nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒07‒21
nineteen papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Understanding the Determinants of Electricity Prices and the Impact of the German Nuclear Moratorium in 2011 By Thoenes, Stefan
  2. A theoretical model of collusion and regulation in an electricity spot market By Escobari, Diego
  3. The Distribution of Energy-Intensive Sectors in the US By Michielsen, T.O.
  4. Taking the LEED? Analyzing Spatial Variations in Market Penetration Rates of Eco-Labeled Properties By Franz Fuerst; Constantine Kontokosta; Pat McAllister
  5. Civil Unrest in North Africa – Risks for Natural Gas Supply? By Lochner, Stefan; Dieckhoener, Caroline
  6. Market Structure Scenarios in International Steam Coal Trade By Trueby, Johannes; Paulus, Moritz
  7. Nations as Strategic Players in Global Commodity Markets: Evidence from World Coal Trade By Paulus, Moritz; Trueby, Johannes; Growitsch, Christian
  8. Deterring and Compensating Oil Spill Catastrophes: The Need for Strict and Two-Tier Liability By Viscusi, W. Kip; Zeckhauser, Richard J.
  9. La eficiencia energética en la industria manufacturera Colombiana:Una estimación con DEA y Datos de Panel By Clara Inés Pardo Martinez - Alexander Cotte Poveda
  10. Will Natural Gas Prices Decouple from Oil Prices across the Pond? By Reinout De Bock; Jose G Gijon
  11. The role of ethanol in the brazilian economy: three decades of progress By Costa, Cinthia Cabral da; Cunha, Marcelo Pereira da; Guilhoto, Joaquim José Martins
  12. A New Index of Environmental Quality By Elettra Agliardi; Mehmet Pinar; Thanasis Stengos
  13. Resources and Technologies By Alberto Quadrio Curzio; Fausta Pellizzari; Roberto Zoboli
  14. Brown Backstops versus the Green Paradox By Michielsen, T.O.
  15. Growth and Pollution Convergence: Theory and Evidence By C. Ordás Criado; S. Valente; T. Stengos
  16. Taxe carbone globale, effet taille de marché et mobilité des fi…rmes By Nelly Exbrayat; Carl Gaigne; Stéphane Riou
  17. The Natalist Bias of Pollution Control By David de la Croix; Axel Gosseries
  18. Exploring the Nature of Strategic Interactions in the Ratification Process of the Kyoto Protocol By Alexandre Sauquet
  19. Border Carbon Adjustments and the Potential for Protectionism By Peter Holmes; Tom Reilly; Jim Rollo

  1. By: Thoenes, Stefan (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: This paper shows how the effect of fuel prices varies with the level of electricity demand. It analyzes the relationship between daily prices of electricity, natural gas and carbon emission allowances with a vector error correction model and a semiparametric varying smooth coef- ficient model. <p>The results indicate that the electricity price adapts to fuel price changes in a long-term cointegration relationship. Different electricity generation technologies have distinct fuel price dependencies, which allows estimating the structure of the power plant portfolio by exploiting market prices. <p>The semiparametric model indicates a technology switch from coal to gas at roughly 85% of maximum demand. It is used to analyze the market impact of the nuclear moratorium by the German Government in March 2011. Futures prices show that the market efficiently accounts for the suspended capacity and expects that several nuclear plants will not be switched on after the moratorium.
    Keywords: Electricity Market; Merit Order; Cointegration; Varying Coefficient; Nuclear Moratorium
    JEL: G14 L94 Q41 Q48
    Date: 2011–07–07
  2. By: Escobari, Diego
    Abstract: This paper presents a theoretical model of collusion and regulation in a wholesale electricity spot market. Given a demand for electricity, competing generators report their marginal costs. Then, only generators with the lowest marginal costs are selected to sell at a price equal to the marginal costs of the last generator selected to sell. The results show that under a fixed price level it is a weakly dominant strategy to truthfully report the marginal cost. Variable (or endogenous) prices create the possibility of profitable collusion among generators. With uncertainty in the marginal costs and risk neutrality, the results show that a necessary condition for collusion to be sustainable is that the marginal cost reported by the pivot (marginal generator) should be higher than the average of the true marginal costs of all the generators. The existence of collusion fines and audit probabilities were found to be effective in deterring collusion. It is also shown that more efficient generators have less incentive to collude.
    Keywords: Electricity; Regulation; Collusion.
    JEL: K20 L43 D43
    Date: 2011–01
  3. By: Michielsen, T.O. (Tilburg University, Center for Economic Research)
    Abstract: We study the in uence of energy endowments on the location of energy-intensive industries. We use data on manufacturing sectors in 50 US states from 2002 until 2008, with detailed information on state endowments of coal, natural gas, oil and hydropower and sectoral fuel and electricity intensities. The effect of energy on industry location is statistically and economically significant. A one standard deviation increase in energy en- dowments per capita increases the activity of energy-intensive industries by about 20%.
    Keywords: industry location;factor endowments;energy;Heckscher-Ohlin model
    JEL: F10 R12
    Date: 2011
  4. By: Franz Fuerst (School of Real Estate & Planning, Henley Business School, University of Reading); Constantine Kontokosta (New York University); Pat McAllister (School of Real Estate & Planning, Henley Business School, University of Reading)
    Abstract: This paper investigates the impact of policies to promote the adoption of LEED-certified buildings across CBSA in the United States. Drawing upon a unique database that combines data from a large number of sources and using a number of regression procedures, the determinants of the proportion LEED-certified  space for more than 170 CBSA in the US is modeled.  LEED-certified space still accounts for a relatively small proportion of commercial stock in all markets.  The average proportion is less than 1%.  There is no conclusive evidence of a positive impact of policy intervention on the levels of LEED-certified space. However, after accounting for bias introduced by non-random assignment of policies, we find preliminary evidence of a positive impact of city-level green building incentives. There is a significant positive association between market size and indicators of economic vitality on proportions of LEED-certified space.
    Keywords: energy efficiency, LEED, real estate, innovation diffusion, eco-labeling
    JEL: R33
    Date: 2011
  5. By: Lochner, Stefan (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Dieckhoener, Caroline (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: The uprising and military confrontation in Libya that began in February 2011 has led to disruptions of gas supplies to Europe. An analysis of how Europe has compensated for these missing gas volumes shows that this situation has not affected security of supply. <p> However, this situation would change if the North African uprising were to spread to Algeria. Since Algeria is a much more important gas supplier to Europe than is Libya, more severe consequences would be likely. Applying a natural gas infrastructure model, we investigate the impact of supplier disruptions from both countries for a summer and winter period. Our analysis shows that disruptions in the low-demand summer months could be compensated for, mainly by <p> LNG imports. An investigation of a similar situation at the beginning of the winter shows that security of supply would be severely compromised and that disruptions to Italian consumers would be unavoidable.
    Keywords: Natural gas; security of supply; network modelling; North Africa
    JEL: C61 L95 Q34 Q41
    Date: 2011–04–11
  6. By: Trueby, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Paulus, Moritz (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: The seaborne steam coal market changed in recent years. Trade volumes grew dynamically, important players emerged and since 2007 prices increased significantly and remained relatively high since then. <p>In this paper we analyse market equilibria in the years 2006 and 2008 by testing for two possible market structure scenarios in this market: perfect competition and an oligopoly setup with major exporters competing in quantities. <p>We conclude from our results that international steam coal trade is not perfectly competitive as there is a large spread between marginal costs and prices and a low capacity utilisation in 2008. Further, trade flows are generally more diversified in reality than in the competitive scenario.<p> However, also the Cournot scenarios fail to accurately explain real market outcomes. We conclude that only more sophisticated models of strategic behaviour can predict market equilibria in international steam coal trade.
    Keywords: Steam coal trade; Mining Costs; Market Structure
    JEL: C61 L11 L71 Q31
    Date: 2011–04–12
  7. By: Paulus, Moritz (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Trueby, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Growitsch, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: We explore the hypothesis that export policies and trade patterns of national players in the steam coal market are consistent with non-competitive market behavior. We test this hypothesis by developing an equilibrium model which is able to model coal producing nations as strategic players. We explicitly account for integrated seaborne trade and domestic markets. The global steam coal market is simulated under several imperfect market structure setups. We find that trade and prices of a China - Indonesia duopoly fit the real market outcome best and that real Chinese export quotas in 2008 were consistent with simulated exports under a Cournot-Nash strategy.
    Keywords: Strategic National Trade; Imperfect Competition; Steam Coal; China; Indonesia
    JEL: C61 F10 L13 L71
    Date: 2011–06–01
  8. By: Viscusi, W. Kip (Vanderbilt University); Zeckhauser, Richard J. (Harvard University)
    Abstract: The BP Deepwater Horizon oil spill highlighted the glaring weakness in the current liability and regulatory regime for oil spills and for environmental catastrophes more broadly. This article proposes a new liability structure for deep sea oil drilling and for catastrophic risks generally. It delineates a two-tier system of liability. The first tier would impose strict liability up to the firm's financial resources plus insurance coverage. The second tier would be an annual tax equal to the expected costs in the coming year beyond this damages amount. A single firm will be identified as responsible for generating the risk. It would be required to demonstrate substantial ability to pay in the first tier before being permitted to engage in the risky activity. This structure provides for efficient deterrence for environmental catastrophes, since the responsible party is bearing in expectation the risks it is imposing. It also addresses the challenges posed by the fat-tailed distributions of catastrophic environmental risks and provides for more assured and adequate compensation of potential losses than current liability and regulatory arrangements.
    JEL: G22 K32 Q30 Q40
    Date: 2011–07
  9. By: Clara Inés Pardo Martinez - Alexander Cotte Poveda
    Abstract: En el presente estudio se ha utilizado el método de Análisis Envolvente de Datos (DEA) para determinar las tendencias de la eficiencia energética en la industria manufacturera colombiana, tomando como referencia los sectores intensivos energéticamente (SIE). Los resultados de DEA muestran que la gran mayoría de los sectores industriales estudiados han mejorado su eficiencia energética indicando que la energía, como un factor productivo, es importante dentro de las estructuras de producción y es un elemento clave dentro del desarrollo tecnológico. En una segunda etapa, el análisis de regresión utilizando técnicas de datos paneles muestra cómo la productividad laboral, las inversiones y el capital son determinantes en los resultados de la eficiencia energética. Estos resultados indican que las políticas energéticas deben motivar la eficiencia energética a través de mejoras tecnológicas e inversiones que aumenten la productividad y disminuyan el consumo de la energía así como la contaminación ambiental.
    Date: 2011–07–10
  10. By: Reinout De Bock; Jose G Gijon
    Abstract: We show that US natural gas prices have decoupled from oil prices following substantial institutional and technological changes. We then examine how this interrelationship has evolved in Europe using data for Algeria, one of Europe’s key gas suppliers. Taking into account total gas exports and cyclical conditions in partner countries, we find that gas prices remain linked to oil prices, though the nexus has loosened. Both high oil prices and a modest industrial recovery in partner countries have kept gas exports at low levels in recent years, suggesting changing market forces. The paper then shows how such shifts can have important macroeconomic implications for a big gas exporter such as Algeria.
    Keywords: Algeria , Commodity prices , Economic models , Europe , Exports , External shocks , Natural gas , Oil , Oil prices , Production , United States ,
    Date: 2011–06–17
  11. By: Costa, Cinthia Cabral da; Cunha, Marcelo Pereira da; Guilhoto, Joaquim José Martins
    Abstract: Sustainable energy strategies require decision-makers in government, industry, academia and civil society alike to make choices among tradeoffs. Within the transport sector alone, ethanol has been shown to be the dominant solution among viable, low carbon options to date, yet questions remain over the economic and ecological impacts of this industry. In Brazil - the largest producer of sugarcane-based ethanol and a country with over three decades of ethanol development – we find a strong basis for evaluating the ethanol industry’s role in a national economy. In the mid 1970’s, Brazilian ethanol production received an important boost with the launch of the “Proálcool” program. The ethanol industry has subsequently evidenced flux until its consolidation in the period following 2000. Over the course of three decades, economic, institutional, technological and environmental determinants have factored in the success of Brazilian ethanol diffusion. In economic terms, price tradeoffs for ethanol vs. sugar and ethanol vs. gasoline played a role in scale-up of the biofuel together with balance of payment considerations. From an institutional standpoint, support for the Proálcool program, deregulation of the sugar-cane sector in the 1990’s and fuel pump adaptations also factored. With respect to technology, the development of flex fuel cars, greater use of mechanized harvesting, and launch of domestic, co-generated, electrical power were key drivers. Finally, in environmental terms, challenges associated with pollution and public health in major cities as well as questions related to climate change gained visibility. In this paper, we analyze a set of input-output tables for the Brazilian economy from 1975 to 2006, taking the above factors into consideration. Deriving a series of indicators, such as multipliers and linkages, we study the evolution of the ethanol sector’s role in the Brazilian economy and its relation to the productive structure of the country
    Keywords: Brazil; Ethanol; Input-Output; Productive Structure
    JEL: R15
    Date: 2011
  12. By: Elettra Agliardi (RCEA; University of Bologna); Mehmet Pinar (Fondazione Eni Enrico Mattei; University of Guelph); Thanasis Stengos (University of Guelph; RCEA)
    Abstract: An optimal weighting scheme is proposed to construct a new index of environmental quality for different countries using an approach that relies on consistent tests for stochastic dominance efficiency. The test statistics and the estimators are computed using mixed integer programming methods. The variables that are considered include countries’ greenhouse emissions, water pollution and forest benefits, as from the dataset of the World Bank. First, the stochastic efficient weighting for each set of variables is calculated to build three sub-indices (for greenhouse emissions, water pollution and land without forests) and then an overall risk index of environmental quality is constructed. One main result is that land without forest contributes the most (with around 70%), greenhouse emissions contribute with around 20% and water pollution contributes less (with around 10%). Finally, countries are ranked according to their index of environmental quality and their rankings are compared with those of the Kyoto Protocol.
    Keywords: Environmental Quality; Emissions; Water Pollution; Nonparametric Stochastic Dominance, Mixed Integer Programming
    JEL: C4 C5 C14 Q01 Q5 Q51
    Date: 2011–07
  13. By: Alberto Quadrio Curzio; Fausta Pellizzari; Roberto Zoboli
    Abstract: This Working Paper joint two previous articles by the authors: The economic theory of exhaustible natural resources, in “Enciclopedia degli Idrocarburi”, vol. IV, Istituto della Enciclopedia Treccani, Roma, 2008, pp. 3-10;Technological innovation, relative scarcity, investments, in “Enciclopedia degli Idrocarburi”, vol. IV, Istituto della Enciclopedia Treccani, 2008, pp. 11-22. In the first one (cap. 1-4), we consider the contribution of economic theory (partly through a reevaluation of history) in order both to interpret and predict events, and to identify economic policies; this happens especially when the world economy feels the significant constraints imposed by some natural resources and raw materials, partly due to the rapid growth of a number of developing countries, and when there is an urgent need to increase resources rapidly to ensure continuing availability. Even if the problem of scarce resources (of which natural resources are the most obvious category) has been central to analysis for centuries, natural resource economics is contradictory. The main reason for this is that economic theory is out of step with prevailing economic conditions, as a consequence of the varying concern for a crucial phenomenon in the dynamics of economic systems: the opposition-coexistence of the scarcity of natural resources and the producibility of commodities. Natural resource economics can be summarized by dividing it into three main lines of thought: the theory of producibility and scarcity developed by classical economists; the theory of general and natural scarcities developed by marginalists and neoclassicals; the theory of dynamics with and without natural scarcities developed by macroeconomists, structuralists and empirical stylizers. Using this three-way subdivision, which is not clearly codified in economic theory, the basic features of each approach will be examined with special attention to its early exponents. The historical starting point is the second half of the Eighteenth century, although we will ignore contributions such as those made by the Physiocrats who, during the same period, developed a theory of production based on the surplus generated by agriculture. In the second one (cap. 5-6), we consider that the role of technological innovation for resources use and conservation is often measured by empirical indicators of intensity or efficiency which express the evolution of resource use in relation to variables such as population and GDP. The historical evolution of these indicators tends to indicate a process of decoupling – in other words, a decrease in the energy/emissions intensity of economic activity or an increase in the efficiency/productivity of resource use. These empirical regularities have led to the proposition of stylized facts representing the relationships between resource-use efficiency and economic growth known as environmental Kuznets curves. However, the economic interpretations of the innovation mechanisms underlying the progress suggested by efficiency indicators, nonetheless, remain open and complex at the very time when there is increasing demand for further substantial advances in resource-use efficiency. We will survey the empirical evidence on the medium- and long-term dynamics of these indicators and will discuss their significance. This will be followed by an analysis of the possible role played by economic factors (especially resource prices and markets) and institutional factors (especially climate policy) in triggering and supporting progress in the use efficiency of energy resources.
    Keywords: natural resources; technological innovation; relative scarcity; investments
    JEL: N50 O30
    Date: 2011
  14. By: Michielsen, T.O. (Tilburg University, Center for Economic Research)
    Abstract: Imperfect climate policies may be ineffective when fossil fuel owners respond by shifting their supply spatially (coined carbon leakage) or intertemporally (the green paradox). Though these effects are usually analyzed separately, the underlying mechanisms are similar. Exhaustibleffossil fuel owners must trade off present and future extraction or supplying one country and the other. Whereas this is a plausible representation for oil and natural gas, important emission-intensive substitutes such as coal and uncoventional oil are so abundant that their owners face no such trade-off. A decrease in coal demand in one time period or region will therefore not trigger an equal increase in supply in the other. Moreover, if imperfect climate policies causes oil and natural gas owners to supply more in the near future or in countries with lax regulation, demand for dirtier substitutes will go down. Both effects mitigate intertemporal and spatial carbon leakage. When the substitutability between oil and coal differs across time periods or countries, a 'strong green orthodox' may occur.
    Keywords: green paradox;exhaustible resource;backstop;climate change;carbon tax
    JEL: Q31 Q54
    Date: 2011
  15. By: C. Ordás Criado (ETH Zurich, Center for Energy Policy and Economics (CEPE), Switzerland; Université Laval, Département d’économique, Canada); S. Valente (ETH Zurich, Center of Economic Research (CER), Switzerland); T. Stengos (University of Guelph, Department of Economics, Canada)
    Abstract: Stabilizing pollution levels in the long run is a pre-requisite for sustainable growth. We develop a neoclassical growth model with endogenous emission reduction predicting that, along optimal sustainable paths, pollution growth rates are (i) positively related to output growth (scale effect) and (ii) negatively related to emission levels (defensive effect). This dynamic law reduces to a convergence equation that is empirically tested for two major and regulated air pollutants - sulfur oxides and nitrogen oxides - with a panel of 25 European countries spanning the years 1980-2005. Traditional parametric models are rejected by the data. More flexible regression techniques confirm the existence of both the scale and the defensive effect, supporting the model predictions.
    Keywords: Air pollution, convergence, economic growth, nonparametric regressions
    JEL: C14 C23 O13 Q53
    Date: 2011–07
  16. By: Nelly Exbrayat (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Carl Gaigne (INRA Rennes - INRA Rennes - INRA : RENNE); Stéphane Riou (GATE LSE - GATE LSE - Université Sainte Etienne)
    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 fi…rmes du grand pays vers le petit pays de sorte que même …fixée à un taux unique, une …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
    Date: 2011–07–04
  17. By: David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE)); Axel Gosseries (FNRS (Belgium) and UNIVERSITE CATHOLIQUE DE LOUVAIN, Hoover Chair)
    Abstract: For a given technology, two ways are available to achieve low polluting emissions: reducing production per capita or reducing population size. This paper insists on the tension between the former and the latter. Controlling pollution either through Pigovian taxes or through tradable quotas schemes encourages agents to shift away from production to tax free activities such as procreation and leisure. This natalist bias will deteriorate the environment further, entailing the need to impose ever more stringent pollution rights per person. However, this will in turn gradually impoverish the successive generations: population will tend to increase further and production per capita to decrease as the generations pass. One possible solution consists in capping population too.
    Keywords: Overlapping generations, Environmental Policy, Endogenous Fertility, Quantity - Quality Tradeoff, Population Control
    JEL: Q58 Q56 J13 O41
    Date: 2011–05–31
  18. By: Alexandre Sauquet (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Do countries interact when they decide to ratify the Kyoto protocol? What is the nature of these possible interactions? To answer these questions we provide a theoretical analysis based on the notions of strategic substitutability and strategic complementarity. Firstly, we analyze the nature of interactions between countries when they merely seek to provide a global public good (avoiding climate change). Secondly, we argue that countries are interlinked in several dimensions in the real world and we try to shed light on the nature of strategic interactions generated by geographic proximity, trade flows and green investment flows. The empirical investigation is realized via the introduction of spatially lagged endogenous variables in a parametric survival model and our data sample covers the period from 1998 to 2009 for 164 countries. We find evidence that the decisions of neighbors and of green investors matter. Furthermore, our results indicate that the influence of the decision of trading partners is even more substantial.
    Keywords: International Environmental Agreements;Kyoto Protocol Ratification;Strategic Substitutes/complements;Survival model;Spatial lag
    Date: 2011–07–11
  19. By: Peter Holmes (Department of Economics, University of Sussex); Tom Reilly; Jim Rollo (Politics and Contemporary European Studies, University of Sussex)
    Abstract: Balancing legitimate fears that carbon leakage could undermine the impact of any global climate change agreement are countervailing fears that leakage will be the excuse for protectionism in the guise of “Border Carbon Adjustments”. This would have dangers for the world trading system, risking disputes due to ambiguities in the details of WTO rules over what types of border measures are potentially and actually admissible. Even with good quality data, there is considerable potential for judgemental discretion, and hence opportunistic manipulation, in estimating the carbon charges to levy on an imported product. This is even with agreement on whether to use importer or exporter coefficients. A clear distinction needs to be made between environmental and competitiveness motives for border adjustments. The key argument is that the traditional symmetry between origin based taxes (production) and other charges and those based on the destination (consumption) principle breaks down in the case of carbon charges. This paper explores the potential for regional agreements to ensure origin as the basis for carbon levies in the aftermath of the Copenhagen Accord, while recognising the challenges that this poses for the mutual recognition of emissions regimes in particular.
    Keywords: Competitiveness, carbon leakage, cap-and-trade (C&T), trade policy, WTO and regionalism.
    JEL: F18
    Date: 2010–08

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