nep-ene New Economics Papers
on Energy Economics
Issue of 2014‒12‒29
forty-five papers chosen by
Roger Fouquet
London School of Economics

  1. Do Trade and Investment Flows Lead to Higher CO2 Emissions? Some Panel Estimation Results By Debashis Chakraborty; Sacchidananda Mukherjee
  2. Growth, Distributions, and the Environment. A Stock-Flow Consistent Framework for Policy Analysis By Asjad Naqvi
  3. The Development of Gas Hubs in Europe By Caterina Miriello; Michele Polo
  4. The Stringency of Environmental Regulations and Trade in Environmental Goods By Jehan Sauvage
  5. Combining International Cap-and-Trade with National Carbon Taxes By Peter Heindl; Peter J. Wood; Frank Jotzo
  6. Decision Making in Incomplete Markets with Ambiguity -- A Case Study of a Gas Field Acquisition By Lin Zhao; Sweder van Wijnbergen
  7. Environmental Legislation and International Trade: Theory, Policy and Indian experience By Chatterjee, Tonmoy
  8. Selective Reporting and the Social Cost of Carbon By Tomáš Havránek; Zuzana Iršová; Karel Janda; David Zilberman
  9. Fair allocation of disputed properties By JU, Biung-Ghi; MORENO-TERNERO, Juan; ,
  10. Capacity Payment Mechanisms and Investment Incentives in Restructured Electricity Markets By Brown, David
  11. Gas Storage valuation with regime switching By Nicole B\"auerle; Viola Riess
  12. Harnessing the Potential for Green Growth in Kuwait By Mohammed Al-Ahmad; Marwan Dimashki; Samia Al-Duaij; Tom Roundell
  13. La pobreza energética y sus implicaciones By Mikel González-Eguino
  14. Determinants of Commuter Trends and Implications for Indirect Rebound Effects: A Case Study of Germany’s Largest Federal State of NRW, 1994–2013 By Galvin, Raymond; Madlener, Reinhard
  15. A risk averse stochastic optimization model for power generation capacity expansion By Maria Teresa Vespucci; Marida Bertocchi; Laureano F. Escudero; Stefano Zigrino
  16. The long-term impact of matching and rebate subsidies when public goods are impure: Field experimental evidence from the carbon offsetting market By Kesternich, Martin; Löschel, Andreas; Römer, Daniel
  17. Time-Varying Causality between Oil and Commodity Prices in the Presence of Structural Breaks and Nonlinearity By Rangan Gupta; Gbeada Josiane Seu Epse Kean; Mpho Asnath Tsebe; Nthabiseng Tsoanamatsie; João Ricardo Sato
  18. Strategic Assessment of the Ethiopian Mineral Sector : Final Report By World Bank Group
  19. The impact of oil price on South African GDP growth: A Bayesian Markov Switching-VAR analysis By Mehmet Balcilar; Reneé van Eyden; Josine Uwilingiye; Rangan Gupta
  20. A Bilevel Programing Approach to Modeling of Power Transmission Capacity Planning By Paolo Pisciella; Marida Bertocchi; Maria Teresa Vespucci
  21. Nuclear Power Plants Shutdown and Alternative Power Plants Installation: A nine-region spatial equilibrium analysis of the electric power market in Japan By HOSOE Nobuhiro
  22. Is it all about CO2 emissions? The environmental effects of a tax reform for new vehicles in Norway By Ciccone, Alice
  23. Restructuring the Electricity Industry: Vertical Structure and the Risk of Rent Extraction By Buehler, Stefan; Boom, Anette
  24. What is the market potential of electric vehicles as commercial passenger cars? A case study from Germany By Gnann, Till; Plötz, Patrick; Funke, Simon; Wietschel, Martin
  25. Costs of power supply flexibility: the indirect impact of a Spanish policy change By Ronald Huisman; Elisa Trujillo-Baute
  26. Renewable Energy and Negative Externalities: The Effect of Wind Turbines on House Prices By Martijn Droes
  27. Off-grid Solar PV: Is it an affordable or an appropriate solution for rural electrification in sub-Saharan African countries? By Glenn P. Jenkins; Saule Baurzhan
  28. Myanmar: Electricityy in Myanmar: Negotiating Nation Building, A Path to Unity and Progress By David Dapice
  29. Emissions structure: a systemic analysis to Brazilian economy ? 2003 and 2009 By Fernando Perobelli; Vinicius Vale
  30. Are there Gains from Pooling Real-Time Oil Price Forecasts? By Baumeister, Christiane; Kilian, Lutz; Lee, Thomas K
  31. Dimming Hopes for Nuclear Power: Quantifying the Social Costs of Perceptions of Risks By Anni Huhtala; Piia Remes
  32. Climate Tipping and Economic Growth: Precautionary Saving and the Social Cost of Carbon By de Zeeuw, Aart J.; van der Ploeg, Frederick
  33. Estimating the cost of future global energy supply By Narbel, Patrick A.; Hansen, Jan Petter
  34. Optimum Growth and Carbon Policies with Lags in the Climate System By Lucas Bretschger; Christos Karydas
  35. Causal linkages between electricity consumption and GDP in Thailand: evidence from the bounds test By Jiranyakul, Komain
  36. What do we know about gasoline demand elasticities? By Carol A. Dahl
  37. Transitional Dynamics in an R&D-based Growth Model with Natural Resources. By Thanh Le; Cuong Le Van
  38. A stylized applied energy-economy model for France. By Henriet, F.; Maggiar, N.; Schubert, K.
  39. Climate Science and Climate Economics By Fisher, Anthony
  40. Transition to Clean Technology By Daron Acemoglu; Ufuk Akcigit; Douglas Hanley; William Kerr
  41. Shifting to a Green Economy: Lock-in, Path Dependence, and Policy Options By Kemp-Benedict, Eric
  43. Power System Transformation towards Renewables: An Evaluation of Regulatory Approaches for Network Expansion By Juan Rosellon; Jonas Egerer; Wolf-Peter Schill
  44. The Effect of Economic Growth and Oil Price Variations on CO2 Emissions: Evidence from Spain (1874-2011) By Jacint Balaguer; Manuel Cantavella-Jordá
  45. The Drivers of Long-run CO2 Emissions: A Global Perspective since 1800 By Sofia Teives Henriques; Karol J. Borowiecki

  1. By: Debashis Chakraborty (Indian Institute of Foreign Trade, Kolkata, India); Sacchidananda Mukherjee (National Institute of Public Finance and Policy, New Delhi, India)
    Abstract: Over the last decade cross-country trade and investment flows have increased considerably, which is often linked to climate change concerns. The present analysis attempts to understand the influence of trade and investment flows on CO2 emissions through panel data model estimation for a set of 181 countries over 1990-2009. The empirical findings confirm that both in case of lower and higher income countries, higher merchandise trade growth in general and service and merchandise export growth in particular leads to the higher CO2 emission growth in their territories. Both FDI inward and outward stock is found to be positively related to CO2 emission, reflecting a complementary relationship between the two. The empirical results indicate that the composition, scale and technology effects significantly influence the trade-climate change interrelationship.
    Keywords: environment and trade, foreign direct investment, climate change; democracy.
    JEL: F21 Q56
    Date: 2013–08
  2. By: Asjad Naqvi
    Abstract: The paper presents a benchmark multi-sectoral stock-flow consistent (SFC) macro model which addresses issues of production, energy, and emissions in a demand-driven framework. The model introduces three innovations in modeling the production side of the economy. First, the firms and the energy producers are vertically integrated interlinking output and prices across the two sectors. Second, energy supply is generated from two different sources; a non-renewable input dependent high-emissions energy and a renewable zero-emissions energy. Third, the monetary economy is integrated with the environment through two channels; a non-renewable input extracted for energy production and Greenhouse Gasses (GHGs) accumulated through the production process. Five policy experiments are conducted on a calibrated economy; a reduction in consumption, capital damage function, a higher share of renewable energy, carbon taxes, technological shock to capital and energy productivity. Results show that different policy channels can yield the same macro outcomes although through very different adjustment processes especially in unemployment, prices, and income distributions.
    Keywords: Stock-flow consistent, production, energy, emissions, distributions, employment
    JEL: E12 E17 E23 E24 Q52 Q56
    Date: 2014–11
  3. By: Caterina Miriello; Michele Polo
    Abstract: This paper investigates the development of wholesale markets for natural gas at the different stages of market liberalization. We identify three steps in the process: wholesale trade initially develops to cope with balancing needs when the shippers and suppliers segments become more fragmented; once the market becomes more liquid, it turns out to be a second source of gas procurement in alternative to long term contracts; finally, to manage price risk financial instruments are traded. We review in detail the different regulatory measures that must be introduced to create an efficient and functioning wholesale gas market. Finally, we analyze the evolution of gas hubs in the UK, the Netherlands, Germany and Italy in terms of market rules and market liquidity. We argue that each of these country cases can be easily located into the evolutionary path we have highlighted at the beginning, with the UK and the Netherlands leading the process, Germany and Italy constrained by limited supply; Italy is also showing an interesting counterfactual.
    Keywords: natural gas markets, gas balancing, market liquidity.
    JEL: Q48 L95
    Date: 2014
  4. By: Jehan Sauvage
    Abstract: This report assesses conceptually and empirically the extent to which the stringency of environmental regulations drives international trade in environmental goods. Many of the measures governments adopt to address issues such as local air and water pollution or GHG emissions take the form of regulations that aim to change the behaviour of firms or households. Compliance by private actors with those regulations in turn generates a growing market for environmental goods and services that is increasingly international in scope as more countries tighten their environmental regulations. Regulatory stringency thus spurs the development of a market for a whole range of equipment specifically meant for preventing and abating pollution, with important implications for international trade in such equipment. The different indicators of regulatory stringency considered in the present analysis generally support the notion that the stringency of environmental regulations positively affects countries’ specialisation in environmental products, even when considering specific sectors such as solid-waste management or wastewater treatment. While increased trade in environmental products is not an end in itself, the environmental benefits this entails can contribute to global improvements in environmental quality. By increasing demand for environmental products and technologies, environmental policy can complement trade policy in supporting pollution-reduction efforts not just domestically, but also abroad.
    Keywords: environment, trade, environmental goods, comparative advantage, environmental regulations, wastewater treatment, solid waste management
    JEL: F14 F18 Q53 Q56 Q58
    Date: 2014–12–05
  5. By: Peter Heindl (Centre for European Economic Research (ZEW)); Peter J. Wood (Crawford School of Public Policy, The Australian National University); Frank Jotzo (Crawford School of Public Policy, The Australian National University)
    Abstract: This paper examines the effects of combining an international cap-and-trade scheme with national carbon taxes. We consider a two-country stochastic partial equilibrium model with log-normally distributed uncertainty. The situation is analogous to the situation where European countries impose national carbon taxes in addition to the EU emissions trading. The allowance price in the joint cap-and-trade scheme depends on the tax rate, the relative size of countries and abatement options, the magnitude of uncertainty, and correlation of abatement costs. In most cases, the additional tax will not lead to additional production of the public good beyond the fixed targets. The additional tax results in higher costs of abatement to the country introducing the additional tax, and higher costs overall.
    Keywords: prices vs. quantities, linking, cap-and-trade, carbon tax, uncertainty, EU Emissions Trading Scheme
    JEL: Q53 H23 H41
    Date: 2014–11
  6. By: Lin Zhao (University of Amsterdam); Sweder van Wijnbergen (University of Amsterdam)
    Abstract: We apply utility indifference pricing to solve a contingent claim problem, valuing a connected pair of gas fields where the underlying process is not standard Geometric Brownian motion and the assumption of complete markets is not fulfilled. First, empirical data are often characterized by time-varying volatility and fat tails; therefore we use Gaussian GAS (Generalized AutoRegressive Score) and GARCH models, extending them to Student's t-GARCH and t-GAS. Second, an important risk (reservoir size) is not hedgeable. Thus markets are incomplete which also makes preference free pricing impossible and thus standard option pricing inapplicable. Therefore we parametrize the investor's risk preference and use utility indifference pricing techniques. We use Lease Square Monte Carlo simulations as a dimension reduction technique. Moreover, an investor often only has an approximate idea of the true probabilistic model underlying variables, making model ambiguity a relevant problem. We show empirically how model ambiguity affects project values, and importantly, how option values change as model ambiguity gets resolved in later phases of the projects considered. We show that traditional valuation approaches will consistently underestimate the value of project flexibility and in general lead to overly conservative investment decisions in the presence of time dependent stochastic structures.
    Keywords: real options; time varying volatility and fat tails; GAS models; model ambiguity; decision making in incomplete markets; utility indifference pricing
    JEL: C61 D81 G01 G31 G34 Q40
    Date: 2014–12–01
  7. By: Chatterjee, Tonmoy
    Abstract: This paper considers some contemporary environmental problems like carbon emission, deforestation etc, faced by mainly the developing nations of the world. In this context I have considered some facts and figures of Indian Tannery industry for realization of above mentioned issue. In this paper an attempt has been made to analyze theoretically, the effect of environmental pollution on the output of different sectors in a small open economy. Here, I have presented a theoretical model based on the general equilibrium framework, which mainly highlights on a paradoxical result. The paradox exists in the sense that, with strict environmental control, the formal sector subcontracts their production to the informal sector, thereby accentuating the total level of pollution faced by the society.
    Keywords: Dirty goods, Environmental pollution, Applied General equilibrium and Informal sector
    JEL: D58 Q53 Q58
    Date: 2014–12–11
  8. By: Tomáš Havránek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic; Czech National Bank); Zuzana Iršová (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic); Karel Janda (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic; University of Economics, Prague); David Zilberman (University of California, Berkeley)
    Abstract: We examine potential selective reporting in the literature on the social cost of carbon (SCC) by conducting a meta-analysis of 809 estimates of the SCC reported in 101 studies. Our results indicate that estimates for which the 95% confidence interval includes zero are less likely to be reported than estimates excluding negative values of the SCC, which creates an upward bias in the literature. The evidence for selective reporting is stronger for studies published in peer-reviewed journals than for unpublished papers. We show that the findings are not driven by the asymmetry of confidence intervals surrounding the SCC and are robust to controlling for various characteristics of study design and to alternative definitions of confidence intervals. Our estimates of the mean reported SCC corrected for the selective reporting bias are imprecise and range between 0 and 130 USD per ton of carbon in 2010 prices for emission year 2015.
    Keywords: social cost of carbon, climate policy, integrated assessment models, meta-analysis, selective reporting, publication bias
    JEL: C83 O12 O32 D24
    Date: 2014–09
  9. By: JU, Biung-Ghi (Seoul National University); MORENO-TERNERO, Juan (Universidad Pablo de Olavide, Spain; Université catholique de Louvain, CORE, Belgium); ,
    Abstract: We model problems of allocating disputed properties as generalized exchange economies in which agents have preferences and claims over multiple goods, and the social endowment of each good may not be sufficient to satisfy all individual claims. In this context, we investigate procedural and end-state principles of fairness, their implications and relations. To do so, we explore “procedural” allocation rules represented by a composition of a rights-assignment mechanism (to assign each profile of claims individual property rights over the endowment) and Walrasian, or other individually rational, exchange rule. Using variants of fairness based on no-envy as end-state principles, we provide axiomatic characterizations of the three focal egalitarian mechanisms, known in the literature on rationing problems as constrained equal awards, constrained equal losses, and proportional mechanisms. Our results are connected to focal contributions in political philosophy, and also provide rationale for market-based environ- mental policy instruments (such as cap-and-trade schemes and personal carbon trading) and moral foundation for the three proposals to allocate GHG emission rights known as the equal per capita sharing, the polluter pays principle and the equal burden sharing (the victims pay principle).
    Keywords: fairness, claims, no-envy, individual rationality, egalitarianism, efficiency, Walrasian exchange
    JEL: D63 D71
    Date: 2014–07–03
  10. By: Brown, David (University of Alberta, Department of Economics)
    Abstract: I analyze the ability of capacity payment mechanisms to alleviate underinvestment in electricity generation capacity. I derive the optimal capacity payment parameters under two capacity payment mechanisms, when capacity demand is price-elastic and when it is price-inelastic. Price-elastic capacity demand reduces the firms’ abilities to exercise market power, alleviates the bimodal capacity market pricing structure, and reduces the degree of market concentration.Further, at the optimal capacity demand parameters, expected welfare, consumer surplus, and aggregate capacity is higher under the price-elastic demand setting. However, a certain degree of underinvestment in generation capacity persists. These findings support the movement of regulatory policy towards a price-elastic capacity demand regime with market monitoring.
    Keywords: electricity; capacity markets; reliability; market power; regulation
    JEL: D44 L13 L50 L94 Q40
    Date: 2014–12–01
  11. By: Nicole B\"auerle; Viola Riess
    Abstract: In this paper we treat a gas storage valuation problem as a Markov Decision Process. As opposed to existing literature we model the gas price process as a regime-switching model. Such a model has shown to fit market data quite well in Chen and Forsyth (2010). Before we apply a numerical algorithm to solve the problem, we first identify the structure of the optimal injection and withdraw policy. This part extends results in Secomandi (2010). Knowing the structure reduces the complexity of the involved recursion in the algorithms by one variable. We explain the usage and implementation of two algorithms: A Multinomial-Tree Algorithm and a Least-Square Monte Carlo Algorithm. Both algorithms are shown to work for the regime-switching extension. In a numerical study we compare these two algorithms.
    Date: 2014–12
  12. By: Mohammed Al-Ahmad; Marwan Dimashki; Samia Al-Duaij; Tom Roundell
    Keywords: Macroeconomics and Economic Growth - Climate Change Economics Energy - Energy and Environment Water Resources - Water and Industry Energy - Energy Production and Transportation Environment - Environment and Energy Efficiency
    Date: 2013–09
  13. By: Mikel González-Eguino
    Abstract: El sector energético se enfrenta en las próximas décadas a tres grandes transformaciones relacionadas con el cambio climático, la seguridad de suministro y la pobreza energética. Las dos primeras han sido analizadas ampliamente. Sin embargo, la pobreza energética ha pasado más desapercibida a pesar de tener una gran influencia en la vida de millones de personas, especialmente en los países más pobres. <br /> Actualmente, 1.300 millones de personas (el 20% de la población mundial) no tienen acceso a la electricidad y 2.700 millones dependen del uso de la biomasa para cocinar. La pobreza energética tiene implicaciones importantes para la salud, la economía y el medio ambiente. Según la OMS, 1,3 millones de personas mueren al año por causas relacionadas con la contaminación interior asociada al uso de biomasa en cocinas inadecuadas. Aunque la pobreza energética no puede ser desligada del problema más amplio y complejo de la pobreza, el acceso a infraestructuras energéticas evitaría sus peores consecuencias y ayudaría a fomentar un desarrollo más autónomo. Según la IEA, el coste de universalizar el acceso a la energía para 2030 supondría una inversión anual de 35.000 millones de dólares; una cantidad muy inferior a las subvenciones otorgadas a las energías fósiles y equivalente al 2% de las tarifas eléctricas en los países de la OCDE.<br />
    Keywords: energy poverty; energy access; indoor air pollution; economic development. Pobreza energética; acceso a la energía; contaminación interior; desarrollo.
    Date: 2014–11
  14. By: Galvin, Raymond (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: Home-work commuting distances are increasing in Europe. Many studies see this as due to geographical mismatches between workplaces and homes, or worker skills and job locations, and often recommend policies to close geographical gaps between jobs and suitable workers. A different approach sees commuting as essential in a modern economy, as it facilitates information flow across complex economic networks in geographically dispersed regions. In this ‘city-network’ view, many workers make deliberate choices to commute and many employers encourage this. This paper explores these viewpoints in a case study of increasing commuting in Germany’s most populous state, North-Rhine-Westphalia, in 1994-2013, using Federal data on workers’ home and work locations. It finds an average annual increase in commuter numbers of 1.35%, from 43% to 55% of the workforce. Some of this increase can be explained by worker skills and job location mismatches, but steady increases in various commuting metrics lead to the suggestion that commuting is also something people choose to do. This supports the city-network hypothesis, and also implies a rebound effect of increased travel due to increased economy-wide energy efficiency. Qualitative and quantitative studies are needed to identify the actual reasons people commute, and to more accurately estimate rebound effects.
    Keywords: Commuting; city networks; rebound effect
    Date: 2014–09
  15. By: Maria Teresa Vespucci; Marida Bertocchi; Laureano F. Escudero; Stefano Zigrino
    Abstract: We present a mathematical model for maximizing the benefit of a price-taker power producer who has to decide the power generation capacity expansion planning in a long time horizon under uncertainty of the main parameters. These parameters are the variable production costs of the power plants already owned by the producer as well as of the candidate plants of the new technologies among which to choose; the market electricity price along the horizon, as well as the price of green certificates and CO2 emission permits; the potential market share that can be at hand for the power producer. These uncertainties are represented in a two stage scenario tree, so the model is a two stage stochastic integer optimization one, subject to technical constraints, market opportunities and budgetarial constraints, whose first stage variables represent the number of new power plants for each candidate technology to be added to the existing generation mix (whose construction has to start in) every year of the planning horizon. The second stage variables (i.e., scenario dependent) are the continuous operation variables of all power plants in the generation mix along the time horizon. We start presenting the maximization of the net present value of the expected profit over the scenarios along the time horizon (i.e., considering the so named risk neutral strategy). Alternatively, we consider different risk averse strategies (i.e., Conditional Value at Risk, Shortfall Probability, Expected Shortage and First- and Second-order Stochastic Dominance constraint integer-recourse strategies). By using a pilot case we report the main results of considering the six strategies under different hypotheses of the available budget, analysing the impact of each risk averse strategy on the expected profit. For that purpose we use a state-of-the-art MIP solver, concluding that 1. the technical advantage of replacing the risk neutral with the risk averse strategies needs a substantial increase in the computing requirements, but it strongly reduces the risk of non-wanted scenarios at a price of a relatively small reduction on the expected profit; 2. the risk averse strategies considered provide consistent solutions, since for all of them the optimal generation mix mainly consists of conventional thermal power plants, for low risk aversion, which are replaced by renewable energy sources plants, as risk aversion increases; 3. it is mandatory to replace the plain use of the solver with ad-hoc decomposition algorithms that have the additional feature of tackling cross-scenario constraints.
    Date: 2013
  16. By: Kesternich, Martin; Löschel, Andreas; Römer, Daniel
    Abstract: In this paper, we investigate both short- and long-term impacts of financial stimuli on public goods provision when contributions are tied to individual harm-related behavior. We conduct a large-scaled field experiment to examine voluntary contributions to a carbon offsetting program during the online purchase of a bus ticket. We systematically vary the individual payoff structure by introducing different matching grants (1/3:1, 1:1, 3:1) and price rebates (r-25%, r-50%, r-75%). Our results show that price rebates are more effective than matching schemes in raising participation rates while matching grants induce higher contributions to the offsetting program. We suspect differences in the personal responsibility for the compensated emissions to drive this result. Analyzing repeated bookings, we find decreasing treatment effects for returning customers except for the case of 1:1 matching grants. The equal matching scheme is also the only intervention that increases net contributions of customers compared to the control group.
    Keywords: voluntary carbon offsets,randomized field experiment,public goods,rebate subsidy,matching subsidy
    JEL: H41 C93 D03 L92
    Date: 2014
  17. By: Rangan Gupta (Department of Economics, University of Pretoria); Gbeada Josiane Seu Epse Kean (Department of Economics, University of Pretoria); Mpho Asnath Tsebe (Department of Economics, University of Pretoria); Nthabiseng Tsoanamatsie (Department of Economics, University of Pretoria); João Ricardo Sato (Center of Mathematics, Computation and Cognition, Universidade Federal do ABC,Brazil.)
    Abstract: The recent commodity price boom has spurred interest to understand determinants of commodity price movements. This paper investigates the causal relationship between oil prices and the prices of 25 other commodities, which include both metals and agricultural products, in the presence of instability and nonlinearity. For this purpose, we make use of a long annual time series dataset spanning from 1900 to 2011, and analyze time-varying Granger causality test, since the inference drawn based on linear Granger causality tests could be invalid due to structural breaks and nonlinearity – which we show are present in the relationship between the variables of interest. We find that, under the case of time-varying causality there are fewer rejections of the null, than under the standard linear Granger causality test, thus highlighting the importance of accounting for instability and nonlinearity. Relying on the time-varying causality test, we observe stronger evidence of other commodity prices in predicting (in-sample) oil prices (15 cases) than the other way around (7 cases).
    Keywords: Oil prices, commodity prices, stability, causality, linear, time-varying
    JEL: C32 Q11 Q47 F2 G00
    Date: 2014–11
  18. By: World Bank Group
    Keywords: Water Supply and Sanitation - Wastewater Treatment Oil Refining and Gas Industry Mining and Extractive Industry (Non-Energy) Transport Economics Policy and Planning Water Supply and Sanitation - Sanitation and Sewerage Transport Industry
    Date: 2014–07
  19. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus , via Mersin 10,Turkey;Department of Economics, University of Pretoria, Pretoria, 0002, South Africa.); Reneé van Eyden (Department of Economics, University of Pretoria); Josine Uwilingiye (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: One characteristic of many macroeconomic and financial time series is their asymmetric behaviour during different phases of a business cycle. Oil price shocks have been amongst those economic variables that have been identified in theoretical and empirical literature to predict the phases of business cycles. However, the role of oil price shocks to determine business cycle fluctuations has received less attention in emerging and developing economies. The aim of this study is to investigate the role of oil price shocks in predicting the phases of the South African business cycle associated with higher and lower growth regimes. By adopting a regime dependent analysis, we investigate the impact of oil price shocks under two phases of the business cycle, namely high and low growth regimes. As a net importer of oil, South Africa is expected to be vulnerable to oil price shocks irrespective of the phase of the business cycle. Using a Bayesian Markov switching vector autoregressive (MS-VAR) model and data for the period 1960Q2 to 2013Q3, we found the oil price to have predictive content for real output growth under the low growth regime. The results also show the low growth state to be shorter-lived compared to the higher growth state. Length: 27 pages
    Keywords: Macroeconomic fluctuations, oil price shocks, Bayesian Markov switching VAR
    JEL: C32 E32 Q43
    Date: 2014–11
  20. By: Paolo Pisciella; Marida Bertocchi; Maria Teresa Vespucci
    Abstract: We propose a TransCo model for coordinating transmission expansion planning with com- petitive generation capacity planning in electricity markets. Our purpose is to provide a tool to simulate the equilibrium interplay regarding strategic decisions of a set of power producers and a single transmission operator. The solution represents an iterative process for de ning the optimal transmission expansion program together with a correct guess of the power plants expansion program for each GenCo involved. The composition of new investments in power plants guessed by the TransCo must coincide with the optimal expansion plan de ned by each GenCo. We illustrate the methodology by means of an example depicting a zonal electricity market with two zones.
    Date: 2013
  21. By: HOSOE Nobuhiro
    Abstract: After the Great East Japan Earthquake and the subsequent nuclear accident, nuclear power stations no longer can be presumed to be perfectly safe and thus hardly can be allowed to restart in Japan. In this study, we develop a nine-region spatial equilibrium model of the Japanese power market and simulate two-part situations: (a) none of the nuclear power plants can operate any longer and (b) gas turbine combined cycle (GTCC) power plants are installed to fully cover the lost capacity of the nuclear power plants. If all of the nuclear power plants are shut down, average power prices would rise by 1.5-3 yen/kWh. By replacing that lost capacity with the GTCC power plants, we could compress the average price rise by as high as 0.5-1.5 yen/kWh compared with the status quo. Their impact, however, would differ by region on the basis of the share of nuclear power in their plant portfolios. When nuclear power is fully available, inter-regional transmission is mainly driven by the abundant base-load capacity, including nuclear power, at night. After the nuclear power plant shutdown, regions with abundant nuclear power capacity would not be able to afford to sell their power to other regions, causing less serious congestion at the inter-regional transmission links. The installation of GTCC power plants would make the plant portfolios more similar among regions and reduce inter-regional transmission further, which would very rarely cause congestion. When we assume only boiling water reactors or old plants are shut down, the results indicate less serious impacts.
    Date: 2014–12
  22. By: Ciccone, Alice (Dept. of Economics, University of Oslo)
    Abstract: In 2007, the Norwegian government reformed the vehicle registration tax in order to reduce the CO2 emissions intensity of the new car fleet by incentivizing the purchase of more fuel efficient cars. This paper identifies the impact of the new tax structure on four dimensions: 1) the average CO2 emissions intensity of new registered vehicles, 2) the relative change between low and high polluting cars, 3) the market share of diesel cars and 4) the average weight of the fleet. A Difference in Difference approach is employed to estimate the short run effects on each outcome variable of interest. The results show that, as a consequence of the tax reform, the average CO2 intensity of new vehicles was reduced in the short run by at least 6 gCO2/Km, which is about half of the overall reduction observed when including supply effects. This reduction is the result of a 12 percentage points drop in the share of highly polluting cars and of an increase of about 23 percentage points in the market share of diesel cars. Lastly, the mass of the average fleet increased by at least 10 Kg.
    Keywords: CO2 emissions intensity; New vehicles; Vehicle registration tax; Tax reform; Norway; Diesel
    JEL: H25 L62 Q51 Q53 Q54 Q58 R48
    Date: 2014–08–30
  23. By: Buehler, Stefan; Boom, Anette
    Abstract: We study the role of vertical structure in determining generating capacities and retail prices in the electricity industry. Allowing for uncertain demand, we compare three market configurations: (i) integrated monopoly, (ii) integrated duopoly with wholesale trade, and (iii) separated duopoly with wholesale trade. We find that equilibrium capacities and retail prices are such that welfare is highest (lowest) under separated (integrated) duopoly. The driving force behind this result is the risk of rent extraction faced by competing integrated generators on the wholesale market. Our analysis suggests that vertical structure plays an important role in determining generating capacities and retail prices.
    Keywords: Electricity, Investments, Generating Capacities, Vertical Integration, Monopoly and Competition
    JEL: D42 D43 D44 L11 L12 L13
    Date: 2014–12
  24. By: Gnann, Till; Plötz, Patrick; Funke, Simon; Wietschel, Martin
    Abstract: Commercial passenger cars are often discussed as an early market segment for plug-in electric vehicles (EVs). Compared to private vehicles, the commercial vehicle segment is characterized by higher vehicle kilometers travelled and a higher share of vehicle sales in Germany. Studies which consider commercial passenger EVs less important than private ones often use driving data with an observation period of only one day. Here, we calculate the market potential of EVs for the German commercial passenger car sector by determining the technical and economic potential in 2020 for multiday driving profiles to be operated as EV.We find that commercial vehicles are better suited for EVs than private ones because of the regularity of their driving. About 87% of analysed vehicles could technically be operated as battery electric vehicles (BEVs) while plug-in hybrid electric vehicles (PHEVs) could obtain an electric driving share of 60% on average. In moderate energy price scenarios EVs can reach a market share of 4% in the German commercial passenger car market by 2020 while especially the large commercial branches are important. However, our analysis shows a high sensitivity of results to energy and battery prices as well as electric consumptions.
    Date: 2014
  25. By: Ronald Huisman (Erasmus School of Economics & IEB); Elisa Trujillo-Baute (Universitat de Barcelona & IEB)
    Abstract: The increase in the share of supply from intermittent power sources changes the demand for power from traditional power plants. The power system demands more volume flexibility from traditional plants. Our goal is to better understand the impact of a reduction of flexibility in power supply on the costs of volume adjustments. We define flexibility as the capacity with which nominated power plants can adjust their output to unexpected changed in residual demand. We exploit a policy change in Spain that affected the power market. The policy, implemented in 2010, aims to provide a stimulus for producing power with domestic coal. The policy, in combination with a year with scant rainfall in the year after the policy was implemented, decreased the amount of flexibility in power supply and we use this to examine the effect of a change in flexibility on the costs of the power system. We find that a decrease in flexibility resulted in an increase in the costs of adjustments as those flexible plants driven out of the spot market by the coal fired plants compensated themselves by charging higher prices in the adjustment market. Policies as the one evaluated in this paper oriented to stimulate generation from less flexible and more pollutant conventional plants should therefore in any case be abandoned. In contrast to the Spanish coal policy, more flexible power plants should remain online and be prioritised against less flexible power plants.
    Keywords: Sustainable energy policy, power supply flexibility, imbalance costs
    JEL: Q48 L11 L52 G14
    Date: 2014
  26. By: Martijn Droes
    Abstract: SUMMARY ― In many countries, wind turbines are constructed as part of a strategy to reduce fossil fuel dependence. In this paper, we measure the external effect of wind turbines on the transaction prices of nearby properties. Using a unique transaction price dataset covering the period 1985-2011 and the exact location of all wind turbines built in the Netherlands, we find that property prices within a 2 km radius of a wind turbine, after it has been constructed, are on average 1.4 percent lower than property prices in comparable neighborhoods. We provide further evidence that the external costs of wind turbines are at least 10 percent of construction costs.
    JEL: R31 Q42 Q15 L94
    Date: 2014–11
  27. By: Glenn P. Jenkins (Queen’s University, Canada and Eastern Mediterranean University, North Cyprus); Saule Baurzhan (Eastern Mediterranean University, North Cyprus)
    Abstract: In this paper the feasibility of off-grid solar PV systems in Sub Sahara Africa (SSA) is analysed focusing on five major issues in the context of falling system costs: cost-effectiveness, affordability, financing, environmental impact, and poverty alleviation. Solar PV systems are found to be an extremely costly source of electricity for the rural poor in SSA. It is estimated that it will take at least 16.8 years for solar PV systems to become competitive with small diesel generators. The cost of reducing CO2 emissions through solar PV electrification is far in excess of the estimated marginal economic cost of CO2.
    Keywords: Solar PV, rural electrification, sub-Saharan Africa, affordability, CO2 emissions
    JEL: Q42 O55
    Date: 2014–07
  28. By: David Dapice
    Abstract: Electricity is a fundamental input to every modern economy. Electricity consumption per capita in Myanmar is among the lowest in Asia and had been growing very slowly since the 1980's. It gently grew from 45kWh per capita in 1987 to 99 kWh in 2008, a 3.8 percent annual growth rate. However, since 2008, the production of electricity has jumped very quickly. This 50 percent jump in three years is about 15 percent per year, far higher than in the past. The CSO does not report any increase in installed capacity since 2009/10, so the existing system is being worked much more intensively. This creates problems, such as the risk of sudden outages from failures in generators. Indeed, there has been an increase in blackouts in the Yangon and Mandalay areas in the last year in spite of higher output - and even during the wet season. With increases in tourism, exports and overall economic activity, electricity demand will continue to soar. Even with 2011-12 output, estimated consumption in Myanmar is only about 160 kWh per capita, compared to 2009 consumption of over 250 kWh per capita in Bangladesh and nearly 600 in Indonesia. Vietnam had over 1000 kWh per capita in 2011.
  29. By: Fernando Perobelli; Vinicius Vale
    Abstract: In the recent period, there is an increase in the household income in Brazil. There is a positive impact upon consumption and welfare. On the other hand is important to verify the impact upon emissions derived from household consumption. The literature presents two approaches to analyze emissions. They are: account CO2 emissions based on the production principle and on the consumer principle. According to the consumer principle, the consumer is responsible for CO2 emissions from the production of energy, goods and services. In this case, the CO2 emissions are related to final use of goods and services even if they are imported from other countries. In order to reach the main aim of this paper we will use an input-output approach, specifically the extraction method. We use input-output matrix calibrated for 2003 and 2009 for the Brazilian economy considering 35 production sectors. We opened the household consumption into eight income categories. We closed the input-output model for household. This enables us to better understand the impact of each class of consumption upon the CO2 emissions.
    JEL: Q50 C67
    Date: 2014–11
  30. By: Baumeister, Christiane; Kilian, Lutz; Lee, Thomas K
    Abstract: The answer depends on the objective. The approach of combining five of the leading forecasting models with equal weights dominates the strategy of selecting one model and using it for all horizons up to two years. Even more accurate forecasts, however, are obtained when allowing the forecast combinations to vary across forecast horizons. While the latter approach is not always more accurate than selecting the single most accurate forecasting model by horizon, its accuracy can be shown to be much more stable over time. The MSPE of real-time pooled forecasts is between 3% and 29% lower than that of the no-change forecast and its directional accuracy as high as 73%. Our results are robust to alternative oil price measures and apply to monthly as well as quarterly forecasts. We illustrate how forecast pooling may be used to produce real-time forecasts of the real and the nominal price of oil in a format consistent with that employed by the U.S. Energy Information Administration in releasing its short-term oil price forecasts, and we compare these forecasts during key historical episodes.
    Keywords: forecast combination; forecast pooling; oil price; real-time data; refiners' acquisition cost; WTI
    JEL: C53 Q43
    Date: 2014–07
  31. By: Anni Huhtala; Piia Remes
    Abstract: The preferences expressed in voting on nuclear reactor licenses and the risk perceptions of citizens provide insights into social costs of nuclear power and decision making in energy policy. We introduce an analytical model which shows that where people?s risk perceptions affect their stand on nuclear power, a perceived probability of accident results in external costs. These costs consist of disutility caused by unnecessary anxiety - due to misperceived risks relating to existing reactors - and where licenses for new nuclear reactors are not granted, delayed or totally lost energy production. Empirical evidence is derived from Finnish surveys eliciting explicitly the significance of risk perceptions in respondents? preferences regarding nuclear power and their views on its environmental and economic impacts. Various model specifications show that the estimated marginal impact of a high perceived risk of nuclear accident is statistically significant and that such a perception considerably decreases the probability of a person supporting nuclear power. The public?s risk perceptions translate into a significant social cost, and are likely to affect the revenues, costs and financing conditions in the nuclear power sector in the future.
    Keywords: energy, vote, nuclear accident, subjective risks, probabilities, binary variable, instrumental variable
    Date: 2014–11–07
  32. By: de Zeeuw, Aart J.; van der Ploeg, Frederick
    Abstract: The optimal reaction to a pending productivity shock of which the expected arrival time increases with global warming is to accumulate more precautionary capital to smooth consumption and to levy a carbon tax, proportional to the marginal hazard of a catastrophe, to curb the risk of climate change. The carbon tax holds down the stock of greenhouse gases, so that the risk of catastrophe decreases and less precautionary saving is needed. We also allow for conventional marginal climate damages and decompose the optimal carbon tax in two catastrophe components and a conventional Pigouvian component. Further, the productivity catastrophe is compared with recoverable catastrophes and with a catastrophe shock to the temperature response. Finally, the trade-off between adaptation capital and capital used for production is analyzed.
    Keywords: adaptation capital; economic growth; non-marginal climate shock; precaution; risk avoidance; social cost of carbon; tipping point
    JEL: D81 H20 O40 Q31 Q38
    Date: 2014–05
  33. By: Narbel, Patrick A. (Dept. of Business and Management Science, Norwegian School of Economics); Hansen, Jan Petter (Dept. of Physics and Technology, University of Bergen)
    Abstract: This study produces an attempt to estimate the cost of future global energy supplies. The approach chosen to address this concern relies on a comparative static exercise of estimating the cost of three energy scenarios representing different energy futures. The first scenario, the business as usual scenario, predicts the future energy-mix based on the energy plans held by major countries. The second scenario is the renewable energy scenario, where as much of the primary energy supply as possible is replaced by renewable energy by 2050. The cost of the renewable energy generating technologies and their theoretical potential are taken into account in order to create a plausible scenario. The third scenario, the nuclear case, is based on the use of nuclear and renewable energy to replace fossil-fuels by 2050. Endogenous learning rates for each technology are modeled using an innovative approach where learning rates are diminishing overtime. It results from the analysis that going fully renewable would cost between -0.4 and 1.5% of the global cumulated GDP over the period 2009-2050 compared to a business as usual strategy. An extensive use of nuclear power can greatly reduce this gap in costs.
    Keywords: Primary energy supply; experience curve; scenario
    JEL: Q40 Q42
    Date: 2014–04–14
  34. By: Lucas Bretschger; Christos Karydas
    Abstract: We study the eects of greenhouse gas emissions on optimum growth and climate policy by using an endogenous growth model with polluting non-renewable resources. Climate change harms the capital stock. Our main contribution is to introduce and extensively explore the naturally determined time lag between greenhouse gas emission and the damages due to climate change, which proves to be crucial for the transition of the economy towards its steady state. The social optimum and the optimal abatement policies are fully characterized. The inclusion of a green technology delays optimal resource extraction.The optimal tax rate on emissions is proportional to output. Poor understanding of the emissions diffusion process leads to suboptimal carbon taxes and suboptimal growth and resource extraction.
    Keywords: Non-Renewable Resource Dynamics, Pollution Diffusion Lag, Optimum Growth, Clean Energy, Climate Policy
    JEL: Q54 O11 Q52 Q32
    Date: 2014
  35. By: Jiranyakul, Komain
    Abstract: This paper investigates the causal relationship between electricity consumption and real GDP by applying the bounds testing for cointegration in a multivariate framework. The error correction mechanism is employed to detect causal relationship in the presence of cointegration among three variables. Empirical results for Thailand during 2001Q1 and 2014Q2 suggest that there is long-run unidirectional causality between electricity consumption and real GDP. The source of causation in the long run is found by the significance of the error correction terms in the Wald F-test. In the short run, bidirectional causal relationship between electricity consumption and economic growth is observed. The findings give implications for electricity efficiency and alternative energy sources in the long run.
    Keywords: Causality, electricity consumption, economic growth
    JEL: C32 Q43
    Date: 2014–11
  36. By: Carol A. Dahl (Division of Economics and Business, Colorado School of Mines)
    Abstract: This survey of surveys contains an historical summary of what I knew about short- and long-run gasoline demand elasticities as of 2006. I discuss 13 surveys published from 1977-2004 along with a few additional studies. Although there is wide variation in price and income elasticities across the more than 100 studies surveyed across time, all of these surveys conclude that gasoline consumption does respond to price, and most of them come to a quantitative conclusion about summary values for the price elasticity. The majority conclude that a good representative short-run price elasticity (annual) is between -0.2 and -0.3 with a good long-run representative value between -0.6 and -0.9. There is somewhat less interest and agreement on representative income elasticities, especially in the long-run. Where reported and concluded short-run representative income elasticities (annual) are between 0.3 and 0.5 but long-run representative income elasticities range between 0.5 and 1.5. A number of reasons are thought to contribute to this wide long-run variation in income elasticity. In the ever popular Koyck models, collinearity between the lagged endogenous variable, price, and income seem to contribute to high variation in the income elasticity. I also believe that the increased popularity of error correction models over time has also led to smaller long-run income elasticities. Long-run income elasticities once seemed to be in the inelastic region for industrial countries, which were relatively saturated in vehicles, and the elastic range in developing countries, which were becoming rich enough to rapidly increase their vehicle stock. More recently vehicle efficiency standards and movements towards ever more efficient vehicles by the world's major car manufacturers have likely decreased income elasticities. Increased income means more cars but ones that are on average newer and more efficient. Thus the spatial and temporal dimensions, policy, and the methodologies of the studies surveyed may be influencing the wider variation in long-run income elasticities.
    Date: 2014–11
  37. By: Thanh Le (University of Queensland); Cuong Le Van (Centre d'Economie de la Sorbonne - Paris School of Economics, IPAG and VCREME)
    Abstract: Upon introducing natural resources, both renewable and non-renewable, into an endogenous growth framework with R&D, this paper derives the transitional dynamics of an economy towards its long-run equilibrium. Using the Euler - Lagrange framework, this paper has succesfully figured out the optimal paths of the economy. It then shows the existence and uniqueness of a balanced growth path for each type of resources. The steady state is shown to be of a saddle point stability. Along the balanced growth path, it is found that a finite size resource sector coexists with other continuously growing sectors. The paper then examines long-run responses of the economy to various changes pertaining to innovative production condition, resource sector parameters as well as rate of time preference. It also shows that positive long-run growth will be sustained regardless the type of resources used.
    Keywords: R&D-based growth, natural resources, vertical innovation, transitional dynamics.
    JEL: O13 O31 O41
    Date: 2014–10
  38. By: Henriet, F.; Maggiar, N.; Schubert, K.
    Abstract: We build, calibrate and simulate a stylized energy-economy model designed to evaluate the magnitude of carbon tax that would allow the French economy to reduce by a factor of four its CO2 emissions at a forty-year horizon. We estimate the substitution possibilities between fossil energy and other factors for households and firms. We build two versions of the model, the first with exogenous technical progress, and the second with an endogeneisation of the direction of technical progress. We show that if the energy-saving technical progress rate remains at its recent historical value, the magnitude of the carbon tax is quite unrealistic. When the direction of technical progress responds endogenously to economic incentives, CO2 emissions can be reduced by more than that allowed by the substitution possibilities, but not by a factor of four. To achieve this, an additional instrument is needed, namely a subsidy to fossil energy-saving research. The redirection of technical progress, which is a driver of energy transition, comes at a small cost in terms of the overall growth rate of the economy.
    Keywords: CGE model, Energy, Environment, Carbon Tax.
    JEL: C32 Q4 Q54 Q55 Q58
    Date: 2014
  39. By: Fisher, Anthony
    Keywords: Social and Behavioral Sciences, Climate change, nonlinearities, catastrophic events
    Date: 2014–11–01
  40. By: Daron Acemoglu (Department of Economics, MIT and CIFAR); Ufuk Akcigit (Department of Economics, University of Pennsylvania); Douglas Hanley (Department of Economics, University of Pittsburgh); William Kerr (Harvard Business School, Harvard University)
    Abstract: We develop a microeconomic model of endogenous growth where clean and dirty technologies complete in production and innovation - in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up withdirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry and exit from the US energy sector. The model’s quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.
    Keywords: carbon cycle, directed technological change, environment, innovation, optimal policy
    JEL: O30 O31 O33 C65
    Date: 2014–12–03
  41. By: Kemp-Benedict, Eric
    Abstract: In the face of increasingly likely dangerous climate change, many developing countries are designing green economy or low-emissions development strategies, but are simultaneously on a course of investment locking them into high-emission infrastructure. Meanwhile, many high-income countries are working to reduce their emissions but are hampered by the cost of switching from an existing capital stock designed for a fossil fuel-based economy. This paper looks at economic aspects of the challenge of escaping carbon lock-in using a “brown-green capital” model. In the model, brown capital is more productive than green capital in a brown capital-dominated economy, while green capital is more productive in a green capital-dominated economy; that is, the model allows for “carbon lock-out”. We explore possible macroeconomic consequences of policies to drive a transition to a low-carbon economy and policy responses in the case that macroeconomic imbalances result. Three results are particularly interesting. First, the effect of policy instruments depends on whether the economy is wage-led or profitled, a distinction that emerges from post-Keynesian theory. Second, if investors hedge against uncertainty over expected levels of green and brown investment, then there is likely to be underinvestment in green capital even at quite high levels of green capital penetration, creating a substantial challenge for policymakers. Third, the model suggests an unusual role for a carbon price, to control inflationary pressure arising from public green capital investment, in addition to its usual role of encouraging emissions reductions at the margin.
    Keywords: green economy; brown-green capital; carbon lock-in; post-Keynesian; Kaleckian
    JEL: E12 E61 G11 Q01
    Date: 2014–11–25
  42. By: Slobodan Cvetanović , Miljan Jovanović (University of Niš, Faculty of Economics)
    Abstract: The increasing renewable source usage and energy efficiency enhancement represent the key aims of the energy sector's development in EU countries. The purpose of their implementation is at the same time the creation of the renewable sources concept as a new development paradigm.Thus, this points to the conclusion that all the projects of renewable source usage and energy efficiency enhancement must be viewed from the perspective of the manifestation of economic, environmental and social effects.Having these facts in mind the paper considers the place of renewable sources and energy efficiency in the energy policy of the EU. The analysis is primarily based on examination of the solutions that are defined in the directives of the European Commission that deal with renewable sources and energy efficiency.
    Keywords: European Union, energy policy, renewable energy sources, energy efficiency
    JEL: Q40 Q42 Q48
    Date: 2014–04
  43. By: Juan Rosellon (Division of Economics, CIDE); Jonas Egerer; Wolf-Peter Schill
    Abstract: We analyze various regulatory regimes for electricity transmission investment in the context of a transformation of the power system towards renewable energy. We study distinctive developments of the generation mix with different implications on network congestion, assuming that a shift from conventional power plants towards renewables may go along with exogenous shocks on transmission requirements, which may be either of temporary or permanent nature. We specifically analyze the relative performance of a combined merchant-regulatory price-cap mechanism, a cost-based rule, and a non-regulated approach in dynamic generation settings. Through application in a stylized two-node network, we find that incentive regulation may perform satisfactorily only when appropriate weights are used. While quasi-ideal weights generally restore the beneficial properties that incentive regulatory mechanisms are well-known for in static settings, pure Laspeyres weights may either lead to overinvestment (stranded investments) or delayed investments as compared to the welfare optimum benchmark. Stranded investments could then be avoided through proper handling of weights. Model results indicate that using average Laspeyres-Paasche weights appears to be an appropriate strategy in the context of permanently or temporarily increasing network congestion. Our analysis motivates further research aimed to characterize optimal regulation for transmission expansion in the context of renewable integration.
    Keywords: Electricity transmission, incentive regulation, renewable integration, Laspeyres/Paasche weights, ideal weights
    JEL: Q40 Q42 L51
    Date: 2013–10
  44. By: Jacint Balaguer (Department of Economics and Instituto de Economía Internacional, Universitat Jaume I, Castellón, Spain); Manuel Cantavella-Jordá (Department of Economics and Instituto de Economía Internacional, Universitat Jaume I, Castellón, Spain)
    Abstract: A structural analysis on an environmental Kuznets curve (EKC with oil prices is carried out for Spain from 1874 to 2011. The dynamics of the long and short-term relationships among carbon dioxide (CO2), economic growth and oil prices is captured through an autoregressive distributed lag (ARDL) model. The EKC hypothesis is supported in a context where real oil price increases play a significant role on the reduction of CO2 emissions. Hence, the results suggest that oil taxes should be taken into account as an effective tool of environmental policy.
    Keywords: Environmental Kuznets curve, CO2, oil prices, autoregressive distributed lag model, time series
    JEL: Q53 Q56
    Date: 2014
  45. By: Sofia Teives Henriques (University of Southern Denmark); Karol J. Borowiecki (University of Southern Denmark)
    Abstract: Fossil-fuel-related carbon dioxide emissions have risen dramatically since 1800. We identify the long-run drivers of CO2 emissions for a sample of twelve developed economies using an extended Kaya decomposition. By considering biomass and carbon-free energy sources along with fossil fuels we are able to shed light on the effects of past and present energy transitions on CO2 emissions. We find that at low levels of income per capita, fuel switching from biomass to fossil fuels is the main contributing factor to emission growth. Scale effects, especially income effects, become the most important emission drivers at higher levels of income and also dominate the overall long-run change. Technological change is the main offsetting factor. Particularly in the last decades, technological change and fuel switching have become important contributors to the decrease in emissions in Europe. Our results also individualize the different CO2 historical paths across parts of Europe, North America and Japan.
    Keywords: CO2 emissions, Kaya decomposition, Energy transition
    JEL: N70 O44 Q40 Q54 Q5
    Date: 2014–08

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