nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒12‒12
fifty-five papers chosen by
Roger Fouquet
London School of Economics

  1. Quantifying the Ancillary Benefits of the Representative Concentration Pathways on Air Quality in Europe By Milan Šcasný; Emanuele Massetti; Jan Melichar; Samuel Carrara
  2. How much Electricity do we Consume? A Guide to German and European Electricity Consumption and Generation Data By Maximilian Schumacher; Lion Hirth
  3. Combination of Equilibrium Models and Hybrid Life Cycle–Input-Output Analysis to Predict the Environmental Impacts of Energy Policy Scenarios By Elorri Igos; Benedetto Rugani; Sameer Rege; Enrico Benetto; Laurent Drouet; Dan Zachary
  4. Agglomeration, Urban Growth and Infrastructure in Global Climate Policy: A Dynamic CGE Approach By Fabio Grazi; Henri Waisman
  5. Modelling of Distributional Impacts of Energy Subsidy Reforms: an Illustration with Indonesia By Olivier Durand-Lasserve; Lorenza Campagnolo; Jean Chateau; Rob Dellink
  6. Oil price shocks, road transport pollution emissions and residents' health losses in China By Sheng Yang; Ling-Yun He
  7. Wind speed and electricity demand correlation analysis in the Australian National Electricity Market: Determining wind turbine generators’ ability to meet electricity demand without energy storage By Bell, William Paul; Wild, Phillip; Foster, John; Michael, Hewson
  8. Policy Surveillance in the G-20 Fossil Fuel Subsidies Agreement: Lessons for Climate Policy By Joseph E. Aldy
  9. An assessment of fiscal and regulatory barriers to deployment of energy efficiency and renewable energy technologies in Guyana By Niel Gardner, Devon O.; Alleyne, Dillon; Gomes, Charmaine
  10. Pathways to Deep Decarbonization in Italy By Isabella Alloisio; Alessandro Antimiani; Simone Borghesi; Enrica De Cian; Maria Gaeta; Chiara Martini; Ramiro Parrado; Maria Cristina Tommasino; Elena Verdolini; Maria Rosa Virdis
  11. Global Oil Market and the U.S. Stock Returns By Maryam Ahmad; Matteo Manera; Mehdi Sadeghzadeh
  12. Directed Technological Change and Energy Efficiency Improvements By Jan Witajewski-Baltvilks; Elena Verdolini; Massimo Tavoni
  13. Solving the Clinker Dilemma with Hybrid Output-based Allocation By Frédéric Branger; Misato Sato
  14. Integrated Assessment of Climate Catastrophes with Endogenous Uncertainty: Does the Risk of Ice Sheet Collapse Justify Precautionary Mitigation? By Delavane B. Diaz
  15. An assessment of mechanisms to improve energy efficiency in the transport sector in Grenada, Saint Lucia and Saint Vincent and the Grenadines By Emanuel, Elizabeth; Gomes, Charmaine
  16. Regional Carbon Budgets: Do They Matter for Climate Policy? By Massimo Tavoni; Detlef van Vuuren
  17. Using Carbon Pricing Revenues to Finance Infrastructure Access By Michael Jakob; Claudine Chen; Sabine Fuss; Annika Marxen; Narasimha Rao; Ottmar Edenhofer
  18. Big Fish: Oil Markets and Speculation By Alessandro Cologni; Elisa Scarpa; Francesco Giuseppe Sitzia
  19. Energy efficiency and mobility: A roadmap towards a greener economy in Latin America and the Caribbean By Kreuzer, Fabian Maximilian; Wilmsmeier, Gordon
  20. International Environmental Agreements with Asymmetric Countries: Climate Clubs vs. Global Cooperation By Achim Hagen; Klaus Eisenack
  21. Future Costs of Key Low-Carbon Energy Technologies: Harmonization and Aggregation of Energy Technology Expert Elicitation Data By Erin Baker; Valentina Bosetti; Laura Diaz Anadon; Max Henrion; Lara Aleluia Reis
  22. Forecasting the Term Structure of Crude Oil Futures Prices with Neural Networks By Jozef Barunik; Barbora Malinska
  23. Optimal Management of Markets for Bankable Emission PermitsOptimal Management of Markets for Bankable Emission Permits By Jussi Lintunen; Olli-Pekka Kuusela
  24. Optimal environmental tax swaps and double dividend hypothesis By Su-Mei Chen; Ling-Yun He
  25. The Role of Natural Gas in the EU Decarbonisation Path By Manfred Hafner; Simone Tagliapietra
  26. Modeling Coupled Climate, Ecosystems, and Economic Systems By W. A. Brock; A. Xepapadeas
  27. Levelling the Playing Field: On the Missing Role of Network Externality in Designing Renewable Energy Technology Deployment Policies By Wei Jin; ZhongXiang Zhang
  28. Forecasting crude oil market volatility: can the Regime Switching GARCH model beat the single-regime GARCH models? By Yue-Jun Zhang; Ting Yao; Ling-Yun He
  29. Carbon Emissions Trading in China: The Evolution from Pilots to a Nationwide Scheme By ZhongXiang Zhang
  30. Bending The Learning Curve By Jan Witajewski-Baltvilks; Elena Verdolini; Massimo Tavoni
  31. The role of money and the financial sector in energy-economy models used for assessing climate policy By H. Pollitt; J. -F. Mercure
  32. Cournot Competition and "Green" Innovation: An Inverted-U Relationship By Luca Lambertini; Joanna Poyago-Theotoky; Alessandro Tampieri
  33. Uncertainty and Natural Resources - Prudence Facing Doomsday By Johannes Emmerling
  34. Turkish Stream: What Strategy for Europe? By Manfred Hafner; Simone Tagliapietra
  35. The impact of oil shocks on exchange rates: A Markov-switching approach By Syed Abul, Basher; Alfred A, Haug; Perry, Sadorsky
  36. The Basilicata Wealth Fund: Resource Policy and Long-run Economic Development in Southern Italy By Roberto Iacono
  37. Environmental Policy: The Coevolution of Pollution and Compliance By Yannis Petrohilos-Andrianos; Anastasios Xepapadeas
  38. Transboundary Capital and Pollution Flows and the Emergence of Regional Inequalities By Simon Levin; A. Xepapadeas
  39. CO2 Intensity and the Importance of Country Level Differences: An Analysis of the Relationship Between per Capita Emissions and Population Density By Thomas Longden
  40. Decision Frameworks and the Investment in R&D By Erin Baker; Olaitan Olaleye; Lara Aleluia Reis
  41. The Role of Outliers and Oil Price Shocks on Volatility of Metal Prices By Niaz Bashiri Behmiri; Matteo Manera
  42. Gobernanza del gas natural no convencional para el desarrollo sostenible de América Latina y el Caribe: experiencias generales y tendencias en la Argentina, el Brasil, Colombia y México By Arroyo, Andrés; Perdriel, Andrea
  43. Energy efficiency in Latin America and the Caribbean: Progress and challenges of the past five years. Executive summary By -
  44. Políticas climáticas en países desarrollados: impacto en América Latina By Flores, José Luis
  45. Competitive Benchmarking: An IS Research Approach to Address Wicked Problems with Big Data and Analytics By Ketter, W.; Peters, M.; Collins, J.; Gupta, A.
  46. Could Resource Rents Finance Universal Access to Infrastructure? A First Exploration of Needs and Rents By Sabine Fuss; Claudine Chen; Michael Jakob; Annika Marxen; Narasimha D. Rao; Ottmar Edenhofer
  47. Making China the Transition to a Low-Carbon Economy: Key Challenges and Responses By ZhongXiang Zhang
  48. Can EU’s Decarbonisation Agenda Break the State-Company Axis in the Power Sector? By Thomas Sattich; Inga Ydersbond; Daniel Scholten,
  49. Energía y políticas públicas en los Estados Unidos: una relación virtuosa para el desarrollo de fuentes no convencionales By Bustillo, Inés; Artecona, Raquel; Makhoul, Isabel; Perrotti, Daniel E.
  50. The economics of climate change in Latin America and the Caribbean: Paradoxes and challenges. Overview for 2014 By -
  51. Informe nacional de monitoreo de la eficiencia energética de la República Argentina, 2014 By -
  52. Emisiones de gases de efecto invernadero y mitigación en el sector de uso del suelo, cambio en el uso del suelo y silvicultura: economía del cambio climático en la Argentina By Ginzo, Héctor Daniel
  53. Big data and open data as sustainability tools: A working paper prepared by the Economic Commission for Latin America and the Caribbean By -
  54. Relatório nacional de monitorização da eficiência energética do Brasil By -
  55. Eficiencia energética y regulación económica en los servicios de agua potable y alcantarillado By Ferro, Gustavo; Lentini, Emilio

  1. By: Milan Šcasný (Charles University in Prague, Environment Center); Emanuele Massetti (Georgia Institute of Technology, CESIfo and FEEM); Jan Melichar (Charles University in Prague, Environment Center); Samuel Carrara (Fondazione Eni Enrico Mattei)
    Abstract: This paper presents estimates of the economic benefit of air quality improvements in Europe that occur as a side effect of GHG emission reductions. We consider three climate policy scenarios that reach radiative forcing levels in 2100 of three Representative Concentration Pathways (RCPs). These targets are achieved by introducing a global uniform tax on all GHG emissions in the Integrated Assessment Model WITCH, assuming both full as well as limited technological flexibility. The resulting consumption patterns of fossil fuels are used to estimate the physical impacts and the economic benefits of pollution reductions on human health and on key assets by implementing the most advanced version of the ExternE methodology with its Impact Pathway Analysis. We find that the mitigation scenario compatible with +2°C reduces total pollution costs in Europe by 76%. Discounted ancillary benefits are more than €2.5 trillion between 2015 and 2100. The monetary value of reduced pollution is equal to €22 per abated ton of CO2 in Europe. Less strict climate policy scenarios generate overall smaller, but still considerable, local benefits (14 € or 18 € per abated ton of CO2). Without discounting, the ancillary benefits are in a range of €36 to €50 per ton of CO2 abated. Cumulative ancillary benefits exceed the cumulative additional cost of electricity generation in Europe. Each European country alone would be better off if the mitigation policy was implemented, although the local benefits in absolute terms vary significantly across the countries. We can identify the relative losers and winners of ancillary benefits in Europe. In particular, we find that large European countries contribute to as much as they benefit from ancillary benefits. The scenarios with limited technology flexibility do deliver results that are similar to the full technology flexibility scenario.
    Keywords: Ancillary benefits, External costs, Climate change mitigation, Integrated Assessment Models, ExternE, Impact Pathway Analysis
    JEL: Q47 Q51 Q53 Q54
    Date: 2015–10
  2. By: Maximilian Schumacher (Neon Neue Energieökonomik GmbH (Neon), Germany); Lion Hirth (Neon Neue Energieökonomik GmbH (Neon), Germany, Potsdam Institute for Climate Impact Research (PIK), Germany, Mercator Research Institute on Global Commons and Climate Change (MCC), Germany)
    Abstract: Accurate information about electricity generation and consumption is crucial to power system modelling. Several institutions publish such data: for European countries these include the association of system operators ENTSO-E, the EU body Eurostat, and the International Energy Agency; for Germany they comprise the sector organisation BDEW, the federal statistical office Statistisches Bundesamt, the working group AG Energiebilanzen, and the four transmission system operators. This paper compares the terminology, methodology, and reported data of these sources, finding inconsistencies at all three levels. For example, annual electricity generation from wind and solar power in Germany differs by as much as 10% – 20%, depending on who you ask. ENTSO-E publishes “hourly load”, which is widely used among power system modellers. The data documentation provides a (constant) “representativity factor” that should be used to scale the hourly load values. However, we find that the scaling factor, when derived from ENTSO-E’s own more comprehensive data sources (“monthly consumption”), is neither the one provided, nor is it constant. The deviation is particularly worrying in Germany, where peak electricity demand might be underestimated by up to a quarter, and so we propose a scaling procedure that avoids such bias.
    Keywords: Power system data, Power market modelling
    JEL: L94 C63
    Date: 2015–10
  3. By: Elorri Igos (Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg); Benedetto Rugani (Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg); Sameer Rege (Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg); Enrico Benetto (Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Luxembourg Institute of Science and Technology, Environmental Research and Innovation Department, Luxembourg); Laurent Drouet (Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies, Luxembourg Fondazione Eni Enrico Mattei and Euro-Mediterranean Center on Climate Change, Italy); Dan Zachary (Public Research Centre Henri Tudor, Resource Centre for Environmental Technologies and Whiting School of Engineering, The Johns Hopkins University, USA)
    Abstract: Nowadays, many countries adopt an active agenda to mitigate the impact of greenhouse gas emissions by moving towards less polluting energy generation technologies. The environmental costs, directly or indirectly generated to achieve such a challenging objective, remain however largely underexplored. Until now, research has focused either on pure economic approaches such as computable general equilibrium (CGE) and partial equilibrium (PE) models, or on (physical) energy supply scenarios. These latter could be used to evaluate the environmental impacts of various energy saving or cleaner technologies via life cycle assessment (LCA) methodology. These modelling efforts have, however, been pursued in isolation, without exploring the possible complementarities and synergies. In this study, we have undertaken a practical combination of these approaches into a common framework: on the one hand, by coupling a CGE with a PE model, and, on the other hand, by linking the outcomes from the coupling with a hybrid input-output-process based life cycle inventory. The methodological framework aimed at assessing the environmental consequences of two energy policy scenarios in Luxembourg between 2010 and 2025. The study highlights the potential of coupling CGE and PE models but also the related methodological difficulties (e.g. small number of available technologies in Luxembourg, intrinsic limitations of the two approaches, etc.). The assessment shows both environmental synergies and trade-offs due to the implementation of energy policies. For example, despite the changes in technologies towards the reduction of greenhouse gas emissions, only marginal improvements are observed in the climate change mitigation scenario as compared to the business-as-usual. The energy related production and imports are indeed expected to increase over time and represent a large contribution to the country’s impacts. Interestingly, side effects on other impacts than climate change or fossil resource depletion (e.g. ionising radiation and water depletion) may also occur mainly due to the use of nuclear energy in neighbouring countries.
    Keywords: Computable General Equilibrium Model, Partial Equilibrium Model, Energy Policy Life Cycle Assessment, Consequential, Input-Output
    JEL: Q40 C67 C68
    Date: 2015–06
  4. By: Fabio Grazi (Agence Française de Développement, Research Directorate); Henri Waisman (Centre International de Recherche sur l’Environnement et le Développement)
    Abstract: This paper presents an integrated model of urban agglomeration economies within a computable general equilibrium (CGE) model of global economic activity, energy use and carbon emissions to explore the theoretical and empirical nature of the interdependence of cities and the world economy in a climate policy context. Based on calibration data for 74 major OECD agglomerations, the integrated model is used to gauge the long-term impact of: i) global carbon pricing on urban systems and the economic activity; ii) urban infrastructure development on the economic costs of curbing carbon emissions. Importantly, it is found that combining urban infrastructure and carbon pricing allows for stringent emissions reduction targets, while still avoiding the economic and welfare costs of the carbon price only.
    Keywords: Calibration, Cities, Hybrid Energy-Economy Modeling, New Economic Geography, Trade and Transport, Urban Infrastructure, Welfare
    JEL: C68 R12 Q54
    Date: 2015–06
  5. By: Olivier Durand-Lasserve (OECD Environmental Directorate, France); Lorenza Campagnolo (Ca’ Foscari University of Venice, Centro Euro-Mediterraneo sui Cambiamenti Climatici and Fondazione Eni Enrico Mattei, Italy); Jean Chateau (OECD Environmental Directorate, France); Rob Dellink (OECD Environmental Directorate, France)
    Abstract: This report develops an analytical framework that assesses the macroeconomic, environmental and distributional consequences of energy subsidy reforms. The framework is applied to the case of Indonesia to study the consequences in this country of a gradual phase out of all energy consumption subsidies between 2012 and 2020. The energy subsidy estimates used as inputs to this modelling analysis are those calculated by the International Energy Agency, using a synthetic indicator known as “price gaps”. The analysis relies on simulations made with an extended version of the OECD’s ENV-Linkages model. The phase out of energy consumption subsidies was simulated under three stylised redistribution schemes: direct payment on a per household basis, support to labour incomes, and subsidies on food products. The modelling results in this report indicate that if Indonesia were to remove its fossil fuel and electricity consumption subsidies, it would record real GDP gains of 0.4% to 0.7% in 2020, according to the redistribution scheme envisaged. The redistribution through direct payment on a per household basis performs best in terms of GDP gains. The aggregate gains for consumers in terms of welfare are higher, ranging from 0.8% to 1.6% in 2020. Both GDP and welfare gains arise from a more efficient allocation of resources across sectors resulting from phasing out energy subsidies. Meanwhile, a redistribution scheme through food subsidies tends to create other inefficiencies. The simulations show that the redistribution scheme ultimately matters in determining the overall distributional performance of the reform. Cash transfers, and to a lesser extent food subsidies, can make the reform more attractive for poorer households and reduce poverty. Mechanisms that compensate households via payments proportional to labour income are, on the contrary, more beneficial to higher income households and increase poverty. This is because households with informal labour earnings, which are not eligible for these payments, are more represented among the poor. The analysis also shows that phasing out energy subsidies is projected to reduce Indonesian CO2 emissions from fuel combustion by 10.8% to 12.6% and GHG emissions by 7.9% to 8.3%, in 2020 in the various scenarios, with respect to the baseline. These emission reductions exclude emissions from deforestation, which are large but highly uncertain and for which the model cannot make reliable projections.
    Keywords: Computable General Equilibrium Model, Households’ Heterogeneity, Fossil Fuel Subsidy Reforms, Distributional Impacts, Indonesia
    JEL: C68 H23 O53
    Date: 2015–07
  6. By: Sheng Yang; Ling-Yun He
    Abstract: China's rapid economic growth resulted in serious air pollution, which caused substantial losses to economic development and residents' health. In particular, the road transport sector has been blamed to be one of the major emitters. During the past decades, fluctuation in the international oil prices has imposed significant impacts on the China's road transport sector. Therefore, we propose an assumption that China's provincial economies are independent "economic entities". Based on this assumption, we investigate the China's road transport fuel (i.e., gasoline and diesel) demand system by using the panel data of all 31 Chinese provinces except Hong Kong, Macau and Taiwan. To connect the fuel demand system and the air pollution emissions, we propose the concept of pollution emissions elasticities to estimate the air pollution emissions from the road transport sector, and residents' health losses by a simplified approach consisting of air pollution concentrations and health loss assessment models under different scenarios based on real-world oil price fluctuations. Our framework, to the best of our knowledge, is the first attempt to address the transmission mechanism between the fuel demand system in road transport sector and residents' health losses in the transitional China.
    Date: 2015–12
  7. By: Bell, William Paul; Wild, Phillip; Foster, John; Michael, Hewson
    Abstract: This paper analyses wind speed and electricity demand correlation to determine the ability of wind turbine generators to meet electricity demand in the Australian National Electricity Market (NEM) without the aid of energy storage. With the proposed increases in the number of windfarms to meet the Large-scale Renewable Energy Target (LRET), this correlation study is formative to identifying price and power stability issues and determining what transmission structure is required to best facilitate the absorption of wind power. We calculate correlations between wind speed and electricity demand data for the years 2010 to 2012 using Weather Research & Forecasting Model (WRF 2015) wind speed data and Australian Energy Market Operator (AEMO) electricity demand data. We calculate state level correlations to identify potential bottlenecks in the interconnectors that link each state’s transmission network. The transmission lines within each state tend to be less of a constraint. We find a small temporal increase in correlation between electricity demand and wind speed. This we attribute to an unwitting renewable energy portfolio effect with the increase in solar PV and solar water heating. Strengthening this portfolio effect is the decline in manufacturing that makes household domestic demand relatively larger. Comparing our study with an earlier correlation analysis by Bannister and Wallace (2011) tends to confirm our initial findings. We find the most advantage from the lack of correlation between wind speed between the NEM’s peripheral states including Queensland, South Australia and Tasmania. Additionally, the correlation between electricity demand and wind speed is strongest between these states. Similarly, we find the most advantage from the lack of correlation between electricity demand in each of these states. The self-interest groups within Victoria and New South Wales and the transmission companies geographically contained within each state hinders the development of optimal interconnector capacity to maximise the benefit of wind power in the peripheral states and the NEM generally.
    Keywords: Wind speed Electricity demand Correlation Australian National Electricity Market Wind turbine generators Renewable energy Renewable energy portfolio solar PV
    JEL: Q4 Q42 Q47 Q5 Q53 Q56
    Date: 2015–11–10
  8. By: Joseph E. Aldy (Harvard Kennedy School)
    Abstract: Inadequate policy surveillance has undermined the effectiveness of multilateral climate agreements. To illustrate an alternative approach to transparency, I evaluate policy surveillance under the 2009 G-20 fossil fuel subsidies agreement. The Leaders of the Group of 20 nations tasked their energy and finance ministers to identify and phase-out fossil fuel subsidies. The G-20 leaders agreed to submit their subsidy reform strategies to peer review and to independent expert review conducted by international organizations. This process of developed and developing countries pledging to pursue the same policy objective, designing and publicizing implementation plans, and subjecting plans and performance to review by international organizations differs considerably from the historic approach under the UN Framework Convention on Climate Change. This paper draws lessons from the fossil fuel subsidies agreement for climate policy surveillance.
    Keywords: Transparency, Pledge and Review, International Environmental Agreements
    JEL: F53 H23 Q40
    Date: 2015–10
  9. By: Niel Gardner, Devon O.; Alleyne, Dillon; Gomes, Charmaine (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Guyana, like many CARICOM countries continues to depend on imported oil that fuels the electricity and transport sectors. Simultaneously, the high level of expenditure on oil reduces the financial resources available to invest in social development, environmental protection, adaptation to climate change and improving food security. The electricity sector in Guyana, in particular, offers significant opportunities for achieving reductions in fossil imports. However, fiscal and regulatory barriers to energy efficiency and renewable energy use are apparent in Guyana. This document seeks to identify these barriers and propose strategies that may be utilised to remove them. Consultations were held with experts from the energy agency as well as the ministries of finance and utilities in order to obtain data and information that will inform the analysis. It was found that an increasing demand for reliable, cost effective, accurately priced energy supplies is a major challenge to sustainable economic development in Guyana and the country experiences difficulties in accessing capital especially for smaller firms and lower to middle income households. The limited knowledge of the technical risks associated with renewable energy and energy efficiency projects limit local investments and opportunities for foreign capital and are affected by high transaction costs. Furthermore, the strategic removal of energy subsidies continue to undermine the economic case for improved energy efficiency and increased renewable energy use. Planning for renewable energy use within the Guyana energy sector remains wedded to utility scale hydropower replacement of fossil based thermal generation, as well as remote solar PV systems. However, the Levelized Cost of Electricity (LCOE) is indicative of other cost effective options. The substantive goal of the Government of Guyana should be related to the creation of a country in which there is equitable availability of energy intensive goods and services to its people that harmonizes economic growth, social progress and environmental stewardship.
    Date: 2014–02
  10. By: Isabella Alloisio (Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC)); Alessandro Antimiani (INEA); Simone Borghesi (University of Siena and Fondazione Eni Enrico Mattei (FEEM)); Enrica De Cian (Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC)); Maria Gaeta (Studies and Strategy Unit, ENEA); Chiara Martini (Energy Efficiency Unit, ENEA); Ramiro Parrado (Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC)); Maria Cristina Tommasino (Studies and Strategy Unit, ENEA); Elena Verdolini (Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC)); Maria Rosa Virdis (Studies and Strategy Unit, ENEA)
    Abstract: The Deep Decarbonization Pathways Project (DDPP), an initiative of the Sustainable Development Solutions Network (SDSN) and the Institute for Sustainable Development and International Relations (IDDRI), aims to demonstrate how countries can transform their energy systems by 2050 in order to achieve a low-carbon economy and significantly reduce the global risk of catastrophic climate change. Built upon a rigorous accounting of national circumstances, the DDPP defines transparent pathways supporting the decarbonization of energy systems while respecting the specifics of national political economy and the fulfillment of domestic development priorities. The project comprises 16 Country Research Teams, composed of leading research institutions from countries representing about 70% of global GHG emissions and at very different stages of development. These 16 countries are: Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, South Africa, South Korea, the United Kingdom, and the United States. “Pathways to Deep Carbonization in Italy” contributes to the national debate on climate-change mitigation, and the importance of deep decarbonization, by examining three alternative pathways that could reduce Italian CO2 emissions by at least 40% in 2030 and 80% in 2050, compared to 1990. It analyzes the challenges the Italian energy system faces, and possible future technological developments that will need to be pursued.
    Keywords: Decarbonization, Low-carbon Economy, Climate Change
    JEL: Q4 Q5
    Date: 2015–09
  11. By: Maryam Ahmad (Lombardy Advanced School of Economic Research (LASER)); Matteo Manera (University of Milan-Bicocca and Fondazione Eni Enrico Mattei (FEEM)); Mehdi Sadeghzadeh (Bocconi University)
    Abstract: This paper provides an analysis of the link between the oil market and the U.S. stock market returns at the aggregate as well as industry levels. We empirically model oil price changes as driven by speculative demand shocks along with consumption demand and supply shocks in the oil market. We also take into account in our model all the factors that affect stock market price movements over and above the oil market, in order to quantify the pure effect of oil price shocks on returns. The results show that stock returns respond to oil price shocks differently, depending on the causes behind the shocks. Impulse response analysis suggests that consumption demand shocks are the most relevant drivers of the stock market return, relative to other oil market driven shocks. Industry level analysis is performed to control for the heterogeneity of the responses of returns to oil price changes. The results show that both cost side and demand side effects of oil price shocks matter for the responses of industries to oil price shocks. However, the main driver of the variation in industries’ returns is the shock to aggregate stock market.
    Keywords: Oil Market, Oil Price, Stock Market
    JEL: G1 G12 Q41
    Date: 2015–10
  12. By: Jan Witajewski-Baltvilks (Fondazione Eni Enrico Mattei (FEEM)); Elena Verdolini (Fondazione Eni Enrico Mattei (FEEM) and Centro Euromediterraneo sui Cambiamenti Climatici (CMCC)); Massimo Tavoni (Fondazione Eni Enrico Mattei (FEEM) and Politecnico di Milano)
    Abstract: This paper applies the Directed Technical Change (DTC) framework to study improvements in the efficiency of energy use. We present a theoretical model which (1) shows that the demand for energy is shifted down by innovations in energy intensive sectors and (2) highlights the drivers of innovative activity in these sectors. We then estimate the model through an empirical analysis of patent and energy data. Our contribution is fivefold. First, our model shows that under very general assumptions information about energy expenditures, knowledge spillovers and the parameters governing the R&D process are sufficient to predict the R&D effort in efficiency improving technologies. Second, we pin down the conditions for a log-linear relation between energy expenditure and the R&D effort. Third, the calibration of the model provides clear evidence that the value of the energy market as well as international and inter-temporal spillovers play a significant role in determining the level of innovative activity. Fourth, we show that innovative activity in energy intensive sectors shifts down the (Marshallian) demand for energy. Finally, we show that due to the streamlined modelling framework we adopt, the point estimates from our regression can potentially be used to calibrate any model of DTC in the context of energy consumption.
    Keywords: Energy Efficiency, Directed Technological Change, Induced Innovations, Patents Econometrics
    JEL: O31 O33 Q43
    Date: 2015–09
  13. By: Frédéric Branger (CIRED and AgroParistech ENGREF, France); Misato Sato (LSE, UK)
    Abstract: This paper proposes an innovative solution to distribute free allowances to the cement sector under emissions trading systems, called hybrid output-based allocation (OBA). We demonstrate that unlike many of the allocation methods currently being used, our design provides incentives which are aligned with the mitigation options available to this sector in the short to medium term. Specifically, it increases the incentive to improve the carbon intensity of clinker production; reduces the incentive to import clinker to avoid carbon costs; increases the incentive to use more low-carbon clinker alternatives to produce cement; and finally it reduces excess allocation and reduces incentives to inflate production volumes to obtain more free allowances. The hybrid OBA does not, however, provide incentives to reduce the consumption of cement or to bring about break-through technologies, hence should be considered as a mid-term solution to aid the decarbonization of the cement sector in conjunction with other support mechanisms.
    Keywords: Emissions Trading, Output-based Allocation, Climate Policy, Cement sector, Clinker Dilemma
    JEL: Q50 Q54 H23
    Date: 2015–10
  14. By: Delavane B. Diaz (Department of Management Science and Engineering, Stanford University, USA)
    Abstract: Greenhouse gas policies confront the trade-off between the costs of reducing emissions and the benefits of avoided climate change. The risk of uncertain and potentially irreversible catastrophes is an important issue related to the latter, and one that has not yet been well incorporated into economic models for climate change policy analysis. This paper demonstrates a multistage stochastic programming framework for catastrophe modeling with endogenous uncertainty, applied to a benchmark integrated assessment model. This study moves beyond recent catastrophe or tipping point studies with arbitrary risk, instead investigating the specific threat of the uncertain collapse of the West Antarctic Ice Sheet (WAIS), characterized in accordance with recent expert elicitations, empirical results, and physical relationships. The stochastic DICE-WAIS model introduced here informs risk management strategies that balance uncertain future climate change impacts with the costs of mitigation investments today. This work finds that accounting for the consequences of the possible WAIS collapse in a stochastic setting with endogenous uncertainty leads to more stringent climate policy recommendations (increasing the CO2 control rate by an additional 4% of global emissions and raising the social cost of carbon by $10), reflecting the need to hedge against uncertainties with downside risk as well as pursue precautionary mitigation.
    Keywords: Climate Change Policy, Sea Level Rise, Ice Sheet Collapse, Endogenous Uncertainty, Stochastic Optimization, Greenhouse Gas Mitigation, Risk Management
    JEL: C61 D61 D81 H23 Q54 Q58
    Date: 2015–07
  15. By: Emanuel, Elizabeth; Gomes, Charmaine (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Like many other Caribbean countries, Grenada, Saint Lucia and Saint Vincent and the Grenadines are almost entirely dependent on imported petroleum as their primary source of energy. In this regard, many countries in the subregion have taken a strategic approach to long-term planning in the energy sector towards creating higher levels of efficiency on both the demand and supply sides as well as promoting diversification in the energy mix. Within this context, this study was conducted to present mechanisms to improve energy efficiency (EE) in the transport sector in Grenada, Saint Lucia and Saint Vincent and the Grenadines. For each country, the report presents a brief description of current trends in energy consumption generally as well as energy issues in the transport sector and programmes, initiatives and regulatory mechanisms currently in place that are contributing to energy efficiency in the sector.
    Date: 2014–10
  16. By: Massimo Tavoni (Fondazione Eni Enrico Mattei and Politecnico di Milano); Detlef van Vuuren (PBL and Utrecht University)
    Abstract: Carbon budgets have emerged as a robust metric of warming, but little is known about the usefulness of regional carbon budgets as indicators of policy. This article explores the potential of regional carbon budgets to inform climate policy. Using the large database of scenarios from IPCC AR5 WGIII, we show that regional budgets are important metrics of the long term contribution to climate change and the effort required to mitigate it. However, their value appears to be more limited for informing short term courses of actions, and for predicting the economic consequences of emission reduction policies.
    Keywords: Carbon Budgets, Climate Policy, IPCC
    JEL: Q54 Q40
    Date: 2015–07
  17. By: Michael Jakob (Mercator Research Institute on Global Commons and Climate Chang and Potsdam Institute for Climate Change Impact Research); Claudine Chen (Mercator Research Institute on Global Commons and Climate Change); Sabine Fuss (Mercator Research Institute on Global Commons and Climate Change); Annika Marxen (Technical University Berlin and Mercator Research Institute on Global Commons and Climate Change); Narasimha Rao (International Institute of Systems Analysis); Ottmar Edenhofer (Mercator Research Institute on Global Commons and Climate Change, Potsdam Institute for Climate Change Impact Research and Technical University Berlin)
    Abstract: Introducing a price on greenhouse gas emissions would not only contribute to reducing the risk of dangerous anthropogenic climate change, but would also generate substantial public revenues. Some of these revenues could be used to cover investment needs for infrastructure providing access to water, sanitation, electricity, telecommunications and transport. In this way, emission pricing could promote sustainable socio-economic development by safeguarding the stability of natural systems which constitute the material basis of economies while at the same time providing public goods that are essential for human well- being. An analysis of several climate scenarios with different stabilization targets and technological assumptions reveals that emission pricing has a substantial potential to close existing access gaps.
    Keywords: Q31, H54
    Date: 2015–10
  18. By: Alessandro Cologni (Edison Trading S.p.A.); Elisa Scarpa (Edison Trading S.p.A., University of Milan, Polytechnic University of Milan); Francesco Giuseppe Sitzia (Edison Trading S.p.A.)
    Abstract: The role of speculators in the oil markets has been vastly investigated during the last few years. Several authors focused on the definition of speculation while others examined the relationship between oil prices and the behavior of trading actors. In this paper, we formulate a new theory able to describe “hedging needs” as well as the role of speculators in the crude oil market. According to our model, the different strategies of producers and consumers aimed at defending themselves against abrupt oil price changes can be satisfied only if speculators play a very active role. Due to the rapid growth in shale oil production, the importance of speculation in ensuring an equilibrium in the U.S. crude oil market has consequently grown noticeably. We estimate an econometric conditional Error Correction Model (ECM) applying Pesaran’s bound tests, over the sample February 2000 November 2014, using WTI and CFTC data. Our theory is well supported by econometric evidence. In other words, our model is suitable to demonstrate how commercial operators act on the market. In addition, the increasing importance of future contracts (also known as financialisation of crude oil market) helps in reaching a level of prices close to the equilibrium one. Finally, we are able to find evidence of a positive impact of the action of speculators on the efficiency of oil markets as they help stabilizing prices.
    Keywords: Oil Price Dynamics, Speculation and Fundamentals, Conditional Error, Correction Models, Pesaran Bounds Testing Approach
    JEL: Q4 Q41 D84 G15
    Date: 2015–06
  19. By: Kreuzer, Fabian Maximilian; Wilmsmeier, Gordon (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Much analysis and proposals on sustainable transport policies have been developed around the world, both at government and research institutions. It is clear that no action will provide the single solution and it is imperative to act simultaneously on: i) improvement of technology in vehicles, leading to increased energy efficiency; ii) the change in driver behavior, to use less fuel per kilometer; iii) reducing the distances traveled per vehicle; and iv) a change in the type of travels towards more sustainable modes of transport.In general, the recommendations for energy efficiency in transport are mainly focused on the first two priorities on the list, while the portfolios of policies —instrumental to the needs of the countries— should use trans-sectoral and multi-dimensional approaches, such as public transport planning and land use. In ECLAC, we consider that the time has come to provide Latin American and Caribbean countries with a deeper understanding and a more strategic vision (and adapted to the realities of the region) on these issues; in this sense, we hope that this document will help countries to improve and further expand their portfolios of energy efficiency policies in the transport sector, in order to achieve the ambitious goals of energy efficiency, needed to ensure a sustainable energy future.
    Date: 2014–10
  20. By: Achim Hagen (Carl von Ossietzky University Oldenburg, Germany); Klaus Eisenack (Carl von Ossietzky University Oldenburg, Germany)
    Abstract: We investigate whether global cooperation for emission abatement can be improved if asymmetric countries can sign different parallel environmental agreements. The analysis assumes a two-stage game theoretical model. Conditions for self-enforcing sets of agreements and the resulting total emission abatement are determined. We allow for multiple coalitions with multiple types of asymmetric countries. We then analyze the effect of multiple coalitions for the case of increasing marginal costs of abatement as well as for decreasing marginal benefits of abatement more generally. The results are sensitive to the assumptions on the benefits from abatement. For constant marginal benefits, the possibility of multiple agreements increases the number of cooperating countries and total abatement (compared to the standard case with a single agreement). For decreasing marginal benefits, total emissions are independent of the number of admitted agreements. The paper thus contributes to the emerging discussion on the scope and limits of climate clubs.
    Keywords: Multiple International Environmental Agreements, Coalition Formation
    JEL: Q54 C72
    Date: 2015–06
  21. By: Erin Baker (University of Massachusetts Amherst, Amherst, MA, United States); Valentina Bosetti (Fondazione Eni Enrico Mattei and Bocconi University, Italy); Laura Diaz Anadon (Harvard University, Cambridge, MA, United States); Max Henrion (Lumina Decision Systems, Los Gatos, CA, United States); Lara Aleluia Reis (Fondazione Eni Enrico Mattei, Italy)
    Abstract: In this paper we standardize, compare, and aggregate results from thirteen surveys of technology experts, performed over a period of five years using a range of different methodologies, but all aiming at eliciting expert judgment on the future cost of five key energy technologies and how future costs might be influenced by public R&D investments. To enable researchers and policy makers to use the wealth of collective knowledge obtained through these expert elicitations we develop and present a set of assumptions to harmonize them. We also aggregate expert estimates within each study and across studies to facilitate the comparison. The analysis showed that, as expected, technology costs are expected to go down by 2030 with increasing levels of R&D investments, but that there is not a high level of agreement between individual experts or between studies regarding the technology areas that would benefit the most from R&D investments. This indicates that further study of prospective cost data may be useful to further inform R&D investments. We also found that the contributions of additional studies to the variance of costs in one technology area differed by technology area, suggesting that (barring new information about the downsides of particular forms of elicitations) there may be value in not only including a diverse and relatively large group of experts, but also in using different methods to collect estimates.
    Keywords: Expert Elicitation, Energy Technology Cost, R&D Investments
    JEL: O30 O32 Q40 Q55
    Date: 2015–05
  22. By: Jozef Barunik (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Pod Vodarenskou Vezi 4, 182 00, Prague, Czech Republic); Barbora Malinska (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: The paper contributes to the rare literature modeling term structure of crude oil markets. We explain term structure of crude oil prices using dynamic Nelson-Siegel model, and propose to forecast them with the generalized regression framework based on neural networks. The newly proposed framework is empirically tested on 24 years of crude oil futures prices covering several important recessions and crisis periods. We find 1-month, 3-month, 6-month and 12-month-ahead forecasts obtained from focused time-delay neural network to be significantly more accurate than forecasts from other benchmark models. The proposed forecasting strategy produces the lowest errors across all times to maturity.
    Keywords: term structure, Nelson-Siegel model, dynamic neural networks, crude oil futures
    JEL: C14 C32 C45 G02 G17
    Date: 2015–11
  23. By: Jussi Lintunen (Natural Resources Institute Finland); Olli-Pekka Kuusela (Natural Resources Institute Finland)
    Abstract: We examine the optimal management of emission permit markets when banking but not borrowing of permits is allowed. The regulator maximizes expected social welfare through an optimal allocation rule in an infinite horizon setting. The policy is second-best as the emission cap is set before the uncertainty about the current state of the economy is resolved. In this setting, the role of banking is to decrease the regulator’s risk as it generates an endogenous price floor in the permit markets. We show that the regulator’s optimal policy adjusts the emissions cap irrespective of the existing number of permits in the bank, with the implication that the regulator neutralizes the effect of the existing bank on future permit prices. We derive the optimality conditions for the second-best emission cap with banking and solve the model analytically in the case of IID shocks. Our results show that the discount factor together with the slopes of the marginal damages and benefits determine the welfare gains from allowing baking of permits. Finally, to address the current state of the EU Emission Trading Scheme (EU ETS) and guide the design of future permit markets, we solve the model numerically with persistent shock process and show that the optimal emission cap is positively correlated with business cycles, meaning that during downturns the regulator should tighten the cap. The expected emissions and permit prices also correlate positively with economic activity
    Keywords: Cap and Trade, Climate Change, Business Cycle, Second Best, Prices vs. Quantities
    JEL: E32 Q54 Q58
    Date: 2015–05
  24. By: Su-Mei Chen; Ling-Yun He
    Abstract: Taking environmental tax rate as given, is there an optimal allocation of tax revenues to benefit economic variables? This paper analyzes this issue in an overlapping-generations model with the pollution-related health damage. It finds the optimal allocations towards pollution abatement and labor income to maximize the steady-state lifetime welfare and per-worker output, respectively. Moreover, a greater shift towards labor income might enhance steady-state welfare while reducing per-worker output.
    Date: 2015–12
  25. By: Manfred Hafner (Associate Researcher, FEEM); Simone Tagliapietra (Senior Researcher, FEEM)
    Abstract: Over the last decade decarbonisation has become a key priority for the EU. However, on the contrary of renewable energy or energy efficiency, the role of gas in this process has never been clearly defined. This uncertainty opens a wide debate on the future role of gas in the EU energy system, particularly vis-à-vis the progressively stronger role of renewables in the EU energy mix. This paper tackles this issue with the aim to explore what role gas might play in making the EU decarbonisation path more balanced and secure up to 2030 and beyond.
    Keywords: Gas, Decarbonisation, EU Energy Policy
    JEL: Q40 Q42 Q48
    Date: 2015–10
  26. By: W. A. Brock (Department of Economics, University of Wisconsin, and Department of Economics, University of Missouri, Columbia, USA); A. Xepapadeas (Department of International and European Economic Studies, Athens University of Economics and Business, Greece)
    Abstract: Human economies and ecosystems form a coupled system coevolving in time and space, since human economies use ecosystems services and at the same time affect ecosystems through their production and consumption activities. The study of the interactions between human economies and ecosystems is fundamental for the efficient use of natural resources and the protection of the environment. This necessitates the development and use of models capable of tracing the main interactions, links and feedbacks. In developing this chapter, our objective was to focus on a segment of rapidly developing literature on coupled ecological/economic models with an emphasis on climate change. The advantage of this approach is that it introduces the reader to a very important current research topic, but it also allows, by using climate as the reference ecosystem, the exploration of new modeling approaches which are relevant and useful for the modeling of other types of coupled ecological/economic systems. These include modeling of deep structural uncertainty by using robust control methods, exploring modeling through cumulative carbon budgeting, studying spatial transport phenomena and spatial aspects in economic/ecological modelling.
    Keywords: Coupled Ecological/Economic Models, Climate Change, Deep Uncertainty, Robust Control, Cumulative Carbon Budgeting, Energy Balance Climate Models, spatial Aspects in Ecological/Economic Modeling
    JEL: Q20 Q40 Q54 Q57
    Date: 2015–07
  27. By: Wei Jin (School of Public Policy, Zhejiang University, Hangzhou, China); ZhongXiang Zhang (College of Management and Economics, Tianjin University, Tianjin, China)
    Abstract: In creating a level playing field that facilitates the deployment of renewable energy technology (RET), the traditional energy policy regime based on eliminating RET’s cost gaps versus fossil energy technology (FET) may be not sufficient. Building on an economic model of energy technology adoption that features network externality, this paper takes an explicit account of the potential importance of network externality in the design of RET adoption policies. We argue that as incumbent FET has established pervasive deployment and installed base advantages within the existing energy production, distribution and service network, it would create a network externality mechanism that makes it difficult to dislodge the dominant FET-based technological regime, leading to an inertia against the adoption of newly emerging RET even if energy policy regulations have been put in place to eliminate RET’s cost disadvantage. We hence propose that a reformulation of RET policy paradigm should consider extending the traditional scheme centring on eliminating cost gap to a new one that corrects for both cost and network externality gaps
    Keywords: Renewable Energy Deployment, Energy Technology Adoption, Network Externality, Climate Technology Policies
    JEL: Q41 Q42 Q48 Q54 Q55 Q58 H23 O13
    Date: 2015–09
  28. By: Yue-Jun Zhang; Ting Yao; Ling-Yun He
    Abstract: In order to obtain a reasonable and reliable forecast method for crude oil price volatility, this paper evaluates the forecast performance of single-regime GARCH models (including the standard linear GARCH model and the nonlinear GJR-GARCH and EGARCH models) and the two-regime Markov Regime Switching GARCH (MRS-GARCH) model for crude oil price volatility at different data frequencies and time horizons. The results indicate that, first, the two-regime MRS-GARCH model beats other three single-regime GARCH type models in in-sample data estimation under most evaluation criteria, although it appears inferior under a few of other evaluation criteria. Second, the two-regime MRS-GARCH model overall provides more accurate volatility forecast for daily data but this superiority dies way for weekly and monthly data. Third, among the three single-regime GARCH type models, the volatility forecast of the nonlinear GARCH models exhibit greater accuracy than the linear GARCH model for daily data at longer time horizons. Finally, the linear single-regime GARCH model overall performs better than other three nonlinear GARCH type models in Value-at-Risk (VaR) forecast.
    Date: 2015–12
  29. By: ZhongXiang Zhang (College of Management and Economics, Tianjin University and School of Economics, Fudan University, China)
    Abstract: The Chinese central government has approved the seven pilot carbon trading schemes. These seven pilot regions are deliberately selected to be at varying stages of development and are given considerable leeway to design their own schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the key common and varying features of these carbon trading pilots and their first-year performance, draws the lessons learned, discusses the potential pathways for evolution of regional pilot carbon trading schemes into a nationwide carbon trading scheme, and raises fundamental issues that must be addressed in order to make such an emissions trading scheme to work reliably and effectively and with an increasingly expanded coverage and scope.
    Keywords: Pilot Carbon Trading Schemes, Environmental Taxes, Compliance, Carbon Offsets, Energy Prices, China
    JEL: H23 O13 P28 Q43 Q48 Q52 Q54 Q58
    Date: 2015–04
  30. By: Jan Witajewski-Baltvilks (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC)); Elena Verdolini (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC)); Massimo Tavoni (Fondazione Eni Enrico Mattei (FEEM), Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) and Politecnico di Milano)
    Abstract: This paper aims at improving the application of the learning curve, a popular tool used for forecasting future costs of renewable technologies in integrated assessment models (IAMs). First, we formally discuss under what assumptions the traditional (OLS) estimates of the learning curve can deliver meaningful predictions in IAMs. We argue that the most problematic of them is the absence of any effect of technology cost on its demand (reverse causality). Next, we show that this assumption can be relaxed by modifying the traditional econometric method used to estimate the learning curve. The new estimation approach presented in this paper is robust to the reverse causality problem but preserves the reduced form character of the learning curve. Finally, we provide new estimates of learning curves for wind turbines and PV technologies which are tailored for use in IAMs. Our results suggest that the learning rate should be revised downward for wind power, but possibly upward for solar PV.
    Keywords: Learning Curve, Renewable Technologies, Integrated Assessment Models
    JEL: Q42 Q55 C26
    Date: 2015–07
  31. By: H. Pollitt; J. -F. Mercure
    Abstract: This paper outlines a critical gap in the assessment methodology used to estimate the macroeconomic costs and benefits of climate policy. It shows that the vast majority of models used for assessing climate policy use assumptions about the financial system that sit at odds with the observed reality. In particular, the models' assumptions lead to `crowding out' of capital, which cause them to show negative impacts from climate policy in virtually all cases. We compare this approach with that of the E3ME model, which follows non-equilibrium economic theory and adopts a more empirical approach. While the non-equilibrium model also has limitations, its treatment of the financial system is more consistent with reality and it shows that green investment need not crowd out investment in other parts of the economy -- and may therefore offer an economic stimulus. The implication of this finding is that standard CGE models consistently over-estimate the costs of climate policy in terms of GDP and welfare, potentially by a substantial amount. These findings overly restrict the range of possible emission pathways accessible using climate policy from the viewpoint of the decision-maker, and may also lead to misleading information used for policy making. Improvements in both modelling approaches should be sought with some urgency -- both to provide a better assessment of potential climate policy and to improve understanding of the dynamics of the global financial system more generally.
    Date: 2015–12
  32. By: Luca Lambertini (University of Bologna, Italy); Joanna Poyago-Theotoky (La Trobe University, Australia); Alessandro Tampieri (University of Luxembourg, Luxembourg)
    Abstract: We examine the relationship between competition and innovation in an industry where production is polluting and R&D aims to reduce emissions ("green" innovation). We present an n-firm oligopoly where firms compete in quantities and decide their investment in "green" R&D. When environmental taxation is exogenous, aggregate R&D investment always increases with the number of firms in the industry. Next we analyse the case where the emission tax is set endogenously by a regulator (committed or time-consistent) with the aim to maximise social welfare. We show that an inverted-U relationship exists between aggregate R&D and industry size under reasonable conditions, and is driven by the presence of R&D spillovers.
    Keywords: "Green" R&D, R&D Spillovers, Emission Taxation, Time-Consistent Emission Tax, Pre-Commited Emission Tax
    JEL: Q55 Q56 O30 L13
    Date: 2015–08
  33. By: Johannes Emmerling (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC))
    Abstract: This paper studies the optimal extraction of a non-renewable resource under uncertainty using a discrete-time approach in the spirit of the literature on precautionary savings. We find that boundedness of the utility function, in particular the assumption about U(0), gives very different results in the two settings which are often considered as equivalent. For a bounded utility function, we show that in a standard two-period setting, prudence is no longer sufficient to ensure a more conservationist extraction policy than under certainty. If on the other hand we increase the number of periods to infinity, we find that prudence is not anymore not anymore necessary to induce a more conservationist extraction policy and risk aversion is sufficient. These results highlight the importance of the specification of the utility function and its behavior at the point of origin.
    Keywords: Expected Utility, Non-Renewable Resource, Prudence, Uncertainty
    JEL: Q30 D81
    Date: 2015–05
  34. By: Manfred Hafner (Fondazione Eni Enrico Mattei); Simone Tagliapietra (Fondazione Eni Enrico Mattei)
    Abstract: On December 1, 2014 Russian President Vladimir Putin surprised the energy world by announcing, during a state visit to Turkey, the demise of the long-planned South Stream pipeline project and the launch of a new project to evacuate Russian gas to Turkey and South-East Europe bypassing Ukraine: Turkish Stream. Since 2007 South Stream has represented a key element of the discussions concerning the EU security of gas supply and the overall EU-Russia relations. For this reason, the unexpected demise of South Stream and the quick rise of Turkish Stream need to be carefully evaluated both under the economic and geopolitical perspectives. This paper will first provide an overview of the Russian gas export strategy to Europe in order to entrench the current discussion on the major long-term trends concerning the issue. On the basis of this analysis the paper will then discuss the future prospects of Turkish Stream, arguing that the EU could seize this new reality to launch the formation of a fluid, reliable and interconnected South-Eastern European regional gas hub.
    Keywords: Turkish Stream, South Stream, Energy Security, Gas Markets, EU Energy Union
    JEL: Q40 Q42 Q48
    Date: 2015–05
  35. By: Syed Abul, Basher; Alfred A, Haug; Perry, Sadorsky
    Abstract: This paper uses Markov-switching models to investigate the impact of oil shocks on real exchange rates for a sample of oil exporting and oil importing countries. This is an important topic to study because an oil shock can affect a country’s terms of trade which can affect its competitiveness. We detect significant exchange rate appreciation pressures in oil exporting economies after oil demand shocks. We find limited evidence that oil supply shocks affect exchange rates. Global economic demand shocks affect exchange rates in both oil exporting and importing countries, though there is no systematic pattern of appreciating and depreciating real exchange rates. The results lend support to the presence of regime switching for the effects of oil shocks on real exchange rates.
    Keywords: Markov-switching; exchange rates; oil shocks.
    JEL: F31 G15 Q43
    Date: 2015–12–06
  36. By: Roberto Iacono (Sør-Trøndelag University College (HiST), Department of Applied Social Science)
    Abstract: This paper contributes to the growing political economy literature of within-country natural resources management, by proposing a new resource policy for the oil-rich southern Italian region of Basilicata. The policy proposal is to establish a (regional) wealth fund in which all the royalty revenues from non-renewable natural resource exploitation in Basilicata would be stored and fully converted into low-risk financial assets. The scope is to give priority to long-run investments as to better exploit revenues from large-scale extraction of natural capital. Establishing a wealth fund at the regional sub-national level is a novel approach that can be applied to other resource-rich regions in the world. I label the fund as the Basilicata Wealth Fund (BWF). The BWF would be a regionally owned investment fund, however independently administered from national authorities (for instance, as an independent legal entity under the jurisdiction of the Bank of Italy). In addition, the paper posits a transparent and clear-cut spending fiscal rule in order to let regional authorities use the resource revenues to finance economic policy. The clear advantage from the BWF would be the stronger focus on long-run economic development and the higher accountability, hence avoiding misuse of resource revenues for myopic fiscal spending.
    Keywords: Exhaustible Natural Resources, Sovereign Wealth Fund, Regional Economy, Long-run Economic Development, Basilicata
    JEL: O13 Q32 R11 R58
    Date: 2015–10
  37. By: Yannis Petrohilos-Andrianos; Anastasios Xepapadeas
    Abstract: We study the evolution of compliance of firms in a setup of taxable emissions. Firms can either choose to comply with the emissions rule or violate it. Violation is considered either as a single option or is let to vary between low and high emissions, inducing a different level of fine if the firm gets caught. The firms can switch between strategies according to an evolutionary proportional rule and the conditions for stability are investigated accounting for two distinct types of probability of inspection.
    Keywords: Emission taxes, compliance, replicator dynamics.
    Date: 2015–12–07
  38. By: Simon Levin (Department of Ecology and Evolutionary Biology, Princeton University, Beijer Institute of Ecological Economics and RFF University); A. Xepapadeas (Athens University of Economics and Business, Department of International and European Economic Studies and Beijer Institute of Ecological Economics)
    Abstract: We seek to explain the emergence of spatial heterogeneity regarding development and pollution on the basis of interactions associated with the movement of capital and polluting activities from one economy to another. We use a simple dynamical model describing capital accumulation along the lines of a ?fixed-savings-ratio Solow-type model capable of producing endogenous growth and convergence behavior, and pollution accumulation in each country with pollution diffusion between countries or regions. The basic mechanism underlying the movements of capital across space is the quest for locations where the marginal productivity of capital is relatively higher than the productivity at the location of origin. The notion that capital moves to locations of relatively higher productivity but not necessarily from locations of high concentration to locations of low concentration, does not face difficulties associated with the Lucas paradox. We show that, for a wide range of capital and pollution rates of flow, spatial heterogeneity emerges even between two economies with identical fundamental structures. These results can be interpreted as suggesting that the neoclassical convergence hypothesis might not hold under differential rates of fl?ow of capital and polluting activities among countries of the same fundamental structure.
    Keywords: Transboundary Flows, Capital, Pollution, Diffusion, Turing Instability, Spatial Heterogeneity
    JEL: O44 R12 Q52 C65
    Date: 2015–07
  39. By: Thomas Longden (Institute of Transport and Logistics Studies - The University of Sydney Business School Faculty of Business and Economics - Macquarie University)
    Abstract: Previous studies have found an inverse (or negative) correlation between urban population density and per capita emissions from land transport. In contrast, this paper finds a positive relationship between per capita CO2 emissions from transport and population density using a dataset of over 200 cities from 28 countries. This positive relationship holds when a range of variables are accounted for and the specification of the regression analysis captures the distinction between country level differences, high/low emission intensity or city specific fixed effects. Separating the cities into two groups based on the clustering that occurs on either side of a crucial point of three tonnes of CO2 emissions per capita highlights the peculiarity of the higher emission intensity of North American cities. Rather than finding a consistent relationship across all cities, this paper finds that cities in North America are distinct from those located in other countries and that the estimated relationship between urban population density and emissions from transport is different across the two groups of countries. The results of this paper have consequences for policy prescriptions that are related to previous results that find that a reduction in per capita emissions tends to occur with an increase population density.
    Keywords: Transport, CO2 Emissions, Population Density
    JEL: R40 Q54 Q56
    Date: 2015–05
  40. By: Erin Baker (Department of Mechanical and Industrial Engineering, College of Engineering, University of Massachusetts, Amherst, MA); Olaitan Olaleye (Department of Mechanical and Industrial Engineering, College of Engineering, University of Massachusetts, Amherst, MA); Lara Aleluia Reis (Centro Euro-Mediterraneo per i Cambiamenti Climatici, Fondazione Eni Enrico Mattei (FEEM))
    Abstract: In this paper we provide an overview of decision frameworks aimed at crafting an energy technology Research & Development portfolio, based on the results of three large expert elicitation studies and a large scale energy-economic model. We introduce importance sampling as a technique for integrating elicitation data and large IAMs into decision making under uncertainty models. We show that it is important to include both parts of this equation – the prospects for technological advancement and the interactions of the technologies in and with the economy. We find that investment in energy technology R&D is important even in the absence of climate policy. We illustrate the value of considering dynamic two-stage sequential decision models under uncertainty for identifying alternatives with option value. Finally, we consider two frameworks that incorporate ambiguity aversion. We suggest that these results may be best used to guide future research aimed at improving the set of elicitation data.
    Keywords: Decision Making Under Uncertainty, Climate Change, Stabilization Pathways, Energy technology, Ambiguity Aversion
    JEL: Q42
    Date: 2015–05
  41. By: Niaz Bashiri Behmiri (Fondazione Eni Enrico Mattei (FEEM)); Matteo Manera (University of Milan-Bicocca and FEEM)
    Abstract: This study investigates the price volatility of metals, using the GARCH and GJR models. First we examine the persistence of volatility and the leverage effect across metal markets taking into account the presence of outliers, and second we estimate the effects of oil price shocks on the price volatility of metals, allowing for the asymmetric responses. We use daily spot prices for the selected metals, including aluminum, copper, lead, nickel, tin, zinc, gold, silver, palladium and platinum. The main findings indicate that, returns show a high degree of volatility persistence before and after correcting outliers, outliers bias the parameters estimation of the GARCH-type models, and removing outliers improves the performance of models in capturing volatility. However in a comparison, Student-t distribution outperforms the approach of correcting outliers in capturing volatility. Moreover, we find the existence of inverse leverage effect for seven metals, the leverage effect for copper and no leverage effect for nickel and palladium. Finally, price volatility of metals differently reacts to oil price shocks and there is an asymmetric reaction of volatility to oil price shocks for seven metals.
    Keywords: Metals, Commodities, Volatility, Oil Price, Outliers
    JEL: G13 Q4 C1
    Date: 2015–09
  42. By: Arroyo, Andrés; Perdriel, Andrea (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: El presente estudio tiene por objeto relacionar la problemática del desarrollo sostenible con la explotación de gas natural no convencional a nivel general y en específico para los países seleccionados
    Date: 2015–01
  43. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: The present document analyses the progress of national programmes and activities associated with the promotion and development of energy efficiency between the years 2008 and 2013 in the 27 Latin American and the Caribbean member countries of the Latin American Energy Organization (OLADE). The new study is based on the original report —prepared by ECLAC and OLADE between July 2008 and July 20091— taking into consideration any progress made over the past four to five years, an interval long enough to justify an update both of the current status of energy efficiency and its prospects, developments and challenges in the Region of Latin America and the Caribbean.
    Date: 2014–02
  44. By: Flores, José Luis (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Las actividades económicas generan, de forma colateral, emisiones de gases de efecto invernadero (GEI) que conforman el fenómeno del cambio climático. En este sentido, la teoría económica sugiere diversas soluciones de política pública en donde destacan el uso de impuestos a las emisiones de CO2, la conformación de un mercado de emisiones a través de la creación de un sistema de permisos comercializables o el uso de regulaciones especificas que limita las emisiones de gases de efecto invernadero . Cada una de estas opciones tiene desde luego ventajas y desventajas. En este contexto, existen diversas propuestas que buscan apuntalar el uso de algún tipo de impuesto al carbono; en particular en la modalidad de un impuesto al carbono en referencia a las importaciones de los países desarrollados. Este mecanismo gravaría a las importaciones hacia los países desarrollados atendiendo al contenido de carbono de los productos. En este sentido, resulta relevante identificar la viabilidad y consecuencias potenciales de la imposición de este tipo de impuesto en América Latina.
    Date: 2014–12
  45. By: Ketter, W.; Peters, M.; Collins, J.; Gupta, A.
    Abstract: Wicked problems like sustainable energy and financial market stability are societal challenges that arise from complex socio-technical systems in which numerous social, economic, political, and technical factors interact. Understanding and mitigating them requires research methods that scale beyond the traditional areas of inquiry of Information Systems (IS) “individuals, organizations, and markets” and that deliver solutions in addition to insights. We describe an approach to address these challenges through Competitive Benchmarking (CB), a novel research method that helps interdisciplinary research communities to tackle complex challenges of societal scale by using different types of data from a variety of sources such as usage data from customers, production patterns from producers, public policy and regulatory constraints, etc. for a given instantiation. Further, the CB platform generates data that can be used to improve operational strategies and judge the effectiveness of regulatory regimes and policies. We describe our experience applying CB to the sustainable energy challenge in the Power Trading Agent Competition (Power TAC) in which more than a dozen research groups from around the world jointly devise, benchmark, and improve IS-based solutions.
    Keywords: benchmarking, big data analytics, design science, energy information services, research competitions, smart grids, sustainability, virtual worlds
    Date: 2015–12–02
  46. By: Sabine Fuss (Mercator Research Institute on Global Commons and Climate Change); Claudine Chen (Mercator Research Institute on Global Commons and Climate Change); Michael Jakob (Mercator Research Institute on Global Commons and Climate Change and Potsdam Institute for Climate Change Impact Research); Annika Marxen (Technical University Berlin and Mercator Research Institute on Global Commons and Climate Change); Narasimha D. Rao (International Institute of Systems Analysis); Ottmar Edenhofer (Mercator Research Institute on Global Commons and Climate Change, Technical University Berlin and Potsdam Institute for Climate Change Impact Research)
    Abstract: It is often argued that, ethically, resource rents should accrue to all citizens. Yet in reality the rents from exploiting national resources are often concentrated in the hands of a few. If resource rents were to be taxed, on the other hand, substantial amounts of public money could be raised and used to cover the population’s infrastructure needs, such as access to electricity, water, sanitation, communication technology and roads, which all play important roles in a nation’s economic development process. Here, we examine to what extent existing resource rents could be used to provide universal access to these infrastructures.
    Keywords: Resource Rents, Infrastructure, Economic Development
    JEL: H54
    Date: 2015–10
  47. By: ZhongXiang Zhang (College of Management and Economics, Tianjin University)
    Abstract: China has realized that for its own sake and from the international community’s perspective, it cannot afford to continue along the conventional path of encouraging economic growth at the expense of the environment. Accordingly, the country has placed ecological goals at the same level of priority as policies on economic, political, cultural and social development. Specifically, to meet the grand goal involves not only capping China’s nationwide coal consumption to let it peak before 2020 and carbon emissions peak around 2030, but also putting in place a variety of flagship programs and initiatives, prices and policies. This paper argues that the 2030 carbon emissions peak goal is ambitious but achievable and concludes by arguing why China’s anti-pollution outcomes this time might be different from the previous ones.
    Keywords: Low-Carbon Economy, Carbon Emissions Peaks, Coal Consumption, Carbon Pricing, Energy Prices, Resource Tax Reform, Renewable Energy, China
    JEL: H23 P28 Q42 Q43 Q48 Q53 Q54 Q58
    Date: 2015–10
  48. By: Thomas Sattich (Vrije Universiteit Brussel, Belgium); Inga Ydersbond (University of Oslo, Norway); Daniel Scholten,
    Keywords: Decarbonisation, Electricity generation, Energy policy, European Union, Interconnectors, Member States, Political negotiations, Policy making, Power grid, Power transmission system, Power pools, Power system, Regulatory framework, Renewable energy
    JEL: O13 Q4 Q42 Q48
    Date: 2015–06
  49. By: Bustillo, Inés; Artecona, Raquel; Makhoul, Isabel; Perrotti, Daniel E. (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: En la última década, la producción de gas y petróleo a partir de formaciones de esquisto han crecido exponencialmente en los Estados Unidos. Una historia breve de esta auténtica revolución podría fundamentarse en el hecho de que en la década de los 2000 los precios de estas fuentes energéticas subieron considerablemente, lo que habría llevado a varias empresas a reaccionar frente al nuevo costo de oportunidad e invertir en recursos que anteriormente no resultaban rentables. La anterior explicación dejaría de lado lo que fue el proceso verdaderamente enriquecedor que se llevó a cabo en connivencia entre el sector público, el sector privado, las universidades, y los centros de investigación. En este trabajo se presentan los principales vínculos que existieron entre estos actores sociales, que permitieron alcanzar un resultado exitoso en el largo plazo.
    Date: 2015–10
  50. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: The current global development style is not sustainable considering its simultaneous impact on economic, social and environmental conditions, as reflected fully in the climate change challenge. Climate change, which is being brought about essentially by anthropogenic greenhouse gas emissions, is already discernible in such phenomena as a rise in average global temperatures, alterations in precipitation patterns, rising sea levels, the shrinking cryosphere and changes in the pattern of extreme weather events (IPCC, 2013). There is evidence that the mean global temperature rose by 0.85°C over the period from 1880 to 2012 and, in the most probable scenarios, the average is projected to climb by between 1°C and 3.7°C during this century, with the increase amounting to between 1°C and 2°C by 2050. Some extreme regional scenarios predict even higher temperature rises. To date insufficient progress has been made in reducing greenhouse gas emissions in order to stabilize climate conditions, and the effects of climate change that are expected to arise during this century therefore appear to be increasingly unavoidable. The only possible solution to climate change entails a global agreement in which all countries take part.
    Date: 2014–11
  51. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Para los países de América Latina y el Caribe, el desarrollo económico con mayores niveles de eficiencia energética resulta ser un importante paso hacia el sendero de la sostenibilidad. Asumiendo una perspectiva de mediano plazo, entre los principales factores que movilizan la promoción de la eficiencia energética cabe considerar a la seguridad en el suministro de la energía, la mayor eficiencia en el gasto y el alto potencial de producir ahorros energéticos, las preocupaciones por mitigar los impactos ambientales fruto de las emisiones de gases de efecto invernadero (GEI), lo que obviamente incluye al fenómeno del cambio climático y, en los países en desarrollo, las limitaciones que pudieran generarse en relación a la inversión orientada expandir la oferta energética de los mismos. En los países de América Latina y el Caribe, la calidad de las estadísticas e indicadores de desempeño que permiten cuantificar los resultados de los programas nacionales de eficiencia energética ha sido insuficiente. Para superar esta carencia, la CEPAL ha articulado el Programa Regional BIEE (Base de Indicadores de Eficiencia Energética para América Latina y el Caribe). Siguiendo el proceso técnico-político y la lógica de funcionamiento del programa de análisis y medición de la eficiencia energética más exitoso del mundo, el Programa ODYSSEE desarrollado por la Comisión Europea y gestionado por la agencia Francesa: ADEME (Agence de l'Environnement et de la Maîtrise de l'Energie), y con la expectativa de producir un conjunto de indicadores específicos metodológicamente consistentes, que permitan medir la evolución de los programas nacionales de eficiencia energética, analizar los resultados en el tiempo y - como consecuencia - tomar las decisiones de políticas que correspondan, desde la CEPAL se ha encarado la labor de capacitar y coordinar la acción de los países de la región con miras a desarrollar una herramienta común que facilite esta labor.
    Date: 2014–10
  52. By: Ginzo, Héctor Daniel (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: El sector de uso del suelo,cambio en el uso del suelo y silvicultura (USCUSS) tiene una particular relevancia para la evolución futura de las emisiones netas de gases de efecto invernadero (GEI) de la Argentina por dos motivos: hay superficie apta para plantar montes destinados a la captura de CO2 y hay una decreciente superficie de montes nativos como consecuencia de su talado.. En el presente documento se desarrollan tres escenarios —(referencial (ER), de limitación hídrica (LH) a partir de 2050 y de adaptación genética (AD) a partir de 2030)— para una plantación de dos especies hipotéticas: una destinada a generar títulos de reducción de emisiones y la otra especie para para proveer una renta con la cual sufragar los costos de implantación y gestión de la plantación de la especie destinada a la acumulación de carbono.
    Date: 2015–10
  53. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: The two main forces affecting economic development are the ongoing technological revolution and the challenge of sustainability. Technological change is altering patterns of production, consumption and behaviour in societies; at the same time, it is becoming increasingly difficult to ensure the sustainability of these new patterns because of the constraints resulting from the negative externalities generated by economic growth and, in many cases, by technical progress itself. Reorienting innovation towards reducing or, if possible, reversing the effects of these externalities could create the conditions for synergies between the two processes. Views on the subject vary widely: while some maintain that these synergies can easily be created if growth follows an environmentally friendly model, summarized in the concept of green growth, others argue that production and consumption patterns are changing too slowly and that any technological fix will come too late. These considerations apply to hard technologies, essentially those used in production. The present document explores the opportunities being opened up by new ones, basically information and communication technologies, in terms of increasing the effectiveness (outcomes) and efficiency (relative costs) of soft technologies that can improve the way environmental issues are handled in business management and in public policy formulation and implementation.
    Date: 2014–10
  54. By: - (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Este documento consolida os resultados de um extenso trabalho que vem sendo realizado pela EPE há três anos e que tem por objetivos principais o desenvolvimento e o preenchimento de um banco de indicadores de eficiência energética, para fins de monitoramento do desempenho de eficiência energética no Brasil.
    Date: 2015–07
  55. By: Ferro, Gustavo; Lentini, Emilio (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Este documento analiza el consumo de energía en el sector de agua potable y alcantarillado y propone políticas regulatorias para mejorar la eficiencia energética de los prestadores de estos servicios en América Latina y el Caribe. Está dirigido a las agencias de regulación sectorial, así como todas las demás partes interesadas del sector privado y público.
    Date: 2015–01

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