nep-ene New Economics Papers
on Energy Economics
Issue of 2016‒09‒11
27 papers chosen by
Roger Fouquet
London School of Economics

  1. Pricing wind: A revenue adequate, cost recovering uniform price for electricity markets with intermittent generation By Zakeri, Golbon; Pritchard, Geoff; Bjørndal, Mette; Bjørndal, Endre
  2. The impact of (co-) ownership of renewable energy production facilities on demand flexibility By Roth, Lucas; Hashani, Alban; Lowitzsch, Jens; Yildiz, Özgür
  3. Monitoreando la eficiencia energética en América Latina By -
  4. The Public Economics of Electricity Policy with Philippine Applications By Majah-Leah Ravago; James Roumasset
  5. Determinantes de consumo eficiente de energía eléctrica en el sector residencial en México: un enfoque de regresión cuantílica. By Aldo Gutiérrez Mendieta
  6. Investing in Electricity, Growth, and Debt Sustainability; The Case of Lesotho By Michele Andreolli; Aidar Abdychev
  7. Greening the Vehicle Fleet: Evidence from Norway’s CO2 Differentiated Registration Tax By Yan, Shiyu; Eskeland, Gunnar S.
  8. Energy (in)security and the arms trade By Vincenzo Bove; Claudio Deiana; Roberto Nisticò
  9. Natural resources and capital structure By Kurronen, Sanna
  10. Optimal control theory with applications to resource and environmental economics By Hoel, Michael
  11. Where are natural gas prices heading, and which are the environmental consequences for Latin America? By Arturo Leonardo Vásquez Cordano; Abdel M. Zellou
  12. The US oil supply revolution and the global economy By Kamiar Mohaddes; Mehdi Raissi
  13. An Analysis of OPEC’s Strategic Actions, US Shale Growth and the 2014 Oil Price Crash By Alberto Behar; Robert A Ritz
  14. The Impact of Oil Prices on the Banking System in the GCC By Padamja Khandelwal; Ken Miyajima; Andre O Santos
  15. Oil prices and the global economy: Is it different this time around? By Kamiar Mohaddes; M. Hashem Pesaran
  16. Canada; 2016 Article IV Consultation-Press Release; and Staff Report By International Monetary Fund. Western Hemisphere Dept.
  17. Trinidad and Tobago; Selected Issues By International Monetary Fund. Western Hemisphere Dept.
  18. Macroeconomic determinants of crude oil demand in Ghana By Oteng-Abayie, Eric Fosu; Ayimbila, Prosper Awuni; Eshun, Maame Esi
  19. South Africa; Technical Assistance Report-Petroleum Sector Fiscal Regime Reform-Additional Analysis for the Davis Tax Committee By International Monetary Fund. Fiscal Affairs Dept.
  20. Oil and Gas Sector in Russia in 2015 By Bobylev Yuri
  21. Information Processing in Freight and Freight Forward Markets: An Event Study on OPEC Announcements By Lauenstein, Philipp; Küster Simic, André
  22. Testing Supply-Side Climate Policies for the Global Steam Coal Market - Can They Curb Coal Consumption? By Roman Mendelevitch
  23. Environmental Policy and Growthwhen Environmental Awarenessis Endogenous By Karine Constant; Marion Davin
  24. Investing to Mitigate and Adapt to Climate Change; A Framework Model By Anthony Bonen; Prakash Loungani; Willi Semmler; Sebastian Koch
  25. External Adjustment in Oil Exporters; The Role of Fiscal Policy and the Exchange Rate By Alberto Behar; Armand Fouejieu
  26. Estimating CO2 Emissions Embodied in Final Demand and Trade Using the OECD ICIO 2015: Methodology and Results By Kirsten S. Wiebe; Norihiko Yamano
  27. Climate Mitigation in China; Which Policies Are Most Effective? By Ian W.H. Parry; Baoping Shang; Philippe Wingender; Nate Vernon; Tarun Narasimhan

  1. By: Zakeri, Golbon (Electric Power Optimization Centre, University of Auckland); Pritchard, Geoff (Electric Power Optimization Centre, University of Auckland); Bjørndal, Mette (Dept. of Business and Management Science, Norwegian School of Economics); Bjørndal, Endre (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: With greater penetration of renewable generation, the uncertainty faced in electricity markets has increased substantially. Conventionally, generators are assigned a pre-dispatch quantity in advance of real time, based on estimates of uncertain quantities. Expensive real time adjustments then need to be made to ensure demand is met, as uncertainty takes on a realization. We propose a new stochastic-programming market clearing mechanism to optimize pre-dispatch quantities, given the uncertainties’ probability distribution and the costs of real-time deviation. This model differs from similar mechanisms previously proposed in that pre-dispatch quantities are not subject to any network or other physical constraints; nor do they play a role in financial settlement. We establish revenue adequacy in each scenario (as opposed to “in expectation”), welfare enhancement and expected cost recovery (including deviation costs), for this market clearing mechanism. We also establish that this market clearing mechanism is social welfare optimizing.
    Keywords: Stochastic programming; locational pricing; wind power; regulation
    JEL: C60 L10 L94
    Date: 2016–09–06
  2. By: Roth, Lucas; Hashani, Alban; Lowitzsch, Jens; Yildiz, Özgür
    Abstract: The transition from fossil fuels to renewable energy sources requires financial, technical and social innovation. This is particularly true for wind and solar energy which have structural differences to fossils: they depend on weather and thus are volatile in their power production scheme. Not only must a new energy infrastructure be built, but consumers motivated to change consumption habits so as to balance demand with a volatile energy supply and to accept new technologies like smart meters. Consumer (co-)ownership has proved successful in engaging consumers in financing renewable energy infrastructures, thus becoming “prosumers”. In addition, studies also indicate that co-ownership can induce behavioral changes in energy consumption. Based on a sample of 2,143 completed questionnaires collected through an online survey, the study presented in this paper seeks to empirically analyze empirically whether (co-)ownership also has an influence on demand side flexibility. Our results indicate a statistical correlation between (co-)ownership of renewable energy production facilities and the willingness of private households to adjust their consumption behavior. However, the relation is complex: Only when prosumers have the choice between self-consumption and sale of the surplus electricity production to the grid we observe a statistically significant effect on consumption behavior. As every kilowatt-hour not consumed is one potentially sold to the grid an economic incentive kicks in which is equally important for energy efficient behavior. To exclude a self-selection bias we have applied propensity score matching.
    Keywords: consumer ownership; renewable energy; energy consumption behavior; flexibility, demand response; demand side management; propensity score matching
    JEL: C01 Q2 Q21 Q4 Q41 Q48
    Date: 2016–09–07
  3. By: -
    Abstract: Luego de haberse analizado las fortalezas y debilidades de los programas que los países de la región han venido realizando en materia de eficiencia energética, la Unidad de Recursos Naturales (URNE) de la División de Recursos Naturales e Infraestructura (DRNI) ha podido concluir que uno de los principales inconvenientes ha sido la falta de información e indicadores que faciliten analizar la evolución de tales políticas en forma cuantitativa, completa e integrada con miras a realizar intervenciones de política sobre bases informadas. En los países de América Latina y el Caribe, la calidad de las estadísticas e indicadores de desempeño que permiten cuantificar los resultados de los programas nacionales de eficiencia energética ha sido insuficiente. Para superar esta carencia, la CEPAL ha articulado el Programa Regional BIEE (Base de Indicadores de Eficiencia Energética para América Latina y el Caribe).
    Date: 2016–09
  4. By: Majah-Leah Ravago (Assistant Professor at the University of the Philippines and Program Director of the Energy Policy and Development Program (EPDP) of the Philippines); James Roumasset (Emeritus Professor of Economics (pending) at the University of Hawaii, Manoa)
    Abstract: Electricity policy in many countries is charged with multiple objectives including affordability, sustainability, inclusivity, and renewability. Unless these objectives can be reconciled, the pursuit of one will detract from the pursuit of another. We provide a framework for culling some objectives and reconciling other by extending the traditional view of efficiency. Philippine power policies are characterized and evaluated with respect to conflicting objectives and the problem of incomplete deregulation. We also make preliminary suggestions regarding investment planning for generation and transmission, including the suitability of short-cut metrics such as levelized and avoided costs and the prospects for increased competitiveness.Creation-Date: 2016-08
    Keywords: Electricity, renewable energy, excess burden, deregulation, competition, Philippines
    JEL: Q4 Q48 Q41
  5. By: Aldo Gutiérrez Mendieta (Division of Economics, CIDE)
    Keywords: consumo de electricidad; eficiencia energética; regresión cuantílica
    JEL: D12 Q41 Q48
    Date: 2016–08
  6. By: Michele Andreolli; Aidar Abdychev
    Abstract: This paper analyses a large public investment in a construction of a hydropower plant in Lesotho and its implications on the growth and debt sustainability. The paper employs an open economy dynamic general equilibrium model to assess the benefits of a large public investment through growth-enhancing increase in domestic energy supply and receipts from selling electricity abroad to ease the fiscal burden, which is often associated with big investment projects. During the transition (construction stage), various financing options are explored: increase in the public debt, increase in domestic revenue (fiscal adjustment), and combination. The calibration matches Lesotho's data and it captures the project's main challenges regarding the project costs. Moreover,the key remaining issue is the agreement with South Africa to purchase sufficient amount of electricity to allow the potential plant to run at a high capacity. We find that, the project can lead to sizable macroeconomic benefits as long as costs are relatively low and demand from South Africa is sufficiently high. However, the risks for the viability of the project are high, if these assumptions are violated.
    Keywords: Public investment;Lesotho;Electricity;Energy sector;Economic growth;Debt sustainability;Econometric models;Public Investment, Energy Production, Growth, Debt Sustainability, Fiscal Policy.
    Date: 2016–06–09
  7. By: Yan, Shiyu (Dept. of Business and Management Science, Norwegian School of Economics); Eskeland, Gunnar S. (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: Fiscal policies are used to improve vehicle fuel efficiency and reduce CO2 emissions in the transport sector. Years of forceful reform in Norway may be seen as informative. From 2007, Norway has linked its new vehicle registration tax to CO2 intensities, later adapting it into a feebate form. We exploit a detailed dataset of new vehicle registrations, using fixed effects and instrumental variables in our econometric analysis. We find that the CO2 differentiated registration tax contributes significantly to shifting purchases towards low-emitting cars. A 1000NOK tax increase (about 120USD) is associated with a reduction of 1.13% - 1.58% in vehicle registrations, and the responsiveness in car choice to fuel costs is of the same magnitude. The estimated effect of the tax explains the majority (79%) of the reduction in average CO2 intensity in the new car fleet 2006 through 2011. A point estimate of the elasticity of the CO2 intensity with respect to the CO2 price is minus 0.06, whereas the elasticity with respect to (resulting) car prices is about minus 0.5. An intuitive model with ‘all’ car types losing demand to low-emitting types applies fairly well: low-emitting segments gain in share and do not get CO2 leaner, while high-emitting segments lose in share and become CO2 leaner. Moves between nine segments and within those segments are equally important.
    Keywords: CO2 intensity; new vehicle; vehicle registration tax; fuel cost; Pigovian taxation; green tax reform; greenhouse gas emission reductions
    JEL: C12 H23 Q00 Q50
    Date: 2016–08–31
  8. By: Vincenzo Bove (University of Warwick); Claudio Deiana (University of Essex); Roberto Nisticò (Università di Napoli Federico II and CSEF)
    Abstract: We provide novel empirical models of the arms trade and focus on the role of energy dependence, in particular of oil, in explaining the trade of weapons between countries. Dramatic geopolitical events such as wars can cause significant disruptions in the supply of oil and increase oil prices. Oil-dependent economies have therefore incentives to provide security by selling or giving away arms to oil-rich countries and reduce the risk of instability. We find strong empirical support for this claim using data on international transfers of major weapons and information on global and local oil dependence, oil reserves and oil discoveries.
    Keywords: Arms Trade, Oil, Security
    JEL: F10 F50 H56 Q34
    Date: 2016–09–03
  9. By: Kurronen, Sanna
    Abstract: ​This paper examines the effect of natural resources on capital structure of the firm. Using an extensive dataset of listed firms in 70 countries, we show that firms operating in resource extraction industries have less debt and that that debt tends to have a longer maturity than that of other non-financial firms. Moreover, non-resource firms in resource-dependent countries are found to be less indebted than their counterparts in other countries. The results suggest that the very fact of a firm’s location in a resource-dependent country may be an overlooked country-specific de-terminant of firm capital structure and that financial institutions in resource-dependent countries may play a role in exacerbating a nation’s resource curse.
    Keywords: resource dependence, capital structure, panel data
    JEL: G32 O13 Q32
    Date: 2016–08–29
  10. By: Hoel, Michael (Dept. of Economics, University of Oslo)
    Abstract: This note gives a brief, non-rigorous sketch of basic optimal control theory, which is a useful tool in several simple economic problems,such as those in resource and environmental economics. While the mathematical analysis in the note is self-contained, there is not much explanation and intuition on the economic issues. The note should therefore be read together with articles or books that give more discussion of the economics of the problems considered.
    Keywords: optimal control theory; exhaustible Resources; renewable Resources; climate change; water management
    JEL: C61 Q20 Q30 Q50
    Date: 2016–08–23
  11. By: Arturo Leonardo Vásquez Cordano (Chief Economist and Manager of the Bureau of Regulatory Policy and Economic Analysis at Osinergmin, Vice-President of the Commission of Free Competition at the Peruvian Antitrust and Consumer Protection Authority (Indecopi), as well as Professor at GERENS Graduate School of Business in Lima, Peru.); Abdel M. Zellou (currently co-founder and partner at Clear Future Consulting, U.S.A. Was Market Development Director of Gathering and Midstream Gas at T.D. Williamson, U.S.A.)
    Abstract: There was an upward trend in energy commodity prices since 2000, but with the surge in supply coming from unconventional oil and gas resources in North and South America, the trend in natural gas prices has become downward in recent years. However, the exploitation of these resources is generating public concerns due to the possible adverse environmental impacts of using hydraulic fracturing and other techniques on underground water. The purpose of this paper is to address the following questions: are there super cycles in natural gas prices? What are the environmental consequences in Latin America of the exploitation of unconventional gas given the cyclical behavior of gas prices and how can governments implement environmental policies to regulate unconventional gas extraction? Three super cycles in natural gas prices are identified with the last peak occurring in 2006. Our analysis indicates that the instable political situation and institutional weakness, the governmental intervention through asset nationalization and state-owned oil companies, the lack of transparent investment rules, high capital expenditures to develop LNG export projects and the exploration of shale resources, as well as the pre-salt discoveries in Brazil make uncertain that the shale gas boom achieve a large impact in Latin American during the current gas price super cycle.
    JEL: E32 L71 Q41 E37 L51 Q48 Q58
    Date: 2016–05
  12. By: Kamiar Mohaddes; Mehdi Raissi
    Abstract: This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the United States, using a Global VAR model estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Set-identification of the U.S. oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a U.S. supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, output declining in commodity exporters, inflation falling in most countries, and equity prices rising worldwide. Overall, our results suggest that following the U.S. oil revolution, with oil prices falling by 51 percent in the first year, global growth increases by 0.16 to 0.37 percentage points. This is mainly due to an increase in spending by oil importing countries, which exceeds the decline in expenditure by oil exporters.
    Keywords: Tight oil, shale oil, fracking revolution, oil price decline, oil supply, global macroeconometric modeling, and international business cycle
    JEL: C32 E17 F44 F47 O13 Q43
    Date: 2016–09
  13. By: Alberto Behar; Robert A Ritz
    Abstract: In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers including US shale oil out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a "regime switch" by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.
    Keywords: Oil sector;Organization of Petroleum Exporting Countries;Markets;United States;Oil production;Supply and demand;Oil prices;Econometric models;Crude oil, OPEC, price crash, shale oil, market share, limit pricing
    Date: 2016–07–06
  14. By: Padamja Khandelwal; Ken Miyajima; Andre O Santos
    Abstract: This paper examines the links between global oil price movements and macroeconomic and financial developments in the GCC. Using a range of multivariate panel approaches, including a panel vector autoregression approach, it finds strong empirical evidence of feedback loops between oil price movements, bank balance sheets, and asset prices. Empirical evidence also suggests that bank capital and provisioning have behaved countercyclically through the cycle.
    Keywords: Oil prices;Cooperation Council for the Arab States of the Gulf;Banking sector;Non-performing loans;Bank capital;Panel analysis;Vector autoregression;Econometric models;Macro-financial linkages, nonperforming loans, panel vector autoregression
    Date: 2016–08–05
  15. 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: 2016–09
  16. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: This paper describes recent economic developments, outlook, risks, and policy challenges of the Canadian economy. After almost two years, the effects of the oil price shock continue to reverberate through the Canadian economy. Growth has decelerated, but inflation expectations remain well anchored. With the slowdown in growth, the output gap has reopened. Persistently low energy prices pose an important risk to the economy. The banking system remains sound, but exposure to the oil and gas sector will require higher provisions against expected losses. The policy mix over the near-term should cushion the adverse effects of lower oil prices on the economy while safeguarding financial stability.
    Keywords: Article IV consultation reports;Economic growth;External shocks;Oil prices;Monetary policy;Exchange rate depreciation;Financial sector;Housing;Fiscal policy;Fiscal reforms;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Canada;oil prices, investment, market, monetary fund, inflation
    Date: 2016–06–13
  17. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: This paper reviews the historical background of fuel subsidies in Trinidad and Tobago, discusses their fiscal impact and the inflationary impact of subsidy reform, summarizes the regressive distribution of subsidy benefits, focuses on the negative externalities caused by fuel subsidies and the environmental and traffic benefits of phasing them out, and discusses key factors contributing to successful reforms. Fuel subsidies in Trinidad and Tobago, established in 1974, increased dramatically owing to rising global crude oil price in the past few years and led to a growing debate on the costs and benefits of subsidy reform. Fuel subsidies have significantly contributed to the country’s procyclical fiscal stance.
    Keywords: Energy;Subsidies;Oil prices;Oil subsidies;Climatic changes;Environment;Selected Issues Papers;Trinidad and Tobago;
    Date: 2016–06–29
  18. By: Oteng-Abayie, Eric Fosu; Ayimbila, Prosper Awuni; Eshun, Maame Esi
    Abstract: This paper investigates the macroeconomic determinants of crude oil demand (consumption) in Ghana with annual data from 1980 to 2013. The study applied the vector error correction model (VECM) to estimate the long-run and short-run determinants of crude oil demand in Ghana within the study period. The long run estimates reveal that price of crude oil, real GDP per capita, real effective exchange rate, and energy saving technical progress are significant long run determinants of crude oil demand. The results also indicate that crude oil demand in Ghana is income and price inelastic. Crude oil price has a positive long run effect indicating the virtual lack of substitutes and overdependence on crude oil for energy generation and economic activities in Ghana. Based on the variance decomposition and impulse response analyses, the study also found that positive shocks from real effective exchange rate had a dominant and positive impact on crude oil demand in Ghana. We suggest among others that Ghana vigorously explore alternative and sustainable and energy sources to curtail the overdependence on crude oil, strategically hedge against volatilities in the exchange rate market, and revive the country’s oil refinery to refine her own crude oil to reduce importation.
    Keywords: crude oil demand, GDP per capita, crude oil price, VECM, Ghana
    JEL: Q4 Q41 Q43
    Date: 2016–04–04
  19. By: International Monetary Fund. Fiscal Affairs Dept.
    Abstract: This report follows meetings between FAD and the Davis Tax Committee (DTC) – Sub-Committee on Oil and Gas - in March 2016. It first lists the main issues discussed with the DTC oil and gas sub-committee regarding their planned recommendations for tax reform in the oil and gas sector. The second part of the note provides additional fiscal analysis prepared at the request of the subcommittee. The basis of the discussion was both the FAD 2015 report and the DTC’s draft oil and gas report which outlined the preliminary recommendations of the sub-committee.
    Keywords: Oil sector;Oil;Natural gas;Greenhouse gas emissions;Taxes;Fiscal reforms;Fiscal policy;Technical Assistance Reports;South Africa;
    Date: 2016–08–01
  20. By: Bobylev Yuri (Gaidar Institute for Economic Policy)
    Abstract: Oil and gas industry remains the basic sector of Russian economy playing the key role in shaping the state budget revenues and the country’s trade balance. In 2015, the oil sector’s development was marked by positive dynamics. Due to investments made in the previous years, the crude oil production in Russia has reached peak levels since 1990 and crude oil export hit all time maximum. Restructuring of the oil sector taxation system has been launched. The reform envisages significant reduction of the economic role of export duties. Low global crude oil prices together with financial and technological sanctions imposed on Russia have hampered the development of this sector.
    Keywords: Russian economy, oil and gas sector, oil production, oil prices
    JEL: L71 L72
    Date: 2016
  21. By: Lauenstein, Philipp (Helmut Schmidt University, Hamburg); Küster Simic, André (HSBA Hamburg School of Business Administration)
    Abstract: In this paper, information processing in spot and forward freight markets with respect to the Organization of the Petroleum Exporting Countries (OPEC) output announcements is investigated. We use the event study methodology to study returns in tanker freight spot and forward markets around OPEC conferences from 2003 to 2014. Significant abnormal returns indicate that the output decisions are informationally important for the pricing of crude oil transportation services. We consistently find patterns of positive abnormal returns around production increase announcements and negative abnormal returns around announcements of production cuts. Our analysis also suggests that market participants appear to trade three to five days prior to the final announcement based on their anticipation of the actual output announcements. This is consistent with findings from related studies on crude oil returns. Persistence of abnormal returns in the post-event period indicates incomplete initial reactions or at least slow adjustment to disseminated information.
    Keywords: Tanker Freight Rates; Freight Forwards; OPEC; Informational Efficiency; Event Study
    JEL: F10 G13 G14
    Date: 2016–09–06
  22. By: Roman Mendelevitch
    Abstract: The achieved international consensus on the 1.5‐2°C target entails that most of current fossil fuel reserves must remain unburned. Currently, a majority of climate policies aiming at this goal are directed towards the demand side. In the absence of a global carbon regime these polices are prone to carbon leakage and other adverse effects. Supply‐side climate policies present an alternative and more direct approach to reduce the consumption of fossil fuels by addressing their production. Here, coal as both, the most abundant and the most emission-intensive fuel, plays a pivotal role. In this paper, I employ a numerical model of the international steam coal market (COALMOD‐World) to examine two alternative supply‐side policies: 1) a production subsidy reform introduced in major coal producing countries, in line with the G20 initiative to reduce global fossil fuel subsidies; 2) a globally implemented moratorium on new coal mines. The model is designed to replicate global patterns of coal supply, demand and international trade. It features endogenous investments in production and transportation capacities in a multi‐period framework and allows for substitution between imports and domestic production of steam coal. Hence, short‐run adjustments (e.g. import substitution effects) and long‐run reactions (e.g. capacity expansions) of exporting and importing countries are endogenously determined. Results show that a subsidy removal, while associated with a small positive total welfare effect, only leads to an insignificant reduction of global emissions. By contrast, a mine moratorium induces a much more pronounced reduction in global coal consumption by effectively limiting coal availability and strongly increasing prices. Depending on the specification of reserves, the moratorium can achieve a coal consumption path consistent with the 1.5‐2°C target.
    Keywords: Supply‐side climate policy, coal markets, reserves, subsidy removal, International trade
    JEL: C72 H25 Q35
    Date: 2016
  23. By: Karine Constant; Marion Davin
    Abstract: This paper examines the relationship between environmental policy and growth whengreen preferences are endogenously determined by education and pollution. We consideran environmental policy in which the government implements a tax on pollution andrecycles the revenue to fund pollution abatement activities and/or an education subsidy(influencing green behaviors). When the sensitivity of agents’ environmental preferencesto pollution and human capital is high, the economy can converge to a balanced growthpath equilibrium with damped oscillations. We show that this environmental policy canboth remove the oscillations, associated with intergenerational inequalities, and enhancethe long-term growth rate. However, this solution requires that the revenue from the taxrate must be allocated to education and direct environmental protection simultaneously.We demonstrate that this type of mixed-instrument environment policy is an effectiveway to address environmental and economic issues in both the short and the long run
    Date: 2016–08
  24. By: Anthony Bonen; Prakash Loungani; Willi Semmler; Sebastian Koch
    Abstract: We propose a macroeconomic model to assess optimal public policy decisions in the the face of competing funding demands for climate change action versus traditional welfare-enhancing capital investment. How to properly delineate the costs and benefits of traditional versus adaption-focused development remains an open question. The paper places particular emphasis on the changing level of risk and vulnerabilities faced by developing countries as they allocate investment toward growth strategies, adapting to climate change and emissions mitigation.
    Keywords: Climatic changes;Government expenditures;Public investment;Econometric models;Climate Change, Fiscal Policy, Public Capital, Nonlinear Model Predictive Control
    Date: 2016–08–05
  25. By: Alberto Behar; Armand Fouejieu
    Abstract: After the decline in oil prices, many oil exporters face the need to improve their external balances. Special characteristics of oil exporters make the exchange rate an ineffective instrument for this purpose and give fiscal policy a sizeable role. These conclusions are supported by regression analysis of the determinants of the current account balance and of the trade balance. The results show little or no relationship with the exchange rate and, especially for the less diversified oil exporters (including the Gulf Cooperation Council), a strong relationship with the fiscal balance or government spending.
    Keywords: Oil exporting countries;Cooperation Council for the Arab States of the Gulf;Exchange rates;Current account balances;Balance of trade;Fiscal policy;Regression analysis;Econometric models;Keywords: Oil exporters, current account, trade balance, fiscal policy, exchange rates, trade volume elasticities, Marshall Lerner conditions
    Date: 2016–06–08
  26. By: Kirsten S. Wiebe; Norihiko Yamano
    Abstract: Reliable carbon emissions statistics are essential for formulating responses to climate change including global negotiations such as those concluded in Kyoto in 1997 or recently in Paris at COP21. Typically, emissions statistics are compiled according to production-based or territorial emission accounting methods: measuring emissions occurring within sovereign borders. However, these estimates do not account for global production chains i.e. emissions from many countries may be implicated in the production of final goods and services. Using the 2015 edition of the OECD Inter-Country Input-Output (ICIO) tables and detailed IEA CO2 emissions from fuel combustion data, estimates of emissions embodied in final demand and in international trade were generated to contribute to a better understanding of how CO2 emissions around the world are driven by global consumption patterns. After explaining the methodology in detail, some general results are described and examples given of how to use and interpret the derived indicators.
    Date: 2016–09–03
  27. By: Ian W.H. Parry; Baoping Shang; Philippe Wingender; Nate Vernon; Tarun Narasimhan
    Abstract: For the 2015 Paris Agreement on climate change, China pledged to reduce the carbon dioxide (CO2) intensity of GDP by 60–65 percent below 2005 levels by 2030. This paper develops a practical spreadsheet tool for evaluating a wide range of national level fiscal and regulatory policy options for reducing CO2 emissions in China in terms of their impacts on emissions, revenue, premature deaths from local air pollution, household and industry groups, and overall economic welfare. By far, carbon and coal taxes are the most effective policies for meeting environmental and fiscal objectives as they comprehensively cover emissions and have the largest tax base.
    Keywords: Climatic changes;China;Greenhouse gas emissions;Trading systems;Fiscal policy;Climate policy;Paris Agreement, carbon tax, China, air pollution, coal tax, emissions trading, incidence, welfare effects
    Date: 2016–07–25

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