nep-ene New Economics Papers
on Energy Economics
Issue of 2016‒07‒16
35 papers chosen by
Roger Fouquet
London School of Economics

  1. Offering Energy Efficiency under Imperfect Competition and Consumer Inattention By Tode, Christian
  2. Making the implicit explicit: A look inside the implicit discount rate By Schleich, Joachim; Gassmann, Xavier; Faure, Corinne; Meissner, Thomas
  3. Energieeffizienz & Rebound-Effekte im Kontext der Energiewende By Haack, Frederik; Nagel, Manuel; Richters, Oliver; Schäfer, Ernst; Wunderlich, Sebastian
  4. The history and politics of energy transitions Comparing contested views and finding common ground By Benjamin K. Sovacool
  5. Wind versus Nuclear Options for Generating Electricity in a Carbon Constrained World: Proceedings of the CSME International Congress 2016 By G. Cornelis van Kooten
  6. Policy interventions in renewable energy for sustainable development: is Ghana on the right path to achieve SDG 7? By Ishmael Ackah
  7. Renewable energy intermittency and its impact on thermal generation By Christoph Graf; Claudio Marcantonini
  8. Achieving Universal Electricity Access in Indonesia By Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB)
  9. Optimal Transmission Planning under the Mexican New Electricity Market By Juan Rosellón; Eric Zenón
  10. A Structural Model for Electricity Forward Prices By Benth, Fred Espen; Paraschiv, Florentina
  11. 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
  12. Viet Nam: Energy Sector Assessment, Strategy, and Road Map By Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB); Asian Development Bank (ADB)
  13. Fuel for life: Domestic cooking fuels and women's health in rural China? By Nie, Peng; Sousa-Poza, Alfonso; Xue, Jianhong
  14. Energy and Resilient Cities By OECD
  15. Innovation in Clean Coal Technologies: Empirical Evidence from Firm-Level Patent Data By Jürgen Kruse; Heike Wetzel
  16. The Effect of Natural Gas Shortages on the Mexican Economy By Alcaraz Carlo; Villavazo Martin Sergio
  17. Testing co-volatility spillovers for natural gas spot, futures and ETF spot using dynamic conditional covariances By Chia-Lin Chang; Michael McAleer; Yanghuiting Wang
  18. The California Fuel Tax Swap By Wachs, Martin; Garrett, Mark; Brown, Anne
  19. Do giant oilfield discoveries fuel internal armed conflicts? By Yu-Hsiang Lei; Guy Michaels
  20. Modelling OPEC behaviour. Theory and evidence By Pål Boug; Ådne Cappelen; Anders Rygh Swensen
  21. Modelling and testing volatility spillovers in oil and financial markets for USA, UK and China By Chia-Lin Chang; Michael McAleer; Jiarong Tian
  22. Oil shocks on unemployment in Central and Eastern Europe By Juan Carlos Cuestas; Luis A. Gil-Alana
  23. An Econometric Analysis of ETF and ETF Futures in Financial and Energy Markets Using Generated Regressors By Chang, C-L.; McAleer, M.J.; Wang, C-H.
  24. Governmental platform intermediation to promote alternative fuel vehicles By Dietrich, Antje-Mareike
  25. A Cointegration Analysis of Agricultural, Energy and Bio-Fuel Spot and Futures Prices By Allen, D.E.; Chang, C-L.; McAleer, M.J.; Singh, A.K.
  26. Investigating the carbon leakage effect on the environmental Kuznets curve using luminosity data By Steinkraus, Arne
  27. Acting Local!An Evaluation of the First Compliance Period of Tokyo’s Carbon Market By Sven Rudolph; Toru Morotomi
  28. “Lock-in” Effect of Emission Standard and Its Impact on the Choice of Market Based Instruments By Qian, Haoqi; Wu, Libo; Tang, Weiqi
  29. The WITCH 2016 Model - Documentation and Implementation of the Shared Socioeconomic Pathways By Emmerling, Johannes; Drouet, Laurent Drouet; Reis, Lara Aleluia; Bevione, Michela; Berger, Loic; Bosetti, Valentina; Carrara, Samuel; De Cian, Enrica; De Maere D'Aertrycke, Gauthier; Longden, Tom; Malpede, Maurizio; Marangoni, Giacomo; Sferra, Fabio; Tavoni, Massimo; Witajewski-Baltvilks, Jan; Havlik, Petr
  30. Mitigating Global Warming : A Real Options Approach By Marc CHESNEY; Pierre LASSERRE; Bruno TROJA
  31. Herausforderung Climate Engineering: Bewertung neuer Optionen für den Klimaschutz By Klepper, Gernot; Dovern, Jonas; Rickels, Wilfried; Barben, Daniel; Goeschl, Timo; Harnisch, Sebastian; Heyen, Daniel; Janich, Nina; Maas, Achim; Matzner, Nils; Scheffran, Jürgen; Uther, Stephanie
  32. Equilibrium to Equilibrium Dynamics in a Climate Change Economy By Song, Edward
  33. Changement climatique et familles politiques en Europe By Carine Moehler; Grégory Pieter; Edwin Zaccai
  34. Green nudges: Do they work? Are they ethical? By Christian Schubert
  35. The Economics and Ethics of Human Induced Climate Change By Clive L. Spash; Clemens Gattringer

  1. By: Tode, Christian (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Energy efficiency is considered to be a win-win situation for both the economy and the environment. Producing products and services at lower energy input and related input costs can contribute to climate change abatement and economic competitiveness. Actual implementation of energy efficiency falls short to expectations, though. For one thing, research suggests that consumer inattention is an underlying force for underinvestments. For another thing, energy supply markets are often characterized by imperfect competition. Do firms in the energy retail market have incentives to voluntarily introduce energy efficiency? Or should informational regulation inform inattentive consumers? In this article I show that consumer inattention and imperfect competition are the crucial drivers for firms' decisions to introduce or conceil energy efficiency to customers. I find two symmetric equilibria: One in which both firms introduce energy efficiency and one in which both firms conceil energy efficiency. Equilibrium coordination depends on the distribution of consumers that are attentive to energy effienciency and consumers that are not. Further, mandatory disclosure laws are found to be weakly welfare increasing.
    Keywords: Imperfect Competition; Consumer Inattention; Product Differentiation; Disclosure; Energy Efficiency
    JEL: D83 L13 L41
    Date: 2016–07–06
  2. By: Schleich, Joachim; Gassmann, Xavier; Faure, Corinne; Meissner, Thomas
    Abstract: Implicit discount rates (IDRs) are employed in energy models to capture household investment decisions, yet the factors behind the IDR and their respective implications for policy-making usually remain blurred and fractional. The proposed comprehensive framework distinguishes three broad categories of factors underlying the IDR for household adoption of energy-efficient technologies (EETs): preferences (notably over time, risk, loss, debt, and the environment), predictable (ir)rational behavior (bounded rationality, rational inattention, behavioral biases), and external barriers to energy efficiency. Existing empirical findings suggest that the factors underlying the IDRs that differ across household characteristics and technologies should be accounted for in energy models. Furthermore, the framework allows for a fresh look at the interplay of IDRs and policies. We argue that a simple observation of high IDRs (or observing correlations between IDRs and socio-economic characteristics) does not provide guid-ance for policy-making since the underlying sources cannot be identified. In-stead, we propose that some of the factors underlying the IDR - notably external barriers - can be changed (through directed policy interventions) whereas other factors - notably preferences and predictable (ir)rational behavior - are innate and can only be taken into account (through reactive policy interventions).
    Keywords: energy efficiency,energy modeling,implicit discount rate,energy policy,behavioral economics
    Date: 2016
  3. By: Haack, Frederik; Nagel, Manuel; Richters, Oliver; Schäfer, Ernst; Wunderlich, Sebastian
    Abstract: Abschlussbericht des Workshops „Energieeffizienz & Rebound-Effekte im Kontext der Energiewende“ bei der NachDenkstatt 2013, Oldenburg
    Abstract: Final report of the workshop “Energy Efficiency and Rebound Effects in the Context of the Energiewende” during the NachDenkstatt 2013, Oldenburg, Germany
    Keywords: energy efficiency,rebound effects,energy transition,Energiewende
    JEL: P18
    Date: 2015
  4. By: Benjamin K. Sovacool
    Abstract: According to some definitions, an energy transition refers to the time that elapses between the introduction of a new primary energy source, or prime mover, and its rise to claiming a substantial share of the overall market. According to one academic view, energy transitions take an incredibly long time to occur. Another view argues the opposite. It suggests that there have been many transitions at varying scales that have occurred quite quickly.that is, between a few years and a decade or so, or within a single generation. This paper holds that both sides are partly right, and partly wrong. After presenting evidence in support of either thesis, it elucidates four lessons for energy analysts and policy makers. Keywords: energy transitions, energy pathways, transition pathways, energy security
    Date: 2016
  5. By: G. Cornelis van Kooten
    Abstract: A mathematical programming model is used to examine the impact of carbon taxes on the optimal generation mix in Alberta’s electrical system. The model permits decommissioning of generating assets with high CO2 emissions and investment in new gas, wind and, in some scenarios, nuclear capacity. Although there are interties between Alberta and the U.S. and Saskatchewan, the focus is on the one to British Columbia, as wind energy can potentially be stored in reservoirs behind hydroelectric dams. Storage can also smooth out the net load facing nuclear facilities. In the model, a carbon tax facilitates early removal of coal-fired capacity, which is replaced by low-emissions gas plants. It is only when the carbon tax exceeds $80/tCO2 that wind enters the system, although wind is displaced by nuclear power if that option is permitted. Despite high upfront costs, nuclear outcompetes wind primarily because wind requires a great deal of gas capacity that is not needed with nuclear energy. While wind alone could lower CO2 emissions by two-thirds, nuclear can reduce them by more than 90%.
    Keywords: climate change, renewable energy, transmission capacity, energy storage
    JEL: Q42
    Date: 2016–06
  6. By: Ishmael Ackah (Accra, Ghana)
    Abstract: Goal 7 of the Sustainable Development Goals seeks to ensure universal access to affordable, reliable and modern energy services and increase substantially the share of renewable energy in the global energy mix by 2030. This target provides an opportunity as well as a challenge to African countries including Ghana. Indeed, the Ghana Energy Commission estimates that Ghana has about 34 potential hydro sites and enjoys about 330 days of sunshine annually. For instance, the three Northern regions, Volta and northern parts of Brong Ahafo have radiation levels with monthly average of between 4.0 and 6.5kWh/m2/day. These hydro and solar resources, coupled with abundant waste, wind potential of about 2000 MW and tidal potential can make Ghana a net exporter of power when the needed investment is provided. This paper examines the policy interventions in renewable energy in Ghana over the past 20 years. It also includes a review of the literature on the relationship between renewable energy investment and sustainable development and provides policy recommendations to fast-track renewable energy technology deployment in Ghana.
    Keywords: Renewable Energy, Ghana, Sustainable Development Goals, Energy supply and demand
    Date: 2016–06
  7. By: Christoph Graf; Claudio Marcantonini
    Abstract: Electricity production from renewable sources generally displaces thermal generation, which leads to lower CO2 emissions in the power sector. However, the intermittent nature of many renewable technologies leads to greater inefficiencies in the operation of existing fossil power plants. This inefficiency translates into higher production costs as well as a higher rate of emissions relative to output. In this paper we focus on Italian power installations. Using panel econometrics, we show that a 10% increase in photovoltaics and wind infeed has reduced yearly CO2 emissions of the average thermal installation by about 4% while the average plants emissions relative to its output have increased by about 0.3% between 2005 and 2014. Given the additional inefficiency caused by intermittent renewables, our results suggest that the average installation actually only achieves around 94% of the expected reductions. The effect is more pronounced for installations that have not been retrofitted and for installations serving peak demand.
    Keywords: Emission factors, load-cycling, inefficiency
    Date: 2016–03
  8. 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: Indonesia has achieved an impressive 84% electrification ratio, but faces significant challenges in reaching the remaining 16% of its households. This report describes Indonesia’s electrification environment and identifies barriers to achieving universal electricity access. Principles drawn from international best practices such as government commitment, enabling institutional environments, adequate and sustainable financing, and stakeholder coordination are discussed in the context of Indonesia’s energy sector. The report gives recommendations for establishing service standards, streamlining financing, setting appropriate targets, and monitoring and evaluation, as well as near-term steps to help achieve universal electricity access.
    Keywords: adb, asian development bank, asdb, asia, pacific, poverty asia, indonesia, indonesia electrification, electricity access, electrification ratios, SII, energy services, rural electrification, energy access, financing electricity access, lisdes, listrik pedesaan, sumba iconic island initiative, ta 8287-ino
    Date: 2016–03
  9. By: Juan Rosellón (Division of Economics, CIDE); Eric Zenón (Centro del Cambio Global y la Sustentabilidad en el Sureste, CCGSS)
    Abstract: This paper addresses electricity transmission planning under the new industry and institutional structure of the Mexican electricity market, which has engaged in a deep reform process after decades of a state-owned vertically-integrated non-competitive closed industry. Under this new structure, characterized by a nodal pricing system and an independent system operator (ISO), we analyze welfare-optimal network expansion with two modeling strategies. In a first model, we propose the use of an incentive price-cap mechanism to promote the expansion of Mexico networks. In a second model, we study centrally-planned grid expansion in Mexico by an ISO within a power-flow model. We carry out comparisons of these models which provide us with hints to evaluate the actual transmission planning process proposed by Mexican authorities (Prodesen). We obtain: 1) the Prodesen plan appears to be a convergent welfare optimal planning process, and 2) incentive regulation in Mexico could further help to implement such an optical process.
    Keywords: Electricity market reform, vertical and horizontal disintegration, transmission planning, nodal prices, Mexico.
    JEL: L51 L91 L94 Q40
    Date: 2016–04
  10. By: Benth, Fred Espen; Paraschiv, Florentina
    Abstract: Structural models for forward electricity prices are of great relevance nowadays, given the major structural changes in the market due to the increase of renewable energy in the production mix. In this study, we derive a spatio-temporal dynamical model based on the Heath-Jarrow-Morton (HJM) approach under the Musiela parametrization, which ensures an arbitrage-free model for electricity Forward prices. The model is fitted to a unique data set of historical price Forward curves. As a particular feature of the model, we disentangle the temporal from spatial (maturity) effects on the dynamics of forward prices, and shed light on the statistical properties of risk premia, of the noise volatility term structure and of the spatio-temporal noise correlation structures. We find that the short-term risk premia oscillates around zero, but becomes negative in the long run. We identify the Samuelson effect in the volatility term structure and volatility bumps, explained by market fundamentals. Furthermore we find evidence for coloured noise and correlated residuals, which we model by a Hilbert space-valued normal inverse Gaussian Lévy process with a suitable covariance functional.
    Keywords: spatio-temporal models, price forward curves, term structure volatility, risk premia, electricity markets
    JEL: C02 C13 C23
    Date: 2016–06
  11. By: Roula Inglesi-Lotz
    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
  12. 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: The latest energy sector assessment, strategy, and road map for Viet Nam of the Southeast Asia Energy Division of the Asian Development Bank (ADB) highlights energy sector performance, major development constraints, government development plans and strategy, previous support from ADB and other development partners, and ADB’s future support strategy in Viet Nam’s energy sector. The assessment, strategy, and road map will add on to ADB’s 2016–2020 country partnership strategy for Viet Nam. The report also provides energy sector background information for ADB investment and technical assistance operations.
    Keywords: Energy, Viet Nam, renewable energy, power generation plants, green growth strategy, country partnership strategy, sector assessment, hydropower plant, liquefied natural gas, energy consumption, noncommercial energy, crude oil
    Date: 2016–01
  13. By: Nie, Peng; Sousa-Poza, Alfonso; Xue, Jianhong
    Abstract: Using longitudinal and biomarker data from the China Family Panel Studies and the China Health and Nutrition Survey, this study examines the association between the type of domestic cooking fuel and the health of women aged Ï16 in rural China. Regarding three major domestic cooking fuels (wood/straw, coal and liquefied natural gas (LNG)), we find that, compared to women whose households cook with dirty fuels like wood/straw, women whose households cook with cleaner fuels like LNG have a significantly lower probability of chronic or acute diseases and are more likely to report better health. Even after controlling for unobserved individual heterogeneity, we find some evidence that women in households cooking with LNG are less likely to suffer from chronic/acute diseases. Cooking with domestic coal instead of wood or straw is also associated with elevated levels of having certain risks (such as systolic and diastolic blood pressure) related to cardiovascular diseases.
    Keywords: household cooking fuels,health,women,rural China
    JEL: I10 D10 J10 Q53
    Date: 2016
  14. By: OECD
    Abstract: This paper analyses the role of cities in energy policies to build resilience and assesses related energy policy practices in cities. It analyses how energy affects resilience in cities from the economic, environmental, social and institutional perspectives. It also assesses the policy practices of six cities; Barcelona (Spain), Bristol (UK), Kyoto (Japan), Munich (Germany), Perpignan (France) and Toronto (Canada). This paper outlines the building blocks of key policy strategies; adaptive energy management, robust energy management, redundant energy management, flexible energy management, inclusive energy management, resourceful energy management and integrated energy management. It proposes a number of policy measures in the building blocks for managing energy smartly in cities to build resilience.
    Keywords: energy, resilience, cities, urban development, renewables
    JEL: Q48 Q54 R11 R58
    Date: 2016–07–01
  15. By: Jürgen Kruse (University of Cologne); Heike Wetzel (University of Kassel)
    Abstract: This article empirically analyzes supply-side and demand-side factors expected to affect innovation in clean coal technologies. Patent data from 93 national and international patent offices is used to construct new firm-level panel data on 3,648 clean coal innovators over the time period 1978 to 2009. The results indicate that on the supply-side a firm’s history in clean coal patenting and overall propensity to patent positively affects clean coal innovation. On the demand-side we find strong evidence that environmental regulation of emissions, that is, CO2, NOX and SO2, induces innovation in both efficiency improving combustion and after pollution control technologies.
    Keywords: clean coal technologies, innovation, patents, technological change
    JEL: C33 O31 Q40 Q55
    Date: 2016
  16. By: Alcaraz Carlo; Villavazo Martin Sergio
    Abstract: The Mexican economy experienced a shortage of natural gas from the second quarter of 2012 through the second half of 2013. In order to deal with this problem, the state-owned national supplier of natural gas (Pemex) implemented a system that restricts the amount of natural gas used by the manufacturing sector. With this information, we have constructed a "shortage index" that represents the percentage of natural gas restricted per month in each region. We quantify the effect of natural gas shortages on the manufacturing sector and the GDP using a panel data model with state and time fixed effects. We estimate that the natural gas shortage reduced the Mexican GDP annual growth rate by 0.28 percentage points in the second quarter of 2013.
    Keywords: Public Economy
    JEL: D24 H40 O14
    Date: 2016–06
  17. 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.); Yanghuiting Wang (Institute of Statistics 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
  18. By: Wachs, Martin; Garrett, Mark; Brown, Anne
    Abstract: This project documents and analyzes the recent change in California transportation revenue collection programs that end discontinued the state sales tax on motor fuels and increased the state per gallon excise taxes on motor fuels.
    Keywords: Engineering, Motor fuel tax, sales taxes, transportation revenue, California
    Date: 2016–05–01
  19. By: Yu-Hsiang Lei; Guy Michaels
    Abstract: We use new data to examine the effects of giant oilfield discoveries around the world since 1946. On average, these discoveries increase per capita oil production and oil exports by up to 50%. But these giant oilfield discoveries also have a dark side: they increase the incidence of internal armed conflict by about 5-8 percentage points. This increased incidence of conflict due to giant oilfield discoveries is especially high for countries that had already experienced armed conflicts or coups in the decade prior to discovery.
    Keywords: natural resources; resource curse; petroleum; armed conflict; civil war
    JEL: O13 Q33 Q34
    Date: 2014–09
  20. By: Pål Boug; Ådne Cappelen (Statistics Norway); Anders Rygh Swensen
    Abstract: We analyse the behaviour of OPEC as a group for the period 1992 to 2015 by formulating a model that encompasses several of the alternatives discussed in the literature. There is no consensus in the literature on how OPEC behaviour affects crude oil prices. Some studies treat the oil market as a standard competitive market where OPEC plays no important role, whereas others argue that OPEC is a dominant producer with a competitive fringe or a cartel that adjusts its production to influence crude oil prices in a way that benefits the member states. We analyse the behaviour of OPEC as a group for the period 1992 to 2015 by formulating a model that encompasses several of the alternatives discussed in the literature. Applying a system-based cointegration analysis, we find support for the imperfect competition hypothesis regarding the output decision of OPEC. We also find, using full information maximum likelihood and recursive methods, that a dynamic equilibrium correction model with imperfect competition is reasonably stable in-sample and has somewhat better fit than an alternative dynamic model with weaker theoretical underpinnings. However, a forecasting exercise reveals that the dynamic equilibrium correction model breaks down following the OPEC meeting in November 2014. At the end of 2015 the model underpredicts the production of OPEC by almost 2.5 million barrels per day. We therefore conclude that the OPEC behaviour has changed significantly, probably to limit the role of competitors like American producers of shale oil.
    Keywords: OPEC behaviour; Economic and econometric modelling; Forecasting
    JEL: C51 C52 D43
    Date: 2016–07
  21. 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.); Jiarong Tian (Department of Quantitative Finance National Tsing Hua University Taiwan.)
    Abstract: The primary purpose of the paper is to analyze the conditional correlations, conditional covariances, and co-volatility spillovers between international crude oil and associated financial markets. The paper investigates co-volatility spillovers (namely, the delayed effect of a returns shock in one physical or financial asset on the subsequent volatility or co-volatility in another physical or financial asset) between the oil and financial markets. The oil industry has four major regions, namely North Sea, USA, Middle East, and South-East Asia. Associated with these regions are two major financial centers, namely UK and USA. For these reasons, the data to be used are the returns on alternative crude oil markets, returns on crude oil derivatives, specifically futures, and stock index returns in UK and USA. The paper will also analyze the Chinese financial markets, where the data are more recent. The empirical analysis will be based on the diagonal BEKK model, from which the conditional covariances will be used for testing co-volatility spillovers, and policy recommendations. Based on these results, dynamic hedging strategies will be suggested to analyze market fluctuations in crude oil prices and associated financial markets.
    Keywords: Co-volatility spillovers, Crude oil, Financial markets, Spot, Futures, Diagonal BEKK, Optimal dynamic hedging.
    JEL: C58 D53 G13 G31 O13
    Date: 2016–06
  22. By: Juan Carlos Cuestas (EestiPank); Luis A. Gil-Alana (University of Navarra)
    Abstract: The aim of this paper is to shine some light on the effect of oil price movements on unemployment in Central and Eastern Europe. In order to do so, we disentangle oil prices movements by their sign. From there we analyse the separate effect of positive and negative movements of oil prices on unemployment rates. We find that although oil prices and unemployment are not very much correlated in the short run, the effect of oil price shocks on the natural rate of unemployment goes in the same direction, i.e. increases or decreases in oil prices increase or decrease the natural rate of unemployment.
    Keywords: unemployment rates; oil prices shocks; Central and Eastern Europe
    JEL: C22 E39 Q43
    Date: 2016–06–28
  23. By: Chang, C-L.; McAleer, M.J.; Wang, C-H.
    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 co-volatility 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: 2016–06–05
  24. By: Dietrich, Antje-Mareike
    Abstract: Many governments promote green technological innovation within the automobile sector as a means of combating climate change. Most of these innovations are driven by alternative fuels. Buyer's premiums and governmental investment in service infrastructure are widely used. This paper investigates the question regarding whether market intervention is adequate by considering the two-sided market character of the automobile market. This study shows that network effects, competition effects triggered by more automobile users and decreasing marginal utilities of further service stations determine the welfare-efficient extent of governmental intervention. The results of the analysis indicate that governmental promotion of service infrastructure is reasonable, although governments should be cautious about buyer's premiums.
    Keywords: network effects,two-sided markets,platform intermediation,alternative fuel vehicles,climate change,regulation
    JEL: L15 L92 L98 O33 Q55 Q58
    Date: 2016
  25. By: Allen, D.E.; Chang, C-L.; McAleer, M.J.; Singh, A.K.
    Abstract: This paper features an analysis of the cointegration relationships among agricultural commodity, ethanol and Cushing crude oil spot and futures prices. The use of grains for the creation of bio-fuels has sparked fears that these demands are inflating food prices. We analyse approximately 10 years of daily spot and futures prices for corn, wheat, sugar ethanol and oil prices from Datastream for the period 19 July 2006 to 2 July 2015. The analysis, featuring Engle-Granger pairwise cointegration and Markov-switching VECM and Impulse Response Analysis, confirms that these markets have significant linkages which vary according to whether they are in low or high volatility regimes.
    Keywords: bio-fuels, time series, cointegration, Markov-switching, VECM, impulse responses, voloatility
    JEL: Q42 C22
    Date: 2016–07–04
  26. By: Steinkraus, Arne
    Abstract: This paper studies the effect of carbon leakage on the environmental Kuznets curve (EKC) using satellite nighttime light data. I show that nighttime lighting is an important variable for estimating carbon dioxide emissions that is superior to other existing indicators and covers all countries in the world. I find evidence of an inverted-U shaped relationship between light and, thus, greenhouse gas emissions and income, with a turning point at approximately US $50,000. However, the relationship is primarily driven by changes in the structure of international trade, implying strong carbon leakage effects. Consequently, environmental regulations that become operative in only one part of the world may fail without global coordination.
    Keywords: Environmental Kuznets Curve,Carbon Leakage,Nighttime Lighting
    JEL: F18 F64 Q50
    Date: 2016
  27. By: Sven Rudolph; Toru Morotomi
    Abstract: While the Paris COP21 Agreement blazes the trail for global climate policy, bottom-up market-based initiatives like the Tokyo Metropolitan Government Emissions Trading Scheme (TMG ETS) are still valuable supplements. The program has just finished its first compliance period: It’s high time for an interim evaluation.
    Date: 2016–05
  28. By: Qian, Haoqi; Wu, Libo; Tang, Weiqi
    Abstract: A country’s existing emission standard policy will lead to a “lock in” effect. When the country plans to adopt new market-based instruments to control greenhouse gas emissions, it must consider this effect as it chooses among instruments to avoid larger efficiency loss. In this paper, we find that the “lock in” effect will cause a kink point to occur on the marginal abatement cost (MAC) curve. This change of shape for the MAC curve reminds us to be cautious in choosing market-based instruments when applying Weitzman’s rule. We also introduce this concept into a dynamic multi-regional computable general equilibrium (CGE) model for China and simulate MAC curves for all regions. After applying Weitzman’s rule, we propose a timeline for introducing price instruments under different marginal benefit (MB) curve scenarios.
    Keywords: Lock-in Effect; Marginal Abatement Cost Curve; Cap and Trade of Carbon Emissions Rights; Carbon Tax
    JEL: C68 Q58
    Date: 2016–03
  29. By: Emmerling, Johannes; Drouet, Laurent Drouet; Reis, Lara Aleluia; Bevione, Michela; Berger, Loic; Bosetti, Valentina; Carrara, Samuel; De Cian, Enrica; De Maere D'Aertrycke, Gauthier; Longden, Tom; Malpede, Maurizio; Marangoni, Giacomo; Sferra, Fabio; Tavoni, Massimo; Witajewski-Baltvilks, Jan; Havlik, Petr
    Abstract: This paper describes the WITCH - World Induced Technical Change Hybrid - model in its structure, calibration, and the implementation of the SSP/RCP scenario implementation. The WITCH model is a regionally disaggregated hard-linked model based on a Ramsey type optimal growth model and a detailed bottom-up energy sector model. A particular focus of the model is the modeling or technical change and RnD investments and the analysis of cooperative and non-cooperative climate policies. Moreover, the WITCH 2016 version now includes land-use change modeling based on the GLOBIOM model, and air pollutants, as well as detailed modeling of the transport sector and the possibility for stochastic modeling. This version has been also used to implement the Shared Socioeconomic Pathways (SSPs) set of scenarios and RCP based climate policies to provide a new set of climate scenarios. In this paper, we describe in detail the mathematical formulation of the WITCH model, the solution method and calibration, as well as the implementation of the five SSP scenarios. This report therefore provides detailed information for interested users of the model, and for understanding the implementation of the different “worlds" of the SSP.
    Keywords: Integrated Assessment Model, SSPs, Climate Change, Scenarios, Research and Development/Tech Change/Emerging Technologies, Q54, C63,
    Date: 2016–07–04
  30. By: Marc CHESNEY; Pierre LASSERRE; Bruno TROJA
    Abstract: Mitigation and adaptation represent two solutions to the issue of global warming. While mitigation aims at reducing CO2 emissions and preventing climate change, adaptation encompasses a broad scope of techniques used to reduce the impacts of climate change once they have occurred. Both have direct costs on a country’s Gross Domestic Product, but costs also arise from temperature increases due to inaction. This paper introduces a tipping point in a real options model and analyzes optimal investment choices in mitigation and their timing.
    Keywords: adaptation, mitigation, real options, delay, tipping point, climate change, CO2, gross domestic product
    Date: 2016
  31. By: Klepper, Gernot; Dovern, Jonas; Rickels, Wilfried; Barben, Daniel; Goeschl, Timo; Harnisch, Sebastian; Heyen, Daniel; Janich, Nina; Maas, Achim; Matzner, Nils; Scheffran, Jürgen; Uther, Stephanie
    Abstract: [Einleitung] Der Begriff Climate Engineering (CE) fasst verschiedene Technologien zusammen, mit denen bewusst in das Klimasystem der Erde eingegriffen wird, um den anthropogenen Klimawandel zu begrenzen. Dabei lassen sich die CE-Technologien von den herkömmlichen Vermeidungs- und Anpassungsmaßnahmen durch die Tatsache abgrenzen, dass sie ansetzen, nachdem Treibhausgase in die Atmosphäre emittiert wurden, aber bevor es zu einer Anpassung an die Auswirkungen des Klimawandels kommt (Keith 2000). Sie können danach in zwei Gruppen eingeteilt werden, je nachdem ob sie eingesetzt werden, um die atmosphärische Treibhausgaskonzentration zu senken - und damit die Ursache des Klimawandels zurückzuführen - oder ob sie eingesetzt werden, um in die Strahlungsbilanz der Erde einzugreifen und damit die Symptome des Klimawandels abzumildern. Die Technologien der ersten Gruppe werden als Carbon Dioxid Removal (CDR)-Technologien und jene der anderen als Radiation Management (RM)-Technologien bezeichnet. Dabei ist Radiation Management der weitere Begriff, da sowohl Technologien zur direkten Beeinflussung der kurzwelligen (SRM) als auch der langwelligen (TRM) Strahlung beinhaltet sind. Entsprechend könnten Technologien zur ursächlichen Rückführung des Klimawandels eigentlich auch als Concentration Management bezeichnet werden, da theoretisch die atmosphärische Konzentration verschiedener Treibhausgase manipuliert werden könnte (Rickels et al. 2011: 41). Da aber derzeit nur die Konzentration von Kohlendioxid (CO2) beeinflusst wird, wird in der vorliegenden Studie der engere Begriff CDR verwendet. [...]
    Date: 2016
  32. By: Song, Edward
    Abstract: Different from past economic research, I incorporate recent theories by climatologists that burning fossil fuels increases the equilibrium level of carbon dioxide, CO2, in the atmosphere into a macroeconomic growth model. In the model, both production and consumption produces $CO_2$ emissions. I also assume that Anthropogenic Global Warming, AGW, not only damages production, but also capital stock and utility. In addition, a boundary condition similar to the Simpson-Kombayashi-Ingersoll (SKI) Limit holds, that there exists a critical temperature which leads to runaway greenhouse warming. Under these assumptions with no alternative fuel sources, and unlimited fossil fuel supply, the economy eventually flat lines (dies). Abatement only delays the inevitable. Using discount factors of .95 and .99, modest abatement policy can increase world welfare but do not increase life expectancy. When the discount factor is zero, conclusions of which policy is best is sensitive to the time horizon policy makers use. If a 100 year time horizon is used, modest consumption abatement may be the best policy, which may actually decrease life expectancy. However, a theoretical infinite time horizon may imply near zero emissions as the growth of damages is reduced and the probability of survival increases. Unfortunately, because humans have finite lives, this creates an ethical dilemma. In order for society to be better off, the current living must sacrifice by accepting policies that lead them to experience near zero output, consumption and near zero lifetime utility and welfare.
    Keywords: Macroeconomics, Economic Growth, Climate Change
    JEL: E19 O4 Q54
    Date: 2015–09–30
  33. By: Carine Moehler; Grégory Pieter; Edwin Zaccai
    Abstract: Le changement climatique constitue une thématique politique relativement récente dans les agendas politiques et électoraux. Souvent, dans le grand public, la question climatique est perçue à travers la médiatisation des grands sommets des Nations Unies consacrés à cette problématique (Rio de Janeiro en 1992, Kyoto en 1997, Copenhague en 2009, Paris en 2015, etc.). Mais les positions que défendent les différents pays lors de ces réunions ont bien entendu été préalablement construites, entre autres, sur les scènes nationales.Les partis politiques sont à la fois les reflets des opinions publiques et les initiateurs des régulières redéfinitions des orientations politiques qui entourent la thématique du changement climatique. Ils filtrent également les demandes politiques de la société civile qui paraissent compatibles avec leur programme et leur faisabilité, et les transforment. Aux États-Unis, la polarisation politique autour de la question du changement climatique est aisément détectable. Qu’en est-il en Europe ?L’opinion publique s’y déclare majoritairement convaincue de la réalité de changements climatiques d’origine anthropique et la trouve préoccupante, même s’il existe une part significative de la population qui en doute. Ce scepticisme se traduit-il toutefois dans les programmes électoraux de certains partis politiques, à l’instar de ce que l’on constate aux États-Unis ?Telle a été la question à la base du présent Courrier hebdomadaire. Annonçons cependant d’emblée que ce que nous désignerons ici par « climato-scepticisme », au sens strict de mise en doute du changement climatique d’origine humaine, n’est qu’un aspect assez partiel de cette étude. Nos résultats révèlent en effet que cette position climato-sceptique est extrêmement minoritaire parmi les formations politiques d’Europe.
    Keywords: Partis politiques; Europe; Changement climatique
    Date: 2015
  34. By: Christian Schubert (University of Kassel)
    Abstract: Environmental policies are increasingly informed by behavioral economics insights. ‘Green nudges’ in particular have been suggested as a promising new tool to encourage consumers to act in an environmentally responsible way, such as choosing renewable energy sources or saving energy. While there is an emerging literature on the instrumental effectiveness of behavioral policy tools such as these, their ethical assessment has largely been neglected. This paper attempts to fill this gap by, first, providing a structured overview of the most important contributions to the literature on pro-environmental nudges and, second, offering some critical guidelines that may help the practitioner come to an ethically informed assessment of nudges.
    Keywords: Nudges, Libertarian Paternalism, Behavioral Economics, Green Defaults, Autonomy
    Date: 2016
  35. By: Clive L. Spash; Clemens Gattringer
    Abstract: Human induced climate change poses a series of ethical challenges to the current political economy, although it has often be regarded by economists as only an ethical issue for those concerned about future generations. The central debate in economics has then concerned the rate at which future costs and benefits should be discounted. Indeed the full range of ethical aspects of climate change are rarely even discussed. Despite recent high profile and lengthy academic papers on the topic the ethical remains at best superficial within climate change economics. Recognising the necessary role of ethical judgment poses a problem for economists who conduct exercises in cost-benefit analysis and deductive climate modelling under the presumption of an objectivity that excludes values. Priority is frequently given to orthodox economic methodology, but that this entails a consequentialist utilitarian philosophy is forgotten while the terms of the debate and understanding is simultaneously restricted. We set out to raise the relevance of a broader range of ethical issues including: intergenerational ethics as the basis for the discount rate, interregional distribution of harm, equity and justice issues concerning the allocation of carbon budgets, incommensurability in the context of compensation, and the relationship of climate ethics to economic growth. We argue that the pervasiveness of strong uncertainty in climate science, incommensurability of values and non-utilitarian ethics are inherent features of the climate policy debate. That mainstream economics is ill-equipped to address these issues relegates it to the category of misplaced concreteness and its policy prescriptions are then highly misleading misrepresentations of what constitutes ethical action.
    Keywords: Climate change; economics; ethics; carbon budgets; discounting; compensation; harm; intergenerational equity; intragenerational distribution; justice; consequentialism; utilitarianism; incommensurability; risk; uncertainty; cost-benefit analysis; growth economy
    Date: 2016

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