nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒06‒11
thirty-one papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Anatomy of a Paradox: Management Practices, Organisational Structure and Energy Efficiency By Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner; Laure B. de Preux
  2. Rebound Effects from Increased Efficiency in the Use of Energy by UK Households* By Patrizio Lecca; Kim Swales; Karen Turner
  3. The Rebound Effect: Some Questions Answered By Janine De Fence; Maggie Koerth-Baker; Karen Turner; Cathy Xin Cui
  4. Energy Demand and Trade in General Equilibrium: An Eaton-Kortum-type Structural Model and Counterfactual Analysis By Egger, Peter; Nigai, Sergey
  5. Analyzing Energy Consumption and GDP Nexus Using Maximum Entropy Bootstrap: The Case of Turkey By A. Talha Yalta
  6. Development Effects of Electrification: Evidence from the Geologic Placement of Hydropower Plants in Brazil* By Barham, Tania; Lipscomb, Molly; Mobarak, Ahmed Mushfiq
  7. Turkish Aggregate Electricity Demand: An Outlook to 2020 By Zafer Dilaver; Lester C Hunt
  8. L'accès à des services énergétiques réduit-il la malnutrition des enfants au Sénégal ? Evaluation du programme des plateformes multifonctionnelles By Marie-Charlotte Buisson
  9. Innovaatiotoiminta. Näkemyksiä ympäristö- ja energia-alaan By Jari Hyvärinen
  10. Gasoline and Diesel Consumption for Road Transport in Spain: a Dynamic Panel Data Approach By Rosa M. González-Marrero; Rosa M. Lorenzo-Alegría; Gustavo A. Marrero
  11. Real-Time Forecasts of the Real Price of Oil By Baumeister, Christiane; Kilian, Lutz
  12. Forecasting the Price of Oil By Alquist, Ron; Kilian, Lutz; Vigfusson, Robert J.
  14. Is There An Association Between Gasoline Prices & Physical Activity?Evidence from American Time Use Data. By Sen, Bisakha
  15. Do financial investors destabilize the oil price? By Marco J. Lombardi; Ine Van Robays
  16. World oil price and biofuels : a general equilibrium analysis By Timilsina, Govinda R.; Mevel, Simon; Shrestha, Ashish
  17. Biofuels and climate change mitigation : a CGE analysis incorporating land-use change By Timilsina , Govinda R.; Mevel, Simon
  18. Greenhouse Gas and Nitrogen Fertilizer Scenarios for U.S. Agriculture and Global Biofuels By Amani Elobeid; Miguel Carriquiry; Jacinto F. Fabiosa; Kranti Mulik; Dermot J. Hayes; Bruce A. Babcock; Jerome Dumortier; Francisco Rosas
  19. The Dynamics of Energy-Grain Prices with Open Interest By Shawkat Hammoudeh; Soodabeh Sarafrazi; Chia-Lin Chang; Michael McAleer
  20. Economic Growth and Environmental Degradation in Nigeria: Beyond the Environmental Kuznets Curve By Akpan, Usenobong F.; Chuku, Agbai
  21. Cross-country polarisation in CO2 emissions per capita in the European Union: changes and explanatory factors By Juan Antonio Duro Moreno; Emilio Padilla Rosa
  23. Climate Change Issues and Mitigation Actions in Indonesia By Arief Anshory Yusuf
  24. Conservation and Climate Change Mitigation: A Framework and Principles from Regional Government’s Perspective and Its Financing Implication By Arief Anshory Yusuf
  25. Forecasting the European Carbon Market By Gary Koop; Lise Tole
  26. Strategic climate policy with offsets and incomplete abatement : carbon taxes versus cap-and-trade By Strand, Jon
  27. Price Floors in Emissions Trading to Reduce Policy Related Investment Risks: an Australian View By Frank Jotzo; Steve Hatfield-Dodds
  28. The Impact of Receiving Price and Climate Information in the Agricultural Sector By Adriana Camacho; Emily Conover
  29. Environmental Policy and the Macroeconomy in the Presence of Ecological Thresholds By Heijdra, Ben J.; Heijnen, Pim
  30. Tackling dangerous climate change: slow-ramp or springboard?. By Mason, Michael
  31. Climate Change Policies for the XXIst Century: Mechanisms, Predictions and Recommendations By Igor Khmelinskii; Peter Stallinga

  1. By: Ralf Martin; Mirabelle Muûls; Ulrich J. Wagner; Laure B. de Preux
    Abstract: This paper presents new evidence on managerial and organizational factors that explain firm level energy efficiency and TFP. We interviewed managers of 190 randomly selected manufacturing plants in the UK and matched their responses with official business microdata. We find that 'climate friendly' management practices are associated with lower energy intensity and higher TFP. Firms that adopt more such practices also engage in more R&D related to climate change. We show that the variation in management practices across firms can be explained in part by organizational structure. Firms are more likely to adopt climate friendly management practices if climate change issues are managed by the environmental or energy manager, and if this manager is close to the CEO. Our results support the view that the "energy efficiency paradox" can be explained by managerial factors and highlight their importance for private-sector innovation that will sustain future growth in energy efficiency.
    Keywords: climate policy, energy efficiency, firm behavior, management practices, manufacturing,microdata, organizational structure
    JEL: M20 M14 Q41 Q54 Q58
    Date: 2010–12
  2. By: Patrizio Lecca (Department of Economics, University of Strathclyde); Kim Swales (Department of Economics, University of Strathclyde); Karen Turner (Stirling Management School, Division of Economics, University of Stirling)
    Abstract: In this paper, we use CGE modelling techniques to identify the impact on energy use of an improvement in energy efficiency in the household sector. The main findings are that 1) when the price of energy is measured in natural units, the increase in efficiency yields only to a modification of tastes, changing as a result, the composition of household consumption; 2) when households internalize efficiency, the improvement in energy efficiency reduces the price of energy in efficiency units, providing a source of improved competitiveness as the nominal wage and the price level both fall; 3) the short-run rebound can be greater than the long run rebound if the household demand elasticity is the same for both time frames, however, the short run rebound is always lower than in the long-run if the demand for energy is relatively more elastic in the long-run; 4) the introduction of habit formation changes the composition of household consumption, modifying the magnitude of the household rebound only in the short-run. In this period, household and economy wide rebound are lowest for external habit formation and highest when consumers’ preferences are defined using a conventional utility function.
    Keywords: Energy efficiency; Rebound effects; Households energy consumption; CGE models.
    JEL: C68 D57 D58 Q41 Q43 Q48
    Date: 2011–04
  3. By: Janine De Fence (Department of Economics, University of Strathclyde); Maggie Koerth-Baker (Freelance Writer and Editor, Wiley & Sons.); Karen Turner (Division of Economics, University of Stirling); Cathy Xin Cui (Department of Economics, University of Strathclyde.)
    Abstract: Greenhouse gas (and other pollutant) emissions from energy use are now taken to be a problem both internationally and for individual national and regional governments. A number of mechanisms are being employed to reduce energy consumption demand as part of climate and energy policies internationally. A central policy focus is increased efficiency in the use of energy. However, the straightforward link between increased energy efficiency and reduced energy consumption has been questioned. This is due to the notion of the ‘rebound effect’. Rebound occurs when improvements in energy efficiency actually stimulate the direct and indirect demand for energy in production and/or consumption. It is triggered by the fact that an increase in the efficiency in the use of energy acts to reduce the implicit price of energy, or the price of effective energy services for each physical unit of energy used. Thus, it is an economic phenomenon. The rebound effect implies that measures taken to reduce energy use might lead to increases in carbon emissions, or at least not offset them to the extent anticipated. It is possible to distiguish between direct rebound effects in energy consumption in the activity where energy efficiency has increased, indirect rebound effects from income and substitutuion effects and economy-wide rebound effects (impacts on macro-level energy use). This paper attempts to provide a non-technical overview of work on the latter, carried out under an ESRC-funded project investigating the source and magnitude of econom-wide rebound effects from increased energy efficiency in the UK.
    Keywords: General equilibrium, energy efficiency, rebound effects, disinvestment.
    JEL: D57 D58 R15 Q41 Q43
    Date: 2011–03
  4. By: Egger, Peter; Nigai, Sergey
    Abstract: This paper sheds light on the role of the impact of taxes on energy production versus tariffs on imported goods for trade, energy demand, and welfare. For this, we develop a structural Eaton-Kortum type general equilibrium model of international trade which includes an energy sector. We estimate the key parameters of that model and calibrate it to domestic prices and production using data for 34 OECD countries and the rest of the world in the average year between 2000 and 2005. The model helps understanding the interplay between country-specific energy productivity, energy demand, and trade. The energy sector turns out to be an important determinant of the size of welfare gains from trade liberalization. We find that general import tariffs can be an effective instrument to reduce energy demand. For small open economies, taxing imports as an indirect instrument may be even preferable to taxing energy as a direct instrument from a welfare perspective, if countries pursue the goal of reducing energy demand to a specific extent. This is not the case for large countries such as the United States.
    Keywords: Calibrated general equilibrium analysis; Energy demand; International trade; Structural model estimation
    JEL: F11 F14 Q43 Q48
    Date: 2011–06
  5. By: A. Talha Yalta
    Date: 2011–06
  6. By: Barham, Tania; Lipscomb, Molly; Mobarak, Ahmed Mushfiq
    Abstract: We estimate the development effects of electrification across Brazil over the period 1960-2000. Brazil relies almost exclusively on hydropower, which requires intercepting water at high velocity. We build an engineering model which takes as inputs only geography (river gradient, water flow and Amazon) and simulates a time series of hypothetical electricity grids for Brazil that show how the grid would have evolved had infrastructure investments been made based solely on geologic cost considerations, ignoring all demand-side concerns. Using the model as an instrument, we document large positive effects of electrification on development that are underestimated when one fails to account for the political allocation of infrastructure projects or its targeting to under-developed areas. Broad-based improvement in labor productivity across sectors and areas rather than general equilibrium re-sorting (in-migration to electrified counties) appears to be the likely mechanism by which these development gains are realized.
    Date: 2011–06
  7. 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 paper investigates the relationship between Turkish aggregate electricity consumption, GDP and electricity prices in order to forecast future Turkish aggregate electricity demand. To achieve this, an aggregate electricity demand function for Turkey is estimated by applying the structural time series technique to annual data over the period 1960 to 2008. The results suggest that GDP, electricity prices and an underlying energy demand trend (UEDT) are all important drivers of Turkish electricity demand. The estimated income and price elasticities are found to be 0.17 and -0.11 respectively with the estimated UEDT found to be generally upward sloping (electricity using) but at a generally decreasing rate. Based on the estimated equation, and different forecast assumptions, it is predicted that Turkish aggregate electricity demand will be somewhere between 259 TWh and 368 TWh in 2020.
    Keywords: Turkish Turkish Aggregate Electricity Demand; Structural Time Series Model (STSM); Energy Demand Modelling and Future Scenarios.
    JEL: C22 Q41 Q48
    Date: 2011–05
  8. By: Marie-Charlotte Buisson (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Le programme de plateformes multifonctionnelles (PTF) vise à favoriser l'accès à l'énergie dans les villages ruraux sénégalais. En proposant notamment des services de mouture et de broyage, le programme s'adresse d'abord aux femmes. Il s'agit ici d'évaluer l'impact du programme à partir des données collectées en juin 2009 auprès de ménages appartenant à des villages traités et non-traités par le programme. L'anthropométrie est l'indicateur d'impact choisi. Il traduit la diffusion de l'utilisation de la PTF par les femmes à l'ensemble du ménage et aux enfants : libération de temps, autonomisation économique et sociale, éducation, amélioration de la nutrition. . . Les effets de la présence de la PTF, de la durée de cette présence et de son intensité de fonctionnement sont mesurés, à la fois sur le statut nutritionnel de court et de long terme. La méthode privilégiée se base sur la différence entre villages traités et non traités. Cependant, un biais de sélection existe puisque les villages font une demande d'installation de PTF examinée par un comité de représentants locaux qui sélectionne les villages bénéficiaires. Il existe donc une endogénéité du coté de la demande et du coté de l'offre. Ce problème est surmonté par deux méthodes. Lors de l'échantillonnage, la sélection par propensity score matching des villages non traités permet de s'assurer de leur similitude avec les villages traités. La seconde méthode est l'utilisation de variables instrumentales. Dans ce contexte très politisé, les résultats d'élections locales permettent d'expliquer l'allocation du programme. La présence de la PTF et la durée de cette présence réduisent les retards de croissance infanto-juvéniles. Par ailleurs, plus que le fonctionnement de l'infrastructure, c'est sa présence et donc le changement de comportement qu'elle implique qui explique son impact. Enfin, la probabilité de déficience pondérale est réduite par l'intensité du fonctionnement de l'équipement.
    Keywords: évaluation d'impact;anthropometrie;malnutrition;variables instrumentales;propensity score matching
    Date: 2011–06–01
  9. By: Jari Hyvärinen
    Abstract: This study examines structures at the environment and energy sectors and those challenges to face in ongoing climate change. It investigates firstly goals behind steps how to decrease effects of climate change, research results and scenarios and which support to achieve these goals. Study also clarifies those goals set in Finland which improve environmental conditions, and moreover in the Baltic Sea. In the end, the study explores markets, business possibilities, investments and resources at the environment and energy sectors, and especially at the renewable energy sector globally and in Finland.
    Date: 2011–06–03
  10. By: Rosa M. González-Marrero; Rosa M. Lorenzo-Alegría; Gustavo A. Marrero
    Abstract: Using a panel data set for Spanish regions between 1998 and 2006, we study the factors explaining per capita fuel consumption for road transport at the macroeconomic level. The contributions of the article are the following. First, we specify a dynamic panel data (DPD) model for gasoline and diesel consumption. Second, we properly apply estimation techniques based on the system Generalized Methods of Moments (GMM) procedure of Arellano and Bover (1995). We find that more traditional estimation procedures (pooling-OLS, the Within-Group or the first difference GMM), which might generate bias estimate in a DPD framework, produce important differences that may even change policy recommendations. Finally, we find important differences between the results for the gasoline and the diesel model. While the estimated equation correctly fits the gasoline consumption behavior, results emphasizes the need to specify a different model for aggregate diesel consumption, which must include aditional determinants than those traditionally used in fuel consumption models.
    Date: 2011–05
  11. By: Baumeister, Christiane; Kilian, Lutz
    Abstract: We construct a monthly real-time data set consisting of vintages for 1991.1-2010.12 that is suitable for generating forecasts of the real price of oil from a variety of models. We document that revisions of the data typically represent news, and we introduce backcasting and nowcasting techniques to fill gaps in the real-time data. We show that real-time forecasts of the real price of oil can be more accurate than the no-change forecast at horizons up to one year. In some cases real-time MSPE reductions may be as high as 25 percent one month ahead and 24 percent three months ahead. This result is in striking contrast to related results in the literature for asset prices. In particular, recursive vector autoregressive (VAR) forecasts based on global oil market variables tend to have lower MSPE at short horizons than forecasts based on oil futures prices, forecasts based on AR and ARMA models, and the no-change forecast. In addition, these VAR models have consistently higher directional accuracy. We demonstrate how with additional identifying assumptions such VAR models may be used not only to understand historical fluctuations in the real price of oil, but to construct conditional forecasts that reflect hypothetical scenarios about future demand and supply conditions in the market for crude oil. These tools are designed to allow forecasters to interpret their oil price forecast in light of economic models and to evaluate its sensitivity to alternative assumptions.
    Keywords: Forecast; Oil price; Real time; Scenario analysis
    JEL: C53 E32 Q43
    Date: 2011–06
  12. By: Alquist, Ron; Kilian, Lutz; Vigfusson, Robert J.
    Abstract: We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable based on macroeconomic aggregates? Does this predictability translate into gains in out-of-sample forecast accuracy compared with conventional no-change forecasts? How useful are oil futures markets in forecasting the price of oil? How useful are survey forecasts? How does one evaluate the sensitivity of a baseline oil price forecast to alternative assumptions about future demand and supply conditions? How does one quantify risks associated with oil price forecasts? Can joint forecasts of the price of oil and of U.S. real GDP growth be improved upon by allowing for asymmetries?
    Keywords: Asymmetries; Demand and supply; Forecasting; Oil price; Predictability
    JEL: C53 Q43
    Date: 2011–05
  13. By: Shu-ping Shi; Vipin Arora
    Abstract: We estimate three different models of speculative behaviour using oil price data. There are two major results: (i) The three-regime model of Brooks and Katsaris (2005) and a three-regime variant of van Norden and Schaller (2002) fit the oil price data reasonably well; and (ii) Both models show that the probabilities of being in a bubble collapsing state and a bubble expansion state spike in late-2008/early-2009. This provides some support for the claim by Phillips and Yu (2010) and Gilbert (2010) that a bubble in oil prices existed for short period in 2008.
    JEL: C5 Q4
    Date: 2011–05
  14. By: Sen, Bisakha
    Abstract: Obesity is epidemic in the U.S, and there is an imperative need to identify policy tools that may help fight this epidemic. A recent paper in the economics literature finds an inverse relationship between gasoline prices and obesity-risk --- suggesting that increased gasoline prices via higher gasoline taxes may have the effect of reducing obesity prevalence. This study builds upon that paper. It utilizes cross-sectional time-series data from the American Time Use Survey over 2003-2008, utilizes the increases that occurred in gasoline prices in this period due to Hurricane Katrina and to the global spike in gasoline prices as a ‘natural experiment’, and explores how time spent by Americans on different forms of physical activity is associated with gasoline price levels. Economic theory suggests that higher gasoline prices may alter individual behavior both via a ‘substitution effect’ whereby people seek alternatives to motorized transportation, and an ‘income effect’ whereby the effect of higher gasoline prices on the disposable family budget lead people to make various adjustments to what they spend money on. The latter may lead to some increase in physical activity (for example, doing one’s own yard work instead of hiring help), but may also lead to decreases in other physical activities that involve expenses, such as team sports or work-outs at the gym. Thus, ultimately, the relationship between gasoline prices and physical activity must be empirically determined. Results from multivariate regression models with state and time fixed-effects indicate that higher gasoline prices are associated with an overall increase of physical activity that is at least moderately energy intensive. The increases are most pronounced in periods where gasoline prices fluctuate more sharply. These results appear robust to a number of model specifications. One of the major components of this increase appear to be an increase in housework that is at least moderately energy intensive – such as interior and exterior cleaning, garden and yard work, etc. This tentatively suggests that there is an ‘income effect’ of higher gasoline prices. However, the increases in physical activity associated with increased gasoline prices are weaker among minorities and low socioeconomic status (SES) individuals. Hence, while a policy which increases gasoline prices via raised gasoline taxes may have benefits in terms of increasing overall physical activity levels in the U.S., one concern is that these benefits may not accrue to low SES individuals to the same extent as to their higher SES counterparts.
    Keywords: Gasoline Prices; Physical Activity; Income Effect; Substitution Effect; Housework
    JEL: I12 I18
    Date: 2011–04–30
  15. By: Marco J. Lombardi (European Central Bank, Directorate General Economics, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Ine Van Robays (Department of Financial Economics, Ghent University, Woodrow Wilsonplein 5D, B-9000 Gent, Belgium.)
    Abstract: In this paper, we assess whether and to what extent financial activity in the oil futures markets has contributed to destabilize oil prices in recent years. We define a destabilizing financial shock as a shift in oil prices that is not related to current and expected fundamentals, and thereby distorts efficient pricing in the oil market. Using a structural VAR model identified with sign restrictions, we disentangle this non-fundamental financial shock from fundamental shocks to oil supply and demand to determine their relative importance. We find that financial investors in the futures market can destabilize oil spot prices, although only in the short run. Moreover, financial activity appears to have exacerbated the volatility in the oil market over the past decade, particularly in 2007-2008. However, shocks to oil demand and supply remain the main drivers of oil price swings. JEL Classification: C32, Q41, Q31.
    Keywords: Oil price, Speculation, Structural VAR, Sign restrictions.
    Date: 2011–06
  16. By: Timilsina, Govinda R.; Mevel, Simon; Shrestha, Ashish
    Abstract: The price of oil could play a significant role in influencing the expansion of biofuels. However, this issue has not been fully investigated yet in the literature. Using a global computable general equilibrium model, this study analyzes the impact of oil price on biofuel expansion, and subsequently, on food supply. The study shows that a 65 percent increase in oil price in 2020 from the 2009 level would increase the global biofuel penetration to 5.4 percent in 2020 from 2.4 percent in 2009. A doubling of oil price in 2020 from its baseline level, or a 230 percent increase from the 2009 level, would increase the global biofuel penetration in 2020 to 12.6 percent. The penetration of biofuels is highly sensitive to the substitution possibility between biofuels and their fossil fuel counterparts. The study also shows that aggregate agricultural output drops due to an oil price increase, but the drop is small in major biofuel producing countries as the expansion of biofuels would partially offset the negative impacts of the oil price increase on agricultural outputs. An increase in oil price would reduce global food supply through direct impacts as well as through diversion of food commodities and cropland toward the production of biofuels.
    Keywords: Energy Production and Transportation,Climate Change Economics,Markets and Market Access,Renewable Energy,Food&Beverage Industry
    Date: 2011–06–01
  17. By: Timilsina , Govinda R.; Mevel, Simon
    Abstract: The question of whether biofuels help mitigate climate change has attracted much debate in the literature. Using a global computable general equilibrium model that explicitly represents land-use change impacts due to the expansion of biofuels, this study attempts to shed some light on this question. The study shows that if biofuel mandates and targets currently announced by more than 40 countries around the world are implemented by 2020 using crop feedstocks, and if both forests and pasture lands are used to meet the new land demands for biofuel expansion, this would cause a net increase of greenhouse gas emissions released to the atmosphere until 2043, since the cumulative greenhouse gas emissions released through land-use change would exceed the reduction of emissions due to replacement of gasoline and diesel until then. However, if the use of forest lands is avoided by channeling only pasture lands to meet the demand for new lands, a net increase of cumulative greenhouse gas emissions would occur but would cease by 2021, only a year after the assumed full implementation of the mandates and targets. The study also shows, contrary to common perceptions, that the rate of deforestation does not increase with the rate of biofuel expansion; instead, the marginal rate of deforestation and corresponding land-use emissions decrease even if the production of biofuels increases.
    Keywords: Climate Change Mitigation and Green House Gases,Climate Change Economics,Energy and Environment,Environment and Energy Efficiency,Climate Change and Environment
    Date: 2011–06–01
  18. By: Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Miguel Carriquiry (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Kranti Mulik (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Bruce A. Babcock (Center for Agricultural and Rural Development (CARD)); Jerome Dumortier; Francisco Rosas
    Abstract: This analysis uses the 2011 FAPRI-CARD (Food and Agricultural Policy Research Institute–Center for Agricultural and Rural Development) baseline to evaluate the impact of four alternative scenarios on U.S. and world agricultural markets, as well as on world fertilizer use and world agricultural greenhouse gas emissions. A key assumption in the 2011 baseline is that ethanol support policies disappear in 2012. The baseline also assumes that existing biofuel mandates remain in place and are binding. Two of the scenarios are adverse supply shocks, the first being a 10% increase in the price of nitrogen fertilizer in the United States, and the second, a reversion of cropland into forestland. The third scenario examines how lower energy prices would impact world agriculture. The fourth scenario reintroduces biofuel tax credits and duties. Given that the baseline excludes these policies, the fourth scenario is an attempt to understand the impact of these policies under the market conditions that prevail in early 2011. A key to understanding the results of this fourth scenario is that in the absence of tax credits and duties, the mandate drives biofuel use. Therefore, when the tax credits and duties are reintroduced, the impacts are relatively small. In general, the results show that the entire international commodity market system is remarkably robust with respect to policy changes in one country or in one sector. The policy implication is that domestic policy changes implemented by a large agricultural producer like the United States can have fairly significant impacts on the aggregate world commodity markets. A second point that emerges from the results is that the law of unintended consequences is at work in world agriculture. For example, a U.S. nitrogen tax that might presumably be motivated for environmental benefit results in an increase in world greenhouse gas emissions. A similar situation occurs in the afforestation scenario in which crop production shifts from high-yielding land in the United States to low-yielding land and probably native vegetation in the rest of the world, resulting in an unintended increase in global greenhouse gas emissions.
    Keywords: afforestation, energy price, ethanol tax credit, fertilizer, partial equilibrium model, policy analysis.
    Date: 2011–06
  19. By: Shawkat Hammoudeh; Soodabeh Sarafrazi; Chia-Lin Chang; Michael McAleer (University of Canterbury)
    Abstract: This paper examines the short- and long-run daily relationships for a grain-energy nexus that includes the prices of corn, crude oil, ethanol, gasoline, soybeans, and sugar, and their open interest. The empirical results demonstrate the presence of these relationships in this nexus, and underscore the importance of ethanol and soybeans in all these relationships. In particular, ethanol and be considered as a catalyst in this nexus because of its significance as a loading factor, a long-run error corrector and a short-run adjuster. Ethanol leads all commodities in the price discovery process in the long run. The negative cross-price open interest effects suggest that there is a money outflow from all commodities in response to increases in open interest positions in the corn futures markets, indicating that active arbitrage activity takes place in those markets. On the other hand, an increase in the soybean open interest contributes to fund inflows in the corn futures market and the other futures markets, leading to more speculative activities in these markets. In connection with open interest, the ethanol market fails because of its thin market. Finally, it is interesting to note that the long-run equilibrium (cointegrating relationship), speeds of adjustment and open interest across markets have strengthened significantly during the 2009-2011 economic recovery period, compared with the full and 2007-2009 Great Recession periods.
    Keywords: Energy-grain price nexus; open interest; futures prices; ethanol; crude oil; gasoline; corn; soybean; sugar; arbitrage; speculation
    JEL: E43 Q11 Q13
    Date: 2011–05–01
  20. By: Akpan, Usenobong F.; Chuku, Agbai
    Abstract: The Environmental Kuznets Curve (EKC) hypothesis is a presumption that environmental degradation follows an inverted U-shaped trajectory in relation to economic growth. The thorny question of whether economic growth could provide a cure to environmental degradation has sparked off a large body of empirical studies in the last decade. The conclusions have been mixed. This study contributes to the debate on the existence and policy relevance of the EKC for Nigeria by applying autoregressive distributed lag (ARDL) framework to annual time series data from 1960 to 2008. The traditional EKC model is extended by including (in addition to the level, square and cubed values of the income variable), trade openness as well as the shares of manufacturing, agriculture and service sectors in Nigeria’s GDP. Using Co2 emissions per capita to proxy environmental degradation, our findings do not support the existence of the EKC hypothesis. Rather our results show that Nigeria’s situation when confronted with data is exemplified by an N-shaped relationship with a turning point at $77.27 that lies below the data set used for the study. Based on these findings, the paper posit that the hypothesized EKC serves as a dangerous policy guide to solving environmental problems in Nigeria. The conclusion is that to ensure sustainability, there exist an urgent need to look beyond the EKC by adopting courageous policy measures of environmental preservation in Nigeria irrespective of the country’s level of income.
    Keywords: Environmental Degradation; ARDL; Environmental Kuznets Curve; Nigeria
    JEL: C32 O43 Q24
    Date: 2011–04–27
  21. By: Juan Antonio Duro Moreno (Department of Economics and CREIP, Univ. Rovira i Virgili); Emilio Padilla Rosa (Department of Applied Economics, Univ. Autónoma de Barcelona)
    Abstract: In this study, we analyse the degree of polarisation—a concept fundamentally different from that of inequality—in the international distribution of CO2 emissions per capita in the European Union. It is analytically relevant to examine the degree of instability inherent to a distribution and, in the analysed case, the likelihood that the distribution and its evolution will increase or decrease the chances of reaching an agreement. Two approaches were used to measure polarisation: the endogenous approach, in which countries are grouped according to their similarity in terms of emissions, and the exogenous approach, in which countries are grouped geographically. Our findings indicate a clear decrease in polarisation since the mid-1990s, which can essentially be explained by the fact that the different groups of countries have converged (i.e. antagonism among the CO2 emitters has decreased) as the contribution of energy intensity to between-group differences has decreased. This lower degree of polarisation in CO2 distribution suggests a situation more conducive to the possibility of reaching EU-wide agreements on the mitigation of CO2 emissions.
    Keywords: CO2 emissions, distribution of emissions, European Union, mitigation agreements, polarisation.
    Date: 2011–05
  22. By: Emilio Padilla Rosa (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Juan Antonio Duro Moreno (Department of Economics and CREIP, Univ. Rovira i Virgili)
    Abstract: The design of European mitigation policies requires a detailed examination of the factors explaining the unequal emissions in the different countries. This research analyzes the evolution of inequality in CO2 per capita emissions in the European Union (EU-27) in the 1990–2006 period and its explanatory factors. For this purpose, we decompose the Theil index of inequality into the contributions of the different Kaya factors. The decomposition is also applied to the inequality between and within groups of countries (North Europe, South Europe, and East Europe). The analysis shows an important reduction in inequality, to a large extent due to the smaller differences between groups and because of the lower contribution of the energy intensity factor. The importance of the GDP per capita factor increases and becomes the main explanatory factor. However, within the different groups of countries the carbonization index appears to be the most relevant factor in explaining inequalities.
    Keywords: CO2 emissions, emission inequality, European Union, Kaya factors, Theil index.
    Date: 2011–05
  23. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: This paper first highlights at least four important issues relevant to be discussed in the context of climate change in Indonesia: (1) Indonesia is among the most vulnerable to climate change impact; (2) Indonesia is the second biggest contributor to global GHG emissions from land use change or deforestation; (3) As the fourth biggest country in term of population, Indonesia is also the candidate to become among the most important carbon emitters from energy consumption; (4) Indonesia is still struggling in economic development, particularly poverty alleviation. The first three issues are sufficient reasons for Indonesia, together with the rest of the world, to take necessary actions against climate change and the fourth issue is ‘the number one’ priority in Indonesian development and the element that must always be the prime consideration in any of those actions. This paper also review some of the actions that has been done particularly by Indonesian government in tackling climate change and questions some of its shortcomings and challenges.
    Keywords: climate change, Indonesia
    JEL: Q54 Q56 Q58
    Date: 2011–06
  24. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: This paper highlights the importance of regional governments in the context of Indonesian struggle to resolve the problem of climate change, in particular, and wider area of environmental problem. It emphasizes, that regional governments, more often than not, overlook the value of conservation, despite evidences that conservation not only has the benefit of securing the welfare of future generation but also can avoid various environmental problem and many natural disasters of today. There is a need to modify the paradigm of financing for climate change mitigation or adaptation from focusing on searching external financing with the basis of compensation but optimizing internal source of financing as it is the local who will benefit from many of our conservation actions.
    Keywords: climate change, conservation, regional development, Indonesia
    JEL: Q54 Q56 Q58
    Date: 2011–06
  25. By: Gary Koop (Department of Economics, University of Strathclyde); Lise Tole (Edinburgh University, Business School)
    Abstract: In an effort to meet its obligations under the Kyoto Protocol, in 2005 the European Union introduced a cap-and-trade scheme where mandated installations are allocated permits to emit CO2. Financial markets have developed that allow companies to trade these carbon permits. For the EU to achieve reductions in CO2 emissions at a minimum cost, it is necessary that companies make appropriate investments and policymakers design optimal policies. In an effort to clarify the workings of the carbon market, several recent papers have attempted to statistically model it. However, the European carbon market (EU ETS) has many institutional features that potentially impact on daily carbon prices (and associated ?nancial futures). As a consequence, the carbon market has properties that are quite different from conventional financial assets traded in mature markets. In this paper, we use dynamic modelaveraging (DMA) in order to forecast in this newly-developing market. DMA is a recently-developed statistical method which has three advantages over conventional approaches. First, it allows the coe¢ cients on the predictors in a forecasting model to change over time. Second, it allows for the entire forecasting model to change over time. Third, it surmounts statistical problems which arise from the large number of potential predictors that can explain carbon prices. Our empirical results indicate that there are both important policy and statistical benefits with our approach. Statistically, we present strong evidence that there is substantial turbulence and change in the EU ETS market, and that DMA can model these features and forecast accurately compared to conventional approaches. From a policy perspective, we discuss the relative and changing role of different price drivers in the EU ETS. Finally, we document the forecast performance of DMA and discuss how this relates to the efficiency and maturity of this market.
    Keywords: Bayesian, carbon permit trading, financial markets, state space model, model averaging
    JEL: C53 C24
    Date: 2011–04
  26. By: Strand, Jon
    Abstract: This paper provides a first analysis of optimal offset policies by a"policy bloc"of fossil fuel importers implementing a climate policy, facing a (non-policy) fringe of other importers, and a bloc of fuel exporters. The policy bloc uses either a carbon tax or a cap-and-trade scheme, jointly with a fully efficient offset mechanism for reducing emissions in the fringe. The policy bloc is then shown to prefer a tax over a cap-and-trade scheme, since 1) a tax extracts more rent as fuel exporters reduce the export price, and more so when the policy bloc is larger relative to the fringe; and 2) offsets are more favorable to the policy bloc under a tax than under a cap-and-trade scheme. The optimal offset price under a carbon tax is half the tax rate; under a cap-and-trade scheme the quota and offset price are equal. The domestic carbon and offset price are both higher under a tax than under a cap-and-trade scheme when the policy bloc is small; when it is larger the offset price can be higher under a cap-and-trade scheme. Fringe countries gain by mitigation in the policy bloc, and more under a carbon tax since the fuel import price is lower, and since the price obtained when selling offsets is often higher (always so for a large fringe).
    Keywords: Climate Change Economics,Climate Change Mitigation and Green House Gases,Energy Production and Transportation,Markets and Market Access,Environment and Energy Efficiency
    Date: 2011–06–01
  27. By: Frank Jotzo; 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)
    Abstract: The merits of floor prices in emissions trading schemes (ETS) depend on the problem addressed. Traditional hybrid approaches emphasise automatic response to lower than anticipated abatement costs, but we find adjusting emissions targets over time is the better way to deal with this in the context of climate policy. We find, however, that a price floor is well suited to addressing policy generated carbon price risk as domestic and international policy frameworks mature, reducing the risk of unintended low carbon prices. Reducing such downside risk can encourage cost effective investment in low-emissions assets that might otherwise be precluded by perceived policy risks, even if the price floor is never actually triggered. In AustraliaÕs planned ETS, a price floor could support investments that lower the national emissions trajectory, and boost policy stability and credibility. A price floor in operation can increase the static costs of achieving a given emissions target, but reduce economic costs over time. Assessment of implementation options suggests a domestic reserve price for auctioned permits along with a periodically adjusted fee on the conversion of international permits for use in the domestic ETS. This approach minimises administrative complexity and avoids arbitrary interventions in carbon markets.
    JEL: Q54 Q58
    Date: 2011–05
  28. By: Adriana Camacho; Emily Conover
    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 weather information using text messages (SMS technology). We find that relative to those farmers who did not receive SMS information, the farmers who did were more likely to provide market price information, had a narrower dispersion in the expected price of their crops, and had a significant reduction in crop loss. Farmers also report that text messages provide useful information, especially in regards to sale prices. We do not find, however, a significant difference between the treated and untreated farmers in the actual sale price, nor changes in farmers’ revenues or household expenditures.
    JEL: D62 Q11 Q12 Q13
    Date: 2011–05
  29. By: Heijdra, Ben J. (Faculty of Economics and Business, University of Groningen, The Netherlands, and Institute for Advanced Studies, CESifo, Netspar); Heijnen, Pim (Faculty of Economics and Business, University of Groningen, The Netherlands)
    Abstract: We study the environmental and economic effects of public abatement in the presence of multiple stable steady-state ecological equilibria. Under shallow-lake dynamics (SLD), the isocline for the stock of pollution features two stable branches, a good and a bad one. Assuming that the ecology is initially located on the upper (bad) branch of the isocline, the ecological equilibrium is hysteretic and a suitably designed temporary abatement policy can be used to steer the environment from the bad to the good equilibrium. In all models considered in this paper, a “cold turkey” abatement policy is optimal, i.e. the largest feasible shock should be administered for the shortest possible amount of time. Depending on the particular model used to characterize the economic system, there is a capital feedback effect that either helps or hinders the attainment of a successful abatement policy.
    Keywords: Shallow-lake dynamics, Bifurcation, Environmental policy, Overlapping generations
    JEL: D60 E62 H23 H63 Q20 Q28 Q50
    Date: 2011–05
  30. By: Mason, Michael
    Date: 2010–10
  31. By: Igor Khmelinskii; Peter Stallinga
    Abstract: Recent experimental works demonstrated that the Anthropogenic Global Warming (AGW) hypothesis, embodied in a series of Intergovernmental Panel on Climate Change (IPCC) global climate models, is erroneous. These works prove that atmospheric carbon dioxide contributes only very moderately to the observed warming, and that there is no climatic catastrophe in the making, independent on whether or not carbon dioxide emissions will be reduced. In view of these developments, we discuss climate predictions for the XXIst century. Based on the solar activity tendencies, a new Little Ice Age is predicted by the middle of this century, with significantly lower global temperatures. We also show that IPCC climate models can't produce any information regarding future climate, due to essential physical phenomena lacking in those, and that the current budget deficit in many EU countries is mainly caused by the policies promoting renewable energies and other AGW-motivated measures. In absence of any predictable adverse climate consequences of carbon dioxide emissions, and with no predictable shortage of fossil fuels, we argue for recalling of all policies aimed at reducing carbon dioxide emissions and usage of expensive renewable energy sources. The concepts of carbon credits, green energy and green fuels should be abandoned in favor of productive, economically viable and morally acceptable solutions.
    Date: 2011–05

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