nep-ene New Economics Papers
on Energy Economics
Issue of 2016‒07‒09
53 papers chosen by
Roger Fouquet
London School of Economics

  1. Fossil Fuel Subsidies in Asia: Trends, Impacts, and Reforms: Integrative Report By Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB)
  2. Rebound effect of improved energy efficiency for different energy types: A general equilibrium analysis for China By Yingying Lu; Yu Liu; Meifang Zhou
  3. Promoting Renewable Energy and Energy Efficiency in Africa: A Framework to Evaluate Employment Generation and Cost-effectiveness By Nicola Cantore; Patrick Nussbaumer; Max Wei; Daniel Kammen
  4. Energy efficiency gains from trade in intermediate inputs: Firm-level evidence from Indonesia By Holger Breinlich; Anson Soderbery; Greg C. Wright
  5. A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly By Greer Gosnell; John List; Robert Metcalfe
  6. Simultaneous use of black, green, and white certificates systems: A rather messy business By Amundsen, Eirik Schrøder; Bye, Torstein
  7. From Fossil Fuels to Renewables: The Role of Electricity Storage. By Lazkano, Itziar; Nøstbakken, Linda; Pelli, Martino
  8. Market power in interactive environmental and energy markets: The case of green certificates By Amundsen, Eirik Schrøder; Nese, Gjermund
  9. Explaining the Interplay of Three Markets: Green Certificates, Carbon Emissions and Electricity By Schusser, Sandra; Jaraite, Jurate
  10. California Dreaming: The Economics of Renewable Energy By G. Cornelis van Kooten
  11. Natural gas-fired power plants valuation and optimisation under Levy copulas and regime-switching By Nemat Safarov; Colin Atkinson
  12. Cogeneration Technology Adoption in the U.S. By Mary Jialin Li
  13. Quality of Data on Connections to the National Electric Grid for Evaluation of Millennium Challenge Corporation's Energy Project in Mainland Tanzania (Memo) By Duncan Chaplin; Arif Mamun
  14. Ownership, Pricing, and Productivity: Evidence from Electric Distribution Cooperatives By Hueth, Brent; Jang, Heesun
  15. Directed Technical Change and Energy Intensity Dynamics: Structural Change vs. Energy Efficiency By Christian Haas; Karol Kempa
  16. Modeling emission-generating technologies: Reconciliation of axiomatic and by-production approaches By Sushama Murty; R. Robert Russell
  17. Social Rate of Return to R&D on Various Energy Technologies: Where Should We Invest More? A Study of G7 Countries By Roula Inglesi-Lotz
  18. A Model for Estimating Revenue from Avoided Demand Charges for Agricultural Operations Utilizing Anaerobic Digesters By Hurley, Sean
  19. Tanzania.from mining to oil and gas By Alan R. Roe
  20. The actual impact of shale gas revolution on the U.S.manufacturing sector By Yassine Kirat
  21. The development of the liquefied natural gas spot market: origin and implications By Yves Jégourel
  22. Testing Co-Volatility Spillovers for Natural Gas Spot, Futures and ETF Spot using Dynamic Conditional Covariances By Chia-Lin Chang; Michael McAleer; Yanghuiting Wang
  23. Oil and Growth Challenge in Kazakhstan By Nurmakhanova Mira
  24. Turning Rainy Day Oil into Clean Energy Gold: Funding Mission Innovation with a Strengthened Strategic Petroleum Reserve By Ross, Heather
  25. The Impact of Oil Shocks in a Small Open Economy New-Keynesian Dynamic Stochastic General Equilibrium Model for South Africa By Rangan Gupta; Hylton Hollander
  26. Evidence of cross-country portfolio diversification benefits: The case of Saudi Arabia By Ali, Hakim; Masih, Mansur
  27. Do land markets anticipate regulatory change? Evidence from Canadian Conservation policy. By Boskovic, Branko; Nøstbakken, Linda
  28. An econometric analysis of ETF and ETF futures in financial and energy markets using generated regressors By Chia-Lin Chang; Michael McAleer; Chien-Hsun Wang
  29. Working Paper 03-16 - The fiscal treatment of company cars in Belgium: effects on car demand, travel behaviour and external costs By Benoît Laine; Alex Van Steenbergen
  30. The Effect of Owning a Car on Travel Behavior: Evidence from the Beijing License Plate Lottery By Linn, Joshua; Yang, Jun; Liu, Antung A.; Qin, Ping
  31. Strategic Subsidies for Green Goods By Fischer, Carolyn
  32. Environmental Protection for Sale: Strategic Green Industrial Policy and Climate Finance By Fischer, Carolyn
  33. The Green Paradox and Interjurisdictional Competition across Space and Time By Habla, Wolfgang
  34. Design choices and environmental policies By Sophie BERNARD
  35. When do Firms Go Green? Comparing Price Incentives with Command and Control Regulations in India By Nataraj, Shanthi; Harrison, Ann E.; Martin, Leslie A.; Hyman, Ben
  36. Willingness to Pay for Clean Air: Evidence from Air Purifier Markets in China By Koichiro Ito; Shuang Zhang
  37. Valuing Air Quality Using Happiness Data: The Case of China By Zhang, Xin; Zhang, Xiaobo; Chen, Xi
  38. Green taxes in a post-Paris world: are millions of nays inevitable? By Stefano Carattini; Andrea Baranzini; Philippe Thalmann; Frédéric Varone; Frank Vöhringer
  39. Trade in environmental goods and sustainable development: What are we learning from the transition economies’ experience? By Natalia Zugravu-Soilita
  40. Institutions and the Environment: Existing Evidence and Future Directions By Shouro Dasgupta; Enrica De Cian
  41. Survival of the Cleanest? Evidence from a Plant Level Analysis of Pollutant Emissions in Canadian Pulp and Paper Industry, 2005-2013 By Jean-Thomas Bernard; Md. Jakir Hussain; Mishaal Masud Sinha
  42. Installation entries and exits in the EU ETS industrial sector By Stefano F. Verde; Christoph Graf; Thijs Jong and Claudio Marcantonini
  43. Employment and Output Leakage Under California's Cap-And-Trade Program By Gray, Wayne B.; Linn, Joshua; Morgenstern, Richard D.
  44. Consignment Auctions of Free Emissions Allowances under EPA’s Clean Power Plan By Burtraw, Dallas; McCormack, Kristen
  45. Border Adjustments for Carbon Emissions: Basic Concepts and Design By Weisbach, David; Kortum, Sam
  46. Der UN-Klimagipfel in Paris: Frischer Wind oder viel heiße Luft? By Adrian Amelung
  47. Climate Agreements in a Mitigation-Adaptation Game By Basak Bayramoglu; Michael Finus; Jean-François Jacques
  48. Uncertainty, Extreme Outcomes and Climate Change: a critique By Arvaniti, Maria
  49. Policy instruments for the Green Climate Fund By Kris Bachus; Kristine Van Herck; Lize Van Dyck
  50. On the Importance of Baseline Setting in Carbon Offsets Markets By Bento, Antonio; Kanbur, Ravi; Leard, Benjamin
  51. Das "Paris-Agreement": Durchbruch der Top-Down-Klimaschutzverhandlungen im Kreise der Vereinten Nationen. By Adrian Amelung
  52. Climate Challenged Society: John S. Dryzek, Richard B. Norgaard, David Schlosberg Oxford University Press, 2013, 192 p. By Edwin Zaccai
  53. How Green are Economists? By Stefano Carattini; Alessandro Tavoni

  1. By: Asian Development Bank (ADB); Asian Development Bank (ADB) (Economic Research and Regional Cooperation Department, ADB); Asian Development Bank (ADB) (Economic Research and Regional Cooperation Department, ADB); Asian Development Bank (ADB)
    Abstract: Unsustainable budgetary cost of selling oil, gas, and coal at low prices has propelled energy subsidy reform in developing Asian economies. This report measures the size of associated subsidies on these fossil fuels including direct transfers, tax exemptions, subsidized credit, and losses of state enterprises in India, Indonesia, and Thailand. An analysis of complex interactions between economic, social, energy, and environmental issues shows that the initial rise in energy prices due to a reduction or removal of the subsidies will nudge households and businesses to shift to alternative fuels, make investment in clean energy attractive, increase energy supply, reduce energy shortages, and cut greenhouse gas emissions. Using the money freed up from subsidies to compensate poor households and to increase government budgets will offset the negative effects of the initial price rise, promote sustainable energy use, and help allay the fears of reform.
    Keywords: India; Indonesia; Thailand; energy; fossil fuel subsidies; greenhouse gas emissions; energy use; economic impacts; social programs and developing Asia
    Date: 2016–03
  2. By: Yingying Lu; Yu Liu; Meifang Zhou
    Abstract: This paper explores the rebound effect of different energy types in China based on a static computable general equilibrium model. A one-off 5% energy efficiency improvement of using five different types of energy is imposed, respectively, in all the 135 production sectors in China. The rebound effect is measured both on the production level and on the economy-wide level by each type of energy. The results show that improving energy efficiency of using electricity has the largest positive impact on GDP among the five energy types. Inter-fuel substitutability does not affect the macroeconomic results significantly, but long-run impact is usually greater than the short-run impact. For those exports-oriented sectors, the capital-intensive sectors get big negative shock in the short run while the labor-intensive sectors get hurt in the long run. There is no “backfire” effect; however, improving efficiency of using electricity can cause negative rebound, which implies that improving the energy efficiency of using electricity might be a good policy choice under China’s current energy structure. In general, macro-level rebound is larger than production-level rebound. Primary energy goods show larger rebound effect than secondary energy goods. In addition, the paper points out that the policy makers in China should look at the rebound effect in the long term rather in the short term. The energy efficiency policy would still be a good and effective policy choice for energy conservation in China who has small inter-fuel substitution in that higher inter-fuel substitution may lead to larger rebound effect.
    Keywords: Rebound Effect, Energy Efficiency Policy, China, CGE Model
    JEL: Q43 Q48 C68
    Date: 2016–06
  3. By: Nicola Cantore (UNIDO); Patrick Nussbaumer (UNIDOF); Max Wei (Lawrence Berkeley National Laboratory); Daniel Kammen (Energy and Resources Group, University of California and Goldman School of Public Policy, University of California)
    Abstract: The ongoing debate over the cost-effectiveness of renewable energy (RE) and energy efficiency (EE) deployment often hinges on the current cost of incumbent fossil-fuel technologies versus the long-term benefit of clean energy alternatives. This debate is often focused on mature or ‘industrialized’ economies and externalities such as job creation. In many ways, however, the situation in developing economies is at least as or even more interesting due to the generally faster current rate of economic growth and of infrastructure deployment. On the one hand, RE and EE could help decarbonize economies in developing countries, but on the other hand, higher upfront costs of RE and EE could hamper short-term growth. The methodology developed in this paper confirms the existence of this trade-off for some scenarios, yet at the same time provides considerable evidence about the positive impact of EE and RE from a job creation and employment perspective. By extending and adopting a methodology for Africa designed to calculate employment from electricity generation in the U.S., this study finds that energy savings and the conversion of the electricity supply mix to renewable energy generates employment compared to a reference scenario. It also concludes that the costs per additional job created tend to decrease with increasing levels of both EE adoption and RE shares.
    Keywords: Renewable Energy, Employment, Energy Efficiency, Africa
    JEL: N77 O13 Q40
    Date: 2016–06
  4. By: Holger Breinlich; Anson Soderbery; Greg C. Wright
    Abstract: This paper investigates whether importing intermediate goods improves firm-level environmental performance in a developing country, using data from the Indonesian manufacturing sector. We build a simple theoretical model showing that trade integration of input markets entails energy efficiency improvements within importers relative to nonimporters. To empirically isolate the impact of firm participation in foreign intermediate input markets we use ‘nearest neighbour’ propensity score matching and difference-indifference techniques. Covering the period 1991-2005, we find evidence that becoming an importer of foreign intermediates boosts energy efficiency, implying beneficial effects for the environment.
    Keywords: Services Trade, Trade Liberalization, Import Competition
    Date: 2016
  5. By: Greer Gosnell; John List; Robert Metcalfe
    Abstract: Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to "look under the hood" of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains' performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments-which include performance information, personal targets, and prosocial incentives-induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.
    Date: 2016
  6. By: Amundsen, Eirik Schrøder (Department of Economics, University of Bergen); Bye, Torstein (Statistics Norway/Norwegian University of Life Sciences)
    Abstract: We formulate a model with black, green and white certificates markets that function in conjunction with an electricity market. The markets function well in the sense that a common equilibrium solution exist, where all targets are satisfied (e.g. share of green electricity and share of energy saving/efficiency increase.) The equilibrium solution adapts to changing targets (e.g. harsher target on energy saving), but it is in general impossible to tell whether this will lead to more, less, or unchanged consumption of ”black”, ”green” or ”white” electricity. These, markets give thus a poor guidance for future investments in green and white electricity. In order to get clear cut results, specific assumptions of parameter values and functional forms are needed. An example of this, based on a calibrated model founded on Norwegian data, is provided in the article. Also, gains and losses in terms of consumer’s and producer’s surpluses are calculated.
    Keywords: Renewable energy; Electricity; Green Certificates; White Certificates
    JEL: C70 Q28 Q42 Q48
    Date: 2016–06–27
  7. By: Lazkano, Itziar (Dept. of Economics, Norwegian School of Economics and Business Administration); Nøstbakken, Linda (Dept. of Economics, Norwegian School of Economics and Business Administration); Pelli, Martino (Université de Sherbrooke)
    Abstract: We analyze the role of electricity storage for technological innovations in electricity generation. We propose a directed technological change model of the electricity sector, where innovative rms develop better electricity storage solutions, which a ect not only the relative competitiveness between renewable and nonrenewable electricity Sources but also the ease with which they can be substituted. Using a global rm-level data set of electricity patents from 1963 to 2011, we empirically analyze the determinants of innovation in electricity generation, and the role of storage in directing innovation. Our results show that electricity storage increases innovation not only in renewables but also in conventional technologies. This implies that efforts to increase innovation in storage can benefit conventional, fossil fuel- red electricity plants as well as increasing the use of renewable electricity.
    Keywords: Innovation; Directed technical change; Electricity storage; Electricity markets; Power generation
    JEL: O30 O40 O50 Q20 Q30 Q40 Q50
    Date: 2016–05–31
  8. By: Amundsen, Eirik Schrøder (Department of Economics, University of Bergen); Nese, Gjermund (Norwegian Competition Authority.)
    Abstract: A market for Tradable Green Certificates (TGCs) is strongly interwoven in the electricity market as the producers of green electricity are also the suppliers of TGCs. Therefore, strategic interaction may result. We formulate an analytic equilibrium model for simultaneously functioning electricity and TGC markets, and focus on the role of market power (i.e. Stackelberg leadership). One result is that a certificate system faced with market power may collapse into a system of per unit subsidies. Also, the model shows that TGCs may be an imprecise instrument for regulating the generation of green electricity.
    Keywords: Renewable energy; Electricity; Green Certificates; Market power
    JEL: C70 Q28 Q42 Q48
    Date: 2016–06–27
  9. By: Schusser, Sandra (CERE and the Department of Forest Economics, SLU); Jaraite, Jurate (CERE and the Department of Economics, Umeå University)
    Abstract: The European Union's Emissions Trading System (EU ETS) and the Swedish-Norwegian Tradable Green Certicate System (Swedish-Norwegian TGC system) are two market-based instruments that have the overlapping goal to mitigate greenhouse gas (GHG) emissions by shifting economies to cleaner energy sources. Understanding the price signals and interactions of these two newly created markets is essential for all decisions makers, regulators and direct market participants, who aim to reach the predefined environmental policy goals in the most efficient manner. The interaction between these policy instruments has been widely examined from the theoretical perspective. This research contributes to the literature by empirically examining the interplay between the prices of three markets: (1) the price of tradable green certificates in the Swedish-Norwegian TGC system, (2) the price of carbon in the EU ETS and (3) the price of electricity in Nord Pool. We use a multivariate vector-autoregression (VAR) approach to take into account the endogenous relationships between these prices. To date, our empirical results do not support the theoretical considerations that the impacts of carbon price on green certicate prices and on renewable electricity production are negative. Contrary, we find that, to date, increases in carbon prices positively affect green certificate prices at least in the short-run.
    Keywords: Renewable energy; Electricity; Green certificates; Emissions trading; EU ETS; interactions; tradable green certificates; Sweden; VAR model
    JEL: Q28 Q41 Q42 Q48
    Date: 2016–06–01
  10. By: G. Cornelis van Kooten
    Abstract: California was the first jurisdiction to mandate a reduction in greenhouse gas (GHG) emissions by 80% below 1990 levels by 2050. This target was subsequently endorsed by the G8 in 2009 and the European Commission in 2014, and is the guiding principle of the 2015 Paris Agreement. To achieve these targets will require near elimination of fossil fuels and/or a technological breakthrough that might be considered a black swan event. Eschewing nuclear power, countries are relying on renewable energy sources to meet future energy needs. In this paper, I examine the prospects of reducing GHG emissions by 80% by first summarizing extant global energy sources and production, trends and projections of energy demand, and the potential mix of future energy sources. I consider the role of conservation and then focus on the electricity sector to determine how wind and biomass could contribute to the 80% target. I conclude that these ambitious targets cannot be attained without nuclear power.
    Keywords: Climate change; intermittent energy; biofuels; nuclear power; fossil fuels
    JEL: H41 L51 L94 Q42 Q48 Q54
    Date: 2016–06
  11. By: Nemat Safarov; Colin Atkinson
    Abstract: In this work we analyse a stochastic control problem for the valuation of a natural gas power station while taking into account operating characteristics. Both electricity and gas spot price processes exhibit mean-reverting spikes and Markov regime-switches. The Levy regime-switching model incorporates the effects of demand-supply fluctuations in energy markets and abrupt economic disruptions or business cycles. We make use of skewed Levy copulas to model the dependence risk of electricity and gas jumps. The corresponding HJB equation is the non-linear PIDE which is solved by an explicit finite difference method. The numerical approach gives us both the value of the plant and its optimal operating strategy depending on the gas and electricity prices, current temperature of the boiler and time. The surfaces of control strategies and contract values are obtained by implementing the numerical method for a particular example.
    Date: 2016–07
  12. By: Mary Jialin Li
    Abstract: Well over half of all electricity generated in recent years in Denmark is through cogeneration. In U.S., however, this number is only roughly eight percent. While both the federal and state governments provided regulatory incentives for more cogeneration adoption, the capacity added in the past five years have been the lowest since late 1970s. My goal is to first understand what are and their relative importance of the factors that drive cogeneration technology adoption, with an emphasis on estimating the elasticity of adoption with respect to relative energy input prices and regulatory factors. Very preliminary results show that with a 1 cent increase in purchased electricity price from 6 cents (roughly current average) to 7 cents per kwh, the likelihood of cogeneration technology adoption goes up by about 0.7-1 percent. Then I will try to address the general equilibrium effect of cogeneration adoption in the electricity generation sector as a whole and potentially estimate some key parameters that the social planner would need to determine the optimal cogeneration investment amount. Partial equilibrium setting does not consider the decrease in investment in the utilities sector when facing competition from the distributed electricity generators, and therefore ignore the effects from the change in equilibrium price of electricity. The competitive market equilibrium setting does not consider the externality in the reduction of CO2 emissions, and leads to socially sub-optimal investment in cogeneration. If we were to achieve the national goal to increase cogeneration capacity half of the current capacity by 2020, the US Department of Energy (DOE) estimated an annual reduction of 150 million metric tons of CO2 annually – equivalent to the emissions from over 25 million cars. This is about five times the annual carbon reduction from deregulation and consolidation in the US nuclear power industry (Davis, Wolfram 2012). Although the DOE estimates could be an overly optimistic estimate, it nonetheless suggests the large potential in the adoption of cogeneration technology.
    Date: 2016–01
  13. By: Duncan Chaplin; Arif Mamun
    Keywords: Tanzania, electric grid, energy project
    JEL: F Z
  14. By: Hueth, Brent; Jang, Heesun
    Keywords: Industrial Organization, Productivity Analysis,
    Date: 2016–06–20
  15. By: Christian Haas (University of Giessen); Karol Kempa (Frankfurt School of Finance and Management)
    Abstract: This paper uses a theoretical model with Directed Technical Change to analyse the observed heterogeneous energy intensity developments. Based on the empirical evidence on the underlying drivers of energy intensity developments, we decompose changes in aggregate energy intensity into structural changes in the economy (Sector Effect) and within-sector energy efficiency improvements (Efficiency Effect). We analyse how energy price growth and the relative productivity of both sectors affect the direction of research and hence the relative importance of the aforementioned two effects. The relative importance of these effects is determined by energy price growth and relative sector productivity that drive the direction of research. In economies that are relatively more advanced in sectors with low energy intensities, the Sector Effect dominates energy intensity dynamics given no or moderate energy price growth. In contrast, the Efficiency Effect dominates energy intensity developments in economies with a high relative technological level within their energy-intensive industries if moderate energy price growth is above a certain threshold. We further show that temporal energy price shocks might induce a permanent redirection of innovation activities towards sectors with low-energy intensities.
    Keywords: directed technical change, energy efficiency, energy intensity, structural change
    JEL: O33 Q43 Q55
    Date: 2016
  16. By: Sushama Murty (University of Exeter and Jawaharlal Nehru University); R. Robert Russell (University of California, Riverside)
    Abstract: We study the link between the by-production approach of Murty, Russell, and Levkoff [2012 J. Environ. Econ.] (MRL) and the axiomatic approach of Murty [2015 Econ. Theory] to modelling emission-generating technologies. We show that the by-production technology of MRL, obtained as an intersection of two independent sub-technologies, satisfies all the Murty axioms. Conversely, a technology satisfying all these axioms decomposes into two independent sub- technologies having the MRL features. These two sub-technologies, reflect, respectively, the relations between goods in intended-output production designed by human engineers, on the one hand, and the emission-generating mechanism of nature governed by material-balance considerations, on the other. In either approach, the technology can be functionally represented by two radial distance functions with well-defined properties. These distance functions can also serve as measures of technological and environmental efficiency. We exploit the link between the by-production and axiomatic approaches to offer preliminary suggestions about suitable functional forms for the empirical estimation of the two distance functions.
  17. By: Roula Inglesi-Lotz (Department of Economics, University of Pretoria)
    Abstract: The severity of investment in Research and Development (R&D) in the energy sector is undisputable especially considering the benefits of new technologies to sustainability, security and environmental protection. However, the nature and potential of various energy technologies that are capable to improve the energy and environmental conditions globally is a challenging task for governments and policy makers that have to make decisions on the allocation of funds in R&D. To do so, the optimal resource allocation to R&D should be determined by estimating the social rate of return for R&D investments. This paper aims to estimate the social rate of return of R&D on various energy applications and technologies such as energy efficiency, fossil fuels, renewable energy sources, and nuclear for the G7 countries. The results show that primarily R&D investment on Energy Efficiency technologies and Nuclear are the ones that yield high social benefits for all G7 countries while exactly the opposite holds for Fossil fuels.
    Keywords: R&D, Energy, Energy fuels, return
    Date: 2016–06
  18. By: Hurley, Sean
    Abstract: This paper investigates how to estimate revenue from avoided demand charges that are part of a net-metering time-of-use contract that is seen in California. Utilizing fifteen minute kW data regarding supply and demand of electricity for a digester operator, simulation modeling was used to investigate electricity bills, specifically demand charges. Findings show that demand charges are an important component for a digester operator to be mindful of when selecting the individual’s initial engine configuration and maintenance scheduling.
    Keywords: anaerobic digesters, time-of-use, net metering, dairy, best management practices, electricity generation, differential pricing, Agribusiness, Farm Management, Livestock Production/Industries, Production Economics,
    Date: 2016
  19. By: Alan R. Roe
    Abstract: This paper compares and contrasts the economic situation in Tanzania during the resurgence of gold and diamond production after 1999, with the situation that is now emerging as the country begins to exploit very large resources of natural gas mainly from the Indian Ocean. The mining boom after 1999, provided the authorities with significant lessons and opportunities associated with managing natural resources wealth. The paper assesses some of the key component issues and interprets these in the context of the new possibilities (and dangers) opened up by the natural gas revolution.
    Keywords: Tanzania, gas, liquefied natural gas, mining, energy generation
    Date: 2016
  20. By: Yassine Kirat (Université Paris 1 Panthéon-Sorbonne, Paris School of Economics)
    Abstract: This paper investigates the comparative advantage allowed by the U.S shale gas revolution to the U.S manufacturing sector. It estimates the response of various economic variables related to the U.S manufacturing sector using dynamic panel data models that allow each sector's response to vary with its energy intensity. We show that the decline in natural gas prices in the US relative to natural gas prices in Europe has led to an increase in industrial activity by nearly 2%. We show also that exports increased by 0,86% and imports decreased by 1,11%. Moreover, we find an empirical evidence that the relationship between natural gas prices and imports or exports has experienced structural breaks. Overall, we conclude that the shale gas revolution expended some industries but it does not have a strong effect on the manufacturing sector as a whole.
    Keywords: C23, Q43
    Date: 2016–06
  21. By: Yves Jégourel
    Abstract: Due to the existing geographical distance between the main consumption and production regions and the resulting significant logistical costs, the liquefied natural gas (LNG) market has historically been structured around long-term supply contracts indexed to oil prices. With the recent development of shale gas and sluggish European growth, excess LNG supply now fosters the development of spot markets, particularly in Asia, by nature more flexible and disconnected from oil prices. In this light, it is not impossible that the LNG industry becomes financialized on a relatively long-term basis.
    Keywords: commodity , contrats, energy, oil prices, spot markets, spot, natural gas
    Date: 2016–01
  22. By: Chia-Lin Chang (National Chung Hsing University, Taiwan); Michael McAleer (National Tsing Hua University, Taiwan; Erasmus University Rotterdam, the Netherlands; Complutense University of Madrid, Spain); Yanghuiting Wang (National Tsing Hua University, Taiwan)
    Abstract: There is substantial empirical evidence that energy and financial markets are closely connected. As one of the most widely-used energy resources worldwide, natural gas has a large daily trading volume. In order to hedge the risk of natural gas spot markets, a large number of hedging strategies can be used, especially with the rapid development of natural gas derivatives markets. These hedging instruments include natural gas futures and options, as well as Exchange Traded Fund (ETF) prices that are related to natural gas stock prices. The volatility spillover effect is the delayed effect of a returns shock in one physical, biological or financial asset on the subsequent volatility or co-volatility of another physical, biological or financial asset. Investigating volatility spillovers within and across energy and financial markets is a crucial aspect of constructing optimal dynamic hedging strategies. The paper tests and calculates spillover effects among natural gas spot, futures and ETF markets using the multivariate conditional volatility diagonal BEKK model. The data used include natural gas spot and futures returns data from two major international natural gas derivatives markets, namely NYMEX (USA) and ICE (UK), as well as ETF data of natural gas companies from the stock markets in the USA and UK. The empirical results show that there are significant spillover effects in natural gas spot, futures and ETF markets for both USA and UK. Such a result suggests that both natural gas futures and ETF products within and beyond the country might be considered when constructing optimal dynamic hedging strategies for natural gas spot prices.
    Keywords: Energy; natural gas; spot; futures; ETF; NYMEX; ICE; optimal hedging strategy; covolatility spillovers; diagonal BEKK
    JEL: C58 D53 G13 G31 O13
    Date: 2016–06–27
  23. By: Nurmakhanova Mira
    Abstract: CIS countries possess extensive natural resources and rely heavily on revenues from primary commodity exports, in particular petroleum and natural gas. We use Kazakhstan’s dependence on revenues from the oil sector to demonstrate commodity producer vulnerability to external commodity price fluctuations. The goal of this paper is to examine the nature of the relationship between real GDP, fiscal revenues, real exchange rate, price level, and oil prices. We employ Bayesian approach to time series data for the period 2000–2015. We find evidence of significant effect of oil prices on Kazakhstani economy where one of the key channels playing a role in the effect of oil prices on real activity is related to the real effective exchange rate. Additionally, results of this research indicate that one possible channel for oil price shocks to affect the real exchange rate is through the upward pressure on domestic price level.
    JEL: E58 F31 F43 Q4
    Date: 2016–06–21
  24. By: Ross, Heather (Resources for the Future)
    Abstract: Establishing a public-private agency to operate the US Strategic Petroleum Reserve, a common arrangement in other member nations of the International Energy Agency (IEA), can improve the reserve’s performance as an oil shock buffer in a systemically volatile market by strengthening its coordination with other government and commercial stockholdings and transportation infrastructure. Requiring oil companies to purchase and maintain oil in the reserve sufficient, in concert with other stocks, to meet the IEA’s 90-day strategic stockholding standard can protect the reserve from loss of functionality as a result of future federal budget–driven drawdowns or inadequate operating funds. The fee paid on oil production and imports to purchase the oil in the reserve will introduce an essential price corrective in the domestic oil market. Most important, it will release the large store of value locked in the little-used reserve to combat, through essential clean energy R&D, a monumentally bigger energy threat — climate change.
    Keywords: Oil, Climate, Clean Energy R&D, Mission Innovation, Strategic Petroleum Reserve
    Date: 2016–04–15
  25. By: Rangan Gupta (Department of Economics, University of Pretoria); Hylton Hollander (Department of Economics, Stellenbosch University, Stellenbosch)
    Abstract: This paper studies the effects of foreign (real) oil price shocks on key macroeconomic variables for South Africa: a net-importer of oil. We develop and estimate a small open economy new-Keynesian dynamic stochastic general equilibrium model with a role for oil in consumption and production. The substitutability of oil for capital and consumption goods is low, import price pass-through is incomplete, domestic and foreign prices and wages are sticky, and the uncovered interest rate parity condition holds imperfectly. Foreign real oil price shocks have a strong and persistent effect on domestic production and consumption activities and, hence, are a fundamental driver of output, inflation and interest rates in both the short- and long-run. Oil price shocks also generate a trade-off between output and inflation stabilisation. As a result, episodes of endogenous tightening of monetary policy slow the recovery of South Africa's real economy. Our findings go further to suggest an important role for oil prices in predicting the South African output during and after the recession that followed the 2008 global financial crisis.
    Keywords: Oil shocks, small open economy, DSGE model, South Africa
    JEL: E31 E32 E37 E52 Q41 Q43
    Date: 2016–06
  26. By: Ali, Hakim; Masih, Mansur
    Abstract: Recent literature draw attention to the issue whether the time-varying correlation and the heterogeneity in investment horizons has an effect on investor’s return. Earlier studies investigated the interdependence of Saudi Arabian Stock market with its major trading partners without taking care of the time-varying correlation and different investments horizons of the investors. We make the initial attempt to study the extent to which investors can benefit from portfolio diversification with the Shariah indices of the major trading partners (United States, China, Japan, Germane, India), using Saudi Arabia as a case study where investors recently suffered due to downward trend of oil price. In order to investigate that, the pertinent timevarying and time horizon techniques like, Multivariate GARCH-DCC, the continuous wavelet transform (CWT) and the maximal overlap discrete wavelet transform (MODWT) are applied. Our findings tend to indicate that the Saudi Arabian investors have portfolio diversification benefits with all major trading partners in the short investment horizon, However in the long run, all markets are correlated yielding minimum portfolio diversification benefits and more importantly Saudi Arabian Investors have portfolio diversification benefits with Indian Islamic equity market in almost all investment horizons.
    Keywords: portfolio diversification, Sharia (Islamic) indices, GARCH-DCC, Wavelets
    JEL: C22 C58 G11
    Date: 2016–06–22
  27. By: Boskovic, Branko (University of Alberta); Nøstbakken, Linda (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: Regulation often evolves, and affected consumers or firms may adjust their behavior in anticipation of potential changes to regulation. Using shifting land use regulation boundaries and oil lease prices from Canada, we estimate the effect of anticipated regulatory change on the value of land. We find that anticipated rezoning decreases the price of unregulated leases. Based on our estimates, not accounting for anticipation underestimates the total cost of the regulation by nearly one-third. Overall, the evidence suggests that anticipation effects are signi cant and that the cost of anticipated regulation is capitalized into land values.
    Keywords: Regulation; anticipation; land values; zoning; oil leases; endangered species.
    JEL: D44 Q30 Q52 Q58
    Date: 2016–06–27
  28. By: Chia-Lin Chang (Department of Applied Economics Department of Finance National Chung Hsing University Taichung, Taiwan.); Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute, Erasmus School of Economics Erasmus University Rotterdam and Tinbergen Institute, The Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain.); Chien-Hsun Wang (Institute of Statistics National Tsing Hua University, Taiwan.)
    Abstract: It is well known that that there is an intrinsic link between the financial and energy sectors, which can be analyzed through their spillover effects, which are measures of how the shocks to returns in different assets affect each other’s subsequent volatility in both spot and futures markets. Financial derivatives, which are not only highly representative of the underlying indices but can also be traded on both the spot and futures markets, include Exchange Traded Funds (ETFs), which is a tradable spot index whose aim is to replicate the return of an underlying benchmark index. When ETF futures are not available to examine spillover effects, “generated regressors” may be used to construct both Financial ETF futures and Energy ETF futures. The purpose of the paper is to investigate the covolatility spillovers within and across the US energy and financial sectors in both spot and futures markets, by using “generated regressors” and a multivariate conditional volatility model, namely Diagonal BEKK. The daily data used are from 1998/12/23 to 2016/4/22. The data set is analyzed in its entirety, and also subdivided into three subset time periods. The empirical results show there is a significant relationship between the Financial ETF and Energy ETF in the spot and futures markets. Therefore, financial and energy ETFs are suitable for constructing a financial portfolio from an optimal risk management perspective, and also for dynamic hedging purposes.
    Keywords: Exchange traded funds, Financial and energy sectors, Co-volatility spillovers, Spot and futures prices, Generated regressors, Diagonal BEKK.
    JEL: C58 G13 G23 G31 Q41
    Date: 2016–06
  29. By: Benoît Laine; Alex Van Steenbergen
    Abstract: This paper seeks to understand how the current tax subsidy for the ownership and use of employer-provided cars influence behaviour by its recipients. We first seek to clarify how it affects the choice about cars, i.e. the number of cars a household owns, their engine size and their value. Second, we study the impact of the subsidy on the propensity to use a car for commuting and the number of kilometres driven for commuting and for other, private purposes. The analysis has been made on the basis of the BELDAM survey, a rich dataset on mobility behaviour in Belgium.
    JEL: D62 H24 R41
    Date: 2016–02–24
  30. By: Linn, Joshua (Resources for the Future); Yang, Jun; Liu, Antung A.; Qin, Ping
    Abstract: To reduce pervasive problems of traffic congestion and air pollution, many cities in developing countries have considered restricting vehicle ownership. There is no empirical evidence on these programs’ efficacy and costs, but other prior work suggests that not having a car increases the cost of commuting and limits the set of job opportunities. However, these prior studies do not address the endogeneity of car ownership. We leverage a unique policy, the Beijing license plate lottery, to estimate the effect of restricting vehicles on distance traveled and commuting time, while addressing the endogeneity of car ownership. We find that adding a car has little impact on total distance traveled or time spent traveling, but a large impact on mode of travel. While reducing car ownership by 20 percent and car travel distance by 10 percent in Beijing, this policy has not added significantly to overall distances traveled or commute times.
    Date: 2016–05–20
  31. By: Fischer, Carolyn (Resources for the Future)
    Abstract: Globally and locally, government support policies for green goods (like renewable energy) are much more popular internationally than raising the cost of bads (as through carbon taxes). These support policies may encourage downstream consumption (renewable energy deployment) or upstream development and manufacturing of those technologies. The use of subsidies — particularly upstream ones — is disciplined by World Trade Organization agreements, and its subsidies code lacks exceptions for transboundary externalities such as human health or resource conservation, including those related to combating global climate change. The strategic trade literature has devoted little attention to the range of market failures related to green goods. This paper considers the market for a new environmental good that when consumed downstream may provide external benefits such as reduced emissions. The technology is traded internationally but provided by a limited set of upstream suppliers that may operate in imperfect markets, such as with market power or external scale economies. We examine the national incentives and global rationales for offering production and consumption subsidies in producer countries, allowing that some of the downstream market may lie in nonregulating third-party countries. Although technology producer countries can benefit from restraints on upstream subsidies, global welfare is higher without them, and market failures imply that optimal subsidies are even higher. We supplement the analysis with numerical simulations of the case of renewable energy, exploring optimal subsidies for the major renewable energy producing and consuming regions and the cost of restrictions on upstream subsidies.
    Keywords: International Trade, Subsidies, Imperfect Competition, Externalities, Emissions Leakage
    JEL: F13 F18 H21 Q5
    Date: 2016–04–14
  32. By: Fischer, Carolyn (Resources for the Future)
    Abstract: Industrial policy has long been criticized as subject to protectionist interests; accordingly, subsidies to domestic producers face disciplines under World Trade Organization agreements, without exceptions for environmental purposes. Now green industrial policy is gaining popularity as governments search for low-carbon solutions that also provide jobs at home. The strategic trade literature has largely ignored the issue of market failures related to green goods. I consider the market for a new environmental good (such as low-carbon technology) whose downstream consumption provides external benefits (such as reduced emissions). Governments may have some preference for supporting domestic production, such as by interest-group lobbying, introducing a political distortion in their objective function. I examine the national incentives and global rationales for offering production (upstream) and deployment (downstream) subsidies in producer countries, allowing that some of the downstream market may lie in nonregulating third-party countries. Restraints on upstream subsidies erode global welfare when environmental externalities are large enough relative to political distortions. Climate finance is an effective alternative if political distortions are large and governments do not undervalue carbon costs. Numerical simulations of the case of renewable energy indicate that a modest social cost of carbon can imply benefits from allowing upstream subsidies.
    Keywords: Green Industrial Policy, Emissions Leakage, Externalities, International Trade, Renewable Energy, Subsidies
    JEL: F13 F18 H21 Q5
    Date: 2016–04–14
  33. By: Habla, Wolfgang (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper demonstrates that unintended effects of climate policies (Green Paradox effects) also arise in general equilibrium when countries compete for mobile factors of production (capital and resources/energy). Second, it shows that countries have a rationale to use strictly positive source-based capital taxes to slow down resource extraction. Notably, this result comes about in the absence of any revenue requirements by the government, and independently of the elasticity of substitution between capital and resources in production. Third, the paper generalizes the results obtained by Eichner and Runkel (2012) by showing that the Nash equilibrium entails inefficiently high pollution.
    Keywords: Green Paradox; factor mobility; interjurisdictional competition; resource extraction; substitutability between capital and resources; capital taxation
    JEL: E22 H23 H77 Q31 Q58
    Date: 2016–06
  34. By: Sophie BERNARD (Polytechnique Montreal)
    Abstract: This paper studies the impact of environmental policies when firms can adjust product design as they see fit. In particular, it considers cross relationships between product design dimensions. For example, when products are designed to be more durable, this may add production steps and increase pollutant emissions during production. More generally, changes applied to one dimension can affect the cost or environmental performance of other dimensions. In this theoretical model, a firm interacts with consumers and a regulator. Before the production stage, the firm must choose the levels of three design dimensions: 1) energy performance during production, 2) energy performance during use, and 3) durability. Depending on the assumptions, the dimensions are said to be complementary, neutral, or competitive. The regulator can promote greener designs by applying targeted environmental taxes on emissions during production or consumption. The main results shed light on the consequences of modifying public policies. When some design dimensions are competitive, a targeted emission tax can result in environmental burden shifting, with an overall increase in pollution. This paper also explores the social optimum and the development of second-best policies when some policy instruments are imperfect. Under given conditions, a government would want to regulate and constraint the level of durability.
    Keywords: green design, environmental policies, durability
    JEL: L10 O13 Q53 Q55 Q58
    Date: 2016–05
  35. By: Nataraj, Shanthi; Harrison, Ann E.; Martin, Leslie A.; Hyman, Ben
    Abstract: India has a multitude of environmental regulations but a history of poor enforcement. Between 1996 and 2004, India's Supreme Court required 17 cities to enact Action Plans to reduce air pollution through a variety of command-and-control (CAC) environmental regulations. We compare the impacts of these regulations with the impact of changes in coal prices on establishment-level pollution abatement, coal consumption, and productivity growth. We find that higher coal prices reduced coal use within establishments, with price elasticities similar to those found in the US. In addition, higher coal prices are associated with lower pollution emissions at the district level. CAC regulations did not affect within-establishment pollution control investment or coal use, but did impact the extensive margin, increasing the share of large establishments investing in pollution control and reducing the entry of new establishments. For reducing SO2 emissions, our results suggest that higher coal prices were more effective in improving environmental outcomes than command and control measures.
    Date: 2015–11
  36. By: Koichiro Ito; Shuang Zhang
    Abstract: We develop a framework to estimate willingness to pay (WTP) for clean air from defensive investment. Applying this framework to product-by-store level scanner data on air purifier sales in China, we provide among the first revealed preference estimates of WTP for clean air in developing countries. A spatial discontinuity in air pollution created by the Huai River heating policy enables us to analyze household responses to long-run exposure to pollution. Our model allows heterogeneity in preference parameters to investigate potential heterogeneity in WTP among households. We show that our estimates provide important policy implications for optimal environmental regulation.
    JEL: L0 Q0 Q5 Q51 Q52 Q53 Q56 Q58
    Date: 2016–06
  37. By: Zhang, Xin (Peking University); Zhang, Xiaobo (Peking University); Chen, Xi (Yale University)
    Abstract: This paper estimates the monetary value of cutting PM2.5, a dominant source of air pollution in China. By matching hedonic happiness in a nationally representative survey with daily air quality data according to exact dates and locations of interviews in China, we are able to estimate the relationship between local concentration of particulate matter and individual happiness. By holding happiness constant, we calculate the tradeoff between the reduction in particulate matter and income, essentially a happiness-based measure of willingness-to-pay for mitigating air pollution. We find that people on average are willing to pay ¥539 ($88, or 3.8% of annual household per capita income) for a 1 μg/m3 reduction in PM2.5 per year per person.
    Keywords: willingness to pay, hedonic happiness, air pollution, China
    JEL: Q51 Q53 I31
    Date: 2016–06
  38. By: Stefano Carattini; Andrea Baranzini; Philippe Thalmann; Frédéric Varone; Frank Vöhringer
    Abstract: Turning greenhouse gas emissions pledges into domestic policies is the next challenge for governments. We address the question of the acceptability of cost-effective climate policy in a real-voting setting. First, we analyze voting behavior in a large ballot on energy taxes, rejected in Switzerland in 2015 by more than 2 million people. Energy taxes were aimed at completely replacing the current value-added tax. We examine the determinants of voting and find that distributional and competitiveness concerns reduced the acceptability of energy taxes, along with the perception of ineffectiveness. Most people would have preferred tax revenues to be allocated for environmental purposes. Second, at the same time of the ballot, we tested the acceptability of alternative designs of a carbon tax with a choice experiment survey on a representative sample of the Swiss population. Survey respondents are informed about environmental, distributional and competitiveness effects of each carbon tax design. These impacts are estimated with a computable general equilibrium model. This original setting generates a series of novel results. Providing information on the expected environmental effectiveness of carbon taxes reduces the demand for environmental earmarking. Making distributional effects salient generates an important demand for progressive designs, e.g. social cushioning or recycling via lump-sum transfers. The case of lump-sum recycling is particularly striking: it is sufficient to show its desirable distributional properties to make it one of the most preferred designs, which corresponds to a completely novel result in the literature. We show that providing proper information on the functioning of environmental taxes can close both the gap between acceptability ex ante and ex post and the gap between economists’ prescriptions and the preferences of the general public.
    Date: 2016–06
  39. By: Natalia Zugravu-Soilita (CEMOTEV, Université de Versailles Saint-Quentin-en-Yvelines)
    Abstract: We investigate the causal effects of trade intensity in environmental goods (EGs) on air and water pollution by treating trade, environmental policy and income as endogenous. We estimate a system of reduced-form, simultaneous equations on extensive data, from 1995 to 2003, for transition economies that include Central and Eastern Europe and the Commonwealth of Independent States. Our empirical results suggest that although trade intensity in EGs (pooled list) reduces CO? emissions mainly through an indirect income effect, it increases water pollution because the income-induced effect does not offset the direct harmful scale-composition effect. No significant effect is found for SO2 emissions with respect to the list of aggregated EGs. In addition to diverging effects across pollutants, we show that results are sensitive to EGs’ classification: e.g., cleaner technologies and products, end-of-pipe products, environmentally preferable products, etc. For instance, a double profit—environmental and economic—is found only for “cleaner technologies and products” in the models explaining greenhouse gases emissions. Interesting findings are discussed for imports and exports of various classifications of EGs. Overall, we cannot support global and uniform trade liberalization for EGs in a sustainable development perspective. Regional or bilateral trade agreements taking into account the states’ priorities could act as building blocks towards a global, sequentially achieved liberalization of EGs.
    Keywords: trade liberalization, environmental goods, environmental policy, pollution, transition countries
    JEL: F13 F14 F18 Q56
    Date: 2016–05
  40. By: Shouro Dasgupta (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici); Enrica De Cian (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici)
    Abstract: In this review we synthetize the existing contributions that use econometric approaches to examine the influence of institutions and governance on environmental policy, environmental outcomes, and investments. The paper describes how the relationship between institutions and various response variables related to environmental performance and environmental policy have been conceptualized and operationalized in the literature, and it summarizes the main findings. The second part of the paper outlines avenues for future research in the specific context of energy and climate change. We identify various opportunities for empirical work that have recently emerged with the growing availability of data in the field of green investments, climate, and energy policy. Expanding the current empirical literature towards these research topics is of scientific and policy relevance, and can provide important insights on the broader field of sustainability transition and sustainable development.
    Keywords: Institutions, Environmental Performance, Environmental Policy, Investments
    JEL: O10 Q5 Q00 P16
    Date: 2016–06
  41. By: Jean-Thomas Bernard (Department of Economics, University of Ottawa, Ottawa, ON); Md. Jakir Hussain (Department of Economics, University of Ottawa, Ottawa, ON); Mishaal Masud Sinha (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: In this paper we capitalize on our access to plant level data in examining the relative changes in emissions of three major pollutants | Biochemical Oxygen Demand (BOD), Total Suspended Solids (TSS), and Greenhouse Gas (GHG) | for Canadian pulp and paper mills covering the period from 2005 to 2013. Over this eight-year period emissions of these three pollutants decreased by 31.0%, 35.5% and 42.5%, respectively, for the plants included in our sample. Access to plant data allows us to investigate the roles played by some specific factors, such as changes in output, emission intensity, allocation of production among surviving plants, and plant closures, in contributing to the abrupt decline in emissions. Information on fairly homogeneous groups of plants, formed on the basis of production processes and output mixes, reveals a diverse picture of the roles played by these factors. For our analytical framework we adapt the factor decomposition technique proposed by Levinson (2015) to plant data. Our findings suggest that output change has been the main factor behind the reduction in emissions at the industry level, and that improvement of emission intensity by surviving plants | the so-called technique effect | brought a small, yet positive contribution. However, production shift among surviving plants and plant closure had almost no effects. Moreover, there are no indications that market operations determining plant output and plant survival led to lower emissions.
    Keywords: Biochemical Oxygen demand (BOD), Total Suspended Solids (TSS), Greenhouse Gas (GHG) Emissions, technique effect, pulp and paper industry
    JEL: Q55
    Date: 2016
  42. By: Stefano F. Verde; Christoph Graf; Thijs Jong and Claudio Marcantonini
    Abstract: Focusing on the industrial sector of the EU ETS, this study identifies and analyses the entries and the exits of installations into and from the system over the period 2005-2013. The overall number of exits was notable relative to the number of installations, and significantly greater than that of the entries. Further, we estimate a hazard model for the risk of an installation exiting the EU ETS, which identifies a number of different factors referring to the installation, the firm, and the economy, explaining the occurrence of this event. In addition to these, an “end-of-phase effect” is found, whereby the chances of exit were significantly higher in the final years of the EU ETS Phases I and II. This effect, related to the rules concerning the closure of an installation and the withdrawal of the relative allowances, is detrimental to the allocative efficiency of the system and, therefore, to its cost-effectiveness in emissions abatement. The evidence provided by the study and some of its methodological aspects may be useful for future attempts to identify investment leakage in the EU ETS.
    Keywords: EU ETS, entries and exits, manufacturing sector, hazard model, end-of-phase effect
    Date: 2016–03
  43. By: Gray, Wayne B. (Clark University); Linn, Joshua; Morgenstern, Richard D.
    Abstract: To estimate the potential impact of California’s cap-and-trade program on the state’s energy-intensive, trade-exposed manufacturing industries, this paper uses confidential plant-level Census data to model the effect of historical energy prices on plant-level output, employment, and value added, both inside and outside California, holding constant foreign energy prices. Simulation of the model for an assumed compliance cost of $10 per metric ton of carbon dioxide equivalent (CO2) in California and zero outside the state yields 0 to 3 percent short-term (one year) impacts for almost a third of the industries studied with no output-based rebating. The largest losses are estimated in glass container manufacturing (17 percent), paperboard mills (14 percent), automobile manufacturing (13 percent), iron and steel mills and ferroalloy manufacturing (12 percent), and poultry processing (11 percent); these industries are among the most energy intensive of those studied. Estimated losses for another group of five industries are about 10 percent. These losses should be compared to an overall average one year loss of about 5.7 percent across all the California energy-intensive, trade-exposed industries studied. Simulations of higher compliance costs (up to $22 per metric ton of CO2) result in correspondingly larger losses. Over the long run, defined as a five-year period, the results suggest that increases in California's energy prices relative to those in nearby states have smaller effects than those effects seen over 1 year. Over this longer period, the largest output losses are below 1 percent, with most industries experiencing output losses below 0.1 percent, although for a variety of technical reasons the authors offer caution when interpreting the industry-specific long-run results.
    Keywords: Carbon Price, Competitiveness, Leakage
    JEL: D21 H23 J23
    Date: 2016–05–13
  44. By: Burtraw, Dallas (Resources for the Future); McCormack, Kristen
    Abstract: The initial distribution of emissions allowances is usually thought to be independent of the emissions outcome, but free allocation can affect the efficiency and fairness of allowance trading. Inefficiency may result from thin allowance markets, poor price discovery, and regulatory or organizational complexities that hinder recognition of opportunity costs and innovation. Concerns about fairness may result from lack of access to allowances for some entities and lack of transparency with respect to transfers of substantial value in the program. We explore the role of consignment auctions in mitigating these concerns. These revenue-neutral auctions return revenue to the original allowance holders, whose compliance obligations can be met by reacquiring allowances through purchase. Consignment auctions have minimal administrative costs and do not necessarily involve government. Experience indicates that they can play an important role in a new market. EPA and states could consider consignment auctions in planning for the Clean Power Plan.
    Keywords: Climate Change, Clean Air Act, Clean Power Plan, Emissions Markets, Cap and Trade, Allocation, Environmental Markets
    JEL: H44 Q53 D23
    Date: 2016–06–02
  45. By: Weisbach, David (The University of Chicago Law School); Kortum, Sam
    Abstract: We consider the economics and the design of border adjustments (BAs) under a carbon tax. BAs are taxes on imports and rebates on exports on the emissions from the production of a good. They are thought to be a method of reducing inefficiencies from a unilateral carbon price, such as shifts in the location of production, known as leakage. After examining the basic economics of BAs, we examine three design issues: which goods BAs should apply to, which emissions from the production of those goods should be taxed, and from and to which countries BAs should apply. We conclude that BAs will impose high administrative costs and need strong welfare justifications.
    Keywords: carbon taxes, leakage, border adjustments
    Date: 2016–03–11
  46. By: Adrian Amelung
    Date: 2016–01
  47. By: Basak Bayramoglu (Economie Publique, INRA, AgroParisTech, Université Paris-Saclay); Michael Finus (Department of Economics, University of Bath); Jean-François Jacques (Université Paris-Est, ERUDITE, and LEDa-CGEMP, Université Paris-Dauphine)
    Abstract: We study the strategic interaction between mitigation (public good) and adaptation (private good) strategies in a climate agreement. We show that these two strategies are strategic substitutes considering various definitions of substitutability. Moreover, adaptation may cause mitigation levels between different countries to be no longer strategic substitutes but complements. We analyze under which conditions this leads to more succesful self-enforcing agreements. We argue that our results extend to many important externality problems involving public goods.
    Keywords: C71, D62, D74, H41, Q54
    Date: 2016–05
  48. By: Arvaniti, Maria (CERE and the Department of Economics, Umeå University)
    Abstract: Building upon the work of Pindyck(2012), I show how different assumptions regarding the utility and damage functions can support the immediate adoption of a stringent abatement policy. I employ an additive rather than a multiplicative form for the utility function and a damage function that accounts for extreme climate change. Using the distribution for temperature change and the economic impact provided by Pindyck (2012), based on information from the IPCC (2007) and recent IAMs, I estimate a simple measure of “willingness to pay". My specifications lead to significantly higher estimations for the WTP than in Pindyck and in some extreme cases to a value close to 1. Although one could not strongly argue which is the right specification for the model, the analysis suggests that seemingly small differences in modelling can have very different policy implications.
    Keywords: environmental policy; climate change; uncertainty; catastrophic outcomes; willingness to pay
    JEL: Q54
    Date: 2016–06–22
  49. By: Kris Bachus (HIVA, KU Leuven); Kristine Van Herck (HIVA, KU Leuven); Lize Van Dyck (HIVA, KU Leuven)
    Abstract: This research paper provides an overview of the main international climate finance and governance bodies, such as the Green Climate Fund (GCF), where Belgium was a Board member in 2015. The specific objectives of the study are to provide a comprehensive overview of the financial instruments that a donor can use to make contributions to the GCF taking into account the aim of the GCF and the institutional context (“upstream financial instruments”), the financial instruments that the Board of the GCF and national and regional intermediaries can use to mobilize private finance (“instream financial instruments”) and the financial instruments that the Board of the GCF can use to finance projects (“downstream financial instruments”).
    Keywords: Green Climate Fund, climate finance, climate flows, climate-related development finance, climate change, UNFCCC
    JEL: F35
    Date: 2015–06
  50. By: Bento, Antonio (University of Southern California, Sol Price School of Public Policy and NBER); Kanbur, Ravi; Leard, Benjamin
    Abstract: Incorporating carbon offsets in the design of cap-and-trade programs remains a controversial issue because of its potential unintended impacts on emissions. At the heart of this discussion is the issue of crediting of emissions reductions. Projects can be correctly, over- or under-credited for their actual emissions reductions. We develop a unified framework that considers the supply of offsets within a cap-and-trade program that allows us to compare the relative impact of over-credited offsets and under-credited emissions reductions on overall emissions under different levels of baseline stringency and carbon prices. In the context of a national carbon pricing scheme that includes offsets, we find that the emissions impacts of over-credited offsets can be fully balanced out by under-credited emissions reductions without sacrificing a significant portion of the overall supply of offsets, provided emissions baselines are stringent enough. In the presence of high predicted business-as-usual (BAU) emissions uncertainty or low carbon prices, to maintain the environmental integrity of the program, baselines need to be set at stringent levels, in some cases below 50 percent of predicted BAU emissions. As predicted BAU emissions uncertainty declines or as the carbon market achieves higher equilibrium prices, however, less stringent baselines can balance out the emissions impacts of over-credited offsets and under-credited emissions reductions. These results imply that to maintain environmental integrity of offsets programs, baseline stringency should be tailored to project characteristics and market conditions that influence the proportion of over-credited offsets to under-credited emissions reductions.
    Keywords: Carbon Offsets, Crediting, Environmental Integrity
    Date: 2016–03–21
  51. By: Adrian Amelung
    Date: 2016–03
  52. By: Edwin Zaccai
    Date: 2015
  53. By: Stefano Carattini (Haute école de gestion de Genève, University of Applied Sciences Western Switzerland and Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science); Alessandro Tavoni (Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science)
    Abstract: The market for voluntary carbon offsets has grown steadily in the last decade, yet it remains a very small niche. Most emissions from business travel are still not offset. This paper exploits a unique dataset examining the decision to purchase carbon offsets at two academic conferences in environmental and ecological economics. We find that having the conference expenses covered by one's institution increases the likelihood of offsetting, but practical and ethical reservations as well as personal characteristics and preferences also play an important role. We draw lessons from the effect of objections on the use of offsets and discuss the implications for practitioners and policy-makers. Based on our findings, we conclude that ecological and environmental economists should be more involved in the design and use of carbon offsets.
    Keywords: Voluntary Carbon Offsetting, Public Goods, Ecological Economics, Environmental Economics
    JEL: D6 H8 Q4
    Date: 2016–06

This nep-ene issue is ©2016 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.