nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒03‒12
24 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. The impact of renewable energy sources on economic growth and CO2 emissions - a SVAR approach By Susana Silva; Isabel Soares; Carlos Pinho
  2. Regulated Expansion of Electricity Transmission Networks: The Effects of Fluctuating Demand and Wind Generation By Wolf-Peter Schill; Juan Rosellón; Jonas Egerer
  3. ”How much is enough?” Determining Adequate Levels of Environmental Compensation for Wind Power Impacts using Equivalency Analysis: An Illustrative & Hypothetical Case Study of Sea Eagle Impacts at the Smøla Wind Farm, Norway By Cole, Scott
  4. Forecasting Spikes in Electricity Prices By Tim Christensen; Stan Hurn; Ken Lindsay
  5. Tariff regulation and profitability of energy networks By Machiel Mulder
  6. Modeling Storage and Demand Management in Electricity Distribution Grids By Andreas Schröder; Jan Siegmeier; Murk Creusen
  7. Difference based Ridge and Liu type Estimators in Semiparametric Regression Models By Esra Akdeniz Duran; Wolfgang Karl Härdle; Maria Osipenko
  8. Spatial Risk Premium on Weather Derivatives and Hedging Weather Exposure in Electricity By Wolfgang Karl Härdle; Maria Osipenko
  9. Monitor groothandelsmarkten gas en elektriciteit 2010 By Marcel Vermeulen
  10. A Utility Based Approach to Energy Hedging By John Cotter; Jim Hanly
  11. Petroleum subsidies in Yemen : leveraging reform for development By Breisinger, Clemens; Engelke, Wilfried; Ecker, Olivier
  12. Valor del Capital Natural y Sostenible del Petróleo en Colombia By Carlos Andrés Vergara
  13. Introducing First and Second Generation Biofuels into GTAP Data Base version 7* By Taheripour, Farzad; Wally Tyner
  14. The Impact of Biofuels Policy on Agribusiness Stock Prices By Tepe, Fatma; Du, Xiaodong; Hennessy, David A.
  15. Reducing Fuel Volatility - An Additional Benefit From Blending Bio-fuels? By Rob Bailis; Barbara Sophia Koebl; Mark Sanders
  16. Two-echelon freight transport optimisation: unifying concepts via a systematic review By Jesus Gonzalez-Feliu
  17. On modeling pollution-generating technologies By Sushama Murty; R. Robert Russell; Steven B. Levkoff
  19. The long term equilibrium interest rate and risk premiums under uncertainty By Aase, Knut K.
  20. Insure or Invest in Green Technologies to Protect Against Adverse Weather Events? By Pietola, Kyösti; Myyrä, Sami; Niemi, Jarkko K.; van Asseldonk, Marcel
  21. Endogenous Timing in Strategic Environmental Policymaking By Hattori, Keisuke; Kitamura, Takahiro
  22. Endogenous Timing in Pollution Control: Stackelberg versus Cournot-Nash Equilibria By Melanie Heugues
  23. Climate Engineering: Cost benefit and beyond By Gramstad, Kjetil; Tjøtta, Sigve
  24. The Conflict between Economic Development and Planetary Ecosystem in the Context of Sustainable Development By Corina-Maria Ene; Anda Gheorghiu; Cristina Burghelea; Anca Gheorghiu

  1. By: Susana Silva (Faculdade de Economia da Universidade do Porto); Isabel Soares (CEF.UP and Faculdade de Economia da Universidade do Porto); Carlos Pinho (Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro)
    Abstract: Over the last years renewable energy sources (RES) have increased their share on electricity generation of most developed economies due to environmental and security of supply concerns. The aim of this paper was to analyze how an increasing share of RES on electricity generation (RES-E) affects Gross Domestic Product (GDP) and carbon dioxide (CO2) emissions. Several methodologies could be used for this purpose. The Structural Vector Autoregressive (SVAR) methodology considers the interactions among all variables in the model and is well suited to predict the effects of specific policy actions or important changes in the economy. Therefore, we chose to implement this methodology. We used a 3 variable SVAR model for a sample of four countries along the period 1960-2004. The existence of unit roots was tested to infer the stationarity of the variables. The countries chosen have rather different levels of economic development and social and economic structures but a common effort of investment in RES in the last decades. Through the impulse response functions (IRF), the SVAR estimation showed that, for all countries in the sample, except for the USA, the increasing RES-E share had economic costs in terms of GDP per capita. As expected, there was also an evident decrease of CO2 emissions per capita. The variance decomposition showed that a significant part of the forecast error variance of GDP per capita and a relatively smaller part of the forecast error variance of CO2 per capita were explained by the share of RES-E.
    Keywords: Renewables, economic growth, CO2 emissions, SVAR
    JEL: O13 Q42 Q43 Q56
    Date: 2011–03
  2. By: Wolf-Peter Schill; Juan Rosellón; Jonas Egerer
    Abstract: We study the performance of different regulatory approaches for the expansion of electricity transmission networks in the light of realistic demand patterns and fluctuating wind power. In particular, we are interested in the relative performance of a combined merchant-regulatory mechanism compared to a cost-based and a merchant-like approach. In contrast to earlier research, we explicitly include both an hourly time resolution and fluctuating wind power, which allows representing demand in a very realistic way. This substantially increases the real-world applicability of results compared to previous analyses, which were based on simplifying assumptions. We show that a combined merchant-regulatory regulation, which draws on a cap over the two-part tariff of the Transco, leads to welfare outcomes far superior to the modeled alternatives. This result proves to be robust over a range of different cases and sensitivity analyses. We also find that the intertemporal rebalancing of the two-part tariff carried out by the Transco so as to expand the network is such that the fixed tariff part turns out to be relatively large compared to extension costs.
    Keywords: Electricity, Regulation, Transmission Expansion, Wind Power
    JEL: Q40 L51 D42
    Date: 2011
  3. By: Cole, Scott (CERE, Centre for Environmental and Resource Economics)
    Abstract: Environmental considerations at wind power require avoidance and mitigation of environmental impacts through proper citing, operational constraints, etc. However, some impacts are unavoidable for otherwise socially-beneficial projects. Criteria for Environmental Impact Assessment (EIA) suggest that compensation be provided for unavoidable or residual impacts on species and/or habitat from wind power development. Current environmental compensation schemes for wind power fail to demonstrate a connection between the expected ecological damage and the ecological gains through restoration. The EU-funded REMEDE project developed quantitative methods known as "equivalency analysis" to assist in scaling environmental compensation. This study provides a framework for estimating compensation at wind facilities based on the REMEDE approach. I illustrate the approach with a hypothetical case study involving sea eagle impacts at the Smøla Wind Farm (Norway). I quantify the damage (debit) from sea eagle turbine collisions and scale a compensatory project (credit) that reduces eagle mortality from power line electrocution, which is quantified using hypothetical data. The framework is generalizable to on- and off-shore wind development but requires targeted and thoughtful data collection. Importantly, compensation should not be used disingenuously to justify otherwise environmentally costly projects.
    Keywords: Equivalency Analysis; environmental compensation; wind power
    JEL: K32 Q42 Q51 Q57
    Date: 2011–03–03
  4. By: Tim Christensen (Yale University); Stan Hurn (QUT); Ken Lindsay (Glasgow)
    Abstract: In many electricity markets, retailers purchase electricity at an unregulated spot price and sell to consumers at a heavily regulated price. Consequently the occurrence of extreme movements in the spot price represents a major source of risk to retailers and the accurate forecasting of these extreme events or price spikes is an important aspect of effective risk management. Traditional approaches to modeling electricity prices are aimed primarily at predicting the trajectory of spot prices. By contrast, this paper focuses exclusively on the prediction of spikes in electricity prices. The time series of price spikes is treated as a realization of a discrete-time point process and a nonlinear variant of the autoregressive conditional hazard (ACH) model is used to model this process. The model is estimated using half-hourly data from the Australian electricity market for the sample period 1 March 2001 to 30 June 2007. The estimated model is then used to provide one-step-ahead forecasts of the probability of an extreme event for every half hour for the forecast period, 1 July 2007 to 30 September 2007, chosen to correspond to the duration of a typical forward contract. The forecasting performance of the model is then evaluated against a benchmark that is consistent with the assumptions of commonly-used electricity pricing models.
    Keywords: Electricity Prices, Price Spikes, Autoregressive Conditional Duration, Autoregressive
    JEL: C14 C52
    Date: 2011–01–25
  5. By: Machiel Mulder (Netherlands Competition Authority)
    Abstract: In this paper we analyse the impact of the regulatory framework for the new regulatory period (2011 – 2013) on the long-term profitability of TenneT TSO, the operator of the highvoltage electricity network in the Netherlands. Long-term profitability is a key component of the financeability of a firm. In the long run, the return on capital should be at least equal to the opportunity costs of capital in order to finance investments. As the ultimate indicator for the long-term profitability, we use the net present value of economic profit, which is the difference between total revenues and total costs, including a normal return on capital. In order to simulate the future financial development of the TSO, we developed a model.
    JEL: C60 G18 L51 G32 L97
    Date: 2010–12
  6. By: Andreas Schröder; Jan Siegmeier; Murk Creusen
    Abstract: Storage devices and demand control may constitute beneficial tools to optimize electricity generation with a large share of intermittent resources through inter-temporal substitution of load. We quantify the related cost reductions in a simulation model of a simplified stylized medium-voltage grid (10kV) under uncertain demand and wind output. Benders Decomposition Method is applied to create a two-stage stochastic program. The model informs an optimal investment sizing decision as regards specific 'smart grid' applications such as storage facilities and meters enabling load control. Model results indicate that central storage facilities are a more promising option for generation cost reductions as compared to demand management. Grid extensions are not appropriate in any of our scenarios. A sensitivity analysis is applied with respect to the market penetration of uncoordinated Plug-In Electric Vehicles which are found to strongly encourage investment into load control equipment for `smart` charging and slightly improve the case for central storage devices.
    Keywords: Storage, demand management, stochastic optimization, Benders Decomposition
    JEL: Q40 Q41
    Date: 2011
  7. By: Esra Akdeniz Duran; Wolfgang Karl Härdle; Maria Osipenko
    Abstract: We consider a difference based ridge regression estimator and a Liu type estimator of the regression parameters in the partial linear semiparametric regression model, y = Xβ + f + ε. Both estimators are analysed and compared in the sense of mean-squared error. We consider the case of independent errors with equal variance and give conditions under which the proposed estimators are superior to the unbiased difference based estimation technique. We extend the results to account for heteroscedasticity and autocovariance in the error terms. Finally, we illustrate the performance of these estimators with an application to the determinants of electricity consumption in Germany.
    Keywords: Difference based estimator; Differencing estimator, Differencing matrix, Liu estimator, Liu type estimator, Multicollinearity, Ridge regression estimator, Semiparametric model
    JEL: C14 C51
    Date: 2011–03
  8. By: Wolfgang Karl Härdle; Maria Osipenko
    Abstract: Due to dependency of energy demand on temperature, weather derivatives enable the effective hedging of temperature related fluctuations. However, temperature varies in space and time and therefore the contingent weather derivatives also vary. The spatial derivative price distribution involves a risk premium. We examine functional principal components of temperature variation for this spatial risk premium. We employ a pricing model for temperature derivatives based on dynamics modelled via a vectorial Ornstein-Uhlenbeck process with seasonal variation. We use an analytical expression for the risk premia depending on variation curves of temperature in the measurement period. The dependence is exploited by a functional principal component analysis of the curves. We compute risk premia on cumulative average temperature futures for locations traded on CME and fit to it a geographically weighted regression on functional principal component scores. It allows us to predict risk premia for nontraded locations and to adopt, on this basis, a hedging strategy, which we illustrate in the example of Leipzig.
    Keywords: risk premium, weather derivatives, Ornstein-Uhlenbeck process, functional principal components, geographically weighted regression
    JEL: C01 C31
    Date: 2011–03
  9. By: Marcel Vermeulen
    Abstract: Marktwerking op de Nederlandse groothandelsmarkt voor gas is tot op heden beperkt van de grond gekomen. Handelsvolumes op de TTF nemen jaar op jaar toe maar het aandeel in de totale gasstromen blijft beperkt. Het jaar 2011 belooft echter een kentering te brengen. GTS voert per 1 april een nieuw marktmodel en nieuw balanceringsregime in en op 1 april komt Gasterra met nieuwe producten en diensten op de markt.
    Keywords: Monitoring, electricity, gas, competition, infrastructure
    JEL: L1 Q4
    Date: 2011–02–01
  10. By: John Cotter (University College Dublin); Jim Hanly (Dublin Institute of Technology)
    Abstract: A key issue in the estimation of energy hedges is the hedgers’ attitude towards risk which is encapsulated in the form of the hedgers’ utility function. However, the literature typically uses only one form of utility function such as the quadratic when estimating hedges. This paper addresses this issue by estimating and applying energy market based risk aversion to commonly applied utility functions including log, exponential and quadratic, and we incorporate these in our hedging frameworks. We find significant differences in the optimal hedge strategies based on the utility function chosen.
    Keywords: Energy; Hedging; Risk Management; Risk Aversion; Forecasting
    JEL: G10 G12 G15
    Date: 2011–03–02
  11. By: Breisinger, Clemens; Engelke, Wilfried; Ecker, Olivier
    Abstract: Petroleum subsidy reform is increasingly seen as an opportunity for consolidating public finances and fostering sustainable economic development. Yemen, as the country with the lowest per capita income in the group of countries with a high level of energy subsidies, started to reduce subsidies in 2010 and is discussing further options for reform. The results of this paper support a comprehensive petroleum subsidy reform in Yemen. Economic growth is projected to accelerate between 0.1 and 0.8 percentage points annually as a result of reform. Yet, the design of the reform is critically important, especially for the poor. Outcomes of alternative reform scenarios range from an increase in poverty of 2 to 6 percentage points. A promising strategy combines subsidy reduction with direct transfers of 13,800 to 19,700 Yemeni rials annually to the poorest 30 percent of households and enhanced public investments. Investments should focus on the utilities, transport, trade, and construction sectors to integrate economic spaces and create the platform for a restructuring of agricultural, industrial, and service value chains, which should encourage private sector led and job creating growth in the medium term.
    Keywords: Transport Economics Policy&Planning,Economic Theory&Research,Emerging Markets,Access to Finance,Rural Poverty Reduction
    Date: 2011–02–01
  12. By: Carlos Andrés Vergara
    Abstract: Este artículo aborda tres aspectos de la sostenibilidad de la extracción de petróleo en Colombia para el período 1998 - 2003: i) los precios que reflejan la escasez de este recurso natural no renovable; ii) el valor del capital petróleo para el período analizado y, finalmente, utilizando la metodología del Valor del Capital Natural de Mäler (2001) iii) la sostenibilidad de la extracción de petróleo en Colombia. Esto a partir de dos modelos específicos desarrollados por Mäler (2001), que se diferencian en el supuesto de autonomía de los mecanismos de asignación del recurso. Los resultados sugieren que la explotación del petróleo en Colombia no ha mostrado una senda sostenible durante el período de análisis, implicando una pérdida de bienestar inter-generacional, que en todos los casos supera los 300 millones de dólares anuales.
    Date: 2011–02–27
  13. By: Taheripour, Farzad; Wally Tyner
    Abstract: The first version of GTAP-BIO Data Base was built based on the GTAP standard data base version 6 which represents the world economy in 2001 (Taheripour et al., 2007). That data base covers global production, consumption, and trade of the first generation of biofuels including ethanol from grains (eth1), ethanol from sugarcane (eth2), and biodiesel (biod) from oilseeds in 2001. Version 7 of GTAP Data Base, which depicts the world economy in 2004, is now published (Narayanan, B.G. and T.L. Walmsley, 2008). However, this standard data base does not include biofuel industries explicitly. The first objective of this research memorandum is to introduce the first generation of biofuels into this new data base. To accomplish this task we will follow Taheripour et al. (2007). The rapid expansion of the first generation of biofuels in the past decades has raised important concerns related to food-fuel competition, land use change, and other economic and environmental issues. These issues have increased interest in the second generation of biofuels which can be produced from cellulosic materials such as dedicated crops, agricultural and forest residues, and waste materials. To examine the economic and environmental consequences of the second generation of biofuels, a CGE model is an appropriate and essential instrument. A data base which presents the first and second generation of biofuels will facilitate research in this field. Hence the second objective of this research memorandum is to expand the space of biofuel alternatives to the second generation. Given that advanced cellulosic biofuels are not yet commercially viable, we used the most up to date information in this area to define the production technologies for these industries.
    Date: 2011
  14. By: Tepe, Fatma; Du, Xiaodong; Hennessy, David A.
    Date: 2011–03–03
  15. By: Rob Bailis; Barbara Sophia Koebl; Mark Sanders
    Abstract: Oil price volatility harms economic growth. Diversifying into different fuel types can mitigate this effect by reducing volatility in fuel prices. Producing bio-fuels may thus have additional benefits in terms of avoided damage to macro-economic growth. In this study we investigate trends and patterns in the determinants of a volatility gain in order to provide an estimate of the tendency and the size of the volatility gain in the future. The accumulated avoided loss from blending gasoline with 20 percent ethanol-fuel estimated for the US economy amounts to 795 bn. USD between 2010 and 2019 with growing tendency. An amount that should be considered in cost-benefit analysis of bio-fuels.
    Date: 2011–02
  16. By: Jesus Gonzalez-Feliu (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat)
    Abstract: Multi-echelon distribution schemes are one of the most common strategies adopted by the transport companies in an aim of cost reduction, but their identification in scientific literature is not always easy due to a lack of unification. This paper presents the main concepts of two-echelon distribution via a systematic review, in the specific a meta-narrative analysis, in order to identify and unify the main concepts, issues and methods that can be helpful for scientists and transport practitioners. The problem of system cost optimisation in two-echelon freight transport systems is defined. Moreover, the main variants are synthetically presented and discussed. Finally, future research directions are proposed.
    Keywords: location-routing problems, multi-echelon distribution, cross-docking, combinatorial optimisation, systematic review.
    Date: 2011–02–25
  17. By: Sushama Murty (Department of Economics, University of Exeter); R. Robert Russell (Department of Economics, University of California); Steven B. Levkoff (Department of Economics, University of California)
    Abstract: Distinguishing between intended ("good") production and unintended or residual ("bad") generation, we introduce the concept of by-production. In by-production technologies, pollution is an output that satises a "costly disposability" assumption and violates standard free disposability with respect to pollution-causing inputs. Our approach therefore differs substantially from standard approaches to modeling pollution-generating technologies. We show how by-production can be modeled using data envelopment analysis (DEA) methods. With an electric power plant database, we illustrate shortcomings under by-production of two popular eciency indexes: the hyperbolic index and the directional distance function. We propose and implement an alternative eciency index with superior properties.
    Keywords: pollution-generating technologies, free disposability, weak disposability, data envelopment analysis, environmental and technical eciency measurement
    JEL: D20 D24 D62 Q50
    Date: 2011
  18. By: Hector G. Lopez-Ruiz (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat); Hector G. Lopez-Ruiz (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat); Yves Crozet (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat)
    Abstract: Today, numerous works conclude that transport seems to be completely coupled to economic and export/import growth. Therefore, as a direct consequence of economic development transport sits today as one of the major final energy consumers and one of the most important sources of carbon dioxide emissions. Consequently, this situation of continuous increase in transport clearly poses an environmental problem. In this paper we propose to asses a certain number of possible solutions through scenario building in a backcasting manner using the TILT (Transport Issues in the Long Term) model. In particular, we evaluate three different scenarios that address how technology and different public policies can contribute towards a sharp reduction in CO2 emissions. Furthermore, we propose an estimation of infrastructure investment needs as well as insight on how transport budgets (time and monetary) could evolve in each of the three scenarios presented: • Pegasus - promoting strict technology standards • Chronos - promoting green multimodality • Hestia - promoting transport-GDP growth decoupling. Each scenario allows a quick comprehension of the types of results that can be obtained through different policy mixes. In sum, realistic technological hypothesis show that a 50% reduction in emissions, from the 2000 level, is a clear possibility, and that the remaining 25 % reduction in emissions is possible through different types of policy mixes.
    Keywords: Greenhouse gas, long-term, scenario, transport, sustainable development.
    Date: 2010–10–21
  19. By: Aase, Knut K. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: Both the equilibrium interest rate and the equity premium, as well as risk premiums of risky investments are all important quantities in cost-benefit analyses. In the light of the current (2008 -) financial crisis, it is of interest to study models that connect the the financial sector with the real economy. The effects of climate change has, on the other hand, been the subject of extensive discussions, for example in connection with the Stern report. The paper addresses both these issues, first based on standard assumptions. In particular we investigate what is needed to have long-term interests lower than short term rates. Our model allows us to tell what happens to risk premiums in turbulent times, consistent with observations. Next we extend the pure exchange model to a production economy. As a result we obtain an equilibrium term structure of interest rates, as well as a model for the equity premium. We end by a discussion of risk adjustments of the discount factor. For projects aimed at insuring future consumption, the interest rate is smaller than the risk free rate. Mitigation can have the characteristics of such a project.
    Keywords: Dynamic equilibrium; the Lucas model; term structure; CIR; pure exchange; production economy; equity premium puzzle; risk free rate puzzle; climate models; Stern Review
    JEL: D00 G00
    Date: 2011–02–28
  20. By: Pietola, Kyösti; Myyrä, Sami; Niemi, Jarkko K.; van Asseldonk, Marcel
    Abstract: This paper analyses investments in green technologies when insurance is also an option. Green technologies are defined to have the power to increase productivity and decrease volatility of future revenues. The insurance options involve the scale and coverage either in a yield insurance or in an index insurance. The stochastic process is a combination of insurable stationary short-run process and non-stationary long run process. The optimal decision rules are solved numerically by stochastic dynamic programming. The results suggest that the index insurance maintains market based incentives to invest in green technologies whereas a yield insurance substantially decreases investments, as expected. An actuarially fair yield insurance decreases investments at high productivity firms. By contrast if the insurance premiums are supported to the extent that the net loading becomes negative, firms with the lowest productivity have strong incentives to collect the benefits of the subsidized insurance rather than invest in higher productivity and lower risks. The yield insurance is the most attractive for low productivity firms while the index insurance is the most attractive for high productivity firms. Nevertheless, the demand for actuarially fair index insurance is reduced also amongst the high productivity firms, when the correlation between the yield and the index falls below 50%.
    Keywords: investment, insurance, uncertainty, dynamic programming, green technology, Agribusiness, Agricultural Finance, Financial Economics, Risk and Uncertainty,
    Date: 2011–02
  21. By: Hattori, Keisuke; Kitamura, Takahiro
    Abstract: In this paper, we endogenize the timing of policymaking in a simple two-country model of strategic environmental policy. We consider a timing game in which two policymakers non-cooperatively decide their preferred sequence of moves before setting emission tax rates. We show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages: When the damages are insignificant, the tax rates are strategic substitutes and the simultaneous-move policymaking emerges in equilibrium. In contrast, when the damages are significant, the tax rates are strategic complements and the sequential-move policymaking emerges. In addition, we extend the model by allowing for differences in the vulnerability to environmental damages between countries. When the differences are large, the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader. In the case where multiple equilibrium emerges, the risk dominant equilibrium is also that the less vulnerable country leads.
    Keywords: Strategic environmental policy; Endogenous timing; Environmental tax; Duopoly
    JEL: Q28 L13 Q56 C72
    Date: 2011–03–06
  22. By: Melanie Heugues
    Abstract: In the framework of international cooperation on climate change to control greenhouse gas emissions<br /> (GHG), this paper aims to shed new light on the eventuality of the emergence of a country (or a group<br /> of countries) behaving as a leader in the implementation of its environmental policy. The sequence of<br /> moves in the existing literature is usually an exogenous assumption, – known as the Cournot<br /> assumption (if countries take action simultaneously) and the Stackelberg assumption (if they act<br /> sequentially, the latter observing the strategy of the former). The main purpose here is to make the<br /> timing endogenous. To do so, we introduce a pre-play stage in the basic two-country game. Then we<br /> provide different sets of minimal conditions – on the benefit and damage functions linked to GHG<br /> emissions into the atmosphere, yielding respectively the simultaneous and the two sequential modes of<br /> play. While the results essentially confirm the prevalence of the former, they also indicate that the<br /> latter are natural under some robust conditions: a leader can emerge endogenously when<br /> implementing its environmental policy. Finally we provide sufficient conditions for a specific leader<br /> to appear. All the results come with an analysis in terms of global emissions and global welfare. No<br /> extraneous assumptions such as concavity, existence, or uniqueness of equilibria are needed, and the<br /> analysis makes crucial use of the basic results from the theory of supermodular games.<br />
    Keywords: Climate change; non cooperative game; global pollution; strategic interactions; endogenous timing; supermodular game theory
    Date: 2011–03
  23. By: Gramstad, Kjetil (University of Bergen); Tjøtta, Sigve (University of Bergen)
    Abstract: International efforts on abating climate change, focusing on reductions of greenhouse gas emissions, have thus far proved unsuccessful. This motivates exploration of other strategies such as climate engineering. We modify the Dynamic Integrated model of Climate and the Economy (DICE), and use it in a cost-benefit analysis of climate engineering specifically deposition of sulphur in the stratosphere. The model simulations show that climate engineering passes a cost-benefit test. The cost of postponing climate engineering by 20-30 years is relatively low. Going beyond these standard cost-benefit analyses, climate engineering may still fail. Voters may dislike the idea of climate engineering; they do not like the idea of tampering with nature, and their dislike stands independent of outcomes of cost-benefit analyses.
    Keywords: Climate change; climate engineering; cost-benefit analyses; public choice.
    JEL: Q54 Q58
    Date: 2010–09–01
  24. By: Corina-Maria Ene; Anda Gheorghiu; Cristina Burghelea; Anca Gheorghiu
    Abstract: The green area of economy is the key of healthy living. It is necessary to convene economic and ecologic framework to establish a market attentive to drastic reduction of emissions damaging our climate and landscapes in rural areas, to the protection of biological diversity of the planet, to stop producing nuclear waste, etc. This paper tries to demonstrate human concern for a waste recycling economy that will provide new jobs, will create economic and social stability and will ensure a healthier and cleaner environment. Green Economy and its support system (planetary ecosystem) won't be in conflict anymore. Green Economy will be able to support economic progress for future.
    Date: 2011–02

This nep-ene issue is ©2011 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.