nep-ene New Economics Papers
on Energy Economics
Issue of 2014‒04‒11
35 papers chosen by
Roger Fouquet
London School of Economics

  1. Stochastic Kaya model and its applications By Hwang, In Chang
  2. Energy market liberalisation and renewable energy policies in OECD countries By Francesco Vona; Francesco Nicolli
  3. International Capital Markets, Oil Producers and the Green Paradox By Rick Van der Ploeg; Gerard van der Meijden; Cees Withagen
  4. Household Fuel Choice in Urban Ethiopia: A Random Effects Multinomial Logit Analysis By Alem, Yonas; Beyene, Abebe D.; Kohlin, Gunnar; Mekonnen, Alemu
  5. How Consumers Respond to Environmental Certification and the Value of Energy Information By Sébastien Houde
  6. "Effects of Consumer Subsidies for Renewable Energy on Industry Growth and Welfare: Japanese Solar Energy" By Satoshi Myojo; Hiroshi Ohashi
  7. Transmission and generation investment in electricity markets: The effects of market splitting and network fee regimes By Grimm, Veronika; Martin, Alexander; Weibenzahl, Martin; Zoettl, Gregor
  8. "Large-scale Penetration of Solar PV in Japan: Simulation Analysis" (in Japanese) By Keiji Saito; Shin-ichi Hanada; Hiroshi Ohashi
  9. The direct and indirect eects of oil shocks on energy related stocks By David C Broadstock; Rui Wang; Dayong Zhang
  10. Strategic Withholding through Production Failures By Fogelberg, Sara; Lazarczyk, Ewa
  11. Long-Term Mitigation Strategies and Marginal Abatement Cost Curves: A Case Study on Brazil By Adrien Vogt-Schilb; Stéphane Hallegatte; Christophe De Gouvello
  12. Promoting Second Generation Biofuels: Does the First Generation Pave the Road? By Eggert, Håkan; Greaker, Mads
  13. Production Risk, Energy Use Efficiency and Productivity of Korean Industries By Khayyat, Nabaz T.; Heshmati, Almas
  14. Exploring the optimality of cyclical emission rates By George Halkos; George Papageorgiou
  15. The Elephant in the Ground: Managing Oil and Sovereign Wealth By Rick Van der Ploeg; Samuel Wills; Ton van den Bremer
  16. The Impact of Oil Revenues on the Iranian Economy and the Gulf States By Dreger, Christian; Rahmani, Teymur
  17. A Smooth Transition Logit Model of the Effects of Deregulation in the Electricity Market By A.S. Hurn; Annastiina Silvennoinen; Timo Teräsvirta
  18. Freight transport, policy instruments and climate By Mandell, Svante; Nilsson , Jan-Eric; Vierth , Inge
  19. The effectiveness of foreign aid for sustainable energy By Rogner, H-Holger
  20. Energie et compétitivité By Dominique Bureau; Lionel Fontagné; Philippe Martin
  21. The Great Shift : Macroeconomic projections For the World Economy at the 2050 Horizon By Jean Fouré; Agnès Bénassy-Quéré; Lionel Fontagné
  22. Oil Shock Transmission to Stock Market Returns: Wavelet Multivariate Markov Switching GARCH Approach By Rania Jammazi
  23. Petrole : statu quo By Céline Antonin
  24. Cap and Trade under Transactions Costs By Singh, Rajesh; Weninger, Quinn
  25. Climate Change, Hydro-dependency and the African Dam Boom By Matthew Cole; Robert Elliott; Eric Strobl
  26. Regulation of Network Sectors in the EU: A Federalist Perspective By Wolfgang Kerber; Julia Wendel
  27. How ICT Investment and Energy Use Influence the Productivity of Korean Industries By Khayyat, Nabaz T.; Lee, Jongsu; Heshmati, Almas
  28. Pétrole : la poudrière syrienne By Céline Antonin
  29. Strategic choice of stock pollution: Why conservatives (appear to) turn green By Voß, Achim
  30. Environmental Policy and Growth in a Model with Endogenous Environmental Awareness By Karine Constant; Marion Davin
  31. Guidelines for Exploiting Natural Resource Wealth By Rick Van der Ploeg
  32. Optimal Expectations and the Welfare Cost of Climate Variability By Alem, Yonas; Colmer, Jonathan
  33. The Power of Hydroelectric Dams: Agglomeration Spillovers By Severnini, Edson R.
  34. What's the damage? Environmental regulation with policy-motivated bureaucrats By Voß, Achim; Lingens, Jörg
  35. Calculating the real return of the Norwegian Government Pension Fund Global by alternative measures of the deflator By Andreas Benedictow; Pål Boug

  1. By: Hwang, In Chang
    Abstract: This paper develops a stochastic Kaya model. The elasticity of carbon dioxide emissions with respect to population, per capita GDP, energy efficiency, and fossil fuel dependence is estimated using the panel data of 132 countries from 1960 to 2010. As an application of the stochastic Kaya model, we investigate the achievement of each nation to the stabilization of carbon emissions with economic development, using a method of index decomposition analysis. In addition, carbon emissions are projected by 2050 using the model. One of the main findings is that assuming the unit elasticity for each driving force underestimates the scale effect (population change and economic growth) and overestimates the counteracting technology effect. This results in significant differences in quantifying driving forces of the changes in carbon emissions and in future emissions projections.
    Keywords: Climate change policy; CO2 emissions; emissions scenarios; decomposition analysis
    JEL: Q54 Q56 Q57
    Date: 2013–12–13
  2. By: Francesco Vona (OFCE); Francesco Nicolli (Facoltà di Economia (Faculty of Economics))
    Abstract: We analyse the impact of market liberalisation on renewable energy policies in OECD countries. To this end, we first develop an aggregated indicator of renewable energy policies using principal components analysis and then examine its determinants through panel datatechniques. Our resultsare consistent with the predictions of political-economy models of environmental policies, as brown lobbying, proxied by entry barriers in the energy sector, and citizens’ preferenceshave the expected effectson policy. Brown lobbying has a negative effect on the policy indicator, evenwhen accounting for endogeneity in its effects in a dynamic panel specification and using different policy indicators. Reducing income inequality, the ratification of the Kyoto protocol and stronger green parties all positively affect the approval of more ambitious policies but with less robust results.
    Keywords: Renewable Energy Policy; Energy Market Liberalisation; Political Economy
    JEL: Q42 Q48 O38 D72
    Date: 2013–07
  3. By: Rick Van der Ploeg; Gerard van der Meijden; Cees Withagen
    Abstract: In partial equilibrium a rapidly rising carbon tax encourages oil producers to extract fossil fuels more quickly, giving rise to the Green Paradox. General equilibrium analysis for a closed economy shows that a rapidly rising carbon tax negatively affects the interest rate, which tends to weaken the Green Paradox. However, in a two-country world with an oil-importing and an oil-exporting region the Green Paradox may be amplified in general equilibrium if exporters are relatively patient. On the contrary, if oil exporters are relatively impatient, the Green Paradox might be reversed. Furthermore, general equilibrium effects tend to weaken the link between a capital asset tax and the time profile of resource extraction so that the capital asset tax becomes less useful as an instrument to offset the Green Paradox effect associated with the announcement of a future carbon tax. Taking exploration costs into account, we show that the effect of both policy instruments on cumulative extraction is of opposite sign as the effect on current extraction. Moreover, if the change in current extraction is amplified or reversed in general equilibrium, so will be the change in cumulative extraction.
    Keywords: Green Paradox, Hotelling rule, oil importers, oil producers, investment, capital markets, carbon tax, asset holding tax
    JEL: D81 H20 Q31 Q38
    Date: 2014–01–31
  4. By: Alem, Yonas; Beyene, Abebe D.; Kohlin, Gunnar; Mekonnen, Alemu
    Abstract: We use three rounds of a rich panel data set to investigate the determinants of household fuel choice and energy transition in urban Ethiopia. We observe that energy transition did not occur following economic growth in Ethiopia during the past decade. Regression results from a random effects multinomial logit model, which controls for unobserved household heterogeneity, show that households’ economic status, price of alternative energy sources, and education are important determinants of fuel choice in urban Ethiopia. The results also suggest the use of multiple fuels, or “fuel stacking behavior.” We argue that policy makers could target these variables to encourage transition to cleaner energy sources.
    Keywords: urban Ethiopia, energy choice, random effects multinomial logit
    JEL: C25 Q23 Q42 O13
    Date: 2013–10–10
  5. By: Sébastien Houde
    Abstract: The ENERGY STAR certification is a voluntary labeling that favors the adoption of energy efficient products. In the US appliance market, the label is a coarse summary of otherwise readily accessible information. Using micro-data of the US refrigerator market, I develop a structural demand model and find that consumers respond to certification in different ways. Some consumers have a large willingness to pay for the label, well beyond the energy savings associated with certified products; others appear to pay attention to electricity costs, but not to the certification, and still others appear to be insensitive to both electricity costs and ENERGY STAR. The findings suggest that the certification acts as a substitute for more accurate, but complex energy information. Using the structural model, I find that the opportunity cost of having imperfectly informed consumers in the refrigerator market ranges from $12 to $17 per refrigerator sold.
    JEL: D12 D83 L15 Q41 Q50
    Date: 2014–03
  6. By: Satoshi Myojo (Faculty of Economics, Hosei University); Hiroshi Ohashi (Faculty of Economics, the University of Tokyo)
    Abstract:    This paper examines the e¤ectiveness of consumer subsidies to encourage the in- stallment of solar panels in Japan. Such subsidies can be justi…ed on the ground that the prices to consumers of the conventional energy alternative do not re‡ect their full social costs. The paper investigates two types of subsidies: buy-back rebates and feed-in tari¤s. Estimates reveals modest demand elasticity and small learning e¤ect. Simula- tions, based on structural demand and supply estimates, indicate that the subsidies can have either bene…cial or detrimental e¤ects on social welfare. The paper concludes that the impacts of the subsidies critically rely on the cost structure and the magnitude of external costs arising from greenhouse emissions.
    Date: 2014–03
  7. By: Grimm, Veronika; Martin, Alexander; Weibenzahl, Martin; Zoettl, Gregor
    Abstract: In this paper we propose a three-level computational equilibrium model that allows to analyze the impact of the regulatory environment on transmission line expansion (by the regulator) and investment in generation capacity (by private firms) in liberalized electricity markets. The basic model analyzes investment decisions of the transmission operator (TO) and private firms in expectation of an energy only market and cost-based redispatch. In different specifications we consider the cases of one versus two price zones (market splitting) and analyze different approaches to recover network cost, in particular lump sum, capacity based, and energy based fees. In order to compare the outcomes of our multi-stage market model with the first best benchmark, we also solve the corresponding integrated planer problem. In two simple test networks we illustrate that energy only markets can lead to suboptimal locational decisions for generation capacity and thus, imply excessive network expansion. Market splitting heals those problems only partially. Those results obtain for both, capacity and energy based network tariffs, although investment slightly differs across those regimes. --
    Keywords: Electricity markets,Network Expansion,Generation Expansion,Investment Incentives,Computational Equilibrium Models,Transmission Management
    Date: 2014
  8. By: Keiji Saito (Graduate School of Economics, University of Tokyo); Shin-ichi Hanada (Faculty of Economics, Kanazawa Seiryo University); Hiroshi Ohashi (Faculty of Economics, University of Tokyo)
    Abstract: This paper examines the effects of large-scale penetration of solar PV in Japan. Since the government adopted in 2009 the feed-in tariff on renewable energy sources, the solar PV has been popular for both for residential and non-residential users. This paper employs power system simulation and assess several scenarios on the penetration of solar PV in 2020. The paper finds two major results; (1) the penetration is reached at 4000GW, the annual peak demand would shift from summer to winter. No kW value would be placed on an additional unit of solar PV. (2) Since solar PV would replace thermal power generation, the fuel cost of the generation would reduce with penetration of solar PV, but at a slower rate.
    Date: 2014–02
  9. By: David C Broadstock (TIERS, Southwestern University of Finance and Economics, China and Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey, UK.); Rui Wang (TIERS, Southwestern University of Finance and Economics, China); Dayong Zhang (TIERS, Southwestern University of Finance and Economics, China)
    Abstract: We attempt to consolidate (at least in part) the vast literature on oil shocks and stock returns by decomposing the influence of oil shocks into two channels of effect: ‘direct’ and ‘indirect’. Using a simple empirical asset pricing model it is shown that oil shocks can affect stocks not only directly, but also indirectly through general market risk (which is shown to be due in part to oil shocks), or put another way that additional oil price risk exposure is embedded in the traditional market beta. As far as is known, this is the first paper explicitly quantifying both effects together. By doing so we offer a more complete picture of when and how oil shocks impact stock returns, thus allowing investors to make more informed responses to oil shocks. The results are illustrated using daily data from all (active) listed energy related stock portfolios in the Asia Pacific Region, and are robust to structural instability and the specification of oil-shock used.
    Keywords: Oil Prices, Energy Related Stocks, Threshold GARCH, Asset Pricing, Structural Break.
    JEL: G12 G15
    Date: 2014–04
  10. By: Fogelberg, Sara (Research Institute of Industrial Economics (IFN)); Lazarczyk, Ewa (Research Institute of Industrial Economics (IFN))
    Abstract: Anecdotal evidence indicates that electricity producers use production failures to disguise strategic reductions of capacity in order to influence prices, but systematic evidence is lacking. We use a quasi-experimental set up and data from the Swedish energy market to examine such behavior. In a market without strategic withholding, the decision of reporting a failure should be independent of the market price. We show that marginal producers in fact base their decision to report a failure in part on prices, which indicates that failures are a result of economic incentives as well as of technical problems.
    Keywords: Electricity markets; Urgent Market Messages (UMMs); Unplanned failures
    JEL: L49 L94
    Date: 2014–03–31
  11. By: Adrien Vogt-Schilb (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - AgroParisTech); Stéphane Hallegatte (World Bank - World Bank); Christophe De Gouvello (World Bank - World Bank)
    Abstract: Decision makers facing abatement targets need to decide which abatement measures to implement, and in which order. This paper investigates the ability of marginal abatement cost (MAC) curves to inform this decision, reanalysing a MAC curve developed by the World Bank on Brazil. Misinterpreting MAC curves and focusing on short-term targets (e.g., for 2020) would lead to under-invest in expensive, long-to-implement and large-potential options, such as clean transportation infrastructure. Meeting short-term targets with marginal energy-efficiency improvements would lead to carbon-intensive lock-ins that make longer-term targets (e.g., for 2030 and beyond) impossible or too expensive to reach. Improvements to existing MAC curves are proposed, based on (1) enhanced data collection and reporting; (2) a simple optimization tool that accounts for constraints on implementation speeds; and (3) new graphical representations of MAC curves. Climate mitigation policies can be designed through a pragmatic combination of two approaches. The synergy approach is based on MAC curves to identify the cheapest mitigation options and maximize co-benefits. The urgency approach considers the long-term objective (e.g., halving emissions by 2050) and works backward to identify actions that need to be implemented early, such as public support to clean infrastructure and zero-carbon technologies.
    Date: 2014
  12. By: Eggert, Håkan; Greaker, Mads
    Abstract: The transport sector contributes almost a fifth of the current global emissions of greenhouse gases (GHG), and its share is likely to increase in the future. The US, Brazil, and a number of European and other countries worldwide have introduced various support schemes for biofuels. The advantage of biofuels is that they are easily integrated with the current fossil fuel–based transport sector. However, recent studies question whether the supply of feedstock is sufficient, and to what extent biofuels lead to GHG emission reductions. In addition, studies find that some first generation (1G) biofuels have had a significant impact on food commodity prices. 1G biofuels’ problems can be overcome by a transition to second generation (2G) biofuels. So far, 2G biofuels are much more costly to produce. We therefore ask to what extent targeted support to 2G biofuels is likely to bring costs down. Are current support schemes for biofuels well designed in order to promote the development of 2G biofuels? We find that ethanol made from cellulose using the biochemical conversion process is far from a ripe technology, with several cost-reducing opportunities yet to be developed. Hence, targeted support to cellulosic ethanol might induce a switch from 1G to 2G biofuels. However, we find little evidence that production and use of 1G biofuels will bridge the conversion to 2G biofuels. The production processes are so different that more use of 1G biofuels will have little impact on technological development in 2G biofuels. Hence, to the extent that private investment in the development of 2G biofuels is too low,current support schemes for 1G fuels may block 2G biofuels instead of promoting them. Classification-JEL: separated by commas
    Keywords: biofuels, ethanol, cellulose, second generation
    Date: 2013–12–27
  13. By: Khayyat, Nabaz T. (College of Engineering, Seoul National University); Heshmati, Almas (Centre of Excellence for Science and Innovation Studies (CESIS) and Sogang University)
    Abstract: Korea imports all of its primary energy, which leads to high dependency and vulnerability related to its energy supply. Efficiency in the use of energy is a way to reduce dependency and emissions. This study provides empirical results of the stochastic production process in energy use. Special attention is given to the factors that increase the risk or variation of using more of the energy input in production. A dynamic panel model is specified and applied to 25 Korean industrial sectors over the period 1970-2007. The determinants of energy use are identified and their effects in the form of elasticities of energy use are estimated. Stochastic production technology is applied to estimate an energy demand model based on an inverted factor demand. The findings reveal that: first, there are large variations in the degree of overuse or inefficiency in energy use among the individual industries as well as over time; second, information and communication technology (ICT) capital and labor are substituting for energy; and third, ICT capital input decreases the variability of energy demand while non-ICT capital, material and labor increase the variability of energy demand. The results suggest that technical progress contributes more to the increase in the mean energy demand than to the reduction in the level of risk. It is recommended that industries increase their level of ICT capital as well as digitalize and invest more in R&D activities and value added services to reduce the uncertainty related to their demand for energy.
    Keywords: Production risk; Energy use efficiency; Technical change; Stochastic production; Panel data; Industrial Sector; Korea
    JEL: C23 D24 L60 O13 O33
    Date: 2014–03–31
  14. By: George Halkos; George Papageorgiou
    Abstract: In this paper, one of the basic assumptions is that the environment provides two different kinds of services. First, the environment may serve as an input to the production of conventional goods. For example, the exploitation of an oil source from which one firm extracts the oil which in turn is used as a fossil fuel for an industry. In the worst case, the use of the environment for industrial purposes will negatively affect the environment, e.g. the water quality of a paper mill along a river. Nevertheless, the possibility to pollute, i.e., to save abatement costs, lowers production costs. Hence, firms and consumers evaluate this service positively. Second, the environment itself-clean air, natural creeks and rivers instead of paper mills, hydro power plants, etc.-provides amenities and thus a second service that is different, because enjoying this service does not degrade environmental quality. As it is intuitively clear, the environment provides consumptive and non-consumptive uses. In renewable resources means, the environmental stock may be harvested and used as an input for conventional goods� production but provides simultaneously a positive externality. The purpose of this paper is to study the dynamics of pollution and the possibility of cycles and instability, while the major findings of this paper are the following: First, taking the simplest pollution model with one state and one control variables and extending it into two state variables, equilibrium may change from the fixed point into a limit cycle equilibrium, i.e. the optimal emissions rate may be cyclical. Second, taking the conflicting case as a differential game we found again the conditions under which the richer limit cycle equilibrium takes place.
    Keywords: Renewable resources; environmental economics; pollution management
    JEL: C61 C62 D43 H21
    Date: 2014–04–01
  15. By: Rick Van der Ploeg; Samuel Wills; Ton van den Bremer
    Abstract: Many oil exporters accumulate large sovereign wealth funds, though their portfolio allocation does not take into account below-ground assets, like oil. Similarly, the above-ground portfolio does not affect the decision to extract oil. This paper shows that subsoil oil wealth should change a country's above-ground asset allocation in two ways. First, the holding of all risky assets is leveraged because there is additional wealth outside the fund. Second, more (less) is invested in financial assets that are negatively (positively) correlated with oil to hedge against the riskiness of subsoil exposure. Furthermore, if marginal oil rents move pro-cyclically with the value of the financial assets in the fund, then oil will be extracted slower than predicted by the standard Hotelling rule. This leaves a buffer of oil to be extracted when both oil prices and asset returns are high. Finally, any unhedged residual volatility must be managed through additional precautionary saving.
    Keywords: oil, portfolio allocation, sovereign wealth fund, optimal extraction
    JEL: E21 G11 G15 O13 Q32 Q33
    Date: 2013–12–31
  16. By: Dreger, Christian (DIW Berlin); Rahmani, Teymur (University of Tehran)
    Abstract: In line with the neoclassical growth model a persistent stream of oil revenues might have a long lasting impact on GDP per capita in oil exporting countries through higher investment activities. This relationship is explored for Iran and the countries of the Gulf Cooperation Council (GCC) using (panel) cointegration techniques. The existence of cointegration between oil revenues, GDP and investment can be confirmed for all countries. While the cointegration vector is found to be unique for Iran, long run equations for GDP and investment per capita are distinguished for the Gulf countries. Both variables respond to deviations from the steady state, while oil income can be treated as weakly exogenous. The long run oil elasticities for the Gulf states exceed their Iranian counterparts. In addition, investment in Iran does not react to oil revenues in the long run. Hence, oil revenues may have been spent less wisely in Iran over the past decades.
    Keywords: oil exporting countries, oil revenues, panel cointegration
    JEL: F43 O53 Q30 C33
    Date: 2014–03
  17. By: A.S. Hurn (School of Economics and Finance, Queensland University of Technology); Annastiina Silvennoinen (School of Economics and Finance, Queensland University of Technology); Timo Teräsvirta (Aarhus University and CREATES)
    Abstract: We consider a nonlinear vector model called the logistic vector smooth transition autoregressive model. The bivariate single-transition vector smooth transition regression model of Camacho (2004) is generalised to a multivariate and multitransition one. A modelling strategy consisting of specification, including testing linearity, estimation and evaluation of these models is constructed. Nonlinear least squares estimation of the parameters of the model is discussed. Evaluation by misspecification tests is carried out using tests derived in a companion paper. The use of the modelling strategy is illustrated by two applications. In the first one, the dynamic relationship between the US gasoline price and consumption is studied and possible asymmetries in it considered. The second application consists of modelling two well known Icelandic riverflow series, previously considered by many hydrologists and time series analysts. JEL Classification: C23, C51, L94, Q41.
    Keywords: Smooth transition, binary choice model, logit model, electricity spot prices, peak load pricing, price spikes
    Date: 2014–03–28
  18. By: Mandell, Svante (KTH and VTI); Nilsson , Jan-Eric (VTI); Vierth , Inge (VTI)
    Abstract: The impact of policy instruments supposed to reduce greenhouse gas emissions from road freight transports may seem smaller than expected. Using insights from economics and contract theory, the paper sorts out the (possible) instances of market failure in the freight transport market; operator market power, asymmetric information split incentives, and public goods. The primary limitations of standard policy instruments are demonstrated to be linked to unobservable information. Some of these may be reduced but not eliminated as information technologies develop, making it possible to observe, verify and provide contract-relevant information to the uninformed parties. There is little reason to believe that possible market failures present major limitations to the efficiency of economic instruments geared toward protecting the climate, other than possibly in the short run
    Keywords: Freight transport; Climate; Greenhouse gas; Policy instruments; Asymmetric information; Split incentives
    JEL: R40
    Date: 2014–03–25
  19. By: Rogner, H-Holger
    Abstract: Foreign aid and technology transfer are an essential means, especially for the least developed countries, towards meeting the Millennium Development Goals as well as facilitating adaptation to, and mitigation of, climate change. The deployment of technolo
    Keywords: official development assistance, foreign aid, climate change mitigation, renewables, good practices
    Date: 2013
  20. By: Dominique Bureau (MEEDDAT); Lionel Fontagné (Maison des Sciences Economiques); Philippe Martin (Département d'économie)
    Abstract: Dans un contexte de renchérissement prévisible de l’énergie au cours des vingt prochaines années, orienter l’effort d’innovation industrielle et l’offre de biens et services vers des technologies économes en énergie est une nécessité. Toutefois, une hausse des prix de l’énergie plus marquée en France que chez nos concurrents pénaliserait la compétitivité à court terme de l’industrie française. Cette Note expose les termes de l’arbitrage que doit affronter la France entre la préservation d’un élément significatif de sa compétitivité à court terme (le coût relativement faible de son énergie en particulier électrique) et la nécessaire transformation de ses avantages comparatifs à moyen-long terme (sous l’effet d’une vérité des prix énergétiques). À partir d’un travail économétrique original portant sur les exportations des entreprises françaises, nous estimons qu’une hausse de 10 % des prix de l’électricité en France réduirait la valeur des exportations en moyenne de 1,9 % et qu’une même augmentation du prix du gaz les réduirait de 1,1 %. La perte de compétitivité est sensiblement plus marquée pour les plus gros exportateurs, parti- culièrement dans les secteurs fortement dépendants de l’énergie. Cet effet négatif de court terme est à mettre en regard de l’effet de signal d’une hausse des prix de l’énergie sur les spécialisations à moyen-long terme, afin que la France ne reste pas en arrière dans la course à l’innovation « verte ». Nous tirons de cette analyse plusieurs enseignements. Tout d’abord, il convient d’annoncer la hausse des prix de l’énergie, de manière crédible, afin que les agents économiques l’intègrent dans leurs calculs et réorientent leurs choix de consommation et de production. Afin de limiter les effets négatifs d’un renchérissement de l’énergie sur la compétitivité à court terme, nous recommandons que la taxation supplémentaire de l’énergie soit utilisée pour réduire le coût du travail, une grande prudence quant au rythme de déclassement des équipements nucléaires historiques, dont le coût au kWh est particulièrement performant, une imputation différenciée de la charge de service public en fonction de l’intensité énergétique (comme en Allemagne) et une convergence des approches au niveau européen pour ce qui concerne les coûts de réseau.
    Date: 2013–05
  21. By: Jean Fouré (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique); Agnès Bénassy-Quéré (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Lionel Fontagné (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Department of Economics - European University Institute)
    Abstract: We present growth scenarios for 147 countries to 2050, based on MaGE (Macroeconometrics of the Global Economy), a three-factor production function that includes capital, labour and energy. We improve on the literature by accounting for the energy constraint through dynamic modelling of energy productivity, and departing from the assumptions of either a closed economy or full capital mobility by applying a Feldstein-Horioka-type relationship between savings and investment rates. Our results suggest that, accounting for relative price variations, China could account for 33% of the world economy in 2050, which would be much more than the United States (9%), India (8%), the European Union (12%) and Japan (5%). They suggest also that China would overtake the United States around 2020 (2040 at constant relative prices). However, in terms of standards of living, measured through GDP per capita in purchasing power parity, China would still lag 10 percent behind the United States at the 2050 horizon.
    Keywords: GDP projections ; Llong run ; Global economy
    Date: 2014–03–21
  22. By: Rania Jammazi
    Abstract: In recent years our understanding of the nature of crude oil price shocks and their effects on the stock market returns has evolved noticeably. Evidence on spillover effects between several kinds of markets has widely been discussed around the globe whereas the transmission of shocks between crude oil market and stock market returns has received little attention. Extending earlier work in the literature, we use data on monthly crude oil returns and stock market returns of five developed countries (USA, UK, Japan, Germany and Canada) to investigate two issues that have been at the center of recent debates on the effect of crude oil shocks on the stock market returns. First, we analyze whether shocks and or volatility emanating from two major crude oil markets are transmitted to the equity markets. We do this by decomposing monthly real crude oil prices and analyzing the effect of the smooth part on the degree of the stock market instability. The motivation behind the use of the former method is that noises can affect the quality of the shock and thus increase erroneous results of the shock transmission to the stock market. Second, under the hypothesis of common increased volatility, we investigate whether these states happen around the identified international crises. In doing so, flexible model involving the dynamic properties of the Trivariate Markov switching GARCH model and the recent Harr A trous wavelet decomposition, is implemented to achieve prominent prediction of the mentioned issues. The proposed model is able to circumvent the path dependency problem that can affect the prediction's robustness and can provide useful information for investors and government agencies that have largely based their views on the notion that crude oil markets affect negatively stock market returns. Indeed, the results show that the A Haar Trous Wavelet decomposition method appears to be an important step toward improving accuracy of the smooth signal in detecting key real crude oil volatility features. Additionally, apart from UK and Japanese cases, the responses of the stock market to an oil shock depend on the geographic area for the main source of supply whether from the North Sea or from the North America (as we take two oil benchmarks WTI and Brent respectively).
    Keywords: Trivariate BEKK-Markov Switching, wavelet decomposition, oil shocks, stock markets.
    Date: 2014–03–28
  23. By: Céline Antonin (OFCE)
    Abstract: Alors que le premier semestre 2012 avait été marqué par une grande volatilité des cours, les prix du Brent sont restés relativement stables au deuxième semestre avec une moyenne à 110 dollars. Le Brent est actuellement soumis à plusieurs forces antagonistes (...).
    Keywords: petrole
    Date: 2013–04
  24. By: Singh, Rajesh; Weninger, Quinn
    Abstract: We study equilibrium production and emission in a model where firms jointly produce a valued good and an environmental bad, pollution. Firms are ex ante identical but receive random productivity shocks. A regulator imposes a cap-and-trade policy to control pollution emissions. Trade in emission permits entails transactions costs which follow two specifications: constant per unit trading costs or fixed trading costs. Under proportional costs, the equilibrium outcome is independent of buyers' and sellers' costs and depends only on the total, buyers' plus sellers, per unit trading cost. Under fixed costs, both buyers' and sellers' costs matter. Under proportional costs trade always occurs, either fully or partially, as long as the total trading costs are below the market surplus obtained from the traded permit. With fixed costs, trade is either partial or non-existent. The implication is that production is efficient for a range of proportional trading costs, but always inefficient under fixed costs. In either case, trade is impeded most, even with small costs, when the emission permit market is thin, i.e., when the mass of buyers and sellers is small. We derive a non-monotonic relationship between the aggregate emissions cap and an upper bound for trading costs that obstruct or preclude trade. Further, we find that output loss due to emissions-permit-constrained unutilized capacity increases with productivity variance under ad valorem costs, the result is the opposite under fixed costs.
    Keywords: Cap-and-trade regulation; emissions permit trading; ad valorum and fixed transactions costs; capacity utilization.
    JEL: L5 Q5
    Date: 2014–03–29
  25. By: Matthew Cole; Robert Elliott; Eric Strobl
    Abstract: We examine Africa's increasing reliance on hydropower in light of climate change induced variations in rainfall and the potential power outages that may result. We use a continent wide riverflow material model and IPPC climate change scenarios and show that current plans for African dam building are fairly well matched with river-flow predictions so that fears that international donors and national governments are making a series of expensive and environmentally damaging investments may be overstated. However, predictions of an increase in extreme events and reduced rainfall for certain countries means there are still viabilty concerns for certain planned hydropower investments.
    Keywords: Hydropower, Climate Change, Africa Energy
    Date: 2014–03
  26. By: Wolfgang Kerber (University of Marburg); Julia Wendel (University of Marburg)
    Abstract: The vertical allocation of regulatory powers within the European two-level system of network sector regulation is analysed from the perspective of the economic theory of legal federalism. The analysis shows that sophisticated combinations of harmonised European rules along with sufficient scope for decentralised decisions of national regulators seem to be optimal. Especially interesting is that networks of regulatory authorities (as BEREC in telecommunications) can play an important role in regard to balancing the advantages and disadvantages of (de)centralisation. Whereas in regard to telecommunication a further shifting of regulatory powers to the EU level cannot be recommended, both in energy and railway markets it might still be necessary to strengthen the regulatory power of the EU.
    Keywords: EU sector regulation, legal federalism, regulatory networks, telecommunication
    JEL: K23 H77 F15
    Date: 2014
  27. By: Khayyat, Nabaz T. (Seoul National University); Lee, Jongsu (Seoul National University); Heshmati, Almas (Sogang University)
    Abstract: This empirical study examines changes in industrial productivity in Korea between 1980 and 2009, focusing on how investment in information and communication technology (ICT) and energy use, influence productivity levels. A dynamic factor demand model is applied in order to link inter-temporal production decisions by explicitly recognizing that the level of certain factors of production cannot be changed without incurring so-called adjustment costs, defined in terms of forgone output from current production. In particular, we investigate how the ICT–energy relationship affects total factor productivity growth in 30 industrial sectors. Describing industry-specific productivity levels is important for policymakers when the allocation of public investment and support is limited. The results presented herein show that ICT/non-ICT capital investment are substitutes for labor and energy use. We also find a high output growth rate in the sampled sectors, and increasing returns to scale, whose effects on the TFP component are higher than those of technological progress.
    Keywords: dynamic factor demand, panel data, ICT investment, energy use, productivity
    JEL: C32 C33 Q41
    Date: 2014–03
  28. By: Céline Antonin (OFCE)
    Abstract: Les craintes du début de l’année de voir les cours du Brent dépasser durablement la barre des 120 dollars ne se sont pas matérialisées et le premier semestre 2013 a été marqué par une baisse des cours du baril de Brent de 116 à 103 dollars entre janvier et juin 2013. Ce fléchissement s’explique par plusieurs facteurs : la faiblesse de la demande en provenance des pays industriels, la montée en puissance de nouveaux gisements non conventionnels en Amérique du Nord, et la présence de capacités de production inutilisées au sein des pays de l’OPEP.
    Date: 2013–10
  29. By: Voß, Achim
    Abstract: The public management of stock pollutants is an intertemporal problem; today's optimal choice takes the behavior of future governments into account. If a government expects a successor with different environmental preferences - for instance, if Conservatives expect green successors - it must choose strategically. I model this interaction in a two-period game in which the government of each period chooses consumption as a flow variable that adds to a stock of pollution. In this setting, I analyze how the prospect of losing political power changes the incumbent's policy choice. It is shown that both the prospect of a more conservative or of a greener successor reduce present consumption. This implies that losing power in the future makes a conservative government choose a compromise policy today - which may explain why in some countries, conservative governments seem to adopt green policies. By contrast, the expected loss of power makes a green government choose a policy that appears as a radicalization of their position. --
    Keywords: Stock Pollution,Political Economy of Environmental Policy,Time Inconsistency,Strategic choice of stock variables,Sequential Game,Partisan Politicians,Ideological Preferences,Green Parties
    JEL: Q58 D72 C72
    Date: 2014
  30. By: Karine Constant (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)); Marion Davin (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))
    Abstract: This paper examines the relationship between environmental policy and growth when green preferences are endogenously determined by education and pollution. The government can implement a tax on pollution and recycle the revenue in public pollution abatement and/or education subsidy (influencing green behaviors). When agent's preferences for the environment are highly sensitive to environmental damages, the economy can converge to a balanced growth path equilibrium with damped oscillations. Therefore, we identify two objectives that environmental policy seeks to address: remove oscillations, source of intergenerational inequalities, and enhance the long-term growth rate. We show that a tighter tax allows to achieve both objectives when the tax revenue is well allocated between education and direct environmental protection.
    Keywords: environmental policy; endogenous growth; environmental awareness; education
    Date: 2014–03
  31. By: Rick Van der Ploeg
    Abstract: The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling rule and the Hartwick rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations, a liquidity fund for the precautionary buffers to deal with commodity price volatility, and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment. Capital scarcity implies that a positive part of the windfall should be spent on domestic investment. The conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth.
    Keywords: permanent income, Hotelling rule, Hartwick rule, precaution, capital scarcity, absorption constraints, Dutch disease, investing to invest, political economy
    JEL: E21 E22 D91 Q32
    Date: 2013–12–31
  32. By: Alem, Yonas; Colmer, Jonathan
    Abstract: Uncertainty about the future is an important determinant of well-being, especially in developing countries where financial markets and other market failures result in ineffective insurance mechanisms. However, separating the effects of future uncertainty from realised events, and then measuring the impact of uncertainty on utility, presents a number of empirical challenges. This paper aims to address these issues and provides supporting evidence to show that increased climate variability (a proxy for future income uncertainty) reduces farmers' subjective well-being, consistent with the theory of optimal expectations (Brunnermeier & Parker, 2005 AER), using panel data from rural Ethiopia and a new data set containing daily atmospheric parameters. The magnitude of our result indicates that a one standard deviation (7%) increase in climate variability has an equivalent effect on life satisfaction to a two standard deviation (1-2%) decrease in consumption. This effect is one of the largest determinants of life satisfaction in rural Ethiopia.
    Keywords: separated by commas
    JEL: C25 D60 I31
    Date: 2014–03–05
  33. By: Severnini, Edson R. (Carnegie Mellon University)
    Abstract: How much of the geographic clustering of economic activity is attributable to agglomeration spillovers as opposed to natural advantages? I present evidence on this question using data on the long-run effects of large scale hydroelectric dams built in the U.S. over the 20th century, obtained through a unique comparison between counties with or without dams but with similar hydropower potential. Until mid-century, the availability of cheap local power from hydroelectric dams conveyed an important advantage that attracted industry and population. By the 1950s, however, these advantages were attenuated by improvements in the efficiency of thermal power generation and the advent of high tension transmission lines. Using a novel combination of synthetic control methods and event-study techniques, I show that, on average, dams built before 1950 had substantial short run effects on local population and employment growth, whereas those built after 1950 had no such effects. Moreover, the impact of pre-1950 dams persisted and continued to grow after the advantages of cheap local hydroelectricity were attenuated, suggesting the presence of important agglomeration spillovers. Over a 50 year horizon, I estimate that at least one half of the long run effect of pre-1950 dams is due to spillovers. The estimated short and long run effects are highly robust to alternative procedures for selecting synthetic controls, to controls for confounding factors such as proximity to transportation networks, and to alternative sample restrictions, such as dropping dams built by the Tennessee Valley Authority or removing control counties with environmental regulations. I also find small local agglomeration effects from smaller dam projects, and small spillovers to nearby locations from large dams.
    Keywords: hydroelectric dams, agglomeration spillovers, employment growth, event-study analysis with synthetic control methods
    JEL: N92 R11 R12 Q42
    Date: 2014–03
  34. By: Voß, Achim; Lingens, Jörg
    Abstract: Many environmental-policy problems are characterized by complexity and uncertainty. Government's choice concerning these policies commonly relies on information provided by a bureaucracy. Environmental bureaucrats often have a political motivation of their own, so they might be tempted to misreport environmental effects in order to influence policy. This transforms a problem of uncertainty into one of asymmetric information. We analyze the ensuing principal-agent relationship and derive the government's optimal contract, which conditions policy and rewards on reported environmental effects. We find that agents who are more environmentalist than the government are rewarded for admitting that the environmental impact is low (and vice versa). With higher uncertainty, the bureaucrat has a stronger influence on policy. For some values of the environmental impact, the bureau is permitted to set its own preferred policy (optimal delegation). --
    Keywords: Environmental Policy,Political Economy,Delegation,Bureaucracy,Regulatory Agency,Mechanism Design,Type-dependent Participation Constraint,Pure State Constraints in Optimal Control
    JEL: D73 D82 C61 Q52 Q58
    Date: 2014
  35. By: Andreas Benedictow; Pål Boug (Statistics Norway)
    Abstract: According to the present guidelines for fiscal policy, the use of oil revenues in the Norwegian economy should over time equal the expected real return on the Government Pension Fund Global (GPFG). An important question is therefore how to measure the real return, taking into account that the aim of the investment strategy of the GPFG is to maximise the purchasing power with respect to future Norwegian imports. In this paper, we present estimates of average annual real return of the GPFG over the sample period running from 1998 to 2012 based on alternative measures of the deflator. We find that the choices of international price measure, weighting scheme and method of aggregation generally are of major importance for the measure of the deflator, and thereby for the estimate of the real return. Two major factors providing low estimates of inflation and, thus, high real return, are GPFG weights dominated by western, low inflation countries, and export prices growing relatively slow, possibly due to strong international competition. Applying a method of aggregation tailored to also capture the deflationary effects of Norwegian imports increasingly originating from low cost countries (known as the China effect), reduces the estimate of inflation by close to one percentage point. We present estimates of average annual real return of the GPFG ranging from 2.3 to 3.3 per cent, and up to 4.5 per cent including the China effect. The present practice of calculating the deflator, based on CPI inflation in the countries the GPFG invests in, delivers an estimate of average annual real return of 3.1 per cent, which is close to the middle of this range.
    Keywords: Government Pension Fund Global; Real return; Deflators; Index numbers
    JEL: C43 E31 F14
    Date: 2014–04

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