nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒09‒16
forty-six papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Smart grids : Another step towards competition, energy security and climate change objectives By Cédric Clastres
  2. Impact of Smart Grid Technologies on Peak Load to 2050 By Steve Heinen; David Elzinga; Seul-Ki Kim; Yuichi Ikeda
  3. An economic analysis of used electric vehicle batteries integrated into commercial building microgrids By Beer, Sebastian; Gómez, Tomás; Dallinger, David; Momber, Ilan; Marnay, Chris
  4. Optimizing plug-in electric vehicle charging in interaction with a small office building By Momber, Ilan; Dallinger, David; Beer, Sebastian; Gomez, Tomás; Wietschel, Martin; Marnay, Chris; Stadler, Michael
  5. Estimating the Impact of Restructuring on Electricity Generation Efficiency: The Case of the Indian Thermal Power Sector By Maureen L. Cropper; Alexander Limonov; Kabir Malik; Anoop Singh
  6. Energy Efficiency Investments in the Home: Swiss Homeowners and Expectations about Future Energy Prices By Anna Alberini; Silvia Banfi; Celine Ramseier
  7. Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems By Ibon Galarraga; David Heres Del Valle; Mikel González-Eguino
  8. Ireland's Generic Repeat Design Schools Programme By Tony Sheppard
  9. On the redistributive effects of Germany's feed-in tariff By Grösche, Peter; Schröder, Carsten
  10. Large-scale integration of wind: Flexible Voluntary Curtailment Agreements under a Feed-in System with RES-E priority to avoid inefficiently negative power prices By Christine Brandstätt; Gert Brunekreeft; Katy Jahnke
  11. Did residential electricity rates fall after retail competition? a dynamic panel analysis By Adam Swadley; Mine Yücel
  12. Short run and long run dynamics of residential electricity consumption: Homogeneous and heterogeneous panel estimations for OECD By Bilgili, Faik; Pamuk, Yalçın; Halıcı Tülüce, Nadide Sevil
  13. The Dynamics of Electricity Consumption and Economic Growth:A Revisit Study of Their Causality in Pakistan By Muhammad, Shahbaz; Lean, Hooi Hooi
  14. Vertical Economies and the Costs of Separating Electricity Supply – A Review of Theoretical and Empirical Literature By Roland Meyer
  15. Does Financial Development Increase Energy Consumption? Role of Industrialization and Urbanization in Tunisia By Muhammad, Shahbaz; Lean, Hooi Hooi
  16. Regulation and Regulatory Risk in the Face of Large Transmission Investment By Gert Brunekreeft; Roland Meyer
  17. Man is the only animal that trips twice over the same stone By Lorca-Susino, Maria
  18. The impact of oil price fluctuations on stock markets in developed and emerging economies By Thai-Ha Le; Youngho Chang
  19. Oil rents, governance quality, and the allocation of talents in developing countries By Christian Ebeke; Luc Désiré Omgba
  20. Oil shocks through international transport costs: evidence from U.S. business cycles By Hakan Yilmazkuday
  22. Can oil prices forecast exchange rates? By Domenico Ferraro; Ken Rogoff; Barbara Rossi
  23. Cost effectiveness of bio-ethanol to reduce carbon dioxide emissions in Greece By Md. I. Haque; Stelios Rozakis; A. Natsis; M. Walker; K. Mizak
  24. How location decisions influence the transport cost of processed and unprocessed bioenergy digestates: the impact of plant size and location on profitability of biogas plants in Germany By Ruth Delzeit; Ulla Kellner
  25. Nachwachsende Rohstoffe â entwicklungspolitisch einmal anders gedacht By Breuer, Thomas; Henckes, Christian; Loos, Tim K.; Zeller, Manfred
  26. Harmonizing Biodiesel Fuel Standards in East Asia: Current Status, Challenges and Way Forward By Xunpeng SHI; Shinichi GOTO
  27. Coordinating cross‐border congestion management through auctions: An experimental approach to European solutions By Céline Jullien; Virginie Pignon; Stéphane Robin; Carine Staropoli
  28. Environment and economic development: determinants of an EKC hypothesis By Halkos, George
  29. Income inequality and carbon emissions By Nicole Grunewald; Stephan Klasen; Inmaculada Martínez-Zarzoso; Chris Muris
  30. Is « Pollution Haven » Hypothesis valid for China’s manufacture sectors? An empirical analysis based on carbon embodied in trade By Jie He; Jingyan Fu
  31. Environmental Pricing for Energy Generation Sources: Evidence from a Contingent Valuation Study in Chile By Claudia D. Aravena
  32. Price and welfare effects of emission quota allocation By Rolf Golombek, Sverre A.C. Kittelsen and Knut Einar Rosendahl
  33. Cleaning the Bathwater with the Baby: The Health Co-Benefits of Carbon Pricing in Transportation By Christopher R. Knittel; Ryan Sandler
  34. The political economy of the clean development mechanism (CDM) governance system. By Nedergaard, Peter
  35. Financing the Clean Development Mechanism through debt-for-efficiency swaps? Case study evidence from a Uruguayan wind farm project By Cassimon, Danny; Prowse, Martin; Essers, Dennis
  36. Forest Conservation and CO2 Emissions : A Viable Approach. By Domenech, Pablo Andres; Saint-Pierre, Patrick; Zaccour, Georges
  37. Evaluating the Long-Term Effects of Global Climate Change on the Brazilian Agriculture according to farm size By Juliana Speranza
  38. Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies By Stephen P. Holland; Jonathan E. Hughes; Christopher R. Knittel; Nathan C. Parker
  39. Carbon border adjustement, trade and climate governance : issues for OPEC economies By Mehdi Abbas
  40. Expectation-Driven Climate Treaties with Breakthrough Technologies By Daiju Narita; Ulrich J. Wagner
  41. Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change By Yu-Fu Chen; Michael Funke; Nicole Glanemann
  42. The Private Provision of International Impure Public Goods: the Case of Climate Policy By Martin Altemeyer-Bartscher; Anil Markandya; Dirk T.G. Rübbelke
  43. Implications of inequality aversion for international climate policy By Vogt, Carsten; Sturm, Bodo
  44. Low Climate Stabilisation under Diverse Growth and Convergence Scenarios By Anil Markandya; Mikel González-Eguino; Patrick Criqui; Silvana Mima
  45. The Political Economy of International Environmental Agreements: A Survey By Leo Wangler; JJuan-Carlos Altamirano-Cabrera; Hans-Peter Weikard
  46. Climate Policy Under Fat-Tailed Risk: An Application of Dice By Hwang, In Chang; Reynès, Frédéric; Tol, Richard S. J.

  1. By: Cédric Clastres (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : FRE3389 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The deployment of smart grids in electricity systems has given rise to much interdisciplinary research. The new technology is seen as an additional instrument available to States to achieve targets for promoting competition, increasing the safety of electricity systems and combating climate change. But the boom in smart grids also raises many economic questions. Public policies will need to be adapted, firstly to make allowance for the potential gains from smart grids and the associated information flow, and secondly to regulate the new networks and act as an incentive for investors. The new competitive offerings and end-user pricing systems will contribute to improving allocative and productive efficiency, while minimizing the risks of market power. With real-time data on output and consumption, generators and consumers will be able to adapt to market conditions. Lastly smart grids will boost the development of renewable energy sources and new technologies, by assisting their integration and optimal use.
    Keywords: Smart grid ; Regulation ; Investments
    Date: 2011–09
  2. By: Steve Heinen; David Elzinga; Seul-Ki Kim; Yuichi Ikeda
    Abstract: The IEA’s <a href="" target=_blank">Smart Grids Technology Roadmap</a> released on 4th April 2011, identified five global trends that could be effectively addressed by deploying smart grids. These are: increasing peak load (the maximum power that the grid delivers during peak hours), rising electricity consumption, electrification of transport, deployment of variable generation technologies (e.g. wind and solar PV) and ageing infrastructure. Along with this roadmap, a new working paper – Impact of Smart Grid Technologies on Peak Load to 2050 – develops a methodology to estimate the evolution of peak load until 2050. It also analyses the impact of smart grid technologies in reducing peak load for four key regions; OECD North America, OECD Europe, OECD Pacific and China. This working paper is a first IEA effort in an evolving modelling process of smart grids that is considering demand response in residential and commercial sectors as well as the integration of electric vehicles.
    Date: 2011–08
  3. By: Beer, Sebastian; Gómez, Tomás; Dallinger, David; Momber, Ilan; Marnay, Chris
    Abstract: Current policies in the U.S. and other countries are trying to stimulate electric transportation deployment. Consequently, plug-in electric vehicle (PEV) adoption will presumably spread among vehicle users. With the increased diffusion of PEVs, lithium-ion batteries will also enter the market on a broad scale. However, their costs are still high and ways are needed to optimally deploy vehicle batteries in order to account for the higher initial outlay. This study analyzed the possibility of extending the lifecycle of PEV batteries to a secondary, stationary application. Battery usage can be optimized by installing used battery packs in buildings' microgrids. Employed as decentralized storage, batteries can be used for a microgrid's power supply and provide ancillary services (A/S). This scenario has been modeled with the Distributed Energy Resources Customer Adoption Model (DER-CAM), which identifies optimal equipment combinations to meet microgrid requirements at minimum cost, carbon footprint, or other criteria. Results show that used PEV batteries can create significant monetary value if subsequently used for stationary applications. --
    Keywords: Battery storage,building management systems,dispersed storage and generation,electric vehicles,load management,microgrid,optimization methods,power system economics,road vehicle electric propulsion
    Date: 2011
  4. By: Momber, Ilan; Dallinger, David; Beer, Sebastian; Gomez, Tomás; Wietschel, Martin; Marnay, Chris; Stadler, Michael
    Abstract: This paper considers the integration of plug-in electric vehicles (PEVs) in microgrids. Extending a theoretical framework for mobile storage connection, the economic analysis here turns to the interactions of commuters and their driving behavior with office buildings. An illustrative example for a real office building is reported. The chosen system includes solar thermal, photovoltaic, combined heat and power generation as well as an array of plug-in electric vehicles with a combined aggregated capacity of 864 kWh. With the benefit-sharing mechanism proposed here and idealized circumstances, estimated cost savings of 5% are possible. Different pricing schemes were applied which include flat rates, demand charges, as well as hourly variable final customer tariffs and their effects on the operation of intermittent storage were revealed and examined in detail. Because the plug-in electric vehicle connection coincides with peak heat and electricity loads as well as solar radiation, it is possible to shift energy demand as desired in order to realize cost savings. --
    Keywords: Battery storage,building management systems,dispersed storage and generation,electric vehicles,load management,microgrid,optimization methods,power system economics,road vehicle electric propulsion
    Date: 2011
  5. By: Maureen L. Cropper; Alexander Limonov; Kabir Malik; Anoop Singh
    Abstract: This paper examines the impact of unbundling of generation from transmission and distribution on the operating efficiency of state-owned thermal power plantsin India. Using information collected by India’s Central Electricity Authority we construct a panel dataset for thermal power plants for the years 1994-2008. We take advantage of variation across states in the timing of reforms to examine the impact of restructuring on plant performance and thermal efficiency. We estimate difference-in-differences models that control for state-level time trends, and plant and year fixed effects. The models suggest that unbundling significantly improved average annual plant availability by about 4.6 percentage points and reduced forced outages by about 2.9 percentage points in states that unbundled before 2003. Restructuring has not, however, improved thermal efficiency. This may reflect the fact that unbundling has not yet attracted independent power producers into the market to the same extent as has occurred in the US.
    JEL: L43 L94 O13 O25 Q4
    Date: 2011–09
  6. By: Anna Alberini (Department of Agricultural Economics, university of Maryland, US and Centre for Energy Policy and Economics (CEPE), ETH Zurich, Switzerland); Silvia Banfi (Centre for Energy Policy and Economics (CEPE), Department of Management, Technology and Economics, ETH Zurich); Celine Ramseier (Centre for Energy Policy and Economics (CEPE), Department of Management, Technology and Economics, ETH Zurich)
    Abstract: In May 2010, we surveyed 473 Swiss homeowners about their preferences for energy efficiency renovations in their homes. We used conjoint choice experiments that asked respondents to choose among hypothetical energy efficiency renovation projects. We find that homeowners are responsive to the upfront costs of the renovation projects, the savings in energy expenses, the time horizon over which such savings would be realized, and the thermal comfort improvement afforded by such renovations. Even more important, the likelihood of undertaking energy-efficiency renovations increases with the size of the subsidy offered by the Swiss federal government. At least for an average-sized project, we find that the impact of a rebate is comparable to that of an improvement in the thermal comfort of the home. The savings in the annual energy bills and the duration of the investment are less important. The discount rate implicit in the responses to the conjoint choice experiments is low. Depending on the specification of the random utility model, the discount rate ranges from 1.5 to about 3%. This is consistent with the point in Hassett and Metcalf (1993) and Metcalf and Rosenthal (1995), and with the fact that our scenarios contain no uncertainty. Respondents who feel completely uncertain about future energy prices are more likely to select the status quo (no renovations) in any given choice task and weight the cost of the investments more heavily than those respondents who expect energy prices to increase in the future. The hypothetical renovations are more likely to take place when respondents believe that climate change considerations should be an important determinant of home renovations.
    Keywords: energy efficiency, energy savings, choice experiments, discount rates, residential energy use
    JEL: Q40 Q48 D91
    Date: 2011–08
  7. By: Ibon Galarraga; David Heres Del Valle; Mikel González-Eguino
    Abstract: This article uses the hedonic pricing method to estimate the price premium paid for the highest energy-efficiency label (A+) in the refrigerators market of the Basque Autonomous Community (Spain). The estimated figure is 8.9% of the final price or about 60 euro, which represents one third of the energy savings that a consumer gets during the lifetime of a refrigerator with the highest energy-efficiency label. This figure is then combined with the linear version of the Almost Ideal Demand System (LA/AIDS) to obtain own and cross-price elasticities of demand. The information presented here is useful for policy design and analysis. The results indicate that the demand for refrigerators with the highest energy-efficiency label is highly sensitive to price variations.
    Date: 2011–08
  8. By: Tony Sheppard
    Abstract: The Irish Department of Education and Skills (DoE) is strongly committed to energy efficiency and to reducing CO2 by developing and implementing energy level ceilings in relation to school design that aim to remain below half of the accepted good practice in the field. This approach works within normal departmental budgetary limits to create school buildings that are breaking ground for building designers.
    Keywords: school design, energy efficiency, extendibility, compactness, repeatability
    Date: 2011–09
  9. By: Grösche, Peter; Schröder, Carsten
    Abstract: The present article assesses the redistributive effects of a key element of German climate change policy, the promotion of renewables in the electricity mix through the provision of a feed-in tariff. The tariff shapes the distribution of households' disposable incomes by charging a levy that is proportional to household electricity consumption, and by financial transfers channeled to households feeding green electricity into the grid. Our study builds on representative household survey data, providing information on various socio demographics, household electricity consumption and ownership of solar facilities. The redistributive effects of the feed-in tariff are evaluated by means of various inequality indices. All the inequality measures indicate that Germany's feed-in tariff is mildly regressive. --
    Keywords: Income distribution,redistribution,tax incidence,renewable resources,energy policy
    JEL: D12 D31 H22 H23 Q27 Q48
    Date: 2011
  10. By: Christine Brandstätt; Gert Brunekreeft; Katy Jahnke
    Abstract: For the large-scale integration of electricity from renewable energy sources (RES-E), the German system seems to reach its limits. In 2009, the electricity wholesale market experienced serious negative prices at times of high wind and low demand. The feed-in system in Germany consists of a fixed feed-in price, a take-off obligation and a RES priority rule, and in practice only very restrictive use of RES-E curtailment. Exactly the latter is the problem. We argue that the overall performance of the system would improve seriously by lifting the restrictions on the use of voluntary curtailment agreements, while retaining the priority rule as such. Since generators of RES-E can only improve under this system reform, investment conditions improve, leading to higher installed RES-E capacity. This in turn implies that reduced wind output due to curtailment can actually be offset by higher wind output in all periods in which there is no problem.
    Keywords: renewable energies, market design, feed-in system
    Date: 2010–12
  11. By: Adam Swadley; Mine Yücel
    Abstract: A key selling point for the restructuring of electricity markets was the promise of lower prices, that competition among independent power suppliers would lower electricity prices to retail customers. There is not much consensus in earlier studies on the effects of electricity deregulation, particularly for residential customers. Part of the reason for not finding a consistent link with deregulation and lower prices was that the removal of the transitional price caps led to higher prices. In addition, the timing of the removal of price caps coincided with rising fuel prices, which were passed on to consumers in a competitive market. Using a dynamic panel model, we analyze the effect of participation rates, fuel costs, market size, a rate cap and a switch to competition for 16 states and the District of Columbia. We find that an increase in participation rates, price controls, a larger market, and high shares of hydro in electricity generation lower retail prices, while increases in natural gas and coal prices increase rates. The effects of a competitive retail electricity market are mixed across states, but generally appear to lower prices in states with high participation and raise prices in states that have little customer participation.
    Keywords: Price regulation
    Date: 2011
  12. By: Bilgili, Faik; Pamuk, Yalçın; Halıcı Tülüce, Nadide Sevil
    Abstract: The purpose of this paper is to reveal the short run and long run dynamics of residential electricity consumption for 11 OECD countries within annual period 1979-2006. To this end, this paper first explores the findings from related literature evidence and, later, follows panel cointegration equations (CEs) and panel error correction models (ECMs). CEs give long run relations of the variables in residential electricity demand function. ECMs include both long run and short run parameter estimates of the per capita residential electricity demand in terms of residential electricity price, residential light fuel oil price, residential natural gas price and per capita income. For both ECs and ECMs, the techniques of panel OLS, panel adjusted OLS and panel dynamic OLS are utilized. Finally, this paper yields short term and long term elasticities of residential electricity consumption together with error correction terms through homogeneous and heterogeneous variance structures.
    Keywords: electricity consumption; elasticities; homogeneous and heterogeneous variance structures; panel error correction model; panel dynamic ordinary least squares
    JEL: C51 D12 C33 Q43
    Date: 2010–11
  13. By: Muhammad, Shahbaz; Lean, Hooi Hooi
    Abstract: This study revisits the relationship between electricity consumption and economic growth in Pakistan by controlling and investigating the effects of two major production factors - capital and labor. The empirical evidence confirms the cointegration among the variables and indicates that electricity consumption has a positive effect on economic growth. Moreover, bi-directional Ganger causality between electricity consumption and economic growth has been found. The findings suggests that adoption of electricity conservation policies to conserve energy resources may unwittingly decline growth and the lower growth rate will in turn further decrease the demand for electricity. Therefore, governments contemplating such conservationist policies should instead explore and develop alternate sources of energy as a strategy rather than just increasing electricity production per se in order to meet the rising demand for electricity in their quest towards sustaining development in the country.
    Keywords: Electricity Consumption; Economic Growth; Ganger Causality
    JEL: F43 Q4
    Date: 2011–09–01
  14. By: Roland Meyer
    Abstract: Motivated by the European movement towards a separation of electricity networks from the competitive functions generation and supply this paper reviews theoretical and empirical literature on vertical synergies in electricity supply. In the analysis a clear distinction is made between four different unbundling options leading to different forms and magnitudes of synergy losses. Apart from coordination economies a main source of scope economies seems to result from a market risk effect if generation and retail are separated. Accordingly, the European policy of network unbundling (either transmission or distribution) results in synergy losses between 2 and 5 percent due to coordination losses, while an unbundling option that includes a separation between retail and generation, as observed in some U.S. states, may lead to a permanent cost increase of 15 percent and more due to a significant risk increase.
    Keywords: ownership unbundling, vertical integration, economies of scope
    Date: 2011–04
  15. By: Muhammad, Shahbaz; Lean, Hooi Hooi
    Abstract: This paper assesses the relationship among energy consumption, financial development, economic growth, industrialization and urbanization in Tunisia from 1971-2008. The autoregressive distributed lag bounds testing approach to cointegration and Granger causality tests are employed for the analysis. The result confirms the existence of long-run relationship between energy consumption, economic growth, financial development, industrialization and urbanization in Tunisia. Moreover, financial development, industrialization and urbanization are positively related to energy consumption especially in the long-run. Long-run bidirectional causal relationships are found between financial development and energy consumption, financial development and industrialization, and industrialization and energy consumption. Hence, sound and developed financial system which can attract investors, boost the stock market and improve the efficiency of economic activities should be encouraged in the country. Nevertheless, promoting industrialization and urbanization can never be left out from the process of development. On the other hand, the unidirectional causality from energy consumption to financial development implies that government should implement loose monetary policy which will stimulates investment activities and enhances economic growth and hence the energy consumption.
    Keywords: Energy Consumption; Financial Development; Economic Growth
    JEL: E44 Q4
    Date: 2011–09–01
  16. By: Gert Brunekreeft; Roland Meyer
    Abstract: Most transmission systems in Europe are currently in need of large network expansions, in particular to cope with increasing shares of load remote renewable energy sources. Given that the scope for further cost reductions is largely exhausted, we observe a paradigm shift into the direction of implementing more cost-pass-through elements into price-based regulation to strengthen the necessary investment incentives. Regulatory emphasis is shifting from cost-reductions to promoting investment. Obstacles to investments arise in particular from regulatory risk and efficiency risk. Addressing these topics, we recommend a move towards more cost-based approaches, with ex-ante investment approval and less reliance on ex-post benchmarking.
    Keywords: regulation, regulatory risk, network investments
    Date: 2011–02
  17. By: Lorca-Susino, Maria
    Abstract: Since mid-2009 the world has been experiencing a feeble economic recovery that has been halted by an increase in oil prices which have negatively affected the recovery. History has taught us that the world has developed thanks to major industrial revolutions which have foster economic growth. The first industrial revolution took place in the 19th century when engineers started using refined coal which helped the first step of industrialization. The second major economic revolution came in the 20th century when the world moved forward due to the development of the petroleum industry with fuel oil and gasoline as a source of energy. The world’s industrial performance and economic growth in the 21st century is still stuck on fuel oil and gasoline a limited resource which has become a source of political and economic instability.
    Keywords: Oil crisis; economics; political turmoil
    JEL: Q43
    Date: 2011–07–10
  18. By: Thai-Ha Le (Division of Economics, Nanyang Technological University, Singapore); Youngho Chang (Division of Economics, Nanyang Technological University, Singapore)
    Abstract: This study examines the response of stock markets to oil price volatilities in Japan, Singapore, Korea and Malaysia by applying the generalized impulse response and variance decomposition analyses to the monthly data spanning 1986:01 – 2011:02. The results suggest that the reaction of stock markets to oil price shocks varies significantly across markets. Specifically, the stock market responds positively in Japan while negatively in Malaysia; the signal in Singapore and South Korea is unclear. We find that the stock market inefficiency, among others, appeared to have slowed the responses of the stock market to aggregate shocks such as oil price surges.
    Keywords: oil price fluctuation, stock return, exchange rate, emerging market, VAR model.
    JEL: Q43 F3 G14 G15
    Date: 2011
  19. By: Christian Ebeke (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Luc Désiré Omgba (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Evidence shows that the allocation of talented people is not neutral for growth. Thus, a country with a large population of law concentrators tends to develop rent-seeking activities that reduce growth. A country with a large population of engineers tends to foster innovation and strengthen growth. But what determines the allocation of talents? This question has not yet been empirically examined. This paper contributes to fill this gap. Based on a sample of 69 developing countries the paper highlights that oil rents determine the allocation of talents but this effect is not linear. It largely depends on the quality of governance. While, oil rents in well governed countries tend to orient talents towards productive activities, oil rents in badly governed countries tend to orient talents towards rent-seeking activities. These results are robust to different specifications, datasets on governance quality and estimation methods.
    Keywords: Rent-seeking; occupational choice; oil rents
    Date: 2011–08–23
  20. By: Hakan Yilmazkuday
    Abstract: The effects of oil shocks on output volatility through international transport costs are investigated in an open-economy DSGE model. Two versions of the model, with and without international transport costs, are structurally estimated for the U.S. economy by a Bayesian approach for moving windows of ten years. For model selection, the posterior odds ratios of the two versions are compared for each ten-year window. The version with international transport costs is selected during periods of high volatility in crude oil prices. The contribution of international transport costs to the volatility of U.S. GDP has been estimated as high as 36 percent during periods of oil crises.
    Keywords: Monetary policy ; International trade
    Date: 2011
  21. By: Thai-Ha Le (Division of Economics, Nanyang Technological University, Singapore); Youngho Chang (Division of Economics, Nanyang Technological University, Singapore)
    Abstract: This study using the monthly data spanning 1986:01-2011:04 to investigate the relationship between the prices of two strategic commodities: gold and oil. We examine this relationship through the inflation channel and their interaction with the index of the US dollar. We used different oil price proxies for our investigation and found that the impact of oil price on the gold price is not asymmetric but non-linear. Further, results show that there is a long-run relationship existing between the prices of oil and gold. The findings imply that the oil price can be used to predict the gold price.
    Keywords: oil price fluctuation, gold price, inflation, US dollar index, cointegration.
    JEL: E3
    Date: 2011
  22. By: Domenico Ferraro; Ken Rogoff; Barbara Rossi
    Abstract: This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S. dollar nominal exchange rate. Despite state-of-the-art methodologies, the authors find little systematic relation between oil prices and the exchange rate at the monthly and quarterly frequencies. In contrast, the main contribution is to show the existence of a very short-term relationship at the daily frequency, which is rather robust and holds no matter whether the authors use contemporaneous (realized) or lagged oil prices in their regression. However, in the latter case the predictive ability is ephemeral, mostly appearing after instabilities have been appropriately taken into account.
    Keywords: Foreign exchange rates ; Economic forecasting
    Date: 2011
  23. By: Md. I. Haque (Agricultural Economics and Rural Development Department, Agricultural University of Athens); Stelios Rozakis (Agricultural Economics and Rural Development Department, Agricultural University of Athens); A. Natsis ("Department of Natural Resources Management and Agricultural Engineering Agricultural University of Athens, Greece"); M. Walker; K. Mizak
    Abstract: "The purpose of this study is to evaluate ethanol cost- effectiveness with regards to carbon dioxide emissions. Actually, bio-fuel production is only viable thanks to the tax credit policy resulting in economic ‘deadweight’ loss. The environmental performance is assessed under the Life Cycle Assessment (LCA) framework. Economic burden to society to support the activity divided by avoided CO2 equivalent emissions indicates the bio-ethanol cost effectiveness. Agricultural feedstock supply that comprises of sugarbeets, grains and industrial processing sub-models are articulated in a regional sector model. The maximization of total welfare determines optimal crop mix for farmers and the best configurations for industry. This is illustrated for bio-ethanol produced by the ex-sugar industry in Thessaly, Greece. Life cycle activity analysis showed that, at the optimum, CO2 emission is reduced between 1 and 1.5 t of carbon dioxide equivalent per ton of ethanol. The unitary cost falls in the range of 100 to 250 euro per ton of CO2 and it is remarkably dependent on the agricultural policy scenario. "
    Keywords: Cost effectiveness, ethanol, mathematical programming, life cycle assessment, greenhouse gases
    Date: 2011
  24. By: Ruth Delzeit; Ulla Kellner
    Abstract: The production of bioenergy is considered to be a promising energy source for a sustainable energy mix and it is politically promoted in many countries. With the exception of Brazilian ethanol, bioenergy not competitive to fossil energy sources, and therefore needs to be subsidised. Several types of bioenergy are based on bulky raw biomass with high per unit transport costs, importantly impacting on the plant’s production costs and profitability. In addition, considerable quantities of digestates are released, causing disposal costs. Various studies in the past aimed primarily at analysing transport costs of inputs. In this paper we focus on disposal costs of fermentation digestates from biogas production in Germany and analyse different processing techniques and their impact on profitability for three plant size in three case study areas. Our results show that especially in regions with only a small amount of agricultural land and a large heterogeneity in its agricultural area, processing of digestates increases the profitability of biogas production. The same accounts for regions with high livestock density, where the area needed for disposal is comparatively large. The cost efficiency is enforced by a high share of animal excrements on input and the biogas plant size
    Keywords: transport costs, biogas profitability, digestates processing, choice of location
    JEL: C69 Q16 Q55
    Date: 2011–09
  25. By: Breuer, Thomas; Henckes, Christian; Loos, Tim K.; Zeller, Manfred
    Abstract: Steigende Agrarpreise, und damit steigende Nahrungsmittelpreise, beleben die Diskussion über die Notwendigkeit der âNon-Foodâ-Nutzung (Anbau von Energiepflanzen, aber auch Pflanzen für die stoffliche Nutzung, z.B. Holz oder Kautschuk) von Agrarrohstoffen. Dieses Diskussionspapier betrachtet die allgemeinen Brennpunkte der Debatte und erörtert speziell die Möglichkeiten von Biotreibstoffen als Triebkraft für Investitionen in Infrastruktur und Marktzugang im ländlichen Raum und als Treiber der Nachhaltigkeitsdiskussion im Agrarsektor der Entwicklungs- und Schwellenländer. Auf lange Sicht ist die konkurrierende Nutzung von Land für Energie- und Nahrungsmittelpflanzen differenziert zu betrachten. Kurz- bis mittelfristig jedoch ist die energetische und stoffliche Nutzung von Agrarprodukten eine alternative Markt- und damit auch Einkommensmöglichkeit für die Landwirtschaft. In den Industrieländern bietet der Anbau von nachwachsenden Rohstoffen die Möglichkeit, Ãberschussproduktionen einzudämmen und Exportsubventionen abzubauen. Damit wird auch deren preissenkender Einfluss auf den Weltmarkt abgebaut. In den Entwicklungsländern könnten sich dadurch Produktionsanreize im Agrarsektor ergeben, die, ausgelöst durch landwirtschaftliche- und auÃerlandwirtschaftliche Beschäftigungseffekte, eine Armutsreduktion induzieren könnten. Zusätzlich besteht die Möglichkeit, den lokalen Energiebedarf mit ökologisch nachhaltigen Ressourcen zu unterstützen und damit den Kleinbauern neben dem Marktzugang auch die Möglichkeit zur lokalen Veredelung zu bieten. Allerdings würde sich die Situation für Erzeuger in Entwicklungsländern noch zusätzlich verbessern, wenn Industrieländer nicht die Erzeugung von nachwachsenden Rohstoffen (NawaRo) subventionieren, sondern auf tarifäre und nichttarifäre Importbarrieren für Agrarprodukte, inklusive der nachwachsenden Rohstoffe, verzichten würden. Im Zusammenhang mit der Förderung von nachwachsenden Rohstoffen stellen sich der Entwicklungszusammenarbeit verschiedene Herausforderungen. Um eine breitenwirksame Armutsminderung zu erzielen, muss vor allem die kleinbäuerliche Landwirtschaft unterstützt werden. Hierzu sollten Ansätze verfolgt werden, in denen die bäuerlichen Produktionssysteme, wegen ihrer Beschäftigungseffekte, mit agro-industriellen Verarbeitungsmöglichkeiten kombiniert werden. In diesem Zusammenhang besteht die Notwendigkeit und die Möglichkeit, die sozialen (inkl. breitenwirksames Wachstum) und ökologischen (Erhalt und Förderung der natürlichen Ressouren) Bedingungen der Produktion aller Agrarrohstoffe nachhaltig zu gestalten.
    Keywords: Agrarrohstoffe, Biomasse, Nachwachsender Rohstoff, Entwicklungszusammenarbeit, Agrarpolitik, Nachhaltigkeit, Resource /Energy Economics and Policy, Q16, Q2, Q4,
    Date: 2011
  26. By: Xunpeng SHI (Xunpeng SHI Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia); Shinichi GOTO (Shinichi GOTO Research Center for New Fuels and Vehicle Technology (NFV), National Institute of Advanced Industrial Science and Technology (AIST), Japan)
    Abstract: Abstract: This paper discusses the development of and policy towards biodiesel fuel (BDF) in the East Asia Summit (EAS) Region (hereafter East Asia), with a focus on activities related to harmonizing BDF standards. It finds that the EAS countries have actively promoted the development of BDF for a variety of reasons. To minimize problems with engines arising from the use of BDF, most EAS countries have established their national BDF standards. However, these diverse standards cause barriers for BDF trade and act against the regional interest in maximizing benefits from BDF production and utilization. Therefore, the EAS policy makers decided to harmonize BDF standards, and a regional benchmark standard has been published. Through a comparative review of existing national standards against the benchmark, it finds that the harmonization is beneficial economically and environmentally, and is technically feasible but practically stalled due to the lack of political determination. Therefore, among a few policy implications, the key message to deliver is a call for political determination to implement the harmonization in the EAS region. Since harmonization of BDF standards has been tried in other regions, the findings of this paper may supplement the literature, enhance understanding of the EAS case, and provide lessons and implications that may be helpful in advancing similar harmonization elsewhere.
    Date: 2011–05–01
  27. By: Céline Jullien (GAEL - Economie Appliquée de Grenoble - INRA : UR1215 - Université Pierre Mendès-France - Grenoble II); Virginie Pignon (EDF R&D Division - EDF Recherche et Développement); Stéphane Robin (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Carine Staropoli (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Competition among producers within an integrated electricity system is impeded by any limited transmission capacity there may be at its borders. Two alternative market mechanisms have recently been designed to organize the allocation of scarce transmission capacity at cross-border level: (i) the "implicit auction", already used in some countries, and (ii) the "coordinated explicit auction", proposed by the European Transmission System Operators (ETSO) but not implemented yet. The main advantage of the explicit auction is that it allows each country to keep its own power exchange running. In the European institutional context, this is seen as a factor of success of a market reform, although the explicit auction (not coordinated) is known to be less efficient than the implicit mechanism. The addition of a coordination dimension in the explicit auction is intended to solve problems of international flows. We use an experimental methodology to identify and compare in a laboratory setting the efficiency properties of these two market mechanisms, given a market structure similar to the existing one in continental Europe, i.e. a competitive oligopoly. Our main result highlights the inefficiency of the coordinated explicit auction compared to the performance of the implicit auction, measured in terms of both energy prices and transmission capacity allocation. We suggest that the poor performance of the coordinated explicit auction in the laboratory is due to the level of individual expectations about both energy and transmission prices that the mechanism demands. One solution to resolve this problem when the mechanism is implemented in the field would be to design an additional and secondary market for "used" transmission capacity.
    Keywords: auctions; congestion management; electricity markets; experimental economics
    Date: 2011–08–25
  28. By: Halkos, George
    Abstract: In this paper we examine the concept of an Environmental Kuznets Curve (EKC) hypothesis in a critical way aiming to justify its existence as well as to propose policies compatible with sustainable development. For this reason, we make use of a data set on CO2 emissions for 32 countries over a 36 year time period. For this balanced panel database, we apply a number of econometric methods to estimate the income-environment relationship. Our results indicate the existence of N-shaped relationship between economic development and pollution. However we show that the turning points calculated by panel data analysis may not reveal the actual turning points valid for individual countries. In our case and using different countries from different geographical regions we found a mixture of monotonic or inverted U-shape or N-shape behaviour. Countries are heterogeneous with different stochastic regression coefficients. This implies that the use of the total N-shape income-environment relationship by policy makers may be misleading with serious policy ineffectiveness implications.
    Keywords: Environmental Kuznets Curve; Panel Data; CO2 emissions
    JEL: Q56 C23 O20
    Date: 2011
  29. By: Nicole Grunewald (Georg-August-University Göttingen); Stephan Klasen (Georg-August-University Göttingen); Inmaculada Martínez-Zarzoso (Georg-August-University Göttingen); Chris Muris (Georg-August-University Göttingen)
    Abstract: We document a U-shaped relationship between income inequality and carbon dioxide emissions per capita, using a newly available panel data set on income inequality (GINI) with observations for 138 countries over the period 1960–2008. Our findings suggest that, for high-income countries with high income inequality, pro-poor growth and reduced per capita emissions levels go hand in hand.
    Keywords: environmental quality; income inequality; panel data
    JEL: I3 O1 Q3
    Date: 2011–09–01
  30. By: Jie He (University of Sherbrooke, GREDI); Jingyan Fu (Department of International Trade and Economics, Jinan University)
    Abstract: Based on single-country linked Input-Output model, this paper first calculated the balance of emission embodied in trade (BEET) and pollution trade terms (PTT) for China’s international trade during 1996-2004. Our results confirm China as a net emission exporter but also find China’s exports to be less-polluting than China’s import. Our estimation results confirm the findings of IO analysis and reveals that China has comparative advantages in less polluting labour-intensive sector. The reason China which exports principally in less-polluting sectors to have a positive BEET is because China has higher emission intensity in almost all sectors than its trade partners. Our conclusion also reveals international production division is organised without consideration of environmental performance of producers of different countries, this is the principal reason for the carbon leakage phenomenon related to international trade, while the pollution haven hypothesis plays actually a marginal role.
    Keywords: Single-country linked Input-Output model, Pollution Haven Hypothesis, Carbon leakage, Comparative advantage, BEET, Pollution terms of trade, China
    Date: 2011–08
  31. By: Claudia D. Aravena (Queens University Belfast , UK)
    Abstract: The rapid increase in energy demand in Chile requires a choice for additional production between different kinds of energy sources currently available to the country. Current projects to develop large dams for hydropower in Chilean Patagonia impose an environmental price by damaging the natural environment. The increased use of fossil fuels on the other hand entails an environmental price related to emissions and global warming. This paper studies the debate on the future energy supply in Chile by investigating the preferences of households for different energy sources (fossil fuels, large hydropower in Chilean Patagonia and renewable energy). The paper also aims to value the externalities associated to these traditional methods of energy generation. Using the Contingent Valuation method, the willingness to pay for renewable energy sources over the other alternatives is elicited. Results suggest a strong preference for renewable sources with almost equally large environmental prices imposed by consumers on electricity from large dams and thermoelectric sources. Results also suggest possibility of introduction and promotion of incentives for renewable energy developments supported by consumers through green tariffs or environmental premiums. Key words: contingent valuation, willingness to pay, renewable energy, fossil fuels, hydropower
    Date: 2010–10
  32. By: Rolf Golombek, Sverre A.C. Kittelsen and Knut Einar Rosendahl (Statistics Norway)
    Abstract: We analyze how different ways of allocating emission quotas may influence the electricity market. Using a large-scale numerical model of the Western European energy market, we show that different allocation mechanisms can have very different effects on the electricity market, even if the total emission target is fixed. This is particularly the case if output-based allocation (OBA) of quotas is used, with gas power production substantially higher, partly at the expense of renewable and coal power, than if grandfathering and auctioning based mechanisms are used. The price of emissions is almost twice as high. Moreover, even though electricity prices are lower, the welfare costs of attaining a fixed emission target are significantly higher. The paper analyzes other allocation mechanisms as well, leading to yet more outcomes in the electricity market. The numerical results for OBA are supported by theoretical analysis, with some new general results.
    Keywords: Quota market; Electricity market; Allocation of quotas
    JEL: D61 H23 Q41 Q58
    Date: 2011–09
  33. By: Christopher R. Knittel; Ryan Sandler
    Abstract: Efforts to reduce greenhouse gas emissions in the US have relied on Corporate Average Fuel Economy (CAFE) Standards and Renewable Fuel Standards (RFS). Economists often argue that these policies are inefficient relative to carbon pricing because they ignore existing vehicles and do not adequately reduce the incentive to drive. This paper presents evidence that the net social costs of carbon pricing are significantly less than previous thought. The bias arises from the fact that the demand elasticity for miles travelled varies systematically with vehicle emissions; dirtier vehicles are more responsive to changes in gasoline prices. This is true for all four emissions for which we have data—nitrogen oxides, carbon monoxide, hydrocarbon, and greenhouse gases—as well as weight. This reduces the net social costs associated with carbon pricing through increasing the co-benefits. Accounting for this heterogeneity implies that the welfare losses from $1.00 gas tax, or a $110 per ton of CO2 tax, are negative over the period of 1998 to 2008 even when we ignore the climate change benefits from the tax. Co-benefits increase by over 60 percent relative to ignoring the heterogeneity that we document. In addition, accounting for this heterogeneity raises the optimal gas tax associated with local pollution, as calculated by Parry and Small (2005), by as much as 57 percent. While our empirical setting is California, we present evidence that the effects may be larger for the rest of the US.
    JEL: D62 H2 H3 I18 L0 L9 Q5 R2 R4
    Date: 2011–09
  34. By: Nedergaard, Peter
    Abstract: In spite of the exponentially increasing volume of the CDM system of the Kyoto Protocol, very few have so far come up with scholarly political economy analysis of its governance system. Based on interviews with the CDM system’s main stakeholders as well as through scrutiny of CDM related documents, this paper will contribute to filling this hole. In this respect, it is assumed that the political economy analysis can be based on two analytical concepts: First, the CDM governance system has to be legitimate (the political side of the system), i.e. seen as broadly acceptable and accountable by its stakeholders as well as the broader public. Second, the CDM governance system has to be efficient (the economic side of the system), i.e. involve as few transaction costs as possible. Based on these concepts, the paper analyses the present balances of the CDM governance system.
    Keywords: CDM; climate policy; legitimacy; efficiency
    JEL: E0
    Date: 2011
  35. By: Cassimon, Danny; Prowse, Martin; Essers, Dennis
    Abstract: As one of Kyoto’s three flexibility mechanisms for reducing the cost of compliance, the Clean Development Mechanism (CDM) allows the issuance of Certified Emission Reduction (CER) credits from offset projects in non-Annex I countries. Whilst much attention has focused on the widespread use of the mechanism by China and India, the complex project cycle, and the lack of convincing baselines, little attention has been paid to the financing of CDM projects. In this paper we assess the extent to which CDM projects with public bodies should utilise debt swaps as a form of finance. The paper does this through analysing the use of a debt swap between Uruguay and Spain within a CDM wind farm project in Uruguay. The paper assesses this transaction according to a simple framework by which debt swaps can be evaluated: whether it delivers additional resources to the debtor country and/or debtor government budget; whether it delivers more resources for climate purposes; whether it has a sizeable effect on overall debt burdens (thereby creating ‘indirect’ benefits); and whether it adheres to the principles of alignment with government policy and systems (key elements within the new aid approach).
    Date: 2011–08
  36. By: Domenech, Pablo Andres; Saint-Pierre, Patrick; Zaccour, Georges
    Abstract: We adopt viability theory to assess the sustainability of the world’s forests while taking into account some of the competing economic, social, and environmental uses of these forests, namely, timber production, poverty alleviation through agriculture, and air quality as well as the negative externalities that these uses create. We provide insights on the different trade-offs faced to achieve sustainability and draw some policy implications as to what is the path leading to sustainability in the long run.
    Keywords: Viability theory; Sustainability; Forest; Emissions;
    JEL: Q01 Q34 Q32 Q54
    Date: 2011
  37. By: Juliana Speranza (Instituto de PesquIsa Económica Aplicada)
    Abstract: This paper aims to assess the long-term effects of global climate change on Brazilian agriculture. In particular, it will address the following questions: (i) What are the long-term effects of global climate change in terms of land values in the distinct Brazilian biomes?; and (ii) do these effects differ according to farm size? In order to answer these questions, the hedonic approach proposed by Mendelsohn et al. (1994) is estimated for Brazilian municipalities. Since the intention is to assess socio-economic issues regarding global climate change, the paper also conducts a disaggregated analysis of the effects according to farm size, so as to evaluate whether large and small Brazilian farms would be distinctly affected by climate change. The simulations of the effects of global climate change on Brazilian agriculture refer to 2020, 2050 and 2080 time slices. The climate projections are from ten General Circulation Models of the Fourth Assessment Report of the IPCC (2007) according to A2 and A1B scenarios. The results show that the expected effects of global climate change on Brazilian agriculture vary spatially and by farm size categories. In the Pampa region, for example, the effects on land values are quite different depending on the farm size category. We believe that the outcomes of this research will be of great importance for supporting the formulation of risk mitigation and adaptation strategies, poverty and welfare policies in Brazil’s future, especially because the breakdown of farms by size and biomes is a pioneering application in Brazilian scientific literature.
    Date: 2010–11
  38. By: Stephen P. Holland; Jonathan E. Hughes; Christopher R. Knittel; Nathan C. Parker
    Abstract: Instead of efficiently pricing greenhouse gases, policy makers have favored measures that implicitly or explicitly subsidize low carbon fuels. We simulate a transportation-sector cap & trade program (CAT) and three policies currently in use: ethanol subsidies, a renewable fuel standard (RFS), and a low carbon fuel standard (LCFS). Our simulations confirm that the alternatives to CAT are quite costly–2.5 to 4 times more expensive. We provide evidence that the persistence of these alternatives in spite of their higher costs lies in the political economy of carbon policy. The alternatives to CAT exhibit a feature that make them amenable to adoption–a right skewed distribution of gains and losses where many counties have small losses, but a smaller share of counties gain considerably–as much as $6,800 per capita, per year. We correlate our estimates of gains from CAT and the RFS with Congressional voting on the Waxman-Markey cap & trade bill, H.R. 2454. Because Waxman-Markey (WM) would weaken the RFS, House members likely viewed the two policies as competitors. Conditional on a district's CAT gains, increases in a district's RFS gains are associated with decreases in the likelihood of voting for WM. Furthermore, we show that campaign contributions are correlated with a district's gains under each policy and that these contributions are correlated with a Member's vote on WM.
    JEL: H2 H3 K0 K2 L5 L7 L9
    Date: 2011–09
  39. By: Mehdi Abbas (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : FRE3389 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The relation between the climate regulation and the multilateral trade regime is a rising issue in the field of international governance. This article presents the options available to OPEC economies related to this. It analyses the option of introducing a carbon tax or border adjustment measures in the core of the WTO regime. It demonstrates that this option is not sustainable for both institutional and political economy reasons. This is why the article argues that the way to build a climate-compatible trade regulation which takes into account oil exporting countries' interests is to elaborate a cross-institutional cooperation between the WTO and the UNFCCC
    Keywords: World Trade Organization ; multilateral trade regime ; climate governance
    Date: 2011–09
  40. By: Daiju Narita; Ulrich J. Wagner
    Abstract: The production of bioenergy is considered to be a promising energy source for a sustainable energy mix and it is politically promoted in many countries. With the exception of Brazilian ethanol, bioenergy not competitive to fossil energy sources, and therefore needs to be subsidised. Several types of bioenergy are based on bulky raw biomass with high per unit transport costs, importantly impacting on the plant’s production costs and profitability. In addition, considerable quantities of digestates are released, causing disposal costs. Various studies in the past aimed primarily at analysing transport costs of inputs. In this paper we focus on disposal costs of fermentation digestates from biogas production in Germany and analyse different processing techniques and their impact on profitability for three plant size in three case study areas. Our results show that especially in regions with only a small amount of agricultural land and a large heterogeneity in its agricultural area, processing of digestates increases the profitability of biogas production. The same accounts for regions with high livestock density, where the area needed for disposal is comparatively large. The cost efficiency is enforced by a high share of animal excrements on input and the biogas plant size
    Keywords: International environmental agreements (IEAs), climate policy, technology choice, expectations, multiple equilibria
    JEL: Q54 O33 H87
    Date: 2011–09
  41. By: Yu-Fu Chen; Michael Funke; Nicole Glanemann
    Abstract: This paper examines the impact of Knightian uncertainty upon optimal climate policy through the prism of a continuous-time real option modelling framework. We analytically determine optimal intertemporal climate policies under ambiguous assessments of climate damages. Additionally, numerical simulations are provided to illustrate the properties of the model. The results indicate that increasing Knightian uncertainty accelerates climate policy, i.e. policy makers become more reluctant to postpone the timing of climate policies into the future.
    Keywords: Climate change, Knightian uncertainty, kappa-ambiguity, real options
    JEL: C61 D81 Q54
    Date: 2011–08
  42. By: Martin Altemeyer-Bartscher; Anil Markandya; Dirk T.G. Rübbelke
    Abstract: We discuss a tax-transfer scheme that aims at addressing the under-provision problem associated with the private supply of international public goods and at bringing about Pareto optimal allocations internationally. In particular, we consider the example of the global public good ‘climate stabilisation’, both in an analytical and a numerical simulation model. The proposed scheme levies Pigouvian taxes globally, while international sidepayments are employed in order to provide incentives to individual countries for not taking a free-ride from the international Pigouvian tax scheme. The side-payments, in turn, are financed via the environmental taxes. As a distinctive feature we take into account ancillary benefits that may be associated with local public characteristics of climate policy. We determine the positive impact that ancillary effects may exert on the scope for financing side-payments via environmental taxation. A particular attractive feature of ancillary benefits is that they arise shortly after the implementation of climate policies and therefore yield an almost immediate payback of investments in abatement efforts. Especially in times of high public debt levels, long periods of amortisation would tend to reduce political support for investments in climate policy.
    Date: 2011–09
  43. By: Vogt, Carsten; Sturm, Bodo
    Abstract: In this paper, we extend the Fehr and Schmidt model of inequality aversion to a situation where the players differ with respect to their benefits and costs from contributions to a non-linear public good. A necessary condition for contributing to the public good is that the players' benefit exceeds some critical value. Using data from the impact assessment model RICE and estimates for inequality aversion from the experimental literature, we show that this condition fails to hold for major countries involved in international climate policy. --
    Keywords: Climate policy,public good game,inequality aversion,voluntary cooperation
    JEL: C72 D63 H41 Q54
    Date: 2011
  44. By: Anil Markandya; Mikel González-Eguino; Patrick Criqui; Silvana Mima
    Abstract: In the last decade, a few papers have analysed the consequences of achieving the greenhouse gas concentration levels necessary to maintain global temperature increases below 2 degrees Celsius above preindustrial levels. Most models and scenarios assume that future trends in global GDP will be similar to the growth experienced in the past century, which would imply multiplying current output nineteen-fold in this century. However, natural resource and environmental constraints suggest that future global economic growth may not be so high. Furthermore, the environmental implications of such growth depend on how it is distributed across countries. This paper studies the implications on GHG abatement policies of different assumptions on global GDP growth and convergence levels. A partial equilibrium model (POLES) of the world´s energy system is used to provide detailed projections up to 2050 for the different regions of the world. The results suggest that while low stabilisation is technically feasible and economically viable for the world in all the scenarios considered, it is more likely to occur with more modest global growth. Convergence in living standards on the other hand places greater pressures in terms of the required reduction in emissions. In general we find that there are major differences between regions in terms of the size and the timing of abatement costs and economic impact.
    Date: 2011–08
  45. By: Leo Wangler (School of Economics and Business Administration, Friedrich-Schiller-University Jena); JJuan-Carlos Altamirano-Cabrera (Universidad Autonoma Metropolitana-Azcapotzalco, Department of Economics, Growth and Environment Group, Mexico City, Mexico); Hans-Peter Weikard (Environmental Economics and Natural Resources Group, Wageningen University, The Netherlands.)
    Abstract: This paper surveys the recent literature on the political economy of the formation of international environmental agreements. The survey covers theoretical modelling approaches and empirical studies including experimental work. Central to our survey is the question how the political process impacts different stages of agreement formation and stability. Relevant are the rules defined during pre-negotiations that govern negotiations, ratification and implementation. Strategic delegation and lobbying are directly relevant during the negotiation and ratification phases. Implementation, the choice of policy instruments at the national level, will also be impacted by lobbying and indirectly influence negotiations.
    Keywords: international environmental agreements, coalition formation, coalition stability, environmental policy-making, strategic delegation, interest groups, free-rider incentives, determinants of international environmental cooperation, public goods experiments
    JEL: D72 D62 C72 H41
    Date: 2011–09–05
  46. By: Hwang, In Chang; Reynès, Frédéric; Tol, Richard S. J.
    Abstract: Uncertainty plays a significant role in evaluating climate policy, and fat-tailed uncertainty may dominate policy advice. Should we make our utmost effort to prevent the arbitrarily large impacts of climate change under deep uncertainty? In order to answer to this question we propose an new way of investigating the impact of (fat-tailed) uncertainty on optimal climate policy: the curvature of carbon tax against the uncertainty. We find that the optimal carbon tax increases as the uncertainty about climate sensitivity increases, but it does not accelerate as implied by Weitzman's Dismal Theorem. We find the same result in a wide variety of sensitivity analyses. These results emphasize the importance of balancing of the costs and the benefits of climate policy, also under deep uncertainty.
    Keywords: Climate policy/Policy/risk/uncertainty/impacts/Impacts of climate change/Climate change/taxes/cost
    Date: 2011–08

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