nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒03‒05
twenty-six papers chosen by
Roger Fouquet
London School of Economics

  1. Individual Time Preferences and Energy Efficiency By Richard G. Newell; Juha V. Siikamaki
  2. The effect of electricity taxation on the German manufacturing sector: A regression discontinuity approach By Flues, Florens; Lutz, Benjamin Johannes
  3. Efectos del cargo por confiabilidad sobre el precio spot de la energía eléctrica en Colombia By Juan Pablo Botero; John J. García; Ermilson Velásquez
  4. Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market By Ali Hortaçsu; Seyed Ali Madanizadeh; Steven L. Puller
  5. A Field Experiment on Dynamic Electricity Pricing in Los Alamos:Opt-in Versus Opt-out By Takanori Ida; Wenjie Wang
  6. Estimación del precio marginal del sistema eléctrico colombiano: una mirada desde la organización industrial By Ona Duarte Venslauskas; John J. García
  7. Scaling Up Access to Electricity : Pay-as-You-Go Plans in Off-Grid Energy Services By Alejandro Moreno; Asta Bareisaite
  8. Integrating Variable Renewable Energy into Power System Operations By Thomas Nikolokakis; Debabrata Chatopadhyay
  9. Achieving absolute decoupling? Comparing biophysical scenarios and macro-economic modelling results By Dominik Wiedenhofer; Marina Fischer-Kowalski
  10. Peeling the onion: Analyzing aggregate, national and sectoral energy intensity in the European Union By Löschel, Andreas; Pothen, Frank; Schymura, Michael
  11. The long-term trends on Russian electricity market: comparison of empirical mode and wavelet decompositions By Afanasyev, Dmitriy; Fedorova, Elena
  12. Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand By John Coglianese; Lucas W. Davis; Lutz Kilian; James H. Stock
  13. Metabolic paths in world economy and crude oil price By Francesco Picciolo; Andreas Papandreou; Franco Ruzzenenti
  14. On the emissions-inequality trade-off in energy taxation: Evidence on the German car fuel tax By Nikodinoska, Dragana; Schröder, Carsten
  15. Modeling and Forecasting Crude Oil Price Volatility: Evidence from Historical and Recent Data By Thomas Lux; Mawuli Segnon; Rangan Gupta
  16. Political influence in commercial and financial oil trading : the evidence from US firms By Kashcheeva, Mila; Tsui, Kevin K.
  17. The Potential of Alternative Fuel Vehicles: A Cost-Benefit Analysis By Ito, Yutaka; Managi, Shunsuke
  18. Social implications of green growth policies from the perspective of energy sector reform and its impact on households By Heindl, Peter; Löschel, Andreas
  19. Can the Energy Transition Be Smooth? By Jean-François Fagnart; Marc Germain
  20. Moving Toward Climate Budgeting : Policy Note By World Bank Group
  21. Supplier Evasion of a Buyer's Audit: Implications for Motivating Compliance with Labor and Environmental Standards By Plambeck, Erica L.; Taylor, Terry A.
  22. Allocating Emissions among Co-products: Implications for Procurement, Offsetting and Border Adjustment By Sunar, Nur; Plambeck, Erica
  23. MENA Quarterly Economic Brief : Plunging Oil Prices By Lili Mottaghi
  24. Air Quality, Mortality, and Perinatal Health: Causal Evidence from Wildfires By Christopher Khawand
  25. Reciprocity and Trust as Factors for Success in International Climate Policy By Friedel Bolle; Wolfgang Buchholz; Wolfgang Peters; Reimund Schwarze; Aneta Ufert; Patrick Gneuss; Özgür Yildiz
  26. Environmental Kuznets Curve and Economic Growth: The Role of Institutional Quality and Distributional Heterogeneity Revisited. By Tapas Mishra; Mamata Parhi; Claude Diebolt; Prashant Gupta

  1. By: Richard G. Newell; Juha V. Siikamaki
    Abstract: We examine the role of individual discount rates in energy efficiency decisions using evidence from an extensive survey of U.S. homeowners to elicit preferences for energy efficiency and cash flows over time. We find considerable heterogeneity in individual discount rates. We also find that individual time preferences systematically influence willingness to invest in energy efficiency, as measured through product choices, required payback periods, and energy efficiency tax credit claims. Individual discount rate heterogeneity is in turn significantly related to characteristics of the individual and their household, including their financial situation. Individuals with less education, larger households, low income, and low credit scores had systematically higher discount rates, as did black, non-Hispanic respondents. Our findings highlight the importance of individual discount rates to understanding energy efficiency investments, the energy-efficiency gap, and policy evaluation.
    JEL: D9 H43 Q41 Q48
    Date: 2015–02
  2. By: Flues, Florens; Lutz, Benjamin Johannes
    Abstract: Germany taxes electricity use since 1999. The government granted reduced rates to energy intensive firms in the industrial sector for addressing potentially adverse effects on firms' competitiveness. Firms that use more electricity than certain thresholds established by legislation, pay reduced marginal tax rates. As a consequence, the marginal tax rate is a deterministic and discontinuous function of electricity use. We identify and estimate the causal effects of these reduced marginal tax rates on the economic performance of firms using a regression discontinuity design. Our econometric analysis relies on official micro-data at the plant and firm level collected by the German Federal Statistical Office that cover the whole manufacturing sector. We do not find any systematic, statistically significant effects of the electricity tax on firms' turnover, exports, value added, investment and employment. The results suggest that eliminating the reduced marginal electricity tax rates could increase revenues for the government without adversely affecting firms' economic performance.
    Keywords: Efficiency of Environmental Taxes,Control of Externalities,Regression Discontinuity Design
    JEL: D22 H21 H23 Q41 Q48
    Date: 2015
  3. By: Juan Pablo Botero; John J. García; Ermilson Velásquez
    Abstract: This paper considers the effect of electricity generation reliability on the spot price of the electricity market in Colombia, a mechanism implemented in 2006 to encourage existing generators or new investors to increase the installed capacity in the wholesale energy market. We describe the performance of this mechanism in Colombia and analyze the behavior of some structural variables in the operation of this market, such as the ratio between the market demand and the actual availability, El Niño and La Niña, the reservoir level and some regulation measures. The spot price presents high volatility implying that the proper specification corresponds to a regression model with ARCH structure (Engle, 1982). Results show that the reliability charge is positive and statistically significant. Also El Niño has a positive impact on the spot price, due to the large hydraulic share of this market. ****** Este paper considera el efecto del cargo por confiabilidad sobre el precio spot de la energía eléctrica en Colombia, implementado en 2006 con el fin de incentivar a los generadores existentes o nuevos inversionistas para mejorar la confiabilidad de la prestación del servicio, lo que conduce a incrementar la capacidad instalada en el mercado de energía mayorista. Se describe el funcionamiento de este mecanismo en Colombia y analiza el comportamiento de algunas variables estructurales en el funcionamiento de este mercado, como la relación entre la demanda comercial y la disponibilidad real, el fenómeno de El Niño y La Niña, el nivel de embalse y algunas medidas de carácter regulatorio. El precio spot presenta alta volatilidad haciendo que la especificación adecuada corresponda a un modelo de regresión con estructura ARCH (Engle, 1982). Los resultados obtenidos evidencian que el cargo por confiabilidad es estadísticamente significativo y positivo, es decir hace que el precio spot aumente. Además, El Niño presenta un impacto positivo sobre el precio spot, debido a la gran participación hidráulica de este mercado.
    Keywords: Cargo por confiabilidad; mercado de energía mayorista; preciospot; ARCH; Colombia
    JEL: D43 L13 L51
    Date: 2015–01–01
  4. By: Ali Hortaçsu; Seyed Ali Madanizadeh; Steven L. Puller
    Abstract: Many jurisdictions around the world have deregulated utilities and opened retail markets to competition. However, inertial decisionmaking can diminish consumer benefits of retail competition. Using household-level data from the Texas residential electricity market, we document evidence of consumer inertia. We estimate an econometric model of retail choice to measure two sources of inertia: (1) search frictions/inattention, and (2) a brand advantage that consumers afford the incumbent. We find that households rarely search for alternative retailers, and when they do search, households attach a brand advantage to the incumbent. Counterfactual experiments show that low-cost information interventions can notably increase consumer surplus.
    JEL: D8 L0 L5
    Date: 2015–02
  5. By: Takanori Ida; Wenjie Wang
    Abstract: We use a field experiment to examine how consumers respond to distinct combinations of default options (opt-in versus opt-out) and framing of economic incentives (gain versus loss). A randomized controlled trial (RCT) is implemented to investigate the demand reduction performance of three dynamic electricity pricing programs - opt-in critical peak pricing (CPP, incentive framed as loss), opt-out CPP, and opt-out peak time rebate (PTR, incentive framed as gain). We find that the opt-in customer enrollment rate is much higher than those documented in the literature are; our subjects’ high education levels and technology related experiences may have contributed largely to the mitigation of the opt-in default effect. In addition, we obtain precise estimates of the average treatment effects, with the treatment effect being most pronounced for customers assigned to the opt-in CPP group. This result is largely attributable to the high opt-in CPP enrollment rate and to the customer inertia generated by opt-out procedures. Furthermore, an “option to quit” effect is found among PTR customers. This finding is consistent with a growing behavioral literature highlighting that incentives framed as losses loom larger than those framed as gains.
    Keywords: Field Experiment, Behavioral Economics, Framing, Default Effect, Dynamic Elec- tricity Pricing.
    JEL: C23 C93 D03 Q41
    Date: 2015–03
  6. By: Ona Duarte Venslauskas; John J. García
    Abstract: This paper has two important goals. The first one is to build a Cournot model that illustrate the strategic behavior of the leader energy generators of the Colombian energy market, using the spot price as a strategic variable to estimate the optimal quantities of the short term energy market. The second goal is to use the quantities estimated to build industrial organizational variables, and with them estimate the spot price using VAR models, that allow an impulse response analysis. A daily series is used for the estimation, which it goes from June of 2010 until November of the same year. The results showed that the storage capacity of the hydraulic companies give them a higher strategic behavior that thermal companies when the demand level is low, but the opposite happens when the demand level is high. It was found that a random shock over the residual demand of the oligopoly and the concentration ratio of the market structure, are reflected in a fluctuated behavior of the spot energy price, this effect can be read as a reaction of the companies to the new circumstances of the market condition. ****** El artículo tiene dos principales objetivos. El primero es construir un modelo de Cournot que simule el comportamiento estratégico de las empresas generadoras líderes del mercado eléctrico colombiano, usando el Precio Marginal del Sistema (PMS) como variable estratégica para determinar las cantidades optimas a ofertar en el mercado spot. El segundo es usar las cantidades estimadas con el modelo de Cournot para construir variables de organización industrial (Índice de Demanda Residual y el Índice de Herfindahl e Hirschman) y con ellas estimar modelos vectoriales autorregresivos (VAR) que permitan estimar el PMS y hacer análisis de impulso respuesta. Los modelos se estiman para la serie diaria desde junio del 2010 hasta noviembre del mismo año. Los resultados muestran que la capacidad de almacenamiento de las empresas hidráulicas permite un mayor comportamiento estratégico que el de una empresa térmica cuando la demanda es baja, mientras que las térmicas son más estratégicas cuando la demanda es alta dado que los recursos de generación hidráulica se ven reducidos. Además se encuentra que los choques sobre los cambios en la capacidad de maniobra del oligopolio y en la concentración del mercado, se reflejan en un comportamiento fluctuante sobre el crecimiento del PMS, lo que se puede interpretar como una reacción de la estrategia de las empresas ante un cambio en las circunstancias de organización del mercado.
    Keywords: Modelo de Cournot; Precio Marginal del Sistema; mercado eléctrico; Índice dedemanda residual; Índice de Herfindahl - Hirschman; modelo de vectores autorregrasivos - VAR
    JEL: D43 L11 L13
    Date: 2014–03–01
  7. By: Alejandro Moreno; Asta Bareisaite
    Keywords: Energy - Energy Demand Energy - Energy Production and Transportation Science and Technology Development - Engineering Power and Energy Conversion Private Sector Development - E-Business
    Date: 2015–01
  8. By: Thomas Nikolokakis; Debabrata Chatopadhyay
    Keywords: Environment - Climate Change Mitigation and Green House Gases Energy - Energy and Environment Power and Energy Conversion Energy - Energy Production and Transportation Environment - Environment and Energy Efficiency
    Date: 2015–01
  9. By: Dominik Wiedenhofer; Marina Fischer-Kowalski
    Abstract: Most economic models struggle to incorporate biophysical relationships between materials, energy and emissions, in order to appropriately deal with biophysical constraints of supply (and possibly also demand). After the incorporation of biophysical constraints, some functions produced surprising or even highly implausible results. These results have been checked against expert judgement of plausibility, some biophysical assumptions have been refomulated or removed to secure consistency, and some economic functions have been adjusted to take care of adequacy and plausibility of outcomes and model specifications. A number of efforts were made to check the consistency of economic modelling outcomes with some fundamental functional interdependencies on the biophysical level and against the biophysical scenarios presented in earlier papers (Milestones MS35 - published as WWWforEurope Working Paper no. 25; and MS36 - unpublished). This usually required extensive communication between research teams and the re-formulation of certain parameters, relationships and semi-empirical assumptions. Methodologically, such interdisciplinary cross-checking is a novel and time-consuming exercise. This process highlights the limitations of existing economic models to incorporate certain biophysical functional interdependencies, and vice versa the still very limited ability of biophysical models to explore ranges of flexibility imposed upon changing economic assumptions. Furthermore this ongoing collaboration showed that the specification of the baseline scenario and the semi-empirical assumptions about efficiency gains as well as developments of factor productivity and technical change are highly influential on the results of each scenario. Therefore a 'realistic' specification and critical reflection of the actual feasability of certain baseline trajectories is deemed necessary.
    Keywords: Beyond GDP, Biophysical constraints, CGE models, Ecological innovation, Economic growth path, Economic strategy, European economic policy, Full employment growth path, Industrial policy, Innovation policy, Macroeconomic disequilibria, Market economy with adjectives, Socio-ecological transition, Sustainable growth, Wealth
    JEL: Q3 Q4 Q5
    Date: 2015–02
  10. By: Löschel, Andreas; Pothen, Frank; Schymura, Michael
    Abstract: One of the most promising ways of meeting climate policy targets is improving energy efficiency, i.e. reducing the amount of scarce and polluting resources needed to produce a given quantity of output. This study undertakes an empirical exercise using the World Input-Output Database (WIOD), a harmonized dataset comprising time-series of input-output tables along with environmental satellite accounts and socioeconomic information. The paper consists of two parts. In the first part we begin with an aggregated picture of EU27 energy intensity and its evolution between 1995 and 2009. Then we dig deeper and introduce sectoral detail to identify the economic changes that occurred during the same period. Finally, we disaggregate the EU27 into countries for regional analysis and perform a sectoral disaggregation for a fine-grained picture of energy intensity in Europe. In the second part of the study we take our findings from index decomposition analysis and subject them to panel estimations. The objective is to control for factors that may have shaped the evolution of energy intensity in the European Union. In particular, we investigate the impact of technological change, structural change, trade, environmental regulation and country-specific characteristics.
    Keywords: Environmental and Climate Economics,Energy Intensity,Index Decomposition
    JEL: Q0 Q50
    Date: 2015
  11. By: Afanasyev, Dmitriy; Fedorova, Elena
    Abstract: The problem of trend-cyclic component filtering from price time-series arises in many commodity market studies, including those of wholesale electricity market. The long-term component filtering is an important part of price analysis since incorrect determination of this component may result in substantial risk underestimation, distorted expectations of both consumers and power generating companies, as well as financial losses. A great strand of literature on this topic proposes quite a lot of approaches and procedures for solving this problem, but all of them suffer from two principal flaws: (1) inability to deal with non-stationary and nonlinear processes; (2) assumption of an "a priori", knowledge of the phenomenon being studied. The complete ensemble empirical mode decomposition with adaptive noise (CEEMDAN) allows to effectively overcome these flaws and is expected to produce more adequate results as compared to other methods. In order to check this, we compare the performance of CEEMDAN with the ordinary EMD and yet another well-known approach - the wavelet-decomposition, with an example of the Russian day-ahead electricity market (price zones Europe-Ural and Siberia). Our results shows that the CEEMDAN is much more effective than the standard EMD and is comparable with the wavelet-decomposition (in terms of trend estimation error). At the same time, we found that there are some real data problems with the criterion of the number of low-frequency modes that are included into trend.
    Keywords: electricity market, trend-cyclic component, complete ensemble empirical mode decomposition with adaptive noise (CEEMDAN), wavelet-decomposition
    JEL: C14 C63 C90 L94
    Date: 2015–02–24
  12. By: John Coglianese; Lucas W. Davis; Lutz Kilian; James H. Stock
    Abstract: Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices are biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We demonstrate that anticipatory behavior provides an important explanation for this result. We provide evidence that gasoline buyers increase gasoline purchases before tax increases and delay gasoline purchases before tax decreases. This intertemporal substitution renders the tax instrument endogenous, invalidating conventional IV analysis. We show that including suitable leads and lags in the regression restores the validity of the IV estimator, resulting in much lower and more plausible elasticity estimates. Our analysis has implications more broadly for the IV analysis of markets in which buyers may store purchases for future consumption.
    JEL: H23 H26 Q41 Q47
    Date: 2015–02
  13. By: Francesco Picciolo; Andreas Papandreou; Franco Ruzzenenti
    Abstract: In 1983 Hamilton demonstrated the correlation between the price of oil and gross national product for the U.S. economy. A prolific literature followed exploring the potential correlation of oil prices with other important indices like inflation, industrial production, and food prices, using increasingly refined tools. Our work sheds new light on the role of oil prices in shaping the world economy by investigating the metabolic paths of value across trade between 1960 and 2010, by means of Markov Chain analysis. We show that the interdependence of countries' economies are strictly (anti)correlated to the price of oil. We observed a remarkably high correlation of 0.85, unmatched by any former study addressing the correlation between oil price and major economic indicators.
    Date: 2015–02
  14. By: Nikodinoska, Dragana; Schröder, Carsten
    Abstract: By using estimates from an Almost Ideal Demand System (AIDS), we investigate how the German energy tax on car fuels changes the private households-CO2 emissions, living standards, and post-tax income distribution. Our results show that the tax implies a trade-off between the aim to reduce emissions and vertical equity, which refers to the idea that people with a greater ability to pay taxes should pay more.
    Keywords: energy taxes,environmental taxes,energy demand,emissions,tax incidence,redistribution,inequality
    JEL: C31 D12 D63 H22 H23 I3 K32 Q21
    Date: 2015
  15. By: Thomas Lux (Department of Economics, University of Kiel, Kiel, Germany); Mawuli Segnon (Department of Economics, University of Kiel, Germany); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This paper uses the Markov-switching multifractal (MSM) model and generalized autoregressive conditional heteroscedasticity (GARCH)-type models to forecast oil price volatility over the time periods from January 02, 1875 to December 31, 1895 and from January 03, 1977 to March 24, 2014. Based on six dierent loss functions and by means of the superior predictive ability (SPA) test, we evaluate and compare their forecasting performance at short and long horizons. The empirical results indicate that none of our volatility models can uniformly outperform other models across all six different loss functions. However, the new MSM model comes out as the model that most often across forecasting horizons and subsamples cannot be outperformed by other models, with long memory GARCH-type models coming out second best.
    Keywords: Crude oil prices, GARCH, Multifractal processes, SPA test
    JEL: C52 C53 C22
    Date: 2015–03
  16. By: Kashcheeva, Mila; Tsui, Kevin K.
    Abstract: International politics affects oil trade. But do financial and commercial traders who participate in spot oil trading also respond to changes in international politics? We construct a firm-level dataset for all U.S. oil-importing companies over 1986-2008 to examine how these firms respond to increases in "political distance" between the U.S. and her trading partners, measured by divergence in their UN General Assembly voting patterns. Consistent with previous macro evidence, we first show that individual firms diversify their oil imports politically, even after controlling for unobserved firm heterogeneity. However, the political pattern of oil imports is not entirely driven by the concerns of hold-up risks, which exist when oil transactions via term contracts are associated with backward vertical FDI that is subject to expropriation. In particular, our results indicate that even financial and commercial traders significantly reduce their oil imports from U.S. political enemies. Interestingly, while these traders diversify their oil imports politically immediately after changes in international politics, other oil companies reduce their oil imports with a significant time lag. Our findings suggest that in designing regulations to avoid harmful repercussions on commodity and financial assets, policymakers need to understand the nature of political risk.
    Keywords: United States, Petroleum, International trade, Foreign investments, Energy policy, International politics, FDI-based imports, Hold-up risk, Energy security
    JEL: F13 F51 F59 Q34
    Date: 2015–02
  17. By: Ito, Yutaka; Managi, Shunsuke
    Abstract: This study investigates the economic validity of the diffusion of fuel cell vehicles (FCVs) and all-electric vehicles (EVs), employing a cost-benefit analysis from the social point of view. This research assumes the amount of NOx and tank-to-wheel CO2 emissions and gasoline use reduction as the benefits and the purchase costs, infrastructure expenses, and maintenance costs of alternative vehicles as the costs of switching internal combustion engine (ICE) vehicles to alternative energy vehicles. In addition, this study conducts a sensitivity analysis considering cost reductions in FCV and EV production and increasing costs for CO2 abatement as well as increasing gasoline prices. In summary, the results show that the diffusion of FCVs is not economically beneficial until 2110, even if the FCV purchase cost decreases to that of an ICE vehicle. EV diffusion might be beneficial by 2060 depending on increases in gasoline prices and CO2 abatement costs.
    Keywords: Fuel cell vehicle; Electric vehicle; Cost benefit analysis; Sensitivity analysis
    JEL: D61 Q42 Q55 R49
    Date: 2015–02–01
  18. By: Heindl, Peter; Löschel, Andreas
    Abstract: This paper reviews the literature on distributional effects of energy and carbon taxation with focus on microsimulation models. Most studies find that direct energy and carbon taxation tends to be regressive. Regressive effects occur mostly with respect to taxation of electricity or space heating. Taxation of transportation fuels show less regressive, neutral, or even progressive effects. Adequate revenue recycling often allows for neutralisation or full elimination of regressive effects so that energy and carbon tax reforms can be progressive. Some studies find evidence for the existence of a double dividend. There seems to be an efficiency-equity trade-off in revenue recycling, i.e. whether to foster growth or to assist low-income households. While a large number of studies on advanced economies are available, there clearly is a gap with regard to evidence for developing countries. Another gap relates to the lack of documentation on the challenges of incorporating macroeconomic models and long-term modelling perspectives in microsimulation. Both aspects can be of great importance with respect to the design of green growth policies. Thoughtful incorporation of social considerations, including aspects of poverty in modelling approaches could enhance the existing instruments of exante policy assessments since poverty is a tangible concept which is well-known, understandable, and openly observable for citizens and policy makers.
    Keywords: Distributional Effects,Environmental Tax Reform,Green Growth,Energy Poverty,Microsimulation
    JEL: H23 H31 Q54
    Date: 2015
  19. By: Jean-François Fagnart (CEREC, Université Saint-Louis Bruxelles and IRES, UCLouvain.); Marc Germain (EQUIPPE, Université de Lille 3 and IRES, UCLouvain)
    Abstract: We analyse the transition of a decentralized economy whose energy supply switches progressively from non-renewable (NRE) to renewable energy (RE) sources. The two energies are perfect substitutes but RE production offers a lower Energy Return On Energy Invested(EROEI). The transition is characterized by a decreasing trend of the aggregate EROEI and by major changes both in the allocation of output between consumption and investment and in the allocation of capital between energy and final good productions. As a result, the energy transition may (and will usually) be characterized by a non-monotonic evolution of aggregate income and private consumption: after a peak and before the NRE exhaustion, the economy experiences a contraction. We analyze what affects 1) its magnitude and 2) the possibility of an ulterior recovery of income. Incidentally, a complementarity appears between a rapid development of RE production and the availability of NRE: the end of the NRE era puts a drag on the development of the RE production.
    Keywords: Energy transition, EROEI
    JEL: Q32
    Date: 2015–02
  20. By: World Bank Group
    Keywords: Environment - Climate Change Mitigation and Green House Gases Macroeconomics and Economic Growth - Climate Change Economics Macroeconomics and Economic Growth - Subnational Economic Development Public Sector Expenditure Policy Science and Technology Development - Science of Climate Change Public Sector Development
    Date: 2014
  21. By: Plambeck, Erica L. (Stanford University); Taylor, Terry A. (University of CA, Berkeley)
    Abstract: Deadly factory fires. Illegal pollution. Injured workers. Many brands have recently been tarnished by publicity of suppliers' labor and environmental violations. This paper provides guidance to buyers as to how they can motivate their suppliers to comply with labor and environmental standards. Obvious approaches (increasing auditing, making it more difficult for the supplier to deceive an auditor, publicizing negative audit reports) can be counterproductive. Less obvious approaches (squeezing the supplier's margin by reducing the price paid to the supplier or increasing wages for workers, precommitment to a low level of auditing) might better motivate supplier compliance effort. Even if the buyer ensures that the supplier's facility is compliant (e.g., through direct investment in the facility), the supplier may outsource some production of the buyer's order to unauthorized subcontractors, exposing the buyer to risk of brand damage. The results in the paper also apply to mitigation of unauthorized subcontracting.
    Date: 2014–03
  22. By: Sunar, Nur (University of NC); Plambeck, Erica (Stanford University)
    Abstract: A state with climate policy may impose a tax on imported products for greenhouse gas emissions that occur in production and transportation to its border (a so-called border adjustment). A buyer may voluntarily commit to offset its upstream supply chain emissions, with similar effect. When a process yields co-products in fixed proportions, how should emissions from the process be allocated among the co-products? We address that question from the perspective of a border adjustment policy maker and buyer, in turn. Emissions and a buyer's profit can increase due to border adjustment, or because a buyer is required to use a higher allocation or pay a higher tax (offset price) per unit emissions.
    Date: 2014–01
  23. By: Lili Mottaghi
    Keywords: Energy - Energy Demand Oil Refining and Gas Industry Macroeconomics and Economic Growth - Markets and Market Access Environment - Environment and Energy Efficiency Energy - Energy and Environment Industry
    Date: 2015–02
  24. By: Christopher Khawand
    Abstract: I demonstrate how scientific models of pollution processes can be leveraged in quasi-experimental econometric designs to credibly estimate the impacts of environmental quality on health or other outcomes while also improving precision and external validity over previous approaches. I simulate the geographic distribution of fine particulate matter (PM2.5) caused by wildfires for the entire continental United States during 2004-2010 using a set of scientific models of wildfire emissions and air pollution transport commonly used wildfire and air quality applications. Regressing observed concentrations of PM2.5 at pollution monitoring stations on simulated PM2.5 from wildfires, I find that wildfires can explain at least 15 percent of ambient ground-level PM2.5 and even larger fractions of toxic mercury and lead particulates. I then regress county-level health outcomes on station-measured PM2.5 using simualted wildfire PM2.5 as an instrumental variable. I find that a 10 microgram per cubic meter (approximately 2.3 standard deviation) increase in monthly PM2.5 concentration is associated with one additional premature death per 100,000 individuals. This effect is driven primarily by deaths from cardiovascular and respiratory diseases for individuals over age 65. With a control function approach, I find evidence that dose response is approximately linear below the U.S. ambient air quality standard for PM2.5. In addition, I find that in-utero exposure to PM2.5 is associated with higher rates of prematurity, lower birth weights, and changes in the sex ratio, which I interpret as evidence of fetal attrition. Finally, I show that the estimated health effects of PM2.5 are sensitive to the inclusion of controls for other pollutants. I present suggestive evidence that this sensitivity reflects a heterogeneous response to metallic particulates, which are known to be particularly detrimental to health. These findings contribute to a growing body of evidence on the health dangers of fine particulate matter.
    JEL: Q53 Q54 I18
    Date: 2015–02–28
  25. By: Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Wolfgang Buchholz (Department of Economics, University of Regensburg); Wolfgang Peters (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Reimund Schwarze; Aneta Ufert (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Patrick Gneuss (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Özgür Yildiz (Technische Universität Berlin Fakultät VII - Wirtschaft und Management Fachgebiet Umweltökonomie und Wirtschaftspolitik Sekretariat H 50, Straße des 17. Juni 135, 10623 Berlin)
    Abstract: Policy recommendations: Reciprocity and trust can facilitate multilateral agreements in various ways, if they are appropriately used:  Instruments for climate policy should be designed so that they are compatible with the principle of reciprocity.  Cost sharing and matching is recommended as these instruments increase the incentives for unilateral and multilateral climate protection activities.  A hybrid control mechanism consisting of unilateral reporting and an independent external verification proves to be the optimal strategy for fostering trust.  The current system based on national reporting should gradually be transformed into a MRV architecture based on external mechanisms.  Satellite-based monitoring is recommended, as it allows independent, external control of CO2 emissions at low cost and technical stability.
    Date: 2015–02
  26. By: Tapas Mishra; Mamata Parhi; Claude Diebolt; Prashant Gupta
    Abstract: We re-examine the frequency observed inverted U-Shaped relationship between income and environmental quality (Environmental-Kuznets-Curve, EKC) by introducing the roles of institutional quality and distributional heterogeneity. A panel quantile regression of 127 economies run over a period of four decades demonstrates that once endogeneity bias is corrected and heterogeneity in the effects of income and institutional quality is introduced, EKC tends to disappear at higher quantiles of emission but proves its existence at lower quantiles. The non-uniqueness of EKC is also confirmed by robustness checks where various instruments for institutional quality as well as an alternative measure of emission are introduced.
    Keywords: Income and environment, Endogeneity bias, Institutional heterogeneity, Instrumental variable, Panel quantile regression.
    JEL: Q56 C21 C23
    Date: 2015

This nep-ene issue is ©2015 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.