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on Energy Economics |
| By: | Louis-Gaëtan Giraudet (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); Sébastien Houde (University of Maryland - University of Maryland) |
| Abstract: | We investigate how moral hazard problems can cause sub-optimal investment in energy efficiency, a phenomenon known as the energy efficiency gap. We argue that such problems are likely to be important for home energy retrofits, where both the seller and the buyer can take hidden actions. The retrofit contractor may cut on the quality of installation to save costs, while the homeowner may rebound, that is, increase her use of energy services when provided with higher energy efficiency. We first formalize the double moral hazard problem described above and examine how the resulting energy efficiency gap can be reduced through minimum quality standards or energy-savings insurance. We then calibrate the model to the U.S. home insulation market and quantify the deadweight loss. We find that for a large range of market environments, the welfare gains from undoing moral hazard are substantially larger than the costs of quality audits. They are also about one order of magnitude larger than those from internalizing carbon dioxide externalities associated with the use of natural gas for space heating. Moral hazard problems are consistent with homeowners investing with implied discount rates in the 15-35% range. Finally, we find that minimum quality standards outperform energy-savings insurance. |
| Keywords: | Energy efficiency gap, moral hazard, energy-savings insurance, minimum quality standard |
| Date: | 2014–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01016109&r=ene |
| By: | Hyland, Marie; Lyons, Ronan C.; Lyons, Seán |
| Keywords: | energy efficiency/Ireland/value |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2014/1/3&r=ene |
| By: | Mák, Fruzsina |
| Abstract: | The correct modelling of long- and short-term seasonality is a very interesting issue. The choice between the deterministic and stochastic modelling of trend and seasonality and their implications are as relevant as the case of deterministic and stochastic trends itself. The study considers the special case when the stochastic trend and seasonality do not evolve independently and the usual differencing filters do not apply. The results are applied to the day-ahead (spot) trading data of some main European energy exchanges (power and natural gas). |
| Keywords: | unit root, seasonality, energy exchange |
| JEL: | C22 Q41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:cvh:coecwp:1611&r=ene |
| By: | John Lynham (Department of Economics, University of Hawaii at Manoa and UHERO); Kohei Nitta (Department of Economics, University of Hawaii at Manoa); Tatsuyoshi Saijo (School of Management, Kochi University of Technology); Nori Tarui (Department of Economics, University of Hawaii at Manoa) |
| Abstract: | A number of studies have estimated how much energy conservation is achieved by providing households with real-time information on energy use via in-home displays. However, none of these studies tell us why real-time information changes energy-use behavior. We explore the causal mechanisms through which real-time information affects energy consumption by conducting a randomized-control trial with residential households. The experiment disentangles two competing mechanisms: (i) learning about the energy consumption of various activities, the “learning effectâ€, versus (ii) having a constant reminder of energy use, the “saliency effectâ€. We have two main results. First, we find a statistically significant treatment effect from receiving real-time information. Second, we find that learning plays a more prominent role than saliency in driving energy conservation. This finding supports the use of energy conservation programs that target consumer knowledge regarding energy use. |
| Keywords: | energy efficiency; energy conservation; real-time information; experiment |
| JEL: | D03 D12 Q41 Q48 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201419&r=ene |
| By: | Louis-Gaëtan Giraudet (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); D. Finon (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) |
| Abstract: | White certificate obligations impose energy savings targets on energy companies and allow them to trade energy savings certificates. They can be seen as a means of internalizing energy-use externalities and addressing energy efficiency market failures. This paper reviews existing evaluations of experiences with white certificate obligations in Great Britain, Italy and France. Ex ante microeconomic analysis find that the obligation is best modelled as a hybrid subsidy-tax instrument, whereby energy companies subsidize energy efficiency and pass-through the subsidy cost onto energy prices. Ex post static efficiency assessments find largely positive benefit-cost balances, with national differences reflecting heterogeneity in technical potentials. Compliance involved little trading between obligated parties. Whether the cost borne by obligated parties was recovered through increased energy revenue could not be ascertained. Ex post dynamic efficiency assessments find that in addition to addressing liquidity constraints through subsidies, white certificate obligations seem to have addressed informational and organisational market failures. Confidence in these conclusions is limited by the fact that no econometric analysis was performed. Yet the lack of publicly available data, a counterpart to the rationale of the instrument of harnessing private financing, makes any empirical evaluation of white certificate obligations challenging. |
| Keywords: | White certificate obligation, energy savings, energy efficiency gap, static efficiency, dynamic efficiency |
| Date: | 2014–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01016110&r=ene |
| By: | Frédéric Branger (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, AgroParisTech - AgroParisTech); Louis-Gaëtan Giraudet (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); Céline Guivarch (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); Philippe Quirion (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) |
| Abstract: | In this paper, we discuss the results of a sensitivity analysis of Res-IRF, an energy-economy model of the demand for space heating in French dwellings. Res-IRF has been developed for the purpose of increasing behavioral detail in the modeling of energy demand. The different drivers of energy demand, namely the extensive margin of energy efficiency investment, the intensive one and building occupants' behavior are disaggregated and determined endogenously. The model also represents the established barriers to the diffusion of energy efficiency: heterogeneity of onsumer preferences, landlord-tenant split incentives and slow diffusion of information. The relevance of these modeling assumptions is assessed through the Morris method of sensitivity analysis, which allows for the exploration of uncertainty over the whole input space. We find that the Res-IRF model is most sensitive to energy prices. It is also found to be quite sensitive to the factors parameterizing the different drivers of energy demand. In contrast, inputs mimicking barriers to energy efficiency have been found to have little influence. These conclusions build confidence in the accuracy of the model and highlight occupants' behavior as a priority area for future empirical research. |
| Keywords: | Sensitivity Analysis, Morris Method, Monte Carlo, Energy Efficiency |
| Date: | 2014–05–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01016399&r=ene |
| By: | C. Rhode (Fraunhofer - Fraunhofer Institute); Jan Rosenow (Environmental Change Institute South Parks Road - University of Oxford); Nick Eyre (Environmental Change Institute South Parks Road - University of Oxford); Louis-Gaëtan Giraudet (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) |
| Abstract: | Better leverage of public funding is essential in order to trigger the invest-ment needed for energy efficiency. In times of austerity governments in-creasingly look at policy instruments not funded by public expenditure and Energy Savings Obligations represent one option. Because Energy Savings Obligations are paid for by all energy customers, the degree to which they are able to raise additional private capital for energy efficiency invest-ments is crucial with regard to the financial burden on consumers. In this paper, we systematically assess how successful Energy Savings Obliga-tions were in levering capital from parties other than the obligated entities including private investors and other public bodies. We analyse three countries with substantial experience with Energy Savings Obligations, identify the main design differences and the effect this has on the degree of leverage. We conclude that the design of Energy Savings Obligations largely determines the degree of leverage and that that there appears to be a trade-off between high leverage and additionality. |
| Keywords: | Energy Savings Obligation, Leverage, Financing |
| Date: | 2014–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01016112&r=ene |
| By: | Brockwell, Erik (Umeå University) |
| Abstract: | This article aims to examine how sin taxation changes long-term consumer behavior regarding commodities which are deemed harmful for both health and the environment. These include tobacco, alcoholic beverages, sugar and confectionary, household energy, and motor fuel. Specifically, we examine the signaling effect from taxation which is seen if a tax increase leads to a significantly larger change in consumption than a producer price change. The empirical analysis is conducted by a US panel data study, during the period 1988-2012 for the four US census regions, using the Almost Ideal Demand System (AIDS). We find the main result to be that the signaling effect from taxation is significant for tobacco (at the 10% significance level) as well as for electricity and motor fuel (at the 5% significance level). |
| Keywords: | taxation; signaling; public policy; regulation; legislation; almost ideal demand system; panel data |
| JEL: | C23 D12 H23 I18 |
| Date: | 2014–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2014_004&r=ene |
| By: | Philipp M. Richter; Franziska Holz |
| Abstract: | The Russian-Ukrainian crisis has revitalized the European concerns of supply disruptions of natural gas as experienced in 2006 and 2009. However, the European supply situation, regulation and infrastructure have changed since: imports aremore diversified, EU member states better connected and a common regulation on the security of supply has been introduced. Nevertheless, several East European countries are highly dependent on Russian natural gas. This paper investigates different Russian natural gas export disruptions scenarios and analyses short- and long-term reactions to ensure a sufficient supply of natural gas within Europe. We use the Global Gas Model (GGM), a large-scale mixed complementarity representation of the natural gas sector with a high-level of technical granularity with respect to storage and transportation infrastructure. We find that most of the EU member states are not severely affected by a complete drop out of Russian exports. Removing infrastructure bottlenecks within the EU should still be prioritized in order to secure a sufficient natural gas supply for all EU member states. |
| Keywords: | natural gas trade, Russia, Europe, security of supply, infrastructure investment, equilibrium modelling |
| JEL: | Q34 Q37 Q41 C61 L95 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1383&r=ene |
| By: | Mark Jacobsen; Jacob LaRiviere; Michael Price |
| Abstract: | We develop a model of the private provision of public goods in a world where agents face convex costs of provision. Consonant with prior empirical evidence, we introduce preference heterogeneity by allowing a subset of agents to exhibit pro-social behavior that reflects "green" preferences. We use the model to compare different policies to promote private provision of public goods such as environmental quality or energy conservation. Counter to the standard result, we find that technology standards are frequently preferred to price-based instruments. Extending the model to allow for both benefit and cost heterogeneity, we find that policy choice depends on the correlation between the two forms of heterogeneity. |
| JEL: | D03 D04 H41 Q48 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20266&r=ene |
| By: | Thi-Hong-Hanh Pham (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272) |
| Abstract: | This paper aims to advance in the knowledge of the economic impacts of ISO 50001 certification on firms' performance. The study hypothesizes that ISO 50001 is associated with improvements in market value of firms. We employ, on one hand, event study methodology for a sample of 40 companies listed on different stock exchanges. On the other hand, we use market reaction to the announcement of ISO 50001 as a proxy for changes in firm performance. We reveal that market reaction to the adoption of ISO 50001 is negative but statistically insignificant. However, this result is not suggesting that getting ISO 50001 is a bad investment, but rather that inflated expectations of financial performance improvement due to the adoption of ISO 50001 has still been unfounded. |
| Keywords: | Energy Management Systems; ISO 50001; Market value; Event study. |
| Date: | 2014–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01012096&r=ene |
| By: | Claire Bergaentzlé (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) |
| Abstract: | The new pricing schemes, enabling smart grids technologies and remote control equipments allow retail consumers to procure demand response resources and participate more intensely in the efficient functioning of markets. This fact is inducing significant changes regarding the roles historically attributed to the different operators acting along the supply chain. It is also involving improvements in markets efficiency, system reliability, and of course regulatory models (Clastres, 2011). This paper aims at focusing on two different benefits, although not incompatible, of smart technology and retail consumers' activation. - The first focus lies on smart grids technology's potential and on smart consumers in enhancing the reliability of power systems. - The second focus is based on the potential of smart grids technology to improve markets efficiency. Regarding the many aspects contained in these two -restricted- sides of benefits, this paper studies smart grids and demand response (DR) programs adoption in California, Germany, Illinois and the UK and is articulated in four points. First, it describes the challenges linked to peak load and peak prices and discusses the instruments becoming available through short-term demand side activation as well as the barriers to procure greater flexibility. Second, this paper deals with demand response and smart metering as a way to enhance wholesale and retail markets efficiency. At last, it discusses the regulatory mechanisms available to the authorities to give the sound incentives for adopting smart grids technology, in order to respond to the real needs encountered by the systems. |
| Keywords: | SMART GRIDS TECHNOLOGY |
| Date: | 2013–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01011169&r=ene |
| By: | Melick, William R. (Kenyon College) |
| Abstract: | This paper examines the response of U.S. manufacturers to changes in competitiveness brought about by movements in the price of natural gas. I estimate the response of various measures of manufacturing activity using panel regression methods across roughly 80 industries that allow each industry's response to vary with its energy intensity. These estimates suggest that the fall in the price of natural gas since 2006 is associated with a 2 to 3 percent increase in activity for the entire manufacturing sector, with much larger effects of 30 percent or more for the most energy intensive industries. |
| Keywords: | Manufacturing; natural gas |
| JEL: | D24 Q43 |
| Date: | 2014–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1108&r=ene |
| By: | Guglielmo Maria Caporale; Faek Menla Ali; Nicola Spagnolo |
| Abstract: | This paper investigates the time-varying impact of oil price uncertainty on stock prices in China using weekly data on ten sectoral indices over the period January 1997-Febraury 2014. The estimation of a bivariate VAR-GARCH-in-mean model suggests that oil price volatility affects stock returns positively during periods characterised by demand-side shocks in all cases except the Consumer Services, Financials, and Oil and Gas sectors. The latter two sectors are found to exhibit a negative response to oil price uncertainty during periods with supply-side shocks instead. By contrast, the impact of oil price uncertainty appears to be insignificant during periods with precautionary demand shocks. |
| Keywords: | China, Oil price uncertainty, Sectoral stock returns |
| JEL: | C32 Q43 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1394&r=ene |
| By: | Santos, Carlos Filipe; Fuinhas, José Alberto; Marques, António Cardoso |
| Abstract: | Our study presents a new perspective of the nexus of causality between energy consumption and economic growth, controlling for exports of goods and services, employment, oil revenues, inflation and the self-sufficiency. The analysis covers a set of 14 oil producing countries from a diverse universe, in the period 1970-2012. We proceeded to the use of ARDL estimator which allows to analyse the dynamic relationships among variables, and the Driscoll-Kraay estimator which permitted to correct the instability of the parameters. The results of the macro panel show that exports and the self-sufficiency have na influence on the short term and the long run. Exports show a more extensive dynamic complexity in the short term than in the long run one. Self-sufficiency proved crucial variable. Without it, the model would lose its explanatory power. Furthermore the inclusion of this variable in the model allowed us to analyse oil producing countries, which in general introduces a specificity. |
| Keywords: | Energy-growth nexus, oil producing countries, macro panels |
| JEL: | C33 O40 Q43 |
| Date: | 2014–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57008&r=ene |
| By: | Rizvi, Aun; Masih, Mansur |
| Abstract: | Global reliance on Hydrocarbon sector has dramatically increased multi-fold which has led to rise to dominance of GCC. GCC is home to 45% of the proven oil reserves and contributes nearly 35% of the world oil exports annually. With such heavy reliance of the world on GCC for its oil produce, and the GCC’s economic reliance on Oil and Gas exports, the matter of world oil price shocks and its transmission to other areas of economy is of immense importance to the GCC economies. With Oil wealth accumulating in GCC with some estimates of over $500 billion, oil shocks and stock market volatility in GCC has emerged as a key concern area. Our paper focuses on understanding the short term and long term correlation between oil price shocks and GCC stock market’s volatility and the presence of any lead lag relationships. This study provides unique findings, different from earlier studies as we are able to analyze with non-linearity and least restrictive assumptions. The findings of this study are paramount for portfolio managers for their diversification benefit as well as timing of investment and divestment purposes. |
| Keywords: | GCC, Oil Price Shocks, Stock Market Volatility, Hydrocarbon Exports |
| JEL: | C22 C58 O13 Q43 |
| Date: | 2014–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56993&r=ene |
| By: | Abdullah, Ahmad Monir; Saiti, Buerhan; Masih, Abul Mansur M. |
| Abstract: | An understanding of how volatilities of and correlations between commodity returns change over time including their directions (positive or negative) and size (stronger or weaker) is of crucial importance for both the domestic and international investors with a view to diversifying their portfolios for hedging against unforeseen risks. This paper is a humble attempt to add value to the existing literature by empirically testing the ‘time-varying’ and ‘scale dependent’ volatilities of and correlations of the sample commodities. Particularly, by incorporating scale dependence, it is able to identify unique portfolio diversification opportunities for different set of investors bearing different investment horizons or holding periods. In order to address the research objectives, we have applied the vector error-correction test and several recently introduced econometric techniques such as the Maximum Overlap Discrete Wavelet Transform (MODWT), Continuous Wavelet Transform (CWT) and Multivariate GARCH – Dynamic Conditional Correlation. The data used in this paper is the daily data of seven commodities (crude oil, gas, gold, silver, copper, soybean and corn) prices from 1 January 2007 until 31 December 2013. Our findings tend to suggest that there is a theoretical relationship between the sample commodities (as evidenced in the cointegration tests) and that the oil, gold and corn variables are leading the other commodities (as evidenced in the Vector Error-Correction models). Consistent with these results, our analysis based on the application of the recent wavelet technique MODWT tends to indicate that the gold price return is leading the other commodities. From the point of view of portfolio diversification benefits based on the extent of dynamic correlations between variables, our results tend to suggest that an investor should be aware that the gas price return is less correlated with the crude oil in the short run (as evidenced in the continuous wavelet transform analysis), but due to its high volatility, it offsets its benefit of diversification in the long run and that an investor holding the crude oil can gain by including corn in his/her portfolio (as evidenced in the Dynamic conditional correlations analysis). Our analysis based on the recent applications of the wavelet decompositions and the dynamic conditional correlations helps us unveil the portfolio diversification opportunities for the investors with heterogeneous investment horizons or holding stocks over different periods. |
| Keywords: | Commodity, MODWT, CWT, DCC-MGARCH, Diversification, Causality |
| JEL: | C22 C58 Q43 |
| Date: | 2014–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56988&r=ene |
| By: | Stephan E. Maurer; Andrei V. Potlogea |
| Abstract: | This paper analyzes the effect of resource-based economic specialization on women's labor market outcomes. Using information on the location and discovery of major oil fields in the Southern United States coupled with a county-level panel derived from US Census data for 1900-1940, we specifically test the hypothesis that the presence of mineral resources can induce changes in the sectoral composition of the local economy that are detrimental to women's labor market outcomes. We find evidence that the discovery of oil at the county level may constitute a substantial male biased demand shock to local labor markets, as it is associated with a higher gender pay gap. However, we find no evidence that oil wealth lowers female labor force participation or has any impact on local marriage and fertility patterns. While our results are consistent with oil shocks limiting female labor market opportunities in some sectors (mainly manufacturing), this effect tends to be compensated by the higher availability of service sector jobs for women who are therefore not driven out of the labor market. |
| Keywords: | Oil, structural transformation, female labor force, participation, gender pay gap |
| JEL: | R1 N5 O1 J1 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1280&r=ene |
| By: | Abdullah, Ahmad Monir; Masih, Abul Mansur M. |
| Abstract: | An understanding of how volatilities of and correlations between crude oil and macroeconomic variables change over time including their directions and size is of crucial importance for both the domestic and international investors with a view to diversifying their portfolios for hedging against unforeseen risks. This paper is a humble attempt to add value to the existing literature by empirically testing for the ‘time-varying’ and ‘scale dependent’ correlations between selected commodities and selected macroeconomic variables taking Malaysia as a case study. Particularly, by incorporating the scale dependence, it is possible to identify unique portfolio diversification opportunities for different set of investors bearing different investment horizons or stock-holding periods. Our findings tend to suggest that there is a theoretical relationship between the selected macroeconomic variables and the selected commodities and that the crude oil, gold, KLCI, CPI, BLR and T-bill are exogenous but the corn, industrial production and M2 are endogenous. Consistent with these results, our analysis based on the application of Generalised variance decompositions (VDCs) tends to indicate that the gold commodity is the most exogenous variable that drives the other commodities and the Malaysian macroeconomic variables. Finally, the value added stemming from the findings of Continuous Wavelet Transformation (CWT) tends to indicate that an investor who has exposure in crude oil commodity and wants to invest in KLCI, industrial production and treasury bill in Malaysia, should not hold his/her portfolio for more than 8 months in order to obtain diversification benefit. |
| Keywords: | Commodity, Malaysian Macro Variables, Continuous Wavelet Transformation, Diversification, Causality |
| JEL: | C58 Q4 |
| Date: | 2014–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56976&r=ene |
| By: | Rithuan, Syahidah Hanis Meor; Abdullah, Ahmad Monir; Masih, Abul Mansur M. |
| Abstract: | An understanding of how volatilities of and correlations between commodity returns and Islamic stock indices change over time including their directions (positive or negative) and size (stronger or weaker) is of crucial importance for both the domestic and international investors with a view to diversifying their portfolios for hedging against unforeseen risks. This paper is the first attempt to add value to the existing literature by empirically testing for the ‘time-varying’ and ‘scale dependent’ correlations between the selected Islamic stock indices of Gulf Cooperation Council (GCC) countries and selected commodities. Particularly, by incorporating scale dependence, it is able to identify unique portfolio diversification opportunities for different set of investors bearing different investment horizons or holding periods. In order to address the research objectives, we have applied the vector error-correction model and several recently introduced appropriate wavelet decomposition techniques such as the Maximum Overlap Discrete Wavelet Transform (MODWT) and Continuous Wavelet Transform (CWT). The data used in this paper are the daily data of three commodities (crude oil, gold and corn) prices and Islamic stock indices from 1 June 2007 until 28 February 2014. Our findings tend to suggest that there is a theoretical relationship between the selected Islamic stock indices and selected commodities (as evidenced in the cointegration tests) and that the Islamic stock indices of Saudi Arabia, Oman and crude oil price are leading the other Islamic stock indices and the commodities (as evidenced in the Vector Error-Correction models). Our analysis based on the application of the recent wavelet technique MODWT indicates mixed results in that in the short run, the crude oil price is leading the other Islamic indices but in the long run, it is the other way around. From the point of view of portfolio diversification benefits, our results tend to suggest that an investor will obtain diversification benefit if his/her investment horizon is below 128 days (as evidenced in the continuous wavelet transform analysis). This result is consistent with the cointegration test that indicates that the diversification benefits for crude oil and the other Islamic indices is minimised in the long run because the variables under review tend to move together toward the same direction. Our analysis based on the recent applications of the wavelet decompositions helps us unveil the portfolio diversification opportunities for the investors with heterogeneous investment horizons or holding stocks over different periods. |
| Keywords: | Commodity, Islamic Stock Index Returns (ISIR), MODWT, CWT, Diversification, Causality |
| JEL: | C22 C58 Q43 |
| Date: | 2014–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56989&r=ene |
| By: | di Cosmo, Valeria; Lyons, Seán; Nolan, Anne |
| Keywords: | electricity |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2014/2/2&r=ene |
| By: | Daniel Huppmann; Jonas Egerer |
| Abstract: | The transformation of the European energy system requires substantial investment in transmission capacity to facilitate cross-border trade and to efficiently integrate renewable energy sources. However, network planning in the EU is still mainly a national prerogative. In contrast to other studies aiming to identify the pan-European (continental) welfare-optimal transmission expansion, we investigate the impact of national regulators deciding on network investment strategically, with the aim of maximizing consumer surplus and generator profits in their jurisdiction. This reflects the inadequacy of current mechanisms to compensate for welfare re-allocations across national boundaries arising from network upgrades. We propose a three-stage equilibrium model to describe the Nash game between zonal planners (i.e., national governments, regulators, or system operators), each taking into account the impact of network expansion on the electricity spot market and the resulting welfare effects on the constituents within her jurisdiction. Using a four-node sample network, we identify several Nash equilibria of the game between the zonal planners, and illustrate the failure to reach the first-best welfare expansion in the absence of an effective compensation mechanism. |
| Keywords: | Electricity transmission, network expansion, Generalized Nash equilibrium (GNE), mixed-integer equilibrium problem under equilibrium constraints (MI-EPEC) |
| JEL: | L51 C61 C72 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1379&r=ene |
| By: | Bjørndal, Mette (Dept. of Business and Management Science, Norwegian School of Economics); Gribkovskaia, Victoria (Dept. of Business and Management Science, Norwegian School of Economics); Jörnsten, Kurt (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | In this paper we present a model for analysing the strategic behaviour of a generator and its short run implications on an electricity network with transmission constraints. The problem is formulated as a Stackelberg leader-follower game. The upper level problem is generator’s profit maximisation subject to the solution of the lower level problem of optimal power flow (OPF) solved by system operator. Strategic bidding is modelled as an iterative procedure where the supply functions of the competitive fringe are fixed while the strategic player’s bids are changed in a successive order until the bid giving maximum profit is found. This application rests on the assumption of supply function Nash equilibrium when the supplier believes that changes in his bids will not influence other actors to alter their bid functions. Numerical examples are presented on a simple triangular network. |
| Keywords: | Electric power market; Supply function equilibria; Bilevel games; Strategic energy bidding; Irrelevant constraints |
| JEL: | Q00 |
| Date: | 2014–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2014_029&r=ene |
| By: | Thure Traber |
| Abstract: | The reduced attractiveness of investments in reliable power plants under conditions of liberalized markets and the transition towards renewable energies has brought a discussion on capacity policies to Europe. We use a partial equilibrium model to compare important effects of three basic policies. A strategic reserve policy and a capacity market policy with administratively set capacity targets, and the obligation of generators to hold certificates of reliable capacities in relation to their supply. We find important differences of policies for consumers and producers that are depending on existing power plant structure and the elasticity of demand particularly in the medium term perspective until the year 2023. In the longer term until 2033 the results differ less pronounced. However, for the German case we demonstrate the potential to effectively reduce the burden on the economy to achieve a prescribed target through the implementation of a capacity certificate system. |
| Keywords: | Electricity market; capacity mechanism; investment model |
| JEL: | C63 D61 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1385&r=ene |
| By: | Lidia Puka; Kacper Szulecki |
| Abstract: | The common European electricity market requires both market integration and transmission grid expansion, including trans-border interconnectors. Although the benefits of increased interconnectivity are widely acknowledged, expansion of interconnectors is often very slow. This paper gathers insights on the reasons behind this "grid-lock" drawing on the study of the German-Polish border. Although two interconnectors already exist, the trade is blocked by unplanned electricity loop flows. A third interconnector has been discussed for years, but saw little progress in spite of declarations of support on both sides. Drawing on the existing literature on the topic of grid expansion we identify four hypotheses for the grid-lock: inadequate financing; diverging interests; governance and administration problems; and different actors' motivations, trust and security perceptions. We evaluate them using the empirical material gathered through document analysis and stakeholder interviews conducted in Germany and Poland. None of the hypotheses on its own can explain the "gridlock". However, while financing has not been a major obstacle, divergent interests had an impact on the project delay, administrative and governance problems are a great hindrance on the technical level, while motivations influence interstate political relations and policy shaping. EU support and closer bilateral cooperation provide opportunities to address these challenges. |
| Keywords: | Electricity interconnectors, the European Union, loop-flows |
| JEL: | N74 N7 Q4 Q48 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1378&r=ene |
| By: | Alexander Zerrahn; Daniel Huppmann |
| Abstract: | Lack of transmission capacity hampers the integration of the European electricity market, and thereby precludes reaping the full benefits of competition. We investigate the extent to which transmission grid expansion promotes competition, efficiency and welfare. This work proposes a three-stage model for grid investment: a benevolent planner decides on network upgrades, considering welfare benefits of investments through a reduction of market power exertion by strategic generators. These firms anticipate their impact on market clearing, in particular when lines are congested. To this end, we provide the first model effectively endogenizing the trade-off between costs of grid investment and benefits by reduced market power potential. In a three-node network, we illustrate three distinct strategic effects: firstly, by reducing market power exertion, network expansion can promote welfare beyond pure efficiency gains: optimally accounting for strategic generator behavior can push welfare close to a first-best competitive benchmark. Secondly, network upgrades entail a relative shift of rents from producers to consumers, and thirdly, they may yield suboptimal or even disequilibrium outcomes when strategic behavior is neglected. |
| Keywords: | Market power, electricity transmission, network expansion, Generalized Nash equilibrium (GNE), mixed-integer equilibrium problem under equilibrium constraints (MIEPEC) |
| JEL: | L13 L51 C61 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1380&r=ene |
| By: | Katrin Trepper; Michael Bucksteeg; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen) |
| Abstract: | For the further development of an integrated European electricity market, congestion management mechanisms are one of the major market design issues. Against the background of increasing generation from RES and resulting congestions, an efficient management of network congestions is gaining importance especially in Germany. Introducing nodal pricing as the first best mechanism is not considered to be realistic for Germany in the nearer future. Yet the splitting of the German electricity market into several market zones will also improve congestion management. A key issue in the so-called market splitting is the determination of the net transfer capacity (NTC) between the market zones as it determines the effectiveness of market splitting as congestion management mechanism. We therefore develop an integrated approach to incorporate the effects of renewables feed-in, load pattern and cross border flows on NTCs. We conclude that the NTCs strongly depend on RES infeed and that this effect has to be considered when modelling alternative congestion management mechanisms like market splitting. |
| Keywords: | net transfer capacity, congestion management, market splitting |
| JEL: | Q40 Q47 Q49 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1402&r=ene |
| By: | Durmaz, Tunc (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | I consider an economy with fossil fuel and renewable energy and energy storage, and search for the conditions that lead to welfare improvements when energy is stored. I then solve for the optimal decision rule and analyze the long-run tendencies of the economy-energy variables. The findings are threefold. First, energy storage is fostered by the convexity of the marginal utility (prudence), the marginal cost function for fossil fuel energy, and the degree of intermittency. Second, considering a low penetration of renewable energy to the power grid, energy storage is not welfare improving if the fossil fuel energy cost function is linear. Third, energy storage creates an added value to renewable energy investments when actively used. By showing the in uence that energy storage can have on energy generation and investment decisions, I hope that the current work can be in uential in a more generous treatment of energy supply in future energy-economy-climate models. |
| Keywords: | Energy storage; Fossil fuel energy; Renewable energy; Precautionary savings; Collocation method; Monte Carlo simulations. |
| JEL: | C61 C63 G31 Q21 Q41 Q42 |
| Date: | 2014–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2014_018&r=ene |
| By: | Patrice Bougette (University of Nice Sophia Antipolis, France; GREDEG CNRS); Christophe Charlier (University of Nice Sophia Antipolis, France; GREDEG CNRS) |
| Abstract: | Faced with the energy transition imperative, governments have to decide about public policy to promote renewable electrical energy production and to protect domestic power generation equipment industries. For example, the Canada - Renewable energy dispute is over Feed-in tariff (FIT) programs in Ontario that have a local content requirement (LCR). The EU and Japan claimed that FIT programs constitute subsidies that go against the SCM Agreement, and that the LCR is incompatible with the non-discrimination principle of the World Trade Organization (WTO). This paper investigates this issue using an international quality differentiated duopoly model in which power generation equipment producers compete on price. FIT programs including those with a LCR are compared for their impacts on trade, profits, amount of renewable electricity produced, and welfare. When 'quantities' are taken into account, the results confirm discrimination. However, introducing a difference in the quality of the power generation equipment produced on both sides of the border provides more mitigated results. Finally, the results enable discussion of the question of whether environmental protection can be put forward as a reason for subsidizing renewable energy producers in light of the SCM Agreement. |
| Keywords: | Feed-in tariffs, Subsidies, Local content requirement, Industrial policy, Canada - Renewable energy dispute, Trade policy |
| JEL: | F18 L52 Q42 Q48 Q56 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2014-20&r=ene |
| By: | Pollmann, Olaf; Podruzsik, Szilárd; Fehér, Orsolya |
| Abstract: | Current energy systems are in most instances not fully working sustainably. The provision and use of energy only consider limited resources, risk potential or financial constraints on a limited scale. Furthermore, the knowledge and benefits are only available for a minor group of the population or are outright neglected. The availability of different resources for energy purposes determines economic development, as well as the status of the society and the environment. The access to energy grids has an impact on socio-economic living standards of communities. This not fully developed system is causing climate change with all its related outcomes. This investigation takes into consideration different views on renewable energy systems — such as international discussions about biomass use for energy production, “fuel versus food”, biogas use — and attempts to compare major prospects of social acceptance of renewable energy in Europe and Africa. Can all obstacles to the use of renewable energy be so profound that the overall strategy of reducing anthropogenic causes of climate change be seriously affected? |
| Keywords: | renewable energy, energy production, future technology, society |
| JEL: | D71 O13 Q01 R11 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:cvh:coecwp:1607&r=ene |
| By: | Matthew Tisdale; Thilo Grau; Karsten Neuhoff |
| Abstract: | The 2014 reform of the German Renewable Energy Act introduces a mandatory shift from a fixed feed-in tariff to a floating premium system. This is envisaged to create additional incentives for project developers, but also impacts revenues and costs for new investments in wind generation. Thus uncertainties for example about balancing costs and the impact of the location specific generation profile on the average price received by a wind project are allocated to renewable projects. We first estimate the magnitude of the impacts on wind projects based on historic and cross-country comparison. We then apply a cash-flow model for project finance to illustrate to what extent the impact of the uncertainty for project investors reduces the scale of debt that can be accessed by projects and thus increases financing costs. |
| Keywords: | Feed in tariff, financing renewables, project finance |
| JEL: | G32 L51 L94 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1387&r=ene |
| By: | di Cosmo, Valeria; Malaguzzi Valeri, Laura |
| Keywords: | wind generation |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2014/2/1&r=ene |
| By: | Curtis, John; di Cosmo, Valeria; Deane, Paul |
| Keywords: | Climate policy/electricity/Interconnection/Ireland/Policy |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2014/1/7&r=ene |
| By: | Nanthakumar, Loganathan; Shahbaz, Muhammad; Taha, Roshaiza |
| Abstract: | This paper explores how carbon taxation and economic growth affect environment hazards in Malaysia using time series data over the period of 1974-2010. We applied cointegration and causality approaches to determine long term and the direction of causal relationship between these variables. Based on the results, we found the cointegration relationship between the variables. Furthermore, we noted that Kuznets’ theory i.e. inverted-U shaped curve between economic growth and CO2 emissions is valid for Malaysia but the carbon taxation policy is ineffective to control CO2 emissions. The causality analysis revealed that there is bidirectional relationship is found between carbon tax and CO2 emissions. Economic growth Granger causes CO2 emissions and carbon tax is Granger cause of economic growth. To enhance the awareness on pollution issues governments should rely on alternative instruments, which may give benefit not only to taxpayers but also to reduce pollution, which is the pivotal issue to be tackle globally. |
| Keywords: | economic growth, environment hazards |
| JEL: | C1 |
| Date: | 2014–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56843&r=ene |
| By: | Lucas Bretschger; Alexandra Vinogradova |
| Abstract: | We analyze an endogenously growing economy in which production generates greenhouse gas emissions leading to global temperature increase. Global warming causes stochastic climate shocks, modeled by the Poisson process, which destroy part of the economy's capital stock. Part of the output may be devoted to emissions abatement and thus damages from climate shocks may be reduced. We solve the model in closed form and show that the optimal path is characterized by a constant growth rate of consumption and capital stock until a shock arrives, triggering a downward jump in both variables. The magnitude of the jump depends on the Poisson arrival rate, abatement efficiency, damage intensity, and the elasticity of intertemporal consumption substitution. Optimum mitigation policy consists of spending a constant share of output on abatement, which is an increasing function of the Poisson arrival rate, the economy's productivity, polluting intensity of output, and the intensity of environmental damage. Optimum growth and abatement react sharply to changes in the arrival rate and the damage intensity, suggesting more stringent climate policies for a realistic world with uncertainty compared to the certainty-equivalent case. We extend the baseline model by adding climate-induced fluctuations around the growth trend and stock pollution effects, showing the robustness of our results. |
| Keywords: | climate policy, uncertainty, natural disasters, endogenous growth |
| JEL: | O10 Q52 Q54 |
| Date: | 2014–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:eus:ce3swp:0214&r=ene |
| By: | Stefan Dercon |
| Abstract: | With serious impacts of climate change looming in a few decades, but current poverty still high in the developing world, we ask how to spend development aid earmarked for the poor. Poverty reduction tends to be strongly linked to economic growth, but growth impacts the environment and increases CO2 emissions. So can greener growth that is more climate-resilient and less environmentally damaging deliver large scale poverty reduction? Can aid be used for effective poverty reduction now without affecting carbon emissions substantially? We argue that there are bound to be trade-offs between emissions reductions and a greener growth on the one hand, and growth that is most effective in poverty reduction. We argue that development aid, earmarked for the poorest countries, should only selectively pay attention to climate change, and remain focused on fighting current poverty reduction, including via economic growth, not least as future resilience of these countries and their population will depend on their ability to create wealth and build up human capital now. The only use for development aid within the poorest countries for explicit climate-related investment ought to be when the investments also contribute to poverty reduction now, including for increasing resilience to current impacts of environmental shocks, or when the investments done now have serious intertemporal ‘lock-in’ problems so that they have implications also for when climate change bites by 2050. In our conclusions, we offer a series of concrete principles to judge development spending. |
| Keywords: | Green growth, poverty, environmental externalities |
| JEL: | O44 Q01 Q54 F35 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2014-24&r=ene |
| By: | Honma, Satoshi |
| Abstract: | This study analyzes environmental efficiency, and its determinants, for 98 countries in terms of four typical air pollutants—SO2, NOx, particulate matter 10 micrometers or less in diameter (PM10), and CO2—for the period 1970–2008. For this purpose, I propose a super slacks-based measure and data envelopment analysis (DEA) model with undesirable outputs—which has higher discriminating power than previous DEA efficiency indices, modifying the ones proposed in preceding articles. Furthermore, I analyze the determinants of environmental efficiency in association with the environmental Kuznets curve hypothesis and the pollution haven hypothesis. The panel regression results reveal that there is no Kuznets-type relationship between environmental efficiency and per-capita income. The impact of trade on environmental efficiency depends on relative per-capita income and capital–labor ratio, i.e., the higher the relative income and the lower the capital–labor ratio, the higher the environmental efficiency. Overall, the elasticities of trade openness for NOx, PM10, and CO2 are significantly negative for an average country in the sample. |
| Keywords: | Data envelopment analysis; Environmental efficiency; Environmental Kuznets curve; Pollution haven hypothesis; Super efficiency |
| JEL: | O13 Q53 Q54 Q56 |
| Date: | 2014–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56950&r=ene |
| By: | Marie-Sophie Hervieux (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Pierre-Alexandre Mahieu (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272) |
| Abstract: | Since the early 90', many articles have been published on Environmental Kuznets Curve (EKC), especially empirical articles dealing with CO2. In our paper, we provide a detailed review of the empirical articles dealing with CO2 that were published in 2012 and 2013 in ISI Web of Knowledge. Our review, which is based on 41 studies, reports many information, such as the outcome of the study or the econometric procedure employed. Our review can be useful for several purposes, such as to perform a meta-analysis or to test the EKC. |
| Keywords: | Environmental Kuznets Curve ; Carbon dioxide |
| Date: | 2014–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01010243&r=ene |
| By: | Bjørndal, Endre (Dept. of Business and Management Science, Norwegian School of Economics); Bjørndal, Mette (Dept. of Business and Management Science, Norwegian School of Economics); Gribkovskaia, Victoria (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | Presently in the Nordic day-ahead market, zonal pricing or market splitting is used for relieving congestion between a predetermined set of price areas. Constraints internal to the price areas are resolved by counter trading or redispatching in the regulation market. In a model of the Nordic electricity market we consider an hourly case from winter 2010 and present analyses of the effects of different congestion management methods on prices, quantities, surpluses and network utilization. We also study the effects of two different ways of taking into account security constraints. |
| Keywords: | Congestion management; Zonal pricing; Dayahead market simulation |
| JEL: | Q00 |
| Date: | 2014–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2014_030&r=ene |
| By: | Walsh, Darragh; O'Sullivan, Kevin; Lee, William; Devine, Mel |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:rb2014/1/4&r=ene |