nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒01‒15
47 papers chosen by
Roger Fouquet
London School of Economics

  1. Grid Investment and Support Schemes for Renewable Electricity Generation By Wagner, Johannes
  2. Reactive Power Management of a DFIG Wind System in Microgrids Based on Economics of the System By Mahdavi, Sadegh; Amin Froutani-Fard, Amin
  3. Spatio-temporal variation in peer effects - The case of rooftop photovoltaic systems in Germany By Johannes Rode; Sven Müller
  4. Cobenefits and Trade-Offs of Green and Clean Energy: Evidence from the Academic Literature and Asian Case Studies By Sovacool, Benajmin
  5. An Economic Assessment of Low-Carbon Investment Flows in the U.S. Power Sector By Lu Wang; Alice Favero; Marilyn Brown
  6. Economic information from Smart Meter: Nexus Between Demand Profile and Electricity Retail Price Between Demand Profile and Electricity Retail Price By Yang Yu; Guangyi Liu; Wendong Zhu; Fei Wang; Bin Shu; Kai Zhang; Ram Rajagopal; Nicolas Astier
  7. Non-Sequential Search, Competition and Price Dispersion in Retail Electricity By Gugler, Klaus; Heim, Sven; Liebensteiner, Mario
  8. Investment under Uncertainty in Electricity Generation By Gugler, Klaus; Haxhimusa, Adhurim; Liebensteiner, Mario; Schindler, Nora
  9. Integration and Efficiency of European Electricity Markets: Evidence from Spot Prices By Gugler, Klaus; Haxhimusa, Adhurim; Liebensteiner, Mario
  10. Post-EPIRA Impacts of Electric Power Industry Competition Policies By Navarro, Adoracion M.; Detros, Keith C.; dela Cruz, Kirsten J.
  11. Cross-Border Technology Differences and Trade Barriers: Evidence from German and French Electricity Markets By Gugler, Klaus; Haxhimusa, Adhurim
  12. Optimal energy taxation in cities By Rainald Borck; Jan Brueckner
  13. The Changing Dynamics of Energy in Turkey By Simone Tagliapietra
  14. The Impact of Reforming Energy Subsidies, Cash Transfers, and Taxes on Inequality and Poverty in Ghana and Tanzania. By Stephen Younger
  15. Do oil endowment and productivity matter for accumulation of international reserves? By Fatum, Rasmus; Zhu, Guozhong; Hui, Wenjie
  16. Turkey's Role in Natural Gas - Becoming a Transit Country? By Berk, Istemi; Schulte, Simon
  17. Oil Prices and African Stock Markets Co-movement: A Time and Frequency Analysis By Gourène, Grakolet Arnold Zamereith; Mendy, Pierre
  18. Productivity Growth and the General X-factor in Austria´s Gas Distribution By Gugler, Klaus; Liebensteiner, Mario
  19. On the Price Spread of Benchmark Crude Oils: A Spatial Price Equilibrium Model By Bennett, Max; Yuan, Yue
  20. Decomposing Multifactor Productivity Growth in Canada by Industry and Province, 1997-2014 By Matthew Calver and Alexander Murray
  21. Network Centrality and Market Prices: An Empirical Note By Firgo, Matthias; Pennerstorfer, Dieter; Weiss, Christoph
  22. Dynamic Fuel Price Pass-Through; Evidence from a New Global Retail Fuel Price Database By Kangni R Kpodar; Chadi Abdallah
  23. Gasoline Price Uncertainty and the Design of Fuel Economy Standards By Ryan Kellogg
  24. Geopolitical Risks and the Oil-Stock Nexus Over 1899-2016 By Nikolaos Antonakakis; Rangan Gupta; Christos Kollias; Stephanos Papadamou
  25. Oil Price Shock and Effects on Stock Markets of Emerging Economies By Chatterjee, Susmita; Bagchi, Bhaskar; Dandapat, Dhruba Ranjan
  26. Did the Renewable Fuel Standard Shift Market Expectations of the Price of Ethanol? By Baumeister, Christiane; Ellwanger, Reinhard; Kilian, Lutz
  27. Dedicated Energy Crops and Competition for Agricultural Land By Sands, Ronald D.; Malcolm, Scott A.; Suttles, Shellye A.; Marshall, Elizabeth
  28. Cost-Effectiveness and Incidence of Renewable Energy Promotion in Germany By Christoph Böhringer; Florian Landis; Miguel Angel Tovar Reaños
  29. The Coase Mechanism and the Iteration Argument By Schlicht, Ekkehart
  30. Governance, Vulnerability to Climate Change, and Green Growth: International Evidence By Le, Thai-Ha; Chang, Youngho; Park, Donghyun
  31. Output-Based Rebating of Carbon Taxes in the Neighbor's Backyard. Competitiveness, Leakage and Welfare By Christoph Böhringer; Brita Bye; Taran Faehn; Knut Einar Rosendahl
  32. A New Passage Point on an Old Road? By Felix Wilmsen; Friederike Gesing
  33. Climate Change Economics and Heat Transport across the Globe: Spatial-DSICE By Cai, Yongyang; Brock, William; Xepapadeas, Anastasios
  34. The Efficiency Cost of Protective Measures in Climate Policy By Christoph Böhringer; Xaquín Garcia-Muros; Ignacio Cazcarro; Iñaki Arto
  35. Decarbonization Pathways in Southeast Asia: New Results for Indonesia, Malaysia, Philippines, Thailand and Viet Nam By Francesco Bosello; Carlo Orecchia; David A. Raitzer
  36. Trade in Carbon and the Effectiveness of Carbon Tariffs By Christoph Böhringer; Jan Schneider; Emmanuel Asane-Otoo
  37. Transition Towards a Green Economy in Europe: Innovation and Knowledge Integration in the Renewable Energy Sector By C. Conti; M. L. Mancusi; F. Sanna-Randaccio; R. Sestini; E. Verdolini
  38. Policy- v. Individual Heterogeneity in the Benefits of Climate Change Mitigation: Evidence from a Stated-Preference Survey By Anna Alberini; Milan Šcasný; Andrea Bigano
  39. Climate Change and Growth Risks By Ravi Bansal; Marcelo Ochoa; Dana Kiku
  40. Environmental disclosure and innovation activity: Evidence from EU corporations By Emiko Inoue
  41. Carbon Policy and the Structure of Global Trade By Edward J. Balistreri; Christoph Boehringer; Thomas F. Rutherford
  42. Maximizing the Impact of Climate Finance: Funding Projects or Pilot Projects? By Matthew J. Kotchen
  43. US Climate Policy: A Critical Assessment of Intensity Standards By Christoph Böhringer; Xaquín Garcia-Muros; Mikel Gonzalez-Eguino; Luis Rey
  44. The Cost of Climate Stabilization in Southeast Asia, a Joint Assessment with Dynamic Optimization and CGE Models By Francesco Bosello; Giacomo Marangoni; Carlo Orecchia; David A. Raitzer; Massimo Tavoni
  45. Is faster economic growth compatible with reductions in carbon emissions? The role of diminished population growth By Casey, Gregory; Galor, Oded
  46. The impacts of the EU ETS on efficiency: An empirical analyses for German manufacturing firms By Löschel, Andreas; Lutz, Benjamin Johannes; Managi, Shunsuke
  47. The Economics of Greenhouse Gas Mitigation in Developing Asia By Reis, Lara Aleluia; Emmerling, Johannes; Tavoni, Massimo; Raitzer, David

  1. By: Wagner, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: The unbundling of formerly vertically integrated utilities in liberalized electricity markets led to a coordination problem between investments in the regulated electricity grid and investments into new power generation. At the same time investments into new generation capacities based on weather dependent renewable energy sources such as wind and solar energy are increasingly subsidized with different support schemes. Against this backdrop this article analyzes the locational choice of private wind power investors under different support schemes and the implications on grid investments. I find that investors do not choose system optimal locations in feed-in tariff schemes, feed-in premium schemes and subsidy systems with direct capacity payments. Consequently, inefficiencies arise if transmission investment follows wind power investment. A benevolent transmission operator can implement the first-best solution by anticipatory investment behavior, which is however only applicable under perfect regulation. Alternatively a location dependent network charge for wind power producers can directly influence investment decisions and internalize the grid integration costs of wind power generation.
    Keywords: Renewable Energy Investment; Transmission Investment; Coordination Problem; External Effects
    JEL: D47 D62 L92 Q28 Q48
    Date: 2016–10–01
  2. By: Mahdavi, Sadegh; Amin Froutani-Fard, Amin
    Abstract: Due to significant line resistances in microgrids, active power variations produced by wind turbine can lead to significant fluctuations in voltage magnitudes and as a result economic of the grid. This project proposes a voltage sensitivity analysis-based scheme to achieve voltage regulation at a target bus in such microgrids. The method is local and can be implemented in the absence of widespread communication system or remote measurement. The economic performance of the method is illustrated on the IEEE-13 bus distribution network. Dynamic simulations (in PSCAD/EMTDC) are presented to assess the voltage regulation characteristics.
    Keywords: Optimization, Economic, Microgrid
    JEL: L0
    Date: 2017–01–05
  3. By: Johannes Rode; Sven Müller
    Abstract: We study spatio-temporal variation of peer effects in rooftop photovoltaics adoption of households. Our investigation employs locational data on potential adopters and a geocoded data set of all grid-connected photovoltaic systems set up in Germany through 2010. The detailed locational data allows us to construct an individual measure of peer effects for each potential adopter across Germany. Based on a discrete choice model with panel data, our analysis reveals that peer effects are mostly localized within a range of 0-0.2 km. Within this range they deflate slowly in a non-linear manner. We also find that the peer effect decreases over time.
    Keywords: Peer effects; installed base; discrete choice models; technology adoption; imitation; photovoltaics; solar; Germany
    JEL: O33 C35 Q55 R10
    Date: 2016–12
  4. By: Sovacool, Benajmin (Aarhus University)
    Abstract: This working paper assesses the positive cobenefits of promoting green and clean energy in Asia. It first defines what is meant by “clean” energy across the four technological systems of cooking, renewable electricity, energy efficiency, and urban transport. Then, drawn from a synthesis of peer-reviewed articles, it summarizes at least four general types of cobenefits of investing in these systems: (i) diversification and enhanced energy security, (ii) jobs and green growth, (iii) displaced pollution and associated cost savings, and (iv) enhanced resilience and adaptive capacity to things like climate change and natural disasters. It also offers some insight to possible challenges and trade-offs that must be managed when attempting to capture cobenefits. The paper then focuses on four case studies of cobenefits that have been delivered in practice: liquefied petroleum gas stoves in Indonesia, renewable electricity generation in the People’s Republic of China, energy efficiency in Japan, and mass transit in Singapore. The paper concludes with insights for energy analysts and policy makers.
    Keywords: climate; change
    JEL: Q54
    Date: 2016–12–14
  5. By: Lu Wang (Beijing Institute of Technology and Georgia Institute of Technology); Alice Favero (Georgia Institute of Technology); Marilyn Brown (Georgia Institute of Technology)
    Abstract: This study used the GT NEMS model to analyze how the proposed federal regulation on carbon emissions will impact investments in the U.S. electricity generating capacity at the federal and Census Division level for 2016-2030. Results show that in order to reduce emissions by 32% by 2030, cumulative investments will increase from 399 to 414 billion USD by 2030. Under the scenario which addresses carbon leakage - covering new and existing power plants - cumulative investment will reach 475 billion USD by 2030. Addressing carbon leakage will affect not only the size of the investments but also the direction: when only existing power plants are covered investments in natural gas remains almost unchanged (123 billion USD) relative to the Reference case; while under the scenario that covers all power plants, investment in natural gas will be 24% lower and the investments in renewable will be 64% higher than the Reference. Carbon regulation will produce not only losers and winners among energy sources but also among U.S. states. While the South and Midwest states will experience much higher increase in cumulative investments with respect to the national average; Northeast and West states will reduce their overall investments by 2030 under the policy scenarios.
    Keywords: Clean Power Plan, Climate Change Mitigation Policy, Investment, Electricity, United States
    JEL: Q42 Q43 Q48 Q58
    Date: 2016–12
  6. By: Yang Yu; Guangyi Liu; Wendong Zhu; Fei Wang; Bin Shu; Kai Zhang; Ram Rajagopal; Nicolas Astier
    Abstract: In this paper, we demonstrate that a consumer's marginal system impact is only determined by their demand profile rather than their demand level. Demand profile clustering is identical to cluster consumers according to their marginal impacts on system costs. A profile-based uniform-rate price is economically efficient as real-time pricing. We develop a criteria system to evaluate the economic efficiency of an implemented retail price scheme in a distribution system by comparing profile clustering and daily-average clustering. Our criteria system can examine the extent of a retail price scheme's inefficiency even without information about the distribution system's daily cost structure. We analyze data from a real distribution system in China. In this system, targeting each consumer's high-impact days is more efficient than target high-impact consumers.
    Date: 2016–09
  7. By: Gugler, Klaus; Heim, Sven; Liebensteiner, Mario
    Abstract: We investigate the impact of consumer search and competition on pricing strategies in Germany's electricity retail. We utilize a unique panel dataset on spatially varying search requests at major online price comparison websites to construct a direct measure of search intensity and combine this information with zip code level data on electricity tariffs between 2011 and 2014. The paper stands out by explaining price dispersion by differing pricing strategies of former incumbents and entrant firms, which are distinct in their attributable shares in informed versus uninformed consumers. Our empirical results suggest causal evidence for an inverted U-shape effect of consumer search intensity on price dispersion in a clearinghouse environment as in Stahl (1989). The dispersion is caused by opposite pricing strategies of incumbents and entrants, with incumbents initially increasing and entrants initially decreasing tariffs as a reaction to more consumer search. We also find an inverted U-shape effect of competition on price dispersion, consistent with theoretical findings by Janssen and Moraga-González (2004). Again, the effect can be explained by opposing pricing strategies of incumbents and entrants. (authors' abstract)
    Keywords: Search; Information; Competition; Price Dispersion; Electricity Retail
    Date: 2016–05
  8. By: Gugler, Klaus; Haxhimusa, Adhurim; Liebensteiner, Mario; Schindler, Nora
    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. (authors' abstract)
    Keywords: Tobin's q; Uncertainty; Investment; Electricity
    Date: 2016–09
  9. By: Gugler, Klaus; Haxhimusa, Adhurim; Liebensteiner, Mario
    Abstract: This paper seeks to investigate the current state of market integration among European electricity day-ahead spot prices. We provide reasoning that market integration brings about benefits, such as lower average prices and increased welfare from allocative efficiency. Yet, price convergence leads to higher prices in the low-price market and to lower prices in the high-price market, which creates winners and losers and thus makes the political implementation of market integration cumbersome. In our empirical analysis, we utilize a large sample of hourly spot prices of 25 European markets for the period 01.01.2010-30.06.2015 and combine it with other relevant data such as interconnector capacities and the existence of market coupling. Firstly, empirical results from cointegration analysis indicate that market integration increased from 2010 to 2012 but then declined until 2015, most likely due to increased feed-in from intermittent renewables. Secondly, we empirically assess the speed of adjustment from price shocks and reach the conclusion that the resulting efficiency of integration is rather modest. In general, our findings suggest that integration among European electricity markets has a large potential for improvements from additional capacity investments and further promotion of market coupling. (authors' abstract)
    Keywords: Market integration; Spot Price; Convergence; Internal Market; Electricity
    Date: 2016–06
  10. By: Navarro, Adoracion M.; Detros, Keith C.; dela Cruz, Kirsten J.
    Abstract: This study evaluates the achievement of the desired outcomes of the competition policies contained in the Electric Power Industry Restructuring Act of 2001 (EPIRA). It traces the evolution of the electric power industry before EPIRA and post-EPIRA. It looks at impacts on the consumers in terms of price affordability and supply reliability, and impact on production efficiency in terms of system loss reduction. In pre-EPIRA, electricity price in the Philippines was already high relative to other countries. Trends show that, in real terms, there was a price uptrend during the transition (2001-2005) toward the start of competition in the generation sector. There was a slight downtrend in the real price of electricity after the introduction of spot electricity trading, but the price of electricity remains high and it has not declined to pre-EPIRA levels. There is a danger that the findings on price trends could provide ammunition to those advocating the repeal of the EPIRA and renationalization of the industry. It must be emphasized, however, that the country has a long history of private sector-led electric power industry. Moreover, the nationalization years were marked by inefficiencies and fiscal problems that were not borne by electricity consumers alone but by the whole country. Thus, calls to repeal EPIRA are ill-advised. What needs to be done is to find ways of improving its implementation. The electricity spot market has to be governed by an independent market operator, regulatory capacity has to be strengthened, and the energy department needs to beef up its planning function.
    Keywords: Philippines, competition, EPIRA, electric power industry, restructuring, electricity price
    Date: 2016
  11. By: Gugler, Klaus; Haxhimusa, Adhurim
    Abstract: Using hourly data, we show that the convergence of German and French electricity spot prices depends on the employed generation mix structure, on the trade (export/import) capacity between the two countries, and on characteristics of neighbouring markets. Only when German and French electricity markets employ "similar" generation mixes price spreads vanish, and the likelihood for congestion of electricity flows is significantly reduced. This implies that, at least, a part of the convergence that was documented in recent literature is spurious, because it is not (only) driven by the forces of arbitrage, but by the similarity of the Generation structures. The direction of congestion matters in this regard. Furthermore, we document consistent evidence for the most important predictions of trade theory if markets are characterized by increasing marginal cost (i.e. supply) curves and limited cross-border capacities. (authors' abstract)
    Keywords: Market Integration; Electricity; Renewables; Technology Differences; Jaffe Index
    Date: 2016–10
  12. By: Rainald Borck; Jan Brueckner
    Abstract: This paper presents the first investigation of the effects of optimal energy taxation in an urban spatial setting. Rather than exploring the effects of a carbon tax, our approach is to derive the supplements to existing taxes that are needed to support the social optimum. We then analyze the effects of these taxes on urban spatial structure. Emissions are generated by housing consumption and commute trips, and the optimal tax structure has a tax on commuting, housing floor space, and land. These taxes reduce the extent of commuting and the level of housing consumption while increasing building heights, generating a more-compact city with a lower level of emissions per capita.
    Keywords: emissions; energy; taxation; monocentric city
    JEL: Q4 Q5 R1
    Date: 2016–12
  13. By: Simone Tagliapietra (Fondazione Eni Enrico Mattei)
    Abstract: This paper explores how Turkey’s politics and economy are affected by changes in global energy. To define which are the most relevant developments, the paper opens with an overview of the country's economic landscape. This analysis illustrates that energy, being the key driver behind its large current account deficit, represents a major point of vulnerability for the country. On this basis, the paper illustrates Turkey's energy matrix, an analysis that outlines the rising role of gas in the country's energy sector, both under the internal (i.e. growing share of the mix) and external (i.e. the country's potential role as regional gas hub) points of view. Finally, these issues are discussed with the aim of assessing the prospects for Turkey to turn gas into a geopolitical and economic asset for the country.
    Keywords: Turkey, Energy Security, Gas, TANAP, TAP, TurkStream
    JEL: Q40 Q42 Q48
    Date: 2016–12
  14. By: Stephen Younger (Department of Economics, Ithaca College, Ithaca, NY.)
    Abstract: The paper explains methods developed by the Commitment to Equity Institute to simulate policy changes and uses them to assess the distributional consequences of three types of policy reform in Ghana and Tanzania: removal of energy subsidies, expansion of conditional cash transfer programs, and shifts in the balance between indirect and direct taxation. The methods are simple to implement and provide a first-order approximation to the true distributional effects. In both countries energy subsidies are substantial and popular but regressive despite the use of lifeline tariffs for electricity consumption. Their removal would reduce inequality but also increase poverty by a non-trivial amount because the poor do garner some benefit from the subsidies. A simultaneous expansion of cash transfer programs could offset the poverty consequences at significantly lower fiscal cost than that of the energy subsidies. In both countries direct taxes are more progressive than indirect taxes, yet shifting taxation from indirect to direct taxes has relatively little effect on inequality and poverty because the incidence of the two is not so different as, for instance, the difference between taxes and a strongly progressive expenditure like conditional cash transfers.
    Keywords: fiscal incidence, poverty, inequality, subsidy reform, Ghana, Tanzania
    JEL: D31 H22 I14
    Date: 2016–11
  15. By: Fatum, Rasmus (University of Alberta); Zhu, Guozhong (University of Alberta); Hui, Wenjie (Peking University)
    Abstract: We develop a dynamic stochastic optimization model with oil price shocks to show that countries with certain combinations of oil endowment and productivity have strong precautionary incentives to accumulate foreign reserves in response to oil price shocks. Using the Simulated Method of Moments to estimate the model we demonstrate how oil price shocks are absorbed by changes in foreign reserves which, in turn, leads to less variation in aggregate consumption. Along with productivity and oil endowment, we also consider as determinants of reserves holding conventional variables such as trade- to-GDP ratio and capital openness. Overall, our results suggest that productivity and oil endowment are potentially important determinants of foreign reserves that for some countries should be considered as complements to conventional determinants.
    Keywords: foreign reserves; oil price shocks; precautionary demand
    JEL: E21 F40 Q43
    Date: 2016–12–01
  16. By: Berk, Istemi (Dokuz Eylul University, Iszmir, Turkey); Schulte, Simon (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: This paper analyses the possible future role that Turkey can play in European natural gas markets. We employ a global gas market simulation model, COLUMBUS, to assess the outcomes of different scenarios concerning natural gas supply routes to Europe through Turkey up to 2030. The results imply simply that under current conditions, i.e., a more competitive environment in European gas markets leading to low gas prices, Turkey’s role would be of only minor importance. In accordance with various scenarios presented in this study, Turkey’s role is seen at its most important when European demand increases and Russia exerts power in the European markets.
    Keywords: COLUMBUS; European Gas Supply; Turkey; Scenario Analyses
    JEL: C68 L13 Q31
    Date: 2017–01–06
  17. By: Gourène, Grakolet Arnold Zamereith; Mendy, Pierre
    Abstract: This paper explores the co-movement between OPEC (Organization of the Petroleum Exporting Countries) oil prices and six largest African stock markets in term of capital. The Wavelet Coherence method is used to analyze the evolution of this relationship in both time and frequency. Our results show that the co-movement between the African financial markets and oil prices is relatively low except for the emerging stock markets such as South Africa and Egypt and is related for the majority of stock markets in large time scales during the period of the 2007 financial crisis and after. At small time scales, African stock markets could be a way of diversification benefits for oil market active investors.
    Keywords: African Stock Markets, OPEC oil prices, Co-movement, Wavelet Coherence.
    JEL: C1 F3 G1
    Date: 2015–12–31
  18. By: Gugler, Klaus; Liebensteiner, Mario
    Abstract: We estimate cost functions to derive productivity growth using a unique database on costs and outputs of essentially all regulated Austrian gas distribution companies over the period 2002-2013, covering the times before and after the introduction of incentive regulation in 2008. We estimate a concave relation between total costs and time, and a significant one-off but permanent reduction in real costs after an imposed reduction in granted costs in the course of the introduction of incentive regulation. Our results imply that technological opportunities were higher in the early years of the sample than in later years, and that productivity growth grinded to a halt from 2008 on. We conclude that technological opportunities are exhausted (for the time being) in the Austrian gas distribution sector giving rise to an optimal general X factor (X-gen) of zero for the foreseeable future. (authors' abstract)
    Keywords: X-gen; Productivity; Regulation; Gas distribution
    Date: 2016–10
  19. By: Bennett, Max; Yuan, Yue
    Abstract: Benchmark crude oils exhibited dramatic fluctuations in price spreads in the recent decade, a phenomenon that rarely occurred in earlier decades. This paper develops a rational expectations two-period model of spatial price equilibrium, and departs from standard models by assuming increasing marginal costs of transportation and storage. We econometrically validate our model using a dataset that covers an extended time period. The model allows us to determine the underlying causes of the unique phenomenon of drastically changing crude oil price spreads over the past decade.
    Keywords: Crude oil; price spread; spatial price equilibrium
    JEL: G1 Q41
    Date: 2016–10–18
  20. By: Matthew Calver and Alexander Murray
    Abstract: Between 1997 and 2014, multifactor productivity (MFP) in Canada's business sector industries grew at an annual rate of 0.02 per cent per year − essentially zero. In this report, we decompose aggregate MFP growth into contributions by industry and province. Two sets of results are presented: one based on the generalized exactly additive decomposition (GEAD) and one based on the CSLS decomposition. The two decomposition methods lead to very different conclusions. The GEAD suggests that the reallocation of inputs to the mining and oil and gas extraction industry in the oil-rich provinces were the primary drivers of MFP growth in Canada while the manufacturing sector, concentrated in Ontario and Quebec, dragged MFP growth down. The CSLS decomposition suggests precisely the opposite: mining and oil and gas was the main hindrance to Canada’s MFP performance while manufacturing was the major driver of MFP growth. The disagreement between the two methods is primarily attributable to the fact that the large increase in commodity prices (especially oil prices) over the 1997-2014 period increases the mining and oil and gas industry's contribution to MFP growth according to the GEAD while the CSLS decomposition does not treat such relative price effects as contributors to productivity growth.
    Keywords: Productivity, Total Factor Productivity, Multifactor Productivity, Canada
    JEL: D24 O51
    Date: 2016–12
  21. By: Firgo, Matthias; Pennerstorfer, Dieter; Weiss, Christoph
    Abstract: We empirically investigate the importance of centrality (holding a central position in a spatial network) for strategic interaction in pricing for the Austrian retail gasoline market. Results from spatial autoregressive models suggest that the gasoline station located most closely to the market center - defined as the 1-median location - exerts the strongest effect on pricing decisions of other stations. We conclude that centrality influences firms' pricing behavior and further find that the importance of centrality increases with market size. (authors' abstract)
    Keywords: Network Centrality; Spatial Competition; Retail Markets; Gasoline Prices
    Date: 2015–09
  22. By: Kangni R Kpodar; Chadi Abdallah
    Abstract: This paper assesses the dynamic pass-through of crude oil price shocks to retail fuel prices using a novel database on monthly retail fuel prices for 162 countries. The impulse response functions suggest that on average, a one cent increase in crude oil prices per liter translates into a 1.2 cent increase in the retail gasoline price at peak level six months after the shock. However, the estimates vary significantly across country groups, ranging from about 0.5 cent in MENA countries to two cents in advanced economies. The results also show that positive oil price shocks have a larger impact than negative price shocks on the retail gasoline price. Finally, the paper underscores the importance of the new dataset in refining estimates of the fiscal cost of incomplete pass-through.
    Date: 2016–12–23
  23. By: Ryan Kellogg
    Abstract: What are the implications of gasoline price volatility for the design of fuel economy policies? I show that this problem has a strong parallel to Weitzman's (1974) classic model of using price or quantity controls to regulate an externality. Changes in fuel prices act as shocks to the marginal cost of complying with the standard. Assuming constant marginal damages from fuel consumption, an application of Weitzman (1974) implies that a fixed fuel economy standard reduces expected welfare relative to a “price” policy such as a feebate or, equivalently, a fuel economy standard that is indexed to the price of gasoline. When the regulator is constrained to use a fixed standard, I show that the usual approach to setting the standard—equate expected marginal compliance cost to marginal damage—is likely to be sub-optimal because the standard may not bind if the realized gasoline price is sufficiently high. Instead, the optimal fixed standard will be relatively relaxed and may be non-binding even at the expected gasoline price. Finally, I show that although an attribute-based standard allows vehicle choices to flexibly respond to gasoline price shocks, the resulting distortions imply that the optimal fuel economy standard is not attribute-based.
    JEL: H23 L51 L91 Q48 Q50
    Date: 2017–01
  24. By: Nikolaos Antonakakis (Webster Vienna Private University and University of Portsmouth); Rangan Gupta (Department of Economics, University of Pretoria, South Africa); Christos Kollias (University of Thessaly); Stephanos Papadamou (University of Thessaly)
    Abstract: Markets are invariably influenced and affected not only by the usual array of economic and financial factors but also by uncertainty inducing shocks. Using monthly stock and oil real returns data that spans over a century, this study takes a long historical perspective on whether the time-varying stock–oil covariance, their returns and their variances are affected by geopolitical risk as encapsulated and quantified by a recently developed index (Caldara and Iacoviello, 2016). To address the issue, a VAR(p)-BEKK-GARCH(1,1) model is used. The results reported herein indicate that the geopolitical risk index introduced in the estimations triggers a negative effect mainly in case of oil returns and volatility and to a smaller degree reduces the covariance between the two markets with a time lag.
    Keywords: Geopolitical Risk, Stock and Oil markets, BEKK-GARCH models
    JEL: H56 G1 G15
    Date: 2017–01
  25. By: Chatterjee, Susmita; Bagchi, Bhaskar; Dandapat, Dhruba Ranjan
    Abstract: The present study investigates the effect of sharp continuous falling crude oil prices on stock market indices of emerging economies like Brazil, Russia, India, China, South Africa and South Korea and also the relationship between crude oil prices and stock indices of these countries. The period of the study spans from July 2009 to January 2016. Multivariate cointegration techniques along with vector error correction mechanism, impulse response functions and multivariate CCC-GARCH model have been employed in the study. The long-run relationship has been empirically established between the variables only in Brazil and Russia, but, no such relationship has been found in case of other emerging economies. Except South Africa, stock indices of the other emerging economies adjust to changes in crude oil prices to correct short-run disequilibrium although, with varied speed of adjustment. CCC-GARCH estimation reveals the existence of volatility spillovers between crude oil prices and stock indices and convergence have been achieved for all the emerging economies.
    Keywords: emerging economies, new oil price shock; stock indices
    JEL: F4 F6
    Date: 2016–12–29
  26. By: Baumeister, Christiane; Ellwanger, Reinhard; Kilian, Lutz
    Abstract: It is commonly believed that the response of the price of corn ethanol (and hence of the price of corn) to shifts in biofuel policies operates in part through market expectations and shifts in storage demand, yet to date it has proved difficult to measure these expectations and to empirically evaluate this view. We utilize a recently proposed methodology to estimate the market's expectations of the prices of ethanol, unfinished motor gasoline and crude oil at horizons from three months to one year. We quantify the extent to which price changes were anticipated by the market, the extent to which they were unanticipated, and how the risk premium in these markets has evolved. We show that the Renewable Fuel Standard (RFS) is likely to have increased ethanol price expectations by as much $1.45 in the year before and in the year after the implementation of the RFS had started. Our analysis of the term structure of expectations provides support for the view that a shift in ethanol storage demand starting in 2005 caused an increase in the price of ethanol. There is no conclusive evidence that the tightening of the RFS in 2008 shifted market expectations, but our analysis suggests that policy uncertainty about how to deal with the blend wall raised the risk premium in the ethanol futures market in mid-2013 by as much as 50 cents at longer horizons. Finally, we present evidence against a tight link from ethanol price expectations to corn price expectations and hence to storage demand for corn in 2005-06.
    Keywords: biofuels; corn; crude oil; gasoline; market integration; policy uncertainty; Risk premium; storage demand; term structure of price expectations
    JEL: Q18 Q28 Q42 Q58
    Date: 2017–01
  27. By: Sands, Ronald D.; Malcolm, Scott A.; Suttles, Shellye A.; Marshall, Elizabeth
    Abstract: Dedicated energy crops, such as switchgrass in the United States, have received much attention as potential renewable feedstocks for liquid fuels or bioelectricity; however, markets do not presently exist for large-scale use of this resource. This study examines three policy scenarios that could create a market for bioelectricity using dedicated energy crops: a subsidy for bioelectricity generation, a national Renewable Portfolio Standard (RPS), and a national cap-and-trade policy to limit carbon dioxide (CO2) emissions. Model results suggest that energy crops as a share of total cropland by region would be greatest in the Northern Plains, Southeast, and Appalachia. Even though the impact of energy crop production on land use across scenarios is similar by design, the impacts on other model outputs are quite different, including the mix of electricity-generating technologies, the price of electricity, CO2 emissions, and the cost relative to a no-policy reference scenario. For example, the price of electricity increases with cap-and-trade but declines with a bioelectricity subsidy. In all scenarios, U.S. CO2 emissions decrease relative to the reference scenario. Emissions reductions are greatest in the cap-and-trade scenario, but significant reductions are also obtained with an RPS.
    Keywords: bioenergy, land use, energy crops, scenarios, renewable portfolio standard, climate policy, Agricultural and Food Policy, Environmental Economics and Policy, Land Economics/Use, Resource /Energy Economics and Policy,
    Date: 2017–01
  28. By: Christoph Böhringer (University of Oldenburg); Florian Landis (Centre for European Economic Research (ZEW)); Miguel Angel Tovar Reaños (Centre for European Economic Research (ZEW))
    Abstract: Over the last decade Germany has boosted renewable energy in power production by means of massive subsidies. The flip side are very high electricity prices which raises concerns that the transition cost towards a renewable energy system will be mainly borne by poor households. In this paper, we combine computable general equilibrium and microsimulation analysis to investigate the cost-effectiveness and incidence of Germany’s renewable energy promotion. We find that the regressive effects of renewable energy promotion could be attenuated by alternative subsidy financing mechanisms which achieve the same level of electricity generation from renewable energy sources.
    Keywords: renewable energy policy, feed-in tariffs, CGE, microsimulation
    JEL: Q42 H23 C63
    Date: 2016–10
  29. By: Schlicht, Ekkehart
    Abstract: The “iteration argument” presented in Schlicht (1996) shows that the allocation of property rights may generate inefficiencies, contrary to what the “Coase Theorem,” as commonly understood, asserts. The argument may be summarized by saying that markets (and bargaining) cease to function properly if several people are entitled and prepared to engage in the same externality-ridden activity and each of them has to be bribed individually from being the first offender. Given that the harm from pollution does not rise linearily with the amount of pollution, the sum-total of the damages produced when all of the potential offenders engage in the harmful activity may be smaller than the sum-total of the bribes which must be offered to prevent each potential offender from starting the offensive activity, even if the ensuing social damages exceed the associated private returns and an inefficient outcome is obtained. If pollution without permission by the community is not permitted, a different – and in this case efficient – outcome results. This note illustrates the argument by means of a simple example. It is an excerpt of Schlicht (1997).
    Keywords: claims; contract enforcement; contracts; entitlements; interactions; motivation; norms; obligations; rights
    JEL: D02 D04 D23 D62 H23 K11 O50
    Date: 2017
  30. By: Le, Thai-Ha (RMIT University); Chang, Youngho (Nanyang Technological University); Park, Donghyun (Asian Development Bank)
    Abstract: We examine the role of governance and vulnerability to climate change in green growth using a global panel data set of 122 countries in 2000‒2012. We find that, as expected, governance has a positive effect on environmental performance and vulnerability to climate change has a negative effect. This suggests that promoting good governance and reducing climate change vulnerability can contribute to a cleaner environment. We find qualitatively similar results for the subsample of high-income countries, but governance does not have a significant effect for the subsamples of upper-middleincome, lower-middle-income, and low-income countries. One possible interpretation is that high-income countries have environmental policies which are strong enough to protect the environment, whereas other countries have relatively weak environmental policies which need to be strengthened.
    Keywords: air quality; governance; green growth; PM2.5; vulnerability to climate change
    JEL: Q56
    Date: 2016–11–08
  31. By: Christoph Böhringer (University of Oldenburg); Brita Bye (Statistics Norway - Research Department); Taran Faehn (Statistics Norway - Research Department); Knut Einar Rosendahl (Norwegian University of Life Sciences; Statistics Norway - Research Department)
    Abstract: We investigate how carbon taxes combined with output-based rebating (OBR) in an open economy perform in interaction with the carbon policies of a large neighboring trading partner. Analytical results suggest that whether the purpose of the OBR policy is to compensate firms for carbon tax burdens or to maximize welfare (accounting for global emission reductions), the second-best OBR rate should be positive in most cases. Further, it should fall with the introduction of carbon taxation in the neighboring country, particularly if the neighbor refrains from OBR. Numerical simulations for Canada with the US as the neighboring trading partner, indicates that the impact of US policies on the second-best OBR rate will depend crucially on the purpose of the domestic OBR policies. If the aim is to restore the competitiveness of domestic emission-intensive, trade exposed (EITE) firms at the same level as before the introduction of its own carbon taxation for a given US carbon policy, we find that the domestic optimal OBR rates are relatively insensitive to the foreign carbon policies. If the aim is to compensate the firms for actions taken by the US following a Canadian carbon tax, the necessary domestic OBR rates will be lower if also the US regulates its emissions, particularly if the US refrains from OBR. If the goal is rather to increase the efficiency of Canadian policies in an economy-wide sense by accounting for carbon leakage, the US policies have but a minor reducing impact on domestic optimal OBR rates.
    Keywords: carbon leakage, second-best optimal carbon policies, output-based rebates
    JEL: Q43 Q54 H2 D61
    Date: 2015–11
  32. By: Felix Wilmsen; Friederike Gesing (University of Bremen)
    Abstract: Urban areas and cities have received growing recognition in transnational climate governance as crucial sites of emission sources, and as governmental and administrative actors with significant influence on carbon-intense infrastructures (Bulkeley & Betsill 2013; Schroeder et al. 2013). Since the late 1980s, greenhouse gas emission inventories have been conducted for cities and metropolitan regions as a means of developing reduction measures and monitoring their effects. Early approaches were characterized by great discrepancies between methodologies that were specifically designed for particular local needs. Subsequently, various transnational actors began to develop standardized tools by adapting existing methodologies developed for the national level and for corporations to the needs of cities and municipalities. So far, no municipal emission inventory protocol has been recognized as a globally agreed standard. The field received new momentum in 2014, when the two transnational city networks ICLEI and C40 Cities joined under the newly established Compact of Mayors initiative, and announced the Global Protocol for Community-Scale Greenhouse Gas Emission Inventories (GPC). This paper provides a genealogy of the GPC by comparing several municipal inventory protocols. The analysis suggest that if understood as a means of strengthening the political claims of transnational actors, the GPC can indeed be expected to have considerable impact on the global climate policy arena. However, despite its considerable effort, the protocol ultimately does not bring much new to the table in technical terms, as it does not solve known issues of geographic-plus emissions accounting. Therefore, the GPC is characterized as a new passage point on an old road.
    Keywords: cities and climate change, emissions accounting, emissions reporting, non-state actors, transnational municipal networks, standardization, transnational climate governance
    Date: 2016–11
  33. By: Cai, Yongyang; Brock, William; Xepapadeas, Anastasios
    Abstract: This paper extends the stochastic DSICE model of Cai et al. (Cai et al. 2015a, 2015b) to include the case of spatial transport of heat and moisture from the Equator to the Poles. This well-known and important phenomenon in climate science has been neglected in popular IAM’s, e.g. RICE and DICE (Nordhaus 2010, 2013). Spatial transport leads to another well-known phenomenon in climate science called polar amplification where a one degree increase in the global yearly mean temperature anomaly causes a more than one degree increase of the yearly mean temperature anomaly in the high latitudes (Langen and Alexeev 2007). This extension allows us to compare the optimal paths of key quantities like the Social Cost of Carbon (SCC), emissions, abatement, and damages and their uncertainty bands when heat and moisture transport are neglected as in the received literature on IAMs to when this important phenomenon documented by climate science is included. We view our paper as a first step towards adding additional aspects of climate dynamics like heat and moisture transport across latitudes and polar amplification to the existing literature on IAMs.
    Keywords: Integrated Assessment Model, spatial transition, climate policy, social cost of carbon, tipping point, Epstein-Zin preference, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy, Q54, Q58, C61, C63,
    Date: 2016–12
  34. By: Christoph Böhringer (University of Oldenburg); Xaquín Garcia-Muros (Basque Centre for Climate Change (BC3), Students); Ignacio Cazcarro (Basque Centre for Climate Change (BC3)); Iñaki Arto (Basque Centre for Climate Change (BC3))
    Abstract: Despite recent achievements towards a global climate agreement, climate action to reduce greenhouse gas emissions remains quite heterogeneous across countries. Energy-intensive and trade-exposed (EITE) industries in industrialized countries are particularly concerned on stringent domestic emission pricing that may put them at a competitive disadvantage with respect to producers of similar goods in other countries without or only quite lenient emission regulation. This paper focuses on climate policy analysis for the United States of America (US) and compares the economic implications of four alternative protective measures for US EITE industries: (i) output-based rebates, (ii) exemptions from emission pricing, (iii) energy intensity standards, and (iv) carbon intensity standards. Based on simulations with a large-scale computable general equilibrium model for the global economy we quantify how these protective measures affect competitiveness of US EITE industries. We find that while protective measures can attenuate adverse competitiveness impacts measured in terms of common sector-specific competitiveness indicators, they run the risk of making US emission reduction much more costly than uniform emission pricing stand-alone. In fact, the cost increase is associated with negative income effects such that the gains of protective measures for EITE exports may be more than compensated through losses in domestic EITE demand.
    Keywords: unilateral climate policy, competitiveness, computable general equilibrium
    JEL: D21 H23 D58
    Date: 2016–10
  35. By: Francesco Bosello (University of Milan, FEEM and CMCC); Carlo Orecchia (FEEM and CMCC); David A. Raitzer (Asian Development Bank)
    Abstract: Southeast Asia is one of the most vulnerable regions of the world to the impacts of climate change. At the same time, the region is also following a trajectory that could make it a major contributor to greenhouse gas emissions in the future. Understanding the economic implications of policy options for low carbon growth is essential to formulate instruments that achieve the greatest emissions reductions at lowest cost. This study focuses on five developing countries of Southeast Asia that collectively account for 90% of regional emissions in recent years—Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam. The analyses are based on the CGE economy-energy-environment model ICES under an array of scenarios reflecting business as usual, fragmented climate policies, an approximately 2.4°C post 2020 global climate stabilization target, termed 650 parts per million (ppm) carbon dioxide (CO2) equivalent (eq), and an approximately 2°C global target (termed 500 ppm CO2 eq). Averted deforestation through reducing emissions from forest degradation and deforestation (REDD) is included in some scenarios. The study shows that global and coordinated action is found to be critical to the cost effectiveness of emissions stabilization policies. A 650ppm stabilization scenario (below 3°C in 2100) has a similar cost to the region to current fragmented targets, but achieves much higher levels of emissions reductions. However, only some of the countries have short-term emissions targets that are consistent with a stabilization scenario at 650ppm: these are Indonesia, Philippines and Viet Nam. None of the countries’ mid-term targets are coherent with more ambitious stabilization scenario at 500ppm.
    Keywords: Climate Change Mitigation, Asian Economies, Computable General Equilibrium Models
    JEL: Q54 Q58 C68
    Date: 2016–12
  36. By: Christoph Böhringer (University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)); Jan Schneider (University of Oldenburg); Emmanuel Asane-Otoo (University of Oldenburg)
    Abstract: Carbon-based import tariffs are discussed as policy measures to reduce carbon leakage and increase the global cost-effectiveness of unilateral CO2 emission pricing. We assess how the potential of carbon tariffs to increase cost-effectiveness of unilateral climate policy depends on the magnitude and composition of carbon embodied in trade. For our assessment, we combine multi-region input-output (MRIO) analysis with computable general equilibrium (CGE) analysis based on data from the World Input-Output Database (WIOD) for the period 1995 to 2007. The MRIO analysis confirms that carbon embodied in trade has sharply increased during this period. Yet, the CGE analysis suggests that the effectiveness of carbon tariffs in reducing leakage and improving global-cost effectiveness of unilateral climate policy does not increase over time, whereas the potential to shift the economic burden of CO2 emissions reduction from abating developed regions to non-abating developing regions increases substantially.
    Keywords: carbon tariffs, unilateral climate policy, computable general
    JEL: Q58 D57 D58
    Date: 2016–09
  37. By: C. Conti (Sapienza University of Rome); M. L. Mancusi (Catholic University (Milan) and CRIOS, Bocconi University); F. Sanna-Randaccio (Sapienza University of Rome); R. Sestini (Sapienza University of Rome); E. Verdolini (Fondazione CMCC and Fondazione Eni Enrico Mattei)
    Abstract: A major concern regarding innovation in clean technologies in the EU is that the fragmentation of its innovation system may hinder knowledge flows and, consequently, spillovers across member countries. A low intensity of knowledge flows across EU states can negatively impact their technological base, suppressing opportunities for further innovations and hindering the movement towards the technological frontier. This paper evaluates the fragmentation of the EU innovation system in the field of renewable energy sources (RES) by examining the intensity and direction of knowledge spillovers over the years 1985-2010. We modify the original double exponential knowledge diffusion model to provide information on the degree of integration of EU countries’ innovation efforts and to assess how citation patterns changed over time. We show that EU RES inventors have increasingly built “on the shoulders of the other EU giants”, intensifying their citations to other member countries and decreasing those to domestic inventors. Furthermore, the EU strengthened its position as source of RES knowledge for the US. Finally, we show that this pattern is peculiar to RES, with other traditional (i.e. fossil-based) energy technologies behaving in a completely different way.
    Keywords: Knowledge Spillovers, Renewable Energy Technologies, Fossil Energy Technologies, EU Innovation
    JEL: Q55 Q58 Q42 O31 O33
    Date: 2016–12
  38. By: Anna Alberini (University of Maryland, FEEM and Centre for Energy Policy and Economics, ETH Zürich); Milan Šcasný (Charles University Environment Center); Andrea Bigano (FEEM, CMCC and Far East Federal University)
    Abstract: The implementation of decarbonization policies depends crucially on the public’s willingness to pay for them. We use stated preference methods to investigate the public’s preferences for such policies. We ask three research questions. First, does the willingness to pay (WTP) for each ton of CO2 emissions reductions depend on the policies and on individual characteristics of the respondents? Second, how extensive is the variation associated with these factors? Third, what factors affect support for or opposition to a carbon tax? Based on the responses to discrete choice experiments from a sample of Italians, we find that the WTP per ton of CO2 ranges between € 6 and 130, depending on whether the public program is based on taxes, incentives, information-based approaches or standards. Further allowing for individual characteristics of the respondents, such as gender or education, and knowledge of climate change, results in a 300% change in WTP, holding the policy instrument the same. We conclude that the variation associated with the policy instrument is approximately of the same order of magnitude as that associated with individual characteristics of the respondents.
    Keywords: Climate Change Mitigation, WTP per ton of CO2 Emissions Reduced, Choice Experiments
    JEL: Q41 Q48 Q54 Q51
    Date: 2016–12
  39. By: Ravi Bansal; Marcelo Ochoa; Dana Kiku
    Abstract: To study the welfare implications of rising temperature we propose a temperature-augmented long-run risks model that accounts for the interaction between temperature, economic growth and risk. The model simultaneously matches the projected temperature path, the observed consumption growth dynamics, discount rates provided by the risk-free rate and equity market returns, and the negative elasticity of equity prices to temperature risks documented in the data. We use the calibrated model to quantify the social cost of carbon (SCC) and to frame the optimal climate policy. We show that a preference for early resolution of uncertainty and long-run impact of temperature on growth imply a significant SCC and motivate early actions to abate global warming.
    JEL: E0 G0 Q0
    Date: 2016–12
  40. By: Emiko Inoue
    Abstract: Innovation is expected to become an essential element in overcoming climate change issue. To examine the factors that might induce such innovation, this study focuses on environmental disclosure and scrutinises how it influences innovation activity. Utilising firm-level panel datasets from EU corporations (fiscal years 2000-08) that were constructed based on the Carbon Disclosure Project data and the EU Industrial R&D Investment Scoreboard, I estimate dynamic panel models using the system GMM estimator. The potential endogeneity issue is addressed in the models. Innovation activity is measured by R&D investment. The results show that corporations that implement a specific environmental disclosure action, namely, disclosing Scope 3 GHGemissions, are more likely to invest in R&D. This study sugg ests that supply chain management is crucial for corporations to enhance their innovation activity. In addition,this study reveals that a policy that stimulates corporate incentives to disclose Scope 3 GHG emissions may be a key to enhancing innovation activity. Since communication between corporations and other stakeholders, which may be enhanced by environmental disclosure , is a significant factor in encouraging corporate innovation activity, it is important to construct a system wherein environmental disclosure is evaluated objectively and corporations with strong environmental performance are adequately rewarded.
    Keywords: innovation;Environmental disc losure;Voluntary action;Endog eneity;Climate change
    Date: 2016–12
  41. By: Edward J. Balistreri (Colorado School of Mines - Division of Economics and Business); Christoph Boehringer (University of Oldenburg); Thomas F. Rutherford (University of Wisconsin - Madison)
    Abstract: Alternative perspectives on the structure of international trade have important implications for the evaluation of climate policy. In this paper we assess climate policy in the context of three important alternative trade formulations. First is a Heckscher‐Ohlin model based on trade in homogeneous products, which establishes the traditional neoclassical view on comparative advantage. Second is an Armington model based on regionally differentiated goods, which constitutes a popular specification for numerical simulations of trade policy. Third is a Melitz model based on monopolistic‐competition and firm heterogeneity. This heterogeneous‐firms framework is adopted in many contemporary theoretic and empirical investigations in international trade. As we show in this paper, the three alternative trade formulations have important implications for the assessment of climate policy with respect to competitive effects for energy‐intensive production (and hence carbon leakage) as well as the transmission of policy burdens across countries.
    Keywords: Heterogeneous firms, carbon leakage, competitiveness
    JEL: F12 F18 Q54 Q56
    Date: 2015–10
  42. By: Matthew J. Kotchen
    Abstract: This paper contributes to the understanding of how to maximize the impact of publicly provided climate finance to leverage the private sector. Agencies seeking to promote private investment in support of climate change mitigation and adaptation may have a choice between subsidizing projects or pilot projects. Pilots are either scaled down versions of full projects or an experimental phase that generates better information about whether a full project is likely to succeed or fail. Drawing on insights about the value of experimentation for entrepreneurship and raising private capital, the theoretical model developed herein provides guidance about when subsidizing projects or pilots is more efficient.
    JEL: G18 H2 Q4 Q5
    Date: 2017–01
  43. By: Christoph Böhringer (University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)); Xaquín Garcia-Muros (Basque Centre for Climate Change (BC3), Students); Mikel Gonzalez-Eguino (Basque Centre for Climate Change (BC3)); Luis Rey (Basque Centre for Climate Change (BC3))
    Abstract: Intensity standards have gained substantial momentum as a regulatory instrument in US climate policy. Based on numerical simulations with a large-scale computable general equilibrium model we show that intensity standards may rather increase than decrease counterproductive carbon leakage. Moreover, standards can lead to considerable welfare losses compared to emission pricing via carbon taxation or an emissions trading system. The tradability of standards across industries is a mechanism that can reduce these negative effects.
    Keywords: unilateral climate policy; carbon leakage; intensity standards; computable general equilibrium
    JEL: D21 H23 D58
    Date: 2015–11
  44. By: Francesco Bosello (University of Milan, FEEM and CMCC); Giacomo Marangoni (FEEM and CMCC); Carlo Orecchia (FEEM and CMCC); David A. Raitzer (Asian Development Bank); Massimo Tavoni (Politecnico di Milano, FEEM and CMCC)
    Abstract: Southeast Asia is at a time one of the most vulnerable region to the impacts of a changing climate, with millions of its inhabitants still trapped in extreme poverty without access to energy and employed in climate-sensitive sectors, and, potentially, one of the world’s biggest contributors to global warming in the future. Fortunately, major Southeast Asian countries are also implementing policies to improve their energy and carbon efficiency and are discussing if and how to extend these further. The present study aims to assess the implications for energy consumption, energy intensity and carbon intensity in the Southeast Asia region of a set of short-term and long-term de-carbonization policies characterized by different degrees of ambition and international cooperation. The analysis applies two energy-climate-economic models. The first, the fully dynamic Integrated Assessment model WITCH, is more aggregated in the sectoral and country representation, but provides a detailed technological description of the energy sector. The second, the ICES Computable General Equilibrium model, offers a richer sectoral breakdown of the economy and of international trade patterns, but is less refined in the representation of technology. The joint application of these two complementary models allows the capture of distinct and key aspects of low- carbon development paths in Southeast Asia.
    Keywords: Climate Change Mitigation, Asian Economies, Computable General Equilibrium Models
    JEL: Q54 Q58 C68
    Date: 2016–12
  45. By: Casey, Gregory; Galor, Oded
    Abstract: We provide evidence that lower fertility can simultaneously increase income per capita and lower carbon emissions, eliminating a trade-off central to most policies aimed at slowing global climate change. We estimate the effect of lower fertility on carbon emissions, accounting for the fact that changes in fertility patterns affect carbon emissions through three channels: total population, the age structure of the population, and economic output. Our analysis proceeds in two steps. First, we estimate the elasticity of carbon emissions with respect to population and income per capita in an unbalanced yearly panel of cross-country data from 1950–2010. We demonstrate that the elasticity with respect to population is nearly seven times larger than the elasticity with respect to income per capita and that this difference is statistically significant. Thus, the regression results imply that 1% slower population growth could be accompanied by an increase in income per capita of nearly 7% while still lowering carbon emissions. In the second part of our analysis, we use a recently constructed economic-demographic model of Nigeria to estimate the effect of lower fertility on carbon emissions, accounting for the impacts of fertility on population growth, population age structure, and income per capita. We find that by 2100 C.E. moving from the medium to the low variant of the UN fertility projection leads to 35% lower yearly emissions and 15% higher income per capita. These results suggest that population policies could be part of the approach to combating global climate change.
    Keywords: Climate Change, Demography, Economic Growth
    JEL: J11 O40 Q50
    Date: 2017–01–05
  46. By: Löschel, Andreas; Lutz, Benjamin Johannes; Managi, Shunsuke
    Abstract: We investigate the effect of the European Union Emissions Trading System (EU ETS) on the economic performance of manufacturing firms in Germany. Our difference-in-differences framework relies on several parametric conditioning strategies and nearest neighbor matching. As a measure of economic performance, we use the firm specific distance to the stochastic production frontier recovered from official German production census data. None of our identification strategies provide evidence for a statistically significant negative effect of emissions trading on economic performance. On the contrary, the results of the nearest neighbor matching suggest that the EU ETS rather had a positive impact on the economic performance of the regulated firms, especially during the first compliance period. A subsample analysis confirms that EU ETS increased the efficiency of treated firms in at least some two-digit industries.
    Keywords: Control of Externalities,Emissions Trading,Economic Performance,Manufacturing,Difference-in-Differences,Nearest Neighbor Matching,Stochastic Production Frontier
    JEL: Q52 D22 Q38 Q48
    Date: 2016
  47. By: Reis, Lara Aleluia (Fondazione Eni Enrico Mattei); Emmerling, Johannes (Fondazione Eni Enrico Mattei); Tavoni, Massimo (Fondazione Eni Enrico Mattei); Raitzer, David (Asian Development Bank)
    Abstract: Developing Asia has the world’s fastest greenhouse gas emissions growth. This study uses an economy–energy–climate model to assess the effects of Paris Agreement pledges on Asia, in comparison with business as usual (BAU) and more ambitious scenarios. Results confirm that pledges must be strongly increased in ambition to achieve the Paris Agreement’s goal of less than 2 degrees Celsius (2°C) warming. The policy costs of Asia’s pledges are found to be less than 1% of gross domestic product (GDP) through 2050, while 2°C scenarios may cost less than 2% of GDP. However, costs are sensitive to assumptions about international carbon markets and mitigation timing, with costs for 2°C scenarios doubling in the absence of carbon trade, and increasing the later that mitigation is initiated. Under the 2°C scenarios, annual average energy supply investments are about $300 billion above the BAU levels through 2050. Mitigation policy may substantially reduce air pollution mortality, with up to 600,000 fewer deaths in Asia annually by 2050. When costs, benefits of avoided climate change, and cobenefits are considered together, investment in mitigation policy is found to have substantial economic returns for the region—if action is taken rapidly and international carbon market mechanisms are implemented.
    Keywords: climate change; energy; greenhouse gas; mitigation; Paris Agreement
    JEL: C61 D58 Q52 Q53 Q54
    Date: 2016–12–23

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