nep-ene New Economics Papers
on Energy Economics
Issue of 2012‒11‒24
27 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao, Spain

  1. The Energy Sector in Mediterranean and MENA Countries By Marcella Nicolini; Simona Porcheri
  2. Robust estimation and forecasting of the long-term seasonal component of electricity spot prices By Nowotarski, Jakub; Tomczyk, Jakub; Weron, Rafal
  3. Electricity Demand in Wholesale Italian Market By Simona Bigerna; Carlo Andrea BOLLINO
  4. On the role of international benchmarking of electricity Transmission System Operators facing significant investment requirements By Gert Brunekreeft
  5. Employment effects of regional climate policy: The case of renewable energy promotion by feed-in tariffs By Heindl, Peter; Voigt, Sebastian
  6. Optimal Recharging Strategy for Battery-Switch Stations for Electric Vehicles in France By Margaret Armstrong; Charles El Hajj Moussa; Alain Galli; Philippe Rivière; Jérôme Adnot
  7. Lead markets for clean coal technologies: A case study for China, Germany, Japan and the USA By Horbach, Jens; Chen, Qian; Rennings, Klaus; Vögele, Stefan
  8. Oil Price Shocks and Macroeconomy: The Role for Precautionary Demand and Storage By Rizvanoghlu, Islam
  9. Non-renewable resource prices. A robust evaluation from the stationarity perspective By Presno, María José; Landajo, Manuel; Fernández, Paula
  10. Austrian-style gasoline price regulation: How it may backfire By Obradovits, Martin
  11. Is bioenergy trade good for the environment? By Jean-Marc Bourgeon; Helene Ollivier
  12. Effects of biogas production on inter- and in-farm competition By Ostermeyer, Arlette; Schonau, Franziska
  13. Can we predict long-run economic growth? By Timothy J. Garrett
  14. Income and the pollution path: Update and extensions By Eugenio Figueroa B.; Roberto Pasten C.
  15. An integrated assessment model with endogenous growth By Hübler, Michael; Baumstark, Lavinia; Leimbach, Marian; Edenhofer, Ottmar; Bauer, Nico
  16. Constructing a regional Social Accounting Matrix using non survey method for CGE Modeling By Martana, Kadim; Evison, David; Lennox, James A.; Manley, Bruce
  17. The EU decarbonisation roadmap 2050: What way to walk? By Hübler, Michael; Löschel, Andreas
  18. Small forests owners and environmental sustainability in Guatemala: The potential of the Carbon Banking approach By Garcia-Barrios, Fernando; Bigsby, Hugh R.; Kerr, Geoffrey N.
  19. vestment Timing and Eco(nomic)-Efficiency of Climate-Friendly Investments in Supply Chains By Elmar Lukas; Andreas Welling
  21. Financial intermediaries and emissions trading market development and pricing strategies By Heindl, Peter
  22. The Carousel Value-added Tax Fraud in the European Emission Trading System By Maria Berrittella; Filippo Alessandro Cimino
  23. Mitigating market power under tradeable permits By Heindl, Peter
  24. The cost structure of the clean development mechanism By Rahman, Shaikh M.; Larson, Donald F.; Dinar, Ariel
  25. The clean development mechanism and technology transfer to China By Daniela Marconi; Francesca Sanna-Randaccio
  26. Spatial Climate-Economic Models in the Design of Optimal Climate Policies Across Locations By William A. Brock; Gustav Engström; Anastasios Xepapadeas
  27. 2C or Not 2C? By Céline Guivarch; Stéphane Hallegatte

  1. By: Marcella Nicolini (University of Pavia, and Fondazione Eni Enrico Mattei, Italy); Simona Porcheri (Fondazione Eni Enrico Mattei, Italy)
    Abstract: This paper describes the energy sector in the Mediterranean and MENA (Middle East and North Africa) countries. It first analyses the production of energy by fossil and renewable sources and discusses the increasing demand in the area and its consequences. It describes the policy frameworks to promote renewable energy as well as fossil-fuel subsidies, which are still abundant in the MENA area. It presents some avenues for integration across the Mediterranean and finally it discusses the implications of the Arab spring on energy production in the next future.
    Keywords: Energy, Mediterranean Countries, MENA Countries, Subsidies
    JEL: Q42 Q43 Q48
    Date: 2012–10
  2. By: Nowotarski, Jakub; Tomczyk, Jakub; Weron, Rafal
    Abstract: When building stochastic models for electricity spot prices the problem of uttermost importance is the estimation and consequent forecasting of a component to deal with trends and seasonality in the data. While the short-term seasonal components (daily, weekly) are more regular and less important for valuation of typical power derivatives, the long-term seasonal components (LTSC; seasonal, annual) are much more difficult to tackle. Surprisingly, in many academic papers dealing with electricity spot price modeling the importance of the seasonal decomposition is neglected and the problem of forecasting it is not considered. With this paper we want to fill the gap and present a thorough study on estimation and forecasting of the LTSC of electricity spot prices. We consider a battery of models based on Fourier or wavelet decomposition combined with linear or exponential decay. We find that all considered wavelet-based models are significantly better in terms of forecasting spot prices up to a year ahead than all considered sine-based models. This result questions the validity and usefulness of stochastic models of spot electricity prices built on sinusoidal long-term seasonal components.
    Keywords: Electricity spot price; Long-term seasonal component; Robust modeling; Forecasting; Wavelets
    JEL: C53 C45 Q47 C80
    Date: 2012–11–11
  3. By: Simona Bigerna; Carlo Andrea BOLLINO
    Abstract: In this paper we pursue two objectives: firstly we construct a theory based behavioral model of electricity demand in the Italian market; secondly we measure demand elasticity at hourly level, directly from consumer behavior. This is a novel approach providing the first attempt in the literature to estimate demand elasticity using individual demand bid data, in the Italian Power Exchange (IPEX). Econometric estimation allows us to identify robust results, showing that elasticity varies significantly with: time of the day; day of the week; season of the year; pattern of line congestion, as well as according to the level of equilibrium price. This has a policy implication: fostering more competition on the supply side could yield lower equilibrium prices and proportionately much higher quantities, for a lower offer curve, shifted to the right, would intersect a flatter portion of the demand curve.
    Date: 2012–10–15
  4. By: Gert Brunekreeft
    Abstract: Electricity networks currently face massive investment requirements. This paper argues that, given the investment requirements, (international) benchmarking is not an adequate tool for the regulation of transmission system operators (TSO). Errors in the outcomes of benchmarking will likely distort network investment and therefore the costs of doing it wrong are high. The paper discusses options to reduce the weight of benchmarking in TSO regulation and options that do not rely on benchmarking at all. Overall, facing massive investment requirements, it seems desirable to switch to a regulatory system with ex-ante investment approval and away from ex-post benchmarking.
    Keywords: electricity, network, regulation, benchmarking, uncertainty
    JEL: D42 G00 L51
    Date: 2012–10
  5. By: Heindl, Peter; Voigt, Sebastian
    Abstract: For the case of the German state of Baden-Wuerttemberg, production and employment effects of the promotion of renewable energy sources are examined based on a regionalized input-output table. Our findings suggest that policy actions promoting renewable energy types do not necessarily create new jobs and additional turnover for the whole economy. They rather induce a structural change of the economy since other investments might be crowded out by investments in installations of renewable energy and the demand in other sectors might decrease. However, if the producers of the installations are able to export parts of their products to the rest of Germany and/or the rest of the world, these crowding out effects can be attenuated and turnover and employment effects might be positive for the state in total. --
    Keywords: Renewable energy,Employment effects,Input output
    JEL: C67 Q42 R11
    Date: 2012
  6. By: Margaret Armstrong (CERNA - Centre d'économie industrielle - Mines ParisTech); Charles El Hajj Moussa (CERNA - Centre d'économie industrielle - Mines ParisTech); Alain Galli (CERNA - Centre d'économie industrielle - Mines ParisTech); Philippe Rivière (CEP - Centre Énergétique et Procédés - Mines ParisTech); Jérôme Adnot (CEP - Centre Énergétique et Procédés - Mines ParisTech)
    Abstract: Most papers that study the recharging of electric vehicles focus on charging the batteries at home and at the work-place. The alternative is for owners to exchange the battery at a specially equipped battery switch station (BSS). This paper studies strategies for the BSS to buy and sell the electricity through the day-ahead market. We determine what the optimal strategies would have been for a large fleet of EVs in 2010 and 2011, for the V2G and the G2V cases. These give the amount that the BSS should offer to buy or sell each hour of the day. Given the size of the fleet, the quantities of electricity bought and sold will displace the market equilibrium. Using the aggregate offers to buy and the bids to sell on the day-ahead market, we compute what the new prices and volumes transacted would be. While buying electricity for the G2V case incurs a cost, it is possible to generate revenue in the V2G case, if the arrivals of the EVs are evenly spaced during the day. We compare the total cost of implementing the strategies proposed with the cost of buying the same quantity of electricity from EDF.
    Keywords: day-ahead auction market; vehicle-to-grid; grid-to-vehicle
    Date: 2012–06–27
  7. By: Horbach, Jens; Chen, Qian; Rennings, Klaus; Vögele, Stefan
    Abstract: Despite the high CO2 emission intensity of fossil and especially coal fired energy production, these energy carriers will play an important role during the coming decades. The case study identifies the main technological trajectories concerning more efficient fossil fuel combustion and explores the potentials for lead markets for these technologies in China, Germany, Japan and the USA taking into account the different regulation schemes in these countries. We concentrate on technologies that have already left the demonstration phase. This is the case for supercritical (SC) and ultra-supercritical (USC) pulverized coal technologies that are already established. The analysis shows that the typical pattern of a stable lead market only applies to a limited extent. In the 1960s and 1970s, the USA has established a lead market for SC und USC technologies. In the meanwhile, Japan has surpassed the United States, although it started as a typical lag market. Japan has caught up in terms of supply factors, China in terms of price, demand and regulation advantage. This supports the hypothesis that - apart from the demand-oriented lead market model - push factors such as R&D activity play a strong role as well. The advantage of Japan mainly stems from its intensive R&D activities. It can also be observed that some other advantages - such as price and demand advantage - are shifting to China. China is practicing a leapfrogging strategy, and has already become a leader in the market segment of low and middle quality boilers, whereas Japan and Germany still dominate the world turbine market. The conclusion is that lead markets may switch over time to markets with high growth rates, although first mover advantages exist for some market segments such as turbines. First movers have a strong technological expertise which is important in the catching up process of late followers, and they may even profit from the growth in lag countries by exporting and cooperation activities. Thus international technology cooperation is a beneficial process for all involved parties. --
    Keywords: Lead Markets,Coal Power plants,Energy Technology,Energy Policy
    Date: 2012
  8. By: Rizvanoghlu, Islam
    Abstract: Traditional literature on energy economics gives a central role to exogenous political events (supply shocks) or to global economic growth (aggregate demand shock) in modeling the oil market. However, more recent literature claims that the increased precautionary demand for oil triggered by increased uncertainty about a future oil supply shortfall is also driving the price of oil. The intuition behind the precautionary demand is that since firms, using oil as an input in their production process, are concerned about the future oil prices, it is reasonable to think that in the case of uncertainty about future oil supply (such as a highly expected war in the Middle East), they will buy futures and/or forward contracts to guarantee a future price and quantity. We find that under baseline Taylor-type interest rate rule, real oil price, inflation and output loss overshoot and go down below steady state at the next period if uncertainties are not realized. However, if the shock is realized, i.e. followed by an actual supply shock, the effect on inflation and output loss is high and persistent.
    Keywords: oil price shocks; precautionary demand; storage
    JEL: E32 E52 Q43
    Date: 2011–12–01
  9. By: Presno, María José; Landajo, Manuel; Fernández, Paula
    Abstract: The bulk of the literature investigating persistence properties of non-renewable resource prices series has focused on application of unit root tests. This paper contributes to the debate, applying a methodology which allows (1) robust detection of the presence and (if so) the number of changes, (2) inference on stationarity of the series, and (3) estimation of change locations. In contrast to previous papers, the analysis is carried out from the perspective of stationarity testing, incorporating quadratic trends and the possibility of smooth changes. For a classical database, we find significant evidence of trend stationarity in most of the series, suggesting that shocks are mostly of a transitory nature. Exceptions are silver and natural gas, with stationarity being rejected for all the specifications considered in the paper. Finally, the knowledge of the stochastic characteristics of the series allows robust detection of change points which appear to be related to economic events.
    Keywords: non-renewable resource prices; structural changes; stationarity test; sequential procedure
    JEL: Q31 C12
    Date: 2012–11–09
  10. By: Obradovits, Martin
    Abstract: In January 2011, a price regulation was established in the Austrian gasoline market which prohibits firms from raising their prices more than once per day. Similar restrictions have been discussed in New York State and Germany. Despite their intuitive appeal, this article argues that Austrian-type policies may actually harm consumers. In a two-period duopoly model with consumer search, I show that in face of the regulation, firms will distort their prices intertemporally in such a way that their aggregate expected profit remains unchanged. This implies that, as some consumers find it optimal to delay their purchase due to expected price savings, but find it inconvenient to do so, a friction is introduced that decreases net consumer surplus in the market.
    Keywords: Price Regulation; Consumer Search; Price Dispersion; Intertemporal Search; Regulation; Austria
    JEL: L5 L13 D83
    Date: 2012–11–08
  11. By: Jean-Marc Bourgeon (Institut National de la Recherche Agronomique - INRA, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Helene Ollivier (ARE - Department of Agricultural and Resource Economics - University of California, Berkeley)
    Abstract: We analyze the impacts of bioenergy trade on greenhouse gas emissions using a two-good, three-factor model. Bioenergy is an agricultural good used as a substitute for fossil fuels in industry. Governments tax domestic pollution without international coordination. We assume that northern countries have higher labor productivity than southern ones and that agriculture is less pollution intensive than industry (after taxation). We show that whereas southern countries impose a lower tax rate than northern ones, they do not necessary have a competitive advantage in industry, and that compared to autarky, trade liberalization either increases or decreases worldwide emissions depending on regional comparative advantages.
    Keywords: Bioenergy; Intermediate product; North-South trade; Global pollution
    Date: 2012–04
  12. By: Ostermeyer, Arlette; Schonau, Franziska
    Abstract: Biogas production is one of the influential innovations of recent decades in German agriculture. Due to high guaranteed energy prices biogas production led to distortions in agricultural and land markets. This paper provides insights in effects of biogas production on farms, farm structures and rural areas for the region Altmark, Germany, for the period 2012-2026 by using the agent-based simulation model AgriPoliS. AgriPoliS enables to simulate agricultural structural change and impacts of policies based on a linear programming approach. To maximize the household-income, farm agents can invest, produce and compete against each other on the land rental market. To analyse effects of biogas production, biogas plants, possible substrate mixtures and feed-in remunerations are introduced in the model. In our analyses, we focus on 1) the choice of production of farms, 2) the competition between farms, and 3) impacts on rural areas including environmental issues and labour market. Our simulation results show that biogas production provides especially for farmers with high management capabilities and large farms a profitable income opportunity. On average, biogas farms cannot increase their profitability. As result of an increased value added through biogas production and high competition among farms, rental prices increase and thus a high share of the value added is transferred to the land owners. Biogas production leads to an intensification of land use, especially to increases in cultivation of grass and maize silage instead of meadows and other crops, and in livestock production. This may cause negative environmental effects. On the other hand both, the intensification and the biogas production have positive effects on the labour market as biogas farms have an additional workforce demand.
    Keywords: biogas production, agricultural production, agent-based model AgriPoliS, land rental prices, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  13. By: Timothy J. Garrett
    Abstract: For those concerned with the long-term value of their accounts, it can be a challenge to plan in the present for inflation-adjusted economic growth over coming decades. Here, I argue that there exists an economic constant that carries through time, and that this can help us to anticipate the more distant future: global economic wealth has a fixed link to civilization's overall rate of energy consumption from all sources; the ratio of these two quantities has not changed over the past 40 years that statistics are available. Power production and wealth rise equally quickly because civilization, like any other system in the universe, must consume and dissipate its energy reserves in order to sustain its current size. One perspective might be that financial wealth must ultimately collapse as we deplete our energy reserves. However, we can also expect that highly aggregated quantities like global wealth have inertia, and that growth rates must persist. Exceptionally rapid innovation in the two decades following 1950 allowed for unprecedented acceleration of inflation-adjusted rates of return. But today, real innovation rates are more stagnant. This means that, over the coming decade or so, global GDP and wealth should rise fairly steadily at an inflation-adjusted rate of about 2.2% per year.
    Date: 2012–11
  14. By: Eugenio Figueroa B.; Roberto Pasten C.
    Abstract: Searching for a behavioural explanation of the empirical occurrence of Environmental Kuznets Curve (EKC) the literature has usually assumed additive preferences, i.e. that the marginal utility of consumption does not depend on pollution levels. We update and extend previous literature on the EKC and show that the signing of the slope of the elasticity of substitution between consumption and environmental quality determines the occurrence of the EKC. This novel result does not require imposing restrictions on the sign of the cross-partial derivative of utility with respect to consumption and environmental quality. Under the assumption of a decreasing elasticity of substitution we derive a closed form of the EKC and show that this more general model encompasses as special cases most of the relevant EKC-generating models described in earlier literature.
    Date: 2012–11
  15. By: Hübler, Michael; Baumstark, Lavinia; Leimbach, Marian; Edenhofer, Ottmar; Bauer, Nico
    Abstract: We introduce endogenous directed technical change into numerical integrated climate and development policy assessment. We distinguish expenditures on innovation (R&D) and imitation (international technology spillovers) and consider the role of capital investment in creating and implementing new technologies. Our main contribution is to calibrate and numerically solve the model and to examine the model's sensitivity. As an application, we assess a carbon budget-based climate policy and vary the beginning of energy-saving technology transfer. Accordingly, China is a main beneficiary of early technology transfer. Herein, our results highlight the importance of timely international technology transfer for efficiently meeting global emission targets. Most of the consumption gains from endogenous growth are captured in the baseline. Moreover, mitigation costs turn out to be insensitive to changes in most of the parameters of endogenous growth. A higher effectivity of energy-specific relative to labor-specific expenditures on innovation and imitation reduces mitigation costs, though. --
    Keywords: endogenous growth,directed technical change,technology transfer,integrated assessment,carbon budget,China
    JEL: O11 O30 O44 O47 Q32
    Date: 2012
  16. By: Martana, Kadim; Evison, David; Lennox, James A.; Manley, Bruce
    Abstract: The Government of Indonesia is committed to cut its emissions by 26% by 2020. In forestry sector, this is done through reducing emissions from deforestation and forest degradation (REDD) program. One of several pilot activities of the REDD Program is the Berau Forest Carbon Program (BFCP) which is located in the Berau District East Kalimantan Indonesia. The Program attempts to generate behavioural changes of the forests stakeholders like forest-dependent community, forestry/logging company and oil palm plantation company to contribute to the emissions reduction, which is formulated in the Program‟s strategies. Changes of these behaviours are reflected in the costs being borne by the relevant forest stakeholders as well as the incentive rewarded for engaging in the programme. This paper focuses on the dataset preparation i.e. the Berau District Social Accounting Matrix for CGE modeling analysis of the above context. A non survey method was employed to generate the regional accounts and was it combined with available data as well as experts‟ estimates.
    Keywords: Demand and Price Analysis, Environmental Economics and Policy, Land Economics/Use,
    Date: 2012–08
  17. By: Hübler, Michael; Löschel, Andreas
    Abstract: We carry out a detailed CGE (Computable General Equilibrium) analysis of the EU Decarbonisation Roadmap 2050 on a macroeconomic and on a sectoral level. Herein, we study a Reference scenario that implements existing EU policies as well as 3 unilateral and 3 global climate action scenarios. We identify global climate action with international emissions trading and the ful l equalization of CO2 prices across all (EU) sectors as a reasonable policy option to avoid additional costs of the Decarbonisation Roadmap to a large extent. This policy option may include CDM (Clean Development Mechanism in the sense of 'where'-flexibility) in an extended form if there are countries without emissions caps. Moreover, we identify diverse sectoral effects in terms of output, investment, emissions and international competitiveness. We conclude that the successful realization of the EU Decarbonisation Roadmap probably requires a wise and joint consideration of technology, policy design and sectoral aspects. --
    Keywords: EU,Decarbonisation Roadmap,Copenhagen Pledges,post Kyoto,energy-intensive sectors,competitiveness,leakage
    JEL: C68 F18 Q43 Q54
    Date: 2012
  18. By: Garcia-Barrios, Fernando; Bigsby, Hugh R.; Kerr, Geoffrey N.
    Abstract: Forest carbon is potentially an important income stream for small land owners in Guatemala that would help to cease deforestation and forest degradation pressures. However, the temporary nature of sequestered forest carbon, the risk of environmental disturbances releasing forest sequestered carbon, and the form of international carbon markets affect the ability of small forest owners to participate in carbon trading schemes. This paper reports the results of an investigation into the stability of carbon pools formed by small forest owners in Guatemala, accounting for forest fire risk and the effects on implementation of a carbon banking approach
    Keywords: Agribusiness, Community/Rural/Urban Development, Environmental Economics and Policy, Land Economics/Use, Production Economics,
    Date: 2012–08
  19. By: Elmar Lukas (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Andreas Welling (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Emission trading schemes like the European Union Emissions Trading System (EUETS) try to reconcile economic efficiency and ecological efficiency by creating financial incentives for companies to invest in climate-friendly innovations. Using real options methodology we demonstrate that under uncertainty economic and ecological efficiency are still mutually exclusive. This problem is even tightened if a climate-friendly project depends on investments of a whole supply chain. We model a sequential bargaining game in a supply chain where the parties negotiate about the implementation of a carbon dioxide (CO2) saving investment project. We show that the outcome of their bargaining is not economic efficient and even less ecological efficient. Furthermore, we can show that a supply chain is getting less economic efficient and less ecological efficient with every additional chain link. Finally, we give recommendations how managers or politicians could improve the situation and thereby increase the economic as well as the ecological efficiency of supply chains.
    Keywords: Emission trading, Optimal investment timing, Real options, Game theory, Supply chain management, Eco-efficiency
    JEL: G34 D81 M11
    Date: 2012–10
  20. By: Engel, Anna-Maria; Wegener, Jens Karl; Lange, Marco; Schaper, Christian
    Abstract: Im internationalen Wettbewerb gewinnt die Bilanzierung von CO2e-Emissionen in Unter-nehmen immer mehr an Bedeutung. Klimalabel bieten Unternehmen dabei die Möglichkeit, die Reduktion von CO2e-Emissionen entlang der Wertschöpfungskette ihrer Produkte an den Konsumenten zu kommunizieren. Durch den Kauf klimagelabelter Produkte können diese die unternehmerischen Klimaschutzaktivitäten unterstützen und nehmen somit aktiv am Klima-schutz teil. In den letzten Jahren hat sich eine Vielzahl von Klimalabeln und -programmen am Markt entwickelt. Da es noch keine international einheitlichen Methoden zur Analyse, Re-duktion und Kompensation von CO2e-Emissionen gibt, unterscheiden sich diese hinsichtlich der Anwendung der Standards, der Validierung, Verifizierung, Zertifizierung und der Carbon Credits. Ziel der vorliegenden Studie ist es, die verschiedenen am Markt befindlichen Klima-label und -programme anhand der genannten Unterschiede zu analysieren und zu vergleichen. Datengrundlage bildet eine Umfrage unter 19 internationalen Anbietern von Klimalabel und -programmen. Die Analyse zeigte, dass deutliche Unterschiede bei der Ausgestaltung der In-halte bzw. der Qualität der einzelnen Programme bestehen. Zur Erhöhung der Transparenz von Klimalabeln müssen international einheitliche Standards für die Bilanzierung und Kom-pensation von CO2e-Emissionen, deren Auszeichnung und Kontrolle entwickelt werden.
    Keywords: Carbon Credit, Klimalabel, Kompensation, CO2e-Emissionen, Zertifizierung, Carbon Credit, carbon label, compensation, greenhouse gas emissions, certification, Environmental Economics and Policy,
    Date: 2012
  21. By: Heindl, Peter
    Abstract: This paper examines the role of intermediaries in quantity regulation theoretically and presents a data application to the EU Emissions Trading Scheme (EU ETS). The choice of regulated firms to trade permits through intermediaries or directly at the exchange is discussed. Permit pricing strategies of intermediaries and possible issues of market power of intermediaries are modeled. Based on empirical data, the model application aims to assess the actual costs (fees, fixed costs) from permit trading, which represent costs of transacting. In a competitive setup, costs are relatively modest with about 1% to 2% of the permit price. In the EU ETS, firms that trade more than 283,000t CO2/year are likely to directly access the exchange while others trade with intermediaries. In the unlikely event of an intermediary having market power, overall costs would be six times higher in the model application. Options for regulated firms to access a permit exchange directly at low costs decrease the costs of transacting considerably in a competitive and non-competitive intermediary market. --
    Keywords: permit trading,financial intermediaries,market power
    JEL: Q52 D42 D21
    Date: 2012
  22. By: Maria Berrittella (Dipartimento di Scienze Economiche, Aziendali e Finanziarie, Università degli Studi di Palermo); Filippo Alessandro Cimino (Facoltà di Scienze Economiche e Giuridiche, Università Kore di Enna)
    Abstract: In this article, we analyse the effects of the carousel value-added tax fraud in the European carbon market and the legislative measures that the EU Member States could adopt to deal with this phenomena. We use a computable general equilibrium model, called GTAP-E and the version 6 of the GTAP database to evaluate the economy-wide and terms of trade effects. The policy test has been designed for five European countries: Belgium, France, Germany, Italy, Netherlands and the United Kingdom. According to our findings, the legislative measures aimed to remove the VAT fraud in the European Emission Trading System will have positive effects in terms of GDP and welfare in the selected EU Member States.
    Keywords: Domestic Emission Trading, General Equilibrium Analysis, Legislative Measures, Value-added Tax Fraud, Welfare
    JEL: C68 H26 K34 Q58
    Date: 2012–10
  23. By: Heindl, Peter
    Abstract: As shown by R. Hahn [6], free allocation equal to the amount of permits a firm with market power uses in equilibrium, can prevent welfare losses. If the necessary amount of free allocation is not provided to the firm with market power, a second best solution is obtained where marginal abatement costs of regulated firms are not equated. In this paper, it is proposed that the government may change the economy wide emissions constraint (cap) as a response to market power, e.g. when free allocation cannot be adjusted. Changing the cap can lead to a situation where marginal abatement costs are equated in the presence of market power. Because changing the cap will lead to changes of social welfare, both effects must be balanced. It is shown that there exists a second best social optimum by balancing the positive effect of limiting market power and the negative effect of changing the cap. --
    Keywords: Tradeable Permits,Market Power,Environmental Regulation
    JEL: Q53 L12 D21
    Date: 2012
  24. By: Rahman, Shaikh M.; Larson, Donald F.; Dinar, Ariel
    Abstract: This paper examines the cost of producing emission reduction credits under the Clean Development Mechanism. Using project-specific data, cost functions are estimated using alternative functional forms. The results show that, in general, the distribution of projects in the pipeline does not correspond exclusively to the cost of generating anticipated credits. Rather, investment choices appear to be influenced by location and project type considerations in a way that is consistent with variable transaction costs and investor preferences among hosts and classes of projects. This implies that comparative advantage based on the marginal cost of abatement is only one of several factors driving Clean Development Mechanism investments. This is significant since much of the conceptual and applied numerical literature concerning greenhouse gas mitigation policies relies on presumptions about relative abatement costs. The authors also find that Clean Development Mechanism projects generally exhibit constant or increasing returns to scale. In contrast, they find variations among classes of projects concerning economies of time.
    Keywords: Climate Change Economics,Climate Change Mitigation and Green House Gases,Energy Production and Transportation,Transport Economics Policy&Planning,Energy and Environment
    Date: 2012–11–01
  25. By: Daniela Marconi (Banca d'Italia); Francesca Sanna-Randaccio (Sapienza University of Rome)
    Keywords: Technology transfer, CDM, climate change, China, FDI
    JEL: F23 Q55 Q56 A A
    Date: 2012–09
  26. By: William A. Brock (Department of Economics, University of Wisconsin); Gustav Engström (The Beijer Institute of Ecological Economics and University of Stockholm); Anastasios Xepapadeas (Athens University of Economics and Business)
    Abstract: We couple a one-dimensional energy balance climate model with heat transportation across latitudes, with an economic growth model. We derive temperature and damage distributions across locations and optimal taxes on fossil fuels which, in contrast to zero-dimensional Integrated Assessment Models, account for cross latitude externalities. We analyse the impact of welfare weights on the spatial structure of optimal carbon taxes and identify conditions under which these taxes are spatially nonhomogeneous and are lower in latitudes with relatively lower per capita income populations. We show the way that heat transportation affects local economic variables and taxes, and locate sufficient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time.
    Keywords: One-dimensional Energy Balance Model, Heat Transport, Latitudes, Temperature Distribution, Damage Distribution, Social Planner, Competitive Equilibrium, Local Welfare Weights, Optimal Taxes
    JEL: Q54 Q58 R11
    Date: 2012–10
  27. By: Céline Guivarch (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - AgroParisTech); Stéphane Hallegatte (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - AgroParisTech, CNRM-GAME - Groupe d'étude de l'atmosphère météorologique - CNRS : URA1357 - INSU - Météo France)
    Abstract: Political attention has increasingly focused on limiting warming to 2°C. However, there is no consensus on both questions "Is the 2°C target achievable?" and "What should be done with this target that becomes increasingly difficult to achieve?". This paper aims at disentangling the points of deep uncertainty underlying this absence on consensus. It first gives simple visualizations of the challenge posed by the 2°C target and shows how key assumptions (on the points of deep uncertainty) influence the answer to the target achievability question. It then proposes an "uncertainties and decisions tree", linking different beliefs on climate change, the achievability of different policies, and current international policy dynamics to various options to move forward on climate change.
    Keywords: feasibility of 2°C target, climate change negotiations, deep uncertainty
    Date: 2012–11–09

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