nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒06‒18
35 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Experience of technological and natural disasters and their impact on the perceived risk of nuclear accidents after the Fukushima nuclear disaster in Japan 2011: A cross-country analysis By Yamamura, Eiji
  2. Smart Meter Devices and The Effect of Feedback on Residential Electricity Consumption: Evidence from a Natural Experiment in Northern Ireland By Will Gans; Anna Alberini; Alberto Longo
  3. Energy Saving in Link Stability Routing Protocol By Crescenzio Gallo; Michele Perilli; Michelangelo De Bonis
  4. The effect of counter-trading on competition in electricity markets. By Dijk, Justin; Willems, Bert
  5. Modeling Energy and Non-energy Substitution – A Survey of Elasticities By Manuel Frondel
  6. The European Commission‘s Light Bulb Decree: Another Costly Regulation? By Manuel Frondel; Steffen Lohmann
  7. Vintage capital and the diffusion of clean technologies By Theophile Azomahou; Raouf Boucekkine; Phu Nguyen-Van
  8. Western Balkans: Employment in the Gas and Electricity Sectors By Vasily Astrov; Mario Holzner; Sebastian Leitner; Doris Hanzl-Weiss; Hermine Vidovic; Edward Christie; Waltraut Urban
  9. Economic Analysis of Feed-in Tariffs for Generating Electricity from Renewable Energy Sources By G. Cornelis van Kooten
  10. Forecasting Photovoltaic Deployment with Neural Networks By Crescenzio Gallo; Michelangelo De Bonis
  11. Volatility of Power Grids under Real-Time Pricing By Mardavij Roozbehani; Munther A Dahleh; Sanjoy K Mitter
  12. Vers une nouvelle forme de concurrence dans les marchés de l'électricité ? By Evens Salies
  13. Eco-efficiency and convergence in OECD countries By Mariam Camarero; Juana Castillo; Andrés J. Picazo-Tadeo; Cecilio Tamarit
  14. The Energy2B project: stimulating environmental entrepreneurship and building an energy infrastructure through institutional entrepreneurship By Fletcher, Denise; Knol, Erik; Janicki, Marcin
  15. Presentation of the Three-ME model: Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy By Frédéric Reynes; Yasser Yeddir-Tamsamani; Gaël Callonec
  16. Cash by any other name? Evidence on labelling from the UK Winter Fuel Payment By Timothy K.M. Beatty; Laura Blow; Thomas Crossley; Cormac O'Dea
  17. Oil Price Shocks and Cyclical Dynamics in an Asymmetric Monetary Union By Volker Clausen; Hans-Werner Wohltmann
  18. Rationalization in the Canadian Retail Gasoline Industry: The Role of Environmental Regulations By Eckert, Heather; Eckert, Andrew
  19. The Dynamics of Energy-Grain Prices with Open Interest By Shawkat Hammoudeh; Soodabeh Sarafrazi; Chia-Lin Chang; Michael McAleer
  20. Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences By William K. Jaeger; Thorsten M. Egelkraut
  22. Decoupling urban transport from GHG emissions in Indian cities--A critical review and perspectives By Jun Li
  23. Trade and the Greenhouse Gas Emissions from International Freight Transport By Anca D. Cristea; David Hummels; Laura Puzzello; Misak G. Avetisyan
  24. Coordinating Climate and Trade Policies: Pareto Efficiency and the Role of Border Tax Adjustments By Michael Keen; Christos Kotsogiannis
  25. Cointegration with multiple structural breaks: an application to the Spanish environmental Kuznets curve, 1857-2007 By Vicente Esteve; Cecilio Tamarit
  26. Approximation of Marginal Abatement Cost Curve By Olga Kiuila; Thomas F. Rutherford
  27. Incentives for environmental R&D By Greaker, Mads; Hoel, Michael
  28. Climate Policy Design with Correlated Uncertainties in Offset Supply and Abatement Cost By Fell, Harrison; Burtraw, Dallas; Morgenstern, Richard; Palmer, Karen
  29. Europe's clean technology investment challenge By Reinhilde Veugelers
  30. Under what conditions does a carbon tax on fossil fuels stimulate biofuels ? By Timilsina, Govinda R.; Csordas, Stefan; Mevel, Simon
  31. Preliminary Evidence on Responses to the New Zealand Forestry Emissions Trading Scheme By Karpas, Eric; Kerr, Suzi
  32. The role of sequestration costs with a ceiling on atmospheric carbon concentration By Wilfried Rickels
  33. Structuring national and sub-national economic incentives to reduce emissions from deforestation in Indonesia By Jonah Busch; Ruben Lubowski; Fabiano Godoy; Marc Steininger; Arief Anshory Yusuf; Kemen Austin; Jenny Hewson; Daniel Juhn; Muhammad Farid; Frederick Boltz
  34. Do Geographical Variations in Climate Influence Life Satisfaction? By Thomas Murray; David Maddison; Katrin Rehdanz
  35. International Environmental Agreements: Incentive Contracts with Multilateral Externalities By Carsten Helm; Franz Wirl

  1. By: Yamamura, Eiji
    Abstract: This paper uses cross-country data compiled immediately after the Fukushima nuclear accident to investigate how the experience of such disasters affects the perception of the risk of nuclear accidents. Estimation results show that the perceived risk of a nuclear accident is positively associated with experiencing technological disasters but not with that of natural disasters.
    Keywords: Technological disaster; Natural disaster; Nuclear accidents; Risk; Fukushima accidents; Perception; Bayesian learning
    JEL: D84 J28 D83 Q54
    Date: 2011–06–03
  2. By: Will Gans (AREC, University of Maryland); Anna Alberini (AREC, University of Maryland and Fondazione Eni Enrico Mattei); Alberto Longo (Gibson Institute for Land Food and Environment, UKCRC Centre of Excellence for Public Health (NI), School of Biological Sciences, Queen‘s University)
    Abstract: Using a unique set of data and exploiting a large-scale natural experiment, we estimate the effect of real-time usage information on residential electricity consumption in Northern Ireland. Starting in April 2002, the utility replaced prepayment meters with “smart” meters that allow the consumer to track usage in real-time. We rely on this event, account for the endogeneity of price and plan with consumption through a plan selection correction term, and find that the provision of information is associated with a decline in electricity consumption of up to 20%. We find that the reduction is robust to different specifications, selection-bias correction methods and subsamples of the original data. At £15-17 per tonne of CO2e (2009£), the smart meter program delivers cost-effective reductions in carbon dioxide emissions.
    Keywords: Residential Energy, Electricity Demand, Feedback, Smart Meter, Information
    JEL: Q40 Q41 D8
    Date: 2011–05
  3. By: Crescenzio Gallo; Michele Perilli; Michelangelo De Bonis
    Abstract: Because the CPU is a very expensive resource in mobile ad hoc networks (MANETs), it is very important to consider the overhead introduced in a routing protocol. Many theories have been hypothesized with the aim of minimizing it. But how much is the energy consumption from a network node’s battery induced by the routing protocol overhead? In a previous work we dealt with a routing protocol based on link stability (link duration observed in a time interval). In this work we attempt to hypothesize a model for conserving the battery energy consumed by nodes in a MANET adopting the link stability routing protocol.
    Keywords: mobile ad hoc network, routing protocol, energy consumption.
    Date: 2011–03
  4. By: Dijk, Justin; Willems, Bert (Universiteit van Tilburg)
    Date: 2011
  5. By: Manuel Frondel
    Abstract: Estimating the degree of substitution between energy and non-energy inputs is key for any evaluation of environmental and energy policies. Yet, given the large variety of substitution elasticities, the central question arises as to which measure would be most appropriate. Apparently, ALLEN’s elasticities of substitution have been the most-used measures in applied production analysis. In line with Frondel (2004), this paper argues that cross-price elasticities are preferable for many practical purposes. This conclusion is based on a survey of classical substitution measures, such as those from ALLEN, MORISHIMA, and MCFADDEN. The survey also highlights the fact that cross-price elasticities are their essential ingredients.
    Keywords: Cross-price elasticities; Allen partial elasticities; Morishima elasticities
    JEL: C3 D2
    Date: 2011–04
  6. By: Manuel Frondel; Steffen Lohmann
    Abstract: Since September 2009, Regulation 244/2009 of the European Commission enforces the gradual phase-out of incandescent light bulbs. As of September 2012, only energyefficient lighting sources will be allowed for sale. Among these are halogen light bulbs, light-emitting diodes (LED), or compact fluorescent light bulbs? often referred to as energy-saving light bulbs. The Commission’s justification for the phase-out of conventional light bulbs maintains that a reduction in the electricity consumed will not only lead to lower energy cost for private households and industrial consumers, but at the same time lead to a decrease in greenhouse gas emissions. This article discusses possible reasons for the slow market diffusion of energy-saving light bulbs and shows that the investment in energy-efficient light bulbs does not necessarily lead to significant cost reductions. Drawing on some illustrative examples, we demonstrate that the use of cheaper incandescent bulbs instead of energy-saving light bulbs can be economically rational in cases of rather low usage times, in which the higher initial purchasing price might only pay off after very long time spans. Furthermore, due to the coexistence with the European Emissions Trading Scheme (ETS), this regulation attains no additional emission reductions beyond those achieved by the ETS alone. We thus conclude that the general ban of incandescent light bulbs is inappropriate and should be abolished by the Commission.
    Keywords: Energy efficiency; rebound effect
    JEL: D12 Q41
    Date: 2011–03
  7. By: Theophile Azomahou (Maastricht University - univ. Maastricht); Raouf Boucekkine (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Phu Nguyen-Van (BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II)
    Abstract: We develop a general equilibrium vintage capital model with energy-saving technological progress and an explicit energy sector to study the impact of investment subsidies on equilibrium investment and output. Energy and capital are assumed to be complementary in the production process. New machines are less energy consuming and scrapping is endogenous. Two polar market structures are considered for the energy market, free entry and natural monopoly. First, it is shown that investment subsidies may induce a larger equilibrium investment into cleaner technologies either under free entry or natural monopoly. However in the latter case, this happens if and only if the average cost is decreasing fast enough. Second, larger diffusion rates do not necessarily mean lower energy consumption at equilibrium, which may explain certain empirical observations.
    Keywords: Energy-saving technological progress; vintage capital; market imperfections; natural monopoly; investment
    Date: 2011–06–08
  8. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw); Edward Christie; Waltraut Urban
    Abstract: The objective of this study is to analyse employment developments in the gas and electricity sectors in seven Western Balkan Contracting Parties of the Energy Community. These are Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Kosovo under UNSCR 1244/99. In addition, the impact of the liberalization of the respective markets is examined (quantitatively and qualitatively) and the most likely trends for the future development are identified. In more detail, the study analyses the current state of the gas and electricity sectors in the Western Balkan countries as well as the evolution of employment in these sectors and the different areas of activities by structural features. Based on results from interviews with the main stakeholders of the energy sector, it assesses the impact of liberalization and EU energy legislation on the number of jobs in the Western Balkan countries. We also examine the process of job destruction and job creation during the period of liberalization and restructuring and explore how different categories of workers are affected. Specific emphasis is given to the impact on the quality of jobs, such as changing skill requirements, improvements in work organization and working conditions.
    Keywords: Western Balkans, energy market liberalization, employment, job quality, restructuring
    JEL: J21 J24 J28 J50 L94 L95 Q4
    Date: 2011–03
  9. By: G. Cornelis van Kooten
    Keywords: Feed-in tariffs, renewable energy
    JEL: Q20 Q40 Q42
    Date: 2011–05
  10. By: Crescenzio Gallo; Michelangelo De Bonis
    Abstract: The photovoltaic (PV) industry in Italy has already crossed the threshold of 1 GW of installed capacity. Currently there are approximately 70,000 certified facilities in operation for a power generation of 1,300 GWh/year. With these figures, Italy has become the second country in Europe for PV installed power after Germany. The energy produced would be sufficient to meet the power needs of approximately 1,200,000 people. This leads to some questions: Will this technology continue to grow exponentially even after the recent reduction in rates by the Energy Bill? Will the number of installed PV facilities still grow even with less public support and (probably) a reduction in the technology purchase price? The purpose of this paper is therefore to develop a conceptual model to make a prediction of the PV installed power in Italy through the use of “supervised” artificial neural networks. This model is also applied to the analysis of the spread of this technology in some other European countries.
    Keywords: photovoltaic, forecasting, neural networks.
    Date: 2011–03
  11. By: Mardavij Roozbehani; Munther A Dahleh; Sanjoy K Mitter
    Abstract: The paper proposes a framework for modeling and analysis of the dynamics of supply, demand, and clearing prices in power system with real-time retail pricing and information asymmetry. Real-time retail pricing is characterized by passing on the real-time wholesale electricity prices to the end consumers, and is shown to create a closed-loop feedback system between the physical layer and the market layer of the power system. In the absence of a carefully designed control law, such direct feedback between the two layers could increase volatility and lower the system's robustness to uncertainty in demand and generation. A new notion of generalized price-elasticity is introduced, and it is shown that price volatility can be characterized in terms of the system's maximal relative price elasticity, defined as the maximal ratio of the generalized price-elasticity of consumers to that of the producers. As this ratio increases, the system becomes more volatile, and eventually, unstable. As new demand response technologies and distributed storage increase the price-elasticity of demand, the architecture under examination is likely to lead to increased volatility and possibly instability. This highlights the need for assessing architecture systematically and in advance, in order to optimally strike the trade-offs between volatility, economic efficiency, and system reliability.
    Date: 2011–06
  12. By: Evens Salies (Observatoire Français des Conjonctures Économiques)
    Abstract: La loi de nouvelle organisation des marchés de l'électricité s'inscrit dans le prolongement du processus d'ouverture à la concurrence du secteur européen de l'énergie électrique engagé par les États membres de l'Union européenne en 1996. Cette nouvelle loi, qui modifie et complète celle de février 2000, est notamment une réponse du Gouvernement à la mise en cause par les autorités européennes de la compatibilité des tarifs réglementés français avec le droit de l'Union européenne et, plus généralement, de la configuration du secteur français qui bloquerait le développement de la concurrence. C'est en réalité EDF qui est visée avec cette loi, car, du fait de sa situation historique, l'entreprise produit plus de 85 % de l'électricité et sert la quasi-totalité des clients de la France métropolitaine. Sur le marché des petits professionnels ouvert le 1er juillet 2004 (seuls 7% d'entre eux avaient quitté leur entreprise historique d'électricité trois ans plus tard), puis sur le marché résidentiel (les particuliers) ouvert le 1er juillet 2007 (environ 5% étaient en 2010 servis par des fournisseurs alternatifs), peu de clients semblent vouloir passer à la concurrence, ce qui était prévisible.
    Keywords: Business Economics, Cognitive & Behavioural Economics, Industrial Competition, European Economics, Energy Economics, Innovation, Marketing, Regulation
    JEL: D2 D4 D83 H4 L4 L5 L94
    Date: 2011–03
  13. By: Mariam Camarero (Dpto. Economía. Universidad Jaume I); Juana Castillo (Dpto. Economía Aplicada II. Universidad de Valencia); Andrés J. Picazo-Tadeo (Dpto. Economía Aplicada II. Universidad de Valencia); Cecilio Tamarit (Dpto. Economía Aplicada II. Universidad de Valencia)
    Abstract: This paper assesses the convergence in eco-efficiency of a group of 22 OECD countries over the period 1980-2005. In doing so, three air-pollutants representing the impact on the environment of economic activities are considered, namely, carbon dioxide (CO2), nitrogen oxides (NOX) and sulphur oxides (SOX); furthermore, eco-efficiency scores at both country and air-pollutant-specific levels are computed using Data Envelopment Analysis techniques. Then, convergence is evaluated using the recent approach by Phillips and Sul (2007), which allows testing for the existence of convergence groups. First, we find that, with the exception of NOX emissions, eco-efficiency has improved over the period, the greatest progress corresponding to CO2 emissions. Second, Switzerland is the most eco-efficient country, followed by some Scandinavian economies such as Sweden, Norway, Iceland and Denmark. In contrast, European Mediterranean countries such as Portugal, Spain and Greece, in addition to Hungary, Turkey, Canada or the US, are among the worst performers. Finally, we find that both the most eco-efficient countries and the worst-performing countries also tend to form clubs of convergence among them.
    Keywords: Eco-efficiency; Air pollutants; Convergence clubs; OECD
    JEL: C15 C22 C61 F15 Q56
    Date: 2011–06
  14. By: Fletcher, Denise; Knol, Erik; Janicki, Marcin
    Abstract: The Energy2B Project is an EU funded innovation stimulating initiative that targets university students at five universities across Europe and encourages them to practice environmental entrepreneurship and turn energy innovation ideas into new business start-ups. The project is administered by a European consortium of commercial and academic co-ordinators through an online web platform. The web-platform is used to develop an energy infrastructure that connects diverse stakeholders (including industrial actors, energy bodies and field experts) through the administration of local idea challenges and energy innovation competitions at a local and European level. In this paper, we discuss how the project contributes to the practice of environmental entrepreneurship and explain the projects theoretical significance as a case of institutional entrepreneurship. We also outline the academic deliverables of the project in terms of individual case studies and a survey that measures the project’s effectiveness in accelerating the practice of environmental entrepreneurship. First results are available in the second quarter of 2011.
    Keywords: environmental entrepreneurship; sustainable entrepreneurship; institutional entrepreneurship
    JEL: I21 Q01 L26
    Date: 2010–11–08
  15. By: Frédéric Reynes (VU University Amsterdam, IVM - Institute for Environmental Studies); Yasser Yeddir-Tamsamani (Observatoire Français des Conjonctures Économiques); Gaël Callonec (Agence de l'environnement et de la maîtrise de l'énergie)
    Abstract: This paper presents the structure and the main properties of Three-ME. This new model of the French economy has been especially designed to evaluate the medium and long term impact of environmental and energy policies at the macroeconomic and sector levels. To do so Three-ME combines two important features. Firstly, it has the main characteristics of neo-Keynesian models by assuming a slow adjustment of effective quantities and prices to their notional level. Compared to standard multi-sectors CGEM, this has the advantage to allow for the existence of under-optimum equilibriums such as the presence of involuntary unemployment. Secondly, production and consumption structures are represented with a generalized CES function which allows for the elasticity of substitution to differ between each couple of inputs or goods. This is an improvement compared to the standard approach that uses nested CES functions which has the disadvantage to impose a common elasticity of substitution between the goods located in two different nested structures.
    Keywords: neo-Keynesian model, macroeconomic modeling, energy and environmental policy modeling
    JEL: E12 E17 E27 E37 E47 D57 D58
    Date: 2011–05
  16. By: Timothy K.M. Beatty; Laura Blow (Institute for Fiscal Studies); Thomas Crossley (Institute for Fiscal Studies and University of Cambridge); Cormac O'Dea (Institute for Fiscal Studies)
    Abstract: <p><p>Standard economic theory implies that the labelling of cash transfers or cash-equivalents (e.g. child benefits, food stamps) should have no effect on spending patterns. The empirical literature to date does not contradict this proposition. We study the UK Winter Fuel Payment (WFP), a cash transfer to older households. Exploiting sharp eligibility criteria in a regression discontinuity design, we find robust evidence of a behavioural effect of the labelling. On average households spend 41% of the WFP on fuel. If the payment was treated as cash, we would expect households to spend approximately 3% of the payment on fuel.</p></p>
    Date: 2011–06
  17. By: Volker Clausen; Hans-Werner Wohltmann
    Abstract: This paper analyzes the dynamic effects of anticipated and unanticipated oil price increases in a small two-country monetary union, which is simultaneously characterized by asymmetric wage adjustments and asymmetric interest rate sensitivities of private absorption. Common external oil price disturbances lead in this asymmetric macroeconomic setup to temporary divergences in output developments across the monetary union. In the case of anticipated oil price increases the relative cyclical position is reversed in the course of the adjustment process. Complete stabilization of the output variables throughout the overall adjustment process requires a restrictive monetary policy being time inconsistent from a quantitative but time consistent from a qualitative point of view. That means that the central bank credibly announces a future reduction in the growth rate of the nominal money stock but actually implements a reduction, which is less restrictive than the original announcement.
    Keywords: EMU; international policy transmission; oil price shock; time inconsistency; monetary policy
    JEL: E63 F41
    Date: 2011–03
  18. By: Eckert, Heather (University of Alberta, Department of Economics); Eckert, Andrew (University of Alberta, Department of Economics)
    Abstract: The number of gasoline stations in Canada fell by 40 percent between 1989 and 2000. Many demand and competition related explanations have been offered for this rationalization, while industry sources cite stiffer environmental regulations as a factor in station closures. In the late 1980s and early 1990s most Canadian provinces adopted regulations requiring that unprotected petroleum storage tanks be upgraded or replaced according to a schedule based on the age of the tank and that nearby unprotected tanks also be upgraded or removed. In this paper, we exploit provincial differences in the timing of these regulations to examine the role of upgrade and removal regulations on the timing and degree of station shutdown in 12 cities across the country.
    Keywords: petroleum storage; rationalization; retail gasoline; underground storage tanks; environmental regulations
    JEL: K20 L81 Q58
    Date: 2011–05–01
  19. By: Shawkat Hammoudeh (Lebow College of Business Drexel University); Soodabeh Sarafrazi (Lebow College of Business Drexel University); Chia-Lin Chang (Department of Applied Economics Department of Finance National Chung Hsing University Taichung); Michael McAleer (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, Complutense University of Madrid, and Institute of Economic Research, Kyoto University)
    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;crude oil;gasoline;corn;soybean;suger;arbitrage;speculation.
    Date: 2011–05
  20. By: William K. Jaeger (Oregon State University); Thorsten M. Egelkraut (Oregon State University)
    Abstract: This paper examines biofuels from an economic perspective and evaluates the merits of promoting biofuel production in the context of the policies’ multiple objectives, life-cycle implications, pecuniary externalities, and other unintended consequences. The policy goals most often cited are to reduce fossil fuel use and to lower greenhouse gas emissions. But the presence of multiple objectives and various indirect effects complicates normative evaluation. To address some of these complicating factors, we look at several combinations of policy alternatives that achieve the same set of incremental gains along the two primary targeted policy dimensions, making it possible to compare the costs and cost-effectiveness of each combination of policies. For example, when this approach is applied to U.S.-produced biofuels, they are found to be 14 to 31 times as costly as alternatives like raising the gas tax or promoting energy efficiency improvements. The analysis also finds the scale of the potential contributions of biofuels to be extremely small in both the U.S. and EU. Mandated U.S. corn ethanol production for 2025 reduces U.S. petroleum input use by 1.75%, and would have negligible net effects on CO2 emissions; and although EU imports of Brazilian ethanol may look better given the high costs of other alternatives, this option is equivalent, at most, to a 1.20% reduction in EU gasoline consumption.
    Keywords: Biofuel, Biodiesel, Cost-Effectiveness, Indirect Land Use Change Effects, Net Energy, Multiple Objectives, Ethanol, Ghg
    JEL: Q42 Q48 Q54
    Date: 2011–05
  21. By: Baker, Justin; Murray, Brian; McCarl, Bruce
    Abstract: Biofuel expansion efforts and climate mitigation policy could fundamentally alter land management trends in U.S. agriculture and forestry (AF) by mandating biofuel feedstock production and providing incentives for greenhouse gas (GHG) emissions reduction and carbon sequestration from terrestrial sources. Research has shown that biofuel expansion can alter commodity markets, induce agricultural land expansion, and intensify production. Meanwhile, GHG mitigation efforts could limit agricultural expansion, reduce current cultivation, and lower management intensity by incentivizing GHG emissions reduction and carbon sequestration within AF. To date, little work has attempted to quantify biofuel and climate policy-induced shifts together along the extensive and intensive agricultural production margins within a systems-based framework, though such shifts could have resounding implications on agricultural water consumption and quality. This study uses a comprehensive and detailed economic model of the U.S. AF sectors to simulate land management responses to biofuel expansion and GHG policies. While bioenergy production and altered AF management practices are found to significantly reduce GHG emissions, additional water consumption and nutrient use are possible policy outcomes. Specifically, we find that policies that influence shifts to the extensive margin will increase aggregate water use and nutrient application, but lead to lower intensity per-unit area. Conversely, when combined with biofuel mandates climate mitigation incentives lower agricultural land expansion, but lead to higher levels of management intensity. Somewhat contrary to expectations, GHG mitigation incentives cause water and nutrient use intensity to grow at an increasing rate due to the greater level of land use competition. Additionally, important regional trends emerge, as water use and quality concerns grow with the CO2 price in areas with limited GHG mitigation possibilities. This suggests that âwater leakageâ is possible whereby emissions reduction activities decrease output in one region and stimulate management intensity elsewhere. The potential indirect consequences of combined biofuel and climate mitigation incentives on water resource systems warrant further attention in policy design and future research.
    Keywords: Greenhouse gas mitigation, biofuels, water resource management, Environmental Economics and Policy, Production Economics, Resource /Energy Economics and Policy,
    Date: 2011
  22. By: Jun Li (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - AgroParisTech)
    Abstract: How to sustain rapid economic and urban growth with minimised detriment to environment is a key challenge for sustainable development and climate change mitigation in developing countries, which face constraints of technical and financial resources scarcity as well as dearth of infrastructure governance capacity. This paper attempts to address this question by investigating the driving forces of transport demand and relevant policy measures that facilitate mitigating GHG emissions in the urban transport sector in Indian cities based on a critical review of the literature. Our overview of existing literature and international experiences suggests that it is critical to improve urban governance in transport infrastructure quality and develop efficient public transport, coupled with integrated land use/transport planning as well as economic instruments. This will allow Indian cities to embark on a sustainable growth pathway by decoupling transport services demand of GHG emissions in the longer term. Appropriate policy instruments need to be selected to reconcile the imperatives of economic and urban growth, aspiration to higher quality of life, improvements in social welfare, urban transportrelated energy consumption and GHG emissions mitigation target in Indian cities.
    Keywords: India, Urban transport, GHG mitigation
    Date: 2011–04–22
  23. By: Anca D. Cristea; David Hummels; Laura Puzzello; Misak G. Avetisyan
    Abstract: We collect extensive data on worldwide trade by transportation mode and use this to provide detailed comparisons of the greenhouse gas emissions associated with output versus international transportation of traded goods. International transport is responsible for 33 percent of world-wide trade-related emissions, and over 75 percent of emissions for major manufacturing categories like machinery, electronics and transport equipment. US exports intensively make use of air cargo; as a result two-thirds of its export-related emissions are due to international transport, and US exports by themselves generate a third of transport emissions worldwide. Inclusion of transport dramatically changes the ranking of countries by emission intensity. US production emissions per dollar of exports are 16 percent below the world average, but once we include transport US emissions per dollar exported are 59 percent above the world average. We use our data to systematically investigate whether trade inclusive of transport can lower emissions. In one-quarter of cases, the difference in output emissions is more than enough to compensate for the emissions cost of transport. Finally, we examine how likely patterns of trade growth will affect modal use and emissions. Full liberalization of tariffs and GDP growth concentrated in China and India lead to transport emissions growing much faster than the value of trade, due to trade shifting toward distant trading partners. Emissions growth from growing GDP dwarfs any growth from tariff liberalization.
    JEL: F17 F18 Q56
    Date: 2011–06
  24. By: Michael Keen (International Monetary Fund); Christos Kotsogiannis (Department of Economics, University of Exeter)
    Abstract: This paper explores the role of trade instruments in globally efficient climate policies, focusing on the central issue of whether border tax adjustment (BTA) is warranted when carbon prices differ internationally. It shows that tariff policy has a role in easing cross-country distributional concerns that can make non-uniform carbon pricing efficient, and that Pareto-efficiency requires a form of BTA when carbon taxes in some countries are constrained, a special case being identified in which this has the simple structure envisaged in practical policy discussion. It also stresses—a point that has been overlooked in the policy debate—that the case for BTA depends critically on whether climate policies are pursued by carbon taxation or by cap-and-trade.
    Keywords: Environmental taxation; cap-and-trade; international trade; Pareto efficiency; border tax adjustments.
    JEL: H20 F18
    Date: 2011
  25. By: Vicente Esteve (Universidad de Valencia and Universidad de La Laguna, Spain); Cecilio Tamarit (Universidad de Valencia, Spain)
    Abstract: In this paper we consider the possibility that a linear cointegrated regression model with multiples structural changes would provide a better empirical description of the Spanish environmental Kuznets curve during the period 1857-2007. Our methodology is based on instability tests recently proposed in Kejriwal and Perron (2008, 2010) as well as the cointegration test in Arai and Kurozumi (2007) and Kejriwal (2008) developed to allow for a single or multiple breaks under the null hypothesis of cointegration, respectively. Overall, the results of the Kejriwal-Perron tests suggest a model with two breaks estimated at 1941 and 1967 and three regimes. The coefficient estimated between per capita CO2 and per-capita income (or long-run elasticity) in a two breaks model show a tendency to decrease over time. This implies that even if per capita CO2 consumption is monotonically rising in income, the "income elasticity" is less than one.
    Keywords: Environmental Kuznets curve; CO2 emissions; Cointegration; Multiple Structural Breaks
    JEL: C32 Q43 Q53
    Date: 2011–06
  26. By: Olga Kiuila (Faculty of Economic Sciences, University of Warsaw); Thomas F. Rutherford (Centre for Energy Policy and Economics, ETH Zurich)
    Abstract: Top-down models usually include piecewise-smooth functions to describe marginal cost curves, while bottom-up models describe those curves with a step function. When a bottom-up cost curve is available, we can explicitly represent this curve with a top-down model in order to replicate its shape instead of arbitrary assumptions. We propose methods to approximate a piecewise function from a step function using constant elasticity of substitution technologies. Specifically, we consider a pollution abatement sector and calibrate the parameters of the abatement function in order to be able properly to assess the economic effects of an environmental policy. Our methodology can be applied to any sector characterized by decreasing returns to scale technologies. We conclude that the elasticities of substitution need not be estimated only on the basis of historical data, but can be precisely calibrated on the basis of engineering estimates of technology potential.
    Keywords: elasticity of substitution, calibration, abatement, top-down and bottom-up modeling
    JEL: D24 Q53 C60
    Date: 2011
  27. By: Greaker, Mads (Dept. of Economics, University of Oslo); Hoel, Michael (Dept. of Economics, University of Oslo)
    Abstract: Since governments can influence the demand for a new abatement technology through their environmental policy, they may be able to expropriate innovations in new abatement technology ex post. This suggests that incentives for environmental R&D may be lower than the incentives for market goods R&D. This in turn may be used as an argument for environmental R&D getting more public support than other R&D. In this paper we systematically compare the incentives for environmental R&D with the incentives for market goods R&D. We find that the relationship might be the opposite: When the innovator is able to commit to a licence fee before environmental policy is resolved, incentives are always higher for environmental R&D than for market goods R&D. When the government sets its policy before or simultaneously with the innovator's choice of licence fee, incentives for environmental R&D may be higher or lower than for market goods R&D.
    Keywords: R&D; environmental R&D; innovations; endogenous technological change
    JEL: H23 O30 Q55 Q58
    Date: 2011–04–18
  28. By: Fell, Harrison (Resources for the Future); Burtraw, Dallas (Resources for the Future); Morgenstern, Richard (Resources for the Future); Palmer, Karen (Resources for the Future)
    Abstract: Current and proposed greenhouse gas cap-and-trade systems allow regulated entities to offset abatement requirements by paying unregulated entities to abate. These offsets from unregulated entities are believed to contain system costs and stabilize allowance prices. However, the supply of offsets is highly uncertain and may be correlated with other sources of uncertainty in emissions trading systems. This paper presents a model that incorporates both uncertainties in the supply of offsets and in abatement costs. We numerically solve a dynamic stochastic model, with parameters relevant to the U.S. climate debate, under a variety of parameter settings, including a system that includes allowance price controls, risk aversion, and competitive offset purchasing. We find that as uncertainty in offsets and uncertainty in abatement costs become more negatively correlated, expected abatement plus offset purchase costs increase, as does the variability in allowance prices and emissions from the regulated sector. These results are amplified with risk sensitivity, larger annual offset limits, and competitive offset purchasing. Imposing an allowance price collar substantially mitigates cost increases as well as the variability in prices, while roughly maintaining expected environmental outcomes. In contrast with previous literature we find a collar may also mitigate emissions variability.
    Keywords: climate change, offsets, cap-and-trade, price collars, stochastic dynamic programming
    JEL: Q54 Q58 C61
    Date: 2011–06–09
  29. By: Reinhilde Veugelers
    Abstract: Development and deployment of clean-energy technologies is crucial if climate targets are to be met cost-effectively. The European Union already has a plan that deals with these issues: the Strategic Energy Technology Plan, which has become central to the achievement of the EU's ambitions. In a period of constrained public finances, if governments want to leverage the necessary private innovation for clean-energy technologies, they will have to provide well-designed time-consistent policies, reducing commercial and financial risk through a combination of consistent carbon pricing, regulations and public funding, which will have to give a sizable and consistent push to early-stage clean-energy technologies, with a clear exit strategy. But first and foremost, governments should establish a sufficiently high and long-term predictable carbon price. The design of the EU emissions trading system and the distribution of carbon allowances should take into account more explicitly its power to leverage innovation. A move to a 30 percent EU emissions reduction target, which would involve a tighter emissions cap and fewer allowances being auctioned, would result would result in a higher carbon price and provide greater incentives for innovation.
    Date: 2011–06
  30. By: Timilsina, Govinda R.; Csordas, Stefan; Mevel, Simon
    Abstract: A carbon tax is an efficient economic instrument to reduce emissions of carbon dioxide released from fossil fuel burning. Its impacts on production of renewable energy depend on how it is designed -- particularly in the context of the penetration of biofuels into the energy supply mix for road transportation. Using a multi-sector, multi-country computable general equilibrium model, this study shows first that a carbon tax with the entire tax revenue recycled to households through a lump-sum transfer does not stimulate biofuel production significantly, even at relatively high tax rates. This reflects the high cost of carbon dioxide abatement through biofuels substitution, relative to other energy substitution alternatives; in addition, the carbon tax will have negative economy-wide consequences that reduce total demand for all fuels. A combined carbon tax and biofuel subsidy policy, where part of the carbon tax revenue is used to finance a biofuel subsidy, would significantly stimulate market penetration of biofuels. Although the carbon tax and biofuel subsidy policy would cause higher loss in global economic output compared with the carbon tax with lump sum revenue redistribution, the incremental output loss is relatively small.
    Keywords: Climate Change Mitigation and Green House Gases,Transport Economics Policy&Planning,Taxation&Subsidies,Environment and Energy Efficiency,Energy and Environment
    Date: 2011–06–01
  31. By: Karpas, Eric (Stanford University); Kerr, Suzi (Motu Economic and Public Policy Research)
    Abstract: New Zealand is the first country to implement a Greenhouse Gas Emissions Trading Scheme (ETS) that includes a forestry component as part of its contribution to global climate mitigation and as a strategy for compliance with the international climate change agreement the Kyoto Protocol. The goal of this paper is to provide information o forestry’s role in the New Zealand ETS such that a foreign policymaker will be able to understand the intricacies and issues of the New Zealand system and be able to apply this knowledge to the design of his or her own ETS. This paper also aims to provide useful documentation of the system as it stands in 2010 for the New Zealand Parliament to use in future reviews of the system. The paper first provides a brief outline of the role of forestry in New Zealand’s ETS, including the reasons for its inclusion in the greater system and the rules by which forestry operates within the system. This paper then analyses these rules, indicating the reasons behind the inclusion of certain provisions where the reasoning may not be immediately clear. Finally, this paper provides both quantitative and qualitative data on how well the system is working so far, whether the system is operating as predicted, and why any discrepancies between predicted and actual outcomes arise.
    Keywords: Forestry; emissions trading; carbon trading; climate change; climate change mitigation; government policy; New Zealand
    JEL: Q23 Q54 Q58
    Date: 2011–06
  32. By: Wilfried Rickels
    Abstract: I investigate the optimal role of carbon sequestration for mitigation in the presence of a ceiling on atmospheric carbon concentration and consider aspects that have so far only been analyzed in the context of a damage function to measure the consequences of climate change for society. I assume extraction costs to be stock-dependent, replace the proportional decay description of the global carbon cycle by a two-box model, investigate the differences resulting from linear versus convex sequestration costs, and consider oceanic instead of geological carbon storage. Using a two-box model allows the non-renewable aspects of the global carbon cycle to be accounted for and implies that carbon emissions have to decline at the ceiling due to the ongoing saturation of the ocean with respect to anthropogenic carbon. Convex sequestration costs result in a continuous use of such a technology and allow the ceiling to be reached later than without sequestration, whereas linear sequestration costs result in a discontinuous use of such a technology and earlier reaching of the ceiling. Consequently, taking into the account the uncertainties in defining an appropriate ceiling, the policy recommendations with respect to carbon sequestration differ crucially according to the underlying assumptions of sequestration costs. Furthermore, the ocean might be a storage option for captured carbon, but even though its storage capacity is probably not scarce by itself, the ongoing saturation of the complete carbon cycle has to be taken into account
    Keywords: atmospheric ceiling, global carbon cycle, ocean sequestration
    JEL: Q30 Q54
    Date: 2011–06
  33. By: Jonah Busch (Conservation International, Arlington, VA); Ruben Lubowski (Environmental Defense Fund, Washington, DC); Fabiano Godoy (Conservation International, Arlington, VA); Marc Steininger (Conservation International, Arlington, VA); Arief Anshory Yusuf (Department of Economics, Padjadjaran University); Kemen Austin (World Resources Institute, Washington, DC); Jenny Hewson (Conservation International, Arlington, VA); Daniel Juhn (Conservation International, Arlington, VA); Muhammad Farid (Conservation International, Jakarta, Indonesia); Frederick Boltz (Conservation International, Arlington, VA)
    Abstract: We estimate the impacts that alternative national and sub-national economic incentive structures for reducing emissions from deforestation (REDD+) in Indonesia would have had on greenhouse gas emissions and national and local revenue if they had been in place from 2000-2005. The impact of carbon payments on deforestation is calibrated econometrically from the pattern of observed deforestation and spatial variation in the benefits and costs of converting land to agriculture over that time period. We estimate that at an international carbon price of $10/tCO2e, a “basic voluntary incentive structure” modeled after a traditional payment-for-ecosystem-services (PES) program would have reduced emissions nationally by 62 MtCO2e/yr, or 8% below the without-REDD+ reference scenario (95% CI: 45-76 MtCO2e/yr; 6-9%), while generating a programmatic budget shortfall. By making four policy improvements—paying for net emission reductions at the scale of an entire district rather than site-by-site, paying for reductions relative to estimated business-as-usual levels rather than historical levels, sharing a portion of district-level revenues with the national government, and sharing a portion of the national government’s responsibility for costs with districts—an “improved voluntary incentive structure” would have reduced emissions by 175 MtCO2e/yr, or 22% below the reference scenario (95% CI: 136-207 MtCO2e/yr; 17-26%), while generating a programmatic budget surplus. A “regulatory incentive structure” such as a cap-and-trade or symmetric tax-and-subsidy program would have reduced emissions by 211/yr, or 26% below the reference scenario (95% CI: 163-247 MtCO2e/yr; 20-31%), and would not have required accurate predictions of business-as-usual emissions to guarantee a programmatic budget surplus.
    Keywords: Climate change, land-use change, REDD+, reference levels, economic incentives
    JEL: Q20 Q23 Q50 Q54
    Date: 2011–06
  34. By: Thomas Murray; David Maddison; Katrin Rehdanz
    Abstract: Accounting for socioeconomic and demographic variables as well as country specific effects, households’ willingness to pay for changes in climate is revealed using European data on reported life satisfaction. Individuals located in areas with lower average levels of sunshine and higher average levels of relative humidity are less satisfied as are individuals in locations subject to significant seasonal variation in monthly mean temperatures and rain days. Ranking regions according to the preferred climates households appear strongly to favour the Mediterranean climate over the climate of Northern Europe
    Keywords: Life Satisfaction, Europe, Willingness to Pay, Climate, Climate Change
    JEL: C21 I31 Q51 Q54
    Date: 2011–04
  35. By: Carsten Helm (Department of Economics, University of Oldenburg); Franz Wirl (University of Vienna, Center of Business Studies)
    Abstract: We consider how one party can induce another party to join an inter- national emission compact given private information. Due to multilateral externalities the principal uses her own emissions besides subsidies to in- centivize the agent. This leads to a number of non-standard features: Optimal contracts can include a boundary part, which is not a copy of the no contract outcome. Compared to this, a contract can increase emis- sions of the principal for ine¢ cient types, and reduce his payo¤ for e¢ cient types. Subsidies can be constant or even decreasing and turn negative, i.e., the agent reduces emissions and pays the principal.
    Keywords: private information, multilateral externalities, mecha- nism design, restricted contracts, environmental agreements
    JEL: D82 Q54 H87
    Date: 2011–06

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.