nep-ene New Economics Papers
on Energy Economics
Issue of 2011‒11‒07
thirty-one papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Merchant and Regulated Transmission: Theory, Evidence and Policy By Littlechild, S.
  2. Renewable Electric Energy Integration: Quantifying the Value of Design of Markets for International Transmission Capacity By Karsten Neuhoff; Rodney Boyd; Thilo Grau; Julian Barquin; Francisco Echavarren; Janusz Bialek; Chris Dent; Christian von Hirschhausen; Benjamin Hobbs; Friedrich Kunz; Hannes Weigt; Christian Nabe; Georgios Papaefthymiou; Christoph Weber
  3. Italian consumers’ willingness to pay for renewable energy sources By Bigerna, Simona; Polinori, Paolo
  4. Effect of transparency on changing views regarding nuclear energy before and after Fukushima accident By Yamamura, Eiji
  5. Coordination Under Uncertain Conditions: An Analysis of the Fukushima Catastrophe By Aoki, Masahiko; Rothwell, Geoffrey
  6. Cost-Effectiveness of Electricity Energy Efficiency Programs By Toshi H. Arimura; Shanjun Li; Richard G. Newell; Karen Palmer
  7. Evaluation of Economically Optimal Retrofit Investment Options for Energy Savings in Buildings By Kumbaroğlu, Gürkan; Madlener, Reinhard
  8. Energy, the Environment and Behaviour Change: A survey of insights from behavioural economics By Baddeley, M.
  9. The national-level energy ladder and its carbon implications By Paul J. Burke
  10. Energy Restrictions toGrowth: the past, present and future of energy supply in Brazil By LUCIANO LOSEKANN; Eduardo Pontual Ribeiro; Rosemarie BrökerBone; Adilson de Oliveira
  11. The world energy production, consumption and productivity in the energy sector, population and the per capita growth: Regression analysis By Josheski, Dushko; Lazarov , Darko; Koteski, Cane; Sovreski V. , Zlatko
  12. Geopolitics, Global Patterns of Oil Trade, and China¡¦s Oil Security Quest By Sergey Mityakov; Heiwai Tang; Kevin K. Tsui
  13. Structural breaks and financial volatility: Lessons from BRIC countries By Morales, Lucía; Gassie, Esmeralda
  14. Oil and Gold Prices: Correlation or Causation? By Thai-Ha LE; Youngho CHANG
  15. The Impact of Oil Price Fluctuations on Stock Markets in Developed and Emerging Economies By Thai-Ha LE; Youngho CHANG
  16. Can Oil Prices Forecast Exchange Rates? By Ferraro, Domenico; Rogoff, Kenneth; Rossi, Barbara
  17. Estimating Income Elasticity of Government Expenditures: Evidence from Oil Price Shocks By Markus Bruckner; Alberto Chong; Mark Gradstein
  18. Modeling the Environmental and Socio-Economic Impacts of Biofuels By Karel Janda; Ladislav Kristoufek; David Zilberman
  20. Economic growth, energyconsumption and emissions: an extension of Ramsey-Cass-Koopmans modelunder EKC hypothesis By Luiz Fernando Ohara Kamogawa; Ricardo Shirota
  22. An empirical model of the environmental effect of FDI in host countries: Analysis based on Chinese panel data By Yang, Boqiong; Chen, Jianguo
  24. Vad skulle likabehandling av alla transportslag innebära för kustsjöfarten, miljön och behovet av infrastrukturinvesteringar? By Kågeson, Per
  25. Addressing leakage in the EU ETS : Border adjustment or output-based allocation ?. By Monjon, Stéphanie; Quirion, Philippe
  26. The role of abatement technologies for allocating free allowances By Christin, Clémence; Nicolai, Jean-Philippe; Pouyet, Jerome
  27. Third parties’ participation in tradable permits market. Do we need them? By T. Elias Asproudis; Tom Weyman Jones
  28. The marginal damage costs of different greenhouse gases: An application of FUND By Waldhoff, Stephanie; Anthoff, David; Rose, Steven; Tol, Richard S. J.
  29. Fulfilling Australia's international climate finance commitments: Which sources of financing are promising and how much could they raise? By Frank Jotzo; Jonathan Pickering; Peter J. Wood
  30. Geoengineering as an alternative to mitigation: specification and dynamic implications By Olivier STERCK
  31. Policy-Instrument Choice and Benefit Estimates for Climate-Change Policy in the United States By Matthew J. Kotchen; Kevin J. Boyle; Anthony A. Leiserowitz

  1. By: Littlechild, S.
    Abstract: Economists acknowledge the problems of regulated transmission but take different views about the likely efficiency of merchant transmission. This paper examines the evidence on alleged market failure and regulatory failure as experienced in practice in Australia and Argentina. In these examples, merchant transmission (broadly defined to include private initiatives) has generally not exhibited the standard examples of market failure but regulated transmission generally has exhibited the standard examples of regulatory failure. Imperfect information – more specifically, in the form of lack of coordination – has often been a challenge whatever the approach. Policy should therefore seek to improve the regulatory framework and to remove barriers to merchant transmission and private initiatives. An important role for regulation is to facilitate coordination between potential providers and users of transmission lines.
    JEL: L33 L51 L94
    Date: 2011–10–12
  2. By: Karsten Neuhoff; Rodney Boyd; Thilo Grau; Julian Barquin; Francisco Echavarren; Janusz Bialek; Chris Dent; Christian von Hirschhausen; Benjamin Hobbs; Friedrich Kunz; Hannes Weigt; Christian Nabe; Georgios Papaefthymiou; Christoph Weber
    Abstract: Integrating large quantities of supply-driven renewable electricity generation remains a political and operational challenge. One of the main obstacles in Europe to installing at least 200 GWs of power from variable renewable sources is how to deal with the insufficient network capacity and the congestion that will result from new flow patterns. We model the current methodology for controlling congestion at international borders and compare its results, under varying penetrations of wind power, with a model that simulates an integrated European network that utilises nodal/localised marginal pricing. The nodal pricing simulations illustrate that congestion - and price - patterns vary considerably between wind scenarios and within countries, and that a nodal price regime could make fuller use of existing EU network capacity, introducing substantial operational cost savings and reducing marginal power prices in the majority of European countries.
    Keywords: Power market design, renewable power integration, congestion management, transmission economics
    Date: 2011
  3. By: Bigerna, Simona; Polinori, Paolo
    Abstract: EU Directive 2009/72/CE imposes to the European Countries environmental and energy targets. The Italian goal is to attain a 17% share in electricity production from renewable energy sources (RES) by 2020. To make investment in renewables attractive, market prices must be profitable and the gap between the private and social costs of renewables must be filled using “persuasive” tools. The acceptance of such a burden may be controversial because it results in an increase in prices. It is interesting to estimate the consumer’s willingness to pay (WTP) for green electricity. We based our research on a national survey conducted in November 2007 in Italy. We used a stochastic payment card (SPC) including a “certainty correction” and proposing five degrees of acceptance. An empirical analysis shows that there is a substantial willingness among Italian consumers to partially cover the cost of achieving the RES goal.
    Keywords: contingent valuation; interval data; stochastic payment card; renewable energy sources
    JEL: Q41 Q26 C24
    Date: 2011–10–30
  4. By: Yamamura, Eiji
    Abstract: Using cross-country data, this paper examines the influence of government transparency on changing views regarding nuclear energy before and after Japan’s natural and nuclear disasters of 2011. It was observed that in the majority of countries the rate of favoring nuclear energy declined after the disaster. However, empirical results have shown that this rate is less likely to decrease in a more transparent country, even after a disaster. This implies that views regarding nuclear energy were less elastic to the news of the Fukushima incident when people were more certain about nuclear energy prior to the Fukushima incident.
    Keywords: Transparency; persuasion; Fukushima accident; nuclear energy
    JEL: H10 D73 D82 Q54
    Date: 2011–10–20
  5. By: Aoki, Masahiko (Asian Development Bank Institute); Rothwell, Geoffrey (Asian Development Bank Institute)
    Abstract: This paper analyzes the impacts of the 11 March 2011 earthquake and tsunami at the Fukushima nuclear power plant in Japan, which were amplified by a failure of coordination across the plant, corporate, industrial, and regulatory levels, resulting in a nuclear catastrophe, comparable in cost to Chernobyl. It derives generic lessons for industrial structure and regulatory frame of the electric power industry by identifying the two shortcomings of a horizontal coordination mechanism: instability under large shock and the lack of “defense in depth.”
    Keywords: fukushima catastrophe; nuclear power; earthquake and tsunami
    JEL: L22 L43 L94
    Date: 2011–10–28
  6. By: Toshi H. Arimura; Shanjun Li; Richard G. Newell; Karen Palmer
    Abstract: We analyze the cost-effectiveness of electric utility ratepayer–funded programs to promote demand-side management (DSM) and energy efficiency (EE) investments. We specify a model that relates electricity demand to previous EE DSM spending, energy prices, income, weather, and other demand factors. In contrast to previous studies, we allow EE DSM spending to have a potential long-term demand effect and explicitly address possible endogeneity in spending. We find that current period EE DSM expenditures reduce electricity demand and that this effect persists for a number of years. Our findings suggest that ratepayer funded DSM expenditures between 1992 and 2006 produced a central estimate of 0.9 percent savings in electricity consumption over that time period and a 1.8 percent savings over all years. These energy savings came at an expected average cost to utilities of roughly 5 cents per kWh saved when future savings are discounted at a 5 percent rate.
    JEL: H76 L94 Q41 Q48
    Date: 2011–10
  7. By: Kumbaroğlu, Gürkan (Department of Industrial Engineering, Boğaziçi University); Madlener, Reinhard (E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University)
    Abstract: In this study, a techno-economic evaluation methodology for energy retrofit of buildings is introduced, geared towards finding the economically optimal set of retrofit measures. Split incentives of building owners and users are considered explicitly in a conventional (static) evaluation to identify the investment alternatives maximizing the net present value (NPV). Energy price uncertainty for various distributional assumptions of the stochastic variables is addressed through Monte Carlo simulation. Results from the simulation are used to compute probabilities and expected NPVs. Based on this, a sequential (dynamic) evaluation methodology is developed, featuring a real options investment appraisal. The methodological advancements introduced are applied to an office building, illustrating the model’s performance. The case study results indicate that energy price changes significantly affect the profitability of retrofit investments, and that increased price volatility creates a substantial value of waiting, making it more rational to postpone the investment. Further insight is gained on various aspects of economic decision-making concerning energy retrofit of buildings.
    Keywords: Building energy efficiency; Energy conservation; Net present value; Real options
    Date: 2011–09
  8. By: Baddeley, M.
    Abstract: Evidence of climate change is largely undisputed but moderating the impacts not only of climate change but also of resource depletion is a complex, multi-faceted problem. Technical solutions will have a large role to play but engineering behaviour change within households and firms is essential to harnessing the potential for energy efficient consumption, production and investment. To inform debates about behavior change, this paper explores some insights from behavioural economics including analyses of bounded rationality, cognitive bias / heuristics, temporal discounting, social in uences, well-being and emotions.
    JEL: Q5 Q58
    Date: 2011–10–28
  9. By: Paul J. Burke (Crawford School of Economics & Government, Australian National University, Canberra, ACT, Australia)
    Abstract: This paper documents an energy ladder that nations ascend as their per capita incomes increase. On average, economic development results in an overall substitution from the use of biomass to fulfill energy needs to energy sourced from fossil fuels, and then toward nuclear power and certain low-carbon modern renewables such as wind power. The results imply an inverse-U shaped relationship between per capita income and the carbon intensity of energy, which is borne out in the data. Fossil fuel-poor countries are more likely to climb to the upper rungs of the national-level energy ladder and experience reductions in the carbon intensity of energy as they develop than fossil fuel-rich countries. Leapfrogging to low-carbon energy sources on the upper rungs of the national-level energy ladder is one route via which developing countries can reduce the magnitudes of their expected upswings in carbon dioxide emissions.
    JEL: O11 O13 Q43 Q54
    Date: 2011–11
  10. By: LUCIANO LOSEKANN; Eduardo Pontual Ribeiro; Rosemarie BrökerBone; Adilson de Oliveira
    Date: 2011
  11. By: Josheski, Dushko; Lazarov , Darko; Koteski, Cane; Sovreski V. , Zlatko
    Abstract: In this paper was investigated the relationship between GDP per capita growth and Log of energy production, energy consumption per capita, the log of productivity in energy sector and population. Data covered sample for 220 countries and world regions, years covered from 1980 to 2002.The results showed that if energy consumption increases by 1% GDP per capita growth will decline by 0,57%, if energy production will rise by 1% growth will rise by 1,51%, if population rise by 1% growth will decline by 0,098%, although this coefficient is statistically here below significance. If productivity in energy sector rise by 1% growth will rise by 1,32%.
    Keywords: Energy; economic growth; population; sustainable growth
    JEL: Q43
    Date: 2011–10–27
  12. By: Sergey Mityakov (Clemson University); Heiwai Tang (Tufts University and Hong Kong Institute for Monetary Research); Kevin K. Tsui (Clemson University and Hong Kong Institute for Monetary Research)
    Abstract: Does China's quest for oil raise tensions with the United States? This paper examines the effect of international relations on global oil trade patterns. Using voting records for the United Nations General Assembly to measure the state of international relations, we estimate a modified gravity model in a panel data framework over the period 1962-2000. Our presumption is that a divergence in voting patterns reflects misalignment in political interests among pairs of states, and hence an increase in "political distance." Controlling for oil exporters' endowment, potential supply disruption due to civil conflict, other standard gravity controls, as well as exporter and year fixed effects, we first show that private energy companies based in the United States import significantly less crude oil from US political opponents. The result is robust to controlling for economic sanctions and militarized interstate disputes, suggesting that the political oil import diversification is more than a wartime phenomenon. A similar oil import pattern is observed in China, in which case only a few national oil companies control the oil sector. While the incentives to diversify are stronger for both the United States and China when the exporters are nondemocratic, import sanctions have opposite effects on oil imports into the United States and China. Finally, we document that there is no such oil import pattern in other non-major power oil importing countries.
    Keywords: Energy Security, International Relations, Oil Trade Diversification
    JEL: F13 F51 F59 Q34
    Date: 2011–10
  13. By: Morales, Lucía; Gassie, Esmeralda
    Abstract: Despite the fact that there is a substantial literature on the analysis of volatility spillovers between stock returns and domestic exchange rates, surprisingly, little empirical research has examined volatility spillovers between oil prices and emerging economies, where a clear gap of research have been found regarding to the BRIC financial markets and the effects of the 2007-2009 World economy crisis. This lack of research might appear as surprising given that energy markets are of particular interest as they are considered a fundamental reference for economic recovery and growth. Therefore, this work aims to address this gap on the literature by looking at the BRIC financial markets and their co-movements with regard to some energy markets (oil, natural gas and electricity) and also to the international pressures that may arise from fluctuations originated in the US stock markets. This research major findings show compelling evidence highlighting the weak integration levels that exist among the Chinese financial markets, energy markets and the US stock market. On the other hand, the Brazilian, Indian and Russian markets are found to be more sensitive to international shocks arisen from US markets and also to energy markets instability, especially with regard to oil market uncertainty. --
    Keywords: BRIC,Energy Markets,GARCH,T-GARCH modeling,Volatility
    JEL: F G
    Date: 2011
  14. By: Thai-Ha LE (Division of Economics, Nanyang Technological University, Singapore 639798, Singapore); Youngho CHANG (Division of Economics, Nanyang Technological University, Singapore 639798, Singapore)
    Abstract: This paper uses the monthly data spanning from Jan-1986 to April-2011 to investigate the relationship between the prices of two strategic commodities: gold and oil. We examine this relationship through the inflation channel and their interaction with the index of the US dollar. We use different oil price proxies in our investigation and find that the impact of oil price on gold price is not asymmetric but non-linear. Our results show that there is a long-run relationship existing between the prices of oil and gold. Our findings imply that the oil price can be used to predict the gold price.
    Keywords: oil price, gold price, inflation, US dollar index, cointegration
    JEL: E3
    Date: 2011–02
  15. By: Thai-Ha LE (Division of Economics, Nanyang Technological University, Singapore 639798, Singapore); Youngho CHANG (Division of Economics, Nanyang Technological University, Singapore 639798, Singapore)
    Abstract: This study examines the response of stock markets to oil price volatilities in Japan, Singapore, Korea and Malaysia by applying the generalized impulse response and variance decomposition analyses to the monthly data spanning 1986:01 – 2011:02. The results suggest that the reaction of stock markets to oil price shocks varies significantly across markets. Specifically, the stock market responds positively in Japan while negatively in Malaysia; the signal in Singapore and South Korea is unclear. We find that the stock market inefficiency, among others, appeared to have slowed the responses of the stock market to aggregate shocks such as oil price surges.
    Keywords: oil price fluctuation, stock return, exchange rate, emerging market, VAR model
    JEL: Q43 F3 G14 G15
    Date: 2011–03
  16. By: Ferraro, Domenico; Rogoff, Kenneth; Rossi, Barbara
    Abstract: This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S dollar nominal exchange rate. Despite state-of-the-art methodologies, we find little systematic relation between oil prices and the exchange rate at the monthly and quarterly frequencies. In contrast, the main contribution is to show the existence of a very short-term relationship at the daily frequency, which is rather robust and holds no matter whether we use contemporaneous (realized) or lagged oil prices in our regression. However, in the latter case the predictive ability is ephemeral, mostly appearing after instabilities have been appropriately taken into account.
    Keywords: exchange rates
    JEL: C22 C53 F31 F37
    Date: 2011–11
  17. By: Markus Bruckner (School of Economics, University of Adelaide); Alberto Chong (George Washington University); Mark Gradstein (Ben Gurion University)
    Abstract: We estimate the income elasticity of government expenditures using variation in the international oil price as a plausibly exogenous source of within-country variation of countries' permanent income. Our short run elasticity estimates, between 0.25-0.50, are generally somewhat smaller than the previously obtained ones, and they, in particular, indicate that Wagner's law does not hold; long run elasticities are larger, but still smaller than unity. We also explore the correlates of the income elasticity of government spending and find no support for views that either democracy, inequality, or openness are associated with a larger elasticity. However, we find evidence consistent with "voracity" theories: cross-country differences in ethnic polarization are associated with a significantly higher oil price driven income elasticity of government spending.
    Date: 2011–09
  18. By: Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Ladislav Kristoufek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); David Zilberman (University of California, Berkeley)
    Abstract: This paper provides a general overview of the social, environmental, and economical issues related to biofuels and a review of economic modeling of biofuels. The increasing importance of biofuels is driven primarily by government policies since currently available biofuels are generally not economically viable in the absence of fiscal incentives or high oil prices. Also the environmental impacts of biofuels as an alternative to fossil fuels are quite ambiguous. The literature review of the most recent economic models dealing with biofuels and their economic impacts provides a distinction between structural and reduced form models. The discussion of structural models centers primarily on computable general equilibrium models. The review of reduced models is structured toward the time series analysis approach to the dependencies between prices of biofuels, prices of agricultural commodities used for the biofuel production and prices of the fossil fuels.
    Keywords: Biofuels; Ethanol; Biodiesel; Prices; Time-series
    JEL: Q16 Q42
    Date: 2011–10
    Date: 2011
  20. By: Luiz Fernando Ohara Kamogawa; Ricardo Shirota
    Date: 2011
  21. By: Terciane Sabadini Carvalho; Eduardo Almeida
    Date: 2011
  22. By: Yang, Boqiong; Chen, Jianguo
    Abstract: From the 1970's, Foreign Direct Investment (FDI) flowed into host countries. With the development of economy in host countries the environment deteriorated. The overall goal of this paper is to estimate whether the impacts of FDI positive or negative on environment in host countries. To meet this overall goal, it is constructed a simultaneous system with data of 28 provinces in China (1992-2008). This system supposes the pollution indicators to be determined by economic scale, industrial composition and pollution density of a province, in which pollution density is created to estimate the environmental effect of FDI more exactly than traditional technological character. Also the domestic and foreign capital is tried to distinguish to make the pollution source clear. Based on a panel data of 28 provinces (1992-2008) with the three-stage least squares (3sls) estimator, the results of the system show that with the domestic investment, the environmental effect is positive, which means that FDI increases pollution emission. The direct environmental effect of FDI, which does not include domestic investment, is different decided by various pollution indicators. --
    Keywords: FDI,pollution emission, host countries
    JEL: F23 F18 O13
    Date: 2011
    Date: 2011
  24. By: Kågeson, Per (KTH)
    Abstract: The cost of short-sea shipping on the seas surrounding Sweden will increase considerably after 2015 as a result of the introduction of stringent emission limits on NOx and sulphur. This may give trucks and trains an upper hand in market segments where customers can choose between sea transport and land-based modes. This report shows that the balance would shift in favor of shipping if government gives all modes an equal liability for external costs. With the internalization based on the short-term social marginal costs of infrastructure use, accident risk, and emissions of NOx, sulphur and CO2, rail will be losing market shares. In this scenario the current fairway dues would have to be lowered by at least 90 per cent in order to reflect the short-term marginal cost (rather than variable + fixed costs), while at the same time railway infrastructure charges would quadruple. A surprising result of the calculations is that long-distance freight transport by truck on the main road arteries that compete with short-sea shipping will by 2015 have internalized its short-term social marginal costs based on the current (2011) taxation of vehicles, roads and fuels. This is a result of an increasingly cleaner vehicle fleet and the use of the best roads whose social marginal costs for accidents and road tear are well below average. Equal treatment of all modes with regard to social cost liability will make it possible for short-sea shipping to relieve the national railway system of some of its growing capacity problems that would otherwise have to be resolved by substantial investment in additional rail infrastructure.
    Keywords: Internalization; freight transport; short sea shipping; intermodal competition
    JEL: R48
    Date: 2011–11–03
  25. By: Monjon, Stéphanie; Quirion, Philippe
    Abstract: The EU ETS has been criticised for threatening the competitiveness of European industry and generating carbon leakage, i.e., increasing foreign greenhouse gas emissions. Two main options have been put forward to tackle these concerns : border adjustments and output-based allocation, i.e., allocation of free allowances in proportion to current production. We compare various configurations of these two options, as well as a scenario with full auctioning and no border adjustment. Against this background, we develop a model of the main sectors covered by the EU ETS: electricity, steel, cement, and aluminium. We conclude that the most efficient way to tackle leakage is auctioning with border adjustment, which generally induces a negative leakage (a spillover). This holds even if the border adjustment does not include indirect emissions, if it is based on EU (rather than foreign) specific emissions, or (for some values of the parameters) if it covers only imports. Another relatively efficient policy is to combine auctioning in the electricity sector and output-based allocation in exposed industries, especially if free allowances are given both for direct and indirect emissions, i.e., those generated by the generation of the electricity consumed. Although output-based allocation is generally less effective than border adjustment to tackle leakage, it is more effective to mitigate production losses in the sectors affected by the ETS, which may ease climate policy adoption.
    Keywords: Emission trading; border adjustment; output‐based allocation; competitiveness; carbon leakage;
    JEL: Q38 Q58 Q54 L94 L61 L51
    Date: 2011–09
  26. By: Christin, Clémence; Nicolai, Jean-Philippe; Pouyet, Jerome
    Abstract: The issue of how to allocate pollution permits is critical for the political sustainability of any cap-and-trade system. Under the objective of offsetting firms' losses resulting from the environmental regulation, we argue that the criteria for allocating free allowances must account for the type of abatement technology: industries that use process integrated technologies should receive some free allowances, whereas those using end-of-pipe abatement should not. In the long run, we analyze the interaction between the environmental policy and the evolution of the market structure. In particular, a reserve of pollution permits for new entrants may be justified when the industry uses a process integrated abatement technology. --
    Keywords: Cap-and-trade system,profit-neutral allocations,abatement technologies
    JEL: L13 Q53 Q58
    Date: 2011
  27. By: T. Elias Asproudis (School of Business and Economics, Loughborough University, UK); Tom Weyman Jones (School of Business and Economics, Loughborough University, UK)
    Abstract: This paper analyses the behaviour, influence and role of third parties in tradable permits markets. Following the literature, it focuses on a framework in order to understand how society and third parties react against the firms’ emissions due to their participation in the tradable permits market. Therefore the paper reveals the tradable permits mechanism as a new way for public direct action and highlights the possible benefits for the regulator. An important part of the third parties consists of the very active participation of the Environmental Non-Governmental Organisations. Therefore, this paper argues that the third party’s participation and specifically the environmental groups’ participation in tradable permits market could drive the market to the optimum equilibrium. In order to examine this proposition we use some data from the first phase of the permits market in European Union and some available data for the environmental groups’ income. We conclude that the environmental groups could purchase the exceeded, over-allocated permits and could drive the market in the equilibrium point. Finally, for the regulator the environmental groups participation could be desirable given that they could improve the efficiency of the tradable permits market.
    Date: 2011–09
  28. By: Waldhoff, Stephanie; Anthoff, David; Rose, Steven; Tol, Richard S. J.
    Abstract: We use FUND 3.5 to estimate the social cost of carbon dioxide, methane, nitrous oxide, and sulphur hexafluoride emissions. We show the results of a range of sensitivity analyses, focusing on the impact of carbon dioxide fertilization. Ignored in previous studies of the social cost of greenhouse gas emissions, carbon dioxide fertilization has a positive effect at the margin, but only for carbon dioxide. Because of this, the ratio of the social cost of a greenhouse gas to that of carbon dioxide (the global damage potential) is higher - that is, previous papers underestimated the importance of reducing non-carbon dioxide greenhouse gas emissions. When leaving out carbon dioxide fertilization, our estimate of the social cost of methane is comparable to previous estimates. Our estimate of the global damage potential of methane is close to the estimates of the global warming potential because discounting roughly cancels carbon dioxide fertilization. Our estimate of the social cost of nitrous oxide is higher than previous estimates, also when omitting carbon dioxide fertilization. This is because, in FUND, vulnerability to climate change falls over time (with development) while in the long run carbon dioxide is a more potent greenhouse gas than nitrous oxide. Our estimate of the global damage potential of nitrous oxide is larger than the global warming potential because of carbon dioxide fertilization, discounting, and rising atmospheric concentrations of both gases. Our estimate of the social cost of sulphur hexafluoride is similar to the one previous estimate. Its global damage potential is higher than the global warming potential because of carbon dioxide fertilization, discounting, and rising concentrations. --
    Keywords: climate change,social cost,carbon dioxide,methane,nitrous oxide,sulphur hexafluoride
    JEL: Q54
    Date: 2011
  29. By: Frank Jotzo (Crawford School of Economics & Government, Australian National University, Canberra, ACT, Australia); Jonathan Pickering (Centre for Applied Philosophy and Public Ethics, The Australian National University); Peter J. Wood (Resource Management in Asia-Pacific Program, Crawford School of Economics and Government, The Australian National University)
    Abstract: Developed countries have pledged to mobilise $100 billion per year by 2020 for climate change action in developing countries. Progress on financing is necessary to ensure broader progress on climate change cooperation. Supporting the global commitment is in Australia's interests, since climate finance can harness low-cost mitigation opportunities and help vulnerable countries in the Asia-Pacific region adapt to climate change. Based on Australia's wealth and emissions, we find that a fair share for Australia may be around 2.4 per cent, or $2.4 billion a year by 2020. We analyse possible sources of finance in Australia. Carbon markets could provide large financial flows but their short-term prospects are uncertain, and additional public finance is needed in any event. While Australia currently draws its climate finance from a growing aid budget, a large scale-up of climate change aid could raise concerns that aid is being diverted from existing development priorities. A carbon levy on international transport could provide considerable revenue and could be implemented unilaterally ahead of a global scheme. Reducing tax breaks for fossil fuel using and producing activities could raise revenue well in excess of Australia's total climate finance commitment, while improving economic efficiency and cutting carbon emissions. Further, Australia's exports of coal and other resources provide a very large tax base which could be tapped to a greater extent.
    JEL: H20 F35 Q54
    Date: 2011–10
  30. By: Olivier STERCK (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Geoengineering, i.e. the use of artificial techniques aiming at cooling the planet, is increasingly considered as a realistic alternative to emission mitigation. Several methods are promising for their capacity to quickly halt global warming at a moderate cost. Such cheap technologies might be very beneficial to countries profoundly affected by global warming. In this paper, I propose a dynamic model in which geoengineering is introduced as an alternative to mitigation. Contrary to abatement, geoengineering is fast and cheap, but requires a large initial investment in research and development. Within this framework, I confirm the fear which is common among geoengineering opponents: abatement is reduced if geoengineering is expected to be available in the future. The long-run implications of the model are also alarming as geoengineering will not be undertaken progressively. The sudden implementation of geoengineering, together with the sharp jump in temperature induced, may disturb climate equilibrium and fragile ecosystems. Furthermore, the availability of geoengineering will exacerbate intergenerational issues: while current generations will anticipate the use of geoengineering by increasing their emissions, future generations will have to reduce their emissions, to bear the cost of sustaining geoengineering for centuries and to suffer from its negative side-effects.
    Keywords: Geoengineering, Abatement, Climate change, Global warming, R&D, Intergenerational issues
    JEL: Q01 Q52 Q54 Q55
    Date: 2011–10–17
  31. By: Matthew J. Kotchen; Kevin J. Boyle; Anthony A. Leiserowitz
    Abstract: This paper provides the first willingness-to-pay (WTP) estimates in support of a national climate-change policy that are comparable with the costs of actual legislative efforts in the U.S. Congress. Based on a survey of 2,034 American adults, we find that households are, on average, willing to pay between $79 and $89 per year in support of reducing domestic greenhouse-gas (GHG) emissions 17 percent by 2020. Even very conservative estimates yield an average WTP at or above $60 per year. Taking advantage of randomized treatments within the survey valuation question, we find that mean WTP does not vary substantially among the policy instruments of a cap-and-trade program, a carbon tax, or a GHG regulation. But there are differences in the sociodemographic characteristics of those willing to pay across policy instruments. Greater education always increases WTP. Older individuals have a lower WTP for a carbon tax and a GHG regulation, while greater household income increases WTP for these same two policy instruments. Republicans, along with those indicating no political party affiliation, have a significantly lower WTP regardless of the policy instrument. But many of these differences are no longer evident after controlling for respondent opinions about whether global warming is actually happening.
    JEL: Q4 Q48 Q5
    Date: 2011–10

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