nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒01‒25
35 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. A Preliminary Review of the American Recovery and Reinvestment Act’s Clean Energy Package By Aldy, Joseph E.
  2. How Will Energy Demand Develop in the Developing World? By Catherine Wolfram; Orie Shelef; Paul J. Gertler
  3. From Correlation to Granger Causality By David Stern
  4. The Boardroom Perspective: How Does Energy Efficiency Policy Influence Decision Making in Industry? By Julia Reinaud; Amelie Goldberg
  5. Energy and Material Efficiency Innovations: The Relevance of Innovation Strategies By Bönte, Werner; Dienes, Christian
  6. Regulating Greenhouse Gases from Coal Power Plants under the Clean Air Act By Linn, Joshua; Mastrangelo, Erin; Burtraw, Dallas
  7. Energy Savings via Foreign Direct Investment? - Empirical evidence from Portugal By João Paulo Bento
  8. Costly Blackouts? Measuring Productivity and Environmental Effects of Electricity Shortages By Karen Fisher-Vanden; Erin T. Mansur; Qiong (Juliana) Wang
  9. ICT Applications for the Smart Grid: Opportunities and Policy Implications By OECD
  10. Supply Function Equilibria Always Exist By Edward Anderson
  11. Trade Opportunities for Climate Smart Goods and Technologies in Asia By Soumyananda Dinda
  12. Health Impacts of Power-Exporting Plants in Northern Mexico By Blackman, Allen; Chandru, Santosh; Mendoza-Dominguez, Alberto; Russell, A.G.
  13. Taking Technology to Task: The Skill Content of Technological Change in Early Twentieth Century United States By Rowena Gray
  14. Economy-wide impacts of consumer responses to environmental information disclosure in Tokyo and the other parts of Japan By Masaru Ichihashi; Satoru Komatsu; Shinji Kaneko
  15. The Impact of Wind Power on European Natural Gas Markets By Irene Vos
  16. Do Flemish Households Value Renewables? By Pepermans, Guido
  17. Impacts of urbanization on national transport and road energy use: Evidence from low, middle and high income countries By Phetkeo Poumanyvong; Shinji Kaneko; Shobhakar Dhakal
  18. How do international stock markets respond to oil demand and supply shocks? By Jochen H. F. Güntner
  19. Does the Iranian oil supply matter for the oil prices? By Farzanegan, Mohammad Reza
  20. How important are real interest rates for oil prices? By Arora, Vipin; Tanner, Matthew
  21. The Effects of Terrorism and War on the Oil and Prices - Stock Indices Relationship By Christos Kollias; Catherine Kyrtsou; Stephanos Papadamou
  22. Propagation Shocks to Food and Energy Prices: an International Comparison By Michael Pedersen
  23. The dependence of the potential sustainability of a resource economy on the initial state: a comparison of models using the example of Russian oil extraction By Bazhanov, Andrei
  24. Зависимость долгосрочного роста ресурсной экономики от начального состояния: сравнение моделей на примере российской нефтедобычи By Bazhanov, Andrei
  25. Pollution control: targets and dynamics. By Giuseppe Travaglini
  26. Market-based instruments for international aviation and shipping as a source of climate finance By Keen, Michael; Parry, Ian; Strand, Jon
  27. The European Emission Trading Scheme and environmental innovation diffusion: Empirical analyses using Italian CIS data By Giulio Cainelli; Massimiliano Mazzanti; Simone Borghesi
  28. Innovation and the environmental Kuznets curve: the case of CO, NMVOCs and SOx in the Italian regions By Donatella Baiardi
  29. Least Developed Countries and the Green Transition: Towards a renewed political economy agenda By Giovanni Valensisi; Junior Davis
  30. Enabling Local Green Growth: Addressing Climate Change Effects on Employment and Local Development By Gabriela Miranda; Graham Larcombe
  31. What Can Be Learned from “Green Growth Diagnostics” for Greening the Growth Path of China? - Conceptional Issues and Industry Evidence By Harald Sander
  32. Climate Change and Industrial Policy By Wim Naudé
  33. Climate and Industrial Policy in an Asymmetric World By Thomas Gries
  34. Unilateral action and negotiations about climate policy By Konrad, Kai A.; Thum, Marcel
  35. How to Deal With the Dilemma of Anthropogenic Global Warming and the Natural Variability as Drivers for Climate Change By Guido Heijdra

  1. By: Aldy, Joseph E.
    Abstract: The American Recovery and Reinvestment Act included more than $90 billion in strategic clean energy investments intended to promote job creation and promote deployment of low-carbon technologies. In terms of spending, the clean energy package has been described as the nation’s “biggest energy bill in history.” To provide a preliminary assessment of the Recovery Act’s clean energy package, this paper reviews the rationale, design, and implementation of the act. The paper surveys the policy principles for clean energy stimulus and describes the process of crafting the clean energy package during the 2008–2009 Presidential Transition. Then, the paper reviews the initial employment, economic activity, and energy outcomes associated with these energy investments and provides a more detailed case study on the Recovery Act’s support for renewable power through grants and loan guarantees. The paper concludes with lessons learned.
    Keywords: economic stimulus, tax credits, energy loan guarantees, climate change, renewable energy
    JEL: E61 Q48 Q54
    Date: 2012–01–13
  2. By: Catherine Wolfram; Orie Shelef; Paul J. Gertler
    Abstract: Most of the medium-run growth in energy demand is forecast to come from the developing world, which consumed more total units of energy than the developed world in 2007. We argue that the main driver of the growth is likely to be increased incomes among the poor and near-poor. We document that as households come out of poverty and join the middle class, they acquire appliances, such as refrigerators, and vehicles for the first time. These new goods require energy to use and energy to manufacture. The current forecasts for energy demand in the developing world may be understated because they do not accurately capture the dramatic increase in demand associated with poverty reduction.
    JEL: O13 Q47
    Date: 2012–01
  3. By: David Stern (The Australian National University)
    Abstract: The paper focuses on establishing causation in regression analysis in observational settings. Simple static regression analysis cannot establish causality in the absence of a priori theory on possible causal mechanisms or controlled and randomized experiments. However, two regression based econometric techniques – instrumental variables and Granger causality - can be used to test for causality given some assumptions. The Granger causality technique is applied to a time series data set on energy and economic growth from Sweden spanning 150 years to determine whether increases in energy use and energy quality have driven economic growth. I show that the Granger causality technique is very sensitive to variable definition, choice of additional variables in the model, and sample periods. Better results can be obtained by using multivariate models, defining variables to better reflect their theoretical definition, and by using larger samples. The better specified models with larger samples are more likely to show that energy causes output growth but it is also possible that the relationship between energy and growth has changed over time. Energy prices have a significant causal impact on both energy use and output while there is no strong evidence that energy use causes carbon and sulfur emissions despite the obvious physical relationship.
    Keywords: causality, energy, economic growth
    JEL: C32 Q43
    Date: 2011–09
  4. By: Julia Reinaud; Amelie Goldberg
    Abstract: The rationale for an individual company making an investment that will reduce energy consumption varies considerably and depends on a range of factors. This report delves into the major factors or driving forces that decision makers within a large industrial company take into account when deciding to make new investments - the so-called "boardroom perspective". It explores the factors that influence companies to invest in energy savings and proposes a methodology to evaluate the effectiveness of a country's energy efficiency and greenhouse gas mitigation policies mix from this boardroom perspective
    Date: 2012–01–10
  5. By: Bönte, Werner (Schumpeter School of Business and Economics, University of Wuppertal, Germany); Dienes, Christian (Schumpeter School of Business and Economics, University of Wuppertal, Germany)
    Abstract: This study explores the relationship between energy and material efficiency innovations (EMEIs) and innovation strategies employed by manufacturing firms to develop their process innovations. Firms may mainly develop process innovations in-house, let them mainly develop by other enterprises or institutions, or they or they may develop them jointly with external partners. The empirical analysis is based on data of European manufacturing firms obtained from the fourth Community Innovation Survey. Our results suggest that EMEIs are related to process innovation strategies. Firms which let mainly develop their process innovations by other enterprises or institutions tend to be less likely to introduce EMEIs at all and these firms are also less likely to introduce EMEIs with stronger efficiency effects. Moreover, our results do not suggest that firms following the 'cooperation strategy' are more likely to introduce EMEIs and to reach a higher EMEI performance than firms following the 'in-house strategy'.Hence, our results do not confirm the results of previous research pointing to a positive relationship between environmental innovations and cooperation with external partners.
    Keywords: energy and material efficiency, process innovations, innovation strategy
    JEL: D22 O32 O33 Q55
    Date: 2012–01
  6. By: Linn, Joshua (Resources for the Future); Mastrangelo, Erin; Burtraw, Dallas (Resources for the Future)
    Abstract: The Clean Air Act has assumed the central role in U.S. climate policy, directing the Environmental Protection Agency to develop regulations governing the emissions of greenhouse gases from existing coal-fired power plants. The cost and environmental effectiveness of policy options depend on abatement costs, the magnitude of emissions reduction opportunities, and the sensitivity of plant utilization. This paper examines the operation of electricity-generating units over 25 years to estimate the marginal costs and potential magnitude of emissions reductions that could result from improvements in their operating efficiency. We find that a 10 percent increase in coal prices causes a 0.3 to 0.9 percent heat rate reduction, broadly consistent with engineering assessments of abatement costs and opportunities. We also find that coal prices have a significant effect on utilization, but that will vary depending on the policy design. The results are used to compare cost-effectiveness of alternative policies.
    Keywords: efficiency, regulation, greenhouse gas, carbon dioxide, coal, performance standards
    JEL: L94 Q54
    Date: 2012–01–10
  7. By: João Paulo Bento (Research Unit in Governance, Competitiveness and Public Policy and Department of Economics Management and Industrial Engineering, University of Aveiro, 3810-193 Aveiro, Portugal)
    Abstract: This study runs a cointegration analysis on annual data from 1980 to 2007 to investigate the relationship between primary energy consumption, economic growth and net inflows of foreign direct investment with the Engle and Granger method, Stock-Watson dynamic ordinary least squares (DOLS), the bounds testing approach to cointegration and error correction modelling. The empirical results suggest that there is a stable long run linear cointegration relationship between these three variables. While income has a large and positive influence on energy consumption, the results point to a small but negative effect of foreign direct investment (FDI) on energy consumption. As for the short-run relationship among the series, the estimation and inference in the autoregressive distributed lag error correction model (ARDL) further confirm this link. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign investment can induce energy conservation without obstructing economic growth.
    Keywords: energy consumption, economic growth, foreign direct investment, cointegration
    JEL: Q54 F21
    Date: 2011–11
  8. By: Karen Fisher-Vanden; Erin T. Mansur; Qiong (Juliana) Wang
    Abstract: In many countries, unreliable inputs, particularly those lacking storage, can significantly limit a firm's productivity. In the case of an increasing frequency of blackouts, a firm may change factor shares in a number of ways. It may decide to self generate electricity, to purchase intermediate goods that it used to produce directly, or to improve its technical efficiency. We examine how industrial firms responded to China's severe power shortages in the early 2000s. Fast-growing demand coupled with regulated electricity prices led to blackouts that varied in degree over location and time. Our data consist of annual observations from 1999 to 2004 for approximately 32,000 energy-intensive, enterprises from all industries. We estimate the losses in productivity due to factor-neutral and factor-biased effects of electricity scarcity. Our results suggest that enterprises re-optimize among factors in response to electricity scarcity by shifting from energy (both electric and non-electric sources) into materials---a shift from "make" to "buy." These effects are strongest for firms in textiles, timber, chemicals, and metals. Contrary to the literature, we do not find evidence of an increase in self generation. Finally, we find that these productivity changes, while costly to firms, led to small reductions in carbon emissions.
    JEL: D24 P2 Q4
    Date: 2012–01
  9. By: OECD
    Abstract: The smart grid is revolutionizing electricity production and consumption. However, strategic use of ICTs and the Internet in energy innovation requires clarifying the roles of partners coming from distinct industries. And it begs for greater coordination of government departments and stakeholder communities that so far had unrelated competencies. This report outlines opportunities, challenges and public policy implications from shifts to ICT-enabled, "smart" electricity grids.
    Date: 2012–01–10
  10. By: Edward Anderson (The University of Sydney Business School)
    Abstract: Supply function equilibria are used in the analysis of divisible good auctions with a large number of identical objects to be sold or bought. An important example occurs in wholesale electricity markets. Despite the substantial literature on supply function equilibria the existence of a pure strategy Nash equilibria for a uniform price auction in asymmetric cases has not been established in a general setting. In this paper we prove the existence of a supply function equilibrium for a duopoly with asymmetric firms having convex costs, with decreasing concave demand subject to an additive demand shock, provided the second derivative of the demand function is small enough. The proof is constructive and also gives insight into the structure of the equilibrium solutions.
    Keywords: Wholesale electricity markets; divisible good auctions; supply functions; existence of equilibria.
    Date: 2011–04
  11. By: Soumyananda Dinda (Chandragupt Institute of Management Patna, E-mail:,, &
    Abstract: This study focuses on trade opportunities of climate smart goods and technologies (CSGT) in Asia. Paper mainly highlights the export gaps for climate smart goods and technologies (CSGT) in Asia and identifies the trade opportunities among trade partners in intraregional and interregional. Applying the gravity model we estimate the export gap for the CSGT as the difference between the actual bilateral export flow and the mean value predicted by the model. In other words, ‘export gap’ is the difference between the actual and predicted export value. There is a scope to increase the export of climate smart goods and technologies with trading partners when the actual trade is below the predicted value ( i.e., negative value of the export gap). This gap actually provides the opportunity to raise the trade and attracting investment in CSGT sector and thereby development takes place. This paper also identifies the export gaps in CSGT for each regional member in its trade with partners within the region, EU, and North America (i.e., the US and Canada). This study contributes to the empirical literature in terms of measuring and identifying the potential trade opportunity of CGST in Asia. The paper also suggests that the climate smart export-led growth model is still valid in emerging Asian countries.
    Keywords: Bilateral trade flow, Climate Smart Goods and Technologies, Export, Gravity model, Export gap, Potential Trade, Asia.
    JEL: C13 F18 O53 Q Q54 O11 O13
    Date: 2011–11
  12. By: Blackman, Allen (Resources for the Future); Chandru, Santosh; Mendoza-Dominguez, Alberto; Russell, A.G.
    Abstract: In the past two decades, rapid population and economic growth on the U.S.–Mexico border has spurred a dramatic increase in electricity demand. In response, American energy multinationals have built power plants just south of the border that export most of their electricity to the United States. This development has stirred considerable controversy because these plants effectively skirt U.S. environmental air pollution regulations in a severely degraded international airshed. Yet to our knowledge, this concern has not been subjected to rigorous scrutiny. This paper uses a suite of air dispersion, health impacts, and valuation models to assess the human health damages in the United States and Mexico caused by air emissions from two power-exporting plants in Mexicali, Baja California. We find that these emissions have limited but nontrivial health impacts, mostly by exacerbating particulate pollution in the United States, and we value these damages at more than half a million dollars per year. These findings demonstrate that power-exporting plants can have cross-border health effects and bolster the case for systematically evaluating their environmental impacts.
    Keywords: electricity, air pollution, Mexico
    JEL: Q48 Q51 Q53
    Date: 2012–01–09
  13. By: Rowena Gray (University of Essex, UK)
    Abstract: This paper presents a new picture of the labor market effects of technological change in pre-WWII United States. I show that, similar to the recent computerization episode, the electrification of the manufacturing sector led to a "hollowing out" of the skill distribution whereby workers in the middle of the distribution lost out to those at the extremes. To conduct this analysis, a new dataset detailing the task composition of occupations in the United States for the period 1880-1940 was constructed using information about the task content of over 4,000 occupations from the Dictionary of Occupational Titles (1949). This unique data was used to measure the skill content of electrification in U.S. manufacturing. OLS estimates show that electrification increased the demand for clerical, numerical, planning and people skills relative to manual skills while simultaneously reducing relative demand for the dexterity-intensive jobs which comprised the middle of the skill distribution. Thus, early twentieth century technological change was unskill-biased for blue collar tasks but skill-biased on aggregate. These results are in line with the downward trend in wage differentials within U.S. manufacturing up to 1950. To overcome any threat to the exogeneity of the electricity measure, due for example to endogenous technological change, 2 instrumental variable strategies were developed. The first uses cross-state differences in the timing of adoption of state-level utility regulation while the second exploits differences in state-level geography that encouraged the development of hydro-power generation and thus made electricity cheaper. The results from these regressions support the main conclusions of the paper.
    Keywords: Technological change, skill bias
    JEL: J23 O33 N32 N33
    Date: 2011–10
  14. By: Masaru Ichihashi (Graduate School for International Development and Cooperation, Hiroshima University); Satoru Komatsu (Graduate School for International Development and Cooperation, Hiroshima University); Shinji Kaneko (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: Environmental problems such as global warming due to GHG emissions have necessitated some constraint in our economic activities, as many countries and many people around the world are concerned about these issues. Environmental and economic policies such as carbon tax are one such constraint. A tax policy can be interpreted as a desirable method that can lead the economy, which has to pay the social cost of false economic activity or market failure, to a more optimal path. However, this policy will surely raise prices of goods. On the one hand, this price rise will benefit the public sector, but on the other hand, consumers demand will decline. The magnitude of the reduction usually depends on the price elasticity of demand, and the increase in government gain depends on the necessity of the goods for the people. Therefore, it is not necessarily trivial to ask whether the total effect of rising energy prices will be negative. In addition, nowadays, many people are concerned about environmental problems, and there are indications that consumers tend to change their purchasing behavior regarding certain goods to take environmental concerns into account even if this necessitates paying a higher price. This paper will empirically prove how the rise in oil and gas prices due to environmental policies like carbon tax affects the total production/consumption when we take into account the change in consumer behavior reflecting their attitudes toward preventing global warming. The main result of the analysis using an input-output model and price elasticity of demand in several sectors will show that most of sectors do not experience a decline in production after a price rise except the biggest sector, real estate. In Japan, real estate might be the main target to support for consumerfs purchasing from the viewpoint of economic policy.
    Keywords: consumer behavior; disclosure of information about environmental damage; energy price rising effect; price elasticity of demand; International Input-Output model.
    JEL: O44 Q56 R15
    Date: 2012–01
  15. By: Irene Vos
    Abstract: Due to its clean burning properties, low investment costs and flexibility in production, natural gas is often put forward as the ideal partner fuel for wind power and other renewable sources of electricity generation with strongly variable output. This working paper examines three vital questions associated with this premise: 1) Is natural gas indeed the best partner fuel for wind power? 2) If so, to what extent will an increasing market share of wind power in European electricity generation affect demand for natural gas in the power sector? and 3) Considering the existing European natural gas markets, is natural gas capable of fulfilling this role of partner for renewable sources of electricity?
    Date: 2012–01–13
  16. By: Pepermans, Guido (Hogeschool-Universiteit Brussel (HUB), Belgium)
    Abstract: This paper assesses whether and to what extent Flemish households are willing to pay for electricity generated with renewable resources. Via a choice experiment, households were offered the choice between as set of green electricity contracts, characterised by the renewables share in electricity supplied to their dwelling, the renewable generation technology (wind, biomass, PV...) and its impact on the electricity bill. A main effects conditional logit model and a main effects random parameter logit model are estimated. The estimation results show that households prefer ‘green contacts’, but renewables technologies are valued differently. The estimates are then used to assess the marginal willingness to pay by Flemish households for each of the contract attributes. From a policy perspective, the results suggest that a not too small proportion of Flemish households would be willing to switch to another power supply contract if that can be done at limited cost. Moreover, the results suggest that it would not be a good idea to focus on the deployment of one or only a few technologies. Policies resulting in a diversified portfolio of technologies are positively valued by households and will obtain broader support.
    Keywords: choice experiment; renewables; conditional logit model; random parameter logit model; willingness-to-pay
    JEL: C25 C93 D12 Q41
    Date: 2011–05
  17. By: Phetkeo Poumanyvong (Graduate School for International Development and Cooperation, Hiroshima University); Shinji Kaneko (Graduate School for International Development and Cooperation, Hiroshima University); Shobhakar Dhakal (National Institute for Environmental Studies)
    Abstract: Few attempts have been made to investigate quantitatively and systematically the impact of urbanization on transport energy use for countries of different stages of economic development. This paper examines the influence of urbanization on national transport and road energy use for low, middle and high income countries during 1975?2005, using the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) model. After controlling for population size, income per capita and the share of services in the economy, the main results suggest that urbanization influences national transport and road energy use positively. However, the magnitude of its influence varies among the three income groups. Changes in urbanization appear to have a greater impact on transport and road energy use in the high income group than in the other groups. Surprisingly, the urbanization elasticities of transport and road energy use in the middle income group are smaller than those of the low income group. This study not only sheds further light on the existing literature, but also provides policy makers with insightful information on the link between urbanization and transport energy use at the three different stages of development.
    Keywords: Urbanization, Transport energy use, Development stages
    JEL: R49 Q41 Q56
    Date: 2012–01
  18. By: Jochen H. F. Güntner (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Building on Kilian and Park's (2009) structural VAR analysis of the effects of oil demand and supply shocks on the U.S. stock market, this paper studies the responses of a broader set of stock markets in six OECD member countries. The focus is on the differences and commonalities in the response of stock prices in net oil exporting and net oil importing economies during 1974-2011. Structural oil price shocks aid our understanding of historical fluctuations in stock returns - in particular of the 2008 stock market crash. I find that unexpected shortfalls in global oil supply have no significant impact on the stock market in any of the six countries. While an increase in global aggregate demand consistently raises oil prices and cumulative stock returns, the effect is more persistent for net oil exporters and more pronounced for Norway. Other, e. g., precautionary oil demand shocks have a detrimental impact on the stock market in oil importing countries, a statistically insignificant effect for Canada, and a significantly positive effect for Norway. Oil prices account for a larger fraction of the forecast error variance in global relative to national stock returns.
    Keywords: Net oil exporters; Oil price shocks; Stock market returns; Structural VAR estimation
    JEL: C32 O57 Q41 Q43
    Date: 2011–12
  19. By: Farzanegan, Mohammad Reza
    Abstract: There is an increasing tension between the Iranian Government and the west on an increasingly likely European oil embargo and the Iranian threat to close the Strait of Hormuz. The main question is: What will happen to the international oil prices in the case of shocks in the flow of Iranian oil to the international markets? In this study, we analyze the dynamic relationship between the Iranian oil supply and international oil prices from January 1973 - September 2011, using a modified version of the Granger causality test introduced by Toda and Yamamoto (1995). Our results show that there is no Granger causality between the Iranian oil production and international oil prices. Historical data on the Iranian oil production do not provide any useful information to explain the current and future values of international oil prices. Thus, global oil prices do not follow shocks in the Iranian oil production.
    Keywords: Oil price; Oil production; VAR model; Granger causality; Sanction; Iran
    JEL: Q32 Q34 E37
    Date: 2012–01–18
  20. By: Arora, Vipin; Tanner, Matthew
    Abstract: Using a recursive vector autoregression (VAR), this paper considers the relation between the U.S. real interest rate and the real oil price. Theoretically, as outlined in Hotelling (1931) and Working (1949), a lower real interest rate results in reduced production and increased storage, implying a higher oil price. The results presented here show that the robustness of this relationship depends crucially on how the real interest rate is calculated, and the time-frame of the sample. Consistent with earlier studies, the oil price falls with an innovation to the ex-ante U.S. real interest rate. However, this is not true if the real interest rate is calculated ex-post. In this case, the oil price only falls in response to an innovation in short-term U.S. real interest rates (three months or less). Additionally, the response of the oil price to longer-term ex-ante U.S. real interest rates must include the period through 2006 for this relationship to appear. The oil price consistently responds to innovations in short-term rates throughout the entire sample. We draw two conclusions from the results. The first is that the oil price is consistently responsive to short-term U.S. real interest rates, underlying the importance of storage. Second, oil prices have become more responsive to longer-term U.S. real interest rates. The reasons behind this change are unclear and require further study.
    Keywords: Oil price; Real interest rate; VAR; Hotelling; Storage
    JEL: F49 Q43
    Date: 2011–12–23
  21. By: Christos Kollias; Catherine Kyrtsou; Stephanos Papadamou
    Abstract: This paper, investigates the effect war and terrorism, have on the covariance between oil prices and the indices of four major stock markets - the American S&P500 and the European DAX, CAC40 and FTSE100 - using nonlinear BEKK-GARCH type models. Findings reported herein indicate that the covariance between stock and oil returns is affected by war. A tentative explanation is that the two wars examined here, predispose investors and market agents for more profound and longer lasting effects. On the other hand, in the case of terrorist incidents that, vis-à-vis war, are of a more transitory nature and one-off security shocks, only the co-movement between CAC40, DAX and oil returns is affected. No significant impact for the same terrorist events is observed in the relationship between the S&P500, FTSE100 and oil returns. This difference in the reaction may tentatively be interpreted as indicating that the latter markets are more efficient in absorbing the impact of terrorist attacks.
    Keywords: war, terrorism, crude oil, stock market returns, co-movement
    JEL: G10 E0 C5
    Date: 2011
  22. By: Michael Pedersen
    Abstract: The present paper analyzes propagation of shocks to food and energy prices in 46 countries with data from the period 1999-2010. The empirical evidence suggests that in only one of the countries considered, a shock to the price of either energy or food shows no propagation to the prices of the goods and services included in the core inflation measure. In general, the propagation effect of food price shocks is larger than that of energy price shocks. Emerging economies are more affected by propagation than advanced ones. The results advocate that policy makers concerned with price stability should pay special attention to shocks affecting domestic food prices.
    Date: 2011–12
  23. By: Bazhanov, Andrei
    Abstract: The studies of the International Monetary Fund offer a model for recommending sustainable budget policy to oil-exporting countries including Russia. The model does not contain any resource as a factor of production and assumes that Russian oil reserves will be exhausted by the middle of the 21st century. The current paper examines the sustainability of open and closed models, which are calibrated on Russia's data and include a resource as a factor of production. The open-model case shows that monotonic economic growth is impossible given the current state of the Russian economy. This paper offers an approach for estimating changes that improve long-term sustainability.
    Keywords: nonrenewable resource; weak sustainability; open imperfect economy; Russian oil extraction
    JEL: Q32 Q38 O13
    Date: 2011–12–15
  24. By: Bazhanov, Andrei
    Abstract: The studies of the International Monetary Fund offer a model for recommending sustainable budget policy to oil-exporting countries including Russia. The model does not contain any resource as a factor of production and assumes that Russian oil reserves will be exhausted by the middle of the 21st century. The current paper examines the sustainability of open and closed models, which are calibrated on Russia's data and include a resource as a factor of production. The open-model case shows that monotonic economic growth is impossible given the current state of the Russian economy. This paper offers an approach for estimating changes that improve long-term sustainability.
    Keywords: nonrenewable resource; weak sustainability; open imperfect economy; Russian oil extraction
    JEL: Q32 Q38 O13
    Date: 2011–12–15
  25. By: Giuseppe Travaglini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo")
    Abstract: In this paper I study the e¤ects of environmental regulation which establishes upper and lower binding targets to pollution emissions. Essentially, I deal with the properties of a stochastic model of pollution control in continuous-time under emission targets and uncertainty, emphasizing dynamic nonlinearities. Inside the targets pollution behaves as if it were freely floating until it hits one of the two limits. The model provides three main results. First, I show that binding targets can affect the pollution floating even when the boundaries are currently slack. Solutions of the model show that pollution becomes an S-shaped locus of the fundamentals. Second, I show that binding targets will lead to more stable pollution rate determination within the boundaries, than free floating. Finally, stabilization of pollution is related to the growth rate and volatility of fundamentals, to the sensitivity to expected changes of pollution rate and to the credibility of the authorities in defending the pollution targets.
    Keywords: Pollution targets, Optimal stochastic control, Uncertainty, Environmental policy.
    JEL: L51 H23 Q28
    Date: 2012
  26. By: Keen, Michael; Parry, Ian; Strand, Jon
    Abstract: The international aviation and maritime sectors today enjoy relatively favorable tax treatment, as their fuels are not taxed and the sectors are not subject to any value-added tax or turnover tax. Nor are these fuel uses subject to any global measures to reduce their associated CO2 emissions, even though they represent at least 5 percent of the global greenhouse gas emissions. A carbon charge on fuels for international aviation and shipping equal to $25 per tonne of emitted CO2 could raise about $12 billion from aviation and about $26 billion from shipping by 2020. Market-based instruments ought to be used to raise such revenue, preferably charges based on the carbon contents of fuels. Such charges would also scale back emissions by at least 5-10 percent. Developing countries ought to be able to keep their own tax revenue, and additional compensation to them for the economic burdens of these carbon charges may be warranted. Such compensation would constitute at most 40 percent of the raised global revenue. Implementing these charges can be a challenge, especially for aviation, where a large number of bilateral air-service agreements would need to be rewritten.
    Keywords: Transport Economics Policy&Planning,Climate Change Economics,Climate Change Mitigation and Green House Gases,Environmental Economics&Policies,Energy Production and Transportation
    Date: 2012–01–01
  27. By: Giulio Cainelli; Massimiliano Mazzanti; Simone Borghesi
    Abstract: We study the driving forces behind the adoption of environmental innovations (EI) in the Italian economy over 2006-2008 through empirical analyses of the new wave of Community Innovation Survey (CIS) data that covered environmental innovation adoptions in different realms (energy, carbon, production, consumption, etc..). Given the shortage of studies that have empirically assessed the innovation effects of ETS at micro econometric level, we investigate whether the first phase of EU ETS (started in 2005-2006) has exerted some effects on environmental innovations. We then include in a typical probit innovation function some policy stringency indicators, for the ETS sectors, to verify whether the likelihood of adopting environmental innovations is stimulated among other factors by the ETS lever. We test a wide and comprehensive set of potential drivers, including internal factors (R&D), external (to the firm) factors (cooperation, networking), international drivers (foreign related relationships), and mostly important, the dynamic incentives to innovation eventually provided by the ETS implementation. Estimates show that external forces and complementarity with other management practices are particularly relevant to increase the adoption of relatively new and radical technologies: relationships with other firms and institutions, local public funding, group membership are the key factors in this sense. Training is also positively related to EI, confirming recent evidence. The role of ETS on EI seems instead to be weak, but it turns out to be significant for energy efficiency innovations and for consumption level/good related reductions of atmospheric and water emissions.
    Keywords: environmental innovation; industrial sectors; ETS; innovation drivers; CIS data
    JEL: C21 L2 O33 Q38 Q55
    Date: 2012–01–12
  28. By: Donatella Baiardi (Department of Economics and Quantitative Methods, University of Pavia)
    Abstract: The paper explores the relationship between per capita income and three air pollutants, CO, NMVOCs and SOx, using a novel dataset based on the Italian regions. Given the central role of technological progress in long-term environmental problems, we empirically investigate the influence of innovation on the environmental Kuznets curve (EKC). The estimation results validate the EKC hypothesis for the three air pollutants considered. Furthermore, the influence of innovation on the inverted-U-shaped curve identified by the theoretical literature is empirically confirmed too.
    Keywords: Air pollutants, Environmental Kuznets Curve, Italian regions, Technological Progress.
    Date: 2012–01
  29. By: Giovanni Valensisi (UNCTAD. Corresponding address; Junior Davis (UNCTAD. Corresponding address
    JEL: Q54 O13
    Date: 2011–11
  30. By: Gabriela Miranda; Graham Larcombe
    Abstract: The transition to a green economy will not necessarily mean job losses, but there are some barriers that need to be overcome in order to ensure a successful transition. The need to align local and national strategies towards green growth, build strong partnerships, identify transferable skills, better target up-skilling programmes, support green entrepreneurship, and leverage the role of public authorities in supporting green growth activities are some of the recommendations emanating from a report just released by the LEED Programme, on Enabling Local Green Growth: Addressing Climate Change Effects on Employment and Local Development. The recommendations are illustrated by good practice models identified from across the globe.
    Date: 2012–01–11
  31. By: Harald Sander (Professor of Economics and International Economics & Director of the Institute of Global Business and Society, Cologne University of Applied Sciences Professor of Economics at Maastricht School of Management)
    Abstract: It is evident that China’s manufacturing‐based growth model increasingly contradicts local, regional and global environmental imperatives. It is therefore of high importance to identify cost‐efficient strategies for greening the growth path of China. On 25 May 2011 the OECD has launched a “Green Growth Strategy” and proposed a “Green Growth Diagnostics” approach to identify the binding constraints on green growth. This paper discusses the usefulness of this approach for identifying the binding constraints to green growth in general as well as for the special case of China. It is argued that the approach is best applied at the industry level after some adjustments to identify binding constraints to the ‘greening’ of certain industries. The workings of the approach are illustrated for the case of the Chinese energy sector.
    JEL: Q54 O11 O13
    Date: 2011–11
  32. By: Wim Naudé (Maastricht School of Management, Endepolsdomein 150, 6229 EP Maastricht, The Netherlands and UNU‐ WIDER, Katajanokanlaituri 6b, 00160 Helsinki, Finland.)
    Abstract: Industrial policy (IP) can make an important contribution to both environmental and social sustainability. The purpose of this paper is to explore the new rationale for IP due to climate change and to determine its implications for the how of industrial policy. Five implications are discussed, namely the need for international coordination of IPs; for putting human‐ development, and not emission targets, as the overriding objective of low‐carbon IP; of stimulating innovation for energy efficiency, energy diversification, and carbon capture and storage; and for aligning IP with trade policies. Finally the funding needs of low‐carbon IPs are discussed, and the importance of private sector funding emphasized.
    Keywords: climate change, sustainable development, industrialization, industrial policy, low‐ carbon growth
    JEL: Q54 O25 O40
    Date: 2011–03
  33. By: Thomas Gries (University of Paderborn, Center for International Economics)
    Abstract: In today’s globalized world there is a complex relationship between economic activity and the environment. In addition, there is a feedback mechanism from the environment to economic activity and welfare. Besides the fact that economic development is a driving force for climate change, policies that aim to mitigate global warming may also impact negatively on the speed of global development processes. We aim to demonstrate that there can be no solution for the problem of global warming on a global scale that does not account for the effects that climate policy has on economic development, especially for less developed countries. Even more, the causal interdependencies are highly asymmetric. Looking at the variety of countries in the world, we observe major asymmetries and heterogeneities. There are asymmetries in welfare, technology, industry structure, pollution and the accumulation of a pollution stock, and in the way countries are affected by climate change. The effects of these asymmetries in the world economy are neither adequately understood nor taken into account. This paper seeks to highlight the main effects of the global asymmetries on the efficiency of a global climate and industrial policy, and to illustrate the distribution problems that arise from such a policy. Since economic theory is well developed with respect to environmental economics we can use the associated findings as a starting point for analyzing the asymmetry issue.
    JEL: Q54 O11 O13
    Date: 2011–11
  34. By: Konrad, Kai A.; Thum, Marcel
    Abstract: We analyze bargaining over international climate agreements in a setting with incomplete information about abatement costs. Unilateral commitment to high abatement reduces the gains from global cooperation. This reduces the probability of reaching efficient international environmental agreements. --
    Keywords: Mitigation,international climate agreements,bargaining,unilateral advances
    JEL: Q54 Q58 F53 H41
    Date: 2011
  35. By: Guido Heijdra (Associate Professor Water and Environmental Management, Maastricht school of Management and Senior Consultant with Royal Haskoning)
    JEL: Q54 O13
    Date: 2011–11

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