nep-ene New Economics Papers
on Energy Economics
Issue of 2014‒04‒29
nineteen papers chosen by
Roger Fouquet
London School of Economics

  1. Can general purpose technology theory explain economic growth? Electrical Power as a case study By Cristiano Andrea Ristuccia; Solomos Solomou
  2. Analysis on Price Elasticity of Energy Demand in East Asia: Empirical Evidence and Policy Implications for ASEAN and East Asia By Han PHOUMIN; Shigeru KIMURA
  3. Beyond national economy-wide rebound effects: An applied general equilibrium analysis incorporating international spillover effects By Koesler, Simon; Swales, Kim; Turner, Karen
  4. Energy transition and behavioural change in rural areas - The role of energy cooperatives By Timo Kaphengst; Eike Karola Velten
  5. Rethinking how to support intermittent renewables By Narbel, Patrick A.
  6. Valuation Of Multiple Hyro Reservoir Storage Systems In Competitive Electricity Markets By Bastian Felix
  7. The Hidden Cost of Investment: The Impact of Adjustment Cost on Firm Performance Measurement and Regulation By Nick, Sebastian; Wetzel , Heike
  8. Proving the old spell wrong: New African hydrocarbon producers and the 'resource curse' By Bresand, Albert
  9. The Risks of Fiscal Policy in Countries Rich in Natural Resource By Alexander Knobel
  10. The economic spillovers from resource extraction: a partial resource blessing at the subnational level? By James CUST; Ridwan D. RUSLI
  11. Greening the Property Tax By Nicola Brandt
  12. Optimal Timing of Carbon Capture and Storage Policies Under Learning-by-doing By Amigues, Jean-Pierre; Lafforgue, Gilles; Moreaux, Michel
  13. Non-renewable Resources in Asian Economies: Perspective of Availability, Applicability Acceptability, and Affordability By Youngho CHANG; Yanfei LI
  14. On the environmental Kuznets curve with fossil-fuel induced emission: Theory and some illustrative examples By Sushama Murty
  15. Strategic Carbon Taxation and Energy Pricing: The Role of Innovation By Zhang, Xiao-Bing
  16. A carbon footprint proportional to expenditure - a case for Norway? By Narbel, Patrick A.; Isaksen, Elisabeth T.
  17. National Soft Landing CO2 trajectories under global carbon budgets By Patrick Criqui; Constantin Ilasca; Emmanuel Prados
  18. Necessary and sufficient conditions for an environmental Kuznets curve with some illustrative examples By Sushama Murty
  19. The social and environmental sustainability of the maritime industry By Moreira, Paulo Pires

  1. By: Cristiano Andrea Ristuccia; Solomos Solomou
    Abstract: Does the concept of General Purpose Technologies help explain periods of faster and slower productivity advance in economies? The paper develops a new comparative data set on the usage of electricity in the manufacturing sectors of the USA, Britain, France, Germany and Japan and proceeds to evaluate the hypothesis of a productivity bonus as postulated by many existing GPT models. Using the case of the diffusion of electrical power in the early twentieth century this paper shows that there was no generalized productivity boost from electrical power diffusion as postulated by many existing GPT models. The productivity gains from this GPT varied widely across economies and industries, suggesting that the power of GPTs to predict aggregate or sectoral growth is limited.
    Keywords: General Purpose Technologies, Economic Growth, Economic History,Productivity, Long Swings
    JEL: N11 N12 N13 N14 N60 O40
    Date: 2014–04–16
  2. By: Han PHOUMIN (Economic Research Institute for ASEAN and East Asia (ERIA)); Shigeru KIMURA (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: This study uses time series data of selected ASEAN and East Asia countries to investigate the patterns of price and income elasticity of energy demand. Applying a dynamic log-linear energy demand model, both short-run and long-run price and income elasticities were estimated by country. The study uses three types of dependent variable “energy demand” such as total primary energy consumption (TPES), total final energy consumption (TFEC) and total final oil consumption (TFOC) to regress on its determinants such as energy price and income. The finding shows that price elasticity is generally inelastic amongst all countries of studies. These findings support to the theory of price inelasticity of energy demand due to the assumption that energy remains a special commodity due to its nature of lack of substitution. Any shift from oil to other energy is difficult as it depends on equipment uses which are not easily to be replaced. As a result, a unit change in price may not induce equal change in quantity of demand. Although prices are inelastic, this study observed that price elasticity in developing counties is more sensitive than in developed countries. Among the countries studied, Thailand, Singapore and the Philippines have shown to be price sensitive compared to other developing countries and developed countries. For the income elasticity, this study also found that income has been very sensitive towards energy consumption, except for countries like India, China and Australia due to energy supply limitation in the cases of India and China and to less energy intensive industrial structure in the case of Australia. The price elasticity by energy type shows that TPES has a smaller impact than TFEC and TFOC, and TFEC is smaller than TFOC in terms of sensitivity of the price elasticity. Amongst other reasons, fuel subsidies may play roles in the insensitivity of energy prices. The findings have policy implications as inelastic price will impact on the uptake of energy efficiency in developing as well as developed countries. Therefore, removal of energy subsidies, albeit done in a gradual manner, will be critical to the promotion of energy efficiency. Its impact likewise goes further in that it will benefit the Renewable Energy uptake, the environment and social benefits.
    Keywords: Energy intensity, price and income elasticities, energy demand, energy subsidy, ASEAN and East Asia
    JEL: O4 L1 Q4
    Date: 2014–05
  3. By: Koesler, Simon; Swales, Kim; Turner, Karen
    Abstract: This paper proposes that the national focus of energy 'rebound' studies should be extended to an international context in the presence of supra-national agreements such as EU 20-20-20. The potential for energy efficiency improvements in one nation to impact energy use in others means that national targets and actions cannot be considered independently. This paper develops a general equilibrium analysis of increased efficiency in productive energy use, identifying a range of channels through which spillover effects may be transmitted as a result of trade in goods and services. The results show that energy efficiency in one nation does impact energy use in others. However, the sectoral and spatial distribution of positive and negative effects depends on the nature of the efficiency improvement and factor supply conditions. In particular, changes in relative competitiveness and energy supply conditions act to dampen economy-wide rebound as the boundaries of the economy are expanded. --
    Keywords: energy supply,energy demand,rebound effects,energy efficiency,general equilibrium,trade spillover
    JEL: D58 Q41 Q43 F18 Q56
    Date: 2014
  4. By: Timo Kaphengst; Eike Karola Velten
    Abstract: The overall aim of this study is to investigate energy transition processes in rural areas by paying particular attention to the role of energy cooperatives in these processes. The study should mainly uncover, if and under which conditions energy cooperatives provide favourable structures for initialising transition processes in rural areas and involving relevant stakeholders. A particular focus will be on the question of agency in energy transition processes and the internal drivers and motivations of the people to become involved in energy cooperatives. The theoretical background of the study is the transition theory and transition management (TM) concept, which we complement by drawing on Practice Theory and social learning in order to explain behavioural changes. The study mainly builds on an empirical case study in the Rhön-Grabfeld district in Northern Bavaria (Germany). Several energy cooperatives were formed there recently through the support and promotion a small rural consultancy. In addition, the results from the case study will be complemented by and compared with other case studies from Denmark and Spain taken from the literature. One of the main research question will be, to what extent energy cooperatives can be considered a good practice example for participatory involvement in transition processes and to what extent does this have an influence on the inner drivers/motivations of actors in this transition, possibly leading to behavioural changes.
    Keywords: Academic research, Behavioural economics, Post-industrialisation, Social development, Social innovation, Socio-ecological transition, Transition research
    JEL: D83 Q01 Q28
    Date: 2014–04
  5. By: Narbel, Patrick A. (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: Intermittent renewable energy sources, including solar and wind power, typically remain more expensive than conventional power sources. As a consequence, few intermittent power projects would have been deployed if specific policy instruments had not been implemented. Existing policy instruments facilitating the deployment of intermittent renewable energy technologies include the feed-in tariff, the feed-in premium and the quota system. Based on a numerical analysis, it is shown that these specific policy instruments do not necessarily facilitate the deployment of valuable energy sources because they ignore the cost of intermittency. A valuable intermittent energy source is defined here as a source of energy which requires little financial support and which limits the need for capacity payments in order to ensure the security of supply. Based on insights from the numerical analysis, a new policy instrument is suggested: a multiplicative premium. This type of policy instrument would increase the likelihood that valuable intermittent energy assets are deployed in priority.
    Keywords: Intermittent renewables; value of energy; security of supply
    JEL: Q40 Q50
    Date: 2014–04–14
  6. By: Bastian Felix (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: Increasing renewable generation results in growing supply uncertainty. By now hydrostorages are the most efficient way of smoothing uncertain power supply. In liberalized and competitive markets the valuation of hydro storages investment projects needs to take the market information and therefore the uncertainty of electricity prices into account in investment valuation. Besides the investment in new pump storage facilities the extension of existing storage sites may be an opportunity. However, the correct valuation of multiple reservoir storage systems within an uncertain market is a valuation problem with high dimensionality. We propose an approach that applies numerically constructed multinomial recombining price trees to reduce the problem dimension. We present results for a representative case study. In doing so, we apply a spot price model which accounts for the price fundamentals as well as for the price stochastic.
    Keywords: hydroelectric valuation, optimal control, dynamic programming
    JEL: L94 C61 Q4
    Date: 2014–04
  7. By: Nick, Sebastian (Energiewirtschaftliches Institut an der Universitaet zu Koeln); Wetzel , Heike (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: In this study, we address a major problem in the measurement of firm performance and the regulation of natural monopolies, namely the intertemporal character of long-term investment decisions. In specific, we focus on the impact of adjustment costs of investments on estimates of firms' technical and cost inefficiency. We apply nonparametric dynamic data envelopment analysis to investigate the dynamic inefficiency of electricity distribution and transmission companies in the US during the years 2004 to 2011 and compare our results with their static counterparts. Our empirical findings reveal that ignoring long-term investments and their corresponding adjustment costs does significantly distort both firm-specific and industrial inefficiency estimates and may thus create misleading incentives for the regulated firms to cut investments.
    Keywords: Dynamic Inefficiency; Dynamic Directional Distance Function; Dynamic Data Envelopment Analysis; Electricity Transmission and Distribution
    JEL: D22 D24 D61 D92 L51
    Date: 2014–03–04
  8. By: Bresand, Albert (Groningen University)
    Abstract: Avoiding the ?resource curse? will be key to turning oil and gas discoveries into sustainable development for new African producers. The article focuses on international and national policy innovations that can cut the economic, institutional and cultural Gordian knot behind the curse. ?Oil funds? have a disappointing record; best practices on why and how to use them are ambiguous. By contrast, the Extractive Industry Transparency Initiative has triggered learning processes of strengthening momentum. Leveraging transparency toward accountability through informed national policy debates is now the central policy challenge for new African producers. Meanwhile, Corporate Social Responsibility has evolved beyond health and safety to cover a firm?s environmental and social impact and can be mobilized in the form of developmentsupportive partnerships with investing companies. Much of past policy innovation has been defensive in nature, however. The post-2015 Sustainable Development Goals proposed by the UN High Level Panel present governments, companies and stakeholders with a shared positive agenda to eradicate poverty and turn natural resources into sustainable development.
    Date: 2014
  9. By: Alexander Knobel (Gaidar Institute for Economic Policy)
    Abstract: The article addresses the issue of fiscal policy risks in countries with an abundance of natural resources, including Russia. It is demonstrated which consequences Russia’s federal budget may be faced with as a result of declining oil prices. In the context of phenomena typical of resource-dependent economies, it is shown that they have a tendency toward a lower rate of long-term economic growth. The macroeconomic and institutional aspects of the resource curse and the role of sovereign funds in shaping up the budget policy are discussed, with a special emphasis being made on their institutional importance.
    Keywords: resource curse, budget policy, institutions, economic growth, sovereign funds.
    JEL: H61 O11 Q32
    Date: 2014
  10. By: James CUST (University of Oxford & University of Luxembourg); Ridwan D. RUSLI (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological University, Singapore, 637332.)
    Abstract: We examine the economic consequences of resource extraction and associated revenue windfalls, measured at the subnational level. Our analysis focuses on variations across Indonesian districts and municipalities to estimate the spillover effects on economic activity, measured in terms of local GDP. Two important channels are identified: direct spillover eects from extraction activity, and the fiscal spillovers from local government spending associated with revenue windfalls from extraction activity. We use Indonesia's fiscal sharing rules to quantify and disentangle these two channels by application of an instrumental variable. We show that the main economic gains accrue via transfers to, and spending by, local government. While direct project-level investments and production contribute to measures of overall GDP, these are found to be largely due driven by the value of oil extraction, with only limited evidence for a direct impact on non-oil GDP. In contrast to other works, it appears that regionally decentralized government spending can be growth-enhancing over the decade surveyed. We argue that resource endowments do contribute to increased economic activity at the subnational level in Indonesia, but may lower the overall growth eect of spending.
    Date: 2014–02
  11. By: Nicola Brandt
    Abstract: This paper reviews the literature and policy discussions about the role of the property tax for land use. Various externalities of the development of land, such as new infrastructure needs, the loss of open space or air pollution due to longer commutes as people locate far from city centres, are not internalised fully by property taxes or other policy instruments and this is often thought to contribute to excessive land use and urban sprawl. The impact of property taxes on land use intensity and sprawl is ambiguous in theory, however, and it depends on tax design, as well as land use regulation policies and other taxes that can influence municipalities’ incentives to convert land for development. Yet, there is some evidence suggesting that higher property taxes can limit urban sprawl, in particular when the tax on land is higher than on structures, although effects are small given relatively given a limited price elasticity of land use. Various property tax design options are discussed that may help to better internalise land use related externalities.
    Keywords: land use, fiscal zoning, property tax, urban sprawl
    JEL: R14 R38 R51 R52
    Date: 2014–04–08
  12. By: Amigues, Jean-Pierre; Lafforgue, Gilles; Moreaux, Michel
    Abstract: Using a standard Hotelling model of resource exploitation, we determine the optimal consumption paths of three energy resources: dirty coal, which is depletable and carbon-emitting; clean coal, which is also depletable but carbon-free thanks to an abatement technology (CCS: Carbon Capture and Storage), and solar energy which is renewable and carbon-free. Carbon emissions are released into the atmosphere and we assume that the atmospheric carbon stock cannot exceed a given ceiling. We consider learning-by-doing in the abatement technology, implying that the marginal CCS cost is decreasing in the cumulative consumption of clean coal. We show the following results. i) Learning-by-doing does not imply "early" capture, i.e. the clean coal exploitation must begin at the earliest once the carbon cap is reached. ii) The energy price path can evolve non-monotonically over time. iii) When the solar cost is low enough, there may exist unusual energy consumption sequence along which solar energy is interrupted for some time and replaced by clean coal.
    Keywords: Climate change; Energy substitution; Carbon Capture and Storage;Learning-by-doing.
    JEL: Q31 Q42 Q54 Q55
    Date: 2014–02
  13. By: Youngho CHANG (Scholl of Humanities and Social Sciences, Nanyang Technological University); Yanfei LI (Economic Research Institute for ASEAN and East Asia (ERIA))
    Abstract: This paper reviews the factors that determine the sustainability of nonrenewable energy production and consumption in Asian economies. It reviews the recent literature on the issue and all of the key findings under the 4As framework (Availability, Applicability, Acceptability, and Affordability) which is derived from the classical Hotelling non-renewable resource economics models. Conclusions derived focus on the implications of the fast growth in non-renewable energy consumption and its outpacing the growth in indigenous production, the uneven distribution of exploitable non-renewable energy resources, the potentials of shale oil and shale gas, the role of coal, renewable energy and nuclear energy, the reform of domestic energy markets, and the environmental impacts of the use of nonrenewable energy in the Asian economies.
    Keywords: Non-renewable energy, Sustainability, Asian economies, 4A framework
    JEL: Q01 Q30 Q40
    Date: 2014–02
  14. By: Sushama Murty (Department of Economics, University of Exeter)
    Abstract: We propose a model of fossil-fuel induced emission, which permits multiple emission-mitigation strategies. In a dierentiable framework, we derive a set of necessary and sucient conditions for an environmental Kuznets curve in terms of the relative responses of the preference and technology-based shadow prices of emission to changes in the economic resource base when the emission policy is not allowed to adjust. Employing these conditions we construct examples of preference and technology combinations that result in an EKC in both static and dynamic frameworks. In these examples, optimal emission-mitigation strategies include employing a part of available resources for cleaning-up activities and inter-fuel substitution from dirtier to cleaner energy inputs. We show that the social optimum can be decentralised not only through standard emission policies such a Pigouvian tax, but also by a scheme that subsidises cleaning-up activities and taxes the usage of fossil fuels.
    Keywords: Environmental Kuznets curve, marginal abatement cost, marginal willingness to pay, fossil fuels, inter-fuel substitution, abatement effort
    JEL: Q56 Q58 H23 D62
    Date: 2014
  15. By: Zhang, Xiao-Bing (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper investigates the strategic interactions between carbon taxation by a resource-consumers’ coalition and (wellhead) energy pricing by a producers’ cartel under possible innovation in a cheap carbon-free technology through a dynamic game. The arrival time of innovation is uncertain, but can be affected by the amount spent on R&D. The results show that the expectation of possible innovation decreases both the initial carbon tax and producer price, resulting in higher initial resource extraction or carbon emissions. Even though this 'green paradox' effect will appear in the cooperative case (no strategic interactions) as well, the presence of strategic interactions between resource producers and consumers can somewhat restrain such an effect. The optimal R&D to stimulate innovation is an increasing function of the initial CO2 concentration for both the resource consumers and a global planner. However, the resource consumers can over-invest in R&D (compared with the global efficient investment.
    Keywords: Carbon taxation; Innovation; Uncertainty; Dynamic game
    JEL: C73 H21 Q23 Q54
    Date: 2014–04
  16. By: Narbel, Patrick A. (Dept. of Business and Management Science, Norwegian School of Economics); Isaksen, Elisabeth T. (Centre for Ecological and Evolutionary Synthesis, Dept. of Biosciences, University of Oslo)
    Abstract: Assuming that emissions originate from the consumption of goods and services, we study the relationship between consumption-based per capita carbon footprint and per capita expenditure for Norway, using 2007 data. A two-region input-output model reveals that the consumption-based per capita carbon footprint is directly proportional to expenditure with an estimated elasticity close to unity. We show that this result is at least partly driven by a near zero-emission power sector, which leads to comparatively low emission intensities for domestically-produced goods and services.
    Keywords: Carbon footprint; consumption; trade
    JEL: Q40 Q50
    Date: 2014–04–14
  17. By: Patrick Criqui (PACTE - Politiques publiques, ACtion politique, TErritoires - Institut d'Études Politiques [IEP] - Grenoble - CNRS : UMR5194 - Université Pierre-Mendès-France - Grenoble II - Université Joseph Fourier - Grenoble I); Constantin Ilasca (PACTE - Politiques publiques, ACtion politique, TErritoires - Institut d'Études Politiques [IEP] - Grenoble - CNRS : UMR5194 - Université Pierre-Mendès-France - Grenoble II - Université Joseph Fourier - Grenoble I); Emmanuel Prados (INRIA Grenoble Rhône-Alpes / LJK Laboratoire Jean Kuntzmann - STEEP - INRIA - Université Joseph Fourier - Grenoble I - Laboratoire Jean Kuntzmann - CNRS : UMR5224 - Institut polytechnique de Grenoble (Grenoble INP))
    Abstract: One of the most important outcomes during the last Conferences of the Parties was the Durban Platform for Enhanced Action, which can be seen not only as a window of opportunity, but as a necessity to act. Our concern in the present paper is with the identification of an appropriate international climate-policy architecture in order to foster climate governance. The paper attempts to raise awareness towards the Soft landing commitment scheme which is proposed as an element of answer to the climate-policy dilemma. The scheme (REDEM for REDuction of Emissions) proposes a pathway to stabilize the emissions with a timing and a level of commitment, which are differentiated on the basis of capability (per capita income levels) and responsibility (per capita emissions). We present a couple of simulation examples which show different ways to conceive the shapes of the emissions and their rates of variation. The REDEM algorithm is designed as a tool for the benchmarking of supposed national emission reduction trajectories. The tool shows a practical way to guide the potential national trajectories, through a convergence mechanism into a comprehensible framework.
    Keywords: national emission reduction ; climate policy ; REDEM ; simulation
    Date: 2014–03
  18. By: Sushama Murty (Department of Economics, University of Exeter)
    Abstract: We propose a set of necessary and sufficient conditions for the environmental Kuznets curve (EKC) phenomenon in a general model that permits non-smooth preferences and feasible sets and corner solutions for welfare maximisation. These conditions pertain to the relationship between the sets of preference and technology-based shadow prices at an outcome reached by an emission-held-fixed-effect (EHFE), where the emission policy does not adjust to an increase in the economic resource base and only consumption adjusts. In particular, an EKC arises if and only if there exists a threshold level of resource such that, at any level of resource below (respectively, above) the threshold, the outcome reached by the EHFE is one where the set of preference-based shadow prices lies completely below (respectively, above) the set of technological shadow prices. This characterisation is employed to study and construct examples of preference-technology combinations that can potentially result in an EKC, when emission is a consumption externality. In particular, the cases of homothetic economies, increasing returns to abatement, emission as a normal good, and EKC in a model with economic growth are studied.
    Keywords: environmental Kuznets curve, Clarke's tangent and normal cones, sets of preference and technology-based shadow prices of emission, marginal willingness to pay, marginal abatement cost, welfare maximisation, homotheticity, normal good, inferior good, increasing returns to abatement.
    JEL: Q56 D62 C60
    Date: 2014
  19. By: Moreira, Paulo Pires
    Abstract: Although in the recent years the trend is changing, still few international academic papers on this topic are available. On the other hand, there is a total void by national academicians regarding the production of literature on social and environmental sustainability of the maritime industry in parallel as in multiple aspects related to the maritime chain and the supply chain management seen in its global assumptions. Nevertheless, sustainability in its different components – economical, social and environmental – is becoming a major concern for citizens, on the basis of participatory citizenship or as aggregated sources of social capital, public and private policy makers and governments. As concern about climate change grows and that the events of maritime disasters multiply, there is an entire industry, which despite of being vital to the world economy and for the welfare of the people, continues to be managed in a way that requires no more regulation but their actual application. An industry for the future but at the same time one that largely contributes to emissions and several forms of air and marine pollution and which cannot continue to use the planet seas and oceans as sewage. Thus, we chose to extract from scratch the fundamentals through elaborate work of collecting and analysing institutional information and by unroll the intricate web that this issue, being transversal to the entire maritime industry, incorporates. So we focused on the norms and laws issued by agencies and sectoral organizations of regulatory nature and the methodology is based in the paradoxical confrontation between occurrences and existing legislation.
    Keywords: social and environmental sustainability; international shipping
    JEL: R41 R49
    Date: 2014–04

This nep-ene issue is ©2014 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.