nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒05‒15
27 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Cash for Coolers By Lucas W. Davis; Alan Fuchs; Paul J. Gertler
  2. Effective and Equitable Adoption of Opt-In Residential Dynamic Electricity Pricing By Severin Borenstein
  3. The costs of electricity interruptions in Spain. Are we sending the right signals? By Pedro Linares; Luis Rey
  4. The Potential for Segmentation of the Retail Market for Electricity in Ireland By Hyland, Marie; Leahy, Eimear; Tol, Richard S. J.
  5. Energy Demand for Heating in Spain: An Empirical Analysis with Policy Purposes By Xavier Labandeira; José M. Labeaga; Xiral López-Otero
  6. Some Economic Aspects of Energy Security By Xavier Labandeira; Baltasar Manzano
  7. The Future of Oil: Geology versus Technology By Michael Kumhof; Jaromir Benes; Ondra Kamenik; Susanna Mursula; Marcelle Chauvet; Jack Selody; Douglas Laxton
  8. Understanding Rig Rates By Osmundsen, Petter; Rosendahl, Knut Einar; Skjerpen, Terje
  9. Reducing Reliance on Natural Resource Revenue and Increasing Subnational Tax Autonomy in Bolivia By Giorgio Brosio
  10. Tourism Induced Contribution to Diesel Oil and Gasoline Consumption By Mohcine Bakhat; Jaume Roselló
  11. Price Asymmetric Relationships in Commodity and Energy Markets By Wixson, Sarah E.; Katchova, Ani L.
  12. Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets By Gardebroek, Cornelis; Hernandez, Manuel A.
  13. Returns in commodities futures markets and financial speculation: a multivariate GARCH approach By Matteo Manera; Marcella Nicolini; Ilaria Vignati
  14. Substitution between bio-fuels and fossil fuels: is there a Green Paradox? By Quentin Grafton; Tom Kompas; Ngo Van Long
  15. Economic Rationale for Safety Investment in Integrated Gasification Combined-Cycle Gas Turbine Membrane Reactor Modules By Koc, R.; Kazantzis, N.K.; Nuttall, W.J.; Ma, Y.H
  16. Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves By Rema Hanna; Esther Duflo; Michael Greenstone
  17. Enforcement and air pollution: an environmental justice case study By Germani, Anna Rita; Morone, Piergiuseppe; Testa, Giuseppina
  18. Environmental efficiency indices: towards a new approach to green-growth accounting By Peroni, Chiara
  19. The heterogeneity of Carbon Kuznets Curves for advanced countries. Comparing homogeneous, heterogeneous and shrinkage/Bayesian estimators By Massimiliano Mazzanti; Antonio Musolesi
  20. Trade, economic growth and environment By Managi, Shunsuke
  21. The clean development mechanism in a globalized carbon market By Thierry Bréchet; Yann Ménière; Pierre M. Picard
  22. Offsetting versus Mitigation Activities to Reduce CO2 Emissions: A Theoretical and Empirical Analysis for the U.S. and Germany By Andreas Lange; Andreas Ziegler
  23. Gradual Green Tax Reforms By Carlos de Miguel; Baltasar Manzano
  24. Carbon capture and storage and transboundary pollution: a differential game approach By Luisito Bertinelli; Carmen Camacho; Benteng Zou
  25. AGRICULTURAL PRICE VOLATILITY UNDER CLIMATE CHANGE: The Impact of Multiple Objectives on Commodity Prices By Fuss, Sabine; Havlik, Petr; Szolgayova, Jana; Obersteiner, Michael; Schmid, Erwin
  26. EU wide regional impacts of climate change By Shrestha, Shailesh; Himics, Mihaly; van Doorslaer, Benjamin; Ciaian, Pavel
  27. When Should Developing Countries Announce Their Climate Policy? By Jorge Fernandez; Sebastian Miller

  1. By: Lucas W. Davis; Alan Fuchs; Paul J. Gertler
    Abstract: This paper examines a large-scale appliance replacement program in Mexico that since 2009 has helped 1.5 million households replace their old refrigerators and air-conditioners with energy-efficient models. Using household-level electric billing records from the population of Mexican residential customers we find that refrigerator replacement reduces electricity consumption by an average of 11 kilowatt hours per month, about a 7% decrease. We find that air conditioning replacement, in contrast, increases electricity consumption by an average of 6 kilowatt hours per month, with larger increases during the summer. To put these results in context we present a simple conceptual framework in which energy-efficient durable goods cost less to operate, so households use them more. This behavioral response, sometimes called the “rebound” effect, is important for air-conditioners, but not important for refrigerators.
    JEL: D12 H23 Q40 Q54
    Date: 2012–05
  2. By: Severin Borenstein
    Abstract: While time-varying retail electricity pricing is very popular with economists, that support is not matched among regulators and consumers. Many papers have been written estimating and extolling the societal benefits of time-varying rates -- especially dynamic rates that change on a day's notice or less. Yet, such tariffs have been almost completely absent in the residential sector. In this paper, I present a potential approach to implementing an opt-in dynamic pricing plan that would be equitable to both customers who choose the rate and to those who choose to remain on a default flat-rate tariff. The approach bases the dynamic and the flat rate on the same underlying cost structure, and minimizes cross-subsidies between the two groups. I study the potential distributional impact of such a tariff structure using hourly consumption data for stratified random samples of customers from California's two largest utilities. I find that low-income households would, on average, see almost no change in their bills, while low-consumption households would see their bills decline somewhat and high-consumption households would see their bills rise. I also show that the opt-in approach is unlikely to increase the flat rate charged to other customers by more than a few percentage points. I then discuss the most common approach to implementing dynamic electricity pricing -- critical-peak pricing -- and suggest how it might be designed to more accurately match retail price spikes with periods of true supply shortages. Finally, I study the incentive problems created by an alternative program in growing use that pays customers to reduce their consumption on peak usage days.
    JEL: L51 L94
    Date: 2012–05
  3. By: Pedro Linares (Universidad Ponticia de Comillas, MR-CBG Harvard Kennedy Schooland Economics for Energy); Luis Rey (Economics for Energy)
    Abstract: One of the objectives of energy security is the uninterrupted physical availability of energy. However, there is limited information about how much is the cost of energy supply interruptions. This information is essential to optimize investment and operating decisions to prevent energy shortages. In this paper, we estimate the economic impact of an electricity interruption in diferent sectors and regions of Spain. We find that in 2008 the cost for the Spanish economy of one kWh of electricity not supplied was around e6, which is much higher than the signals sent for the operation of the power system. This would mean that we are underinvesting in short-term energy security.
    Keywords: Energy security, electricity interruptions, value of lost load, Spain
    JEL: Q40 Q41 L94
    Date: 2012–04
  4. By: Hyland, Marie; Leahy, Eimear; Tol, Richard S. J.
    Abstract: We estimate the gross margin that is earned from the supply of electricity to households in Ireland. Using half hourly electricity demand data, the system marginal price (also called the wholesale price) and the retail price of electricity, we analyse how the gross margin varies across customers with different characteristics. The wholesale price varies throughout the day, thus, the time at which electricity is used affects the gross margin. The main factor in determining gross margin, however, is demand. The highest gross margins are earned from supplying customers that have the following characteristics: being aged between 46 and 55, having a household income of at least ?75,000 per annum, being self?employed, having a third level education, having a professional or managerial occupation, living in a household with 7 or more people, living in a detached house, having at least 5 bedrooms or being a mortgage holder. An OLS regression shows that gross margin is partly explained by the energy conservation measures which are present in a household, the number of household members, the number of bedrooms, income, age, occupation and accommodation type.
    Keywords: data/education/electricity/Ireland/regression
    Date: 2012–04
  5. By: Xavier Labandeira (Rede (Universidade de Vigo) and Economics for Energy); José M. Labeaga (Instituto de Estudios Fiscales and UNED); Xiral López-Otero (Rede (Universidade de Vigo) and Economics for Energy)
    Abstract: Household energy consumption, mostly due to residential heating, is a large component of energy demand in developed countries and thus a target for public policies aimed at reducing negative environmental effects and energy dependence. This paper uses detailed Spanish household micro data to model the related decisions on the type of heating energy source and on the amount of energy used for heating. This way, the article provides accurate estimates that may be used to assess the short and long term effects of public policies in this field. In particular, the relative prices of the three main energy sources for heating influence the discrete decision on the type of energy source in a sort of medium/long term effect. Moreover, the short-term demand reactions to energy price changes are found to be limited but variable across the different energy sources for heating in Spain.
    Keywords: Environment, energy, security, discrete, continuous, choice, taxes, prices
    JEL: C13 C14 C23 Q41
    Date: 2011–10
  6. By: Xavier Labandeira; Baltasar Manzano (Rede (Universidade de Vigo) and Economics for Energy)
    Abstract: Energy security is becoming an increasingly important issue in the energy domain. However, from an economic point of view, many questions related to energy security are still unclear: from its definition and the costs associated to insecurity, to the design of policies intended to reduce it. In this paper we first illustrate why the security of energy supply is and will continue to be a major concern in the next few decades. We subsequently attempt, with a review of the limited literature on these matters, to provide an answer to some of the economic concepts associated to this issue and to the application of corrective public policies in the field.
    Date: 2012–04
  7. By: Michael Kumhof; Jaromir Benes; Ondra Kamenik; Susanna Mursula; Marcelle Chauvet; Jack Selody; Douglas Laxton
    Abstract: We discuss and reconcile two diametrically opposed views concerning the future of world oil production and prices. The geological view expects that physical constraints will dominate the future evolution of oil output and prices. It is supported by the fact that world oil production has plateaued since 2005 despite historically high prices, and that spare capacity has been near historic lows. The technological view of oil expects that higher oil prices must eventually have a decisive effect on oil output, by encouraging technological solutions. It is supported by the fact that high prices have, since 2003, led to upward revisions in production forecasts based on a purely geological view. We present a nonlinear econometric model of the world oil market that encompasses both views. The model performs far better than existing empirical models in forecasting oil prices and oil output out of sample. Its point forecast is for a near doubling of the real price of oil over the coming decade. The error bands are wide, and reflect sharply differing judgments on ultimately recoverable reserves, and on future price elasticities of oil demand and supply.
    Keywords: Demand , Economic models , External shocks , Oil prices , Oil production , Supply ,
    Date: 2012–05–02
  8. By: Osmundsen, Petter (UiS); Rosendahl, Knut Einar (Statistics Norway); Skjerpen, Terje (Statistics Norway)
    Abstract: We examine the largest cost component in offshore development projects, drilling rates, which have been high over the last years. To our knowledge, rig rates have not been analysed empirically before in the economic literature. By econometric analysis we examine the effects on Gulf of Mexico rig rates of gas and oil prices, rig capacity utilization, contract length and lead time, and rig specific characteristics. Having access to a unique data set containing contract information, we are able to estimate how contract parameters crucial to the relative bargaining power between rig owners and oil and gas companies affect rig rates. Our econometric framework is a single equation random effects model in which the systematic part of the equation is non-linear in the parameters. The non-linearity is due to representing the effects of gas and oil prices by a CES price aggregate. Such a model belongs to the class of non-linear mixed models which has been heavily utilized within the biological sciences.
    Keywords: Rig rates; Oil and gas drilling; Panel data
    JEL: C18 C23 Q40
    Date: 2012–05–08
  9. By: Giorgio Brosio
    Abstract: This paper address options for restructuring the revenue system of Bolivia’s subnational governments, particularly prefectures, emphasizing reduction of dependence on natural resources and strengthening of subnational tax autonomy. The paper additionally identifies tax instruments or tax bases that could be assigned exclusively to regional governments or shared with the central government, assessing their main advantages and disadvantages through a simulation of revenue generation. The results show that several options exist for increasing the tax autonomy of local governments. The tax instruments proposed in this paper carry relatively low administrative costs. In fact, the taxes proposed would not require the establishment of new agencies but could be collected by existing agencies and, in the case of energy and fuel taxes, by producing and distributing firms.
    JEL: H21 H23 H24 H25 H26 H71
    Date: 2012–04
  10. By: Mohcine Bakhat (Economics for Energy); Jaume Roselló (University of the Balearic Islands)
    Abstract: During the last years, tourism has received increasing attention due to its environmental impacts. Particularly, the use of fossil energy has been considered as one of its major environmental problems and also one of the factors directly related to climatic change. Various studies have estimated the contribution of tourism to environmental damage using a sectorial perspective, evaluating the impact of air transport, the accommodation sector or other tourism-related economic sector. In this paper, the contribution of tourism to diesel oil and gasoline consumption is considered from a broader framework, taking advantage of monthly information collected from different sources. Considering the case study of the Balearic Islands (Spain) and using a conventional econometric model that includes data for monthly stocks of tourists, the influence of tourism on diesel oil and gasoline demand is estimated.
    Keywords: Diesel oil demand, gasoline demand, tourism contribution, environment impacts
    Date: 2011–09
  11. By: Wixson, Sarah E.; Katchova, Ani L.
    Abstract: Recent increases in the price of crude oil have led to a rise in the prominence of corn-based ethanol as an alternative source of energy. As a result linkages have been established between commodity and energy prices. The aim of this study is to determine if soybeans, corn, wheat, oil, and ethanol adjust their prices asymmetrically depending on whether their actual price is over or under-predicted with respect to one another. This study’s goal of determining if asymmetric price relationships exist is accomplished by using monthly time series price data incorporated into a distributed lag error correction model distinguishing between positive and negative price difference and positive and negative values of the error correction terms. The primary results of this study found that asymmetric price changes do occur in the commodity and energy markets. Interestingly, in all the asymmetric price adjustments that were found, with only one exception in the soybean-corn relationship, prices will adjust downward when the actual price of one variable is above its equilibrium price as determined by the price of another study variable and consequently would be expected to exhibit a downward adjustment in price in the following month.
    Keywords: commodity prices, energy prices, price asymmetry, Risk and Uncertainty, Q13,
    Date: 2012–02–23
  12. By: Gardebroek, Cornelis; Hernandez, Manuel A.
    Abstract: This paper examines volatility transmission in oil, ethanol and corn prices in the United States between 1997 and 2011. We follow a multivariate GARCH approach to evaluate the level of interdependence and the dynamics of volatility across these markets. Preliminary results indicate a higher interaction between ethanol and corn markets in recent years, particularly after 2006. We only observe, however, significant volatility spillovers from corn to ethanol prices but not the converse. We also do not find major cross-volatility effects from oil to corn markets. The results do not provide evidence of volatility in energy markets stimulating price volatility in grain markets.
    Keywords: Risk and Uncertainty,
    Date: 2012–02–23
  13. By: Matteo Manera (Department of Statistics, University of Milan-Bicocca and Fondazione Eni Enrico Mattei, Milan); Marcella Nicolini (Department of Economics and Business, University of Pavia and Fondazione Eni Enrico Mattei, Milan); Ilaria Vignati (Fondazione Eni Enrico Mattei, Milan)
    Abstract: This paper analyses futures prices for four energy commodities (light sweet crude oil, heating oil, gasoline and natural gas) and five agricultural commodities (corn, oats, soybean oil, soybeans and wheat), over the period 1986-2010. Using CCC and DCC multivariate GARCH models, we find that financial speculation is poorly significant in modelling returns in commodities futures while macroeconomic factors help explaining returns in commodities futures. Moreover, spillovers between commodities are present and the conditional correlations among commodities are high and time-varying.
    Keywords: Energy; Commodities; Futures markets; Financial speculation; Multivariate GARCH
    JEL: C32 G13 Q11 Q43
    Date: 2012–04
  14. By: Quentin Grafton; Tom Kompas; Ngo Van Long
    Abstract: We show that (i) subsidies for renewable energy policies with the intention of encouraging substitution away from fossil fuels may accentuate climate change damages by hastening fossil fuel extraction, and that (ii) the opposite result holds under some specified conditions. We focus on the case of subsidies for renewable resources produced under increasing marginal costs, and assume that both the renewable resources and the fossil fuels are currently in use. Such subsidies have a direct effect and an indirect effect working in opposite directions. The direct effect is the reduction in demand for fossil fuels at any given price. The indirect effect is the reduction in the current equilibrium price for fossil fuels, which tends to increase the amount of fossil fuels demanded. Whether the sum of the two effects will actually result in an earlier or later date of exhaustion of the stock of fossil fuels depends on the curvature of the demand curve for energy and of the supply curve for the renewable substitute. <P>Nous montrons que (i) la subvention de la production d'énergie renouvelable avec l'intention d'encourager la substitution des combustibles fossiles pourrait accentuer les dommages du changement climatique en accélérant l'extraction des combustibles fossiles, et que (ii) ce résultat est renversé dans certaines conditions spécifiées. Nous nous concentrons sur le cas des subventions pour des ressources renouvelables produites dans le cadre des coûts marginaux croissants, et supposons que les ressources renouvelables et les carburants fossiles sont actuellement en cours d'utilisation. Ces subventions ont un effet direct et un effet indirect dans des directions opposées. L'effet direct est la réduction de la demande de combustibles fossiles à un prix donné. L'effet indirect est la réduction du prix d'équilibre actuelle de carburants fossiles, ce qui tend à augmenter la demande de combustibles fossiles. La somme des deux effets peut avancer ou retarder la date de l'épuisement du stock de ressources non-renouvelables selon la courbure de la courbe de la demande d'énergie et de la courbe d'offre pour le substitut renouvelable.
    Keywords: Subsidies of renewable energy; the Green Paradox; climate change., Subvention des ressources renouvelables; le Paradoxe Vert ; changements climatiques
    JEL: Q54 Q42 Q30
    Date: 2012–05–01
  15. By: Koc, R.; Kazantzis, N.K.; Nuttall, W.J.; Ma, Y.H
    Abstract: A detailed Net Present Value (NPV) model has been developed to evaluate the economic viability of an Integrated Gasification Combined Cycle – Membrane Reactor (IGCC-MR) power plant intended to provide an electricity generating and pure H2 (hydrogen) producing technology option with significantly lower air pollutants and CO2 (carbon dioxide) emission levels, where the membrane reactor module design conforms also to basic inherent safety principles. Sources of irreducible uncertainty (market, regulatory and technological) are explicitly recognized, such as the power plant capacity factor, Pd (palladium) price, membrane life-time and CO2 prices (taxes) due to future regulatory action/policies. The effect of the above uncertainty drivers on the project’s/plant’s value is elucidated using a Monte-Carlo simulation technique that enables the propagation of the above uncertain inputs through the NPV-model, and therefore, generate a more realistic distribution of the plant’s value rather than a single-point/estimate that overlooks these uncertainties. The simulation results derived suggest that in the presence of (operational, economic and regulatory) uncertainties, inherently safe membrane reactor technology options integrated into IGCC plants could become economically viable even in the absence of any valuation being placed on human life or quality of life by considering only equipment damage and interruption of business/lost production cost. Comparatively more attractive NPV distribution profiles are obtained when concrete safety risk-reducing measures are taken into account through pre-investment in process safety (equipment) in a pro-active manner, giving further credence to the thesis that process safety investments may result in enhanced economic performance in the presence of irreducible uncertainties.
    Keywords: Membrane reactors; IGCC; Hydrogen production; Process intensification; Process safety; Process economic analysis; Net Present Value; Uncertainty; Monte Carlo simulation.
    JEL: G11 G31 G32
    Date: 2012–05–09
  16. By: Rema Hanna; Esther Duflo; Michael Greenstone
    Abstract: It is conventional wisdom that it is possible to reduce exposure to indoor air pollution, improve health outcomes, and decrease greenhouse gas emissions in the rural areas of developing countries through the adoption of improved cooking stoves. This belief is largely supported by observational field studies and engineering or laboratory experiments. However, we provide new evidence, from a randomized control trial conducted in rural Orissa, India (one of the poorest places in India), on the benefits of a commonly used improved stove that laboratory tests showed to reduce indoor air pollution and require less fuel. We track households for up to four years after they received the stove. While we find a meaningful reduction in smoke inhalation in the first year, there is no effect over longer time horizons. We find no evidence of improvements in lung functioning or health and there is no change in fuel consumption (and presumably greenhouse gas emissions). The difference between the laboratory and field findings appear to result from households’ revealed low valuation of the stoves. Households failed to use the stoves regularly or appropriately, did not make the necessary investments to maintain them properly, and usage rates ultimately declined further over time. More broadly, this study underscores the need to test environmental and health technologies in real-world settings where behavior may temper impacts, and to test them over a long enough horizon to understand how this behavioral effect evolves over time.
    JEL: I15 I18 O10 O12 O13 Q0 Q23 Q3 Q51 Q53 Q56
    Date: 2012–05
  17. By: Germani, Anna Rita; Morone, Piergiuseppe; Testa, Giuseppina
    Abstract: This paper provides an environmental justice empirical analysis on the relationship between income, demographic characteristics and concentrations of air industrial pollutants within the Italian provinces. Two general conclusions can be drawn from the empirical results. First, the estimates obtained are consistent with an inverse U-shaped environmental Kuznets curve: air pollution releases increase with income up to a turning point, where the relation reverts. Second, there is evidence that air releases tend to be higher in provinces with high concentration of females as households’ head and with high concentration of children. Since our findings do not point to environmental discrimination on the basis of ethnicity, this suggests that environmental justice issues in Italy are not likely to manifest themselves along racial and ethnic terms but instead in terms of social categories and gender composition. We also find that judicial inefficiency (a measure of the inefficiency of law enforcement) is associated with higher levels of pollution. In terms of policy implications, this result suggests the need to strengthen, all through the territory, the local enforcement of environmental laws in order to possibly reduce the negative effects on ambient air pollution.
    Keywords: Environmental justice; social inequalities; air pollution emissions
    JEL: K32 Q50
    Date: 2011–10
  18. By: Peroni, Chiara
    Abstract: This article analyses the link between environmental and productive efficiency in a group of EU member states and the US using data from the UN Framework Convention on Climate Change. Its main indicator, carbon intensity, is defined as the ratio of total greenhouse gases emissions to output. A non-parametric frontier approach enables modelling a multiple output technology in which greenhouse gas emissions are an undesirable outcome of a production process. A DEA method is used to compute environmental efficiency indices, which grade countries according to their ability to increase production while reducing pollutants, under minimal assumptions. The only assumptions are that bad outputs are costly to dispose of and that returns to scale are variable. The study shows that productive efficiency is considerably lowered when environmental degradation are taken into account. Only two (Luxembourg and Sweden) out of 16 countries are environmentally efficient. Malmquist indices, however, show that environmental performances improved over the period considered in nearly all countries. A decomposition of carbon intensity, which links emission performance to technical progress, is also presented; this highlights the positive contribution of labour productivity on the reduction in carbon intensity. Finally, no evidence of a DEA-based environmental Kuznet curve is found.
    Keywords: Carbon intensity; data envelopment analysis; Malmquist index; decomposition; Kuznet curve
    JEL: Q50 C44 Q56 O40
    Date: 2012–02–01
  19. By: Massimiliano Mazzanti; Antonio Musolesi
    Abstract: We investigate carbon Kuznets curves (CKC) relationships for advanced countries grouped in policy relevant groups - North America and Oceania, South Europe, North Europe - by means of various homogeneous, heterogeneous and shrinkage/Bayesian panel estimators. We try to provide an answer to the question "how sensitive are the CKC estimates to changes in the level of parameters-heterogeneity?". We do Â…nd that in coherence with their 'policy and economic' commitment to carbon reductions and environmental market based instruments implementation, bell shapes are present only for northern EU, that leads the group of advanced countries. The other two lag behind. We show for the Â…rst time that CKC shapes are present if we net out Europe of the southern and less developed countries. This is coherent with the Kuznets paradigm. The negative side of the tale is that they characterise a bunch of few countries. Other advanced countries lag behind and are far from reaching a CKC dynamics. Heterogeneous and Bayesian estimators clearly show this, with the latter presenting turning points closely around $13,000 per capita GDP. Heterogeneous panel estimates also show that in those two cases presumed bell shapes turn into linear relationships. The stability of outcomes across models is stronger when we compare heterogeneous rather than homogeneous models. If it is compared with other studies, our analysis highlights a relative lower variability across speciÂ…cations.
    Keywords: environmental Kuznets curves; advanced countries; heterogeneous panel estimators; Bayesian estimators; CO2; parameter heterogeneity
    JEL: C14 C23 Q53
    Date: 2012–04–20
  20. By: Managi, Shunsuke
    Abstract: The literature on trade openness, economic development, and the environment is largely inconclusive about the environmental consequences of trade. This study review previous studies focusing on treating trade and income as endogenous and estimating the overall impact of trade openness on environmental quality using the instrumental variables technique. The results show that whether or not trade has a beneficial effect on the environment varies depending on the pollutant and the country. Trade is found to benefit the environment in OECD countries. It has detrimental effects, however, on sulfur dioxide (SO2) and carbon dioxide (CO2) emissions in non-OECD countries, although it does lower biochemical oxygen demand (BOD) emissions in these countries. The results also find the impact is large in the long term, after the dynamic adjustment process, although it is small in the short term.
    Keywords: Developed countries, Developing countries, International trade, Environmental problems, Economic development, Trade, Environment
    JEL: F13 F18 L50 L60 O13
    Date: 2012–03
  21. By: Thierry Bréchet (CORE and Louvain School of Management, Université catholique de Louvain); Yann Ménière (CERNA, Ecole des Mines de Paris); Pierre M. Picard (CREA, University of Luxembourg (Luxembourg), and CORE, Université catholique de Louvain (Belgium).)
    Abstract: This paper discusses the role of the Clean DevelopmentMechanisms (CDM) on the market for carbon quotas and countries' commitments to reduce their carbon emission levels. We show that the CDM contributes to an efficient funding of clean technology investments in least developed countries. How- ever, the CDM is not neutral on the global level of carbon emissions as it entices countries to raise their emission caps. The CDM may also make inap- propriate the inclusion of any country that makes no emission target commit- ment in the climate change protocol (like the Kyoto protocole). It can even make inefficient a country's decision to commit to an emission target.
    Date: 2011
  22. By: Andreas Lange (University of Hamburg, Germany); Andreas Ziegler (University of Kassel, Germany, and ETH Zurich, Switzerland)
    Abstract: This paper studies the voluntary provision of public goods that is partially driven by a desire to offset for individual polluting activities. We first extend existing theory and show that offsets allow a reduction in effective environmental pollution levels while not necessarily extending the consumption of a polluting good. We further show a nonmonotonic income-pollution relationship and derive comparative static results for the impact of an increasing environmental preference on purchases of offsets and mitigation activities. Several theoretical results are then econometrically tested using a novel data set on activities to reduce CO2 emissions for the case of vehicle purchases in the U.S. and Germany. We show that an increased environmental preference triggers the use of CO2 offsetting and mitigation channels in both countries. However, we find strong country differences for the purchase of CO2 offsets. While such activities are already triggered by a high general awareness of the climate change problem in the U.S., driver’s license holders in Germany need to additionally perceive road traffic as being responsible for CO2 emissions to a large extent.
    Keywords: public good, voluntary provision, climate change, CO2 offsetting, vehicle purchase, discrete choice models
    JEL: C25 C35 H41 Q54
    Date: 2012–05
  23. By: Carlos de Miguel; Baltasar Manzano (Universidade de Vigo and Economics for Energy)
    Abstract: Green tax reforms have become an important tool not only in protecting the environment but also in bringing about a more efficient tax system. However, reforms often imply accepting sacrifices in the short-run and bring about the risk of potential political opposition. Within this framework, the debate on whether to implement green tax reforms in one-step or gradually becomes of great interest. In this paper we use a calibrated dynamic general equilibrium model to evaluate different reforms that consist in increasing energy taxes and adjusting capital taxation in a revenue-neutral framework. Our findings show that, although an environmental dividend is always granted, the efficiency dividend depends on the type of reform, its size and how gradually it is implemented. Thus, one-step reforms that produce an efficiency dividend would imply large efficiency costs in the short-run. In this case, the reform could only produce efficiency gains in the short-run if it is implemented gradually, although such gains would end up disappearing in the long-run.
    Keywords: Green Tax Reform, General Equilibrium
    JEL: E62 Q43 H23
    Date: 2011–09
  24. By: Luisito Bertinelli (CREA, University of Luxembourg); Carmen Camacho (CNRS, Centre d’Economie de la Sorbonne, Paris 1); Benteng Zou (CREA, University of Luxembourg)
    Abstract: We study the strategic behavior of two countries facing transboundary pollution under a differential game setting. In our model, the reduction of both pollution and CO2 concentration occur through the creation of pollution sinks, rather than through the adoption of cleaner technologies. To our knowledge, this is the first formal attempt to model carbon capture and storage. Furthermore, we provide the explicit short-run dynamics for this game with symmetric open-loop and a special Markovian Nash strategies. Furthermore, we analyze and compare these strategies and the games’ steady states along some balanced growth paths. Our results show that if the initial level of pollution is relatively high, state dependent emissions reductions can lead to higher overall environmental quality, hence, feedback strategy leads to less social waste.
    Keywords: Transboundary pollution, carbon capture and storage, differential game
    JEL: Q58 Q55 Q52 C73
    Date: 2011
  25. By: Fuss, Sabine; Havlik, Petr; Szolgayova, Jana; Obersteiner, Michael; Schmid, Erwin
    Abstract: Agricultural price volatility has moved to the forefront of research efforts and political discussion, where much work is already being undertaken with respect to the impact of fluctuations in input prices (e.g. fertilizer, feed and energy). In this paper we also want to take into account the impact of climate change on prices via increased volatility in crop yields. In addition, we analyze the impact of having multiple objectives competing for the land on which crops are grown. In particular, we want to address the concerns that have been voiced about biofuel targets and calls for prioritization of food security.
    Keywords: energy, food security, food price volatility, optimization under uncertainty, Risk and Uncertainty, Q12, Q18, Q28, C61, D81,
    Date: 2012–02–23
  26. By: Shrestha, Shailesh; Himics, Mihaly; van Doorslaer, Benjamin; Ciaian, Pavel
    Abstract: The current paper investigates the medium term impact of climate changes on EU agriculture. We employ CAPRI partial equilibrium modelling framework. The results indicate that within the EU, there will be both winners and losers, with some regions benefitting from climate change, while other regions suffering losses in production and welfare. In general, there are relatively small market effects at the EU aggregate. For example, the value of total agricultural income, land use and welfare change by approximately between -0.3% and 2%. However, there is a stronger impact at regional level with the effects increase by a factor higher than 10 relative to the aggregate EU impacts. The price adjustments reduce the response of agricultural sector to climate change in particular with respect to production and income changes.
    Keywords: climate change, regional impacts, CAPRI, market effects, Risk and Uncertainty, Q54,
    Date: 2012–02–23
  27. By: Jorge Fernandez; Sebastian Miller
    Abstract: This paper provides a rationale for developing countries to announce future credible commitments to reduce GHG emissions even if these are not to materialize in the short run, and for domestic reasons only. A simple framework is presented in which it is shown that it may be costly for an economy to transition from high to low emissions; and that, if climate policy eventually will be enacted, then it may be better for countries to commit earlier and therefore eliminate the uncertainty for the private sector to invest appropriately in clean technologies. In particular, conditions are shown under which the private investor prefers a pre-announced climate policy, and how this policy affects investment decisions and the deployment of clean technologies.
    JEL: D81 H23 Q54
    Date: 2011–12

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