nep-ene New Economics Papers
on Energy Economics
Issue of 2014‒09‒25
24 papers chosen by
Roger Fouquet
London School of Economics

  1. The Drivers of Long-run CO2 Emissions: A Global Perspective since 1800 By Sofia Teives HENRIQUES; Karol Jan BOROWIECKI
  2. Is sustainable transport policy sustainable? By Jonas ELIASSON; Stefan PROOST
  3. Explaining the Variation in the Value of Building Energy Efficiency Certificates: A Quantitative Meta-Analysis By Isaac Ankamah-Yeboah; Katrin Rehdanz
  4. Searching for carbon leaks in multinational companies By Antoine Dechezleprêtre; Caterina Gennaioli; Ralf Martin; Mirabelle Muûls
  5. Policy Labels and Investment Decision-making By Lange, Ian; Moro, Mirko; Rahman, Mohammad Mahbubur
  6. Structural disparities in carbon dioxide consumption and trade in the world economy By Stefan Ederer; Stefan Weingärtner
  7. A dynamic CGE modelling approach for analyzing trade-offs in climate change policy options: the case of Green Climate Fund By Alessandro Antimiani; Valeria Costantini; Anil Markandya; Chiara Martini; Alessandro Palma; ; Maria Cristina Tommasino
  8. Asymmetric Exchange Rate and Oil Price Pass-Through in Turkish Fuel Oil Market By Fatih Akcelik; Mustafa Utku Ozmen
  9. Estimating the Price of ROCs By Bryan, Jeff; Lange, Ian; MacDonald, Alex
  10. The Residential Energy Efficiency Program in Lithuania By Viktoras Sirvydis
  11. Merit order effect and strategic investments in intermittent generation technologies By Silvia Concettini
  12. Cooperation and Competition in Climate Change Policies: Mitigation and Climate Engineering when Countries are Asymmetric By Vassiliki Manoussi; Anastasios Xepapadeas
  13. Abatement Technology Search By Alain-Désiré Nimubona; Andrew Leach
  14. Mobilising Investment in Energy Efficiency: Economic Instruments for Low‐energy Buildings By Anuschka Hilke; Lisa Ryan
  15. The Energy Implications of City Size and Density By Anthony M. Yezer; William Larson
  16. Climate Change Mitigation, Economic Growth and the Distribution of Income By G.A. Meagher; P.D. Adams; Felicity Pang
  17. Climate change mitigation and employment growth By G.A.Meagher; R.A.Wilson; J.M. Dixon
  18. Atténuation de l’effet de serre d’origine agricole : efficacité en coûts et instruments de régulation By Stephane De Cara; Bruno Vermont
  19. Mining and Indonesia’s Economy: Institutions and Value Adding, 1870-2010 By Eng, Pierre van der
  20. Travel Distance and Fuel Efficiency: An Estimation of the Rebound Effect using Micro-Data in Switzerland By Sylvain Weber; Mehdi Farsi
  21. Should we build more large dams? The actual costs of hydropower megaproject development By Atif Ansar; Bent Flyvbjerg; Alexander Budzier; Daniel Lunn
  22. Heat Tariff Reform and Social Impact Mitigation : Recommendations for a Sustainable District Heating Sector in Belarus By World Bank
  23. Search and Stockpiling in Retail Gasoline Markets By David P. Byrne; Nicolas de Roos
  24. Boom or gloom? Examining the Dutch disease in two-speed economies By Hilde C. Bjørnland; Leif Anders Thorsrud

  1. By: Sofia Teives HENRIQUES (Department of Business and Economics, University of Southern Denmark); Karol Jan BOROWIECKI (Department of Business and Economics, University of Southern Denmark; Department of Economics, Trinity College Dublin)
    Abstract: Fossil-fuel-related carbon dioxide emissions have risen dramatically since 1800. We identify the long-run drivers of CO2 emissions for a sample of twelve developed economies using an extended Kaya decomposition. By considering biomass and carbon-free energy sources along with fossil fuels we are able to shed light on the effects of past and present energy transitions on CO2 emissions. We find that at low levels of income per capita, fuel switching from biomass to fossil fuels is the main contributing factor to emission growth. Scale effects, especially income effects, become the most important emission drivers at higher levels of income and also dominate the overall long-run change. Technological change is the main offsetting factor. Particularly in the last decades, technological change and fuel switching have become important contributors to the decrease in emissions in Europe. Our results also individualize the different CO2 historical paths across parts of Europe, North America and Japan.
    Keywords: CO2 emissions, Kaya decomposition, Energy transition
    JEL: N70 O44 Q40 Q54 Q5
    Date: 2014–09
  2. By: Jonas ELIASSON; Stefan PROOST
    Abstract: The paper challenges part of the sustainable transport literature. Sustainable transport plans often focus on reducing carbon emissions in a specific city, region or country, and this neglects two handicaps of strong unilateral action. The first is that climate is a global commons problem, so a strong binding international climate agreement is unlikely. The second is that a unilateral reduction of oil consumption may be partially, or even completely, offset by market responses – in some circumstances, cumulative emissions may even come earlier (the “green paradox”). When a coalition of the willing reduces oil use in the transport sector, this may delay rather than reduce total emissions. This requires rethinking climate policies for the transport sector: What policies remain cost effective in reducing greenhouse gas emissions?
    Date: 2014–06
  3. By: Isaac Ankamah-Yeboah; Katrin Rehdanz
    Abstract: The built environment has been identified as one of the cost effective platforms for reducing energy demand and greenhouse gas emissions. With policies and the know-how in existence, the real estate sector has already adopted measures such as building codes and energy efficiency labels to drive prices and spur demand with the objective of increasing the demand for energy efficient buildings. Since 2008, many studies have emerged estimating the price premium that is expected to be associated with energy efficient buildings. Evidence from such studies has so far been mixed. We use a meta-regression approach to identify some of the underlying drivers causing the variation. Our results reveal that energy efficiency is highly valued in the sales market and the non-residential sector. We also observed that Europe values energy efficiency over the US possible due to their relative strengths of their energy efficiency policies as revealed on the international energy efficiency rankings. Labels with categorical scales have a weak impact on the value of energy efficiency labels while the effects of regulation by voluntary strategies tend to decline with time, with the effect lasting over a period of thirteen years. These are vital information for policy issues in achieving significant cuts in greenhouse gas emissions
    Keywords: energy efficiency premium, meta-analysis, multilevel model, value transfer, valuation
    JEL: P48 Q40 Q48 C53 C50 Q51 Q54
    Date: 2014–08
  4. By: Antoine Dechezleprêtre; Caterina Gennaioli; Ralf Martin; Mirabelle Muûls
    Abstract: Does climate change policy cause companies to shift the location of production, thereby creating carbon leakage? We examine the impact of the European Union Emissions Trading System (EU ETS) on the geographical distribution of carbon emissions within multinational companies based on data from the Carbon Disclosure Project for the period 2007- 2009. Our data includes regional emissions of 435 companies, of which 47 are subject to EU ETS regulation. We find no evidence that the EU ETS has induced a displacement of carbon emissions from Europe towards the rest of the world. Our results suggest that claims that the EU ETS would cause carbon leakage might have been exaggerated.
    Date: 2014–09
  5. By: Lange, Ian; Moro, Mirko; Rahman, Mohammad Mahbubur
    Abstract: Much attention in recent years has turned to the potential of behavioural insights to improve the performance of government policy. One behavioural concept of interest is the effect of a cash transfer label on how the transfer is spent. The Winter Fuel Payment (WFP) is a labelled cash transfer to offset the costs of keeping older households warm in the winter. Previous research has shown that households spend a higher proportion of the WFP on energy expenditures due to its label (Beatty et al., 2011). If households interpret the WFP as money for their energy bills, it may reduce their willingness to undertake investments which help achieving the same goal, such as the adoption of renewable energy technologies. In this paper we show that the WFP has distortionary effects on the renewable technology market. Using the sharp eligibility criteria of the WFP in a Regression Discontinuity Design, this analysis finds a reduction in the propensity to install renewable energy technologies of around 2.7 percentage points due to the WFP. This is a considerable number. It implies that 62% of households (whose oldest member turns 60) would have invested in renewable energy but refrain to do so after receiving the WFP. This analysis suggests that the labelling effect spreads to products related to the labelled good. In this case, households use too much energy from sources which generate pollution and too little from relatively cleaner technologies.
    Keywords: Winter Fuel Payment, Regression Discontinuity, Renewable energy,
    Date: 2014
  6. By: Stefan Ederer; Stefan Weingärtner
    Abstract: Social scientists have long argued that developed countries are more and more responsible for climate change because they externalise pollution to less developed countries. This paper offers a way to quantify climate responsibility by calculating carbon footprints and carbon balances between regions by means of an input-output analysis. We find that regions in the center of the world economy are increasingly consuming CO2 which was emitted in the periphery. Developed countries exhibit a large emission balance deficit with the less developed economies. Furthermore, we decompose carbon footprint developments between 1995 and 2007 into three effects: technical progress, shifts in the global value chain and increasing final demand. Our results show that the effect of technical progress is overcompensated by the effect of increased consumption and value chain shifts. Footprint growth in the center is strongly linked to additional pollution and technical development in the periphery. These findings challenge the prevailing view of the potential of modernisation and globalisation with regard to climate change.
    Keywords: Climate responsibility, carbon leakage, carbon footprint, environmental world-system theory, input-output analysis
    JEL: C67 F18 Q37 Q56 O13
    Date: 2014–09
  7. By: Alessandro Antimiani; Valeria Costantini; Anil Markandya; Chiara Martini; Alessandro Palma; ; Maria Cristina Tommasino
    Abstract: We investigate the trade-offs between economic growth and low carbon targets for developing and developed countries in the period up to 2035. Policy options are evaluated with an original version of the dynamic CGE model GDynE. Abatement costs appear to be strongly detrimental to economic growth for developing countries. We investigate options for reducing these costs that are consistent with a green growth strategy. We show that Green Climate Fund financed through a levy on carbon taxation can benefit all parties, and larger benefits are associated with investment of the Green Climate Fund to foster energy efficiency in developing countries.
    Keywords: Climate Change Policies, Green Growth, Developing Countries, Dynamic CGE Energy Model, Green Climate Fund
    Date: 2014–05
  8. By: Fatih Akcelik; Mustafa Utku Ozmen
    Abstract: In this paper, we revisit the unsettled discussion of whether retail fuel oil prices respond asymmetrically to oil price shocks. Using a novel micro approach that considers each price spell separately; we find evidence of pass-through asymmetry in the fuel oil market in Turkey. With our approach it is possible to analyze asymmetry at various other grounds including source and size of the cost shock. We show that exchange rate (oil price) is the main factor fueling asymmetry in case of cost increases (decreases). Also, if the magnitude of positive cost shock is higher, pass-through will be lower. Finally, empirical evidence suggests that pricing behavior in terms of pass-through degree and asymmetry varies across firms. The market power of the firms is suggested as the main explanation of the asymmetry, yet there are factors limiting the use of market power in price setting.
    Keywords: Fuel oil, Oil price, Exchange rate, Pass-through asymmetry, Gasoline, Diesel; Micro data, Turkey
    JEL: D22 D43 E31
    Date: 2014
  9. By: Bryan, Jeff; Lange, Ian; MacDonald, Alex
    Abstract: The UK government introduced the Renewable Obligation (RO), a system of tradable quotas, to encourage the installation of renewable electricity capacity. Each unit of generation from renewables created a renewable obligation certificate (ROC). Electricity generators must either; earn ROCs through their own production, purchase ROCs in the market or pay the buy-out price to comply with the quota set by the RO. A unique aspect of this regulation is that all entities holding ROCs receive a share of the buy-out fund (the sum of all compliance purchases using the buy-out price). This set-up ensures that the difference between the market price for ROCs and the buy-out price should equal the expected share of the buy-out fund, as regulated entities arbitrage these two compliance options. The expected share of the buy-out fund depends on whether enough renewable generation is available to meet the quota. This analysis tests whether variables associated with renewable generation or electricity demand are correlated with, and thus can help predict, the price of ROCs.
    Keywords: Renewable Obligation, Arbitrage, Electricity,
    Date: 2013
  10. By: Viktoras Sirvydis
    Keywords: Finance and Financial Sector Development - Access to Finance Environmental Economics and Policies Urban Development - Urban Housing Banks and Banking Reform Energy - Energy Production and Transportation Environment
    Date: 2014–05
  11. By: Silvia Concettini
    Abstract: This paper studies the strategic interactions between two electricity generators, the first producing with a \traditional" technology and the second employing a \renewable" technology characterized by the random availability of capacity due to the intermittency of its power source. The competition between the \traditional" and the \renewable" power producers is examined through a modified version of the two stage Dixit model for entry deterrence (Dixit, 1980) with Cournot competition in the post entry stage. The outcome of the game suggests that the \renewable" generator exploits the merit order rule which governs spot electricity markets to invest and produce as if it were a sort of Stackelberg leader. While in most cases producer's preferences over strategies do not depend on the average value of capacity availability, according to the value of this parameter the market may lead to an equilibrium which benefits both the \renewable" producer and the consumers. Given that production of electricity from the renewable source depends on actual weather conditions, the analysis of ex-post payoffs reveals that \renewable" producer's preferences over strategies may be reversed for small errors in the forecasting of the true value of the average capacity availability factor when the investment cost in the renewable technology is relatively low. In this case, the incentives for strategic behaviour of the \renewable" producer may be even stronger. The main insights of the model seem to be barely sensitive to changes in the market power of competitors: even when the \renewable" generator behaves as a competitive fringe in the spot market, it is able to infuence equilibrium outcome to its own advantage through investment choices although to a smaller degree than in the standard setting.
    Keywords: Competition, Renewable generation, Capacity investments, Merit order.
    JEL: D43 L13 L43 L94
    Date: 2014
  12. By: Vassiliki Manoussi; Anastasios Xepapadeas
    Abstract: We study a dynamic game of climate policy design in terms of emissions and solar radiation management (SRM) involving two heterogeneous regions or countries. Countries emit greenhouse gasses (GHGs), and can block incoming radiation by unilateral SRM activities, thus reducing global temperature. Heterogeneity is modelled in terms of the social cost of SRM, the environmental damages due to global warming, the productivity of emissions in terms of generating private benefits, the rate of impatience, and the private cost of geoengineering. We determine the impact of asymmetry on mitigation and SRM activities, concentration of GHGs, and global temperature, and we examine whether a tradeoff actually emerges between mitigation and SRM. Our results could provide some insights into a currently emerging debate regarding mitigation and SRM methods to control climate change, especially since asymmetries seem to play an important role in affecting incentives for cooperation or unilateral actions.
    Keywords: Climate change, mitigation, solar radiation management, cooperation, differential game, asymmetry, feedback Nash equilibrium.
    JEL: Q53 Q54
    Date: 2014–09–02
  13. By: Alain-Désiré Nimubona (Department of Economics, University of Waterloo); Andrew Leach (Alberta School of Business, University of Alberta)
    Abstract: We develop a three-stage model of abatement technology search, adoption, and deployment. Using this model, which draws on search theory tools more frequently used in labour and monetary economics, we compare market-based and command-and-control pollution control instruments with respect to the incentives each provides for abatement technology search and adoption, expected emissions reductions, and expected compliance costs. We show that the polluting firm always has more incentives to search for and adopt a more ecient abatement technology under either an emissions tax or a tradeable permit system than under an equivalently stringent emissions standard. We also show that while expected incentives for innovation are comparable under emissions taxes and tradeable permit regimes, the likelihood for total future compliance costs to be reduced after an increase in the stringency of environmental policy - the so-called Porter hypothesis - is higher with a tradeable permit regime.
    JEL: Q55 Q58 H23 D83
    Date: 2014–08
  14. By: Anuschka Hilke; Lisa Ryan
    Abstract: Taxes, loans and grants, trading schemes and white certificates, public procurement and investment in R&D or infrastructure: known collectively as “economic instruments”, these tools can be powerful means of mobilising the finances needed to achieve policy goals by implementing energy efficiency measures. The role of economic instruments is to kick-start the private financial markets and to motivate private investors to fund EE measures. They should reinforce and promote energy performance regulations.
    Date: 2012–12–01
  15. By: Anthony M. Yezer (Department of Economics/Institute for International Economic Policy, George Washington University); William Larson (Bureau of Economic Analysis)
    Abstract: This paper develops a new urban simulation model with endogenous population, housing supply and demand, and highway use and congestion. These features allow the model to simulate cities of different sizes with a single parameterization and hence to study the partial effect of city size differences on economic activity. The model is applied to the important problem of the energy implications of city size and density. Energy consumption in housing and commuting is calculated based on the structure type and size of housing units, consumption of a numeraire good, and commuting distances and velocities on congested roadways. The surprising conclusion is that per capita energy consumption does not vary as city size increases. Households in larger cities consume less housing, commute longer (and slower), and consume more of the numeraire good. The energy use implications of these eff ects are offsetting for a laissez-faire city. However, common land use policies, speciï¬cally density limits and greenbelts, can positively or negatively affect both city welfare and the elasticity of energy use with respect to city size.
    Keywords: urban simulation, congestion, commuting, gasoline, greenbelt
    JEL: Q40 R14
    Date: 2014
  16. By: G.A. Meagher; P.D. Adams; Felicity Pang
    Abstract: In October 2008, the Australian Government released a major report: Australia's Low Pollution Future: The Economics of Climate Change Mitigation. In that report, various scenarios are used to explore the potential economic effects of climate mitigation policy in Australia. One of the scenarios, designated CPRS-5, a Carbon Pollution Reduction Scheme (CPRS) aims to reduce emissions to 5 per cent below 2000 levels by 2020. It is consistent with stabilisation at around 550 parts per million of carbon dioxide equivalent (ppm CO2-e) in the atmosphere by 2100. In assessing the likely effects these policies on the future growth of output and employment by industry, the Government's report relies mainly on economic modelling using the MMRF applied general equilibrium model of the Australian economy. Results are reported for 58 industries. This paper begins by using the same model to closely reproduce the analysis of the CPRS-5 scenario conducted for the report. However, this time the MMRF model is enhanced by a labour market extension MLME which allows the employment results to be extended to 81 occupations and 64 skill groups. The enhanced model is then used in a top-down configuration with an income distribution extension MIDE and a microsimulation extension MMSE to generate changes in income. In MIDE, income redistributions between households (taken collectively), corporate trading enterprises, financial trading enterprises, the government and foreigners (the 'institutions') are modelled by the inclusion of the associated current and capital accounts from the Australian System of National Accounts. Within the household sector, changes in disposable income from unincorporated enterprises (differentiated by 17 industries), compensation of employees (differentiated by 81 occupations), property income, and net transfers from other institutions are separately modelled. On the income side, one hundred types of recipient are identified corresponding to personal income percentiles. On the expenditure side, six hundred types of household are identified, this time differentiated by household income and the ages of its members. This arrangement allows changes in real income to be computed using household specific CPIs. The microsimulation extension MMSE uses MIDE results to update the incomes of more than 13,500 persons. The effects of the climate change mitigation policies on the incomes of various socio-economic groups are then be obtained by aggregation.
    Keywords: CGE modelling, climate change mitigation, distribution of employment, distribution of income, microsimulation
    JEL: C68 D31 D58 J23 O56 Q52
    Date: 2014–09
  17. By: G.A.Meagher; R.A.Wilson; J.M. Dixon
    Abstract: Reducing greenhouse gas emissions without reducing economic growth requires advances in technology (which reduce the emissions intensity of industrial production) and/or policy measures to promote structural change (which shift the composition of production in favour of less polluting industries). Moreover, both methods of mitigating the effect of the gases must inevitably proceed in an environment of structural change driven by a variety of other economic forces. This paper introduces new economic modelling which permits an analysis of the effects of mitigation policy on employment that is firmly located within the historical structure of the economy, and within its likely future development in the medium term. Specifically, the paper investigates the imposition of a tax on the employment of labour by each industry in proportion to the emissions per hour of employment in the industry. In this approach, the extent to which the job of a particular worker can be considered to be 'green' depends on the industry in which he/she works and not on his/her occupation or skill level. The effects of imposing the tax are reported as deviations from the current CEDEFOP medium-term employment forecasts for the European Union. The analysis uses a CGE labour market extension to the macro-econometric E3ME model. The tax is assumed to be returned to producers in such a way that aggregate employment remains constant, so the focus of the analysis is on the structural, rather than the secular, implications of mitigation policy for employment growth. The model incorporates a detailed description of the structure of the labour market, identifying cross-classified employment in 41 industries, 27 occupations and 3 skill levels. Hence it allows for a comprehensive, cohesive assessment of the economy's requirements for 'green' skills in the sense that it determines which occupations/skill levels expand, and which contract, in response to the mitigation policy. This kind of comparison is important for assigning the appropriate weight to training programs that allocate resources to green skills rather than alternative objectives of educational policy. The analysis in the paper is restricted to the United Kingdom but the model is designed to provide a suitable basis for comparative-dynamic labour market analyses for all countries belonging to the European Union.
    Keywords: CGE modelling, climate change mitigation, distribution of employment, green jobs
    JEL: C68 D33 D58 I29 J23 O52 Q52
    Date: 2014–09
  18. By: Stephane De Cara (Economie Publique, INRA); Bruno Vermont (Economie Publique, INRA)
    Abstract: Du fait de son poids dans les émissions de gaz à effet de serre (GES), l’agriculture peut (et doit) participer significativement à l’effort d’atténuation global. Les politiques publiques peuvent jouer un rôle important pour que les potentiels d’atténuation que peut offrir ce secteur soient mobilisés au meilleur coût pour la société. Ce texte synthétise les concepts qui sous-tendent les travaux d’économie appliquée qui ont examiné cette question. Il précise notamment le concept d’efficacité en coûts et le rôle que peuvent jouer les instruments économiques à cet égard. Les résultats de travaux récents portant sur cette question dans les cas français et européen illustrent l’importance des gains en efficacité permis par les instruments économiques. Ces éléments sont mis en regard de l’évolution récente des politiques climatiques et agricoles dans leur prise en compte de la question des émissions de GES d’origine agricole.
    Abstract: Given its weight in greenhouse gas emissions (GHG), agriculture can (and should) contribute significantly to the global mitigation effort. Public policies may play an important role in realizing the mitigation potential in this sector at the lowest possible cost for the society. This text provides an overview of the concepts used in applied economics research works that have addressed this issue. In particular, it presents the concept of cost-effectiveness and the role that economic instruments can play in this regard. Recent results from studies that have examined this question in the French and European contexts illustrate the efficiency gains that can be expected from the implementation of economic instruments. These results are then used to analyze the recent trends in climate and agricultural policies with respect to the issue of GHG emissions from agriculture.
    Keywords: gaz à effet de serre, émission de gazinstrument économiqueprotoxyde d'azote, méthaneefficacitécoût
    Date: 2014
  19. By: Eng, Pierre van der
    Abstract: Indonesia has long been a major producer of minerals for international markets. Starting in 2014, it implemented legislation banning exports of unprocessed minerals and requiring producers to invest in processing facilities to add more value before export. This paper establishes what light past experiences in Indonesia with mining sheds on this recent development. It quantifies and discusses the growth of mining production in Indonesia since 1870. It analyses the institutional arrangements that past governments used to maximise resource rents and domestic value adding. The paper finds that production and exports of mining commodities were long dominated by oil, but increased and diversified over time, particularly since the 1960s. The development of the mining sector depended on changes in market prices, mining technologies and the cost of production, but particularly on the institutional arrangements that guided the decisions of foreign investors to commit to mining production and processing in Indonesia.
    Keywords: natural resources, mining sector, Indonesia, resource rents
    JEL: L71 L72 L78 N55 O13 Q32
    Date: 2014–08
  20. By: Sylvain Weber (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland); Mehdi Farsi (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland)
    Abstract: We estimate the rebound effect for private transportation using cross-section micro-level data in Switzerland for 2010. Our simultaneous equations model accounts for endogeneity of travel distance, vehicle fuel intensity and vehicle weight. Compared to the literature, our paper provides an important contribution as micro-level data and simultaneous equations models have seldom been used to estimate the rebound effect. Moreover, among the distance measures we use, one is highly reliable as it was recorded using GIS (Geographical Information System) software. Our results, obtained by 3SLS, point to substantial direct rebound effects between 75% and 81%, which lie at the higher end of the estimates found in the literature. OLS estimates are however much lower and seem to under-estimate the rebound effect.
    Keywords: Rebound effect, Travel demand, Simultaneous equations model.
    JEL: C31 D12 Q41 R41
    Date: 2014–09
  21. By: Atif Ansar; Bent Flyvbjerg; Alexander Budzier; Daniel Lunn
    Abstract: A brisk building boom of hydropower mega-dams is underway from China to Brazil. Whether benefits of new dams will outweigh costs remains unresolved despite contentious debates. We investigate this question with the "outside view" or "reference class forecasting" based on literature on decision-making under uncertainty in psychology. We find overwhelming evidence that budgets are systematically biased below actual costs of large hydropower dams - excluding inflation, substantial debt servicing, environmental, and social costs. Using the largest and most reliable reference data of its kind and multilevel statistical techniques applied to large dams for the first time, we were successful in fitting parsimonious models to predict cost and schedule overruns. The outside view suggests that in most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return unless suitable risk management measures outlined in this paper can be affordably provided. Policymakers, particularly in developing countries, are advised to prefer agile energy alternatives that can be built over shorter time horizons to energy megaprojects.
    Date: 2014–08
  22. By: World Bank
    Keywords: Finance and Financial Sector Development - Access to Finance Energy - Energy Production and Transportation Economic Theory and Research Private Sector Development - Emerging Markets Infrastructure Economics and Finance - Infrastructure Economics Macroeconomics and Economic Growth
    Date: 2014–06
  23. By: David P. Byrne; Nicolas de Roos
    Abstract: This note presents some simple, direct tests for search and dynamic demand behavior in retail gasoline markets. We exploit a unique market-level dataset that allows us to directly measure search intensity with daily web traffic data from a gasoline price reporting website, and perfectly measure daily changes in price levels and dispersion. We find stark evidence of both search and stockpiling behavior.
    Keywords: search, dynamic demand, retail gasoline
    JEL: D8 L8
    Date: 2014
  24. By: Hilde C. Bjørnland (BI Norwegian Business School and Norges Bank (Central Bank of Norway)); Leif Anders Thorsrud (BI Norwegian Business School)
    Abstract: Traditional studies of the Dutch disease do not account for productivity spillovers between the booming resource sector and other domestic sectors. We put forward a simple theory model that allows for such spillovers. We then identify and quantify these spillovers using a Bayesian Dynamic Factor Model (BDFM). The model allows for resource movements and spending effects through a large panel of variables at the sectoral level, while also identifying disturbances to the commodity price, global demand and non-resource activity. Using Australia and Norway as representative cases studies, we find that a booming resource sector has substantial productivity spillovers on non-resource sectors, effects that have not been captured in previous analysis. That withstanding, there is also evidence of two-speed economies, with non-traded industries growing at a faster pace than traded. Furthermore, commodity prices also stimulate the economy, but primarily if an increase is caused by higher global demand. Commodity price growth unrelated to global activity is less favourable, and for Australia, there is evidence of a Dutch disease effect with crowding out of the tradable sectors. As such, our results show the importance of distinguishing between windfall gains due to volume and price changes when analysing the Dutch disease hypothesis.
    Keywords: Resource boom, Commodity prices, Dutch disease, Learning by doing, Two-speed economy, Bayesian Dynamic Factor Model (BDFM)
    JEL: C32 E32 F41 Q33
    Date: 2014–08–28

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