nep-ene New Economics Papers
on Energy Economics
Issue of 2013‒12‒06
thirty-one papers chosen by
Roger Fouquet
London School of Economics

  1. Energy efficiency and industrial output: The case of the iron and steel industry By Flues, Florens; Rübbelke, Dirk; Vögele, Stefan
  2. Fuel Conservation Effect of Energy Subsidy Reform in Iran By Hossein Mirshojaeian Hosseini; Shinji Kaneko
  3. Energy Efficiency in Market versus Planned Economies: Evidence from Transition Countries By Rabindra Nepal; Tooraj Jamasb
  4. Local Energy Policy and Managing the Low Carbon Transition: The Case of Leicester By Mark Lemon; Michael G. Pollitt; Steven J. Steer
  5. Mandatory vs Voluntary Payment for Green Electricity By Elcin Akcura
  6. Energy and Reserve Procurement Through Standardized Contracts in Linked Electricity Markets: Illustrative Examples By Heo, Deung-Yong; Tesfatsion, Leigh
  7. The Russian Electricity Supply Industry: from Reform to Reform? By Nadia Chernenko
  8. Determining the optimal length of regulatory guarantee: A Length-of-Contract Auction By Thomas Greve; Michael G. Pollitt
  9. Finding the Optimal Approach for Allocating and Realising the Distribution System Capacity: Deciding between Interruptible Connections and Firm DG Connections By Karim L. Anaya; Michael G. Pollitt
  10. The Siting of UK Nuclear Power Installations By M.C. Grimston; W.J. Nuttall
  11. An integrated approach to model redispatch and to assess potential benefits from market splitting in Germany By Katrin Trepper; Michael Bucksteeg; Christoph Weber
  12. Correlations between the Petroleum Industry and the Per Capita Income in Nigeria: Cointegration and Error Correction Model Approach by Olaniyi Evans By Evans, Olaniyi
  13. From Boom to Bust?: A Critical Look at US Shale Gas Projections By Philipp M. Richter
  14. Price Discrimination and Limits to Arbitrage in Global LNG Markets By Robert Ritz
  15. International dispersion of retail diesel fuel prices and the estimation of normal price values By Vladimir Kossov; Elena Kossova
  16. Are Futures Prices Influenced by Spot;Prices or Vice-versa? An Analysis of Crude;Oil, Natural Gas and Gold Markets By Mihaela NICOLAU; Giulio PALOMBA; Ilaria TRAINI
  18. Is forest sequestration at the expense of bioenergy and forest products cost-effective in EU climate policy to 2050? By Munnich Vass, Miriam; Elofsson, Katarina
  19. Elasticity of substitution between clean and dirty energy inputs: A macroeconomic perspective By Papageorgiou, Chris; Saam, Marianne; Schulte, Patrick
  20. On licensing and diffusion of clean technologies in oligopoly By Idrissa Sibailly
  21. A Relação Entre Crescimento e o Meio Ambiente: Uma Reavaliação da Curva de Kuznets Ambiental By Sandro Sacchet de Carvalho
  23. Economic development and CO2 emissions: assessing the effect of policy and energy time events for advanced countries By Mazzanti, M.; Musolesi, A.
  24. Unilateral emissions mitigation, spillovers, and global learning By Shurojit Chatterji; Sayantan Ghosal; Sean Walsh; John Whalley
  26. Politiques de R&D, Taxe Carbone et Paradoxe Vert By Grimaud, André; Neubauer, Mauricio; Rougé, Luc
  27. On the Pigouvian Tax Rule in an Open Economy: Opening the Gate to the Eco-industry By Idrissa Sibailly
  28. Pollution Permits, Imperfect Competition and Abatement Technologies By Clémence Christin; Jean-Philippe Nicolai; Jerome Pouyet
  29. Does the Social Cost of Carbon Matter?: An Assessment of U.S. Policy By Robert W. Hahn; Robert A. Ritz
  30. Ability of greens and supergreens to influence environmental regulations By Lenka Wildnerova
  31. Prospect theory, mitigation and adaptation to climate change By Osberghaus, Daniel

  1. By: Flues, Florens; Rübbelke, Dirk; Vögele, Stefan
    Abstract: The iron and steel industry is one of the most carbon emitting and energy consuming sectors in Europe. At the same time this sector is of high economic importance for the European Union. Therefore, while public environmental and energy policies target this sector, there is political concern that it suffers too much from these policy measures. Various actors fear a policy-induced decline in steel production, and possibly an international reallocation of production plants. This study analyzes the role that input prices and public policies may play in attaining an environmentally more sustainable steel production and how this - in turn - affect total steel output. As we find out for examples of major European steel producing countries, a kind of rebound effect of energy-efficiency improvements in steel production on total steel output may arise. --
    Keywords: energy efficiency,iron and steel industry,environmental protection,rebound effect
    JEL: L51 L61 Q43 Q50
    Date: 2013
  2. By: Hossein Mirshojaeian Hosseini (Graduate School for International Development and Cooperation, Hiroshima University); Shinji Kaneko (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: To prevent further increases in energy consumption, the Iranian government commenced energy subsidy reform in 2010. This paper investigates the fuel conservation effects of the reform in Iran using a homothetic translog cost function that provides estimates of the own- and cross-price elasticities of fuel demands. The percentage reduction in fuel demands is estimated using the likely effect of the reform on fuel prices. The results reveal that the reform may not be as successful as assumed. Under optimistic assumptions, the reform may reduce energy consumption marginally, and under pessimistic assumptions, it may increase energy consumption because of inelastic fuel demands and substantial substitution between fuels.
    Keywords: Energy subsidy reform, Energy conservation, Iran, Translog cost function
    JEL: C32 Q38 Q43
    Date: 2013–01
  3. By: Rabindra Nepal; Tooraj Jamasb
    Abstract: Economic theory suggests that market-based policies and reforms should promote energy efficiency in developing and transition countries. This paper, therefore, analyses the impacts of a varied set of market-oriented macro-level reforms on macro level energy efficiency across the transition countries. Since the early 1990s, these economies experienced a rapid marketization process which transformed them from central planning towards more market driven economies. The results from the relatively new bias corrected fixed-effect analysis (LSDVC) technique suggest that between 1990 and 2010, reforms in overall market liberalisation, financial sector and infrastructure industries, excluding the power sector, drove the energy efficiency improvements in these countries. Also, privatisation programmes only improved energy efficiency in the SEE countries. Thus, the empirical evidence support market driven energy efficiency policies aimed at addressing the market failures in the network industries and capital markets. We conclude that these results can help explain the energy efficiency policy puzzles in developing and transition countries where energy efficiency improvement can be a leading policy response to growing climate change and security of supply concerns.
    Keywords: market reforms, energy efficiency, transition countries, institutions
    JEL: P28 Q54 C33
    Date: 2013–11–27
  4. By: Mark Lemon; Michael G. Pollitt; Steven J. Steer
    Abstract: This paper seeks to provide insights into the links between the local and national energy policy. Leicester City Council has sought to take a leadership role on implementing innovative energy policies within their city. Consequently, this paper investigates the impact of national and local energy policy in Leicester. It examines the consumption of energy within city, the network of players within energy policy and two flagship aspects of the policy – the district heating scheme and the use of smart metering. The paper concludes that energy policy looks very different at local and national levels.
    Keywords: local energy policy, Leicester, energy transition, CHP, intelligent metering.
    JEL: H76 L97
    Date: 2013–11–26
  5. By: Elcin Akcura
    Abstract: Renewable energy sources have a critical role to play in contributing to the diversity, sustainability and security of energy supplies. The main objectives of the paper is to gain an understanding of UK households' preferences for the type of mechanism that is used to support renewables. Two self-designed contingent valuation method (CVM) surveys are used to explore whether the type of payment option has an impact on households' willingness to pay for increasing share of renewable energy in electricity generation. The paper also investigates whether the type of payment mode affects respondents' self-reported certainty of paying their stated valuations.The results indicate that the likelihood of paying a positive amount for supporting renewable energy is higher under a mandatory scheme compared to a voluntary payment option in the UK. Respondents have a higher level of certainty in paying their stated WTP under a mandatory payment scheme.
    Keywords: Contingent Valuation Method, Payment Method, Renewable Energy, Green Tariffs, Willingness to Pay, Zero Inflated Ordered Probit Model
    JEL: C35 D10 D12 D80
    Date: 2013–11–26
  6. By: Heo, Deung-Yong; Tesfatsion, Leigh
    Abstract: The current design of electricity markets makes it difficult to ensure appropriate compensation for many important load-balancing services, such as flexibility in power start times, ramp rates, and durations.� To address this problem, the authors of a recent Sandia National Laboratories report recommend that contracts for energy and reserve be standardized, and that their trade be supported by a sequence of linked forward markets with planning horizons ranging from years to minutes ahead of each operating point.� This study examines the possibility of implementing these recommendations.� Specific forms are proposed for energy and reserve products as standardized firm and option contracts with swing (flexibility) in their contractual terms.� It is then shown, through concrete examples, how the trading of these contracts can be supported by day-ahead and real-time markets in a manner that permits efficient real-time load balancing subject to reserve requirements.�
    Keywords: electricity markets; swing contracts; linked forward markets; load balancing
    JEL: D4 G1 Q4
    Date: 2013–11–27
  7. By: Nadia Chernenko
    Abstract: The paper looks at the development of the industry in the post-Soviet Russia, starting from the ealry 1990s. The main focus is on the last reform 2003-11 and the relationship of cost, prices and investment. In particular, the author examines the new designs for the electricity and capacity markets and their impact on incentives for short-run production and long-term planning and construction. The author defends the pro-competitive approach to the electricity industry reform in Russia and traces the roots of its success and failures.
    Keywords: Russian Electricity Industry, RAO EES, reform 2003-11, restructuring, market liberalisation, capacity markets
    JEL: L11 L22 L43 L52 L94
    Date: 2013–11–27
  8. By: Thomas Greve; Michael G. Pollitt
    Abstract: One of the biggest challenges in the area of infrastructure investment is the provision of funding to finance activities. This paper presents an auction design which can reduce the financing cost of infrastructure investments by allowing the length of the regulatory funding period to be determined via an auction. The auction allows bidders to submit bids against a payment for periods of varying length. Thus instead of, for example, a fixed 20-year contract period, some bidders might want to bid for financing over a longer period, say 25 or 30 years. This can be desirable in terms of securing more favourable terms in the financial markets. Our auction design can secure efficiency and lower financing costs. Our auction is motivated by the auctions currently being undertaken by the UK energy regulator (Ofgem) for financing offshore transmission assets. Although the auction was designed with electricity transmission in mind, the auction could be used in other areas of infrastructure investments
    Keywords: Auctions, Contracts, Investments, Regulation
    JEL: D44 D86 E43
    Date: 2013–11–27
  9. By: Karim L. Anaya; Michael G. Pollitt
    Abstract: The aim of this study is to perform a cost benefit analysis of the different options for connecting distributed generation (DG) customers in a specific constrained area (the March Grid), under the context of the Flexible Plug and Play trial. The study shows the importance of the development of levels of understanding and trust among the customers and suppliers of the system-level complexities of an interconnected grid that affect all involved, of the need to achieve acceptability for all involved and the development of a shared, confident forward awareness of future evolution capability, both technically and contractually. This research required a comprehensive revision of the current regulatory framework applied to DG and the search of the most recent estimations of generation costs with a focus on wind, solar PV and anaerobic digestion (AD) generators. Specific assumptions were made in terms of interruptible capacity quota, generation mix, embedded benefits, curtailment levels and load factors. The results are presented in four different scenarios. Two kinds of connection options have been assessed: smart option (non-firm or interruptible) and reinforcement option (firm). Results suggest that in general small wind generators will always have advantage over the large wind generators regardless the type of connection, solar PV would struggle to connect and AD generators would always connect.
    Keywords: cost benefit analysis, distributed generation, interruptible connections (non-firm)
    JEL: D61 L51 L94 Q21 Q40 Q48
    Date: 2013–11–27
  10. By: M.C. Grimston; W.J. Nuttall
    Abstract: Choosing a suitable site for a nuclear installation requires the consideration and balancing of several factors which are sometimes in tension with one another. One particularly interesting tension is a human and demographic one. On the one hand it is beneficial to place nuclear stations close to centres of population, to reduce transmission losses and other costs (including to the local environment) of transporting electricity over large distances from generator to consumer. On the other it is advantageous to place nuclear stations some distance away from such population centres in order to minimise the potential human consequences of a major release of radioactive materials in the (extremely unlikely) event of a major nuclear accident, not only in terms of direct exposure but also concerning the management of emergency planning, notably evacuation. This paper considers the emergence of policies aimed at managing this tension in the UK. In the first phase of nuclear development (roughly speaking 1945 to 1965) there was a highly cautious attitude, with installations being placed in remote rural locations with very low population density. The second phase (1965 to 1985) saw a more relaxed approach allowing Advanced Gas-Cooled Reactor construction closer to population centres (in ‘semi-urban’ locations, notably at Hartlepool and Heysham). In the third phase (1985 to 2005) there was very little new nuclear development, Sizewell B (the first and so far only pressurised water power reactor in the UK) being co-located with an early Magnox station on the rural Suffolk coast. However, there was considerable effort expended on trying to find a site for disposal of radioactive wastes. Renewed interest in nuclear new build grew from 2005 onwards and led to a number of sites being identified for new reactors before 2025; all having previously hosted nuclear stations and including the semi-urban locations of the 1960s and 1970s. Finally, some speculative comments are made as to what a ‘fifth phase’ starting in 2025 might look like.
    Keywords: Nuclear Power, Safety, Planning, Environmental Protection
    JEL: K32 L94 N74
    Date: 2013–11–27
  11. By: Katrin Trepper; Michael Bucksteeg; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Future congestion management is one of the major market design issues in the European electricity market. In the light of the sharp increase in redispatch measures seen within the last years, the importance of an efficient management of network congestion increases particularly in Germany. Against this background, we develop an integrated approach to model (re)dispatch for Germany in detail while considering interactions with neighbouring countries. Compared to 2011, our findings indicate a much more critical network situation in Germany for 2015. We identify increased RES production, resulting imports and exports, delays in grid extension and the impacts of the nuclear phase-out (leading to an amplified north-south congestion problem) as main drivers for the nearly doubling of redispatch volumes in 2015. We show that market splitting can potentially contribute to a secure grid operation and leads to a significant reduction of redispatch volumes (59%) according our model calculations. We state that market splitting can of course not be the ’one and only solution’ but an interim approach to manage upcoming congestion in Germany in times when grid expansion has not yet been completed and that the implementation of market splitting can also serve as an alternative to grid extension within less congested areas.
    Keywords: redispatch, congestion management, market design, market splitting
    JEL: Q40 Q47 Q49
    Date: 2013–11
  12. By: Evans, Olaniyi
    Abstract: In the literature, there has been an acquiescence that the greater the dependence on oil and mineral resources, the worse the growth performance of an economy. With time series data of Oil Revenue (proxy for petroleum industry), Non-oil Revenue, Investment and GDP per capital from 1970-2012, the paper explores the correlations between the petroleum industry and real per capita income in Nigeria. Using cointegration and error correction approach, the study finds that oil revenue has a positive and significant impact on per capital real income in the long-run. As well, the study shows that non-oil revenue and investment has insignificant impact on per capital real income, validating the fact that the entire economy is dominated by oil. Contrary to a report by the Ernst & Young (2013) which indicated that Nigeria’s per capita Gross Domestic Product is expected to cross the $2,000 threshold by 2017, Nigeria may not harness its petroleum revenues to lift its teeming population out of the vicious circle of poverty because only a small percentage of the population is employed in the petroleum industry. Therefore, Nigeria needs to develop other sectors of the economy. Some of the suggested means are: economic diversification, technology management, transparency, investments in education, domestic private ownerships, public involvement and strong institutions among others.
    Keywords: Petrolum industry, oil revenue, real per capital income, cointegration, error correction model, dutch disease
    JEL: E6 L7 O2
    Date: 2013–11–21
  13. By: Philipp M. Richter
    Abstract: US shale gas production is generally expected to continue its fast rise. However, a cautious evaluation is needed. Shale gas resource estimates are potentially overoptimistic and it is uncertain to which extent they can be produced economically. Moreover, the adverse environmental effects of ever more wells to be drilled may lead to a fall in public acceptance and a strengthening of regulation. The objective of this paper is hence twofold: providing a critical look at current US shale gas projections, and investigating in a second step the implications of a less optimistic development by means of numerical simulation. In a world of declining US shale gas production after 2015, natural gas consumption outside the USA is reduced from its reference path by at least as much as US consumption. Trade flows are redirected, and the current US debate on LNG export capacity requirements becomes obsolete.
    Keywords: Natural Gas, Shale, USA, Scenarios, Equilibrium Modeling
    JEL: Q37 L71 Q41 Q33 C61 Q53
    Date: 2013
  14. By: Robert Ritz
    Abstract: Gas prices around the world vary widely despite being connected by international trade of LNG. Some industry observers argue that major exporters (e.g., Qatar) have acted irrationally by failing to engage in price arbitrage. This is also difficult to reconcile with a perfectly competitive model in which price differences exist solely because of transport costs. We show that a model with market power can rationalize observed price differentials and trade flows. We highlight how different features of the LNG market limit the ability and/or incentive of other players to arbitrage, and discuss the potential impact of US LNG exports.
    Keywords: International trade, limits to arbitrage, LNG pricing, market power, natural gas, price discrimination
    JEL: D40 F12 L95
    Date: 2013–11–27
  15. By: Vladimir Kossov (Research University Higher School of Economics , professor); Elena Kossova (Research University Higher School of Economics, Ph.D. in mathematics, lecturer)
    Abstract: For the large majority of goods, the price dispersion between countries does not exceed 1:10. Diesel fuel stands out, with a dispersion which exceeds 1:100. Given a constant oil price the difference in diesel fuel prices between countries is caused by the different taxes. The average share of taxes in the price determines the normal price. An estimation of the normal price of diesel fuel is made using an econometric model (using 79 countries, 1998-2008 by even years). Of greatest interest to economic policy are normal prices for countries with economies in transition and developing countries. This paper is organized as follows. In the introduction a definition of the term "normal price" and why it is important are presented. The first chapter is devoted to the notion of "price level" both international and national. The normal price is calculated using an econometric model. The estimation of the normal price of goods is determined by the international component and deviation of the normal price by the national one. In the second chapter the results of evaluating the parameters of the econometric model and the values of normal prices are given. In the third chapter price deviations in Russia and Kazakhstan are discussed and it is concluded that they have reached the maximum value, above which mass protests may result
    Keywords: budget revenue; diesel fuel price; motor fuel tax; mass protests; normal price; oil rent; price level
    JEL: C23 D49 E37 Q48
    Date: 2013
  16. By: Mihaela NICOLAU (Danubius University, Galati, Romania); Giulio PALOMBA (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Ilaria TRAINI ([n.a.])
    Abstract: Considering the financial theory based on cost-of-carry model, a futures contract price is always influenced by the spot price of its underlying asset, as long as the futures price is determined as the sum of the underlying asset's spot price and its cost of carrying or storing. The aim of this paper is to verify if there are dynamic connections between spot and futures prices as statued by the cost-of-carry model, and to identify the direction of causality.;The empirical analysis is conducted on three different commodity markets, namely crude oil, natural gas and gold. We estimate a battery of recursive bivariate VAR models over a sample of daily spot and futures prices ranging from January 1997 to September 2013. Using the recursive Grange-rcausality analysis, we show that some interactions between spot and futures prices clearly exist and they mainly depend on market type and futures contract's maturity.
    Keywords: Granger-Causality, commodity markets, recursive estimation, spot and futures prices
    JEL: C32 C58 G13
    Date: 2013–11
  17. By: Matthias Kehrig; Nicolas Ziebarth
    Abstract: We separate changes in labor supply and demand through changes in higher-order moments of the wage distribution. We illustrate this idea in a study of the effects of oil price shocks, which generate a predictable labor demand adjustment across regions. Empirically, oil price shocks decrease average wages, particularly skilled wages, and increase wage dispersion, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil price shocks, have counterfactual implications for the response of wage dispersion. Only shifts in labor supply can explain this latter fact.
    Date: 2013–11
  18. By: Munnich Vass, Miriam (Department of Economics, Swedish University of Agricultural Sciences); Elofsson, Katarina (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: Forest management affects the quantity of CO2 emissions in the atmosphere by carbon sequestration in standing biomass, carbon storage in forest products and production of bioenergy that replace fossil fuels. The main question in this paper is whether forest sequestration is worth increasing at the expense of bioenergy and forest products to achieve EU’s emission reduction target to 2050 cost-effectively. The assessment is based on numerical calculations using a dynamic, partial equilibrium model of cost-effective solutions, where three abatement methods in the forest sector are included together with abatement in the fossil fuel sector. The results show that forest sequestration in standing biomass is cost-effective compared to bioenergy. When sequestration is taken into account, net present costs for meeting EU carbon targets can be reduced by 18%. This is achieved through an increase in annual carbon sequestration by 30-158 million ton CO2. The overall cost of reaching the 80 per cent carbon reduction target amounts to 2,002 billion Euros when sequestration is included in the policy, but increases to 2,371 billion Euros without sequestration. Results suggest that forests can serve as a cost-efficient carbon sink over the considered time period.
    Keywords: Forest carbon sequestration; bioenergy; cost-effectiveness; dynamic partial equilibrium; EU climate policy
    JEL: Q23 Q52 Q54 Q58
    Date: 2013–11–22
  19. By: Papageorgiou, Chris; Saam, Marianne; Schulte, Patrick
    Abstract: Recently Acemolgu, Aghion, Bursztyn and Hemous (AER 2012) formulated a model in which a high macroeconomic elasticity of substitution between clean and dirty production represents a crucial condition for green growth. Until now it has never been systematically estimated. Using a novel panel of cross-country sectoral data, we formulate specifications of nested CES production functions that allow to estimate a special case of this parameter: the elasticity of substitution between clean and dirty energy inputs. Contrary to what is expected based on the earlier interfuel substitution literature, we find evidence that this elasticity exceeds one. --
    Keywords: clean and dirty energy inputs,aggregate elasticity of substitution,CES function,cross-country sectoral data,environmental policy
    JEL: O44 O47 Q54 Q58
    Date: 2013
  20. By: Idrissa Sibailly (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, LEI - Laboratoire d'Economie Industrielle - Centre de Recherche en Économie et STatistique (CREST))
    Abstract: Clean technologies implemented by polluters subject to environmental regulation are often developed and patented by specialized technology suppliers. This paper investigates the impact of the environmental regulation stringency on the diffusion of patented clean technologies when the polluters (i.e. the potential licensees) compete in imperfectly competitive markets. We show that the polluters' willingness to pay for clean technology and the diffusion of such technology (i.e. the extent to which it is privately disseminated through licensing) depend not only on the regulatory stringency and the technological efficiency, but also on the polluters' competitive environments. More stringent regulations (e.g., higher carbon taxes) or increased technological efficiency (e.g., supported by more R&D subsidies) do not necessarily induce more diffusion of efficient clean technologies. Indeed, as the returns to implementing a clean technology increase, so do the technology supplier's incentives to sell fewer licenses so as to extract more rent from each of its licensees.
    Keywords: Clean technology, Environmental Regulation, Oligopoly, Licensing
    Date: 2013–11–29
  21. By: Sandro Sacchet de Carvalho
    Abstract: Neste artigo, estuda-se a relação entre o crescimento econômico e a degradação ambiental por meio de uma discussão sobre a curva de Kuznets ambiental. Apresentam-se os principais resultados obtidos por uma imensa literatura, avaliando-se suas implicações. Empiricamente, reconsidera-se a validade da curva de Kuznets ambiental para as emissões de dióxido de carbono com modelos robustos à presença de variáveis não estacionárias e à dependência entre as unidades do painel. Os resultados apontam a fragilidade do conceito de uma curva de Kuznets ambiental quando as propriedades das séries temporais são adequadamente levadas em consideração. In this paper we study the relationship between economic growth and environmental degradation through a discussion of the environmental Kuznets curve. We present the main results of an immense literature and assess its implications. Empirically, we reassess the validity of the environmental Kuznets curve for emissions of carbon dioxide with models robust to the presence of non-stationary variables and dependence among the units of the panel. The results point out the weakness of the concept of an environmental Kuznets curve when the properties of the series are properly taken into account
    Date: 2013–11
  22. By: Adam Isen; Maya Rossin-Slater; W. Reed Walker
    Abstract: This paper examines the long-term impacts of in-utero and early childhood exposure to ambient air pollution on adult labor market outcomes. We take advantage of a new administrative data set that is uniquely suited for addressing this question because it combines information on individuals' quarterly earnings together with their counties and dates of birth. We use the sharp changes in ambient air pollution concentrations driven by the implementation of the 1970 Clean Air Act Amendments as a source of identifying variation, and we compare cohorts born in counties that experienced large changes in total suspended particulate (TSP) exposure to cohorts born in counties that had minimal or no changes. We find a significant relationship between TSP exposure in the year of birth and adult labor market outcomes. A 10 unit decrease in TSP in the year of birth is associated with a 1 percent increase in annual earnings for workers aged 29-31. Most, but not all, of this effect is driven by an increase in labor force participation. In present value, the gains from being born into a county affected by the 1970 Clean Air Act amount to about $4,300 in lifetime income for the 1.5 million individuals born into these counties each year.
    Date: 2013–10
  23. By: Mazzanti, M.; Musolesi, A.
    Abstract: This paper documents the structural differences that exist among advanced countries with regard to their long run carbon dioxide-income relationships. The application of intervention analysis to the framework of Environmental Kuznets curves shows that time related effects, namely structural breaks, have been predominantly relevant in explaining the eventual occurrence of `bell shaped curves' with significant turning points. We indeed present heterogeneity of effects when comparing advanced countries long run dynamics. The second oil shock in the 80's and the 1992 Rio convention are among the major underlying causes of temporal breaks. Thus, environmental policy can exert long run beneficial shocks to the energy-economic system. Evidence provides food for thought for the post Kyoto era policy making, just after the Rio+20 step. Market and policy shocks are likely to be dynamically interrelated, but generating mutually interactive effects in the way the system `adapts' and reacts to changing (pricing) conditions over time.
    JEL: C22 Q53
    Date: 2013
  24. By: Shurojit Chatterji; Sayantan Ghosal; Sean Walsh; John Whalley
    Abstract: Whats the role of unilateral measures in global climate change mitigation in a post-Durban, post 2012 global policy regime? We argue that under conditions of preference heterogeneity, unilateral emissions mitigation at a subnational level may exist even when a nation is unwilling to commit to emission cuts. As the fraction of individuals unilaterally cutting emissions in a global strongly connected network of countries evolves over time, learning the costs of cutting emissions can result in the adoption of such activities globally and we establish that this will indeed happen under certain assumptions. We analyze the features of a policy proposal that could accelerate convergence to a low carbon world in the presence of global learning.
    Keywords: Unilateral initiatives, mitigation, spillovers, global learning, technol- ogy transfer
    JEL: Q54 F53 Q55 O33
    Date: 2013–11
  25. By: Shital Sharma
    Abstract: This research studies the link between environmental regulation and plant level productivity in two U.S. manufacturing industries: pulp and paper mills and oil refineries using Data Envelopment Analysis (DEA) models. Data on abatement spending, emissions and abated emissions are used in different DEA models to study plant productivity outcomes when accounting for abatement spending or emissions regulations. Results indicate that pulp and paper mills and oil refineries in the U.S. suffered decreases in productivity due to pollution abatement activities from 1974 to 2000. These losses in productivity are substantial but have been slowly trending downwards even when the regulations have tended to become more stringent and emission of pollutants has declined suggesting that the best practice has shifted over time. Results also show that the reported abatement expenditures are not able to explain all the losses arising out of regulation suggesting that these abatement expenditures are consistently under-reported.
    Date: 2013–10
  26. By: Grimaud, André; Neubauer, Mauricio; Rougé, Luc
    Abstract: We study an economy in which a final good is produced by two sectors. One uses a non-renewable and polluting resource, the other a renewable and clean resource. A specific type of research is associated to each sector. The public authorities levy a carbon tax and simultaneously subsidize both research sectors. We study the impact of such a policy scheme on the rate of resource extraction and emissions. The subsidy to research in the clean sector goes in the opposite direction of the effects of the carbon tax. If the tax creates a green paradox, the subsidy moderates it; if the tax slows down resource extraction, then the subsidy generates a green paradox
    Keywords: carbon tax, directed technical change, green paradox, R&D policy
    JEL: O32 O41 Q20 Q32
    Date: 2013–11
  27. By: Idrissa Sibailly (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, LEI - Laboratoire d'Economie Industrielle - Centre de Recherche en Économie et STatistique (CREST))
    Abstract: This note investigates the impact of (international) technology transfer on optimal pollution taxation. To use a patented pollution abatement technology, the polluters subject to the emissions tax only pay fixed license fees to an (international) eco-industry (whose profits are shared among national and foreign suppliers). The second-best emissions tax is shown to decrease as the exogenous share of imported technology increases. When the domestic polluting industry is imperfectly competitive, this tax is always lower than the marginal damage. In contrast, when the polluting industry is perfectly competitive, the second-best emissions tax is lower than the marginal damage only in the case of incoming technology transfer. If the technology is transferred domestically, the second-best emissions tax is equal to the marginal damage. These results contrast with the literature on the impact of market power in the eco-industry on optimal policy design, initiated by David and Sinclair-Desgagné (2005).
    Keywords: Pigouvian Taxes, Eco-Industry, Technology Transfer, International Trade
    Date: 2013–11–29
  28. By: Clémence Christin (Université de Caen Basse-Normandie, France); Jean-Philippe Nicolai (ETH Zurich, Switzerland); Jerome Pouyet (Paris School of Economics, France)
    Abstract: Under imperfect competition, the effect of a cap-and-trade system on indus- try profits depends on the type of abatement technology that is used by firms: industries that use process-integrated technologies are more affected than those using end-of-pipe abatement technologies. The interaction between environmental policy and the evolution of the market structure is then studied. In particular, a reserve of pollution permits for new entrants is justified when the industry uses a process-integrated abatement technology, while a system with a preemption right may be justified in the case of end-of-pipe abatement technology.
    Keywords: Cap-and-trade system; imperfect competition; abatement technologies.
    JEL: L13 Q53 Q58
    Date: 2013–10
  29. By: Robert W. Hahn; Robert A. Ritz
    Abstract: We evaluate a recent U.S. initiative to include the social cost of carbon (SCC) in regulatory decisions. To our knowledge, this paper provides the first systematic test of the extent to which applying the SCC has affected national policy. We examine all economically significant federal regulations since 2008, and obtain a surprising result: Putting a value on changes in carbon dioxide emissions does not generally affect the ranking of the preferred policy compared with the status quo. Overall, we find little evidence that use of the SCC has affected U.S. policy choices to date. We offer an explanation related to the political economy of regulation.
    Keywords: Cost-Benefit Analysis; Social Cost of Carbon; Climate Policy; Regulatory Innovation
    JEL: H43 K32 Q51 Q58
    Date: 2013–11–27
  30. By: Lenka Wildnerova (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne - PRES HESAM)
    Abstract: The goal of this paper is to explore the environmental policies introduced by the government that cares about the welfare of its citizens and the contributions from the lobby groups. Our addition to the topic of environmental lobbying is in modeling lobby groups, where we distinguish between local and global pollution. We showed that in some cases, the environmental lobbying might have a negative impact on the tax level, which is not true for the local lobbying. Even more interesting result shows that the presence of supergreens might increase the pollution level in the home country. Our results for the cooperative policies prove that the introduced tax will imply lower global emissions. We demonstrated that the asymmetries in some parameters will reinforce the tax levels in the case of national lobby and supergreens if the asymmetry parameter in the foreign country is larger.
    Keywords: environmental lobbying, lobby groups, pollution tax, emission leakage, large countries, local lobby, supergreens
    Date: 2013–07–05
  31. By: Osberghaus, Daniel
    Abstract: Climate change is one of the most pressing challenges in current environmental policy. Appropriate policies intended to stimulate efficient adaptation and mitigation should not exclusively rely on the assumption of the homo oeconomicus, but take advantage of well-researched alternative behavioural patterns. Prospect theory provides a number of climate-relevant insights, such as the notion that evaluations of outcomes are reference dependent, and the relevance of perceived certainty of outcomes. This paper systematically reviews what prospect theory can offer to analyse mitigation and adaptation. It is shown that accounting for reference dependence and certainty effects contributes to a better understanding of some well-known puzzles in the climate debate, including (but not limited to) the different uptake of mitigation and adaptation amongst individuals and nations, the role of technical vs. financial adaptation, and the apparent preference for hard protection measures in coastal adaptation. Finally, concrete possibilities for empirical research on these effects are proposed. --
    Keywords: Adaptation,Climate Change,Mitigation,Prospect Theory,Reference Point,Uncertainty
    Date: 2013

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