nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒11‒21
thirty papers chosen by
Roger Fouquet
London School of Economics

  1. Second-best analysis of European energy policy: Is one bird in the hand worth two in the bush? By Hübler, Michael; Schenker, Oliver; Fischer, Carolyn
  2. The Role of Information for Energy Efficiency in the Residential Sector By Ana Ramos; Alberto Gago; Xavier Labandeira; Pedro Linares
  3. Energy Switch: a Home-Automation System for Renewable Energy Self-Consumption Optimization By Daniele Sora
  4. Innovative Procurement Frameworks for Energy Performance Contracting in the UK Public Sector By Friedemann Polzin; Steve Sorrell; Colin Nolden
  5. Pro-Environmental Households and Energy Efficiency in Spain By Ana Ramos; Xavier Labandeira; Andreas Lšschel
  6. Valuing Energy Performance Certificates in the Portuguese Residential By Ana Ramos; Alicia Pérez-Alonso; Susana Silva
  7. Energy efficiency and emissions intensity standards By Harrison Fell; Daniel T. Kaffine; Daniel Steinberg
  8. On dynamic standards for energy efficiency in differentiated duopoly By Peter Michaelis; Thomas Ziesemer
  9. Wind electricity production in Germany and Spain: a dynamic relationship By Alonso-Rodriguez, Agustin
  10. Annoyance and welfare costs from the presence of renewable energy power plants: an application of the contingent valuation method By Anabela Botelho; Lina Sofia Lourenço-Gomes; Lígia Costa Pinto; Sara Sousa; Marieta Valente
  11. 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 Budzinski; Mikolaj Czajkowski; Nick Hanley
  12. Econometric Analysis of 15-minute Intraday Electricity Prices By Kiesel, Ruediger; Paraschiv, Florentina
  13. Transport and Low-carbon. Fuel: A study of Public Preferences in Spain By María L. Loureiro; Xavier Labandeira; Michael Hanemann
  14. Background of the Gazprom Antitrust Case: Internal and external energy policies, and antitrust law enforcement in the EU (Japanese) By TAKEDA Kuninobu
  15. Dutch Disease or Agglomeration? The Local Economic Effects of Natural Resource Booms in Modern America By Hunt Allcott; Daniel Keniston
  16. From a rise in B to a fall in C? SVAR analysis of environmental impact of biofuels By Pavel Ciaian; d’Artis Kancs; Giuseppe Piroli; Miroslava Rajcaniova
  17. Using stated preference methods to assess environmental impacts of forest biomass power plants in Portugal By Anabela Botelho; Lina Sofia Lourenço-Gomes; Lígia Costa Pinto; Sara Sousa; Marieta Valente
  18. Happiness in the air: How does dirty sky affect subjective well-being?: By Zhang, Xin; Zhang, Xiaobo; Chen, Xi
  19. The value of air quality in Chinese cities: Evidence from labor and property market outcomes By Xuan Huang; Bruno Lanz
  20. Macroeconomics, climate change and 'recomposition' of consumption By Ian Gough
  21. An empirical analysis on the relationship between emissions trading system and R&D investment By Emiko Inoue
  22. The impact of administrative transaction costs in the EU emissions trading system By Heindl, Peter
  23. Firm-level estimates of fuel substitution: an application to carbon pricing By Marie Hyland; Stefanie Haller
  24. Sea Level Rise, Radical Uncertainties and Decision-Maker's Liability: The European Coastal Airports Case By Leonid Sorokin; Gérard Mondello
  25. Pareto improvements induced by climate funding in a strategic adaptation-mitigation framework By Wolfgang Peters; Reimund Schwarze; Anna-Katharina Topp
  26. Households and heat stress: estimating the distributional consequences of climate change By Park,Jisung; Hallegatte,Stephane; Bangalore,Mook; Sandhoefner,Evan
  27. Smart hedging against carbon leakage By Christoph Böhringer; Knut Einar Rosendahl; Halvor Briseid Storrøsten
  28. Multi-Sectorial Convergence in Greenhouse Gas Emissions By Guilherme de Oliveira; Deise Bourscheidt
  29. The climate beta By Dietz, Simon; Gollier, Christian; Kessler, Louise
  30. Does Exporting Improve Firms' CO₂ Emissions Intensity and Energy Intensity? Evidence from Japanese manufacturing By JINJI Naoto; SAKAMOTO Hiroaki

  1. By: Hübler, Michael; Schenker, Oliver; Fischer, Carolyn
    Abstract: This paper studies policy instruments that correct insufficient learning-by-doing (LbD) and research and development (R&D) of renewable electricity technologies and insufficient investments in energy efficiency (EE) in the presence of carbon pricing. The theoretical model analysis shows how to re-adjust the first-best in second-best situations, in which one of the policy instruments is restricted. Calibrated to the European power sector, the first-best choice of all instruments reduces the climate policy cost by one third. Feed-in tariffs turn out to be good substitutes for LbD, but not for R&D or EE subsidies.
    Keywords: second-best,climate policy,energy policy,feed-in tariff,power sector,EU
    JEL: C61 O33 Q48 Q54 Q55
    Date: 2015
  2. By: Ana Ramos (Rede (Universidade de Vigo)); Alberto Gago (Rede (Universidade de Vigo)); Xavier Labandeira (Rede (Universidade de Vigo) and European University Institute); Pedro Linares (Universidad Pontificia Comillas)
    Abstract: In spite of the large potential and existing efforts to foster energy efficiency in the residential sector, much remains to be achieved. This may be partially due to the many barriers and market failures faced by energy efficiency, which are even greater in the residential sector. In particular, informational failures seem to be pervasive and relevant in this area. Addressing these issues requires specific policy instruments and strategies. This paper reviews the empirical evidence on the effectiveness of such instruments, focusing on energy certificates, feedback programs, and energy audits. Results show that energy certificates and feedback programs can be effective, but only if they are carefully designed. Yet energy audits seem to have little effect on efficiency. In addition, the paper points out the large potential for new instruments as well as combinations of existing ones.
    Keywords: Energy efficiency, information, behavior.
    JEL: Q40 Q48 Q58
    Date: 2014–02
  3. By: Daniele Sora (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy)
    Abstract: One of the biggest problem regarding the distributed production of renewable energy is the effective employment of the produced energy. Usually, this energy is reintroduced in the grid with a disadvantage for the producer. In this scenario, we propose an approach that aims at exploiting the entire energy production reintroducing into the grid only the part in excess. The proposed solution is based on a device, called energy switch, that enables a change of the electric energy source of a system such as one linked to both photovoltaic and classical energy grid. This operation needs many considerations for warranting a correct energy management and avoiding energy lacks potentially dangerous for the appliances. In particular the system has to be able to recognize the situations in which it is possible to use the cheaper source without causing an energy lack to the system. In the proposed solution, the input data for the system are given by the OMeter stations developed by Over Technologies, a spin-off of Sapienza University. A working prototype of the energy switch has been built for future empirical test about its efficiency. The system reduces the problem of choosing which lines to connect to which energy source to the knapsack problem. The performance of the system are evaluated, checking at anytime whether there is a sufficient power supply or, on the contrary, a power fault happened.
    Keywords: Smart Grid ; Renewable Energies ; Home automation ; Energy Management
    Date: 2015
  4. By: Friedemann Polzin (Utrecht University School of Economics (USE), Sustainable Finance Lab, Kriekenpitplein 21-22, 3584 EC Utrecht, The Netherlands); Steve Sorrell (SPRU (Science Policy Research Unit), School of Business, Management and Economics, University of Sussex, UK); Colin Nolden (SPRU (Science Policy Research Unit), School of Business, Management and Economics, University of Sussex, UK)
    Abstract: Procurement Frameworks for Energy Performance Contracting (PFEPCs) simplify the process of negotiating, developing and implementing Energy Performance Contracts (EPCs) with Energy Service Companies (ESCOs). This paper analyses their role in promoting the implementation of cost-effective energy efficiency measures in the UK public sector. Compared to conventional approaches to procuring goods and services involving detailed specifications, PFEPCs translate the challenge of upgrading, retrofitting and replacing energy related equipment and infrastructures into required outputs through functional specifications. The innovativeness of specific PFEPCs often lies less in the diffusion of ‘developmental’ innovative energy efficient solutions, although partner bidding approaches create favourable conditions for innovation. However increasing standardisation and bundling prove successful at lowering transaction cost, which enables ESCOs to address projects which would not be considered in the absence of PFEPsdue to high transaction costs. This particular organisational innovation opens the market up to new approaches to implementing costeffective energy efficiency measures.
    Keywords: Energy efficiency; energy performance contracting (EPC); energy service companies (ESCOs); public procurement of innovation; public sector.
    Date: 2015
  5. By: Ana Ramos (Rede (Universidade de Vigo)); Xavier Labandeira (Rede (Universidade de Vigo) and European University Institute); Andreas Lšschel (WestfŠlische Wilhelms-University MŸnster and Centre for European Economic Research (ZEW))
    Abstract: The residential building sector is a major driver of current and future energy consumption and associated emissions, which can be potentially mitigated through significant energy-efficiency (EE) improvements in both emerging and developed countries. Yet, there are several persistent barriers that hinder the attainment of EE improvements in this area. Using data from a 2008 national representative survey of Spanish households, this paper is interested in the determinants of EErelated decisions. In particular, a discrete-choice model empirically analyzes whether pro-environmental households are more likely to invest in EE and to adopt daily energy-saving habits. We show that households with eco-friendly behaviors are more likely to investment in well-differentiated EE measures as well as to steer daily habits towards energy savings. However, no effects are found for households with environmental attitudes based on stated willingness to pay to protect the environment. In addition to this, households belonging to higher income groups and education levels are more likely to invest in EE but not to adopt energy-saving habits; while households with older members are less likely to invest in EE and show fewer eco-friendly habits.
    Keywords: Energy efficiency, investment, behavior, habits
    JEL: Q41 Q48 Q58
    Date: 2015–10
  6. By: Ana Ramos (Rede (Universidade de Vigo) and Economics for Energy); Alicia Pérez-Alonso (Universidade de Vigo and Economics for Energy); Susana Silva (Universidade Lusíada, CefUP and Economics for Energy)
    Abstract: Informational instruments such as energy performance certificates have been widely adopted by many governments during the last decade to promote energy efficiency in the residential sector. The objective of these instruments is to reduce the informational and behavioural failures that avoid consumers from taking efficient decisions regarding dwelling energy efficiency. The European Commission approved in 2012 the Energy Performance of Buildings Directive, which states that a certificate must be made available to buyers or tenants in the moment the dwelling is sold or rented out. Despite the rapid diffusion and interest this type of instruments have raised, little is known about its effectiveness. We provide the first analysis on consumersÕ willingness to pay for energy performance certificates in a Southern European Country: Portugal. Portugal is an interesting case study because this Directive is fully and properly implemented, and the level of consumerÕs awareness is high. We construct a database that contains a large number of dwelling attributes, including energy efficiency characteristics, such as heating or air conditioning systems, gas or solar energy sources. These characteristics allow us to isolate the effect of the certificate on the price. We use the two-step Heckman procedure to estimate a hedonic price function for dwellings. Our results show that Portuguese consumers have a high valuation for high rated dwellings.
    Keywords: Keywords: Energy Efficiency; Incomplete Information; Energy Performance Certificate; Residential Sector; Hedonic Price Model; Portugal.
    JEL: Q41 Q58 R21 C25
    Date: 2015–11
  7. By: Harrison Fell (Division of Economics and Business, Colorado School of Mines); Daniel T. Kaffine (Department of Economics, University of Colorado); Daniel Steinberg (National Renewable Energy Lab)
    Abstract: In order to comply with the Environmental Protection Agency's (EPA) recently released regulations governing greenhouse gas emissions from power plants, states are given the option to implement rate-based emissions intensity standards for the power sector. One well-known consequence of rate-based emissions standards is that in addition to encouraging substitution towards less emissions-intensive sources, they also subsidize output, and thus are considered by economists to be inferior to a first-best solution. However, the exiting literature has not considered energy efficiency decisions within the framework of intensity standards. This omission is particularly problematic in the context of the power sector, where energy efficiency has been considered an important channel of cost-minimizing emissions reductions. To encourage end-use efficiency measures under an intensity standard EPA allows states to credit electricity savings as a means of complying with the rule by treating them as a form of zero-emissions output. In this paper we investigate the role of energy efficiency choices in rate-based emissions intensity standards. We show that when demand for energy services is perfectly inelastic, crediting efficiency measures can recover the first-best allocation. This approach extends the output subsidy in a traditional intensity standard to energy efficiency, thereby eliminating the distortion that favors electricity generation over energy efficiency. However, when demand for energy services exhibits some elasticity, crediting energy efficiency can no longer recover first-best. While crediting energy efficiency removes the relative distortion between energy generation and energy efficiency, it distorts the equilibrium level of both energy generation and energy efficiency via an energy services subsidy. Simulations calibrated to the electricity sector in Texas examine the above issues numerically, as well as explore the implications of alternative energy efficiency crediting schemes.
    Date: 2015–11
  8. By: Peter Michaelis (University of Augsburg, Department of Economics); Thomas Ziesemer (University of Augsburg, Department of Economics)
    Abstract: We consider a two-periods-model of differentiated duopoly. Firms produce an en-ergy consuming household durable differentiated by its energy efficiency. Consumers differ by the weight they apply to their future energy costs when deciding which product to buy. In line with the Japanese Top Runner Program, the regulator introduces a minimum efficiency standard in period t=2 which is fixed according to the efficiency of the product supplied by the high efficiency firm in t=1. We show that in t=1 both firms supply lower efficiency products and the high efficiency firm gains in market share and profits. In t=2 these effects are reversed. Calculated over both periods, total energy consumption does not change. Although there is no ecological effect, total welfare increases because price competition becomes tighter and the cost savings accruing to the consumers exceed the firms’ losses in profits.
    Keywords: energy efficiency standards, product differentiation, duopoly, regulation
    JEL: L13 Q48 Q58
    Date: 2015–11
  9. By: Alonso-Rodriguez, Agustin
    Abstract: In this paper, a dynamic relationship between the wind electricity production of Germany and Spain is presented. With the help of a VAR(1) model, and using the terminology of Granger Causality, it is shown that the wind electricity production of Germany Granger causes the wind electricity production of Spain. Other aspects of this dynamic relationship are presented as well.
    Keywords: Wind electricity,Impulse response,VAR models,production,Granger Causality
    Date: 2015
  10. By: Anabela Botelho (Universidade de Aveiro, GOVCOPP); Lina Sofia Lourenço-Gomes (University of Trás-os-Montes and Alto Douro); Lígia Costa Pinto (Universidade do Minho, NIMA); Sara Sousa (Instituto Politéctnico de Coimbra, ISCAC); Marieta Valente (Universidade do Minho, NIMA)
    Abstract: Sustainability is frequently defined by its three pillars: economically viable, socially equitable, and environmentally bearable. Consequently the evaluation of the sustainability of any decision, public or private, requires information on these three dimensions. This paper focuses on social sustainability. In the context of renewable energy sources, the examination of social sustainability requires the analysis of not only the efficiency but also the equity of its welfare impacts. The present paper proposes and applies a methodology to generate the information necessary to do a proper welfare analysis of the social sustainability of renewable energy production facilities. This information is key both for an equity and an efficiency analysis. The analysis focuses on the case of investments in renewable energy electricity production facilities, where the impacts on local residents’ welfare are often significantly different than the welfare effects on the general population. We apply the contingent valuation method to selected facilities across the different renewable energy power plants located in Portugal and conclude that local residents acknowledge differently the damage sustained by the type, location and operation of the plants. The results from these case studies attest to the need of acknowledging and quantifying the negative impacts on local communities when assessing the economic viability, social equity and environmental impact of renewable energy projects.
    Keywords: Sustainability, Renewable Energy Sources, Contingent Valuation, Public Attitudes
    JEL: Q4
    Date: 2015–11
  11. By: Aljona Karlõševa (Stockholm Environmental Institute, Tallinn, Estonia); Sulev Nõmmann (Stockholm Environmental Institute, Tallinn, Estonia); Tea Nõmmann (Stockholm Environmental Institute, Tallinn, Estonia); Evelin Urbel-Piirsalu (Stockholm Environmental Institute, Tallinn, Estonia); Wiktor Budzinski (University of Warsaw, Department of Economics); Mikolaj Czajkowski (University of Warsaw, Department of Economics); Nick Hanley (Department of Geography and Sustainable Development, University of St. Andrews)
    Abstract: The drive to increase renewable electricity production in many parts of Europe has led to an increasing concentration of new wind energy sites at sea. This results in a range of environmental impacts which should be taken into account in a benefit-cost analysis of such proposals. 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. We find that, while respondents are generally opposed to converting marine shoals to conventional wind farms and prefer the establishment of marine protected areas instead, benefits from constructing ‘environmentally-friendly’ wind farms – an alternative program which is also considered by the government – are not statistically different with respect to consumers’ welfare to those associated with 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 stand-alone latent class or mixed logit approaches. The paper is also presents the first use of the latent class mixed logit model in willingness-to-pay space for environmental goods.
    Keywords: Discrete Choice Experiment, Off-Shore Wind Energy, Marine Protected Areas, Willingness to Pay Space, Latent Class Mixed Logit, Renewable Energy
    JEL: Q51 O13 Q56 Q58 Q42 Q48 Q25 Q28
    Date: 2015–11
  12. By: Kiesel, Ruediger; Paraschiv, Florentina
    Abstract: The trading activity in the German intraday electricity market has increased significantly over the last years. This is partially due to an increasing share of renewable energy, wind and photovoltaic, which requires power generators to balance out the forecasting errors in their production. We investigate the bidding behavior in the intraday market by looking at both last prices and continuous bidding, in the context of a fundamental model. A unique data set of 15-minute intraday prices and intraday-updated forecasts of wind and photovoltaic has been employed and price bids are modelled by prior information on fundamentals. We show that intraday prices adjust asymmetrically to both forecasting errors in renewables and to the volume of trades dependent on the threshold variable demand quote, which reflects the expected demand covered by the planned traditional capacity in the day-ahead market. The location of the threshold can be used by market participants to adjust their bids accordingly, given the latest updates in the wind and photovoltaic forecasting errors and the forecasts of the control area balances.
    Keywords: Intraday Electricity Prices, Bidding Behavior, Renewable Energy, Forecasting Model
    Date: 2015–10
  13. By: María L. Loureiro (Department of Foundations of Economic Analysis, University of Santiago de Compostela); Xavier Labandeira (Rede (Universidade de Vigo) and Economics for Energy); Michael Hanemann (Arizona State University and University of California at Berkeley)
    Abstract: Transport is essential for the control of future greenhouse gas (GHG) emissions and thus a target for active policy intervention in the future. Yet, social preferences for policies are likely to play an important role. In this paper we first review the existing literature on preferences regarding low- GHG car fuels, but also covering policy instruments and strategies in this area. We then present the results of a survey of Spanish households aimed at measuring preferences for climate change policies. We find a positive WTP (in the form of higher car fuel prices) for a policy to reduce GHG emissions through biofuels. There is, however, significant heterogeneity in public preferences due to personal motivations (accounted for via factor analysis of responses to attitudinal questions) and to socio-demographicvariables.
    Keywords: biofuels, WTP, contingent valuation
    JEL: Q54 Q58 R48
  14. By: TAKEDA Kuninobu
    Abstract: The European Commission sent a Statement of Objections to Russian state-owned enterprise (SOE) Gazprom, alleging that its business practices breached European Union (EU) antitrust rules. This paper analyzes the case from the viewpoints of EU internal and external energy policies. The Commission has been using competition law as a tool for internal and external energy policies. Until the entry into force of the Lisbon Treaty, the Commission had been applying competition law in order to materialize an internal energy policy. Since the Lisbon Treaty, it has been using competition law for both external and internal energy policies. The Gazprom case, in which Lithuania pressed the Commission to enforce competition law under the name of "solidarity," is the latter case. But using competition law in such an instrumental way can cause a negative side effect such as disincentive for investment in pipelines, and it can also bring about a fierce conflict between concerned nations as seen in a Russian blocking statute.
    Date: 2015–11
  15. By: Hunt Allcott; Daniel Keniston
    Abstract: Do natural resources benefit producer economies, or is there a "Natural Resource Curse," perhaps as Dutch Disease crowds out manufacturing? We combine new data on oil and gas abundance with Census of Manufactures microdata to estimate how oil and gas booms have affected local economies in the United States. Migration does not fully offset labor demand growth, so local wages rise. Notwithstanding, manufacturing is actually pro-cyclical with resource booms, driven by growth in upstream and locally traded sectors. The results highlight the importance of highly local demand for many manufacturers and underscore how natural resource linkages can drive manufacturing growth.
    JEL: J2 L6 O4 Q43 R1
    Date: 2015–11
  16. By: Pavel Ciaian (European Commission – JRC - IPTS); d’Artis Kancs (European Commission – JRC - IPTS); Giuseppe Piroli (European Commission – Directorate General for Employment, Social Affairs and Inclusion); Miroslava Rajcaniova (FEM, Slovak Agricultural University in Nitra)
    Abstract: This is the first paper that econometrically estimates the impact of rising Bioenergy production on global CO2 emissions. We apply a structural vector autoregression (SVAR) approach to time series from 1961 to 2009 with annual observation for the world biofuel production and global CO2 emissions. We find that in the medium- to long-run biofuels reduce global CO2 emissions: the CO2 emission elasticities with respect to biofuels range between -0.57 and -0.80. In the short-run, however, biofuels may increase CO2 emissions temporarily. Our findings complement those of life-cycle assessment and simulation models. However, by employing a more holistic approach and obtaining more robust estimates of environmental impact of biofuels, our results are particularly valuable for policy makers.
    Keywords: time-series econometrics, biofuels, CO2 emissions, environment, agriculture, indirect land use changes
    JEL: C14 C22 C51 D58 Q11 Q13 Q42
    Date: 2015–11
  17. By: Anabela Botelho (Universidade de Aveiro, GOVCOPP); Lina Sofia Lourenço-Gomes (University of Trás-os-Montes and Alto Douro); Lígia Costa Pinto (Universidade do Minho, NIMA); Sara Sousa (Instituto Politéctnico de Coimbra, ISCAC); Marieta Valente (Universidade do Minho, NIMA)
    Abstract: As a renewable energy source, the use of forest biomass for electricity generation is advantageous in comparison with fossil fuels, however the activity of forest biomass power plants causes adverse impacts, affecting particularly neighbouring communities. The main objective of this study is to estimate the effects of the activity of forest biomass power plants on the welfare of two groups of stakeholders, namely local residents and the general population and we apply two stated preference methods: contingent valuation and discrete choice experiments, respectively. The former method was applied to estimate the minimum compensation residents of neighbouring communities of two forest biomass power plants in Portugal would be willing to accept. The latter method was applied among the general population to estimate their willingness to pay to avoid specific environmental impacts. The results show that the presence of the selected facilities affects individuals’ well-being. On the other hand, in the discrete choice experiments conducted among the general population all impacts considered were significant determinants of respondents’ welfare levels. The results of this study stress the importance of performing an equity analysis of the welfare effects on different groups of stakeholders from the installation of forest biomass power plants, as their effects on welfare are location and impact specific. Policy makers should take into account the views of all stakeholders either directly or indirectly involved when deciding crucial issues regarding the sitting of new forest biomass power plants, in order to achieve an efficient and equitable outcome.
    Keywords: Forest Biomass, Stated Preference Methods, Contingent Valuation, Discrete Choice Experiments, Environmental Impacts, Public Attitudes
    JEL: C90
    Date: 2015–11
  18. By: Zhang, Xin; Zhang, Xiaobo; Chen, Xi
    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 and place 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: air pollution, welfare, psychology, hedonic happiness, life satisfaction, mental well-being, air quality,
    Date: 2015
  19. By: Xuan Huang; Bruno Lanz
    Abstract: Using a dual-market sorting model of workers' location decisions, this paper studies the capitalization of air pollution in wages and property prices across Chinese cities. We exploit quasi-experimental variations in particulate matter (PM10) concentration induced by a policy subsidizing coal-based winter heating in northern China, specifying a regression discontinuity design based on cities' location relative to the policy boundary. We estimate that the elasticity of wages and house prices with respect to PM10 concentration is 0.41 and -0.71 respectively. Our results are robust to the use of an alternative source of exogenous variation in PM10 concentration (sandstorms), supporting the view that the local effect we measure provides policy-relevant information on the value of air quality improvements in China.
    Keywords: Hedonic model; Air pollution; Labor market; Housing prices; Local public goods.
    JEL: H41 J31 R31 Q53
    Date: 2015–11–16
  20. By: Ian Gough
    Abstract: Macroeconomic policy should be evaluated, he says, and devised according to sustainability criteria alongside economic and social criteria. Economic goals whether growth of GDP productivity or competitiveness, should not trump equity/justice or sustainability. But nor should environmental goals trump social goals. The urgent challenge addressed in this PRIME e-publication is to develop a macroeconomic framework that supports ‘eco-social’ policies to pursue both goals simultaneously. Just and sustainable macroeconomic planning should take into account two policy dimensions: the emissions intensity of different items of consumption, and the necessitousness of these items. Ways of measuring both of these are proposed. When personal consumption in the UK is analysed in this way, an awkward policy dilemma immediately appears: almost all necessities are high carbon, while most ‘luxuries’ emit lower than average GHGs. Transport is also high carbon and comprises both necessary spending given current infrastructure and luxury spending. Thus a radical macroeconomic framework needs to endorse and devise new ‘eco-social’ policies to serve both justice and sustainability goals, alongside income redistribution and public social consumption. Three approaches are suggested: taxing high-carbon luxury consumption, variable pricing of high-carbon necessities, and rationing carbon.
    JEL: N0
    Date: 2015–10
  21. By: Emiko Inoue
    Abstract: Innovation is now expected to play an important role to overcome difficult issues of climate change more than ever. To examine how to induce innovation, the relationship between environmental policy and innovation has been focused on. Still few researches, however, have examined the impact of the EU emission trading scheme on innovation based on econometric analysis. This study scrutinises how corporate responses towards the EU ETS influence R&D investments of EU major corporations. Using firm-level panel data, which is constructed based on the data of corporate responses to the Carbon Disclosure Project, EU Industrial R&D Investment Scoreboard, and corporationsf CSR reports, I estimate two dynamic panel models using system GMM estimator. Endogeneity issue is addressed in these models. The results show that corporations which have a policy or a strategy to comply with the EU ETS or to react proactively before being regulated by the EU ETS are more likely to encourage R&D investment. The process of reacting towards the EU ETS may provide an opportunity for corporations to recognise the importance of R&D investment for their future strategy.
    Keywords: Climate change; EU ETS; R&D investment
    Date: 2015–11
  22. By: Heindl, Peter
    Abstract: This paper empirically investigates the impact of transaction costs for monitoring, reporting, and verification (MRV) of emissions on companies regulated by the EU Emissions Trading System (EU ETS) in Germany. Based on a unique panel dataset, we investigate if MRV costs are dependent on the amount of annual emissions of regulated companies and if there are differences in transaction costs between economic sectors. The results indicate that administrative costs are dependent on the amount of annual emissions for larger companies which has implications for the economic efficiency of the EU ETS. The most important finding, however, is that there are significant differences in MRV transaction costs dependent on the 'type' and 'size' of companies. This implies the existence of considerable economies of scale. Overall, the EU ETS could benefit from reforms by means of a push towards upstream regulation as this would likely increase administrative efficiency.
    Keywords: EU Emissions Trading System,Cap-and-Trade,Transaction Costs,Monitoring, Reporting, and Verification
    JEL: D22 D23 Q58
    Date: 2015
  23. By: Marie Hyland; Stefanie Haller
    Abstract: We estimate partial- and total-fuel substitution elasticities between electricity, gas and oil, using firm-level data. We find that, based on the partial elasticity measure, electricity is the least-responsive fuel to changes in its own price and in the price of other fuels. The total elasticity measure, which adjusts the partial elasticity for changes in aggregate energy demand induced by individual fuel price changes, reveals that the demand for electricity is much more price responsive than the partial elasticity suggests. Our results illustrate the importance of accounting for the feedback effect between interfactor and interfuel substitution elasticities when considering the effectiveness of environmental taxation. We use the estimated elasticities to simulate the impact of a e15/tCO2 carbon tax on average energy-related CO2 emissions. The carbon tax results in a small reduction in CO2 emissions from oil and gas use, but this reduction is partially offset by an increase in emissions due to increased electricity consumption by some firms.
    Keywords: Fuel substitution; Firm-level data; Environmental taxation
    JEL: D24 Q38 Q41 Q48 Q58
    Date: 2015–10
  24. By: Leonid Sorokin (Peoples' Friendship University of Russia); Gérard Mondello (Université Nice Sophia Antipolis; GREDEG-CNRS)
    Abstract: Until now, most of the growing climate legal litigations mainly concern environmental associations or victims against energy of energy-users firms or States. However, in a near future, because of exacerbating sudden floods linked to climate change, future litigations could (will) concern infrastructure governance versus private companies. Indeed, sues would (will) concern the financial losses these last ones would (will) endure because the infrastructure managers did not made convenient protection choices in due time. This paper particularly investigates the case of coastal airports at the European level. It insists on the importance of climate scientists divergent opinions about the sea level rise and its consequences for decision-takers concerning their potential legal liability for negligence.
    Keywords: Climate Change, Sea level rise, flood, airports, transportation infrastructures, legal liability, uncertainty
    JEL: K32 Q54 R53
    Date: 2015–11
  25. By: Wolfgang Peters (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Reimund Schwarze (Europa University Viadrina and Helmholtz Centre for Environmental Research (UFZ)); Anna-Katharina Topp (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: We address the international regime of climate finance, which is emerging in the post-Kyoto architecture, and investigate which type of earmarked funding may lead to Pareto improvements for donor and recipient countries. As funding within the post-Kyoto framework is voluntary, sustained finance in the long term can only be guaranteed if all participating countries benefit. In order to rule out for the Bergstrom paradox, which states that recipient countries may end up in a worse-off situation as a consequence of conditional transfers, we presume a framework in which donor countries commit themselves not to reduce their own mitigation efforts. Regarding three types of earmarked climate funding, which compensate either mitigation, adaptation or damage costs, we find that only funds that are directed at mitigation activities boost the global level of mitigation and may induce Pareto improvements. Transferring our results into the political context of the Green Climate Fund, we recommend to prioritize finance of 'energy generation and access', which aims at enhancing mitigation through low-emission power generation and access.
    Keywords: adaptation, climate change, funding, mitigation, Nash bargaining
    JEL: Q54 H41 H87 C72
    Date: 2015–11
  26. By: Park,Jisung; Hallegatte,Stephane; Bangalore,Mook; Sandhoefner,Evan
    Abstract: Recent economic research documents a range of adverse welfare consequences from extreme heat stress, including health, labor productivity, and direct consumption disutility impacts. Without rapid adaptation, climate change will increase the burden of heat stress experienced by much of the world?s population in the coming decades. What will the distributional consequences of this added heat stress be, and how might this affect optimal climate policy? Using detailed survey data of household wealth in 690,745 households across 52 countries, this paper finds evidence suggesting that the welfare impacts of added heat stress caused by climate change may be regressive. Specifically, the analysis finds that poorer households tend to be located in hotter locations across and within countries, and poorer individuals are more likely to work in occupations with greater exposure to the elements not only across but also within countries. These findings?combined with the fact that current social cost of carbon estimates do not include climate damages arising from the productivity impacts of heat stress?suggest that optimal climate policy, especially when allowing for declining marginal utility of consumption, involves more stringent abatement than currently suggested, and that redistributive adaptation policies may be required to reduce the mechanical inequities in welfare impacts arising from climate change.
    Keywords: Economic Theory&Research,Global Environment,Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Economics
    Date: 2015–11–05
  27. By: Christoph Böhringer; Knut Einar Rosendahl; Halvor Briseid Storrøsten (Statistics 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 adjustment is a second-best instrument, and more cost-effective than output-based rebating, in which case domestic output is indirectly subsidized. No country has so far imposed border carbon adjustment, while variants of output-based rebating have been implemented. In this paper we show that combining output-based rebating for emission-intensive and trade-exposed goods with a consumption tax on the same goods can be equivalent with border carbon adjustment. Moreover, we demonstrate that it is welfare improving for a region which has already implemented emission pricing along with outputbased rebating to also introduce such a consumption tax. We conclude that supplementing outputbased rebating with a consumption tax constitutes smart hedging against carbon leakage: Compared to output-based rebating stand-alone it constitutes a robust strategy for improving cost-effectiveness of unilateral climate policy; compared to border carbon adjustment it limits the risks of potentially detrimental trade disputes.
    Keywords: Carbon leakage; output-based rebating; border carbon adjustment; consumption tax
    JEL: D61 H2 Q54
    Date: 2015–10
  28. By: Guilherme de Oliveira; Deise Bourscheidt
    Abstract: Este artigo usa um painel dinâmico multi-setorial para testar a hipótese de convergência per capita na emissão de gases do efeito-estufa. Tal teste tornou-se possível com a recente publicação da World Input Output Database. A estratégia empírica aplica estimadores convencionais de efeitos aleatórios e fixos, e também um GMM de Arellano e Bond (1991), para os principais poluentes relacionados ao efeito estufa. Encontramos evidências robustas de convergência na emissão de CH4 em setores ligados à agricultura, indústria de alimentos, e serviços. Com relação à emissão de CO2, encontramos evidencias moderadas na agricultura, indústria de alimentos, indústria de bens-duráveis e serviços. Em todos os casos, o tempo para convergência foi menor do que quinze anos. Nas emissões relevantes pelo uso de energia, uma das maiores fontes causadoras do efeito estufa, encontramos evidências moderadas apenas na indústria extrativa. Todos os demais poluentes apresentaram evidência fraca ou ausência de evidências.
    Keywords: Greenhouse gas emissions; multi-sectorial convergence; panel data
    JEL: Q5 Q52 C33
    Date: 2015–10–23
  29. By: Dietz, Simon; Gollier, Christian; Kessler, Louise
    Abstract: Mitigation reduces the expected future damages from climate change,flbut how does it affect the aggregate risk borne by future generations?flThis raises the question of the ‘climate beta’, i.e., the elasticity of climatefldamages with respect to a change in aggregate consumption. Inflthis paper we show that the climate beta is positive if the main sourceflof uncertainty is exogenous, emissions-neutral technological progress,flimplying that mitigation has no hedging value. But these results areflreversed if the main source of uncertainty is related to the carbonclimate-flresponse and the damage intensity of warming. We then showflthat in the DICE integrated assessment model the climate beta is positivefland close to unity. In estimating the social cost of carbon, thisflwould justify using a relatively high rate to discount expected climatefldamages. However, the stream of undiscounted expected climate damagesflis also increasing in the climate beta. We show that this dominatesflthe discounting effect, so that the social cost of carbon is in fact largerflthan when discounting expected damages at the risk-free rate.
    Keywords: beta, climate change, discounting, integrated assessment,flmitigation, risk, social cost of carbon
    JEL: Q54
    Date: 2015–11
  30. By: JINJI Naoto; SAKAMOTO Hiroaki
    Abstract: Using Japanese firm-level data, we investigate the firm-level relationship between export status and environmental performance in terms of carbon dioxide (CO₂) emissions intensity and energy intensity. As in previous studies, we first find that exporting firms have significantly lower CO₂ emissions/energy intensity. We then investigate the effects of exporting on CO₂ emissions/energy intensity by employing the propensity score matching (PSM) method, and find that the effects significantly vary across industries. Whereas exporting significantly improves environmental performance in most industries, exporting actually increases CO₂ emissions/energy intensity in the iron & steel industry. This finding suggests that the effect of exporting varies across industries.
    Date: 2015–11

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