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on Energy Economics |
| By: | Jean-Francois Mercure (Cambridge Centre for Climate Change Mitigation Research, Department of Land Economy, University of Cambridge); Hector Pollitt (Cambridge Econometrics Ltd, Covent Garden, Cambridge, CB1 2HT, UK); Unnada Chewpreecha (Cambridge Econometrics Ltd, Covent Garden, Cambridge, CB1 2HT, UK); Pablo Salas (Cambridge Centre for Climate Change Mitigation Research, Department of Land Economy, University of Cambridge); Aideen M. Foley (Cambridge Centre for Climate Change Mitigation Research, Department of Land Economy, University of Cambridge); Philip B. Holden (Environment, Earth and Ecosystems, Open University); Neil R. Edwards (Environment, Earth and Ecosystems, Open University) |
| Abstract: | This paper presents an analysis of possible uses of climate policy instruments for the decarbonisation of the global electricity sector in a non-equilibrium economic and technology innovation-diffusion perspective. Emissions reductions occur through changes in technology and energy consumption; in this context, investment decision-making opportunities occur periodically, which energy policy can incentivise in order to transform energy systems and meet reductions targets. Energy markets are driven by innovation, dynamic costs and technology diffusion; yet, the incumbent systems optimisation methodology in energy modelling does not address these aspects nor the effectiveness of policy onto decision-making since the dynamics modelled take their source from the top-down `social-planner' assumption. This leads to an underestimation of strong technology lock-ins in cost-optimal scenarios of technology. Breaking this tradition, our approach explores bottom-up investor dynamics led global diffusion of low carbon technology in connection to a highly disaggregated sectoral macroeconometric model of the global economy, FTT:Power-E3MG. A set of ten different projections to 2050 of the future global power sector in 21 regions based on different combinations of electricity policy instruments are modelled using this framework, with an analysis of their climate impacts. We show that in an environment emphasising diffusion and learning-by-doing, the impact of combinations of policies does not correspond to the sum of the impacts of individual instruments, but that strong synergies exist between policy schemes. We show that worldwide carbon pricing on its own is incapable of breaking the current fossil technology lock-in, but that under an elaborate set of policies, the global electricity sector can be decarbonised affordably by 89% by 2050 without early scrapping of capital. |
| Keywords: | Transport, Technological change, Emissions, Fuel use |
| JEL: | O33 Q41 Q42 Q48 Q54 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:ccc:wpaper:006&r=ene |
| By: | Georg Zachmann |
| Abstract: | Read Georg Zachmann's Memos to the new Commissioner for Energy and the new Commissioner for Climate Action The issue: European Union energy policy is guided by three objectives: sustainability, security of supply and competitiveness. To meet its goals in these areas, the EU is updating its energy strategy with new targets for 2030. The starting point for this is the assessment of the previous EU climate and energy package, at the centre of which were the 20-20-20 targets for 2020. Although the EU is largely on track to meet these targets, EU energy policy is generally not perceived as a success. Recent events have undermined some of the assumptions on which the 2020 package was built, and the policies for achieving the 2020 targets â?? although at first sight effective â?? are far from efficient. Policy challenge: ;To meet the EU's objectives for emissions, electricity supply and gas security of supply, well-designed European markets could provide better results at lower cost than uncoordinated national approaches. In other areas â?? such as energy efficiency and supporting innovation â?? markets alone might not be enough. Europe should thus rethink its quantitative headline targets for 2030.The proposed 40 percent decarbonisationtarget is in line with a stronger emission allowance market, but the target for renewables should be defined in terms of innovation rather than deployment, and the energy-efficiency target should be defined in terms of encouraged energy and cost savings, not the amount of energy consumed in a certain period. Introduction The European Union is largely on track to meet the so-called 20-20-20 climate and energy targets1, which were seen as quite ambitious when they were adopted in 2009. EU final energy consumption fell by 7 percent from 2005-11 (Figure 1), energy production from renewable sources increased by 4.2 percentage points from 2005-12 (Figure 1) and greenhouse gas emissions dropped by 13 percent in the same period (Figure 2). By 2012, emissions were already 19.2 percent below the 1990 level, leaving just a small gap before the EU meets the 20 percent reduction target for 20202. However, EU energy policy is generally not perceived as a success. Recent events have undermined some of the assumptions on which the 2020 package was built, and the policies for achieving the 2020 targets â?? although at first sight effective â?? are far from efficient. In terms of supply security, the Ukraine crisis has shown that energy efficiency and increased deployment of renewables have been so far insufficient to eliminate Europeâ??s reliance on Russian gas. In terms of sustainability, other major emitters have not wholeheartedly followed the EU lead to cut emissions. New fossil energy resources make it more difficult to believe that such a global agreement is feasible because it would imply not using most of the fossil-fuel bounty. So the global impact of Europe's emission reductions will be close to insignificant, while Europeâ??s decarbonisation strategy turned out less ambitious than originally claimed, because the recession (and some other factors) supplied much of the promised emissions reduction. In terms of competitiveness, various developments have made the energy mix envisaged in 2008 relatively more expensive. The Fukushima accident resulted in the closure of cheap nuclear plants while increasing the already high cost of new nuclear. It also became clear that carbon capture and storage technology3 is unlikely to become competitive any time soon relative to other low-carbon electricity generation technologies. Consequently, decarbonisation in Europe might have to rely even more on variable renewables, which is likely to drive up the cost of the transition. Meanwhile, the US shale gas boom caused a widening transatlantic energy price gap. All this happened during the EUâ??s most severe economic crisis, and shifted the focus of policymakers from long-term industrial policy projects such as developing renewables, to defending the competitiveness of sectors such as energy-intensive steel plants. In addition, the 2020 climate and energy policies have inherent problems. Decarbonisation has been mainly delivered by a combination of economic downturn and renewables policy (CDC, 2014). Consequently, the EU emissions trading system (ETS) â?? which would have been able to identify much cheaper abatement options â?? was barely used. Furthermore, most investments in power plants, networks and consumption have been based on national remuneration schemes, undermining the internal energy market and failing to deliver a well-balanced European energy system that could support the climate and energy policy objectives. Nevertheless, the EU package for 2020 was a valid hedging strategy in a world of scarce and expensive energy. It addressed the questions of its time, and could have been quite effective in a scenario that saw renewable energy quickly become indispensable in all parts of the world. Now, European Commission proposals for 2030 foresee an emissions reduction of 40 percent and a 27 percent share of renewables (European Commission, 2014). There is also some momentum for a binding energy efficiency target that could be set at 30 percent. The differentiated increase in the three targets indicates a change in priorities: The 40 percent emissions reduction relative to 1990 is a compromise. It is an ambitious unilateral target as long as there is no global agreement. It provides a signal for low-carbon investment and allows the political decarbonisation instruments â?? such as emission trading â?? to be boosted without excessive cost. It therefore keeps the door to a more aggressive decarbonisation policy open, should other major economies join the battle. But the target is less than optimal to deliver Europe's share of the global 2050 objective4.The 27 percent renewables target is essentially insignificant5. Its main justification is to form the legal basis for national renewable support schemes that might otherwise be challenged for undermining the internal energy market.A 30 percent energy efficiency target would be an acknowledgement of the importance of efficiency to achieve the energy policy objectives. But the case for the chosen metric and the corresponding number is weaker than that for the other two targets. The proposed quantitative targets testify to the prioritisation within EU energy policy â?? 40-30-27 instead of 20-20-20 â?? but are not a consistent strategy to respond to the changing energy policy challenges6. The strategic task is to translate the prioritisation of objectives and the interaction between instruments into a consistent policy framework. From a strategic perspective, it is important to note that it is impossible to determine which menu of investments is most conducive to achieve security of supply, sustainability and competitiveness of energy supply. So the main role of policy is to develop reliable frameworks that will encourage the investment that will enable stable energy services at the lowest direct and external cost. A well-functioning internal energy market is the core of such a framework, complemented by an equally well-functioning European market for emission allowances and a market for supply security. Europe also needs an ambitious framework to speed up low-carbon innovation. The final element is a system to make energy efficiency policies at different levels of government comparable in order to come up with the best mix. Revamping the market A functioning internal energy market in which companies and technologies freely compete to provide the best services at the lowest price, while respecting societal and environmental constraints, could be hugely welfare enhancing. Despite three EU legal packages, neither the provisioning of gas nor of electricity is organised in such markets. In electricity, the attempt to create a European market by coupling national day-ahead markets proved only partially successful. While national prices have somewhat converged, no internal electricity market has developed because important parts of the electricity sector are still subject to widely differing national rules and arrangements7. Investment decisions in the electricity sector are thus based on national policies, not European markets. This non-cooperation is costly, and the corresponding welfare loss is set to increase with the rising shares of renewables in the power system8. A European electricity market will not spontaneously evolve based on the enforcement of some first principles. Functioning electricity markets need to be designed: products need to be defined and schemes for their remuneration need to be engineered. An efficient market design needs to include all parts of the relevant system. It must ensure efficient incentives for trade-offs such as demand response versus storage, transmission lines versus decentralised generation or solar versus lignite. And to be efficient, this design needs to be European. The first step is to ensure that national energy regulations are not used for domestic industrial or social policy. Regulated final consumer tariffs in France below what the market would offer, the same electricity price in south and north Germany despite a lack of interconnection, or paying premiums to domestic plants â?? which is essentially what capacity mechanisms and renewables support schemes do â?? are all inconsistent with a functioning internal market. This implies that the fuel mix prerogative of the member states should be restricted to preferences against certain technologies, such as â??no nuclear in Germanyâ?? or â??no shale gas in Franceâ??. While restricting certain technologies, if done transparently and predictably, would be consistent with a functioning European market, there can be no European market if member states prescribe certain fuel mixes, such as â??more than 40 percent of electricity from German renewables in Germanyâ?? or â??more than 80 percent of Polish electricity from Polish coalâ??. Given the substantial distributive effects9, a European energy market requires accountable governance. Market designs need to be regularly adapted to changing circumstances, so the governance structure needs to be institutionalised. But, the European Commission has neither been given the authority to strike a deal between vested interests, nor does it possess the manpower for such a complex task10. Consequently, the Commission relies on selected stakeholders to negotiate compromises over individual issues11. To develop a truly functioning internal market, the Commission needs to prepare a fourth legal package outlining the European energy market framework. This should not shy away from curtailing the role of national energy policymaking. It should propose one or several generic market designs. The European Parliament and Council should then decide which of those generic designs should be developed further. Because of the complexity, the substantial information asymmetries between stakeholders and the significant redistributive effects, this task of developing a market model should be entrusted to a well-staffed and accountable institution that will also be responsible for the ongoing implementation of the design12 â?? for example, the Agency for the Cooperation of European Regulators (ACER). This would, however, require resources matching its responsibility13 and an overhaul of the decision-making process. The final design would then be ratified by the European Parliament and Council. Creating a functioning internal energy market would be a major shift that will not be achieved through smooth convergence of national markets. The alternative would be to return to a system of more-or-less managed national electricity systems â?? with some unreliable cross-border exchanges of energy. This would not only make the systems less efficient. It will also make national security of supply more costly, and deployment of renewables beyond a certain level prohibitively expensive. Re-establishing the ETS The ETS covers most carbon-emitting industries and will run indefinitely, with a shrinking annual supply of allowances. It is an effective and efficient tool to mitigate emissions14. But, the price of ETS allowances has collapsed because of an oversupply15 and the undermining of the systemâ??s credibility. The risk in these developments is that the ETS gets replaced by less-efficient national, sectoral and time-inconsistent measures. A revamp is therefore important to incentivise the use of current low-carbon alternatives (for example burning gas instead of coal) and to ensure low-carbon investment. The European Commission proposal to revamp the ETS is (1) to increase the speed by which the annual allocation of allowances are curtailed from 1.74 percent to 2.2 percent every year after 202017 and (2) to introduce a â??market stability reserveâ?? through which any surplus of allowances above a certain level will be removed from the market, and reintroduced when the surplus falls below a certain level. Steeper reduction of annual allowance allocations after 2020 is a sensible step to ensure that Europe plays its part in the containment of global warming. There is however a risk that the sectors covered by the ETS could fall out of step with the emission reductions in sectors that do not fall under the ETS, such as transport and heating. For example, electricity for electric vehicles and heat pumps falls under the ETS, while combustion-engine cars and oil heating do not. The most elegant solution to avoid different carbon prices for different technologies would be to extend the scope of the ETS to all relevant sectors18. The Commission's proposed â??market stability reserveâ?? is intended to avoid politically motivated intervention in the market. But the use and workability of such a mechanism are highly disputed19. A more promising way to effectively shield the ETS from political interference would be to ensure that future policymakers that decide to undermine the ETS have to compensate companies that invested based on the claims made by policymakers today that the ETS is stable. This could be organised through private contracts between low-carbon investors and the public sector. A public bank could offer contracts that will pay in the future any positive difference between the actual carbon price and a target level20. Low-carbon investors would bid to acquire such contracts to hedge their investments. This would produce three benefits. First, the public bank would be able to collect money upfront (a sort of insurance premium) and make a profit if a sufficiently tight climate policy is maintained. Second, the private investor significantly reduces its exposure to the â?? political â?? carbon market and hence accepts longer pay-back times for its investments. This would unlock long-term investment that is currently too risky. Third and most importantly, public budgets would be significantly exposed to the functioning of the ETS. If future policymakers take decisions that increase the number of available allowances, they might be called back by their treasuries because this would activate the guarantees pledged to investors. This would serve as a much more credible commitment to preserve the integrity of the ETS. Supply security The EU's perceived vulnerability to a reduction in gas (and oil) supplies from Russia in the context of the Ukrainian crisis has put supply security back on the agenda21. Security of gas supply is not primarily about reducing import dependency or increasing Europeâ??s negotiating power with foreign suppliers. Rather, it is about maintaining unused alternatives that could be tapped into for an indefinite period in case the most important supplier fails for technical or political reasons. There is a long-standing debate about whether completing the internal market will deliver supply security. A functioning internal market offers the most efficient rationing mechanism during crises and market-based long-term prices in Europe ensure that suppliers have the right incentives to develop new sources. On the other hand, the market â?? which typically goes for the cheapest available source â?? might fail to sufficiently diversify. For example, the current market design will not provide infrastructure to connect sources that are in normal circumstances uncompetitive, but which serve as insurance in case the cheapest supplies become unavailable. But managed approaches, such as providing security via public investment in certain infrastructure, could crowd out private investment if not properly shielded from the market. If, for example, Europe financially supports a pipeline from Turkmenistan, the business case for the corresponding volume from the Levant region might disappear. Furthermore, national managed approaches regularly fail to select the most efficient options (eg demand curtailment, storage, LNG plants, pipelines, domestic production, domestic fuels). So neither the current market design nor ad-hoc managed approaches appear well suited to efficiently ensure gas supply security. We therefore propose a market for â??reserve suppliesâ??. Each domestic gas supplier would be legally required to maintain a certain amount of alternative supply, such as 20 percent of the contracted energy demand for three years. Suppliers can meet their obligation through different options such as (i) interruptible contracts with their consumers, (ii) volumes in storage, or (iii) option contracts with other domestic and foreign suppliers. Europe's suppliers would need to make sure that the transport capacities â?? pipelines and terminals â?? needed to deliver the corresponding volumes to customers are available. Furthermore, â??reserve suppliesâ?? could not be met by options involving pivotal suppliers/infrastructure. That is, holding an option for additional supplies from Russia would not qualify as â??reserve suppliesâ??. To ensure this, pivotal suppliers/infrastructure will have to be identified. In case a supplier finds itself in a situation in which all existing infrastructure is either already used or pivotal, it will have to invest in new infrastructure. Suppliers would only be able to draw on these â??reserve suppliesâ?? in security crises following an official declaration. This system, the cost of which the domestic suppliers will largely pass through to their customers, should ensure security of supply for all at lowest cost and without undermining the internal market. Such an approach would obviously have distributive effects. Consumers in well-connected regions that face a very limited risk of supply disruptions will have to pay for â??theirâ?? share of reserves, which most likely only their less well-connected neighbours might need. But this solidarity will not wash away regional differences arising from different infrastructure endowments because suppliers in areas with less-developed infrastructure will find it more costly to ensure the level of supply security. This is efficient because it provides an incentive against locating the most vulnerable sectors in vulnerable markets. For example, a chemical plant in Cyprus will only get an interruptible contract because no supplier could affordably secure the required reserve capacities. RES-innovation target Since the EU 20 percent target for renewables was decided, some of the reasons for investing in renewables have become less urgent. There is less risk that fossil fuels will run out quickly, more reliable suppliers are entering the global energy market22 and a global agreement to mitigate greenhouse gases seems distant. Nevertheless, in the longer-term, issues such as dependence on imports from uncertain sources and rising hydrocarbon costs will return. Most importantly, affordable decarbonisation of the energy sector will require competitive renewable energy sources (RES). Consequently, the focus of renewables support should shift from a deployment target that encourages the quick roll-out of the cheapest currently renewable technology, to an ambitious innovation target that encourages investment to cut the cost of RES. If successful, an innovation target will be the largest possible contribution of Europe (and its partners) to saving the global climate, and might be instrumental in developing a competitive edge in what will become a major global market23. It is difficult to establish the optimal size, selection, balance and timing of 'push' and 'pull' measures â?? for example, public R&D support, or feed-in tariffs to create demand for a new technology. Zachmann et al (2014) indicate that both public support to boost innovation and the timing of instruments matters. It is not massive actual deployment24, but the prospect of deployment that is the carrot for industry to commercialise the technologies developed through publicly-supported R&D. A long-term deployment target â?? such as the 20 percent for 2020 â?? is helpful, not least because it incentivises innovation and investment in complementary technologies such as storage or networks. However, the deployment target should be broken down to technology-specific targets and developed as part of an innovation policy that optimally supports a broad portfolio of technologies at different stages of maturity. A revised Strategic Energy Technology Plan25 could form the basis for defining measures and allocating support to technologies. The current and envisaged renewables policies are not focused on innovation. Europe currently spends on relevant R&D about a hundredth of what it spends on renewables deployment (Figure 3)26. It does not integrate its deployment and R&D policies into a strategic innovation policy and does not coordinate its deployment policies across borders. Energy efficiency The key tool to ensure efficient energy usage is confronting all users with market-based price signals. Wasteful usage does not only refer to using more energy to produce a certain good, but also artificially maintaining a specialisation in energy-intensive goods. As Europe should not strive to subsidise labour costs to make the European textile industry competitive with Asia, Europe should not subsidise energy costs to make European aluminium production competitive with the US, especially as defending energy-intensive sectors at all cost locks in high energy consumption and implies that Europe needs to draw on more expensive supplies for all other sectors. Beyond the issue of prices, the question is if energy efficiency needs to be regulated and if this should be done at European level. The need for regulation is often deduced from the finding that even efficiency measures with positive net present values are not delivered by the market27. As energy efficiency is an issue in virtually all sectors, there is a myriad of existing and proposed measures. So, energy efficiency policies can be welfare enhancing, but their efficiency depends on their design. The same holds for the question of subsidiarity. The obvious argument for a European energy efficiency policy is its interdependence with the single market. National product energy-efficiency standards, national energy-efficiency schemes for energy companies or even distorting energy taxes could weigh on the single marketâ??s integrity. On the other hand, national regulatory environments and structures for important energy consuming sectors (eg buildings) differ markedly. This might make a one-size-fits-all European energy efficiency policy very inefficient in these fields. So the somewhat generic conclusion on energy efficiency is that individual market failures should be addressed by the most efficient measures at the right level of government. For the broad portfolio of regional, national and European policies that is necessary, a binding EU 2030 energy consumption target is not well suited. It neither addresses who has to deliver nor does it properly take economic developments into account. To benchmark energy-efficiency policies we would suggest a bottom-up approach. Based on the ex-post evaluation of each individual energy efficiency policy, the incentivised demand reduction and the corresponding policy cost should be reported. For example, the energy-efficiency loans in Germany in 2011 had an estimated cost of about â?¬1 billion and encouraged annual savings of 0.1 million tonnes of oil equivalent (Mtoe). Two targets would then serve to benchmark the success of the overall policy framework up to 2030: one for total incentivised energy savings (eg more than 400 Mtoe of induced energy savings between 2020 and 2030) and one for total energy efficiency policy cost (eg less than â?¬100 billion). This target might be broken down by member state (or even to sub-national level) and even made binding. Conclusion Policy and market failures in the energy sector are common. There is too little energy saving, too little investment in security and innovation and emissions are too high. Governments tend to over-invest in big supply projects and use energy-sector regulation for other national policy purposes, preferring to solve the issues of the day instead of addressing the structural problems. The European 2030 framework should strive to address the market failures without falling for the government failures. Essential elements will be well-designed European markets for emissions, electricity supply and gas security of supply. Better policy frameworks are also needed to encourage energy efficiency and innovation in low-carbon energy technologies. This would be a radical step-change in European energy and climate policy, but so were the 2020 targets. But in planning for 2030, Europe cannot avoid substantially revising the governance of its energy sector, without compromising on security of supply, sustainability and competitiveness. Research assistance from Marco Testoni is gratefully acknowledged. The author would also like to thank those who provided valuable comments on an earlier draft. The research underpinning this paper benefited from support from the Simpatic project (EU Seventh Framework Programme, grant agreement 290597, www.simpatic.eu). All notes and full references are available in the .pdf. |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polbrf:846&r=ene |
| By: | Aurelie Slechten; Vincenzo Verardi |
| Abstract: | This paper considers the effect of international air-pollution agreements ratified since 1970 on carbon dioxide emissions (CO2), the main cause of anthropogenic climate change. The analysis is based on a panel dataset of 150 countries over the period 1970-2008. While the literature generally focuses on one particular agreement, we analyze the effect of the accumulation of agreements using a two-way (country, year) fixed effects regression model. We find that the relationship between the number of ratifications and CO2 emissions is statistically significant and linearly decreasing. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:64981625&r=ene |
| By: | Michael Wyman |
| Abstract: | Ontario electricity consumers will benefit from less risk and lower prices if the province moves to a capacity market for obtaining generation, according to a report from the C.D. Howe Institute. In “Rethinking Ontario’s Electricity System with Consumers in Mind,” author Michael Wyman calls for the province of Ontario to adopt a capacity market, in which generators would receive payments for being available to produce energy, if needed, at some point in the future. |
| Keywords: | Economic Growth and Innovation, Electricity, Ontario |
| JEL: | L94 Q40 |
| URL: | http://d.repec.org/n?u=RePEc:cdh:ebrief:182&r=ene |
| By: | Steve Sorrell (Centre for Innovation and Energy Demand and Sussex Energy Group, SPRU - Science and Technology Policy Research, University of Sussex, UK) |
| Keywords: | rebound effects; elasticities of substitution; energy augmenting technical change |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:sru:ssewps:2014-16&r=ene |
| By: | Aurelie Slechten; Vincenzo Verardi |
| Abstract: | Many countries are part of multiple international air-pollution agreements that interact with each other given that a single source of emissions is typically composed of several pollutants. This paper studies the effect on carbon dioxide emissions of the various agreements that follow the Long-Range Transboundary Air-Pollution (LRTAP) Convention and that are related to acid rain problems. The analysis is based on a panel dataset of 150 countries over the period 1970 - 2008. We show that ratifying each additional treaty has a significant and negative impact on the level of CO2 emissions, even if they are not specifically targeted toward carbon emissions. Our findings can be explained by (1) the more local nature of pollutants covered (2) the relative ease to implement LRTAP treaties. To deal with an eventual reverse causality problem, we instrument the decision to ratify treaties by the status of the death penalty in each country. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:64981588&r=ene |
| By: | Stefan Ederer (WIFO); Stefan Weingärtner (WIFO) |
| 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 |
| Date: | 2014–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2014:i:478&r=ene |
| By: | Robert C. Schmidt; Roland Strausz; Melanie; |
| Abstract: | A central issue in climate policy is the question whether long-term targets for green- house gas emissions should be adopted. This paper analyzes strategic effects related to the timing of such commitments. Using a two-country model, we identify a redistributive effect that undermines long-term cooperation when countries are asymmetric and side payments are unavailable. The effect enables countries to shift rents strategically via their R&D efforts under delayed cooperation. In contrast, a complementarity effect stabi- lizes long-term cooperation, because early commitments in abatement induce countries to invest more in low-carbon technologies, and create additional knowledge spillovers. Con- trasting both effects, we endogenize the timing of climate agreements. |
| Keywords: | climate treaty, abatement, long-term cooperation, spillover, strategic delay |
| JEL: | D62 F53 H23 Q55 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2014-044&r=ene |
| By: | Wim BENOOT; Stef PROOST |
| Abstract: | The paper analyses the strategic environmental policy choices of governments for the car market. We consider two countries that each have a small number of car producers who sell cars at home and abroad, there are cross border pollution externalities and cross border R&D externalities. Each government can set a fuel tax and a fuel emission standard but tariffs are not allowed. We show that the symmetric cooperative equilibrium will have a fuel tax lower than global environmental damage and the fuel standard may not be needed as instrument. The symmetric non-cooperative fuel tax equals the local environmental damage. Non-cooperative governments always prefer to use a fuel tax rather than a fuel efficiency standard as the fuel tax allows to tax foreign profits. When car manufacturing is concentrated in only one country, the car importing country will opt for a higher fuel tax. The role of the fuel efficiency standard is enhanced when there is only a small number of producers, when there is a higher spill over rate and when crude oil prices are lower. The results are illustrated with a simple numerical model for the car market. |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces14.23&r=ene |
| By: | Longhi, Simonetta |
| Abstract: | We use a panel of UK households to analyse the impact that various individual, household and dwelling characteristics have on energy expenditures and whether changes in household socio-economic circumstances translate in changes in energy expenditures. Socio-economic characteristics have a moderate impact on per-capita energy expenditures, while dwelling characteristics and especially household size have much larger impacts in magnitude. Similarly, the largest changes in energy expenditures are related to changes in household size rather than to changes in other socio-economic and dwelling characteristics. The recent socio-demographic trends will make it harder to design policies to effectively reduce the carbon footprint of a country, while policies influencing cohabitation and family size may have positive indirect effects. |
| Date: | 2014–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2014-22&r=ene |
| By: | Thomas Eichner; Rüdiger Pethig |
| Abstract: | This paper studies within a multi-country model with international trade the stability of international environmental agreements (IEAs) when countries regulate carbon emissions either by taxes or caps. Regardless of whether coalitions play Nash or are Stackelberg leaders the principal message is that the choice of caps or taxes matters. International trade and tax regulation are necessary conditions for the existence of the encompassing self-enforcing IEA, and that the latter is attained the more likely, the less severe the climate damage. Hence, cap regulation is inferior to tax regulation insofar as in case of the former there exist no large and effective self-enforcing IEAs, in particular not the encompassing self-enforcing IEA. Further results are that for the formation of encompassing self-enforcing IEAs it does not matter whether climate coalitions play Nash or are Stackelberg leaders or whether fossil fuel is modeled as a consumer good or an intermediate good. |
| Keywords: | cap, tax, international trade, self-enforcing environmental agreements, Nash, Stackelberg |
| JEL: | C72 F02 Q50 Q58 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:sie:siegen:165-14&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: | Kilian, Lutz (University of Michigan CEPR); Vigfusson, Robert J. (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide a formal analysis of this question with special attention to the possible role of net oil price increases in amplifying the transmission of oil price shocks. We quantify the conditional recessionary effect of oil price shocks in the net oil price increase model for all episodes of net oil price increases since the mid-1970s. Compared to the linear model, the cumulative effect of oil price shocks over the course of the next two years is much larger in the net oil price increase model. For example, oil price shocks explain a 3 percent cumulative reduction in U.S. real GDP in the late 1970s and early 1980s and a 5 percent cumulative reduction during the financial crisis. An obvious concern is that some of these estimates are an artifact of net oil price increases being correlated with other variables that explain recessions. We show that the explanatory power of oil price shocks largely persists even after augmenting the nonlinear model with a measure of credit supply conditions, of the monetary policy stance and of consumer confidence. There is evidence, however, that the conditional fit of the net oil price increase model is worse on average than the fit of the corresponding linear model, suggesting much smaller cumulative effects of oil price shocks for these episodes of at most 1 percent. |
| Keywords: | Real GDP; nonlinearity; asymmetry; time variation; conditional response; prediction. |
| JEL: | E32 E37 E51 Q43 |
| Date: | 2014–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1114&r=ene |
| By: | David P. Byrne; Andrea La Nauze; Leslie A.Martin |
| Abstract: | Information programs that leverage peer comparisons are used to encourage pro-social behavior in many contexts. We document how imperfect information generates heterogenous responses to treatments involving personalized feedback and peer comparisons. In our field experiment in retail electricity, we find that most households either overestimate or underestimate their relative energy consumption pre-treatment. Households that overestimated respond to new information by temporarily increasing electricity consumption, whereas households that underestimated take steps that lead to long term energy conservation. We explore the implications of these results for the external validity and design of information programs. |
| JEL: | C93 D12 D84 L94 Q41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1180&r=ene |
| By: | Kapil Narula (Indira Gandhi Institute of Development Research); B. Sudhakara Reddy (Indira Gandhi Institute of Development Research) |
| Abstract: | An 'Energy Index', which is aggregated from energy indicators is a rich source of information and is helpful in providing an assessment of a country's performance. This has, however, resulted in mushrooming of a plethora of indices, which claim to quantify the performance of a country in attaining the goal of energy security and energy sustainability. The paper attempts to compare three different indices, viz., 'Energy Sustainability Index', 'International Index of Energy Security Risk', 'Energy Architecture Performance Index' and their variants to establish whether they provide consistent rankings for various countries. A comparative assessment reveals that different indices provide different country rankings, which are inconsistent, especially for countries which perform poorly. Further, the impact of minor methodological change in the composition of the index is different on different countries. Based on the analysis, it can be concluded that countries which consistently rank in the top of the list of different indices have robust energy systems as they are insensitive to differences in construction of the index. However, the scores of countries which show poor performance vary widely and therefore their ranking is unreliable. This situation is akin to blind men groping the elephant with each one measuring a different part of the body (considering its huge size) and asserting their assessment of the animal's size only to be true. Therefore, while one's subjective experience may be true it may not be the totality of the truth. Similarly, although the ranking from each of the variants of the indices may be correct, they only present a part of the picture and not the whole picture of a country's energy security and sustainability. Hence, while various energy indices give relevant information, much more needs to be done, to examine energy security and sustainability with other relevant tools. |
| Keywords: | Energy Security, Energy Sustainability, Indicators, Energy Index |
| JEL: | P28 Q41 Q42 Q48 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2014-024&r=ene |
| By: | Carey, J.M.; Knapp, S.; Irving, P. |
| Abstract: | __Abstract__ Existing methodologies to assess risk due to vessel traffic often do not account for damages to marine assets in case of oil or chemical spills from ships. While some socio-economic damages can be quantified in monetary terms, expert knowledge is often the only way to assess potential damages to the marine ecology. The use of expert knowledge introduces a source of uncertainty. We propose a method which minimizes recognized flaws in subjective assessments by eliciting sensitivity ratings from multiple assessors and recognizing their differences of opinion as a source of uncertainty. We also explore various scoring options to reflect overall expert opinions. We develop and apply the methodology to the Victorian coastline in Australia and believe that improved assessment can assist policy makers of any maritime nation to make better informed decisions. |
| Keywords: | expert knowledge, environmental sensitivities, oil pollution, uncertainty, Kendall’s coefficient of concordance |
| JEL: | C10 |
| Date: | 2014–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:ems:eureir:51749&r=ene |
| By: | NU. CEPAL. Subsede de México |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col094:27184&r=ene |
| By: | NU. CEPAL. Subsede de México |
| Date: | 2013–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col031:4927&r=ene |
| By: | Cheng, Fang-Ting |
| Abstract: | As can been seen from the U.S.'s non-ratification of the Kyoto Protocol, together with the negotiations toward the post-Kyoto Protocol framework, the U.S. and China have been quarrelling over their responsibilities and have contradicted one another over the introduction of compulsory domestic greenhouse gases emission reduction targets. Therefore, for a long time, it has been argued that the controversy between the two countries has hindered the process of forging an international agreement to deal with climate change. On the other hand, Sino-U.S. bilateral cooperation on climate change has significantly increased in recent years in summit talks and their Strategic & Economic Dialogue (S&ED), especially after the 15th Conference of Parties (COP) of the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen, one of whose aims was to facilitate positive negotiations for the post-Kyoto Protocol agreement. Analyzing this in the light of recent developments, we find that the U.S. and China have tended to address climate change and related issues from a pluralistic viewpoint and approach, by regarding the achievement of bilateral cooperation and global agreements as their common strategic objective. |
| Keywords: | China, United States, Climatic change, Foreign relations, Environmental problems, Climate change, Mitigation, Adaptation, Copenhagen Accord, Cancun Agreement, UNFCCC, Sino-U.S. relationship, U.S.-China Strategic & Economic Dialogue (S&ED) |
| JEL: | K32 O13 O19 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper476&r=ene |
| By: | Timothy Swanson (Centre for International Environmental Studies, IHEID, The Graduate Institute of International and Development Studies, Geneva); Chiara Ravetti; Yana Popp Jin; Mu Quan; Zhang Shiqiu |
| Abstract: | This paper looks at the problem of information control behind the unsustainable levels of air pollution in China. In particular, it focuses on a large urban area, Beijing, and it examines the role of the public, government-controlled information and the adaptation choices of households in response to signals about high pollution. Our analysis is based on a simple theoretical framework in which people migrate from rural areas to polluted cities, receiving a signal from the government about urban pollution; hence, they decide whether to adapt to pollution or not. We find that the government has no incentive to ensure sustainable air quality, as it can distort pollution information in order to attract cheap labour. We then analyse empirically two different air pollution indexes from different sources and agents’ behaviour in an original household survey collected in Beijing. We find that the official air pollution values are systematically distorted, creating perverse incentives for households to react to bad air quality, especially for people who rely on government-controlled sources of information. |
| Keywords: | Air Pollution; Government; Information; Averting Behaviour; Sustainability. |
| JEL: | Q53 Q56 Q58 |
| Date: | 2014–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:gii:ciesrp:cies_rp_27&r=ene |
| By: | Gunther Bensch; Michael Grimm; Jörg Peters |
| Abstract: | Around 3 billion people in developing countries rely on woodfuels for their daily cooking needs with profound negative implications for their workload, health, and budget as well as the environment. Improved cookstove (ICS) technologies in many cases appear to be an obvious solution. Despite continuous efforts of the international community to disseminate ICS, take up rates in most developing countries are strikingly low. In this paper, we examine the reasons for (non-)adoption of a very simple ICS in urban Burkina Faso. As a first result, we find that ICS users save between 20 and 30 percent of fuels compared to traditional stoves making the investment a very profitable one. Nonetheless, adoption rates are low at a mere 10 percent. It turns out that the major deterrent of adoption are the upfront investment costs – which are much more important than access to information, taste preferences, or the woman’s role in the household. These findings suggest that more direct promotion strategies such as subsidies would help the household to overcome its liquidity constraints and hence improve adoption rates. |
| Keywords: | Household technology adoption; liquidity constraints; weak beliefs; norms and traditions; energy access; Sub-Saharan Africa |
| JEL: | D01 D12 D80 O33 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0498&r=ene |
| By: | Raju Jan Singh; Cristina Bodea; Masaaki Higashijima |
| Keywords: | Peace and Peacekeeping Social Development - Social Conflict and Violence Social Development - Post Conflict Reintegration Health, Nutrition and Population - Population Policies Conflict and Development - Post Conflict Reconstruction |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:20101&r=ene |
| By: | Mori, Takahito |
| Abstract: | It has been generally assumed in the study of German urban history that the municipal electric services were brought to an end by the growth of regional power networks during the Weimar period. However, municipal electric services were not completely replaced by regional power systems. So, this paper examines, on the basis of a case study of Frankfurt am Main, how the municipal electric services were able to sustain themselves as an autonomous system against the expanding influence of regional power networks based on private capital during the Weimar period. Frankfurt tried not only to enlarge its power stations but also to utilize the waterpower and brown coal obtained nearby the city, with a view to defending its autonomy against the Rheinisch-Westfälisches Elektrizitätswerk AG. These attempts enabled Frankfurt to preserve its autonomous electric services until the second half of the 20th century, though it owed a lot to the assistance from Preussenelektra, the national electric power company of Prussia. |
| Keywords: | "Electric War", "Electric Peace", Frankfurt am Main, Preußenelektra, RWE |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:hit:econdp:2014-12&r=ene |
| By: | L. Lambertini; A. Palestini; A. Tampieri |
| Abstract: | We investigate a linear state dfferential game describing an asymmetric Cournot duopoly with capacity accumulation à la Ramsey and a negative environmental externality (pollution), in which one of the firms has adopted corporate social responsibility (CSR) in its statute, and therefore includes consumer surplus and the environmental effects of production in its objective function. If the market is sufficiently large, the CSR firm sells more, accumulates more capital and earns higher profits than its profit-seeking rival. |
| JEL: | C73 H23 L13 O31 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp959&r=ene |
| By: | Leschinski, Christian; Sibbertsen, Philipp |
| Abstract: | We propose an automatic model order selection procedure for k-factor GARMA processes. The procedure is based on sequential tests of the maximum of the periodogram and semiparametric estimators of the model parameters. As a byproduct, we introduce a generalized version of Walker's large sample g-test that allows to test for persistent periodicity in stationary ARMA processes. Our simulation studies show that the procedure performs well in identifying the correct model order under various circumstances. An application to Californian electricity load data illustrates its value in empirical analyses and allows new insights into the periodicity of this process that has been subject of several forecasting exercises. |
| Keywords: | seasonal long memory, k-factor GARMA, model selection, electricity loads |
| JEL: | C22 C52 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-535&r=ene |
| By: | François Bafoil (Centre d'études et de recherches internationales); Laurent Baechler (Institut Européen des Hautes Etudes Internationales, Nice) |
| Abstract: | Dans l’UE, l’accent est mis sur deux stratégies. Sur le plan interne la priorité est double : transition énergétique pour diversifier le bouquet énergétique des Etats membres trop souvent dépendants de quelques sources clés ; intensification des infrastructures de réseaux afin d’optimiser l’utilisation des différentes sources d’énergie et d’augmenter les capacités de coopération pour ne laisser aucun pays trop fortement dépendant d’approvisionnements extérieurs à l’Union. Vers l’extérieur, la stratégie européenne consiste d’une part à tenter d’exporter son « modèle énergétique » par la voie de traités internationaux incitant les signataires à incorporer les règles du marché intérieur énergétique, d’autre part à multiplier les projets de partenariats d’approvisionnement pour réduire le risque géopolitique de la dépendance à l’égard de certaines sources... |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/1ijo3b4sp3821q0lfekpj3852i&r=ene |
| By: | Blum, Matthias; McLaughlin, Eoin; Hanley, Nick |
| Abstract: | Genuine Savings (GS), also known as ‘net adjusted savings’, is a composite indicator of the sustainability of economic development. Genuine Savings reflects year-on-year changes in the total wealth or capital of a country, including net investment in produced capita, investment in human capital, depletion of natural resources, and damage caused by pollution. A negative Genuine Savings rate suggests that the stock of national wealth is declining and that future utility must be less than current utility, indicating that economic development is non-sustainable (Hamilton and Clemens, 1999). We make use of data over a 150 year period to examine the relationship between Genuine Savings and a number of indicators of well-being over time, and compare the relative changes in human, produced, and components of natural capital over the period. Overall, we find that the magnitude of genuine savings is positively related to changes in future consumption, with some evidence of a cointegrating relationship. However, the relationships between genuine savings and infant mortality or average heights are less clear. |
| Keywords: | Sustainability, economic development, Net adjusted savings, Genuine Savings, well-being, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:573&r=ene |