nep-ene New Economics Papers
on Energy Economics
Issue of 2016‒02‒04
33 papers chosen by
Roger Fouquet
London School of Economics

  1. Driving Forces of CO2 Emissions in Emerging Countries: LMDI Decomposition Analysis on China and India’s Residential Sector By Yeongjun Yeo; Dongnyok Shim; Jeong-Dong Lee; Jorn Altmann
  2. Sustainable Energy Access Planning: A Framework By Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB)
  3. Prospects for enhancing energy security in Asia and the Pacific through regional trade By Joong-Wan Cho; Rajan Sudesh Ratna; Vivian Leung Shi Min
  4. Rethinking the security of the European Union’s gas supply By Simone Tagliapietra; Georg Zachmann
  5. Volatility and a Century of Energy Markets Dynamics By Apostolos Serletis; Libo Xu
  6. Changes in the relationship between the financial and real sector and the present economic financial crisis: study of energy sector and market By Franco Ruzzenenti
  7. Energy Efficiency Developments and Potential Energy Savings in the Greater Mekong Subregion By Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB)
  8. Mitigation and adaptation are not enough: turning to emissions reduction abroad By Alain Ayong Le Kama; Aude Pommeret
  9. Green to Gold: barriers to and driving forces for biogas investments in Ukrainian agribusiness sector By Romets, Dmytro; Decker, Thomas; Menrad, Klaus
  10. Eciency Snakes and Energy Ladders: A (meta-)frontier demand analysis of electricity consumption eciency in Chinese households By David C Broadstock; Jiajia Li; Dayong Zhang
  11. Efficient Promotion of Renewable Energy with Reverse Auctions By Sebastian Schäfer; Lisa Schulten
  12. Do Smart Grids Boost Investment in Photovoltaics? The Prosumer Investment Decision By Chiara D'Alpaos; Marina Bertolini; Michele Moretto
  13. The role of oil prices and monetary policy in the Norwegian economy since the 1980s By Q. Farooq Akram; Haroon Mumtaz
  14. Dominion Virginia Power and Clean Power Plan Costs: A brief review of the Dominion Power 2015 Integrated Resource Plan compliance cost estimates By William M. Shobe
  15. Distributional Implications of Geoengineering By Richard S.J. Tol
  16. International Gas Projects of Russia in the Context of a Changing Economic Environment and Paradigm By Nataliya S. Karpova
  17. An examination of the relationship between biodiesel and soybean oil prices using an asset pricing model By Miguel Carriquiry
  18. Carbon tax, pollution and spatial location of heterogeneous firms By Nelly Exbrayat; Stéphane Riou; Skerdilajda Zanaj
  19. Regional Oil Extraction and Consumption: A simple production model for the next 35 years Part I By Michael Dittmar
  20. Household heterogeneity, aggregation, and the distributional impacts of environmental taxes By Sebastian Rausch; Giacomo Schwarz
  21. Oil prices and global factor macroeconomic variables By Ratti, Ronald; Vespignani, Joaquin
  22. Oil price forecastability and economic uncertainty By Stelios D. Bekiros; Rangan Gupta; Alessia Paccagnini
  23. Reassessing the empirical relationship between the oil price and the dollar By Virginie Coudert; Valérie Mignon
  24. Climate Change and Long-Run Discount Rates: Evidence from Real Estate By Matteo Maggiori; Stefano Giglio; Johannes Stroebel; Andreas Weber
  25. The Effect of Biofuels on the Link between Oil and Agricultural Commodity Prices: A Smooth Transition Cointegration Approach By Anthony Paris
  26. Intraday Markets for Power: Discretizing the Continuous Trading? By Karsten Neuhoff; Nolan Ritter; Aymen Salah-Abou-El-Enien; Philippe Vassilopoulos
  27. Working Paper 09-15 - Fuel excise reform in Belgium - Long term effects on the environment, traffic and public finance By Alex Van Steenbergen
  28. Non-renewable resources, extraction technology, and endogenous growth By Stuermer, Martin; Schwerhoff, Gregor
  29. Social Costs of Morbidity Impacts of Air Pollution By Alistair Hunt; Julia Ferguson; Fintan Hurley; Alison Searl
  30. Buy coal to mitigate climate damage and benefit from strategic deposit action By Thomas Eichner; Rüdiger Pethig
  31. A Simple extension of Dematerialization Theory: Incorporation of Technical Progress and the Rebound Effect By Christopher L. Magee; Tessaleno C. Devezas
  32. Millennium Challenge Corporation's Electricity Transmission and Distribution Line-Extension Activity in Tanzania: Qualitative Evaluation, Appendix D By Candace Miller; John Schurrer; Nicholas Redel; Arif Mamun; Duncan Chaplin
  33. "Eigenversorgung mit Solarstrom" - ein Treiber der Energiewende? By Nils May; Karsten Neuhoff

  1. By: Yeongjun Yeo (College of Engineering, Seoul National University); Dongnyok Shim (College of Engineering, Seoul National University); Jeong-Dong Lee (College of Engineering, Seoul National University); Jorn Altmann (College of Engineering, Seoul National University)
    Abstract: The main objective of this paper is to identify and analyze the key drivers behind changes of CO2 emissions in the residential sectors of the emerging economies, China and India. This paper also aims to draw policy implications in terms of finding challenges and opportunities to reduce residential CO2 emissions in both countries. For the analysis, we investigate to what extent changes in residential emissions are due to changes in energy emissions coefficients, energy consumption structure, energy intensity, households’ income, and population size. We decompose the changes in residential CO2 emissions in China and India into these five contributing factors from 1990 to 2011 by applying the Logarithmic Mean Divisia Index (LMDI) method. According to our results, the increase in per capita income level is the biggest contributor to the increase of residential CO2 emissions, while the energy intensity effect had the largest effect on CO2 emissions reduction in the residential sectors in both countries. This implies that investments for energy savings, technological improvements, and energy efficiency policies were effective in mitigating CO2 emissions. It is also found that the change in CO2 emission coefficients for fuels, which is the ratio of CO2 emissions arising from consumption of fuels to the consumption level slowed down the increase of residential emissions. In addition, results demonstrate that changes in the population and energy consumption structure drove the increase in CO2 emissions.
    Keywords: CO2 Emissions, Emerging Economy, Residential Sector, Logarithmic Mean Divisia Index (LMDI) Method.
    JEL: C02 C15 C43 C65 O32 O33 Q01 Q48 Q55 Q56 R11 R22
    Date: 2015–12
  2. By: Asian Development Bank (ADB); Asian Development Bank (ADB) (Sustainable Development and Climate Change Department, ADB); Asian Development Bank (ADB) (Sustainable Development and Climate Change Department, ADB); Asian Development Bank (ADB)
    Abstract: Sustainable energy access planning, unlike traditional energy planning, gives primary importance to the energy demand of both poor and nonpoor households, the need to make cleaner energy services more affordable to the poor, the costs of both supply-side and demand-side access options, and the sustainability of technology and resource options. As such, this type of energy planning contributes to low carbon development and achievement of Sustainable Energy for All objectives. This report presents a framework for sustainable energy access planning that planners and policy makers can use to design cost-effective clean energy supply systems that both poor and nonpoor can sustainably access to meet at least the minimum amount of energy for their basic needs. The report discusses the multidimensional assessments involved in this type of planning, as well as their interlinkages and implementation issues.
    Keywords: sustainable energy access, clean energy, energy for all, energy poverty, energy planning, energy costs, Nepal
    Date: 2015–06
  3. By: Joong-Wan Cho (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)); Rajan Sudesh Ratna (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)); Vivian Leung Shi Min (United Nations Economic and Social Commission for Asia and the Pacific (ESCAP))
    Abstract: Growing demand for raw materials and the expansion of the productive capacity of emerging economies have exacerbated the region’s high resource dependence, especially in energy, such as fossil fuels. A growth in energy demand, coupled with the high price volatility and dependence on fossil fuels, has made efforts for energy security more challenging than before. The Asia-Pacific region as a whole has increased its share of global commodity imports, across all sectors (minerals and metals, fuels and agriculture) over the last five years (2009 to 2013), from 26% to 30%, based on nominal values. Growth in energy demand, coupled with the increasing price volatility and dependence on fossil fuels, has made efforts for energy security more challenging than before. The Asia-Pacific economies hold vast amounts of fossil and non-fossil energy resources. As a region, it is a net exporter of coal, natural gas (through the pipeline), and electricity, but a net importer of oil and liquefied natural gas (LNG). Owing to accelerated levels of economic development, region’s demand continued to grow. This increased demand is not being met with a sufficient rise in production, leading to reduced exports and increased import demand. Despite holding vast coal and natural gas reserves, demand for fossil fuel in Asia and the Pacific is increasingly being met by imports with long term effect on its trade balance. To enhance energy security, which is essential for inclusive and sustainable growth, countries of Asia-Pacific will have to strengthen energy cooperation, build regional connectivity, and invest in adequate infrastructure. Growing import dependency coupled with emergent regionalism has certainly enhanced the prospects for regional energy cooperation and integration of the energy sector, which can enhance the possibility of regional energy security. However, due to its diverse nature, such cooperation is confined to national initiatives rather than at a pan Asia-Pacific or sub-regional levels. The paper examines the prospects for enhanced energy security through regional energy trade and integration by exploring the case of the Asia-Pacific Trade Agreement (APTA). The paper concludes by stating that regional cooperation for achieving energy security collectively is a viable alternative to traditional individual or bilateral attempts and that the Asia-Pacific Trade Agreement is an ideal vehicle for providing energy security through enhanced trade due to tariff concessions to be offered on energy products and also through expansion of its membership to the energy supplying countries.
    Keywords: energy, energy security, fossil fuels, Asia and the Pacific
    JEL: M13 M15 M21 M37 O31 O33
    Date: 2015–09
  4. By: Simone Tagliapietra; Georg Zachmann
    Abstract: Highlights The security of the European Union’s gas supplies is crucial to ensuring that supplies to households are not disrupted in freezing winters, that industry can flourish and that the EU cannot be blackmailed in vital foreign policy questions. Gas supply security should be addressed at EU level because a joint solution would be cheaper, national approaches could undermine the internal energy market and have adverse effects on other countries, and the EU Treaty explicitly calls for energy solidarity. The current focus on supply diversification and reduction of dependence on imported gas is expensive and does not constitute a systemic response. Instead of doing everything to reduce gas supplies from key suppliers, gas supply security could more effectively be safeguarded by ensuring that unused alternatives are maintained so that they can be tapped into for an indefinite period in case of supply disruption from a key supplier. This Policy Contribution outlines a market approach that could safeguard gas supply security at very low cost. The European Union would benefit from a new approach to ensure the security of its gas supply, not least because gas imports are likely to increase. The EU’s existing gas infrastructure is sufficient to buffer a major supply shock. Therefore, instead of focusing on expensive policies to stimulate supply diversification and to reduce of dependence on imports, the aim should be to find a way to maintain an adequate level of flexibility and make it available when needed. This could be done by creating an EU market for a gas security margin, which could be an asset for the EU in the context of the unpredictable nature of gas supplies, with countries today perceived as secure being potentially affected by supply interruptions in the future, and the need to overcome the current EU patchwork of fragmented national and technology-specific supply-security measures. The market for a gas security margin would be designed to have the lowest possible cost by relying on the cheapest flexibility options available, and by shielding the internal gas market from ad-hoc intervention. The distributive effects and the political feasibility of such approach would have to be taken into account. The EU gas market - current trends and future scenarios In the midst of the 2014 Ukraine crisis, concerns about a potential politically motivated disruption of all EU gas supplies from Russia, and especially those that pass through Ukraine, triggered a discussion on creating an Energy Union to counter this threat (Zachmann, 2014). These discussions lifted energy issues to the top of the agenda of the European Commission under its president Jean-Claude Juncker (European Commission, 2014). The high priority given to gas supplies arose because - (1) gas represents about one quarter of the EU energy mix; (2) about one third of this gas is imported from Russia; and (3) in contrast to oil or coal, it is not possible to bring large amounts of gas to where it is needed if the corresponding infrastructure is not in place (Figure 1). Figure 1 - The EU gas market - current trends Source - Bruegel on the basis of BP (2015). Note - Demand/supply difference is a result of re-exports of LNG, stock changes (eg medium-term storage, regasification terminals) and transportation losses. This implies the EU is vulnerable to a few external suppliers that might, at any moment, cut their supplies for technical or geopolitical reasons. On this point a caveat is necessary - while the EU security of gas supply debate is often exclusively concentrated on Russia and on the related fears about its geopolitical use of gas, the issue is in reality much wider because it potentially encompasses gas supplies from all suppliers, which might be interrupted for either technical or geopolitical reasons. For instance, a traditionally secure supplier as Norway might need to reduce its gas exports in the future simply because of depleting resources, or Algeria, another traditionally secure supplier, might cut its supplies in case of unpredictable regional political turbulence. Security of gas supply is therefore an issue that concerns all EU member states. The EU’s vulnerability to gas import disruptions is set to remain because, even assuming a stagnant outlook for EU gas demand, import requirements will likely grow because of rapidly declining domestic production. In the Netherlands, gas production dropped from 70 billion cubic metres (bcm) in 2010 to 56 bcm in 2014. This declining trend is set to accelerate after the production cap imposed in 2015 on Europe's largest gas field – Groningen – because of more powerful and more frequent earthquakes resulting from the extraction activities. The United Kingdom’s gas production volume declined from 57 bcm in 2010 to 37 bcm in 2014, mainly because of the rapid depletion of resources in the North Sea. According to the International Energy Agency (IEA, 2015), the EU’s import requirements will increase in all scenarios.
    Date: 2016–01
  5. By: Apostolos Serletis (University of Calgary); Libo Xu (University of Calgary)
    Abstract: How similar is the price behavior of oil, natural gas, and coal? Are there any interactions among these three fuel prices and their volatilities? Using the Yatchew and Dimitropoulos (2015) annual data for the United States, over the period from 1870 to 2014, and state-of-the-art econometric methodology, we explore for spillovers and interactions among the three energy markets. In doing so, we use a range of univariate and multivariate volatility models. The key contribution to the literature is the estimation of a trivariate BEKK model that allows for the interdependence of oil, natural gas, and coal returns and volatilities, using the longest span prices that have ever been studied before.
    Date: 2016–01–28
  6. By: Franco Ruzzenenti (University of Siena)
    Abstract: The goal of D 3.08 to which this paper contributes, is to examine whether financialisation has tended to increase price instability in international energy markets, generating ‘price bubbles’, and whether these markets have been significant transmitters of the effects of the financial crisis. The paper starts by briefly outlining the evolution of energy markets’ regulation (oil, natural gas, coal and electricity) in Europe and in OECD countries, from the late 1990 to now, with the aim of establishing whether liberalization has led to 1) price reductions, and 2) increased price (?) volatility. Empirical evidence suggest that in all energy markets, since the 2000s, prices rose dramatically and volatility increased slightly However, the most remarkable result is that in the 21st century, prices of energy commodities began to be locked to the price of oil, showing a level of correlation not seen in previous decades. A possible explanation for the synchronization of energy prices with oil price lies in the “commodity bubble” in futures markets that occurred in the second half of the 2000s. Nevertheless, according to most of the existing literature, oil markets in the long run still seem to be dominated by spot markets rather than future markets, indicating that fundamentals are pivotal in determining the price of oil. In order to test this, we performed an analysis of the dynamical Hurst exponent of two crude oil (WTI and Brent) prices, spot and futures, from the 1980s to now, on a daily basis, aimed at assessing the long memory (autocorrelation) of returns.
    Keywords: Finance; Energy Markets; Financialisation of Energy Markets, Commodity Bubble, Oil Price, Hurst Exponent, Multifractality
    JEL: C22 G10 Q43
    Date: 2015–04–01
  7. By: Asian Development Bank (ADB); Asian Development Bank (ADB) (Southeast Asia Department, ADB); Asian Development Bank (ADB) (Southeast Asia Department, ADB); Asian Development Bank (ADB)
    Abstract: This report was produced under the technical assistance project Promoting Renewable Energy, Clean Fuels, and Energy Efficiency in the Greater Mekong Subregion (TA 7679). It reports on energy efficiency targets and developments in five countries in the Greater Mekong Subregion (GMS): Cambodia, the Lao People’s Democratic Republic, Myanmar, Thailand, and Viet Nam. The GMS countries envisage substantial energy efficiency savings over the next 15 to 20 years, with overall energy efficiency savings amounting to almost 60 million tons of oil equivalent annually by 2030. Most GMS governments have established plans for reaching these targets and have implemented policy, regulatory, and program measures to lower energy intensity and achieve energy efficiency. GMS countries project that their energy needs will double or triple over the next 15 years and greater energy efficiency offers a win–win public–private sector partnership for reducing unsustainable reliance on high-carbon (coal and oil) fuels.
    Keywords: energy efficiency developments in the gms, energy efficiency, energy savings, greater mekong subregion, gms, asian development bank, cambodia, lao pdr, myanmar, thailand, viet nam, 3rd asean energy outlook, eria, targets and projected energy savings, energy efficiency policy frameworks in the gms, energy elasticity, energy intensity, food-energy-water nexus, energy efficiency performance targets, energy efficiency program, energy efficiency initiatives, cambodia ministry of mines and energy, lao pdr ministry of energy and mines, myanmar ministry of energy, thailand department of alternative energy development and efficiency, electricity regulatory authority of viet nam lahmeyer internationa gmbh, climate change, energy demand forecast, energy efficiency by industry, business as usual vs energy efficiency
    Date: 2015–07
  8. By: Alain Ayong Le Kama (EconomiX, Université Paris Ouest-Nanterre la Défense); Aude Pommeret (SEE, City University of Hong Kong and IREGE Université de Savoie)
    Abstract: In this paper we focus on a long-term dynamic analysis of the optimal adaptation/mitigation mix in the presence of a pollution threshold above which adaptation is no longer efficient. We account for accumulation in abatement capital, greenhouse gases, and adaptation capital in order to better capture the arbitrage between abatement and adaptation investments. Pollution damages arise from the emissions due to the country consumption but also from the emissions of the rest of the world (ROW). A pollution threshold is then introduced, above which adaptation is no longer efficient. We obtain that if this threshold is lower than the steady-state level of pollution, there is no way for the modeled economy to avoid it. In particular, such a situation will appear if the ROW?s emissions are high. Next step is then to introduce another type of investment allowing for lower ROW pollution ie. emissions reduction abroad through CDM for instance. We obtain that CDM may be a means to avoid a pollution threshold above which adaptation becomes of no use.
    Keywords: climate change, mitigation, adaptation, CDM, pollution threshold
    JEL: Q5 Q52 Q56 Q58
    Date: 2016–01
  9. By: Romets, Dmytro; Decker, Thomas; Menrad, Klaus
    Abstract: Since 2009 Ukrainian Government has been planning to increase the share of renewable energies (RE) in the country´s energy mix and to promote the natural gas substitution by the use of biomass and biogas production. Notwithstanding their many environmental, economic and social advantages, after several years of policy making none of them have been implemented on large scale. The aim of this paper is to create insight into the underlying factors of this troublesome trajectory of biogas technologies in Ukrainian agribusiness sector and to shed new light on biogas investment decisions by large agricultural companies. We investigate the investment decisions of large-scale farms, with the objective to identify the main determinants of their choices. Our findings reveal that large-scale farms show related investment thresholds. Their investment decision regarding biogas is mainly driven by the projects´ capital costs and payback period. But the other important issue is the potential of energy cost reduction through natural gas substitution and a perceived need of waste recycling. Nevertheless, there are systemic problems that hamper investments in biogas in Ukraine, such as lack of capital, geopolitical uncertainty and investor´s perceived risk. The analysis provides several lessons to take into account when developing policies for the acceleration of the biogas production in the agricultural sector of Ukraine.
    Keywords: Renewable energy investments, organisations´ decision-making, biogas technologies, Agribusiness, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy,
    Date: 2015–09–16
  10. By: David C Broadstock (Southwestern University of Finance and Economics, Chengdu, China and Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey, UK.); Jiajia Li (Southwestern University of Finance and Economics, Chengdu, China.); Dayong Zhang (Southwestern University of Finance and Economics, Chengdu, China.)
    Abstract: Policy makers presently lack access to quantified estimates–and hence an explicit understanding–of energy consumption efficiency within households, creating a potential gap between true efficiency levels and the necessarily assumed efficiency levels that policy makers adopt in designing and implementing energy policy. This paper attempts to fill this information gap by empirically quantifying electricity consumption efficiency for a sample of more than 7,000 households. Adopting the recently introduced frontier demand function due to Filippini and Hunt (2011) but extending it into the metafrontier context–to control for structural heterogeneity arising from location type–it is shown that consumption efficiency is little more than 60% on average. This implies huge potential for energy reduction via the expansion of schemes to promote energy efficiency. City households, which are the wealthiest in the sample, are shown to define the metafrontier demand function (and hence have the potential to be the most efficient households), but at the same time exhibit the largest inefficiencies. These facts together allow for a potential refinement on the household energy ladder concept, suggesting that wealth affords access to the best technologies thereby increasing potential energy efficiency (the ‘traditional’ view of the household energy ladder), but complementary to this these same households are most inefficient. This has implications for numerous areas of policy, including for example the design of energy assistance schemes, identification of energy education needs/priorities as well more refined setting of subsidies/tax-credit policies.
    Keywords: Energy consumption efficiency; Frontier demand function; Chinese households.
    JEL: D12 Q41 Q48 R22
    Date: 2015–10
  11. By: Sebastian Schäfer (University of Siegen); Lisa Schulten (University of Siegen)
    Abstract: Despite negative experiences with auctioning off subsidies for renewable energy in some countries, tenders are increasingly used today. We develop a reverse auction which accounts for particularities of intermittent renewable energy sources. Determining the quantity, demanded by the regulator, is internalized and directly linked to his two main objectives. On the one hand, the regulator seeks for a high share of renewable energy. On the other hand, he wants to enhance burden sharing between electricity consumers and renewable electricity producers. We further account for asymmetric information in reverse auctions. We analyze incentives for bidders to manipulate the auction outcome and adapt the design to prevent this behavior. Regional features as grid and generating capacity can be considered to optimize the deployment of renewable energy. We thereby introduce a link to fossil capacity auctions.
    Keywords: Auction Design, Tendering, Renewable Energy, Adverse Selection, Moral Hazard, Burden Sharing
    JEL: C72 D44 D82 L10 Q48
    Date: 2015
  12. By: Chiara D'Alpaos (University of Padova); Marina Bertolini (University of Padova); Michele Moretto (University of Padova)
    Abstract: In Italy and in many EU countries, the last decade was characterized by a large development of distributed generation power plants. Their presence determined new critical issues for the design and management of the overall energy system and the electric grid due to the presence of discontinuous production sources. It is commonly agreed that contingent problems that affect local grids (e.g. inefficiency, congestion rents, power outages, etc.) may be solved by the implementation of a ?smarter? electric grid. The main feature of smarts grid is the great increase in production and consumption ?flexibility. Smart grids give producers and consumers, the opportunity to be active in the market and strategically decide their optimal production/consumption scheme. The paper provides a theoretical framework to model the prosumer?s decision to invest in a photovoltaic power plant, assuming it is integrated in a smart grid. To capture the value of managerial fl?exibility, a real option approach is implemented. We calibrate and test the model by using data from the Italian energy market.
    Date: 2016–01
  13. By: Q. Farooq Akram (Norges Bank (Central Bank of Norway)); Haroon Mumtaz (Queen Mary College)
    Abstract: We use a TVP-VAR model to investigate possible changes in the time series properties of key Norwegian macroeconomic variables since the 1980s. The sample period is characterised by deregulation, globalization, sizable petroleum revenues, a switch from exchange rate to infl?ation targeting and adoption of a policy rule for the use of petroleum revenues.We fi?nd that the long-run means of CPI and core in?flation rates declined signifi?cantly until the mid-1990s and have since then remained close to the ifln?ation target of 2.5% from 2001 onwards. The persistence in especially CPI infl?ation has fallen during the infl?ation targeting period while the volatility of both infl?ation rates and the nominal effective exchange rate has increased. We document an increase in the correlations between money market rates and the in?flation rates as well as the output gap during the in?flation targeting period and a steady decline towards zero in the correlations between money market rates and nominal exchange rate changes. There is evidence of an increase in the correlations between oil prices and the other macroeconomic variables over time. Our counterfactual analysis suggests oil shocks to have been important for output gap and in?flation volatility while monetary policy shocks have been important for driving infl?ation persistence and the correlation of money market rates with macroeconomic variables.
    Keywords: Time-varying coefficients, stochastic volatility, persistence, great moderation, inflation targeting
    JEL: C51 E31 E32 E52 E58
    Date: 2015–12–31
  14. By: William M. Shobe (University of Virginia)
    Abstract: Dominion Virginia Power's 2015 Integrated Resource Plan filed with the State Corporation Commission presents cost estimates for complying with the proposed federal regulations, known as the Clean Power Plan (CPP), that force reductions in greenhouse gas emissions from existing power plants. The IRP incorrectly attributes to the CPP costs that would occur with or without the CPP. This and other modeling choices result in substantially overstated estimates of compliance costs.
    Keywords: Dominion Power; energy; clean power plan; Virginia; climate change
    JEL: Q4 Q5
    Date: 2015–01–08
  15. By: Richard S.J. Tol (UK Department of Economics, University of Sussex,UK Institute for Environmental Studies and Department of Spatial Economic, Vrije Universiteit, Amsterdam, The Netherlands Tinbergen Institute, Amsterdam, The Netherlands CESifo, Munich, Germany)
    Abstract: Greenhouse gas emission reduction is a global public good. The main problem is underprovision, and the inequitable distribution of the impacts of excessive climate change. Geoengineering is a private good with externalities. Individual countries, and indeed medium-sized organizations and companies, can geoengineer unilaterally and impose their preferred climate on others. In this paper, I use the FUND model to illustrate the implications, comparing and contrasting efficient, optimal, and equitable solutions to emission reduction and geoengineering.
    Keywords: Climate change, geoengineering, efficiency, equity
    JEL: Q54
    Date: 2016–01
  16. By: Nataliya S. Karpova (National Research University Higher School of Economics)
    Abstract: This paper explores the current changes in the world gas market where Russia has a wide spectrum of economic interests, international projects, as well as problems to be solved in the context with decline in demand and prices for natural gas and other energy commodities, growing contradictions and rivalry among the leading market players, political pressure and the introduction of market restrictions (sanctions). The country needs a new paradigm of development, pre-empting the future and reacting in the moment
    Keywords: world gas markets, key players, demand for energy, price volatility, the Russian gas strategy and projects, challenges of sanctions, strategies for the future.
    JEL: Z
    Date: 2015
  17. By: Miguel Carriquiry (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This work utilized a discrete time return model of finance to analyze whether prices changes of soybean oil, the main feedstock for biodiesel production in the US affect the prices of biodiesel. Empirical models of asset pricing attempt to extract information about latent state variables and structural parameters from observed prices. These models, which often involve high dimension latent state variables, can be conveniently estimated using Bayesian methods. Results from this study indicate the price of soybean oil does not have a strong direct impact on the price of biodiesel in the short run, or in a daily basis.
    Keywords: Soybean oil, biofuels, biodiesel, Bayesian methods, models of asset pricing
    JEL: C11 C13 C32 C51 G12 Q41
    Date: 2015–12
  18. By: Nelly Exbrayat (Université de Lyon, Lyon F- 69007, France; CNRS, GATE L-SE, Ecully, F- 69130, France; Université J. Monnet, Saint-Etienne, F- 42000, France); Stéphane Riou (Université de Lyon, Lyon F- 69007, France; CNRS, GATE L-SE, Ecully, F- 69130, France; Université J. Monnet, Saint-Etienne, F- 42000, France); Skerdilajda Zanaj (CREA, University of Luxembourg, Avenue de la Faïencerie, 162A, L-1511, Luxembourg)
    Abstract: This paper investigates the ability of a fully harmonized carbon tax to curb carbon emissions in a globalized economy characterized by an uneven spatial distribution of heterogeneous firms. The level of the carbon tax matters for the direction of the relocation and its impact on global emissions. When the carbon tax is low enough, emissions are reduced as firms relocate to the smaller country to pay lower taxes by reducing their output. If the carbon tax is too high, then firms react by relocating to the larger country to maintain their export activity, so that the most environmentally friendly spatial configurations can be removed.
    Keywords: global carbon tax, heterogeneous firms, international trade, firm location
    JEL: F12 F15 F18 Q28
    Date: 2016
  19. By: Michael Dittmar (ETH Zurich, Institute of Particle Physics)
    Abstract: The growing conflicts in and about oil exporting regions and speculations about volatile oil prices during the last decade have renewed the public interest in predictions for the near future oil production and consumption. Unfortunately, studies from only 10 years ago, which tried to forecast the oil production during the next 20-30 years, failed to make accurate predictions for today's global oil production and consumption. Forecasts using economic growth scenarios, overestimated the actual oil production, while models which tried to estimate the maximum future oil production/year, using the official country oil reserve data, predicted a too low production. In this paper, a new approach to model the maximal future regional and thus global oil production (part I) and consumption (part II) during the next decades is proposed. Our analysis of the regional oil production data during past decades shows that, in contrast to periods when production was growing and growth rates varied greatly from one country to another, remarkable similarities are found during the plateau and decline periods of different countries. Following this model, the particular production phase of each major oil producing country and region is determined essentially only from the recent past oil production data. Using these data, the model is then used to predict the production from all major oil producing countries, regions and continents up to the year 2050. The limited regional and global potential to compensate this decline with unconventional oil and oil-equivalents is also presented.
    Date: 2016–01
  20. By: Sebastian Rausch (ETH Zurich, Switzerland); Giacomo Schwarz (ETH Zurich, Switzerland)
    Abstract: This paper examines how the general equilibrium incidence of an environmental tax depends on the effect of different incomes and preferences of heterogeneous households on aggregate outcomes. We develop a Harberger-type model with general forms of preferences and substitution between capital, labor, and pollution in production that captures the impact of household heterogeneity and interactions with production characteristics on the general equilibrium. We theoretically show that failing to incorporate household heterogeneity can qualitatively aect incidence. We quantitatively illustrate that this aggregation bias can be important for assessing the incidence of a carbon tax, mainly by aecting the returns to factors of production. Our findings are robust to a number of extensions including alternative revenue recycling schemes, preexisting taxes, non-separable utility in pollution, labor-leisure choice, and multiple commodities.
    JEL: H23 Q52
    Date: 2016–01
  21. By: Ratti, Ronald (School of Business, University of Western Sydney); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: This paper investigates the relationship between oil prices, and global output, prices, central bank policy interest rate and monetary aggregates with a global factor-augmented error correction model. We confirm the following stylized relationships: i) in line with the quantitative theory of money, at global level, money, output and prices are cointegrated; ii) positive innovation in global oil price is connected with global interest rate tightening; iii) positive innovation in global money, price level and output is connected with an increase in oil prices; iv) positive innovations in global interest rate are associated with a decline in oil prices; v) positive shocks to the trade weighted U.S. dollar are linked with reductions in oil price; vi) the U.S., Euro area and China are the main drivers of global macroeconomic factors.
    Keywords: Global interest rate, global monetary aggregates, oil prices, GFAVEC
    JEL: E44 E50 Q43
    Date: 2015
  22. By: Stelios D. Bekiros; Rangan Gupta; Alessia Paccagnini
    Abstract: Information on economic policy uncertainty does matter in predicting the change in oil prices. We compare the forecastability of standard, Bayesian and time-varying VAR against univariate models. The time-varying VAR model outranks all alternative models over the period 2007:1–2014:2.
    Keywords: Oil prices; Economic policy uncertainty; Forecasting
    JEL: C22 C32 C53 E60 Q41
    Date: 2015–07
  23. By: Virginie Coudert; Valérie Mignon
    Abstract: This paper aims at reassessing the empirical relationship between the real price of oil and the U.S. dollar real effective exchange rate over the 1974-2015 period. We find that changes in both variables are now linked by a negative relationship, going from the dollar exchange rate to the real oil price. However, the same relationship is found positive when ending the sample in the mid-2000s, in line with the previous literature. To understand and investigate this evolution, we rely on a nonlinear, smooth transition regression model in which the oil pricedollar nexus depends on the dynamics followed by the U.S. currency. Our results show that the relationship is negative most of the times but turns positive when the dollar hits very high values, as in the early eighties.
    Keywords: oil price, dollar real effective exchange rate, causality, nonlinearity.
    JEL: C22 F31 Q43
    Date: 2016
  24. By: Matteo Maggiori; Stefano Giglio; Johannes Stroebel; Andreas Weber
    Abstract: The optimal investment to mitigate climate change crucially depends on the discount rate used to evaluate the investment's uncertain future benefits. The appropriate discount rate is a function of the horizon over which these benefits accrue and the riskiness of the investment. In this paper, we estimate the term structure of discount rates for an important risky asset class, real estate, up to the very long horizons relevant for investments in climate change abatement. We show that this term structure is steeply downward-sloping, reaching 2.6% at horizons beyond 100 years. We explore the implications of these new data within both a general asset pricing framework that decomposes risks and returns by horizon and a structural model calibrated to match a variety of asset classes. Our analysis demonstrates that applying average rates of return that are observed for traded assets to investments in climate change abatement is misleading. We also show that the discount rates for investments in climate change abatement that reduce aggregate risk, as in disaster-risk models, are bounded above by our estimated term structure for risky housing, and should be below 2.6% for long-run benefits. This upper bound rules out many discount rates suggested in the literature and used by policymakers. Our framework also distinguishes between the various mechanisms the environmental literature has proposed for generating downward-sloping discount rates.
    Date: 2015–01
  25. By: Anthony Paris
    Abstract: Given the few studies highlighting the existence of an oil-price effect on agricultural commodity prices in the last decade, we sought to demonstrate the role of first-generation biofuel production in such a relationship. Relying on a smooth transition cointegration approach, we show that biofuel development has led to an increase in the long-term price effect of oil on agricultural commodity prices. Thus, the increasing production of biofuels contributes to the price rise of agricultural commodities. This result underlines the importance of accelerating second-generation biofuel production to replace first-generation biofuels
    Keywords: IBiofuel, Oil price, Agricultural commodity, Nonlinear econometrics.
    JEL: C22 Q02 Q16
    Date: 2016
  26. By: Karsten Neuhoff; Nolan Ritter; Aymen Salah-Abou-El-Enien; Philippe Vassilopoulos
    Abstract: A fundamental question regarding the design of electricity markets is whether adding auctions to the continuous intraday trading is improving the performance of the market. To approach this question, we assess the experience with the implementation of the 3 pm local auction for quarters in Germany at the European Power Exchange (EPEX SPOT) in December 2014 to assess the impact on trading volumes/liquidity, prices, as well as market depth. We discuss further opportunities and challenges that are linked with a potential implementation of an intraday auction.
    Keywords: Auctions, electricity, empirical analysis, market design
    JEL: C5 C93 D44 L50
    Date: 2016
  27. By: Alex Van Steenbergen
    Abstract: This paper seeks to analyze the long term effects on traffic, environmental quality and public finance of the planned reform of fuel excise duties in Belgium. In the framework of a large scale tax reform, the Belgian federal government will implement an equalization of diesel and petrol excise rates over the 2016-2018 period.
    JEL: H21 H23 Q53 Q55 Q58
    Date: 2015–12–08
  28. By: Stuermer, Martin (Federal Reserve Bank of Dallas); Schwerhoff, Gregor (Mercator Research Institute on Global Commons and Climate Change (MCC))
    Abstract: We add an extractive sector to an endogenous growth model of expanding varieties and directed technological change. Firms increase their economically extractable stocks of non-renewable resources through R&D investment in extraction technology and reduce their stocks through extraction. We show how the geological distribution of the non-renewable resource interacts with technological change. Our model accommodates long-term trends in non-renewable resource markets - namely stable prices and exponentially increasing extraction - for which we present data going back to 1792. The model suggests that over the long term, development of new extraction technologies neutralizes the increasing demand for non-renewable resources in industrializing countries such as China.
    Keywords: Non-renewable resources; endogenous growth; extraction technology
    JEL: O30 O41 Q30
    Date: 2015–12–29
  29. By: Alistair Hunt; Julia Ferguson; Fintan Hurley; Alison Searl
    Abstract: Outdoor air pollution is a major determinant of health worldwide. The greatest public health effects are from increased mortality in adults. However, both PM and O3 also cause a wide range of other, less serious, health outcomes; and there are effects on mortality and morbidity of other pollutants also, e.g. nitrogen dioxide (NO2) and sulphur dioxide (SO2). These adverse health effects have economic consequences; OECD (2014) suggests that the social costs of the health impact of outdoor air pollution in OECD countries, China and India was approximately USD 1.7 trillion and USD 1.9 trillion, respectively, in 2010. However, the study highlights that though the social costs of premature mortality account for the majority of these totals, the social costs of morbidity remain poorly estimated. The objective of this paper is to inform the development of improved estimates of the social costs of human morbidity impacts resulting from outdoor air pollution in two components; namely to develop a core set of pollutant-health end-points to be covered when estimating the costs of morbidity, and to review current estimates of the cost of morbidity from air pollution.
    Keywords: health impact assessment, air quality regulation, non-market valuation
    JEL: I18 Q53 Q58
    Date: 2016–01–28
  30. By: Thomas Eichner; Rüdiger Pethig
    Keywords: climate coalition, fossil fuel, deposits, extraction, deposit policy
    JEL: Q31 Q38 Q55
    Date: 2015
  31. By: Christopher L. Magee; Tessaleno C. Devezas
    Abstract: Dematerialization is the reduction in the quantity of materials needed to produce something useful over time. Dematerialization fundamentally derives from ongoing increases in technical performance but it can be counteracted by demand rebound - increases in usage because of increased value (or decreased cost) that also results from increasing technical performance. A major question then is to what extent technological performance improvement can offset and is offsetting continuously increasing economic consumption. This paper contributes to answering this question by offering some simple quantitative extensions to the theory of dematerialization. The paper then empirically examines the materials consumption trends as well as cost trends for a large set of materials and a few modern artifacts over the past decades. In each of 57 cases examined, the particular combinations of demand elasticity and technical performance rate improvement are not consistent with dematerialization. Overall, the theory extension and empirical examination indicate that there is no dematerialization occurring even for cases of information technology with rapid technical progress. Thus, a fully passive policy stance that relies on unfettered technological change is not supported by our results.
    Date: 2016–01
  32. By: Candace Miller; John Schurrer; Nicholas Redel; Arif Mamun; Duncan Chaplin
    Abstract: This report presents our qualitative evaluation findings on the implementation of the T&D activity and the FS initiative, and the outcomes of electrification as perceived by households, businesses, and other community institutions.
    Keywords: Energy, electrification, performance evaluation, qualitative evaluation, case study
    JEL: F Z
    Date: 2015–07–22
  33. By: Nils May; Karsten Neuhoff
    Abstract: Der Anteil der Solarenergie an der Stromversorgung in Deutschland hat sich rasant entwickelt, von weniger als einem Prozent in 2008 auf 5,7% in 2014. Die große Kostendegression in dem Zeitraum zog starke Vergütungssatzsenkungen nach sich. Seit circa 2012 liegt diese Vergütung unter dem Strombezugspreis von Haushalten (die sogenannte „Netzparität“). Dieses hat zur Folge, dass Haushalte mit Photovoltaik (PV)-Anlagen ihren produzierten Strom lieber selbst verbrauchen als ihn ins Netz abzugeben (Eigenversorgung). Da dieses attraktiver ist als den Strom unter EEG-Vergütung ins Netz einzuspeisen, ist heute ein wesentlicher Bestandteil der PV-Förderung darauf basierend, dass Haushalte durchden Eigenverbrauch (EV) ihre Ausgaben für den Strombezug senken. Haushalte erhöhen ihren EV-Anteil weiter, indem sie Batteriespeicher einsetzen und ihre Stromnachfrage ihrer eigenen Stromerzeugung anpassen. Dieses hat potentiell eine Reihe von Vorteilen für die Allgemeinheit: Die Netze werden weniger ausgelastet und der Haushaltsstromverbrauch ist erstmals angepasst an das eigene Stromangebot). Außerdem unterstützt das neue Segment der „Prosumer“ die Akzeptanz der Energiewende insgesamt. Zugleich entstehen Anreizen für Anlagenbetreiber, ihre Batteriespeicher, ihren Stromverbrauch und die PV-Anlagengröße so auszulegen und zu betreiben, dass ein möglichst hoher EV-Anteil entsteht. Dieses muss aber nicht mit einem volkswirtschaftlichen Optimum übereinstimmen, bei dem auch der jeweilige Strompreis und Auswirkungen auf Netzengpässe bedacht werden. Außerdem kann die EV-optimierte Wahl der Anlagengröße dazu führen, dass PV Anlagen zu klein dimensioniert und damit Dachflächenpotentiale für PV-Panels nicht effektiv genutzt werden. Auch wird debattiert, ob Gemeinkosten wie Netzkosten derzeit fair verteilt werden. Vor diesem Hintergrund wird derzeit debattiert wie die Regelungen für PVEigenverbrauch in Zukunft gestaltet werden können
    Date: 2016

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