |
| Keywords: | Carbon Kuznets Curves, Kyoto, Long Run Dynamics, Policy Events, Heterogeneous Panels, Cross-Section Correlation, Semi Parametric Models, Common Time Trends |
| JEL: | C14 C22 C23 Q53 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.149&r=ene |
| By: | Alexander Golub (Environmental Defense Fund); Daiju Narita (Kiel Institute for the World Economy) |
| Abstract: | Uncertainty plays a key role in the economics of climate change, and the discussions surrounding its implications for climate policy are far from settled. We give an overview of the literature on uncertainty in integrated assessment models of climate change and identify some future research needs. In the paper, we pay particular attention to three different and complementary approaches that model uncertainty in association with integrated assessment models: the discrete uncertainty modeling, the most common way to incorporate uncertainty in complex climate-economy models: the real options analysis, a simplified way to identify and value flexibility: the continuous-time stochastic dynamic programming, which is computationally most challenging but necessary if persistent stochasticity is considered. |
| Keywords: | Uncertainty, Learning, Economics of Climate Change, Integrated Assessment Models, Real Options |
| JEL: | D81 Q54 C61 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.02&r=ene |
| By: | Johannes Herold (Technische Universität Berlin); Sophia Rüster (Technische Universität Dresden); Christian Von Hirschhausen (Technische Universität Dresden) |
| Abstract: | This paper is a follow up of the SECURE-project, financed by the European Commission to study “Security of Energy Considering its Uncertainties, Risks and Economic Implications”. It addresses the perspectives of, and the obstacles to a CCTS-roll out, as stipulated in some of the scenarios. Our main hypothesis is that given the substantial technical and institutional uncertainties, the lack of a clear political commitment, and the available alternatives of low-carbon technologies, CCTS is unlikely to play an important role in the future energy mix; it is even less likely to be an “energy bridge” into a low-carbon energy future |
| Keywords: | Carbon Capture, Transport, Storage |
| JEL: | L71 Q3 Q4 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.156&r=ene |
| By: | Francesco Bosello (Fondazione Eni Enrico Mattei, University of Milan, Euromediterranean Center for Climate Change); Fabio Eboli (Fondazione Eni Enrico Mattei, University of Venice, Euromediterranean Center for Climate Change); Ramiro Parrado (Fondazione Eni Enrico Mattei, University of Venice, Euromediterranean Center for Climate Change); Renato Rosa (Fondazione Eni Enrico Mattei, University of Venice, Euromediterranean Center for Climate Change) |
| Abstract: | Deforestation is a major source of CO2 emissions, accounting for around 17% of total annual anthropogenic carbon release. While the cost estimates of reducing deforestation rates vary considerably depending on model assumptions, it is widely accepted that emissions reductions from avoided deforestation consist of a relatively low cost mitigation option. Halting deforestation is therefore not only a major ecological challenge, but also a great opportunity to cost effectively reduce climate change negative impacts. In this paper we analyze the impact of introducing avoided deforestation credits into the European carbon market using a multiregional Computable General Equilibrium model – the ICES model (Inter-temporal Computable Equilibrium System). Taking into account political concerns over a possible “flooding” of REDD credits, various limits to the number of REDD allowances entering the carbon market are considered. Finally, unlike previous studies, we account for both direct and indirect effects occurring on land and timber markets resulting from lower deforestation rates. We conclude that avoided deforestation notably reduces climate change policy costs - by approximately 80% with unlimited availability of REDD credits - and may drastically reduce carbon prices. Policy makers may, however, effectively control for these imposing limits to avoided deforestation credits use. Moreover, avoided deforestation has the additional positive effect of reducing carbon leakage of a unilateral European climate change policy. This is good news for the EU, but not necessarily for REDD regions. Indeed we show that REDD revenues are not sufficient to compensate REDD regions for a less leakage-affected and more competitive EU in international markets. In fact, REDD regions would prefer to free ride on the EU unilateral mitigation policy. |
| Keywords: | Forestry, Avoided Deforestation, Climate Change, Emission Trading, General Equilibrium Modelling |
| JEL: | D58 Q23 Q54 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.142&r=ene |
| By: | Valentina Giannini (Institute for Environmental Studies (IVM), Ca’ Foscari University and Fondazione Eni Enrico Mattei) |
| Abstract: | Climate change mitigation can be achieved, according to many, by means of Reducing emissions from deforestation and forest degradation in the Tropics (REDD). Within the climate change policy debate we thus find discussions on how to reduce GHG emissions by designing appropriate REDD programmes and projects. In this paper I try to capture this debate by looking at the role of five major international organizations, which were chosen to represent the different aspects related to REDD. In order for REDD to be successful, not only GHG reduction, but also multiple benefits should be achieved: indigenous and local peoples’ involvement, livelihood improvement, fair and equitable labour, biodiversity conservation, and sustainable forest management, to name some of the most relevant. The selected international organizations are: UN-REDD, The GEF, The CBD, ITTO, and ILO. The role of these is assessed, to understand not only what has been defined and achieved, but also what possible way forward the organizations are envisioning, and what issues remain to be addressed. |
| Keywords: | Reducing Emissions from Deforestation and Forest Degradation, REDD, Climate Change, Climate Policy Debate, Mitigation, Multiple Benefits, UN-REDD, The GEF, The CBD, ITTO, ILO |
| JEL: | O13 O20 Q23 Q28 Q54 Q56 Q57 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.157&r=ene |
| By: | Melania Michetti (Fondazione Eni Enrico Mattei); Renato Nunes Rosa (Fondazione Eni Enrico Mattei) |
| Abstract: | This paper analyzes the role of afforestation-reforestation and timber management activities, and their major and secondary economic effects in stabilizing climate during the first commitment period of the Kyoto Protocol. In particular, with a Computable General Equilibrium framework, the ICES model, it is inferred how forest carbon sequestration fits within the European domestic portfolio of a 2020-20 and 2020-30 climate stabilization policy. Afforestation and land use are accounted for by introducing their effects in the model. This is done by relying on carbon sequestration curves provided by Sohngen (2005), which describe the average annual cost of sequestration for selected world regions. Results show that afforestation and timber management could lead to substantially lower policy costs if included. By allowing afforestation alone it is possible to achieve the 30% emissions reduction target with an additional European effort of only 0.2% compared with the cost of a 20% emissions reduction without afforestation. The introduction of these alternatives for mitigating climate is expected to reduce carbon price by around 30% in 2020 and the already contained leakage effect (around 1%), coming from an independent European commitment, by 0.2%. |
| Keywords: | Climate Change, General Equilibrium Modelling, Forestry, Afforestation |
| JEL: | D58 Q23 Q24 Q52 Q54 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.04&r=ene |
| By: | Adriana Camacho; Emily Conover; econover@hamilton.edu |
| Abstract: | Previous studies indicate that Colombian farmers make production decisions based on informal sources of information, such as family and neighbors or tradition. In this paper we randomize recipients of price and climate information using text messages (SMS technology). Under this experimental design we find that relative to those farmers who did not receive SMS information, the farmers that did had better knowledge of prices and the dispersion in the expected price of their crops was narrower, although we do not see a significant difference in the actual sale price. Farmers also report that text message information is useful and becomes an important source of information for sales. Even though we find significant reduction in crop loss in general and due to weather conditions, we do not find significant changes in their revenues or household expenditures. |
| Date: | 2010–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:007907&r=ene |
| By: | Ruslana Rachel Palatnik (FEEM, Department of Economics, the Max Stern Academic College of Emek Yezreel Israel, NRERC- Natural Resource and Environmental Research Center, University of Haifa); Paulo A.L.D. Nunes (FEEM and Center for Environmental Economics and Management, Department of Economics, Ca’ Foscari University of Venice) |
| Abstract: | It is clear that climate change involves changes in temperature and precipitation and therefore directly affects land productivity. However, this is not the only channel for climatic change to affect agro-systems. Biodiversity is subject to climatic fluctuations and in turn may alter land productivity too. Firstly, biodiversity is an input into agro-ecosystems. Secondly, biodiversity supports the functioning of these systems (e.g. the balancing of the nutrient cycle). Thirdly, agro-systems also host important wildlife species which, though not always, play a functional role in land productivity, nonetheless constitute important sources of landscape amenities. The present paper illustrates a unique attempt to economically assess this additional effect climate change may imply on agriculture. We first empirically evaluate changes in land productivity due to climatic change effect on temperature, precipitations and biodiversity. Then we estimate the economic cost of biodiversity impact on agro-systems. Our key finding is that climate-change-induced biodiversity impact on European agro-systems measured in terms of GDP change in year 2050 is sufficiently large to deepen the direct climate-change effect in some regions and to reverse it in others. Different economies show different resilience profiles to deal with this effect. |
| Keywords: | Climate Change, Biodiversity, Agro-Ecosystems |
| JEL: | D58 Q54 Q57 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.138&r=ene |
| By: | Skoufias, Emmanuel; Vinha, Katja; Conroy, Hector V. |
| Abstract: | This paper examines the impacts of weather shocks, defined as rainfall or growing degree days more than a standard deviation from their respective long-run means, on household consumption per capita and child height-for-age. The results reveal that the current risk-coping mechanisms are not effective in protecting these two dimensions of welfare from erratic weather patterns. These findings imply that the change in the patterns of climatic variability associated with climate change is likely to reduce the effectiveness of the current coping mechanisms even more and thus increase household vulnerability further. The results reveal that weather shocks have substantial (negative as well as positive) effects on welfare that vary across regions (North vs. Center and South) and socio-economic characteristics (education and gender). The heterogeneous impacts of climatic variability suggest that a"tailored"approach to designing programs aimed at decreasing the sensitivity and increasing the capacity of rural households to adapt to climate change in Mexico is likely to be more effective. |
| Keywords: | Health Monitoring&Evaluation,Science of Climate Change,Regional Economic Development,Global Environment Facility,Climate Change Mitigation and Green House Gases |
| Date: | 2011–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5555&r=ene |
| By: | Heltberg, Rasmus; Bonch-Osmolovskiy, Misha |
| Abstract: | This paper develops a methodology for regional disaggregated estimation and mapping of the areas that are ex-ante the most vulnerable to the impacts of climate change and variability and applies it to Tajikistan, a mountainous country highly vulnerable to the impacts of climate change. The authors construct the vulnerability index as a function of exposure to climate variability and natural disasters, sensitivity to the impacts of that exposure, and capacity to adapt to ongoing and future climatic changes. This index can inform decisions about adaptation responses that might benefit from an assessment of how and why vulnerability to climate change varies regionally and it may therefore prove a useful tool for policy analysts interested in how to ensure pro-poor adaptation in developing countries. Index results for Tajikistan suggest that vulnerability varies according to socio-economic and institutional development in ways that do not follow directly from exposure or elevation: geography is not destiny. The results indicate that urban areas are by far the least vulnerable, while the eastern Region of Republican Subordination mountain zone is the most vulnerable. Prime agricultural valleys are also relatively more vulnerable, implying that adaptation planners do not necessarily face a trade-off between defending vulnerable areas and defending economically important areas. These results lend support to at least some elements of current adaptation practice. |
| Keywords: | Population Policies,Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Economics,Adaptation to Climate Change |
| Date: | 2011–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5554&r=ene |
| By: | Francesco Bosello (University of Milan and Fondazione Eni Enrico Mattei); Chen Chen (Defap Graduate School in Public Economics and Fondazione Eni Enrico Mattei) |
| Abstract: | Nowadays, as stressed by important strategic documents like for instance the 2009 EU White Paper on Adaptation or the recent 2009 “Copenhagen Accord”, it is amply recognized that both mitigation and adaptation strategies are necessary to combat climate change. This paper enriches the rapidly expanding literature trying to devise normative indications on the optimal combination of the two introducing the role of catastrophic and spatial uncertainty related to climate change damages. Applying a modified version of the Nordhaus’ Regional Dynamic Integrated Model of Climate and the Economy it is shown that in both cases uncertainty works in the direction to make mitigation a more attractive strategy than adaptation. When catastrophic uncertainty is concerned mitigation becomes relatively more important as, by curbing emissions, it helps to reduce temperature increase and hence the probability of the occurrence of the event. Adaptation on the contrary has no impact on this. It is also shown that optimal mitigation responses are much less sensitive than adaptation responses to spatial uncertainty. Mitigation responds to global damages, while adaptation to local damages. The first, being aggregated, change less than the second in the presence of spatial uncertainty as higher expected losses in some regions are compensated by lower expected losses in other. Accordingly, mitigation changes less than adaptation. Thus if it cannot be really claimed that spatial uncertainty increases the weight of mitigation respect to that of adaptation, however its presence makes mitigation a “safer” or more robust strategy to a policy decision maker than adaptation. |
| Keywords: | Climate Change, Mitigation, Adaptation, Uncertainty, Integrated Assessment Model |
| JEL: | C61 D58 Q54 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.159&r=ene |
| By: | Brechet, Thierry (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics and Management, B-1348 Louvain-la-Neuve, Belgium); HRITONENKO, Natali (Department of Mathematics, Prairie View A&M University, Texas, USA); YATSENKO, Yuri (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics and Management, B-1348 Louvain-la-Neuve, Belgium; School of Business, Houston Baptist University, Texas, USA) |
| Abstract: | The paper analytically explores the optimal policy mix between mitigation and environmental adaptation against climate change at a macroeconomic level. The constructed economic- environmental model is formulated as a social planner problem with the adaptation and abatement investments as separate decision variables. The authors prove the existence of a unique steady state and provide a comparative static analysis of the optimal investment. It leads to essential implications for associated long-term environmental policies. In particular, the dependence of the optimal ratio between abatement and adaptation investments on economic efficiency appears to have an inverted U-shape. Data calibration and numerical simulation are provided to illustrate theoretical outcomes. |
| Keywords: | environmental adaptation, mitigation, optimal investment, long-term climate policies |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010065&r=ene |
| By: | BRECHET, Thierry (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium); THENIE, Julien (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium; ORDECSYS Company, Chêne-Bougeries, Switzerland.); ZEIMES, Thibaut (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium); ZUBER, Stéphane (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Eonomics and Management, B- 1348 Louvain-la-Neuve, Belgium) |
| Abstract: | This article presents an analysis of the behavior of countries defining their climate policies in an uncertain context. The analysis is made using the S-CWS model, a stochastic version of an integrated assessment growth model. The model includes a stochastic definition of the climate sensitivity parameter. We show that the impact of uncertainty on policy design critically depends on the shape of the damage function. We also examine the benefits of cooperation in the context of uncertainty: we highlight the existence of an additional benefit of cooperation, namely risk reduction. |
| Keywords: | cooperation, uncertainty, climate change, integrated assessment model |
| JEL: | C71 C73 D9 D62 F42 Q2 |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010062&r=ene |
| By: | Dirk Rübbelke |
| Abstract: | <br /> International transfers in climate policy channeled from the industrialized to the developing<br /> world either support the mitigation of climate change or the adaptation to global warming.<br /> From an allocative efficiency point of view, transfers supporting mitigation tend to be Pareto-improving<br /> whereas this is not very likely in the case of adaptation support. We illustrate this<br /> by regarding transfer schemes currently applied under the UN Framework Convention on<br /> Climate Change (UNFCCC) and the Kyoto framework.<br /> However, if we enrich the analysis by integrating distributional aspects, we find that<br /> international adaptation funding may help both developing and developed world. Interestingly<br /> this is not due to altruistic incentives, but due to follow-up effects on international<br /> negotiations on climate change mitigation. We argue that the lack of fairness perceived by<br /> developing countries in the international climate policy arena can be reduced by the support<br /> of adaptation in these countries. As we show – taking into account different fairness concepts<br /> – this might raise the prospects of success in international negotiations on climate change.<br /> Yet, we find that the influence of transfers may induce different fairness effects on climate<br /> change mitigation negotiations to run counter.<br /> We discuss whether current transfer schemes under the UNFCCC and the Kyoto framework<br /> adequately serve the distributive and allocative objectives pursued in international climate<br /> policy.<br /> |
| Keywords: | adaptation, climate change, fairness, Global Environmental Facility, international climate policy, mitigation, reciprocity, transfers |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:bcc:wpaper:wp2011-02&r=ene |
| By: | Joachim Fünfgelt (Sustainability Economics Group, Leuphana University of Lüneburg, Germany); Günther G. Schulze (Dept. of International Economic Policy, University of Freiburg, Germany) |
| Abstract: | We analyze the formation of environmental policy to regulate transboundary pollution if governments are self-interested. In a common agency framework, we portray the environmental policy calculus of two political supportmaximizing governments that are in a situation of strategic interaction with respect to their environmental policies, but too small to affect world market prices. We show how governments systematically deviate from socially optimal environmental policies. Taxes may be too high if environmental interests and pollution-intensity of production are very strong; under different constellations they may be too low. Governments may actually subsidize the production of a polluting good. Politically motivated environmental policy thus may be more harmful to the environment as compared to the benevolent dictators’ solution. In other cases it may enhance environmental quality and welfare beyond what a benevolent government would achieve. |
| Keywords: | Political economy, environmental policy, transboundary pollution, common agency, strategic interaction |
| JEL: | Q F |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:196&r=ene |
| By: | Steve Hatfield-Dodds (CSIRO Energy Transformed Flagship, Canberra, ACT, Australia; Centre for Climate Economics and Policy, Crawford School of Economics & Government, Australian National University, Canberra, ACT, Australia); Mark Morrison (Institute for Land, Water and Society, School of Business, Charles Sturt University, Bathurst, New South Wales, Australia) |
| Abstract: | Concerns about the economic impacts of achieving deep cuts in emissions are a pivotal issue in achieving the political support required for emissions reductions. We assess a widespread reference point bias in the communication of economic modelling of climate policy impacts, and find it significantly reduces public support for emissions reductions. At least one in five Americans and Australians incorrectly believe that reducing emissions would result in incomes falling from current levels Ð triggering loss aversion Ð rather than incomes rising more slowly. Avoiding this misunderstanding results in support being up to 23 percentage points higher than when impacts are presented as reductions in income from current levels. This suggests that clearly communicating that incomes continue to rise could have a larger effect on support for emissions reductions among US and Australian citizens over the next few years than increased public confidence in climate science. We conclude that improved communication of policy impacts, including that ambitious stabilisation goals are consistent with strong trend economic growth and rising incomes and employment, has a crucial role in facilitating an informed democratic response to climate change, and may be necessary for achieving a political mandate for global action. |
| JEL: | Q54 D70 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:0910&r=ene |
| By: | Carlo Carraro (University of Venice, Fondazione Eni Enrico Mattei); Emanuele Massetti (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center for Climate Change) |
| Abstract: | We propose a realistic approach to climate policy based on the Copenhagen Agreement to reduce Greenhouse Gases (GHGs) emissions. We assess by how much the non-binding, although official, commitments to reduce emissions made in Copenhagen will affect the level of world GHGs emissions in 2020. Our estimates are based on official communications to the UNFCCC, on historic data and on the Business-as-Usual scenario of the WITCH model. We are not interested in estimating the gap between the expected level of emissions and what would be needed to achieve the 2°C target. Nor do we attempt to calculate the 2100 temperature level implied by the Copenhagen pledges. We believe these two exercises are subject to high uncertainty and would not improve the current state of negotiations. Rather, we take stock of the present politically achievable level of commitment and suggest an effective way to push forward the climate policy agenda. The focus is on what can be done rather than on what should be done. To this end, we estimate the potential of the financial provisions of the Copenhagen Agreement to sponsor mitigation effort in Non-Annex I countries. Using scenarios produced with the WITCH model, we show that lower commitment on domestic abatement measures can be compensated by devoting roughly 50% of the Copenhagen financial provisions in 2020 to mitigation in Non-Annex I countries. The policy implications of our results will be discussed. |
| Keywords: | Kyoto Protocol, International Climate Agreements, Climate Policy, Clean Development Mechanism |
| JEL: | F5 Q01 Q54 Q58 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.136&r=ene |