nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒10‒06
thirty-two papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. Analysing the Impact of ENERGY STAR Rebate Policies in the US By Souvik Datta; Massimo Filippini
  2. Heat savings and heat generation technologies: Modelling of residential investment behaviour with local externalities By zvingilaite, Erika; Klinge Jacobsen, Henrik
  3. Cooperation mechanisms to achieve EU renewable targets By Klinge Jacobsen, Henrik; Hansen, Lise-Lotte P; Schröder, Sascha T; Kitzing, Lena
  4. CO2 Abatement from RES Injections in the German Electricity Sector: Does a CO2 Price Help? By Ellerman Denny; Delarue Erik; Hannes Weigt
  5. The role of foreign direct investment in the renewable electricity generation and economic growth nexus in Portugal: a cointegration and causality analysis By Bento Cerdeira, João Paulo
  6. Renewables in the Energy Transition: Evidence on Solar Home Systems and Lighting-Fuel Choice in Kenya By Jann Lay; Janosch Ondraczek; Jana Stoever
  7. Energy price transmissions during extreme movements By Marc Joëts
  8. Food vs. Wood: Dynamic Choices for Kenyan Smallholders By Peralta Sanchez, Alexandra
  9. Breakthrough Renewables and the Green Paradox By Frederick van der Ploeg
  10. Optimal Oil Production and the World Supply of Oil By Nikolay Aleksandrov; Raphael Espinoza; Lajos Gyurko
  11. InternationalPolitics and Import Diversification in the Second Wave of Globalization By Sergey Mityakov; Heiwai Tang; Kevin K. Tsui
  12. Resource Wars and Confiscation Risk By Frederick van der Ploeg
  13. Government Spending, Subsidies and Economic Efficiency in the GCC By Raphael Espinoza
  14. Factor Accumulation and the Determinants of TFP in the GCC By Raphael Espinoza
  15. India’s economic growth and environmental sustainability : what are the tradeoffs ? By Mani, Muthukumara; Markandya, Anil; Sagar, Aarsi; Sahin, Sebnem
  16. Economics of Using Flared vs. Conventional Natural Gas to Produce Nitrogen Fertilizer: A Feasibility Analysis By Maung, Thein A.; Ripplinger, David G.; McKee, Gregory J.; Saxowsky, David M.
  17. Shale Gas Development and Property Values: Differences Across Drinking Water Sources By Lucija Muehlenbachs; Elisheba Spiller; Christopher Timmins
  18. Is Energy Consumption Per Capita Stationary? Evidence from First and Second Generation Panel Unit Root Tests By Muhammad, Shahbaz; Tiwari, Aviral Kumar; Khan, Saleheen
  19. Cointegration Models Applied For Portugal’s Energy Consumption, Inward FDI and GDP Series (1980-2007) By Cerdeira Bento, João Paulo
  20. Assessing the investment climate for climate investments : a comparative framework for clean energy investments in South Asia in a global context By Mani, Muthukumara S.
  21. Libéralisation et sécurité énergétique dans l'Union européenne. Succès et questions By Cédric Clastres; Catherine Locatelli
  22. Breaking Environmental Kuznets Curves. Evaluating Energy and Policy Time Events Effects on CO2 Trends for Advanced Countries By Massimiliano Mazzanti; Antonio Musolesi
  23. Do Environmental Regulations Disproportionately Affect Small Businesses? Evidence from the Pollution Abatement Costs and Expenditures Survey By Randy A. Becker; Ronald J. Shadbegian; Carl Pasurka
  24. Pollution Generating Technologies and Environmental Efficiency By Färe, Rolf; Grosskopf, Shawna; Lundgren, Tommy; Marklund, Per-Olov; Zhou, Wenchao
  25. The environmental Effect of Green Taxation : The case of the french "Bonus/Malus" By Xavier d'Haultfoeuille; Pauline Givord; Xavier Boutin
  26. The Optimal Carbon Tax and Economic Growth: Additive versus multiplicative damages By Armon Rezai; Frederick van der Ploeg; Cees Withagen
  27. The French tax credit dedicated to sustainable development: an econometric evaluation By A. MAUROUX
  28. Trade-offs between environmental regulation and market competition: airlines, emission trading systems and entry deterrence By Cristina Barbot; Ofelia Betancor; M. Pilar Socorro; M. Fernanda Viecens
  29. How Volatile is ENSO for Global Greenhouse Gas Emissions and the Global Economy? By Lan-Fen Chu; M. McAleer; Chi-Chung Chen
  30. Territorial Economic Impacts of Climate Anomalies in Brazil By Eduardo A. Haddad; Alexandre A. Porsse, Paula C. Pereda
  31. Rural Households in a Changing Climate By Baez, Javier E.; Kronick, Dorothy; Mason, Andrew D.
  32. Should we sustain? And if so, sustain what? Consumption or the quality of life? By Humberto Llavador; John E. Roemer; Joaquim Silvestre

  1. By: Souvik Datta (Centre for Energy Policy and Economics (CEPE), Department of Management, Technology and Economics, ETH Zurich); Massimo Filippini (Centre for Energy Policy and Economics (CEPE), Department of Management, Technology and Economics, ETH Zurich and Department of Economics, University of Lugano, Switzerland)
    Abstract: In this paper we estimate the impact of rebate policies in various US states on the share of sales of ENERGY STAR household appliances between 2001 and 2006. We use a difference-in-difference approach to exploit the variation in the rebate policies over time and across US states to estimate their effect on the share of sales of ENERGY STAR household appliances. To account for the possibility of an endogenous rebate policy we use an instrumental variables approach in a fixed effects panel data regression model. Results suggest that rebate policies increase the share of sales of ENERGY STAR household appliances by around 7.4% and this represents an impact of around 21% on the mean level of the share of sales of ENERGY STAR household appliances in the US between 2001 and 2006.
    Keywords: Residential appliances, ENERGY STAR, Rebate policies, Difference-in-difference
    JEL: D D1 Q Q4 Q5
    Date: 2012–02
  2. By: zvingilaite, Erika; Klinge Jacobsen, Henrik
    Abstract: The trade off between investing in energy savings in single family houses and investing in more expensive heating technologies with low variable costs has been modelled for a number of building and consumer categories in Denmark. The households have an option to combine their primary heating source with secondary heating e.g. woodstove. We address increased indoor air pollution with fine particles, which are potentially harmful to human health, when using a woodstove, in order to represent a close proximity to and tangibility of the environmental and health problems of air pollution for private consumers. We integrate health cost into household optimisation of woodstove use as secondary heating source. We investigate whether the monetary value of the possible health damage has an effect on the optimal consumers’ choice of a heating technology and heat savings. The results show that due to combination of low costs of primary fuel and low environmental performance of woodstoves today, included health costs lead to decreased secondary heating. Overall the interdependence of heat generation technology and heat savings is significant. The optimal level of heat savings for private consumers decrease by 66% when all have the option to shift to the technology with lowest variable costs.
    Keywords: Energy savings; externalities; modelling; residential heating; rebound
    JEL: Q41 Q53 C61 H23
    Date: 2012–08
  3. By: Klinge Jacobsen, Henrik; Hansen, Lise-Lotte P; Schröder, Sascha T; Kitzing, Lena
    Abstract: There are considerable benefits from cooperating among member states on meeting the 2020 RES targets. Today countries are supporting investments in renewable energy by many different types of support schemes and with different levels of support. The EU has opened for cooperation mechanisms such as joint support schemes for promoting renewable energy to meet the 2020 targets. The potential coordination benefits, with more efficient localisation and composition of renewable investment, can be achieved by creating new areas/sub-segments of renewable technologies where support costs are shared and credits are transferred between countries. Countries that are not coordinating support for renewable energy might induce inefficient investment in new capacity that would have been more beneficial elsewhere and still have provided the same contribution to meeting the 2020 RES targets. Furthermore, countries might find themselves competing for investment in a market with limited capital available. In both cases, the cost-efficiency of the renewable support policies is reduced compared to a coordinated solution. Barriers for joint support such as network regulation regarding connection of new capacity to the electricity grid and cost sharing rules for electricity transmission expansion are examined and solutions are suggested. The influence of additional renewable capacity on domestic/regional power market prices can be a barrier. The market will be influenced by for example an expansion of the wind capacity resulting in lower prices, which will affect existing conventional producers. This development will be opposed by conventional producers whereas consumers will support such a strategy. A major barrier is the timing of RES targets and the uncertainty regarding future targets. We illustrate the importance of different assumptions on future targets and the implied value of RES credits. The effect on the credit price for 2020 is presented in an exemplary case study of 200MW wind capacity.
    Keywords: RES target; cooperation mechanisms; policy coordination; renewables; European energy policy
    JEL: Q48 Q01 Q20
    Date: 2012–09
  4. By: Ellerman Denny; Delarue Erik; Hannes Weigt (University of Basel)
    Abstract: <p style="text-indent:0cm"><span lang="EN-GB">The overlapping impact of the Emission Trading System (ETS) and renewable energy (RE) deployment targets creates a classic case of interaction effects. Whereas the price interaction is widely recognized and has been thoroughly discussed, the effect of an overlapping instrument on the abatement attributable to an instrument has gained little attention. </span><span style="line-height:150%" lang="EN-GB">This paper estimates the actual reduction in demand for European Union Allowances that has occurred due to RE deployment focusing on the German electricity sector, for the five years 2006 through 2010. </span><span lang="EN-US">Based on a unit commitment model we estimate that CO2 emissions from the electricity sector are reduced by 33 to 57 Mtons, or 10% to 16% of what estimated emissions would have been without any RE policy. Furthermore,</span><span style="line-height:150%" lang="EN-US"> </span><span style="line-height:150%" lang="EN-GB">we find that the abatement attributable to RE injections is greater in the presence of an allowance price than otherwise. The same holds for the ETS effect in presence of RE injection. T</span><span lang="EN-US">his interaction effect is consistently positive for the German electricity system, at least for these years, and on the order of 0.5% to 1.5% of emissions.</span></p>
    Keywords: ETS, RE policy, interaction, emission abatement, Germany
    JEL: L94 Q58
    Date: 2012
  5. By: Bento Cerdeira, João Paulo
    Abstract: This study attempts to investigate a supply function for electricity in Portugal through cointegration and causality analysis over the sample period of 1970 to 2008 to test hypotheses related to the electricity-economic growth nexus in the literature. Evidence is found in favour of cointegration among electricity generation from renewable sources, real gross domestic product, inward foreign direct investment, carbon emissions from electricity production and population size in Portugal by using the bound testing approach to cointegration and error correction models developed within an autoregressive distributed lag (ARDL) framework. Evidence from Granger causality tests show that unidirectional causality is running from renewable electricity production to foreign direct investment in the short-run, and indicate the presence of bilateral causality among renewable electricity production, inward foreign direct investment, real income and population. The joint short- and long-run Granger causality tests provide further support for the feedback hypothesis. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign direct investment can induce conservation and efficient electricity use without obstructing economic growth. The promotion of foreign direct investment is crucial in boosting Portugal’s socio-economic development towards a more efficiency-orientated and less resource-depleting economy.
    Keywords: Renewable electricity production; Economic growth; Foreign direct investment; ARDL cointegration; Granger causality; Portugal
    JEL: C32 Q43
    Date: 2012–09–24
  6. By: Jann Lay (GIGA German Institute of Global and Area Studies); Janosch Ondraczek (GIGA German Institute of Global and Area Studies); Jana Stoever (GIGA German Institute of Global and Area Studies)
    Abstract: We study the determinants of households’ choices of lighting fuels in Kenya, including the option of using solar home systems (SHSs). The paper adds new evidence on the factors that influence the introduction and adoption of decentralized and less carbon-intensive energy sources in developing countries. We capitalize on a unique representative survey on energy use and sources from Kenya, one of the few relatively well-established SHSs markets in the world. Our results reveal some very interesting patterns in the fuel transition in the context of lighting-fuel choices. While we find clear evidence for a crosssectional energy ladder, the income threshold for modern fuel use – including solar energy use – is very high. Income and education turn out to be key determinants of SHSs adoption, but we also find a very pronounced effect of SHSs clustering. In addition, we do not find a negative correlation between grid access and SHSs use.
    Keywords: renewable energy, household fuel choice, lighting-fuel choice, solar power use, solar home systems, Kenya, energy ladder, KIHBS
    Date: 2012–07
  7. By: Marc Joëts
    Abstract: This paper investigates price transmissions across European energy forward markets at distinct maturities during both normal times and extreme fluctuation periods. To this end, we rely on the traditional Granger causality test (in mean) and its multivariate extension in tail distribution developped by Candelon, Joëts, and Tokpavi (2012). Con- sidering forward energy prices at 1, 10, 20, and 30 months, it turns out that no significant causality exists between markets at regular times whereas comovements are at play during extreme periods especially in bear markets. More precisely, energy prices comovements appear to be stronger at short horizons than at long horizons, testifying an eventual Samuelson mechanism in the maturity prices curve. Diversification strategies tend to be more efficient as maturity increases.
    Keywords: Forward energy prices; Value-at-Risk (VaR); CAViaR approach; risk spillover; Granger causality
    JEL: C32 Q40
    Date: 2012
  8. By: Peralta Sanchez, Alexandra
    Abstract: Smallholder farmers in many areas of the semiarid tropics are planting exotic tree species that provide alternative income sources, fuel, and building materials. While providing other benefits, these trees often occupy land that could produce annual food crops. This study uses a polyperiod, linear programming model to explore the opportunity cost of planting Eucalyptus grandis and Grevillea robusta trees compared to crops in the Nyando watershed of western Kenya. Results of the ten year period wealth maximization model suggest that a representative farmer’s decisions on farm resource allocation are sensitive to changes in the relative prices of short rotation tree products and annual crops. The model also suggests that there are economic tradeoffs between planting trees and crops, as well as between planting different tree species. Timber production is not likely to replace food crops for two main reasons: (1) the high cost of meeting household subsistence requirements from marketed grains, (2) household cash flow needs met by annual crops. Farmers plant eucalyptus for commercial purposes because they can obtain timber products within four years; however if the prices of these short rotation products go down, farmers will prefer to grow timber from high yield grevillea.
    Keywords: Community/Rural/Urban Development, Production Economics, Resource /Energy Economics and Policy,
    Date: 2012
  9. By: Frederick van der Ploeg
    Abstract: We show how a monopolistic owner of oil reserves responds to a carbon-free substitute becoming available at some uncertain point in the future if demand is isoelaastic and variable extraction costs are zero but upfron exploration investment costs have to be made. Not the arrival of this substitute matters for efficiency, but the uncertainty about the timing of this substitute coming on stream. Before the carbon-free substitute comes on stream, oil rserves are depleted too rapidly; as soon as the substitute has arrived, the oil depletion rate drops and the oil price jumps up by a discrete amount. Subsidizing green R&D to speed up the introduction of breakthrough renewables leads to more rapid oil extraction before the breakthrough, but more oil is left in situ as exploration investment will be lower. The latter offsets the Green Paradox.
    Keywords: Hotelling principle, exhaustible resources, carbon-free substitute, regime switch, oil stock, uncertainty, hold-up problem, green R&D, Green Paradox
    JEL: D81 H20 Q31 Q38
    Date: 2012
  10. By: Nikolay Aleksandrov; Raphael Espinoza; Lajos Gyurko
    Abstract: We study the optimal oil extraction strategy and the value of an oil field using a multiple real option approach. The numerical method is flexible enough to solve a model with several state variables, to discuss the effect of risk aversion, and to take into account uncertainty in the size of reserves. Optimal extraction in the baseline model is found to be volatile. If the oil producer is risk averse, production is more stable, but spare capacity is much higher than what is typically observed. We show that decisions are very sensitive to expectations on the equilibrium oil price using a mean reverting model of the oil price where the equilibrium price is also a random variable. Oil production was cut during the 2008-09 crisis and we find that the cut in production was larger for OPEC, for countries facing a lower discount rate, as predicted by the model, and for countries whose governments' finances are more dependent on oil revenues. However, the net present value of a country's oil reserves would be increased significantly (by 100 percent, in the most extreme case) if production was cut completely when prices fall below the country's threshhold price. If several producers were to adopt such strategies, world oil prices would be higher but more stable.
    Keywords: Oil production, Real Options, Capacity Expansion, Equilibrium Price of Oil, OPEC
    JEL: C61 Q30 Q43
    Date: 2012
  11. By: Sergey Mityakov; Heiwai Tang; Kevin K. Tsui
    Abstract: We provide evidence that deterioration of relations between the United States and another country, measured by divergence in their UN General Assembly voting patterns, reduces US imports from that country during the second wave of globalization. Though statistically, significant, such an effect of "political distance" on trade is small compared with the frictions imposed by other trade barriers. Indeed, using sector-level trade data, we show that except for petroleum and some chemical products, US imports are not affected by international politics. American firms, however, diversify their import of crude oil significantly away from the political opponents of the US, even after controlling for wars, sanctions, and tariffs. To explain the distinctive political impact on oil import diversification, we test the strategy commodity hypothesis over the hold-up risk hypothesis, because while oil is widely thought to be a strategic commodity, oil trade is also often associated with backward vertical FDI that is subject to the risks of hold-up and expropriation. Our results suggest both political and economic forces are at work. First, although the political limits on oil import are only significant when American firms import oil from dictators, the effect is even more pronounced when the exporting countries have high expropriation risk. Second, a similar import pattern is observed only for other major powers or countries with oil companies operating overseas. Finally, we show that while the US imports of a few strategic commodities, such as tin, are also discouraged by political distance, a similar political effect is also observed in the import of R&D intensive goods, in which case quasi-rents derived from backward FDI in R&D may be expropriated by a hostile government.
    Keywords: international politics, hold-up risk, energy security
    JEL: F13 F51 F59 Q34
    Date: 2012
  12. By: Frederick van der Ploeg
    Abstract: Resource wars can be modeled with two-way regime switch uncertainty and contest success functions. Fighting is more intense if the plitical system is less cohesive, fighting technology is well developed, oil reserves are high and the wage is low. More government stability intensifies resource wars, but leads to less voracious oil depletion. Oil extraction is more aggressive in the presence of contested resources, but less so with more government stability. Our model of resource wars builds on a model of confiscation risk and of perennial political cycles. Not confiscation, but risk of confiscation matters for efficiency. Before confiscation, oil reserves are depleted too rapidly. Risk of confiscation is associated with a hold-up problem, which depresses exploration investment and exacerbates the inefficiences. A subsidy can correct for this. If there is a chance that the economy flips back to no confiscation outcomes are less distorting.
    Keywords: resource wars, contest success functions, political cohesiveness, confiscation risk, taxation, regime switch, oil reserves uncertainty, Hotelling principle, exhaustible resources, exploration investment, hold-up problem
    JEL: D81 H20 Q31 Q38
    Date: 2012
  13. By: Raphael Espinoza
    Abstract: Public investment and subsidies are typically inefficient but in the GCC these are crucial engines of growth. Subsidies are also used to redistribute oil windfalls in the region, and the problem of a government that wants to 'distribute' oil money is a problem fully symmetric to the one analyzed by Ramsey (1927) of optimal taxation. The second-best policy (when lump-sum transfers are not available) is to use subsidies across a wide range of goos (as opposed to the focus on energy chosen by the GCC). In addtion, the 'inverse' Ramsey model implies that commodities for which demand is least elastic to prices should be subsidized at higher rates. This suggests subsidizing basic needs at higher rates, in particular food, healthcare and education. In addition, when subsidies are very large, they create additional distortions because households prefer to queue for subsidies (e.g. public service jobs, subsidized mortgages in Saudi Arabia) rather than participate in private markets. As an example, we draw a model where recruitment of public servants can induce a large diincentive to take private sector positions and compute the conditions under which the disincentive is so strong that overall employment is actually decreased as public servants are being hired.
    Keywords: Gulf Cooperation Council, Middle East and North Africa, Resource Curse
    JEL: Q32 Q38 O53
    Date: 2012
  14. By: Raphael Espinoza
    Abstract: GDP growth in the GCC has been considerably higher than in advanced economies or other oil exporters since 1986. The paper shows that the GCC countries have swiftly accumulated large stocks of physical capital but the population increase and the shift away from oil meant that capital intensity actually decreased or remained roughtly constant. On teh other hand, the efforts that have been made to improve human capital would have had positive effects on growth though educational attainment remains below what is achieved by countries with similar levels of income. A growth accounting exercise suggests as a result that the development of Bahrain and Saudi Arabia was hampered by declining TFP, while TFP growth in Qatar and the UAE would have been low. One potential explanation is that the kind of capital that has been accumulated in the region (aircraft, computer equipment, electrical equipment) is not fully productive because the labor force is not educated enough. The paper also discusses the lessons from the impirical growth literature for the GCC. The poor quality of institutions and the large size of government consumption, both of which ar possile symptoms of a resource curse, could explain the disappointing TFP growth.
    Keywords: Gult Cooperation Council, Growth Accounting, Middle East and North Africa, Resource Curse
    JEL: O43 O53
    Date: 2012
  15. By: Mani, Muthukumara; Markandya, Anil; Sagar, Aarsi; Sahin, Sebnem
    Abstract: One of the key environmental problems facing India is that of particle pollution from the combustion of fossil fuels. This has serious health consequences and with the rapid growth in the economy these impacts are increasing. At the same time, economic growth is an imperative and policy makers are concerned about the possibility that pollution reduction measures could reduce growth significantly. This paper addresses the tradeoffs involved in controlling local pollutants such as particles. Using an established Computable General Equilibrium model, it evaluates the impacts of a tax on coal or on emissions of particles such that these instruments result in emission levels that are respectively 10 percent and 30 percent lower than they otherwise would be in 2030. The main findings are as follows: (i) A 10 percent particulate emission reduction results in a lower gross domestic product but the size of the reduction is modest; (ii) losses in gross domestic proudct from the tax are partly offset by the health gains from lower particle emissions; (iii) the taxes reduce emissions of carbon dioxide by about 590 million tons in 2030 in the case of the 10 percent reduction and 830 million tons in the case of the 30 percent reduction; and (iv) taken together, the carbon dioxide reduction and the health benefits are greater than the loss of gross domestic product in both cases.
    Keywords: Environmental Economics&Policies,Climate Change Mitigation and Green House Gases,Climate Change Economics,Energy Production and Transportation,Environment and Energy Efficiency
    Date: 2012–09–01
  16. By: Maung, Thein A.; Ripplinger, David G.; McKee, Gregory J.; Saxowsky, David M.
    Abstract: The feasibility analysis begins by examining the economic potential of using flared natural gas as a feedstock to produce a low-cost, reliable, and sustainable supply of nitrogen fertilizer for North Dakota farmers. Specific objectives include • Determining the most profitable facility size, location, and configuration for a natural gas nitrogen fertilizer production facility in North Dakota. • Calculating the financial returns and capital requirements of gas-based nitrogen fertilizer production. • Identifying possible business structures for the fertilizer production facility. Project objectives are achieved by evaluating the technological and economic feasibility of alternative nitrogen fertilizer production and distribution systems. • Flared Gas Collection: the economics of flared gas collection in western North Dakota analyzes the availability of flared gas supplies. • Ammonia Plant Preliminary Design: several ammonia production plants based on commercially available technologies are used to estimate capital and operating cost. • Business Structure: the effect of alternative business structures, including new generation cooperatives, on incorporation, capitalization, taxation, and fertilizer marketing are investigated. • Facility Siting: factors in determining optimal plant site include fertilizer form (e.g. ammonia, urea), technological and economies of scale, transportation and utility infrastructure, and nitrogen fertilizer demand. The use of natural gas in western and eastern North Dakota and co-location by existing coal-fired power plants or refineries are considered. Topics originally intended to study but not yet completed or are no longer relevant include • Preparing a financial pro forma, including pro forma balance sheet, income and cash flow statements for the nitrogen fertilizer production plant to demonstrate the financial viability of the enterprise. • Incorporating a supply chain model to estimate storage and transportation costs and efficiencies, including capturing and retaining value, and reducing cost and risks. • Determining the willingness of food manufacturers, bioenergy producers, and other current and potential buyers of North Dakota crops to pay the premiums for green inputs. • Estimating the impact of using of green fertilizer on farm profit. The focus of the study was refined when initial findings revealed that initiating an enterprise to capture and process flared gas was not economical at this time, but that relying on the energy industry to supply conventional natural gas for fertilizer manufacturing is more feasible at the present time. However, a premium for crops produced with green inputs and need for carbon sequestration in the future should be subsequently studied at appropriate times.
    Keywords: Environmental Economics and Policy, Production Economics,
    Date: 2012–09
  17. By: Lucija Muehlenbachs; Elisheba Spiller; Christopher Timmins
    Abstract: While shale gas development can result in rapid local economic development, negative externalities associated with the process may adversely affect the prices of nearby homes. We utilize a triple-difference estimator and exploit the public water service area boundary in Washington County, Pennsylvania to identify the housing capitalization of groundwater risk, differentiating it from other externalities, lease payments to homeowners, and local economic development. We find that proximity to wells increases housing values, though risks to groundwater fully offset those gains. By itself, groundwater risk reduces property values by up to 24 percent.
    Keywords: shale gas, property values, hedonic models, groundwater, triple difference estimator
    JEL: Q4 Q53
    Date: 2012
  18. By: Muhammad, Shahbaz; Tiwari, Aviral Kumar; Khan, Saleheen
    Abstract: This paper investigates the unit root properties of energy consumption per capita of 103 high, middle and low income countries using first and second generation panel unit root tests. Our results indicate that energy consumption per capita contains stationary process in all groups of countries. This suggests that short run energy policies should be followed to sustain economic growth and to fulfill energy demand.
    Keywords: Energy Consumption; Panel Unit Root Test
    JEL: Q4
    Date: 2012–09–24
  19. By: Cerdeira Bento, João Paulo
    Abstract: This study runs a cointegration analysis on annual data from 1980 to 2007 to investigate the relationship between primary energy consumption, economic growth and net inflows of foreign direct investment with the Engle and Granger method, Stock-Watson dynamic ordinary least squares (DOLS), the bounds testing approach to cointegration and error correction modelling. The empirical results suggest that there is a stable long run linear cointegration relationship between these three variables. While income has a large and positive influence on energy consumption, the results point to a small but negative effect of foreign direct investment (FDI) on energy consumption. As for the short-run relationship among the series, the estimation and inference in the autoregressive distributed lag error correction model (ARDL) further confirm this link. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign investment can induce energy conservation without obstructing economic growth.
    Keywords: Energy consumption; Economic growth; Foreign direct investment; Cointegration
    JEL: Q43
    Date: 2012–09–28
  20. By: Mani, Muthukumara S.
    Abstract: One of the strong messages that came out of the recent United Nations Climate Change conference in Durban was that the private sector has to play an important role if we are to globally move toward a low carbon, climate resilient -- or"climate compatible"-- future. However, private investment will only flow at the scale and pace necessary if it is supported by clear, credible, and long-term policy frameworks that shift the risk-reward balance in favor of less carbon-intensive investment. The private sector also needs information on where to invest in clean energy in emerging markets, and it needs policy support to lower investment risk. Barriers to low carbon investments often include unclear and inconsistent energy policies, monopoly structures for existing producers, stronger incentives for conventional energy than clean energy, and a domestic financial sector not experienced in new technologies. With the long-term goal of promoting and accelerating the implementation of climate mitigation technologies, this study aims to facilitate development of a policy framework for promoting sustainable investment climates for clean energy investments in South Asia and elsewhere. A key aspect of the study is also the pilot construction of the Climate Investment Readiness Index for several countries. The index is a tool to objectively evaluate the enabling environment for supporting private sector investment in select climate mitigation or low carbon technologies.
    Keywords: Energy Production and Transportation,Environmental Economics&Policies,Climate Change Mitigation and Green House Gases,Climate Change Economics,Debt Markets
    Date: 2012–09–01
  21. By: Cédric Clastres (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : FRE3389 - Université Pierre Mendès-France - Grenoble II); Catherine Locatelli (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : FRE3389 - Université Pierre Mendès-France - Grenoble II)
    Abstract: L'environnement énergétique de l'union européenne ainsi que sa situation interne ont connu de profonds changements. La sécurité énergétique des Etats membres est une question prenant de plus en plus d'importance . Ces préoccupations apparaissent à la fois sur les marchés électriques et gaziers, et concernent les infrastructures, les contrats existants, les besoins d'investissements et le lien croissant qui existe entre le gaz et la production d'électricité. Les acteurs énergétiques se doivent de gérer cette sécurité dans les deux marchés pour fournir de manière socialement et économiquement efficace ces commodités. Dans cet article, deux questions sont analysées. La première étudie les capacités de l'Union européenne à répondre aux problèmes de sécurité interne par des mesures domestiques. La seconde concerne sa sécurité externe d'approvisionnement. L'amont de la chaîne gazière composé de fournisseurs extérieurs à l'Union européenne fait émerger des difficultés dans la gestion des relations entre ces fournisseurs et l'UE, ainsi que dans les investissements dans les grands gazoducs.
    Date: 2012–09
  22. By: Massimiliano Mazzanti; Antonio Musolesi
    Abstract: This paper documents the structural differences among advanced countries with regard to their long run carbon-income relationships. On the basis of a first application of intervention analysis to Environmental Kuznets curves, we show that time related effects, namely structural breaks, have been predominantly relevant in explaining the eventual occurrence of such bell shaped curves. We indeed find great heterogeneity of effects in comparing advanced countries long run performances. The different response in terms of environmental policy and innovation efforts of northern EU to exogenous policy events such as the 1992 climate change Rio convention, that gave earth to the Kyoto era, and to the second oil shock that preceded it in the 80’s are among the underlying causes. Environmental policy can be or create the pre conditions to exert long run beneficial shocks to the energy-economic system. Evidence provides food for thought for the post Kyoto era policy making, just after the Rio+20 step.
    Keywords: Carbon Kuznets Curves; Rio convention; policy events; oil shocks; intervention analysis; structural breaks
    JEL: C22 Q53
    Date: 2012–09–23
  23. By: Randy A. Becker; Ronald J. Shadbegian; Carl Pasurka
    Abstract: It remains an open question whether the impact of environmental regulations differs by the size of the business. Such differences might be expected because of statutory, enforcement, and/or compliance asymmetries. Here, we consider the net effect of these three asymmetries, by estimating the relationship between plant size and pollution abatement expenditures, using establishment-level data on U.S. manufacturers from the Census Bureau’s Pollution Abatement Costs and Expenditures (PACE) surveys of 1974-1982, 1984-1986, 1988-1994, 1999, and 2005, combined with data from the Annual Survey of Manufactures and Census of Manufactures. We model establishments’ PAOC intensity – that is, their pollution abatement operating costs per unit of economic activity – as a function of establishment size, industry, and year. Our results show that PAOC intensity increases with establishment size. We also find that larger firms spend more per unit of output than do smaller firms.
    Keywords: Environmental Regulation, costs, Business size, U. S.manufactoring
    JEL: L51 L60 Q52
    Date: 2012–09
  24. By: Färe, Rolf (Dept. of Economics); Grosskopf, Shawna (Dept. of Applied Economics); Lundgren, Tommy (CERE); Marklund, Per-Olov (CERE); Zhou, Wenchao (CERUM)
    Abstract: technology. Pollutants, or bads, are explicitly modeled by imposing technology properties of disposability and null-jointness. With data on firms from Swedish manufacturing, we investigate the potential to reduce emissions, and we take a closer look at the pulp and paper sector. Dividing the firms into “brown” and “green” firms, we find that there is significant potential, in both categories, to improve environmental efficiency, and hence lower emissions, of three air pollutants. Furthermore, we suggest that treating biofuels as entirely carbon neutral (as is common practice) may underestimate environmental efficiency scores and generate misleading policy implications.
    Keywords: Pollution; Environmental Efficiency
    JEL: D24 Q01 Q53
    Date: 2012–09–28
  25. By: Xavier d'Haultfoeuille (Crest); Pauline Givord (INSEE); Xavier Boutin (European Commission-Team)
    Abstract: At the beginning of 2008 was introduced in France a feebate on the purchase of new cars called the “Bonus/Malus”. Since January 2008, the less polluting cars benefited from a price reduction of up to 1,000 euros, while the most polluting ones were subject to a taxation of 2,600 euros. We estimate the impact of this policy on carbon dioxide emissions in the short and long run. These emissions depend on the market shares and the average emissions per kilometer of each car, but also on their manufacturing and the number of kilometers traveled by their owners. We first develop a simple tractable model that relates car choice and mileage. We then estimate this model, using both the exhaustive dataset of car registrations and a recent transportation survey which provides information on individual journeys. We show that if the shift towards the classes benefiting from rebates is spectacular, the environmental impact of the policy is negative. The reform has notably increased sales, leading to an important increase in manufacturing and traveling emissions. We thus stress that such policies may be efficient tools for reducing CO2 emissions (French consumers do react to the feebate in their car choice), but should be designed with care to achieve their primary goal
    Keywords: Environmental taxation, automobiles, carbon dioxide emissions, policy evaluation
    JEL: C25 D12 H23 L62 Q53
    Date: 2012–07
  26. By: Armon Rezai; Frederick van der Ploeg; Cees Withagen
    Abstract: In a calibrated integrated assessment model we investigate the differentia impact of additive and multiplicative damages from climate change for both a socially optimal and a business-as-usual scenario in the market economy within the context of a Ramsey model of economic growth. The sources ofenergy are fossil fuel which is available at a cost which rises as reserves diminish and a carbon-free backstop supplied at a decreasing cost. if damages are not proportional to aggregate production output, and the economy is along a development path, the social cost of carbon and the optimal carbon tax are smaller as damages can more easily be compensated for by higher output. As a result, the economy switches later from fossil fuel to the carbon-free backstop and leaves less fossil fuel in situ. This is in contrast to a partial equilibrium analysis with dmages in utility rather than in production which finds that the willingness to forsake current consumption to avoid future global warming is higher (lower) under additive damages in a growing economy if the elasticity of intertemporal substitution is smaller (bigger) than one.
    Keywords: climate change, multiplicative damages, additive damages, integrated assessment models, Ramsey growth model, fossil fuel, carbon-free backstop
    JEL: H21 Q51 Q54
    Date: 2012
  27. By: A. MAUROUX (Insee)
    Abstract: A tax credit dedicated to sustainable development was first introduced in France in 2005 in order to encourage households to invest in energy conservation and to install renewable energy equipments. It was a big success: between 2005 and 2008 about one primary residence in sixteen was renovated asking for this green tax credit (Clerc, Marcus, Mauroux 2010). In this article we take advantage of an exogenous increase of the tax credit rate to assess its incentive impact. In 2006 the tax credit rate on energy conservation expenditures was raised from 25% to 40% but only for the subset of homeowners living for less than 3 years in a building completed before 1977. We estimate on exhaustive fiscal data the impact of this marginal increase of the tax credit rate on the declaration rate of eligible households using a matching method combined with triple differences, based on Heckman, Ichimura, Smith and Todd (1998). If the tax credit rate had not been raised, in 2006 one eligible household in fifteen among the declarants living for less than three years in a dwelling completed between 1969 and 1976 would not have used this tax credit, one in eight in 2007 and in 2008. Between 2006 and 2008, the additional public cost due to the tax credit increase is at least 80 million euros for the sub-sample of homeowners living for less than 3 years in a dwelling completed between 1969 and 1976, i.e. an average cost between 6,550 and 10,360 euros per additional retrofitted dwelling. Except if the average CO2 emission reductions per household are greater than 10 tonnes each year over the equipment life span, the public cost of a tonne of CO2 avoided by additional declarant among the eligible living in a building completed between 1969 and 1973 would be higher than 32 ¬, the tutelary value of carbon in 2008.
    Keywords: tax credit, sustainable development, public policy evaluation, matching, difference-in-differences estimates
    JEL: H31 H23 D12
    Date: 2012
  28. By: Cristina Barbot; Ofelia Betancor; M. Pilar Socorro; M. Fernanda Viecens
    Abstract: Emission trading systems (ETS) are being applied worldwide and in different economic sectors as an environmental regulatory tool that induces reductions of CO2 emissions. In Europe such a system is in place since 2005 for energy intensive installations and, since 1st January 2012, for airlines with flights arriving and departing from Community airports. The efficiency of the system should consider not only how it allows reaching an environmental goal, but also it should take into account its implications for market competition. In this work we develop a theoretical model that analyses the European ETS’s main features as devised for airlines, focusing on its effects on potential competition and entry deterrence. Contrary to other economic activities under ETS, potential competition is usual in most airline markets. Our results indicate that the share of capped allowances allocated initially for free to air operators may be a key element in deterring or allowing entry into the market. This result may be in collision with the general European principle of promoting competition and may represent a step backwards in the construction of a single European air transport market.
    Date: 2012–09
  29. By: Lan-Fen Chu (National Science and Technology Center for Disaster Taiwan); M. McAleer (Econometric Institute Erasmus School of Economics Erasmus University Rotterdam and Institute of Economic Research Kyoto University andDepartment of Quantitative Economics Complutense University of Madrid); Chi-Chung Chen (Department of Applied Economics National Chung Hsing University Taiwan)
    Abstract: This paper analyzes two indexes in order to capture the volatility inherent in El Ninos Southern Oscillations (ENSO), develops the relationship between the strength of ENSO and greenhouse gas emissions, which increase as the economy grows, with carbon dioxide being the major greenhouse gas, and examines how these gases affect the frequency and strength of El Nino on the global economy. The empirical results show that both the ARMA(1,1)-GARCH(1,1) and ARMA(3,2)-GJR(1,1) models are suitable for modelling ENSO volatility accurately, and that 1998 is a turning point, which indicates that the ENSO strength has increased since 1998. Moreover, the increasing ENSO strength is due to the increase in greenhouse gas emissions. The ENSO strengths for Sea Surface Temperature (SST) are predicted for the year 2030 to increase from 29.62% to 81.5% if global CO2 emissions increase by 40% to 110%, respectively. This indicates that we will be faced with even stronger El Nino or La Nina effects in the future if global greenhouse gas emissions continue to increase unabated.
    Keywords: El Ninos Southern Oscillations (ENSO), Greenhouse Gas Emissions, Global Economy, Southern Oscillation Index (SOI), Sea Surface Temperature (SST), Volatility.
    Date: 2012–09
  30. By: Eduardo A. Haddad; Alexandre A. Porsse, Paula C. Pereda
    Abstract: This paper evaluates the systemic impact of climate variations in a regional perspective using an interregional CGE model integrated with a physical model estimated for agriculture in order to catch the effects of climate change. The climate anomalies are estimated for 2005 and represent deviations over the historic trend. The results of this paper suggest that the economic costs of climate anomalies can be significantly underestimated if only partial equilibrium effects (direct impact/damage) are accounted for. The results show that a general equilibrium approach can provide a better comprehension about the systemic impact of climate anomalies, suggesting the economic costs are higher than those that would be observed in a partial equilibrium analysis. In addition, intersectoral and interregional linkages as well price effects seem to be important transmission channels in the context of systemic impact of climate anomalies.
    Keywords: climate anomalies, systemic impact, interregional CGE analysis
    JEL: Q54 R13
    Date: 2012–09–15
  31. By: Baez, Javier E. (World Bank); Kronick, Dorothy (World Bank); Mason, Andrew D. (World Bank)
    Abstract: This paper argues that climate change poses two distinct, if related, sets of challenges for poor rural households: challenges related to the increasing frequency and severity of weather shocks and challenges related to long-term shifts in temperature, rainfall patterns, water availability, and other environmental factors. Within this framework, we examine evidence from existing empirical literature to compose an initial picture of household-level strategies for adapting to climate change in rural settings. We find that although households possess numerous strategies for managing climate shocks and shifts, their adaptive capacity is insufficient for the task of maintaining – let alone improving – household welfare. We describe the role of public policy in fortifying the ability of rural households to adapt to a changing climate.
    Keywords: climate change, rural households, adaptation, risk-coping mechanisms, long-term effects
    JEL: Q12 Q54 O13
    Date: 2012–09
  32. By: Humberto Llavador; John E. Roemer; Joaquim Silvestre (Department of Economics, University of California Davis)
    Abstract: Sustainability has been largely replaced by discounted utilitarianism in contemporary climate-change economics. Our approach rejuvenates sustainability by expanding the conception of the quality of life, along the lines of the UN Human Development Reports, to include not only consumption, but also education, leisure, the stock of knowledge and the quality of the biosphere. We report on our results showing that the quality of life can be sustained forever at levels higher than present levels, while reducing GHG emissions to converge to carbon concentrations of 450 ppm. Here we repeat our optimization but substituting consumption for the quality of life. Our sustainability results carry over. As it should be expected, optimal consumption is higher when the objective is consumption rather than the quality of life, but not by much (7% higher). On the other hand, the stock of knowledge is twice as large, and education is four times as large. So if the “true” social welfare index were consumption, a planner who “mistakenly” maximized the quality of life would be making a relatively small error. But the converse error would be large. If the quality of life provides an appropriate welfare index, but the public policy aims at maximizing consumption, the quality of life would be reduced by 60%. The expansion of the concept of welfare beyond consumption renders possible responding to the climate-change challenge by moving away from energy-intensive commodities and towards less intensive ones, like knowledge, education, and leisure.
    Keywords: Sustainability, climate change, growth, GHG, CO2 emissions, quality of life, education, knowledge.
    JEL: D62 D63 D90 H41 O40 Q54 Q55 Q56 Q58
    Date: 2012–09–26

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