nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒04‒03
thirty-two papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Will policies to promote renewable electricity generation be effective? Evidence from panel stationarity and unit root tests for 115 countries By Hooi Hooi Lean; Russell Smyth
  2. Dead Battery? Wind Power, the Spot Market, and Hydro Power Interaction in the Nordic Electricity Market By Mauritzen, Johannes
  3. Are fluctuations in production of renewable energy permanent or transitory? By Hooi Hooi Lean; Russell Smyth
  4. Pricing electricity derivatives within a Markov regime-switching model By Joanna Janczura
  5. Self-Disconnection Among Pre-Payment Customers - A Behavioural Analysis By Brutscher, P.
  6. The energy short fall and its after effects (a case study for Karachi city in context to Karachi electric supply corporation) By Hasan, Dr. Syed Akif; Subhani, Dr. Muhammad Imtiaz; Osman, Ms. Amber
  7. Electricity consumption and economic growth causality revisited: evidence from Turkey By Muhammad, Shahbaz; Ilhan, Ozturk
  8. “Policy options for the promotion of electric vehicles: a review” By Jordi Perdiguero; Juan Luis Jiménez
  9. Effects of deregulation and vertical unbundling on the performance of China's electricity generation sector By Hang GAO; Jo VAN BIESEBROECK
  10. Real-time pricing when consumers have saving costs By Evens Salies
  11. Energy Consumption, Economic Growth and CO2 Emissions in Middle East and North African Countries By Arouri, Mohamed El Hedi; Ben Youssef, Adel; M'henni, Hatem; Rault, Christophe
  12. Are fluctuations in energy variables permanent or transitory? A survey of the literature on the integration properties of energy consumption and production By Russell Smyth
  13. Energy consumption and economic growth: evidence from nonlinear panel cointegration and causality tests By Omay, Tolga; Hasanov, Mubariz; Ucar, Nuri
  14. Net energy analysis in a ramsey-hotelling growth model By Arturo Macías; Mariano Matilla-García
  15. The Role of Speculation in Oil Markets: What Have We Learned So Far? By Fattouh, Bassam; Kilian, Lutz; Mahadeva, Lavan
  16. An Empirical Growth Model for Major Oil Exporters By Esfahani, H. S.; Mohaddes, K.; Pesaran, M. H.
  17. Rational Habits and Uncertain Prices: Simulating Gasoline Consumption Behavior By K. Rebecca Scott
  18. Demand and price volatility: rational habits in international gasoline demand By Scott, K. Rebecca
  19. Effect of soil heterogeneity on the welfare economics of biofuel policies By Vincent Martinet
  20. Demand and Price Volatility: Rational Habits in International Gasoline Demand By Scott, K. Rebecca
  21. Speciality oils supply chain optimization: from a decoupled to an integrated planning approach By Guajardo, Mario; Kylinger, Martin; Rönnqvist, Mikael
  22. Growing Biomass Fuel Industry, Declining Local Forage Demands, and Changing Greenhouse Gas Emissions from U.S. Agriculture: A Case Study By Gallagher, Paul W.; Richey, Jeremiah
  23. Are Compact Cities Environmentally (and Socially) Desirable? By Gaigne, Carl; Riou, Stephane; Thisse, Jacques-Francois
  24. A proposal for the revewal of sectoral approaches building on the Cement Sustainability Initiative By Gregory Cook; Jean-Pierre Ponssard
  25. Import Competition and Environmental Performance: Evidence from Mexican Plant-level and Satellite Imagery Data By Emilio Gutierrez; Kensuke Teshima
  26. The Effectiveness of Differentiation of the Finnish Car Purchase Tax according to Carbon Dioxide Emission Performance By Adriaan Perrels; Tarja Tuovinen
  27. Distributional effects of the European Emissions Trading System and the role of revenue recycling: Empirical evidence from combined industry- and household-level data By Cludius, Johanna; Beznoska, Martin; Steiner, Viktor
  28. Investment Incentives under Emission Trading: An Experimental Study By Eva Camacho-Cuena; Till Requate; Israel Waichman
  29. Informational Efficiency of the EU ETS market ? a study of price predictability and profitable trading By Kimmo Ollikka; Piia Aatola; Markku Ollikainen
  30. Human Capital, Innovation, and Climate Policy: An Integrated Assessment By Carraro, Carlo; De Cian, Enrica; Tavoni, Massimo
  31. Climate responsive social protection By Kuriakose, Anne T.; Heltberg, Rasmus; Heltberg, Rasmus; Wiseman, William; Costella, Cecilia; Cipryk, Rachel; Cornelius, Sabine
  32. Korea's Low-Carbon Green Growth Strategy By Sang In Kang; Jin-gyu Oh; Hongseok Kim

  1. By: Hooi Hooi Lean; Russell Smyth
    Abstract: This study examines whether policies to promote renewable electricity generation are likely to be effective by applying panel unit root and stationarity tests to time series data on renewable electricity generation for 115 countries over the period 1980-2008. We find that for the panel as a whole, and almost three quarters of the individual countries, renewable electricity generation is characterized by a unit root. This result implies that policies to promote renewable electricity generation, such as renewable portfolio standards, which result in annual increases in renewable energy and, as such, which represent permanent positive shocks to the long-run growth path of renewable electricity generation, will be more effective in increasing renewable electricity generation than policies with a pre-specified time horizon.
    Date: 2012–03
  2. By: Mauritzen, Johannes (Research Institute of Industrial Economics (IFN))
    Abstract: It is well established within both the economics and power system engineering literature that hydro power can act as a complement to large amounts of intermittent energy. In particular hydro power can act as a "battery" where large amounts of wind power are installed. In this paper I use simple distributed lag models with data from Denmark and Norway. I find that increased wind power in Denmark causes increased marginal exports to Norway and that this effect is larger during periods of net exports when it is difficult to displace local production. Increased wind power can also be shown to slightly reduce prices in southern Norway in the short run. Finally, I estimate that as much as 40 percent of wind power produced in Denmark is stored in Norwegian hydro power magazines.
    Keywords: Wind Power; Hydro Power; Nordic Electricity Market; Empirical
    JEL: L90 Q40
    Date: 2012–03–27
  3. By: Hooi Hooi Lean; Russell Smyth
    Abstract: This study examines the integration properties of total renewable energy production, as well as production of biofuels and biomass in the United States. To do so we employ Lagrange Multiplier(LM) univariate unit root tests with up to two structural breaks. We conclude that each production series contains a unit root. This result suggests that random shocks, including regulatory changes, to renewable energy production may lead to permanent departures from predetermined target levels. Furthermore, this result implies that positive shocks associated with a permanent policy stance (such as renewable portfolio standards) that increases the production of renewable energy resources will realize more in terms of positively altering the energy mix between renewable energy and energy from fossil fuels than temporary policy stances (such as investment tax credits over a predetermined time horizon).
    Date: 2012–03
  4. By: Joanna Janczura
    Abstract: In this paper analytic formulas for electricity derivatives are calculated. To this end, we assume that electricity spot prices follow a 3-regime Markov regime-switching model with independent spikes and drops and periodic transition matrix. Since the classical derivatives pricing methodology cannot be used in case of non-storable commodities, we employ the concept of the risk premium. The obtained theoretical results are then used for the European Energy Exchange (EEX) market data. The 3-regime model is calibrated to the spot electricity prices. Next, the risk premium is derived and used to calculate prices of European options written on spot, as well as, forward prices.
    Date: 2012–03
  5. By: Brutscher, P.
    Abstract: In this paper, we revisit the problem of self-disconnection among prepayment energy customers. Using metering data from 2.3 million electricity pre-payment customers, we study how often households with an electricity pre-payment meter tend to self-disconnect over the course of a year - and why they do so. What we find is that, in any given year, the majority of households (ca. 78%) do not self-disconnect; ca. 12% self-disconnect once; ca. 3% selfdisconnect more often than four times. We also find that most selfdisconnections (ca. 62%) last for less than one day; between 72% and 82% last for less than two days; 12%-18% last for more than 3 days. As for the main driver of self-disconnection, we identify financial constraints. This suggests that it is likely to be difficult/expensive to reduce the total number of self-disconnections. In the last part of the paper, we argue, however, that it may (still) be possible to reduce the negative impact of self-disconnection in a relatively inexpensive way - at least to some extent - by helping households to better smooth their self disconnections over the course of a year.
    Keywords: Pre-payment; Self-Disconnection: Commitment Device; Self Control; Fuel Poverty
    JEL: D03 D04 D12 D14
    Date: 2012–03–21
  6. By: Hasan, Dr. Syed Akif; Subhani, Dr. Muhammad Imtiaz; Osman, Ms. Amber
    Abstract: This paper is an attempt to interrogate and examine the unstoppable short fall of energy which has been paralyzing the life of Karachi for decades. The monthly data for the period of Jan-2009 to Dec-2011 has been interrogated while using the Pearson correlation, Vector Auto regression (VAR) and Tobit model, to conclude the bottom line. The findings reveal that there is a vast difference between the actual demand and actual supply of energy i.e. energy shortfall for the various segments of Karachi city which include house hold and industrial consumptions both, and such overwhelming gap causes Load shedding for every now and then, and made the life of this city even difficult but this load shedding to overcome the stated gap does not reduce it empirically and historically. The paper also confirms that it is the short fall which decides the per unit price of energy use for both the households and industries.
    Keywords: Energy; Electricity; Vector Auto Regression; Tobit Model; Energy Short Fall
    JEL: N7
    Date: 2012
  7. By: Muhammad, Shahbaz; Ilhan, Ozturk
    Abstract: The study reconsiders the relationship between electricity consumption and economic growth by incorporating financial development, capital and labor as important factors of production using augmented production function in Turkey for the period of 1971-2009. In doing so, we applied ARDL bounds testing approach and found long run relationship between electricity consumption, economic growth, financial development, capital and labour. Further,results indicated that electricity consumption, financial development, capital and labor have positive effect on economic growth. The VECM granger causality analysis shows bidirectional causality between electricity consumption, economic growth, financial development,capital and labor. The findings have important policy implication to sustain economic growth through comprehensive energy policy and developing financial sector in Turkey.
    Keywords: Electricity consumption; Financial development; Economic growth
    JEL: F43 Q4
    Date: 2012–03–01
  8. By: Jordi Perdiguero (Faculty of Economics, University of Barcelona); Juan Luis Jiménez (Department of Applied Economic Analysis. University of Las Palmas de Gran Canaria)
    Abstract: The upward trend in fuel prices and the desire to reduce pollution levels mean that the electric vehicle has become an increasingly attractive alternative in recent years. The aim of this study is to examine the main barriers that the electric vehicle must overcome if it is to become a successful mode of transport and to review the main public policies that governments might implement to help in overcoming these obstacles. Public policies have been directed at four basic features of the electric vehicle: the charging network; increasing demand for these vehicles; industrialization and research and development programs; and the introduction of electric vehicles in programs of sustainable mobility. This article describes the public policies that have been implemented around the world to overcome the barriers to the adoption of electric vehicle so that it might become the vehicle of the future.
    Keywords: Electric vehicle; public policies; recharge system. JEL classification: H23; P28; Q42.
    Date: 2012–03
    Abstract: We study whether the 2002 deregulation and vertical unbundling of the Chinese electricity sector has boosted productivity in the generation segment of the industry. Controlling explicitly for sources of price-heterogeneity across firms and for firm-fixed effects, we find deregulation to be associated with a reduction in labor input and material use of 6 and 4 percent, respectively. This effect only appears two years after the reforms, is robust to alternative ways of identifying restructured firms, and to the nonrandom selection of restructured firms using a matching estimator. Input use of new state-owned firms that start operations two years into the reform period does not differ significantly anymore from input use of private sector entrants.
    Date: 2011–11
  10. By: Evens Salies (Observatoire Francais des Conjonctures Economiques)
    Abstract: Effectiveness of real-time electricity prices depends upon consumers being willing to subscribe to them and being able to curb their consumption levels. The present paper addresses both issues by considering consumers differentiated by their saving costs in the stylized real-time pricing model put forward by Chao, 2010, Price-responsive demand management for a smart grid world, The Electricity Journal, 23, 7-20. The present paper shows that when consumers are free to adopt real-time prices, and half the consumer population is pro-real-time prices (i.e. have zero or negative saving costs), producers do not offer sufficient incentives in return for efficient usage of electricity. They instead prefer to charge inefficient prices and discriminate against the portion of the consumer population who has no saving costs. We also find that efficient marginal cost pricing, although feasible, is not compatible with adoption of real-time prices by all consumers. Overall, our results cast some doubt about the allocative efficiency of real-time pricing, whether it is compulsory or not.
    Keywords: real-time pricing,energy conservation,price discrimination, demand response programs
    JEL: D1 Q2
    Date: 2012–03
  11. By: Arouri, Mohamed El Hedi (EDHEC Business School); Ben Youssef, Adel (University of Nice Sophia-Antipolis); M'henni, Hatem (University of Manouba); Rault, Christophe (University of Orléans)
    Abstract: This article extends the recent findings of Liu (2005), Ang (2007), Apergis et al. (2009) and Payne (2010) by implementing recent bootstrap panel unit root tests and cointegration techniques to investigate the relationship between carbon dioxide emissions, energy consumption, and real GDP for 12 Middle East and North African Countries (MENA) over the period 1981–2005. Our results show that in the long-run energy consumption has a positive significant impact on CO2 emissions. More interestingly, we show that real GDP exhibits a quadratic relationship with CO2 emissions for the region as a whole. However, although the estimated long-run coefficients of income and its square satisfy the EKC hypothesis in most studied countries, the turning points are very low in some cases and very high in other cases, hence providing poor evidence in support of the EKC hypothesis. Thus, our findings suggest that not all MENA countries need to sacrifice economic growth to decrease their emission levels as they may achieve CO2 emissions reduction via energy conservation without negative long-run effects on economic growth.
    Keywords: growth, Environmental Kuznets Curve, energy consumption, carbon dioxide emissions
    JEL: Q43 Q53 Q56
    Date: 2012–03
  12. By: Russell Smyth
    Abstract: This study reviews the empirical literature on the integration properties of energy consumption and production. The survey begins with a discussion of the implications of whether energy variables contain a unit root and proceeds to examine how results differ according to the specific unit root or stationarity test employed. Various issues in the literature such as country coverage, use of aggregate versus disaggregate energy data and national versus sub-national data are discussed. Results are found to be sensitive to methodology and type of energy considered. Suggestions for future research are discussed.
    Date: 2012–03
  13. By: Omay, Tolga; Hasanov, Mubariz; Ucar, Nuri
    Abstract: In this paper, we propose a nonlinear cointegration test for heterogeneous panels where the alternative hypothesis is an exponential smooth transition (ESTAR) model. We apply our tests for investigating cointegration relationship between energy consumption and economic growth for the G7 countries covering the period 1977-2007. Moreover, we estimate a nonlinear Panel Vector Error Correction Model in order to analyze the direction of the causality between energy consumption and economic growth. By using nonlinear causality tests we analyze the causality relationships in low economic growth and high economic growth regimes. Furthermore, we deal with the cross section dependency problem in both nonlinear panel cointegration test and nonlinear Panel Vector Error Correction Model.
    Keywords: Nonlinear panel cointegration; nonlinear Panel Vector Error Correction Model; cross section dependency
    JEL: C13 C23 C33
    Date: 2012–03–26
  14. By: Arturo Macías (Banco de España); Mariano Matilla-García (Universiad Nacional de Educación a Distancia)
    Abstract: This article presents a dynamic growth model with energy as an input in the production function. The available stock of energy resources is ordered by a quality parameter based on energy accounting: the “Energy Return on Energy Invested” (EROI). To our knowledge this is the first paper where EROI fits in a neoclassical growth model (with individual utility maximization and market equilibrium), setting the economic use of “net energy analysis” on firmer theoretical ground. All necessary concepts to link neoclassical economics and EROI are discussed before their use in the model, and a comparative static analysis of the steady states of a simplified version of the model is presented.
    Keywords: EROI, net energy analysis, growth, Ramsey-Hotelling, energy depletion
    JEL: Q00 Q43 O13
    Date: 2012–03
  15. By: Fattouh, Bassam; Kilian, Lutz; Mahadeva, Lavan
    Abstract: A popular view is that the surge in the price of oil during 2003-08 cannot be explained by economic fundamentals, but was caused by the increased financialization of oil futures markets, which in turn allowed speculation to become a major determinant of the spot price of oil. This interpretation has been driving policy efforts to regulate oil futures markets. This survey reviews the evidence supporting this view. We identify six strands in the literature corresponding to different empirical methodologies and discuss to what extent each approach sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. Instead, there is strong evidence that the co-movement between spot and futures prices reflects common economic fundamentals rather than the financialization of oil futures markets.
    Keywords: Financialization; Fundamentals; Futures market; Oil price; Speculation; Spot market
    JEL: G15 G28 Q43
    Date: 2012–03
  16. By: Esfahani, H. S.; Mohaddes, K.; Pesaran, M. H.
    Abstract: This paper develops a long-run growth model for a major oil exporting economy and derives conditions under which oil revenues are likely to have a lasting impact. This approach contrasts with the standard literature on the "Dutch disease" and the "resource curse", which primarily focuses on short-run implications of a temporary resource discovery. Under certain regularity conditions and assuming a Cobb-Douglas production function, it is shown that (log) oil exports enter the long-run output equation with a coefficient equal to the share of capital (a). The long-run theory is tested using quarterly data on nine major oil economies, six of which are current members of OPEC (Iran, Kuwait, Libya, Nigeria, Saudi Arabia, and Venezuela), plus Indonesia which is a former member, and Mexico and Norway, which are members of the OECD. Overall, the test results support the long-run theory. The existence of long-run relations between real output, foreign output and real oil income is established for six of the nine economies considered. The exceptions, Mexico and Norway, do not possess sufficient oil reserves for oil income to have lasting impacts on their economies. At their current production rates, the proven oil reserves of Mexico and Norway are expected to last 9 and 10 years respectively, as compared to reserve-production ratios of OPEC members, which lie in the range of 45 to 125 years. For Indonesia, whose share of oil income in GDP has been declining steadily over the past three decades, the theory suggests that the e¤ect of oil income on the economy?s steady state growth rate will vanish eventually, and this is indeed con?rmed by the results. Sensible estimates of a are also obtained across the six economies with long-run output equations, and impulse responses are provided for the e¤ects of shocks to oil income and foreign output in these economies.
    Keywords: Growth models, long run and error correcting relations, major oil exporters, OPEC member countries, oil exports and foreign output shocks.
    JEL: C32 C53 E17 F43 F47 Q32
    Date: 2012–03–21
  17. By: K. Rebecca Scott
    Abstract: When consumers are forward-looking with respect to their demand for a habit-forming good, traditional measures of price elasticity are misleading. In particular, such measures will underestimate sensitivity to long-run shifts - and therefore underestimate the potential effect of policy instruments that act through price. Correcting elasticities for the behavior of the price process requires a model with forward-looking consumers, a habit-forming good, and uncertain relative prices. With appropriate restrictions on the type of price uncertainty, this paper shows that it is possible to solve for the optimal consumption path under any price process. Simulations then sketch out how habits and the price process shape demand. Gasoline demand motivates the model and illustrates its implications.
    Keywords: Gasoline demand, Rational habits, Price elasticity
    JEL: H30 Q40 Q41 Q50 R40
    Date: 2012
  18. By: Scott, K. Rebecca (University of California, Berkeley. Dept of agricultural and resource economics)
    Abstract: The combination of habits and a forward outlook suggests that consumers will be sensitive not just to prices but to price dynamics. In particular, rational habits models suggest 1. that price volatility and uncertainty will reduce demand for a habit-forming good and 2. that such volatility will dampen demand?s responsiveness to price. These two implications can be tested by augmenting a traditional partial-adjustment or error-correction model of demand. I apply this augmented model to data on gasoline consumption, as rational habits provide a succinct representation for the investment and behavioral decisions that determine gasoline usage. The trade-o¤s among 2SLS, system GMM, and pooled mean group (PMG) estimators are considered, and my preferred PMG estimator provides evidence for the two implications of rational habits in a panel of 29 countries for the years 1990-2009. The sensitivity of certain results to the choice of estimator o¤ers a cautionary illustration of the cost of assumptions such as coe¢ cient heterogeneity. Given the evidence uncovered in favor of rational gasoline habits, such habits may help to explain some of the cross-country variation in "total" price elasticity. These habits also imply that the e¤ect of price volatility must be taken into account when projecting the impacts of potential policies on gasoline consumption.
    Keywords: gasoline demand, rational habits, price elasticity
    JEL: H30 Q40 Q41 Q50 R40
    Date: 2011–06
  19. By: Vincent Martinet
    Abstract: Biofuel policies (blend mandate or tax credit) have impacts on food and energy prices, and on land-use. The magnitude of these effects depends on the market response to price, and thus on the agricultural supply curve, which, in turn, depends on the land availability (quantity and agronomic quality). To understand these relationships, we develop a theoretical framework with an explicit representation of land heterogeneity. The elasticity of the supply curve is shown to be non-constant, depending on land heterogeneity and the availability of land for agricultural expansion. This influences the welfare economics of biofuels policies, and the possible carbon leakage in land and fuel markets. We emphasize that the impacts of biofuel policies on welfare and land-use change depend strongly on the potential development of the agricultural sector in terms of expansion and intensification, and not only on its current size.
    Keywords: Agricultural and energy market, Biofuels, Land use, Soil heterogeneity, Welfare
    Date: 2012
  20. By: Scott, K. Rebecca
    Abstract: eeeeee
    Keywords: Natural Resources and Conservation, Economics, gasoline demand, rational habits, price elasticity
    Date: 2011–07–08
  21. By: Guajardo, Mario (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Kylinger, Martin (Dept. of Production Economics, Linköping University); Rönnqvist, Mikael (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: We study a problem of tactical planning in a divergent supply chain. It involves decisions regarding production, inventory, internal transportation, sales and distribution to customers. The problem is motivated by the context of a company in the speciality oils industry. The overall objective at tactical level is to maximize contribution and, in order to achieve this, the planning has been divided into two separate problems. The first problem concerns sales where the nal sales and distribution planning is decentralized to individual sellers. The second problem concerns production, transportation and inventory planning through refineries, hubs and depots and is managed centrally with the aim of minimizing costs. Due to this decoupling, the solution of the two problems needs to be coordinated in order to achieve the overall objective. In the company, this is pursued through an internal price system aiming at giving the sellers the incentives needed to align their decisions with the overall objective. We propose and discuss linear programming models for the decoupled and integrated planning problems. We present numerical examples to illustrate potential effects of integration and coordination and discuss the advantages and disadvantages of the integrated over the decoupled approach. While the total contribution is higher in the integrated approach, it has also been found that the sellers' contribution can be considerably lower. Therefore, we also suggest contribution sharing rules to achieve that both the company and sellers get a better outcome under the integrated planning.
    Keywords: Supply chain management; integrated planning; decoupled planning; linear programming; contribution sharing; OR in the oil industry
    JEL: C44
    Date: 2012–03–26
  22. By: Gallagher, Paul W.; Richey, Jeremiah
    Abstract: This paper investigates the effect of a biomass crop introduction in a local market where field crops, cattle forage and biomass crops compete for the agricultural resources and determine land use. A simulation study for a State in the US (Minnesota) with extensive and diverse agricultural resources that could also support a biomass industry is reported. Local market impact on prices and land use is summarized. A local biofuel industry with 1.0 billion gallon capacity can transform declining local land values to stable or moderately increasing land values, partly because secular declines in cattle forage can be replaced with biofuel demands. The effects of greenhouse gas emissions and sinks are also estimated. The local agriculture sectors’ net greenhouse gas changes are converted from a net emission to a net sink position with a biofuels industry-we calculate an annual net improvement of 55 bil. Lbs CO2 –equivalent, due, in part, declining cattle emissions and favorable land use effects from expanding hay production.
    Keywords: land use; Land rent; livestock emissions; switchgrass; greenhouse gas (GHG)
    Date: 2012–03–28
  23. By: Gaigne, Carl; Riou, Stephane; Thisse, Jacques-Francois
    Abstract: There is a wide consensus among international institutions and national governments in favor of compact (i.e. densely populated) cities as a way to improve the ecological performance of the transport system. Indeed, when both the intercity and intra-urban distributions of activities are given, a higher population density makes cities more environmentally friendly as the average commuting length is reduced. However, when we account for the possible relocation of activities within and between cities in response to a higher population density, the latter may cease to hold. Because changes in population density affect land rents and wages, firms and workers re-optimize and choose new locations. We show that this may reshape the urban system in a way that generates both a higher level of pollution and welfare losses. As cities become more compact, agglomeration occurs and, eventually, the secondary business centers vanish. By increasing the average commuting length, these changes in the size and structure of cities may be detrimental to both the ecological and welfare objectives even if intercity trade flows decrease. This means that compact is not always desirable, and thus an increasing-density policy should be supplemented with instruments that impact the intra- and inter-urban distributions of activities. We argue that a policy promoting the creation of secondary business centers can raise welfare and decrease emissions.
    Keywords: Greenhouse gas, commuting costs, transport costs, cities, Environmental Economics and Policy, D61, F12, Q54, Q58, R12,
    Date: 2012–03
  24. By: Gregory Cook (Carbon Counts Ltd - {-]); Jean-Pierre Ponssard (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: The prospects for an international agreement within the United Nations Framework on Climate Change (UNFCCC) resulting in a common carbon price ‐ such as a global cap and trade scheme ‐ can for now only be seen as a long term goal. In the meantime, we have to work in a world of unilateral climate policies, eventually loosely coordinated among a limited number of countries. Two key considerations need be addressed in the design of these policies: equity for emerging countries, and competitiveness for carbon intensive internationally traded sectors. This context has generated a renewed interest in sectoral approaches. This paper provides a sound methodological framework to discuss equity and efficiency issues in sectoral approaches, makes a proposal that addresses these national requirements, and discusses some related implementation issues. The proposed approach combines basic components put forward by industry such as absolute caps for industrialized countries and intensity targets for emerging countries, BTA for those countries that do not adopt the sectoral approach, as well as reduced eligibility of these countries to benefit from the financial transfers collected through CO2 revenues in industrialized countries. The proposal is applied to the case of the cement industry.
    Keywords: carbon leakage; cement industry emissions; climate policy frameworks; leakage
    Date: 2012–03–21
  25. By: Emilio Gutierrez (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)); Kensuke Teshima (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: We investigate the impact of international trade, in particular import competition, on the environment. We tackle this question from a new perspective, i.e., whether trade liberalization affects production plants' environmental performance by changing incentives of firms to undertake two types of investment: investment in the environment and in efficient energy use, and investment in technology in general. Identifying such effects empirically has been challenging. Not only is it unusual to obtain direct information on plants' environmental performance as well as plants' effort towards environmental protection; it is also difficult to find an exogenous source of variation in tariffs on goods produced by plants. We overcome these difficulties by constructing a unique combination of Mexican plant-level data and satellite imagery data, thus providing evidence of the effects of import competition on three direct measures: energy efficiency in terms of electricity use; investment at the plant level in efficient energy and the environment; and measures of pollution around plants' geographic location. We use tariff changes due to free trade agreements as shocks to import competition, which are arguably less endogenous than unilateral tariff reduction and have been shown to have no systematic correlation with initial plant-level characteristics. The key finding is that the reduction of tariffs on goods produced by Mexican plants induced them to increase efficiency in energy use, thus allowing them to reduce pollution and in turn also reduce direct investment in efficient energy and environmental protection. The results suggest that even when detailed data on environmental effort at the plant level are available, caution should be taken when trying to measure the effects of openness to trade on environmental performance, as trade is also likely to change the firms' incentive to invest in technology in general, which may indirectly be more environmentally friendly.
    Date: 2011
  26. By: Adriaan Perrels; Tarja Tuovinen
    Abstract: The study concerns an assessment of the effectiveness of car purchase tax differentiation according to the CO2-emission performance of newly sold cars as implemented in Finland. This policy instrument came into force as of 1 January 2008. The effectiveness of the instrument is assessed by means of decomposition of car sales by key features of cars and by estimation of impact relations between changes in the emission performance of newly sold cars and various explanatory variables, including the imputed tax differentiation based price differences
    Keywords: fuel efficiency, policy effectiveness, automobile tax reform, transport emissions
    JEL: Q48 H31 R48 H23
    Date: 2012–03–06
  27. By: Cludius, Johanna; Beznoska, Martin; Steiner, Viktor
    Abstract: We calculate the expected distributional effects of the European Emissions Trading System combining industry and household-level data. By combining data on direct CO2 emissions by production sector from the German Environmental Account with the German Input-Output Accounts, we calculate the CO2 intensity of each sector covered by the EU ETS. We focus on the impact of price increases in the electricity sector, both directly in the form of higher electricity bills for consumers and indirectly through products that use electricity as an input to production. Distributional effects of price increases are analyzed on the basis of the German Income and Expenditure Survey for the year 2008 data and updated to 2013. We confirm the ex-ante expected regressive effect, which is, however, both rather small in magnitude and can be offset and even more than offset by revenue recycling, in particular the reduction of social security contributions on labour income. --
    Date: 2012
  28. By: Eva Camacho-Cuena (Department of Economics, Universitat Jaume I); Till Requate (Department of Economics, University of Kiel); Israel Waichman (Department of Economics, University of Heidelberg)
    Abstract: This paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading. Our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits. We consider three allocation/auction policies: auctioning off (costly) permits through an ascending clock auction, grandfathering permits with re-allocation through a single-unit double auction, and grandfathering with reallocation through an ascending clock auction. Our results confirm both dynamic and static theoretical equivalence of auctioning and grandfathering. We nevertheless find that although the market institution used to reallocate permits does not impact the dynamic efficiency from investment, it affects the static efficiency from permit trading.Length: 39 pages
    Keywords: environmental policy; abatement technology; taxes; permit trading;auctions
    JEL: C92 D44 L51 Q28 Q55
    Date: 2012
  29. By: Kimmo Ollikka; Piia Aatola; Markku Ollikainen
    Abstract: We study the informational efficiency of the European Emissions Trading Scheme, EU ETS market by simulating the trading in this emerging market. If the market is efficient, profitable trading should only exist locally in time. We adopt the Timmermann and Granger (2004) definition of efficiency and for the first time in the literature run a large set of econometric, technical analysis and combined models to forecast the emissions allowance price changes. These forecasts are then used as trading signals in the trading simulation. We find that the combined models outperform the other models in forecasting ability. Trading simulation based on models combining time series and technical analysis trading rules shows that there have been possibilities for profitable trading in the EU ETS market during the study period of 2008?2010. This suggests that the EU ETS market shows periods with no informational efficiency.
    Keywords: European Union emissions trading, informational efficiency, econometric analysis
    JEL: Q52 Q53
    Date: 2012–03–22
  30. By: Carraro, Carlo; De Cian, Enrica; Tavoni, Massimo
    Abstract: This paper looks at the interplay between human capital and innovation in the presence of climate and educational policies. Using recent empirical estimates, human capital and general purpose R&D are introduced in an integrated assessment model that has been extensively applied to study the climate change mitigation. Our results suggest that climate policy stimulates general purpose as well as clean energy R&D but reduces the incentive to invest in human capital formation. Human capital increases the productivity of labour and the complementarity between labour and energy drives its pollution-using effect (direct effect). When human capital is an essential input in the production of generic and energy dedicated knowledge, the crowding out induced by climate policy is mitigated, thought not completely offset (indirect effect). The pollution-using implications of the direct effect prevail over the indirect contribution of human capital to the creation of new and cleaner knowledge. A policy mix that combines educational as well as climate objectives offsets the human capital crowding-out with a moderate, short-term consumption loss. Human capital is complement to all forms of innovation and an educational policy stimulates both energy and general purpose innovation. This result has important policy implications considering the growing concern that effective climate policy is conditional on solid economic development and therefore it needs to be supplemented by other policy targets.
    Keywords: Climate Policy; Human Capital; Innovation; Sustainable Development
    JEL: O33 O41 Q43
    Date: 2012–03
  31. By: Kuriakose, Anne T.; Heltberg, Rasmus; Heltberg, Rasmus; Wiseman, William; Costella, Cecilia; Cipryk, Rachel; Cornelius, Sabine
    Abstract: In the years ahead, development efforts aiming at reducing vulnerability will increasingly have to factor in climate change, and social protection is no exception. This paper sets out the case for climate?responsive social protection and proposes a framework with principles, design features, and functions that would help Social Protection (SP) systems evolve in a climate?responsive direction. The principles comprise climate?aware planning; livelihood?based approaches that consider the full range of assets and institutions available to households and communities; and aiming for resilient communities by planning for the long term. Four design features that can help achieve this are: scalable and flexible programs that can increase coverage in response to climate disasters; climate?responsive targeting systems; investments in livelihoods that build community and household resilience; and promotion of better climate risk management.
    Keywords: Climate Change Economics,Safety Nets and Transfers,Science of Climate Change,Climate Change Mitigation and Green House Gases,Hazard Risk Management
    Date: 2012–03–01
  32. By: Sang In Kang; Jin-gyu Oh; Hongseok Kim
    Abstract: This paper examines Korea’s low-carbon green growth strategy with a focus on three pillars: regulations to reduce greenhouse gas emissions from industries; incentive mechanisms for businesses to develop green technologies and products; and public information tools to increase awareness and demand for green products. Korea’s transition to a low-carbon green growth path may provide a useful reference for many developing countries in a carbonconstrained global economy. The institutionalisation of a low-carbon green growth strategy supported by strong political leadership and elaborated implementation programmes is key to solving many socio-economic and environmental challenges posed by the traditional growth paradigm that is heavily dependent on the consumption of energy and natural resources, including fossil fuels. Efficient role sharing and co-operation among public and private stakeholders in the process of planning, budget preparation and implementation are major components of Korea’s low-carbon green growth strategy.<BR>Ce document analyse la stratégie de croissance verte à faible intensité de carbone de la Corée en examinant plus particulièrement trois éléments : les régulations pour réduire les émissions de gaz à effet de serre de l’industrie ; les mécanismes d’incitation pour les entreprises à développer les technologies et les produits respectueux de l’environnement ; et les outils d’information publics pour sensibiliser l’opinion publique et accroître la demande de produits respectueux de l’environnement. Dans une économie mondiale sous contrainte carbone, la transition de la Corée vers une croissance verte à faible intensité de carbone peut servir de point de référence pour bon nombre de pays en développement. L’institutionnalisation de la stratégie de croissance verte à faible intensité de carbone bénéficiant d’un large soutien politique et soutenue par des programmes de mise en oeuvre détaillés est essentielle pour résoudre les défis socio-économiques et environnementaux que posent le paradigme classique de la croissance fortement énergivore et consommatrice de ressources naturelles, parmi lesquelles les énergies fossiles. Un partage efficace des rôles et une coopération suivie entre les acteurs publics et privés dans le processus de planification, de préparation du budget et de mise en oeuvre sont des composantes majeures de la stratégie de croissance verte à faible intensité de carbone de la Corée.
    Keywords: green technologies, green growth, low-carbon economy, green products, croissance verte, économie à faible intensité de carbone, produits respectueux de l’environnement, technologies respectueuses de l'environnement
    JEL: Q01 Q28 Q58
    Date: 2012–03–21

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