nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒07‒11
seventeen papers chosen by
Roger Fouquet
London School of Economics

  1. The Impact of LNG Export Expansion in Queensland, with special emphasis on the effects of increased gas prices By Philip Adams
  2. Designing a new EU-Turkey strategic gas partnership By Simone Tagliapietra; Georg Zachmann
  3. Should we extract the European shale gas? The effect of climate and financial constraints By Fanny Henriet; Katheline Schubert
  4. Using Stated Preference Methods to Design Cost-Effective Subsidy Programs to Induce Technology Adoption. An Application to a Stove Program in Southern Chile By Felipe Vásquez; Walter Gómez; Hugo Salgado; Carlos Chávez
  5. The great plunge in oil prices: causes, consequences, and policy responses By John Baffes; M. Ayhan Kose; Franziska Ohnsorge; Marc Stocker
  6. The Response of Macro Variables of Emerging and Developed Oil Importers to Oil Price Movements By Taghizadeh-Hesary, Farhad; Yoshino, Naoyuki; Hossein Abadi, Majid Mohammadi; Farboudmanesh, Rosa
  7. Capturing rents from natural resource abundance: private royalties from U.S. onshore oil and gas production By Brown, Jason; Fitzgerald, Timothy; Weber, Jeremy G.
  8. Lobbying over Exhaustible-Resource Extraction By Achim Voss; Mark Schopf
  9. Steam Coal at an Arms Length: An Evaluation of Proposed Reform Options for US Coal Used in Power Generation By Jason Pearcy; Mark Haggerty; Megan Lawson
  10. Economy-wide Estimates of Rebound Effects: Evidence from Panel Data By Adetutu, Morakinyo; Glass, Anthony; Weyman-Jones, Thomas
  11. Dynamic of Publication Network in German Photovoltaic Industry By Vasaf, Esmaeil; Sanatkhani, Mahboobeh
  12. Fuel for Economic Growth? By Gars, Johan; Olovsson, Conny
  13. On the cointegration and causality between Oil market, Nuclear Energy Consumption, and Economic Growth: Evidence from Developed Countries By Naser, Hanan
  14. Volatility Spillovers between Energy and Agricultural Markets: A Critical Appraisal of Theory and Practice By Chia-Lin Chang; Yiying Li; Michael McAleer
  15. Press and Leaks: Do Newspapers Reduce Toxic Emissions? By Pamela Campa
  16. Public Preferences for Carbon Tax Attributs By Z. Eylem Gevrek; Ayse Uyduranoglu
  17. Evaluating the Purchase Process of Household Appliances Accounting for Consumers’ Attitudes towards Eco-Friendly and Sustainable Consumption Behavior By Banerjee, Tanushri; Banerjee, Arindam

  1. By: Philip Adams
    Abstract: The large Queensland LNG projects currently under construction will begin production over the next two years. Exploiting previously unused reserves of coal seam gas, the LNG produced will be sold at an international price which far exceeds the current price of natural gas in Eastern Australia. The new exports of LNG will therefore boost Australia's exports and terms of trade, leading to increased real GDP and welfare for the national economy. But this is only one part of the overall impacts of the new projects. Through competitive pressures, the price premium received for unconventional Queensland gas will lead to increased prices for gas throughout Eastern Australia. This will increase costs of production for energy-intensive industries. For those industries (and regions) which cannot pass on the cost increases, production will fall. In this paper, using the Victoria University Regional Model (VURM), we report on simulations designed to provide a balanced assessment of the costs and benefits of the new LNG projects. Key findings are: During construction, the projects boost real GDP and national welfare, and have a positive impact on most industries and most regional economies; During the mature, production phase, the national impacts are marginal. Real GDP is stimulated slightly, while national welfare is hardly affected. Some industries gain production, particularly electricity-related sectors that benefit from favourable price-induced substitution effects. Other industries lose production, due to the adverse cost impacts of increased gas and electricity prices. Because some industries gain, while other industries lose, so some regions gain real GSP and employment (Queensland), while other regions lose (notably Victoria and South Australia). The projects will lead to higher CO2-e emissions, due to the stimulus to coal-fired electricity.
    Keywords: CGE modelling, Gas production, LNG exports, Australian economy
    JEL: C68 D58 F43 O40
    Date: 2014–11
  2. By: Simone Tagliapietra; Georg Zachmann
    Abstract: â?¢ The European Commissionâ??s February 2015 Energy Union Communication calls for intensified work on the Southern Gas Corridor (SGC) and the establishment of a new strategic energy partnership with Turkey. The presence of the European Union and Turkey in the region is complementary in a number of ways. Building on this could unlock the regionâ??s gas export potential and make gas supplies to the EU and Turkey more secure. â?¢ The EU should establish dedicated energy diplomacy taskforces with Turkey and each potential supplier in the region (Azerbaijan, Turkmenistan, Iran, Kurdistan Region of Iraq). This would allow the EU and Turkey to make use of their complementary diplomatic leverages to overcome barriers to regional gas trade. â?¢ In parallel, the EU should establish with Turkey a dedicated financing mechanism to facilitate gas infrastructure investments, with a primary focus on the upgrade of the Turkish gas grid. The European Investment Bank might play a role in attracting private and institutional investors through its financing tools. â?¢ The four â??EU-Turkey Energy Diplomacy Taskforcesâ?? and the â??EU-Turkey Gas Infrastructure Financing Initiativeâ?? would be initiatives of the recently started EU-Turkey Strategic High Level Energy Dialogue
    Date: 2015–07
  3. By: Fanny Henriet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS); Katheline Schubert (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)
    Abstract: In the context of the deep contrast between the shale gas boom in the United States and the recent ban by France of shale gas exploration, this paper explores whether climate policy justifies developing more shale gas, taking into account environmental damages, both local and global, and addresses the question of a potential arbitrage between shale gas development and the transition to clean energy. We construct a Hotelling-like model where electricity may be produced by three perfectly substitutable sources: an abundant dirty resource (coal), a non-renewable less polluting resource (shale gas), and an abundant clean resource (solar). The resources differ by their carbon contents and their unit costs. Fixed costs must be paid for shale gas exploration, and before solar production begins. Climate policy takes the form of a ceiling on atmospheric carbon concentration. We show that at the optimum tightening climate policy always leads to bringing forward the transition to clean energy. We determine conditions under which the quantity of shale gas extracted should increase or decrease as the ceiling is tightened. To address the question of the arbitrage between shale gas development and the transition to clean energy, we assume that the social planner has to comply to the climate constraint without increasing energy expenditures. We show that when the price elasticity of electricity demand is low, a binding financial constraint leads to an overinvestment in shale gas and postpones the switch to the clean backstop. We calibrate the model for Europe and determine whether shale gas should be extracted, depending on the magnitude of the local damage, as well as the potential extra amount of shale gas developed because of a financial constraint, and the cost of a moratorium on extraction.
    Date: 2015–06
  4. By: Felipe Vásquez; Walter Gómez; Hugo Salgado; Carlos Chávez (School of Business and Economics, Universidad del Desarrollo)
    Abstract: We study the design of an economic incentive based program –a subsidy- to induce adoption of more efficient technology in a pollution reduction program in southern Chile. Stated preferences methods, contingent valuation (CV), and choice experiment (CE) are used to estimate the probability of adoption and the willingness to share the cost of a new technology by a household.
    Keywords: Stated preferences, cost-effectiveness, environmental policy, urban pollution, households, contingent valuation, choice experiments.
    Date: 2013–08
  5. By: John Baffes; M. Ayhan Kose; Franziska Ohnsorge; Marc Stocker
    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: 2015–06
  6. By: Taghizadeh-Hesary, Farhad (Asian Development Bank Institute); Yoshino, Naoyuki (Asian Development Bank Institute); Hossein Abadi, Majid Mohammadi (Asian Development Bank Institute); Farboudmanesh, Rosa (Asian Development Bank Institute)
    Abstract: This paper assesses the impact of crude oil price movements on two macro variables—the gross domestic product (GDP) growth rate and consumer price index inflation rate—in the developed economies of the United States and Japan, and an emerging economy, the People’s Republic of China (PRC). These countries were chosen for this research because they are the world’s three largest oil consumers. The main objective of this study is to see whether these economies are still reactive to oil price movements. The results obtained suggest that the impact of oil price fluctuations on the GDP growth of the developed oil importers is much lower than on the GDP growth of the emerging economy. The main reasons for this lie in fuel substitution (higher use of nuclear energy, gas, and renewables), a declining population (for Japan), the shale gas revolution (for the United States), and strategic oil stocks and government-mandated energy efficiency targets in developed economies. All of these factors make developed economies more resistant to oil shocks. On the other hand, the impact of oil price movements on the PRC’s inflation rate was found to be milder than in the two developed countries that were examined. The main cause for this is that the PRC experiences a larger forward shift in its aggregate supply due to higher growth, which allows it to avoid a massive increase in price levels following oil price shocks.
    Keywords: oil price movements; oil importers; oil consumption; fuel substitution; price shocks
    JEL: E31 O57 Q43
    Date: 2015–07–07
  7. By: Brown, Jason (Federal Reserve Bank of Kansas City); Fitzgerald, Timothy; Weber, Jeremy G.
    Abstract: Innovation-spurred growth in oil and gas production from shale formations led the U.S. to become the global leader in producing oil and natural gas. Because most shale is on private lands, drilling companies must access the resource through private lease contracts that provide a share of the value of production – a royalty – to mineral owners. We investigate the competitiveness of leasing markets by estimating how much mineral owners capture geologically-driven advantages in well productivity through a higher royalty rate. We estimate that the six major shale plays generated $39 billion in private royalties in 2014, however, there is limited pass-through of resource abundance into royalty rates. A doubling of the ultimate recovery of the average well in a county increases the average royalty rate by 2 percentage points (an 11 percent increase). The low pass-through is consistent with firms exercising market power in private leasing markets, and with uncertainty over the value of resource endowments. The finding suggests that policies affecting the cost of extraction likely have little effect on the share of the value of production captured by mineral owners.
    Keywords: Royalty payments; Oil; Natural gas; Mineral rights;
    JEL: L71 Q32 R11
    Date: 2015–06–01
  8. By: Achim Voss (University of Muenster); Mark Schopf (University of Paderborn)
    Abstract: Republished as CIE Working Paper 2014-06
    Keywords: Environmental Policy, Exhaustible Resources, Political Economy, Lobbying, Nash Bargaining, Dynamic Programming
    JEL: D72 Q31 Q38 Q58
    Date: 2015–03
  9. By: Jason Pearcy (Montana State University); Mark Haggerty (Headwaters Economics); Megan Lawson (Headwaters Economics)
    Abstract: The ONRR has proposed to reform federal coal valuation policy for royalty assessment and in this paper we estimate the expected changes associated with different reform options. We find that if royalty revenues are determined using the delivered price of coal instead of prices used in non-arm’s length transactions, royalty revenues from domestic sales to power generators would increase by $141 million per year. The associated price effect is an increase of 23 cents per ton (0.89%) and the effect on the quantity is a decrease of 971 thousand tons per year (-0.17%). In addition to using delivered prices for royalty valuation if transportation costs that exceed 50% of the net delivered price are included in royalty payments, royalty revenues from domestic sales to power generators are expected to increase by $517 million per year. This change would increase the average price of coal by 88 cents per ton (3.36%), decrease the quantity extracted by 3.7 million tons per year (-0.65%), and reduce severance and income tax collections by $13 million per year.
    Keywords: Coal, Royalty Revenue, Policy Evaluation
    JEL: D4 H2 L7 Q3
    Date: 2015–06–26
  10. By: Adetutu, Morakinyo; Glass, Anthony; Weyman-Jones, Thomas
    Abstract: Energy consumption and greenhouse emissions across many countries have increased overtime despite widespread energy efficiency improvements. One explanation offered in the literature is the rebound effect (RE), however there is a debate about the magnitude and appropriate model for estimating RE. Using a combined stochastic frontier analysis and two-stage dynamic panel data approach for 55 countries covering 1980-2010, we explore these two issues of magnitude and model. Our central estimates indicate that, in the short-run, 100% energy efficiency improvement is followed by 90% rebound in energy consumption, but in the long-run it leads to a 36% decrease in energy consumption. Overall, our estimated cross-country RE magnitudes indicate the need to consider or account for RE when energy forecasts and policy measures are derived from potential energy efficiency savings.
    Keywords: Energy Efficiency, Input Distance Function, Panel Data, Rebound Effects, Stochastic Frontier Analysis
    JEL: C23 D2 Q43
    Date: 2015–07–02
  11. By: Vasaf, Esmaeil; Sanatkhani, Mahboobeh
    Abstract: Besides high policy-induced motivations for development of research activities in photovoltaic industry, there have been a few social network studies concentrating on the scientific publication in this field. This study tried to shed light on the structure and evolution of publication network in German PV industry from 1988 to 2013. For this purpose, using the centrality indices, I realized the most influential actors as potential source of knowledge and actors who play the central role in knowledge production and diffusion. In next step, I investigated the dynamic of co-authorship network of scientists. Results showed that against the downward trend of network’s cohesion, overall compared to the same size random generated network, German PV co-authorship network is characterized as a small world network which emphasizes the efficient diffusion of knowledge compare to other type of network. Finally, to disclose the drivers behind the evolution of co-authorship network, I hypothesized two different scenarios. First, using descriptive analysis, the existence of preferential attachment mechanism is investigated. Fitting power law distribution over degree of nodes rejected our hypothesis for all investigating time windows. Therefore, preferential attachment mechanism cannot significantly explain the evolution of the network and reveals that network is robust in response to removal of large nodes. Second, looking at the composition of knowledge on map of science provided strong evidence in support of interdisciplinarity nature of German PV industry. Our descriptive analysis shows that along with existence of leading macro-disciplines such as Materials Science and Physics Applied, new subject categories of science have found a significant position over the existing knowledge domain during the observed period.
    Keywords: publication network, PV industry, knowledge diffusion, preferential attachment
    JEL: O30
    Date: 2014–11–10
  12. By: Gars, Johan (GEDB, Royal Swedish Academy of Sciences); Olovsson, Conny (Research Department, Central Bank of Sweden)
    Abstract: We set up an endogenous growth model in which the efficiency of both capital and fossil energy can be improved, whereas the efficiency of one alternative energy source is limited. With capital and energy as complements, there exist two steady states: one stagnant where energy is fully derived from the alternative energy source, and one with balanced growth where energy is fully sourced from fossil fuel. Heterogeneity in initial TFP levels can generate the Great Divergence. The demand for fossil fuel in technologically advanced countries drives up its price and makes fossil fuel too costly in less advanced countries that choose the alternative and stagnant energy input.
    Keywords: Growth; Malthusian stagnation; Industrial Revolution; Great Divergence; Technological progress
    JEL: O11 O14 O33 O41 O50
    Date: 2015–05–01
  13. By: Naser, Hanan
    Abstract: This study uses Johansen cointegration technique to examine both the equilibrium relationship and the causality between oil consumption, nuclear energy consumption, oil price and economic growth. To do so, four industrialized countries including: the US, Canada, Japan, and France are investigated over the period from 1965 - 2010. The cointegration test results suggest that the proposed variables tend to move together in the long-run in all countries. In addition, the causal linkage between the variables is scrutinized through the exogeneity test. The results point that energy consumption (i.e., oil or nuclear) has either a predictive power for economic growth, or feedback impact with real GDP growth in all countries. The oil consumption is found to have a great effect on economy in all the investigated countries, especially in Canada. Also, exogenous test with respect to the speed of adjustment shows that oil consumption has a predictive power for real GDP in the US, Japan, and France. Regarding nuclear energy consumption - growth nexus, results illustrate that nuclear energy consumption has a predictive power for real economic growth in the US, Canada, and France. On the basis of speed of adjustment, it is concluded that there is bi-directional causality between oil consumption and economic growth in Canada. On the other hand, there is bidirectional causal relationship between nuclear energy consumption and real GDP growth in Japan.
    Keywords: Energy consumption, Economic growth, Nuclear energy, Oil consumption, Cointegration, Error correction model
    JEL: C3 C32 Q40 Q41 Q42
    Date: 2014–10–06
  14. By: Chia-Lin Chang (National Chung Hsing University, Taiwan); Yiying Li (National Tsing Hua University, Taiwan); Michael McAleer (National Tsing Hua University, Taiwan; Erasmus School of Economics, Erasmus University Rotterdam; Complutense University of Madrid, Spain)
    Abstract: Energy and agricultural commodities and markets have been examined extensively, albeit separately, for a number of years. In the energy literature, the returns, volatility and volatility spillovers (namely, the delayed effect of a returns shock in one asset on the subsequent volatility or covolatility in another asset), among alternative energy commodities, such as oil, gasoline and ethanol across different markets, have been analysed using a variety of univariate and multivariate models, estimation techniques, data sets, and time frequencies. A similar comment applies to the separate theoretical and empirical analysis of a wide range of agricultural commodities and markets. Given the recent interest and emphasis in bio-fuels and green energy, especially bio-ethanol, which is derived from a range of agricultural products, it is not surprising that there is a topical and developing literature on the spillovers between energy and agricultural markets. Modelling and testing spillovers between the energy and agricultural markets has typically been based on estimating multivariate conditional volatility models, specifically the BEKK and DCC models. A serious technical deficiency is that the Quasi-Maximum Likelihood Estimates (QMLE) of a full BEKK matrix, which is typically estimated in examining volatility spillover effects, has no asymptotic properties, except by assumption, so that no statistical test of volatility spillovers is possible. Some papers in the literature have used the DCC model to test for volatility spillovers. However, it is well known in the financial econometrics literature that the DCC model has no regularity conditions, and that the QMLE of the parameters of DCC has no asymptotic properties, so that there is no valid statistical testing of volatility spillovers. The purpose of the paper is to evaluate the theory and practice in testing for volatility spillovers between energy and agricultural markets using the multivariate BEKK and DCC models, and to make recommendations as to how such spillovers might be tested using valid statistical techniques. Three new definitions of volatility and covolatility spillovers are given, and the different models used in empirical applications are evaluated in terms of the new definitions and statistical criteria.
    Keywords: Energy markets; agricultural markets; volatility and covolatility spillovers; univariate and multivariate conditional volatility models; BEKK; DCC; definitions of spillovers
    JEL: C22 C32 C58 G32 O13 Q42
    Date: 2015–07–06
  15. By: Pamela Campa (University of Calgary)
    Abstract: This paper investigates whether media presence affects corporate environmental decisions. Using data on plant-level toxic emissions in 1996-2009 from the US Environmental Protection Agency's Toxics Release Inventory and newly collected data on newspapers locations and content, I find that an increase in the number of newspapers near a plant raises the press coverage of the plant's toxic emissions and reduces the amount of these emissions. The effect of newspapers on toxic emissions is specific to industries that produce consumer goods, and is larger in counties that were subject to extreme levels of cancer incidence in the recent past.
    Date: 2015–07–01
  16. By: Z. Eylem Gevrek (Department of Economics, University of Konstanz, Germany); Ayse Uyduranoglu (Istanbul Bilgi University, Turkey)
    Abstract: The impacts of climate change are already visible throughout the world. Recognizing the threats posed by climate change, the Durban Platform, the 17th Session of the Conference of Parties (COP 17), underscores that the global nature of climate change calls for the widest possible cooperation and ambitious action by all countries. A crucial starting point for the design of effective and publicly acceptable policies is to explore public preferences for climate policy instruments. Using a choice experiment, this study investigates public preferences for carbon tax attributes in a developing country context. The results account for heterogeneity in preferences and show that Turkish people prefer a carbon tax with a progressive cost distribution rather than one with a regressive cost distribution. The private cost has a negative effect on the probability of choosing the tax. Earmarking carbon tax revenues increases the public acceptability of the tax. Moreover, there is a preference for a carbon tax that promotes public awareness of climate change.
    Keywords: Carbon taxes, Choice experiment, Latent class model, Mixed logit model, Preferences, Turkey
    JEL: H Q
    Date: 2015–07–08
  17. By: Banerjee, Tanushri; Banerjee, Arindam
    Abstract: Globally depleting fuel resources like coal, oil and gas has triggered discussions in various forums in India emphasizing the significance of renewable energy sources like solar, hydro, wind and bio gas for future sustenance of society. Anticipating a shift of the consumer mindset towards Greener Technology products, organizations have identified this niche market and introduced a range of products for various customer segments. We have used the Howard Sheth Model of consumer behavior to understand how consumers generally look at broad range of factors including energy efficiency when purchasing major appliances, with the factors differing both in nature and order of importance across appliance types. Although there exists significant literature on consumers’ purchase decision, there is not much literature available for consumers’ purchase decision in emerging countries of home appliances considering environmentally friendly factors. This research work aims to study the growing energy saving consciousness and environmental friendly considerations during purchase decision of consumers in India. This is in the context of the purchase of 2 home appliances – the refrigerator and the air-conditioner in Gujarat post 2010. Indicators like star rating have been used as influencing factor on consumers’ decision during purchase. It will provide an understanding of the various parameters that are considered by consumers and the degree to which they influence during the purchase of air-conditioners and refrigerators.

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