nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒09‒30
twenty papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Electricity Prices, River Temperatures and Cooling Water Scarcity By McDermott, Grant R.; Nilsen, Øivind Anti
  2. The Determinants of Invention in Electricity Generation Technologies: A Patent Data Analysis By Elisa Lanzi; Ivan Haščič; Nick Johnstone
  3. The Compressed Development of China's Photovoltaic Industry and the Rise of Suntech Power By MARUKAWA Tomoo
  4. North American Oil and Gas Reserves: Prospects and Policy By Bailey, Jonathan; Lee, Henry
  5. Attention, Media and Fuel Efficiency By Thoenes, Stefan; Gores, Timo
  6. Carbon Tax Salience and Gasoline Demand By Nicholas Rivers; Brandon Schaufele
  7. The effect of crude oil price change and volatility on Nigerian economy By Demachi, Kazue
  8. Downside risk and the energy hedger's horizon By Thomas Conlon; John Cotter
  9. Export diversification and resource-based industrialization: the case of natural gas By Massol, O.; Banal-Estanol, A.
  10. Competition for Land in the Global Bioeconomy By Hertel, Thomas; Jevgenijs Steinbuks; Uris Lantz Baldos
  11. Bioenergy and Land Use Change By Pavel Ciaian; d'Artis Kancs; Miroslava Rajcaniova
  12. Value of Time: Speeding Behavior and Gasoline Prices By Wolff, Hendrik
  13. Will technological progress be sufficient to stabilize CO2 emissions from air transport in the mid-term? By Benoît Chèze; Julien Chevallier; Pascal Gastineau
  14. Allocation of Transportation Cost & CO2 Emission in Pooled Supply Chains Using Cooperative Game Theory By Xiaozhou Xu; Shenle Pan; Eric Ballot
  15. Sources of Comparative Advantage in Polluting Industries By Fernando Broner; Paula Bustos; Vasco Carvalho
  16. The Multiple Discrete-Continuous Extreme Value Model (MDCEV) with fixed costs By Tanner, Reto; Bolduc, Denis
  17. The Economic Implications of Introducing Carbon Taxes in South Africa By Alton, Theresa; Arndt, Channing; Davies, Rob; Hartley, Faaiqa; Makrelov, Konstantin
  18. Emissions Cap or Emissions Tax? A Multi-sector Business Cycle Analysis By Yazid Dissou; Lilia Karnizova
  19. Centralization and Accountability: Theory and Evidence from the Clean Air Act By Federico Boffaa; Amadeo Piollatto; Giacomo Ponzetto
  20. The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment By Schmalensee, Richard; Stavins, Robert N.

  1. By: McDermott, Grant R. (Norwegian School of Economics (NHH)); Nilsen, Øivind Anti (Norwegian School of Economics (NHH))
    Abstract: Thermal-based power stations rely on water for cooling purposes. These water sources may be subject to incidents of scarcity, environmental regulations and competing economic concerns. This paper analyses the effect of water scarcity and increased river temperatures on German electricity prices from 2002 to 2009. Having controlled for demand effects, the results indicate that the electricity price is significantly impacted by both a change in river temperatures and the relative abundance of river water. An implication is that future climate change will affect electricity prices not only through changes in demand, but also via increased water temperatures and scarcity.
    Keywords: thermal-based power, water scarcity, water-energy nexus
    JEL: Q25 Q41 Q5 C3
    Date: 2012–09
  2. By: Elisa Lanzi; Ivan Haščič; Nick Johnstone
    Abstract: This paper analyses the determinants of invention in efficiency-enhancing electricity generation technologies that have the potential to facilitate climate change mitigation efforts, including fossil fuelbased technologies aimed at reducing carbon emissions, renewables and nuclear technologies. The evolution of inventive activity in these technologies is analysed by considering patent data for 11 OECD countries over the period 1978-2008. The analysis considers various drivers of inventive activity, including R&D expenditures and electricity consumption, but pay particular attention to the role of fossil fuel prices because they suggest the impact that price mechanisms such as emissions trading and carbon taxes are likely to have on invention in the electricity generation sector.<P> The results show that the effect of fossil fuel prices varies according to the different types of technologies. As fossil fuel prices increase, inventive activity in renewable energy technologies increases while the effect of on fossil fuel-based technologies is positive but with decreasing increments. The results show that there is no effect of fossil fuel prices on patenting activity in nuclear energy technologies. These results illustrate that there may be a price-induced switching between renewable and fossil fuel-based technologies. As fossil fuel prices rise, an efficiency effect encourages inventive activity in both fossil fuelbased and renewable technologies. As fossil fuel prices increase further, invention in fossil fuel-based technologies starts declining suggesting that a substitution effect drives away innovation from fossil fuelbased towards renewable energy technologies.
    Keywords: innovation, energy, patents, climate change
    JEL: Q4 Q54 Q55
    Date: 2012–09–14
  3. By: MARUKAWA Tomoo
    Abstract: The global demand for photovoltaics (PVs), or solar cells, increased by 53 percent per annum during 2000 to 2010. Japanese PV manufacturers, which had been the leading force of the technological development of the industry since the 1970s, were in a good position to profit from this explosion of demand for PVs, but in 2010, about half of the global PV production was attributed to Chinese PV manufacturers which entered the industry only after 2002. This paper explains the reason for the dramatic rise of Chinese PV manufacturers and the decline of Japanese PV manufacturers. Through a detailed case study on Suntech Power, the largest PV producer since 2010, the paper identifies two points that have been critical for the rise of the Chinese PV industry: choice of technology and fundraising strategy. The paper also tries to shed new light on the understanding of the global value chain through a case study of the global PV value chain.
    Date: 2012–08
  4. By: Bailey, Jonathan (Harvard University); Lee, Henry (Harvard University)
    Abstract: Expanding estimates of North America's supply of accessible shale gas, and more recently, shale oil, have been trumpeted in many circles as the most significant energy resource development since the oil boom in Texas in the late 1920s. How large are these resources? What challenges will need to be overcome if their potential is to be realized? How will they impact U.S. energy policy? To address these questions, the Belfer Center for Science and International Affairs and two of its programs, the Environment and Natural Resources Program and the Geopolitics of Energy Project, convened a group of experts from business, government, and academia on May 1, 2012, in Cambridge, Massachusetts. The following report summarizes the major issues discussed at this workshop. Since the discussions were off-the-record, no comments are attributed to any individual. Rather, this report attempts to summarize the arguments on all sides of the issues. The policy implications of significant additional supplies of domestic oil and gas to the United States are far ranging. Due to time constraints, many important issues were not covered in the depth that they deserved. Examples would include the impact of additional oil and gas supplies on existing U.S. efforts to reduce carbon emissions and its historical commitment to support other fuels, such as coal and nuclear power, or newer options, such as wind and solar energy. Further, as one participant pointed out, officials from industry are constrained under U.S. antitrust laws from sharing proprietary information.
    Date: 2012–08
  5. By: Thoenes, Stefan (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Gores, Timo (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: This study examines attention effects in the market for hybrid vehicles. We show that local media coverage, gasoline price changes and unprecedented record gasoline prices have a significant causal impact on the consumers’ attention. As attention is not directly observable, we analyze online search behavior as a proxy for the revealed consumer attention. Our study is based on weekly panel data of local newspaper coverage, gasoline prices and Google search trends for 19 metropolitan areas in the US. Additionally, we use monthly state-level panel data to show that the adoption rate of the hybrid vehicle technology is robustly related to our measure of attention.
    Keywords: consumer behavior; attention; media; gasoline price; energy efficiency; hybrid vehicle
    JEL: D12 D83 L62 Q41
    Date: 2012–09–20
  6. By: Nicholas Rivers (Graduate School of Public and International Affairs, University of Ottawa, 120 University St., Ottawa,Ontario); Brandon Schaufele (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)
    Abstract: We demonstrate that the carbon tax imposed by the Canadian province of British Columbia, a unique carbon pricing policy that comprehensively applies to all fossil fuels, caused a decline in short-run gasoline demand that is significantly greater than would be expected from an equivalent increase in the market price of gasoline. That the carbon tax is more salient, or yields a larger change in demand than equivalent market price movements, is robust to a range of specifications including intuitively plausible and strong instrumental variables. Along with calculating the reduction in carbon dioxide emissions attributable to the tax, we discuss potential explanations for the differential consumer responses to the carbon tax relative to the marketdetermined price.
    Keywords: Carbon tax, tax salience, instrumental variables, environmental pricing, gasoline demand.
    JEL: C26 H23 H29 Q41 Q58
    Date: 2012
  7. By: Demachi, Kazue
    Abstract: This study analyses the effects of changes in the international oil price and price volatility on the macro-economy of an African oil exporter, Nigeria. Applying the five-variable Structural Vector Auto Regression (SVAR) model to monthly data series from January 1970 to May 2011, impulse response functions are calculated to see the influences among the crude oil price, Nigeria’s exchange rate, money supply (M2), domestic price levels (CPI) and the policy interest rate (Discount Rate). The estimation results suggest that Nigeria’s exchange rate is affected not only by the changes in the international oil price but also by its price volatility. M2 increases as a response to an oil price increase, which suggests that as the international oil price rises there is a huge increase in the money supply into the domestic market from the national oil company and international oil companies, which are the largest suppliers of dollars next to the monetary authority itself.
    Keywords: African oil exporter; Crude oil price; Volatility
    JEL: E5
    Date: 2012–07–31
  8. By: Thomas Conlon (Smurfit School of Business, University College Dublin); John Cotter (UCD Smurfit School of Business, University College Dublin)
    Abstract: In this paper, we explore the impact of investor time-horizon on an optimal downside hedged energy portfolio. Previous studies have shown that minimum-variance hedging effectiveness improves for longer horizons using variance as the performance metric. This paper investigates whether this result holds for different hedging objectives and effectiveness measures. A wavelet transform is applied to calculate the optimal heating oil hedge ratio using a variety of downside objective functions at different time-horizons. We demonstrate decreased hedging effectiveness for increased levels of uncertainty at higher confidence intervals. Moreover, for each of the different hedging objectives and effectiveness measures studied, we also demonstrate increasing hedging effectiveness at longer horizons. While small differences in effectiveness are found across the different hedging objectives, time-horizon effects are found to dominate confirming the importance of considering the hedgers horizon. The findings suggest that while downside risk measures are useful in the computation of an optimal hedge ratio that accounts for unwanted negative returns, hedging horizon and confidence intervals should also be given careful consideration by the energy hedger.
    Keywords: Energy Hedging, Futures Hedging, Wavelet Transform, Hedging Horizon, Downside Risk
    Date: 2012–09–17
  9. By: Massol, O.; Banal-Estanol, A.
    Abstract: For resource-rich economies, primary commodity specialization has often been considered to be detrimental to growth. Accordingly, export diversification policies centered on resource-based industries have long been advocated as effective ways to moderate the large variability of export revenues. This paper discusses the applicability of a mean-variance portfolio approach to design these strategies and proposes some modifications aimed at capturing the key features of resource processing industries (presence of scale economies and investment lumpiness). These modifications help make the approach more plausible for use in resource-rich countries. An application to the case of natural gas is then discussed using data obtained from Monte Carlo simulations of a calibrated empirical model. Lastly, the proposed framework is put to work to evaluate the performances of the diversification strategies implemented in a set of nine gas-rich economies. These results are then used to formulate some policy recommendations.
    Keywords: Resource-based industrialization; Mean-variance portfolio; Export earnings volatility; Natural gas
    Date: 2012
  10. By: Hertel, Thomas; Jevgenijs Steinbuks; Uris Lantz Baldos
    Abstract: The global land use implications of biofuel expansion have received considerable attention in the literature over the past decade. Model-based estimates of the emissions from cropland expansion have been used to assess the environmental impacts of biofuel policies. And integrated assessment models have estimated the potential for biofuels to contribute to greenhouse gas abatement over the coming century. All of these studies feature, explicitly or implicitly, competition between biofuel feed stocks and other land uses. However, the economic mechanisms governing this competition, as well as the contribution of biofuels to global land use change, have not received the close scrutiny that they deserve. The purpose of this paper is to offer a deeper look at these factors. We begin with a comparative static analysis which assesses the impact of exogenously specified forecasts of biofuel expansion over the 2006-2035 period. Global land use change is decomposed according to the three key margins of economic response: extensive supply, intensive supply, and demand. Under the International Energy Agency’s "New Policies" scenario, biofuels account for nearly one-fifth of global land use change over the 2006-2035 period. The paper also offers a comparative dynamic analysis which determines the optimal path for first and second generation biofuels over the course of the entire 21st century. In the absence of GHG regulation, the welfare-maximizing path for global land use allocates 170 Mha to biofuel feed stocks by 2100, with the associated biofuels accounting for about 30% of global liquid fuel consumption. This area expansion is somewhat diminished by expected climate change impacts on agriculture, while it is significantly increased by a moderately aggressive GHG emissions target and by advances in conversion efficiency of second generation biofuels.
    Date: 2012
  11. By: Pavel Ciaian; d'Artis Kancs; Miroslava Rajcaniova
    Abstract: This is the first paper that estimates the global land use change impact of bioenergy support policies. Applying the time-series analytical mechanisms to fuel, biofuel and the agricultural crops which are used to produce both food and bioenergy, we estimate the long-rung relationship between energy prices and the global land use change. Our results suggest that the bioenergy support policies contribute significantly to the global land use change. On the one hand, the share of agricultural crops being used for bioenergy production increases compared to food production. On the other hand, the total cultivated area increases, as the energy prices are rising.
    Keywords: Energy, bioenergy, prices, land use, biofuel support policies.
    JEL: C14 C22 C51 D58 Q11 Q13 Q42
    Date: 2012–09–12
  12. By: Wolff, Hendrik (University of Washington)
    Abstract: Do drivers reduce speeds when gasoline prices are high? Previous research investigating this energy conservation hypothesis produced mixed results. We take a fresh look at the data and estimate a significant negative relationship between speeding and gasoline prices. This presents a new methodology of deriving the 'Value of Time' (VOT) based on the intensive margin (previous VOT studies compare across the extensive margin) which has important advantages to circumvent potential omitted variable problems. While our VOT is 50% of the gross wage rate, we show that previous stated preference estimates are likely downward, whereas previous revealed preference estimates are systematically upward biased. We discuss implications, as VOT today is a key parameter in economics and policy.
    Keywords: value of time, speeding, gasoline price
    JEL: D70 J17 K32 Q26 R41
    Date: 2012–08
  13. By: Benoît Chèze; Julien Chevallier; Pascal Gastineau
    Abstract: This article investigates whether anticipated technological progress can be expected to be strong enough to offset carbon dioxide (CO2) emissions resulting from the rapid growth of air transport. Aviation CO2 emissions projections are provided at the worldwide level and for eight geographical zones until 2025. Total air traffic flows are first forecast using a dynamic panel-data econometric model, and then converted into corresponding quantities of air traffic CO2 emissions using specific hypotheses and energy factors. None of our nine scenarios appears compatible with the objective of 450 ppm CO2-eq. (a.k.a. "scenario of type I") recommended by the Intergovernmental Panel on Climate Change (IPCC). None is either compatible with the IPCC scenario of type III, which aims at limiting global warming to 3.2°C.
    Keywords: Air transport; CO2 emissions; Forecasting; Climate change
    JEL: C53 L93 Q47 Q54
    Date: 2012
  14. By: Xiaozhou Xu (CGS - Centre de Gestion Scientifique - Mines ParisTech); Shenle Pan (CGS - Centre de Gestion Scientifique - Mines ParisTech); Eric Ballot (CGS - Centre de Gestion Scientifique - Mines ParisTech)
    Abstract: The sustainability of supply chain,both economical and ecological, has attracted intensive attentions of academic and industry. It is proven in former works that supply chain pooling given by horizontal cooperation among several independent supply chains create a new common supply chain network that could reduce the costs and the transport CO2 emissions. In this regard, this paper introduces a scheme to share in a fairly manner the savings. After a summary of the concept of pooled-supply-networks optimization and CO2 emission model, we use cooperative game theory as the cooperative mechanism for the implementation of the horizontal pooling. Since we proved the related pooling game to be super-additive, a fair and stable allocation of common gain in transportation cost and CO2 emission is calculated by Shapley Value concept. Through a case study, the results show that supply chains pooling can result in reductions of both transportation cost and carbon emissions, and that the increase of carbon-tax rate gives enterprises more incentives for the implementation of such pooling scheme.
    Date: 2012–05–23
  15. By: Fernando Broner; Paula Bustos; Vasco Carvalho
    Abstract: We study the determinants of comparative advantage in polluting industries. To do this, we combine data on environmental policy at the country level with data on pollution intensity at the industry level and show that countries with laxer environmental regulation have a comparative advantage in polluting industries. This is consistent with the existence of a pollution haven effect. Further, we address the potential problem of reverse causality. To do so we propose an instrument for environmental regulation based on meteorological determinants of pollution dispersion as identified by the atmospheric pollution literature. We find that the pollution haven effect is causal and economically significant.
    Keywords: international trade, environmental regulation, comparative advantage, air pollution
    JEL: F11 F18 Q53 Q56
    Date: 2012–03
  16. By: Tanner, Reto; Bolduc, Denis
    Abstract: In this paper, we present a model that can be viewed as an extension of the traditional Tobit model. As opposed to that specific model, ours also accounts for the the fixed costs of car ownership. That extension is needed since being carless is an option for many households in societies that have a good system of public transportation, the main reason being that carless households wish to save the fixed costs of car ownership. So far, no existing model can adequately map the impact of these fixed costs on car ownership. The Multiple Discrete-Continuous Extreme Value Model (MDCEV) with fixed costs fills this gap. In fact, this model can evaluate the effect of policies intended to influence household behaviour with respect to car ownership, which can be of great interest to policy makers. Our model makes it possible to compute the effect of policies such as taxes on fuel or on car ownership on both the share of carless households and the average driving distance. We calibrated the model using data on Swiss private households in order to forecast were then able to forecast responses to policies. One result of particular interest that cannot be produced by other models is the evaluation of the impact of a tax on car ownership. Our results show that a tax on car ownership has a much lower impact on aggregate driving demand – per unit of tax revenues – than a tax on fuel.
    Keywords: The Multiple Discrete-Continuous Extreme Value Model (MDCEV); fixed costs; fuel consumption; carbon dioxide; emissions
    JEL: C51 D12 C24 Q40 C01
    Date: 2012–07–23
  17. By: Alton, Theresa; Arndt, Channing; Davies, Rob; Hartley, Faaiqa; Makrelov, Konstantin
    Abstract: South Africa is considering introducing carbon taxes to reduce greenhouse gas emissions. We evaluate potential impacts using a dynamic economy-wide model linked to an energy sector model. Simulation results indicate that a phased-in carbon tax that reache
    Keywords: carbon tax; growth; employment; income distribution; South Africa
    Date: 2012
  18. By: Yazid Dissou (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario); Lilia Karnizova (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)
    Abstract: In contrast to previous studies, this paper uses a multi-sector setting to assess aggregate and sectoral impacts of reducing carbon dioxide emissions in the presence of stochastic productivity shocks. We develop a multi-sector dynamic stochastic general equilibrium model, calibrated to the U.S. economy, to compare the economic implications of reducing carbon emissions with an emissions cap and with an emission tax. As in previous studies, we find that an emission cap predicts lower volatility of aggregate variables than an emission tax. Still, our results point to the importance of going beyond a single-sector analysis in evaluating the relative merits of the cap and the tax policies. The ranking of the welfare costs under the two regimes depends on the sources of productivity shocks. While there is no difference in the welfare costs of the two regimes for productivity shocks originating from non-energy sectors, we find that an emissions cap policy is more costly than an emission tax policy for shocks that originate from the energy sectors. Moreover, we find that non-energy shocks have distinct sectoral impacts under the two regimes even though there are no significant differences between the two regimes for the aggregate variables.
    Keywords: cap-and-trade; carbon tax; emissions; business cycle; multiple sectors
    JEL: E32 Q43 Q54 Q58
    Date: 2012
  19. By: Federico Boffaa; Amadeo Piollatto; Giacomo Ponzetto
    Abstract: This paper studies fiscal federalism when voter information varies across regions. We develop a model of political agency with heterogeneously informed voters. Rent- seeking politicians provide public goods to win the votes of the informed. As a result, rent extraction is lower in regions with higher information. In equilibrium, electoral discipline has decreasing returns. Thus, political centralization efficiently reduces aggregate rent extraction. The model predicts that a region’s benefits from centralization are decreasing in its residents’information. We test this prediction using panel data on pollutant emissions across U.S. states. The 1970 Clean Air Act centralized environ- mental policy at the federal level. In line with our theory, we find that centralization induced a differential decrease in pollution for uninformed relative to informed states.
    Keywords: political centralization, government accountability, imperfect information, interregional heterogeneity, elections, environmental policy, air pollution
    JEL: D72 D82 H73 H77 Q58
    Date: 2012–04
  20. By: Schmalensee, Richard (MIT); Stavins, Robert N. (Harvard University and Resources for the Future)
    Abstract: Two decades have passed since the Clean Air Act Amendments of 1990 launched a grand experiment in market-based environmental policy: the SO2 cap-and-trade system. That system performed well but created four striking ironies. First, by creating this system to reduce SO2 emissions to curb acid rain, the government did the right thing for the wrong reason. Second, a substantial source of this system's cost-effectiveness was an unanticipated consequence of earlier railroad deregulation. Third, it is ironic that cap-and-trade has come to be demonized by conservative politicians in recent years, since this market-based, cost-effective policy innovation was initially championed and implemented by Republican administrations. Fourth, court decisions and subsequent regulatory responses have led to the collapse of the SO2 market, demonstrating that what the government gives, the government can take away.
    JEL: Q40 Q48 Q54 Q58
    Date: 2012–08

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