nep-ene New Economics Papers
on Energy Economics
Issue of 2016‒07‒23
thirty-one papers chosen by
Roger Fouquet
London School of Economics

  1. Evidence, drivers and sources of distortions in the distribution of building energy ratings prior to and after energy efficient retrofitting By Collins, Matthew; Curtis, John
  2. Should energy efficiency be traded off for other product attributes? : an analysis of air-conditioner regulation in Japan By Kubo, Kensuke; Watanabe, Mariko; Kojima, Michikazu
  3. Energy efficiency gains from trade in intermediate inputs: firm-level evidence from Indonesia By Michele Imbruno; Tobias Ketterer
  4. Renewables, allowances markets, and capacity expansion in energy-only markets By Paolo Falbo; Cristian Pelizzari; Luca Taschini
  5. Solar off-grid markets in Africa: Recent dynamics and the role of branded products By Grimm, Michael; Peters, Jörg
  6. Renewable Technology Adoption and the Macroeconomy By Ted Temzelides; Borghan Narajabad; Bernardino Adao
  7. Strategic Charging Infrastructure Deployment for Electric Vehicles By Shen, Max; Li, Meng; He, Fang; Jia, Yinghao
  8. A comparative study on nuclear energy policy decision-making By Tae Seok Yong
  9. A Civil Super-Manhattan Project in Nuclear Research for a Safer and Prosperous World By Didier SORNETTE
  10. Move it! How an Electric Contest Motivates Households to Shift their Load Profile By Sylvain Weber; Stefano Puddu; Diana Pacheco
  11. A Comparison of Nineteen Various Electricity Consumption Forecasting Approaches and Practicing to Five Different Households in Turkey By T. O. Benli
  12. GAS Y ELECTRICIDAD. Cálculos económicos para una propuesta integral By Diana Mondino; Ricardo Molina
  13. Aggregation of demand-side flexibility in electricity markets: the effects of portfolio choice By Ieva Linkeviciute
  14. Constructing Taiwan’s motorcycle diffusion model against government subsidy By Shihping Kevin Huang; Lopin Kuo; Kuei-Lan Chou
  15. Volatility Spillovers for Spot, Futures, and ETF Prices in Energy and Agriculture By Chang, C-L.; Liu, C-P.; McAleer, M.J.
  16. Israel's Green Tax on Cars: Lessons in Environmental Policy Reform By OECD
  18. Performance and Combustion Characteristics of a Diesel Engine Fuelled by Camelina Sativa Biodiesel-Diesel Fuel By Hasan AYDOGAN; A. Engin OZCELIK; Mustafa ACAROGLU
  19. An Optimized Combination of a Large Grid Connected PV System along with Battery Cells and a Diesel Generator By Ferdowsi, Farzad; Sadeghi Yazdankhah, Ahmad; Kojabadi, Hossein Madadi
  20. Oil Prices and the Global Economy: Is It Different This Time Around? By Kamiar Mohaddes; M. Hashem Pesaran
  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. Modelling and Testing Volatility Spillovers in Oil and Financial Markets for USA, UK and China By Chang, C-L.; McAleer, M.J.; Tian, J.
  23. Are Land Values Related to Ambiet Air Pollution Levels? Hedonic Evidence from Mexico City By Lopamudra Chakraborti; David Ricardo Heres; Danae Hernández Cortés
  24. Optimal emission prices for a district heating system owner. By Sebastian Wehrle; Martin Kniepert
  25. Implications of Australia's Population Policy for Future Greenhouse Gas Emissions Targets By Corey J. A. Bradshaw and Barry W. Brook
  26. An economic assessment of GHG mitigation policy options for EU agriculture (EcAMPA 2) By Ignacio Pérez Domínguez; Thomas Fellmann; Franz Weiss; Peter Witzke; Jesús Barreiro-Hurlé; Mihaly Himics; Torbjörn Jansson; Guna Salputra; Adrian Leip
  27. The role of innovation and agglomeration for employment growth in the environmental sector By Horbach, Jens; Janser, Markus
  28. Emission intensity and firm dynamics: reallocation, product mix, and technology in India By Geoffrey Barrows; Hélène Ollivier
  29. Testing Gollier and Weitzman’s Solution of the “Weitzman-Gollier Puzzle” By Szekeres, Szabolcs
  30. Positively gamma discounting: combining the opinions of experts on the social discount rate By Mark C. Freeman; Ben Groom
  31. How Green are Economists? By Carattini, Stefano; Tavoni, Alessandro

  1. By: Collins, Matthew; Curtis, John
    Abstract: Energy performance certificates provide a measure of and raise the awareness of the energy efficiency of homes. The Sustainable Energy Authority of Ireland (SEAI) operates a grant aid scheme to incentivise residential energy efficient retrofits known as the Better Energy Homes (BEH) scheme, which was implemented in 2009. Since June 2010, participating homes have been required to undertake independent Building Energy Rating (BER) assessments of the home prior to and after the completion of energy efficient works. This study analyses the distribution of pre- and post-works BERs among participant households, using a regression discontinuity design to examine the significance of discontinuities at each BER grade threshold and to estimate the number of affected BERs in our sample. We find evidence of bunching at the more efficient side of thresholds of post-works BERs, while no evidence of bunching on the more efficient side was found among pre-works BERs. We find slight evidence of bunching on the less efficient side of certain thresholds in the pre-works distribution. We estimate counter-factual distributions around each threshold to examine the number of dwellings which may have been affected by potentially incorrect assessments. We analyse whether adjustment of BER assessments is systemic and whether market forces provide an incentive to adjust assessments. We find significant evidence of the misrepresentation of Building Energy Ratings but this is not found to be systemic. We also examine potential sources of adjustment, finding discontinuities in certain parameters coinciding with the areas where bunching is found to occur.
    Date: 2016–07
  2. By: Kubo, Kensuke; Watanabe, Mariko; Kojima, Michikazu
    Abstract: This paper examines the functioning of energy efficiency standards and labeling policies for air conditioners in Japan. The results of our empirical analysis suggest that consumers respond more to label information, which benchmarks the energy efficiency performance of each product to a pre-specified target, than to direct performance measures. This finding provides justification for the setting, and regular updating, of target standards as well as their use in calculating relative performance measures. We also find, through graphical analysis, that air conditioner manufacturers face a tradeoff between energy efficiency and product compactness when they develop their products. This tradeoff, combined with the semi-regular upward revision of minimum energy efficiency standards, has led to the growth in indoor unit size of air conditioners in recent years. In the face of this phenomenon, regulatory rules were revised so that manufacturers could adhere to less stringent standards if the indoor unit size of their product remains below a certain size. Our demand estimates provide no evidence that larger indoor unit size causes disutility to consumers. It is therefore possible that the regulatory change was not warranted from a consumer welfare point of view.
    Keywords: Energy policy, Energy, Energy efficiency standard and labeling, Promotion policies
    JEL: F15 O14 O30
    Date: 2016–06
  3. By: Michele Imbruno; Tobias Ketterer
    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 non-importers. To empirically isolate the impact of firm participation in foreign intermediate input markets we use ‘nearest neighbour’ propensity score matching and difference-in-difference 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.
    Date: 2016–06
  4. By: Paolo Falbo; Cristian Pelizzari; Luca Taschini
    Abstract: We investigate the combined effect of an Emission Trading System (ETS) and renewable energy sources on electricity generation investment in energy-only markets. We propose a simple representation of the capacity expansion decision between fossil fuel and renewable production, where electricity demand is uncertain. Increasing renewable capacity creates a tradeoff for large electricity producers: a higher share of renewable production can be priced at the higher marginal cost of fossil fuel production, yet the likelihood of achieving higher profits is reduced because more demand is met by cheaper renewable production. A numerical application of the model shows that producers prefer withholding investments in renewable energy sources, calling into question the long-term efficacy of an ETS in achieving decarbonisation goals.
    Date: 2016–07
  5. By: Grimm, Michael; Peters, Jörg
    Abstract: Solar off -grid technologies have become a lower-cost alternative to grid-based electrification in rural Africa. As a contribution to the United Nations' electricity for all goals, policy currently promotes branded solar products based on the assumption that high-quality standards are necessary. We provide evidence suggesting that nonbranded technologies have already made widespread inroads to rural households. Quality is not necessarily worse, in particular if the considerably lower end-user prices are accounted for. A justification of branded solar promotion programs can thus not only be based on energy access arguments, but rather on environmental concerns related to electronic waste. Moreover, we show that if poorer strata are to be reached, end-user subsidies are required.
    Keywords: rural electrification,energy access,energy poverty,technology adoption
    JEL: O13 O33 Q41
    Date: 2016
  6. By: Ted Temzelides (Rice University); Borghan Narajabad (Federal Reserve); Bernardino Adao (Banco de Portugal)
    Abstract: We study the adaptation of new technologies by renewable energy-producing firms in a dynamic general equilibrium model where energy is an input in the production of goods. Energy can come from fossil or renewable sources. Both require the use of capital, which is also needed in the production of final goods. Renewable energy firms can invest in improving the productivity of their capital stock. The actual improvement is subject to spillovers and comes at the cost of some renewable energy output. Together with spill-overs, this leads to under-investment in improving the productivity of renewable energy capital. In the presence of environmental externalities, the optimal allocation can be implemented through a Pigouvian tax on fossil fuel, together with a policy which promotes adaptation of new renewable technologies. We study numerical examples using world-economy data.
    Date: 2016
  7. By: Shen, Max; Li, Meng; He, Fang; Jia, Yinghao
    Abstract: Electric vehicles (EV) are promoted as a foreseeable future vehicle technology to reduce dependence on fossil fuels and greenhouse gas emissions associated with conventional vehicles. This paper proposes a data-driven approach to improving the electrification rate of the vehicle miles traveled (VMT) by a taxi fleet in Beijing. Specifically, based on the gathered real-time vehicle trajectory data of 46,765 taxis in Beijing, we conduct time-series simulations to derive insight for the public charging station deployment plan, including the locations of public charging stations, the number of chargers at each station, and their types. The proposed simulation model defines the electric vehicle charging opportunity from the aspects of charge time window, charging demand and charger availability, and further incorporates the heterogeneous travel patterns of individual vehicles. Although this study only examines one type of fleet in a specific city, the methodological framework is readily applicable to other cities and types of fleets with similar dataset available, and the analysis results contribute to our understanding on electric vehicles’ charging behavior. Simulation results indicate that: i) locating public charging stations to the clustered charging time windows is a superior strategy to increase the electrification rate of VMT; ii) deploying 500 public stations (each includes 30 slow chargers) can electrify 170 million VMT in Beijing in two months, if EV’s battery range is 80 km and home charging is available; iii) appropriately combining slow and fast chargers in public charging stations contributes to the electrification rate; iv) breaking the charging stations into smaller ones and spatially distributing them will increase the electrification rate of VMT; v) feeding the information of the availability of chargers at stations to drivers can increase the electrification rate of VMT; and vi) the impact of stochasticity embedded in the trajectory data can be significantly mitigated by adopting the dataset covering a longer period.
    Keywords: Engineering, trajectory dataset, plug-in hybrid electric vehicle, charging opportunity, electrification rate, public charging stations, vehicle miles traveled
    Date: 2016–05–01
  8. By: Tae Seok Yong (KISTEP(Korea Institute of Science & Technology Evaluation and Planning))
    Abstract: Today many countries are operating nuclear power plants. According to the 2014 IAEA report, there are 438 operational nuclear power reactors in 30 countries. By the way, there has been a change of nuclear energy policy decision-making in many countries after Fukushima nuclear power plant accident. Following the Fukushima nuclear disaster, Germany shut down the old generation of nuclear reactors and pledged to close the rest by 2022. Switzerland has banned the construction of new reactors. Belgium is considering phasing out its nuclear plants. On the other hand, France decided to extend the life of existing nuclear reactors. A fifth new reactor is under construction in Finland( can national nuclear energy policy decision-making to the same external shock be so different? This study attempts to answer this question. First of all, this study examines determinants influencing on nuclear energy policy decision-making, such as energy security, climate change, public acceptance, etc. And this study discovers that the complex causal condition of the determinants of policy decision-making. This study is expected to give substantive and comprehensive information for nuclear energy policy decision makers.
    Keywords: nuclear energy, policy decision-making, policy change, comparative study
  9. By: Didier SORNETTE (ETH Zurich and Swiss Finance Institute)
    Abstract: Humankind is confronted with a "nuclear stewardship curse'', facing the prospect of needing to manage nuclear products over long time scales in the face of the short-time scales of human polities. I propose a super Manhattan-type effort to rejuvenate the nuclear energy industry to overcome the current dead-end in which it finds itself, and by force, humankind has trapped itself in. A 1% GDP investment over a decade in the main nuclear countries could boost economic growth with a focus on the real world, epitomised by nuclear physics/chemistry/engineering/economics with well defined targets. By investing vigorously to obtain scientific and technological breakthroughs, we can create the spring of a world economic rebound based on new ways of exploiting nuclear energy, both more safely and more durably.
    Keywords: social instabilities, nuclear stewardship, innovation, investment
    JEL: O30 Q43 N70
  10. By: Sylvain Weber (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland); Stefano Puddu (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland); Diana Pacheco (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland)
    Abstract: Photovoltaic systems generate electricity around noon, when many homes are empty. Conversely, residential electricity demand peaks in the evening, when production from solar sources is impossible. Based on a randomized control trial, we assess the effectiveness of alternative demand response measures aimed at mitigating these imbalances. More precisely, through information feedback and financial rewards, we encourage households to shift electricity consumption toward the middle of the day. Using a difference-in-differences approach, we find that financial incentives induce a significant increase of the relative consumption during the period of the day when most solar radiation takes place. Households mostly achieve this load shifting by decreasing evening consumption. Information feedback pushes households to decrease overall consumption, but induces no load shifting.
    Keywords: electricity usage, solar energy, demand response, randomized control trial, smart metering.
    JEL: C93 D12 L94 Q41
    Date: 2016–07
  11. By: T. O. Benli
    Abstract: The accuracy of the household electricity consumption forecast is vital in taking better cost effective and energy efficient decisions. In order to design accurate, proper and efficient forecasting model, characteristics of the series have to been analyzed. The source of time series data comes from Online Enerjisa System, the system of electrical energy provider in capital of Turkey, which consumers can reach their latest two year period electricity consumptions; in our study the period was May 2014 to May 2016. Various techniques had been applied in order to analyze the data; classical decomposition models; standard typed and also with the centering moving average method, regression equations, exponential smoothing models and ARIMA models. In our study, nine teen different approaches; all of these have at least diversified aspects of methodology, had been compared and the best model for forecasting were decided by considering the smallest values of MAPE, MAD and MSD. As a first step we took the time period May 2014 to May 2016 and found predicted value for June 2016 with the best forecasting model. After finding the best forecasting model and fitted value for June 2016, than validating process had been taken place; we made comparisons to see how well the real value of June 2016 and forecasted value for that specific period matched. Afterwards we made electrical consumption forecast for the following 3 months; June-September 2016 for each of five households individually.
    Date: 2016–07
  12. By: Diana Mondino; Ricardo Molina
    Abstract: Entre el 2014 y el 2015 se realizaron una serie de reuniones en las aulas de la UCEMA, con el auspicio del Centro Interdisciplinario de Políticas, Negocios y Economía (CIPNE), donde se reunieron más de cincuenta especialistas de distintas áreas de estudio con el propósito de elaborar una propuesta integral para el sector de gas y electricidad de la Argentina. Los objetivos de esa propuesta fueron identificados como: a) eliminar el déficit fiscal proveniente de los subsidios económicos a la energía con tarifas razonables; b) destruir el círculo vicioso entre necesidades de energía y las necesidades de divisas para afrontar las crecientes importaciones; c) lograr inversiones para el sector energético equivalentes al 5/7% del PBI por año; y d) recuperar el rol regulatorio del Estado que ha devenido en los últimos años en un elevado intervencionismo de los mercados energéticos domésticos. La propuesta debía surgir a partir de soluciones innovadoras, compatibles con las mejores prácticas internacionales y con altos estándares de calidad de servicio.
    Date: 2016–07
  13. By: Ieva Linkeviciute (Copenhagen Business School)
    Abstract: Aggregation of demand-side flexibility for balancing purposes is seen as one way to cope with the challenges imposed by increasing share of renewable energy sources in the future power system. The value of demand-side flexibility has attracted attention of researchers and industry a while ago. However, there is still a lack of discussion whether the composition of various flexibility sources could bring additional value in optimizing schedules of flexible load. This paper examines the role of flexible demand aggregators and the effects of their portfolio choice on payments in balancing market and compensations to flexibility providers. It also proposes a game theoretical model which allows to determine optimal flexible load schedules ensuring highest savings in balancing market. Seven scenarios representing portfolios with different compositions of flexibility sources are set to investigate the Nordic power market. Results show that the aggregator’s payments in balancing market and compensations to consumers for provided flexibility depend on the type of flexibility sources in the portfolio. Also, the difference in forecasted and actual reductions in imbalance payments is affected by the portfolio composition. However, there is no significant value in combining all flexibility sources in the portfolio. This means that in order to maximize the value of flexible demand the aggregators might choose to specialize in certain types of flexibility sources.
    Keywords: Demand-side management, flexibility, aggregation, electricity market, smart grid
  14. By: Shihping Kevin Huang (National Chiao Tung University); Lopin Kuo (Tamkang University); Kuei-Lan Chou (National Chiao Tung University)
    Abstract: Government plays an important role in promoting green consumption. However, insofar, most studies are qualitative based. The novelty of this research is to provide quantitative evidence to support the existing literature. We try to examine the connection between government policy initiatives and green consumption in Taiwan. We choose motorcycle industry as the basis of our analysis. Motorcycle is a major green-house gas emission contributor in Taiwan. Consequently, we explore factors associated with the diffusion of electric motorcycle and attempt to forecast the diffusion in Taiwan. The results show that small electric motorcycles are likely to gain a competitive advantage in Taiwan’s market after 2018. Government should gradually reduce its subsidy as the market become mature.
    Keywords: government subsidy, greenhouse gas emission, Taiwan
    JEL: D12
  15. By: Chang, C-L.; Liu, C-P.; McAleer, M.J.
    Abstract: The agricultural and energy industries are closely related, both biologically and financially. The paper discusses the relationship and the interactions on price and volatility, with special focus on the covolatility spillover effects for these two industries. The interaction and covolatility spillovers, or the delayed effect of a returns shock in one asset on the subsequent volatility or covolatility in another asset, between the energy and agricultural industries is the primary emphasis of the paper. Although there has already been significant research on biofuel and biofuel-related crops, much of the previous research has sought to find a relationship among commodity prices. Only a few published papers have been concerned with volatility spillovers. However, it must be emphasized that there have been numerous technical errors in the theoretical and empirical research, which needs to be corrected. The paper not only considers futures prices as a widely-used hedging instrument, but also takes an interesting new hedging instrument, ETF, into account. ETF is regarded as index futures when investors manage their portfolios, so it is possible to calculate an optimal dynamic hedging ratio. This is a very useful and interesting application for the estimation and testing of volatility spillovers. In the empirical analysis, multivariate conditional volatility diagonal BEKK models are estimated for comparing patterns of covolatility spillovers. The paper provides a new way of analyzing and describing the patterns of covolatility spillovers, which should be useful for the future empirical analysis of estimating and testing covolatility spillover effects.
    Keywords: Energy and agriculture, covolatility spillovers, spot prices, futures prices, exchange traded funds, biofuels, optimal dynamic hedging
    JEL: C32 C58 G13 Q14 Q42
    Date: 2016–06–02
  16. By: OECD
    Abstract: In recent decades, Israel’s growing population and rising incomes have seen consumption increase substantially, bringing with it considerable pressure on the environment. One of the main environmental pressures is from the ever-increasing transport activity, especially the use of private vehicles. Although travelling in a private vehicle brings benefits to the individual using it, this entails costs to society as a whole. These social costs extend beyond the private costs of the car and the fuel borne by the car user, imposing a burden on public health and the environment. Transport involves noise, local air pollution, and contributes to climate change, congestion, accidents, and wear and tear to infrastructure. All these negatively affect public health and quality of life in general, a fact not taken into account when an individual chooses whether or not to buy a car. This is known as a “market failure”, because the price of a car does not fully reflect the social costs of using it. Governments can correct market failures like these through policies that ensure that the actual costs to society are incorporated within the price of a car, thus influencing consumers’ purchases. This paper describes how Israel developed an innovative scheme to encourage consumers to choose less polluting cars. The Green Tax scheme targets reductions in all polluting vehicle emissions, not only carbon dioxide (CO2). The paper outlines the design process, reflects on the challenges encountered and the environmental, economic and social impacts. It concludes by discussing the wider lessons that are raised for other governments seeking to tackle similar environmental problems.
    Date: 2016–07–19
  17. By: Deniz Aytaç (Hitit University)
    Abstract: With the purpose of internalization of the adverse externalities in struggling with the environmental pollution, the government excises several of taxes in different ratios for the varieties of energy. It has been determined in my study that the energy which is an effective source of income and suitable for Ramsey pricing due to its negative elasticity as a public income, has been in an increasing course due to the increase in implied taxes between 1998 and 2014 as well as increase in the price indices along with the policies applied and consequently it has not provide efficient results for the purpose of reduction of greenhouse gas. As a result, the important share of the energy taxes within the price structure yields positive results in terms of creating public revenues, however as far as the international trade is concerned; the implied energy taxes and hence high cost of energy can create a situation where it can hamper the competitiveness of Turkey. For the purpose of tackling target environmental pollution by reducing the carbon emissions, the current tax system with its consumption based structure would not serve to the purpose. Realization of this target may be possible by diversification of taxes and other political tools including emission taxes within the financial system.
    Keywords: Energy Prices, Implicit Tax Rates, Greenhouse Gas Emission
    JEL: Q48 H20 H23
  18. By: Hasan AYDOGAN (Selcuk University, Technology Faculty,); A. Engin OZCELIK (Selcuk University, Technology Faculty,); Mustafa ACAROGLU (Selcuk University, Technology Faculty,)
    Abstract: Using renewable alternative fuels in the diesel engines has been grown recently. The aim of the study was to experimentally investigate and compare the performance, combustion characteristics of a diesel engine fuelled by different fuels, which included diesel, biodiesel, mixtures. All the tests were conducted using a four-cylinder direct-injection diesel engine at different engine load conditions. It was found that the optimum alternative fuel among all the tested fuels was the B50 fuel blend as its use increased the maximum engine thermal efficiency by 6.5% and decreased the lowest engine brake specific fuel consumption by 5% compared to the diesel fuel. The change of fuel type had no significant effect on the combustion start timing while the combustion duration increased with increasing the engine load. All the tested fuels did no negatively affect the engine stability.
    Keywords: Camelina sativa Biodiesel, Engine Performance, Combustion Characteristics
    JEL: Q40 Q42
  19. By: Ferdowsi, Farzad; Sadeghi Yazdankhah, Ahmad; Kojabadi, Hossein Madadi
    Abstract: Environmental, economical and technical benefits of photovoltaic (PV) systems make them to be used in many countries. The main characteristic of PV systems is the fluctuations of their output power. Hence, high penetration of PV systems into electric network could be detrimental to overall system performance. Furthermore, the fluctuations in the output power of PV systems make it difficult to predict their output, and to consider them in generation planning of the units. The main objective of this paper is to propose a hybrid method which can be used to control and reduce the power fluctuations generated from large grid- connected PV systems. The proposed method focuses on using a suitable storage battery along with curtailment of the generated power by operating the PV system below the maximum power point (MPP) and deployment of a diesel generator. These methods are analyzed to investigate the impacts of implementing them on the economical benefits that the PV system owner could gain. To maximize the revenues, an optimization problem is solved.
    Keywords: Diesel generator, Economic analysis, Grid- connected, Photovoltaic system, Power curtailment, Storage battery.
    JEL: L69
    Date: 2016–07–13
  20. By: Kamiar Mohaddes; M. Hashem Pesaran
    Abstract: The recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the US and the global economy. In this paper, using a quarterly multi-country econometric model, we first show that a fall in oil prices tends relatively quickly to lower interest rates and inflation in most countries, and increase global real equity prices. The effects on real output are positive, although they take longer to materialize (around 4 quarters after the shock). We then re-examine the effects of low oil prices on the US economy over different sub-periods using monthly observations on real oil prices, real equity prices and real dividends. We confirm the perverse positive relationship between oil and equity prices over the period since the 2008 financial crisis highlighted in the recent literature, but show that this relationship has been unstable when considered over the longer time period of 1946.2016. In contrast, we find a stable negative relationship between oil prices and real dividends which we argue is a better proxy for economic activity (as compared to equity prices). On the supply side, the effects of lower oil prices differ widely across the different oil producers, and could be perverse initially, as some of the major oil producers try to compensate their loss of revenues by raising production. Taking demand and supply adjustments to oil price changes as a whole, we conclude that oil markets equilibrate but rather slowly, with large episodic swings between low and high oil prices.
    Keywords: Oil prices, equity prices, dividends, economic growth, oil supply, global oil markets, and international business cycle
    JEL: C32 E17 E32 F44 F47 O51 Q43
    Date: 2016–07–06
  21. 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); Jiarong Tian (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: 2016–07–18
  22. By: Chang, C-L.; McAleer, M.J.; Tian, J.
    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: 2016–06–04
  23. By: Lopamudra Chakraborti (Division of Economics, CIDE); David Ricardo Heres (Division of Economics, CIDE); Danae Hernández Cortés (Division of Economics, CIDE)
    Abstract: The averange resident of Mexico City suffers unhealthy levels of air quality for the most part of the year. Nevertheless, the uneven distribution of firms and road traffic across the city, together with wind patterns and differences in microclimates generates localized pollution concentrations. The objective of this study is to investigate wheter residents of Mexico City value cleaner air taking advantage of the variation in pollution levels and land values observed across neighborhoods within the city. Contrary to most studies of this type, commonly focused in developed countries, ours is based on land values reported by external appraisals. The panel nature of our data and inclusion of time varying controls for neighborhood characteristics and local economic conditions allows for correction of potential endogeneity bias arising due to unobserved factors that influence both current pollution levels and property values. Our results suggets that air quality improvements lead to an increase in land values by approximately 3% in Mexico City which is equivalent to a marginal willingsess to pay of up to %178 (2010) pesos per m^2. Thus, we provide an estimate of the possible benefits of public policy dedicated to air quality improvements, measured as the value that Mexico City's residents have for cleaner air.
    Keywords: Air Quality, Hedonic Valuation, Willingness to Pay, Environmental amenities, Mexico City
    JEL: Q51 Q53 R14 R21
    Date: 2016–02
  24. By: Sebastian Wehrle (Institute for Sustainable Economic Development, University of Natural Resources and Life Sciences Vienna. Wien Energie GmbH); Martin Kniepert (Institute for Sustainable Economic Development, University of Natural Resources and Life Sciences Vienna)
    Abstract: Low emission prices have stirred up discussion about political measures that aim to increase emission prices. District heating system operators, often municipal utilities, use a variety of heat generation technologies that are affected by the emission trading system. We examine whether district heating system owners have an incentive to support measures that increase emission prices in the short term. Therefore, we (i) develop a simplified analytical framework to analyse optimal decisions of a district heating operator, and (ii) investigate the market-wide effects of increasing emission prices, in particular the pass-through of emission prices to power prices. Using the clustered unit commitment model MEDEA of the common Austrian and German power system, we estimate a pass-through from emission prices to power prices between 1.1 and 0.75, depending on the absolute emission price level. Under reasonable assumptions regarding heat generation technologies, the pass-through from higher emission prices to power prices is about twice as high as required to make low-emission district heating system owners better off.
    Keywords: : Emission Price, Pass Through, Dispatch Model, District Heating, Optimization
    JEL: Q41
    Date: 2016–06
  25. By: Corey J. A. Bradshaw and Barry W. Brook
    Abstract: Australia's high per capita emissions rates makes it is a major emitter of anthropogenic greenhouse gases, but its low intrinsic growth rate means that future increases in population size will be dictated by net overseas immigration. We constructed matrix models and projected the population to 2100 under six different immigration scenarios. A constant 1 per cent proportional immigration scenario would result in 53 million people by 2100, producing 30.7 Gt CO2-e over that interval. Zero net immigration would achieve approximate population stability by mid-century and produce 24.1 Gt CO2-e. Achieving a 27 per cent reduction in annual emissions by 2030 would require a 1.5- to 2.0-fold reduction in per-capita emissions; an 80 per cent reduction by 2050 would require a 5.8- to 10.2-fold reduction. Australia's capacity to limit its future emissions will therefore depend primarily on a massive technological transformation of its energy sector, but business-as-usual immigration rates will make achieving meaningful mid-century targets more difficult.
    Keywords: demography, fertility, dependency ratio, emissions, climate change
    Date: 2016–07–01
  26. By: Ignacio Pérez Domínguez (European Commission – JRC); Thomas Fellmann (European Commission – JRC); Franz Weiss (European Commission – JRC); Peter Witzke (EuroCARE GmbH); Jesús Barreiro-Hurlé (European Commission – JRC); Mihaly Himics (European Commission – JRC); Torbjörn Jansson (Swedish University of Agricultural Sciences); Guna Salputra (European Commission – JRC); Adrian Leip (European Commission – JRC)
    Abstract: The project 'Economic Assessment of GHG mitigation policy options for EU agriculture (EcAMPA)' is designed to assess some aspects of a potential inclusion of the agricultural sector into the EU 2030 climate policy framework. In the context of possible reductions of non-CO2 emissions from EU agriculture, the scenario results of the EcAMPA 2 study highlight issues related to production effects, the importance of technological mitigation options and the need to consider emission leakage for an effective reduction of global agricultural GHG emissions.
    Keywords: greenhouse gas emissions, agriculture, mitigation policy, climate policy, EU, CAPRI model, agricultural markets, emission leakage
    JEL: Q18 Q58 Q02 Q11
    Date: 2016–06
  27. By: Horbach, Jens; Janser, Markus (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "The environmental sector is supposed to yield a dual benefit: its goods and services are intended to help to tackle environmental challenges and its establishments should create new jobs. However, it is still unclear in empirical terms whether that really is the case. This paper investigates whether employment growth in 'green' establishments with 'green' products and services is higher compared to other establishments. Furthermore, the main factors determining labor demand in this field are analyzed. We use linked employment and regional data for Germany. The descriptive results show that the environmental sector is characterized by disproportionately high employment growth. The application of both a generalized linear mixed model and an instrumental variables regression reveals that especially innovation and industry agglomeration foster employment growth in establishments in the environmental sector. Establishments without green products and services show a smaller increase in employment, even if they are also innovative." (Author's abstract, IAB-Doku) ((en))
    Keywords: Umweltschutzindustrie, Beschäftigungseffekte, Innovation, Arbeitskräftenachfrage
    JEL: J23 Q52 Q55 R23
    Date: 2015–05–28
  28. By: Geoffrey Barrows; Hélène Ollivier
    Abstract: We study how market conditions shape aggregate CO2 emission intensity from manufacturing. We first develop a multi-product multi-factor model with heterogeneous firms, variable markups, and monopolistic competition in which each product has a specific emission intensity. Competition affects output shares across heterogeneous firms, product-mix across heterogeneous products, and technological choice within firm-product lines. We find that increased competition shifts production to cleaner firms, but has ambiguous effects on withinfirm changes in emission intensity via product-mix and technology adoption. Next, using detailed firm-product emission intensity data from India, we find core-competency products tend to be cleaner than non-core products; but since market conditions have induced Indian firms to shift production away from core-competency, product-mix has increased CO2 emission intensity in India by 49% between 1990-2010. These emission intensity increases are offset by reductions within firm-product lines and by across-firm share shifts, so aggregate emission intensity has actually fallen by 50%.
    Date: 2016–06
  29. By: Szekeres, Szabolcs
    Abstract: Despite the fact that the “Weitzman-Gollier Puzzle” arose in the context of risk neutrality, Gollier and Weitzman (2009) claimed to have solved the puzzle by showing that, in case of risk aversion, discounting and compounding approaches yield the same result, and that these can be expressed in ways that are morphologically similar to the conflicting formulations of the original risk neutral model. This paper replicates their analysis with a simple numerical example and shows that the equality of results obtained is due to discount and compound factors being each other’s reciprocals in the risk averse model, while the inequality of the puzzle is due to this condition not being met in the risk neutral case. Their claim to have solved the puzzle is not sustained. It is shown that the source of the puzzle is Weitzman’s incorrect specification of the present value factor and that, correcting for this, the right conclusion under his assumptions is that certainty equivalent discount rates are growing functions of time. Gollier and Weitzman (2009) also claimed that “the ‘effective’ discount rate must decline over time toward its lowest possible value.” This paper finds that when long term market yields are a growing function of time, it makes no sense to invest in projects of similar risk but lesser yield, irrespective of one’s degree of risk aversion.
    Keywords: Discounting, uncertainty, "Weitzman-Gollier Puzzle"
    JEL: D61 H43
    Date: 2016–07–17
  30. By: Mark C. Freeman; Ben Groom
    Abstract: The aggregated term structure of social discount rates that results from Weitz-man's (2001) survey of expert opinion is shown to be highly sensitive to the nature of the responses. If variation re.ects irreducible differences in ethical judgements, the term structure can decline rapidly. If variation occurred because respondents were forecasting future rates under uncertainty, the term structure is much flatter because additional experts provide new information. The former approach triples the social cost of carbon when compared to the latter. The distinction between heterogeneity and uncertainty illustrates the need for a nuanced treatment of survey data in intergenerational policy making.
    JEL: N0
    Date: 2015–02–25
  31. By: Carattini, Stefano; Tavoni, Alessandro
    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, Environmental Economics and Policy, D6, H8, Q4,
    Date: 2016–07–04

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