nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒07‒23
53 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Why Are the Stakes So High? Misconceptions and Misunderstandings in China’s Global Quest for Energy Security By ZhongXiang Zhang
  2. Improving Fuel Economy in Heavy-Duty Vehicles By Harrington, Winston; Krupnick, Alan
  3. Implementing energy subsidy reforms : an overview of the key issues By Vagliasindi, Maria
  4. Policies to reduce traffic externalities in cities By Bruno DE BORGER; Stefan PROOST
  5. Energy Consumption Among the Urban Poor in Kenya: A Case Study of Households in Kibera Slums By Yonemitsu, Aya; Njenga, Mary; Liyama, Miyuki; Matsushita, Shusuke
  6. Disaggregate energy consumption and industrial output in Pakistan: An empirical analysis By Qazi, Ahmer Qasim; Ahmed, Khalid; Mudassar, Muhammad
  7. Secular Trends, Environmental Regulation, and Electricity Markets By Burtraw, Dallas; Palmer, Karen; Paul, Anthony; Woerman, Matt
  8. Estimating the impact of time-of-use pricing on Irish electricity demand By Di Cosmo, Valeria; Lyons, Sean; Nolan, Anne
  9. The role of policy driven incentives to attract PPPs in renewable-based energy in developing countries : a cross-country analysis By Vagliasindi, Maria
  10. Germany’s Solar Cell Promotion: An Unfolding Disaster By Manuel Frondel; Christoph M. Schmidt; Colin Vance
  11. The role of regulatory governance in driving PPPs in electricity transmission and distribution in developing countries : a cross-country analysis By Vagliasindi, Maria
  12. Costs for conventional and renewable fuels and electricity in the worldwide transport sector: a mean-variance portfolio approach By Ricardo Guerrero-Lemus; Gustavo A. Marrero; Luis A. Puch
  13. Renewable Technologies and Risk Mitigation in Small Island Developing States (SIDS): Fiji's Electricity Sector By Matthew Dornan; Frank Jotzo
  14. Real-Time Feedback and Residential Electricity Consumption: The Newfoundland and Labrador Pilot By Dean C. Mountain
  15. Economic Loss in Czech Photovoltaic Power Plants By Jan Prùša; Andrea Klimešová; Karel Janda
  16. Do oil prices help forecast U.S. real GDP? the role of nonlinearities and asymmetries By Lutz Kilian; Robert J. Vigfusson
  17. Euro area and global oil shocks: an empirical model-based analysis By Lorenzo Forni; Andrea Gerali; Alessandro Notarpietro; Massimiliano Pisani
  18. Optimum Tariffs and Exhaustible Resources: Theory and Evidence for Gasoline By Julien Daubanes; Lisa Leinert
  19. Oil Price Effects on Land Use Competition – An Empirical Analysis By Matthias Diermeier; Torsten Schmidt
  20. The Political Economy of Long Run Growth in Angola - Everyone Wants Oil and Diamonds but They Can Make Life Difficult By Kyle, Steven C.
  21. Energy from biomass: linkages between the energy and the agricultural sector in the EU until 2050 By Deppermann, Andre; Bruchof, David; Blesl, Markus; Boysen, Ole; Grethe, Harald
  22. Bioenergy and Land Use Change By Ciaian, Pavel; Kancs, d'Artis; Rajcaniova, Miroslava
  23. Policy Capacity for the Transition to a Biofuels Economy: A Comparative Study of the EU and USA By Adiran Kay; Robert Ackrill
  24. Agri-Commodity Price Dynamics: The Relationship Between Oil and Agricultural Market By Rosa, Franco; Vasciaveo, Michela
  25. Ethanol Trade Policy and Global Biofuel Mandates By Dimaranan, Betina V.; Laborde, David
  26. The U.S. Ethanol and Commodity Policy Labyrinth: Looking into Welfare Space to Analyze Policies that Combine Multiple Instruments By Bullock, David S.; Couleau, Anabelle
  27. The Shadow Price of GHG Reduction in Corn Ethanol Plants By Wamisho, Kassu
  28. Uncertainties about the GHG Emissions Saving of Rapeseed Biodiesel By Gernot Pehnelt; Christoph Vietze
  29. Sustainability of rapeseed biodiesel using LCA method By Finco, Adele; Bentivoglio, Deborah; Rasetti, Michele; Padella, Monica; Polla, Piergiuseppe; Cortesi, Davide
  30. Potential gains and losses of Biofuel production in Argentina: a computable general equilibrium analysis By Chisari, Omar O.; Romero, Carlos A.; Timilsina, Govinda
  31. Economic and Environmental Possibilities of Sugar Beet In Spain: Towards Bio-ethanol Production? By Perez Hernandez, Pedro Pablo; Martin Lozano, Jose Manuel; Salazar-Ordonez, Melania
  32. Feasibility of Biofuel Production in Kenya: The Case of Jatropha By Mogaka, Violet; Mbatia, Oliver; Nzuma, Jonathan M.
  33. Are Biofuels Socially Accepted in Guayaquil? By Dominguez, Juan M.; Olivares, Maria
  34. On The Complexity of Eliminating Fuel Subsidy in Indonesia; A Behavioral Approach By Pradiptyo, Rimawan; Sahadewo, Gumilang Aryo
  35. Maintaining Environmental Quality while Expanding Energy Biomass Production: Policy Simulations from Michigan, USA By Egbendewe-Mondzozo, Aklesso; Swinton, Scott M.; Izaurralde, R. Cesar; Manowitz, David H.; Zhang, Xuesong
  36. The Health Effects of Coal Electricity Generation in India By Cropper, Maureen; Gamkhar, Shama; Malik, Kabir; Limonov, Alex; Partridge, Ian
  37. Reassessing the Green Paradox By Mark Schopf; Hendrik Ritter
  38. Should We Be Worried About the Green Paradox? Announcement Effects of the Acid Rain Program By Corrado Di Maria; Ian Lange; Edwin van der Werf
  39. Green innovations and organisational change: making better use of environmental technology By Hottenrott, Hanna; Rexhäuser, Sascha; Veugelers, Reinhilde
  40. Regional economic growth and environmental efficiency in greenhouse emissions: A conditional directional distance function approach By Halkos, George; Tzeremes, Nickolaos
  41. The impact of government expenditure on the environment: An empirical investigation By Halkos, George
  42. Green Growth and Equity in the Context of Climate Change: Some Considerations By Sachs, Jeffrey D.; Someshwar, Shiv
  43. Climate Change Mitigation and Green Growth in Developing Asia By Howes, Stephen; Wyrwoll, Paul
  44. Flexible Mandates for Investment in New Technology By Patino Echeverri, Dalia; Burtraw, Dallas; Palmer, Karen
  45. For the Benefit of California Electricity Ratepayers: Electricity Sector Options for the Use of Allowance Value Created under California’s Cap-and-Trade Program By Burtraw, Dallas; McLaughlin, David; Szambelan, Sarah Joh
  46. Evidence of a nonlinear effect of the EU ETS on the electricity-generation sector By Ibrahim Ahamada; Djamel Kirat
  47. Evidence of a nonlinear effect of the EU ETS on the electricity-generation sector. By Ibrahim Ahamada; Djamel Kirat
  48. California’s New Gold: A Primer on the Use of Allowance Value Created under the CO2 Cap-and-Trade Program By Burtraw, Dallas; McLaughlin, David; Szambelan, Sarah Jo
  49. The Impact of Emissions Trading on Rice Production of India By Phani, Gayatri Yammanuru; Jose, Monish
  50. Tipping Points and Ambiguity in the Economics of Climate Change By Derek M. Lemoine; Christian P. Traeger
  51. Rethinking Environmental Federalism in a Warming World By Shobe, William M.; Burtraw, Dallas
  52. The Potential Role of Carbon Labeling in a Green Economy By Cohen, Mark A.; Vandenbergh, Michael P.
  53. Facing the Climate Change Challenge in a Global Economy By Lee G. Branstetter; William A. Pizer

  1. By: ZhongXiang Zhang (Center for Energy Economics and Strategy Studies, Fudan University, China Institute of Policy and Management, Chinese Academy of Sciences, China, Research Program, East-West Center)
    Abstract: China’s global quest for resources, in particular oil and natural gas, has received unprecedented worldwide attention and scrutiny. This is partly because of China’s own high-profile, active energy diplomacy, its national oil companies’ acquisitions in the key exporting regions of oil and natural gas and some debatable issues about the management and operation of these companies. But why the stakes are raised unnecessarily high is mainly because of the growing politicization of Chinese energy security as a result of misconceptions and misunderstandings of China’s quest for energy security both inside and outside China. This paper aims to de-politicize the debate on China’s global quest for energy resources and to put discussions on that issue into perspective. To that end, the paper first categorizes the main features of China’s energy mix and discusses why energy security in China equates to a large extent to oil security. The paper then pays special attention to misconceptions and misunderstandings regarding the hypothesized U.S.-led oil blockade against China; the Chinese policy banks and their oil and natural gas-based loans; and the role of Chinese investments in oil and gas fields overseas in discussions on China’s global quest for energy resources. Finally, the paper ends with some concluding remarks on a more constructive way forward.
    Keywords: Energy Security, Global Quest for Resources, U.S.-Led Oil Blockade Against China, Loan-for-Oil and -Gas Deals, Equity Oil Production, Chinese Policy Banks, Going-Out Policies, National Oil Companies
    JEL: O13 O53 Q34 Q41 Q43 Q48
    Date: 2012–06
  2. By: Harrington, Winston (Resources for the Future); Krupnick, Alan (Resources for the Future)
    Abstract: In September 2011, the National Highway Traffic Safety Administration and U.S. Environmental Protection Agency promulgated the first-ever federal regulations mandating fuel economy improvements for heavy-duty commercial vehicles. While the performance-based approach to these rules offers familiarity and assurances of fuel economy improvements, it also has some well-known weaknesses. In this paper, we describe fuel economy technologies for the trucking sector, its economic structure, the details of the new fuel economy regulations, and the controversies they sparked. We then address issues raised in reviewing the accompanying regulatory impact analysis. Next, we highlight some flaws of this form of regulation and suggests a variety of alternative, more market-oriented approaches that might work better.
    Keywords: fuel economy, CAFE, trucks, heavy-duty vehicles, technology-based standards, regulatory impact analysis, RIA
    JEL: Q41 Q52 Q55 Q58 R48
    Date: 2012–03–28
  3. By: Vagliasindi, Maria
    Abstract: Poorly implemented energy subsidies are economically costly to taxpayers and damage the environment. This report describes the emerging lessons that could help policy makers to address implementation challenges, including overcoming political economy and affordability constraints. The analysis provides strong evidence of the success of reforms in reducing the associated fiscal burden. For the selected sample of 20 developing countries, the average energy subsidy recorded in the budget was reduced from 1.8 percent in 2004 to 1.3 percent of gross domestic product in 2010. The reduction of subsidies is particularly remarkable for net energy importers. In spite of the relatively price inelastic demand for gasoline and diesel, fossil fuel consumption in the road sector (per unit of gross domestic product) declined in the 20 countries examined from 53 (44) in 2002 to about 23 kilotonnes oil equivalent per million of gross domestic product in 2008 in the case of gasoline (diesel). The most notable decline in consumption was recorded in the low-income and lower-middle-income countries. This reflects the much higher rate of growth in gross domestic product in this group of countries. And it underlines the opportunities to influence future consumption behavior rather than modifying the existing consumption patterns, overcoming inertia and vested interests. Similar trends are recorded for power consumption. While there is no one-size-fits-all model for subsidy reform, implementation of compensatory social policies and an effective communication strategy, before the changes were introduced, made a difference in securing the successful implementation of reforms.
    Keywords: Energy Production and Transportation,Transport Economics Policy&Planning,Economic Theory&Research,Environment and Energy Efficiency,Energy and Environment
    Date: 2012–07–01
  4. By: Bruno DE BORGER; Stefan PROOST
    Abstract: This paper considers various policy measures to reduce traffic externalities in cities, including externality-reducing investments, tolls, emission standards, low emission zones, and bypass capacity to guide traffic around the city center. Using a simple model that distinguishes local and through traffic, we study the optimal use of these instruments by an urban government that cares for the welfare of its inhabitants, and we compare the results with those preferred by a federal authority that takes into account the welfare of all road users. Our results include the following. First, compared to the federal social optimum, we show that the city government will over-invest in externality-reducing infrastructure whenever this infrastructure increases the generalized cost of transit traffic. Second, comparing emission standards and road tolls, we find that cities with a lot of commuters will favor tolls, even though from the federal perspective standards are better. Third, when implementing low emission zones, the urban government will set both the fee for non-compliance and the standard at a higher level than the federal government. Moreover, at sufficiently high transit levels the urban government will prefer imposing a toll instead of implementing a low emission zone. Fourth, if the city can toll the urban infrastructure, it will only invest in bypass capacity when it is allowed to earn extra toll revenues on the bypass that exceed investment costs. Although the paper focuses on non-congestion externalities, most insights also hold in the presence of congestion.
    Date: 2012–07
  5. By: Yonemitsu, Aya; Njenga, Mary; Liyama, Miyuki; Matsushita, Shusuke
    Keywords: Resource /Energy Economics and Policy,
    Date: 2012–08
  6. By: Qazi, Ahmer Qasim; Ahmed, Khalid; Mudassar, Muhammad
    Abstract: The study concentrates on the relationship between disaggregate energy consumption and industrial output in Pakistan by utilizing the Johansen Method of Cointegration. The results confirm the positive effect of disaggregate energy consumption on industrial output. Furthermore, bidirectional causality is identified in the case of oil consumption, whereas unidirectional causality running from electricity consumption to industrial output is observed. Moreover, unidirectional causality has been noticed from industrial output to coal consumption although there is no causality between gas consumption and industrial output. It is obvious that conservative energy policies could be harmful to the industrial production; therefore, the government has to develop innovative energy policies in order to meet the demand for energy. Additionally, the government has to pay serious attention to alternative energy sources such as solar and wind in order to boost the clean industrial growth. --
    Keywords: disaggregate energy consumption,industrial output,Johansen cointegration test
    JEL: C32 Q42
    Date: 2012
  7. By: Burtraw, Dallas (Resources for the Future); Palmer, Karen (Resources for the Future); Paul, Anthony (Resources for the Future); Woerman, Matt (Resources for the Future)
    Abstract: The confluence of several pending environmental rulemakings will require billions of dollars of investment across the industry and changes in the operation of facilities. These changes may lead to retirement of some facilities, and there has been much debate about their potential effects on electricity reliability. Only very exceptional circumstances would trigger supply disruptions; however, the changes may affect electricity prices, the generation mix, and industry revenues. Coincident with these new rules, expectations about natural gas prices and future electricity demand growth are changing in ways that also will have substantial effects on the industry. This paper addresses these two sets of issues using a detailed simulation model of the U.S. electricity market. The findings suggest that recent downward adjustments in natural gas prices and electricty demand projections have a substantially larger impact on electricity prices and generation mix than do the new environmental rules.
    Keywords: air pollution, electricity, regulation, equilibrium model
    JEL: Q41 Q52 Q58
    Date: 2012–03–22
  8. By: Di Cosmo, Valeria; Lyons, Sean; Nolan, Anne
    Abstract: Electricity demand traditionally exhibits a substantial peak during a small number of hours each day. Policymakers are aware of the potential efficiency savings that may be generated from a shift in energy consumption away from peak times. Smart meters, in conjunction with time-of-use (TOU) pricing, can facilitate an improvement in energy efficiency by providing consumers with enhanced information about electricity consumption and costs, and thereby encourage a shift away from consumption during peak hours. In 2009-10, the Irish Commission for Energy Regulation (CER) co-ordinated a randomised controlled trial in the Irish residential electricity market. Smart meters, which replaced the existing mechanical meter readers, were introduced in approximately 5,000 households. Participants were divided into control and treatment groups, with treatment groups exposed to a variety of TOU tariffs and information stimuli (in-home display (IHD) units, monthly billing, etc.). Data was collected over approximately 18 months, with the first half year being used as a control period. This paper analyses the response of Irish households to the introduction of TOU tariffs and information stimuli. We examine how households responded to the different TOU tariffs, at different times of the day (peak, day and night) and in conjunction with different information stimuli. Finally, we examine the variation in our results across households of differing socio-economic status (as proxied by education levels). We find that TOU tariffs and information stimuli have a significant effect in reducing electricity consumption in Ireland, particularly during peak hours. However, while households reduce peak demand significantly after the introduction of TOU tariffs and associated information, there is little incremental response to increasing differentials between peak and off-peak prices.
    Keywords: household electricity demand; electricity pricing; smart metering
    JEL: Q41 D12
    Date: 2012–07
  9. By: Vagliasindi, Maria
    Abstract: This paper presents new global evidence on the key determinants of public-private partnership investment in electricity generated by renewable energy based on a panel data analysis for 105 developing countries over a period of 16 years from 1993 to 2008. It aims to identify the key factors affecting the private investor's decision to enter renewable-based energy generation, through a probit analysis and the amount of investment sunk in this market segment, based on Heckman's sample selection analysis. One of the key results of the paper is that the market for renewable-based energy is strongly driven by supportive policies. Support policies serve not only to attract the entry of private investors, but also to determine the level of investment. In the latter case, its impact is less significant, suggesting the need over time to revisit the power of the incentive schemes, as well as the implied allocation of risks between the public and private sector to ensure that feed-in tariffs produce the desired amount of investment. In contrast, broader economy-wide governance factors, including control for corruption and degree of political competition, are considered by private investors mainly for taking the decision to enter into renewable-based generation. This reinforces the expectation that private investors seem to be adequately protected against their risks, so that once they have entered the market, they can accommodate the governance environment. Private investors in renewable-based energy also require technical and regulatory certainty about the availability of renewable-ready transmission resources, if they are to finance investments. Private investors entering the market look more at the size of the market rather than the income level, whereas when determining the level of investment they assess both the size and"affordability"level. This raises some concerns on the sustainability of support mechanisms and their financing, particularly when the incremental costs implied by renewable-based generation are passed through to consumers.
    Keywords: Energy Production and Transportation,Energy Demand,Emerging Markets,Climate Change Mitigation and Green House Gases,Debt Markets
    Date: 2012–07–01
  10. By: Manuel Frondel; Christoph M. Schmidt; Colin Vance
    Abstract: This article revisits an analysis by Frondel, Ritter and Schmidt (2008) of Germany’s Renewable Energy Act, which legislates a system of feed-in tariff s to promote the use of renewable energies. As in the original article, we argue that Germany’s support scheme subsidizes renewable energy technologies not based on their long-term market potential, but rather on their relative lack of competitiveness, with the photovoltaics (PV) technology enjoying high feed-in tariffs, currently over double those of onshore wind. The result is explosive costs with little to show for either environmental or employment benefits. Indeed, we document that the immense costs foreseen by Frondel and colleagues have materialized: Our updated estimate of the subsidies for PV, at 100 Bn €, exceeds their expectations by about 60%. Moreover, with installed PV capacities growing at a rapid rate, these costs will continue to accumulate, diverting resources from more cost-effective climate protection instruments.
    Keywords: Energy policy; employment effects; climate protection
    JEL: Q28 Q42 Q48
    Date: 2012–07
  11. By: Vagliasindi, Maria
    Abstract: This paper presents new global evidence on the key determinants of public-private partnership investment in electricity transmission and distribution, based on a panel data analysis of 105 developing countries over a period of 16 years from 1993 to 2008. It aims to identify the key factors affecting the private investor's decision to enter electricity transmission and distribution, through a probit analysis and the amount of investment sunk in this market segment, based on Heckman's sample selection analysis. One of the key results of the analysis is that sector regulatory governance affects only the entry of private investors in electricity transmission and distribution. It is not significantly linked to higher investment in transmission and distribution. The result implies that the power of the incentive has not been so strong as to affect the volume of investment. Similarly, economy-wide governance factors, including control for corruption and degree of political competition, are factored in by private investors only in the initial stage of the game when the decision to enter into the transmission and distribution market is taken. This reinforces the expectation that private investors seem to be adequately protected against risks, so that once they have entered the market, they can accommodate the governance environment. Finally, the introduction of renewables in the power system enhanced overall public-private partnership investment in transmission and distribution. Renewable-based energy also requires technical and regulatory certainty about the availability of renewable-ready transmission resources.
    Keywords: Energy Production and Transportation,Emerging Markets,Investment and Investment Climate,Economic Theory&Research,Debt Markets
    Date: 2012–07–01
  12. By: Ricardo Guerrero-Lemus (Departamento de Física Básica, Av. Astrofísico Francisco Sánchez s/n, Universidad de La Laguna, 38206 S/C de Tenerife, SPAIN.); Gustavo A. Marrero (Departamento de Análisis Económico, Campus de Guajara, Universidad de La Laguna, 38071 S/C de Tenerife, SPAIN.); Luis A. Puch (Departamento de Economía Cuantitativa, Universidad Complutense de Madrid, Campus de Somosaguas, 28223 Madrid, SPAIN.)
    Abstract: In this paper we analyze the role of changes in the fuel mix on emissions reduction and the diversification of risks associated to rising prices of energy. To this purpose we evaluate the average cost and the cost volatility of alternative fuel combinations in the road transport sector by means of the Mean-Variance Portfolio Theory. The results suggest big gains in diversification of risks and emissions reduction associated with shifts away the current fuel mix, which is more than 90% concentrated worldwide in fossil fuels. Those shifts are discussed vis à vis the policy recommendations of the International Energy Agency on fuel use in the transport sector, and both the business as usual and the low carbon scenarios of the European Commission. In particular, shifting toward an efficient system would involve optimizing the use of biofuels (mostly from endogenous feedstock), with second generation biofuels taking the lead in the long-run, and this combined with electricity from clean sources. This scenario would mean reducing cost volatility by more than 50% as well as CO2 emissions by more than 30% in the long-run.
    Keywords: Fuel costs, road sector, efficiency frontiers, mean-variance analysis.
    Date: 2012–07
  13. By: Matthew Dornan; Frank Jotzo
    Abstract: In recent years, renewable energy technologies have been advocated in Small Island Developing States (SIDS) in the Pacific as a risk-mitigation measure against oil price volatility. Despite this, there have been no attempts to measure the impact of renewable technologies on financial risk in these countries. This paper develops and applies a stochastic simulation model in order to assess the effect of renewable technologies on the financial risk and cost of electricity supply in Fiji. The modelling results support investments in some, although not all, renewable technologies. Investments in low-cost, low-risk technologies such as energy efficiency, geothermal, biomass and bagasse technologies are found to lower both portfolio generation costs and financial risk. This suggests the Government of Fiji should be encouraging further investment in these technologies, commensurate with increases in total electricity supply. It also suggests that the FEA should prioritize such investments over its planned expansion of hydro-power generation. Renewable technology investments in other SIDS in the Pacific are likely to involve similar risk mitigation benefits.
    Keywords: Pacific island countries, renewable energy technologies, small island developing states, SIDS, risk mitigation, portfolio theory, electricity generation
    JEL: O14 Q40 Q42 Q47
    Date: 2012–02
  14. 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
  15. By: Jan Prùša (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Andrea Klimešová (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This text provides a financial survey of a small sample of Czech photovoltaic (PV) plants. To evaluate the extent of market losses, we calculate the shadow market price of solar electricity. From the profit and loss accounts of the PV plants and the shadow market price we estimate the total economic loss generated by PV electricity sector in the Czech Republic. <BR>The presented microeconomic approach has two main advantages: Firstly, we work with real observed data, which offsets the drawback of a limited sample. Secondly, the profit accounting calculation enables sensitivity analysis with respect to key variables of the plants.<BR>We show that every million invested in PV plants would generate an annual loss of 11%. Given the estimated solar assets of CZK 127.4 billion (EUR 560 million) as of December 2010, this translates in at least CZK 14 billion lost in the Czech solar sector in 2011.<BR>About 42% of this loss is due to high technology costs and corresponds to pure dead weight loss, while the remaining 58% constitute the redistributive profit component of subsidies. Finally, we calculate that unless electricity prices increase or technology costs decrease approximately tenfold, PV plants will remain loss making.
    Keywords: energy subsidies; photovoltaic; renewables
    JEL: Q42 H23 M21
    Date: 2012–07
  16. By: Lutz Kilian; Robert J. Vigfusson
    Abstract: There is a long tradition of using oil prices to forecast U.S. real GDP. It has been suggested that the predictive relationship between the price of oil and one-quarter ahead U.S. real GDP is nonlinear in that (1) oil price increases matter only to the extent that they exceed the maximum oil price in recent years and that (2) oil price decreases do not matter at all. We examine, first, whether the evidence of in-sample predictability in support of this view extends to out-of-sample forecasts. Second, we discuss how to extend this forecasting approach to higher horizons. Third, we compare the resulting class of nonlinear models to alternative economically plausible nonlinear specifications and examine which aspect of the model is most useful for forecasting. We show that the asymmetry embodied in commonly used nonlinear transformations of the price of oil is not helpful for out-of-sample forecasting; more robust and more accurate real GDP forecasts are obtained from symmetric nonlinear models based on the three-year net oil price change. Finally, we quantify the extent to which the 2008 recession could have been forecast using the latter class of time-varying threshold models.
    Date: 2012
  17. By: Lorenzo Forni (International Monetary Fund); Andrea Gerali (Bank of Italy); Alessandro Notarpietro; Massimiliano Pisani (Bank of Italy)
    Abstract: We assess the impact of oil shocks on euro-area macroeconomic variables by estimating a new-Keynesian small open economy model with Bayesian methods. Oil price is determined according to supply and demand conditions in the world oil market. We find that the impact of an increase in the price of oil depends upon the underlying sources of variation: when the driver of higher oil prices is an increase in the rest of the world's aggregate demand, both euro-area GDP and CPI inflation increase, whereas negative oil supply shocks and positive worldwide oil-specific demand shocks have stagflationary effects on the euro-area economy. Moreover, the increase in oil prices during the 2004-2008 period did not induce stagflationary effects on the euro-area economy because it was associated with positive aggregate demand shocks in the rest of the world. Similarly, a drop in world aggregate demand helps to explain the recent (2008) simultaneous drop in oil prices, euro-area GDP and inflation - particularly its fuel component.
    Keywords: oil shocks, DSGE modelling, open-economy macroeconomics, Bayesian inference, euro area
    JEL: C11 C51 E32 F41
    Date: 2012–07
  18. By: Julien Daubanes (ETH Zurich, Switzerland); Lisa Leinert (ETH Zurich, Switzerland)
    Abstract: Domestic consumption taxes on oil products largely differ across countries, ranging from very high subsidies to very high taxes. The empirical literature on the issue has highlighted the role of revenue-raising (Ramsey commodity taxation) and externalitycorrection (Pigovian taxation) motives for national taxation. Isolatedly, the theoretical literature on non-renewable-resource taxation has emphasized the role of the optimumtariff dimension of excise taxes which reflects countries’ non-cooperative exercise of their market power. This paper reconciles these two strands by comprehensively addressing the issue. First, we propose a multi-country model of national taxation with oil – modeled as a polluting exhaustible resource – and some regular commodities. Domestic welfare is maximized with respect to domestic taxes under a revenue-collection constraint. The optimal domestic tax on oil consumption not only consists of a Ramsey inverse-elasticity term and of a Pigovian term, but also of an optimum-tariff component. In fact, resource exhaustibility implies a form of supply inelasticity that magnifies optimum-tariff arguments. Second, based on a multiple regression using a data set with a large number of countries, we test the power of the optimum-tariff tax component in explaining national gasoline taxes. We find strong evidence that this component plays a crucial role in countries’ taxation of gasoline.
    Keywords: Non-renewable resources; Domestic taxation; Ramsey taxation; Optimum tariff theory; Gasoline
    JEL: Q38 F12 H20 H70
    Date: 2012–07
  19. By: Matthias Diermeier; Torsten Schmidt
    Abstract: The increasing use of food commodities for biofuel production has substantial impact on prices and quantities of these and other food commodities. It is therefore likely that this trend also intensifies the competition for arable land. However, evidence for this hypothesis is generated by calibrated models while empirical evidence is rare. In this paper we analyze the effects of crude oil price and prices of input factors for biofuel production on prices, areas and quantities of selected food commodities empirically performing Granger causality and cointegration tests as well as calculating impulse response functions. On the world aggregated level we reveal that the crude petroleum price only Granger causes the price of maize and wheat but the area used for the production of maize, soybean oil, sugar and wheat. The effect on wheat indicates an indirect effect on land use. Moreover, the price index of fats and oils has a stronger effect on prices, areas and quantities of other food commodities. At the country level, we identify that for the U.S., the maize price is the key variable influencing area and quantity of cereals. Additionally, in Indonesia and Malaysia we find that the palm oil price has significant effects on the area and quantity of rice. Despite these positive effects of commodity prices on land use we find no evidence for direct land competition between oil crops and cereals.
    Keywords: Biofuel; food commodity prices; crude oil price; Granger causality;cointegration
    JEL: L71 Q11 Q42 C32
    Date: 2012–05
  20. By: Kyle, Steven C.
    Abstract: Oil and diamond money are at the same time the biggest economic opportunity for Angola as well as being the biggest economic problem. Angola suffers from an extreme case of “Dutch Disease”, the common name for the constellation of distortions and problems that often plague oil-rich low income countries, and it is tempting to view its prospects for future development solely through this lens. However, the details of the Angolan case are of particular importance since the interaction of oil and diamond money with existing political and regional divisions in the country magnifies the difficulties of resolving either the economic or the political problems that have prevented progress for the past several decades. This paper discusses the ways in which mineral income not only distorts the economy, but reinforces political divides that have existed for centuries. It is argued that a durable solution to Angola’s conflicts requires addressing all of these issues simultaneously since they all contribute to the current problems and line up precisely the same groups in opposition to each other. These “axes of polarization” include coastal vs. interior, rural vs. urban/industrial, Mbundu/mestiHo vs. Ovimbundu and MPLA vs. UNITA. This discussion sets the stage for consideration of proposals for a way to overcome these problems and achieve sustained long term growth.
    Keywords: Political Economy,
    Date: 2012–07–11
  21. By: Deppermann, Andre; Bruchof, David; Blesl, Markus; Boysen, Ole; Grethe, Harald
    Abstract: Over the last decades traditional energy sources are increasingly replaced by energy from biomass and this trend is expected to continue into the future. Assessing the efficiency of bioenergy policies requires a comprehensive analysis of the interrelationship between agricultural and energy markets. This study analyzes the impacts of two alternative EU greenhouse gas emission mitigation scenarios on the utilization of biomass for energy production and the price of agricultural products. To this end, we combine the energy system model TIMES PanEU and the agricultural sector model ESIM. We establish a consistent interface between the models and run them in an iterative procedure where TIMES PanEU represents the demand side for energy crops and ESIM their supply side. According to our results, an extension of the mandatory reduction of emissions has strong biomass demand effects and affects the agricultural sector in its entirety. Due to the increased demand for energy crops, average crop prices in the EU increase by an estimated 30 percentage points in 2050. The expanded area use for production of energy crops inside the EU27 turns the EU from being a net exporter to a net importer for many important agricultural commodities.
    Keywords: Biomass, bioenergy, energy system model, agricultural sector model., International Relations/Trade, Resource /Energy Economics and Policy,
    Date: 2012
  22. By: Ciaian, Pavel; Kancs, d'Artis; Rajcaniova, Miroslava
    Keywords: Near-VAR, Energy, Bioenergy, Land use, Crude oil, Environmental Economics and Policy, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Land Economics/Use, C14, C22, C51, D58, Q11, Q13,
    Date: 2012
  23. By: Adiran Kay; Robert Ackrill
    Abstract: The scale of the ambition to decouple emissions growth from energy consumption in the economy runs counter to several decades of debates and literatures on the limits of government. Transport biofuels are an early and influential case of the policy capacity challenge in the transition to low-carbon economies. The case stands analytically for the policy-maker's dilemma of maintaining longer term policy goals as credible commitments, even though considerable flexibility and adaptability in policy-making is required to reach those far horizon goals in conditions of high technological and market uncertainty. In such terms, this paper compares US and EU biofuels policy processes, revealing an intertemporal choice which tests the capacity to account for the future benefits of a low carbon future in current policy processes; because if the pathway to their achievement is uncertain and politically contested in the implementation phase, then those future benefits may be heavily discounted, shortening policy-maker horizons and rendering the overall transition process politically vulnerable.
    Keywords: biofuel, economy, policy, transition
    Date: 2012–06
  24. By: Rosa, Franco; Vasciaveo, Michela
    Abstract: The aim of this paper is to analyze the interactions among the prices of some agricultural commodities in Italy and United States by using the time series analysis method. After a general overview of the world and European agri-markets, the agricultural commodity and oil prices are investigated in order to analyze the cross-market interactions and test the hypothesis that the increased volatility in agricultural prices is caused by the exogenous crude oil prices. For the analysis the data about the commodity spot price series of wheat, corn, soybeans in US and Italy and crude oil price are collected. The results suggest: i) the presence of causal nexus with an exogenous influence of the oil price on the agricultural commodities for the US markets; ii) the evidence of cointegration between US and Italian commodities supporting the unique price condition; iii) no clear evidence of causality between oil and Italian agri-commodities, suggesting that the oil volatility is transmitted directly to the US market and indirectly to the Italian one.
    Keywords: time series analysis, agricultural commodity prices, volatility, causality, market integration., Production Economics,
    Date: 2012–08
  25. By: Dimaranan, Betina V.; Laborde, David
    Abstract: The impacts of the biofuel mandates in the EU and the US on agricultural markets and on the environment are assessed under three trade scenario assumptions using a global general equilibrium model. The study finds that while the biofuel mandates will result in important adjustments in global agricultural markets sector, it will generally be beneficial for the agricultural sector and farm producers, as well as on the environment in terms of reduced CO2 emissions. These benefits are further enhanced if the mandate policies are accompanied by liberalization in ethanol trade.
    Keywords: biofuel mandates, trade policy, ethanol, Agricultural and Food Policy, Environmental Economics and Policy, International Relations/Trade,
    Date: 2012
  26. By: Bullock, David S.; Couleau, Anabelle
    Abstract: We analyze complicated ethanol/commodity policies not just in (q, p) space, but also in “policy space” and “welfare space.” Specific advantages of conducting policy analysis in welfare and policy spaces are (1) it makes clearer the distributional consequences of policy change instead of focusing solely on the aggregate welfare consequences of policy change; (2) it can be used to analyze the effects of many (even infinitely many) policies instead of just a few; and (3) it makes clearer what it means for policies to be more/less “efficient,” and for policy instruments to make each other more/less “efficient.” We show the usefulness of our framework to critique various conclusions that have recently been expressed in the literature on ethanol policies that employ multiple instruments.
    Keywords: Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy,
    Date: 2012
  27. By: Wamisho, Kassu
    Abstract: This article examines the cost of reducing CO2 emissions in a sample of recently built dry-grind corn ethanol plants. The analysis estimates a translog minimum value function that represents both the minimum cost and the minimum CO2 emissions for given levels of ethanol production. The results indicate that the average plant is able to reduce GHG emissions by 36 percent relative to the level under cost minimization, but production costs are 22 percent higher. The reallocations by which these emissions reductions are achieved are primarily the substitution of wet for dry distillers grains, with the corresponding reduction in the use of natural gas and electricity. To move from least cost to least emissions allocations, ethanol plants would on average produce 25 % more of wet byproduct and 47% less of dry byproduct. Comparing results across observations, the estimated shadow cost of emission abatement ranges from $86 to $190 per ton of CO2, with average value of $124 per ton. This implied shadow cost of abatement can be used as a bench mark for pollution trading and serves to assess the potential response to biofeul regulations.
    Keywords: GHG abatement, shadow price of abatement, corn ethanol, Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2012
  28. By: Gernot Pehnelt (GlobEcon); Christoph Vietze (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: During the last years, the renewable energy strategy of the European Union (EU) and the proposed policies and regulations, namely the Renewable Energy Directive (RED), have been heavily discussed among scientific circles and various interest groups. The sustainability of different biofuels and their contribution to the reduction of greenhouse gas (GHG) emissions and the whole renewable strategy has become one of the most controversial issues. RED requires that the greenhouse gas emissions associated with production and use of biofuels are at least 35% lower than those associated with the production and use of conventional fuels to be classified as 'sustainable' and therefore eligible for the mandatory blending scheme applied within the EU. In a recent working paper, we analyze the GHG emissions savings potential of rapeseed biodiesel. For this purpose, we ran a life cycle assessment of rapeseed biodiesel using the same basic methodology and background data contained in RED by considering the whole production chain from cultivation of the feedstock up to use of the biofuels. Unlike other studies, we refer only to publicly available and published data in our calculations. In order to ensure full transparency - again contrary to the vast majority of other studies - we provide a detailed documentation of all data. We follow a rather conservative approach by using average values and assuming common conditions along the supply chain in our scenarios. In most of the scenarios, rapeseed biodiesel does not reach the GHG emissions saving values using the formula contained in RED. Neither the RED typical value for rapeseed oil (45%) nor even the lower default value (38%) can be supported by the analysis. Furthermore, most of the scenarios indicate that rapeseed biodiesel does not reach the 35% threshold required by the EU Directive for being considered as sustainable biofuel. In the standard scenario, we calculate a GHG emissions saving value of not even 30% which is not only well below the GHG emissions saving values (default and typical) that can be found in RED but also far below the 35% threshold. To summarize, we are not able to reproduce the GHG emissions saving values published in the annex of RED. Therefore, the GHG emissions saving values of rapeseed biodiesel stated by the EU are more than questionable. Given these striking differences as well as the lack of transparency in the EU's calculations, we assume that the EU seems to prefer 'politically' achieved typical and default values regarding rapeseed biodiesel over scientifically proven ones.
    Keywords: Biofuel, Biodiesel, Rapeseed, Renewable Energy Directive, RED, Default Values, GHG emissions savings
    JEL: F18 K32 Q01 Q15 Q16 Q27 Q56
    Date: 2012–07–11
  29. By: Finco, Adele; Bentivoglio, Deborah; Rasetti, Michele; Padella, Monica; Polla, Piergiuseppe; Cortesi, Davide
    Abstract: The Kyoto protocol and the EU Directive 2009/28/EC focus their attention on the reduction of greenhouse gases (GHG) emissions. The use of biofuels in the transport sector is one of the main measures proposed. This paper evaluates the environmental impact, in terms of GHG emissions, of the production and use of rapeseed biodiesel, comparing the results with conventional diesel. The methodology used is the Life Cycle Assessment (LCA). The results of the analysis show that the production of rapeseed biodiesel entails a substantial reduction of the GHG emissions compared to the diesel production system. Furthermore, the agricultural phase is identified as the process which causes the largest amount of GHG emissions in biodiesel life cycle. Therefore it could be possible to improve further the environmental performance of biodiesel intervening properly at that stage.
    Keywords: Biodiesel, Sustainability criteria, GHG emissions, LCA, Agricultural and Food Policy, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q01, Q28, Q42,
    Date: 2012–06–28
  30. By: Chisari, Omar O.; Romero, Carlos A.; Timilsina, Govinda
    Abstract: Argentina is one of the world's largest biodiesel producers and the largest exporter, using soybeans as feedstock. Using a computable general equilibrium model that explicitly represents the biofuel industry, this study carries out several simulations on two sets of issues: (i) international markets for biofuel and feedstock, such as an increase in prices of soybean, soybean oil, and biodiesel, and (ii) domestic policies related to biofuels, such as an introduction of biofuel mandates. Both sets of issues can have important consequences to the Argentinean economy. The simulations indicate that increases in international prices of biofuels and feedstocks would increase Argentina's gross domestic product and social welfare. Increases in international prices of ethanol and corn also can benefit Argentina, but to a lesser extent. The domestic mandates for biofuels, however, would cause small losses in economic output and social welfare because they divert part of biodiesel and feedstock from exports to lower-return domestic consumption. An increase in the export tax on either feedstock or biodiesel also would lead to a reduction in gross domestic product and social welfare, although government revenue would rise.
    Keywords: Economic Theory&Research,Energy Production and Transportation,Transport Economics Policy&Planning,Renewable Energy,Food&Beverage Industry
    Date: 2012–07–01
  31. By: Perez Hernandez, Pedro Pablo; Martin Lozano, Jose Manuel; Salazar-Ordonez, Melania
    Abstract: Since 2006 to nowadays sugar beet in Europe has suffered a deep transformation with the new Common Market Organization. That year, in Spain, farms gave up 50% of production quota. New century has come accompanied by different EU strategies, including the obligation of stimulating new energy sources development especially renewable energies. From a double perspective, the authors have made an empirical approach to learn about future viability of this sector in Spain. First of all, we present an economic analysis to reflect the actual situation of market goods offered by this farming. Then we present environmental efficiency analysis (Greenhouse Gases emissions) caused by sugar beet farms with the aim of studying environmental non-market goods derived from bio-ethanol production. Goods that take part of the environmental function of this economical activity as a positive externality which has become an essential characteristic of EU agrarian system.
    Keywords: Sugar Beet, Environmental Efficiency Analysis, Greenhouse Gases emissions, Agricultural and Food Policy, Environmental Economics and Policy, Q15, Q16, Q18,
    Date: 2012–08–22
  32. By: Mogaka, Violet; Mbatia, Oliver; Nzuma, Jonathan M.
    Abstract: This paper evaluates the potential of Jatropha curcas Linnaeus (Jatropha) as an alternative source of energy for rural households. The plant is said to have potential to diversify rural incomes, reclaim unproductive lands, reduce importation of fossil fuels, and consequently accumulation of green house gases in the atmosphere. A cost benefit analysis was employed to evaluate the feasibility of producing Jatropha as a biodiesel feedstock in relation to other crops in Kwale district. An IRR of 11 percent, BCR of 0.62 and a NPV of (28267.56) showed that production of Jatropha is not feasible at the moment. However we conclude that the plant has a potential to achieve its intended purpose if there is coordination in research and development along the Jatropha value chain and if technical and financial support is accorded to actors at the production level of the chain.
    Keywords: Jatropha, Biofuel, feasibility, Cost-benefit-analysis, Agricultural and Food Policy, Financial Economics, Food Security and Poverty, International Development,
    Date: 2012
  33. By: Dominguez, Juan M.; Olivares, Maria
    Abstract: We did a survey to 211 persons in the city of Guayaquil-Ecuador in order to examine, measure and assess the social acceptance that the development of the biofuel industry would potentially have in the country. In the first part of this study sets the mean values and standard deviation of 17 indicators which measure perceptions about the possible effects in areas such as economic, social and environmental. The absence of national goals for blend and consumption of biofuels in the country, allows the social acceptance of this new product plays a key role that could even become a barrier for launching this industry. We made an Analysis of Correspondence to study the relations between the indicators related to perceptions, socioeconomic variables and the willingness to pay (WTP). We found that those who possess a high level of education (high income as well) are those who have the lowest WTP and they also have a negative environmental perception, while those who are unaware of the existence and local production of these fuels have the highest WTP. Finally, with regard to the design of public policies we found that respondents consider job creation and reduction greenhouse gases as the most important attributes, but on the other hand, they consider the institutional framework that regulates this industry as the least important one.
    Keywords: Bio-fuels, Perception, Correspondence Analysis, International Development, Resource /Energy Economics and Policy,
    Date: 2012
  34. By: Pradiptyo, Rimawan; Sahadewo, Gumilang Aryo
    Abstract: People’s attachment to a subsidy creates difficulties for the government to phase out, and eventually eliminate, the subsidy. Elimination of fuel subsidy scheme in Indonesia is a perfect example of such occurrence. The subsidy has been implementing to commodity as opposed to households, thus individuals may not necessarily realized that they have been enjoying the subsidy when they buy fuel. In this case people may feel as if they are endowed by the values from the provision of the policy. The elimination of the subsidy consequently may be perceived as a loss - as opposed to a foregone gain. This study aims to obtain the most acceptable exit strategy to eliminate the subsidy from the perspective of households by conducting a laboratory-based survey. The alternative exit strategies include methods of elimination of the subsidy and of reallocation of resources saved from eliminating the subsidy. The policy options have been derived using insight from behavioral economics ranging from endowment effect, status quo bias, to present biasness. The survey includes 335 subjects, who come from four different backgrounds: 1) households with no motor vehicle; 2) households with only motorcycle(s); (3) households with one car and; 4) households with one luxurious car or more than one car. Each subject faces 55 paired-wise policy alternatives and the method proposed by Dunn-Rankin (1983) has been used to derive the ordering of preferences. The result shows that gradual elimination of fuel subsidy and reallocation to earmarked programs were the most acceptable policy elements of the exit strategy. The survey, indirectly, showed that subjects’ valuation of losses is greater for direct elimination strategies than that of the equivalent gradual elimination strategies. The results also show that respondents chose “to pay” later at a smaller amount than “to pay” immediately of the equivalent total value. The reallocation of resources saved to earmarked programs is more acceptable than the reallocation to non-earmarked programs. In particular, respondents opted for a more immediate compensation from the elimination or reduction of the subsidy.
    Keywords: Fuel subsidy; experimental economics; laboratory-based survey; paired comparison; preference relation; reallocation of resources
    JEL: D03 D12 Q48 C91
    Date: 2012–07–13
  35. By: Egbendewe-Mondzozo, Aklesso; Swinton, Scott M.; Izaurralde, R. Cesar; Manowitz, David H.; Zhang, Xuesong
    Keywords: Agricultural and Food Policy,
    Date: 2012–08
  36. By: Cropper, Maureen (Resources for the Future); Gamkhar, Shama; Malik, Kabir; Limonov, Alex; Partridge, Ian
    Abstract: To help inform pollution control policies in the Indian electricity sector we estimate the health damages associated with particulate matter, sulfur dioxide (SO2), and nitrogen oxides (NOx) from individual coal-fired power plants. We calculate the damages per ton of pollutant for each of 89 plants and compute total damages in 2008, by pollutant, for 63 plants. We estimate health damages by combining data on power plant emissions of particulate matter, SO2 and NOx with reduced-form intake fraction models that link emissions to changes in population-weighted ambient concentrations of fine particles. Concentration-response functions for fine particles from Pope et al. (2002) are used to estimate premature cardiopulmonary deaths associated with air emissions for persons 30 and older. Our results suggest that 75 percent of premature deaths are associated with fine particles that result from SO2 emissions. After characterizing the distribution of premature mortality across plants we calculate the health benefits and cost-per-life saved of the flue-gas desulfurization unit installed at the Dahanu power plant in Maharashtra and the health benefits of coal washing at the Rihand power plant in Uttar Pradesh.
    Keywords: coal-fired power plants, particulate matter, electricity, health damages, pollution control, concentration-response function, India
    JEL: Q01 Q51
    Date: 2012–06–26
  37. By: Mark Schopf (Faculty of Business Administration and Economics, University of Paderborn); Hendrik Ritter (Faculty of Economics and Management, Otto-von-Guericke University 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
  38. By: Corrado Di Maria (University of Birmingham); Ian Lange (University of Stirling); Edwin van der Werf (Wageningen University)
    Abstract: This paper presents the first empirical test of the green paradox hypothesis, according to which well-intended but imperfectly implemented policies may lead to detrimental environmental outcomes due to supply side responses. We use the introduction of the Acid Rain Program in the U.S. as a case study. The theory predicts that owners of coal deposits, expecting future sales to decline, would supply more of their resource between the announcement of the Acid Rain Program and its implementation; moreover, the incentive to increase supply would be stronger for owners of high-sulfur coal. This would, all else equal, induce an increase in sulfur dioxide emissions. Using data on prices, heat input and sulfur content of coal delivered to U.S. power plants, we find strong evidence of a price decrease, some indication that the amount of coal used might have increased, and no evidence that the announcement of the Acid Rain Program led the use of higher sulfur coal. Overall, our evidence suggests that while the mechanism indicated by the theory might be at work, market conditions and concurrent regulation prevented a green paradox from arising. These results have implications for the design of climate policies.
    Keywords: Green Paradox, Implementation Lags, Announcement Effects, Climate Policy, Acid Rain Policy
    JEL: Q31 Q38 Q53 Q54 Q58
    Date: 2012–06
  39. By: Hottenrott, Hanna; Rexhäuser, Sascha; Veugelers, Reinhilde
    Abstract: The literature on within-firm organizational change and productivity suggests that firms can make more efficient use of certain technologies if complementary forms of organization are adopted. This issue may be of even greater importance for the case of greenhouse gas (GHG) abatement technologies imposed by public authority as to reduce social costs of climate change while they are not necessarily expected to increase private returns. Previous research, however, has largely neglected this aspect. Using German firm-level data, we find that organizational change increases the returns to the use of CO2 reducing technologies and that joint adoption leads to higher productivity. Without having introduced complementary organizational innovations, the adoption of CO2 reducing technologies is associated with lower productivity.
    Keywords: environmental innovation; Firm behavior; innovation; organizational change; productivity; technical change
    JEL: D23 D24 L23 O32 O33 Q55
    Date: 2012–07
  40. By: Halkos, George; Tzeremes, Nickolaos
    Abstract: By using conditional directional distance functions this paper investigates the effect of regional economic growth on regions’ environmental efficiency in greenhouse gas emissions. A sample of ninety eight regions (NUTS 2 level) from Germany, France and the U.K. has been used and regional environmental inefficiencies have been obtained using both the unconditional and conditional output directional distance functions. The results reveal that German regions have the highest environmental efficiency levels. In addition it appears that the effect of regional economic growth on regions’ environmental efficiency levels varies between regions and countries due to different national administrative arrangements on the implementation of environmental policies.
    Keywords: Regional environmental efficiency; directional distance function; stochastic kernel; nonparametric regression
    JEL: Q50 Q56 R15 R11 C60
    Date: 2012–07–11
  41. By: Halkos, George
    Abstract: This paper examines the impact of government spending on the environment using a panel of 77 countries for the time period 1980-2000. We estimate both the direct effect of government spending on pollution and the indirect effect which operates through government spending impact on per capita income and the subsequent effect of income level on pollution. In order to take into account the dynamic nature of the relationships examined, appropriate econometric methods are used. For both sulfur dioxide and carbon dioxide, government spending is estimated to have a negative direct impact on per capita emissions. The indirect effect on sulfur dioxide is found to be negative for low levels of income and then becomes positive as income level increases, while it remains negative for carbon dioxide for the whole income range of the sample. The resultant total effects follow the patterns of the indirect effects, which dominate their respective direct ones for each pollutant. Policy implications, occurring from the paper’s results, range according to the level of income of the considered countries.
    Keywords: Government expenditure; environment; direct and indirect effects
    JEL: Q56 Q53 Q54 E60
    Date: 2012–07
  42. By: Sachs, Jeffrey D. (Asian Development Bank Institute); Someshwar, Shiv (Asian Development Bank Institute)
    Abstract: The authors set out to explore some of the ways that equity has been considered in climate change discussions. They discuss per capita emission right approaches, and highlight key challenges in the application of equity in global climate change negotiations. They provide a brief overview of key approaches to carbon financing, focusing on some recent cost estimations of potential climate change impacts, as well as of projected needs for green growth programs. The diversity of estimates and present evidence on the apparent gulf between available public financing and green growth needs are highlighted; and considerations of implementing green growth, focusing on building climate resilience and responding to climate shocks are discussed.
    Keywords: green growth; climate change; carbon financing; climate shocks
    JEL: Q20 Q50
    Date: 2012–07–17
  43. By: Howes, Stephen (Asian Development Bank Institute); Wyrwoll, Paul (Asian Development Bank Institute)
    Abstract: Developing Asia is the driver of today’s emissions intensive global economy. As the principle source of future emissions, the region is critical to the task of global climate change mitigation. Reflecting this global reality and a range of related domestic issues, the governments of the People’s Republic of China, India, Indonesia, Thailand, and Viet Nam have embarked upon an ambitious policy agenda. This report reviews the present and future policy settings for climate change mitigation and green growth in Asia’s major emerging economies.
    Keywords: global climate change; developing asia; green growth; asia emerging economies
    JEL: O10 O44 Q40 Q42 Q53 Q54 Q56 Q58
    Date: 2012–07–11
  44. By: Patino Echeverri, Dalia; Burtraw, Dallas (Resources for the Future); Palmer, Karen (Resources for the Future)
    Abstract: Regulators often seek to promote the use of improved, cleaner technology when new investments occur; however, technology mandates are suspected of raising costs and delaying investment. We examine investment choices for electricity generation under a strict emissions rate performance standard requiring the installation of carbon capture and storage (CCS) on fossil-fired plants. We compare the strict standard with a flexible one that imposes a surcharge for emissions in excess of the standard. A third policy allows the surcharge revenue to fund later CCS retrofits. Analytical results indicate that increasing flexibility leads to earlier introduction of CCS, lower aggregate emissions and higher profits. We test this using multi-stage stochastic optimization, with uncertain future natural gas and emissions allowance prices. Under perfect foresight, the analytical predictions hold. With uncertainty, these predictions hold most often but we find outcomes that contradict the theory. In some cases, investments are delayed to enable the decisionmaker to learn additional information.
    Keywords: technology standards, innovation, climate change, uncertainty, carbon capture and storage
    JEL: Q52 Q55 Q58
    Date: 2012–03–27
  45. By: Burtraw, Dallas (Resources for the Future); McLaughlin, David; Szambelan, Sarah Joh
    Abstract: California will implement a cap-and-trade program to limit emissions of carbon dioxide covering industry and electricity sector emissions in 2013, expanding to cover transportation and natural gas in 2015. Although cap-and-trade would increase annual electricity costs for the average customer by $30 to nearly $100, the allowance value created under the program can offset all of these costs and even reduce electricity bills. California’s Air Resources Board has directed electricity regulators to ensure this allowance value is used for the benefit of electricity ratepayers. This paper surveys four options: (1) reducing electricity bills; (2) sending equivalent revenue directly to households in proportion to costs; or (3) as equal payments per customer account; and (4) making investments to improve the electricity system and help reduce emissions. Under special consideration is this question: Who will receive the allowance value associated with the electricity sector? We explore the implications of three specific proposals.
    Keywords: cap-and-trade, allocation, auction, public utility commission, investor-owned utility, energy efficiency, electricity rates
    JEL: Q54 Q58 L94
    Date: 2012–05–21
  46. By: Ibrahim Ahamada (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Djamel Kirat (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This article considers the evidence for threshold effects in the relationship between electricity and emission permit prices in France and Germany during the second phase of the EU ETS. Specifically, we compare linear and nonlinear threshold models of electricity prices using Hansen's (2000) approach of sample splitting and threshold estimation. We find evidence of nonlinear threshold effects in both countries. The estimated carbon price thresholds are 14.94 € and 12.57 € in France and Germany, respectively. In Germany, the carbon price does not affect the electricity price below this threshold. In France, the price of emission allowances affects the cost of electricity generation only below the carbon-price threshold, thus revealing speculative behavior by French electricity producers on the carbon-allowance market. This is not the case for German electricity producers.
    Keywords: Carbon emission trading, energy prices, nonlinear threshold model.
    Date: 2012–05
  47. By: Ibrahim Ahamada (Centre d'Economie de la Sorbonne - Paris School of Economics); Djamel Kirat (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This article considers the evidence for threshold effects in the relationship between electricity and emission permit prices in France and Germany during the second phase of the EU ETS. Specifically, we compare linear and nonlinear threshold models of electricity prices using Hansen's (2000) approach of sample splitting and threshold estimation. We find evidence of nonlinear threshold effects in both countries. The estimated carbon price thresholds are 14.94 € and 12.57 € in France and Germany, respectively. In Germany, the carbon price does not affect the electricity price below this threshold. In France, the price of emission allowances affects the cost of electricity generation only below the carbon-price threshold, thus revealing speculative behavior by French electricity producers on the carbon-allowance market. This is not the case for German electricity producers.
    Keywords: Carbon emission trading, energy prices, nonlinear threshold model.
    JEL: C13 C32 C51 Q49 Q58
    Date: 2012–05
  48. By: Burtraw, Dallas (Resources for the Future); McLaughlin, David; Szambelan, Sarah Jo
    Abstract: California will enact an economy wide cap-and-trade program on CO2. Estimates of the value of tradable emissions allowances in the first year range from roughly $2.6 to $7.8 billion, when electricity and industry are covered under the program. Those sectors receive most of their allowances for free; electricity sector allowance value is directed to the benefit of ratepayers. In the first year a fraction of allowances, mostly with future year vintage, will be sold through an auction with a value of roughly $0.6 to $1.8 billion. That revenue will be returned to the California economy through appropriation by the legislature. Allowance auction revenue will grow five-fold in 2015 when transportation and natural gas are included. To whom does this revenue belong? This is the key unresolved issue in the design of the California program.
    Keywords: cap-and-trade, allocation, auction, Air Resources Board
    JEL: Q54 Q58
    Date: 2012–05–21
  49. By: Phani, Gayatri Yammanuru; Jose, Monish
    Abstract: Emissions trading is a market-based Kyoto mechanism that is aimed to assist the nations in achieving emission reduction targets in a cost effective manner. However, it is least explored in the agricultural sector though 15 percent of the global GHG emissions are from agriculture. Thus, the paper attempts to study the effect of emissions trading as a greenhouse gas mitigation mechanism in order to reduce methane emissions from paddy cultivation.
    Keywords: Agriculture, Emissions Trading and Methane emissions, Agricultural and Food Policy, Demand and Price Analysis, Resource /Energy Economics and Policy,
    Date: 2012–08–18
  50. By: Derek M. Lemoine; Christian P. Traeger
    Abstract: We model welfare-maximizing policy in an infinite-horizon setting when the probability of a tipping point, the welfare change due to a tipping point, and knowledge about a tipping point's trigger all depend on the policy path. Analytic results demonstrate how optimal policy depends on the ability to affect both the probability of a tipping point and also welfare in a post-threshold world. Simulations with a numerical climate-economy model show that possible tipping points in the climate system increase the optimal near-term carbon tax by up to 45% in base case specifications. The resulting policy paths lower peak warming by up to 0.5°C compared to a model without possible tipping points. Different types of tipping points have qualitatively different effects on policy, demonstrating the importance of explicitly modeling tipping points' effects on system dynamics. Aversion to ambiguity in the threshold's distribution can amplify or dampen the effect of tipping points on optimal policy, but in our numerical model, ambiguity aversion increases the optimal carbon tax.
    JEL: C61 D81 D90 Q54
    Date: 2012–07
  51. By: Shobe, William M.; Burtraw, Dallas (Resources for the Future)
    Abstract: Climate change policy analysis has focused almost exclusively on national policy and even on harmonizing climate policies across countries, implicitly assuming that harmonization of climate policies at the subnational level would be mandated or guaranteed. We argue that the design and implementation of climate policy in a federal union will diverge in important ways from policy design in a unitary government. National climate policies built on the assumption of a unitary model of governance are unlikely to achieve the expected outcome because of interactions with policy choices made at the subnational level. In a federal system, the information and incentives generated by a national policy must pass through various levels of subnational fiscal and regulatory policy. Effective policy design must recognize both the constraints and the opportunities presented by a federal structure of government. Furthermore, policies that take advantage of the federal structure of government can improve climate governance outcomes.
    Keywords: climate change, subsidiarity, states, federalism, climate governance
    JEL: Q54 Q58 H7
    Date: 2012–01–27
  52. By: Cohen, Mark A. (Resources for the Future); Vandenbergh, Michael P.
    Abstract: Over the past several years, labeling schemes that focus on a wide range of environmental and social metrics have proliferated. Although little empirical evidence has been generated with respect to carbon footprint labels, much can be learned from our experience with similar product labels. We first review the theory and evidence on the influence of product labeling on consumer and firm behavior. Next, we consider the role of governments and nongovernmental organizations, concluding that global, multistakeholder organizations have a critical part to play in setting protocols and standards. We argue that it is important to consider the entire life cycle of a product being labeled and develop an international standard for measurement and reporting. Finally, we examine the potential impact of carbon product labeling, discussing methodological and trade challenges and proposing a framework for choosing products best suited for labeling.
    Keywords: carbon labels, voluntary disclosure, consumer behavior, life-cycle analysis, rebound effect, leakage
    JEL: D82 F18 K32 L15 M31 Q54
    Date: 2012–04–17
  53. By: Lee G. Branstetter; William A. Pizer
    Abstract: Over the past two decades, the international community has struggled to deal constructively with the problem of mitigating climate change. This is considered by many to be the preeminent public policy challenge of our time, but actual policy responses have been relatively modest. This essay provides an abbreviated narrative history of international policy in this domain, with a special emphasis on aspects of the problem, proposed solutions, and unresolved issues that are of interest to international economists and informed observers of the global economic system. We also discuss the potential conflict that could emerge between free trade principles on the one hand and environmental policy objectives on the other.
    JEL: F18 F55 Q54
    Date: 2012–07

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