nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒10‒09
43 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Economic Effects of Renewable Energy Expansion: A Model-Based Analysis for Germany By Jürgen Blazejczak; Frauke G. Braun; Dietmar Edler; Wolf-Peter Schill
  2. Clean or “Dirty” Energy: Evidence on a Renewable Energy Resource Curse By Caterina Gennaioli; Massimo Tavoni
  3. Governance-technology co-evolution and misalignment in the electricity industry By Elina De Simone; Alessandro Sapio
  4. The political economy of electricity market liberalization: a cross-country approach By Erdogdu, Erkan
  5. Efficient estimation of Markov regime-switching models: An application to electricity spot prices By Joanna Janczura; Rafal Weron
  6. Black swans or dragon kings? A simple test for deviations from the power law By Joanna Janczura; Rafal Weron
  7. Advantage Energy: Emerging Economies, Developing Countries and the Private-Public Sector Interface By David Elzinga; Lew Fulton; Steve Heinen; Oscar Wasilik
  8. Informing the Financing of Universal Energy Access: An Assessment of Current Flows By Morgan Bazilian; Patrick Nussbaumer; Giorgio Gualberti; Erik Haites; Michael Levi; Judy Siegel; Daniel M. Kammen; Joergen Fenhann
  9. Energy Access Scenarios to 2030 for the Power Sector in Sub-Saharan Africa By Morgan Bazilian; Patrick Nussbaumer; Hans-Holger Rogner; Abeeku Brew-Hammond; Vivien Foster; Shonali Pachauri; Eric Williams; Mark Howells; Philippe Niyongabo; Lawrence Musaba; Brian Ó Gallachóir; Mark Radka; Daniel M. Kammen
  10. Impact Evaluation of Productive Use – An Implementation Guideline for Electrifi cation Projects By Gunther Bensch; Jörg Peters
  11. Property Rights, Institutions and Source of Fuel Wood in Rural Ethiopia By Abebe Damte; Steven F. Koc
  12. Impacts of Rural Electrifi cation in Rwanda By Gunther Bensch,; Jochen Kluve; Jörg Peters
  13. Angola's infrastructure : a continental perspective By Pushak, Nataliya; Foster, Vivien
  14. South Sudan's infrastructure : a continental perspective By Ranganathan, Rupa; Briceno-Garmendia, Cecilia M.
  15. Households’ WTP for the Reliability of Gas Supply By Wan-Jung Chou; Andrea Bigano; Alistair Hunt; Stephane La Branche; Anil Markandya; Roberta Pierfederici
  16. Re-Identifying the Rebound – What About Asymmetry? By Manuel Frondel; Colin Vance
  17. Welfare effects of subsidizing a dead-end network of less polluting vehicles By Dietrich, Antje-Mareike; Sieg, Gernot
  18. Global oil risks in the early 21st century By Fantazzini, Dean; Hook, Mikael; Angelantoni, André
  19. Future Pain at the Diesel Pump? Potential Eff ects of the European Commission’s Energy Taxation Proposal By Manuel Frondel; Colin Vance
  20. The long-run macroeconomic impacts of fuel subsidies in an oil-importing developing country By Plante, Michael
  21. Optimal Oil Extraction as a multiple Real Option By Nikolay Aleksandrov; Raphael Espinoza
  22. Real-Time Economic Analysis and Policy Development during the BP Deepwater Horizon Oil Spill By Aldy, Joseph E.
  23. Tanker Ownership in non-OECD countries and the Rise of Government-Owned Fleets By Al Wood
  24. Measuring the contribution of extractive industries to local development : the case of oil companies in Nigeria By Diongue Abdou Ka; Gaël Giraud; Cécile Renouard
  25. Potential for Corn Oil Extracted from Distillersâ Dried Grain and Solubles as a Feedstock for Biodiesel By Ferris, John (Jake)
  26. Modeling an integrated market for sawlogs, pulpwood and forest bioenergy By Kong, Jiehong; Rönnqvist, Mikael; Frisk, Mikael
  27. Prices vs Quantities with Multiple Pollutants By Ambec, Stefan; Coria, Jessica
  28. Economic Growth and the Environment with Clean and Dirty Consumption By Carlo Orecchia; Maria Elisabetta Tessitore
  29. Greener Growth in the Belgian Federation By Tomasz Kozluk
  30. The Implementation of the Korean Green Growth Strategy in Urban Areas By Lamia Kamal-Chaoui; Fabio Grazi; Jongwan Joo; Marissa Plouin
  31. Environmental Management Policy under International Carbon Leakage By Kazuharu Kiyono; Jota Ishikawa
  32. Who Should Bear the Cost of China’s Carbon Emissions Embodied in Goods for Exports? By ZhongXiang Zhang
  33. Cooperative and non-cooperative solutions to carbon leakage By Alessandro Antimiani; Valeria Costantini; Chiara Martini; Luca Salvatici
  34. International trade, CO2 emissions and heterogeneous firms By Forslid, Rikard; Okubo, Toshihiro; Ulltveit-Moe, Karen-Helene
  35. The Environmental Effect of Green Taxation: the Case of the French "Bonus/Malus" By X. D'HAULTFOEUILLE; P. GIVORD; X. BOUTIN
  36. Carbon Taxation in the EU: Expanding EU Carbon Price By David A. Weisbach
  37. Climate risks and carbon prices: Revising the social cost of carbon By Ackerman, Frank; Stanton, Elizabeth A.
  38. The social cost of CO2 from the PAGE09 model By Hope, Chris W.
  39. Adaptation Can Help Mitigation: An Integrated Approach to Post-2012 Climate Policy By Francesco Bosello; Carlo Carraro; Enrica De Cian
  40. Green Growth and Climate Change Policies in New Zealand By Alexandra Bibbee
  41. Climate Change and Individual Decision Making: An Examination of Knowledge, Risk Perception, Self-interest and Their Interplay By Francesca Pongiglione
  42. Safe vs. Fair: A Formidable Trade-off in Tackling Climate Change By Massimo Tavoni; Shoibal Chakravarty; Robert Socolow
  43. Sustainable Cooperation in Global Climate Policy: Specific Formulas and Emission Targets to Build on Copenhagen and Cancun By Valentina Bosetti; Jeffrey Frankel

  1. By: Jürgen Blazejczak; Frauke G. Braun; Dietmar Edler; Wolf-Peter Schill
    Abstract: Increasing utilization of renewable energy sources (RES) is a priority worldwide. Germany has been a forerunner in the deployment of RES and has ambitious goals for the future. The support and use of renewables affects the economy: It creates business opportunities in sectors producing renewable energy facilities, but also comes along with costs for supporting the deployment of renewables. This paper analyses and quantifies the net balance of economic effects associated with renewable energy deployment in Germany until 2030. To this end, we use a novel model, the 'Sectoral Energy-Economic Econometric Model' (SEEEM). SEEEM is an econometric multi-country model which, for Germany, contains a detailed representation of industries, including 14 renewable energy technology sectors. Our results show that renewable energy expansion can be achieved without compromising growth or employment. The analysis reveals a positive net effect on economic growth in Germany. Net employment effects are positive. Their size depends strongly on labour market conditions and policies. Results at the industry level indicate the size and direction of the need for restructuring across the sectors of the Germany economy.
    Keywords: Renewable energy, Germany, net economic effects
    JEL: Q43 Q52 C5
    Date: 2011
  2. By: Caterina Gennaioli (Fondazione Eni Enrico Mattei); Massimo Tavoni (Fondazione Eni Enrico Mattei)
    Abstract: The aim of this paper is to provide an assessment of the potential for resource curse in the renewable energy sector. Taking a political economy approach, we analyze the link between public support schemes for renewable energy and the potential scope for rent seeking and corruption. The insights of a model of political influence by interest groups are tested empirically using a panel data of Italian provinces for the period 1990-2007. We find evidence that a curse exists in the case of wind energy, and specifically that: i) criminal association activity increased more in high-wind provinces and especially after the introduction of a more favourable public policy regime and, ii) the expansion of the wind energy sector has been driven by both the wind level and the quality of political institutions, through their effect on criminal association. The analysis points out that in the presence of poor institutions, efficient market-based policies can have an adverse impact. This has important normative implications especially for countries that are characterized by abundant renewable resources and weak institutions, and are thus more susceptible to the private exploitation of public incentives.
    Keywords: Corruption, Natural Resources Curse, Wind Energy, Political Economy
    JEL: D73 O13 P16
    Date: 2011–08
  3. By: Elina De Simone; Alessandro Sapio (-)
    Abstract: This paper explores some reasons why the alignment between governance and technology in infrastructures may be unstable or not easy to achieve. Focusing on the electricity industry, we claim that the decentralization of governance – an essential step towards a decentralized technical coordination - may be hampered by if deregulation magnifies behavioural uncertainties and asset specificities; and that in a technically decentralized system, political demand for centralized coordination may arise if the players are able to collude and lobby, and if such practices lead to higher electricity rates and lower efficiency. Our claims are supported by insights coming from approaches as diverse as transaction cost economics, the competence-based view of the firm, and political economy.
    Keywords: Governance; Technology; Coherence; Competence; Transaction costs; Regulation.
    JEL: D23 L43 L94 M20 O31
    Date: 2011–06–16
  4. By: Erdogdu, Erkan
    Abstract: More than half of the countries in the world have introduced a reform process in their power sectors and billions of dollars have been spent on liberalizing electricity markets around the world. Ideological considerations, political composition of governments and educational/professional background of leaders have played and will play a crucial role throughout the reform process. Adapting a political economy perspective, this paper attempts to discover the impact of political economy variables on the liberalization process in electricity markets. Empirical models are developed and analyzed using panel data from 55 developed and developing countries covering the period 1975–2010. The research findings suggest that there is a significant negative relationship between electricity market liberalization and the size of industry sector, meaning that countries with larger industry sectors tend to liberalize less. Also, we detect a negative correlation between polity score and power sector liberalization, that is; it cannot be argued that liberalization policies are stronger in more democratic countries. On the other hand, our results imply that countries that receive foreign financial aid or assistance are more likely to liberalize their electricity markets. In OECD countries, single-party governments accelerate the reform process by reducing public ownership and vertical integration. Moreover, we detect a negative relationship between the years the chief executive has been in office and the reform progress in OECD countries. Furthermore, we identify a decrease in vertical integration in electricity industry during the terms of parties with “right” or “left” ideologies in OECD countries. Additionally, professional and educational background of head of executive branch (prime minister, president and so on) seem to have very significant impact on reform process in OECD countries, but this is not the case in non-OECD countries. Leaders with a professional background as entrepreneurs speed up electricity market liberalization process in OECD countries while those with a background as economists slow it down. As for educational background, the reforms seem to progress slower in OECD countries if the head of executive has an educational background in economics or natural science. As a final point, the study suggests that EU or OECD membership, the existence of electricity market reform idea, population density, electricity consumption, income level, educational level, imports of goods and services (as % of GDP) and country specific features have a strong correlation with liberalization process in electricity markets.
    Keywords: Electric utilities; industrial policy; political economy
    JEL: F59 L52 L94 C33
    Date: 2011–10–10
  5. By: Joanna Janczura; Rafal Weron
    Abstract: In this paper we discuss the calibration of models built on mean-reverting processes combined with Markov regime-switching (MRS). We propose a method that greatly reduces the computational burden induced by the introduction of independent regimes and perform a simulation study to test its efficiency. Our method allows for a 100 to over 1000 times faster calibration than in case of a competing approach utilizing probabilities of the last 10 observations. It is also more general and admits any value of gamma in the base regime dynamics. Since the motivation for this research comes from a recent stream of literature in energy economics, we apply the new method to sample series of electricity spot prices from the German EEX and Australian NSW markets. The proposed MRS models fit these datasets well and replicate the major stylized facts of electricity spot price dynamics.
    Keywords: Markov regime-switching; Energy economics; Electricity spot price; EM algorithm; Independent regimes;
    JEL: C13 C51 Q40
    Date: 2011
  6. By: Joanna Janczura; Rafal Weron
    Abstract: We develop a simple test for deviations from power law tails, which is based on the asymptotic properties of the empirical distribution function. We use this test to answer the question whether great natural disasters, financial crashes or electricity price spikes should be classified as dragon kings or 'only' as black swans.
    Keywords: Black swan; Dragon king; Power-law; Weibull distribution; Tail behavior; Outlier; Hypothesis test;
    JEL: C12 C16 G32
    Date: 2011
  7. By: David Elzinga; Lew Fulton; Steve Heinen; Oscar Wasilik
    Abstract: Increased focus has been placed on the issues of energy access and energy poverty over the last number of years, most notably indicated by the United Nations (UN) declaring 2012 as the “International Year of Sustainable Energy for All”. Although attention in these topics has increased, incorrect assumptions and misunderstandings still arise in both the literature and dialogues. Access to energy does not only include electricity, does not only include cook stoves, but must include access to all types of energy that form the overall energy system. This paper chooses to examine this energy system using a typology that breaks it into 3 primary energy subsystems: heat energy, electricity and transportation. Describing the global energy system using these three subsystems provides a way to articulate the differences and similarities for each system’s required investments needs by the private and public sectors.
    Date: 2011–09
  8. By: Morgan Bazilian (United Nations Industrial Development Organization); Patrick Nussbaumer (United Nations Industrial Development Organization); Giorgio Gualberti (Technical University of Lisbon); Erik Haites (Margaree Consultants Inc.); Michael Levi (Council on Foreign Relations); Judy Siegel (Energy and Security Group); Daniel M. Kammen (The World Bank); Joergen Fenhann (UNEP Risoe Centre, Technical University of Denmark)
    Abstract: Energy poverty is widely recognized as a major obstacle to economic and social development and poverty alleviation. To help inform the design of appropriate and effective policies to reduce energy poverty, we present a brief analysis of the current macro financial flows in the electricity and gas distribution sectors in developing countries. We build on the methodology used to quantify the flows of investment in the climate change area. This methodology relies on national gross fixed capital formation, overseas development assistance, and foreign direct investment. These high-level and aggregated investment figures provide a sense of scale to policy-makers, but are only a small part of the information required to design financial vehicles. In addition, these figures tend to mask numerous variations between sectors and countries, as well as trends and other temporal fluctuations. Nonetheless, for the poorest countries, one can conclude that the current flows are considerably short (at least five times) of what will be required to provide a basic level of access to clean, modern energy services to the “energy poor”.
    Keywords: Energy Access, Energy Finance, Financial flows
    JEL: Q4
    Date: 2011–07
  9. By: Morgan Bazilian (United Nations Industrial Development Organization); Patrick Nussbaumer (United Nations Industrial Development Organization); Hans-Holger Rogner (International Atomic Energy Agency); Abeeku Brew-Hammond (The Energy Center, KNUST); Vivien Foster (The World Bank); Shonali Pachauri (International Institute for Applied Systems Analysis); Eric Williams (International Atomic Energy Agency); Mark Howells (KTH Technical University); Philippe Niyongabo (African Union Commission); Lawrence Musaba (Southern African Power Pool); Brian Ó Gallachóir (University College Cork); Mark Radka (United Nations Environment Programme); Daniel M. Kammen (The World Bank)
    Abstract: In order to reach a goal of universal access to modern energy services in Africa by 2030, consideration of various electricity sector pathways is required to help inform policy-makers and investors, and help guide power system design. To that end, and building on existing tools and analysis, we present several ‘high-level’, transparent, and economy-wide scenarios for the sub-Saharan African power sector to 2030. We construct these simple scenarios against the backdrop of historical trends and various interpretations of universal access. They are designed to provide the international community with an indication of the overall scale of the effort required. We find that most existing projections, using typical long-term forecasting methods for power planning, show roughly a threefold increase in installed generation capacity occurring by 2030, but more than a tenfold increase would likely be required to provide for full access – even at relatively modest levels of electricity consumption. This equates to approximately a 13% average annual growth rate, compared to a historical one (in the last two decades) of 1.7%.
    Keywords: Energy Access, Power System Planning, Sub-Saharan Africa
    JEL: C1 Q41
    Date: 2011–09
  10. By: Gunther Bensch; Jörg Peters
    Abstract: There is a consensus in the international community that rural electrifi cation and, in particular, the productive use of electricity contributes to poverty alleviation. At the same time, eff orts to evaluate the impacts of development projects have increased substantially. This paper provides a hands-on guide for designing evaluation studies regarding the impacts of productive electricity usage. Complementary to the existing literature on evaluation methods, this guide familiarizes project managers with the concrete steps that have to be undertaken to plan and implement an evaluation. The guide comprises three modules based on enterprise surveys and on anecdotal case studies. For each module, the implementation is described on a step-by-step basis including conceptual issues as well as logistics and methodological questions.
    Keywords: Development eff ectiveness; productive electricity use; survey design;monitoring and evaluation
    JEL: O22
    Date: 2011–08
  11. By: Abebe Damte; Steven F. Koc
    Abstract: This study examines the relationship between property rights, defined by land tenure security and the strength of local-level institutions, and household demand for fuel wood, as measured by the source from which fuel wood is collected. A multinomial regression model is applied to survey data collected in rural Ethiopia. Results from the discrete choice model indicate that active local-level institutions increase household dependency on open access forests, while land security reduces open access forest dependence. However, local-level institutions are found to reduce the role of private fuel wood sources, while tenure security has not, at least yet, had any impact on private fuel wood source collection activities. The results suggest that there is a need to bring more open access forests under the management of the community and increase the quality of community forestry management in order to realize improvements in forest conservation
    Keywords: property rights, institutions, fuel wood, rural, Ethiopia
    JEL: C2 D73 O17 H32
    Date: 2011
  12. By: Gunther Bensch,; Jochen Kluve; Jörg Peters
    Abstract: Rural electrifi cation is believed to contribute to the achievement of the MDG. In this paper, we investigate electrifi cation impacts on diff erent indicators. We use household data that we collected in Rwanda in villages with and without electricity access. We account for self-selection and regional diff erences by using households from the electrifi ed villages to estimate the probability to connect for all households – including those in the non-electrifi ed villages. Based on these probabilities we identify counterfactual households and fi nd robust evidence for positive eff ects on lighting usage. Eff ects on income and children’s home studying become insignifi cant if regional diff erences are accounted for.
    Keywords: Rural electrifi cation; energy access; impact evaluation; matching
    JEL: O12 O13 O18 O22
    Date: 2011–09
  13. By: Pushak, Nataliya; Foster, Vivien
    Abstract: Infrastructure made a net contribution of around 1 percentage point to Angola's improved per capita growth performance in recent years, despite unreliable power supplies and poor roads, which each holding back growth by 0.2 percentage points. Raising the country's infrastructure endowment to that of the region's middle-income countries (MICs) could boost Angola's annual growth by about 2.9 percentage points. As a resource-rich, postconflict country, Angola has shown an exceptionally strong commitment to financing the reconstruction and expansion of its infrastructure. It has recently expanded its generation capacity, embarked on an ambitious multibillion-dollar road rehabilitation program, begun to make investments aimed at easing congestion at the Port of Luanda, and embarked upon an ambitious rehabilitation program for urban water systems. Numerous challenges remain, however. Angola needs to upgrade its electricity transmission and distribution infrastructure, expand its urban water-supply system, improve efficiency at the Port of Luanda, and make policy and regulatory adjustments across the board. Angola presently spends around $4.3 billion per year on infrastructure, with $1.3 billion lost to inefficiencies. After taking sectoral allocations and inefficiencies into account, a modest funding gap of $115 million per year remains, which could be largely eliminated by focusing on lower-cost water and sanitation options. Angola's infrastructure needs are manageable relative to its fast-growing economy, as long as the country can address inefficiencies.
    Keywords: Transport Economics Policy&Planning,Infrastructure Economics,Town Water Supply and Sanitation,Energy Production and Transportation,Economic Theory&Research
    Date: 2011–09–01
  14. By: Ranganathan, Rupa; Briceno-Garmendia, Cecilia M.
    Abstract: Newly independent South Sudan faces a challenge in making its own way in infrastructure development. Despite earning $6 billion in oil revenues since 2005, South Sudan's spending has not been proportional to its income, but rather has lagged behind North Sudan's development of infrastructure and social support. South Sudan benefitted from strong donor support during 2004-10, the interim period defined by the Comprehensive Peace Agreement. It focused on reestablishing regional transport links and access to seaports as well as rehabilitating its ports, airstrips, and single rail line. South Sudan also successfully liberalized the ICT sector. Nonetheless, the new country's infrastructure remains in such a dismal state that it is difficult to pinpoint a single most pressing challenge. The transport sector accounts for half of the country's spending needs, and water and sanitation account for a further quarter of the total. But so many improvements are needed that the nation cannot realistically catch up with its neighbors within 10 years, or even longer. South Sudan's annual infrastructure funding gap is $879 million per year. Given that the country's total needs are beyond its reach in the medium term, it must adopt firm priorities for its infrastructure spending. It also must attract international and private-sector investment and look to lower-cost technologies to begin to close its funding gap. Although South Sudan loses relatively little to inefficiencies, redressing those inefficiencies will be vital to creating solid institutions to attract new investors and get the most out of their investments.
    Keywords: Transport Economics Policy&Planning,E-Business,Infrastructure Economics,Energy Production and Transportation,Roads&Highways
    Date: 2011–09–01
  15. By: Wan-Jung Chou (APEC Research Centre for Typhoon and Society); Andrea Bigano (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo per i Cambiamenti Climatici); Alistair Hunt (University of Bath); Stephane La Branche (Institute of political studies); Anil Markandya (BC3 Basque Centre for Climate Change, University of Bath); Roberta Pierfederici (Fondazione Eni Enrico Mattei)
    Abstract: The security of natural gas supply is an important issue for all EU countries due to the region’s heavy dependence on imported supply sources and in light of energy demand for gas that is continuously increasing. Discussions have emphasised strategies for securing the supply at the macro level, e.g. diversification in supply sources, increase in storage capacity, etc. By contrast, consumers’ demand for the reliability of gas supply is rarely investigated. Hence this study was conducted to examine the economic implications associated with the security of gas supply directly to domestic consumers. Based on the choice experiment approach, household surveys were conducted in France, Italy and the UK. The results confirmed that the degree of the economic impact of a disruption of gas supply to domestic consumers was a function of the duration of a supply disruption and the season in which a supply cut would take place, as well as other preferences of consumers. The willingness to pay to secure per unit of gas consumption, or alternatively the costs of gas unsupplied, was estimated at between €2.65/cubic metre and €41.48/cubic metre across three different European countries.
    Keywords: Energy Security, Gas Supply, Households, Willingness to Pay, Choice Experiment, EU
    JEL: C35 C93 D12 Q41
    Date: 2011–07
  16. By: Manuel Frondel; Colin Vance
    Abstract: Rebound eff ects measure the behaviorally induced off set in the reduction of energy consumption following effi ciency improvements. Using panel estimation methods and household travel diary data collected in Germany between 1997 and 2009, this study identifi es the rebound eff ect in private transport by allowing for the possibility that fuel price elasticities – from which rebound eff ects can be derived – are asymmetric. This approach rests on evidence that has emerged from the empirical literature suggesting that the response in individual travel demand to price increases is stronger than to decreases. Such an asymmetric response would necessitate reference to the fuel price elasticity derived from price decreases in order to identify the rebound eff ect, as the rebound occurs in response to a decrease in unit cost for car travel due to improved fuel effi ciency. While we fail to reject the hypothesis that the magnitude of the response to a price increase is equal to that of a price decrease, our rebound eff ect estimate for single-vehicle households of 58% is in line with a recent German study by Frondel, Peters, and Vance (2008).
    Keywords: Automobile travel; panel estimation models
    JEL: D13 Q41
    Date: 2011–08
  17. By: Dietrich, Antje-Mareike; Sieg, Gernot
    Abstract: This article shows that in the presence of environmental externalities, it may be welfare enhancing to overcome a technological lock-in by a dead- end technology through governmental intervention. It is socially desirable to subsidize a dead-end technology if its environmental externality is small relative to the one of the established technology, if the installed base and/or the strength of the network effect is small and if future generations matter. Applying our results to the private transport sector, governments promoting alternatives to gasoline-driven vehicles have to be aware of these opposing welfare effects.
    Keywords: environmental externalities; network effects; private transport; technological change
    JEL: L92 Q55 O33
    Date: 2011–09–28
  18. By: Fantazzini, Dean; Hook, Mikael; Angelantoni, André
    Abstract: The Deepwater Horizon incident demonstrated that most of the oil left is deep offshore or in other difficult to reach locations. Moreover, obtaining the oil remaining in currently producing reservoirs requires additional equipment and technology that comes at a higher price in both capital and energy. In this regard, the physical limitations on producing ever-increasing quantities of oil are highlighted as well as the possibility of the peak of production occurring this decade. The economics of oil supply and demand are also briefly discussed showing why the available supply is basically fixed in the short to medium term. Also, an alarm bell for economic recessions is shown to be when energy takes a disproportionate amount of total consumer expenditures. In this context, risk mitigation practices in government and business are called for. As for the former, early education of the citizenry of the risk of economic contraction is a prudent policy to minimize potential future social discord. As for the latter, all business operations should be examined with the aim of building in resilience and preparing for a scenario in which capital and energy are much more expensive than in the business-as-usual one.
    Keywords: Peak oil; Economic risks; Energy transition risks; Government risks; Business risks
    JEL: Q32 Q31 Q34 Q48 Q30
    Date: 2011–02–01
  19. By: Manuel Frondel; Colin Vance
    Abstract: The Energy Tax Directive recently proposed by the European Commission envisages to tax fuels based on their energy content. By raising prices for diesel to a level higher than that of petrol, this proposal would eliminate the price advantage currently enjoyed by diesel in most EU Member States. To explore the implications of such a tax regime for automobile travel, the present analysis undertakes a comparative analysis of price elasticities for both fuel types. Drawing on household panel data from Germany, we fail to reject the hypothesis that the fuel price elasticities for petrol and diesel are equal. With our uniform fuel price elasticity estimates being on the order of -0.5 to -0.42, the typical fi nding from the empirical literature that the elasticities gleaned from household-level data are generally larger than those from aggregate time-series data is reconfirmed.
    Keywords: Fuel taxation; fuel price elasticities; household data; automobile travel; panel
    JEL: L98 Y10
    Date: 2011–09
  20. By: Plante, Michael
    Abstract: Analytical and numerical results show how the presence of a subsidy on household and firm purchases of oil products distorts long-run macroeconomic aggregates in an oil-importing developing country. Beyond leading to over-consumption of oil products these subsidies also lead to increased labor supply, a distorted emphasis on producing traded goods, and higher real wages. The subsidy also impacts the relative price of non-traded goods, causing it to fall when the non-traded sector is more oil-intensive than the traded sector and vice-versa.
    Keywords: oil; fuel-price subsidies; developing countries; fiscal policy
    JEL: E62 O23 H30 Q43
    Date: 2011–03
  21. By: Nikolay Aleksandrov; Raphael Espinoza
    Abstract: We study optimal oil extraction strategy and the value of an oil field using a multiple real option appraoch. Extracting a barrel of oil is similar to exercising a call option and optimal strategies lead to deferring production when oil prices are low and when volatility is high. We sow that, in theory, the net present alue ofa country's oil reserves is increased significantly (by 100 percent, in the most extreme case) if production decisions are made conditional on oil prices. We also show that the marginal value ofaditional capacity is higher for countries with bigger resources and longer production horizons. We apply the model to Brazil and the U>A>E> in order to pin down two points of the global supply curve.
    Keywords: Oil production, Real Options, Capacity Expansion, Stochastic Optimization
    JEL: C61 Q30 Q43
    Date: 2011
  22. By: Aldy, Joseph E. (Harvard University)
    Abstract: The 2010 BP Deepwater Horizon oil spill posed near-term economic risks to the Gulf of Mexico region and raised questions about appropriate policies to mitigate catastrophic oil spill risks. This essay reviews the Obama Administration's assessment of the economic vulnerabilities to the spill, the Administration's May 12, 2010 legislative proposal focused on minimizing the adverse economic impacts to workers and small businesses in the Gulf of Mexico, and the effort to secure an agreement with BP to ensure that those harmed by the spill will receive full compensation. Then, the essay discusses several of the policy reforms advanced by the Administration to reduce the risks of future catastrophic oil spills, including the value of an industry consortium to provide deepwater well containment resources and the need to remove the arbitrary limit on liability for economic damages from offshore drilling. The essay closes with a few policy lessons learned from the spill.
    Date: 2011–09
  23. By: Al Wood (Institute for International Economic Policy, George Washington University)
    Abstract: This paper provides an historical perspective of the global oil-tanker market, the international tanker fleet, and the major trends in tanker ownership. The available data indicate that outside the OECD, more than half of large tanker capacity is ultimately owned by governments compared to less than one percent within the OECD. A positive correlation is identified between oil imports and tanker ownership at the national level, but only for non-OECD countries. This result suggests that the forecasted increases in oil imports and exports by emerging economies over the next two decades are likely to result in higher levels of government ownership of the international oil tanker fleet.
    Keywords: petroleum, oil tanker, maritime law, OECD
    JEL: F52 L33 L71 L91
    Date: 2011–07
  24. By: Diongue Abdou Ka (UFR SAT - Université Gaston Berger de Saint-Louis Sénégal - Université Gaston Berger de Saint-Louis); Gaël Giraud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, ESCP-Europe - Campus de Paris); Cécile Renouard (ESSEC - ESSEC Business School)
    Abstract: Extractive industries face two main challenges in terms of CSR and poverty reduction: 1) recognize that societal activity is part of their core business; 2) take part in socio-economic projects that contribute to their stakeholders' empowerment and not only to their living conditions. Based on surveys achieved in Nigeria in 2008, the paper presents two societal performance indices meant to be complementary: the Poverty Exit Index (PEI) and the Relational Capability Index (RCI). We show that, while they have fostered the PEI of the local communities, the development projects of the oil companies had a rather negative impact on their RCI. We then identify key variables that can influence positively the RCI and on which a sensible development policy should focus.
    Keywords: development indices ; capability approach ; relational capability ; development ; poverty ; impact assessment
    Date: 2011–07–30
  25. By: Ferris, John (Jake)
    Abstract: Rising prices on vegetable oils and animal fats have enabled dry mill ethanol plants to profitably extract corn oil from distillersâ dried grain. While the mandates under the Energy Independence and Security Act of 2007 for grain based ethanol will level off at 15 billion gallons in 2015, the mandates for biodiesel will likely continue to increase from 1.0 billion gallons in 2012 to nearly 2.0 billion gallons in 2022. Corn oil from distillersâ dried grain can provide the needed profits and diversification of feedstock to assist the biodiesel industry in meeting the mandates.
    Keywords: Agribusiness, Crop Production/Industries, Resource /Energy Economics and Policy,
    Date: 2011–09
  26. By: Kong, Jiehong (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Rönnqvist, Mikael (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Frisk, Mikael (Skogforsk)
    Abstract: Traditionally, most applications in the initial stage of forest supply chain deal with sawlogs to sawmills, pulpwood to pulp or paper mills and forest residues to heating plants. However, in the past decades, soaring prices of fossil fuel, global awareness about CO2 emission and increasing attention to domestic resource security have boosted the development of alternative renewable energy, among which forest bioenergy is the most promising and feasible choice for medium- and large-scale heating and electricity generation. Different subsidies and incentive policies for green energy further promote the utilization of forest bioenergy. As a result, there is a trend that pulpwood may be forwarded to heating plants as complementary forest bioenergy. Though pulpwood is more expensive than forest residues, it is more efficient to transport and has higher energy content. The competition between traditional forest industries and wood-energy facilities, expected to grow in the future, is very sensitive for the forest companies as they are involved in all activities. In this paper, we develop a model that all raw materials in the forest, i.e. sawlogs, pulpwood and forest residues, and byproducts from sawmills, i.e. wood chips and bark, exist in an integrated market where pulpwood can be sent to heating plants as bioenergy. It represents a multi-period multi-commodity network planning problem with multiple sources of supply, i.e. pre-selected harvest areas, and multiple kinds of destination, i.e. sawmills, pulp mills and heating plants. The decisions incorporate purchasing the raw materials in harvest areas, reassigning byproducts from sawmills, transporting those assortments to different points for chipping, storing, wood-processing or wood-fired, and replenishing fossil fuel when necessary. Moreover, different from the classic wood procurement problem, we take the unit purchasing costs of raw materials as variables, on which the corresponding supplies of different assortments linearly depend. With this price mechanism, the popularity of harvest areas can be distinguished. The objective of the problem is to minimize the total cost for the integrated market including the purchasing cost of raw materials. Therefore, the model is a quadratic programming (QP) problem with a quadratic objective function and linear constraints. A large case study in southern Sweden under different scenario assumptions is implemented to simulate the integrated market and to study how price restriction, market regulation, demand fluctuation, policy implementation and exogenous change in price for fossil fuel will influence the entire wood flows. Pair-wise comparisons show that in the integrated market, competition for raw materials between forest bioenergy facilities and traditional forest industries pushes up the purchasing costs of pulpwood. The results also demonstrate that resources can be effectively utilized with the price mechanism in supply market. The overall energy value of forest bioenergy delivered to heating plants is 23% more than the amount in the situation when volume and unit purchasing cost of raw materials are fixed.
    Keywords: Forest supply chain; integrated market; bioenergy; wood procurement; wood distribution; quadratic programming
    JEL: L70 L73
    Date: 2011–06–28
  27. By: Ambec, Stefan (Toulouse School of Economics (INRA-LERNA) and University of Gothenburg); Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We examine the choice of policy instrument price, quantity, or a mix of the two when two pollutants are regulated and firms’ abatement costs are private information. A key parameter that affects this choice is the technological externality between the abatement efforts involved, i.e., whether they are substitutes or complements. If they are complements, a mix policy instrument with a tax on one pollutant and a quota on the other is sometime preferable, even if the pollutants are identical in terms of benefits and costs of abatement. Yet, if they are substitutes, the mix policy is dominated by taxes or quotas.<p>
    Keywords: pollution; environmental regulation; policy mixes; tax; emission standard; asymmetric information
    JEL: D62 Q50 Q53 Q58
    Date: 2011–09–27
  28. By: Carlo Orecchia (University of Rome II Tor Vergata); Maria Elisabetta Tessitore (University of Rome II Tor Vergata)
    Abstract: This paper aims to verify the existence of the Environmental Kuznets Curve (EKC) or inverted U-shaped relationship between economic growth and environmental degradation in the context of endogenous growth. An important feature of this study is that the EKC is examined in the presence of pollution as a by product of consumption activities; also, pollution is a stock variable rather than a flow and tends to accumulate over time. In order to highlight the role of consumption on the environment, consumers do not consider directly pollution in the maximization problem and are assumed to choose between two different consumption types, characterized by a different impact on the environment (i.e. dirty and clean consumption). We find that substitution of dirty consumption with clean consumption alone is not sufficient to reduce environmental pollution. The result depends on the product differentiation and the cost to achieve it. From a social welfare perspective, more environmental awareness is unambiguously desirable when it generates less pollution. However, it could be that more environmental awareness leads to a lower level of social welfare depending on the costs of product differentiation and social marginal damage of pollution.
    Keywords: Environmental Kuznets Curve, Economic Growth, Pollution, Consumption, Consumption behaviour
    JEL: C61 Q56
    Date: 2011–07
  29. By: Tomasz Kozluk
    Abstract: The degradation of the environment due to climate change and pollution can harm living standards and damage growth prospects. In Belgium, one of the most densely populated OECD countries, pressure on the environment is particularly strong, and is reinforced by the high energy intensity of the economy and concentrated agriculture. Environmental policy backlogs accumulated over the years highlight the challenges of reducing greenhouse gas emissions and water pollution in a cost-efficient way. To achieve environmental goals at minimum cost across the economy the polluters should face the marginal costs of the externalities they impose, which should be achieved by increasing reliance on environmental taxation. Potential adverse effects on income distribution could then be addressed in the tax benefit system. Moreover, where environmental responsibilities are better dealt with at the regional level, regions should have the most efficient tools, such as taxation powers. Where, due to economies of scale and scope or important cross-regional effects, environmental issues are better dealt with at the national level (for instance in renewable energy sources and transport policies), better co-ordination among regions or a greater role of the federal level should be envisaged. This Working Paper relates to the 2011 OECD Economic Review of Belgium (<P>Une croissance plus verte en Belgique<BR>La dégradation de l’environnement due au changement climatique et à la pollution peut porter atteinte au niveau de vie et aux perspectives de croissance. En Belgique, l’un des pays de l’OCDE les plus densément peuplés, la pression sur l’environnement est particulièrement forte, et encore aggravée par la haute intensité énergétique de l’économie et la concentration de l’agriculture. Les retards accumulés par la politique environnementale au fil des années accentuent encore le défi qui consiste à réduire, avec un bon rapport coût-efficacité, les émissions de gaz à effet de serre et la pollution de l’eau. Pour que les objectifs environnementaux soient atteints pour un coût minimal dans l’ensemble de l’économie, les pollueurs devraient supporter le coût marginal des externalités qu’ils imposent, ce qui devrait être obtenu par un recours accru à la taxation environnementale. Les conséquences indésirables qui pourraient en découler pour la répartition des revenus pourraient alors trouver une solution dans le cadre du système de prélèvements et de prestations. De plus, dans les cas où les responsabilités environnementales sont mieux prises en charge au niveau régional, les régions devraient disposer des outils les plus efficaces, tels que le pouvoir de taxation. Lorsque, en raison d’économies d’échelle et de gamme ou de la présence d’importants effets transrégionaux, les questions d’environnement relèvent davantage de l’échelon national (par exemple, les sources d’énergie renouvelables et les politiques de transport), une meilleure coordination des régions ou un rôle accru des autorités fédérales devraient être envisagés. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Belgique 2011 (
    Keywords: Belgium, renewable energy, federalism, energy efficiency, road pricing, greenhouse gas emissions, environmental policies, green growth, pollution, transport policies, Belgique, fédéralisme, émissions de gaz à effet de serre, énergies renouvelables, efficacité énergétique, politiques environnementales, croissance verte, tarification des routes, pollution, politiques de transport
    JEL: Q28 Q48 Q53 Q54 Q58 R41 R48
    Date: 2011–09–29
  30. By: Lamia Kamal-Chaoui; Fabio Grazi; Jongwan Joo; Marissa Plouin
    Abstract: This report on the Korean Strategy for Green Growth and its implementation in urban areas assesses the contributions of sub-national governments to Korea's National Strategy for Green Growth and identifies the main challenges for effective implementation at the local level. Korea's economy, heavily reliant on foreign exports, was hard hit by the recent global financial crisis. Since the 1970s, Korea has become one of the most energy-intensive economies in the OECD area, thanks to higher living standards, rapid urbanisation and an expanding industrial sector. As a result, the country's greenhouse gas emissions almost doubled between 1990 and 2005, registering the highest growth rate in the OECD area. It is in this context of rapid urbanisation and unprecedented resource consumption and environmental pressures that the report focuses on the role of urban areas within Korea's National Strategy for Green Growth. The effectiveness of Korea's green growth agenda, which has been driven by a central government vision and strategy, will largely hinge on the contribution of urban areas toward more sustainable, greener growth. Through the lens of a multilevel governance framework, an assessment of green growth policies in Korean cities helps to identify concrete strategies for delivering a coherent policy message and improving governance across all levels of government, with particular recommendations in terms of policy, funding, technical capacity and information sharing.
    Keywords: sustainable development, development, government policy, planning, global warming, regional, regional economics, urban sustainability, territorial, cities, urban, green growth, climate
    JEL: Q2 Q3 Q4 Q5 R1 R4 R5
    Date: 2011–07
  31. By: Kazuharu Kiyono; Jota Ishikawa
    Abstract: This paper studies environmental management policy when two fossil-fuel-consuming countries non-cooperatively regulate greenhouse-gas emissions through emission taxes or quotas. The presence of carbon leakage caused by fuel-price changes affects the tax-quota equivalence. We explore each country's incentive to choose an environment regulation instrument within a framework of a two-stage policy choice game and find subgame-perfect Nash equilibria. This sheds a new light on the question of why adopted policy instruments could be different among countries. We also analyze the welfare effect of creating an international market for emission permits. International trade in emission permits may not benefit the fuel-consuming countries.
    Keywords: Global Warming, Carbon Leakage, Emission Tax, Emission Quota, Tax-quota Equivalence, Emission Trading
    JEL: F18
    Date: 2011–09
  32. By: ZhongXiang Zhang (East-West Center)
    Abstract: China’s capital-intensive, export-oriented, spectacular economic growth since launching its open-door policy and economic reforms in late 1978 not only has created jobs and has lifted millions of the Chinese people out of poverty, but also has given rise to unprecedented environmental pollution and CO2 emissions. While estimates of the embedded CO2 emissions in China’s trade differ, both single country studies for China and global studies show a hefty chunk of China’s CO2 emissions embedded in trade. This portion of CO2 emissions had helped to turn China into the world’s largest carbon emitter, and is further widening its gap with the second largest emitter. This raises the issue of who should be responsible for this portion of emissions and bearing the carbon cost of exports. China certainly wants importers to cover some, if not all, of those costs. While China’s stance is understandable, this paper has argued from a broad and balanced perspective that if this is pushed too far, it will not help to find solutions to this issue. On the contrary it can be to China’s disadvantage for a number of reasons. However, aligning this responsibility with China does not necessarily suggest the sole reliance on domestic actions. In that context, the paper recommends specific actions that need to be taken internationally as well as domestically in order to effectively control the embedded CO2 emissions in China’s trade.
    Keywords: Emissions Embodied In Trade, Consumption-Based Accounting, Production-Based Accounting, Processing Trade; Carbon Tariffs, Energy Policy
    JEL: F18 P28 Q42 Q43 Q48 Q53 Q54 Q56 Q58
    Date: 2011–09
  33. By: Alessandro Antimiani; Valeria Costantini; Chiara Martini; Luca Salvatici
    Abstract: A modified version of the CGE GTAP-E model is developed for assessing the economic and carbon emissions effects related to alternative policy measures implemented with the aim of reducing carbon leakage. We explore a set of scenarios, comparing solutions where Annex I countries introduce exogenously or endogenously determined carbon border taxes in order to solve the carbon leakage problem unilaterally. Results provide evidence on the scarce effectiveness of carbon tariffs in reducing carbon leakage and enhancing economic competitiveness, while they have large negative welfare effects not only on the Non-Annex countries, but also on certain Annex I countries
    Keywords: Carbon Leakage, Carbon Border Tax, GTAP-E model
    JEL: Q43 Q54
    Date: 2011–09
  34. By: Forslid, Rikard; Okubo, Toshihiro; Ulltveit-Moe, Karen-Helene
    Abstract: This paper develops a model of trade with heterogenous firms, where firms invest in abatement technology and thereby have an impact on their level of emissions. The model shows how firm productivity and firm exports are both positively related to investments in abatement technology. Emission intensity is, however, negatively related to firms' productivity and exports. The basic reason for these results is that a larger production scale supports more fixed investments in abatement technology and, in turn, lower emissions per output. In contrast to the standard models of heterogeneous firms, firms' productivity, and thus export performance, is not exogenous, but endogeneously determined by firms' investment in abatement technology. We derive closed form solutions for firm-level abatement investments and emissions per output, and test the empirical implications of the model using detailed Swedish firm-level data. The empirical results strongly support the model.
    Keywords: CO2-emissions; heterogeneous firms; international trade
    JEL: D21 F12 F15
    Date: 2011–09
  35. By: X. D'HAULTFOEUILLE (Insee); P. GIVORD (Insee); X. BOUTIN (Commission européenne)
    Abstract: At the beginning of 2008 was introduced in France a feebate on the purchase of new cars called the Bonus/Malus. Since January 2008, less polluting cars benefit from a price reduction of up to 1,000 euros, while the most polluting ones are subject to a taxation of 2,600 euros. We estimate the impact of this policy on carbon dioxide emissions in the short and long run. These emissions depend on the market shares and the average emissions per kilometer of each car, but also on their manufacturing, car fleet size and the average number of kilometers travelled by their owners. We first develop a simple tractable model that relates car choice and mileage. We then estimate this model, using both the exhaustive dataset of car registrations and a recent transportation survey which provides information on individual journeys. We show that if the shift towards classes benefiting from rebates is spectacular, the environmental impact of the policy is negative. The reform has notably increased sales, leading to an important increase in manufacturing and travelling emissions. We thus stress that such policies may be efficient tool for reducing CO2 emissions since consumers do react to such financial incentives, but should be designed with care to achieve their primary goal.
    Keywords: environmental taxation, automobiles, carbon dioxide emissions, policy evaluation
    JEL: C25 L53 Q53
    Date: 2011
  36. By: David A. Weisbach (University of Chicago)
    Abstract: The current pricing mechanism for carbon in the EU, the EU emissions trading system, only covers 40 percent of emissions. Carbon taxation currently plays no role. The Commission has recently proposed to revise the energy tax system in the EU to include a carbon tax component. This paper evaluates the Commission proposal and considers the possible expansion of the EU carbon pricing base either by expanding emissions trading to cover more sectors or by enacting a carbon tax. It concludes that there are strong arguments for expanding the carbon pricing base, as suggested by the Commission. Nevertheless, expanding the base should done through a unified system, such as expanding the coverage of the emissions trading system or enacting an economywide carbon tax rather than through having side-by-side taxes and trading, as in the Commission proposal.
    Keywords: Carbon Tax
    Date: 2011
  37. By: Ackerman, Frank; Stanton, Elizabeth A.
    Abstract: The social cost of carbon - or marginal damage caused by an additional ton of carbon dioxide emissions - has been estimated by a U.S. government working group at $21 in 2010. That calculation, however, omits many of the biggest risks associated with climate change, and downplays the impact of our current emissions on future generations. Our reanalysis explores the effects of uncertainty about climate sensitivity, the shape of the damage function, and the discount rate. We show that the social cost of carbon is uncertain across a broad range, and could be much higher than $21. In our worst case, it could be almost $900 in 2010, rising to $1,500 in 2050. The most ambitious scenarios for eliminating carbon dioxide emissions as rapidly as technologically feasible (reaching zero or negative net global emissions by the end of this century) require spending up to $150 to $500 per ton of reductions in carbon dioxide emissions by 2050. Using a reasonable set of alternative assumptions, therefore, the damages from a ton of carbon dioxide emissions in 2050 could exceed the cost of reducing emissions at the maximum technically feasible rate. Once this is the case, the exact value of the social cost of carbon loses importance: the clear policy prescription is to reduce emissions a rapidly as possible, and cost-effectiveness analysis offers better insights for climate policy than cost-benefit analysis. --
    Keywords: Social cost of carbon,cost-benefit analysis,climate policy,climate economics
    JEL: Q54 Q58
    Date: 2011
  38. By: Hope, Chris W.
    Abstract: A new version of the PAGE integrated assessment model, PAGE09, is introduced. The most important scientific, impact, emission and adaptation inputs in the latest default version of the model, PAGE09 v1.7 are described. The scientific and economic impact results are presented for a business as usual (BAU) emissions scenario, and for a low emissions scenario which aims to have a 50% chance of keeping the rise in global mean temperatures below 2 degC. Today's mean social cost of CO2 is about $100 per tonne of CO2 in the BAU scenario, and about $50 per tonne in the low emissions scenario. The major influences on the SCCO2 are found to be the transient climate response, the pure time preference rate, the elasticity of the marginal utility of consumption, the feedback response time of the earth and the weight on non-economic impacts. Less than 10% of the mean SCCO2 comes from impacts in annex 1 from annex 1 emissions, while over 45% comes from impacts in the rest of the world (RoW) from RoW emissions. About one third of the mean SCCO2 comes from impacts in the RoW caused by emissions in annex 1, while just over 10% comes from impacts in annex 1 caused by emissions in the RoW. --
    Keywords: Climate change,integrated assessment modelling,uncertainty,social cost
    JEL: Q51 Q54 Q58
    Date: 2011
  39. By: Francesco Bosello (University of Milan and Fondazione Eni Enrico Mattei); Carlo Carraro (University of Venice, CEPR, CESifo and Fondazione Eni Enrico Mattei); Enrica De Cian (University Ca’ Foscari of Venice and Fondazione Eni Enrico Mattei)
    Abstract: The latest round of international negotiations in Copenhagen led to a set of commitments on emission reductions which are unlikely to stabilise global warming below or around 2°C. As a consequence, in the absence of additional ambitious policy measures, adaptation will be needed to address climate-related damages. What is the role of adaptation in this setting? How is it optimally allocated across regions and time? To address these questions, this paper analyses the optimal mix of adaptation and mitigation expenditures in a cost-effective setting in which countries cooperate to achieve a long-term stabilisation target (550 CO2-eq). It uses an Integrated Assessment Model (AD-WITCH) that describes the relationships between different adaptation modes (reactive and anticipatory), mitigation, and capacity-building to analyse the optimal portfolio of adaptation measures. Results show the optimal intertemporal distribution of climate policy measures is characterised by early investments in mitigation followed by large adaptation expenditures a few decades later. Hence, the possibility to adapt does not justify postponing mitigation, although it reduces its costs. Mitigation and adaptation are thus shown to be complements rather than substitutes.
    Keywords: Climate Change Impacts, Mitigation, Adaptation, Integrated Assessment Model
    JEL: Q54 Q56 Q43
    Date: 2011–09
  40. By: Alexandra Bibbee
    Abstract: New Zealand, as a resource-based economy anxious to protect and promote its clean-and-green image, appropriately sees green growth as a natural direction for future development. The country’s environment is of high quality, and depletion of its abundant natural resources is for the most part not a problem. Nevertheless, there are challenges. With little pricing of water resources, water scarcity is being felt increasingly acutely in some dairy-intensive regions prone to drought. Water-quality degradation is linked to leakage from farming by-products. Agricultural activity also gives rise to nearly half the country’s greenhouse gas (GHG) emissions, though electricity consumption and private transport are growing sources of pressure. New Zealand’s GHG intensity of output is the second highest in the OECD (after Australia’s), not surprising for a resource-rich country. Its unique emissions profile, however, makes for costly mitigation: an exceptionally high proportion of electricity generation is already renewable-based (mainly hydro), and no technology to significantly reduce methane from ruminant animals yet exists. New Zealand is a pioneer in implementing an emissions trading scheme (NZ ETS) covering all sectors and gases. Green growth could best be supported by the greater use of market mechanisms among a range of instruments in natural resource management and by strengthening price signals in the NZ ETS. This Working Paper relates to the 2011 OECD Economic Review of New Zealand (<P>Politiques relatives à la croissance verte et au changement climatique en Nouvelle-Zélande<BR>La Nouvelle-Zélande, dont l’économie repose sur l’exploitation de ses ressources naturelles et qui a à coeur de protéger et de promouvoir son image de pays respectueux de l’environnement, voit à juste titre dans la croissance verte une orientation naturelle pour son développement futur. Le pays bénéficie d’un environnement de qualité et du fait de l’abondance de ses ressources naturelles il n’est guère menacé par le risque de leur épuisement. Néanmoins, des défis se profilent à l’horizon. La tarification des ressources en eau étant peu pratiquée, des pénuries d’eau se font sentir avec de plus en plus d’acuité dans certaines régions de production laitière exposées aux sécheresses. La qualité des eaux se dégrade en raison des infiltrations de sous-produits agricoles. L’activité agricole est par ailleurs responsable de près de la moitié des émissions de gaz à effet de serre (GES) du pays, tandis que la consommation d’électricité et le transport privé pèsent eux aussi de plus en plus. L’intensité de production de GES de la Nouvelle-Zélande est la deuxième plus élevée de l’OCDE (après l’Australie), ce qui n’est guère surprenant pour un pays richement doté en ressources. Son profil spécifique d’émissions, toutefois, rend coûteuses les mesures d’atténuation : une proportion exceptionnellement élevée de la production électrique est déjà basée sur les énergies renouvelables (essentiellement hydrauliques), et il n’existe pas encore de technologies permettant de sensiblement réduire les émissions de méthane des animaux ruminants. La Nouvelle-Zélande est pionnière dans la mise en oeuvre d’un système d’échange de quotas d’émission (ETS) couvrant l’ensemble des secteurs et des gaz. Le meilleur moyen de promouvoir une croissance verte serait d’utiliser plus largement les mécanismes de marché, entre autres instruments, pour la gestion des ressources naturelles et de renforcer les signaux donnés par les prix dans le cadre du système néo-zélandais d’échange de quotas d’émission. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Nouvelle-Zélande 2011 (éland e).
    Keywords: New Zealand, climate change, GHG emissions, emissions trading scheme, environmental policies, water use, carbon price, renewables, water pollution, waste management, resource management, agricultural emissions, Kyoto obligations, nutrient trading, mining, biodiversity, changement climatique, Nouvelle-Zélande, émissions de gaz à effet de serre (GES), énergies renouvelables, politiques environnementales, pollution de l'eau, gestion des déchets, gestion des resources, émissions du secteur agricole, échange de quotas sur les nutriments, industries minières, biodiversité
    JEL: H23 Q42 Q48 Q52 Q53 Q54 Q57 Q58
    Date: 2011–09–29
  41. By: Francesca Pongiglione (, Post-doctoral fellow, Università di Bologna, Visiting fellow, FEEM)
    Abstract: In this essay, three separate yet interconnected components of pro-environmental decision making are considered: (a) knowledge, in the form of basic scientific understanding and procedural knowledge, (b) risk perception, as it relates to an individual’s direct experience of climate change and (c) self-interest, either monetary or status-driven. Drawing on a variety of sources in public policy, psychology, and economics, I examine the role of these concepts in inducing or discouraging pro-environmental behavior. Past researches have often overemphasized the weight of just one of those variables in the decision making. I argue, instead, that none of them alone is capable of bringing about the behavioral change required by the environmental crisis. Evidence shows that increasing the public’s scientific knowledge of climate change cannot unilaterally bring about a strong behavioral change. The same can be noticed even when knowledge is joined by risk-perception: deep psychological mechanisms may steer people towards inaction and apathy, despite their direct experience of the detrimental effects of climate change on their lives. Focusing on self-interest alone is similarly unable to induce pro-environmental behavior, due to a host of psychological factors. Instead, in all of the above cases an important missing ingredient may be found in providing the public with locally contextualized procedural knowledge in order to translate its knowledge and concern into action. The importance of this kind of practical knowledge has solid empirical and theoretical underpinnings, and is often overlooked in the climate-change debate that tends to focus on more high-level issues. Yet, for all its essential simplicity, it may carry important public-policy implications.
    Keywords: Individual Behavior, Climate-Change, Psychology, Uncertainty
    JEL: D80 Q00
    Date: 2011–09
  42. By: Massimo Tavoni (Princeton Environmental Institute, Princeton University and Fondazione Eni Enrico Mattei); Shoibal Chakravarty (Princeton Environmental Institute, Princeton University); Robert Socolow (Princeton Environmental Institute, Princeton University and Department of Mechanical and Aerospace Engineering, Princeton University)
    Abstract: Global warming requires a response characterized by forward-looking management of atmospheric carbon and respect for ethical principles. Both safety and fairness must be pursued, and there are severe trade-offs as these are intertwined by the limited headroom for additional atmospheric CO2 emissions. This paper provides a simple numerical mapping at the aggregated level of developed vs. developing countries in which safety and fairness are formulated in terms of cumulative emissions and cumulative per capita emissions respectively. It becomes evident that safety and fairness cannot be achieved simultaneously for strict definitions of both. The paper further posits potential global trading in future cumulative emissions budgets in a world where financial transactions compensate for physical emissions: the safe vs. fair trade-off is less severe but remains formidable. Finally, we explore very large deployments of engineered carbon sinks and show that roughly 1000 GtCO2 of cumulative negative emissions over the century are required to have a significant effect, a remarkable scale of deployment. We also identify the unexplored issue of how such sinks might be treated in sub-global carbon accounting.
    Keywords: Climate Policy, Burden Sharing, Negative Emissions
    JEL: Q01 Q56
    Date: 2011–08
  43. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Jeffrey Frankel (Kennedy School of Government, Harvard University)
    Abstract: We offer a framework to assign quantitative allocations of emissions of greenhouse gases (GHGs), across countries, one budget period at a time. Under the two-part plan: (i) China, India, and other developing countries accept targets at Business as Usual (BAU) in the coming budget period, the same period in which the US first agrees to cuts below BAU; and (ii) all countries are asked in the future to make further cuts in accordance with a common numerical formula to all. The formula is expressed as the sum of a Progressive Reductions Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. This paper builds on our previous work in many ways. First we update targets to reflect pledges made by governments after the Copenhagen Accord of December 2010 and confirmed at the Cancun meeting of December 2011. Second, the WITCH model, which we use to project economic and environmental effects of any given set of emission targets, has been refined and updated to reflect economic and technological developments. We include the possibility of emissions reduction from bio energy (BE), carbon capture and storage (CCS), and avoided deforestation and forest degradation (REDD+) which is an important component of pledges in several developing countries. Third, we use a Nash criterion for evaluating whether a country’s costs are too high to sustain cooperation.
    Keywords: Cancun, Climate, Concentrations, Cooperation, Copenhagen, Costs, Developing Countries, Development, Emissions, Equity, Global Climate, Global Warming, Greenhouse Gas, Human Development, International, Kyoto, Sustainable, Treaty, United Nations, WITCH
    JEL: Q54
    Date: 2011–09

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