nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒06‒05
34 papers chosen by
Roger Fouquet
London School of Economics

  1. he Global Big Oil on the Way to Business Model Innovation? By Alexey Bereznoy
  2. Monetary, Fiscal and Oil Shocks: Evidence based on Mixed Frequency Structural FAVARs By Marcellino, Massimiliano; Sivec, Vasja
  3. Impacts of Rural Electrification Revisited – The African Context By Jörg Peters; Maximiliane Sievert
  4. Does Large Scale Infrastructure Investment Alleviate Poverty? Impacts of Rwanda’s Electricity Access Roll-Out Program By Luciane Lenz; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
  5. Liberalizing Russian gas markets – an economic analysis By Aune, Finn Roar; Golombek, Rolf; Moe, Arild; Rosendahl , Knut Einar; Le Tissier, Hilde Hallre
  6. Predictability of price movements in deregulated electricity markets By Olga Y. Uritskaya; Vadim M. Uritsky
  7. Marine trade-offs: comparing the benefits of off-shore wind farms and marine protected areas By Aljona Karlõševa; Sulev Nõmmann; Tea Nõmmann; Evelin Urbel-Piirsalu; Wiktor Budziński; Mikołaj Czajkowski; Nick Hanley
  8. The Role of Oil Prices in the Forecasts of South African Interest Rates: A Bayesian Approach By Rangan Gupta; Kevin Kotze
  9. How Dependent is Growth from Primary Energy? The Dependency ratio of Energy in 33 Countries (1970-2011) By Gaël Giraud; Zeynep Kahraman
  10. Transitional Dynamics in an R&D-based Growth Model with Natural Resources By Thanh Le; Cuong Le Van
  11. A parsimonious fundamental model for wholesale electricity markets - Analysis of the plunge in German futures prices By Thomas Kallabis; Christian Pape; Christoph Weber
  12. Adoption of low-cost energy efficiency measures in the tertiary sector—An empirical analysis based on energy survey data By Barbara Schlomann; Joachim Schleich
  13. Dynamic and Strategic Behavior in Hydropower-Dominated Electricity Markets: Empirical Evidence for Colombia By Jorge Balat; Juan E. Carranza; Juan D. Martin
  14. A Brighter Future? Quantifying the Rebound Effect in Energy Efficient Lighting By Joachim Schleich; Bradford Mills; Elisabeth Dütschke
  15. Energy coordination in eco-districts: The multi-disciplinary NEXUS project By Gilles Debizet; Caroline Gauthier; Stéphane La Branche; Philippe Menanteau; Valérie Ambroise-Renault; Odile Blanchard; Sylvie Blanco; Nicolas Buclet; Antoine Dore; Fabrice Forest; Bettina Gilomen; Olivier Labussière; Xavier Long; Patrice Schneuwly; Antoine Tabourdeau
  16. Production of Wind Energy and Agricultural Land Values: Evidence from Pennsylvania By Chris Shultz; Joshua C. Hall; Michael P. Strager
  17. Unpacking Big Systems - Natural Language Processing meets Network Analysis. A Study of Smart Grid Development in Denmark By Roman Jurowetzki
  18. EU ETS, Free Allocations and Activity Level Thresholds. The devil lies in the details By Frédéric Branger; Jean-Pierre Ponssard; Oliver Sartor; Misato Sato
  19. Optimal production resource reallocation for CO2 emissions reduction in manufacturing sectors By Fujii, Hidemichi; Managi, Shunsuke
  20. Spatial interaction of Renewable Portfolio Standards and their effect on renewable generation within NERC regions By Eric Bowen; Donald J. Lacombe
  21. Barriers to electricity load shift in companies: A survey-based exploration of the end-user perspective By Mark Olsthoorn; Joachim Schleich; Marian Klobasa D
  22. A First Step Up the Energy Ladder? Low Cost Solar Kits and Household’s Welfare in Rural Rwanda By Michael Grimm; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
  23. Transmission Capacity Constraints and Transmission Costs on Electricity Market Auctions By Blázquez de Paz, Mario
  24. Heterogeneous firms and the environment: a cap-and-trade program By Lisa Anouliès
  25. Country-specific oil supply shocks and the global economy: a counterfactual analysis By Mohaddes, Kamiar; Pesaran, M. Hashem
  26. Making the Most of Natural Resources in Indonesia By Richard Dutu
  27. Competition and the Single Electricity Market: Which Lessons for Ireland By di Cosmo; Lynch, Muireann A.
  28. The Effects of Oil Price Shocks in a New-Keynesian Framework with Capital Accumulation By Verónica Acurio Vásconez; Gaël Giraud; Florent Mc Isaac; Ngoc-Sang Pham
  29. Revisiting the Conflicts between ‘Environmental Taxes vs Standard’ in the Context of International Trade: The Role of Waste Recycling By Chatterjee, Nilendu; Gupta, Kausik; Chatterjee, Tonmoy
  30. Efficiency or Equity? Simulating the Carbon Emission Permits Trading Schemes in China Based on an Inter-Regional CGE Model By Libo Wu; Weiqi Tang
  31. Dynamic and Strategic Behavior in Hydropower-Dominated Electricity Markets: Empirical Evidence for Colombia By Jorge Balat; Juan E. Carranza; Juan D. Martin
  32. Electoral Rentierism? The Cross-National and Subnational Effect of Oil on Electoral Competitiveness in Multiparty Autocracies By Michael Wahman; Matthias Basedau
  33. Household transitions to energy efficient lighting By Bradford Mills; Joachim Schleich
  34. Cooperation and Competition in Climate Change Policies: Mitigation and Climate Engineering when Countries are Asymmetric By Vassiliki Manoussi; Anastasios Xepapadeas

  1. By: Alexey Bereznoy (National Research University Higher School of Economics)
    Abstract: The paper explores the current changes in the global strategy of the elite of the international oil companies, the so-called supermajors, within the context of the potential business model innovation. The work aims to make two main contributions. First, by analyzing recent shifts in the world oil and gas industry and their implications from the perspective of changing supermajors’ market positions and economic power, this paper discloses the root causes of strategic moves undertaken by today's global «Big Oil» struggling with multiple competitive threats and simultaneously adjusting to the on-going industry transformation. Second, the work defines the core features of the supermajors' business model and examines whether the newly introduced strategy characteristics could be considered as business model innovation
    Keywords: global oil and gas industry, International Oil Companies (IOCs), supermajors, National Oil Companies (NOCs), global competition, business model innovation.
    JEL: D21 D23 F23 L10 L20 L29 O32 O33
    Date: 2015
  2. By: Marcellino, Massimiliano; Sivec, Vasja
    Abstract: Large scale factor models have been often adopted both for forecasting and to identify structural shocks and their transmission mechanism. Mixed frequency factor models have been also used in a reduced form context, but not for structural applications, and in this paper we close this gap. First, we adapt a simple technique developed in a small scale mixed frequency VAR and factor context to the large scale case, and compare the resulting model with existing alternatives. Second, using Monte Carlo experiments, we show that the finite sample properties of the mixed frequency factor model estimation procedure are quite good. Finally, to illustrate the method we present three empirical examples dealing with the effects of, respectively, monetary, oil, and fiscal shocks.
    Keywords: estimation; identification; impulse response function; mixed frequency data; Structural FAVAR; temporal aggregation
    JEL: C32 C43 E32
    Date: 2015–05
  3. By: Jörg Peters; Maximiliane Sievert
    Abstract: The investment requirements to achieve the United Nations’ universal electricity access goal by 2030 are estimated at 640 billion US Dollars. The assumption underlying this goal is that electrification contributes to poverty alleviation in many regards. In recent years, a body of literature has emerged that widely confirms this positive poverty impact assumption. Most of these studies, however, are based on data from Asia and Latin America. This paper challenges the transferability of impact findings in the literature to the African context. Using a unique data set that we collected in various African countries we show that impact expectations on income, education, and health should be discounted considerably for Africa, at least in the shorter run. In many cases, the low levels of electricity consumption can also be served by low-cost solar alternatives. To ensure cost-efficient usage of public investments into rural electrification, we call for careful cost-benefit comparisons of on-grid and off-grid solutions.
    Keywords: Energy access; on-grid electrification; off-grid electrification; Africa
    JEL: O33 P46 Q41
    Date: 2015–04
  4. By: Luciane Lenz; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
    Abstract: The United Nations’ objective to provide electricity to the 1.3 billion people without access in developing countries comes at high costs. Little evidence exists on socioeconomic impacts of electrification. This paper rigorously investigates effects of a large grid extension program in Rwanda on all rural beneficiary groups: households, microenterprises, health centers, and schools. While the program has led to a tremendous increase of connections, appliance uptake and electricity consumption remain low. We find only weak evidence for impacts on classical poverty indicators. To inform future policy design, we call for thorough cost-benefit comparison between on-grid and off-grid solutions.
    Keywords: Energy access; difference-in-differences; electrification; mixed-methods; Sub-Saharan Africa
    JEL: O13 O18 Q41
    Date: 2015–04
  5. By: Aune, Finn Roar; Golombek, Rolf; Moe, Arild; Rosendahl , Knut Einar (School of Economics and Business, Norwegian University of Life Sciences); Le Tissier, Hilde Hallre
    Abstract: The Russian gas market is highly regulated. In this paper we examine possible impacts of regulatory changes on the demand side of this market. In particular, we consider the effects on Russian energy consumers of removing natural gas subsidies, and how changes in Russian gas consumption may affect its gas export to Europe. We also examine the importance of Russian pipeline capacity to Europe, as well as impacts of hypothetical changes in Russian gas export behavior. For this purpose, we use a detailed numerical model for the energy markets in Europe and Russia – LIBEMOD. Our results suggest that removing implicit subsidies to Russian gas consumers will have substantial impacts on total consumption of gas in Russia, especially in the electricity sector. Gas exports to Europe will be significantly affected as more gas becomes available for exports. Removal of other market imperfections in the Russian energy markets has smaller impacts on prices and quantities than removing gas subsidies. More competitive Russian gas export behavior would lead to much higher gas export to Europe, but our results suggest that Russian welfare would drop due to lower gas export prices.
    Keywords: Russian gas prices; Russian gas export; European energy market
    JEL: C63 F10 Q41 Q48
    Date: 2015–06–01
  6. By: Olga Y. Uritskaya; Vadim M. Uritsky
    Abstract: In this paper we investigate predictability of electricity prices in the Canadian provinces of Alberta and Ontario, as well as in the US Mid-C market. Using scale-dependent detrended fluctuation analysis, spectral analysis, and the probability distribution analysis we show that the studied markets exhibit strongly anti-persistent properties suggesting that their dynamics can be predicted based on historic price records across the range of time scales from one hour to one month. For both Canadian markets, the price movements reveal three types of correlated behavior which can be used for forecasting. The discovered scenarios remain the same on different time scales up to one month as well as for on- and off- peak electricity data. These scenarios represent sharp increases of prices and are not present in the Mid-C market due to its lower volatility. We argue that extreme price movements in this market should follow the same tendency as the more volatile Canadian markets. The estimated values of the Pareto indices suggest that the prediction of these events can be statistically stable. The results obtained provide new relevant information for managing financial risks associated with the dynamics of electricity derivatives over time frame exceeding one day.
    Date: 2015–01
  7. By: Aljona Karlõševa (Stockholm Environmental Institute); Sulev Nõmmann (Stockholm Environmental Institute); Tea Nõmmann (Stockholm Environmental Institute); Evelin Urbel-Piirsalu; Wiktor Budziński (Faculty of Economic Sciences, University of Warsaw); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (University of St Andrews)
    Abstract: The drive to increase renewable electricity production in many parts of Europe has led to an increasing concentration of location of new sites at sea. This results in a range of environmental impacts which should be taken into account in a benefit-cost analysis of such proposal. In this paper, we use choice modelling to investigate the relative gains and losses from siting new windfarms off the coast of Estonia, relative to the option of creating a new marine protected area. Methodologically, the paper makes a contribution by showing the ability of the latent class mixed logit model to represent both within-and between-class preference heterogeneity, and thus its power to provide a more sophisticated representation of preference heterogeneity than latent class or mixed logit approaches. The paper is also the first to use the latent class mixed logit in willingness-to-pay space for environmental goods.
    Keywords: discrete choice experiment, off-shore wind energy, marine protected areas, willingness to pay, renewable energy
    JEL: Q51 O13 Q56 Q58 Q42 Q48 Q25 Q28
    Date: 2015
  8. By: Rangan Gupta (Department of Economics, University of Pretoria); Kevin Kotze (School of Economics, University of Cape Town, Rondebosch, 7700, South Africa)
    Abstract: This paper considers whether the use of real oil price data can improve upon the forecasts of the interest rate in South Africa. We employ various Bayesian vector autoregressive (BVAR) models that make use of various measures of oil prices and compare the forecasting results of these models with those that do not make use of this data. The real oil price data is also disaggregated into positive and negative components to establish whether this would improve upon the forecasting performance of the model. The full dataset includes quarterly measures of output, consumer prices, ex- change rates, interest rates and oil prices, where the initial in-sample extends from 1979q1 to 1997q4. We then perform rolling estimations and one- to eight-step ahead forecasts over the out-of-sample period 1998q1 to 2014q4. The results suggest that models that includes information relating to oil prices outperform the model that does not include this in- formation, when comparing their out-of-sample properties. In addition, the model with the positive component of oil price tends to perform bet- ter than other models over the short to medium horizons. Then lastly, the model that includes both the positive and negative components of the oil price, provides superior forecasts at longer horizons, where the im- provement is large enough to ensure that it is the best forecasting model on average. Hence, not only do real oil prices matter when forecasting interest rates, but the use of disaggregate oil price data may facilitate additional improvements.
    Keywords: Interest rate, oil price, forecasting, South Africa
    JEL: C32 C53 E43 E47 Q41
    Date: 2015–05
  9. By: Gaël Giraud (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, The Shift Project - Redesigning the Economy to Achieve Carbon Transition); Zeynep Kahraman (The Shift Project - Redesigning the Economy to Achieve Carbon Transition)
    Abstract: Except for specialized resource economics models, economics pays little attention to the role of energy in growth. This paper highlights basic difficulties behind the mainstream analytical arguments for this neglect, and provides an empirical reassessment of this role. We use an error correction model in order to estimate the long-run dependency ratio of output with respect to primary energy use in 33 countries between 1970 and 2011. Our findings suggest that this dependency is much larger than the usual calibration of output elasticity with respect to energy. This strong dependency is robust to the choice of various samples of countries and subperiods of time. In addition, we show that energy and growth are cointegrated and that primary energy consumption univocally Granger causes GDP growth. The latter confirms and extends the results on cointegration and causality between energy consumption and growth already obtained in Stern (2010)
    Abstract: Hormis les modèles spécialisés dans les ressources naturelles, l'économie accorde peu d'attention au rôle de l'énergie dans la croissance. Ce papier met en lumière certaines difficultés élémentaires relatives aux arguments analytiques mainstream qui légitiment cette négligence, et propose une réévaluation empirique de ce rôle. Nous utilisons un modèle à correction d'erreur afin d'estimer la dépendance de long terme de l'output vis-à-vis de l'usage d'énergie primaire dans 33 pays entre 1970 et 2011. Nos résultats suggèrent que cette dépendance est bien supérieure à ce qu'implique la calibration usuelle de l'élasticité de l'output vis-à-vis de l'énergie. Cette forte dépendance est robuste au choix de multiples échantillons de pays et de sous-périodes d'analyse. De surcroît, nous montrons que la consommation d'énergie et la croissance sont cointégrés et que la première cause la seconde, au sens de Granger, de manière univoque. Ceci confirme et étend les résultats obtenus par Stern (2010).
    Date: 2014–12
  10. By: Thanh Le (University of Queensland); Cuong Le Van (VCREME - VanXuan Center of Research in Economics, Management and Environment - VanXuan Center of Research in Economics, Management and Environment, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, IPAG Business School)
    Abstract: Upon introducing natural resources, both renewable and non-renewable, into an endogenous growth framework with R&D, this paper derives the transitional dynamics of an economy towards its long-run equilibrium. Using the Euler - Lagrange framework, this paper has succesfully figured out the optimal paths of the economy. It then shows the existence and uniqueness of a balanced growth path for each type of resources. The steady state is shown to be of a saddle point stability. Along the balanced growth path, it is found that a finite size resource sector coexists with other continuously growing sectors. The paper then examines long-run responses of the economy to various changes pertaining to innovative production condition, resource sector parameters as well as rate of time preference. It also shows that positive long-run growth will be sustained regardless the type of resources used.
    Date: 2014–10
  11. By: Thomas Kallabis; Christian Pape; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: The German market has seen a plunge in wholesale electricity prices from 2007 until 2014, when base futures prices dropped by more than 40 percent. In this paper we determine the fundamental components of electricity futures prices and quantify their impact on the price drop as well as on operation margins. Our methodology is based on a parsimonious model in which the supply stack is approximated by piecewise linear functions. A fundamental futures price estimate can then be given by averaging up the hourly equilibrium prices over the fu-tures contract’s delivery period. It turns out that the parsimonious model is able to replicate electricity futures prices and discover non-linear dependencies in futures price formation. We quantify which of the factors fuel prices, emission prices, renewable feed-in, conventional generation capacities, and demand developments contributed most to the observed price slide.
    Keywords: Futures Prices, Bid Stack, Fundamental Factors, German Electricity Market, Price Modeling, Efficient Markets, Market Expectations, Piecewise Linear Function, Investment Decision
    JEL: Q43 O10
    Date: 2015–04
  12. By: Barbara Schlomann (Fraunhofer ISI - Fraunhofer Institute for Systems and Innovation Research - Fraunhofer Institute for Systems and Innovation Research); Joachim Schleich (Virginia Polytechnic Institute and State University [Blacksburg] - Virginia Polytechnic Institute and State University, MTS - Management Technologique et Strategique - Grenoble École de Management (GEM))
    Abstract: This paper empirically explores factors driving the adoption of low cost energy efficiency measures in the tertiary sector which mainly consists of public and private services, trade, commerce and some small industries. The measures considered include switching off installations or lighting, managing energy use, and routinely considering energy efficiency for new purchases. Our statistical analysis employs single and multivariate probit models relying on more than 1500 observations from a recent representative survey of the tertiary sector in Germany. The findings suggest that the landlord-tenant dilemma holds for the adoption of all low-cost energy efficiency measures considered. They further imply that financial incentives such as higher energy prices accelerate the diffusion of low-cost energy measures. Our findings also provide some evidence that knowledge transfer from the mother company to a subsidiary enhances the diffusion of low-cost energy efficiency measures. Likewise, public-sector organizations are more likely to adopt energy management. By and large though, sectoral heterogeneity appears to have little impact on the adoption of low-cost energy efficiency measures.
    Date: 2015
  13. By: Jorge Balat (Johns Hopkins University); Juan E. Carranza (Banco de la República de Colombia); Juan D. Martin (Universidad ICESI)
    Abstract: In this paper we formulate a dynamic multi-unit auction model to characterize bidding behavior in hydro power dominated electricity markets. Our model implies that, in order to maximize expected profits, hydro producers will submit bid prices above its marginal production costs that account for the intertemporal opportunity cost of water and the expected strategic effects of bids on rivals’ behavior. We test the predictions of our model against data of the Colombian electricity market, where hydro producers hold 63% of total installed capacity, and find evidence consistent with both dynamic and strategic behavior. Classification JEL: L25, D22, D44.
    Keywords: Dynamic auction model, Bidding behavior, Market power, Electricity markets.
    Date: 2015–05
  14. By: Joachim Schleich (Energy Management - MTS - Management Technologique et Strategique - Grenoble École de Management (GEM) - ISI - Fraunhofer Institute for Systems and Innovation Research - a Fraunhofer Institute for Systems and Innovation Research); Bradford Mills (Virginia Polytechnic Institute and State University [Blacksburg] - Virginia Polytechnic Institute and State University); Elisabeth Dütschke (ISI - Fraunhofer Institute for Systems and Innovation Research - a Fraunhofer Institute for Systems and Innovation Research)
    Abstract: Abstract: This paper quantifies the direct rebound effects associated with the switch from incandescent lamps (ILs) or halogen bulbs to more energy efficient compact fluorescent lamps (CFLs) or light emitting diodes (LEDs) using a large nationally representative survey of German households. The direct rebound effect is measured as the elasticity of useful lighting demand with respect to changes in energy efficient lamps. In particular, the rebound effect is decomposed into changes in lamp luminosity and burn time. On average, more efficient replace-ment bulbs are 23% brighter and burn about 6.5 minutes per day longer than replaced bulbs. For the most frequent (modal) bulb switch, i.e. the replacement of the main bulb in the living or dining room, luminosity increases by 10% and burn time increases by 9 minutes per day. For the average bulb, the associated total direct rebound effect is estimated at 6.3%. The larger part (around 60%) of this rebound effect results from increases in bulb luminosity. For the modal bulb the total direct rebound effect is smaller at 2.6%, with around 60% attributable to an increase in burn time. Average and modal bulb differences suggest that the magnitude to the rebound effect may decrease with intensity of initial bulb use. The magnitude of the direct rebound and the relative contributions of changes in luminosity and burn time also tend to differ by initial bulb type and by replacement bulb type. Finally, about a third of the bulb switches entail a nega-tive rebound effect, i.e. energy savings are larger than expected if luminosity and burn time remained unchanged, highlighting significant heterogeneity in household responses to the adoption of energy efficient bulbs.
    Date: 2014
  15. By: Gilles Debizet (PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Caroline Gauthier (Grenoble Ecole de Management - Grenoble École de Management (GEM)); Stéphane La Branche (PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Philippe Menanteau (équipe EDDEN - PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Valérie Ambroise-Renault (Chercheur Indépendant); Odile Blanchard (équipe EDDEN - PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Sylvie Blanco (Grenoble Ecole de Management - Grenoble École de Management (GEM)); Nicolas Buclet (PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Antoine Dore (PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Fabrice Forest (INNOVACS); Bettina Gilomen (Grenoble Ecole de Management - Grenoble École de Management (GEM)); Olivier Labussière (PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Xavier Long (PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier); Patrice Schneuwly (CEA/LITEN/DTNM/LT - CEA, CEA-LITEN-DTS); Antoine Tabourdeau (PACTE - Politiques publiques, ACtion politique, TErritoires - CNRS - Grenoble 2 UPMF - Université Pierre Mendès France - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - Grenoble 1 UJF - Université Joseph Fourier)
    Abstract: Funded by ADEME (French Environment and Energy Management Agency) the NEXUS project aims at identifying innovations in energy storage and management (especially of intermittent renewables) at the level of eco-districts or city blocks. The multidisciplinary analysis involves technological, sociological, economic, city planning and political dimensions 1. The research analyses socio-energy nodes (SEN) at district or block level. SENs are seen as the place of the coordination among district stakeholders, from real estate, energy and city planning actors to constructors or investors. Deploying appropriate technical systems, SENs are supposed to be more or less replicable from a territory to another. The project studies the arrangement and deployment conditions of SENs at district level and describes them through a portfolio of contrasted scenarios (including smart grids) in view of a 2040 goal of dividing greenhouse gases by 4. These scenarios will propose visions of districts or blocks able to smoothen energy intermittencies, using assumptions about economic constraints, technological capacities, regulatory context and political decisions at local and national scales.
    Date: 2014–09–20
  16. By: Chris Shultz (West Virginia University, College of Business and Economics); Joshua C. Hall (West Virginia University, College of Business and Economics); Michael P. Strager (West Virginia University, Division of Resource Management)
    Abstract: Given the push toward renewable and alternative energy, a new energy mix is emerging. Wind is the fastest growing source of renewable electricity in the United States. The siting of wind turbines has proven controversial with multiple operations facing local resistance. Opponents cite issues such as noise, bird deaths, and aesthetics. Given that farmer portfolios are heavily comprised of land assets, the possibility that surrounding wind energy operations may reduce agricultural land value is of concern. This study examines that possibility using a hedonic regression analysis comparing per acre land value to a series of land characteristics and distance variables for Somerset County, PA. Results indicate no significant relationship between the presence of wind turbines and the value of agricultural land. This confirms the findings of similar studies which have examined the same relationship.
    Keywords: wind energy, hedonic regression, agricultural economics
    JEL: Q14 Q15 Q18 Q42 Q43
    Date: 2015–05
  17. By: Roman Jurowetzki (Aalborg University, Department of Business and Management)
    Abstract: Studies within the detection of technological trajectories and technology fore- casting tend traditionally to rely on patent or bibliometric data. The main drawback of these invention-focused approaches is their inability to account for many mainly non-technical factors related to the social and institutional framing of technology. Value driven policies, technological and institutional path dependencies or user expectations and routines have major impact on the technological outcomes in a particular context. This paper suggests a new method for the mapping and analysis of large (technical) systems and contained technological trajectories on a national level using a combination of methods from statistical natural language processing, vector space modelling and network analysis. The proposed approach does not aim at replacing the researcher or expert but rather offers the possibility to algorithmically structure and to some extent quantify unstructured text data. The utilized filtered corpora consist of two types of Danish text-documents: 99 R&DD project descriptions and 574 (initially before filtering 813) non-academic/industrial journal publications dealing with the development of the smart energy grid in Denmark. Results show that in the explored case it is not mainly new technologies and applications that are driving change but innovative re-combinations of old and new technologies.
    Keywords: Technological Systems; Smart Grid; Path Dependence; Natural Language Processing; Topic Modelling; Network Analysis
    Date: 2015–05
  18. By: Frédéric Branger (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - CIRAD - Centre de coopération internationale en recherche agronomique pour le développement - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - AgroParisTech, AgroParisTech); Jean-Pierre Ponssard (Department of Economics, Ecole Polytechnique - CNRS - Polytechnique - X); Oliver Sartor (IDDRI - Institut du Développement Durable et des Relations Internationales - Institut d'Études Politiques [IEP] - Paris); Misato Sato (LSE - London School of Economics)
    Abstract: This paper investigates incentives for firms to increase output above the activity level thresholds (ALTs) in order to obtain more free allowances in the EU Emissions Trading Scheme. While ALTs were introduced in order to reduce excess free allocation to low-activity installations, for installations operating below the threshold, the financial gain from increasing output to reach the threshold may outweigh the costs. Using installation level data for 246 clinker plants, we estimate the effect of ALTs on output decisions. The ALTs induced 5.8Mt of excess clinker production in 2012 (4% of total EU output), which corresponds to 5.2Mt of excess CO2 emissions (over 5% of total sector emissions). As intended, ALTs do reduce overallocation (by 6.6million allowances) relative to a scenario without ALTs, but an alternative output based allocation would further reduce overallocation by 39.5million allowances (29% of total cement sector free allocation). Firms responded disproportionately to ALTs in countries with low demand, especially in Spain and Greece. The excess clinker output lead to increased EU clinker and cement exports, production shifting between plants and also an increase in clinker content of cement thus reducing the carbon efficiency of cement production.
    Date: 2014–10–08
  19. By: Fujii, Hidemichi; Managi, Shunsuke
    Abstract: To mitigate the effects of climate change, countries worldwide are advancing technologies to reduce greenhouse gas emissions. This paper proposes and measures optimal production resource reallocation using data envelopment analysis. This research attempts to clarify the effect of optimal production resource reallocation on CO2 emissions reduction, focusing on regional and industrial characteristics. We use finance, energy, and CO2 emissions data from 13 industrial sectors in 39 countries from 1995 to 2009. The resulting emissions reduction potential is 2.54 Gt-CO2 in the year 2009, with former communist countries having the largest potential to reduce CO2 emissions in the manufacturing sectors. In particular, basic material industry including chemical and steel sectors have a lot of potential to reduce CO2 emissions.
    Keywords: Resource reallocation,CO2 emissions,Data envelopment analysis, Manufacturing sector
    JEL: Q54 Q57
    Date: 2015–05–31
  20. By: Eric Bowen (West Virginia University, College of Business and Economics); Donald J. Lacombe (West Virginia University, Regional Research Institute)
    Abstract: While several studies have examined the effectiveness of renewable portfolio standard laws on renewable generation in states, previous literature has not assessed the potential for spatial dependence in these policies. Spatial dependence in the electric grid is likely, considering the connectivity of the electric grid across NERC regions. Using the latest spatial panel methods, this paper estimates a number of econometric models to examine the impact of RPS policies when spatial autocorrelation is taken into account. Consistent with previous literature, we find that RPS laws do not have a significant impact on renewable generation within a state. However, once spatial dependence is accounted for, we find evidence that a state’s RPS laws have a significant positive impact on the share of renewable generation the NERC region as a whole. These findings provide evidence that electricity markets are efficiently finding the lowest-cost locations to serve renewable load to states with more stringent RPS laws.
    Keywords: Renewable Portfolio Standards, Renewable Energy Policy, Spatial Econometrics
    JEL: Q42 Q48 R15
    Date: 2015–05
  21. By: Mark Olsthoorn (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Joachim Schleich (Virginia Polytechnic Institute and State University [Blacksburg] - Virginia Polytechnic Institute and State University, MTS - Management Technologique et Strategique - Grenoble École de Management (GEM), Fraunhofer ISI - Fraunhofer Institute for Systems and Innovation Research - Fraunhofer Institute for Systems and Innovation Research); Marian Klobasa D (Fraunhofer ISI - Fraunhofer Institute for Systems and Innovation Research - Fraunhofer Institute for Systems and Innovation Research)
    Abstract: As countries move toward larger shares of renewable electricity, the slow diffusion of active electricity load management should concern energy policy makers and users alike. Active load management can increase capacity factors and thereby reduce the need for new capacity, improve reliability, and lower electricity prices. This paper conceptually and empirically explores barriers to load shift in industry from an end-user perspective. An online survey, based on a taxonomy of barriers developed in the realm of energy efficiency, was carried out among manufacturing sites in mostly Southern Germany. Findings suggest that the most important barriers are risk of disruption of operations, impact on product quality, and uncertainty about cost savings. Of little concern are access to capital, lack of employee skills, and data security. Statistical tests suggest that companies for which electricity has higher strategic value rate financial and regulatory risk higher than smaller ones. Companies with a continuous production process report lower barrier scores than companies using batch or justin- time production. A principal component analysis clusters the barriers and multivariate analysis with the factor scores confirms the prominence of technical risk as a barrier to load shift. The results provide guidance for policy making and future empirical studies.
    Date: 2015
  22. By: Michael Grimm; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
    Abstract: More than 1.3 billion people in developing countries are lacking access to electricity. Based on the assumption that electricity is a prerequisite for human development, the United Nations initiative Sustainable Energy for All (SE4All) has proclaimed the goal of providing modern energy to all by 2030. In recent years, Pico-Photovoltaic kits have become a lower-cost alternative to investment-intensive grid electrification. Using a randomized controlled trial we examine uptake and impacts of a simple Pico-Photovoltaic kit that barely exceeds the benchmark of what the UN considers as modern energy. We find significant effects on households’ budget, productivity and convenience. Despite these effects, the data shows that adoption will be impeded by affordability, suggesting that policy would have to consider more direct promotion strategies such as subsidies or financing schemes to reach the UN goal.
    Keywords: Energy access; household productivity; household technology adoption; Sub-Saharan Africa; Randomized Controlled Trial
    JEL: O13 O18 Q41 D13
    Date: 2015–04
  23. By: Blázquez de Paz, Mario (Research Institute of Industrial Economics (IFN))
    Abstract: Capacity constraints on transmissions of electricity are raising an increasing policy concern as electricity markets are integrated around the world. But our understanding of the workings of such markets is still limited. The purpose of this paper is to highlight the impact of transmission capacity constraints and transmission costs on electricity market auctions. In the presence of transmission capacity constraints, the equilibrium is asymmetric even when the suppliers are symmetric in generation capacity and costs. An increase in transmission capacity induces non-monotonic changes in firms’ profits. In the presence of transmission constraints and zero transmission costs, an increase in transmission capacity is pro-competitive; in contrast, then the transmission costs are positive, an increase in transmission capacity could be anti-competitive.
    Keywords: Electricity auctions; Transmission capacity constraints; Transmission
    JEL: D43 D44 L13 L94
    Date: 2015–05–29
  24. By: Lisa Anouliès (Université Paris-Sud, RITM)
    Abstract: Cap-and-trade programs are presently the cornerstone of climate change policies and proposals in many countries. I investigate the economic and environmental effects of different designs for this policy in a general equilibrium setting when firms are heterogeneous and in monopolistic competition. This study first predicts that the cap on emissions perfectly defines the environmental quality but has no effect on firms’ profits and decisions to enter or exit the market. On the contrary, increasing the share of free allocation of emissions allowances reallocates resources among firms toward the most productive ones: the initial allocation of allowances therefore impacts firms’ entry and exit decisions and aggregate economic variables but not the environment. Firm heterogeneity magnifies this economic effect of a change in the initial allocation of allowances.
    Keywords: Emissions trading, Heterogeneous firms, Monopolistic competition
    JEL: Q58 D43 H23
    Date: 2015–05
  25. By: Mohaddes, Kamiar (University of Cambridge); Pesaran, M. Hashem (University of Southern California)
    Abstract: This paper investigates the global macroeconomic consequences of country-specific oilsupply shocks. Our contribution is both theoretical and empirical. On the theoretical side, we develop a model for the global oil market and integrate this within a compact quarterly model of the global economy to illustrate how our multi-country approach to modelling oil markets can be used to identify country-specific oil-supply shocks. On the empirical side, estimating the GVAR-Oil model for 27 countries/regions over the period 1979Q2 to 2013Q1, we show that the global economic implications of oil-supply shocks (due to, for instance, sanctions, wars, or natural disasters) vary considerably depending on which country is subject to the shock. In particular, we find that adverse shocks to Iranian oil output are neutralized in terms of their effects on the global economy (real outputs and financial markets) mainly due to an increase in Saudi Arabian oil production. In contrast, a negative shock to oil supply in Saudi Arabia leads to an immediate and permanent increase in oil prices, given that the loss in Saudi Arabian production is not compensated for by the other oil producers. As a result, a Saudi Arabian oil supply shock has significant adverse effects for the global economy with real GDP falling in both advanced and emerging economies, and large losses in real equity prices worldwide.
    JEL: C32 E17 F44 F47 O53 Q43
    Date: 2015–05–01
  26. By: Richard Dutu
    Abstract: Indonesia abounds with natural resources. But the unique nature of its geography, coupled with the lack of transport infrastructure, makes their exploitation challenging. Moreover, a lack of investment, protectionism and an unwieldy regulatory environment are all inhibiting the sector from reaching its full potential. Agriculture has been held back by low productivity, under-investment, unclear property rights on land, ill-advised trade regulations, misplaced support for staples and restrictions on foreign ownership. By pursuing crop diversification, encouraging co-operation between smallholders and large estates and easing constraints on foreign investment, Indonesia could raise its farmers’ productivity. Fossil fuels have become central to Indonesia’s energy policy and its main source of export revenues. Growing environmental concerns, both domestically and internationally, combined with subsiding coal prices and the on-going shale gas revolution, call into question the sustainability of such a strategy. Indonesia should increase its energy efficiency and further develop gas to plug the gap until sufficient renewable energy, especially geothermal, comes on line. Government control over the oil industry via state-owned Pertamina should be gradually reduced. Clarifying, streamlining and publicising simple regulations in energy and minerals, especially regarding land rights and on-shore processing, and removing foreign-ownership restrictions will help bring much needed investment. The pressure on the environment that natural resource exploitation is creating should be addressed by increasing the share of gas and renewables in the energy mix, properly defining property rights and regulations regarding forest land, and implementing a positive implicit carbon price. More resources should be devoted to combating widespread illegal mining and deforestation. This Working Paper relates to the 2015 OECD Economic Survey of Indonesia (<P>Exploiter au mieux les ressources naturelles en Indonésie<BR>L’Indonésie dispose de ressources naturelles abondantes, mais leur exploitation est rendue difficile par la géographique particulière du pays qui se conjugue au manque d’infrastructures de transport. De plus, l’absence d’investissement, le protectionnisme et la complexité de l’environnement réglementaire sont autant de facteurs qui empêchent ce secteur d’atteindre son plein potentiel. L’agriculture pâtit de la faiblesse de la productivité, du sous-investissement, des incertitudes entourant les droits de propriété des terres, de réglementations commerciales peu judicieuses, de mesures inadéquates de soutien aux produits de première nécessité et de restrictions sur les participations étrangères. La productivité des agriculteurs indonésiens pourrait être stimulée par différentes mesures visant à encourager la diversification des cultures, favoriser la coopération entre les petits propriétaires et les grandes exploitations et alléger les contraintes pesant sur l’investissement étranger. Les combustibles fossiles ont pris une place centrale dans la politique énergétique de l’Indonésie et représentent aujourd’hui sa principale source de revenus d’exportation. La montée des préoccupations environnementales, au plan intérieur comme international, qui vient s’ajouter à la diminution des prix du charbon et à la révolution en cours liée au gaz de schiste, appellent à s’interroger sur la viabilité d’une telle stratégie. L’Indonésie pourrait accroître son efficacité énergétique et continuer à développer le gaz pour combler le déficit jusqu’à pouvoir disposer de suffisamment d’énergies renouvelables, notamment géothermique. Le contrôle de l’industrie pétrolière exercé par l’État via l’entreprise publique Pertamina devrait être progressivement réduit. Clarifier, rationaliser et simplifier la réglementation dans les secteurs de l’énergie et des minéraux, en particulier du point de vue des droits fonciers et du traitement terrestre, et lever les restrictions pesant sur les participations étrangères contribueront à attirer les investissements si nécessaires. Les pressions exercées sur l’environnement par l’exploitation des ressources naturelles devraient être allégées par une augmentation de la part du gaz et des énergies renouvelables dans le bouquet énergétique, par une définition adéquate des droits de propriété et des réglementations relatives aux terrains boisés et par la mise en place d’un prix implicite du carbone positif. Il conviendrait de consacrer des ressources plus importantes à la lutte contre les exploitations minières et la déforestation illégales. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l’Indonésie, 2015 ( ique-indonesie.htm)
    Keywords: environment, gas, natural resources, agriculture, Indonesia, coal, minerals, energy, oil, pétrole, environnement, énergie, charbon, Indonésie, minerais, agriculture, ressources naturelles, gaz
    JEL: O13 O53 Q01
    Date: 2015–05–28
  27. By: di Cosmo; Lynch, Muireann A.
    Date: 2015–03
  28. By: Verónica Acurio Vásconez (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS); Gaël Giraud (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS); Florent Mc Isaac (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS); Ngoc-Sang Pham (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)
    Abstract: The economic implications of oil price shocks have been extensively studied since the 1970s'. Despite this huge literature, no dynamic stochastic general equilibrium model was available that captures two well-known stylized facts: 1) the stagflationary impact of an oil price shock, together with 2) the influence of the energy productivity of capital on the depth and length of this impact. We build, estimate and simulate a New-Keynesian model with capital accumulation, which takes the case of an economy where oil is imported from abroad, and where these stylized facts can be accounted for. Moreover, the Bayesian estimation of the model on the US economy (1984-2007) suggests that the output elasticity of oil might have been above 10%, stressing the role of oil use in US growth at this time. Finally, our simulations confirm that an increase in energy efficiency significantly attenuates the effects of an oil shock —a possible explanation of why the third oil shock (1999-2008) did not have the same macro-economic impact as the first two ones.
    Abstract: Les conséquences économiques des chocs pétroliers ont été très étudiés depuis les années 1970. En dépit d'une abondante littérature, aucun modèle d'équilibre général dynamique stochastique n'était à ce jour disponible, qui captura les deux faits stylisés bien connus suivants : 1) l'impact stagflationniste d'un choc sur le prix du pétrole et 2) l'influence de la productivité énergétique du capital sur la profondeur et la longueur du dit impact. Nous construisons, estimons et simulons un modèle Néo-keynésien avec accumulation du capital, adapté à une économie importatrice de pétrole, où ces faits stylisés peuvent être retrouvés. De plus, l'estimation bayésienne du modèle sur les données des Etats-Unis (1984-2007) suggère que l'élasticité d'output du pétrole pourrait être supérieure à 10%, soulignant le rôle du pétrole dans la croissance des Etats-Unis sur cette période. Enfin, nos simulations confirment qu'une augmentation de l'efficacité énergétique atténue de manière significative les effets du choc —ce qui livre une explication possible au fait que le troisième choc pétrolier (1999-2008) n'a pas eu le même impact macro-économique que les deux premiers.
    Date: 2014–12
  29. By: Chatterjee, Nilendu; Gupta, Kausik; Chatterjee, Tonmoy
    Abstract: The present paper throws light on the famous “tax versus standard” debate in the sphere of environmental economics by using general equilibrium framework and tries to examine which of the two, i.e., tax or standard is the better way to deal with pollution. The present paper has done so in the presence of a waste recycling sector which is the unique feature of it and has shown the impact of tax and standard separately on different polluting and non-polluting sectors of the economy. The paper has developed a unique as well as an interesting result that in the presence of a waste recycling sector in the economy, both pollution tax and environmental standard have the same impact.
    Keywords: Environmental Regulation, Green Capital, Waste Management and General Equilibrium
    JEL: D58 F11 F18 Q52 Q53
    Date: 2015–05
  30. By: Libo Wu (School of Economics, Fudan University); Weiqi Tang (School of Economics, Fudan University)
    Abstract: Energy conservation and greenhouse gas (GHG) abatement have been included in the national development strategy of China. However, the rigidity in command-and-control mechanisms and arbitrariness in assignment of GHG abatement burden across regions have caused unnecessary losses in both economic efficiency and social equity. In this paper, we use an Inter-Regional Dynamic CGE (IRD-CGE) model to simulate economic and welfare impacts of climate policies on national and regional level, including carbon intensity targets, regional emission constraints and cap-and-trade mechanism. Comparison among alternative emission reduction policy mechanisms indicates that emission trading scheme can not only moderate the economic and social welfare losses, but also improve social equity by decoupling the allocation of emission permits from economic optimization of emission reduction scheme. From this perspective, emissions trading bridges the concerns for economic efficiency and social equity, since emission permits could be reallocated as an income transfer so as to promote inter-regional equity, while economic efficiency is maintained. Keywords: greenhouse gas emissions; energy conservation; emission reduction; pollution; cap-and-trade mechanism
    JEL: Q54 Q56
    Date: 2015–05
  31. By: Jorge Balat; Juan E. Carranza; Juan D. Martin
    Abstract: In this paper we formulate a dynamic multi-unit auction model to characterize bidding behavior in hydro power dominated electricity markets. Our model implies that, in order to maximize expected profits, hydro producers will submit bid prices above its marginal production costs that account for the intertemporal opportunity cost of water and the expected strategic effects of bids on rivals’ behavior. We test the predictions of our model against data of the Colombian electricity market, where hydro producers hold 63% of total installed capacity, and find evidence consistent with both dynamic and strategic behavior.
    Keywords: Dynamic auction model, Bidding behavior, Market power, Electricity markets.
    JEL: L25 D22 D44
    Date: 2015–05–27
  32. By: Michael Wahman (London School of Economics); Matthias Basedau (GIGA German Institute of Global and Area Studies)
    Abstract: Building on theoretical insights from research on the rentier state and the “resource curse,” several studies have supported the argument that oil hinders democracy. However, previous research on the rentier state has neglected the global surge of multiparty autocracies or “electoral authoritarian” regimes since the end of the Cold War. No systematic study has been carried out on the question of whether or not and how oil affects electoral contests in nondemocratic regimes. In this paper we contribute to filling this gap by combing the literature on multiparty autocracy and the political economy of the rentier state. As oil production creates substantial, nontransparent revenue streams to national and subnational governments, we hypothesize that oil production has a negative effect on electoral competitiveness, both cross- and subnationally, in multiparty autocracies. Consequently, the democratic “resource curse” emphasized in earlier work on the rentier state is likely to persist even after the introduction of multipartyism in cases where oil production predates democratic institutions. The paper tests the hypothesis cross-nationally, using data on all multiparty elections held in the world in the period 1975–2010, and subnationally, using a new data set on subnational election results and oil production in Nigeria. Our results confirm that oil impedes electoral competitiveness, both cross- and subnationally, in multiparty autocracies.
    Keywords: oil, authoritarianism, elections, Nigeria, competition, Africa
    Date: 2015–04
  33. By: Bradford Mills (Virginia Polytechnic Institute & State University); Joachim Schleich (Virginia Polytechnic Institute & State University, Fraunhofer ISI - Fraunhofer Institute for Systems and Innovation Research - Fraunhofer Institute for Systems and Innovation Research, Grenoble Ecole de Management - Grenoble École de Management (GEM))
    Abstract: New energy efficient lighting technologies can significantly reduce household electricity consumption, but adoption has been slow. A unique dataset of German households is used in this paper to examine the factors associated with the replacement of old incandescent lamps (ILs) with new energy efficient compact fluorescent lamps (CFLs) and light emitting diodes (LEDs). The 'rebound' effect of increased lamp luminosity in the transition to energy efficient bulbs is ana-lyzed jointly with the replacement decision to account for household self-selection in bulb-type choice. Results indicate that the EU ban on ILs accelerated the pace of transition to CFLs and LEDs, while storage of bulbs significantly dampened the speed of the transition. Higher lighting needs and bulb attributes like energy efficiency, environmental friendliness, and durability spur IL replacement with CFLs or LEDs. Electricity gains from new energy efficient lighting are mitigated by 23% and 47% increases in luminosity for CFL and LED replacements, respectively. Model results suggest that taking the replacement bulb from storage and higher levels of educa-tion dampen the magnitude of these luminosity rebounds in IL to CFL transitions.
    Date: 2014
  34. By: Vassiliki Manoussi; Anastasios Xepapadeas
    Abstract: We study a dynamic game of climate policy design in terms of emissions and solar radiation management (SRM) involving two heterogeneous countries or group of countries. Countries emit greenhouse gasses (GHGs), and can block incoming radiation by unilateral SRM activities, thus reducing global temperature. Heterogeneity is modelled in terms of the social cost of SRM, the environmental damages due to global warming, the productivity of emissions in terms of generating private benefits, the rate of impatience, and the private cost of geoengineering. We determine the impact of asymmetry on mitigation and SRM activities, concentration of GHGs, and global temperature, and we examine whether a tradeoff actually emerges between mitigation and SRM. Our results could provide some insights into a currently emerging debate regarding mitigation and SRM methods to control climate change, especially since asymmetries seem to play an important role in affecting incentives for cooperation or unilateral actions.
    Keywords: Climate change, mitigation, solar radiation management, cooperation, differential game, asymmetry, feedback Nash equilibrium
    JEL: Q53 Q54
    Date: 2015–05–25

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