nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒11‒01
twenty papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Fuel Poverty: The problem and its measurement. Interim Report of the Fuel Poverty Review By John Hills
  2. Causal modeling and inference for electricity markets By Egil Ferkingstad; Anders L{\o}land; Mathilde Wilhelmsen
  3. Speculation in the oil market By Luciana Juvenal; Ivan Petrella
  4. Do Giant Oilfield Discoveries Fuel Internal Armed Conflicts? By Lei, Yu-Hsiang; Michaels, Guy
  5. Explaining the Appreciation of the Brazilian <i>real</i> By Annabelle Mourougane
  6. Evaluation of subsidies programs to sell green cars: Impact on prices, quantities and efficiency By Juan Luis Jiménez; Jordi Perdiguero; Carmen García
  7. An economic, environmental and transport evaluation of the Ecopass scheme in Milan: three years later By Romeo Danielis; Lucia Rotaris; Edoardo Marcucci; Jérôme Massiani
  8. Coordinating cross-border congestion management through auctions : An experimental approach to European solutions By Céline Jullien; Virginie Pignon; Stéphane Robin; Carine Staropoli
  9. Brown Backstops versus the Green Paradox (Revision of CentER DP 2011-076) By Michielsen, T.O.
  10. une justice environnementale européenne : le cas de la précarité énergétique. By Laurent, Eloi
  11. Technological vs ecological switch and the environmental Kuznets curve By Raouf Boucekkine; Aude Pommeret; Fabien Prieur
  12. Kuznets curve and environmental performance: evidence from China By Halkos, George; Tzeremes, Nickolaos
  13. When Starting with the Most Expensive Option Makes Sense By Adrien Vogt-Schilb; Stéphane Hallegatte
  14. Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions By David F. Drake
  15. The EU Emission Trading Scheme. Allocation Patterns and Trading Flows By Claudia Kettner; Daniela Kletzan-Slamanig; Angela Köppl
  16. évaluation macroéconomique et sectorielle de la fiscalité carbone en France . By Callonnec, Gaël; Reynès, Frédéric; Tamsamani, Yasser Yeddir
  17. Are international environmental agreements stable ex-post? By Beard, Rodney; Mallawaarachchi, Thilak
  18. Sustainable growth under pollution quotas: optimal R&D, investment and replacement policies By Raouf Boucekkine; Natali Hritonenko; Yuri Yatsenko
  19. Positional goods, climate change and the social returns to investment By Leila Davis; Peter Skott
  20. Distributional biases in the analysis of climate change By Peter Skott; Leila Davis

  1. By: John Hills
    Date: 2011–10
  2. By: Egil Ferkingstad; Anders L{\o}land; Mathilde Wilhelmsen
    Abstract: How does dynamic price information flow among Northern European electricity spot prices and prices of major electricity generation fuel sources? We use time series models combined with new advances in causal inference to answer these questions. Applying our methods to weekly Nordic and German electricity prices, and oil, gas and coal prices, with German wind power and Nordic water reservoir levels as exogenous variables, we estimate a causal model for the price dynamics, both for contemporaneous and lagged relationships. In contemporaneous time, Nordic and German electricity prices are interlinked through gas prices. In the long run, electricity prices and British gas prices adjust themselves to establish the equlibrium price level, since oil, coal, continental gas and EUR/USD are found to be weakly exogenous.
    Date: 2011–10
  3. By: Luciana Juvenal; Ivan Petrella
    Abstract: The run-up in oil prices after 2004 coincided with a growing flow of investment to commodity markets and an increased price comovement between different commodities. We analyze whether speculation in the oil market played a key role in driving this salient empirical pattern. We identify oil shocks from a large dataset using a factor-augmented autoregressive (FAVAR) model. We analyze the role of speculation in comparison to supply and demand forces as drivers of oil prices. The main results are as follows: (i) While global demand shocks account for the largest share of oil price fluctuations, financial speculative demand shocks are the second most important driver. (ii) The comovement between oil prices and the price of other commodities is explained by global demand and financial speculative demand shocks. (iii) The increase in oil prices in the last decade is mainly explained by the strength of global demand. However, financial speculation played a significant role in the oil price increase between 2004 and 2008, and its subsequent collapse. Our results support the view that the financialization process of commodity markets explains part of the recent increase in oil prices.
    Keywords: Petroleum products - Prices ; Vector autoregression ; Speculation
    Date: 2011
  4. By: Lei, Yu-Hsiang; Michaels, Guy
    Abstract: We use new data to examine the effects of giant oilfield discoveries around the world since 1946. On average, these discoveries increase per capita oil production and oil exports by up to 50 percent. But these giant oilfield discoveries also have a dark side: they increase the incidence of internal armed conflict by about 5-8 percentage points. This increased incidence of conflict due to giant oilfield discoveries is especially high for countries that had already experienced armed conflicts or coups in the decade prior to discovery.
    Keywords: Armed Conflict; Civil War; Natural Resources; Petroleum; Resource Curse
    JEL: O13 Q33 Q34
    Date: 2011–10
  5. By: Annabelle Mourougane
    Abstract: This paper seeks to identify factors explaining the appreciation of the Brazilian real observed since 2003, which was temporarily interrupted only during episodes of financial turbulence. Net foreign assets and the productivity differential relative to Brazil’s main trade partners are found to be significant determinants of the real effective exchange rate in the long run. In the short term, exchange-rate developments are mostly explained by movements in net foreign assets. The production of oil is also found to explain developments in the real effective exchange rate in the long run. These results are robust to a wide range of tests. There is evidence of an over-valuation of the real in 2010, but the extent of the misalignment is hard to gauge. FEER estimations point to an overvaluation between 3-10% in 2010. Dynamic simulations of behavioural exchange-rate equations generally suggest an overvaluation of between 10-20%. However, these estimations remain subject to large uncertainties.<P>Comment expliquer l'appréciation du real Brésilien<BR>Ce papier cherche à identifier les facteurs expliquant l’appréciation du real Brésilien observé depuis 2003, qui a été temporairement interrompu uniquement durant des épisodes de turbulences financières. Les avoirs extérieurs nets et le différentiel de productivité relatifs aux principaux partenaires commerciaux du Brésil apparaissent comme des déterminants importants du taux de change effectif réel à long terme. À court terme, les évolutions des taux de change sont principalement expliquées par le mouvement des avoirs extérieurs nets. La production de pétrole explique également l'évolution du taux de change effectif réel à long terme. Ces résultats sont robustes à un large éventail de tests. Si la surévaluation du real en 2010 est évidente, l'ampleur de l'écart à l’équilibre reste difficile à mesurer. Les estimations FEER font état d'une surévaluation de 3 à 10% en 2010. Les simulations dynamiques des équations de comportement du taux de change suggèrent généralement une surévaluation de 10 à 20%. Ces estimations restent cependant soumises à de grandes incertitudes.
    Keywords: Brazil, currency, equilibrium exchange rate, FEER, BEER, Brésil, Monnaie, taux de change d’équilibre, FEER, BEER
    JEL: C10 F31
    Date: 2011–10–21
  6. By: Juan Luis Jiménez (Universidad de Las Palmas de Gran Canaria. Facultad de Economía, Empresa y Turismo, Spain); Jordi Perdiguero (Departament de Política Econòmica. GiM-IREA. University of Barcelona. Spain); Carmen García (Universidad de Las Palmas de Gran Canaria. Facultad de Economía, Empresa y Turismo, Spain)
    Abstract: During the recent period of economic crisis, many countries have introduced scrappage schemes to boost the sale and production of vehicles, particularly of vehicles designed to pollute less. In this paper, we analyze the impact of a particular scheme in Spain (Plan2000E) on vehicle prices and sales figures as well as on the reduction of polluting emissions from vehicles on the road. We considered the introduction of this scheme an exogenous policy change and because we could distinguish a control group (non-subsidized vehicles) and a treatment group (subsidized vehicles), before and after the introduction of the Plan, we were able to carry out our analysis as a quasi-natural experiment. Our study reveals that manufacturers increased vehicle prices by the same amount they were granted through the Plan (1,000 €). In terms of sales, econometric estimations revealed an increase of almost 5% as a result of the implementation of the Plan. With regard to environmental efficiency, we compared the costs (inverted quantity of money) and the benefits of the program (reductions in polluting emissions and additional fiscal revenues) and found that the Plan would only be beneficial if it boosted demand by at least 30%.
    Keywords: Subsidies; Automobile sector; Difference-in-Difference estimator; Green policies.
    JEL: H23 L52 L62 Q58
    Date: 2011–10
  7. By: Romeo Danielis (University of Trieste, Italy); Lucia Rotaris (University of Trieste, Italy); Edoardo Marcucci (University of Roma 3, Italy); Jérôme Massiani (University of Ca’ Foscari, Venice, Italy)
    Abstract: The paper provides an evaluation of the Ecopass scheme for the years 2008, 2009 and 2010. The term Ecopass conveys the stated political objective of the scheme: a PASS to improve the quality of the urban environment (ECO). The scheme has actually improved the air quality in Milan, although the recommended PM10 threshold is still exceeded for a larger number of days than that recommended by EU directives. This paper estimates the costs and benefits of the scheme three years after its implementation using the same methodology applied in Rotaris et al. (2010) for the year 2008. It results that the benefits still exceed the costs by an increasing amount, but at an annual decreasing rate of improvement. The Ecopass scheme has proved beneficial, but it seems to have exhausted its potential: little further gains in environmental quality could be obtained via a fiscal incentive to improve the abatement technology of the vehicles. The new administration, elected in June 2011, is faced with the task of deciding whether to dismiss, maintain or change the Ecopass scheme. The prevailing idea coming from the Ecopass Commission and from the advocacy groups is to extend both the area of application and the number of classes subject to the charge. A move from a pollution charge to a congestion charge, or at least a combination of a pollution and a congestion charge is envisaged.
    Keywords: Ecopass, road pricing, congestion pricing, urban transport
    Date: 2011
  8. By: Céline Jullien (Grenoble Ecole de Management, 12 rue Pierre Sémard, 38003 Grenoble, Cedex 01, France); Virginie Pignon (Electricité de France); Stéphane Robin (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Carine Staropoli (University Panthéon Sorbonne, Centre d’Economie de la Sorbonne, 106 boulevard de l’Hôpital Bureau 514, 75013 Paris, France)
    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
    JEL: C92 D43 D44 D49
    Date: 2011
  9. By: Michielsen, T.O. (Tilburg University, Center for Economic Research)
    Abstract: Anticipated and unilateral climate policies are ineffective when fossil fuel owners respond by shifting supply intertemporally (the green paradox) or spatially (carbon leakage). These mechanisms rely crucially on the exhaustibility of fossil fuels. We analyze the effect of anticipated and unilateral climate policies on emissions in a simple model with two fossil fuels: one scarce and dirty (oil), the other abundant and dirtier (coal). We derive conditions for a ’green orthodox’: anticipated climate policy may reduce current emissions, and unilateral measures may unintentionally reduce emissions in other countries. Calibrations suggest that intertemporal carbon leakage (between -3% and 1%) is less of a concern than spatial leakage (19-39%).
    Keywords: carbon tax;green paradox;exhaustible resource;backstop;climate change.
    JEL: Q31 Q54
    Date: 2011
  10. By: Laurent, Eloi (Centre de recherche en économie de Sciences Po)
    Abstract: Le débat scientifique et démocratique sur la justice environnementale et sur l'articulation des politiques sociales et environnementales, vieux de plus de deux décennies outre-Atlantique, ne fait que commencer en Europe. L'État providence ne peut plus faire l'impasse dans l'Union européenne sur l'environnement dans lequel vivent les individus (travail, résidence, loisirs) dès lors que celui-ci détermine en partie les facteurs affectant leur santé et plus largement leur bien-être. Il s'agit donc pour les pays membres et les instances de l'UE à la fois d'adopter et d'adapter l'exigence de justice environnementale. Cet article propose des pistes en vue de cette adaptation et, après avoir défini différentes catégories d'inégalités environnementales, en éclaire plus particulièrement un aspect : la précarité ou pauvreté énergétique. La situation du Royaume-Uni et de la France sont passées en revue avant d'aborder les enjeux et modalités d'une politique européenne de lutte contre la précarité énergétique.
    Keywords: justice environnementale, Union européenne, inégalités environnementales, précarité énergétique, pauvreté énergétique.;
    Date: 2011
  11. By: Raouf Boucekkine (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Aude Pommeret (IREGE - Institut de Recherche en Gestion et en Economie - Université de Savoie, HEC - HEC LAUSANNE); Fabien Prieur (LAMETA - Laboratoire Montpellierain d'économie théorique et appliquée - CNRS : UMR5474 - INRA : UR1135 - CIHEAM - Université Montpellier I - Montpellier SupAgro)
    Abstract: We consider an optimal technology adoption AK model in line with Boucekkine Krawczyk and Vallée (2011): an economy, caring about consumption and pollution as well, starts with a given technological regime and may decide to switch at any moment to a cleaner technology at a given permanent or transitory output cost. At the same time, we posit that there exists a pollution threshold above which the assimilation capacity of Nature goes down, featuring a kind of irreversible ecological regime. We study how ecological irreversibility interacts with the ingredients of the latter optimal technological switch problem, with a special attention to induced capital-pollution relationship. We find that if a single technological switch is optimal, one recovers the Environmental Kuznets Curve provided initial pollution is high enough. If exceeding the ecological threshold is optimal, then the latter configuration is far from being the rule.
    Keywords: Technology adoption; ecological irreversibility; Environmental Kuznets Curve; Multi-stage optimal control
    Date: 2011–10–17
  12. By: Halkos, George; Tzeremes, Nickolaos
    Abstract: The paper investigates China’s environmental performance-economic development relationship for the time period of 1965-2009. The results indicate that after 1990 China increased its environmental performance mainly driven by the implementation of several environmental policies. In addition when we taking into account several factors contributed to China’s economic growth, the empirical evidences suggest the existence of an inverted “U” shape relationship between China’s environmental performance and economic development. However, when only the influence of the industrial sector is taken into account the shape of the established relationship changes from an inverted “U” to “N” shape, indicating that the main determinant of China’s environmental inefficiencies over the years was the heavily industrialization.
    Keywords: Environmental performance; Environmental Kuznets Curve; China; Economic Growth
    JEL: Q50 C14 O10 P28 C01
    Date: 2011–10
  13. By: Adrien Vogt-Schilb (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - AgroParisTech); Stéphane Hallegatte (CNRM-GAME - Groupe d'étude de l'atmosphère météorologique - CNRS : URA1357 - INSU - Météo France)
    Abstract: We investigate the use of expert-based Marginal Abatement Cost Curves (MACC) to design abatement strategies. We show that introducing inertia, in the form of the "cost in time" of available options, changes the message from MACCs. Under some conditions, it makes sense to implement some of the more expensive options before the potential of the cheapest ones has been exhausted. It can even be preferable to start with the implementation of the most expensive options if their potential is high and their inertia significant. Also, the best way to achieve Europe's goal of 20 percent reduction in emissions by 2020 is different if this objective is the ultimate objective or if it is only a milestone in a trajectory toward a 75 percent reduction in 2050. The cheapest options may be sufficient to reach the 2020 target but could create a carbon-intensive lock-in and preclude deeper emission reductions by 2050. These results show that in a world without perfect foresight and perfect credibility of the long-term carbon-price signal, a unique carbon price in all sectors is not the most efficient approach. Sectoral objectives, such as Europe's 20 percent renewable energy target in Europe, fuel-economy standards in the auto industry, or changes in urban planning, building norms and infrastructure design are a critical part of an efficient mitigation policy.
    Keywords: marginal abatement cost curves; MACC; inertia; when-flexibility; how-flexibility; optimal abatement strategy; merit-order; timing; dynamic efficiency
    Date: 2011–08–01
  14. By: David F. Drake (Harvard Business School, Technology and Operations Management Unit)
    Abstract: Carbon regulation is intended to reduce global emissions, but there is growing concern that such regulation may simply shift production to unregulated regions, potentially increasing overall carbon emissions in the process. Carbon tariffs have emerged as a possible mechanism to address this concern by imposing carbon costs on imports at the regulated region's border. Advocates claim that such a mechanism would level the playing field whereas opponents argue that such a tariff is anti-competitive. This paper analyzes how carbon tariffs affect technology choice, regional competitiveness, and global emissions through a model of imperfect competition between "domestic" (i.e., carbon-regulated) firms and "foreign" (i.e., unregulated) firms, where domestic firms have the option to offshore production and the number of foreign entrants is endogenous. Under a carbon tariff, results indicate that foreign firms would adopt clean technology at a lower emissions price than domestic producers, with the number of foreign entrants increasing in emissions price only over intervals where offshore foreign firms hold this technology advantage. Further, domestic firms would only offshore production under a carbon tariff to adopt technology strictly cleaner than technology utilized domestically. As a consequence, under a carbon tariff, foreign market share is non-monotonic in emissions price, and global emissions conditionally decrease. Without a carbon tariff, foreign share monotonically increases in emissions price, and a shift to offshore production results in a strict increase in global emissions.
    Keywords: Carbon regulation; Carbon leakage; Technology choice; Imperfect competition
    Date: 2011–10
  15. By: Claudia Kettner (WIFO); Daniela Kletzan-Slamanig (WIFO); Angela Köppl (WIFO)
    Abstract: The EU Emission Trading Scheme (EU ETS) that covers emitters from industry and the energy sector representing 40 percent of the EU's total greenhouse gas emissions is the biggest implementation worldwide of a cap-and-trade scheme. The EU ETS has been the core instrument of European climate policy since its start in 2005. Based on a database comprising more than 10,000 installations in 26 EU countries, this paper provides a thorough analysis of the performance of the EU ETS in the period 2005 to 2010. In the first part, we analyse allocation patterns – i.e., the stringency of allocation caps and distribution issues – on EU country and sector level comparing the results of the EU ETS pilot phase and the first three years of the Kyoto phase. In the second part of the paper, we assess trading flows of European Allowance Units (EUAs) between EU countries comparing the results for the first and second trading period. Furthermore, we analyse the use of credits from flexible mechanisms – Certified Emission Reductions (CERs) from CDM projects and Emission Reduction Units (ERUs) from JI projects – that installations may surrender since the beginning of the second trading period on country level.
    Date: 2011–10–17
  16. By: Callonnec, Gaël; Reynès, Frédéric (Centre de recherche en économie de Sciences Po); Tamsamani, Yasser Yeddir
    Abstract: Cet article évalue l’impact macroéconomique et sectoriel d’une taxe carbone en France en utilisant le modèle Three-ME qui combine deux caractéristiques importantes pour cette analyse. (1) Le modèle possède une structure sectorielle détaillée avec une fine description du système fiscal français, en particulier de la fiscalité appliquée à l’énergie. (2) Il a les principales propriétés des modèles d’inspiration néo-keynésienne car il tient compte de la lenteur des processus d’ajustement des prix et des quantités. Les modèles d’équilibre général d’inspiration walrasienne mettent souvent en évidence les conséquences à long terme d’une taxe carbone sur l’économie mais ils négligent les effets à court et moyen terme notamment sur l’emploi et sur la compétitivité des entreprises. Or l’acceptabilité des réformes environnementales dépend souvent de leurs répercussions sur la sphère économique et sociale à court terme. Ayant des propriétés néokeynésiennes, Three-ME permet de mesurer ces répercussions. Nos résultats confirment sous certaines conditions la possibilité d’un double dividende économique et environnemental autant à court terme qu’à long terme. L’amélioration de la situation économique dépend néanmoins des mesures d’accompagnement mises en oeuvre telles que les exonérations et les modalités de redistribution de la taxe. Il apparaît aussi que ces mesures d’accompagnement réduisent sensiblement l’ampleur du dividende environnemental.
    Keywords: taxe carbone, modèle macroéconomique néo-keynésien, analyse sectorielle.;
    Date: 2011
  17. By: Beard, Rodney; Mallawaarachchi, Thilak
    Abstract: In this paper we present a model of international environmental agreements in the presence of threshold effects. The model is in the tradition of models of international environmental agreements formulated as games in partition function form. Games in partition function form allow the incorporation of external effects between players. The model is applied to global climate change agreements. The agreement involves a contract between nations as to the level of abatement of greenhouse gas emissions and how these benefits are to be shared. Benefits to emissions abatement are subject to a threshold. Consequently, we model climate as a global threshold public good. This allows a mechanism to explore incentives and disincentives for signing agreements consequent to a critical number of other players committing to an agreement. We show that thresholds may destabilize what would be an otherwise stable agreement and that combining an emissions tax with an international agreement can be used to restore stability.
    Keywords: International environmental agreements; threshold public good; gamma core; global warming and emissions taxation
    JEL: C71 H41 Q54 H23
    Date: 2011–10–25
  18. By: Raouf Boucekkine (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Natali Hritonenko (Prairie View - A&M University); Yuri Yatsenko (Houston Baptist University - Houston Baptist University)
    Abstract: We consider an optimal growth model of an economy facing an exogenous pollution quota. In the absence of an international market of pollution permits, the economy has three instruments to reach sustainable growth: R&D to develop cleaner technologies, investment in new clean capital goods, and scrapping of the old dirty capital. The R&D technology depends negatively on a complexity component and positively on investment in this sector at constant elasticity. First, we characterize possible balanced growth paths for different parameterizations of the R&D technology. It is shown that countries with an under-performing R&D sector would need an increasing pollution quota over time to ensure balanced growth while countries with a highly efficient R&D sector would supply part of their assigned pollution permits in an international market without harming their long-term growth. Second, we study transitional dynamics to balanced growth. We prove that regardless of how large the regulation quota is, the transition dynamics leads to the balanced growth with binding quota in a finite time. In particular, we discover two optimal transition regimes: an intensive growth (sustained investment in new capital and R&D with scrapping the oldest capital goods), and an extensive growth (sustained investment in new capital and R&D without scrapping the oldest capital).
    Keywords: Sustainable growth; vintage capital; endogenous growth; R&D; pollution quotas
    Date: 2011–10–17
  19. By: Leila Davis (University of Massachusetts Amherst); Peter Skott (University of Massachusetts Amherst)
    Abstract: The economic analysis of global warming is dominated by models based on optimal growth theory. This approach can generate biases in the presence of positional goods and status effects. We show that by ignoring these direct consumption externalities, integrated assessment models overestimate the social return to conventional investment and underestimate the optimal amount of investment in mitigation. Empirical evidence on the influence of relative consumption on utility suggests that the bias could be quantitatively significant. Our results from a simple survey support this conclusion. JEL Categories: Q13, I3, E1
    Keywords: representative agent, consumption externalities, positional goods, relative consumption, welfare, global warming, discount rates.
    Date: 2011–10
  20. By: Peter Skott (University of Massachusetts Amherst); Leila Davis (University of Massachusetts Amherst)
    Abstract: The economic analysis of global warming is dominated by models based on optimal growth theory. These representative-agent models have an intrinsic distributional bias in favor of the rich. The bias is compounded by the se of revenue-neutrality in the allocation of emission permits. The result is mitigation recommendations that are biased downwards. JEL Categories: Q13, I3, E1
    Keywords: representative agent, welfare, global warming, inequality.
    Date: 2011–10

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