nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒07‒29
twenty papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Comments on EPA’s proposed Carbon Pollution Standard for New Power Plants By Burtraw, Dallas; Fraas, Art; Palmer, Karen; Richardson, Nathan
  2. Can Producers Apply a Capacity Cutting Strategy to Increase Prices? The Case of the England and Wales Electricity Market By Sherzod Tashpulatov; Lubomir Lizal
  3. Market Integration and Economic Efficiency at Conflict? Commitments in the Swedish Interconnectors Case By Sadowska, M.; Willems, Bert
  4. Renewable Energies and Low-Carbon Society: Application of CGE Model to Toyohashi City in Japan By Yuzuru Miyata; Shuai Han
  5. Economic Effects of Installing Renewable Energy in the Tohoku Region:Analyses of mega solar and wind power generation using the interregional IO table (Japanese) By ISHIKAWA Yoshifumi; NAKAMURA Ryohei; MATSUMOTO Akira
  6. Back to the Future of Green Powered Economies By M. Scott Taylor; Juan Moreno-Cruz
  7. Analysis of the structure and location of charcoal production in Brazil - time period from 1980 to 2007 By Thais Carvalho; Carlos Bacha
  8. Energy Policy and Regional Inequalities in the Brazilian Economy By Gervasio Santos; Eduardo Haddad; Geoffrey Hewings
  9. Medición de la eficiencia del uso de las regalías petroleras: una aplicación del análisis envolvente de datos By Rosa María Armenta Vergara; Carlos Alberto Barreto Nieto; William Orlando Prieto Bustos
  10. Does the Substitutability of Public Transit Affect Commuters’ Response to Gasoline Price Changes? By Spiller, Elisheba; Stephens, Heather; Timmins, Christopher; Smith, Allison
  11. Evaluating the Economic Impacts of Technological Innovation in the Automobile Industry: The Input-Output Approach By Hiroyuki Shibusawa; Takafumi Sugawara
  12. The Dutch national road pricing scheme: review of appraisal studies and impacts for the Dutch car market and the environment By Karst Geurs; Henk Meurs
  13. Life Satisfaction and Air Quality in Europe By Ferreira, Susana; Akay, Alpaslan; Brereton, Finbarr; Cuñado, Juncal; Martinsson, Peter; Moro, Mirko
  14. Arbitrage croissance économique et pollution environnementale : cas de la chine (1960-2008) By Kapnang, Herrman Brice
  15. Economic implications of reducing carbon emissions from energy use and industrial processes in Brazil By Chen, Y.-H. Henry; Timilsina, Govinda R.
  16. Global Warming, Technology Transfer and Trade in Carbon Energy: Challenge or Threat? By Gunter Stephan; Georg Müller-Fürstenberger
  17. Fossil Fuel Supply, Leakage and the Effectiveness of Border Measures in Climate Policy By Stefan Boeters; Johannes Bollen
  18. The Impact on Japanese Industry of Alternative Carbon Mitigation Policies By Sugino, Makoto; Arimura, Toshi H.; Morgenstern, Richard
  19. Green prices By Tran, Ngoc Bich; Ley, Eduardo
  20. The Timing of Climate Agreements under Multiple Externalities By Schmidt, Robert C.; Strausz, Roland

  1. By: Burtraw, Dallas (Resources for the Future); Fraas, Art (Resources for the Future); Palmer, Karen (Resources for the Future); Richardson, Nathan (Resources for the Future)
    Abstract: The U.S. Environmental Protection Agency’s (EPA) proposed greenhouse gas (GHG) performance standards for power plants are an important step forward in regulating GHGs in terms of both their substantive impact and legal precedent. Nevertheless, we have some concerns with the proposal, which we discuss in the following comments submitted to the agency. The majority of our comments are directed to ways that EPA can increase certainty for the industry—reducing costs and, possibly, improving environmental outcomes. We highlight two specific areas of concern. First, the current proposal contributes to the significant uncertainty facing existing sources. Second, EPA’s proposed averaging option for new facilities that will install carbon capture-and-storage (CCS) technology in the future, although intended to create a flexible pathway, unfortunately creates some new regulatory uncertainty. We also comment on EPA’s decision to combine most coal and gas generators into a single source category. We believe this decision is legally valid and practically important, and that EPA should resist pressure to reconsider.
    Keywords: greenhouse gas emissions, performance standards, new source review, carbon capture and storage technology, U.S. Environmental Protection Agency, uncertainty
    Date: 2012–07–13
  2. By: Sherzod Tashpulatov; Lubomir Lizal
    Abstract: Promoting competition among electricity producers is primarily targeted at ensuring low electricity prices for consumers. Producers could, however, withhold part of production facilities (i.e., apply a capacity cutting strategy) and thereby push more expensive production facilities to satisfy demand for electricity. This behavior could eventually lead to a higher price determined through a uniform price auction. In this paper, using the case of the England and Wales wholesale electricity market, we empirically examine whether producers can indeed apply a capacity cutting strategy. We analyze the bidding behavior of producers during high- and low-demand trading periods across trading days and find direct and indirect evidence for producers' successful manipulation of capacity bids targeted at increasing a wholesale electricity price. We also examine whether the regulatory reforms to improve competition were successful at mitigating the extent of strategic capacity manipulation.
    Keywords: capacity bids; electricity prices; uniform price auction; regulation
    JEL: D22 D44 L50 L94
    Date: 2012–07
  3. By: Sadowska, M.; Willems, Bert (Tilburg University, Tilburg Law and Economics Center)
    Abstract: Abstract: According to the European Commission, Svenska Kraftnät, the Swedish network operator, might have violated competition rules by limiting cross-border transmission capacity to relieve congestion within Sweden. Eventually, the case was settled and Svenska Kraftnät offered commitments to address the Commission’s concerns. As an interim remedy, it committed to reduce transmission flow of electricity on internal network bottlenecks primarily by introducing national measures and by not reducing interconnection capacity. As a final remedy, Svenska Kraftnät agreed to split the Swedish market into multiple price zones. Congestion within Sweden would then be solved by adjusting the prices of those zones. We analyse the economic effects of the alleged abuse and the remedy package. We make three observations. Firstly, it might be socially optimal to reduce cross-border capacity in response to internal congestion. Hence, without an in-depth economic analysis the Commission risked preventing efficient behaviour. Secondly, the interim remedy of handling internal congestion primarily by national measures is not socially optimal, and it cannot be ruled out that it reduces overall welfare. Thirdly, even though splitting the market into price zones may improve allocative efficiency within Sweden, it does not prevent Svenska Kraftnät from potential manipulation of cross-border transmission capacity.
    Keywords: European energy markets;transmission congestion;competition policy;Article 102 TFEU;Swedish network.
    JEL: K21 K42 L43 L44 L94
    Date: 2012
  4. By: Yuzuru Miyata; Shuai Han
    Abstract: Reducing CO2 emissions is the most significant target in the global environmental issue. One of strongest measures for CO2 reduction may be introduction of renewable energies including wind and solar powers. Moreover smart grid is attracting attention as a new power supply system for CO2 reduction as well. Integration of renewable energies, smart grid and eco-friendly vehicles could significantly reduce CO2 emissions leading to the Low-Carbon Society. However economic assessment has not been implemented for such an attractive social form without a few exceptional studies. Thus this article aims to examine the economic performance of Low-Carbon Society taking Toyohashi city in Japan as a study region. The methodology applied in this article is a static CGE model. In this model, renewable energies, smart grid and eco-friendly vehicles are incorporated in addition to the standard structure of a CGE model. Toyohashi city will be evaluated from the viewpoint of reductions in CO2 emissions and fossil fuel consumption, and welfare level by employing the equivalent variation.
    Date: 2011–09
  5. By: ISHIKAWA Yoshifumi; NAKAMURA Ryohei; MATSUMOTO Akira
    Abstract: This study investigates the regional economic recovery effects as well as the mitigation effect of CO₂ in monetary terms from installing mega solar and wind power generation systems in the Tohoku region, in particular, Iwate, Miyagi, and Fukushima prefectures which were substantially damaged by the March 11, 2011 earthquake.By considering the possible amount of renewable energy in the three areas of the Tohoku region, we calculate the regional economic effects in terms of income and product value as well as the mitigation of CO₂ based on scenarios for installing renewable energy policy.The simulation analyses are conducted using the interregional IO table from 2005.We found that a tradeoff between the maximization of aggregate economic effects across regions and the maximization of the Tohoku region's economic effects, which leads to a correction of interregional economic disparities caused by the earthquake and the ensuing tsunami. Installing proper renewable energy size in the region, will depend upon policy judgment.From simulation results, in order to correct the interregional economic disparities, renewable energy generation in the Tohoku region should be exported to the Kanto region rather than used for domestic consumption. On the other hand, the credit created from CO₂ mitigation helps correct the interregional economic disparities, in particular, the Tohoku region, even if domestic consumption of renewable energy occurs.
    Date: 2012–07
  6. By: M. Scott Taylor (University of Calgary); Juan Moreno-Cruz
    Abstract: The purpose of this paper is to introduce the concept of power density [Watts/m²] into economics. By introducing an explicit spatial structure into a simple general equilibrium model we are able to show how the power density of available energy resources determines the extent of energy exploitation, the density of urban agglomerations, and the peak level of income per capita. Using a simple Malthusian model to sort population across geographic space we demonstrate how the density of available energy supplies creates density in energy demands by agglomerating economic activity. We label this result the density-creates-density hypothesis and evaluate it using data from pre and post fossil-fuel England from 1086 to 1801.
    Date: 2012–07–24
  7. By: Thais Carvalho; Carlos Bacha
    Abstract: This paper aims to analyze the regional impacts of the steel and environmental policies on the structure and location of charcoal production in Brazil during the time period from 1980 to 2007. Both statistic and interpretative analysis of secondary data, organized in tables or graphs, are used, paying a special attention to the similarities and differences among the database. The main findings of the paper are: (1st) even though charcoal is an archaic energy source, it still represents 3% of the Brazilian energetic matrix and is rather used in the industrial sector, especially in the steel industry, in which there are steelmakers that use coal (to produce flat steel) or charcoal (if they produce long steel); (2nd) charcoal production trend is directly associated to its industrial use (the correlation coefficient between these two variables is 0.986 in time period from 1980 to 2007); (3rd) due to the impacts of industrial and environmental government policies, charcoal production in the Northern and Northeastern Brazil are mainly conducted by small producers making use of native forests; (4th) also in Northern and Northeastern Brazil, independent producers of pig iron are predominating (exporting most of their production) as well as the environmental legislation enforcement is weaker in relation to other Brazilian regions; (5th) otherwise, largest producers, using mostly planted forests, are predominating in Southeastern Brazil, where environmental law enforcement is stronger and where both integrated steelmakers based on charcoal or on coal are present; (6th) the concentration of charcoal production has increased in Brazil, however the inequality among the producers has decreased. The largest producers (with 10,000 or more hectares) accounted for 8.4% of Brazilian charcoal production in 1980 and for 15.6% in 1996, despite the Gini coefficient among charcoal producers has reduced from 0.793 to 0.757 in the same years, respectively. (7th) Regional differences in relation to inequality and concentration of charcoal production among Brazilian regions have taken place and they are specified and analyzed in the paper. By the end, the papers suggest some policies to improve charcoal production in Brazil with more balance in relation to regional distribution.
    Date: 2011–09
  8. By: Gervasio Santos; Eduardo Haddad; Geoffrey Hewings
    Abstract: The objective of this paper is to evaluate the long-run regional impacts of tariff policy of the Brazilian electric power sector. The structural reforms carried on this sector determined the emergence of two different spatial distribution trends of the electric power tariffs among the Brazilian states: one of convergence and another of spatial divergence. The regional dispersion of tariffs is being influenced by the spatial features of the Brazilian economy, which is marked by the high degree of spatial concentration and the hierarchical distribution of large markets on the space. In spite of this, the electric power price differentials in Brazil tend to be determined by the market size differentials, which provide different conditions for gains from economies of scale by the electric power distribution companies. Based on these elements and in the fact that electric power is an important input for the production process, an Interregional Computable General Equilibrium model for energy policy analysis was built. The simulations showed that the input-output linkages, the spatial heterogeneity of the electric power intensity and the regional energy substitution differentials are the main determinants of spatial impacts of electric power price changes in Brazil. On the other hand, the recent trend of spatial divergence of the electric power prices may be contributing to reduce the national real GDP and to increase the regional inequalities in Brazil.
    Date: 2011–09
  9. By: Rosa María Armenta Vergara; Carlos Alberto Barreto Nieto; William Orlando Prieto Bustos
    Abstract: Resumen En este documento se evalúa y analiza la relación entre las regalías directas y las coberturas mínimas alcanzadas por los municipios productores de petróleo para el periodo 2007-2008; mediante la metodología del análisis envolvente de datos. Esta metodología ha sido implementada en diferentes estudios que evalúan la eficiencia en la gestión gubernamental, sin embargo en Colombia no existe evidencia de su utilización en la gestión de las transferencias por explotación de petróleo. Los resultados obtenidos evidencian una eficiencia técnica pura promedio del 24% para el 2007 y 19.6% para el 2008, en los cuatro modelos analizados, de los que se concluye que son pocos los municipios que presentan un desempeño eficiente en cuanto a la gestión de las regalías. __________ Abstract This paper evaluates and analyzes the relationship between royalty direct and the minimum coverage hit by oil-producing municipalities for the period 2007-2008, using the methodology of data envelopment analysis. This methodology has been implemented in different studies that evaluate the efficiency in government, but in Colombia there is no evidence of its use in managing the transfers of exploitation oil. The results show an average pure technical efficiency of 24% for 2007 and 19.6% in 2008, in the four models analyzed, of which it is concluded that few municipalities with an efficient performance in terms of management of the royalties.
    Date: 2012–06–15
  10. By: Spiller, Elisheba (Resources for the Future); Stephens, Heather; Timmins, Christopher; Smith, Allison
    Abstract: This paper determines the extent to which gasoline price elasticity is affected by the availability of a substitute for driving—public transportation. Measuring the substitutability of public transportation presents an important practical difficulty. To address this, we predict individuals’ commute times by private and public transit conditional upon their observable characteristics and create a measure of substitutability between the two modes based on transit times. This allows us to measure the effect of public transportation on commuters’ sensitivity to gasoline prices. The interaction of gasoline price with our constructed substitutability measure is found to have a significant effect on annual vehicle miles traveled (VMT), indicating that investments in public transit could play an important role in altering motorists’ sensitivity to gasoline prices and increasing the effectiveness of a gasoline tax. However, we find evidence to support a policy of increasing public transit accessibility only in the presence of increased gasoline taxes.
    Keywords: public transportation, elasticity, commuting, gasoline prices
    JEL: Q0 H0
    Date: 2012–07–18
  11. By: Hiroyuki Shibusawa; Takafumi Sugawara
    Abstract: In this paper, the economic impacts of technological innovation, such as electric and hybrid vehicles, in the automobile industry in Japan are examined. The automobile industry has to develop environmentally friendly vehicles in the face of the global warming issue and the exhaustion problem of petroleum. The conventional automobiles with gasoline and diesel oil don’t meet the demands of present age. The new generation automobiles will become popular for coming several decades. The industrial structure will be affected by the appearance of new generation automobile. Especially, since the Japanese economy strongly depends on the automobile industry, the appearance of technological innovation in the automobile industry has an influence on the other industries and the industrial regions where the automobile firms are concentrated. In this study, we explore the economic impacts of shifting the production system in the automobile industry from the conventional automobile technology to an electric and hybrid vehicle technology using the national and multiregional input-output models.
    Date: 2011–09
  12. By: Karst Geurs; Henk Meurs
    Abstract: The Dutch government has decided to gradually introduce a complex national road pricing system in the years 2012 to 2018. Existing car purchase taxes and the annual road taxes are to be replaced by a kilometre-based charging system. Several appraisal studies have been conducted to examine the impacts of different pricing variants, using the well-known Dutch national model system (NMS) and the national car market model DYNAMO. The car market model has recently been developed and simulates yearly car ownership and car purchase behaviour of households at a detailed level (120 car types * 70 household types), and endogenously models second hand car prices as a pricing mechanism to create an equilibrium in supply and demand. The Dutch road pricing scheme is expected to have major impacts: car ownership is projected to increase by 5-6% in the long run, car use is to reduced by by 10-15% and congestion on the main motorway network in 2020 by about 50%, compared to a reference scenario. Cost-benefit analysis studies, using output from the transport models, show significant positive welfare effects. This paper will review existing appraisal studies on the impacts of the kilometre charge, and describe the Dutch car market model DYNAMO and projections of the impacts of different CO2 pricing schemes. Results from DYNAMO estimations show that abolishing existing car purchase and road taxes by a CO2 differentiated kilometre charge has unintended consequences in the form of rising car ownership and increasing shares of diesel cars and relatively large and heavy vehicle types. Explanations for these unintended effects are that households react more to present one-off fixed costs than to recurrent variable costs, and total car costs are reduced for households with relatively low car mileages. For households with low car usage, the reduction of fixed car taxes is not fully compensated by increases in variable costs, and savings can be used to buy a more expensive and larger car. However, overall environmental impacts of CO2 differentiated kilometre charges are quite positive resulting from the reduction in car travel.
    Date: 2011–09
  13. By: Ferreira, Susana (University of Georgia); Akay, Alpaslan (IZA); Brereton, Finbarr (University College Dublin); Cuñado, Juncal (University of Navarra); Martinsson, Peter (University of Gothenburg); Moro, Mirko (University of Stirling)
    Abstract: Concerns for environmental quality and its impact on people's welfare are fundamental arguments for the adoption of environmental legislation in most countries. In this paper, we analyse the relationship between air quality and subjective well-being in Europe. We use a unique dataset that merges three waves of the European Social Survey with a new dataset on environmental quality including SO2 concentrations and climate in Europe at the regional level. We find a robust negative impact of SO2 concentrations on self-reported life satisfaction.
    Keywords: air quality, SO2 concentrations, subjective well-being, life satisfaction, Europe, European Social Survey, GIS
    JEL: I31 Q51 Q53 Q54
    Date: 2012–07
  14. By: Kapnang, Herrman Brice
    Abstract: This study employs the Johansen cointegration and Granger causality to analyze the relation-ship between air pollution and economic growth in China. It allows to draw lessons and de-rive implications for the causal links between these two variables. The results show that these two variables are cointegrated and that 15% threshold, there is a unidirectional causal rela-tionship between them. On the other hand, there is a positive long-term relationship between economic growth and air pollution. In other words, the idea of an environmental Kuznets curve fails to apply to China. These results suggest recommendations that can help the Chi-nese authorities in environmental management in order to lay the foundations for sustainable growth.
    Keywords: pollution, Croissance économique, courbe environnementale de Kuznets, Causalité, cointégration
    JEL: Q56
    Date: 2012–03–12
  15. By: Chen, Y.-H. Henry; Timilsina, Govinda R.
    Abstract: The overall impacts on the Brazilian economy of reducing CO2 emissions from energy use and industrial processes can be assessed using a recursive dynamic general equilibrium model and a hypothetical carbon tax. The study projects that in 2040 under a business-as-usual scenario, CO2 emissions from energy use and industrial processes would be almost three times as high as in 2010 and would account for more than half of total national CO2 emissions. Current policy aims to reduce deforestation by 70 percent by 2017 and emissions intensity of the overall economy by 36-39 percent by 2020. If policy is implemented as planned and continued to 2040, CO2 emissions from energy use and industrial processes would not have to be cut until 2035 as reductions of emissions through controlling deforestation would be enough to meet emission targets. The study also finds evidence that supports the double dividend hypothesis: using revenue from a hypothetical carbon tax to finance a cut in labor income tax significantly lowers the gross domestic product impacts of the carbon tax. Using carbon tax revenue to subsidize wind power can effectively increase the output of wind power in the country, although the impact of the tax on gross domestic product would be somewhat increased.
    Keywords: Climate Change Mitigation and Green House Gases,Climate Change Economics,Energy Production and Transportation,Energy and Environment,Environment and Energy Efficiency
    Date: 2012–07–01
  16. By: Gunter Stephan; Georg Müller-Fürstenberger
    Abstract: Is it possible to combat global climate change through North-to-South technology transfer even without a global climate treaty? Or do carbon leakage and the rebound effect imply that it is possible to take advantage of technological improvements under the umbrella of a global arrangement only? For answering these questions a world with full international co-operation is compared with a world, where countries act non-cooperatively. More precisely, in case of non-cooperation two cases are discussed. The first one is called Kyoto-plus and the second one labeled Kyoto-reversed. Kyoto-plus means that the North decides: (1) to unilate-rally reduce its domestic greenhouse gas emissions and (2), to transfer technological know-ledge to the South. If Kyoto-reversed is considered, the North decides on transferring tech-nology while the South commits itself to reduce emissions. Rebound and leakage effects hinder a sustainable and welfare improving solution of the climate problem.
    Date: 2012–07
  17. By: Stefan Boeters; Johannes Bollen
    Abstract: <p>Understanding fossil fuel supply behaviour is crucial for interpreting carbon leakage and assessing the potential effectiveness of border measures in climate policy.</p><p><span style="font-family: SFRM1095; font-size: medium;"><span style="font-family: SFRM1095; font-size: medium;"><span style="font-family: SFRM1095; font-size: medium;"><span style="font-family: SFRM1095; font-size: medium;">In most computable general equilibrium models, this fossil fuel supply is derived from a constant elasticity of substitution production function, in which a natural resource is treated as a fixed factor. We show that this leads to endogenously decreasing supply elasticities and sharply increasing marginal leakage rates for large coalitions that have ambitious emissions targets, particularly when fuel exporters participate in the coalition. We propose an alternative production function that has a constant elasticity of fuel supply, which results in more stable leakage rates and a different share of trade-related leakage. The role of this model variation for the assessment of border measures in climate policy turns out to be limited. In those cases where the model versions differ most (i.e. large coalition, ambitious targets), border measures have a small effect anyway.</span></span></span></span></p><p> </p><p align="left"><span style="font-family: SFRM1095; font-size: medium;"><span style="font-family: SFRM1095; font-size: medium;"><span style="font-family: SFRM1095; font-size: medium;"><span style="font-family: SFRM1095; font-size: medium;"></span></span></span></span> </ p><p> </p>
    JEL: Q42 Q54 D58
    Date: 2012–07
  18. By: Sugino, Makoto; Arimura, Toshi H.; Morgenstern, Richard (Resources for the Future)
    Abstract: To address the climate change issue, developed nations have considered introducing carbon pricing mechanisms in the form of a carbon tax or an emissions trading scheme (ETS). Despite the small number of programs actually in operation, these mechanisms remain under active discussion in a number of countries, including Japan. Using an input–output model of the Japanese economy, this paper analyzes the effects of carbon pricing on Japan’s industrial sector. We also examine the impact of a rebate program of the type proposed for energy intensive trade exposed (EITE) industries in U.S. legislation, the Waxman–Markey bill (H.R. 2454), and in the European Union’s ETS. We find that a carbon pricing scheme would impose a disproportionate burden on a limited number of sectors—namely, pig iron, crude steel (converters), cement, and other EITE industries. We also find that the determinant of the increase in total cost differs among industries, depending on the relative inputs of directly combusted fossil fuel, electricity, or steam, as well as intermediate goods. Out of 401 industries, 23 would be eligible for rebates if a Waxman–Markey type of program were adopted in Japan. Specifically, the 85 percent rebate provided to eligible industries under H.R. 2454 would significantly reduce the cost of direct and indirect fossil fuel usage. The E.U. criteria identify 120 industries eligible for rebates. However, the E.U. program only covers direct emissions while the U.S. program includes indirect emissions as well. Overall, despite the differences in coverage, we find that the Waxman–Markey and E.U. rebate programs have roughly similar impacts in reducing the average burdens on EITE industries.
    Keywords: carbon price, competitiveness, input-output analysis, output-based allocations, carbon leakage
    JEL: F14 D21 D57 D58 H23
    Date: 2012–07–13
  19. By: Tran, Ngoc Bich; Ley, Eduardo
    Abstract: "Getting the prices right"is a good starting point but is not sufficient for achieving environmentally efficient outcomes. Other policy interventions are often necessary to complement pricing policies. Moreover, when pricing is not at all feasible, regulatory and command-and-control policies must be used instead. This paper focuses on three interrelated themes at the core of the pricing problem. First, there is the incorporation of non-marketed activities with environmental consequences into aggregate measures of economic performance: the so-called"green-GDP."Second, there is the problem regarding the reliable estimation of the valuation of the shadow prices that properly reflect environmental externalities. Third, there is the issue of full-cost pricing that requires the pricing of environmental externalities for guiding both individual and public decision-making.
    Keywords: Environmental Economics&Policies,Economic Theory&Research,Transport Economics Policy&Planning,Markets and Market Access,Climate Change Economics
    Date: 2012–07–01
  20. By: Schmidt, Robert C.; Strausz, Roland
    Abstract: We study the potential of cooperation in global emission abatements with multiple externalities. Using a two-country model without side-payments, we identify the strategic effects under different timing regimes of cooperation. We obtain a positive complementarity effect of long-term cooperation in abatement on R&D levels that boosts potential bene?t of long-term cooperation and a redistributive effect that destabilizes long-term cooperation when countries are asymmetric. We show that whether and what type of cooperation is sustainable, depends crucially on the kind rather than on the magnitude of asymmetries.
    Keywords: climate treaty; timing of cooperation; multiple externalities; long-term commitment
    JEL: D62 F53 H23 Q55
    Date: 2011–11

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