nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒07‒13
33 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Households’ WTP for the Reliability of Gas Supply By Wan-Jung Chou; Andrea Bigano; Alistair Hunt; Stephane La Branche; Anil Markandya; Roberta Pierfederici
  2. Effect of free media on views regarding the safety of nuclear energy after the 2011 disasters in Japan: evidence using cross-country data By Yamamura, Eiji
  3. Structural versus Behavioral Remedies in the Deregulation of Electricity Markets: An Experimental Investigation Guided by Theory and Policy Concerns By Silvester Van Koten; Andreas Ortmann
  4. The Power Trading Agent Competition By Ketter, W.; Collins, J.; Reddy, P.; Flath, C.
  5. Regulatory reforms of European network industries and the courts By Knieps, Günther
  6. A Social Cost-Benefit Analysis: Comparison of Coal and Wind Alternatives in the Case of Soma-A Power Plant By Taylan Zafer Bali; Bahar Celikkol Erbas; Zafer Akin; Gulsum Akarsu
  7. The roles and potentials of renewable energy in less-developed economies By Nepal, Rabindra
  8. Estimating end-use demand: A Bayesian approach. By Bauwens, Luc; Fiebig, Denzil G.; Steel, Mark F.J.
  9. Free lunch in the oil market: a note on Long Memory By Sylvain Prado
  10. A Repayment Model of House Prices Oil Price Dynamics in a Real Business Cycle Model By Vipin Arora; Pedro Gomis-Porqueras
  11. Asset Arbitrage and the Price of Oil By Vipin Arora; Rod Tyers
  12. The Dynamics of Energy-Grain Prices with Open Interest By Hammoudeh, S.M.; Sarafrazi, S.; Chang, C-L.; McAleer, M.J.
  13. Enhancing Web-Spatial DSS interactivity with parallel computing: The case of bio-energy economic assessment in Greece By Dimitris Kremmydas; M.I. Haque; Stelios Rozakis
  14. Ethanol Expansion and Indirect Land Use Change in Brazil By Joaquim Bento de Souza Ferreira Filho; Mark Horridge
  15. Charging the polluters: A pricing model for road and railway noise By Andersson, Henrik; Ögren, Mikael
  16. Can sustainable transport policies cause companies to adopt responsible behaviour ? The case of the textile and clothing industry. By Valentina Carbone; Thomas Zéroual; Corinne Blanquart
  17. Implications of rising energy and transportation costs for future urban development: Inner city trends in Hamburg By Otto, Alkis Henri
  18. The Technology Diffusion and the Green Growth By Grégoire Garsous
  19. Innovation of Energy Technologies: the role of taxes By Copenhagen Economics
  20. Environmental impact of technology policy: R&D Subsidies versus R&D cooperation. By Petrakis, Emmanuel; Poyago-Theotoky, Joanna
  21. Using Geographically Referenced Data on Environmental Exposures for Public Health Research: A Feasibility Study Based on the German Socio-Economic Panel Study (SOEP) By Sven Voigtländer; Jan Goebel; Thomas Claßen; Michael Wurm; Ursula Berger; Achim Strunk; Hendrik Elbern
  22. Comparative analysis of the existing and proposed ETS By Svetlana Maslyuk; Dinusha Dharmaratna
  23. Intertemporal Links in Cap-and Trade Schemes By Aurelie Slechten
  24. Tax Treatment of ETS Allowances: Options for Improving Transparency and Efficiency By Copenhagen Economics
  25. Taxe carbone globale, effet taille de marché et mobilité des fiÂ…rmes By Stéphane RIOU; Carl GAIGNE; Nelly EXBRAYAT
  26. Lightning, IT diffusion and economic growth across US states By Andersen, Thomas Barnebeck; Bentzen, Jeanet; Dalgaard, Carl-Johan; Selaya, Pablo
  27. Largest Consistent Set in International Environmental Agreements By Giovanni Villani; Marta Biancardi
  28. Coopetitive games and global green economy By Carfì, David; Schilirò, Daniele
  29. Coopetitive games and sustainability in project financing By Carfì, David; Patané, Giusy; Pellegrino, Samantha
  30. An international agreement with full participation to tackle the stock of greenhouse gases By Kratzsch, Uwe; Sieg, Gernot; Stegemann, Ulrike
  31. Implications of a lowered damage trajectory for mitigation in a continuous-time stochastic model By Strand, Jon
  32. International Climate Finance and its Influence on Fairness and Policy By Karen Pittel; Dirk Rübbelke
  33. Unilateral climate policy and competitiveness: The implications of differential emission pricing By Christoph Bšhringer; Victoria Alexeeva-Talebi

  1. By: Wan-Jung Chou; Andrea Bigano; Alistair Hunt; Stephane La Branche; Anil Markandya; Roberta Pierfederici
    Abstract: The security of natural gas supply is an important issue for all EU countries due to the region’s heavy dependence on imported supply sources and in light of energy demand for gas that is continuously increasing. Discussions have emphasised strategies for securing the supply at the macro level, e.g. diversification in supply sources, increase in storage capacity, etc. By contrast, consumers’ demand for the reliability of gas supply is rarely investigated. Hence this study was conducted to examine the economic implications associated with the security of gas supply directly to domestic consumers. Based on the choice experiment approach, household surveys were conducted in France, Italy and the UK. The results confirmed that the degree of the economic impact of a disruption of gas supply to domestic consumers was a function of the duration of a supply disruption and the season in which a supply cut would take place, as well as other preferences of consumers. The willingness to pay to secure per unit of gas consumption, or alternatively the costs of gas unsupplied, was estimated at between €2.65/cubic metre and €41.48/cubic metre across three different European countries.
    Keywords: Energy security; gas supply; households; willingness to pay; choice experiment; EU
    Date: 2011–07
  2. By: Yamamura, Eiji
    Abstract: Using cross-country data, this paper investigates how governance influenced views regarding the security of nuclear energy after the 2011 disasters in Japan. Key findings are: (1) citizens are less likely to agree that nuclear power plants are properly secured against accidents with the presence of a free media and higher levels of freedom of expression; and (2) freedom of expression and free media are positively associated with the presence of nuclear plants. These findings indicate that sufficient information leads citizens to both understand the risk of nuclear energy and to accept the existence of nuclear plants.
    Keywords: Natural disaster; Nuclear energy; Governance; Information asymmetry.
    JEL: H19 D73 D82 Q54
    Date: 2011–06–28
  3. By: Silvester Van Koten; Andreas Ortmann
    Abstract: We try to better understand the comparative advantages of structural and behavioral remedies of deregulation in electricity markets, an eminent policy issue for which the experimental evidence is scant and problematic. Specifically, we investigate theoretically and experimentally the effects on competition of introducing a forward market — considered a behavioral remedy by the European Commission. We compare this scenario with the best alternative, the structural remedy of reducing concentration by adding one more competitor by divestiture. Our study contributes to the literature by introducing more realistic cost configurations, by teasing apart competition effect and asset effect, and by investigating competitor numbers that reflect the market concentration in the European electricity industries. Our experimental data suggest that introducing a forward market has a positive effect on the aggregate supply in markets with two or three major competitors, configurations typical for the newly accessed and the old European Union member states, respectively. Introducing a forward market also increases efficiency. In contrast to previous findings, our data furthermore suggest that the effect of introducing a forward market is stronger than adding one more competitor both in markets with two, and particularly three, producers. Our data thus provides evidence that behavioral remedies may be more effective than structural remedies. Our data suggest that competition authorities are well advised, in line with EU law (European Commission, 2006a, p.11), to focus on introducing, and facilitating the proper functioning of, forward markets rather than on lowering market concentration by divestiture.
    Keywords: economics experiments; market power; competition; forward markets; EU electricity market;
    JEL: C91 D61 L13 L43 L94 Q48
    Date: 2011–04
  4. By: Ketter, W.; Collins, J.; Reddy, P.; Flath, C.
    Abstract: This is the specification for the Power Trading Agent Competition for 2011 (Power TAC 2011). Agents are simulations of electrical power brokers, who must compete with each other for both power production and consumption, and manage their portfolios.
    Keywords: autonomous agents;electronic commerce;energy;preferences;portfolio management;power;policy guidance;sustainability;trading agent competition
    Date: 2011–05–10
  5. By: Knieps, Günther
    Abstract: Regulatory reforms in European network industries are strongly influenced by legal decisions. The cases considered in this paper not only initiated the liberali-zation process of the markets for network services but also provided an impor-tant signaling function for the remaining regulatory problems: localization of network-specific market power, abolishment of grandfathering rights, ex ante regulation of network-specific market power instead of negotiated unregulated network access, incentive regulation instead of cost-based regulation. The process towards sector-symmetric market power regulation based on economi-cally founded principles gains increasing relevance. Nevertheless, there are fur-ther reform potentials to be exhausted in the future. --
    Date: 2010
  6. By: Taylan Zafer Bali; Bahar Celikkol Erbas; Zafer Akin; Gulsum Akarsu
    Date: 2011–07
  7. By: Nepal, Rabindra
    Abstract: Increasing the renewable energy share in national energy mix remains one of the major energy policy goals across many economies. This paper assesses the roles and potentials of renewable energy sources in less-developed economies while citing Nepal as an example. Renewable energy has a significant role to play in the electrification of rural areas in developing economies and contribute towards sustainable development. Realizing full potentials of renewable, however, requires addressing both the associated demand-side and supply–side constraints. Innovative subsidies and tax incentives, adequate entrepreneurial support, strengthening institutional arrangement and promoting local community-based organizations such as the cooperatives are the necessary factors in promoting the green technologies in countries like Nepal. International factors such as large scale investment and adequate technology transfer are equally crucial to create a rapid spread and increase affordability of decentralised renewable energy technologies in less-developed economies.
    Keywords: renewable; electrification; research and development
    JEL: Q42 Q01 O33
    Date: 2011–06–28
  8. By: Bauwens, Luc; Fiebig, Denzil G.; Steel, Mark F.J.
    Abstract: Eliminating negative end-use or appliance consumption estimates and incorporating direct metering information into the process of generating these estimates; these are two important aspects, of conditional demand analysis (CDA) that will be the focus of this raper. In both cases a Bayesian approach seems a natural way of proceeding. What needs to be investigated is whether it is also a viable and effective approach. In addition, such a framework naturally lends itself to prediction. Our application involves the estimation of electrical appliance consumptions for a sample of Australian households. This application is designed to illustrate the viability of a full Bayesian analysis of the problem.
    Keywords: End-use demand; Direct metering; Non-negative estimates; Bayesian conditional demand analysis;
  9. By: Sylvain Prado
    Abstract: In the crude oil market the phenomenon of Long Memory can be easily identified with the help of the simple (but effective) methodology of Katsumi Shimotsu. The Exact Local Whittle estimator and two testing strategies provide a strong assessment of the phenomenon. We present evidences and we suggest a profit opportunity. Furthermore, the existence of Long Memory discloses an ine¢ cient oil market.
    Keywords: oil market, long memory, ARFIMA-FIGARCH
    JEL: C22 F47
    Date: 2011
  10. By: Vipin Arora; Pedro Gomis-Porqueras
    Abstract: We show the importance of endogenous oil prices and production in the real business cycle framework. Endogenising these variables improves the model's predictions of business cycle statistics, oil related and non-oil related, relative to a situation where either is exogenous. This result is robust to the standard extensions (variable capacity utilisation and monopolistic competition) used in the literature. In particular, we first show that with either exogenous oil prices or production the standard real business cycle model and variants cannot match the oil-related and business cycle facts. In contrast, when both of these variables are endogenous, we can substantially improve the corresponding co-movements and slightly improve standard business cycle properties for consumption and investment.
    Keywords: Oil price, two regions, variable capacity utilization
    JEL: E37 F47 Q43
    Date: 2011–06
  11. By: Vipin Arora; Rod Tyers
    Abstract: It is commonly understood that macroeconomic shocks influence commodity prices and that one channel for this is the link between interest rates, expected future asset returns and stockholding. In this paper the link is extended to the petroleum market with the recognition that recorded stocks of oil comprise a small share of annual demand and that the parallel with storable commodities is the decision to produce the oil in the first place, as opposed to holding it in the ground as reserve. Oil reserves are then a key asset in producing countries, which is arbitraged against financial assets. Thus, when the yield on financial assets falls, retaining oil reserves becomes more attractive to producing countries, which then have less incentive to accommodate demand rises, and so the oil price rises. This perspective on oil pricing is modeled in a dynamic multi-region general equilibrium framework in which regional households manage portfolios of assets that include oil reserves. When the model is calibrated to match observed data over two decades, simulation results indicate that asset arbitrage made a large contribution to the high pre-GFC oil price.
    JEL: E37 F47 Q43
    Date: 2011–07
  12. By: Hammoudeh, S.M.; Sarafrazi, S.; Chang, C-L.; McAleer, M.J.
    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.
    Date: 2011–05–31
  13. By: Dimitris Kremmydas (Agricultural Economics and Rural Development Department, Agricultural University of Athens); M.I. Haque (Agricultural Economics and Rural Development Department, Agricultural University of Athens); Stelios Rozakis (Agricultural Economics and Rural Development Department, Agricultural University of Athens)
    Abstract: A web based Spatial Decision Support System (web SDSS) has been implemented in Thessaly, the most significant arable cropping region in Greece, in order to evaluate selected energy crop supply. The web SDSS uses an optimization module to support the decision process, incorporating user input from the web user interface then launching mathematical programming profit maximizing farm models. Energy to biomass raw material cost is provided in supply curve form incorporating physical land suitability for crops, farm structure and Common Agricultural Policy (CAP) scenarios. In order to generate biomass supply curves the optimization problem is parametrically solved for a number of steps within a price range determined by the user. The more advanced technique used to solve the MP model, the higher the delay of response to the user. We are examining how effectively we can reduce the web SDSS response time to the user requests using parallel solving of the corresponding optimization problem. The results are encouraging, as the total solution time drops significantly as the problem’s size is increased, improving the users’ experience.
    Keywords: Web Spatial Decision Support System, Parallel Computing, Mathematical Programming, Energy Crop Supply
    JEL: C61 C88 Q11
    Date: 2011
  14. By: Joaquim Bento de Souza Ferreira Filho; Mark Horridge
    Abstract: In this paper we analyze the Indirect Land Use Change (ILUC) effects of ethanol production expansion in Brazil through the use of an inter-regional, bottom-up, dynamic general equilibrium model calibrated with the 2005 Brazilian I-O table. A new methodology to deal with ILUC effects is developed, using a transition matrix of land uses calibrated with Agricultural Censuses data. Agriculture and land use are modeled separately in each of 15 Brazilian regions with different agricultural mix. This regional detail captures a good deal of the differences in soil, climate and history that cause particular land to be used for particular purposes. Brazilian land area data distinguish three broad types of agricultural land use, Crop, Pasture, and Plantation Forestry. Between one year and the next the model allows land to move between those categories, or for Unused land to convert to one of these three, driven initially by the transition matrix, changing land supply for agriculture between years. The transition matrix shows Markov probabilities that a particular hectare of land used in one year for some use would be in an other use next period. These probabilities are modified endogenously in the model according to the average unit rentals of each land type in each region. A simulation with ethanol expansion scenario is performed for year 2020, in which land supply is allowed to increase only in states located in the agricultural frontier. Results show that the ILUC effects of ethanol expansion are of the order of 0.14 hectare of new land coming from previously unused land for each new hectare of sugar cane. This value is higher than values found in the Brazilian literature. ILUC effects for pastures are around 0.47. Finally, regional differences in sugarcane productivity are found to be important elements in ILUC effects of sugar cane expansion.
    Keywords: CGE, ethanol, biofuels, land use, Brazil
    JEL: C68 D58 E47 Q15 Q16
    Date: 2011–06
  15. By: Andersson, Henrik (Toulouse School of Economics (UT1, CNRS, LERNA)); Ögren, Mikael (VTI)
    Abstract: This study outlines a method to estimate the short run marginal cost (SRMC) for road and railway noise. It is based on standardized calculation methods for total noise levels and monetary cost estimates from well established evaluation methods. Here official calculation methods and monetary values are used for Sweden, but the estimation method for the SRMC outlined can be directly applied using other standardized noise calculation methods and monetary values. This implies that the current knowledge regarding the calculation of total noise levels and the evaluation of the social cost of noise can be extended to estimate the marginal effect as well. This is an important finding since it enables policy makers to price noise externalities in an appropriate way. Several sensitivity tests run for the SRMC show that: (i) increasing the total traffic on the infrastructure has only a minor influence, (ii) estimates are quite sensitive to the number of exposed individuals, and (iii) to the monetary values used. Hence, benefits transfer, i.e. using monetary values elicited based on road noise for railway noise, should be done with caution or not at all. Results also show that the use of quiet technology can have a significant effect on the SRMC. The fact that this model is able to differentiate not only modes of transport, but also vehicles and even technologies is an important finding. It is essential that the noise charges give the operators the right incentives to choose their optimal allocation.
    Keywords: Externalities; Marginal cost; Noise; Railway; Road
    JEL: D62 Q51 R41
    Date: 2010–12–21
  16. By: Valentina Carbone (SPLOT - Unité de recherche SPLOT- Systèmes Productifs, Logistique et Organisation des Transports - INRETS); Thomas Zéroual (CLERSE - Centre lillois d'études et de recherches sociologiques et économiques - CNRS : UMR8019 - Université des Sciences et Technologies de Lille - Lille I, SPLOTT - Systèmes productifs, logistique, organisation des transports et travail - INRETS - Université Paris-Est); Corinne Blanquart (SPLOTT - Systèmes productifs, logistique, organisation des transports et travail - INRETS - Université Paris-Est)
    Abstract: Faced with the growing criticism of the externalities of transport, and freight in particular, transport policies have gradually set sustainable development targets. Although the objectives have evolved, the levers for bringing about change have remained the same: mainly the infrastructures made available and the charges for using them. The mid-term review of the 2001 European Commission White Paper recognises that these options have had limited success and that the problem of imbalance between modes of transport remains unchanged. This review advocates using a broader and more flexible set of tools for action. In our view, the problem of public policy options for transport is two-fold: * they are constructed on the basis of a particular idea of sustainable transport and consequently they hinge on a single objective: modal shift * they obscure the variety of determining factors in the choice of transport for companies and in doing so only emphasise a few levers for action The aim of this paper is to draw attention to the diversity of representations of sustainable transport for companies, but also the multiplicity of factors that might promote a more sustainable orientation in the choice of transport (1). We employ régulation theory to shed light on this diversity and to highlight companies' resistance and motivation toward the implementation of sustainable strategies in the area of transport (2). Finally, we illustrate our demonstration using the example of the textile and clothing industry (3).
    Keywords: logistique ; stratégies des firmes ; théorie de la régulation
    Date: 2010
  17. By: Otto, Alkis Henri
    Abstract: The focus of this study is on the consequences of rising energy costs and demographical change in the city of Hamburg. In section 2 we present a class of models that help to understand and explain patterns of urban land use. Section 3 then discusses urban land use and the population structure of Hamburg. Section 4 addresses some future economic and demographic trends and relates them to rising energy costs. Section 5 finally highlights some conclusion drawn from the analysis. --
    Date: 2010
  18. By: Grégoire Garsous
    Abstract: This paper offers a comprehensive analytical framework about how technology dffusion mechanisms among countries influence climate change mitigation. Assuming that developed countries take the first step in greening their technologies, it is far from obvious that green technologies would spread from developed countries to developing countries. The main reason is that clean technologies in the developed world take time to become as productive as dirty technologies. As a result, during this catching-up period, developing countries keeps imitating the best available technology, namely the dirty one.
    Date: 2011–06
  19. By: Copenhagen Economics
    Abstract: The study deals with the links between energy taxation and innovation and presents also new empirical evidence on the impact of energy taxes on patenting activities related to energy technologies. The study suggests that while taxation is a very effective driver of innovation, it can be usefully complemented with other public policy tools, such as public research grants and other technology policies.
    Keywords: European Union, taxation, innovation, environment
    JEL: H24 H25 L29
    Date: 2011–02
  20. By: Petrakis, Emmanuel; Poyago-Theotoky, Joanna
    Abstract: In this paper we study a neglected aspect ofteclmology policy, namely the adverse impact it might have on the envirol1Il1ent through increased production when R&D expenditure leads to cost reduction. Although teclmology policy measures that encourage finns to reduce their production costs would usually reduce energy inputs and therefore generate less pollution per unit of output production, we explore here the case where with reorganisation of production output gene rally increases. So even if per unit of production pollution is less, total pollution generated by the increased production induced by the innovative efforts of films increases. In this context it is therefore necessary to address the issue of tying-in teclmology and environmental policy, which is the issue we raise in this paper. We show that, irrespective of whether teclmology policy takes the fonn of R&D subsidies or R&D cooperation, R&D would gene rally lead to increased pollution and thus have a negative impact on the environment. Policies that might be optimal in the absence of concem for the enviroJUllent ceas e to be so. We claim that not only is a comparison between policy instruments more delicate but the optimal R&D subsidy might be negative. FinalIy, we propose and evaluate a speeific poliey in the form of a targeted subsidy tied-in to abatement activities and show that it is welfare improving.
    Keywords: Technology policy; Process innovation; Pollution; R&D cooperation; R&D subsides;
  21. By: Sven Voigtländer; Jan Goebel; Thomas Claßen; Michael Wurm; Ursula Berger; Achim Strunk; Hendrik Elbern
    Abstract: Background: In panel datasets information on environmental exposures is scarce. Thus, our goal was to probe the use of area-wide geographically referenced data for air pollution from an external data source in the analysis of physical health. Methods: The study population comprised SOEP respondents in 2004 merged with exposures for NO2, PM10 and O3 based on a multi-year reanalysis of the EURopean Air pollution Dispersion-Inverse Model (EURAD-IM). Apart from bivariate analyses with subjective air pollution we estimated cross-sectional multilevel regression models for physical health as assessed by the SF-12. Results: The variation of average exposure to NO2, PM10 and O3 was small with the interquartile range being less than 10µg/m3 for all pollutants. There was no correlation between subjective air pollution and average exposure to PM10 and O3, while there was a very small positive correlation between the first and NO2. Inclusion of objective air pollution in regression models did not improve the model fit. Conclusions: It is feasible to merge environmental exposures to a nationally representative panel study like the SOEP. However, in our study the spatial resolution of the specific air pollutants has been too little, yet.
    Keywords: SOEP, Geographically Referenced Data, Feasibility Study, Air Pollution, EURAD-IM, Physical Health
    Date: 2011
  22. By: Svetlana Maslyuk; Dinusha Dharmaratna
    Abstract: Emissions trading schemes (ETS) have been operational to control greenhouse gas emissions in European Union since 2005. Under the EU ETS, the governments of the Member States agree on national emission caps, allocate allowances to industrial operators, track and validate the actual emissions and retire allowances at the end of each year. ETS have been proposed to be introduced in New Zealand, Australia, Japan, US, Canada, Korea, India and two Chinese provinces in the near future. The main idea of the ETS is to create the market for pollution which will provide economic agents with incentives to reduce their emissions ( Stavins, et al., 2003). The design of ETS plays an important role in reducing greenhouse gas emissions and promoting environmental and economic sustainability. There are several designs of ETS including cap-and-trade, baseline-and-credit and hybrid, however, cap-and-trade scheme is the most popular among the proposed ETS. The purpose of this paper is to perform a comprehensive review of the existing and the proposed ETS focusing on design issues. Findings of this research will be useful for countries with existing and proposed ETS and for countries intending to adopt ETS in the future.
    Keywords: Emission Trading Scheme (ETS), Sustainability, Cap-and-trade, Baseline-and-credit, Hybrid
    JEL: Q54 Q58
    Date: 2011–06
  23. By: Aurelie Slechten
    Abstract: I study the effects of intertemporal emission permits trading in a cap-and-trade scheme when firms' abatement investments have long-term effects. In a two-period general equilibrium model, firms make trading and investment decisions in each period to meet their caps. I compare equilibrium abatement levels and permit prices, with and without intertemporal trading. Intertemporal trading may reduce total abatement investments over the scheme. Without intertemporal trading, some investments in period 1 are entirely driven by second-period abatement needs; in this case, intertemporal trading may reduce investments in period 1 as some are substituted by intertemporal permit trading. Descriptive evidence from the EU Emissions Trading System (ETS) illustrates this potential effect. I also show that if the number of permits issued by the regulator is not equal to the socially optimal level of emissions, then banning intertemporal trading may reduce the social cost thanks to the long-term properties of investments.
    Keywords: cap-and-trade schemes; emission trading; abatements; investment; banking; borrowing
    JEL: Q50 Q58 D92
    Date: 2011–06
  24. By: Copenhagen Economics
    Abstract: The study examines current national practices with respect to emissions allowances in the EU and the countries with similar cap-and-trade systems. It analyses potential distortions resulting from national practices and identifies the best solutions. It deals with issues such as the tax treatment of allowances allocated for free, that of allowances originated as Clean Development Mechanism or Joint Implementation, and the tax treatment of penalties for non-compliance. It also examines the feasibility of various policy solutions at EU level.
    Keywords: European Union, taxation, environmental tax, ETS
    JEL: H24 H25
    Date: 2010–11
  25. By: Stéphane RIOU; Carl GAIGNE; Nelly EXBRAYAT (Centre d'Etudes et de Recherches sur le Développement International)
    Abstract: Nous analysons l'impact et les déterminants d'une taxe carbone globale dans une économie imparfaitement intégrée composée de pays de différente taille. A l'aide d'un modèle de commerce et de localisation, nous montrons tout d'abord que la concentration de firmes dans le pays disposant d'un avantage de taille de marché accroît les émissions totales de CO2. L'intro- duction d'une taxe carbone globale conduit alors à des délocalisations de fiÂ…rmes du grand pays vers le petit pays de sorte que même Â…fixée à un taux unique, une Â…fiscalité carbone ne serait pas neutre du point de vue de la géographie économique. Enfin, parce qu'elles conduisent à une réduction des émissions mondiales de CO2, ces relocalisations améliorent l'efficacité environnementale de la taxe carbone.
    Keywords: Taxe carbone globale, economie geographique
    JEL: Q28 F18 F15 F12
    Date: 2011
  26. By: Andersen, Thomas Barnebeck (Department of Business and Economics); Bentzen, Jeanet (Department of Economics); Dalgaard, Carl-Johan (Department of Economics); Selaya, Pablo (Department of Economics)
    Abstract: Empirically, a higher frequency of lightning strikes is associated with slower growth in labor productivity across the 48 contiguous US states after 1990; before 1990 there is no correlation between growth and lightning. Other climate variables (e.g., temperature, rainfall and tornadoes) do not conform to this pattern. A viable explanation is that lightning influences IT diffusion. By causing voltage spikes and dips, a higher frequency of ground strikes leads to damaged digital equipment and thus higher IT user costs. Accordingly, the flash density (strikes per square km per year) should adversely affect the speed of IT diffusion. We find that lightning indeed seems to have slowed IT diffusion, conditional on standard controls. Hence, an increasing macroeconomic sensitivity to lightning may be due to the increasing importance of digital technologies for the growth process.
    Keywords: Climate; IT diffusion; economic growth
    JEL: O33 O51 Q54
    Date: 2010–11–01
  27. By: Giovanni Villani; Marta Biancardi
    Abstract: In this paper we study the formation and the stability of International Environmental Agreements (IEAs) in a pollution abatement model with a quadratic cost function. Countries play a two-stage game: in the first stage each country decides to join or not the coalition while, in the -second stage, the quantity of pollution abatement is chosen. To analyze the stability of coalition structures in a multiple coalition game, we use the notion of the Largest Consistent Set (LCS) which allows players to be farsighted.In an abstract context, Chwe (1994) developed the concept of farsighted stability: an outcome is stable and it is in the LCS if and only if deviations from it or potential further deviations are not unanimously preferred to the original outcome by the coalition considering the deviations. Applying this notion of stability in the IEA context we assume that, when a country or a sub-coalition contemplate exiting or joining an agreement, it takes into account the reactions of other countries ignited by its own actions. We identify what would be the resulting stable structures and the LCS, examining the indicator of countries’ environmental awareness proposed by the model. A particular analysis is proposed about the Grand Coalition. Moreover, we present a handy Maple algorithm to compare the cost functions and to determine direct dominance.
    Keywords: IEA; Farsightedness; Implementation.
    JEL: F50 C60
    Date: 2011–04
  28. By: Carfì, David; Schilirò, Daniele
    Abstract: The paper aims at providing a Game Theory model of coopetition which addresses the problem of the global Green Economy. The Green Economy is a theoretical model of sustainable development. This sustainable development model should lead to reduce emissions of greenhouse gases, determine the reduction of global pollution and the establishment of a sustainable and lasting global Green Economy, using mainly renewable resources. The paper applies the notion of coopetition, originally devised at microeconomic level, at a country level. The country has to decide whether it wants to collaborate with the rest of the world in getting an efficient Green Economy, even if the country is competing in the global scenario. The model provides a win-win solution, that shows the convenience for each country to participate actively to a program of sustainability and efficient resource allocation within a coopetitive framework.
    Keywords: coopetition; game theory; differentiable Pareto analysis; natural resources; green economy; macroeconomic and global interaction.
    JEL: Q50 B21 C78 C71 C7 F19 C72
    Date: 2011–07
  29. By: Carfì, David; Patané, Giusy; Pellegrino, Samantha
    Abstract: The paper provides a Game Theory model of coopetition which addresses the Project Financing problem of supporting the production of energy via sustainable renewable sources. In our analysis we consider two banks that may decide to invest in renewable and non-renewable energy sources. Several solutions of our coopetitive game are considered and determined explicitly.
    Keywords: Sustainability; coopetition; Differentiable Pareto Analysis; Project Financing
    JEL: G2 C71 C7 C72 G21
    Date: 2011
  30. By: Kratzsch, Uwe; Sieg, Gernot; Stegemann, Ulrike
    Abstract: This paper analyzes greenhouse gas emissions that build up an atmospheric stock which depreciates over time. Weakly renegotiation-proof and subgame perfect equilibria in a game of international emission reduction exist if countries put a sufficiently high weight on future payoffs, even though there is a discontinuity in the required discount factor due to the integrity of the number of punishing countries. Treaties are easier to reach if the gas depreciates slowly.
    Keywords: global warming; international agreement; weak renegotiation-proofness
    JEL: H41 F53 Q54
    Date: 2011–07–02
  31. By: Strand, Jon
    Abstract: This paper provides counterexamples to the idea that mitigation of greenhouse gases causing climate change, and adaptation to climate change, are always and everywhere substitutes. The author considers optimal policy for mitigating greenhouse gas emissions when climate damages follow a geometric Brownian motion process with positive drift, and the trajectory for damages can be down-shifted by adaptive activities, focusing on two main cases: 1) damages are reduced proportionately by adaptation for any given climate impact ("reactive adaptation"); and 2) the growth path for climate damages is down-shifted ("anticipatory adaptation"). In this model mitigation is a lumpy one-off decision. Policy to reduce damages for given emissions is continuous in case 1, but may be lumpy in case 2, and reduces both expectation and variance of damages. Lower expected damages promote mitigation, and reduced variance discourages it (as the option value of waiting is reduced). In case 1, the last effect may dominate. Mitigation then increases when damages are dampened: mitigation and adaptation are complements. In case 2, mitigation and adaptation are always substitutes.
    Keywords: Climate Change Economics,Adaptation to Climate Change,Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Policy and Regulation
    Date: 2011–06–01
  32. By: Karen Pittel; Dirk Rübbelke
    Abstract: Besides costs and benefits, fairness aspects tend to influence negotiating parties’ willingness to join an international agreement on climate change mitigation. Fairness is largely considered to improve the prospects of success of international negotiations and hence measures raising fairness perception might – in turn – help to bring about effective cooperative international climate change mitigation. We consider the influences present international support of climate policy in developing countries exerts on fairness perception and how this again might affect international negotiations. In doing so, we distinguish between fairness perception which is based on historical experiences and perception which is based on conjectures about opponents’ intentions. By identifying beneficial components of current support schemes, lessons can be learnt for designing new schemes like the Green Climate Fund.
    Keywords: adaptation, chicken game, climate policy, fairness, international agreement mitigation, reciprocity, transfers
    Date: 2011–06
  33. By: Christoph Bšhringer (Department of Economics, University of Oldenburg); Victoria Alexeeva-Talebi (Centre for European Economic Research, Mannheim)
    Abstract: Unilateral emission reduction commitments raise concerns on international competitiveness and emission leakage that result in preferential regulatory treatment of domestic energy-intensive and trade-exposed industries. Our analysis illustrates the potential pitfalls of climate policy design which narrowly focuses on competitiveness concerns about energy-intensive and trade-exposed (EITE) branches. The sector-specific gains of preferential regulation in favour of these branches must be traded off against the additional burden imposed on other industries. Beyond burden shifting between industries, differential emission pricing bears the risk for substantial excess cost in emission reduction as policy concedes (too) low carbon prices to EITE industries and thereby foregoes relatively cheap abatement options in these sectors. From the perspective of global cost-effectiveness we find that differential emission pricing of EITE industries hardly reduces emission leakage since the latter is driven through robust international energy market responses to emission constraints. As a consequence the scope for efficiency compared to uniform pricing is very limited. Only towards stringent emission reduction targets will a moderate price differentiation achieve sufficient gains from leakage reduction to offset the losses of diverging marginal abatement cost.
    Keywords: unilateral climate policy design, leakage, competitiveness
    JEL: D58 H21 H22 Q48
    Date: 2011–06

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