nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒03‒12
twenty-six papers chosen by
Roger Fouquet
London School of Economics

  1. Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard By Scheitrum, Daniel
  2. Renewable and Non-Renewable Electricity Consumption, Carbon Emissions and GDP: Evidence From Mediterranean Countries By Fateh Belaïd; Maha Harbaoui Zrelli
  3. The merit order effect of Czech renewable energy By Petra Lunackova; Jan Prusa; Karel Janda
  4. Electric utility regulation under enhanced renewable energy integration and distributed generation By Nori Tarui
  6. Energy Subsidy Reform in Egypt: The Gender – “Energy” Poverty Nexus By Fatma El-Hamidi
  7. Buy coal for preservation and act strategically on the fuel market By Pethig, Rüdiger; Eichner, Thomas
  8. Innovation in Clean Coal Technologies: Empirical Evidence from Firm-Level Patent Data By Wetzel, Heike; Kruse, Jürgen
  9. Lobbying over Exhaustible-Resource Extraction By Achim Voss; Mark Schopf
  10. Is the Discretionary Income Effect of Oil Price Shocks a Hoax? By Baumeister, Christiane; Kilian, Lutz; Zhou, Xiaoqing
  11. Oil Prices and the Global Economy: Is It Different This Time Around? By Kamiar Mohaddes; M. Hashem Pesaran
  12. Oil price uncertainty and the business cycle: Accounting for the influences of global supply and demand within a VAR GARCH-in-mean framework By Thiem, Christopher
  13. How the Tight Oil Boom Has Changed Oil and Gasoline Markets By Kilian, Lutz
  14. On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis By Fredj Jawadi; Waël Louhichi; Hachmi Ben Ameur; Abdoulkarim Idi Cheffou
  15. Explaining the Time-varying Effects Of Oil Market Shocks On U.S. Stock Returns By Claudia Foroni; Pierre Guérin; Massimiliano Marcellino
  16. The Political Economy of Macroeconomic Policy in Arab Resource-Rich Economies By Adeel Malik
  17. Sanctions and Export Deflection: Evidence from Iran By Jamal Ibrahim Haider
  18. National Oil Companies in the Middle East and North Africa: Remaining Relevant in a Changing World By Jenik Radon; Sarah Logan
  19. Unilateral Supply Side Policies and the Green Paradox By Mark Schopf
  20. How do travellers respond to health and environmental policies to reduce air pollution? By Caroline Orset
  21. Environmental policy and directed technological change: evidence from the European carbon market By Raphael Calel; Antoine Dechezlepretre
  22. Optimal Tariffs and Firm Technology Choice: An Environmental Approach By Steffen, Nico
  23. Managing an Accumulative Inorganic Pollutant: An Optimal Tax Prescription for the Social Planner By Onyimadu, Chukwuemeka
  24. Carbon Dioxide Emissions and Economic Growth: An Assessment based on Production and Consumption Emission Inventories By Fernández-Amador, Octavio; Francois, Joseph; Oberdabernig, Doris; Tomberger, Patrick
  25. Risk perception of climate change: Empirical evidence for Germany By Frondel, Manuel; Simora, Michael; Sommer, Stephan
  26. CLIMATE ECONOMICS Opportunities for advances in climate change economics By Burke, M; Craxton, M; Kolstad, CD; Onda, C; Allcott, H; Baker, E; Barrage, L; Carson, R; Gillingham, K; Graf-Zivin, J; Greenstone, M; Hallegatte, S; Hanemann, WM; Heal, G; Hsiang, S; Jones, B; Kelly, DL; Kopp, R; Kotchen, M; Mendelsohn, R; Meng, K; Metcalf, G; Moreno-Cruz, J; Pindyck, R; Rose, S; Rudik, I; Stock, J; Tol, RSJ

  1. By: Scheitrum, Daniel
    Abstract: Natural gas is a growing portion of transportation fuel consumed in California. While natural gas has a slight environmental benefit relative to the use of conventional liquid fuels, such as gasoline and diesel, the environmental performance of natural gas can be greatly improved by procurement from renewable sources. Yet renewable natural gas (RNG) production is too expensive to compete with fossil natural gas in the absence of policy intervention. I consider the impacts of the LCFS policy on four pathways of RNG production: (1) dairy manure, (2) municipal solid waste, (3) wastewater treatment plants, and (4) landfill gas. Using a novel dataset of California RNG supply estimates, I construct a static, multi-market, partial equilibrium model of the California fuels markets to evaluate the supply response of RNG to existing California fuel policy, the Low Carbon Fuel Standard (LCFS). I also evaluate policy response of natural gas from fossil sources, gasoline, ethanol, diesel, and biodiesel fuels. Additionally, I apply a method of modeling consumer fuel switching to accurately reflect the extent to which fuel substitution is possible in the short term. I assess the economic surplus, climate, and RNG response to the LCFS policy and compare the policy efficiency of the LCFS to a hypothetical carbon tax. My findings indicate that the LCFS policy is sufficient to incentivize substantial quantities of RNG production; enough to supply the entire market for vehicular natural gas. Further, the LCFS is less efficient than a carbon tax, but when combined with a price ceiling, the policy approaches the efficiency of a carbon tax as the LCFS policy become more stringent.
    Keywords: renewable natural gas, methane abatement, fuel standards, multi-market partial equilibrium
    JEL: Q18 Q4 Q42 Q5
    Date: 2017–02–28
  2. By: Fateh Belaïd (University Paris-Est); Maha Harbaoui Zrelli
    Abstract: The imperative to reduce Co2 emissions is stronger than ever. According to many studies, renewable energy (electricity) has one of the most significant cost-effective potentials for reducing energy-related greenhouse gas emissions. Increasing the supply of renewable energy would allow for the replacement of carbon-intensive energy sources and significantly reduce pollutant emissions. The major focus of this article is to investigate the causal relationship between renewable and non-renewable electricity consumption, GDP and CO2 emissions for the North and South shores of Mediterranean over the period 1980-2012. Panel unit root tests, cointegration technique allowing cross-section dependence among the panel and causality tests are used to investigate this relationship. The results provide panel empirical evidence that there is a short-run bidirectional causality between GDP, renewable electricity consumption and CO2 emissions; and between non-renewable electricity consumption, GDP and renewable electricity consumption. As for the long-run causal relationship, the result indicates that there is bidirectional causality between non-renewable electricity consumption and CO2 emissions. However, there is evidence of unidirectional causal relationship running from GDP to CO2 emissions and non-renewable electricity consumption; from renewable electricity consumption to CO2 emissions. The findings imply that non-renewable electricity consumption and economic growth stimulate CO2 emissions in Southern and Northern Mediterranean countries while renewable electricity reduces it. Therefore, expansion of renewable energy sources is a strategic plan for addressing energy security and reducing carbon emissions to protect the environment for future generations.
    Date: 2016–08
  3. By: Petra Lunackova; Jan Prusa; Karel Janda
    Abstract: We assess the impact of photovoltaic power plants and other renewable sources on the electricity supply curve in the Czech Republic. The merit order effect is estimated as the elasticity of electricity spot price with respect to change in supply of electricity from renewable sources. Data for the Czech electricity spot market from 2010 to 2015 are analyzed as this is the period with the steepest increase in a renewable generation capacity. The effect is estimated separately for solar and other renewable sources. We find a significant difference between these two groups. Our results show that based on hourly, daily and weekly data energy produced by Czech solar power plants does not decrease electricity spot price, creating double cost to the end consumer. However, the merit order effect based on averaged daily and weekly data is shown to exist for other renewable sources excluding solar (mainly water and wind). This contributes to the conclusion that the Czech renewables policy that prefers solar to other renewable sources may be considered as suboptimal.
    Keywords: energy subsidies, photovoltaic, renewables, merit order effect
    JEL: Q42 H23 M21
    Date: 2017–03
  4. By: Nori Tarui (Department of Economics, University of Hawaii at Manoa, University of Hawaii Economic Research Organization (UHERO))
    Abstract: The economic environment for electric utilities is changing in the United States given increased penetration of distributed generation and limited rooms for sales growth. This paper reviews the recent development of relevant policies in the United States and their economic impacts. This review indicates both challenges and opportunities in improving the policies to enhance distributed generation, and in finding the directions in which electric utility regulation should be reformed.
    Keywords: renewable energy, renewable portfolio standard, clean energy tax credit, net energy metering, utility regulation
    JEL: H23 H24 L51 Q48
    Date: 2017–03
  5. By: Farhad Daruwala; Frank T. Denton; Dean C. Mountain
    Abstract: We consider optional TOU (time-of-use) pricing for residential consumers as an alternative to a single TOU or flat rate structure offered by a publicly regulated electricity supplier. A general equilibrium model is developed and used to explore and quantify the effects of optional pricing on welfare, consumption, and production costs. The model assumes that households can be classified into internally homogeneous groups with differing utility functions, incomes, demand elasticities, and committed consumption requirements. Substitution for electricity among TOU periods and between electricity and other goods is allowed for in the model on the demand side, and differing TOU-specific marginal costs on the supply side. The supplier in the model offers to each household a menu of possible rate sets obtained by maximizing a collective welfare function subject to three types of restriction: Pareto efficiency (no household is worse off under the proposed pricing scheme than under the current pricing scheme); incentive compatibility (every household weakly prefers its set of rates to the sets chosen by other households); breakeven supplier revenue (aggregate revenue must equal aggregate cost). The model is calibrated realistically with three household groups and three distinct TOU costing periods, and used in a series of simulation experiments, including experiments with alternative demand elasticities and marginal cost parameters. The use of optional pricing is shown to increase overall consumer welfare and reduce average production cost. However, the distribution of welfare effects can be uneven, with the highest income group dominating the market to the relative disadvantage of the lowest group. To deal with that situation an alternative strategy with a targeted rate structure for the lowest income group is proposed, corresponding to a modified version of the model specified in which some incentive compatibility restrictions are relaxed. Simulations show that the strategy can be effective in bringing about a more equitable distribution of welfare gains while still maintaining optional TOU pricing.
    JEL: D11 D12 D82 Q41 D58 D61 L94
    Date: 2017–02
  6. By: Fatma El-Hamidi (University of Pittsburgh)
    Abstract: The purpose of this study is to quantify the effects of the current energy reform policy on household expenditures along gender and regional lines. Gender analysis helps to identify constraints such as transportation poverty faced by women to access economic opportunities like education and/or employment. Regional analysis is crucial as well. An energy reform policy on butane gas cylinders, for example, may have a greater effect on rural households compared to urban households since the majority of urban residents rely on natural gas as the main source of energy for electricity and heating water. Results of the study are summarized as follows: 1- the government is taking serious efforts to gradually remove energy subsidies. 2- The poor will pay a higher price than the rest of the population. 3- a comprehensive policy to ease the burden on the poor is to consider a spatially targeted plan in which public investment are weighted significantly in favor of Upper Egypt and rural areas at large. In particular, structural investments in education, health and employment must precede welfare compensatory policies.
    Date: 2016–10–20
  7. By: Pethig, Rüdiger; Eichner, Thomas
    Abstract: In Harstad’s (2012) model, climate damage only hits one group of countries, called the coalition, and the coalition’s climate policy consists of capping own fuel de- mand and supply combined with the purchase of fossil fuel deposits for preserva- tion. Harstad’s Theorem 1 states that if the deposit market clears the coalition’s strategic fuel-cap policy implements the first-best. The present paper reconstructs that efficiency result and argues that the deposit market equilibrium as defined in Harstad (2012) fails to be attained, unless the non-coalition countries act cooper- atively on the deposit market. Without such cooperation, the coalition’s strategic action on the fuel market distorts the allocation to its own favor.
    JEL: Q31 Q38 Q54
    Date: 2016
  8. By: Wetzel, Heike; Kruse, Jürgen
    Abstract: This article empirically analyzes supply-side and demand-side factors expected to affect innovation in clean coal technologies. Patent data from 93 national and international patent offices is used to construct new firm-level panel data on 3,648 clean coal innovators over the time period 1978 to 2009. The results indicate that on the supply-side a firm’s history in clean coal patenting and overall propensity to patent positively affects clean coal innovation. On the demand-side we find strong evidence that environmental regulation of emissions, that is CO2, NOX and SO2 , induces innovation in both efficiency improving combustion and after pollution control technologies.
    JEL: C33 O31 Q55
    Date: 2016
  9. By: Achim Voss (University of Hamburg); Mark Schopf (University of Paderborn)
    Abstract: Consider a lobby group of exhaustible-resource suppliers, which bargains with the government over the extraction of an exhaustible resource and over contribution payments. We characterize the equilibrium extraction path and the development of contribution payments in time. The latter relates to the development of the conflict of interest between profit-maximization and welfare-maximization. Due to stock pollution damages, the government prefers a lower level of cumulative extraction than the lobby group in the long run. In the meantime, the resource suppliers’ aim to maximize profits implies that equilibrium extraction may be too slow to maximize welfare, while flow-pollution damages imply that it may be too fast.
    Keywords: Environmental Policy; Exhaustible Resources; Political Economy; Lobbying; Nash Bargaining; Dynamic Programming
    JEL: D72 Q31 Q38 Q58
    Date: 2016–05
  10. By: Baumeister, Christiane; Kilian, Lutz; Zhou, Xiaoqing
    Abstract: The transmission of oil price shocks has been a question of central interest in macroeconomics since the 1970s. There has been renewed interest in this question after the large and persistent fall in the real price of oil in 2014-16. In the context of this debate, Ramey (2017) makes the striking claim that the existing literature on the transmission of oil price shocks is fundamentally confused about the question of how to quantify the effect of oil price shocks. In particular, she asserts that the discretionary income effect on private consumption, which plays a central role in contemporary accounts of the transmission of oil price shocks to the U.S. economy, makes no economic sense and has no economic foundation. Ramey suggests that the literature has too often confused the terms-of-trade effect with this discretionary income effect, and she makes the case that the effects of the oil price decline of 2014-16 on private consumption are smaller for a multitude of reasons than suggested by empirical models of the discretionary income effect. We review the main arguments in Ramey (2017) and show that none of her claims hold up to scrutiny.
    Keywords: discretionary income effect; expenditure share; gasoline; net oil imports; oil price decline; Stimulus
    JEL: C51 Q43
    Date: 2017–02
  11. By: Kamiar Mohaddes (University of Cambridge); M. Hashem Pesaran
    Abstract: The recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the US and the global economy. In this paper, using a quarterly multicountry econometric model, we first show that a fall in oil prices tends relatively quickly to lower interest rates and inflation in most countries, and increase global real equity prices. The effects on real output are positive, although they take longer to materialize (around 4 quarters after the shock). We then re-examine the effects of low oil prices on the US economy over different sub-periods using monthly observations on real oil prices, real equity prices and real dividends. We confirm the perverse positive relationship between oil and equity prices over the period since the 2008 financial crisis highlighted in the recent literature, but show that this relationship has been unstable when considered over the longer time period of 1946–2016. In contrast, we find a stable negative relationship between oil prices and real dividends which we argue is a better proxy for economic activity (as compared to equity prices). On the supply side, the effects of lower oil prices differ widely across the different oil producers, and could be perverse initially, as some of the major oil producers try to compensate their loss of revenues by raising production. Taking demand and supply adjustments to oil price changes as a whole, we conclude that oil markets equilibrate but rather slowly, with large episodic swings between low and high oil prices.
    Date: 2016–10–13
  12. By: Thiem, Christopher
    Abstract: This paper reinvestigates the influence of oil price uncertainty on real economic activity in the U.S. using a four-variable VAR, GARCH-in-mean, asymmetric BEKK model. In contrast to previous studies in this area, the analysis focuses on business cycle fluctuations and we control for global supply and demand factors that might affect the real price of oil, its volatility as well as the U.S. economy. We find that - even after accounting for these factors - oil price uncertainty still has a highly significant negative influence on the U.S. business cycle. Our computations show that the effect is economically important during several periods, mostly after a significant variance shift in the mid-1980s. We simultaneously estimate the effect on the global business cycle, but find that it is comparatively weak. A battery of robustness checks confirms these results. Finally, significant spillover effects in the GARCH model suggest that oil price volatility is a gauge and channel of transmission of more general macroeconomic shocks and uncertainty. These linkages are particularly strong in case of unexpected bad news. @Dieser Beitrag untersucht den Einfluss von Ölpreisunsicherheit auf die Wirtschaftsaktivität der USA mit Hilfe eines VAR, GARCH-in-mean, asymmetrischen BEKK Modells mit vier Variablen. Im Gegensatz zu früheren Studien in diesem Bereich konzentriert sich die Analyse unmittelbar auf Schwankungen im Konjunkturzyklus. Außerdem kontrollieren wir für globale Angebots- und Nachfragefaktoren, die potentiell nicht nur den realen Ölpreis und dessen Volatilität beeinflussen, sondern gleichzeitig auch einen direkten Einfluss auf die US-Wirtschaft haben. Unsere Untersuchung zeigt, dass - auch nach Berücksichtigung der globalen Einflussfaktoren - Ölpreisunsicherheit weiterhin einen statistisch signifikanten, negativen Einfluss auf den US-Konjunkturzyklus ausübt. Ferner zeigen unsere Berechnungen, dass dieser Effekt während mehrerer Zeitabschnitte auch von erheblicher ökonomischer Bedeutung ist. Dies gilt insbesondere nach einer signifikanten strukturellen Änderung der Varianzen ab Mitte der 80er Jahre. Simultan schätzen wir auch den Einfluss der Ölpreisunsicherheit auf den globalen Konjunkturzyklus, finden hier jedoch nur einen vergleichsweise schwachen Effekt. Beide Ergebnisse werden durch eine ganze Reihe an Robustheitstests bestätigt. Schlussendlich deuten signifikante Spillover-Effekte im GARCH-Modell darauf hin, dass Ölpreisvolatilität auch ein Gradmesser und Übertragungskanal für allgemeinere makroökonomische Schocks und Unsicherheit ist. Die entsprechenden Verknüpfungen sind insbesondere im Fall unerwarteter schlechter Neuigkeiten stark ausgeprägt.
    Keywords: Asymmetric BEKK model,crude oil,multivariate GARCH-in-mean,oil price volatility,real options,U.S. business cycle
    JEL: C32 E32 Q43
    Date: 2017
  13. By: Kilian, Lutz
    Abstract: Starting in late 2008, the U.S. production of tight oil surged, causing a renaissance in the U.S. oil sector that few industry analysts had anticipated. This tight oil boom reduced the dependence of the United States on petroleum imports and allowed it to become a major exporter of gasoline and diesel fuel. Since mid-2014 the global real price of crude oil has experienced a large and sustained decline. This review article addresses several questions of general interest. First, to what extent was the recent oil price decline caused by the tight oil boom? Second, how did the tight oil boom affect the price of gasoline in global markets and in the United States? Third, what determines the investment response of the oil sector to oil price fluctuations? Fourth, how has the tight oil boom affected the transmission of oil price shocks to the U.S. economy? Finally, what are the implications of the U.S. tight oil boom for European oil importing economies?
    Keywords: gasoline price; oil investment; oil price; real GDP growth; shale oil; Tight oil
    JEL: Q33 Q43
    Date: 2017–02
  14. By: Fredj Jawadi; Waël Louhichi; Hachmi Ben Ameur; Abdoulkarim Idi Cheffou
    Abstract: The paper investigates the dynamics of oil price volatility by examining interactions between the oil market and the US USD/EUR exchange rate. To this end, we use recent intradaily data to measure realised volatility and to investigate the instantaneous intradaily linkages between different types and proxies of oil price and US$/euro volatilities. We specify the drivers of oil price volatility through a focus on extreme US$ exchange rate movements (intradaily jumps). Accordingly, we find a negative relationship between the US USD/EUR and oil returns, indicating that a US $ appreciation decreases oil price. Second, we note the presence of a volatility spillover from the US exchange market to the oil market. Interestingly, this spillover effect seems to occur through intradaily jumps in both markets.
    Keywords: Oil price volatility, realised volatility, intradaily jumps, exchange rate, intradaily data, GARCH model.
    JEL: G15 C2
    Date: 2017
  15. By: Claudia Foroni; Pierre Guérin; Massimiliano Marcellino
    Abstract: This paper documents time-variation in the relation between oil price and U.S. equity returns based on both reduced-form and structural analyses. Our reduced-form analysis suggests that a positive correlation between equity returns and oil price has emerged starting from the financial crisis. Based on our structural analysis, we find that oil-specific demand shocks have had positive effects on the U.S. stock market since 2008 as opposed to oil supply shocks, which have no large effects on stock re turns. We also show that the time variation in the parameters of the structural VAR is very well explained by the level of the U.S. short-term interest rate and shifts in consumer confidence. Keywords: Stock Returns, Oil Market Shocks, Time-varying Parameter VAR. JEL Classification Code: G12, Q43, C32.
    Date: 2017
  16. By: Adeel Malik (Oxford Centre for Islamic Studies and Department of International Development, University of Oxford)
    Abstract: Revisiting macroeconomic policies and outcomes of Arab resource-rich economies (RREs), this paper synthesizes the political economy considerations that underpin policy choices. The paper argues that, in the context of Arab RREs, fiscal and financial sector policies play a particularly important role in absorbing natural resource rents. Fiscal policy is highly pro-cyclical and rooted in the underlying political settlement, which is based on extensive distributional commitments. Financial systems are deep but are known for restricted financial access to vast areas of economy. Given the excessive dependence on hydrocarbon rents and the prevalence of fixed exchange rate regimes, the external constraint remains more binding. Even where monetary policy has greater room to operate, existing policy frameworks are not geared towards domestic targets, such as inflation and unemployment, and are largely determined outside the purview of macroeconomic policy. I argue that the political objective function is essential for understanding these macroeconomic arrangements. With weak productive constituencies and few institutional constraints, macroeconomic policy involves limited feedback from the private sector and upholds the interest of the sovereign. In this milieu, institutional constraints on fiscal policy are more important than central bank independence. The paper also discusses the stability implications of current macroeconomic arrangements, arguing that stability in Arab RREs is almost entirely predicated on the uninterrupted flow of oil rents rather than resilient institutional structures.
    Date: 2016–08
  17. By: Jamal Ibrahim Haider (Center for International Development at Harvard University)
    Abstract: Do export sanctions cause export deflection? Data on Iranian non-oil exporters between January 2006 and June 2011 shows that two-thirds of these exports were deflected to non-sanctioning countries after sanctions were imposed in 2008, and that at this time aggregate exports actually increased. Exporting firms reduced prices and increased quantities when exporting to a new destination, however, and suffered welfare losses as a result.
    JEL: F13 F14 F15 F21 F5 F6
    Date: 2017–01
  18. By: Jenik Radon (Columbia University); Sarah Logan
    Abstract: This paper applies a practitioner’s analytical perspective to assessing the contractual arrangements governing oil and natural gas development in oil-producing countries in the Middle East and North African, drawing on international experience for a comparative approach. It also looks at factors influencing the efficiency and competitiveness of national oil companies in these countries, key aspects of the relationship between international oil companies and these governments, and management issues vis-à-vis governments and their national oil companies, such as competitive neutrality. It finds that the type of contractual arrangement used influences the extent to which the needs and interests of host countries are advanced, and that applying political constraints and non-commercial mandates to national oil companies diminish their competitiveness. Finally, it finds that national oil companies that diversify the nature and geographical scope of their activities have a stronger likelihood of remaining relevant in today’s changing oil and gas industry.
    Date: 2016–12–13
  19. By: Mark Schopf (University of Paderborn)
    Abstract: This paper deals with possible foreign reactions to unilateral carbon supply reducing policies. It differentiates between demand and supply side reactions as well as between intra- and intertemporal shifts of greenhouse gas emissions. Ritter & Schopf (2014) integrate stock-dependent marginal physical extraction costs into Eichner & Pethig’s (2011) general equilibrium carbon leakage model. Using this model, we change the policy instrument from an emissions trading scheme to a deposit preserving system. The results are as follows: Under similar conditions than those derived by Ritter & Schopf (2014), the weak green paradox and the strong green paradox arise. In case of acting today, these conditions are tightened due to the energy market channel of carbon leakage. In case of acting tomorrow, the change in the physical user cost of extraction additionally influences the effectiveness of the carbon supply reducing policies. In both cases, it can be more effective to preserve the deposits with the lowest marginal physical extraction costs first.
    Keywords: Carbon Leakage; Green Paradox; General Equilibrium Model
    JEL: Q31 Q32 Q54
    Date: 2016–05
  20. By: Caroline Orset
    Abstract: Despite the various measures taken to reduce air pollution in France, the French continue to use high emitting vehicles. We propose to evaluate the traveller's willingness to pay (WTP) for four means of transport: two high emitting vehicles (taxi diesel and personal diesel car) and two low-emission vehicles (rented electric vehicle and public transport). We get that individuals prefer personal cars. We propose different health and environmental policies to encourage people to adopt low-emission vehicles. Successive messages revealing the effects of air pollution on health and the environment are provided to individuals in a different order. We find that the information and order of information affect the WTP of individuals. This information campaign increases demand for low-emission vehicles, but demand for high emitting vehicles is somewhat affected. Indeed, individuals prefer to ignore information, they behave as in the theory of the tragedy of the commons. We then propose a system of tax subsidies and a standard subsidy system. These two policies drive individuals to switch from high emitting vehicles to low-emission vehicles. The regulator will have to choose between an incentive intervention (with a system of tax subsidies) and a coercive intervention (with a standard subsidy system).
    Keywords: Air Pollution; Information campaign; Mean of transport; Standard-subsidy system; Tax-subsidy system; Traveller's willingness to pay
    JEL: Q53 H23 I18
    Date: 2017–03–02
  21. By: Raphael Calel; Antoine Dechezlepretre
    Abstract: This paper investigates the impact of the European Union Emissions Trading System (EU ETS) on technological change, exploiting installations-level inclusion criteria to estimate the System's causal impact on firms' patenting. We find that the EU ETS has increased low-carbon innovation among regulated firms by as much as 10%, while not crowding out patenting for other technologies. We also find evidence that the EU ETS has not impacted patenting beyond the set of regulated companies. These results imply that the EU ETS accounts for nearly a 1% increase in European low-carbon patenting compared to a counterfactual scenario.
    Keywords: directed technological change; EU emissions trading system; policy evaluation
    JEL: C14 O3 Q55 Q58
    Date: 2016–03
  22. By: Steffen, Nico
    Abstract: This paper introduces the additional dimension of environmental concerns by a government into a setting of rent-extracting strategic trade policy with endogenous firm investment into production technologies. It considers the presence of imperfect competition, namely Cournot competition. The simple analysis highlights the importance of investment incentives caused by tariffs. Furthermore, the implications from traditional tariff considerations can be completely different to the ones derived with an environmentally conscious government. It is shown that an importing country now prefers to impose discriminatory instead of uniform tariffs in a dynamic setting with endogenous technology choices, in order to induce the exporting firms to choose a technology that exhibits lower costs in terms of emissions.
    JEL: F18 F13 Q58
    Date: 2016
  23. By: Onyimadu, Chukwuemeka
    Abstract: The paper strives to postulate a possible optimal policy path for a social planner who is concerned with managing the stock of an accumulative pollutant within the society. Using Hamiltonian functions in a dynamic optimizing problem, the paper was able to show that the policy path that will minimize the damages of an accumulative pollutant depends on the steady state of the accumulative pollutant as compared to the level of the accumulative pollutant present within the society. This relationship between the steady state and level of accumulative pollutant determines both abatement levels and pollution tax: policy tool kits for the social planner. The paper concludes that the social planner should advocate for a tax regime that is below the steady state tax level which will imply lower optimal abatement levels initially. The tax can then be increased over time to ensure increased abetment of the stock pollutant.
    Keywords: Accumulative Pollutant, Dynamic Optimization, Pollution, Social Welfare, Pollution Abatement, Environmental Abatement Tax
    JEL: Q3 Q5
    Date: 2015–08
  24. By: Fernández-Amador, Octavio; Francois, Joseph; Oberdabernig, Doris; Tomberger, Patrick
    Abstract: Working with a new dataset on comparable global CO2 production and consumption inventories spanning the 1997–2011 period, we investigate the relationship between real gross domestic product (GDP) per capita and CO2 emissions per capita associated with both production and consumption activities. By including linkages between production-based emissions in one country and final consumption in another (via cross-border value chains), we focus on the entire carbon chain. We estimate polynomial and threshold models, accounting for reverse causality and identification problems. We find that the income-elasticity for both inventories is regime-dependent and reflects small carbon efficiency gains from economic development. Carbon foot- prints show larger income-elasticities, while national policy instruments targeting production can clearly be circumvented by carbon embodied in intermediate trade. This implies problems of environmental sustainability that may require consumption-based policy instruments.
    JEL: F18 F64 O44 Q54 Q56
    Date: 2017–02
  25. By: Frondel, Manuel; Simora, Michael; Sommer, Stephan
    Abstract: The perception of risks associated with climate change appears to be a key factor for the support of climate policy measures. Using a generalized ordered logit approach and drawing on a unique data set originating from two surveys conducted in 2012 and 2014, each among more than 6,000 German households, we analyze the determinants of individual risk perception associated with three kinds of natural hazards: heat waves, storms, and floods. Our focus is on the role of objective risk measures and experience with these natural hazards, whose frequency is likely to be affected by climate change. In line with the received literature, the results suggest that personal experience with adverse events and personal damage therefrom are strong drivers of individual risk perception. @Die Wahrnehmung von Risiken, die mit dem Klimawandel einhergehen, wird als wesentlicher Faktor für die Unterstützung von Klimaschutzmaßnahmen in der Bevölkerung erachtet. Auf Basis eines Generalized-Ordered-Logit Ansatzes und eines Datensatzes, der auf zwei Erhebungen aus den Jahren 2013 und 2015 unter jeweils mehr als 6000 Haushalten beruht, werden in diesem Papier die Determinanten der individuellen Risikowahrnehmung von drei Naturereignissen analysiert: Hitzewellen, Stürme und Überschwemmungen. Im Fokus der Analyse befinden sich die Rolle von objektiven Risikomaßen und die persönliche Erfahrung mit solchen Ereignissen. In Übereinstimmung mit der empirischen Literatur deuten unsere Ergebnisse darauf hin, dass persönliche Erfahrung mit diesen Ereignissen und dadurch erlittene Schäden die individuelle Risikoeinschätzung stark beeinflusst.
    Keywords: Damage experience,natural hazards,generalized ordered logit
    JEL: D81 H31 Q54
    Date: 2017
  26. By: Burke, M; Craxton, M; Kolstad, CD; Onda, C; Allcott, H; Baker, E; Barrage, L; Carson, R; Gillingham, K; Graf-Zivin, J; Greenstone, M; Hallegatte, S; Hanemann, WM; Heal, G; Hsiang, S; Jones, B; Kelly, DL; Kopp, R; Kotchen, M; Mendelsohn, R; Meng, K; Metcalf, G; Moreno-Cruz, J; Pindyck, R; Rose, S; Rudik, I; Stock, J; Tol, RSJ
    Date: 2016–04–15

This nep-ene issue is ©2017 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.