nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒06‒05
thirty-one papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. The roubstness of agent-based models of electricity wholesale markets By Newberry, D.
  2. Real-time Feedback and Residential Electricity Consumption: The Newfoundland and Labrador Pilot By Dean C. Mountain
  3. Consumer Preferences for Refrigerators Manufactured by “Climate Leaders” By Li, Xiaogu; Clark, Christopher D.; Jensen, Kimberly L.; Yen, Steven T.
  4. Evaluation of Water Pumping Systems: Calculation Sheet By Arturo Pedraza; Ramón Rosas
  5. The Rebound Effect: Some Questions Answered By Koerth-Baker, Maggie; Turner, Karen; De Fence, Janine; Xin Cui, Cathy
  6. Rebound Effects from Increased Efficiency in the Use of Energy by UK Households By Lecca, Patrizio; Swales, Kim; Turner, Karen
  7. Do Eco-Innovations Harm Productivity Growth through Crowding Out? Results of an Extended CDM Model for Italy By Giovanni Marin
  8. Simulating Demand for Electrical Vehicles using Revealed Preference Data By Driscoll, Áine; Lyons, Seán; Mariuzzo, Franco; Tol, Richard S. J.
  9. Analysis of Alternative Fuel Vehicles by Disaggregated Cost Benefit By MANAGI Shunsuke
  10. Less pain at the pump? The effects of regulatory interventions in retail gasoline markets By Dewenter, Ralf; Heimeshoff, Ulrich
  11. Including women in the policy responses to high oil prices: a case study of South Africa By Fofana, Ismaël
  12. Asymmetric long-run effects in the oil industry By Sofía B. Ramos; Helena Veiga; Chih-Wei Wang
  13. The economics of natural resources: Understanding and predicting the evolution of supply and demand By Hart, Rob
  14. The effects of oil shocks on government expenditures and government revenues nexus in Iran (as a developing oil-export based economy) By Dizaji, S.F.
  15. Giant oilfields and civil conflict By Yu-Hsiang Lei; Guy Michaels
  16. Biofuel do Brasil? - Impact of Multinational Biofuel Mandates on Agri-food Trade By Banse, Martin; Junker, Franziska; Prins, Anne Gerdien; Stehfest, Elke; Tabeau, Andrzej A.; Woltjer, Geert B.; van Meijl, Hans
  17. A Theory of Dynamic Biofuel Tax Credit By Ye, Fanglin; Lu, Liang; Du, Xiaoxue
  18. Fuel poverty: the problem and its measurement. By Hills, John
  19. Dynamic and static behaviour with respect to energy use and investment of Dutch Greenhouse firms By Verreth, Daphne M.I.; Emvalomatis, Grigorios; Bunte, Frank H.J.; Oude Lansink, Alfons G.J.M.
  20. An Empirical Analysis of the Role of China's Exports on CO2 Emissions By Michieka, Nyakundi; Fletcher, Jerald J.; Burnett, J. Wesley
  21. The polluter-doesn't-pay principle By Ralf Martin; Ulrich J. Wagner; Laure B. de Preux
  22. Effects from consistent internalization of external effects from transport and manufacturing – a CGE analysis for Sweden By Liu, Xing; Bohlin, Lars
  23. Forecasting the European Carbon Market By Koop, Gary; Tole, Lise
  24. From Rio to Rio: A global carbon price signal to escape the great climate inconsistency By Stéphane Dion; Eloi Laurent
  25. Experimental Evidence on the Properties of the California’s Cap and Trade Price Containment Reserve. By Rachel Bodsky; Domenic Donato; Kevin James; David Porter
  26. Valuation of Carbon Forestry and the New Zealand Emissions Trading Scheme: A Real Options Approach Using the Binomial Tree Method By Tee, James; Scarpa, Riccardo; Marsh, Dan; Guthrie, Graeme
  27. Closing the gap? Dynamic analyses of emission efficiency and sector productivity in Europe By Giovanni Marin
  28. Reassessing the Green Paradox By Mark Schopf; Hendrik Ritter
  29. Statistical evidence about human influence on the climate system By Pierre Perron; Francisco Estrada; Benjamín Martínez-López
  30. Breaks, trends and the attribution of climate change: a time-series analysis By Pierre Perron; Francisco Estrada
  31. Contribution Norms in Heterogeneous Groups: A Climate Change Framing By Zoe Van der Hoven; Martine Visser; Kerri Brick

  1. By: Newberry, D.
    Abstract: Agent-based modelling is an attractive way of finding equilibria in complex problems involving strategic behaviour, particularly in electricity markets with transmission constraints. However, while it may be possible to demonstrate convergence of learning behaviour to a Nash equilibrium, that is not sufficient to establish that the equilibrium is robust against more sophisticated strategy choices. This note examines two particular forms of agent-based modelling used in electricity market models, both variants of mark-up pricing, and demonstrates that they are robust against other strategies.Keywords: Electric utilities, industrial policy, political economy
    Keywords: agent-based modelling, electricity markets, mark-up equilibria, stability, oligopoly, learning
    JEL: C63 C73 D43 L10 L13 L94
    Date: 2012–05–28
  2. By: Dean C. Mountain
    Abstract: A pilot study was undertaken in Newfoundland and Labrador to determine whether provision of a real-time feedback device is sufficient to provide residential customers with the information needed to reduce their electricity consumption. A panel based econometric methodology, which controlled for such factors as weather, appliance and housing stock, and demographic determinants influencing electricity consumption, was used to quantify the impacts of the realtime monitor in reducing energy (kWh) use. The study also provided some important insights about socio-economic factors that influence conservation responsiveness, a feature that may assist in developing targeted energy efficiency programs. For example, the electric water heating households showed a higher savings than non-electric water heating households. While positive attitudes toward conservation significantly increase the reduction in electricity when using the real-time monitor, seniors, in their employment of the real-time monitor, do not conserve as much. Overall, the aggregate reduction in electricity consumption (kWh) across the study sample was 18.1%. The paper describes the experimental design, the data collection, the evaluation model, the conservation results, and customers’ attitudes and perceptions regarding the real-time monitor.
    Keywords: Real-time monitor, Instantaneous feedback, conservation, residential electricity, seniors, panel based econometric methodology
    JEL: C93 D83 J14 Q27 Q41
    Date: 2012–04
  3. By: Li, Xiaogu; Clark, Christopher D.; Jensen, Kimberly L.; Yen, Steven T.
    Abstract: In 2002, EPA established a voluntary program called the Climate Leaders Program (CL Program) designed for organizations to complete a corporate greenhouse gas (GHG) inventory, set a goal for reducing GHG emissions, and achieve that goal. The program was never implemented as a product labeling program. In 2010, EPA announced the program’s phase out. This study examines whether the CL Program could have been effectively used as a consumer product labeling program to assist consumers in choosing products manufactured by firms that have voluntarily set and achieved targeted GHG emission reductions.
    Keywords: Consumer Preferences, Climate Leaders, Willingness-to-Pay, Environmental Economics and Policy, Q50, Q58,
    Date: 2012–05–22
  4. By: Arturo Pedraza; Ramón Rosas
    Abstract: As part of its Technical Cooperation "Energy Efficiency for Caribbean Water and Sanitation Companies", the Sustainable Energy and Climate Change Initiative (SECCI) of the Inter-American Development Bank (IDB) financed the development of a regional methodology to improve energy efficiency and maintenance of water companies in Latin American and Caribbean countries. This methodology, developed by the consulting firms Econoler International and Alliance to Save Energy, focuses mainly on electromechanical efficiencies of water pumping systems in the Caribbean. This publication presents the calculation sheet. The a guide to the calculation sheet, an energy efficiency assessment manual, and a maintenance manual for the evaluation of the systems are also available on the IDB Publications Portal.
    Keywords: Infrastructure & Transport :: Water Supply & Sanitation, Energy & Mining :: Energy Efficiency, Environment & Natural Resources :: Water Management, water pumps, calculation sheet, SECCI
    Date: 2011–11
  5. By: Koerth-Baker, Maggie; Turner, Karen; De Fence, Janine; Xin Cui, Cathy
    Keywords: General equilibrium, energy efficiency, rebound effects, disinvestment,
    Date: 2011
  6. By: Lecca, Patrizio; Swales, Kim; Turner, Karen
    Abstract: In this paper, we use CGE modelling techniques to identify the impact on energy use of an improvement in energy efficiency in the household sector. The main findings are that 1) when the price of energy is measured in natural units, the increase in efficiency yields only to a modification of tastes, changing as a result, the composition of household consumption; 2) when households internalize efficiency, the improvement in energy efficiency reduces the price of energy in efficiency units, providing a source of improved competitiveness as the nominal wage and the price level both fall; 3) the short-run rebound can be greater than the long run rebound if the household demand elasticity is the same for both time frames, however, the short run rebound is always lower than in the long-run if the demand for energy is relatively more elastic in the long-run; 4) the introduction of habit formation changes the composition of household consumption, modifying the magnitude of the household rebound only in the short-run. In this period, household and economy wide rebound are lowest for external habit formation and highest when consumers’ preferences are defined using a conventional utility function.
    Keywords: Energy efficiency, Rebound effects, Households energy consumption, CGE models,
    Date: 2011
  7. By: Giovanni Marin (IMT Lucca Institute for Advanced Studies)
    Abstract: This paper investigates the patterns of emission efficiency (value added per emission) growth of 23 manufacturing sectors in 12 European countries with a focus on five emissions (CO2, NOx, NMVOC, SOx and CO). Emission efficiency growth is expected to be triggered by improvements in the efficiency of frontier countries through the diffusion of better technologies to laggard countries. This effect is likely to differ according to the distance from the frontier country. Finally, the role of productivity patterns (Total Factor Productivity) and energy prices dynamics is assessed. Results based on the European NAMEA (National Accounting Matrix including Environmental Accounts) further merged with sector accounts highlight significant spillovers from leaders in emission efficiency and a general tendency to converge for laggard countries and sectors (except for NMVOC emission efficiency). Energy prices weakly induce improvements in emission efficiency, with the effect being generally stronger for sectors and countries farther away from the emission efficiency frontier. Finally, total factor productivity (TFP) is strongly correlated with emission efficiency while the distance from TFP frontier significantly harms emission efficiency growth.
    Keywords: patents, CDM model, eco-innovation, crowding out
    JEL: Q55 L60 O30
    Date: 2012–05
  8. By: Driscoll, Áine; Lyons, Seán; Mariuzzo, Franco; Tol, Richard S. J.
    Abstract: We have modelled the market for new cars in Ireland with the aim of quantifying the values placed on a range of observable car characteristics. Mid-sized petrol cars with a manual transmission sell best. Price and perhaps fuel cost are negatively associated with sales, and acceleration and perhaps range are positively associated. Hybrid cars are popular. The values of car characteristics are then used to simulate the likely market shares of three new electrical vehicles. Electrical vehicles tend to be more expensive even after tax breaks and subsidies are applied, but we assume their market shares would benefit from an "environmental" premium similar to those of hybrid cars. The "environmental" premium and the level of subsidies would need to be raised to incredible levels to reach the government target of 10% market penetration of all-electric vehicles.
    Date: 2012–05
  9. By: MANAGI Shunsuke
    Abstract: The future of both the automobile and the transportation industries has been of significant interest to many people. In this study, we investigate the economic validity of the diffusion of fuel cell vehicles (FCVs) and all-electric vehicles (EVs), comparing the benefit and cost for diffusion of alternative vehicles by employing cost-benefit analysis. We assume the amount of CO₂ and NOx emissions and gasoline use reduction as a benefit, by switching from internal combustion engine (ICE) vehicles to alternative vehicles; and the purchase amount, infrastructure expenses, and maintenance of alternative vehicles as a cost. We obtained data from two alternative fuel vehicles from an interview with an automobile maker in Japan. Considering uncertainties, we conducted a sensitivity analysis of the cost-benefit ratios. The scenarios used are the following: the progress of alternative vehicle production, the increase in CO₂ abatement cost, the increase in the price of gasoline, and the target year for diffusion. In summary, the results show that the diffusion of FCVs will not be economically feasible until 2110, even if their purchase cost is decreased to that of an ICE vehicle. The diffusion of EVs might be possible by 2060 depending on the increase in gasoline prices and the CO₂ abatement costs.
    Date: 2012–05
  10. By: Dewenter, Ralf; Heimeshoff, Ulrich
    Abstract: Increasing price levels, high price volatility and the suspicion of collusive behavior are important topics of public debates on competition in retail gasoline markets in many countries. Several governments and competition authorities introduced fuel price regulations in form of restrictions on the frequencies of fuel price changes per day. We present empirical evidence of the effects of fuel price regulation in Austria and Western Australia using difference-in-differences methods to estimate treatment effects of the implementation of such pricing rules. Our estimates provide evidence that fuel price levels in Austria decreased after implementation of regulation. However, we cannot find robust significant effects of regulation on fuel price levels in Western Australia. --
    JEL: K2 K23 L5 L51 L71
    Date: 2012
  11. By: Fofana, Ismaël
    Abstract: The recent surge in oil prices has created concern about its impacts on poor people in South Africa. The strong economic performance recorded over the period 1995-05 has not contributed to a substantial reduction in poverty in this country, particularly among women that tend to be overrepresented among poor households. Government management of an oil shock is important in reducing its adverse impacts in oil-importing countries. Thus, this study examines alternative policy responses to the recent high oil prices through a gender lens in South Africa. A multisector general equilibrium framework is developed to account for the energy specificities of the economy and its relationship with nonenergy sectors. In addition, male and female supplies of labor and the households' demand for energy and nonenergy commodities are explored through a careful modeling of the household economy along with the market economy. The simulation scenarios combine increases in world prices of crude oil, petroleum products, and coal with various fiscal policy responses. Under the floating prices scenario, gross domestic product (GDP) falls compared to the baseline value driven by the inflationary effect of high energy prices and the exchange rate depreciation. Labor earnings also fall, while the gap between male and female earnings widens. The low participation of women compared to men in nonoil energy and export-oriented industries increases their vulnerability to the oil price shock. The gender employment gap also increases under the fixed petroleum price scenarios regardless of the tax-financing option. Further, fiscal policy responses are explored through the broadening of price supports to all commodities and all industries financed by an additional tax on household revenue. A government subsidy to businesses under the oil price shock shows the highest multiplier effect—higher GDP and labor earning effects—but the gap in male and female employment does not change significantly compared with that in the floating and set price scenarios. The government subsidy to businesses is decomposed by type of industry to further explore its gender employment impact. Simulation results indicate that the gender employment gap improves when the subsidy is allocated to high female-employing industries. On the other hand, providing a subsidy to industries that easily substitute capital–energy technology with low-skilled work gives the best GDP outcome. Therefore, this study shows that fiscal policy can help ensure equitable growth when an economy faces a serious challenge, such as a surge in world oil prices. This indicates that supporting industries that easily substitute the capital–energy factor and female-dominated, low-skilled work is the most efficient and gender-equitable fiscal response to high oil prices in South Africa. Given the small differences in GDP and employment results between the fiscal response scenarios with and without a focus on gender equity, the cost of investing in gender equality appears to be small.
    Keywords: petroleum, price shock, Gender, Fiscal policies, General equilibrium model, household economy, domestic work, time allocation,
    Date: 2012
  12. By: Sofía B. Ramos; Helena Veiga; Chih-Wei Wang
    Abstract: This paper analyzes long term dependence between the market value of oil firms and oil prices. Applying nonlinear cointegration, the results show that in the long-run oil price hikes and falls show different adjustments to the equilibrium. Using a momentum threshold autoregressive model (MTAR), we find that for oil producing firms, the adjustment is faster for oil price falls than for oil price hikes, but we do not find a difference on the speed of adjustment for oil integrated firms. Moreover, testing for asymmetric cointegration, we also find that oil price falls impact substantially the value of oil producers and integrated firms, but the same is not found for oil price hikes. Overall, the evidence suggests that firm value stays above equilibrium relationship when there are oil price hikes.
    Keywords: Asymmetric cointegration, ECM models, MTAR models, Oil prices, Oil industry
    JEL: G15 Q43
    Date: 2012–02
  13. By: Hart, Rob (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: We develop a dynamic model of prices and quantities of non-renewable resources, carefully justifying our assumptions. Resource stocks are inhomogeneous, and there is endogenous directed technological change both in extraction and final-good production. The model explains stylized facts while simultaneously providing a framework for prediction; it yields analytical results in the baseline case, and may be developed to make empirical predictions about real resources. In the baseline case the economy passes through a series of phases: initially resource consumption is low; as technology improves, resource consumption rises and real resource price is constant; in the long run there is a transition to a b.g.p. on which resource consumption is constant and resource price tracks the wage.
    Keywords: Directed technological change; Natural resources; Hotelling rule.
    JEL: O13 O33
    Date: 2012–05–04
  14. By: Dizaji, S.F.
    Abstract: The main purpose of this study is to investigate the dynamic relationship between government revenues and government expenditures in Iran as a developing oil export based economy. Moreover, I want to know how government expenditures and revenues respond to oil price (revenue) shocks. I use two different groups of the variables with two different time periods (quarterly and annually) to investigate the robustness and reliability of the results and to provide a more comprehensive base for comparison against different methodologies. For the first group of the variables (including oil price, oil revenues to GDP ratio, government total expenditures to GDP ratio and a dummy variable for capturing the effects of war with Iraq) I apply an SVAR model using annual data for the period 1970-2008. The results of the impulse response functions and variance decomposition analysis indicate that the causality is running from oil revenues to GDP ratio to government total expenditures to GDP ratio. Moreover the contribution of oil revenue shocks in explaining the government expenditures to GDP ratio is stronger than the contribution of oil price shocks. For the second group of the variables (oil revenues, government total revenues, government current expenditures, government capital expenditures, money supply and CPI) unrestricted VAR and VEC models have been applied using quarterly data for the period 1990:2-2009:1. The results of the impulse response functions and variance decompositions analysis for both VAR and VEC models indicate that the strong causality is running from government revenues to government expenditures (both current and capital) in Iranian economy while the evidence for the reverse causality is very weak. The results show that in the VEC model which the long-run behavior of endogenous variables is restricted to converge to their co-integration relationships, oil revenue shocks can affect the other macroeconomic variables more directly while in the VAR model this changes and works through the total revenues channel. Moreover the findings indicate that government revenues, government expenditures and money supply are important determinants of domestic price level in Iranian economy. Overall my results support the revenue-spending hypothesis for Iran. In this context Iran should enhance the effectiveness of fiscal policy by making budget expenditure less driven by revenue availability. This policy can help to avoid the costs and instability that variations in public spending generate mostly due to the fluctuations in oil revenues.
    Keywords: government expenditures;sanctions;Iran;government revenues;oil shocks;vector autoregression (VAR)
    Date: 2012–05–10
  15. By: Yu-Hsiang Lei; Guy Michaels
    Abstract: We use new data to examine the effects of giant oilfield discoveries around the world since 1946. On average, these discoveries increase per capita oil production and oil exports by up to 50 percent. But these giant oilfield discoveries also have a dark side: they increase the incidence of internal armed conflict by about 5-8 percentage points. This increased incidence of conflict due to giant oilfield discoveries is especially high for countries that had already experienced armed conflicts or coups in the decade prior to discovery.
    Keywords: Natural resources, resource curse, petroleum, armed conflict, civil war
    JEL: Q34 Q33 O13
    Date: 2012–05
  16. By: Banse, Martin; Junker, Franziska; Prins, Anne Gerdien; Stehfest, Elke; Tabeau, Andrzej A.; Woltjer, Geert B.; van Meijl, Hans
    Abstract: This paper analyzes the consequences of enhanced biofuel production in regions and countries of the world that have announced plans to implement or expand on biofuel policies. The analysis considers not only mandatory blending targets for transportation fuels, but also voluntary ones. The chosen quantitative modeling approach is two-fold: it combines a multi-sectoral economic model (LEITAP) with a spatial bio-physical land use model (IMAGE). This paper adds to existing research by considering biofuel policies in the EU, the US and various other countries with considerable agricultural production and trade, such as Brazil, India and China. Moreover, the combination of the two modeling systems allows for the observation of changes in both economic and bio-physical indicators. The results show that some indicators with high political relevance, such as agricultural prices and greenhouse gas emissions from land use, do not necessarily react proportionally to increasing demand for agricultural products from the biofuel sector. This finding should be considered when designing biofuel policies because these indicators are directly relevant for food security and climate change.
    Keywords: Biofuel mandates, Land use changes, Greenhouse gas emissions, International Relations/Trade, Land Economics/Use, Resource /Energy Economics and Policy,
    Date: 2012
  17. By: Ye, Fanglin; Lu, Liang; Du, Xiaoxue
    Abstract: In this paper, we set up a social cost minimization problem for a government. Using dynamic optimization tools, we analytically shows how exogenous parameters could affect the optimal social cost and the optimal tax credit policy path.
    Keywords: Optimal Control, Biofuel, Tax Credit, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q42, Q48,
    Date: 2012–05–22
  18. By: Hills, John
    Abstract: Interim report of the Fuel Poverty Review
    Date: 2011–10
  19. By: Verreth, Daphne M.I.; Emvalomatis, Grigorios; Bunte, Frank H.J.; Oude Lansink, Alfons G.J.M.
    Abstract: Dutch greenhouse horticultural firms are energy-intensive and major emitters of greenhouse gases. This paper develops a theoretically consistent model that is able to describe the greenhouse firms` behaviour regarding energy use and investments in energy technology. The behaviour of the firm is modelled using a combination of a dynamic cost function and a static profit function framework. This paper derives the optimal quantity of energy and energy capital from the link between these two functions. The model is applied to a panel of 97 Dutch greenhouse firms over the period 2001-2008. The results show that most Dutch greenhouse firms shift from being net electricity users to net electricity producers in the long run. Investing in energy capital contribute to reducing energy, however will increase the quantity of CO2 emissions due to an increase in electricity production.
    Keywords: Greenhouse horticulture, energy, dynamic duality, short-run marginal cost, adjustment costs, Production Economics, Resource /Energy Economics and Policy,
    Date: 2012–05–15
  20. By: Michieka, Nyakundi; Fletcher, Jerald J.; Burnett, J. Wesley
    Keywords: Environmental Economics and Policy,
    Date: 2012–05
  21. By: Ralf Martin; Ulrich J. Wagner; Laure B. de Preux
    Abstract: By granting discounts on environmental taxes to heavy polluting firms, the government is missing out on significant tax revenues and achieving considerably less in reducing greenhouse gas emissions. That is the central conclusion of research by Ralf Martin and colleagues, which reveals the failings of the UK's climate change levy. Their study shows that firms that enjoy a discount from the levy, claiming that such measures damage their ability to compete in the global economy, do not in fact face higher risks to their competitiveness. Firms that pay the full climate change levy reduce their energy use and their emissions by more than those that get a tax discount.
    Keywords: Industry compensation, industrial relocation, emissions trading, permit allocation, EUETS, firm data
    JEL: H23 H25 Q52 Q54
    Date: 2012–05
  22. By: Liu, Xing (Department of Business, Economics, Statistics and Informatics); Bohlin, Lars (Department of Business, Economics, Statistics and Informatics)
    Abstract: This paper uses a static, small open-economy computable General Equilibrium (CGE) model of the Swedish economy to study the effects of consistent internalization of external effects from transport and manufacturing. We look at eight policy scenarios: first a fully implemented Social Marginal Cost Pricing (SMCP) in manufacturing, sea and air transport, road transport, and rail transport; and then SMCP in these sectors separately or in various combinations. We evaluate effects on, among others, national and global emission reductions, GDP, government budget, and social welfare. The results show that the fully implemented SMCP in all sectors generates the highest social welfare surplus, largest emission reduction and largest government net revenue. When this option is not feasible, society still could benefit from correcting prices in or more sectors. Correcting prices only for rail transport generates very small social welfare surplus, emission reduction and government revenue; while correcting prices only for road transport generates much larger effects in all aspects. Taking into consideration that sea and air modes are regulated not only by domestic legislation, the findings from this study suggest that the second-best policy scenario could be to correct prices for the rail, road and manufacturing sectors.
    Keywords: social marginal cost; externalities; transport taxation; CO2 taxation; general equilibrium
    JEL: C68 H23 R48
    Date: 2012–05–22
  23. By: Koop, Gary; Tole, Lise
    Abstract: In an effort to meet its obligations under the Kyoto Protocol, in 2005 the European Union introduced a cap-and-trade scheme where mandated installations are allocated permits to emit CO2. Financial markets have developed that allow companies to trade these carbon permits. For the EU to achieve reductions in CO2 emissions at a minimum cost, it is necessary that companies make appropriate investments and policymakers design optimal policies. In an effort to clarify the workings of the carbon market, several recent papers have attempted to statistically model it. However, the European carbon market (EU ETS) has many institutional features that potentially impact on daily carbon prices (and associated nancial futures). As a consequence, the carbon market has properties that are quite different from conventional financial assets traded in mature markets. In this paper, we use dynamic model averaging (DMA) in order to forecast in this newly-developing market. DMA is a recently-developed statistical method which has three advantages over conventional approaches. First, it allows the coefficients on the predictors in a forecasting model to change over time. Second, it allows for the entire fore- casting model to change over time. Third, it surmounts statistical problems which arise from the large number of potential predictors that can explain carbon prices. Our empirical results indicate that there are both important policy and statistical bene ts with our approach. Statistically, we present strong evidence that there is substantial turbulence and change in the EU ETS market, and that DMA can model these features and forecast accurately compared to conventional approaches. From a policy perspective, we discuss the relative and changing role of different price drivers in the EU ETS. Finally, we document the forecast performance of DMA and discuss how this relates to the efficiency and maturity of this market.
    Keywords: Bayesian, carbon permit trading, fi nancial markets, state space model, model averaging,
    Date: 2011
  24. By: Stéphane Dion; Eloi Laurent (Observatoire Francais des Conjonctures Economiques)
    Abstract: Two decades after the 1992 Rio Conference,we must admit to collective failure in combating human induced climate change. We cannot escape serious climate disruption if we keep going down that road. We must change direction, and we must move quickly. To this end, we call in this paper for a fine tuning of the international negotiations on climate. We propose refocusing these international efforts on negotiating a global carbon price signal, harmonized in principle but flexible in practice, instead of doggedly spending the next few years attempting to convince countries to accept stricter national targets for quantitative reduction of their greenhouse gas (GHG) emissions.
    Keywords: carbon price, carbon taxation, carbon markets, Kyoto Protocol, climate change.
    JEL: H23 H77 Q48 Q54 Q58
    Date: 2012–05
  25. By: Rachel Bodsky (Economic Science Institute, Chapman University); Domenic Donato (Economic Science Institute, Chapman University); Kevin James (Economic Science Institute, Chapman University); David Porter (Economic Science Institute, Chapman University)
    Abstract: We report on a series of experiments to examine the properties of California’s Reserve Sale allocation mechanism to be implemented as part of the forthcoming cap and trade program and compare it with an alternative reserve sale mechanism. The proposed reserve sale mechanism allows covered entities to purchase allowances after the primary auction sale at fixed prices. If demand for units is greater the amount supplied in the reserve sale, a Proportional Rationing rule is used to distribute allowances based on submitted request for units. This rule is contrasted with to an alternative rule, Equal Rationing in which allowances are allocated one at a time until the quantity available is exhausted or the participants’ requests are fulfilled. We find Equal Rationing outperforms Proportional Rationing allocating units with higher efficiency at a lower cost to participants. Additionally, we sorted subjects by quiz score, which yielded a significant impact on performance, suggesting that subjects with a better understanding of the environment outperformed their counterparts.
    Date: 2012
  26. By: Tee, James; Scarpa, Riccardo; Marsh, Dan; Guthrie, Graeme
    Abstract: Under the New Zealand Emissions Trading Scheme, new forests planted on/after 1st January 1990 can earn carbon credits. These credits have to be repaid upon forest harvest. This paper analyses the effects of this carbon scheme on the valuation of bareland, on which radiata pine is to be planted. NPV/LEV and Real Options methods are employed, assuming stochastic timber and carbon prices. Valuation increases significantly and rotation age is likely to be lengthened. We include a scenario analysis of potential implications of rotation age lengthening on carbon stock management in New Zealand.
    Keywords: Emissions Trading Scheme (ETS), Climate change policy, Kyoto Protocol, Real options, carbon forestry, tradable permit, Demand and Price Analysis, Environmental Economics and Policy, Land Economics/Use, Resource /Energy Economics and Policy, Risk and Uncertainty, Q23, Q28, Q54,
    Date: 2012–05–21
  27. By: Giovanni Marin (IMT Lucca Institute for Advanced Studies)
    Abstract: This paper investigates the patterns of emission efficiency (value added per emission) growth of 23 manufacturing sectors in 12 European countries with a focus on five emissions (CO2, NOx, NMVOC, SOx and CO). Emission efficiency growth is expected to be triggered by improvements in the efficiency of frontier countries through the diffusion of better technologies to laggard countries. This effect is likely to differ according to the distance from the frontier country. Finally, the role of productivity patterns (Total Factor Productivity) and energy prices dynamics is assessed. Results based on the European NAMEA (National Accounting Matrix including Environmental Accounts) further merged with sector accounts highlight significant spillovers from leaders in emission efficiency and a general tendency to converge for laggard countries and sectors (except for NMVOC emission efficiency). Energy prices weakly induce improvements in emission efficiency, with the effect being generally stronger for sectors and countries farther away from the emission efficiency frontier. Finally, total factor productivity (TFP) is strongly correlated with emission efficiency while the distance from TFP frontier significantly harms emission efficiency growth.
    Keywords: convergence, environmental efficiency, NAMEA, technological diffusion
    JEL: Q55 Q56 O33
    Date: 2012–05
  28. By: Mark Schopf (University of Paderborn); Hendrik Ritter (University of Magdeburg)
    Abstract: This paper deals with possible foreign reactions to domestic carbon demand reducing policies. It differentiates between demand side and supply side reactions as well as between intra- and intertemporal shifts of greenhouse gas emissions. In our model, we integrate increasing marginal physical extraction costs of fossil fuels into the general equilibrium carbon leakage model of Eichner & Pethig (2011). The results are as follows: The conditions for the emergence of the weak green paradox are similar but somewhat tighter than those derived by Eichner & Pethig (2011). Additionally, a strong green paradox can arise in our model under supplemental constraints. That means a “green" policy measure might not only lead to an acceleration of fossil fuel extraction but to an increase in the cumulative extraction.
    Keywords: Natural Resources, Carbon Leakage, Green Paradox
    JEL: Q31 Q32 Q54
    Date: 2012–05
  29. By: Pierre Perron (Department of Economics, Boston University); Francisco Estrada (Centro de Ciencias de la Atmósfera, Universidad Nacional Autónoma de México); Benjamín Martínez-López (Centro de Ciencias de la Atmósfera, Universidad Nacional Autónoma de México)
    Abstract: We use recent methods for the analysis of time series data, in particular related to breaks in trends, to establish that human factors are the main contributors to the secular movements in observed global and hemispheric temperatures series. The most important feature documented is a marked increase in the growth rates of temperatures (purged from the Atlantic Multidecadal Oscillation) and anthropogenic greenhouse gases occurring for all series around 1955, which marks the start of sustained global warming. Also evidence shows that human interventions effectively slowed global warming in two occasions. The Montreal Protocol and the technological change in agricultural production in Asia are major drivers behind the slowdown of the warming since 1994, providing evidence about the effectiveness of reducing emissions of greenhouse gases other than CO2 for mitigating climate change in the shorter term. The largest socioeconomic disruptions, the two World Wars and the Great Crash, are shown to have contributed to the cooling in the mid 20th century. While other radiative factors have modulated their effect, the greenhouse gases defined the secular movement in both the total radiative forcing and the global and hemispheric temperature series. Deviations from this anthropogenic trend are shown to have transitory effects.
    Date: 2012–01
  30. By: Pierre Perron (Department of Economics, Boston University); Francisco Estrada (Centro de Ciencias de la Atmósfera, Universidad Nacional Autónoma de México)
    Abstract: Climate change detection and attribution have been the subject of intense research and debate over at least four decades. However, direct attribution of climate change to anthropogenic activities using observed climate and forcing variables through statistical methods has remained elusive, partly caused by the difficulties for correctly identifying the time-series properties of these variables and by the limited availability of methods for relating nonstationary variables. This paper provides strong evidence concerning the direct attribution of observed climate change to anthropogenic greenhouse gases emissions by first investigating the univariate time-series properties of observed global and hemispheric temperatures and forcing variables and then by proposing statistically adequate multivariate models. The results show that there is a clear anthropogenic fingerprint on both global and hemispheric temperatures. The signal of the well-mixed GHG forcing in all temperature series is very clear and accounts for most of their secular movement since the beginning of observations. Both temperature and forcing variables are characterized by piecewise linear trends with abrupt changes in their slopes estimated to occur at different dates. Nevertheless, their long-term movements are so closely related that the observed temperature and forcing trends cancel out. The warming experimented during the last century was mainly due to the increase in GHG which was partially offset by the effect of tropospheric aerosols. Other forcing sources, such as solar, are shown to only contribute to (shorter-term) variations around the GHG forcing trend.
    Date: 2012–01
  31. By: Zoe Van der Hoven; Martine Visser; Kerri Brick (SALDRU, School of Economics, University of Cape Town)
    Abstract: While results from public good games with homogeneous players reflect the contribution norm of equal contributions, it is unclear what contribution norm will arise in a heterogeneous setting. Climate change is a perfect example of a social dilemma involving heterogeneous agents. As such, using a public good game with a climate change framing, this study examines what contribution norm arises when players are asymmetric in terms of their impact on the public good (mitigation). The climate change framing exacerbates equity considerations and ultimately increases the difficulty of finding a generalizable concept of fairness (contribution norm) acceptable to both player-types. The efficacy of communication as a means to promoting public good provision is also considered. The default contribution norm, irrespective of player-type, was to free-ride. With the introduction of communication, two dominant contribution norms emerge: free-riding and perfect cooperation.
    Keywords: public good; contribution norm; communication; heterogeneity; climate change
    JEL: H41 Q54 Q58
    Date: 2012

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