nep-ene New Economics Papers
on Energy Economics
Issue of 2016‒10‒02
38 papers chosen by
Roger Fouquet
London School of Economics

  1. Rethinking Electricity Sector Reform in Developing Asia: Balancing Economic and Environmental Objectives By Anupama Sen; Rabindra Nepal; Tooraj Jamasb
  2. The Impact of Power Rationing on Zambia's Agricultural Sector By Samboko, Paul; Chapoto, Antony; Kuteya, Auckland; Kabwe, Stephen; Mofya-Mukuka, Rhoda; Mweemba, Bruno; Munsaka, Eustensia
  3. A Quantile Regression Model for Electricity Peak Demand Forecasting: An Approach to Avoiding Power Blackouts By Niematallah Elamin; Mototsugu Fukushige
  4. Enabling Mini-grid Development in Rural India By Comello, Stephen D.; Reichelstein, Stefan J.; Sahoo, Anshuman; Schmidt, Tobias S.
  5. Time-Adaptive Probabilistic Forecasts of Electricity Spot Prices with Application to Risk Management. By Brenda López Cabrera; Franziska Schulz; ;
  6. Renewable energy trade within Regional Comprehensive Economic Partnership (RCEP) countries: an exploratory analysis By Kaliappa Kalirajan; Yichang Liu
  7. Investment under Uncertainty in Electricity Generation By Klaus Gugler; Mario Liebensteiner; Adhurim Haxhimusa; Nora Schindler
  8. Market integration and the persistence of electricity prices By João Pedro Pereira; Vasco Pesquita; Paulo M.M. Rodrigues; António Rua
  9. Using Inclusive Wealth for Policy Evaluation: Application to Electricity Infrastructure Planning in Oil-Exporting Countries By Collins, Ross D.; Selin, Noelle E.; de Weck, Olivier L.; Clark, William C.
  10. Electricity Markets and the Clean Power Plan By Hogan, William W.
  11. The market-based dissemination of modern-energy products as a business model for rural entrepreneurs: Evidence from Kenya By Bensch, Gunther; Kluve, Jochen; Stöterau, Jonathan
  12. RIODD 2016 « Energie, environnement et mutations sociales » By Sandrine Berger-Douce; Natacha Gondran; Florent Breuil
  13. Car fleet policy evaluation: the case of a Bonus-Malus system in Sweden By Habibi, Shiva; Beser Hugosson, Muriel; Sundbergh, Pia; Algers, Staffan
  14. Asset accounting, fiscal policy and the UK’s oil and gas resources, past and future By Giles Atkinson; Kirk Hamilton
  15. Oil consumption subsidy removal in OPEC and other Non-OECD countries. Oil market impacts and welfare effects By Finn Roar Aune; Kristine Grimsrud; Lars Lindholt; Knut Einar Rosendahl; Halvor Briseid Storrøsten
  16. Oil Extraction and Price Dynamics By Illig, Aude; Schindler, Ian
  17. Saving Alberta's Resource Revenues: Role of Intergenerational and Liquidity Funds By van den Bremer, Ton; van der Ploeg, Frederick
  18. Macro Policy Responses to Natural Resource Windfalls and the Crash in Commodity Prices By van der Ploeg, Frederick
  19. Foreign agents? Natural resources & the political economy of civil society By Breyel, Corinna; Grigoriadis, Theocharis
  20. Lost Recreational Value from the Deepwater Horizon Oil Spill Using Revealed and Stated Preference Data By John C. Whitehead; Tim Haab; James Sherry Larkin; John Loomis; Sergio Alvarez; Andrew Ropicki
  21. The cost of air pollution in Africa By Rana Roy
  22. The Triple Challenge for Europe: The Economy, Climate Change and Governance By Jan Fagerberg; Staffan Laestadius; Ben Martin
  23. Environmentally Adjusted Multifactor Productivity: Methodology and Empirical results for OECD and G20 countries By Miguel Cárdenas Rodríguez; Ivan Haščič; Martin Souchier
  24. Lessons Learned from Three Decades of Experience with Cap-and-Trade By Schmalensee, Richard; Stavins, Robert
  25. Emissions trading systems with cap adjustments By Sascha Kollenberg; Luca Taschini
  26. Evaluating Mitigation Effort: Tools and Institutions for Assessing Nationally Determined Contributions By Aldy, Joseph E.
  27. Carbon Copies: The Prospects for an Economy-wide Carbon Price in Canada By Tracy Snoddon
  28. Delaying the introduction of emissions trading systems—Implications for power plant investment and operation from a multi-stage decision model By Jian-Lei Mo; Joachim Schleich; Lei Zhu; Ying Fan
  29. Transactions in the European Carbon Market: a Bubble of Compliance in a Whirlpool of Speculation By Nathalie Berta; Emmanuelle Gautherat; Ozgur Gun
  30. On modeling pollution-generating technologies: a new formulation of the by-production approach By K Hervé Dakpo
  31. Subsidizing human capital to overcome the green paradox: A demand-side approach By Steinkraus, Arne
  32. Burden Sharing Under the Paris Climate Agreement By Glenn Sheriff
  33. In the wake of Paris Agreement, scientists must embrace new directions for climate change research By Olivier Boucher; Valentin Bellassen; Hélène Benveniste; Philippe Ciais; Patrick Criqui; Celine Guivarch; Hervé Le Treut; Sandrine Mathy; Roland Séférian
  34. A new political economy of climate change By Michel Damian
  35. Environmental awareness: The case of climate change By Hans, Wiesmeth; Weber, Shlomo
  36. Little Green Lies : Optimal environmental regulation with partially verifiable information By Alistair Munro
  37. Better Predictions, Better Allocations: Scientific Advances and Adaptation to Climate Change By Freeman, Mark C.; Groom, Ben; Zeckhauser, Richard
  38. Are we willing to give what it takes? Willingness to pay for climate change adaptation in developing countries By Tanya O'Garra; Susana Mourato

  1. By: Anupama Sen (Oxford Institute for Energy Studies); Rabindra Nepal (OCDU Business School, Charles Darwin University); Tooraj Jamasb (Durham Business School)
    Abstract: The OECD or ‘standard’ model of electricity sector reforms has been widely adopted in non-OECD Asian countries since the 1990s. However, despite two decades of attempts at reforms, no notable progress has been made towards the original objectives of reform. Whilst in OECD countries, reforms were implemented against excess capacity and stable institutions, in developing non-OECD Asian countries they were implemented against chronic electricity shortages, fiscal constraints, weak institutions, and complex political factors. In recent years the debate also focuses on the suitability of electricity market reforms originally designed around fossil fuels in delivering low carbon electricity systems. With electricity demand set to double over the next two decades, reforms in non-OECD Asian countries have important economic as well as environmental implications in terms of global energy use and emissions. This chapter assesses the application of the OECD model of electricity reform in Asia. We analyse the experience of three South Asian countries – India, Nepal and Bhutan, to illustrate the economic and environmental conflicts in electricity market reform against the context of cross-border regional electricity trade.
    Keywords: market liberalisation; electricity restructuring; environment
    JEL: L94 Q58 R58
    Date: 2016–09–28
  2. By: Samboko, Paul; Chapoto, Antony; Kuteya, Auckland; Kabwe, Stephen; Mofya-Mukuka, Rhoda; Mweemba, Bruno; Munsaka, Eustensia
    Abstract: A lack of electricity has devastating consequences for any economy. Since early 2015, Zambia experienced a 2,100 gigawatt-hours (GWh) power deficit triggering countrywide power rationing. We assess the impact of power rationing on Zambia’s agricultural sector, and the costs to firms operating in the agricultural sector. Our analysis reveals economy-wide losses amounting to ZMW 32,496,100,813 (representing 18.8% of the GDP). Losses to the agricultural sector are estimated at ZMW 2,827,160,771 (representing 1.6% of the GDP), and are likely to stifle future economic growth.
    Keywords: Agricultural and Food Policy, Environmental Economics and Policy,
    Date: 2016–03
  3. By: Niematallah Elamin (Graduate School of Economics, Osaka University); Mototsugu Fukushige (Graduate School of Economics, Osaka University)
    Abstract: Electricity peak demand forecasting is a key exercise undertaken to avoid power blackouts and system failure. In this paper, the next day's load peak demand is estimated and forecasted. The challenge is to generate a peak demand forecast that is capable of avoiding the risk of a power blackout. We take an empirical approach to the question of estimating quantiles to indicate forecast uncertainty. Point forecasts generated from quantile regression are compared with the prediction intervals of linear regression. In addition, and to justify the result, their out-of-sample forecasting performance is compared. Distinctively from previous studies on load forecasting, models are evaluated based on their ability to avoid under-prediction i.e. avoid the risk of power blackouts. The analysis shows that quantile regression tends to under predict less than linear regression. Thus quantile regression is more appropriate for avoiding power blackouts.
    Keywords: Electricity peak demand, Quantile regression, Prediction intervals, Blackout
    JEL: Q47 C53 L94
    Date: 2016–09
  4. By: Comello, Stephen D. (Stanford University); Reichelstein, Stefan J. (Stanford University); Sahoo, Anshuman (Stanford University); Schmidt, Tobias S. (ETH Zurich)
    Abstract: Rural electrification rates in India lag behind government goals, in part due to the inability of distribution companies (discoms) to fund central grid expansion. In the absence of central grid electrification, mini-grids offer significant potential for an immediate pathway towards rural electrification and the attendant gains in economic growth and productivity. Yet private investment in mini-grids has been virtually absent in India. Using a comprehensive lifecycle cost analysis, we find that mini-grids based on solar PV power and storage are more economical than incumbent energy services available to households without central grid connection. Under current law, a prospective entrepreneur in India does not require a license or certification in order to build a mini-grid and subsequently provide electricity services in the area covered by said installation. Conversely, there is no legal or regulatory framework that specifies what is to happen if the central grid were to be extended to an area that is already covered by a mini-grid. We report detailed survey evidence from interviews with entrepreneurs, analysts and policymakers whose assessments converge on the same point: mini-grid investments would be jeopardized in the event of central grid extension, precisely because discoms would, by regulatory order, provide electricity services at highly subsidized rates, well below their full economic cost. Our fieldwork suggests that the threat of central grid extension is the gateway barrier preventing mini-grid development in India. The issues associated with the gateway barrier have common elements with the so-called holdup problem as identified in the economics of organizations. There have been two recent federal policy guidelines and one actual-state level policy addressing the regulatory status of mini-grids. We examine the effectiveness of these policies/proposals in terms of an entrepreneur's ability to develop mini-grids in the future.
    Date: 2016–07
  5. By: Brenda López Cabrera; Franziska Schulz; ;
    Abstract: The increasing exposure to renewable energy has amplied the need for risk management in electricity markets. Electricity price risk poses a major challenge to market participants. We propose an approach to model and fore- cast electricity prices taking into account information on renewable energy production. While most literature focuses on point forecasting, our method- ology forecasts the whole distribution of electricity prices and incorporates spike risk, which is of great value for risk management. It is based on func- tional principal component analysis and time-adaptive nonparametric density estimation techniques. The methodology is applied to electricity market data from Germany. We nd that renewable infeed eects both, the location and the shape of spot price densities. A comparison with benchmark methods and an application to risk management are provided.
    JEL: C1 Q41 Q47
    Date: 2016–08
  6. By: Kaliappa Kalirajan; Yichang Liu
    Abstract: Though the availability of cost effective and potentially efficient renewable energy technologies is a necessary condition for the promotion of green growth nationally and internationally, it is the intended nationally determined contributions (INDC) to make use of such technologies is crucial. International trade in low carbon renewable energy goods provides an effective way of achieving INDCs nationally, even when individual countries may not have sufficient infrastructure readily available to them to fulfill INDCs. It is in this context, examination of whether renewable energy goods exports have been flowing without constraints in the Asian region and whether the RCEP regional cooperation mooted by the ASEAN can potentially facilitate minimizing those constraints at the regional level. The short answers to those questions are no and yes respectively. The answer is no mainly due to the existing institutional rigidities of which the major one is the non-tariff measures. The answer is yes mainly due to the possibility of improving the technical cooperation in producing renewable energy goods and consultations in removing non-tariff barriers through the effective functioning of RCEP..
    Keywords: paddy/rice value chain, profit margins of paddy/tice, market structure, Sri Lanka
    JEL: F14 F18 Q27
    Date: 2016
  7. By: Klaus Gugler (Department of Economics and Research Institute for Regulatory Economics, Vienna University of Economics and Business); Mario Liebensteiner (Department of Economics, Vienna University of Economics and Business); Adhurim Haxhimusa (Research Institute for Regulatory Economics, Vienna University of Economics and Business); Nora Schindler (Department of Economics, Vienna University of Economics and Business)
    Abstract: The recent transformation of European electricity markets with increasing generation from intermittent renewables brings about many challenges. Among them, decaying wholesale prices, partly due to support schemes for renewables, may send insufficient investment signals for other technologies. We investigate the investment decision in a structural equation based on the Tobin’s q-model, which we extend by both industry- and firm-technology-specific uncertainty. We utilize rich and novel data at the disaggregated firm generation technology level of European electricity generating firms for the period 2006–2014. Our results show that investment in any generation technology follows market incentives despite sunk and irreversible capital, confirming the implications of the q-model. Moreover, while firm-technology-specific uncertainty decreases firms’ investment activity, especially in coal and gas, aggregate uncertainty triggers firms’ investment. Our results raise concerns about system reliability in the long run since conventional technologies still serve as a flexible system back-up.
    Keywords: Tobin's q, Uncertainty, Investment, Electricity
    JEL: L22 L25 L51 Q48
    Date: 2016–09
  8. By: João Pedro Pereira; Vasco Pesquita; Paulo M.M. Rodrigues; António Rua
    Abstract: There is an ongoing trend of deregulation and integration of electricity markets in Europe and North America. This change in market structure has naturally affected the interaction between agents and has contributed to an increasing commoditization of electric power. This paper focuses on one specific market, the Iberian Electricity Market (MIBEL). In particular, we assess the persistence of electricity prices in the Iberian market and test whether it has changed over time. We consider each hour of the day separately, that is, we analyze 24 time-series of day-ahead hourly prices for Portugal and another 24 series for Spain. We find results consistent with the hypothesis that market integration leads to a decrease in the persistence of the price process. More precisely, the tests detect a break in the memory parameter of most price series around the year 2009, which coincides with a significant increase in the integration of Portuguese and Spanish markets. The results reinforce the view that market integration has an impact on the dynamics of electricity prices.
    JEL: C50 E31 F36
    Date: 2016
  9. By: Collins, Ross D. (Institute for Data, Systems, and Society, MIT I); Selin, Noelle E. (MIT); de Weck, Olivier L. (MIT); Clark, William C. (Harvard University)
    Abstract: Decision-makers often seek to design policies that support sustainable development. Prospective evaluations of how effectively such policies are likely to meet sustainability goals have nonetheless remained relatively challenging. Evaluating policies against sustainability goals can be facilitated through the inclusive wealth framework, which characterizes development in terms of the value to society of its underlying capital assets, and defines development to be potentially sustainable if that value does not decline over time. The inclusive wealth approach has been developed at a theoretical level and previously applied to retrospective evaluations. Here, we apply inclusive wealth theory to prospective policy evaluation coupled with dynamic simulation modeling, using a case of electricity infrastructure policies in oil-exporting countries. To demonstrate the prospective evaluation, we analyze investment policies in non-fossil electricity capacity in terms of their forecast impact on inclusive wealth. Illustrative results show that investing in non-fossil capacity in Saudi Arabia and Kuwait can increase the countries' inclusive wealth, though the impacts depend on future uncertainties. In contrast, the UAE's net inclusive wealth declines under similar investment policies. Finally, expanding the estimation of benefits to include human capital improvements can substantially increase net inclusive wealth, though calculated benefits vary across the countries.
    Date: 2016–03
  10. By: Hogan, William W. (Harvard University)
    Abstract: The Environmental Protection Agency issued a final rule that defines a broad and complicated set of standards for controlling carbon dioxide (CO2) emissions from affected electricity generating units. (Environmental Protection Agency, 2015b) The proposed national average reduction by 2030 is 32% from the 2005 level of emissions, about half of which has already occurred. (Environmental Protection Agency, 2015j) The rules for new power plants are relatively straightforward and imply little more than reinforcing the current economic choice of natural gas over coal fired generation, given current projections for the price of natural gas. The Clean Power Plan rules for existing power plants arise under a different section of the Clean Air Act and present a more complicated picture. The result has implications for the nature and degree of future limitations on carbon dioxide emissions from the electricity sector. In addition, some versions of the possible implementation plans could have material implications for the operations of Regional Transmission Organizations under the regulations of the Federal Energy Regulatory Commission. The purpose here is to highlight some of the possible directions for relevant policies of electricity system operators.
    Date: 2015–10
  11. By: Bensch, Gunther; Kluve, Jochen; Stöterau, Jonathan
    Abstract: This paper provides evidence on a key factor for the success of market-based approaches to disseminate modern-energy products in rural areas of developing countries: the employment and income perspectives of entrepreneurs in the related value chains. We assess the impact of a large-scale energy-access intervention in Kenya that supports individuals in starting a business in improved cookstoves or small solar products. To identify the causal effect of the intervention, the analysis is based on a staggered implementation evaluation design that takes advantage of sequential roll-out of the programme. The results demonstrate how active entrepreneurs use the new business opportunity to intensify and diversify their income-generating activities, often by shifting away from subsistence farming as a main source of income. This goes along with sizeable improvements in individual and household incomes as well as perceived economic well-being. Impacts significantly differ between the two technologies and across sub-groups, most notably gender. The findings support that market-based approaches can successfully establish sustainable local businesses to foster modern energy access in rural areas.
    Abstract: Der vorliegende Artikel untersucht einen entscheidenden Faktor für den Erfolg von marktbasierten Ansätzen zur Verbreitung moderner Energietechnologien in Entwicklungsländern: die Beschäftigungs- und Einkommensperspektiven von Kleinstunternehmern in den jeweiligen Wertschöpfungsketten. Zu diesem Zweck werden die Einkommenseffekte eines Programmes zur Energiegrundversorgung in Kenia untersucht. Das Programm unterstützt Einzelpersonen und Gruppen im ländlichen Raum dabei, eigene Kleinstunternehmen zum Verkauf energiesparender Kochherde oder Solarlampen zu gründen und zu etablieren. Der quasi-experimentelle Evaluationsansatz zur Messung kausaler Effekte der Maßnahme basiert auf der sequentiellen Einführung zusätzlicher Trainings. Unsere Ergebnisse zeigen, wie ausgebildete Kleinstunternehmer die neuen Einkommensmöglichkeiten nutzen, um ihre Erwerbstätigkeiten auszubauen und zu diversifizieren. Dies ist in vielen Fällen mit einer Abkehr von landwirtschaftlicher Subsistenzwirtschaft verbunden. Diese Neuausrichtung geht einher mit beträchtlichen Verbesserungen der Einkommenssituation von Individuen und Haushalten. Die Einkommenseffekte unterscheiden sich jedoch stark zwischen den beiden Energietechnologien und über bestimmte Teilnehmergruppen hinweg, insbesondere zwischen Männern und Frauen. Insgesamt erweist sich der marktbasierte Ansatz als erfolgreich darin, durch den Aufbau lokaler Unternehmen den Zugang zu modernen Energietechnologien im ländlichen Raum nachhaltig zu verbessern.
    Keywords: energy-access interventions,cookstoves,pico-solar,value chain,impact evaluation,entrepreneurship training,entropy balancing
    JEL: O13 O33 H43 L26
    Date: 2016
  12. By: Sandrine Berger-Douce (COACTIS - COACTIS - Université Jean Monnet - Saint-Etienne - Université Lumière - Lyon II : EA4161, EPICE-ENSMSE - Département Etudes sur la performance, l'Innovation et le Changement en Entreprise - Mines Saint-Étienne MSE - École des Mines de Saint-Étienne - Institut Mines-Télécom - Institut Henri Fayol); Natacha Gondran (PIESO-ENSMSE - Département Performance Industrielle et Environnementale des Systèmes et des Organisations - Mines Saint-Étienne MSE - École des Mines de Saint-Étienne - Institut Mines-Télécom - Institut Henri Fayol, EVS - UMR 5600 Environnement Ville Société - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - Université Jean Moulin - Lyon III - Université Jean Monnet - Saint-Etienne - École Nationale des Travaux Publics de l'État [ENTPE] - Ecole Nationale Supérieure des Mines de Saint-Etienne - ENSAL - École nationale supérieure d'architecture de Lyon - CNRS - Centre National de la Recherche Scientifique); Florent Breuil (COACTIS - COACTIS - Université Jean Monnet - Saint-Etienne - Université Lumière - Lyon II : EA4161, EPICE-ENSMSE - Département Etudes sur la performance, l'Innovation et le Changement en Entreprise - Mines Saint-Étienne MSE - École des Mines de Saint-Étienne - Institut Mines-Télécom - Institut Henri Fayol)
    Abstract: Le RIODD a tenu son 11ème congrès annuel du mercredi 6 au vendredi 8 juillet 2016 à St-Etienne. Il s'est déroulé à l'Ecole des Mines de Saint-Étienne. L’organisation de ce 11ème congrès annuel du RIODD était portée par l’Institut Henri Fayol de l’Ecole des Mines de St-Etienne. Cette manifestation scientifique à caractère pluridisciplinaire et de dimension internationale s’est inscrite dans le cadre du Bicentenaire de l’Ecole des Mines de St-Etienne en 2016.
    Keywords: Energie, environnement, mutations sociales, RSE, développement durable
    Date: 2016
  13. By: Habibi, Shiva (Chalmers); Beser Hugosson, Muriel (KTH); Sundbergh, Pia (Trafikanalys); Algers, Staffan (KTH)
    Abstract: The car fleet composition is important from several aspects including energy consumption, greenhouse gas and other emissions. Evaluation of car fleet policy measures is therefore vital for choosing among different car policy options. In this paper, we demonstrate how such an evaluation could have been carried out in the context of the Swedish governmental investigation of a fossil free car fleet, released early 2014. One objective of the policy package is to design a Bonus-Malus system that pushes the Swedish fleet composition towards the EU objectives of the average CO2 emissions for new cars by 2021. The proposed scenarios address cars bought by private persons as well as by companies. These scenarios differ in designs for registration tax, vehicle circulation tax, clean car premiums, company car benefits tax and fuel tax. We use the Swedish car fleet model system to predict the effects of the proposed scenarios on the Swedish car fleet composition. Also, we build a simple supply model to predict future supply. Our model results show that none of the three proposed scenarios is actually successful enough to meet the Swedish average CO2 emissions target. The average CO2 emissions in two of these scenarios are actually not much different from the business as usual scenario. In all scenarios, the number of electric and plug in hybrid cars increase. However, in all scenarios, the car fleet will still be totally dominated by fossil fuelled cars. Also, relative to a business as usual scenario the number of ethanol and gas cars is reduced in the other scenarios. Also, the Bonus-Malus system gives a positive net result in terms of budget effects showing that car buyers choose to pay the malus for a car with higher emissions rather than to be attracted by the bonus of a car with lower emissions.
    Keywords: Bonus-Malus; Taxation policies evaluation; Car fleet modeling; Vehicle supply model
    JEL: R40
    Date: 2016–09–27
  14. By: Giles Atkinson; Kirk Hamilton
    Abstract: The UK has been an exception to the trend of channelling revenues arising from the depletion of subsoil assets into a resource fund. In this paper, we construct an asset account for the UK’s oil and gas resources to evaluate the cost of this exceptionalism and, looking forward, the implications of establishing a fund now. We show that had a decision been made to establish a resource fund in 1975, this fund could now be substantial in size (about GBP 280 billion in 2010). A significant contributor to this result is the historical efficiency of the UK fiscal regime in capturing oil and gas rents, as we demonstrate. A further benefit of the resource fund would have been a reduction in volatility of resource revenues flowing to the Treasury. An ex post cost-benefit analysis of the simulated fund suggests it could have been a sound public investment. However, our simulation of a future resource fund based on (possible) shale gas and oil revenues shows that it could reach a size similar to the 1975-2010 fund only under optimistic assumptions about prices, revenues and economic reserves.
    Date: 2016–09
  15. By: Finn Roar Aune; Kristine Grimsrud; Lars Lindholt; Knut Einar Rosendahl; Halvor Briseid Storrøsten (Statistics Norway)
    Abstract: This paper studies the oil market effects of phasing out oil consumption subsidies in the transport sector. Welfare effects in different countries are also examined. We investigate potential feedback mechanisms of oil subsidy removal via lower oil prices in the global oil market, which may stimulate oil consumption in other regions. An intertemporal numerical model of the international oil market is applied, where OPEC-Core producers have market power. The major subsidizers of oil are OPEC countries, and we find that the effects of subsidy removal here are quite pronounced. Consumption of oil in the transport sector of OPEC countries declines significantly. As a result, the global oil price falls slightly, and other regions increase their oil consumption to some degree. Although OPEC consumers are worse off by the subsidy removal, total welfare in OPEC increases due to higher profits from oil production.
    Keywords: Fossil fuel subsidies; transport; oil market; market power; distribution; feedback mechanisms
    JEL: D42 Q54 R48
    Date: 2016–09
  16. By: Illig, Aude; Schindler, Ian
    Abstract: We use the dynamic production function identities and an empirical model of oil prices based only on oil extraction data to analyze the dynamics of oil prices as we transition into the contraction phase of oil extraction. We explore the implications with respect to several common scenarios.
    Date: 2016
  17. By: van den Bremer, Ton; van der Ploeg, Frederick
    Abstract: We use a welfare-based intertemporal stochastic optimization model and historical data to estimate the size of the optimal intergenerational and liquidity funds and the corresponding resource dividend available to the government of the Canadian province Alberta. To first-order of approximation, this dividend should be a constant fraction of total above- and below-ground wealth, complemented by additional precautionary savings at initial times to build up a small liquidity fund to cope with oil price volatility. The ongoing dividend equals approximately 30 per cent of government revenue and requires building assets of approximately 40 per cent of GDP in 2030, 100 per cent of GDP in 2050 and 165 per cent in 2100. Finally, the effect of the recent plunge in oil prices on our estimates is examined. Our recommendations are in stark contrast with historical and current government policy.
    Keywords: Fiscal policy; oil price volatility; precautionary saving; resource wealth
    JEL: D91 E21 E22 Q32
    Date: 2016–09
  18. By: van der Ploeg, Frederick
    Abstract: Policy prescriptions for managing natural resource windfalls are based on the permanent income hypothesis: none of the windfall is invested at home and saving in an intergenerational SWF is dictated by smoothing consumption across different generations. Furthermore, with Dutch disease effects the optimal response is to intertemporally smooth the real exchange rate, smooth public and private consumption, and limit sharp fluctuations in the intersectoral allocation of production factors. We show that these prescriptions need to be modified for the following reasons. First, to cope with volatile commodity prices precautionary buffers should be put in a stabilisation fund. Second, with imperfect access to capital markets the windfall must be used to curb capital scarcity, invest domestically and bring consumption forward. Third, with real wage rigidity consumption must also be brought forward to mitigate transient unemployment. Fourth, the real exchange rate has to temporarily appreciate to signal the need to invest in the domestic economy to gradually improve the ability to absorb the extra spending from the windfall. Fifth, with finite lives the timing of handing back the windfall to the private sector matters and consumption and the real exchange rate will be volatile. Finally, with nominal wage rigidity we show that a Taylor rule is a better short-run response to a crash in commodity prices than a nominal exchange rate peg.
    Keywords: absorption constraints; capital scarcity; Dutch disease; Overlapping Generations; permanent income
    JEL: E60 F34 F35 F43 H21 H63 O11 Q33
    Date: 2016–09
  19. By: Breyel, Corinna; Grigoriadis, Theocharis
    Abstract: Resource-rich dictatorships are more inclined to repress civil society than others. In this paper, we identify a tradeoff between political rents from natural resources and the organizational density of civil society. This organizational density determines the extent to which citizens can threaten the dictator with a revolution. We find that, in the occurrence of a negative oil price shock, regime change becomes likely, whereas a positive oil shock increases the extractive capacity of the dictator. When a negative oil price shock occurs, the persecution of failed revolutionaries can prevent revolution if the probability of revolutionary success is already low ex-ante. Historical and contemporary illustrations are drawn from Iran, the Soviet Union/Russia and Egypt.
    Keywords: natural resources,dictatorship,civil society,organizational density,persecution
    JEL: C73 P36 P48 P51 Q34
    Date: 2016
  20. By: John C. Whitehead; Tim Haab; James Sherry Larkin; John Loomis; Sergio Alvarez; Andrew Ropicki
    Abstract: The lost recreational use values from the BP/Deepwater Horizon oil spill in the Gulf of Mexico were estimated from cancelled recreational trips to Northwest Florida. The impacts were calculated using the travel cost method for a single site with primary data collected from an online survey conducted after the spill. The data were collected in August and September 2011 with respondents residing in U.S. states that constitute the primary market for coastal tourism to Northwest Florida. The survey gathered information from respondents on their recreational visits to Northwest Florida, including detailed information on their past trips and the number of trips cancelled to the study region due to the oil spill. The empirical analysis involves the estimation of random parameters negative binomial count data demand functions. Using these models we find significant preference heterogeneity surrounding the effects of the oil spill. Aggregate damages are estimated to be $207 million. Key Words: BP/Deepwater Horizon oil spill,travel cost method,cancelled trips
    Date: 2016
  21. By: Rana Roy
    Abstract: This paper is a first attempt at calculating the cost of air pollution in Africa. More precisely, it is a calculation of the major part of this cost: namely, the cost of premature deaths attributable to air pollution. It draws on the epidemiological evidence base assembled in the Global Burden of Disease Study 2013, in order to detail results for the health impacts of air pollution – in absolute terms and relative to selected other major risk factors, per country and for Africa as a whole. And it draws on the economic analyses developed by the present author, among others, in recent OECD work on the value of statistical life, in order to establish results for the economic cost of the health impacts of air pollution. In the period from 1990 to the present, and at each succeeding five-year interval in between, the death toll from air pollution in Africa has risen in tandem with the uninterrupted growth in the size of the urban population of Africa over this period. The total of annual deaths from ambient particulate matter pollution across the African continent increased by 36% from 1990 to 2013, from a then relatively low base of ≈ 180 000 in 1990 to ≈ 250 000 in 2013. Over this period, deaths from household air pollution also continued to increase, by 18%, from an already high base of ≈ 400 000 in 1990 to well over 450 000 in 2013. For Africa as a whole, as at 2013, the estimated economic cost of premature deaths from ambient particulate matter pollution was ≈ USD 215 billion. The estimated economic cost of premature deaths from household air pollution was ≈ USD 232 billion. Ce document est une première tentative d’estimer le coût de la pollution atmosphérique en Afrique. Plus précisément : une tentative de calculer la partie la plus importante de ce « coût », à savoir le coût lié aux décès prématurés dus à la pollution de l'air. Il se fonde sur des éléments de données épidémiologiques recueillis par le « Global Burden of Disease Study 2013 », qui publie des résultats détaillés sur les effets de la pollution atmosphérique sur la santé – tant en termes absolus que par rapport aux autres principaux facteurs à risque –, par pays et pour l'Afrique dans son ensemble. Par ailleurs, il se fonde sur les analyses économiques développées par l'auteur, notamment les travaux récents de l'OCDE sur la « valeur d’une vie statistique », pour estimer le coût économique des effets de la pollution de l'air sur la santé. Dans la période allant de 1990 à nos jours, et à chaque intervalle quinquennal, le nombre de décès dus à la pollution atmosphérique en Afrique a augmenté au même rythme que l’accroissement de la population urbaine pendant cette même période. Le nombre de décès annuels dus à la pollution de l’air par les particules ambiantes sur le continent a augmenté de 36 % entre 1990 et 2013, à partir d’un niveau peu élevé ≈ 180 000 en 1990 à ≈ 250 000 en 2013. Au cours de cette période, les décès dus à la pollution de l’air domestique ont continué d'augmenter de 18 %, à partir d'un niveau déjà élevé de ≈ 400 000 en 1990 à plus de 450 000 en 2013. En 2013, sur le continent africain, le coût économique estimé des décès prématurés dus à la pollution de l’air par les particules ambiantes était d’environ 215 milliards de dollars. Le coût économique estimé des décès prématurés dus à la pollution de l'air domestique était d’environ 232 milliards de dollars.
    Keywords: air pollution, value of statistical life, Africa, Afrique, valeur statistique d’une vie, pollution de l’air
    JEL: Q51 Q53 Q55
    Date: 2016–09–29
  22. By: Jan Fagerberg (University of Oslo - TIK - Senteret); Staffan Laestadius (Royal Institute of Technology (KTH)); Ben Martin (Science Policy Research Unit, University of Sussex, UK)
    Abstract: Europe is confronted by an intimidating triple challenge – economic stagnation, climate change, and a governance crisis. This paper demonstrates how the three challenges are closely inter-related, and discusses how they can be dealt with more effectively in order to arrive at a more economically secure, environmentally sustainable and well governed Europe. In particular, a return to economic growth cannot come at the expense of greater risk of irreversible climate change. Instead, what is required is a fundamental transformation of the economy to a new ‘green’ trajectory based on rapidly diminishing emission of greenhouse gases. This entails much greater emphasis on innovation in all its forms (not just technological). Following this path would mean turning Europe into a veritable laboratory for sustainable growth, environmentally as well as socially. The paper is based on a forthcoming book: Fagerberg, J., S. Laestadius and B. R. Martin eds. (2015) The Triple Challenge for Europe: Economic Development, Climate Change and Governance, Oxford University Press.
    Keywords: Europe; European Union; triple challenge; economic stagnation; climate change; governance crisis; innovation policy; transformation process
    Date: 2016–09
  23. By: Miguel Cárdenas Rodríguez; Ivan Haščič; Martin Souchier
    Abstract: This paper further refines the OECD framework for measuring the environmentally adjusted multifactor productivity growth that seeks to incorporate environmental services in productivity analysis. Compared to standard productivity measurement, this framework allows accounting also for the use of natural capital (currently including 14 types of fossil fuels and minerals) and the emission of pollutants as negative by-products (currently including 8 types of greenhouse gases and air pollutants). An updated series of the indicator is presented, with a geographic coverage extended to all OECD and G20 countries for the 1990-2013 time period. The indicators presented here allow the sources of economic growth to be better identified, and growth prospects in the long run to be better assessed. Le présent rapport affine le cadre de mesure de la croissance de la productivité multifactorielle corrigée des incidences environnementales utilisé par l’OCDE pour incorporer les services environnementaux dans l’analyse de la productivité. Comparé à la mesure classique de la productivité, ce cadre permet également de tenir compte de l’utilisation du capital naturel (actuellement 14 types de combustibles fossiles et minéraux) et des émissions de polluants en tant que sous-produits négatifs (actuellement 8 types de gaz à effet de serre et polluants atmosphériques). Une série actualisée de cet indicateur, dont la couverture géographique s’étend à tous les pays de l’OCDE et du G20, est présentée pour la période 1990-2013. Ces indicateurs permettent de mieux identifier les sources de croissance économique et de mieux évaluer les perspectives de croissance sur le long terme.
    Keywords: multifactor productivity, air pollution, total factor productivity, green productivity, productivity measurement, emission shadow prices, productivité multifactorielle, productivité verte, mesure de la productivité, productivité totale des facteurs, pollution atmosphérique
    JEL: D24 O44 O47 Q3 Q52 Q53 Q56
    Date: 2016–09–22
  24. By: Schmalensee, Richard (MIT); Stavins, Robert (Harvard University)
    Abstract: This essay provides an overview of the major emissions trading programs of the past thirty years on which significant documentation exists, and draws a number of important lessons for future applications of this environmental policy instrument. References to a larger number of other emissions trading programs that have been implemented or proposed are included.
    JEL: Q40 Q48 Q54 Q58
    Date: 2015–11
  25. By: Sascha Kollenberg; Luca Taschini
    Abstract: Emissions Trading Systems (ETSs) with fixed caps lack provisions to address systematic imbalances in the supply and demand of permits due to changes in the state of the regulated economy. We propose a mechanism which adjusts the allocation of permits based on the current bank of permits. The mechanism spans the spectrum between a pure quantity instrument and a pure price instrument. We solve the firms' emissions control problem and obtain an explicit dependency between the key policy stringency parameter – the adjustment rate – and the firms' abatement and trading strategies. We present an analytical tool for selecting the optimal adjustment rate under both risk-neutrality and risk-aversion, which provides an analytical basis for the regulator's choice of a responsive ETS policy.
    Keywords: EU ETS reform; dynamic allocation; policy design; responsiveness; resilience; supply management
    JEL: E63 H23 Q52 Q58
    Date: 2016–09–15
  26. By: Aldy, Joseph E. (Harvard University)
    Abstract: The emerging pledge and review approach to international climate policy provides countries with substantial discretion in how they craft their intended emission mitigation contributions. The resulting heterogeneity in mitigation pledges creates a significant demand for a well-functioning transparency and review mechanism. In particular, the specific forms of intended contributions necessitate economic analysis in order to estimate the aggregate effects of these contributions, as well as to permit "apples-to-apples" comparisons of mitigation efforts. This paper discusses the tools that can inform such analyses, as well as the institutional framework needed to support climate transparency. In light of the negotiating challenges with respect to transparency, the paper describes the potential for countries to implement Living Mitigation Plans that include regular updating of domestic mitigation programs with data and analyses on their outcomes. Such Living Mitigation Plans can serve as the foundation for independent, expert review of domestic mitigation programs. Moreover, they can include the inputs necessary to assess the mitigation value of domestic mitigation efforts. Such assessments could inform the linkage of domestic mitigation policies, especially among disparately designed mitigation policies.
    Date: 2015–11
  27. By: Tracy Snoddon
    Keywords: Energy and Natural Resources
    JEL: H23 Q5
  28. By: Jian-Lei Mo (Center for Energy and Environmental Policy Research, Center for Energy and Environmental Policy Research, Institute of Policy and Management - Chinese Academy of Sciences); Joachim Schleich (Fraunhofer Institute for Systems and Innovation Research - Fraunhofer Institute for Systems and Innovation Research, Virginia Polytechnic Institute and State University [Blacksburg], MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Lei Zhu (University of Toronto); Ying Fan (School of Economics & Management - Beihang University)
    Abstract: Relying on real options theory, we employ a multistage decision model to analyze the effect of delaying the introduction of emission trading systems (ETS) on power plant investments in carbon capture and storage (CCS) retrofits, on plant operation, and on carbon dioxide (CO2) abatement. Unlike previous studies, we assume that the investment decision is made before the ETS is in place, and we allow CCS operating flexibility for new power plant investments. Thus, the plant may be run in CCS-off mode if carbon prices are low. We employ Monte Carlo simulation methods to account for uncertainties in the prices of CO2 certificates, other inputs, and output prices, relying on a realistic parameterization for a supercritical pulverized coal plant in China. We find that CCS operating flexibility lowers the critical carbon price needed to support CCS investment because it renders CCS investment less irreversible. For a low carbon price path, operating flexibility also implies that delaying the introduction of an ETS hardly affects plant CO2 abatement since the plant operator is better off purchasing emission certificates rather than operating the plant in CCS mode. Interestingly, for low carbon prices we find a U-shaped relation between the length of the delay and the economic value of the plant. Thus, delaying the introduction of an ETS may make investors worse off.
    Keywords: power plant investment, regulatory uncertainty, multistage decision, operating flexibility, real options theory, emissions trading, CCS, China
    Date: 2015–11
  29. By: Nathalie Berta (REGARDS - URCA - Université de Reims Champagne-Ardenne, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Emmanuelle Gautherat (LS-CREST - ENSAE ParisTech - Ecole Nationale de la Statistique et de l'Administration Economique, REGARDS - URCA - Université de Reims Champagne-Ardenne); Ozgur Gun (REGARDS - URCA - Université de Reims Champagne-Ardenne)
    Abstract: The European Union Emissions Trading Scheme (EU ETS) is supposed to help regulated installations to cover their CO2 emissions by trading in allowances. In practice, the EU ETS is mainly a financial market used for hedging and speculation. This financial feature is regarded as a solution (hedging and liquidity) to a problem (the price risk and volatility imposed on installations) which the market has actually created itself. This paper provides an estimation of the real underpinning of the scheme, i.e. the needs of installations for allowances transfers to achieve compliance in the two first exchange periods. This estimation, which was singularly lacking in the literature, shows that compliance transactions become more and more marginal as market activity grows and that they are drowned in a whirlpool of speculation. This challenges the role of the carbon price whose financial and self-referential evaluation can obviously not reveal installations' marginal abatement costs, the condition of cost-effectiveness expected from carbon trading.
    Abstract: Le marché du carbone européen est créé en 2005 pour aider les installations assujetties à couvrir leurs émissions de CO2 à travers l'échange de quotas. En pratique, c'est essentiellement un marché financier dédié à l'échange de dérivés à des fins de couverture de risque et de spéculation. Cette dimension financière bien connue est présentée comme une solution (couverture de risque et liquidité) à un problème que le marché a lui-même créé (risque de prix et volatilité imposés par l'instrument, par opposition à un système de taxe). Ce papier établit une estimation du véritable sous-jacent du marché, i.e. des besoins de transferts de permis des installations à des fins de conformité. Cette estimation – singulièrement absente de la littérature – montre que les transactions à des fins de conformité sont de plus en plus marginales à mesure que l'activité sur le marché augmente, activité presque uniquement tirée par la spéculation. Se joue alors la capacité du prix du carbone à révéler les coûts marginaux des entreprises, principale condition d'efficacité attendue en théorie de ce type d'instrument.
    Keywords: European Union Emissions Trading Scheme,carbon market,CO2 allowance,carbon finance,marché de permis négociables,finance carbone,marché de carbone européen
    Date: 2015–10
  30. By: K Hervé Dakpo
    Abstract: We contribute to the literature on undesirable-output technology modeling by first discussing the limits of the recently proposed by-production approach of Murty et al. (2012) (hereafter we will refer to these authors as MRL) and second by proposing some possible extensions. We identify two theoretical limits and two practical drawbacks when using Data Envelopment Analysis (DEA) with this approach. Theoretically, MRL’s by-production model is based on estimating two sub-technologies, one representing good outputs and the other one representing undesirable outputs. However, MRL assume independence of the sub-frontiers. In our paper, by contrast, we discuss the importance and implications of considering that all production processes are interconnected and should not be considered separately. Among the three extensions proposed, we argue that the introduction of some dependence constraints that link the two sub-technologies considered in this framework is very powerful. The two by-production approaches, MRL’s and ours, are discussed under the restrictive assumption of fixed levels of inputs and under the flexible case of free choice of polluting input quantities. An application to a sample of 112 countries reveals that MRL model gives higher inefficiency scores compared to our extension with dependence constraints.
    Keywords: by-production, cost disposability, factor bands, product couplings, dependence constraints, data envelopment analysis
    JEL: C61 D24 Q50
    Date: 2016
  31. By: Steinkraus, Arne
    Abstract: This paper shifts the perspective of the recent green paradox literature towards the demand side. Based on a simple model, I show that a subsidy on input factors in a Cobb-Douglas production function may contribute substantially to postponing resource extraction into the future and, thereby, to limit the future costs of climate change. Specifically, indirect subsidies on human capital, such as investments in education, are plausible policy options to mitigate carbon dioxide emissions because it is robust to short-sighted incentives on the part of politicians and resource owners.
    Keywords: Climate Change,Green Paradox,Subsidy,Demand-Side
    JEL: Q38 Q54 Q58
    Date: 2016
  32. By: Glenn Sheriff
    Abstract: Two decades after creation of the UN Framework Convention on Climate Change (UNFCCC), parties have reached a general political consensus in support of reducing global greenhouse gas (GHG)emissions, but debate continues over how to share equitably the burden of mitigation across countries. As part of the December 2015 Paris Agreement, countries submitted Nationally Determined Contributions(NDCs) for GHG mitigation. I analyze these mitigation targets to evaluate the degree to which they resemble any specific burden-sharing proposals. Results could have several applications as the UNFCCC process continues, including simulating how mitigation commitments may evolve as countries become wealthier and considering how increased ambition might be allocated while maintaining the current implicit burden-sharing allocation.
    Keywords: greenhouse gas mitigation, climate policy, distribution, international environmental agreements
    JEL: F53 Q52 Q54
    Date: 2016–09
  33. By: Olivier Boucher (Met Office Hadley Centre - Met Office); Valentin Bellassen (CESAER - Centre d'Economie et Sociologie appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement); Hélène Benveniste (Institut Pierre-Simon Laplace (IPSL) - CNRS - Centre National de la Recherche Scientifique); Philippe Ciais (Joint Unit, LSCE - Commissariat à l'Energie Atomique et aux Energies Alternatives); Patrick Criqui (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Celine Guivarch (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique); Hervé Le Treut (LMD - Laboratoire de Météorologie Dynamique - UPMC - Université Pierre et Marie Curie - Paris 6 - ENS Paris - École normale supérieure - Paris - Polytechnique - X - INSU - CNRS - Centre National de la Recherche Scientifique); Sandrine Mathy (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Roland Séférian (CNRM - Centre National de Recherches Météorologiques - Aucune)
    Abstract: In this paper we analyze research gaps and identify new directions of research in relation to a number of facets of the Paris Agreement, including the new 1.5 °C objective, the articulation between near-term and long-term mitigation pathways, negative emissions, verification, climate finance, non-Parties stakeholders, and adaptation.
    Keywords: Paris agreement,COP21,research gaps,interdisciplinary climate research
    Date: 2016
  34. By: Michel Damian (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: This article responds to Jean Tirole, winner of the Nobel prize for economics in 2014 and the signatories of the international appeal launched by Toulouse School of Economics and the Climate Economics Chair at Paris Dauphine University who propose setting a universal carbon price and establishing a transcontinental emissions trading system. We hold that the Paris Agreement, which disregarded such recommendations, represents a paradigm shift. The new political economy of climate change departs from the standard approach with regard to its economic instruments (emissions prices and quotas), returning to a classical political economy approach in terms of production economics. It confers a strategic role on methods and techniques for cutting emissions, as part of a long-term vision of energy and industrial transition. It is underpinned by the concerted action of States and multiple actors operating on various scales. There can be no magic wand to swiftly reduce greenhouse gas emissions while disregarding the real conditions of States, which all differ in terms of their relative development, technological capacity and political and social situation, not to mention the diversity of their values and priorities.
    Keywords: Paris Agreement,climate change,carbon price,carbon trading,political economy,regulation,decarbonization
    Date: 2016
  35. By: Hans, Wiesmeth; Weber, Shlomo
    Abstract: The extent of provision of a public good often relies on social awareness and public support for it. This applies, in particular, to global reduction of greenhouse gases and its relevance for mitigating climate change. We examine the concept of "public awareness" by introducing a formal model that analyzes efforts to mitigate climate change in a setting with heterogeneous countries. In the theoretical part we examine the Nash equilibrium of the contribution game. The effects of awareness and economic parameters on mitigation efforts can be disentangled, raising the possibility of linking awareness of climate change with economic wealth. The second part provides some empirical observations and offers the rankings of countries regarding awareness for climate change, as well as an empirical relationship between awareness and economic wealth.
    Keywords: diversity; Environmental awareness; Kyoto protocol; Public Goods; regional economics
    JEL: C72 D74 H41 H87 Q42 Q54
    Date: 2016–09
  36. By: Alistair Munro (National Graduate Institute for Policy Studies)
    Abstract: When the set of possible messages depends on the actual state of the world, optimal incentive schemes to control environmental problems may not always satisfy the revelation principle. As a result, in equilibrium some agents may send false messages, particularly when the information rents in the truth- telling scheme are high. I characterise optimal pollution regulation schemes and produce some numerical examples to show mechanisms which allow some dishonesty in equilibrium may frequently outperform truth-telling schemes.
    Date: 2016–09
  37. By: Freeman, Mark C. (Loughborough University); Groom, Ben (London School of Economics and Political Science); Zeckhauser, Richard (Harvard Univesrity)
    Abstract: The initial hope for climate science was that an improved understanding of what the future might bring would lead to appropriate public policies and effective international climate agreements. Even if that hope is not realized, as now seems likely, scientific advances leading to a more refined assessment of the uncertainties surrounding the future impacts of climate change would facilitate more appropriate adaptation measures. Such measures might involve shifting modes or locales of production, for example. This article focuses on two broader tools: consumption smoothing in anticipation of future losses, and physical adaptation measures to reduce damages. It shows that informative signals on climate-change effects lead to better decisions in the use of each tool.
    Date: 2015–08
  38. By: Tanya O'Garra; Susana Mourato
    Abstract: Climate change adaptation is gaining traction as a necessary policy alongside mitigation, particularly for developing countries, many of which lack the resources to adapt. However, funding for developing country adaptation remains woefully inadequate. This paper identifies the burden of responsibility that individuals in the UK are willing to incur in support of adaptation projects in developing countries. Results from a nationally representative survey indicate that UK residents are willing to contribute £27 per year (or a median of £6 per year) towards developing country adaptation (US$30 and $7 using the World Bank's purchasing power conversion factors). This represents less than one-third of the back-of-the-envelope $100–$140 per capita per year that the authors estimate would be needed to raise the $70–$100 bn/yr recommended by the World Bank to fund developing country adaptation. Regressions indicate that willingness to pay is driven mostly by a combination of beliefs and perceptions about one's own knowledge levels, rather than actual knowledge of climate change. We conclude that, to engage the many different audiences that make up the ‘public’, communication efforts must move beyond the simple provision of information and instead, connect with people's existing values and beliefs.
    Keywords: climate change adaptation; contingent valuation; developing country; environmental economics; development aid/assistance
    JEL: N0
    Date: 2015

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