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on Energy Economics |
| By: | Hugh Saddler (Crawford School of Economics and Government, The Australian National University, Canberra, Australia) |
| Abstract: | This paper focuses on the domestic energy policies of industrialised states and, in particular, those states which have been at the forefront in applying neo-liberal policies to the reform and restructuring of their energy supply industries. It examines the interactions between the neo-liberal and climate change mitigation agendas, as they have been applied to energy policy, and the consequences these interactions are having for energy security, which is a core objective of energy policy for all states. A case study approach is taken using the United Kingdom and Australia as examples. The overall conclusion is that if states set themselves ambitious emissions reduction goals they will need to make radical changes to their energy systems, which, in the absence of decisive policy action, are likely to be deleterious to domestic energy security. By contrast, modest reduction goals will not require far-reaching energy system changes and will pose little threat to energy security, but will also do little to mitigate climate change. |
| JEL: | Q48 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:1101&r=ene |
| By: | Frederick L. Joutz; Gail Cohen; Prakash Loungani |
| Abstract: | We present evidence on one facet of energy security in OECD economies - the extent of diversification in sources of oil and natural gas supplies. Viewed from the perspective of the energy-importing countries as a whole, there has not been much change in diversification in oil supplies over the last decade, but diversification in sources of natural gas supplies has increased steadily. We document the cross-country heterogeneity in the extent of diversification. We also show how the extent of diversification changes if account is taken of the political risk attached to suppliers; the size of the importing country; and transportation risk. |
| Keywords: | Consumption , Cross country analysis , Energy sector , Exports , Imports , Natural gas , OECD , Oil , Risk management , Supply elasticity , |
| Date: | 2011–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/39&r=ene |
| By: | Carl Chiarella (School of Finance and Economics, University of Technology, Sydney); Les Clewlow (Lacima Group); Boda Kang (School of Finance and Economics, University of Technology, Sydney) |
| Abstract: | A typical gas sales agreement (GSA) also called a gas swing contract, is an agreement between a supplier and a purchaser for the delivery of variable daily quantities of gas, between speciï¬ed minimum and maximum daily limits, over a certain number of years at a speciï¬ed set of contract prices. The main constraint of such an agreement that makes them difï¬cult to value are that in each gas year there is a minimum volume of gas (termed take-or-pay or minimum bill) for which the buyer will be charged at the end of the year (or penalty date), regardless of the actual quantity of gas taken. We propose a framework for pricing such swing contracts for an underlying gas forward price curve that follows a regime-switching process in order to better capture the volatility behaviour in such markets. With the help of a recombing pentanonial tree, we are able to efï¬ciently evaluate the prices of the swing contracts, ï¬nd optimal daily decisions and optimaly early use of both the make-up bank and the carry forward bank at different regimes. We also show how the change of regime will affect the decisions. |
| Keywords: | gas sales agreement; swing contract; take-or-pay; make-up; carry forward; forward price curve; regime switching volatility; recombing pentanomial tree |
| Date: | 2011–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:288&r=ene |
| By: | David M. Arseneau |
| Abstract: | This paper uses disaggregated data from a broad cross-section of countries to empirically assess differences in energy consumption profiles across countries. We find empirical support for the energy ladder hypothesis, which contends that as an economy develops it transits away from a heavier reliance on traditional fuel sources towards an increase in the use of modern commercial energy sources. We also find empirical support for the hypothesis that structural transformation--the idea that as an economy matures, it transforms away from agriculture-based activity into industrial activity and, finally, fully matures into a service-oriented economy--is an important driver for the distribution of end-use energy consumption. However, even when these two hypotheses are taken into account, we continue to find evidence suggesting that the patterns of energy consumption in the BRIC economies are importantly different from those of other economies. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1015&r=ene |
| By: | Massimiliano Caporin (Università di Padova); Juliusz Pres' (West Pomeranian University of Technology); Hipolit Torro (Universitat de València) |
| Abstract: | Weather derivatives have become very popular tools in weather risk management in recent years. One of the elements supporting their diffusion has been the increase in volatility observed on many energy markets. Among the several available contracts, Quanto options are now becoming very popular for a simple reason: they take into account the strong correlation between energy consumption and certain weather conditions, so enabling price and weather risk to be controlled at the same time. These products are more efficient and, in many cases, significantly cheaper than simpler plain vanilla options. Unfortunately, the specific features of energy and weather time series do not enable the use of analytical formulae based on the Black-Scholes pricing approach, nor other more advanced continuous time methods that extend the Black-Scholes approach, unless under strong and unrealistic assumptions. In this study, we propose a Monte Carlo pricing framework based on a bivariate time series model. Our approach takes into account the average and variance interdependence between temperature and energy price series. Furthermore, our approach includes other relevant empirical features, such as periodic patterns in average, variance, and correlations. The model structure enables a more appropriate pricing of Quanto options compared to traditional methods. |
| Keywords: | weather derivatives, Quanto options pricing, derivative pricing, model simulation and forecast. |
| JEL: | C32 C51 C53 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0123&r=ene |
| By: | Ronald Albers; Marga Peeters |
| Abstract: | Working paper, focusing on the impact of soaring commodity prices, notably for food and energy on the economy and public finances of Mediterranean neighbour countries of the EU. Just before the global crisis soaring commodity prices pushed up inflation significantly, not least in EU neighbour countries at the Mediterranean. These price shocks affected public finances in the southern Mediterranean region, notably via government subsidies. Partly due to lags in the transmission of commodity prices into prices for final users the subsidies burden continued to be felt, despite the price falls registered in the wake of the credit crisis. We show that downward price rigidities play a role. Recently, commodity price pressures have re-emerged. We focus on food prices and analyse recent developments in food inflation in Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the occupied Palestinian territories, Syria and Tunisia in comparison with other middle income economies. Subsidies on food and fuel are quantified per country for the period 2002-2010. The incremental government subsidies entail an estimated deterioration of the government balances of up to more than 2% of GDP in 2008 and, for most countries only slight improvements in the global recession year 2009. Ensuing longer-term challenges for public finances remain as inflation rises on the back of higher global economic growth. As recent events in Tunisia illustrate, these can have important political implications. Finally, the paper discusses some options that can lead to more efficient government spending, even in the event of sharp swings in prices of basic necessities. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0437&r=ene |
| By: | Libo Wu (Center for Energy Economics ans Strategy Studies, Fudan University); Jing Li (Department of World Economy, School of Economics, Fudan University); ZhongXiang Zhang (East-West Center) |
| Abstract: | This paper aims to examine the impacts of oil-price shocks on China’s price levels. To that end, we develop a partial transmission input-output model that captures the uniqueness of the Chinese market. We hypothesize and simulate price control, market factors and technology substitution - the three main factors that restrict the functioning of a price pass-through mechanism during oil-price shocks. Using the models of both China and the U.S., we separate the impact of price control from those of other factors leading to China’s price stickiness under oil-price shocks. The results show a sharp contrast between China and the U.S., with price control in China significantly preventing oil-price shocks from spreading into its domestic inflation, especially in the short term. However, in order to strengthen the economy’s resilience to oil-price shocks, the paper suggests a gradual relaxing of price control in China. |
| JEL: | Q43 Q41 Q48 O13 O53 P22 E31 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:ewc:wpaper:wp115&r=ene |
| By: | Luís Francisco Aguiar (Universidade do Minho - NIPE); Yi Wen (Federal Reserve Bank of St. Louis and Tsinghua University) |
| Abstract: | Aguiar-Conraria and Wen (2008) argued that dependence on foreign oil raises the likelihood of equilibrium indeterminacy (economic instability) for oil importing countries. We argue that this relation is more subtle. The endogenous choices of prices and quantities by a cartel of oil exporters, such as the OPEC, can affect the directions of the changes in the likelihood of equilibrium indeterminacy. We show that fluctuations driven by self-fulfilling expectations under oil shocks are easier to occur if the cartel sets the price of oil, but the result is reversed if the cartel sets the quantity of production. These results offer a potentially interesting explanation for the decline in economic volatility (i.e., the Great Moderation) in oil importing countries since the mid-1980s when the OPEC cartel changed its market strategies from setting prices to setting quantities, despite the fact that oil prices are far more volatile today than they were 30 years ago. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:10/2011&r=ene |
| By: | Feyes, Jonas (Swedish Environmental Research Inst.); Cole, Scott (CERE, Centre for Environmental and Resource Economics); Hasselström, Linus (Enveco Environmental Economics Consultancy Ltd.) |
| Abstract: | As vessel traffic in the Baltic increases, in particular oil transports from Russia to the international market, so too does the risk of oil spills which above the environmental impacts impose costs on society including direct costs, market costs and non-market costs (e.g., losses in welfare from a damaged environment not easily valued in a market). While financial compensation addresses direct and market costs, environmental compensation (compensatory restoration) offsets welfare declines from the loss of resources or the services they provide. Although a clear international system for recovering environmental restoration costs from oil spills is still un-established, the EU's Environmental Liability Directive (ELD) from 2007 introduces a number of useful terms and concepts that may be applicable in the Baltic context. The European Commission (EC) funded development of the REMEDE Toolkit to help Member States carry out the ELD requirements. The Toolkit provides a useful framework for assessing non-market costs associated with oil spill damages by defining the types of ecological losses suffered by the public and providing interdisciplinary methods for scaling resource-based compensation projects whose cost should be incurred by the responsible polluter(s). This paper suggests that the ELD concepts and REMEDE methods could be transferred to the Baltic to help authorities recover environmental restoration costs from responsible polluters. We illustrate application of REMEDE-like concepts and methods to oil spill damages in the context of US regulations and the UN Compensation Commission and discuss the legal acceptance of these methods. The fact that the ELD cannot legally be invoked to address an oil spill in Europe should not preclude a discussion about how these relatively new European legal concepts, including the REMEDE methodology, could be used to establish a more consistent, transparent, and replicable framework for damage assessment in the sensitive marine environment of the Baltic Sea. |
| Keywords: | Equivalency Analysis; Baltic Sea; environmental valuation; Environmental Liability Directive; environmental compensation |
| JEL: | Q38 Q51 Q53 Q57 |
| Date: | 2011–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2011_005&r=ene |
| By: | Zanxin Wang (Institute of Population, Resource and Environmental Economics, Yunnan University); Yin Lu (Institute of Population, Resource and Environmental Economics, Yunnan University); Siguang Li (Institute of Population, Resource and Environmental Economics, Yunnan University) |
| Abstract: | As in many countries, policy makers in China see biofuel as a potentially important part of the move to a sustainable, post-oil economy. To contribute to this important energy debate, this study looks at the economics and environmental performance of one potential bio-fuel crop: Jatropha curcas L (JCL). This study shows that given current technology levels and management practices, the production of JCL biodiesel is not economically feasible. However, it also shows that JCL biodiesel has excellent performance from both an environmental and energy production point of view. Moreover, it is clear that, if JCL seed yields can be improved, then biodiesel made from the plant would be economically feasible to produce. |
| Keywords: | biodiesel, China |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:eep:pbrief:pb2010061&r=ene |
| By: | Zanxin Wang (Institute of Population, Resource and Environmental Economics, Yunnan University); Yin Lu (Institute of Population, Resource and Environmental Economics, Yunnan University); Siguang Li (Institute of Population, Resource and Environmental Economics, Yunnan University) |
| Abstract: | As in many countries, policy makers in China see biofuel as a potentially important part of the move to a sustainable, post-oil economy. To contribute to this important energy debate, this study looks at the economic and environmental performance of one potential bio-fuel crop: Jatropha curcas L (JCL). The study shows that, given current technology levels and management practices, the production of JCL biodiesel is not economically feasible. However, it also shows that JCL biodiesel has excellent performance from both an environmental and energy production point of view. Moreover, it is clear that, if JCL seed yields can be improved, then biodiesel made from the plant would be economically feasible to produce. With this in mind, the report outlines a number of initiatives that could be pursued to make JCL biodiesel an effective part of China's overall energy policy. These include providing grants and other funding to optimise the JCL biodiesel production process. |
| Keywords: | biodiesel, China |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:eep:report:rr2010061&r=ene |
| By: | Johanna Reichenbach; Till Requate |
| Abstract: | We study the impact of learning by doing, learning spill-overs, and imperfect competition in a model with two types of electricity producers, an oligopolistic sector of polluting fossil-fuel utilities and a competitive fringe of non-polluting generators of electricity from renewable energy sources (RES-E). Furthermore we consider an upstream industry of RES-E equipment producers engaged in learning by doing. We show that a first-best policy requires two instruments, a tax in the fossil-fuel sector and an output subsidy for RES-E equipment producers. We then study second-best-optimal feed-in tariffs that are paid to the generators of RES-E. By means of simulations we calculate the welfare loss of a second-best-optimal feed-in-tariff policy and analyze how market structure impacts on second-best-optimal feed-in tariffs |
| Keywords: | feed-in tariffs; environmental subsidies; learning by doing; spill-overs; market structure |
| JEL: | Q42 L13 O38 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1689&r=ene |
| By: | Eric Guerci (Universite' de la Mediterranee, Marseille); Fulvio Fontini (University of Padova) |
| Abstract: | In this paper, we evaluate the impact of the proposed construction of new nuclear power (NP) plants on the cost of electricity in Italy. We create an agent‐based model that simulates actual Italian market generators’ behaviour in their bid offers at the Italian wholesale electricity market (IPEX), using the existing grid structure and power plant characteristics. We calculate the possible impact of the proposed installation of four nuclear power plants on zonal and average (National Single Price, PUN) electricity prices, taking into account the network grid (with its transmission constraints), the possible location of NP plants, the process of market splitting and the status of the generation side of the market, namely the capacity, production and marginal costs of generators. Both a cost‐ based scenario and a strategic scenario are considered. In the cost‐based scenario, we investigate how NP would shift the supply curve, which technology will be substituted hour by hour and zone by zone and whether the introduction of NP will reduce electricity prices. In the strategic scenario, we allow firms to strategically withhold some capacity through their bids in order to influence the system marginal price and evaluate how the introduction of nuclear base load power generation increases operators’ strategic space and impacts electricity prices. |
| Keywords: | Electricity market, PUN, Agent-based computational economics, Nuclear power. |
| JEL: | Q41 C63 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0130&r=ene |
| By: | Aoshima, Yaichi; Matsushima, Matsushima; Eto, Manabu |
| Abstract: | Drawing on data obtained from the questionnaire survey for the 242 private R&D projects supported by NEDO (New Energy and Industrial Technology Development Organization), Japan’s public management organization promoting R&D, this paper explores how the private R&D projects’ dependence on public supports affects their R&D processes and, in turn, projects’ performance and the commercialization of developed technologies. Our analyses show that dependence on government resources gives rise to some ―isolation. of the projects from the other parts of companies that they belong to. Such isolation, mainly derived from projects’ unique positions in ―double dependence. structures, negatively affects R&D performance especially related to commercialization. First, high dependence on public resources prevents project members from interacting with people outside the projects within the company. This precludes the projects to effectively leverage internal resources in overcoming technological problems. Secondly, high dependence weakens governance or control on project’s activities by internal management. This deters development of commercialization technologies and makes it difficult for the projects to acquire legitimacy for further investment towards commercialization. Our findings suggest that both companies and public funding agencies should promote projects to keep intimate relationships with the other parts of their organization for successful R&D leading to commercialization. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:hit:iirwps:11-02&r=ene |
| By: | Liu Li (College of Environmental Science and Engineering, South China University of Technology); Li Bin |
| Abstract: | In recent years, Chinese policy makers have tried to balance development in different regions of the country by relocating industrial production from prosperous zones to less developed areas. However, this type of industrial relocation is usually accompanied by the transfer of pollution problems. To shed more light on the costs and benefits of this important policy tool, this study looks at the relocation of ceramics production from one region of Guangdong Province to another. The study finds that the transfer of some ceramics production from populous Foshan to less densely populated Qingyuan would be an effective way of reducing the overall negative effect of the industry's air pollution. However, the study underlines the importance of using effective pollution-abatement technology. It recommends that such technology should be implemented in Foshan and in any new ceramics factories in Qingyuan. It finds that the value of the health benefits produced by installing this technology will greatly exceed the cost of putting the technology in place. |
| Keywords: | pollution, China |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:eep:report:rr2010081&r=ene |
| By: | D. Dragone; L. Lambertini; A. Palestini |
| Abstract: | We investigate the possibility of using public firms to regulate polluting emissions in a Cournot oligopoly where production takes place at constant returns to scale and entails a negative environmental externality. We model the problem as a differential game and investigate (i) the Cournot-Nash game among profit-seeking firms; (ii) the Markov Perfect Nash equilibrium under social planning, where the industry output is entirely controlled by a benevolent planner aiming at the maximisation of social welfare; and (iii) the Markov Perfect Nash equilibrium in a mixed setup where at least one firm is public, while the others remain profit-seeking agents. Our analysis identifies the conditions whereby having a mixed market as a regulatory instrument suffices to drive the industry to the same output, externality and social welfare as under planning, both along the optimal path and in steady state. |
| JEL: | C73 D43 D62 L13 L32 Q50 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp738&r=ene |
| By: | Mia Amalia (Environmental Management and Development Program, Crawford School of Economics and Government, Australian National University) |
| Abstract: | Poor air quality in Indonesia's capital city is having a significant impact on residents' health and there is an urgent need to introduce new initiatives to deal with the problem. To help justify investment in such new strategies, this study has looked at the value that citizens in the Jakarta Metropolitan Area (JMA) place on pollution reduction policies for the transportation sector. The study shows that, although many residents are mistrustful of the government's ability to clean up the city's air, the do place a significant value on clean air. Households in the JMA are, on average, willing to pay up to USD 66.51 per annum over three-year period for the implementation of three new environmentally-beneficial transportation policies. These policies would make a significant positive improvement to both Jakarta's air quality and to the health of its citizens. The study uses the choice modeling approach in its assessment. The study carefully crafted the questionnaire to suit local conditions (a population with low literacy and have high dependency on oral than written communication) which are typical in developing countries. |
| Keywords: | pollution, Indonesia |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:eep:pbrief:pb2010111&r=ene |
| By: | Mia Amalia (Environmental Management and Development Program, Crawford School of Economics and Government, Australian National University) |
| Abstract: | Poor air quality in Indonesia's capital city is having a significant impact on residents' health and there is an urgent need to introduce new initiatives to deal with the problem. To help justify investment in such new strategies, a recent EEPSEA study has looked at the value that citizens in the Jakarta Metropolitan Area (JMA) place on pollution reduction policies for the transportation sector. The study shows that, although many residents are mistrustful of the government's ability to clean up the city's air, they do place a significant value on clean air. Households in the JMA are willing to pay up to USD 66.51 per annum over a three-year period. Nonetheless, on average, respondents in the JMA were willing to pay Rp 584,333 (USD 66.51), Rp 558,000 (USD 63.51) and Rp 579,333 (USD 65.94) per household per annum over a three-year period for the implementation of the improved public transport policy (TS), the vehicle restriction policy (RD), and the old-vehicle reduction strategy (RO), respectively. These policies would make a significant positive improvement to both Jakarta's air quality and to the health of its citizens. |
| Keywords: | pollution, Indonesia |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:eep:report:rr2010111&r=ene |
| By: | Carl GAIGNÉ (INRA, French National Institute for Agricultural Research (France)); Stéphane Riou (UMR CNRS 5824 GATE Lyon-Saint-Etienne, Université de Saint-Etienne (France)); Jacques-François THISSE (CORE, Université catholique de Louvain (Belgium), Université du Luxembourg, CEPR, and RIEB, Kobe University) |
| Abstract: | There is a large consensus among international institutions and national governments to favor urban-containment policies - the compact city - as a way to improve the ecological performance of the urban system. This approach overlooks a fundamental fact: what matters for the ecological outcome of cities is the mix between the level of population density and the global pattern of activities. As expected, when both the intercity and intraurban distributions of activities are given, a higher population density makes cities more environmentally friendly. However, once we account for the fact that cities may be either monocentric or polycentric as well as for the possible relocation of activities between cities, the relationship between population density and the ecological performance of cities appears to be much more involved. Indeed, because changes in population density affect land rents and wages, firms and workers are incited to relocate, thus leading to new commuting and shipping patterns. We show that policies favoring the decentralization of jobs may be more environmentally desirable. |
| Keywords: | greenhouse gas, commuting costs, transport costs, cities; urbancontainment policy |
| JEL: | D61 F12 Q54 Q58 R12 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2011-15&r=ene |
| By: | Chugh, Randy; Cropper, Maureen (Resources for the Future); Narain, Urvashi |
| Abstract: | To investigate how fuel economy is valued in the Indian car market, we compute the cost to Indian consumers of purchasing a more fuel-efficient vehicle and compare it to the benefit of lower fuel costs over the life of the vehicle. We use hedonic price functions for four market segments (petrol hatchbacks, diesel hatchbacks, petrol sedans, and diesel sedans) to compute 95 percent confidence intervals for the marginal cost to the consumer of an increase in fuel economy. We find that the associated present value of fuel savings falls within the 95 percent confidence interval for some specifications, in all market segments, for the years 2002 through 2006. Thus, we fail to consistently reject the hypothesis that consumers appropriately value fuel economy. When we reject the null hypothesis, the marginal cost of additional fuel economy exceeds the present value of fuel savings, suggesting that consumers may, in fact, be overvaluing fuel economy. |
| Keywords: | fuel economy, Indian car market, energy paradox |
| JEL: | Q4 L62 |
| Date: | 2011–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-11-12&r=ene |
| By: | Ishikawa, Jota; Kiyono, Kazuharu; Yomogida, Morihiro |
| Abstract: | We develop a two-country (North and South), two-good, general equilibrium model of international trade in goods and explore the effects of domestic and international emission trading under free trade in goods. Whereas domestic emission trading in North may result in carbon leakage by expanding South窶冱 production of the emission-intensive good, international emission trading may induce North to expand the production of the emission-intensive good by importing emission permits. Emission trading may deteriorate global environment. North窶冱 (South窶冱) emission trading may not benefit South (North). International emission trading improves global efficiency but may not benefit both countries. |
| Keywords: | global warming, emission quota, emission trading, carbon leakage, Kyoto Protocol |
| JEL: | F18 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:hit:ccesdp:41&r=ene |
| By: | Coulomb, R.; Henriet, F. |
| Abstract: | Among technological options to mitigate greenhouse gas (GHG) emissions, Carbon Capture and Storage technology (CCS) seems particularly promising. This technology allows to keep on extracting polluting fossil fuels without drastically increasing CO2 atmospheric concentration. We examine here a two-sector model with two primary energy resources, a polluting exhaustible resource and an expensive carbon-free renewable resource, in which an environmental regulation is imposed through a cap on the atmospheric carbon stock. We assume that only the emissions from one sector can be captured. Previous literature, based on one-sector models in which all emissions are capturable, finds that CCS technology should not be used before the threshold has been reached. We find that, when technical constraints make it impossible to capture emissions from both sectors, this result does not always hold. CCS technology should be used before the ceiling is reached if non capturable emissions are large enough. In that case, we find that energy prices paths must differ between sectors reflecting the difference of social cost of the resource according to its use. Numerical exercise shows that the initial carbon tax should equal 52$/t CO2 and that using CCS before the ceiling is optimal. |
| Keywords: | Nonrenewable Resources, Externalities, Carbon Capture. |
| JEL: | Q31 Q38 Q41 Q54 Q55 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:322&r=ene |
| By: | Frank Jotzo (Crawford School of Economics and Government, The Australian National University) |
| Abstract: | This paper identifies principles for carbon pricing that could attract a broad based and durable societal consensus in Australia. It applies these principles to a phased carbon pricing architecture as put forward by Australia's Multi-Party Committee on Climate Change, namely a government determined (fixed) carbon price transitioning to emissions trading. Linking to international carbon markets decouples Australia's domestic carbon price from its national emissions target, allowing significant net national emissions reductions with manageable transitional impacts. A fixed price in the near term can end costly delays to carbon pricing while dealing with uncertainties about Australia's target and international markets. A strategy is outlined to manage international uncertainties and to accommodate the multiple goals of domestic constituencies, while achieving efficiency and effectiveness. First, ensure the medium term carbon price is high enough to for emissions to begin to trend down in the next few years, recognising that investment decisions are shaped by current expectations about future prices. Second, set the initial price at a level that gives confidence that short run impacts will be manageable, given other transitional assistance. Third, ensure that wider policy settings do not compromise incentives for reducing emissions, and make the scheme robust in the face of competing claims for carbon revenue and lobbying efforts. For Australian carbon pricing policy, these principles suggest the carbon price may need to rise rapidly over the course of the decade, to double or more compared to starting prices that are currently in the Australian discussion. Payments of carbon pricing revenue to industry may need to be limited to create more room for income tax cuts, possibly by means of an overall cap and accelerated phase-out of industry assistance. Forestry and agricultural offsets can be supported through the scheme, but at the cost of fiscal revenue. |
| Keywords: | Q54, Q58, D72, A13, Q01 |
| JEL: | Q54 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:1104&r=ene |
| By: | Eric Knight (Department of Geography and the Environment, University of Oxford, Oxford, UK); Nicholas Howarth (Department of Geography and the Environment, University of Oxford, Oxford, UK) |
| Abstract: | Much academic attention has been paid to the role of carbon pricing in developing a market-led response to low carbon energy innovation. Taking an evolutionary economics perspective this paper makes the case as to why price mechanisms alone are insufficient to support new energy technologies coming to market. In doing so, we set out the unique investment barriers in the clean energy space. For guidance on possible approaches to non-carbon price based policies that seek to tackle these barriers we turn to case studies from Asia, a region which has experienced a strong uptake in climate policy in recent years. |
| JEL: | Q48 Q42 Q55 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:1102&r=ene |
| By: | Yazhen Gong |
| Abstract: | Paying developing countries for carbon sequestration is a vital component of climate change mitigation. If appropriately designed, these payments can also transfer income to poor villagers, which can help achieve the goals of long-term sustainability for the carbon sequestration project and of poverty reduction. Using data on reforestation and a survey of village stakeholders, this paper made an assessment whether or not the world's first CDM forest-based carbon sequestration project implemented in China could simultaneously reach its environmental and developmental objectives. Although the Guangxi project is widely heralded as a model CDM project, still less than half of the project land remain unforested at the time of surveys conducted in September of 2007. The survey revealed one major cause to relatively low participation to the carbon project, highlights the important role of social capital in this initiative. |
| Keywords: | CDM, China |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:eep:tpaper:tp201010t2&r=ene |
| By: | Alessandro Tavoni (Grantham Research Institute, London School of Economics); Astrid Dannenberg (Centre for European Economic Research, Mannheim, Germany); Giorgos Kallis (ICTA, Universidad Autonoma de Barcleona); Andreas Lšschel (Centre for European Economic Research, Mannheim, Germany) |
| Abstract: | International efforts to provide global public goods often face the challenges of coordinating national contributions and distributing costs equitably in the face of uncertainty, inequality, and free-riding incentives. In an experimental setting, we distribute endowments unequally among a group of people who can reach a fixed target sum through successive money contributions, knowing that if they fail they will lose all their remaining money with 50% probability. We find that inequality reduces the prospects of reaching the target, but that communication increases success dramatically. Successful groups tend to eliminate inequality over the course of the game, with rich players signalling willingness to redistribute early on. Our results suggest that coordinative institutions and early redistribution from richer to poorer nations may widen our window of opportunity to avoid global climate calamity. |
| JEL: | Q54 C92 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:1103&r=ene |
| By: | Junko Mochizuki (Department of Natural Resources and Environmental Management, University of Hawaii at Manoa); ZhongXiang Zhang (East-West Center); |
| Abstract: | China’s emerging standing in the world demands a major rethinking of its diplomatic strategies. Given its population size, geographical scale, economic power and military presence, China is poised to play a larger political role in the twenty-first century, and is thus perceived by the international community to have greater capacities, capabilities and responsibilities. At the same time, environmental stresses caused by China’s energy and resources demands have become increasingly evident in recent years, urging China to cultivate delicate diplomatic relations with its neighbors and strategic partners. Tensions have been seen in areas such as transboundary air pollution, cross-border water resources management and resources exploitation, and more recently in global issues such as climate change. As the Chinese leadership begins to embrace the identity of a responsible developing country, it is becoming apparent that while unabated resources demands and environmental deterioration may pose a great threat to environmental security, a shared sense of urgency could foster enhanced cooperation. For China to move beyond existing and probable diplomatic tensions, a greater attention to domestic and regional environmental security will no doubt be necessary. This article explores such interrelations among domestic, regional and global environmental securities and China’s diplomacy, and suggests possible means by which China could contribute to strengthening global environmental security. |
| JEL: | Q25 Q34 Q48 Q42 Q53 Q54 Q56 Q58 O13 P28 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:ewc:wpaper:wp116&r=ene |
| By: | Michael Hanemann; Xavier Labandeira; María L. Loureiro |
| Abstract: | Spain faces a complex situation regarding its climate change policies. Since 1990, Spain’s greenhouse gas (GHG) emissions have increased far beyond the Kyoto commitments. Moreover, Spain is likely to suffer significant adverse impacts from climate change. However, there has been little action to reduce GHG emissions, particularly in the area of energy prices. Although the Spanish public generally shows great concern about climate change, it has traditionally opposed price increases for energy. In this paper we offer an explanation of this paradox, and we provide a possible strategy for policy design. We find that Spanish households favor reducing GHG emissions from electricity production and would be willing to pay for this if it promotes new, greener technologies and if it eventually lowers the cost of those technologies in the future. This finding emerges from a contingent valuation survey which also provides a rich set of information on households’ attitudes regarding various policy options for reducing GHG gases. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2011-06&r=ene |
| By: | Frankel, Jeffrey A. (Harvard University); Bosetti, Valentina (FEEM, Milan) |
| Abstract: | A new climate change treaty must plug three gaps: the absence of emission targets extending far into the future, the absence of participation by the United States, China, and other developing countries, and the absence of reason to expect compliance. To be politically acceptable, it must obey certain constraints regarding country-by-country economic costs. We offer a framework to assign quantitative emission allocations, across countries, one budget period at a time. The two-part plan: (i) China and other developing countries accept targets at BAU in the coming budget period, the same period in which the US first agrees to cuts below BAU; (ii) all countries are asked in the future to make further cuts in accordance with a formula which sums a Progressive Reductions Factor, Latecomer Catch-up Factor, and Gradual Equalization Factor. An earlier proposal for specific parameter values in the formulas achieved the environmental goal that CO2 concentrations plateau at 500 ppm by 2100. It obeyed our political constraints: keeping the economic cost for every country below thresholds of Y=1% of income in Present Discounted Value, and X=5% of income in the worst period. In this paper we attain a concentration goal of 460 ppm CO2, but only by loosening political constraints. |
| JEL: | Q54 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-016&r=ene |