nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒09‒11
28 papers chosen by
Roger Fouquet
London School of Economics

  1. How Large Are Global Energy Subsidies? By David Coady; Ian W.H. Parry; Louis Sears; Baoping Shang
  2. Does Final Energy Demand in Portugal Exhibit Long Memory? A Fractional Integration Analysis By José M. Belbute; Alfredo Marvão Pereira
  3. Nudging Electricity Consumption Using TOU Pricing and Feedback: Evidence from Irish Households By Di Cosmo, Valeria; O'Hora, Denis; Devitt, Niamh
  4. Restructuring European Electricity Markets ? A Panel Data Analysis By Hyland, Marie
  5. Cointegrating Jumps: an Application to Energy Facilities By Nicola Cufaro Petroni; Piergiacomo Sabino
  6. Analysing Residential Energy Demand: An Error Correction Demand System Approach for Ireland By Curtis, John; Stanley, Brian
  7. A New Approach to Modeling the Effects of Temperature Fluctuations on Monthly Electricity Demand By Yoosoon Chang; Chang Sik Kim; J. Isaac Miller; Joon Y. Park; Sungkeun Park
  8. Forecasting Electricity Spot Prices using Lasso: On Capturing the Autoregressive Intra-day Structure By Florian Ziel
  9. The Impact of the North Atlantic Oscillation on Electricity Markets: A Case Study on Ireland By Curtis, John; Lynch, Muireann Á.; Zubiate, Laura
  10. New Energy Sources for Jordan: Macroeconomic Impact and Policy Considerations By Andrea Gamba
  11. Wie unbeliebt ist Kohle und wie beliebt sind die Erneuerbaren? Eine empirische Regionalanalyse der energiepolitischen Präferenzen deutscher Haushalte By Andor, Mark A.; Frondel, Manuel; Rinne, Sonja
  12. Electricity demand response in Japan:Experimental evidence from a residential photovoltaic generation system By Takanori Ida; Kayo Murakami; Makoto Tanaka
  13. Endogenous economic growth, EROI, and transition towards renewable energy By Victor Court; Pierre-André Jouvet; Frédéric Lantz
  14. Carbon Dioxide (CO2) Emissions from Electricity: The Influence of The North Atlantic Oscillation By Curtis, John; Lynch, Muireann Á.; Zubiate, Laura
  15. An Insurance-Led Response to Climate Change By Anthony J. Webster; Richard H. Clarke
  16. The long-run relationshiop between C02 emissions and economic activity in a small open economy: Uruguay 1882-2010 By Matias Piaggio; Emilio Padilla; Carolina Roman
  17. Reduced carbon emission estimates from fossil fuel combustion and cement production in China By Zhu Liu; Dabo Guan; Wei Wei; Steven J. Davis; Philippe Ciais; Jin Bai; Shushi Peng; Qiang Zhang; Klaus Hubacek; Gregg Marland; Robert J. Andres; Douglas Crawford-Brown; Jintai Lin; Hongyan Zhao; Chaopeng Hong; Thomas A. Boden; Kuishuang Feng; Glen P. Peters; Fengming Xi; Junguo Liu; Yuan Li; Yu Zhao; Ning Zeng; Kebin He
  18. Carbon Emissions and Social Capital in Sweden By George Marbuah; Ing-Marie Gren
  19. Happiness in the Air: How Does a Dirty Sky Affect Subjective Well-being? By Zhang, Xin; Zhang, Xiaobo; Chen, Xi
  20. Effects of Load Adjustment Contracts on Industrial Electricity Use in Japan (Japanese) By ISOGAWA Daiya; OHASHI Hiroshi
  21. Using Income Contingent Loans for the Financing of the Next Million Australian Solar Rooftops By Kenneth Baldwin; Bruce Chapman; Umbu Raya
  22. Regulating greenhouse gas emissions by an intertemporal policy mix: An experimental investigation By Bernold, Elizabeth; Ancev, Tiho; Baltaduonis, Rimvydas
  23. Local and Global Pollution and International Environmental Agreements in a Network Approach By Günther, Michael; Hellmann, Tim
  24. How do Carbon Emissions Respond to Business-Cycle Shocks? By Hashmat U. Khan; Christopher R. Knittel; Konstantinos Metaxoglou; Maya M. Papineau
  25. Are Gasoline Demand Elasticities Different across Cities? By Philippe Barla; Markus Herrmann; Carlos Ordas-Criado; Luis F. Miranda-Moreno
  26. Do Global CO2 Emissions from Fuel Consumption Exhibit Long Memory? A Fractional Integration Analysis By José M. Belbute; Alfredo Marvão Pereira
  27. Mitigating carbon leakage: Combining output-based rebating with a consumption tax By Christoph Böhringer; Knut Einar Rosendahl; Halvor Briseid Storrøsten
  28. Environmental tax reform in a federation with rent-induced migration By Jean-Denis Garon; Charles Séguin

  1. By: David Coady; Ian W.H. Parry; Louis Sears; Baoping Shang
    Abstract: This paper provides a comprehensive, updated picture of energy subsidies at the global and regional levels. It focuses on the broad notion of post-tax energy subsidies, which arise when consumer prices are below supply costs plus a tax to reflect environmental damage and an additional tax applied to all consumption goods to raise government revenues. Post-tax energy subsidies are dramatically higher than previously estimated, and are projected to remain high. These subsidies primarily reflect under-pricing from a domestic (rather than global) perspective, so even unilateral price reform is in countries’ own interests. The potential fiscal, environmental and welfare impacts of energy subsidy reform are substantial.
    Keywords: Environment;energy subsidies, efficient taxation, deadweight loss, revenue, subsidies, tax, vehicle, traffic, subsidy, Demand and Supply, Government Policy,
    Date: 2015–05–18
  2. By: José M. Belbute (Department of Economics, University of Évora, Portugal); Alfredo Marvão Pereira (Department of Economics, The College of William and Mary)
    Abstract: We measure the degree of fractional integration in final energy demand in Portugal using an ARFIMA model, with and without adjustments for seasonality. We consider aggregate energy demand as well as final demand for petroleum, electricity, coal, and natural gas. Our findings suggest the presence of long memory in all of the energy demand variables. All fractional difference parameters are positive and smaller than 0.5, a sign that the series are stationary, but the mean reversion process is slow. We find that the most persistent are the final demand for petroleum and electricity, closely followed by the final demand for coal, while the least persistent is the demand for natural gas. These results have important implications for the design of energy policies. In particular, temporary policy shocks will affect final energy demand by disappearing slowly, as a result of the long-memory process. Given the temporary nature of these shocks, however, more long lasting effects on final energy demand will require a more permanent policy stance.
    Keywords: Long memory, final energy demand, ARFIMA model, Portugal Technology.
    JEL: C22 O13 Q41
    Date: 2015–08–31
  3. By: Di Cosmo, Valeria; O'Hora, Denis; Devitt, Niamh
    Abstract: This paper analyses the electricity usage of 5,000 Irish residential consumers in response to the introduction of TOU tariffs and three different forms of financial feedback: immediate feedback from in-home displays (IHD), monthly billing and bimonthly billing. Halfhourly data on consumption collected during the trial indicated that TOU tariffs reduced consumption at peak, with some reductions lasting beyond the end of the peak period and post-peak spikes in usage were not observed. IHD feedback resulted in the most reliable reductions and bimonthly billing the least. Households with greater education used the information associated to the TOU tariffs slightly better than the average.
    Date: 2015–07
  4. By: Hyland, Marie
    Abstract: This paper looks at the restructuring of European electricity markets that has been taking place since the 1990s. This liberalisation process, driven largely by EU legislation aiming to create a single market for electricity, has led to significant changes in how electricity markets in member states operate. In this paper I estimate the impact of the restructuring process on electricity prices for industrial consumers. Much of the literature to date estimating the impacts of electricity market restructuring fails to take into account the potential endogeneity of the reform process. By using dynamic panel-data techniques, I aim to overcome this shortcoming. I find that once the potential endogeneity of reforms is accounted for, restructuring has, as of yet, had no statistically significant impact on electricity prices. This research highlights the importance of accounting for dynamics and endogeneity before drawing inferences about the results of EU electricity-market reform.
    Date: 2015–06
  5. By: Nicola Cufaro Petroni; Piergiacomo Sabino
    Abstract: Based on the concept of self-decomposable random variables we discuss the application of a model for a pair of dependent Poisson processes to energy facilities. Due to the resulting structure of the jump events we can see the self-decomposability as a form of cointegration among jumps. In the context of energy facilities, the application of our approach to model power or gas dynamics and to evaluate transportation assets seen as spread options is straightforward. We study the applicability of our methodology first assuming a Merton market model with two underlying assets; in a second step we consider price dynamics driven by an exponential mean-reverting Geometric Ornstein-Uhlenbeck plus compound Poisson that are commonly used in the energy field. In this specific case we propose a price spot dynamics for each underlying that has the advantage of being treatable to find non-arbitrage conditions. In particular we can find close-form formulas for vanilla options so that the price and the Greeks of spread options can be calculated in close form using the Margrabe formula (if the strike is zero) or some other well known approximation.
    Date: 2015–09
  6. By: Curtis, John; Stanley, Brian
    Abstract: This paper analyses the Irish residential energy demand system by using variants of Deaton and Muellbauer?s Almost Ideal Demand System model. Annual data from 1970 to 2013 is employed to estimate a demand system for solid fuels, oil, gas and electricity with the models incorporating quadratic and demographic terms to estimate long-run price and expenditure elasticities. This is the first attempt in an Irish context to estimate an energy demand system for the residential sector. Error correction models were also estimated to recover short-run elasticities. Against the backdrop of onerous climate and energy efficiency policy targets, and given the residential sector?s substantial energy use it is important to update energy demand elasticity estimates to better inform policy instrument design.
    Date: 2015–07
  7. By: Yoosoon Chang (Department of Economics, Indiana University); Chang Sik Kim (Department of Economics, Sungkyunkwan University, Seoul 110-745, Korea); J. Isaac Miller (Department of Economics, University of Missouri); Joon Y. Park (Department of Economics, Indiana University and Sungkyunkwan University); Sungkeun Park (Korea Institute for Industrial Economics and Trade)
    Abstract: This paper proposes a novel approach to measure and analyze the effect of temperature on electricity demand. This temperature effect is specified as a function of the density of temperatures observed at a high frequency with a functional coefficient, which we call the temperature response function. This approach contrasts with the usual approach to model the temperature effect as a function of heating and cooling degree days. We further investigate how non-climate variables, which include the price of electricity relative to that of substitutable energy and latent variables such as preferences and technology that we proxy by a linear time trend, affect the demand response to temperature changes. Our approach and methodology are demonstrated using Korean electricity demand data for residential and commercial sectors.
    Keywords: electricity demand, temperature effect, temperature response function, cross temperature response function, electricity demand in Korea
    JEL: C33 C51 C53 Q41
    Date: 2015–09
  8. By: Florian Ziel
    Abstract: In this paper we present a regression based model for day-ahead electricity spot prices. We estimate the considered linear regression model by the lasso estimation method. The lasso approach allows for many possible parameters in the model, but also shrinks and sparsifies the parameters automatically to avoid overfitting. Thus, it is able to capture changes in the intraday dependency structure of the electricity price as the estimated model structure can vary over the day. We discuss in detail the estimation results which provide insights to the intraday behavior of electricity prices. We perform an out-of-sample forecasting study for several European electricity markets. The results illustrate well that the efficient lasso based estimation technique can join advantages from two common model approaches.
    Date: 2015–09
  9. By: Curtis, John; Lynch, Muireann Á.; Zubiate, Laura
    Abstract: The North Atlantic Oscillation (NAO) is a large-scale circulation pattern driving climate variability in north-western Europe. As the deployment of wind-powered generation expands on electricity networks across Europe the impacts of the NAO on the electricity system will be amplified. This study assesses the impact of NAO, via wind-power generation, on the electricity market considering thermal generation costs, wholesale electricity prices and wind generation subsidies. A Monte Carlo approach is used to model NAO phases and generate hourly wind speed time-series data, electricity demand and fuel input data. A least-cost unit commitment and economic dispatch model is used to simulate an island electricity system, modelled on the all-island Irish electricity system. The impact of NAO obviously depends on the level of wind capacity within an electricity system. Our results indicate that NAO phases can affect thermal generation costs by up to 8%, wholesale electricity prices by as much as ?1.5/MWh, and that wind power generators receive on average 12% higher remuneration.
    Date: 2015–07
  10. By: Andrea Gamba
    Abstract: Jordan’s initiatives to reduce its energy dependency could have substantial macroeconomic implications, but will crucially depend on the level of international oil prices in the next decade. Significant uncertainties remain regarding the feasibility of the initiatives and their potential fiscal costs, including from contingent liabilities, could be very large. Given the lead time required for such major investments, work should start now on: (i) conducting comprehensive cost-benefits analysis of these projects; (ii) addressing the challenges arising from the taxation of natural resources; and (iii) designing a fiscal framework to anchor fiscal policies if revenue from these energy projects materializes.
    Keywords: Energy resources;Energy;Fiscal policy;Fossil fuels;Middle East;Natural resource taxation;Jordan;Oil prices;oil, prices, gas, Publicly Provided Goods: Mixed Markets, General,
    Date: 2015–05–28
  11. By: Andor, Mark A.; Frondel, Manuel; Rinne, Sonja
    Abstract: Es gibt kaum verlässliche empirische Evidenz zu den regionalen Unterschieden in den Bewertungen der im Zuge der Energiewende ergriffenen energiepolitischen Maßnahmen. Wünschenswert wäre daher eine institutionalisierte, regelmäßige Befragung eines festen Panels von Haushalten zu ihren Einstellungen zur Energie-, Umwelt- und Klimapolitik in Deutschland. In Ermangelung solcher institutionalisierter Erhebungen ist es das Ziel dieses Beitrags, auf Basis einer deutschlandweiten Erhebung aus dem Jahr 2013 unter mehr als 6 500 Haushalten Informationen zu den Einstellungen der Bürger zu unterschiedlichen Energietechnologien und Energieträgern sowie energiepolitischen Maßnahmen wie dem Bau neuer Hochspannungsleitungen zu gewinnen. Die Ergebnisse unserer Analyse zeigen, dass es nicht allein bei der Zustimmung zum Bau neuer Stromtrassen regionale Unterschiede zwischen den Bundesländern gibt. Vielmehr differieren auch die Zustimmung der Befragten zu erneuerbaren Energietechnologien und die Ablehnung der Nutzung von Kohle zur Stromerzeugung regional ganz erheblich.
    Keywords: Photovoltaik,Windkraft,Kleinste-Quadrate-Regression,Ordered-Probit-Schätzung
    JEL: Q28 Q42 Q48
    Date: 2015
  12. By: Takanori Ida; Kayo Murakami; Makoto Tanaka
    Abstract: We report on a randomized controlled trial used to examine the effect of dynamic pricing when applied to households with rooftop photovoltaic (PV) power-generation systems. Using high-frequency data on household-level electricity use, PV generation, purchases, and sales, we find that critical peak pricing induced significant usage reductions of 3-4% among households with PV systems, a quarter of the effect size seen among average households without solar PV systems. In addition, we investigate the influence of the amount of PV power generated on treatment effects and the potential heterogeneity caused by participating households’ attributes. This is the first large-scale field experiment evaluating the demand response of households with PV generation capabilities.
    Keywords: randomized controlled trial, field experiment, photovoltaic generation, dynamic pricing
    JEL: D1 Q4
    Date: 2015–08
  13. By: Victor Court; Pierre-André Jouvet; Frédéric Lantz
    Abstract: Due to their initial lack of emphasis on energy and natural resources, exogenous and endogenous growth models have suffered the same critic regarding the limits to economic growth imposed by finite Earth resources. Thus, various optimal control models that incorporate energy or natural resources have been developed during the last decades. However, in all these models the importance of the Energy Return On Energy Investment (EROI) has never been raised. The EROI is the ratio of the quantity of energy delivered by a given process to the quantity of energy consumed in this same process. Hence, the EROI is a measure of the accessibility of a resource, meaning that the higher the EROI the greater the amount of net energy delivered to society in order to support economic growth. The present article build a bridge upon the vacuum lying between the different literatures related to endogenous economic growth, the EROI and the necessary transition from nonrenewable to renewable energy. We provide an endogenous economic growth model subject to the physical limits of the real world (i.e. fossil and renewable energy production costs have functional forms that respect physical constraints). The model is able to reproduce (based on world data) an increasing reliance on fossil fuels from an early renewable era and the subsequent inevitable transition towards complete renewable energy that human will have to deal with in a not-too-far future. Through simulation we define the conditions for having a smooth transition from fossil to renewable energy and we study in which circumstances this transition can have negative impacts on economic growth (peak followed by a degrowth phase). In such cases, the implementation of a carbon tax can partially smooth this unfortunate dynamics depending on the ways of use of the carbon tax income.
    Keywords: Endogenous economic growth, net energy, EROI, energy transition.
    JEL: C6 O4 Q3 Q4
    Date: 2015
  14. By: Curtis, John; Lynch, Muireann Á.; Zubiate, Laura
    Abstract: The North Atlantic Oscillation (NAO) is a large-scale circulation pattern driving climate variability in north-western Europe. In recent years there has been an increasing deployment of wind-powered generation technology, i.e. wind farms, on electricity networks across Europe. As this deployment increases it is important to understand how climate variability will affect both wind powered and non-renewable power generation. This study extends the literature by assessing the impact of NAO, via wind-power generation, on carbon dioxide emissions from the wider electricity system. A Monte Carlo approach is used to model NAO phases, generate hourly wind speed time series data, electricity demand and fuel input data. A unit commitment, least-cost economic dispatch model is used to simulate an entire electricity system, modelled on the all-island Irish electricity system. Our results confirm that the NAO has a significant impact on monthly mean wind speeds, wind power output, and carbon dioxide emissions from the entire electricity system. The impact of NAO on emissions obviously depends on the level of wind penetration within an electricity system but our results indicate that emissions intensity within the Irish electricity system could vary by as much as 10% depending on the NAO phase within the next few years. The emissions intensity of the electricity system will vary with the NAO phase.
    Date: 2015–08
  15. By: Anthony J. Webster; Richard H. Clarke
    Abstract: Climate change is widely expected to increase weather related damage and the insurance claims that result from it. This has the undesirable consequence of increasing insurance costs, in a way that is independent of a customer's contribution to the causes of climate change. This is unfortunate because insurance provides a financial mechanism that mitigates some of the consequences of climate change, allowing damage from increasingly frequent events to be repaired. We observe that the insurance industry could reclaim any increase in claims due to climate change, by increasing the insurance premiums on energy producers for example, without needing government intervention or a new tax. We argue that this insurance-led levy must acknowledge both present carbon emissions and a modern industry's carbon inheritance, that is, to recognise that fossil-fuel driven industrial growth has provided the innovations and conditions needed for modern civilisation to exist and develop. The increases in premiums would initially be small, and will require an event attribution (EA) methodology to determine their size. We propose that the levies can be phased in as the science of event attribution becomes sufficiently robust for each claim type, to ultimately provide a global insurance-led response to climate change.
    Date: 2015–09
  16. By: Matias Piaggio (Instituto de Economia, Universidad de la Republica, Montevideo); Emilio Padilla (Department of Applied Economics, Universitat Autonoma de Barcelona); Carolina Roman (Environment for Development, Centro Agronomico Tropical de Investigacion y Educación, Turrialba)
    Abstract: The long-run relationship between carbon dioxide emissions from energy use and economic activity level is estimated for Uruguay between 1882 and 2010. We apply cointegration techniques and estimate a Vector Error Correction Model (VECM) for testing whether these variables are endogenous over the long-rung while also considering the short-run dynamics. The economic productive structure, the degree of openness, and the share of clean sources on total energy supply are also considered as explanatory variables. The results show that there exists a linear relationship between carbon dioxide emissions and per capita economic activity level. Moreover, emissions increase jointly with the industrial sector participation in total output, as a consequence of the intensity of this activity in the consumption of energy from fossil fuels sources. The degree of openness is inversely related with carbon dioxide emissions. This is so because the periods of major opening were based on primary inputs exports, lower in energy intensity than industrial products. The changes in carbon dioxide emission are inversely related to the variation in the share of clean sources on total energy supply. Finally, all the variables included in the cointegration vector are endogenous, adjusting together to the deviations from the long-run relationship. As a consequence of the above, economic growth appears to be not enough for diminishing Uruguayan emissions in the long-run. Changes in the energy matrix should be encouraged, and emissions reduction should come not by energy constraints but by the development of clean sources or energy use efficiency improvements, given the impact of energy on economic activity level.
    JEL: Q43 C32 Q56
    Date: 2015–09
  17. By: Zhu Liu; Dabo Guan; Wei Wei; Steven J. Davis; Philippe Ciais; Jin Bai; Shushi Peng; Qiang Zhang; Klaus Hubacek; Gregg Marland; Robert J. Andres; Douglas Crawford-Brown; Jintai Lin; Hongyan Zhao; Chaopeng Hong; Thomas A. Boden; Kuishuang Feng; Glen P. Peters; Fengming Xi; Junguo Liu; Yuan Li; Yu Zhao; Ning Zeng; Kebin He
    Abstract: Nearly three-quarters of the growth in global carbon emissions from the burning of fossil fuels and cement production between 2010 and 2012 occurred in China1, 2. Yet estimates of Chinese emissions remain subject to large uncertainty; inventories of China?s total fossil fuel carbon emissions in 2008 differ by 0.3 gigatonnes of carbon, or 15 per cent1, 3, 4,5. The primary sources of this uncertainty are conflicting estimates of energy consumption and emission factors, the latter being uncertain because of very few actual measurements representative of the mix of Chinese fuels. Here we re-evaluate China?s carbon emissions using updated and harmonized energy consumption and clinker production data and two new and comprehensive sets of measured emission factors for Chinese coal. We find that total energy consumption in China was 10 per cent higher in 2000?2012 than the value reported by China?s national statistics6, that emission factors for Chinese coal are on average 40 per cent lower than the default values recommended by the Intergovernmental Panel on Climate Change7, and that emissions from China?s cement production are 45 per cent less than recent estimates1, 4. Altogether, our revised estimate of China?s CO2emissions from fossil fuel combustion and cement production is 2.49 gigatonnes of carbon (2 standard deviations = ±7.3 per cent) in 2013, which is 14 per cent lower than the emissions reported by other prominent inventories1, 4, 8. Over the full period 2000 to 2013, our revised estimates are 2.9 gigatonnes of carbon less than previous estimates of China?s cumulative carbon emissions1, 4. Our findings suggest that overestimation of China?s emissions in 2000?2013 may be larger than China?s estimated total forest sink in 1990?2007 (2.66 gigatonnes of carbon)9 or China?s land carbon sink in 2000?2009 (2.6 gigatonnes of carbon)10.
  18. By: George Marbuah (Department of Economics, Swedish University of Agricultural Sciences); Ing-Marie Gren (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: This paper addresses the issue of whether or not social capital explains per capita CO2 emissions dynamics in Swedish counties in an augmented environmental Kuznets curve framework. By accounting for issues of endogeneity in the presence of dynamic and spatial effects using geo-referenced emissions data, we show that per capita carbon emissions in a county matters for other counties and that net of economic, demographic and environmental factors, social capital has the potential to reduce carbon emissions in Sweden albeit less robustly. We test two different social capital constructs; trust in government and environmental engagement. Specifically, trust in the government inures to the reduction in CO2 emissions. Membership and engagement in environmental organisations reduces CO2 emissions only through its interaction with per capita income or trust. The implication of our estimates suggest that investment geared toward increasing the stock of social capital could inure to re ductions in CO2 emissions in addition to climate policy instruments in Sweden.
    Keywords: Environmental Kuznets curve, Social capital, CO2 emissions, Spatial panel analysis, Sweden
    JEL: C23 Q53 Q56 Z13
    Date: 2015–09
  19. By: Zhang, Xin (Peking University); Zhang, Xiaobo (Peking University); Chen, Xi (Yale University)
    Abstract: Existing studies that evaluate the impact of pollution on human beings understate its negative effect on cognition, mental health, and happiness. This paper attempts to fill in the gap via investigating the impact of air quality on subjective well-being using China as an example. By matching a unique longitudinal dataset at the individual level, which includes self-reported happiness and mental well-being measures, with contemporaneous local air quality and weather information according to the exact date of interview, we show that worse air quality reduces shorter-term hedonic happiness and increases the rate of depressive symptoms. However, life satisfaction, an evaluative measure of happiness, is largely immune from immediate bad air quality.
    Keywords: hedonic happiness, life satisfaction, mental well-being, air quality, China
    JEL: I31 Q51 Q53
    Date: 2015–08
  20. By: ISOGAWA Daiya; OHASHI Hiroshi
    Abstract: This paper estimates the effect of load adjustment contracts offered by electric utilities in Japan on the industrial demand for electricity usage. Using unique data on the electricity usage of individual industrial users, we find that the contracts effectively decrease both electricity consumption and peak demand of the industrial users, but that the magnitude of which differs according to plant size and labor productivity.
    Date: 2015–09
  21. By: Kenneth Baldwin; Bruce Chapman; Umbu Raya
    Abstract: Rooftop solar systems have two major benefits: a reduction of carbon emissions (a public good) and future energy bill savings for consumers. However, the availability of solar energy systems to low-income households is constrained by access to finance for the initial investment cost, an issue which could potentially be addressed with the use of income contingent loans (ICLs). By applying unconditional quantile econometric methods to HILDA income data we illustrate that for a $10,000 loan for home owners ICLs can be used with little or no cost to government to help finance the next one million solar energy devices.
    Keywords: income contingent loans, solar energy
    Date: 2015–08
  22. By: Bernold, Elizabeth; Ancev, Tiho; Baltaduonis, Rimvydas
    Abstract: Incentive-based policies, such as emissions taxes and emissions permit trading schemes, are increasingly used to regulate greenhouse gas (GHG) emissions in many jurisdictions around the world. Taxes impose a fixed price on emissions, whereas under tradable permit schemes prices emerge in the secondary permit market. The delayed price discovery under tradable permit schemes creates uncertainty about the future cost of compliance that liable emitters will face. To mitigate this uncertainty, some jurisdictions, including Australia, have designed policies to regulate GHG emissions that commence with an emissions tax that is in force for several years, subsequently transforming into a tradable permit scheme. This paper examines the effects that this type of staged transition – from no regulation to a regulation by an emissions tax, to a regulation by tradable permits – has on several criteria of interest: abatement investment, quantity of emissions, permit prices and overall regulation efficiency. The effects of the regulation that employs an intertemporal mix of policy instruments are compared to the effects observable under regulation using single policy instrument: a tax only, and a tradable permit only regulation. Economics experiments in a laboratory were used to study economic behavior under these three types of regulation. The findings suggest that a regulation based on a staged transition from a tax to a tradable permit scheme results in more socially desirable outcomes on a range of criteria when compared to a regulation based solely on tradable permits.
    Date: 2015–09
  23. By: Günther, Michael (Center for Mathematical Economics, Bielefeld University); Hellmann, Tim (Center for Mathematical Economics, Bielefeld University)
    Abstract: Increasing concerns about climate change have given rise to the formation of International Environmental Agreements (IEAs) as a possible solution to limit global pollution effects. In this paper, we study the stability of IEAs in a repeated game framework where we restrict to strategies which are simple and invariant to renegotiation. Our main contribution to the literature on IEAs is that we allow for heterogeneous patterns of pollution such that additional to a global effect of pollution there are local pollution effects represented by a network structure. We show that stable IEAs exist if the network structure is balanced. Too large asymmetries in the degree of local spillovers may however lead to non-existence of stable structures. The generality of our approach allows for several applications to general problems in the provision of public goods.
    Keywords: Coalition structures, Networks, International environmental agreements, Weak renegotiation-proofness
    Date: 2015–09–04
  24. By: Hashmat U. Khan (Department of Economics, Carleton University); Christopher R. Knittel (Massachusetts Institute of Technology); Konstantinos Metaxoglou (Department of Economics, Carleton University); Maya M. Papineau (Department of Economics, Carleton University)
    Abstract: Carbon dioxide emissions are highly correlated with cyclical fluctuations in the U.S. economy; they increase during booms and fall during busts. We examine this relationship focusing on the sources of business cycles identified using structural vector autoregression methodologies. Using data for 1973–2012, we find that emissions fall after unanticipated technology and investment shocks, as well as anticipated technology shocks. Emissions, however, increase after an anticipated investment shock. Our findings have two implications for the emerging literature that examines the optimality of environmental policy using dynamic stochastic general equilibrium models with unanticipated technology shocks. First, the assumption that unanticipated technology shocks cause carbon emissions to move with the business cycle has little support in the data both at the aggregate and the state-level. Second, identifying the shocks that explain procyclical carbon emissions is an important first step for crafting effective environmental policy over the business cycle—an anticipated investment shock is a candidate.
    Keywords: structural shocks, business cycles, carbon emissions, environment
    JEL: E32 Q58 Q54
    Date: 2015–08–31
  25. By: Philippe Barla; Markus Herrmann; Carlos Ordas-Criado; Luis F. Miranda-Moreno
    Abstract: In this paper, we examine the heterogeneity in gasoline demand price and income elasticities across 40 cities in the province of Quebec Canada using quarterly data over the 2004 to 2009 period. We reject the hypothesis of identical elasticities across markets. However, the range of values for the price elasticity, between -0.65 and -0.14, is relatively narrow and confirms that the demand for gasoline is price inelastic. We find evidence that the average price and income elasticity is somewhat larger in markets with public transportation. Furthermore, these markets experience a strong declining trend in gasoline use per capita.
    Keywords: Gasoline demand, price and income elasticities, random coefficient model, peak car hypothesis
    JEL: C33 D12 Q41
    Date: 2015
  26. By: José M. Belbute (Department of Economics, University of Évora, Portugal); Alfredo Marvão Pereira (Department of Economics, The College of William and Mary)
    Abstract: In this paper we use an ARFIMA approach to measure the degree of fractional integration of aggregate world CO2 emissions and its five components - coal, oil, gas, cement, and gas flaring. We find that all variables are stationary and mean reverting, but exhibit long-term memory. With aggregate CO2 emissions as a reference, our results suggest that both coal and oil combustion emissions have the weakest degree of long-range dependence, while emissions from gas, and gas flaring have the strongest. With evidence of long memory, we conclude that transitory policy shocks are likely to have long-lasting effects. Although the effects of any active policy on CO2 emissions take longer to disappear, they preserve their temporary nature. Accordingly, permanent effects on CO2 emissions require a more permanent policy stance. In this context, if one were to rely only on testing for stationarity and non-stationarity, one would likely conclude in favor of non-stationarity, and therefore that even transitory policy shocks have permanent effects. Our fractional integration analysis highlights that this is not the case.
    Keywords: CO2 emissions, Long memory, ARFIMA model
    JEL: C22 O13 Q41
    Date: 2015–08–31
  27. By: Christoph Böhringer (Carl von Ossietzky Universität Oldenburg, Institut für Volkswirtschaftslehre & ZenTra); Knut Einar Rosendahl (Norwegian University of Life Sciences, School of Economics and Business); Halvor Briseid Storrøsten (Statistics Norway, Oslo / Norway)
    Abstract: Unilateral climate policy induces carbon leakage through the relocation of emission-intensive and trade-exposed industries to regions with no or more lenient emission regulation. Both analytical and numerical studies suggest that emission pricing combined with border carbon adjustments may be a second-best instrument, and more cost-effective than output-based rebating, in which case domestic output is indirectly subsidized. No countries have so far imposed border carbon adjustments, while variants of output-based rebating have been implemented. In this paper we demonstrate that it is welfare improving for a region who has already implemented emission pricing along with output-based rebating for emission-intensive and trade-exposed goods to also introduce a consumption tax on these goods. Moreover, we show that combining output-based rebating with a consumption tax can be equivalent with border carbon adjustments.
    Keywords: Carbon leakage, output-based rebating, border carbon adjustments, consumption tax
    JEL: D61 H2 Q54
    Date: 2015–09
  28. By: Jean-Denis Garon (ESG-UQAM, CESIfo and CIRPEE); Charles Séguin (ESG-UQAM and CIREQ)
    Abstract: We study the welfare effects of a revenue-neutral green tax reform in a federation. The reform consists of increasing a tax on a polluting input and reducing that on labor income. Households are fully mobile within the federation. Regions are unequally endowed with a nonrenewable natural resource. Resource rents are owned by regions and are redistributed to citizens on a residence basis, which generates a motive for inefficiently relocating to the resource-rich jurisdiction. Since the resource-poor region has a higher marginal product of labor than does the resource-rich region, the tax reform mitigates the scope of inefficient migration. This positive welfare effect may significantly reduce abatement costs of pollution and calls for higher environmental tax, as compared with a model where migration is assumed away.
    Keywords: Federalism, Environment, Taxation, Equalization, Mobility
    JEL: D62 H21 H23 H77
    Date: 2015–09

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