nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒04‒10
twenty-two papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. The role of policy in energy transitions: lessons from the energy liberalisation era By Pollitt, M. G.
  2. Should Coal Replace Coal? Options for the Irish Electricity Market By Diffney, Seán; Malaguzzi Valeri, Laura; Walsh, Darragh
  3. Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices By Kalantzis, Fotis; Sakellaris, Kostis
  4. Light Duty Vehicle Transportation and Global Climate Policy: The Importance of Electric Drive Vehicles By Valentina Bosetti; Thomas Longden
  5. Monetary policy responses to oil price fluctuations By Bodenstein, Martin; Guerrieri, Luca; Kilian, Lutz
  6. The Effects of Gasoline Price Regulations: Experimental Evidence By Haucap, Justus; Müller, Hans Christian
  7. How Much Does Natural Resource Extraction Really Diminish National Wealth? The Implications of Discovery - Working Paper 290 By Alan Gelb, Kai Kaiser, and Lorena Vinuela
  8. Has the UAE Escaped the Oil Curse? By Ilham Haouas; Raimundo Soto
  9. Resource Rents, Political Institutions and Economic Growth By Ibrahim Ahmed Elbadawi; Raimundo Soto
  10. Iraq’s Last Window: Diffusing the Risks of a Petro-State - Working Paper 266 By Johnny West
  11. What Impedes Efficient Adoption of Products? Evidence from Randomized Variation in Sales Offers for Improved Cookstoves in Uganda By Levine, David I.; Cotterman, Carolyn
  12. On the drivers of commodity co-movement: Evidence from biofuels By Francisco Peñaranda; Augusto Rupérez Micola
  13. Multivariate granger causality between CO2 Emissions, energy intensity, financial development and economic growth: evidence from Portugal By Muhammad, Shahbaz
  14. The environmental Kuzents Curve and the role of coal consumption in India: cointegration and causality analysis in an open economy By Tiwari, Aviral Kumar; Muhammad, Shahbaz
  15. Socioeconomic Distribution of Emissions and Resource Use in Ireland By Lyons, Seán; Pentecost, Anne; Tol, Richard S. J.
  16. Education, Convergence and Carbon Dioxide Growth per Capita By Somlanaré Romuald Kinda
  17. Environmental Tax on Products and Services Based on Their Carbon Footprint: A Case Study of the Pulp and Paper Sector By Gemechu, Eskinder D.; Butnar, Isabela; Llop Llop, Maria; Castells i Piqué, Francesc
  18. From Shadow to Green: Linking Environmental Fiscal Reforms and the Informal Economy By Mikel González-Eguino; Anil Markandya; Marta Escapa
  19. Environmental Fiscal Reform and Unemployment in Spain By Anil Markandya; Mikel González-Eguino; Marta Escapa
  20. Can lobbying encourage abatement? Designing a new policy instrument By Lange, Ian; Polborn, Sarah
  21. Does more stringent environmental regulation induce or reduce technology adoption? When the rate of technology adoption is inverted u-shaped By Perino, Grischa; Requate, Till
  22. Impact of environmental regulations on trade in the main EU countries: conflict or synergy? By de santis, roberta

  1. By: Pollitt, M. G.
    Abstract: The aim of this paper is to discuss the period of energy privatisation and liberalisation which began in the 1980s within its wider historical context. The key issues are: what has been learned from this recent period, and; how significant is it in the light of an energy transition to low carbon energy system by 2050? Energy liberalisation has led to positive and globally widespread but modest efficiency gains but a lack of clearly visible direct benefits to households in many countries. It has significantly improved the governance of monopoly utilities (via independent regulators), the prospects for competition and innovation, and the quality of policy instruments for environmental emissions control (through the emergence of trading mechanisms). We conclude that it is not liberalisation per se that will determine the movement towards a low carbon energy transition, but the willingness of societies to bear the cost, which will be significant no matter what the extent of liberalisation.
    Keywords: energy liberalisation; energy privatisation; energy transition
    JEL: L94
    Date: 2012–04–04
  2. By: Diffney, Seán; Malaguzzi Valeri, Laura; Walsh, Darragh
    Abstract: The Moneypoint coal plant is nearing the end of its useful life and will need to be replaced. For Moneypoint's replacement, we consider different types of baseload technologies: coal plants with and without carbon capture, combined-cycle gas plants and a nuclear plant. This paper compares how the different types of plant are likely to affect the net costs of the Single Electricity Market under a number of fossil fuel and carbon price scenarios and highlights issues that might be of interest to final consumers and policy makers, namely effects on short-run prices, emissions and energy security.
    Keywords: cost/electricity/Policy/scenarios
    Date: 2012–03
  3. By: Kalantzis, Fotis; Sakellaris, Kostis
    Abstract: This empirical study assesses the impact of specific regulatory policy measures, adopted in the Greek wholesale electricity market during the period 2004-2011, on the Day-Ahead Market Price. We consider an ARMA-GARCH model extended to include dummies and other exogenous variables that affect market prices, such as RES and Hydro electricity production, as well as load volumes and Brent crude oil prices. In order to analyse the impact of the regulatory reforms on price and volatility dynamics, we include regime dummy variables, reflecting the timeline of these reforms. Based on the results, we discuss the impact of the examined reforms and their significance.
    Keywords: Electricity Market; Greek Wholesale Market; Regulatory Reform; Day-Ahead Price; GARCH
    JEL: L51 C01
    Date: 2012–04–01
  4. By: Valentina Bosetti (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center for Climate Change); Thomas Longden (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center for Climate Change)
    Abstract: With a focus on establishing whether climate targets can be met under different personal transport scenarios we introduce a transport sector representing the use and profile of light domestic vehicles (LDVs) into the integrated assessment model WITCH. In doing so we develop long term projections of light domestic vehicle use and define potential synergies between innovation in the transportation sector and the energy sector. By modelling the demand for LDVs, the use of fuels, and the types of vehicles introduced we can analyse the potential impacts on the whole economy. We find that with large increases in the use of vehicles in many regions around the globe, the electrification of LDVs is important in achieving cost effective climate targets and minimising the impact of transportation on other sectors of the economy.
    Keywords: Light Duty Vehicles, Transportation, Climate Change Policy, Electric Drive Vehicles, Research and Development
    JEL: Q54 R41 O3
    Date: 2012–03
  5. By: Bodenstein, Martin; Guerrieri, Luca; Kilian, Lutz
    Abstract: The recent volatility in global commodity prices and in the price of oil, in particular, has created renewed interest in the question of how monetary policy makers should respond to oil price fluctuations. In this paper, we discuss why this question is ill-posed and has no general answer. The central message of our analysis is that the best central bank policy response to oil price fluctuations depends on why the price of crude oil has changed. For example, an unexpected oil supply disruption in the Middle East calls for a different policy response than an unexpected increase in Chinese productivity or oil intensity. This means that policy makers need to disentangle the structural shocks that are jointly driving the price of oil and the macroeconomy and tailor their response to the observed mix of shocks. We use a multi-country DSGE model to quantify the appropriate policy responses and to analyze the optimal responses from a welfare point of view. We also reexamine the welfare gains from global monetary policy coordination in a world with trade in oil.
    Keywords: endogeneity; global economy; monetary policy; oil price; open economy; policy rule; welfare
    JEL: E32 E43 F32 Q43
    Date: 2012–04
  6. By: Haucap, Justus; Müller, Hans Christian
    Abstract: Economic theory suggests that gasoline retail markets are prone to collusive behavior. Oligopoly market structures prevail, market interactions occur frequently, prices are highly transparent, and demand is rather inelastic. A recent sector inquiry in Germany backed suspicions of tacit collusion and suggested to adopt regulatory pricing rules for gas stations similar to those implemented in Austria, parts of Australia, Luxembourg or parts of Canada. In order to increase consumer welfare these rules either restrict the number of price changes per day or they limit the mark‐up for gasoline retail prices. As theoretical predictions about the impact of these measures are mixed and empirical studies rare, we analyze the effects, using an experimental gasoline market in the lab. Our results reveal that two of the suggested rules rather decrease consumer welfare: The Austrian rule which only allows one price increase per day (while price cuts are always possible) and the Luxembourg rule which introduces a maximum markup for retailers. While no rule tends to induce lower retail prices, the Western Australian rule which allows at most one daily price change (no matter whether up or down) does at least not harm consumers. --
    Keywords: Gasoline Prices,Fuel Prices,Experimental Gasoline Market,Fuel Price Regulation,Retail Price Regulation,Gas Stations
    JEL: L13 L71 L81 L88 K23 C90
    Date: 2012
  7. By: Alan Gelb, Kai Kaiser, and Lorena Vinuela
    Abstract: The paper considers the process of discovery for subsoil resources, including both hard minerals and hydrocarbons and estimates its magnitude in recent years, as derived from the sum of extraction and changes in proven reserves. Spurred on by technology change and strong market conditions, discovery has been substantial for most minerals. The value of discovered reserves is high relative to the costs of exploration, particularly when low social discount rates are used to value potential production in the future. Discovery is therefore valuable and should be considered as adding to national wealth through increases in proven reserves. Many countries can continue to generate resource rents far longer than indicated by current reserve estimates and this has implications for decisions on how to plan to spend or save rents. With the high response of discovery to prices and technology, environmental constraints (climate change, water) are more likely than the actual exhaustion of resource deposits to limit resource-based development. The divergence between private and social valuation of discoveries may also justify measures taken by countries to encourage exploration, including through the provision of geo-scientific data to increase interest in discovery as well as competition among mining companies. More information is needed on the payoff to such investments, some of which are supported by donors. However, exploration is, of course, only a slice of the resource value chain. Many countries will need to improve management along the entire chain if resource wealth is to benefit their development
    Keywords: development, mining, natural resource, resource rich, hydrocarbons, depletion, extractive, wealth measurement.
    JEL: O10 O13 Q30 Q31 Q32 Q40 E01
    Date: 2012–03
  8. By: Ilham Haouas; Raimundo Soto
    Abstract: The UAE is blessed with vast deposits of oil and gas. Contrary to other oil-rich economies, the UAE seems to have escaped from the so-called “oil curse”. We study how the UAE used resource rents to achieve economic development and provide higher welfare for the local population. We identify, nevertheless, symptoms of the resource curse in three areas: very low growth in labor productivity, government policies unable to counteract economic cycles induced by oil-price volatility, and massive overemployment and declining productivity in the public sector. Therefore, we conclude that while the UAE has not been immune to the oil curse, but it has managed to make the benefits outweigh the negative outcomes of oil exporting. We finally study the case of Dubai as an example of how to overcome the dependency on oil exports and diversify the economy by using a combination of market deregulation, support for foreign trade, and efficient provision of infrastructure and institutions for private sector participation.
    Keywords: Natural resources, oil curse, economic growth, export diversifications
    JEL: Q32 O41 F14
    Date: 2012
  9. By: Ibrahim Ahmed Elbadawi; Raimundo Soto
    Abstract: This paper contributes to the empirical literature on oil and other point-source resource curse. We find that the curse does exist but conditional on bad political governance. Unlike previous studies we estimate a flexible econometric growth model that accounts for long-term country heterogeneity and cross-dependency and retains the virtues of the recent literature, including short-run flexibility, cointegration and error-correction mechanisms. We unpack political institutions into those reflecting the degree of inclusiveness (Polity) and credibility of intertemporal commitments (Political Check and Balances) and find that resource-rich countries with low levels on both scores are likely to experience the curse, while those with high enough levels may turn resource rents into a driver of growth. Countries with high scores on only one dimension may avoid the curse but are not likely to effectively use resource rents to promote growth. This suggests that for the oil-rich Arab world to achieve sustained growth, the Arab spring should not only bring democracy, as badly needed as it is, but should also lay the foundations for strong systems of political checks and balances.
    Keywords: Oil and natural resource curse, economic growth, democracy, political checks and balances
    JEL: O13 P16 O43
    Date: 2012
  10. By: Johnny West
    Abstract: Iraq’s oil industry has an opportunity to introduce an oil dividend based on expanding production. The predicted rise in revenues will allow the government to allocate a significant dividend that halves poverty, helps diversify the economy by creating demand at all income levels for goods and services, and stimulates capital formation—all without cutting into the government’s capital spending plans. In this working paper, Johnny West describes how such a dividend program could be structured by, for example, taking advantage of Iraq’s existing rationing system, ubiquitous mobile phone networks, and new biometric ID cards. A dividend, starting at $220 per capita in October 2012 and rising with expanded production, could also cement the affiliation of all citizens to Iraqi territorial integrity, act as a powerful disincentive to secession in oil-producing regions, and create popular pressure among all sections of the population to discourage acts by the ongoing insurgency which disrupt economic reconstruction. Support for an oil dividend policy is growing among some politicians, notably those seeking votes among the Iraqi poor such as the Sadrists and Fadhila party. International support could help the government structure a dividend which functions well and in the public interest.
    Keywords: Iraq, cash trasfers, dividend program
    Date: 2011–09
  11. By: Levine, David I.; Cotterman, Carolyn
    Abstract: Many people do not purchase products that would appear to benefit them. For example, the price of an efficient cookstove can be less than a few months’ savings on fuel. If liquidity constraints, present bias, and poor information on fuel savings and stove durability are barriers, then combining a free trial, time payments, and the right to return the stove at any time should increase sales. In a randomized trial, this offer increases uptake of an efficient charcoal-burning stove in Kampala, Uganda, from 4% to 46%. We provide additional evidence that both liquidity constraints and imperfect information were important barriers.
    Keywords: Economics, JEL C93, D91, L15, L81, M31, D12, D82
    Date: 2012–03–27
  12. By: Francisco Peñaranda; Augusto Rupérez Micola
    Abstract: We use the recent introduction of biofuels to study the effect of industry factors on the relationships between wholesale commodity prices. Correlations between agricultural products and oil are strongest in the 2005-09 period, coinciding with the boom of biofuels, and remain substantial until 2011. We disentangle three possible drivers for the linkage: substitution, energy costs, and financialization. The timing and magnitude of the biofuels-to-oil relationships are different to those of other commodities, and far higher than can be justified by costs and financialization. Substitution and costs drive the monthly correlations of long-term futures, and each of the three contribute equally to the daily co-movement of the short-term ones. The findings survive many robustness checks and appear in the stock market.
    Date: 2011–12
  13. By: Muhammad, Shahbaz
    Abstract: The present study aims to investigate the relationship between economic growth, energy intensity, financial development and CO2 emissions over the period of 1971-2009 in case of Portugal. The stationarity analysis is conducted by applying Zivot-Andrews unit root test and ARDL bounds testing approach for long run relationship between the variables. The direction of causal relationship between the series is examined by VECM Granger causality approach and robustness of causality analysis is tested by innovative accounting approach (IAA). Our results confirmed that the variables are cointegrated for long run relationship. The empirical findings of this study reported that economic growth and energy intensity increase CO2 emissions, while financial development condenses it. The VECM causality analysis showed the feedback hypothesis between energy intensity and CO2 emissions, while economic growth and financial development Granger-cause CO2 emissions.
    Keywords: Growth; Energy; Financial Development; CO2 Emissions
    JEL: Q5 Q4
    Date: 2012–03–24
  14. By: Tiwari, Aviral Kumar; Muhammad, Shahbaz
    Abstract: This study investigates the dynamic relationship between coal consumption, economic growth, trade openness and CO2 emissions for Indian economy. In doing so, Narayan and Pop structural break unit test is applied to test the order of integration of the variables. Long run relationship between the variables is tested by applying ARDL bounds testing approach to cointegration developed by Pesaran et al. (2001). The results confirm the existence of cointegration for long run between coal consumption, economic growth, trade openness and CO2 emissions. Our empirical exercise indicates the presence of Environmental Kuznets Curve (EKC) long run as well as short run. Coal consumption as well as trade openness contributes to CO2 emissions. The causality results report the feedback hypothesis between economic growth and CO2 emissions and same inference is drawn between coal consumption and CO2 emissions. Moreover, trade openness Granger causes economic growth, coal consumption and CO2 emissions.
    Keywords: Energy; Growth; Emissions; EKC
    JEL: O1 Q4
    Date: 2012–03–18
  15. By: Lyons, Seán; Pentecost, Anne; Tol, Richard S. J.
    Abstract: This paper uses the ESRI's ISus model to explore the distributional differences in emissions by household type. Most greenhouse gas and metal emissions are emitted via indirect means, although direct sources of emissions play a role for CO2, SO2 and CO. The results suggest that the richest decile is the biggest emitter and poorer and larger households are seen to emit the least per person.
    Keywords: Ireland
    Date: 2012–03
  16. By: Somlanaré Romuald Kinda (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper examines the existence of convergence and the importance of education on carbon dioxide growth per capita, over the period 1970-2004 for 85 countries. We use panel data and apply GMM-System estimation. This rigorous approach takes into account the observed and unobserved heterogeneity of countries, and solves the endogeneity problems associated with some variables. Our results suggest a divergence in per capita carbon dioxide emissions around the world, and that education is not a factor in carbon dioxide emissions growth. Contrary to commonly held beliefs based on intuition, we provide evidence that, in developing countries, there is no convergence, and that education is not a factor in carbon dioxide growth. In developed countries, we find a convergence for per capita carbon dioxide emissions. Education was found to be a factor in pollution growth, although its effect is mitigated by the presence of political institutions.
    Keywords: Convergence in carbon dioxide; Education; System GMM
    Date: 2011
  17. By: Gemechu, Eskinder D.; Butnar, Isabela; Llop Llop, Maria; Castells i Piqué, Francesc
    Abstract: The main aim of this work is to define an environmental tax on products and services based on their carbon footprint. We examine the relevance of conventional life cycle analysis (LCA) and environmentally extended input-output analysis (EIO) as methodological tools to identify emission intensities of products and services on which the tax is based. The short-term price effects of the tax and the policy implications of considering non-GHG are also analyzed. The results from the specific case study on pulp production show that the environmental tax rate based on the LCA approach (1,8%) is higher than both EIO approaches (0,8% for product and 1,4% for industry approach), but they are comparable. Even though LCA is more product specific and provides detailed analysis, EIO would be the more relevant approach to apply economy wide environmental tax. When the environmental tax considers non-GHG emissions instead of only CO2, sectors such as agriculture, mining of coal and extraction of peat, and food exhibit higher environmental tax and price effects. Therefore, it is worthwhile for policy makers to pay attention on the implication of considering only CO2 tax or GHG emissions tax in order for such a policy measure to be effective and meaningful. Keywords: Environmental tax; Life cycle analysis; Environmental input-output analysis.
    Keywords: Medi ambient -- Impostos, Medi ambient -- Anàlisi d'impacte, 33 - Economia,
    Date: 2012
  18. By: Mikel González-Eguino; Anil Markandya; Marta Escapa
    Abstract: In the past few decades many papers have analysed in some depth different environmental tax reforms and the double dividend hypothesis, i.e. the possibility of improving not only the environment but also the economy through the reduction of distortions in the tax system. Recently, more stress has been placed on testing empirically what effects a reduction in labour taxes may have on unemployment when accompanied by a carbon or other environmental tax. However, such studies have not modelled the effects of the presence of a shadow economy, even though informal markets account for a significant and growing part of GDP in many developed economies. This paper analyses this link using an Applied General Equilibrium model for the case of Spain, which has one of the highest unemployment rates in the world and one of the biggest informal economies of any wealthy country. We conclude that our analysis strengthens the case for an environmental tax reform in Spain if revenues from a CO2 tax are recycled via a labour tax reduction.
    Keywords: Environmental fiscal reform, double dividend hypothesis, shadow economy, unemployment, general equilibrium analysis, Spain
    Date: 2012–03
  19. By: Anil Markandya; Mikel González-Eguino; Marta Escapa
    Abstract: The theoretical literature relevant to the relationship between environmental taxation and employment creation is centred on the suggestion by Pearce (1991) that environmental taxation could lead to a “double dividendâ€. In this paper we review the literature on the employment double dividend for Spain and add to it with some new analysis of our own that fills some important gaps in the literature.
    Keywords: Environmental fiscal reform, double dividend hypothesis, unemployment, Spain
    Date: 2012–04
  20. By: Lange, Ian; Polborn, Sarah
    Abstract: Taking a political economy perspective this paper proposes an alternative carbon abatement policy instrument with significant cant advantages over existing policy instruments. The key feature of the proposed carbon securities is that they entitle their owners to a fi xed proportion of ex ante unknown total emis-sions. The total level of carbon emissions is set by the political process after the carbon securities have been sold. A key benefit of the proposed carbon security is that it creates a group of stakeholders, whose interest is for a smaller level of emissions and which competes with industries that consume signifi cant amounts of carbon-based energy. The advantages over existing policy tools include an equilibrium carbon price closer to the level preferred by voters and a more predictable environmental policy in the presence of either climate or political uncertainty. (JEL: D72, Q54, Q58)
    Keywords: climate policy; Lobbying
    Date: 2012–03
  21. By: Perino, Grischa; Requate, Till
    Abstract: We show that for a broad class of technologies the relationship between policy stringency and the rate of technology adoption is inverted U-shaped. This happens when the marginal abatement cost (MAC) curves of conventional and new technologies intersect, which invariably occurs when emissions are proportional to output and technological progress reduces emissions per output. This outcome does not result from policy failure. On the contrary, in social optimum, the relationship between the slope of the marginal damage curve and the rate of technology adoption is also inverted U-shaped. Under more general conditions, these curves can look even more complicated (e.g. such as inverted W-shaped). --
    Keywords: induced diffusion,environmental policy
    JEL: Q55 Q52 Q58 H23 O33
    Date: 2012
  22. By: de santis, roberta
    Abstract: In an increasingly integrated world with declining trade barriers, environmental regulations can have a decisive role in shaping countries’ comparative advantages. The conventional wisdom about environmental protection is that it comes at an additional cost on firms imposed by the government, which may erode their global competitiveness. However, this paradigm has been challenged by some analysts. In particular, Porter (1991) and Porter and Van der Linde (1995) argue that pollution is often associated with a waste of resources and that more stringent environmental policies can stimulate innovations that may over-compensate for the costs of complying with these policies. This is known as the Porter hypothesis. While there is a broad empirical literature on the impact of trade on environment the empirical literature on the impact of environmental regulations on trade flows is relatively scarce, very heterogeneous and presents mixed results. The innovative feature of this paper is its attempts to estimate, in a gravity setting, augmented with a proxi of environmental stringency, the impact of three major Multilateral Environmental Agreements (MEAs) on 15 EU countries bilateral exports. According to our estimates, in the period 1988-2008, to be member of MEAs had a positive average impact on EU15 bilateral exports. This evidence can be partly explained by a possible trade diversion effect with respect to countries that did not sign MEAs, and a corresponding trade creation effect among members of the environmental agreements. Furthermore, evidence coming from interaction effects estimates seems to show that for exporting countries having signed the UNFCCC and the Montreal agreements, partly mitigates (by the amount of the estimated coefficient ) the negative impact of having a relatively more stringent environmental regulation on bilateral trade. This result could have important policy implications for the future international trade- environmental negotiations.
    Keywords: Comparative advantage; environmental regulation; trade
    JEL: F18
    Date: 2011

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