nep-ene New Economics Papers
on Energy Economics
Issue of 2013‒06‒16
39 papers chosen by
Roger Fouquet
Basque Climate Change Centre, Bilbao

  1. Income Elasticity of Gasoline Demand: A Meta-Analysis By Tomas Havranek; Ondrej Kokes
  2. What Central Bankers Need to Know about Forecasting Oil Prices By Christiane Baumeister; Lutz Kilian
  3. Development Trajectories, Emission Profile, and Policy Actions: Singapore By Doshi, Tilak K.; D’Souza, Neil Sebastian
  4. Climate policy, Interconnection and Carbon Leakage: the Effect of Unilateral UK Policy on Electricity and GHG Emissions in Ireland By Curtis, John A.; di Cosmo, Valeria; Deane, Paul
  5. California Energy Efficiency: Lessons for the Rest of the World, or Not? By Arik Levinson
  6. Flexibility in Europe's Power Sector - an Additional Requirement or an Automatic Complement? By Bertsch, Joachim; Growitsch, Christian; Lorenczik, Stefan; Nagl, Stephan
  7. Import demand and renewable energy generation in 26 countries By Andrea Vaona
  8. Projecting Long-Term Primary Energy Consumption By Zsuzsanna Csereklyei; Stefan Humer
  9. Bottom-Up Strategic Linking of Carbon Markets: Which Climate Coalitions Would Farsighted Players Form? By Jobst Heitzig
  10. Control Power and Variable Renewables A Glimpse at German Data By Lion Hirth; Inka Ziegenhagen
  11. Political determinants of fossil fuel pricing By van Beers, Cees; Strand, Jon
  12. International Trade, Emissions Trading Systems, and Sectorally Differentiated Environmental Regulations (Japanese) By TAKARADA Yasuhiro
  13. Electricity consumption-GDP nexus: A structural time series analysis By Muhammad, Javid; Abdul, Qayyum
  14. Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme By Ralf Martin; Mirabelle Muûls; Laure B. de Preux; Ulrich J. Wagner
  15. Mitigation and Solar Radiation Management in Climate Change Policies By Vasiliki Manousi; Anastasios Xepapadeas
  16. Assessing the CAP influence on European farmers’ preferences towards the adoption of renewable energy production. By Giannoccaro, Giacomo; Bartolini, Fabio; Raggi, Meri; Viaggi, Davide
  17. Futures Price Volatility in Commodities Markets: The Role of Short Term vs Long Term Speculation By Matteo Manera; Marcella Nicolini
  18. Energy Intensity Developments in 40 Major Economies: Structural Change or Technology Improvement? By Enrica De Cian; Michael Schymura; Elena Verdolini; Sebastian Voigt
  19. Linking price and quantity pollution controls under uncertainty By Wood, Peter J.; Heindl, Peter; Jotzo, Frank; Löschel, Andreas
  20. Evaluating the Global Role of Woody Biomass as a Mitigation Strategy By Alice Favero, Yale University, FEEM and CMCC; Robert Mendelsohn
  21. Long Term Trends in Steel Consumption By Roland Döhrn; Karoline Krätschell
  22. Variation and links among food and energy international prices. An analysis through VAR models from 2000 to 2012. By Leucci, A. C.; Ghinoi, S.; Sgargi, D.; Wesz Junior, V. J.
  23. Static vs. dynamic impacts of unbundling: Electricity markets in South America By Schober, Dominik
  24. Public Procurement of Homogeneous Goods: the Czech Republic Case Study By Jiri Skuhrovec
  25. The energy-bias of North-South technology spillovers: A global, bilateral, bisectoral trade analysis By Hübler, Michael; Glas, Alexander
  26. Forecasting Day-Ahead Electricity Prices: Utilizing Hourly Prices By Eran Raviv; Kees E. Bouwman; Dick van Dijk
  27. Oil Price Uncertainty and Sovereign Risk: Evidence from Asian Economies By Susan S Sharma; Kannan Thuraisamy
  28. Driving Restrictions That Work? Quito's Pico y Placa Program By Paul E. Carrillo; Arun S. Malik; Jiseon Yoo
  29. Calculating the carbon footprint from different classes of air travel By Bofinger, Heinrich; Strand, Jon
  30. Modeling and Forecasting the Volatility of Energy Forward Returns - Evidence from the Nordic Power Exchange By Asger Lunde; Kasper V. Olesen
  31. Capital-Labor-Energy Substitution in Nested CES Production Functions for China By Keting Shen; John Whalley
  32. Neighbors, Knowledge, and Nuggets: Two Natural Field Experiments on the Role of Incentives on Energy Conservation By Paul Dolan; Robert Metcalfe
  33. A cross-country analysis of electricity market reforms: Potential contribution of New Institutional Economics By Erdogdu, Erkan
  34. Structural versus Behavioral Remedies in the Deregulation of Electricity Markets: An Experimental Investigation Guided by Theory and Policy Concerns. By Silvester van Koten; Andreas Ortmann
  35. Measuring Environmental Regulatory Stringency By Claire Brunel and Arik Levinson
  36. Did Fukushima matter? Empirical evidence of the demand for climate protection in Germany By Gallier, Carlo; Löschel, Andreas; Sturm, Bodo
  37. Do bilateral commercial relationships influence the distribution of CDM projects? By Valeria Costantini; Giorgia Sforna
  38. Night-Time Light Data: A Good Proxy Measure for Economic Activity? By Mellander, Charlotta; Stolarick, Kevin; Matheson, Zara; Lobo, José
  39. Les institutions françaises de la sûreté nucléaire : un point de vue historique et ethnographique By Grégory Rolina

  1. By: Tomas Havranek (Czech National Bannk); Ondrej Kokes (University of Cambridge)
    Abstract: In this paper we quantitatively synthesize empirical estimates of the income elasticity of gasoline demand reported in previous studies. The studies cover many countries and report a mean elasticity of 0.28 for the short run and 0.66 for the long run. We show, however, that these mean estimates are biased upwards because of publication bias—the tendency to suppress negative and insignificant estimates of the elasticity. Using mixed-effects multilevel meta-regression we filter out publication bias from the literature. Our results suggest that the income elasticity of gasoline demand is smaller than commonly thought: the corrected estimate is 0.1 for the short run and 0.46 for the long run.
    Keywords: Gasoline, income elasticity, publication bias, meta-analysis
    JEL: C83 Q41
    Date: 2013–04
  2. By: Christiane Baumeister; Lutz Kilian
    Abstract: Forecasts of the quarterly real price of oil are routinely used by international organizations and central banks worldwide in assessing the global and domestic economic outlook, yet little is known about how best to generate such forecasts. Our analysis breaks new ground in several dimensions. First, we address a number of econometric and data issues specific to real-time forecasts of quarterly oil prices. Second, we develop real-time forecasting models not only for U.S. benchmarks such as West Texas Intermediate crude oil, but we also develop forecasting models for the price of Brent crude oil, which has become increasingly accepted as the best measure of the global price of oil in recent years. Third, we design for the first time methods for forecasting the real price of oil in foreign consumption units rather than U.S. consumption units, taking the point of view of forecasters outside the United States. In addition, we investigate the costs and benefits of allowing for time variation in vector autoregressive (VAR) model parameters and of constructing forecast combinations. We conclude that quarterly forecasts of the real price of oil from suitably designed VAR models estimated on monthly data generate the most accurate forecasts among a wide range of methods including forecasts based on oil futures prices, no-change forecasts and forecasts based on regression models estimated on quarterly data.
    Keywords: Econometric and statistical methods; International topics
    JEL: Q43 C53 E32
    Date: 2013
  3. By: Doshi, Tilak K. (Asian Development Bank Institute); D’Souza, Neil Sebastian (Asian Development Bank Institute)
    Abstract: Singapore is the most industrialized and urbanized country in Southeast Asia and is totally dependent on oil and natural gas imports to satisfy its energy needs. Its national energy policy framework seeks to find a balance between maintaining Singapore’s competitiveness, improving energy security, and enhancing environmental sustainability. This paper discusses where Singapore stands with regard to its energy consumption and CO2 emissions, its energy policies to date, and those that will be implemented in the near future.
    Keywords: singapore; energy policy; energy consumption; co2 emissions; energy security; environmental sustainability
    JEL: O53 Q38 Q40 Q48
    Date: 2013–05–30
  4. By: Curtis, John A.; di Cosmo, Valeria; Deane, Paul
    Abstract: This paper examines the effect on Ireland's Single Electricity Market (SEM) of the UK's unilateral policy to implement a carbon price floor for electricity generation based on fossil-fuel. We simulate electricity markets and find that, subject to efficient use of the interconnectors between the two markets, a carbon price floor will lead to carbon leakage, with associated emissions in the Republic of Ireland increasing by 8% and SEM's electricity prices increasing by 2.4%. As the carbon price floor does not affect the number of ETS allowances no change is anticipated in aggregate European emissions. We also find that the EU's proposal to postpone ETS allowance auctions will reduce Irish emissions somewhat but that the trade opportunities associated with the UK carbon price floor means that emissions reductions in Ireland will be lower than might have been otherwise. A carbon price floor will result in substantial tax revenues and had the carbon price floor been implemented in Northern Ireland the larger share of taxes remitted would be paid by Republic of Ireland customers within the SEM. A carbon price floor in the Republic of Ireland is a potential policy option that would generate revenues in excess of ?250 million but associated electricity prices increases in excess of 17% would have significant negative welfare and competitiveness effects.
    Date: 2013–06
  5. By: Arik Levinson
    Abstract: Starting in the 1970s California's residential electricity consumption per capita stopped increasing, while other states' electricity use continued to grow steadily. Similar patterns can be seen in non-electric energy, industry, and transportation. What accounts for California's apparent energy savings? Some credit the strict energy efficiency standards for buildings and appliances enacted by California in the mid-1970s. They argue that other states and countries could replicate California's gains, and that California should build on its own success by tightening those standards further. Skeptics might point to three long-run trends that differentiate California's electricity demand from other states: (1) shifting of the U.S. population towards warmer climates of the South and West; (2) relatively small income elasticity of energy demand in California's temperate climate; and (3) evolving differences between the demographics of households in California and other states. Together, these trends account for around 90 percent of California's apparent residential electricity savings, thus providing no lessons for other states or countries considering adopting or tightening their energy efficiency standards.
    JEL: Q4
    Date: 2013–06
  6. By: Bertsch, Joachim (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Growitsch, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Lorenczik, Stefan (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Nagl, Stephan (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: By 2050, the European Union aims to reduce greenhouse gases by more than 80 %. The EU member states have therefore declared to strongly increase the share of renewable energy sources (RES-E) in the next decades. Given a large deployment of wind and solar capacities, there are two major impacts on electricity systems: First, the electricity system must be flexible enough to cope with the volatile RES-E generation, i.e., ramp up supply or ramp down demand on short notice. Second, sufficient back-up capacities are needed during times with low feed-in from wind and solar capacities. This paper analyzes whether there is a need for additional incentive mechanisms for flexibility in electricity markets with a high share of renewables. For this purpose, we simulate the development of the European electricity markets up to the year 2050 using a linear investment and dispatch optimization model. Flexibility requirements are implemented in the model via ramping constraints and provision of balancing power dependent of current renewables feed-in. We fi nd that an increase in fluctuating renewables has a tremendous impact on the volatility of the residual load and consequently on the flexibility requirements. However, any market design that incentivizes investments in least (total system) cost generation investment does not need additional incentives for flexibility. The main trigger for investing in flexible resources are the achievable full load hours and the need for backup capacity. In a competitive market, the cost-efficient technologies that are most likely to be installed, i.e.,gas- red power plants or flexible CCS plants, provide flexibility as a by-product. Under the condition of system adequacy, flexibility never poses a challenge in a cost-minimal capacity mix. Therefore, any market design incentivizing investments in efficient generation thus provides flexibility as an automatic complement.
    Keywords: Electricity; power plant fleet optimization; renewable energy; flexibility; market design
    JEL: C61 C63 Q40
    Date: 2013–06–06
  7. By: Andrea Vaona (Department of Economics (University of Verona))
    Abstract: In the present paper the link between renewable energy generation and imports dynamics is explored in import demand equations. We find that renewable energy generation reduces import growth. Results display a considerable robustness.
    Keywords: renewable energy generation, import demand, panel data, Thirlwall law
    JEL: F10 Q20 Q43 C23
    Date: 2013–05
  8. By: Zsuzsanna Csereklyei (Department of Economics, Vienna University of Economics and Business); Stefan Humer (Department of Economics, Vienna University of Economics and Business)
    Abstract: In this paper we use the long-term empirical relationship among primary energy consumption, real income, physical capital, population and technology, obtained by averaged panel error correction models, to project the long-term primary energy consumption of 56 countries up to 2100. In forecasting long-term primary energy consumption, we work with four different Shared Socioeconomic Pathway Scenarios (SSPs) developed for the Intergovernmental Panel on Climate Change (IPCC) framework, assuming different challenges to adaptation and mitigation. We find that in all scenarios, China, the United States and India will be the largest energy consumers, while highly growing countries will also significantly contribute to energy use. We observe for most scenarios a sharp increase in global energy consumption, followed by a levelling-out and a decrease towards the second half of the century. The reasons behind this pattern are not only slower population growth, but also infrastructure saturation and increased total factor productivity. This means, as countries move towards more knowledge based societies, and higher energy efficiency, their primary energy usage is likely to decrease as a result. Global primary energy consumption is expected however to increase significantly in the coming decades, thus increasing the pressure on policy makers to cope with the questions of energy security and greenhouse gas mitigation at the same time.
    Keywords: Primary Energy Demand, Projections, Panel Cointegration, Model Averaging
    JEL: C53 Q43 Q47
    Date: 2013–05
  9. By: Jobst Heitzig (Potsdam Institute for Climate Impact Research, Transdisciplinary Concepts and Methods)
    Abstract: We present typical scenarios and general insights from a novel dynamic model of farsighted climate coalition formation involving market linkage and cap coordination, using a simple analytical model of the underlying cost-benefit structure. In our model, the six major emitters of CO2 can link domestic cap-and-trade systems to form one or several international carbon markets, and can either choose their emissions caps non-cooperatively or form a hierarchy of cap-coordinating coalitions inside each market. Based on individual and collective rationality and an assumed distribution of bargaining power, we derive scenarios of such a climate coalition formation process which show that a first-best state with a coordinated global carbon market might well emerge bottom-up, and underline the importance of coordinating caps immediately when linking carbon markets. Surprisingly, the process tends to involve less uncertainty when agreements can be terminated unanimously or unilaterally, depending on the level of farsightedness.
    Keywords: Climate Policy, International Environmental Agreements, Cap and Trade, Coalition Formation, Farsightedness
    JEL: D85 Q5
    Date: 2013–05
  10. By: Lion Hirth (Vattenfall GmbH, Potsdam-Institute for Climate Impact Research); Inka Ziegenhagen (Vattenfall GmbH, University of Leipzig)
    Abstract: Control power (regulating power, balancing power) is used to quickly restore the supply-demand balance in power systems. Variable renewable energy sources (VRE) such as wind and solar power are often thought to increase the reserve requirement significantly. This paper provides a comprehensive overview of balancing systems in Europe, discusses the role of VRE, and presents empirical market data from Germany. Despite German VRE capacity doubled during the last five years and has surpassed 70% of peak load, contracted control power decreased by 20%, and procurement cost fell by 50%. Today, control power adds only 0.4% to household electricity prices. Nevertheless, we identify several sources of inefficiency in control power markets and imbalance settlement systems and propose a number of policy changes to stimulate the participation of VRE in control provision and to improve the incentives to forecast accurately.
    Keywords: Balancing power; Control Power; Variable renewables; Wind power; Solar power; Market design
    JEL: Q42 Q48 L94 D62
    Date: 2013–05
  11. By: van Beers, Cees; Strand, Jon
    Abstract: This paper provides an empirical analysis of economic and political determinants of gasoline and diesel prices for about 200 countries over the period 1991-2010. A range of both political and economic variables are found to systematically influence fuel prices, and in ways that differ systematically with countries’ per-capita income levels. For democracies, the analysis finds that fuel prices correlate positively with both duration of democracy and tenure of democratic leaders. In non-democratic societies there is more often no such relationship or it is the opposite of that for democracies. Regime switches -- transitions from non-democratic to democratic government, or vice versa -- reduce fuel prices. Fuel prices are also lower for more corrupt, or more centralized, governments. Higher levels of gross domestic product per capita lead to higher fuel prices, while export income from selling fossil fuels reduces these prices dramatically. Higher motor fuel consumption also appears to reduce fuel prices, most for gasoline. Absolute"pass-through"of crude oil price changes to fuel prices is found to be high on average.
    Keywords: Energy Production and Transportation,Transport Economics Policy&Planning,Economic Theory&Research,Emerging Markets,Transport and Environment
    Date: 2013–05–01
  12. By: TAKARADA Yasuhiro
    Abstract: This paper examines the welfare effects of the enforcement of emissions trading systems when the government initially imposes sectorally differentiated environmental regulations. The implementation of emissions trading is generally considered to be welfare enhancing because it equalizes the marginal abatement costs between sectors. First, contrary to conventional wisdom, we find that a small open economy is harmed by the enforcement of emissions trading if there is a reasonable relation between the import tariff rate (pollution content tariff) and the initial disparity of environmental regulations across sectors. To avoid welfare deterioration, the government should decrease the import tariff in accordance with mitigation of the sectoral difference in regulations through emissions trading. Our result suggests that the enforcement of emissions trading systems should be accompanied by trade liberalization. Second, in a two-country model, we show that international emissions trading may harm the home country that implements sectorally differentiated environmental regulations and buys emission permits but benefits the foreign country that implements uniform environmental regulations and sells emission permits, if the home country exports clean goods and the foreign country exports pollution intensive goods. The home country may lose from permit trading because its terms of trade deteriorate through changes in production caused by permit trading. This result suggests that a country with sectorally differentiated country should purchase emission permits at a sufficiently low price to benefit from international emission trading.
    Date: 2013–06
  13. By: Muhammad, Javid; Abdul, Qayyum
    Abstract: This study investigates the relationships among electricity consumption, real economic activity, real price of electricity and the underlying energy demand trend UEDT at the aggregate and sectoral levels, namely, for the residential, commercial, industrial, and agricultural sectors. To achieve this goal, an electricity demand function for Pakistan is estimated by applying the structural time series technique to annual data for the period from 1972 to 2010. In addition to identifying the size and significance of the price and income elasticities, this technique also uncovers UEDT for the whole economy as well as for sub-sectors. The results suggest that the nature of the trend is not linear and deterministic but stochastic in form. The UEDT for the electricity usage of the commercial, agricultural and residential sectors shows an upward slope. This upward slope of the UEDT suggests that either energy efficient equipment has not been introduced in these sectors or any energy efficiency improvements due to technical progress is outweighed by other exogenous factors.
    Keywords: Electricity; STSM; UEDT;
    JEL: Q4 Q41
    Date: 2013
  14. By: Ralf Martin; Mirabelle Muûls; Laure B. de Preux; Ulrich J. Wagner
    Abstract: When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon intensive and trade exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensation.
    JEL: F18 H23 H25 Q52 Q54
    Date: 2013–06
  15. By: Vasiliki Manousi (Department of International and European Economic Studies, Athens University of Economics and Business); Anastasios Xepapadeas (Department of International and European Economic Studies, Athens University of Economics and Business)
    Abstract: We couple a spatially homogeneous energy balance climate model with an economic growth model which incorporates two potential policies against climate change: mitigation, which is the traditional policy, and geoengineering. We analyze the optimal policy mix of geoengineering and mitigation in both a cooperative and a noncooperative framework, in which we study open loop and feedback solutions. Our results suggests that greenhouse gas accumulation is relatively higher when geoengineering policies are undertaken, and that at noncooperative solutions incentives for geoengineering are relative stronger. A disruption of geoengineering efforts at a steady state will cause an upward jump in global temperature.
    Keywords: Climate Change, Mitigation, Geoengineering, Cooperation, Differential Game, Open Loop - Feedback Nash Equilibrium
    JEL: Q53 Q54
    Date: 2013–05
  16. By: Giannoccaro, Giacomo; Bartolini, Fabio; Raggi, Meri; Viaggi, Davide
    Abstract: Despite a large literature about energy production from renewable resources, the specific interplay between farm characteristics, market, local regulation and the CAP in the adoption of energy-related technologies by farmers is still poorly studied. This paper aims at analyzing the farmers’ intentions towards the on-farm adoption of energy crops or technologies for renewable energy production under alternative policy scenarios. The analysis is based on the econometric analysis of adoption intentions by a sample of more than 2,300 farm-households interviewed in nine European countries. Stated intentions towards the willingness to adopt energy crops/technology for renewable energy production, are expressed firstly under a scenario with the current CAP post 2013 (Baseline) and secondly under a scenario with the complete abolishment of the CAP support (No CAP). The study confirms that the CAP influences farmers’ decision on the adoption of energy crops/technologies for renewable energy production in the next years. Other relevant variables are farm typology specializations, size of owned and rented land and farmer’s education and advices. Moreover, scenario effects seem to be uneven among European States likely due to the interconnected effects with national renewable energy market and regulation.
    Keywords: Common Agricultural Policy, renewable energy, technology adoption, farmer’s behavior, econometric analysis, Agricultural and Food Policy, Environmental Economics and Policy, Farm Management, Q18, Q10,
    Date: 2013–06
  17. By: Matteo Manera (University of Milan-Bicocca, Milan, and Fondazione Eni Enrico Mattei, Milan); Marcella Nicolini (University of Pavia, Pavia, and Fondazione Eni Enrico Mattei, Milan)
    Abstract: This paper evaluates how different types of speculation affect the volatility of commodities’ futures prices. We adopt four indexes of speculation: Working’s T, the market share of non-commercial traders, the percentage of net long speculators over total open interest in future markets, which proxy for long term speculation, and scalping, which proxies for short term speculation. We consider four energy commodities (light sweet crude oil, heating oil, gasoline and natural gas) and seven non-energy commodities (cocoa, coffee, corn, oats, soybean oil, soybeans and wheat) over the period 1986-2010 analyzed at weekly frequency. Using GARCH models we find that speculation significantly affects volatility of returns: short term speculation has a positive and significant impact on volatility, while long term speculation generally has a negative effect. The robustness exercise shows that: i) scalping is positive and significant also at higher and lower data frequencies; ii) results remain unchanged through different model specifications (GARCH-in-mean, EGARCH, and TARCH); iii) results are robust to different specifications of the mean equation.
    Keywords: Commodities Futures Markets, Speculation, Scalping, Working’s T, Data Frequency, GARCH Models
    JEL: C32 G13 Q11 Q43
    Date: 2013–05
  18. By: Enrica De Cian (Fondazione Eni Enrico Mattei (FEEM) and CMCC); Michael Schymura (Centre for European Economic Research (ZEW)); Elena Verdolini (Fondazione Eni Enrico Mattei (FEEM) and CMCC); Sebastian Voigt (Centre for European Economic Research (ZEW))
    Abstract: This study analyzes energy intensity trends and drivers in 40 major economies using the WIOD database, a novel harmonized and consistent dataset of input-output table time series accompanied by environmental satellite data. We use logarithmic mean Divisia index decomposition to (1) study trends in global energy intensity between 1995 and 2007, (2) attribute efficiency changes to either changes in technology or changes in the structure of the economy, and (3) highlight sectoral and regional differences. We first show that heterogeneity within each sector across countries is high. These general trends within the sectors are dominated by large economies, first and foremost the United States. In most cases, heterogeneity is lower within each country across the different sectors. Regarding changes of energy intensity at the country level, improvements between 1995 and 2007 are largely attributable to technological change while structural change is less important in most countries. Notable exceptions are Japan, the United States, Australia, Taiwan, Mexico and Brazil where a change in the industry mix was the main driver behind the observed energy intensity reduction.
    Keywords: Energy Intensity, Logarithmic Mean Divisia Index Decomposition, WIOD Database
    JEL: Q43 C43
    Date: 2013–04
  19. By: Wood, Peter J.; Heindl, Peter; Jotzo, Frank; Löschel, Andreas
    Abstract: This paper examines the linking of price-based and quantity-based provision of a public good by two parties in the example of pollution control under a global quantity constraint, using a stochastic partial-equilibrium model. One country chooses a price-based instrument (tax) and trades with another that lets its emissions price adjust. The expected cost for the price-setting country and the combined expected cost is higher than if both countries choose a quantity-based instrument, and the country with the quantity instrument stands to benefit in terms of expected net costs. The effect increases when the relative size of the country with the price-based constraint increases; and increases with respect to the degree of correlation in ex-ante uncertain abatement costs. While the quantity-setting country benefits from lower expected costs in most circumstances, the variance in cost can be much higher if its costs are correlated with the price-setting country. The optimal ex-ante tax rate differs from that under quantity-quantity linking. These results have important implications for instrument choice for the regulation of greenhouse gases and other pollutants and for the design of international agreements when there are domestic preferences for price regulation. The model is applicable to situations involving the provision of a fixed quantity of a public good beyond pollution control. --
    Keywords: Instrument Choice,Linking,Climate Policy,Prices vs. Quantities
    JEL: Q52 H23 K32
    Date: 2013
  20. By: Alice Favero, Yale University, FEEM and CMCC (Yale University, FEEM and CMCC); Robert Mendelsohn (Yale University)
    Abstract: As policy makers consider stringent targets for greenhouse gas emissions, integrated assessment models are increasingly relying on biomass energy as a critical energy source. However, it is not clear how much woody biomass to expect across time and across the planet. The integrated assessment models simply do not have enough detail about global forests and arable land to make careful forecasts of biomass supply over time. Integrating the complex dynamic demand for bioenergy from the IAMs with the complex dynamic structure of forests and forest supply is a daunting intertemporal task. This study examines the market for woody biomass by combining the integrated assessment model WITCH with the global dynamic forestry model GTM. Three carbon tax schedules are used to simulate different mitigation policies that lead to radiative forcing levels of 3.7, 3.2 and 2.5 W/m2 and a baseline scenario with no mitigation policies. WITCH determines the demand for woody biomass and GTM determines the supply of woody biomass over time. Moving from a mild to stringent mitigation policy would increase the demand of woody biomass from 8.2 to 15.2 billion m3/yr while the international price of wood would increase 4 to 9 times relative to the baseline scenario by 2100. This would shrink the demand for industrial wood products from 80% to 90% with the biomass program. Forest area will expand by 70-95% leading to increased storage of 685-1,279 GtCO2 in forest by 2100. Overall, the biomass program with the CCS technology plays a key contribution to overall GHG emission reductions in all scenarios contributing 20-27% of all mitigation for 2020-2100.
    Keywords: Bio-energy, Carbon Sequestration, Forestry, Integrated Assessment Model
    JEL: Q23 Q42 Q54
    Date: 2013–04
  21. By: Roland Döhrn; Karoline Krätschell
    Abstract: Since the iron and steel sector contributes considerably to industrial CO2 emissions it is important to identify the underlying factors driving steel demand. Using a panel dataset this paper examines the interrelation of steel demand with GDP and its composition, in particular the investment share since investment goods can be expected to be particularly steel intensive. Our analysis confirms that there seems to be an increase of steel demand in an initial stage of economic development and a decline after economies have reached a certain level of per capita income. Moreover, we find some evidence that carbon leakage do not seem to play a role in the steel sector.
    Keywords: Steel consumption; intensity of use-hypothesis; carbon leakage
    JEL: L61 C33 Q53
    Date: 2013–05
  22. By: Leucci, A. C.; Ghinoi, S.; Sgargi, D.; Wesz Junior, V. J.
    Abstract: An adequate understanding of the dynamics that characterize the agri-food market is fundamental for the development of really efficient economic policies, especially after the two recent hikes in the prices of food commodities. The econometric literature provides today advanced analysis tools such as VAR models: these models are based on a system of equations in which each variable is regressed on a set of deterministic variables, on a number of l delays related to each covariate in the model. To test the effectiveness of this analytical tool at dealing with the issues related to agrifood economy we applied a VAR analysis on prices of major food and energy commodities (oil and biodiesel) referred to the period January 2005-December 2012. Our results identified statistically significant intertemporal relationships between the price of corn, soybeans, rapeseed and oil, and suggested the direction of these relationships; we could conclude that the price of corn and soybeans are generated in the energy market only. Moreover, we used as variables the share of commodities used for the production of biofuels, and we could observe that important alterations on the food market are due to the convenience in producing ethanol and biodiesel, since the portion of the crops used for energy is in direct competition with that devoted to the feeding. This kind of models, therefore, deal adequately with datas and issues of the agri-food system and provide an analytical basis to develop economic policies that take into account the complexity of the global food system.
    Keywords: alternative energy source, biofuels, var, Demand and Price Analysis, International Development, C32, Q16, Q42,
    Date: 2013–06
  23. By: Schober, Dominik
    Abstract: Ownership unbundling and third party access are discussed as two options of unbundling in both the literature and political discussions. Focusing on the South American electricity sector, I contrast static and dynamic impacts of ownership unbundling and third party access regimes on customer prices. Substantially different results are found using dynamic rather than static analysis. In particular, negative short term effects of ownership unbundling found in static models are approximately cancelled out by subsequent positive impacts in the dynamic model. Third party access seems to allow for similar benefits while avoiding the (restructuring) costs of ownership unbundling. Previously estimated static models thus appear to suffer from either omitted variable biases or endogeneity problems of static non-difference models. --
    Keywords: (De)Regulation,dynamic panel data analysis,electricity markets,market organization,unbundling,non-discriminatory (third party) access
    JEL: L42 L51 L52 L94
    Date: 2013
  24. By: Jiri Skuhrovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The goal of this paper is to show how institutional and procedural characteristics affect the final price of the public procurement. In order to get comparable prices, only public procurement of homogeneous goods is analyzed. Presented model attempts to explain the variation in unit price as a function of price estimated by the contracting authority, market price and characteristic of procurement procedure – type of procedure, number of bidders and use of electronic auction. We find that the final price in the electricity and natural gas public procurement is more sensitive to purchaser’s estimate than to actual market price. At the same time, we identify that the final price is reduced by using open procedure, electronic auction or attracting more competitors.
    Keywords: public procurement, homogeneous goods, energy markets
    JEL: H57 D23 D73 C21
    Date: 2013–05
  25. By: Hübler, Michael; Glas, Alexander
    Abstract: We examine variations in the South-North ratios (emerging vs. industrialized countries) of energy and labor intensities driven by imports. We use the novel World Input-Output Database (WIOD) that provides bilateral and bisectoral data for 40 countries and 35 sectors for 1995-2009. We find South-North convergence of energy and labor intensities, an energy bias of import-driven convergence and no robust difference between imports of intermediate and investment goods. Accordingly, trade helps emerging economies follow a 'green growth' path, and trade-related policies can enhance this path. However, the effects are economically small and require a long time horizon to become effective. Trade-related policies can become much more effective in selected countries and sectors: China attenuates labor intensity via imports of intermediate goods above average. Brazil reduces energy intensity via imports of intermediate and investment goods above average. Production of machinery as an importing sector in emerging countries can immoderately benefit from trade-related reductions in factor intensities. Electrical equipment as a traded good particularly decreases energy intensity. Machinery particularly dilutes labor intensity. Our main results are statistically highly significant and robust across specifications. --
    Keywords: Energy intensity,labor intensity,trade,technology diffusion,convergence,developing countries
    JEL: C23 F18 F21 O13 O33 O47 Q43
    Date: 2013
  26. By: Eran Raviv (Erasmus University Rotterdam); Kees E. Bouwman (Erasmus University Rotterdam); Dick van Dijk (Erasmus University Rotterdam)
    Abstract: The daily average price of electricity represents the price of electricity to be delivered over the full next day and serves as a key reference price in the electricity market. It is an aggregate that equals the average of hourly prices for delivery during each of the 24 individual hours. This paper demonstrates that the disaggregated hourly prices contain useful predictive information for the daily average price. Multivariate models for the full panel of hourly prices significantly outperform univariate models of the daily average price, with reductions in Root Mean Squared Error of up to 16%. Substantial care is required in order to achieve these forecast improvements. Rich multivariate models are needed to exploit the relations between different hourly prices, but the risk of overfitting must be mitigated by using dimension reduction techniques, shrinkage and forecast combinations.
    Keywords: Electricity market, Forecasting, Hourly prices, Dimension reduction, Shrinkage, Forecast combinations
    JEL: C53 C32 Q47
    Date: 2013–05–17
  27. By: Susan S Sharma (Deakin University); Kannan Thuraisamy (Deakin University)
    Abstract: In this paper, we test whether oil price uncertainty predicts CDS returns for eight Asian countries. We use the Westerlund and Narayan (2011, 2012) predictability test that takes into consideration persistency, endogeneity, and heteroskedasticity of the data. In-sample evidence reveals that oil price uncertainty can predict CDS returns for three Asian countries whereas the out-of-sample evidence suggests that oil price uncertainty can predict CDS returns for six countries.
    Keywords: Oil price uncertainty; Predictability; Asian markets; CDS returns
    Date: 2012–12–26
  28. By: Paul E. Carrillo (Department of Economics/Institute for International Economic Policy, George Washington University); Arun S. Malik (Department of Economics/Institute for International Economic Policy, George Washington University); Jiseon Yoo (Department of Economics/Institute for International Economic Policy, George Washington University)
    Abstract: Programs to reduce tra¢ c congestion and air pollution by restricting use of motor vehicles on working days have generally not met with success given existing studies of such programs in a number of cities. We conduct the Örst study of Quito, Ecuadorís three-year-old Pico y Placa program and Önd that it has reduced ambient concentrations of carbon monoxide (CO), a pollutant primarily emitted by vehicles, by 9-11% during peak tra¢ c hours. During an extended daytime period that encompasses hours when population exposure to air pollution is likely to be highest, CO concentrations have been reduced by approximately 6%. Given that ambient concentrations of CO generally track the spatial and temporal distributions of tra¢ c, these reductions in pollution suggest similar reductions in vehicle áows.
    Keywords: Forecasting, driving restrictions, traffic congestion, air pollution, difference-in-differences
    JEL: R41 D62 Q53 C31 C54
    Date: 2013–01
  29. By: Bofinger, Heinrich; Strand, Jon
    Abstract: This paper develops a new methodology for calculating the"carbon footprint"of air travel whereby emissions from travel in premium (business and first) classes depend heavily on the average class-specific occupied floor space. Unlike methods currently used for the purpose, the approach properly accounts for the fact that the relative number of passenger seats in economy and premium classes is endogenous in the longer term, so adding one additional premium trip crowds out more than one economy trip on any particular flight. It also shows how these differences in carbon attributable to different classes of travel in a carbon footprint calculation correspond to how carbon surcharges on different classes of travel would differ if carbon emissions from international aviation were taxed given a competitive aviation sector globally. The paper shows how this approach affects carbon footprint calculations by applying it to World Bank staff travel for calendar year 2009.
    Keywords: Transport Economics Policy&Planning,Climate Change Mitigation and Green House Gases,Roads&Highways,Montreal Protocol,Environmental Economics&Policies
    Date: 2013–05–01
  30. By: Asger Lunde (Aarhus University and CREATES); Kasper V. Olesen (Aarhus University and CREATES)
    Abstract: We explore the structure of transaction records from NASDAQ OMX Commodities Europe back to 2006 and analyze base load forwards with the Nordic system price on electric power as reference. Following a discussion of the appropriate rollover scheme we incorporate selected realizedmeasures of volatility in a Realized EGARCH framework for the joint modeling of returns and realized measures of volatility. Conditional variances are shown to vary over time, which stresses the importance of portfolio reallocation for risk management and other purposes. We document gains from utilizing data at higher frequencies by comparing to ordinary EGARCH models that are nested in the Realized EGARCH. We obtain improved fit, in-sample as well as out-of-sample. In-sample in terms of improved loglikelihood and out-of-sample in terms of 1-, 5-, and 20-step-ahead regular and bootstrapped rolling-window forecasts. The Realized EGARCH forecasts are statistically superior to ordinary EGARCH forecasts.
    Keywords: Financial Volatility, Realized GARCH, High Frequency Data, Electricity, Power, Forecasting, Realized Variance, Realized Kernel, Model Confidence Set
    JEL: C10 C22 C53 C58 C80
    Date: 2013–05–24
  31. By: Keting Shen; John Whalley
    Abstract: In the CGE based policy modeling literature, especially recent literature on policy modeling for global climate change, nested CES production functions over multiple inputs have been widely used. Although lack of reliable estimates of substitution elasticities for nested structures has been acknowledged for a long time, the problem has not yet been solved satisfactorily. This is especially the situation for the Chinese case for which modeling work has global implications. This paper reports estimates of substitution elasticities for normalized nested CES aggregate production functions for China with different nested structures of input factors: capital, labor with or without human capital adjustment, and energy using data for the period 1979-2006. We adopt grid search based non-linear optimization techniques for estimation. The results show that all the substitution elasticities we estimate are positive. For the widely used (K,L)E structure, we find that the substitution elasticity between capital and labor for China is below unity. When human capital adjusted labor is used as input instead of unadjusted raw labor, estimates of substitution elasticity between capital and labor become lower. By considering the significance of estimates, our results suggest that the (E,L)K structure seems more appropriate for the Chinese economy.
    JEL: C61 C68 Q43 Q54
    Date: 2013–06
  32. By: Paul Dolan; Robert Metcalfe
    Abstract: There is increasing research on the exogenous impact of descriptive social norms on economic behavior. The research to date has a number of limitations: 1) it has not de-coupled the impact of the norm and the knowledge required to understand how to change behavior based upon it; 2) it has exclusively used offline but not online (i.e. emails) methods; and 3) it has not understood the impact of financial incentives in conjunction with norms. We address these three limitations using two natural field experiments. We find, firstly, that norms change energy behavior over a 15 month treatment period irrespective of whether information is provided or not. We find that social norms reduce consumption by around 6% (0.2 standard deviations). Norms have has their largest impact on the day that information on the social norm is received, and then decreases over time. Secondly, we do not find that social norms work online (even with experienced consumers who are used to online billing) - social norms de- livered online may have very little beneficial effects on reducing energy use. Thirdly, we find that large financial rewards work very well online in reducing consumption, with a 0.35 change in energy consumption over a four month period. Perhaps most interestingly, we find that the large effect of financial incentives is completely removed when information on social norms is added online.
    Keywords: social norms, financial incentives, natural field experiments, energy consumption
    JEL: D01 D03 D83 Q41
    Date: 2013–06
  33. By: Erdogdu, Erkan
    Abstract: The paper explores whether the question of why some countries are able to implement more extensive reforms is closely related to the question of why some countries have better institutions than others. We analyze this question by using an empirical econometric model based on Poisson regression with cross-section data covering 51 states in the US, 13 provinces in Canada and 51 other countries. In the course of the study, we check the validity of three important arguments of New Institutional Economics (NIE) for the power market liberalization process. The first argument is the "path-dependency". To test its impact on the reform progress, we try to explain whether the background of the chairperson of the regulatory agency when reforms started or that of the governor/minister responsible for energy policy at that time has an impact on the subsequent reform progress. The second argument is the impact of "democracy" as an institution on the reform progress. We look at the effect of two important indicators of democracy (i.e., civil liberties and political rights) on the reform progress. The final argument of NIE is about transaction costs. We concentrate on the level of corruption in a country as one of the key factors that determine transaction costs and try to explore its impact on the reforms. The results show that the backgrounds of the chairperson and the minister/governor, the level of democracy and corruption in a country are significantly correlated with how far reforms have gone in that country. The negative relationship between reform progress and civil liberties may indicate that reforms may be limited in democratic countries with strong civil society institutions such as trade unions or other organized structures in the society that may consider reforms as 'harmful' to their self-interest.
    Keywords: Econometric modeling; Institutions and the macroeconomy; International economics; Electric utilities
    JEL: C5 E2 F5 L51 L94
    Date: 2013–09
  34. By: Silvester van Koten (European University Institute); Andreas Ortmann (The University of New South Wales)
    Abstract: We try to better understand the comparative advantages of structural and behavioral remedies of deregulation in electricity markets, an eminent policy issue for which the experimental evidence is scant and problematic. Specifically, we investigate theoretically and experimentally the effects on competition of introducing a forward market which the European Commission classifies as a behavioral remedy. We compare this scenario with its best alternative, the structural remedy of adding one more competitor by divestiture. Our study contributes to the literature by introducing more realistic cost configurations, by teasing apart competition effect and asset effect, and by investigating competitor numbers that reflect the market concentration in the European electricity industries. Our experimental data suggest that introducing a forward market has a positive effect on the aggregate supply in markets with two or three major competitors, configurations typical for the newly accessed and the old European Union member states, respectively. Introducing a forward market also increases efficiency.
    Keywords: experimental economics
    Date: 2012–09
  35. By: Claire Brunel and Arik Levinson (Department of Economics, Georgetown University)
    Abstract: Researchers have long been interested in whether environmental regulations discourage investment, reduce labour demand, or alter patterns of international trade. But estimating those consequences of regulations requires devising a means of measuring their stringency empirically. While creating such a measure is often portrayed as a data collection problem, we identify four fundamental conceptual obstacles, which we label multidimensionality, simultaneity, industrial composition, and capital vintage. We then describe the long history of attempts to measure environmental regulatory stringency, and assess their relative success in light of those obstacles. Finally, we propose a new measure of stringency that would be based on emissions data and could be constructed separately for different pollutants.
    Keywords: JEL Codes:
    Date: 2013–01–02
  36. By: Gallier, Carlo; Löschel, Andreas; Sturm, Bodo
    Abstract: This paper investigates the extent to which the Fukushima Daiichi nuclear disaster of March 2011 has had an impact on the private demand for climate protection in Germany. Data are taken from two framed field experiments (Löschel et al. 2013a, b) conducted before and after the disaster. We find that the demand for climate protection in the experiment after the nuclear disaster is significantly higher than in the experiment before the disaster. --
    Keywords: Experimental economics,demand for climate protection
    JEL: Q51 Q54 C93
    Date: 2013
  37. By: Valeria Costantini; Giorgia Sforna
    Abstract: This paper contributes to the issue of the uneven distribution of Clean Development Mechanism (CDM) projects among developing countries. By applying a gravity model to a panel dataset at bilateral country level, we find that well-established export flows from developed economies towards developing countries explain a large portion of the geographical distribution of CDM projects. The policy implication we derive is that a sort of lock-in effect in the CDM relationship should be avoided by enhancing the institutional framework in developing countries hosting CDMs as well as by reinforcing compulsory rules for CDM destination toward the least developed economies. On the contrary, if market forces are left free to influence CDM destination, cost effectiveness in abatement efforts is not the driving force influencing the decision on destination market, but other criteria based on private benefits seem to prevail.
    Keywords: Kyoto Protocol; Clean Development Mechanism, Export Flows; Gravity Model; Institutional Quality
    JEL: F14 F18 Q54 Q56
    Date: 2013–06
  38. By: Mellander, Charlotta (Jönköping International Business School); Stolarick, Kevin (University of Toronto); Matheson, Zara (University of Toronto); Lobo, José (Arizona State University)
    Abstract: Research has suggested that night-time light (NTL) can be used as a proxy for a number of variables, including urbanization, density, and economic growth. But, just how close is the relationship between NTL and economic activity? This paper uses a combination of correlation analysis and geographically weighted regressions in order to examine the relationship between the two. We use fine-grained geo-coded micro-data for Swedish establishments and individuals, and match it with both radiance and saturated light emissions. We find that the correlation between NTL and economic activity is strong enough to make it a relatively good proxy for population and establishment density, but the correlation is weaker in relation to wages. In general, we find a stronger relation between light and density values, than with light and total values. We also find a closer connection between radiance light and economic activity, than with saturated light. Further, we find the link between light and economic activity, especially estimated by wages, to be slightly overestimated in large urban areas, and underestimated in rural areas.
    Keywords: Light-Emission; Economic Activity; Proxy
    JEL: O18 R10
    Date: 2013–06–10
  39. By: Grégory Rolina (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris)
    Abstract: Rendue possible par les découvertes scientifiques majeures du vingtième siècle, l'exploitation de la matière fissile a édifié un marché mondial de l'énergie nucléaire. Très vite, le souci de restreindre les applications de cette énergie au domaine civil et la nécessité d'en maîtriser les conséquences quant à la santé des populations ont encouragé la communauté internationale, à réglementer et contrôler l'accès à ce marché. C'est ainsi qu'est créée en 1957 l'agence internationale de l'énergie atomique (AIEA), dont un des rôles est d'établir les standards de la sûreté nucléaire au niveau mondial. Cinquante plus tard, par le biais de cette agence et de bien d'autres organismes internationaux (OCDE, WANO) ou régionaux (WENRA, ENSREG,...), l'industrie nucléaire apparaît comme un secteur au sein duquel la coopération internationale est particulièrement intense. Néanmoins, les décisions importantes relatives à la sûreté des installations nucléaires d'un pays sont prises au niveau national. Les récentes controverses européennes relatives au périmètre, aux objectifs et aux conséquences des tests de résistance ( stress-test ) l'illustrent remarquablement : malgré le slogan " an accident somewhere is an accident everywhere ", la sûreté nucléaire demeure un objet de souveraineté nationale. Dès lors, pour le citoyen désireux de comprendre le fonctionnement de la sûreté nucléaire en France, il importe de mieux connaître les institutions nationales qui l'évaluent, l'expertisent, la contrôlent, et de qualifier la relation qu'entretiennent ces institutions avec les exploitants du secteur. C'est dans ce but que nous proposons une brève histoire de ces institutions et que nous présentons certains des résultats d'une recherche empirique menée au centre de gestion scientifique de Mines ParisTech, en collaboration avec l'IRSN. Ce travail nous permet de caractériser le mode de régulation des risques nucléaires en France, qui repose sur le maintien d'un dialogue technique et continu entre experts, autorité et exploitants, dont on soulignera en conclusion les avantages et les inconvénients.
    Date: 2012

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