nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒07‒01
thirteen papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Greening China's rural energy : new insights on the potential of smallholder biogas By Christiaensen, Luc; Heltberg, Rasmus
  2. Renewables and the EU Internal Electricity Market: The case for an arranged marriage By Teusch, Jonas
  3. Modeling spike occurrences in electricity spot prices for forecasting By Eichler Michael; Grothe Oliver; Tuerk Dennis; Manner Hans
  4. A cross country analysis of electricity market reforms: potential contribution of New Institutional Economics By Erdogdu, E.
  5. Gas Storage Valudation: A Comparative Simulation Studiy By Stephan Schaeffler
  6. Speculative bubbles in recent oil price dynamics: Evidence from a Bayesian Markov-switching state-space approach By Marc Lammerding; Patrick Stephan; Mark Trede; Bernd Wilfling
  7. A retrospective evaluation of elements of the EU VAT system By Institute for Fiscal Studies
  8. Regressivity of environmental taxation: myth or reality? By Katri Kosonen
  9. Expanding Carbon Markets through New Market-based Mechanisms: A synthesis of discussions and submissions to the UNFCCC By Marcu, Andrei
  10. Option values of low carbon technology policies: how to combine irreversibility effects and learning-by-doing in decisions By Finon, D.; Meunier, G.
  11. Multilateralism in Crisis By Peter Lloyd
  12. Ecological Macroeconomics: An application to climate change By Armon Rezai; Lance Taylor; Reinhard Mechler
  13. Prospects of Tools from Differential Games in the Study Of Macroeconomics of Climate Change By Engwerda, J.C.

  1. By: Christiaensen, Luc; Heltberg, Rasmus
    Abstract: Clean, safe energy for rural areas is an important component of green growth and sustainable development. Biogas could be an important contributor, if its record in reality lives up to its expected potential. This paper provides a preliminary assessment of biogas use by smallholder farmers in rural China, using data collected from 2,700 households in five provinces. The authors find that user satisfaction is high, and environmental and economic benefits appear tangible. There are strong indications of reduced use of wood and crop residues for fuel. Less time is spent on collecting fuel wood and cooking, which is especially beneficial to women. Adopters also save on fertilizers, because of the use of biogas residues. Moreover, problems with suspension of biogas use, whether due to technical or human factors, remained limited. However, few tangible benefits to respiratory health were detected. Overall, these findings are grounds for optimism about the potential for of smallholder biogas to contribute to more sustainable development, in China and beyond.
    Keywords: Energy Production and Transportation,Climate Change Mitigation and Green House Gases,Renewable Energy,Engineering,Energy and Environment
    Date: 2012–06–01
  2. By: Teusch, Jonas
    Abstract: This Policy Brief argues that pursuing the renewables objective could contribute to the completion of the internal electricity market, help to overcome opposition to transmission projects and decrease the market power of incumbents. Conversely, an integrated internal electricity market means less price volatility in specific regional markets, which allows for more efficient deployment and grid integration of renewables. Three sets of recommendations are proposed.
    Date: 2012–03
  3. By: Eichler Michael; Grothe Oliver; Tuerk Dennis; Manner Hans (METEOR)
    Abstract: Predicting the occurrence of extreme prices, so-called spikes, is one of the greatest challengeswhen modeling electricity spot prices. Despite the fact that recently new insights have beenachieved, the contemporaneous literature seems to be still at its beginning of understanding thedifferentmechanisms that drive spike probabilities. We therefore reconsider the problem offorecasting the occurrence of spikes, in the Australian electricity market. For this purpose, wefirst discuss properties of the price data with a focus on the occurrence of spikes. We thenpropose simple models for the probability of spikes which take these properties into account. Themodels compare favorably for in- and out-of-sample forecasts to a competing approach based on theautoregressive conditional hazard model.
    Keywords: econometrics;
    Date: 2012
  4. By: Erdogdu, E.
    Abstract: The paper explores whether the question of why some countries are able to implement more extensive reforms is closely related to the question of why some countries have better institutions than others. We analyse this question by using an empirical econometric model based on Poisson regression with cross-section data covering 51 US states, 13 Canada states and 51 other countries. The results show that both the background of the chairperson of electricity market regulatory agency when reforms started and the minister/governor at that time and institutional endowments of a country are important determinants of how far reforms have gone in a country. Our results also suggest that any improvement in the investment environment contributes to the scope of reforms. On the other hand, there seems to be a negative relationship between reform progress and civil liberties, which may prove that reforms may be limited in democratic countries with strong civil society institutions such as trade unions or other organized structures in the society that may consider reforms as ‘harmful’ to their self-interest.
    Keywords: Electricity market reform, new institutional economics, Poisson regression
    JEL: E02 L51 L94 O17
    Date: 2012–06–19
  5. By: Stephan Schaeffler (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: The purpose of this paper is the comparative analysis of four natural gas storage valuation approaches. In competitive natural gas markets the optimal valuation and operation of natural gas storages is a key task for natural gas companies operating storages. Within this paper, four spot based valuation approaches are analyzed regarding computational time and accuracy. In particular, explicit and implicit finite differences, multinomial recombining trees, and Least Squares Monte Carlo Simulation are compared. These approaches are applied to the valuation of a gas storage facility considering three different underlying price processes. Major characteristics of historical natural gas prices are: seasonality, mean reversion and jumps. Therefore, we consider a mean reversion process as underlying price process. In a first step, we extend this mean reversion process to a mean reversion jump diffusion process, to account for jumps, occurring in historical gas spot price time series. Moreover, we consider a more general price process accounting for mean reversion as well as seasonal patterns as observed in the historical time series. Besides the analysis of the numerical results, the benefits and drawbacks of the methodologies are discussed.
    Keywords: natural gas valuation, limited liquidity
    JEL: C61 L95 Q40
    Date: 2012–06
  6. By: Marc Lammerding; Patrick Stephan; Mark Trede; Bernd Wilfling
    Abstract: Motivated by repeated spikes and crashes during previous decades we investigate whether the heavily financialized market for crude oil has been driven by speculative bubbles. In our theoretical modeling we draw on the convenience yield approach in order to approximate the fundamental value of the oil price. We separate the oil price fundamental from the bubble component by expressing a standard present-value oil price model in state-space form. We then introduce two Markov-regimes into the state-space representation in order to distinguish between two distinct phases in the bubble process, namely one in which the oil price bubble is a stable process and one in which the bubble explodes. We estimate the entire Markov-switching state-space specification using an econometrically robust Bayesian Markov-Chain-Monte-Carlo (MCMC) methodology. Based on inferential techniques designed for statistically separating both Markov-regimes in the bubble process from each other, we find robust evidence for the existence of speculative bubbles in recent oil price dynamics.
    Keywords: Speculative bubbles, oil price, Markov-switching model, state-space model, Bayesian econometrics
    JEL: G10 G12 Q40
    Date: 2012–06
  7. By: Institute for Fiscal Studies
    Abstract: In December 2010, the Commission signed a contract for a retrospective evaluation of the consequences, in economic terms, of the functioning of the most pertinent elements of the current EU VAT system, as identified in the "Green Paper on the future of the VAT". The final report was submitted by the external consultants on 5 December 2011. This evaluation looked into the design and implementation of certain VAT arrangements, assessing their effectiveness and efficiency in terms of results and impacts they had created. It examined their relevance and their coherence with the smooth functioning of the single market and the requirement to avoid distortion of competition specified in Article 113 of the Treaty on the Functioning of the European Union.
    Keywords: European Union, taxation, VAT
    JEL: H25
    Date: 2011–12
  8. By: Katri Kosonen (European Commission)
    Abstract: This paper first presents an overview of the various factors that in light of the economic literature should be taken into account in the analysis of tax incidence of environmental taxation. It then explores the main empirical findings, in particular those which make a distinction between the distributional effects of transport-related taxes and those of other environmental taxes. This includes also some less well-known evidence from the Nordic countries. In the final section it presents some recent evidence on the distributional impact of energy taxation in the EU member states included in the impact assessment of the revision of the European Union’s Energy Tax Directive.
    Keywords: European Union; taxation; environmental taxes, redistribution
    JEL: H23
    Date: 2012–06
  9. By: Marcu, Andrei
    Abstract: At the Durban meeting of the United Nations Framework Convention on Climate Change (UNFCCC), Parties to the Convention and observer organisations were invited to make submissions on a number of issues relevant to the discussions on various approaches, including opportunities for using markets, to enhance the cost-effectiveness of mitigation actions. This Special Report, produced by the newly created CEPS Carbon Market Forum (CMF), reviews the submissions by Parties and observer organisations, with a view to facilitating progress in the expansion of a global carbon market. In this context, the report aims to contribute to the European debate on the development of new market mechanisms and carbon markets, as well as to the UNFCCC negotiating process. It attempts to identify some of the main issues that will need to be addressed this year, leading to the 18th Conference of the Parties (COP) in Doha, and discusses the various options proposed. As a first output of the CEPS CMF on this issue, and given the state of negotiations under the UNFCCC, it does not propose solutions.
    Date: 2012–05
  10. By: Finon, D.; Meunier, G.
    Abstract: In this paper, the political dilemma of the deployment of a large-size low carbon technology (LCT) is analyzed. A simple dynamic model is developed to analyze the interrelation between irreversible investments and learning-by-doing within a context of exogenous uncertainty on carbon price. Contrasting results are obtained. In some cases, the usual irreversibility effects hold, fewer plants of the LCT should be developed when information is anticipated. In other cases, this result is reversed and information arrival can justify an early deployment of the LCT. More precisely, it is shown that marginal reasoning is limited when learning by-doing, and more generally endogenous technical change, is considered. When information arrival is anticipated the optimal policy can move from a corner optimum with no LCT deployment to an interior optimum with a strictly positive development.
    Keywords: investment, option value, learning-by-doing
    JEL: D83 O33 Q55
    Date: 2012–06–19
  11. By: Peter Lloyd (University of Melbourne)
    Abstract: This paper examines multilateralism by looking at the two most important current efforts to devise new multilateral rules binding all nations; the negotiations in the World Trade Organization (WTO) of trade rules and the negotiations under the United Nations Framework Convention on Climate Change (UNFCCC) to devise rules restricting the annual emissions of greenhouse gases. Both negotiations have failed after several years of intensive effort.
    Keywords: Doha Development Round, Climate Change Negotiations, rationale for multilateral organisations, shared vision
    JEL: F02 F13
    Date: 2012–06
  12. By: Armon Rezai; Lance Taylor; Reinhard Mechler
    Date: 2012
  13. By: Engwerda, J.C. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: In this note we sketch a dynamic framework within which the discussion on the macro economic effects of climate change take place. The problem setting is characterized by scientific uncertainties about the development of climate, potential large economic losses and human beings having their specific features. Some considerations about climate change, macroeconomics and their relationship are given. A characteristic feature of the problem setting is that there are multiple decision makers interacting in a dynamic world with large uncertainties. Problems of this type have been studied extensively by (dynamic) game theory. A rough literature review is provided and some items open for future research are indicated.
    Keywords: Climate change;environmental change;macro-economic effects;dynamic games.
    JEL: C7 D6 D8 E6 F I3 O44 Q
    Date: 2012

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