nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒04‒25
53 papers chosen by
Roger Fouquet
London School of Economics

  1. Electricity Networks Privatization in Australia: An Overview of the Debate By Rabindra Nepal; John Foster
  2. Renewable Energy and Negative Externalities: The Effect of Wind Turbines on House Prices By Martijn I. Dröes; Hans R.A. Koster
  3. Decision Making in Incomplete Markets with Ambiguity -- A Case Study of a Gas Field Acquisition By Lin Zhao; Sweder van Wijnbergen
  4. Second-Best Carbon Taxation in the Global Economy: The Green Paradox and Carbon Leakage Revisited By van der Ploeg, Frederick
  5. Preference Elicitation in Generalized Data Envelopment Analysis - In Search of a New Energy Balance in Japan By Soushi Suzuki; Peter Nijkamp; Piet Rietveld
  6. Detailed Data and Changes in Market Structure: The Move to Unmanned Gasoline Service Stations By Tadas Bruzikas; Adriaan R. Soetevent
  7. The Use and Misuse of Models for Climate Policy By Robert S. Pindyck
  8. The Consumption Discount Rate for the Distant Future (if we do not die out) By Koen Vermeylen
  9. Volatility Spillover between Oil and Stock Market Returns By B. Anand; Sunil Paul; M. Ramachandran
  10. Mercados de Capacidad y Confiabilidad en el Sector Eléctrico: Aspectos Conceptuales y Experiencias Internacionales. By Arturo Vásquez; Victor Ormeño
  11. Lying generators: Manipulability of centralized payoff mechanisms in electrical energy trade By David Csercsik
  12. Testing preference formation in learning design contingent valuation (LDCV) using advanced information and repetitivetreatments By Aravena, Claudia; Hutchinson, W. George; Carlsson, Fredrik; Matthews, David I
  13. Members, Joiners, Free-riders, Supporters By Erik Ansink; Cees Withagen
  14. Natural Gas Extraction, Earthquakes and House Prices By Hans R.A. Koster; Jos N. van Ommeren
  15. Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures By Hooi Hooi Lean; Michael McAleer
  16. Adoption of Electric Vehicle in the Netherlands – A Stated Choice Experiment By M. Bockarjova; P. Rietveld; J.S.A. Knockaert
  17. Innovate or imitate? Behavioural Technological Change By Cars Hommes; Paolo Zeppini
  18. Detailed data and changes in market structure: the move to unmanned gasoline service stations By Bruzikas, Tadas; Soetevent, Adriaan
  19. Institutions and return predictability in oil-exporting countries By Aramonte, Sirio; Jahan-Parvar, Mohammad; Shugarman, Justin
  20. The Influence of Environmental Concerns on Drivers’ Preferences for Electric Cars By Alexandros Dimitropoulos
  21. Non-Marginal Cost-Benefit Analysis and the Tyranny of Discounting By Koen Vermeylen
  22. The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses By John Baffes; M. Ayhan Kose; Franziska Ohnsorge; Marc Stocker
  23. Welfare Effects of Distortionary Tax Incentives under Preference Heterogeneity: An Application to Employer-provided Electric Cars By Alexandros Dimitropoulos; Jos N. van Ommeren; Paul Koster; Piet Rietveld†
  24. Forecasting the term structure of crude oil futures prices with neural networks By Jozef Barunik; Barbora Malinska
  25. Dynamics and Determinants of Energy Intensity in the Service Sector: A Cross-Country Analysis, 1980–2005 By Peter Mulder; Henri L.F. de Groot; Birte Pfeiffer
  26. Fixed Costs, Spillovers, and Adoption of Electric Connections By Barron, Manuel; Torero, Maximo
  27. Capacity Choice of Dams under Rivalry Use and Externalities By Harold Houba; Kim Hang Pham Do; Xueqin Zhu
  28. Análisis de la Evolución e Integración de los Mercados Internacionales de Gas Natural. By Arturo Vásquez; Raúl García; Erix Ruiz
  29. Regional Disparity of Embedded Carbon Footprint and its Sources in China: A Consumption Perspective By Jin Fan; Yanrui Wu; Xiumei Guo; Dingtao Zhao; Dora Marinova
  30. Strategic investment in merchant transmission: the impact of capacity utilization rules By Federico Boffa; Viswanath Pingali; Francesca Sala
  31. Modified Ramsey Discounting for Climate Change By Richard S.J. Tol
  32. Measuring the Rebound Effect with Micro Data By Bruno de Borger; Ismir Mulalic; Jan Rouwendal
  33. The Methodology of Modern Macroeconomics and the Descriptive Approach to Discounting By Koen Vermeylen
  34. Technological Change during the Energy Transition By Gerard van der Meijden; Sjak Smulders
  35. Targeted carbon tariffs. Carbon leakage and welfare effects By Christoph Böhringer; Brita Bye; Taran Fæhn; Knut Einar Rosendahl
  36. ASEAN Economic community and climate change By Ditya A Nurdianto; Budy P Resosudarmo
  37. Measuring transformation towards a green economy in Germany By Dr. Christian Lutz; Roland Zieschank; Dr. Thomas Drosdowski
  38. Forecasting Day-Ahead Electricity Prices: Utilizing Hourly Prices By Eran Raviv; Kees E. Bouwman; Dick van Dijk
  39. Carbon Lock-In: The Role of Expectations By Gerard van der Meijden; Sjak Smulders
  40. Vog: Using Volcanic Eruptions to Estimate the Health Costs of Particulates and SO2 By Timothy Halliday; John Lynham; Aureo de Paula
  41. A Target-Oriented Data Envelopment Analysis for Energy-Environment Efficiency Improvement in Japan By Soushi Suzuki; Peter Nijkamp; Piet Rietveld
  42. Monthly Report No. 10/2014 By Vasily Astrov; Vladimir Gligorov; Julia Grübler; Peter Havlik; Michael Landesmann; Sandra M. Leitner; Olga Pindyuk; Marek Rojicek; Roman Stöllinger
  43. Western Australia’s Domestic Gas Reservation Policy - The Elemental Economics By Kelly Neill
  44. Proving the old spell wrong: New African hydrocarbon producers and the 'resource curse' By Bressand, Albert
  45. No blessing, no curse? On the bene…fits of being a resource-rich southern region of Italy By Roberto Iacono
  46. The Impact of External Debt on Economic Growth:Empirical Evidence from Highly Indebted Poor Countries By Abu Siddique; E A Selvanathan; Saroja Selvanathan
  47. Resource Extraction in a Political Economy Framework By Karolina Ryszka
  48. Substitution between Cars within the Household By Bruno De Borger; Ismir Mulalic; Jan Rouwendal
  49. Buffer Effect and Price Effect of a Personal Carbon Trading Scheme By Jin Fan; Shanyong Wang; Yanrui Wu; Jun Li; Dingtao Zhao
  50. Cross-border spillovers from European gas infrastructure investment By Bouwmeester, Maaike; Scholtens, Bert
  51. Carbon Neutrality of Hardwood and Softwood Biomass: Issues of Temporal Preference By Craig M.T. Johnston; G. Cornelis van Kooten
  52. Adaptation for Mitigation By Masako Ikefuji; Jan Magnus; Hiroaki Sakamoto
  53. On the Effectiveness of Feed-in Tariffs in the Development of Photovoltaic Solar By Elbert Dijkgraaf; Tom van Dorp; Emiel Maasland

  1. By: Rabindra Nepal (School of Economics, The University of Queensland); John Foster (School of Economics, The University of Queensland)
    Abstract: The debate on electricity networks privatization in the Australian National Electricity Market is an important public policy concern but remains unsettled. This article reviews and compares the economic performance between the privately and state-owned electricity networks in Australia across three dimensions encompassing prices, quality and investment. The comparative analysis suggests that privately owned networks are not worse off than the state-owned networks in terms of performance. However, international empirical evidences indicate that the efficiency gains to consumers from electricity networks privatization will depend on the underlying regulatory regime and regulatory institutional framework. The long-term concerns on future investments, security of supply, climate change and economic regulation of networks will continue to prevail once the short-term efficiency gains from privatization are exhausted. These concerns imply that the role of the state will still be significant, although transformed, even after electricity networks privatization raising questions on the motives of privatization.
  2. By: Martijn I. Dröes (University of Amsterdam, VU University Amsterdam, and the Amsterdam School of Real Estate, the Netherlands); Hans R.A. Koster (VU University Amsterdam)
    Abstract: In many countries, wind turbines are constructed as part of a strategy to reduce dependence on fossil fuels. In this paper, we measure the external effect of wind turbines on the transaction prices of nearby houses. A unique house price dataset covering the period 1985-2011 is used, including the exact location of all wind turbines built in the Netherlands. We find that house prices within a two kilometer radius of a turbine, after it has been constructed, decrease by about 1.4 to 2.3 percent on average. We find anticipation effects up to three years in advance of the construction of a wind turbine. We provide further evidence that the external costs of a wind turbine are at least 10 percent of its construction cost.
    Keywords: renewable energy; wind turbines; externalities; house prices
    JEL: R31 Q42 Q15 L94
    Date: 2014–09–18
  3. 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
  4. By: van der Ploeg, Frederick
    Abstract: Unilateral second-best carbon taxes are analysed in a two-period, two-country model with international trade in final goods, oil and bonds. Acceleration of global warming resulting from a future carbon tax is large if the price elasticities of oil demand are large and that of oil supply is small. The fall in the world interest rate weakens this weak Green Paradox effect, especially if intertemporal substitution is weak. Still, green welfare rises if the fall in oil supply and cumulative emissions is strong enough. If the current carbon tax is too low, the second-best future carbon tax is set below the first best to mitigate adverse Green Paradox effects. Unilateral second-best optimal carbon taxes exceed the first-best taxes due to an import tariff component. The intertemporal terms of trade effects of the future carbon tax increase current and future tariffs and those of the current tax lower the current tariff. Finally, carbon leakage and globally altruistic and unilateral second-best optimal carbon taxes if non-Kyoto oil importers do not price carbon or price it too low are analysed in a three-country model of the global economy.
    Keywords: asset tax; carbon leakage; global altruism; Green Paradox; intertemporal terms of trade; second best; tax incidence; unburnt fossil fuel; unilateral carbon taxes
    JEL: D62 D90 H22 H23 Q31 Q38 Q54
    Date: 2015–04
  5. By: Soushi Suzuki (Hokkai-Gakuen University); Peter Nijkamp (VU University Amsterdam); Piet Rietveld (VU University Amsterdam)
    Abstract: The recent dramatic change in energy supply in Japan has prompted a search for a new energy-environment-economic efficiency policy, in which a compromise has to be found between a sufficient supply of energy resources, the development of low carbon emission technology, and a continuation of economic growth. The prefectures in Japan – 46 in total (excluding Tokyo) – are regarded as the institutional agents or decision-making units (DMUs) which are responsible for the design of a new sustainable energy balance in these regions. The main challenge is now to design an efficient energy-environment-economic system. The present paper aims to develop a balanced decision-support tool for achieving an efficient energy supply in all Japanese prefectures. To that end, a new variant of Data Envelopment Analysis (DEA) is presented, which is characterized by two integrated features: (i) the use of a general Euclidean Distance Method (EDM) to achieve the most appropriate movement towards the efficiency frontier surface (in contrast to the standard radial movement, leading to a uniform proportional input reduction – or uniform proportional output increase); (ii) the incorporation of preference-based (PB) adjustments in efficiency strategies regarding the input reduction allocation – or the output increase allocation – of DMUs in order to balance rigorous efficiency decisions with political priorities at the regional level. This paper illustrates this new methodology by means of an application to prefectural energy efficiency strategies in Japan.
    Keywords: Data Envelopment Analysis (DEA); Euclidean Distance Minimization (EDM); Preference Based (PB); Energy-Environment-Economic efficiency
    JEL: C00 R58 Q48
    Date: 2013–10–10
  6. By: Tadas Bruzikas (University of Groningen); Adriaan R. Soetevent (University of Groningen, the Netherlands)
    Abstract: We illustrate the impact of detailed data in empirical economic research by considering how the increased data availability has changed the scope and focus of studies on retail gasoline pricing. We show how high-volume, high-frequency price data help to identify and explain long-term trends using original data for the Dutch retail gasoline market. We find that 22% of the observed increase in the highway/off-highway price gap can be explained by the trend towards more unmanned stations; another 13% can be explained by major-to-non-major re-brandings. In one of the first applications of event study analysis to non-financial price data, we show that the adjustment to the new, lower price level is almost immediate in case of manned-to-unmanned conversions but takes one to two months in case of major-to-non-major re-brandings. The impact of both events is asymmetric with no measurable price impact of changes in the opposite direction.
    Keywords: retail gasoline pricing, big data, competitive spillovers, event study analysis
    JEL: L13 L81
    Date: 2014–09–16
  7. By: Robert S. Pindyck
    Abstract: In recent articles, I have argued that integrated assessment models (IAMs) have flaws that make them close to useless as tools for policy analysis. IAM-based analyses of climate policy create a perception of knowledge and precision that is illusory, and can fool policy-makers into thinking that the forecasts the models generate have some kind of scientific legitimacy. But some have claimed that we need some kind of model, and that IAMs can be structured and used in ways that correct for their shortcomings. For example, it has been argued that although we know little or nothing about key relationships in the model, we can get around this problem by attaching probability distributions to various parameters and then simulating the model using Monte Carlo methods. I argue that this would buy us nothing, and that a simpler and more transparent approach to the design of climate change policy is preferable. I briefly outline what that approach would look like.
    JEL: D81 Q51 Q54
    Date: 2015–04
  8. By: Koen Vermeylen (University of Amsterdam)
    Abstract: Gollier and Weitzman (2010) show that if future consumption discount rates are uncertain and persistent, the consumption discount rate should decline to its lowest possible value for events in the most distant future. In this paper, I argue that the lowest possible growth rate of consumption per capita in the distant future is zero (assuming that humans do not die out). Substituting in the Ramsey rule shows then that the lowest possible consumption discount rate for the distant future is equal to the lowest possible utility discount rate of the population (according to the descriptive approach to parameterizing the Ramsey rule) or to the utility discount rate of the social evaluator (according to the prescriptive approach). In both cases, there are strong reasons to set the consumption discount rate for the distant future at a value which is virtually zero.
    Keywords: discount rate, climate change, cost-benefit analysis, prescriptive, descriptive
    JEL: O4 Q5
    Date: 2013–12–16
  9. By: B. Anand (Department of Economics, Pondicherry University, Puducherry); Sunil Paul (Madras School of Economics); M. Ramachandran (Department of Economics, Pondicherry University, Puducherry)
    Abstract: In the recent past, international crude oil markets have witnessed significant fluctuations and such fluctuations tend to have ramifications on the economy as a whole. In this regard, this paper makes an attempt to model such volatility spillover from oil price returns to the returns `of the Indian stock market. The study also makes a comparative analysis of the volatility transmission mechanism between the periods prior to and after the eruption of global financial crisis. The empirical analysis employs BEKK parameterization of bivariate GARCH model and various tools of continuous wavelet transform to understand the dynamics of volatility spillover between these two markets. The empirical evidence suggests that the fluctuations in the crude oil price returns exert significant impact on the volatility of stock market returns. More importantly, such volatility spillovers are found to be much stronger during the post financial crisis period and the results obtained from the wavelet analysis indicate the dominance of high frequency components in the oil-stock market relationship.
    Keywords: Crude oil, Volatility Spillover, BEKK, Continuous Wavelet Transform
    JEL: C32 C1 E0
    Date: 2014–11
  10. By: Arturo Vásquez (Oficina de Estudios Económicos, Osinergmin); Victor Ormeño (Gerencia Adjunta de Regulación Tarifaria, Osinergmin)
    Abstract: En el presente Documento de Trabajo se desarrollan los principales elementos a considerar en el diseño de los Mercados de Capacidad y Confiabilidad para el suministro de electricidad. Se parte de una revisión teórica de los aspectos de la confiabilidad y cómo este objetivo ha tratado de lograrse mediante diferentes mecanismos. En un primer momento, se discute la problemática de los mercados de solo energía, para revisar luego las ventajas y dificultades de los diferentes mecanismos establecidos en el pasado para solucionar el problema de confiabilidad, en particular de la “adecuación” de la oferta de generación (pagos por capacidad, y reservas estratégicas). La descripción de cada uno de estos esquemas irá acompañada de la revisión de los mecanismos adoptados en nuestro país, y experiencias internacionales (Reino Unido, España, Francia y Suecia). El Documento otorga especial interés a los denominados “mercados de capacidad”, los cuales son mecanismos de mercado de reciente implementación en algunos sistemas eléctricos del mundo (Francia, PJM, ISO-NE, Colombia). En estos últimos, el precio de la capacidad se determina por la interacción entre la oferta y la demanda de capacidad, creándose así un mercado específico de este producto. Los mercados de capacidad pueden ser implementados de manera descentralizada (obligaciones de capacidad), o realizarse de forma centralizada (a través de subastas encargadas al operador del sistema). Finalmente, tomando en cuenta la experiencia de los mercados de capacidad analizados, se presenta una serie de recomendaciones a considerar para la implementación de este tipo de mercado en el Perú.
    JEL: L51 L94 Q48
    Date: 2014–12
  11. By: David Csercsik (Momentum Game Theory Research Group, Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Pázmány Péter Catholic University)
    Abstract: Optimal power flow (OPF) problems are focussing on the question how a power transmission network can be operated in the most economic way. The general aim in such scenarios is to optimize generator scheduling in order to meet consumption re-quirements, transmission constraints and to minimize the overall generation cost and transmission losses. We use a simple lossless DC load flow model for the description of the transmission network, and assume linearly decreasing marginal cost of generators with different parameters for each generator. We consider a scenario in which the generation values regarding the OPF are calculated by a central authority who is aware of the network parameters and production characteristics. Furthermore, we assume that a central mechanism is applied for the determination of generator payoffs in order to cover their generation costs and assign them with some profit. We analyze the situation when generators may provide false information about their production parameters and thus manipulate the OPF computation in order to potentially increase their resulting profit. We consider two central payoff mechanisms and compare their vulnerability for such manipulations and analyze their effect on the total social cost.
    Keywords: networks, manipulability, power transmission, optimal power flow
    JEL: C71 L14 L94
    Date: 2015–02
  12. By: Aravena, Claudia (Queen's University Belfast); Hutchinson, W. George (Queen's University Belfast); Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Matthews, David I (Queen's University Belfast)
    Abstract: Policymakers have largely replaced Single Bounded Discrete Choice (SBDC) valuation by the more statistically efficient repetitive methods; Double Bounded Discrete Choice (DBDC) and Discrete Choice Experiments (DCE). Repetitive valuation permits classification into rational preferences: (i) a-priori well-formed; (ii) consistent non-arbitrary values “discovered” through repetition and experience; (Plott, 1996; List 2003) and irrational preferences; (iii) consistent but arbitrary values as “shaped” by preceding bid level (Tufano, 2010; Ariely et al., 2003) and (iv) inconsistent and arbitrary values. Policy valuations should demonstrate behaviorally rational preferences. We outline novel methods for testing this in DBDC applied to renewable energy premiums in Chile.<p>
    Keywords: Contingent valuation; double bounded discrete choice; repetitive learning; advanced information learning; bid dependency; theories of preference formation
    JEL: D03 Q40 Q51
    Date: 2015–04
  13. By: Erik Ansink (VU University Amsterdam, the Netherlands); Cees Withagen (VU University Amsterdam, the Netherlands)
    Abstract: We augment the standard cartel formation game from non-cooperative coalition theory, often applied in the context of international environmental agreements on climate change, with the possibility that singletons support coalition formation without becoming coalition members themselves. Rather, their support takes the form of a monetary transfer to the coalition, which increases the members' payoffs, and thereby provides an incentive for other singletons to join the coalition. We show that, under mild conditions on the costs and benefits of contributing to the public good (i.e. abatement of CO<SUB>2</SUB> emissions), supporters exist in equilibrium. The existence of supporters increases the size of stable coalitions, increases abatement of CO<SUB>2</SUB> emissions, and increases payoffs to each of four types of agents: members, joiners, free-riders, and supporters. Importantly, this result does not require commitment.
    Keywords: Coalition formation; Public goods; Support; Transfers; International Environmental Agreements
    JEL: C72 D02
    Date: 2015–01–27
  14. By: Hans R.A. Koster (VU University Amsterdam, the Netherlands); Jos N. van Ommeren (VU University Amsterdam, the Netherlands)
    Abstract: The production of natural gas is strongly increasing around the world. Long-run negative external effects of extraction are understudied and often ignored in social) cost-benefit analyses. One important example is that natural gas extraction leads to soil subsidence and subsequent induced earthquakes that may occur only after a couple of decades. We show that induced earthquakes that are noticeable to residents generate substantial non-monetary economic effects, as measured by their effects on house prices, also when house owners are fully compensated for damage to their houses. To address the issue that earthquakes do not occur randomly over space, we use temporal variation in the occurrence of noticeable earthquakes while controlling for the occurrence of earthquakes that cannot be felt by house owners. We find that earthquakes that are noticeable with peak ground velocities of above half a cm/s lead to price decreases of 1.2 percent. The total non-monetary costs of induced earthquakes for Groningen are about € 150 million, about € 500 per household. The results also indicate that the non-monetary costs of are in the same order of magnitude as the monetary damage costs.
    Keywords: natural gas extraction, earthquakes, house prices, hedonic price analysis
    JEL: Q54 Q32 R30 R33
    Date: 2015–03–23
  15. By: Hooi Hooi Lean (Universiti Sains, Malaysia;); Michael McAleer (National Tsing Hua University, Taiwan; Erasmus University Rotterdam, The Netherlands; and Complutense University of Madrid, Spain)
    Abstract: This paper examines risk-averse and risk-seeking investor preferences for oil spot and futures prices by using the mean-variance (MV) criterion and stochastic dominance (SD) approach. The MV findings cannot distinguish between the preferences of spot and futures markets. However, the SD tests show that spot dominates futures in the downside risk, while futures dominate spot in the upside profit. On the other hand, the SD findings suggest that spot dominates futures in downside risk, while futures dominate spot in upside profit. Risk-averse investors prefer investing in the spot index. Risk seekers are attracted to the futures index to maximize their expected utility but not expected wealth in the entire period, as well as for both the OPEC and Iraq War sub-periods. The SD findings show that there is no arbitrage opportunity between the spot and futures markets, and these markets are not rejected as being efficient.
    Keywords: Stochastic dominance, mean-variance, risk averter, risk seeker, futures market, spot market
    JEL: C14 G12 G15
    Date: 2013–09–05
  16. By: M. Bockarjova (VU University Amsterdam); P. Rietveld (VU University Amsterdam); J.S.A. Knockaert (VU University Amsterdam)
    Abstract: In this paper, we apply a dynamic innovation diffusion framework to model adoption of full electric vehicles where we explicitly distinguish three major phases of adoption: introduction, growth and maturity. We combine this approach with an SP study to elicit individual preferences for conventional, hybrid and full electric vehicles. We apply a nested logit model to estimate the preferences for EVs based on the total costs of ownership approach that includes monetary and non-monetary costs of owing a vehicle. With negative estimates of WTP for hybrid vehicles (of about €900 on a yearly basis), our results suggest abolishment of subsidization of hybrid vehicles as they potentially crowd out EV adoption. Besides, EVs need to be subsidized on average at €2,000 per year, and this amount is decreasing in the process of vehicle adoption. Time costs associated with rapid charging are a substantial hindrance to EV adoption with average value of time of €63 per hour, increasing for each subsequent consumer segment from €48 to €122 per hour. Environmental costs of CO2 reductions are valued far above the market average at €160 per ton, but determine EV choices only at a later stage of adoption. Finally, towing potential is valued on average at €540 per year and it is about the same for all consumer segments throughout the adoption phases. Policy implications are discussed involving a mix of structural and monetary incentives.
    Keywords: stated preferences, revealed preferences, non-monetary costs, innovation
    JEL: C01 C33 D12 D49 D91 R41
    Date: 2013–07–30
  17. By: Cars Hommes (CeNDEF, University of Amsterdam); Paolo Zeppini (School of Innovation Sciences, Eindhoven University of Technology)
    Abstract: We propose a behavioural model of technological change with evolutionary switching between boundedly rational costly innovators and free imitators, and study the endogenous interplay of innovation decisions, market price dynamics and technological progress. Innovation and imitation are strategic substitutes and exhibit negative feedback. Endogenous technological change is the cumulative outcome of innovation decisions. There are three scenarios: market breakdown, Schumpeterian rents and learning curves. The latter is characterized by an increasing fraction of innovators when demand is elastic, while inelastic demand allows technological progress with shrinking innovation effort. Model simulations are compared to empirical data of two industrial sectors.
    Keywords: discrete choice, innovation patterns, learning curves, switching behavior
    JEL: C62 C73 D21 O33
    Date: 2013–07–26
  18. By: Bruzikas, Tadas; Soetevent, Adriaan (Groningen University)
    Date: 2014
  19. By: Aramonte, Sirio (Board of Governors of the Federal Reserve System (U.S.)); Jahan-Parvar, Mohammad (Board of Governors of the Federal Reserve System (U.S.)); Shugarman, Justin (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: We study whether stock market returns in oil-exporting countries can be predicted by oil price changes, and we investigate the link between predictability and the quality of each country's institutions. Returns are predictable for half the countries we consider, and predictability is stronger when institutional quality is lower. We argue that the relation between predictability and institutional quality reflects the preference of countries with weaker institutions to consume oil windfalls locally rather than smooth out the impact of windfalls by, for instance, investing the proceeds through a sovereign wealth fund.
    Keywords: Country studies; Quality of institutions; Return predictability
    JEL: G12 O16 O50
    Date: 2015–02–18
  20. By: Alexandros Dimitropoulos (VU University Amsterdam)
    Abstract: We examine the influence of drivers’ environmental concerns on their preferences for different types of plug-in electric vehicles (PEVs). Our empirical approach is built around the results of a large-scale survey among Dutch drivers, where preferences for electric vehicles are elicited through a choice experiment and environmental concerns are reflected in individual responses to Likert-type questions. On this basis, we develop advanced latent class models to study preference heterogeneity and its link to drivers’ socio-demographic background and environmental concerns. We find that environmental concerns are an important predictor of class membership and that highly concerned drivers tend to cluster in classes with a positive stand towards PEVs. High environmental concerns are positively associated with driver’s age and education, while negatively related to d river’s household income.
    Keywords: Latent class, Latent variable, Environmental concern, Electric vehicle, Plug-in hybrid
    JEL: D12 O33 Q58 R41
    Date: 2014–09–22
  21. By: Koen Vermeylen (University of Amsterdam)
    Abstract: This paper uses the Kaldor-Hicks compensation principle to compute the present value (PV) of a non-marginal future event. Three theoretical results stand out: First, decreasing returns to capital create a wedge between the PV of future generations' willingness to pay (WTP) and the PV of their willingness to accept compensation (WTA); second, the discount rates implicit in the computation of the PVs are endogenous, and rising (declining) over time for the future generations' WTP (WTA); and third, decreasing returns to capital may make it impossible to compensate future generations according to their WTA, effectively defeating the tyranny of discounting. A back-of-the-envelope calibration suggests that this last result is realistic in the case of climate change. A cost-benefit analysis based on the Kaldor-Hicks compensation principle may therefore be impossible if futu re generations are entitled to a world without climate change; and an environmental trust fund - no matter how large it is - may be insufficient to adequately compensate future generations.
    Keywords: climate change, cost-benefit analysis, discounting, WTP, WTA
    JEL: D61 E13 H43 Q51 Q54
    Date: 2013–12–16
  22. By: John Baffes (World Bank, Development Prospects Group); M. Ayhan Kose (World Bank, Development Prospects Group); Franziska Ohnsorge (World Bank, Development Prospects Group); Marc Stocker (World Bank, Development Prospects Group)
    Abstract: Following four years of relative stability at around $105 per barrel, oil prices have declined sharply since June 2014. This paper presents a comprehensive analysis of the sources of the recent decline in prices, and examines its macroeconomic, financial and policy implications. The recent drop in prices is a significant, but not an unprecedented event as it has some significant parallels with the price collapse in 1985‐86. The recent decline has been driven by a number of factors: several years of upward surprises in the production of unconventional oil; weakening global demand; a significant shift in OPEC policy; unwinding of some geopolitical risks; and an appreciation of the U.S. dollar. Although the relative importance of each factor is difficult to pin down, OPEC’s renouncement of price support and rapid expansion of oil supply from unconventional sources appear to have played a crucial role since mid‐2014. The oil price drop will lead to substantial income shifts from oil exporters to oil importers resulting in a net positive effect for global activity over the medium term. Although several factors could counteract its impact on global growth and inflation, the drop in oil prices will pose significant challenges for monetary, fiscal, and structural policies.
    Keywords: commodity prices, 2014 oil price decline, macroeconomic implications, supply factors, demand factors, unconventional oil production, global output, and global inflation.
    JEL: Q40 Q41 Q43 F40 E32 E62
    Date: 2015–04
  23. By: Alexandros Dimitropoulos; Jos N. van Ommeren; Paul Koster; Piet Rietveld† (VU University Amsterdam)
    Abstract: This paper presents an approach for the estimation of welfare effects of tax policy changes under heterogeneity in consumer preferences. The approach is applied to evaluate the welfare effects of current tax advantages for electric vehicles supplied as fringe benefits by employers. Drawing on stated preferences of Dutch company car drivers, we assess the short-run welfare effects of changes in the taxation of the private use of these vehicles. We find that the welfare gain of a marginal increase in the taxation of electric company cars is substantial and even outweighs the marginal tax revenue raised.
    Keywords: Social welfare, Latent class, Stated preference, Company car, Electric vehicle, Plug-in hybrid
    JEL: D12 H23 H24 H31 O33 Q58 R41
    Date: 2014–06–02
  24. By: Jozef Barunik; Barbora Malinska
    Abstract: The paper contributes to the rare literature modeling term structure of crude oil markets. We explain term structure of crude oil prices using dynamic Nelson-Siegel model, and propose to forecast them with the generalized regression framework based on neural networks. The newly proposed framework is empirically tested on 24 years of crude oil futures prices covering several important recessions and crisis periods. We find 1-month, 3-month, 6-month and 12-month-ahead forecasts obtained from focused time-delay neural network to be significantly more accurate than forecasts from other benchmark models. The proposed forecasting strategy produces the lowest errors across all times to maturity.
    Date: 2015–04
  25. By: Peter Mulder (VU University Amsterdam); Henri L.F. de Groot (VU University Amsterdam); Birte Pfeiffer (German Institute of Global and Area Studies Institute for African Affairs (IAA), Hamburg, Germany)
    Abstract: We present a detailed analysis of energy intensity developments across 23 service sectors in 18 OECD countries over the period 1980−2005. We find that the shift towards a service economy has contributed to lower overall energy intensity levels in the OECD, but this contribution would have been considerably larger if the service sector had realized the same degree of energy efficiency improvements as the manufacturing sector. In most OECD countries actual energy intensity levels in the service sector tend to decrease relatively slow, especially after 1995. If we control this trend for the impact of structural changes within the services sector – by means of a decomposition analysis – we find that in about one-third of the OECD countries, energy intensity levels in the service sector have increased over time. The impact of structural changes on aggregate energy i ntensity dynamics in the service sector has increased considerably after 1995, highlighting a relatively poor energy efficiency performance within a wide range of service sectors. We show that the introduction of Information and Communication Technology (ICT) plays a potentially important role here. Using spatial panel data regression analysis, we find a limited role for energy prices in explaining variation in energy productivity, casting doubt on the effectiveness of price instruments to enhance energy efficiency in the service sector. In contrast, climate conditions have a clear impact on energy productivity, especially the number of heating days.
    Keywords: energy intensity, convergence, decomposition, sectoral analysis, service sector
    JEL: O13 O47 O5 Q43
    Date: 2013–10–22
  26. By: Barron, Manuel; Torero, Maximo
    Abstract: We exploit exogenous variation in the price of connection fees to study the process of adoption of for formal connection to the electric grid in northern El Salvador. This variation, generated by randomly allocating discount vouchers among households, also generated exogenous variation in the share of neighbors receiving a discount ("voucher intensity"). We find that discount vouchers accelerated demand for formal connections, especially among households with an informal connection at baseline. We provide evidence that voucher intensity did not crowd out formal connections by facilitating informal access to the grid. Finally, we show that the electric utility could increase its customer base, revenue flows and profits by sharing part of the connection fee in the early years of an electrification project.
    Keywords: Rural Electrification Spillovers Fixed Costs Adoption
    JEL: O13 O33
    Date: 2015–02–27
  27. By: Harold Houba (VU University Amsterdam, the Netherlands); Kim Hang Pham Do (Massey University, New Zealand); Xueqin Zhu (Wageningen University, the Netherlands)
    Abstract: This paper studies the relation between optimal dam capacity and water management under rivalry uses and externalities. We extend the hydropower generation model, based on Haddad (2011), by including the competing use of water resource, non-linear building cost of dam capacity and externalities in a welfare optimization model. We obtain the optimal dam capacity for multi-functional dams such as providing infrastructure for industrial and households water use, conjunctive use of hydropower generation and irrigation; storing water in the wet season for use in the dry season, and mitigating flooding damages. The optimal solution shows that optimal dam capacity is characterized by the marginal benefits of hydropower generation, the marginal costs of flooding damages, and the constraining factors. Moreover, the optimal water management can be achieved by using derived sea sonal prices in a decentralized manner.
    Keywords: OR in environment and climate change, river-basin management, dam capacity, welfare optimization, externalities
    JEL: C71 C72 D62
    Date: 2014–10–30
  28. By: Arturo Vásquez (Oficina de Estudios Económicos, Osinergmin); Raúl García (Oficina de Estudios Económicos, Osinergmin); Erix Ruiz (Oficina de Estudios Económicos, Osinergmin)
    Abstract: En este documento de trabajo se realiza un análisis de la evolución de los mercados internacionales de gas natural y de los procesos de integración que estarían ocurriendo en los últimos años. Se discuten las principales características de este mercado en las regiones de Norte América, Europa y Asia (Japón/Corea), las más importantes en términos de producción, consumo e infraestructura relacionada con esta fuente de energía. Se analiza también la región de América Latina poniendo énfasis en las características del diseño de los marcos regulatorios en algunos países y las iniciativas de integración regional. También se discuten, a partir del análisis de Brito y Hartley (2007), los factores que pueden contribuir a modificar la estructura actual del mercado mundial del gas natural a través del desarrollo del LNG. Adicionalmente, se analizan brevemente las implicancias del incremento en las reservas de gas natural a través de fuentes no convencionales (shale gas). Posteriormente, y con el objetivo de analizar los niveles de integración entre los mercados regionales de gas natural, se plantean dos aproximaciones. La primera que utiliza el Análisis de Componentes Principales (ACP) y la segunda que utiliza el análisis de cointegración a través de un Vector de Corrección de Errores (VEC), dentro del marco propuesto por Johansen (1995). En ambas aproximaciones se utiliza información sobre los precios de importación para los principales mercados regionales. Usando ambas metodologías, los resultados muestran evidencia de un proceso de integración entre los mercados europeo y asiático. Sin embargo, estos mercados aún no se encontrarían integrados con el mercado norteamericano.
    JEL: C32 F14 L95
    Date: 2013–12
  29. By: Jin Fan (School of Management, University of Science and Technology of China); Yanrui Wu (Business School, University of Western Australia); Xiumei Guo (Curtin University Sustainability Policy Institute, Curtin University of Technology); Dingtao Zhao (Curtin University Sustainability Policy Institute, Curtin University of Technology); Dora Marinova (Curtin University Sustainability Policy Institute, Curtin University of Technology)
    Abstract: Carbon emission reduction could be achieved through extensive cooperation between relevant groups such as businesses, governments and consumers. Generally, carbon emissions stem from consumer behavior. To tackle the increasingly serious energy crisis and climate change in China, it is thus vital to control carbon emissions generated by the country’s urban consumers. From a consumption perspective, we utilize a self-organizing feature map (SOFM) model to analyze the spatial differentiation of per capita embedded carbon footprint (ECF) in urban China. We found that the spatial differentiation is significant with the per capita ECF of the east coastal area at a high level and that per capita disposable income is the key factor affecting ECF. Based on these findings, potential business opportunities to develop low-carbon products are discussed.
    Date: 2015
  30. By: Federico Boffa (Free University of Bolzano & IEB); Viswanath Pingali (Indian Institute of Management Ahmedabad); Francesca Sala (Competition and Markets Authority)
    Abstract: In this paper we look at the relative merits of two capacity utilization regimes in the merchant electricity transmission network: Must offer (Mo) where the entire capacity installed is made available for transmission and Non Must Offer (NMo) where some capacity could be withheld. We look at two specific cases: (i) Demand for transmission varies across time, and (ii) Vertical integration is allowed between investors in transmission network and electricity generators. In the case of time-varying demand under Mo, we find that a monopolist may underinvest in transmission when compared to NMo, although NMo may lead to more capacity withholding. In the case of vertical integration, we find that when the market power is with the generators of the exporting node, without vertical integration no welfare-enhancing merchant investment would occur. Further, if the generators in the importing node have market power, which of the two regimes is welfare enhancing depends on the parameter values. In case vertical integration is better, then Mo is better than NMo. Finally, we also argue that the incentive to collude among various transmission network investors is mitigated with Mo in place.
    Keywords: Electricity transmission, merchant lines, capacity utilization, vertical integration, collusion
    JEL: L94 D24
    Date: 2015
  31. By: Richard S.J. Tol (University of Sussex, United Kingdom; VU University Amsterdam, The Netherlands)
    Abstract: The Ramsey rule for the consumption rate of discount assumes a transfer of money of a (representative) agent at one point in time to the same agent at another point in time. Climate policy (implicitly) transfers money not just over time but also between agents. I propose three alternative modifications of the Ramsey rule to account for this. Taking the Ramsey rule as given, I derive an intuitively clear but ad hoc modification. Using the assumptions underlying the Ramsey rule, I derive a consistent but more elaborate modification. If the discount rate is differentiated by victim, the consistent modified Ramsey rule is simpler and identical to regional equity weights. I apply the modified Ramsey rules to estimates of the marginal damage costs of carbon dioxide emissions. The results confirm that optimal climate policy has differentiated carbon taxes. Results also show that the standard Ramsey rule drastically underestimates the social cost of carbon.
    Keywords: Climate change, social cost of carbon, discount rate, Ramsey rule, equity
    JEL: H43 D63 Q54
    Date: 2013–09–09
  32. By: Bruno de Borger (University of Antwerp, Belgium); Ismir Mulalic (Technical University of Denmark, Denmark); Jan Rouwendal (Faculty of Economics and Business Administration, VU University Amsterdam, the Netherlands)
    Abstract: We provide estimates of the rebound effect for car transport in Denmark, using a rich data set with individual household data on car use, fuel efficiency, and car as well as household characteristics. A demand model is estimated in first differences; the availability of households in the sample that replaced their car during the period of observation combined with information on their driving behaviour before and after the car switch allows us to identify the rebound effect. Endogeneity is taken into account by using appropriate instruments. Results include the following. First, we reject the 'conventional' formulation in which only fuel cost per kilometre matters. Second, the selection equation confirms that higher fuel prices induce households to switch car. Third, the results suggest the presence of a rebound effect that is on the lower end of the estimates available in the literature. Specifically, our best estimate of the rebound effect is some 7.5%-10%. Fourth, the fuel price sensitivity of the demand for kilometres appears to be declining with household income, but we do not find a significant impact of income on the rebound effect. Finally, simulation results indicate that the small rebound effect and changes in car characteristics in response to higher fuel prices imply that -- compared to the reference scenario -- higher fuel prices lead to a substantial reduction in both the demand for kilometres and in demand for fuel.
    Keywords: The rebound effect, fuel efficiency, first difference models
    JEL: D01 C02
    Date: 2015–03–23
  33. By: Koen Vermeylen (University of Amsterdam)
    Abstract: Critics of modern macroeconomics often raise concerns about unwarranted welfare conclusions and data mining. This paper illustrates these concerns with a thought experiment, based on the debate in environmental economics about the appropriate discount rate in climate change analyses: I set up an economy where a social evaluator wants to determine the optimal time path of emission levels, and seeks advice for this from an old-style neo-classical macroeconomist and a new neo-classical (modern) macroeconomist; I then describe how both economists analyze the economy, their policy advice, and their mistakes. I then use the insights from this thought experiment to point out some pitfalls of the modern macroeconomic methodology.
    Keywords: modern macroeconomics, methodology, descriptive, prescriptive, discount rate
    JEL: B22 B41 E13 O44 Q52 Q54
    Date: 2013–12–16
  34. By: Gerard van der Meijden (VU University Amsterdam); Sjak Smulders (Tilburg University, the Netherlands)
    Abstract: The energy transition from fossil fuels to alternative energy sources has important consequences for technological change and resource extraction. We examine these consequences by incorporating a non-renewable resource and an alternative energy source in a market economy model of endogenous growth through expanding varieties. During the energy transition, technological progress is non-monotonic over time: it declines initially, starts increasing when the economy approaches the regime shift, and jumps down once the resource stock is exhausted. A moment of peak-oil does no longer necessarily occur, and simultaneous use of the resource and the alternative energy source will take place if the return to innovation becomes too low.
    Keywords: Alternative energy sources, endogenous growth, energy transition, non-renewable resources, technological change
    JEL: O30 Q32 Q42 Q56
    Date: 2014–08–18
  35. By: Christoph Böhringer; Brita Bye; Taran Fæhn; Knut Einar Rosendahl (Statistics Norway)
    Abstract: Climate effects of unilateral carbon policies are undermined by carbon leakage. To counteract leakage and increase global cost-effectiveness carbon tariffs can be imposed on the emissions embodied in imports from non-regulating regions. We present a theoretical analysis on the economic incentives for emission abatement of producers subjected to carbon tariffs. We quantify the impacts of different carbon tariff designs by an empirically based multi-sector, multi-region CGE model of the global economy. We find that firm-targeted tariffs can deliver much stronger leakage reduction and higher efficiency gains than tariff designs operated at the industry level. In particular, because the exporters are able to reduce their carbon tariffs by adjusting emissions, their competitiveness and the overall welfare of their economies will be less randomly and less adversely affected than in previously studied carbon tariff regimes. This beneficial distributional impact could facilitate a higher degree of legitimacy and legality of carbon tariffs.
    Keywords: carbon leakage; border carbon adjustment; carbon tariffs; computable general equilibrium (CGE)
    JEL: Q43 Q54 H2 D61
    Date: 2015–03
  36. By: Ditya A Nurdianto; Budy P Resosudarmo
    Abstract: This paper analyzes the benefits and losses associated with cooperation among ASEAN members in mitigating their CO2 emission, particularly by implementing a uniform carbon tax across ASEAN. To achieve this goal, this paper uses a multi-country CGE model for ASEAN, known as the Inter-Regional System of Analysis for ASEAN (IRSA-ASEAN) model. This study finds that the implementation of a carbon tax scenario is an effective means of reducing carbon emissions in the region. However, this environmental gain could come at a cost in terms of GDP contraction and reduction in social welfare, i.e. household income. Nevertheless, Indonesia and Malaysia can potentially gain from the implementation of a carbon tax as it counteracts price distortions due to the existence of heavy energy subsidies in these two countries.
    Keywords: climate change, computable general equilibrium model, ASEAN, regional economics
    JEL: Q54 Q56 O21 O57
    Date: 2014
  37. By: Dr. Christian Lutz (GWS - Institute of Economic Structures Research); Roland Zieschank (GWS - Institute of Economic Structures Research); Dr. Thomas Drosdowski (GWS - Institute of Economic Structures Research)
    Abstract: This paper reports results of the study „Green economy: Measuring sustainable welfare using SEEA data“. It contributes to measuring the progress towards green economy and its understanding for political decision making process in Germany. The definition of green economy follows the BMU approach of 2012. The concept to measure the green economy consists of six different dimensions: (A) use of natural resources and environmental damages, (B) natural capital, (C) environmental quality of life, (D) green economy: eco-nomic dimension and fields of action, (E) policies: institutional framework and measures, and (F) background information on economic and social development. For each dimension the concept includes indicators that can be generated from available data and in part have characteristics of desirable indicators. The concept is tested for Germany using scenario analysis (PANTA RHEI model) with regard to the energy transition (‘Energiewende’). Many indicators improve despite some trade-offs such as increases in resource use.
    Keywords: green economy, policies, welfare, sustainability
    JEL: Q
    Date: 2015
  38. By: Eran Raviv (Erasmus University Rotterdam); Kees E. Bouwman (Erasmus University Rotterdam); Dick van Dijk (Erasmus University Rotterdam)
    Abstract: The daily average price of electricity represents the price of electricity to be delivered over the full next day and serves as a key reference price in the electricity market. It is an aggregate that equals the average of hourly prices for delivery during each of the 24 individual hours. This paper demonstrates that the disaggregated hourly prices contain useful predictive information for the daily average price. Multivariate models for the full panel of hourly prices significantly outperform univariate models of the daily average price, with reductions in Root Mean Squared Error of up to 16%. Substantial care is required in order to achieve these forecast improvements. Rich multivariate models are needed to exploit the relations between different hourly prices, but the risk of overfitting must be mitigated by using dimension reduction techniques, shrinkage and forecast combinations.
    Keywords: Electricity market, Forecasting, Hourly prices, Dimension reduction, Shrinkage, Forecast combinations
    JEL: C53 C32 Q47
    Date: 2013–05–17
  39. By: Gerard van der Meijden (VU University Amsterdam); Sjak Smulders (Tilburg University, the Netherlands)
    Abstract: We argue that expectations about future energy use affect the transition from fossil fuels to renewable substitutes, because of an interaction between innovation and resource scarcity. The paper presents a model of directed technical change to study this interaction. We find that resource-saving technical change erodes the incentives to implement the substitute. Conversely, the anticipation of the substitute being implemented in the future diminishes the incentives to invest in resource-saving technology. As a result, two dynamic equilibria may arise, one with a transition to the substitute and with low resource efficiency, and one without the substitute and with fast efficiency improvements. Expectations determine which equilibrium arises in the decentralized market equilibrium. If multiple equilibria exist, the transition to the substitute generates higher welfare.
    Keywords: Directed technical change, energy transition, multiple equilibria
    JEL: O30 Q32 Q42 Q55
    Date: 2014–08–01
  40. By: Timothy Halliday (University of Hawaii at Manoa and IZA); John Lynham (University of Hawaii at Manoa); Aureo de Paula (UCL, Sao Paulo School of Economics, IFS, CeMMAP)
    Abstract: Kilauea volcano is the largest stationary source of SO2 pollution in the United States of America. Moreover, the SO2 that the volcano emits eventually forms particulate matter, another major pollutant. We use this exogenous SO2 on emergency room admissions and costs in the state of Hawaii. Importantly, our data on costs is more accurate than the measures used in much of the literature. We find strong evidence that particulate pollution increases pulmonary-related hospitalization. Specifically, a one standard deviation increase in particulate pollution leads to a 2-3% increase in expenditures on emergency room visits for pulmonary-related outcomes. However, we do not find strong effects for pure SO2 pollution or for cardiovascular outcomes. We also find no effect of volcanic pollution on fractures, our placebo outcome. Finally, the effects of particulate pollution on pulmonary-related admissions are most concentrated among the very young. Our estimates suggest that, since the large increase in emissions that began in 2008, the volcano has increased healthcare costs in Hawaii by approximately $6,277,204.
    Keywords: Pollution, Health, Volcano, Particulates, SO2
    JEL: H51 I12 Q51 Q53
    Date: 2015–04
  41. By: Soushi Suzuki (Hokkai-Gakuen University, Japan); Peter Nijkamp (VU University Amsterdam); Piet Rietveld (VU University Amsterdam)
    Abstract: This paper offers a quantitative contribution to energy-environment policy in Japan in the aftermath of the Fukushima nuclear power accident. Since then, nuclear power energy supply has almost entirely been banned .There is no clear-cut direction for energy policy, as each option involves costs and CO2 consequences. A balanced energy-environment policy is difficult to achieve and there is an urgent need for a comprehensive efficiency and performance analysis of the Japanese energy sector. This paper presents a newly developed adjusted DEA model, emerging from a blend of the Euclidian Distance Minimization EDM method and the Target-Oriented (TO) approach based on a Super-Efficiency model, for generating an appropriate efficiency-improving projection model. The TO approach specifies a Target-Efficiency Score (TES) for inefficient DMUs. This approach can compute an input reduction value and an output increase value in order to achieve a higher TES. This model will be applied to an efficiency analysis of the energy-environment interface for ten regions in Japan. The focus is on two input cost criteria (viz. expenditures and CO2 emission) and two output performance criteria (viz. electricity generation and regional CO2 absorption). A comparative performance analysis of the ten Japan regions under consideration will be pursued.
    Keywords: Data Envelopment Analysis (DEA), Euclidean Distance Minimisation (EDM), Target-Oriented (TO), Energy-Environment efficiency
    JEL: L93
    Date: 2013–09–10
  42. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Julia Grübler (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Marek Rojicek; Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Graph of the month Europe Brent Spot Price, fob per barrel, in current USD and euro and real year 2005 euro (p. 1) Opinion corner Russia-Ukraine conflict do Western sanctions have any effect? (by Vasily Astrov, Vladimir Gligorov, Peter Havlik, Michael Landesmann and Olga Pindyuk; pp. 2-6) Agricultural imports from LDCs a comparison across EU-27 Member States (by Julia Grübler, pp. 7-12) Green industries for Europe mission abandoned (by Roman Stöllinger; pp. 13-16) Determinants of SMEs’ funding obstacles – a comparative analysis of EU-15 and NMS-13 countries (by Sandra Leitner and Marek Rojicek; pp. 17-20) Recommended reading (p. 21) Statistical Annex Monthly and quarterly statistics for Central, East and Southeast Europe (pp. 22-42)
    Keywords: oil price, energy, sanctions, Russia, Ukraine, agricultural imports, LDCs, Africa, barriers to trade, MFN, industry, environmental protection, EU, SME, funding obstacles
    Date: 2014–10
  43. By: Kelly Neill (Business School, University of Western Australia)
    Abstract: Western Australia introduced a domestic gas reservation policy in 2006, which requires new gas developments to supply the equivalent of 15 per cent of their gas exports to the Western Australian domestic gas market. The aim of the policy is to maintain domestic gas prices below export parity. It has been regarded as having the same effects as a tax on production and a subsidy on domestic consumption, with the attendant economic costs. This paper improves on this interpretation by recognising that the policy imposes a proportional relationship between export and domestic supply. While the model developed is consistent with the tax-subsidy interpretation, it enables the quantification of the links between the implicit tax and subsidy rates, the proportion of gas reserved and the domestic market price. The results indicate that a binding reservation policy always causes a deadweight loss. While activity in gas-using industries expands, this does not yield an overall benefit to the economy in the long run. Gas production is reduced and income is foregone because some gas is diverted to lower value uses. The work offers early results from a larger project to model the Australian natural gas industry within a general equilibrium setting.
    Date: 2015
  44. By: Bressand, Albert (Groningen University)
    Date: 2014
  45. By: Roberto Iacono
    Keywords: Natural resources; Oil royalties; Regional development; Synthetic Control Method; Basilicata
    JEL: N54 O13 Q32 R15 R58
    Date: 2015
  46. By: Abu Siddique (Business School, University of Western Australia); E A Selvanathan (Griffith Business School, Griffith University); Saroja Selvanathan (Griffith Business School, Griffith University)
    Abstract: During the 1970s and 1980s, the external debt levels of poor countries rose to a level constituting a ‘debt crisis.’ The main source of the supply of external debt was the surplus revenue generated by the OPEC through significant increases in the price of oil during the 1970s. Unfortunately, many of the countries failed to use the external debt wisely and prudently. When the revenue from oil sales started to decline due to low oil prices during the 1980s, heavily indebted countries experienced difficulty servicing the debt. This paper analyses the extent to which the external debt burden impacts on a country’s gross domestic product (GDP) using data from HIPC over the period 1970-2007. The findings of empirical analysis suggest that, in the short-run as well as in the long-run, a reduction in debt stock would have significantly increased the growth performance of the indebted nations.
    Date: 2015
  47. By: Karolina Ryszka (VU University Amsterdam)
    Abstract: We analyze resource extraction in a political economy setting by introducing a political leader who optimizes both his own and the society's welfare function. We find that accounting for the private utility of a political elite, its higher discount rate and a different time horizon generally speeds up extraction. The higher than optimal resource extraction is not only relevant in welfare terms, but also regarding possible consequences with respect to climate change. The effect of higher extraction caused by a political leader directly accroaching resources does not hold in a decentralized private ownership economy where the government strives to raise revenues through taxation. We endogenize the political economy framework and show that the politician's discount factor is higher than the social discount factor due to the probability of losing power. The weight that the political leader attaches to social welfare is determined by the way the probability of staying in power depends on the welfare of the society.
    Keywords: exhaustible resources, oil, dictatorship, political economy, taxation, climate change
    JEL: Q31 Q38 Q54
    Date: 2013–07–18
  48. By: Bruno De Borger (University of Antwerp, Belgium); Ismir Mulalic (Technical University of Denmark, Denmark); Jan Rouwendal (VU University Amsterdam)
    Abstract: In this paper we study the demand for car kilometres in two-car households, focusing on the substitution between cars in response to fuel price changes. We use a large sample of detailed Danish data on two-car households to estimate -- for each car owned by the household -- own and cross-price effects of increases in fuel costs per kilometre. The empirical results show that failure to capture substitution between cars within the household can result in substantial misspecification biases. Ignoring substitution, we estimate fuel price elasticities of –0.81 and -0.65 for the primary and secondary cars, respectively. When we do take into account the substitution effect, these figures reduce to, respectively, -0.32 and -0.45. We further estimate an alternative version of the model to test the hypothesis that substitution in response to higher fuel prices will be predom inantly from the least to the most fuel efficient car, finding partial support for the underlying hypothesis. More importantly, the results of this extended model emphasize the importance of behavioural differences related to the position of the most fuel efficient car in the household, suggesting that households’ fuel efficiency choices are related to their price sensitivity.
    Keywords: Fuel efficiency, car use, multiple car ownership, substitution effects, fuel consumption
    JEL: D12 R41 Q41
    Date: 2013–10–10
  49. By: Jin Fan (School of Management, University of Science and Technology of China); Shanyong Wang (School of Management, University of Science and Technology of China); Yanrui Wu (Business School, University of Western Australia); Jun Li (School of Management, University of Science and Technology of China); Dingtao Zhao (School of Management, University of Science and Technology of China)
    Abstract: Personal carbon trading (PCT) is a downstream cap-and-trade scheme used to reduce carbon emissions from the household sector. It is argued that the PCT scheme could provide a buffer between the energy price and the total energy price, and thus energy demand remains stable. However these effects have never been verified. To fill in this gap in the literature, a price effect analysis is conducted. Firstly, a general utility optimization (GUO) model is proposed to obtain the general formulae of the price effect, substitution effect and income effect under the PCT scheme. Secondly, a specific version of the GUO model, namely a Cobb-Douglas utility function model, is employed to obtain the specific effect formulae to verify the buffer effect. Finally, a numerical example and a sensitive analysis are presented to demonstrate these effects. The results indicate that, under the PCT scheme, the total energy price and energy demand are less sensitive to the energy price changes. Thus, when energy prices fluctuate, the PCT scheme is capable of providing certainty in emissions reduction and is more effective than carbon taxes. On the basis of these results, implications of this research are discussed and suggestions for future research are provided.
    Date: 2015
  50. By: Bouwmeester, Maaike; Scholtens, Bert (Groningen University)
    Date: 2014
  51. By: Craig M.T. Johnston; G. Cornelis van Kooten
    Abstract: The carbon flux from burning biomass for energy is often legislated, or simply assumed, to be carbon neutral as subsequent forest growth sequesters carbon lost during energy production. In this sense, there may be no net contributions to atmospheric carbon flux associated with biomass energy. However, trees may take decades to recover the CO2 released by burning, so assumed neutrality hinges on the fact that we count CO2 removals equally independent of when they occur. If dealing with climate change is an urgent matter, we may give higher weight to current CO2 emissions over those that occur in the decades to come. If there is no urgency in dealing with climate change, then all types of biomass will eventually return to carbon neutrality. Yet, if climate change is deemed an urgent matter, biomass never returns to carbon neutrality as we give future CO2 removals less weight. If urgency is high enough, biomass may be more emissions intensive than coal, as the discounted future removals are not enough to offset the relatively higher emissions intensity experience by burning biomass for energy. The race to adopt aggressive renewable energy targets implies climate change mitigation is an urgent matter. Yet, the increasing reliance on biomass for energy production suggests there is no time preference. In the end, the potential benefits of substituting biomass for coal to produce energy might be greatly exaggerated.
    Keywords: Bioenergy, Climate Change, Forestry
    JEL: Q23 Q42 Q50 C63
    Date: 2014–11
  52. By: Masako Ikefuji (University of Southern Denmark, Esbjerg, Denmark); Jan Magnus (VU University Amsterdam, Netherlands); Hiroaki Sakamoto (Waseda University, Japan)
    Abstract: This paper develops a dynamic model consisting of two regions (North and South), in which the accumulation of human capital is negatively influenced by the global stock of pollution. By characterizing the equilibrium strategy of each region, we show that the regions' best responses can be strategic complements through a dynamic complementarity effect. The model is used to analyze the impact of adaptation assistance from North to South. It is shown that North's unilateral assistance to South (thus enhancing South's adaptation capacity) can facilitate pollution mitigation in both regions, especially when the assistance is targeted at human capital protection.
    Keywords: Climate change, mitigation, adaptation, human capital
    JEL: D91 Q54 Q58
    Date: 2014–09–19
  53. By: Elbert Dijkgraaf (Erasmus University Rotterdam, the Netherlands); Tom van Dorp (Solarplaza International BV, the Netherlands); Emiel Maasland (Erasmus University Centre for Contract Research and Business Support (ERBS) BV, the Netherlands)
    Abstract: Growing concern for climate change and rising scarcity of fossil fuels prompted governments to stimulate the development of renewables. This paper empirically tests whether feed-in tariff (FIT) policies have been effective in the development of photovoltaic solar (PV), explicitly taking into account structure and consistency of FITs. Panel data estimations are employed for 30 OECD member countries over the period 1990-2011. We find a positive effect of the presence of a FIT and the development of a country’s share of PV in the electricity-mix. This effect increases if policies are consistent. Tariff height is the most important characteristic of a FIT, but other characteristics such as cost level, duration of contract and restrictions on capacity levels can also not be neglected if the goal is to increase effectiveness of FITs.
    Keywords: Photovoltaic solar, Feed-in tariffs, Policy-consistency, Design characteristics
    JEL: C23 G11 H23 N70 Q42 Q48
    Date: 2014–12–22

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.