nep-ene New Economics Papers
on Energy Economics
Issue of 2014‒10‒22
29 papers chosen by
Roger Fouquet
London School of Economics

  1. A Spatial Approach to Energy Economics: Theory, Measurement and Empirics By M. Scott Taylor; Moreno
  2. Energy Prices, Energy Poverty, and Well-Being: Evidence for European Countries By Heinz Welsch; Philipp Biermann
  3. Tracking Progress Toward Sustainable Energy for All in the Middle East and North Africa By Elisa Portale; Joeri de Wit
  4. Tracking Progress Toward Sustainable Energy for All in South Asia By Elisa Portale; Joeri de Wit
  5. Tracking Progress Toward Providing Sustainable Energy for All in Eastern Europe and Central Asia By Elisa Portale; Joeri de Wit
  6. Doubling the Rate of Improvement of Energy Efficiency By Jonathan Sinton; Ashok Sarkar; Ivan Jaques; Irina Bushueva
  7. The use of “Bonus-Malus†schemes for promoting energy-efficient household appliances: a case study for Spain By Ibon Galarraga; Luis M. Abadie
  8. CO2 emissions, output, energy consumption, and trade in Tunisia By Sahbi Farhani; Anissa Chaibi; Christophe Rault
  9. The effects of energy costs on firm re-location decisions By Lucia Lavric; Nick Hanley
  10. Are Fluctuations in Natural Gas Consumption Per Capita Transitory? Evidence from Time Series and Panel Unit Root Tests By Muhammad Shahbaz; Naceur Khraief; Mantu Kumar Mahalik; Khair Uz Zaman
  11. Dependence and extreme dependence of crude oil and natural gas prices with applications to risk management By Riadh Aloui; Mohamed Safouane Ben Aïssa; Shawkat Hammoudeh; Duc Khuong Nguyen
  12. Linkages between Deforestation, Energy and Growth for Environmental degradation in Pakistan By Khalid Ahmed; Muhammad Shahbaz; Ahmer Qasim Qazi; Wei long
  13. Evaluating the performance of VaR models in energy markets By Sasa Zikovic; Rafal Weron; Ivana Tomas Zikovic
  14. The fiscal incentive of GHG cap and trade. Permits may be too cheap and developed countries may abate too little By Jørgen Juel Andersen; Mads Greaker
  15. The Market Stability Reserve in Perspective By Marcu, Andrei
  16. Does U.S. Monetary Policy Affect Crude Oil Future Price Volatility? An Empirical Investigation By Alessandra Amendola; Vincenzo Candila; Antonio Scognamillo
  17. Eco-construction : les nouveaux matériaux pour économiser l’énergie ECO-BUILDING THE NEW MATERIALS TO SAVE ENERGY By Rachel ZANNAKIS
  19. The Netherlands: The representativeness of trade unions and employer associations in the electricity sector By Marianne Grunell
  20. Back to the Future of Green Powered Economies By M. Scott Taylor; Juan Moreno Cruz
  21. Green Consumers, Greenwashing and the Misperception of Environmental Quality By Luca Lambertini; Giuseppe Pignataro; Alessandro Tampieri
  22. Gone with the wind By Steve Gibbons
  23. Volatility Modelling of CO2 Emission Allowance Spot Prices with Regime-Switching GARCH Models By Thijs Benschopa; Brenda López Cabrera; ;
  24. Refinancing under Yardstick Regulation with Investment Cycles–The Case of Long-Lived Electricity Network Assets By Dominik Schober
  25. Local Impacts of Wind Farms on Property Values: A Spatial Difference-in-Differences Analysis By Sunak, Yasin; Madlener, Reinhard
  26. Unbalanced Fractional Cointegration and the No-Arbitrage Condition on Commodity Markets By Gilles de Truchis; Florent Dubois
  27. Cross-border Spillovers from European Gas Infrastructure Investments By Bouwmeester, M.C.; Scholtens, B.
  28. The Kindergarten Rule of Sustainable Growth By M. Scott Taylor; William A. Brock
  29. Support mechanisms for renewables: How risk exposure influences investment incentives By Lena Kitzing; Christoph Weber

  1. By: M. Scott Taylor (University of Calgary); Moreno
    Abstract: This paper sets out a simple spatial model of energy exploitation to ask how the location and productivity of energy resources may affect the distribution of economic activity around the globe. This is a very large research question, and we take one small step towards answering it by combining elements from resource and energy economics into one framework that links the spatial productivity of energy sources (both renewable and non-renewable) to the incentives for economic activity to concentrate. Our theory provides a novel scaling law; a magnification effect; and reveals a complementarity between infrastructure investment and spatially productive energy resources. Our empirical work provides estimates of key model attributes and reviews related empirical work supporting our approach.
    Date: 2014–09–29
  2. By: Heinz Welsch (University of Oldenburg, Department of Economics); Philipp Biermann (University of Oldenburg, Department of Economics)
    Abstract: This paper uses data on the life satisfaction of more than 100,000 individuals in 21 European countries, 2002-2011, to study the relationship between subjective well-being and the prices for households of electricity, oil and gas. We find that energy prices have statistically and economically significant effects on subjective well-being. The effect sizes are smaller than but comparable to the effects of important personal factors of well-being. Effects above average are found in individuals from the lowest income quartile. In addition, effects are strongest at times when required energy expenditures can be expected to be high. The empirical results are consistent with the prediction that greater energy poverty implies a greater effect of energy prices on well-being.
    Keywords: energy price; energy poverty; fuel poverty, consumer welfare; subjective well-being
    JEL: Q41 I31 D12
    Date: 2014–09
  3. By: Elisa Portale; Joeri de Wit
    Keywords: Environment - Climate Change Mitigation and Green House Gases Energy - Energy Demand Energy - Energy Production and Transportation Environment - Environment and Energy Efficiency Energy - Energy and Environment
    Date: 2014–09
  4. By: Elisa Portale; Joeri de Wit
    Keywords: Energy - Energy Demand Energy - Energy and Environment Power and Energy Conversion Energy - Energy Production and Transportation Environment - Environment and Energy Efficiency
    Date: 2014–09
  5. By: Elisa Portale; Joeri de Wit
    Keywords: Energy - Energy Demand Energy - Energy and Environment Power and Energy Conversion Energy - Energy Production and Transportation Environment - Environment and Energy Efficiency
    Date: 2014–09
  6. By: Jonathan Sinton; Ashok Sarkar; Ivan Jaques; Irina Bushueva
    Keywords: Environment - Climate Change Mitigation and Green House Gases Energy - Energy Demand Energy - Energy Production and Transportation Environment - Environment and Energy Efficiency Energy - Energy and Environment
    Date: 2014–09
  7. By: Ibon Galarraga; Luis M. Abadie
    Abstract: Subsidies to promote the purchase of energy-efficient household appliances have been extensively used in many countries. This paper deals with the case of the Spanish rebate scheme, and proposes the use of both subsidies and taxes as a more effective way of promoting efficient appliances. The authors propose a sophisticated methodology for designing optimal combinations of taxes and subsides depending on different policy goals such as budget neutrality, increasing the proportion of efficient appliances, etc.
    Keywords: energy efficiency, Spain, rebates, appliances, rebound effect.
    Date: 2014–09
  8. By: Sahbi Farhani; Anissa Chaibi; Christophe Rault
    Abstract: This article contributes to the literature by investigating the dynamic relationship between carbone dioxide (CO2) emissions, output (GDP), energy consumption, and trade using the bounds testing approach to cointegration and the ARDL methodology for Tunisia over the period 1971-2008. The empirical results reveal the existence of two causal long-run relationships between the variables. In the short-run, there are three unidirectional Granger causality relationships, which run from GDP, squared GDP and energy consumption to CO2 emissions. To check the stability in the parameter of the selected model, CUSUM and CUSUMSQ were used. The results also provide important policy implications.
    Keywords: CO2 emissions, Energy consumption, ARDL bounds testing approach
    JEL: Q56 Q43 C51
    Date: 2014–09–25
  9. By: Lucia Lavric (Department of Economics, Duke University); Nick Hanley (School of Geography and Sustainable Development, University of St. Andrews)
    Abstract: Energy costs are partly driven by environmental policy choices. In this paper, the effects of variations in energy costs – as measured by end-user electricity prices – on firm relocation decisions are investigated. Using a discrete choice model a nd a data base which has not previously been exploited to study this problem, we investigate the effects of variations in energy costs both for a sub-set of re-locating European firms in terms of which country they move to; and then for a larger set of firms in terms of the decision to re-locate or not in response to higher energy prices. We find that energy costs play a significant role in determining relocation destinations, and that this effect is asymmetric between firms moving into and out of a country , and between high energy intensity and low energy intensity sectors. The findings of the paper have implications for the Pollution Havens Hypothesis, since they show the extent to which the effects of climate policy on domestic energy costs can be expected to impact on firm relocation decisions both into and out of a country.
    Keywords: firm re-location, energy costs, Pollution Havens Hypothesis, climate policy, carbonleakage
    JEL: D22 F18 Q41 Q52
    Date: 2014–08
  10. By: Muhammad Shahbaz; Naceur Khraief; Mantu Kumar Mahalik; Khair Uz Zaman
    Abstract: The stationary properties of natural gas consumption are essential for predicting the impacts of exogenous shocks on energy demand, which can help modeling the energy-growth nexus. Then, this paper proposes to investigate the panel unit root proprieties of natural gas energy consumption of 48 countries over the period of 1971- 2010. We apply the Harvey et al. (2008) linearity test in order to determine the type of the unit root tests (the Kruse (2010) nonlinear unit root or LM linear unit root tests). Our results show that the stationarity of natural gas consumption cannot be rejected for more than 60% of countries. In order to provide corroborating evidence, we employed not only the first and second generation panel unit root tests, but also the recent Lagrange Multiplier (LM) panel unit root test developed by Im, Lee and Tieslau (2005). This test allows for structural breaks both in intercept and slope. The empirical findings support evidence in favor of stationarity of natural gas consumption for all panels. These results announce that any shock to natural gas consumption has a transitory impact for almost all countries implying that energy consumption will turn back to its time trend.
    JEL: C22 Q40
    Date: 2014–09–25
  11. By: Riadh Aloui; Mohamed Safouane Ben Aïssa; Shawkat Hammoudeh; Duc Khuong Nguyen
    Abstract: In this article, we show how the copula-GARCH approach can be appro- priately used to investigate the conditional dependence structure between the crude oil and natural gas markets as well as to derive implications for port- folio risk management in extreme economic conditions. Using daily price data from January 1997 to October 2011, our in-sample results show evi- dence of asymmetric dependence between the two markets. The crude oil and gas markets tend to co-move closely together during bullish periods, but not at all during bearish periods. Moreover, taking the extreme comovement into account leads to an improvement in the accuracy of the out-of-sample Value-at-Risk forecasts.
    Keywords: Copulas, extreme dependence measures, crude oil, natural gas, VaR.
    JEL: C51 C58 Q41 Q47
    Date: 2014–09–25
  12. By: Khalid Ahmed; Muhammad Shahbaz; Ahmer Qasim Qazi; Wei long
    Abstract: This study explores the validation of Environmental Kuznets Curve (EKC) hypothesis for Pakistan using time series yearly data 1980-2011. We have taken deforestation as the dependant variable for environmental degradation and four independent variables i.e. income, energy consumption, trade openness, and population to test the link between these underlying variables. We employed ARDL bound testing approach to cointegration and VECM-Granger causality test. The results confirmed cointegration among the variables both in short-run and long-run path. However, the diminishing negative impact of income on deforestation in long run path confirms the EKC hypothesis for deforestation in Pakistan. There is unidirectional causality from income and energy consumption to deforestation and the bidirectional causal effect is detected between income and energy consumption. Whereas, in long run income and trade openness granger causes energy consumption. The diagnostic test also supported the results and model found stable during sensitivity analysis. This study is uniquely designed with the number of significant tests that ensure reliability of results for policy use and contribute future research direction on environment-growth-energy nexus.
    Date: 2014–09–30
  13. By: Sasa Zikovic; Rafal Weron; Ivana Tomas Zikovic
    Abstract: In this paper we analyze the relative performance of 13 VaR models using daily returns of WTI, Brent, natural gas and heating oil one-month futures contracts. After obtaining VaR estimates we evaluate the statistical significance of the differences in performance of the analyzed VaR models. We employ the simulation-based methodology proposed by Zikovic and Filer (2013), which allows us to rank competing VaR models. Somewhat surprisingly, the obtained results indicate that for a large number of different VaR models there is no statistical difference in their performance, as measured by the Lopez size adjusted score. However, filtered historical simulation (FHS) and the semiparametric BRW model stand out as robust and consistent approaches that – in most cases – significantly outperform the remaining VaR models.
    Keywords: Energy markets; Risk management; Value at Risk; Multicriteria classification
    JEL: C14 C22 C52 C53 G24
    Date: 2014–10–03
  14. By: Jørgen Juel Andersen; Mads Greaker (Statistics Norway)
    Abstract: The theoretical justification for a greenhouse gas (GHG) cap and trade system is that participants will trade emission permits until their marginal costs of abatement equal the equilibrium price of emission permits. Abatement is then globally cost efficient. We demonstrate, however, that when the "participants" are national governments this logic may no longer apply: when a national government struggles to raise its desired first-best amount of funds for the provision of public goods, the option of emission trading generates a fiscal incentive that is, generally, inconsistent with a cost effective distribution of abatement. In market equilibrium, global cost efficiency will fail even if just a (small) subset of the participating governments are fiscally constrained: since the fiscally constrained governments will engage in too much abatement, the equilibrium price of GHG emissions will be too low, fiscally unconstrained countries will abate too little, and global GHG abatement costs will not be minimized. Finally, we argue that any institutional change which breaks the direct connection between a national government's abatement policy and its budget is likely to increase welfare.
    Keywords: climate policy; cap and trade; public goods provision
    JEL: Q55 Q58
    Date: 2014–07
  15. By: Marcu, Andrei
    Abstract: This Special Report aims to contribute to the debate on the Market Stability Reserve (MSR), which was introduced by the European Commission in a legislative proposal of January 2014. The MSR would introduce a degree of supply management into the EU Emissions Trading System (ETS). This report is the result of various meetings with ETS-stakeholders throughout 2014. It discusses the MSR’s rationale and reviews the different options available for its design, governance and timing, as well as its consequences for the functioning of the EU ETS and the EU’s climate and energy policy.
    Date: 2014–09
  16. By: Alessandra Amendola; Vincenzo Candila; Antonio Scognamillo
    Abstract: Modeling crude oil volatility is of substantial interest for both energy researchers and policy makers. Many authors emphasize the link between this volatility and some exogenous economic variables. This paper aims to investigate the impact of the U.S. Federal Reserve monetary policy on crude oil future price (COFP) volatility. By means of the recently proposed generalized autoregressive conditional heteroskedasticity-mixed data sampling (GARCH-MIDAS) model, the Effective Federal Fund Rate (EFFR) - as a proxy of the monetary policy - is plugged into the mean-reverting unit GARCH(1,1) model. Strong evidence of an inverse relation between the EFFR and COFP volatility is found. This means that an expansionary monetary policy is associated with an increase of the COFP volatility. Conjecturing that the unusual behavior of the COFP in 2007-2008 was driven by a monetary policy shock, we test the presence of mildly explosive behavior in the prices. The sup Augmented Dickey-Fuller test (SADF) confirms the presence of a bubble in the COFP series that started in October 2007 and ended in October 2008. We expect that the COFP-EFFR association could be affected by such a bubble. Therefore, we apply the same experimental set-up to two sub-samples - before and after October 2007. Interestingly, the results show that EFFR influence on COFP volatility is greater in the aftermath of the bubble.
    Keywords: Volatility, GARCH-MIDAS, Bubbles, Futures, Crude Oil.
    JEL: C22 C58 E30 Q43
    Date: 2014
  17. By: Rachel ZANNAKIS (Master 2 Ingénierie Numérique et Signal Image et Informatique Industrielle, Université du Littoral Côte d’Opale, Calais)
    Abstract: Ce document étudie l'efficacité des nouveaux matériaux utilisés dans l’écoconstruction: sont-ils vraiment incontournables dans la réduction de l’utilisation de l’énergie? Mais quels sont et dans quel but ces matériaux ont-ils été créés ? L'auteur met l'accent sur leur intégration progressive dans la construction, puis une analyse est présentée sur les moyens d’économiser de l’énergie dans la construction, sur l'évolution de la demande en habitations éco-responsables et sur les impacts écologiques de ces nouveaux bâtiments. This paper examines the effectiveness of the new materials used in green building: are they really essential to reducing the use of energy? But what are and for what purpose were these materials created? The author emphasizes their progressive integration into the construction and an analysis is presented on how to save energy in the building sector, on the evolution of demand for eco-friendly homes and on the ecological impacts of these new buildings.
    Keywords: éco-contruction, nouveau matériaux, new material, eco-building
    JEL: Q55 Q56 L74
    Date: 2014–01
  18. By: Tochukwu Onyido (Birmingham University, UK)
    Abstract: This paper was written to explore the viability of supply chain localisation as a strategy for minimising possible adverse environmental and social impacts of large-scale economic activity surrounding the production of sustainable energy solutions. Supply chain localisation here refers to the situation of production activities close to the geographical areas in which the sustainable energy solutions would eventually be installed. Sustainable energy solutions here refer to goods, services, and technologies that minimize negative environmental effects of energy use in buildings throughout their construction and habitation. The paper dwells on the operations of the Sustainable Housing Action Partnership (SHAP), a major network of organisations that is focusing on preparing for the Green Deal – a UK-wide housing retrofit initiative – and the attendant increase in economic and industrial activities that it is expected to generate. As part of measures to ensure that these activities yield minimal negative environmental and social effects while optimising economic benefits, the SHAP programme recommended the localisation of the supply chain for the production, installation and maintenance of sustainable energy solutions. This paper explores the SHAP program and its different outputs before focusing particularly on the concept of supply chain localisation being advocated by SHAP. Based on the primary research conducted on the SHAP program as well as secondary research sources, the paper discusses the economic, social and environmental benefits and detriments of the supply chain localisation agenda. It also looks at the overall practicality of the implementation of supply chain localism within the context of mainstream business practices in the property, construction and energy sectors.
    Date: 2013–09
  19. By: Marianne Grunell (Amsterdams Instituut voor ArbeidsStudies/Arbeidsrecht, Universiteit van Amsterdam)
    Abstract: The electricity sector is of fundamental importance to Dutch society and the economy. In consequence of the introduction of the market mechanisms the production and distribution of electricity have been delegated to the market since 2006. The network infrastructure has remained under state control. So far, the decrease in the number of employees has turned out to be lower than anticipated. Additionally, the organisation of the social partners has remained unchanged and the density is relatively high. Two sectoral collective agreements- one for the network infrastructure, the other for production and distribution - cover the two segments of the sector. The three unions involved – FNV Abvakabo, CNV Publieke Zaak and VMHP-N of the CMHP are accepted parties in collective bargaining as is the employer organisation WENb.
    Date: 2014–04
  20. By: M. Scott Taylor (University of Calgary); Juan Moreno Cruz
    Date: 2014–09–29
  21. By: Luca Lambertini (Department of Economics, University of Bologna); Giuseppe Pignataro (La Trobe University, Victoria Australia); Alessandro Tampieri (CREA, Université de Luxembourg)
    Abstract: In this paper we analyse a setup where consumers are heterogeneous in the perception of environmental quality. The equilibrium is verified in a setting with horizontal and vertical (green) differentiation. Profits are increasing in the misper- ception of quality, while, the investment in green quality decreases the more the goods are substitutes. We further consider the introduction of either an emission tax or an environmental standard. The former rises the investment in environmen- tal quality due to the higher cost of production, whereas in equilibrium quality always improves after the introduction of the latter. We show that an optimal environmental standard is an effective regulatory instrument against greenwashing and that the efficacy of the interventions is conditioned to the damage distribution and the aggregate level of emission.
    Keywords: Green quality; Misperception; Pigouvian taxation; Environmental; Standard.
    JEL: L13 L51 Q50
    Date: 2014
  22. By: Steve Gibbons
    Abstract: Wind farms reduce house prices in postcodes where the turbines are visible, according to research by Steve Gibbons. Households are willing to pay £1,000 a year to avoid a large wind farm visible within 2km. His study notes that wind turbines are generally popular as a source of green energy but they face considerable opposition from the people who have to live near them. He uses local property markets as a way to value the visual impact of 'wind farms' and finds significant negative effects on house prices in postcodes where the turbines are visible.
    Keywords: Housing prices, environment, wind farms, infrastructure
    JEL: R Q
    Date: 2014–10
  23. By: Thijs Benschopa; Brenda López Cabrera; ;
    Abstract: I compare the performance of solution methods in solving a standard real business cycle model with labor market search frictions. Under the conventional calibration, the model is solved by the projection method using the Chebyshev polynomials as its basis, and the perturbation methods up to third order in both levels and logs. Evaluated by two accuracy tests, the projection approximation achieves the highest degree of accuracy, closely followed by the third order perturbation in levels. Although different in accuracy, all the approximated solutions produce simulated moments similar in value.
    Keywords: CO2 Emission Allowances, CO2 Emission Trading, Spot Price Modelling, Markov Switching GARCH Models, Volatility Forecasting
    JEL: C53 G17 Q49 Q53 Q59
    Date: 2014–09
  24. By: Dominik Schober (Chair for Management Science and Energy Economics University of Duisburg-Essen)
    Abstract: In the context of yardstick regulation with long-lived assets, the influence of investment cycles and thereof resulting heterogeneous capital structures on the ability to recover capital is quite important. Investment decisions are based on whole investment cycles of the infrastructure. It is shown in this article that variable lifetimes of assets may cause substantial problems of capital-recovery under an efficient firm standard yardstick regulation based on historic (straight-line) depreciation. Resulting heterogeneous investment and cost cycles may cause instantaneous yardstick levels below the long-run refinancing level. Recovery is neither possible in later periods because of the efficient firm standard. An illustrating empirical example is used to demonstrate the relevance of the problem. Finally, two alternatives, branch average cost yardstick determination and correction factors based on the share of capital under depreciation, are discussed.
    Keywords: Electricity markets, yardstick regulation, benchmarking, infrastructure investment, capital-recovery, sustainable refinancing
    JEL: L51 L52
    Date: 2013–06
  25. By: Sunak, Yasin (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: Today’s investment decisions in large-scale onshore wind projects in Germany are no longer determined only by the investment’s economic benefit, but also by concerns associated to social acceptance. Despite a mostly positive attitude towards the expansion of wind power, local public concerns often stem from the belief that the proximity to large-scale wind farms may lead to a decrease in property prices. In particular, the change in landscape caused by the construction of a wind farm may have an adverse impact on the view from some properties, and thus may negatively affect their price. To investigate the potential devaluation of properties in Germany due to wind farms, we use a quasi-experimental technique and apply a spatial difference-in-differences approach to various wind farm sites in the federal state of North Rhine-Westphalia. We adopt a quantitative visual impact assessment approach to account for the adverse environmental effects caused by the wind turbines. To properly account for spatial dependence and unobserved variables biases, we apply augmented spatial econometric models. The estimates indicate that the asking price for properties whose view was strongly affected by the construction of wind turbines decreased by about 10-17%. In contrast, properties with a minor or marginal view on the wind turbines experienced no devaluation.
    Keywords: Wind power; Difference-in-differences; Visual impact; Spatial dependence
    JEL: Q42 Q51 R31
    Date: 2014–02
  26. By: Gilles de Truchis (Aix-Marseille School of Economics, Aix-Marseille University); Florent Dubois (Aix-Marseille School of Economics, Aix-Marseille University)
    Abstract: A necessary condition for two time series to be nontrivially cointegrated is the equality of their respective integration orders. Nonetheless, in some cases, the apparent unbalance of integration orders of the observables can be misleading and the cointegration theory applies all the same. This situation refers to unbalanced cointegration in the sense that balanced long run relationship can be recovered by an appropriate filtering of one of the time series. In this paper, we suggest a local Whittle estimator of bivariate unbalanced fractional cointegration systems. Focusing on a degenerating band around the origin, it estimates jointly the unbalance parameter, the long run coefficient and the integration orders of the regressor and the cointegrating errors. Its consistency is demonstrated for the stationary regions of the parameter space and a finite sample analysis is conducted by means of Monte Carlo experiments. An application to the no-arbitrage condition between crude oil spot and futures prices is proposed to illustrate the empirical relevance of the developed estimator. Non-technical abstract:The no-arbitrage condition between spot and future prices implies an analogous condition on their underlying volatilities. Interestingly, the long memory behavior of the volatility series also involves a long-run relationship that allows to test for the no-arbitrage condition by means of cointegration techniques. Unfortunately, the persistent nature of the volatility can vary with the future maturity, thereby leading to unbalanced integration orders between spot and future volatility series. Nonetheless, if a balanced long-run relationship can be recovered by an appropriate filtering of one of the time series, the cointegration theory applies all the same and unbalanced cointegration operates between the raw series. In this paper, we introduce a new estimator of unbalanced fractional cointegration systems that allows to test for the no-arbitrage condition between the crude oil spot and futures volatilities.
    Keywords: unbalanced cointegration, Fractional cointegration, no-arbitrage condition, local Whittle likelihood, commodity markets
    JEL: C22 G10
  27. By: Bouwmeester, M.C.; Scholtens, B. (Groningen University)
    Abstract: We investigate international investment in natural gas infrastructure. In particular, we analyze cross-border cost spillovers related to the investment expenditure of five European countries in a multi-regional input-output model. Value added coefficients and employment coefficients are used to translate the impacts into employment compensation, capital compensation and employment hours required. We find that spillovers are generally larger for employment compensation compared to capital compensation, that the spillovers primarily flow to a limited set of countries, and that most employment hours are created for medium skilled-labor. Hence, we suggest that investment plans should not be assessed from a national perspective, but from an EU perspective.
    Date: 2014
  28. By: M. Scott Taylor (University of Calgary); William A. Brock
    Date: 2014–09–29
  29. By: Lena Kitzing; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: We analyse quantitatively how risk exposure from different support mechanisms, such as feed-in tariffs and premiums, can influence the investment incentives for private investors. We develop a net cash flow approach that takes systematic and unsystematic risks into account through cost of capital and the Capital Asset Pricing Model as well as through active liquidity management. Applying the model to a specific case, a German offshore wind park, we find that the support levels required to give adequate investment incentives are for a feed-in tariff scheme approximately 5-7% lower than for a feed-in premium scheme. The effect of differences in risk exposure from the support schemes is significant and cannot be neglected in policy making, especially when deciding between support instruments or when determining adequate support levels.
    Keywords: investment risk, support policies, unsystematic risk, liquidity management, offshore wind, feed-in tariffs
    Date: 2014–08

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