nep-ene New Economics Papers
on Energy Economics
Issue of 2014‒09‒29
twenty papers chosen by
Roger Fouquet
London School of Economics

  1. European experiences with white certificate obligations: A critical review of existing evaluations By Louis-Gaëtan Giraudet; D. Finon
  2. Energy Saving Obligations: Cutting the Gordian Knot of leverage? By C. Rhode; Jan Rosenow; Nick Eyre; Louis-Gaëtan Giraudet
  3. Double moral hazard and the energy efficiency gap By Louis-Gaëtan Giraudet; Sébastien Houde
  4. Establishing and Operationalizing an Energy Efficiency Revolving Fund : Scaling Up Energy Efficiency in Buildings in the Western Balkans By Dilip Limaye; Jas Singh; Kathrin Hofer
  5. Municipal Budgeting and Finance : Scaling Up Energy Efficiency in Buildings in the Western Balkans By Network of Associations of Local Authorities in South-East Europe
  6. Do Renewables Portfolio Standards Increase Electricity Prices? A Synthetic Control Approach By Karen Maguire; Abdul Munasib
  7. Leveling the Field for Renewables : Mexico's New Policy Framework for Incorporating External Costs of Electricity Generation By World Bank
  8. Heterogeneous policies, heterogenous technologies : the case of renewable energy By Francesco Nicolli; Francesco Vona
  9. Republic of South Sudan : Analysis of Juba Distribution Network and Capacity Building Needs in the Electricity Sector By World Bank
  10. How Much Abatement Will Australia's Emissions Reduction Fund Buy? By Harry Clarke; Iain Fraser; Robert Waschik
  11. New climate scenario framework implementation in the GCAM integrated assessment model By Iñigo Capellán-Pérez; Mikel González-Eguino; Iñaki Arto; Alberto Ansuategi; Kishore Dhavala; Pralit Patel; Anil Markandya
  12. The Nexus between Oil price and Russia's Real Exchange rate: Better Paths via Unconditional vs Conditional Analysis By Jamal BOUOIYOUR; Refk SELMI; Muhammad SHAHBAZ; Aviral Kumar TIWARI
  13. Climate policy and competitiveness: Policy guidance and quantitative evidence By Jared C. Carbone; Nicholas Rivers
  14. Does Firm Heterogeneity Impact the Effectiveness of Carbon Taxes? Experiments in Argentina and Mexico By Omar O. Chisari; Sebastián J. Miller
  15. Tax Policy in a Simple General Oligopoly Equilibrium Model with Pollution Permits By Bertrand Crettez; Pierre-André Jouvet; Ludovic A. Julien
  16. A household survey of the cost of illness due to air pollution in Beijing, China By Timothy Swanson; Chiara Ravetti; Yana Popp Jin; Mu Quan; Zhang Shiqiu
  17. Tail-Hedge Discounting and the Social Cost of Carbon By Weitzman, Martin L.
  18. Routing a Mixed Fleet of Electric and Conventional Vehicles By Goeke, D.; Schneider, M.
  19. The Cost of Greening Stimulus: A Dynamic Discrete Choice Analysis of Vehicle Scrappage Programs By Chao Wei; Shanjun Li
  20. How do Co nsumers Respond to Gasoline By David P. Byrne, "; " Gordon Leslie

  1. 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
  2. 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
  3. 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
  4. By: Dilip Limaye; Jas Singh; Kathrin Hofer
    Keywords: Finance and Financial Sector Development - Access to Finance Banks and Banking Reform Finance and Financial Sector Development - Debt Markets Public Sector Economics Energy - Energy Production and Transportation Public Sector Development
    Date: 2014–05
  5. By: Network of Associations of Local Authorities in South-East Europe
    Keywords: Banks and Banking Reform Energy - Energy Production and Transportation Urban Development - Municipal Financial Management Finance and Financial Sector Development - Debt Markets Public Sector Economics Public Sector Development
    Date: 2014–05
  6. By: Karen Maguire (Oklahoma State University); Abdul Munasib (University of Georgia)
    Abstract: We examine whether state level Renewable Portfolio Standards (RPS) influence prices in the electricity market. While vital environmental goals underlie the rationale for RPS there exists a potential for negative welfare impacts through increased costs of electricity generation forcing consumers to allocate a larger portion of their income to energy consumption. We employ the Synthetic Control Method (SCM) for comparative case study and focus on Texas, an early adopter of RPS and arguably a success story. We find that RPS increased residential, industrial and total electricity prices while commercial prices were unaffected.
    Keywords: Renewable portfolio standard, electricity price, synthetic control method
    JEL: Q4 Q42 Q48 H7
    Date: 2013–06
  7. By: World Bank
    Keywords: Environment - Climate Change Mitigation and Green House Gases Macroeconomics and Economic Growth - Climate Change Economics Transport Economics Policy and Planning Energy - Energy Production and Transportation Environmental Economics and Policies Transport
    Date: 2014–04
  8. By: Francesco Nicolli (Università di Ferrara); Francesco Vona (OFCE Sciences Po, Skema Business School)
    Abstract: This paper investigates empirically the effect of market regulation and renewable energy policies on innovation activity in different renewable energy technologies. For the EU countries and the years 1980 to 2007, we built a unique dataset containing information on patent production in eight different technologies, proxies of market regulation and technology-specific renewable energy policies. Our main findings show that lowering entry barriers is a more significant driver of renewable energy innovation than privatisation and unbundling, but its effect varies across technologies, being stronger in technologies characterised by the potential entry of small, independent power producers. Additionally, the inducement effect of renewable energy policies is heterogeneous and more pronounced for wind, which is the only technology that is mature and has high technological potential. Finally, the ratification of the Kyoto protocol – determining a more stable and less uncertain policy framework - amplifies the inducement effect of both energy policy and market liberalisation.
    Date: 2014–07
  9. By: World Bank
    Keywords: Energy - Energy and Environment Energy - Energy Production and Transportation Private Sector Development - E-Business Infrastructure Economics and Finance - Infrastructure Economics Energy - Electric Power
    Date: 2014–06
  10. By: Harry Clarke (School of Economics, La Trobe University); Iain Fraser (School of Economics, La Trobe University; University of Kent); Robert Waschik (School of Economics, La Trobe University)
    Abstract: The economic implications for Australia of replacing its carbon tax policy with an Emissions Reduction Fund (ERF) scheme are examined. A computable general equilibrium model is used to show that the budget allocated for the ERF is about 50 per cent of that required to meet Australia's greenhouse gas abatement commitments.
    Keywords: carbon tax, emissions reduction fund, computable general equilibrium model
    JEL: C68 Q48 Q52
    Date: 2014–08
  11. By: Iñigo Capellán-Pérez; Mikel González-Eguino; Iñaki Arto; Alberto Ansuategi; Kishore Dhavala; Pralit Patel; Anil Markandya
    Abstract: This report has various objectives: (i) to provide an overview of the climate Integrated Assessment approach; (ii) to describe the Global Climate Assessment Model (GCAM); (iii) to outline the new IPCC scenario framework represented by the Shared Socio-economic Pathways (SSPs) and the Representative Concentration Pathways (RCPs); and (iv) to document the implementation of the new scenario framework in version 3.1 of the GCAM. The GCAM baseline is thus calibrated to the “Middle of the Road†or SSP2 scenario using the data calculated by the OECD. The implications of this scenario are important because it will probably become a standard scenario among the research community. The exogenous variables, the implications for income convergence and the results in terms of energy mix, emissions, temperature and radiative forcing of SSP2 implementation in the GCAM are presented at both global and regional levels. These results are also compared with the GCAM-Reference baseline and the IPCC SRES representative scenarios. Then the feasibility, cost and implications of a climate policy that seeks to stabilize temperature at 2ºC (2.6 W/m2 RCP) using a global uniform carbon tax are analyzed. The study is completed by a decomposition analysis that enables the main driving factors of CO2 variation to be identified, including population, affluence, energy intensity, carbon intensity and fossil-fuel share of the energy mix. Finally we draw some conclusions and highlight points for further research.
    Keywords: SSPs, Integrated Assessment Model, long-run projections, energy systems, climate stabilization.
    Date: 2014–04
  12. By: Jamal BOUOIYOUR; Refk SELMI; Muhammad SHAHBAZ; Aviral Kumar TIWARI
    Abstract: The Nexus between Oil price and Russia's Real Exchange rate: Better Paths via Unconditional vs Conditional Analysis
    Date: 2014–09
  13. By: Jared C. Carbone (Division of Economics and Business, Colorado School of Mines); Nicholas Rivers (University of Ottawa)
    Abstract: When considering adoption of a domestic climate change policy, politicians and the public frequently refer to concerns about competitiveness. Competitiveness in this context does not have a precise economic definition. In this article, we discuss possible ways to anchor the concept of competitiveness in economic analysis. This framework then serves as the basis of a systematic survey the literature on the quantitative impacts of unilateral climate change policy derived from the results of computable general equilibrium (or CGE) models. We provide empirical estimates of the magnitude of competitiveness effects that might be associated with the adoption of unilateral climate change policies and a meta-analysis of the key sensitivities displayed by the models as a guide to future research.
    Keywords: competitiveness, leakage, policy, carbon tax, climate change, computable general equilibrium
    JEL: C68 Q52 Q54
    Date: 2014–08
  14. By: Omar O. Chisari; Sebastián J. Miller
    Abstract: This paper examines the effectiveness of carbon taxes on macroeconomic performance when manufacturing firms have the opportunity to change their scale of operation and degree of formality. The hypothesis is that when tax evasion or elusion is possible, it cannot be ruled out that emissions increase rather than decrease due to the reallocation of resources from the rest of manufacturing towards informal small-scale firms. When informality is high, industry could adapt to carbon taxes by reducing the scale of operation of big firms and increasing the number of small firms. However, when taxes are enforceable in all types of firms, there is a cost in terms of GDP and employment, since small-scale firms are more labor intensive. For numerical experiments, two CGE models calibrated for Argentina and Mexico are used. The 'domestic leakage' is found to be more relevant for Argentina than for Mexico.
    Keywords: Environmental taxes, Tax evasion, Taxation, Argentina, Mexico, Informality, Carbon taxes, General Equilibrium Model (CGE)
    Date: 2014–08
  15. By: Bertrand Crettez; Pierre-André Jouvet; Ludovic A. Julien
    Abstract: We introduce a pollution permits market in a general oligopoly equilibrium model. Specifically, we consider a two-commodity economy with one productive sector. The first commodity is inelastically supplied by a set of competitive traders. The second commodity is produced by a set of strategic traders, using the first commodity as an input. The production of the second commodity is a polluting activity. Introducing a competitive emissions permits market solves the pollution control problem but is not sufficient to eliminate market distortions and to reach a Pareto optimal allocation. We study the conditions under which a subsidy to the strategic agents, financed by a tax on the competitive agents, is welfare increasing.
    Keywords: oligopoly equilibrium, taxation policy, pollution.
    JEL: D43 D51 H2
    Date: 2014
  16. By: Timothy Swanson; Chiara Ravetti; Yana Popp Jin; Mu Quan; Zhang Shiqiu (Centre for International Environmental Studies, IHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper examines with a case study of Beijing, China, the health benefits that could be reaped from urban air quality improvements. The study implements a household survey to collect information about the yearly medical expenditures and lost days of work, to estimates the total costs of illness (COI) borne by a typical individual due to airborne diseases. The results of this survey provide a lower bound for the health costs borne by the urban population of Beijing due to air pollution. We find that the average individual COI in our sample is more than 3000 yuan per year, corresponding to almost one month of the average wage (slightly more than 500 US$ per year). This is quite sizeable, considering that it represents just the minimum benchmark for the damages caused by pollution to health. This result indicates that Beijing could benefit quite substantially from reducing air pollution in terms of health costs: if it could completely eliminate pollution, the savings in terms of COI would range in an order of magnitude of 21 million yuan per year only from hospitalized cases.
    Keywords: Cost of Illness, Air pollution, Household survey, Insurance
    JEL: Q53 I13 C83
    Date: 2014–09–12
  17. By: Weitzman, Martin L.
    Abstract: The choice of an overall discount rate for climate change investments depends critically on how different components of investment payoffs are discounted at differing rates reflecting their underlying risk characteristics. Such underlying rates can vary enormously, from ≈1 percent for idiosyncratic diversifiable risk to ≈7 percent for systematic nondiversifiable risk. Which risk-adjusted rate is chosen can have a huge impact on cost-benefit analysis. In this expository paper, I attempt to set forth in accessible language with a simple linear model what I think are some of the basic issues involved in discounting climate risks. The paper introduces a new concept that may be relevant for climate-change discounting: the degree to which an investment hedges against the bad tail of catastrophic damages by insuring positive expected payoffs even under the worst circumstances. The prototype application is calculating the social cost of carbon.
    Date: 2013
  18. By: Goeke, D.; Schneider, M.
    Date: 2014
  19. By: Chao Wei (Department of Economics/Institute for International Economic Policy, George Washington University); Shanjun Li (Dyson School of Applied Economics and Management, Cornell University)
    Abstract: During the recent economic crisis, many countries have adopted stimulus programs designed to achieve two goals: to stimulate economic activity in lagging durable goods sectors and to protect or even enhance environmental quality. The environmental benefits are often viewed and much advocated as co-benefits of economic stimulus. This paper investigates the potential tradeoff between the stimulus and environmental objectives in the context of the popular U.S. Cash-for-Clunkers (CFC) program by developing and estimating a dynamic discrete choice model of vehicle ownership. Results from counterfactual analysis based on several specifcations all show that the design elements to achieve environmental benets significantly limit the program impact on demand stimulus: the cost of vehicle demand stimulus after netting out environmental benets can be up to 77 percent higher under the program than that from an alternative policy design without the design elements aimed at the environmental objective.
    Keywords: Stimulus, Dynamic Discrete Choice Model, Vehicle Scrappage
    JEL: E62 H23 H31
    Date: 2014–12
  20. By: David P. Byrne, "; " Gordon Leslie
    Abstract: This paper empirically studies howconsumers respond to retail gasoline price cycles. Our analys is uses new station-level price data from local markets in Ontario, Canada, and a unique market-level measure of consumer responsiveness based onweb traffic fromgasoline price reportingwebsites. We first document how stations use coordinated pricing strategies that give rise to large daily changes in price levels and dispersion in cycling gasoline markets. We then show consumer responsiveness exhibits cycles that move with these price fluctuations. Through a series of tests we further show that forward-looking stockpiling behavior by consumers plays a central role in generating these patterns.
    Keywords: Retail gasoline price cycles; Dynamic demand; Consumer search
    JEL: L11 L9 D22
    Date: 2013

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