nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒04‒09
33 papers chosen by
Roger Fouquet
London School of Economics

  1. Measuring the Welfare Effects of Residential Energy Efficiency Programs By Hunt Allcott; Michael Greenstone
  2. Increased energy efficiency in Scottish households: trading-off economic benefits and energy rebound effects? By Gioele Figus; Patrizio Lecca; Karen Turner; Peter McGregor
  3. Economic growth and development with low-carbon energy By Sam Fankhauser; Frank Jotzo
  4. Towards the Green Economy – economic effects of the transition to a more efficient world By Ulrike Lehr; Philip Ulrich, Institute for Economic Structures Research (GWS), Heinrichstr. 30, D-49080 Osnabrück, Germany
  5. Fossil fuels, alternative energy and economic growth By Raul Barreto
  6. Catalyzing Investment for Renewable Energy in Developing Countries By Moon, Jin-Young; Song, Jihei; Lee, Seojin
  7. Analysis of New Zealand Specific Electric Vehicle Adoption Barriers and Government Policy By Zhu, Jiayi (Jason)
  8. Economic effects of E-mobility scenarios in the context of intermediate interrelations and consumption By Philip Ulrich; Ulrike Lehr
  9. Adopting a Cleaner Technology: The Effect of Driving Restrictions on Fleet Turnover By Francisco Gallego; Juan-Pablo Montero; Hernán Barahona
  10. Energy Scenarios: The Value and Limits of Scenario Analysis By Sergey Paltsev
  11. 200 years diversifying the energy mix? Diversification paths of the energy baskets of European early comers vs. latecomers By Rubio-Varas, Mar; Muñoz-Delgado, Beatriz
  12. From wood to coal: Directed technical change and the British Industrial Revolution By John C. V. Pezzey; David I. Stern; Yingying Lu
  13. El Nexo entre el agua, la energía y la alimentación en América Latina y el Caribe: planificación, marco normativo e identificación de interconexiones prioritarias By Embid, Antonio; Martín, Liber
  14. Energy Consumption, Weather Variability, and Gender in the Philippines: A Discrete/Continuous Approach By Dacuycuy, Connie B.
  15. Will Technological Change Save the World? The Rebound Effect in International Transfers of Technology By Mare Sarr; Tim Swanson
  16. Macro policy responses to natural resource windfalls and the crash in commodity prices By Frederick van der Ploeg
  17. The Right Fit for the Wrong Reasons: Real Business Cycle in an Oil-Dependent Economy By Miguel Angel Santos
  18. Oil prices in a real-businesscycle model with precautionary demand for oil By Olovsson, Conny
  19. Petroleum tax competition subject to capital rationing By Osmundsen, Petter; Lovas, Kjell; Emhjellen, Magne
  20. The Supply of Non-Renewable Resources By Julien Xavier Daubanes; Pierre Lasserre
  21. The impact of real oil revenues fluctuations on economic growth in Algeria: evidence from 1960-2015 data By LAOURARI, Imène; GASMI, Farid
  22. Oil price shocks and policy uncertainty: New evidence on the effects of US and non-US oil production By Kang, Wensheng; Ratti, Ronald. A.; Vespignani, Joaquin
  23. Credit Dynamics of Various Entities in Russia: Impact of Oil Prices and Sanctions By Yulia Vymyatnina
  24. The dynamics of the real purchasing power of Algeria's oil revenues By Laourari, Imène; Gasmi, Farid
  25. Overview of Policy Actions and Observational Data for PM2.5 and O3 in Japan: A Study of Urban Air Quality Improvement in Asia By Akimoto, Hajime
  26. A Comparative Study of Urban Air Quality in Megacities in Mexico and Japan: Based on Japan-Mexico Joint Research Project on Formation Mechanism of Ozone, VOCs and PM2.5, and Proposal of Countermeasure Scenario By Wakamatsu, Shinji; Kanda, Isao; Okazaki, Yukiyo; Saito, Masahiko; Yamamoto, Mitsuhiro; Watanabe, Takuro; Maeda, Tsuneaki; Mizohata, Akira
  27. There Did All the Markets Go!Or: Sustainable Carbon Markets and How to Get There By Sven Rudolph; Elena Aydos; Takeshi Kawakatsu; Achim Lerch
  28. Can Paris deal boost SDGs achievement? An assesment of climate-sustainabilty co-benefits or side-effects By Lorenza Campagnolo; Fabio Eboli; Marinella Davide
  29. The Effects and Implications of Green Public Procurement with Economy-wide Perspective: A Computable General Equilibrium approach By Yeongjun Yeo; Yeongjun Yeo; SHIN, Ki-yoon; Jeong-Dong Lee
  30. Combining Price and Quantity Controls under Partitioned Environmental Regulation By Sebastian Rausch; Jan Abrell
  31. The Provision of Collective Goods Through a Social Division of Labour By Robert P. Gilles; Maria Laura Pesce; Dimitrios Diamantaras
  32. Climate Policy and the Energy-Water-Food Nexus: A Model Linkage Approach By Dirk Willenbockel; Claudia Ringler; Nikos Perez; Mark Rosegrant; Tingiu Zhu; Nathanial Matthews
  33. Faraway, so Close: Coupled Climate and Economic Dynamics in an Agent-Based Integrated Assessment Model By Francesco Lamperti; Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Alessandro Sapio

  1. By: Hunt Allcott (New York University); Michael Greenstone (University of Chicago)
    Abstract: Â This paper sets out a framework to evaluate the welfare impacts of residential energy efficiency programs in the presence of imperfect information, behavioral biases, and externalities, then estimates key parameters using a 100,000-household field experiment. Several results run counter to conventional wisdom: we find no evidence of informational or behavioral failures thought to reduce program participation, there are large unobserved benefits and costs that traditional evaluations miss, and realized energy savings are only 58 percent of predictions. In the context of the model, the two programs we study reduce social welfare by $0.18 per subsidy dollar spent, both because subsidies are not well-calibrated to currently-estimated externality damages and because of self-selection induced by subsidies that attract households whose participation generates low social value. However, the model predicts that perfectly-calibrated subsidies would increase welfare by $2.53 per subsidy dollar, revealing the potential of energy efficiency programs
    Keywords: energy efficiency, program evaluation, randomized control trials, welfare analysis
    JEL: D12 L94 Q41 Q48
    Date: 2017
  2. By: Gioele Figus; Patrizio Lecca; Karen Turner; Peter McGregor
    Abstract: Energy rebound effect from increased energy efficiency has been generally considered as an undesired consequence of increasing energy efficiency policies that needs to be accounted when assessing the ability of such policies to decrease the demand for energy. However, recent studies have associated the energy rebound effect to a wider range of economic benefits coming from the higher energy efficiency. In computable general equilibrium (CGE) setting Lecca et al. 2014 show that a more efficient use of energy could lead to a reallocation of household’s expenditure towards non-energy sectors, which could stimulate the economy through a shift in the aggregate demand. However this would crowd out export due to an increased pressure on domestic consumption price. Here we use a regional (CGE) model for the Scottish economy to analyse the economic response of household - and of the wider economy - to an increase in household energy efficiency. We follow the approach of Lecca et al. 2014 but we focus on the regional case of Scotland. This allows us to understand some of the implications of moving from a national to a regional CGE modelling framework in the analysis of the impacts household energy efficiency improvements in the whole economy. The macroeconomic impacts of improving household energy efficiency are analysed using a CGE model for Scotland called AMOS-ENVI. This is a dynamic CGE model with forward-looking investment and consumption decisions, designed to analyse environmental and energy disturbances in a regional setting. The model accounts for 20 different productive sectors, including 4 supply chain energy industries, and includes information about fScottish households, the Scottish Government and imports and exports to the rest of the UK (RUK) and to the rest of the World (ROW). Wages are determined within the region in an imperfectly competition setting, using a wage curve where the real wage is negatively related to unemployment rate. The labour force is initially assumed fixed. We than release this assumption to allow for free workers interregional migration across UK, occurring in response to the difference between national and regional real wage and unemployment rates. We consider an energy efficiency improvement as being any technological change which allows households to consume the same bundle goods as before but using less physical energy in doing this. The rebound effect is measured as being the ratio between potential energy savings (PES) and actual energy savings (AES). The PES correspond to the pure engineering effect, for example improving efficiency by 10% and saving 10% of energy. The AES are calculated as the proportionate change in a specific energy use, for which efficiency has improved, as the result of the full general equilibrium adjustments. Results from simulations show that increasing household energy efficiency stimulates the Scottish economy through an increase and change in patterns in the domestic aggregate demand. In the long-run central case scenario the regional GDP increases by 0.11%, unemployment rate drops by 0.45% and households consumption increases by 0.4%. The consumption of energy decreases both in household and in production, although the calculated general equilibrium rebound effect is 50%, so that only 50% of the potential energy savings are achieved. By introducing free migrations of workers, we find that in an open region characterised by an integrated labour market, interregional migration of workers may give additional momentum to the economic expansion from the increased household energy efficiency. In fact the net in-migration relieves pressure on the real wage and the cpi, which return to their baseline values in the long-run restoring the lost competitiveness observed in the national case (Lecca et al., 2014). By considering different simulation scenarios we show that there is a friction between the economic expansion from increased household energy efficiency and the rebound effects. Moreover, we show that the economic stimulus from increased energy efficiency in household would be different depending on the precise specification of the impact itself.
    Keywords: Scotland, General equilibrium modeling, Energy and environmental policy
    Date: 2016–07–04
  3. By: Sam Fankhauser (Grantham Research Institute on Climate Change and Centre for Climate Change Economics and Policy, London School of Economics); Frank Jotzo
    Abstract: Energy is needed for economic growth, and access to cheap, reliable energy is an essential development objective. Historically most incremental energy demand has been met through fossil fuels, however in future that energy will have to be low-carbon and ultimately zero-carbon. Decarbonisation can and needs to happen at varying speeds in all countries, depending on national circumstances. This paper reviews the implications of a transition to low-carbon energy on economic growth and development in current low income countries. It sets out empirical findings about trajectories for energy intensity and emissions intensity of economic growth; explores pathways to accelerate decarbonisation; reviews the theoretical and empirical literature on economic costs and co-benefits of energy decarbonisation; and assesses analytical approaches. It discusses the opportunities that might arise in terms of a cleaner, more dynamic and more sustainable growth model, and the options for developing countries to implement a less carbon intensive model of economic development.
    Keywords: Economic growth, Developing countries, Decarbonisation, Low-emissions trajectories, Climate change mitigation, Emissions intensity
    JEL: Q43
    Date: 2017–03
  4. By: Ulrike Lehr; Philip Ulrich, Institute for Economic Structures Research (GWS), Heinrichstr. 30, D-49080 Osnabrück, Germany
    Abstract: The challenges of climate change led to the claim to decarbonize economic activities. Most recently, the Stern Report (2006) and AR4 of the IPCC (2007) showed that the seeming dichotomy between economic growth and environmental protection can be bridged and that climate change mitigation is an economic opportunity and contributes to growth. Thus, UNEP 2011, OECD 2011, ILO 2012 coined the terms Green Economy, Green Growth and Green Jobs. Resource efficiency is an important pillar of a greener economy. It comprises energy efficiency and contributes to climate change mitigation, and (raw) material efficiency; thus contributing to the protection of water, soil, landscape and biodiversity as well. While efficiency increases autonomously due to price pressures, technological change and innovation, additional incentives are needed for a better internalization of the respective external effects such as pollution, emissions, destruction of wildlife and landscapes etc. Policies for the increase of resource efficiency therefore include price instruments such as fees on the use of certain raw materials as inputs. Additionally, grants to home owners to increase the energy efficiency in buildings, standards and labels are used. The objective of this contribution is to show the economic effects of selected resource policies on an aggregate and a sector specific level. A special focus lies on employment effects from the transition to a green, i.e. more resource efficient economy. The analysis is based upon simulation results obtained with the macroeconometric model PANTA RHEI. PANTA RHEI has a macroeconometric simulation and forecasting model at its core, which consistently describes the annual inter-industry flows between the 59 sectors, their contributions to personal consumption, government, equipment investment, construction, inventory investment, exports as well as prices, wages, output, imports, employment, labor compensation, profits, taxes, etc. for each sector as well as for the total economy. In the behavioral equations decision routines are modeled that are not explicitly based on optimization behavior of agents, but are founded on bounded rationality. The parameters in all equations in PANTA RHEI are estimated econometrically from time series data. Producer prices are the result of mark-up calculations of firms. Output decisions do not stem from an optimization process but follow observable historic developments, including observed inefficiencies. Employment is determined from the production volume and the real wage rate in each sector, which in return depends on labor productivities and prices. To examine the economic effects of additional efficiency measures in Germany our analysis applies PANTA RHEI to two scenarios: a business as usual scenario and a scenario with increased resource efficiency. Both scenarios are implemented in the macro-econometric model PANTA RHEI. The respective differences in economic indicators, such as employment, GDP etc. can then be attributed to the effort for increased efficiency in the scenario, since all other factors are held equal. Changes in volumes and prices are fully accounted for. The simulation model runs until 2030. The scenario includes different aspects of resource efficiency, such as energy efficiency in buildings, supported by a grant; energy efficiency and decrease of material inputs in industry supported by a consultancy program, energy efficiency in public buildings, supported by grants, subsidies for efficient appliances for low income households and a tax on building materials. The simulation yields positive results for both the economy and the environment. The advantageous development in the scenario with increased efficiency shows in additional GDP (0.6% in 2020; 0.4% in 2030). The construction sector gets different signals: increased efficiency in buildings means additional insulation and more activity in construction and the materials’ tax makes construction more expensive and lowers the said activities. The net effect in construction is positive growth, which is negative for the environment, but not as negative as without the tax. Energy productivity increases as does resource productivity in general. GHG emissions decrease as a consequence of increased energy efficiency and decreasing demand for energy. The growth effect increases demand and leads to a small (not overcompensating) rebound effect. Employment in most sectors increases. The construction sector sees an increase in employment by more than 3% compared to the reference scenario. The mining and quarrying sector, however, sees a lower level of employment compared to the reference.
    Keywords: Germany, Energy and environmental policy, Macroeconometric modeling
    Date: 2016–07–04
  5. By: Raul Barreto
    Abstract: Present a theoretical framework of endogenous switching from fossil fuels to alternative energy driven by productivity differentials and consequent prices.General equilibrium endogenous growth framework and non-linear estimation of coefficients. The model depicts a hump shaped growth path that is analogous to a transition from energy rich "peak oil" heydey to alternative energy only world. The model thereby allows for quantitative comparisons of initial conditions, transition and terminal points along the growth path as well as determinants of alternative paths.
    Keywords: North country in North south type GE framework., Growth, Energy and environmental policy
    Date: 2015–07–01
  6. By: Moon, Jin-Young (Korea Institute for International Economic Policy); Song, Jihei (Korea Institute for International Economic Policy); Lee, Seojin (Korea Institute for International Economic Policy)
    Abstract: This paper aims to present ideas on how to mobilize investment for renewable energy by focusing on the catalytic role of public resources. We review global trends in investment and the barriers to renewable energy investment in developing countries. Following the overview, we examine two types of public support to mobilize resource from the private sector. In the conclusion, we suggest ways to increase support and cooperation in renewable energy.
    Keywords: Renewable Energy; ODA; Development Cooperation
    Date: 2016–06–28
  7. By: Zhu, Jiayi (Jason)
    Abstract: The New Zealand (NZ) Transport sector represents over 40% of the country’s greenhouse gas emissions from the energy sector. Electric Vehicles (EV) are fast emerging globally as a viable alternative to traditional fossil fuel burning cars. In hope of addressing the low EV adoption in NZ, the Ministry of Transport published a series of EV policies in May 2016. The literature review found a broad spectrum of EV adoption barriers from a global perspective covering technology, economic, social, environmental, and political factors. However, the analysis of barriers from a NZ perspective is overly simplistic and largely based on international findings with little empirical evidence specific to NZ. The most influential barriers specific to NZ are deemed as 1) range; 2) charging time; 3) purchase price; 4) charging facilities and 5) NZ car market. While there is literature which evaluates global policies and suggests effective policies for NZ, there is no current research that evaluates whether the latest NZ government policy is going to be effective in improving EV uptake in NZ. These papers tend to prescribe a solution of government policies without truly knowing whether their assumptions about EV adoption barriers apply to NZ. Using a mixed methodology, a questionnaire containing both quantitative and qualitative research questions was carried out. The findings of this paper show there are four major NZ specific barriers, namely 1) high purchase price; 2) unknown cost of ownership (i.e. service, maintenance and repair); 3) lack of charging facilities and 4) lack of EV knowledge. Other barriers highlighted by literature such as range and charging time are found to be less influential barriers. Overall, the sentiment for EV adoption is positive and the government policy is deemed to be reasonably effective as it either directly or indirectly addresses the above four barriers; however, certain policies such as ones addressing the cost of ownership can be improved.
    Keywords: Electric vehicles, Government policy, Adoption barriers,
    Date: 2016
  8. By: Philip Ulrich; Ulrike Lehr
    Abstract: The number of passenger cars with electric drives in Germany has nearly quadrupled in the last three years. Even though electric vehicles (EV) still hold less than 1% of the registrations, expectations are high for the future. E-mobility is expected to change the way cars are produced as well as households’ expenditures, as EV could hold 10 to 20% of new cars in 2030. The possible impacts on the economy are manifold; but thus far most studies use microeconomic methods to describe parts of the system changes or they analyze effects of investment in infrastructure. This ignores that manufacturing of cars with electric drives need different – and fewer - inputs than a car with a combustion engine. Therefore, long-term changes in the value chain are going to occur with impacts on the whole economy. In Germany E-mobility is pushed not only to gain or maintain the automotive industry’s shares in the global market but also to use potentials for a greener mobility. The aim is to stronger diversify the energy base in the transport sector and to develop potentials for the use of renewable energies. The objective of this contribution is to show the economic effects of both changing input-output relations and energy use by comparing two scenarios with different shares of electric or other alternative drives in passenger cars. Both indicators of resource use and employment are analyzed on an aggregate and a sector specific level. The analysis is based upon simulation results obtained with the macroeconometric model PANTA RHEI. PANTA RHEI has a macroeconometric simulation and forecasting model at its core, which consistently describes the annual inter-industry flows between the 59 sectors, their contributions to personal consumption, government, equipment investment, construction, inventory investment, exports as well as prices, wages, output, imports, employment, labor compensation, profits, taxes, etc. for each sector as well as for the total economy. The transportation module within the model describes traffic performances of all transport sectors and includes vehicle stocks with fuel or technology categories. Traffic and its modal split are extensively linked with private consumption, intermediate inputs and energy use. To analyze specific implications of drive technologies in cars the transportation module was extended and specific links to the energy use were established. Intermediate inputs between manufacturing industries were changed aligned to the technological transition. To examine the economic effects of a stronger market penetration of EV in Germany our analysis applies PANTA RHEI to two scenarios: a business as usual scenario and a scenario with an increased share of EV among new cars. Both scenarios are implemented in the macro-econometric model PANTA RHEI. The respective differences in economic indicators, such as employment, GDP etc. can then be attributed to more e-mobility in the scenario, since all other factors are held equal. Changes in volumes and prices are fully accounted for. The simulation model runs until 2030. In the scenario with an increased share of EV among new cars the government target of 6 Mio EV in 2030 is met, which is 14% of all vehicles. The long useful life period of cars leads to a rather long term transition. In the business as usual scenario 3.2 Mio personal vehicles with electric drives are operated at the end of the time horizon. The results show that the upcoming shifts in structures of manufacturing and consumption described in the model are not leading to strong macroeconomic effects. In the long term they are found to be negative, as increasing demand in electrical industry is overcompensated by decreasing demand in the automobile industry and related suppliers as well as (traditional) gas stations. Energy consumption in the EV-scenario is lower than in the reference, and so is the import of fuels. The way the well-established automotive value chain is adapting to the upcoming new technologies is very critical for the economic effects in Germany. The strong interlinkages within the automotive industries potentially imply self-energizing effects. Given the past structures these effects are rather negative as capacities for manufacturing electrical drives and batteries are not part of the – often metal-related – sectors. In the scenario analysis employment is higher in the electrical industry and in the energy sector. From 2020 on especially the lower employment in the automobile industry and gas stations lead to a slightly negative or rather balanced net employment effect.
    Keywords: Germany, Macroeconometric modeling, Sectoral issues
    Date: 2016–07–04
  9. By: Francisco Gallego; Juan-Pablo Montero; Hernán Barahona
    Abstract: Driving restrictions —limits on car use based on the last digit of a car’s license plate— are increasingly popular forms of pollution and congestion control, notwithstanding the literature has shown they typically result in more pollution by moving the fleet composition toward higher-emitting vehicles. We study a design feature present in some restriction programs but much overlooked in the literature: that cleaner cars be exempted from the restriction. Based on evidence from Santiago- Chile’s 1992 program, we find this exemption feature to have a large impact on fleet composition toward cleaner vehicles. We also develop and calibrate for Santiago a vertical-differentiation model of the car market to show that driving restrictions that make optimal use of these exemptions can be way more effective in the fight against local air pollution than alternative instruments such as scrappage subsidies and gasoline taxes.
    JEL: J14 O12 L26 M53
    Date: 2016
  10. By: Sergey Paltsev
    Abstract: A need for low-carbon world has added a new challenging dimension for the long-term energy scenarios development. In addition to the traditional factors like technological progress, demographic, economic, political and institutional considerations, there is another aspect of the modern energy forecasts related to the coverage, timing, and stringency of policies to mitigate greenhouse gas emissions and air pollutants. The goal of this paper is to review the value and limits of energy scenarios and, in particular, to assess how the new low-carbon goals are reflected in the latest projections. This relatively new dimension of the scenarios means that in addition to the traditional factors like technology development, demographic, economic, political and institutional considerations, there is another aspect of the modern energy forecasts related to the coverage, timing, and stringency of policies to mitigate greenhouse gas emissions and air pollutants. The results from a long-term global energy-economic model, the MIT Economic Projection and Policy Analysis (EPPA) model, are compared with other major outlooks (like BP, ExxonMobil, IEA) and model-comparison exercises (represented in the IPCC scenario database). Considering the value and limits of the energy scenarios, it is obviously easier to find the limits of the forecasts. It is true not only about the energy projections, but also about other predictions of the future: financial, economic or political. Forecasts of all sorts are usually bad at predicting sudden changes. In terms of energy projections, fast growth of China’s energy appetite and its recent slowdown, fast development of unconventional oil and natural gas, fast deployment of renewables, all these events are missed by most scenarios. A move to a low-carbon energy future requires a drastic change in energy investment and the resulting mix in energy technologies. If history is any guide, energy scenarios overestimate the extent to which the future will look like the recent past. Energy scenarios are useful for decision-makers to assess the scale of the necessary transformation. However, the exact technology mix, paths to the needed mix, price and cost projections should be treated with a great degree of caution. The scenarios do not provide the exact numbers (or even close numbers), but they can be used as a qualitative analysis of decision-making risks associated with different pathways. We should recognize the energy system is complex, interconnected and affected by economic drivers. In turn, economists are notorious for their forecasting ability. Due to a long-lasting nature of energy infrastructure, energy system is not as fluid as economic system, and some trajectories in energy development are more persistent, but the same degree of carefulness should be applied to the long-term energy forecasts as to economic forecasts. Energy scenarios models are complex, but they do not reflect all the complexity, so they often provide imprecise projections. At the same time, without models nothing at all constrains the projections. While indeed energy scenarios are not suited for providing the exact number (or specific forecast), but practically decisions have to be made. The value of energy scenarios (and models that produce them) is not in their decision-making capabilities, but in their decision-support capabilities. Any single energy scenario is not going to provide a prediction of the future, and it cannot be used as a basis for policy-making. However, the results from numerous scenarios obtained from different modelling planforms provide useful information about potential risks and benefits of a particular potential policy or investment. When one has a model to make a scenario – an argument can be made about improvement, simplification, or bringing additional details. When one has just tea leaves to guess the future, there is no tool to advance the knowledge. Most of the energy scenarios offer plausible rather than most likely future. Perhaps the most important uncertainty about the future of energy is its interaction with the environment. The need for low-emitting technologies will shift the current technology mix, but the exact contribution of particular technology and the timing of this shift depend on many economic and political variables. Such uncertainty about the future costs and technologies supports a conclusion that governments should not try to pick the “winners”, rather the policy and investment focus should be on targeting emissions reductions from any energy source. Energy scenarios may not provide the exact projections, but they are the best available tool to assess the magnitude of challenges that lie ahead.
    Keywords: Global, Impact and scenario analysis, Energy and environmental policy
    Date: 2016–07–04
  11. By: Rubio-Varas, Mar (Departamento de Economía. Universidad Pública de Navarra); Muñoz-Delgado, Beatriz (Departamento de Análisis Económico: Teoría Económica e Historia Económica. Universidad Autónoma de Madrid)
    Abstract: The changes in the composition of the energy basket in the long run lead to energy transitions. Primary energy substitution models allow addressing these phenomena. However, the diversification paths of the energy mix of different countries in a long term compared perspective have not been studied yet. This paper proposes an indicator, based on the Herfindahl-Hirschman Index, the Energy Mix Concentration Index (EMCI), to quantify the degree of diversification of the primary energy basket of eight European countries over the last two centuries. The results reveal that early comers, which are large energy consumers, required a huge concentration of their energy basket in the 19th century; however, the observed countries had converged to similar levels of diversification of their energy mixes from the second half of the 20th century, and more crucially after the oil crises. For some countries, today’s degree of diversification is the largest in their energy histories, but it is not the case for all of them. Our results suggest that small energy consuming countries would be able to achieve higher diversification, and therefore to do a faster transition to a low carbon economy, than large energy consumers.
    Keywords: energy mix, energy transitions, energy baskets, energy diversification, energy concentration index, Europe.
    JEL: C43 N50 N70 O13 O33 Q40
    Date: 2017–02
  12. By: John C. V. Pezzey; David I. Stern; Yingying Lu
    Abstract: We build a directed technical change model of the British Industrial Revolution where one intermediate goods sector uses a fixed renewable energy ("wood") quantity, and another uses coal at a fixed price. With a high enough elasticity of substitution between the two goods in producing final output, an industrial revolution, where over time the coal-using sector grows relative to the wood-using sector and its growth accelerates, is not inevitable. However, greater initial scarcity of wood and/or higher population growth puts the economy on a path to an industrial revolution. The converse slows industrialization, or even prevents it forever.
    Keywords: British Industrial Revolution, directed technical change, renewable energy, coal, two-sector model, substitutability, population growth
    JEL: N13 N73 O33 O41 Q43
    Date: 2017–03
  13. By: Embid, Antonio; Martín, Liber
    Abstract: Este documento analiza el Nexo entre agua, energía y alimentación en América Latina y el Caribe centrando su atención en el estado actual de la cuestión, la planificación para su implementación, la articulación del marco normativo y la identificación de interconexiones prioritarias para la región. Partiendo de una revisión de los antecedentes más relevantes del concepto del Nexo y su configuración actual a nivel global, se consideran los principales elementos para establecer el estado actual del debate en la región. Se contemplan, además, otros elementos relevantes, como la conexión del Nexo con los Objetivos de Desarrollo Sostenible (ODS), aspectos financieros relacionados con sus componentes y su importancia en la sociedad de riesgo.
    Date: 2017–03
  14. By: Dacuycuy, Connie B.
    Abstract: Using a discrete/continuous modeling approach, this paper analyzes energy use and consumption in the Philippines within the context of weather variability and gender. Consistent with energy stacking strategy where households use a combination of traditional and modern energy sources, this paper finds that households use multiple energy sources in different weather fluctuation scenarios. It also finds that weather variability has the highest effects on the electricity consumption of balanced and female-majority households that are female headed and in rural areas. Several policies are suggested.
    Keywords: Philippines, discrete/continuous approach, weather variability, gender, energy choice, energy consumption
    Date: 2017
  15. By: Mare Sarr; Tim Swanson
    Abstract: Technological change and its transfer to developing countries is often portrayed by policy-makers as a critical part of the solution to a resource problem such as climate change, based on the assumption that the transfer of resource-conserving technologies to developing countries will result in reduced use of natural capital by those countries. We demonstrate here, in a capital conversion based model of development, that the free transfer of resource-conserving technologies to developing countries will increase the options available to those countries, but that the way that they expend these options need not be in the direction of conserving resources. This is another example of the potential for a rebound effect to determine ultimateoutcomes, here in the context of international technology transfer policy. The transfer of technologies is as likely to simply move developing countries more rapidly down the same development path as it is to alter the choices they make along that path. For this reason, the transfer of resource conserving technologies, without incentives provided to alter development priorities, may not result in any resource-conservation at all.
    Keywords: Technological change, Rebound Effect, Development Path
    JEL: O33 O39 O44 Q55 Q56
    Date: 2017–02
  16. By: Frederick van der Ploeg
    Abstract: Policy prescriptions for managing natural resource windfalls are based on the permanent income hypothesis: none of the windfall is invested at home and saving in an intergenerational SWF is dictated by smoothing consumption across different generations. Furthermore, with Dutch disease effects the optimal response is to intertemporally smooth the real exchange rate, smooth public and private consumption, and limit sharp fluctuations in the intersectoral allocation of production factors. We show that these prescriptions need to be modified for the following reasons. First, to cope with volatile commodity prices precautionary buffers should be put in a stabilisation fund. Second, with imperfect access to capital markets the windfall must be used to curb capital scarcity, invest domestically and bring consumption forward. Third, with real wage rigidity consumption must also be brought forward to mitigate transient unemployment. Fourth, the real exchange rate has to temporarily appreciate to signal the need to invest in the domestic economy to gradually improve the ability to absorb the extra spending from the windfall. Fifth, with finite lives the timing of handing back the windfall to the private sector matters and consumption and the real exchange rate will be volatile. Finally, with nominal wage rigidity we show that a Taylor rule is a better short-run response to a crash in commodity prices than a nominal exchange rate peg.
    Keywords: Dutch disease, permanent income, volatility, capital scarcity, domestic investment, absorption constraints, overlapping generations, nominal wage rigidity
    Date: 2017–03
  17. By: Miguel Angel Santos (Center for International Development at Harvard University)
    Abstract: Venezuela is an oil-dependent economy subject to large exogenous shocks, with a rigid labor market. These features go straight at the heart of two weaknesses of real business cycle (RBC) theory widely reported in the literature: Neither shocks are volatile enough nor real salaries are sufficiently flexible as required by the RBC framework to replicate the behavior of the economy. We calibrate a basic RBC model and compare a set of relevant statistics from RBC-simulated time series with actual data for Venezuela and the benchmark case of the United States (1950-2008). In spite of Venezuela being one of the most heavily intervened economies in the world, RBC-simulated series provide a surprisingly good fit when it comes to the non-oil sector of the economy, and in particular for labor markets. Large restrictions on dismissal and widespread minimum (nominal) wage put all the burden of adjustment on prices; which translate into highly volatile real wages.
    Keywords: Macroeconomics, RBC, oil shocks, labor markets, Venezuela
    JEL: E10 E32 O47 O54 Q32
    Date: 2015–09
  18. By: Olovsson, Conny (Research Department, Central Bank of Sweden)
    Abstract: This paper analyzes the interaction between oil prices and macroeconomic outcomes by incorporating oil as an input in production alongside a precautionary motive for holding oil in a real-business-cycle model. The driving forces are factor-specific technology shocks and supply shocks that can be imprecisely forecasted by noisy news shock. These shocks explain most of the U.S. business cycle as well as the empirical distribution of oil prices. Oil shocks are mainly driven by increasing precautionary/smoothing demand, but supply shocks contribute substantially to both the oil-price volatility and the magnitude of oil shocks mainly through their effect on oil reserves.
    Keywords: Oil price shocks; business cycles
    JEL: E32 Q43
    Date: 2016–11–01
  19. By: Osmundsen, Petter (UiS); Lovas, Kjell; Emhjellen, Magne
    Abstract: The recent dramatic fall in oil prices has led to extensive capital rationing in international oil companies, and subsequent fierce competition between resource extraction countries to attract scarce investment. This situation is not adequately addressed by the large literature on international taxation and multinational companies, since it fails to take account of capital rationing in its assumption that companies sanction all projects with a positive net present value. The paper examines the effect of tax design on international capital allocation when companies ration capital. We analyse capital allocation and government take for four equal oil projects in three different fiscal regimes: the US GoM, UK upstream and Norway offshore. Implications for optimal tax design are discussed.
    Keywords: Taxation; international companies; project metrics; project valuation; oil projects
    JEL: F23 G12 G31 H21 H25
    Date: 2017–03–30
  20. By: Julien Xavier Daubanes (Department of Food and Resource Economics, University of Copenhagen); Pierre Lasserre (Département des Sciences Économiques at Université du Québec À Montréal)
    Abstract: There exists no formal treatment of non-renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location not only depends on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own-price effect, cross-price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: A price increase at some point in space and time causes NRR supply to decrease at all other points. This new but orthodox supply setting extends to NRRs the partial equilibrium analysis of demand and supply policies. Thereby, it provides a generalization of many results about policy-induced changes on NRR markets. The properties of restricted and unrestricted supply functions are characterized for Hotelling (homogeneous) as well as Ricardian (non homogeneous) reserves, for a single deposit as well as for several deposits that endogenously come into production or cease to be active.
    Keywords: Allocating reserves; Supply theory; Substitution effect; Stock compensation effect; Green paradox; Spatial leakage
    JEL: Q38 D21 H22
    Date: 2017–03
  21. By: LAOURARI, Imène; GASMI, Farid
    Abstract: This paper investigates the impact of real oil revenues fluctuations on economic growth in Algeria using data from 1960 to 2015. To shed some new light on this question, we use a measure of real oil revenues recently developed by Gasmi and Laourari (2015) that is endogenous to Algeria’s international trade structure. We apply the Johansen multivariate cointegration approach to analyze the short-run and the long-run dynamic relationship between real oil revenues and economic growth proxied by two variables, namely, real GDP and industrial sector growth. The cointegration analysis suggests that a long-run relationship exists between real oil revenues, real GDP, and industrial growth in Algeria. The impulse response function and the variance decomposition analysis suggest that the impact of unexpected shifts in real oil revenues on the country's economic and industrial growth is negative.
    Keywords: Algeria, Real oil revenues fluctuations, Economic growth, Industrial sector, Time series.
    JEL: C32 O13 O14 Q32
    Date: 2016–10–10
  22. By: Kang, Wensheng (Kent State University); Ratti, Ronald. A. (Economics, Finance and Property, Western Sydney University); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: Important interaction has been established for US economic policy uncertainty with a number of economic and financial variables including oil prices. This paper examines the dynamic effects of US and non-US oil production shocks on economic policy uncertainty using a structural VAR model. Such an examination is motivated by the substantial increases in US oil production in recent years with implications for US political and economic security. Positive innovations in US oil production are associated with decreases in US economic policy uncertainty. The economic forecast interquartile ranges about the US CPI and about federal/state/local government expenditures are particularly sensitive to innovations in US oil supply shocks. Shocks to US oil supply disruption causes rises in the CPI forecast uncertainty and accounts for 21% of the overall variation of the CPI forecaster disagreement. Dis-aggregation of oil production shocks into US and non-US oil production yield novel results. Oil supply shocks identified by US and non-US origins explain as much of the variation in economic policy uncertainty as structural shocks on the demand side of the oil market.
    Keywords: US oil production, economic policy uncertainty, CPI forecast uncertainty, structural VAR
    JEL: E44 G12 Q43
    Date: 2017–02
  23. By: Yulia Vymyatnina
    Abstract: Credit is one of the most important indicators leading boom/bust periods in the economy, therefore studying its dynamics (cycles) allows for early warning of overheating. At the same time credit is important driver of economic growth, and cases of credit constraints for the country as a whole or some of its sectors of companies often become a serious obstacle for growth and development. Sanctions, especially financial, represent one possible way of constraining country's economic prospects. Recent sanctions against Russia might seem relatively mild, but Russian economy was growing at lower and lower rates with oil prices decreasing at the same time. Our aim is to decompose the effects of sanctions and oil prices on the credit dynamics of various entities in Russia. At the first stage we identify credit cycles using threshold method. After the seasonal component is eliminated, we proceed with disaggregating time series we use for our study into long-run trend and cyclical components. For this we apply the Hodrick-Prescott (HP) filter. We favour its use compared to the Baxter-King filter since the latter cuts off some data at the beginning and the end of the times series, and since we have only 64 observations for the longest time series, we opted for HP filter that uses more information. Once the trend is accounted for, thresholds (of statistical nature) can be applied to determine the start and the end dates of the credit boom, denoting cyclical variations higher than average. More precisely, if lit is the deviation of the logarithm of real per capita credit from its long-run trend and if σ(li) is the standard deviation of the cyclical component of real per capita credit, then if on one or more particular sequential dates it is true that lit ≥ φσ(li) (φ is the threshold), we can claim that on this date(s) credit boom was observed. To check for robustness, alternative values of φ were used. At the second stage VECM models were constructed to account for the interaction of endogenous variables. In all cases, however, the coefficients and the share of explained variation due to endogenous variables in the equation for credit indicator were statistically insignificant, which allowed us to use a simple single-equation model for out-of-sample forecasting. The data until the 4th quarter 2013 were used for estimation, and then the data on exogenous variables were used for out-of-sample forecasting (dynamic). The difference until 4th quarter 2014 was used to measure the quality of the forecast and to judge if the quality of the forecast since 4th quarter 2014 could be used as a proxy of the sanctions effect. In order to determine the effect of oil prices, the out-of-sample forecast was also made using the average quarterly oil prices for 2012-2013. Additionally it should be mentioned, that the impulse response analysis in VECM models in most cases demonstrated significant response of GDP gap on changes in the oil prices. In the case of internal credit indicators the internal interest rate also showed response to the GDP gap proxy changes and to the changes in the oil prices. Most of the private sector external credits saw the boom coinciding with the time of the world financial crisis of 2008-2009, while for the government the boom in external borrowing was identified in 2012-2013. The government-affiliated companies and banks had another external credit boom at the end of 2014 – early 2015. It should be stressed that it is visible that financial sanctions have changed the composition of external borrowing from direct investments, bonds and credits to more short-term and less direct external financing. External credit was partly substituted for by internal credit as the boom at the end of the study period suggests. Again, the government has somewhat different timings of credit booms in relation to internal credits. Mostly total internal credit has the same timings of booms as credit in national currency, which is not surprising taking into account the dominant share of credit in national currency in the total outstanding credit, especially after the crisis of 2008-2009 when the banking system became aware of the necessity to deal with the currency mismatch between assets and liabilities. Results of decomposing the effects on external borrowing and domestic credit into effect related to decreasing oil prices and effect due to external (financial) sanctions show that sanctions are felt more compared to decrease in oil prices (in case of external borrowing), and that short-term borrowing decreased less for government companies and banks. Domestic credit market was also influenced by sanctions and decreasing oil prices to varying degrees as external credit was largely substituted by domestic credit where possible.
    Keywords: Russia, Macroeconometric modeling, Business cycles
    Date: 2016–07–04
  24. By: Laourari, Imène; Gasmi, Farid
    Abstract: This paper seeks to evaluate the impact of Algeria’s international trade structure, characterized by a strong asymmetry between exports denominated almost exclusively in US dollars and imports invoiced in alternative currencies, on the real purchasing power of this country’s oil revenues.Using a 1970-2013 dataset, we construct, and adjust these revenues by means of, two indices. The first index captures the fluctuations in the value of the US dollar against a basket of currencies of Algeria’s main import partners.The second accounts for changes in the inflation passed through imports from these partners. We find a persistent loss in the real purchasing power of Algeria’s oil revenues, that however decreased, up to the late 1990s and then, thanks to a relatively stable imported inflation, turned into a gain after the year 2000. Besides allowing us to disentangle the effects of the US dollar fluctuations and the world inflation on the dynamics of the real purchasing power of Algeria’s oil revenues, our analysis cast some light on the genuine role oil resources have played in the development of this country’s economy over the last four decades.
    Keywords: Algeria, Oil revenues, Real purchasing power, Dollar exchange rate, Imported inflation.
    JEL: O13 O55 Q32 Q43
    Date: 2015–11
  25. By: Akimoto, Hajime
    Abstract: Recent topics on PM2.5 and O3 in Japan have been briefly discussed in this paper. In the first part, Japan’s policy measures for PM2.5, including the establishment of Environmental Quality Standards (EQS) and monitoring stations, are described. Additionally, we discuss the monitoring data obtained and the exceedance of EQS in the years 2010-2013. The nationwide averaged data shows that sulfate and EC/OC are the most prominent components of PM2.5 and contribute almost equally to it . Secondly, long-term variation of O3 (Ox) and its precursors, NO2 and NMHC/VOC (non-methane hydrocarbon/volatile organic compound) are presented. The paradox of the increase in the average concentration of O3 in spite of the decrease in ambient concentrations of NO2 and VOC is discussed. The phenomenon was found to reflect three components: (1) a decrease in the NO titration effect, (2) an increase in transboundary transport, and (3) a decrease in in situ photochemical production. It is proposed t hat the integrated approach to mitigation measures for PM2.5 and O3 pollution should be considered within a framework of the SLCPs (short-lived climate pollutants) co-control policy.hat the integrated approach to mitigation measures for PM2.5 and O3 pollution should be considered within a framework of the SLCPs (short-lived climate pollutants) co-control policy.hat the integrated approach to mitigation measures for PM2.5 and O3 pollution should be considered within a framework of the SLCPs (short-lived climate pollutants) co-control policy.hat the integrated approach to mitigation measures for PM2.5 and O3 pollution should be considered within a framework of the SLCPs (short-lived climate pollutants) co-control policy.hat the integrated approach to mitigation measures for PM2.5 and O3 pollution should be considered within a framework of the SLCPs (short-lived climate pollutants) co-control policy.
    Keywords: PM2.5,03,Environmental Quality Standards (EQS),SLCPs co-control policy,03 paradoxical trend
    Date: 2017–01
  26. By: Wakamatsu, Shinji; Kanda, Isao; Okazaki, Yukiyo; Saito, Masahiko; Yamamoto, Mitsuhiro; Watanabe, Takuro; Maeda, Tsuneaki; Mizohata, Akira
    Abstract: Photochemical ozone and black carbon are key substances both for regional air pollution and global climate change. These two pollutants are so-called SLCPs (Short-Lived Climate Pollutants). International comparison studies among megacities with widely different conditions are effective in clarifying the formation mechanisms of SLCPs. A comparison study in megacity areas of Japan and Mexico mainly focusing on ozone, VOCs (volatile organic compounds) and PM2.5 was conducted based on air pollution trend analysis and field measurements including vertical soundings of ozone and meteorological parameters. In this study, co-beneficial countermeasure scenarios based upon the obtained scientific data has been proposed. Photochemical ozone, EC (elemental carbon; a major SLCP), and NOx (nitrogen oxides) and VOCs (NOx and VOCs are implicit SLCPs) need to be controlled to improve the regional and global atmospher ic environment. In Japan, countermeasures including the whole Asian area wil l be necessary because there is considerable contribution from trans-boundary air pollution. In Mexico, regulation of VOCs including energy shift and diesel exhaust gas control will be effective. These findings will be utilized to formulate and/or evaluate ProAire (Program for Air Quality Improvement) for the three studied megacity areas of Mexico.
    Keywords: Mexico,SATREPS(Science and Technology Research Partnership for Sustainable Development),Ozone,VOCs (Volatile Organic Compounds),PM2.5,Countermeasures
    Date: 2017–03
  27. By: Sven Rudolph; Elena Aydos; Takeshi Kawakatsu; Achim Lerch
    Abstract: “Where Did All the Markets Go?”1 was a question prominent amongst environmental economists in the 1990s when they realized the lack of market-based approaches in environmental policy practice with despair. Public Choice, the economic analysis of politics, answered that question by claiming a “market tendency for the political process to resist market mechanisms for rationing scarce environmental resources.”2 And, while recently climate policy cap-andtrade programs have spread across the globe and even different governance levels, most carbon markets’ ambition have to be considered insufficient. But despite of all criticism of the “The Brave New World of Carbon Trading“3, carbon markets offer a number of advantages over alternative policy instruments, and in view of the tremendous challenges of the Paris Agreement and the necessity to decarbonize the global economy within this century, any policy option should be (re-)considered without prejudices. Yet, exactly because there is no time to waste, carbon markets can only be considered a valuable policy option if they are both sustainable and political feasible; a contradiction? Can sustainable carbon markets ever be made politically feasible? We think: yes! In order to support this, first, we will summarize environmental economics’ arguments in favor of cap-and-trade and add a sustainability rationale for carbon markets, but from selected case studies we will also identify problems representative for many carbon markets in practice. We then identify the political barriers of sustainable carbon markets applying Public Choice reasoning. Last, we show how to overcome political obstacles and implement efficient, effective, and fair carbon markets by referring to best-practice examples and lessons from modern environmental governance literature.
    Date: 2017–04
  28. By: Lorenza Campagnolo; Fabio Eboli; Marinella Davide
    Abstract: The fall of 2015 will see a redefinition of international policy environment with the 21th UNFCCC Conference Of Parties (COP 21) in Paris and the adoption of the Sustainable Development Goals (SDGs) by United Nations. SDGs, the Millennium Development Goals follow-up, will set broader and more ambitious targets for both developed and developing countries encompassing all sustainability dimensions (economic, social, and environmental) and designing the pathway towards an inclusive green growth. The COP 21 agreement, defining new emission targets (Intended Nationally Determined Contributions - INDCs), will directly affect countries’ environmental performance, but also social and economic dimensions if we consider the possible use of climate policy revenues to reduce poverty prevalence (SDG 1) and malnutrition (SDG 2) or to extend access to electricity (SDG 7) or to lower the pressure on public debt (SDG 8). This paper aims at giving an ex-ante assessment of the co-benefits and side effects of this new policy setting and, in particular, to shed some light on the influence of COP21 agreement on achieving SDGs. Our analysis relies on a recursive-dynamic Computable General Equilibrium (CGE) model developed and enriched with indicators representative of each SDGs. CGE models have a flexible structure, and can capture trade‐offs and higher-order implications across sectors and countries that follows a shock or a policy. These models are well suited to assess the performance of economic indicators such as sectoral value added, GDP per capita, and public debt evolution; moreover, the CGE modelling literature of the past decades has highlighted that this is also a powerful tool to assess the evolution of some key environmental indicators, such as land use determined by land owners’ revenues maximisation or GHG and CO2 emissions directly linked to agents’ production and consumption choices (Böhringer and Löschel, 2006). Modelling social indicators in a CGE framework is a difficult task, especially when these imply dispersion measures such are poverty prevalence and inequality at the core of GOAL 1 and 10. In this case, we overcome the representative agent structure proper of CGE models empirically relying on the empirical literature and directly estimating the relations between indicators and endogenous variables of the model (Bourguignon et al., 2005; Ferreira et al., 2007; Montalvo and Ravallion, 2010). Extending the model with social and environmental indicators, in addition to the economic ones, allows assessing in an internally consistent framework how and at which extent changes in one sustainability sphere may affect the achievement of SDGs all around the world. Our framework considers 33 indicators covering 16 SDGs and classified into the three sustainability pillars. The analysis has world coverage, but for modelling reasons we aggregate the result in 40 countries/macro-regions. The historical records of indicators’ values rely on international databases (Commission on Sustainable Development of the United Nations, EU Sustainable Development Strategy, and World Development Indicators from World Bank) and are the starting point in our baseline scenario design. The baseline reproduces a Shared Socio-economic Pathways 2 (SSP2), consistent with a RCP4.5, and it is used as a benchmark to assess the effects of two mitigation scenarios anticipating the outcome of COP 21. The two proposed mitigation scenarios consider a coordinated effort to curb GHG emissions from 2020: 1.Post-Paris Global Trade (global ITS) scenario: the abatement pledges stated in the INDCs submitted ahead of the Paris Conference (COP 21) are effective for the committing countries. The global climate policy implementation envisions an international emission trading scheme (ITS). 2.Post Paris EU ETS scenario: in this scenario the European Union (EU28) implements an Emission Trading System (ETS) as already foreseen by the EU ETS domestic legislation, while all other countries achieve their targets unilaterally with a domestic carbon tax. Both scenarios are characterised by two different recycling schemes of the revenues collected from the carbon market or the carbon taxes: •revenues are redistributed internally in a lump sum; •revenues are used in part internally in EU28 and other developed countries and in part flow to a Development Fund benefiting LDCs: EU28 uses at least 50% of the revenues recycled to support clean energy in EU, 5% goes to the Development Fund and the rest is redistributed internally. The other committing countries allocate 1% of the carbon tax revenues to the Development Fund. In the LDCs revenues are recycled to achieve other SDGs, e.g. poverty and malnutrition reduction, access to education and electricity. This analysis will mainly focus on characterising the future trend of some social indicators, e.g. poverty prevalence and inequality, in the SSP2 baseline scenario, in addition to the usual economic and environmental indicators. Then, this baseline scenario will be used as a term of comparison to assess the impact of climate policy and different recycling scheme on environmental, social and economic indicators. Considering the INDCs as binding targets, COP21 agreement will determine a slight reduction of extreme poverty prevalence in the LDCs, but this outcome is mainly due to a leakage effect. The effect of climate policy on income distribution will be neutral and recycling carbon revenues with the creation of a Development Fund and a lump sum transfer to LDCs will have a negligible effect on poverty and inequality.
    Keywords: Global, but with a focus on LDCs, General equilibrium modeling, Developing countries
    Date: 2016–07–04
  29. By: Yeongjun Yeo; Yeongjun Yeo; SHIN, Ki-yoon; Jeong-Dong Lee
    Abstract: Nowadays, with increasing interests of demand-side innovation policy, there is needs for investigating public procurement policy aiming to strengthen the industrial competitiveness by expanding new markets with innovative activities. Public Procurement is regarded as the most effective policy for stimulating innovation in relevant sectors. Under this background, each countries in OECD spends about 15~20% of its GDP on public procurement, and most of the demands in industry and technology sector such as energy, environment, health, construction is stimulated by public procurement. Especially, in order to achieve both mitigating climate change and economic revitalization, the share of green public procurement which is public procurement for green products in total public procurement is enlarging among developed countries. Despite of the amount of public procurement, and policy significance and effectiveness, there is few study on the effects of public procurement for innovation and the macroeconomic analysis from public procurement. In addition, some empirical studies which investigated policy impact of green public procurement are also limited in partial equilibrium perspectives, and they did not show the integrated and macro-economic impact of public procurement. Therefore, with previous literature reviews, this study presents general equilibrium perspectives which can analyze environmental, economic, and social benefits from public procurement simultaneously. Based on the conceptual framework from the previous literature, this study will present empirical results of the impacts of green public procurement quantitatively by computable general equilibrium(CGE) model. To analyze the economic impacts of green public procurement, it is essential to represent the innovation activities and its contributions within the CGE model. For the analysis, we construct the knowledge-based social accounting matrix(SAM), which includes knowledge in factors of production and R&D investment under investment. In addition, we construct the knowledge-based CGE model to capture the innovation related activities, and its effects on the macroeconomic system. Main differences between the knowledge-based CGE model and conventional CGE model is that factors of production include knowledge, and investment includes R&D investment. Another difference is that industry-specific knowledge stock accumulated by R&D investment influences productivity of other industries through spillover effect. These features of knowledge-based CGE model enable us to understand various macro-economic effects of green public procurement(GPP) considering innovation related aspects. Although green public procurement(GPP) could have indirect and direct effects on the economy in terms of environmental, economic, and social perspectives, previous literature give us bounded information in understanding potential effects of the GPP. This is because most studies on the GPP are limited to a specific cases based on the theoretical or conceptual level, and analyzing its effect with partial equilibrium perspectives. Firstly, GPP can have environmental impacts through energy savings and reduction of greenhouse gases by reducing energy consumption with the procurement of energy efficient products by the public sectors. Each country including Korea has its own standards of energy efficiency for the products, and GPP is implemented as the government preferentially buy the products with high levels of energy efficiency. Secondly, the GPP can have economic impacts through creating and escalating the market, because the public sector take a role of lead consumer in green products and services. As a lead consumer, the public sector reduce market and technological uncertainties by specification of the demand of green technology and products. Thanks to the public sector, potential suppliers can escalate their pre-commercialization R&D and commercialization process. That is, GPP reduce the uncertainty across whole stage of production from development of new technology to diffusion of the products by specifying the information on demand for the industry, and it leads more innovation activity of suppliers and investment for the production. Therefore, this study aims to analyze the various impacts of green public procurement in environmental, and economic perspectives as discussed above. In addition, GPP’s main effects could appear in various pathways, including the environmental, economic, and social factors. Therefore, as an empirical study we will try to model those factors within the knolwedge-based CGE model.
    Keywords: South Korea, General equilibrium modeling, Impact and scenario analysis
    Date: 2016–07–04
  30. By: Sebastian Rausch; Jan Abrell
    Abstract: This paper analyzes hybrid emissions trading systems (ETS) under partitioned environmental regulation when firms’ abatement costs and future emissions are uncertain. We show that hybrid policies that introduce bounds on the price or the quantity of abatement provide a way to hedge against differences in marginal abatement costs across partitions. Price bounds are more efficient than abatement bounds due to their ability to exploit information on firms’ abatement technologies while abatement bounds can only address emissions uncertainty. We find that introducing hybrid policies in EU ETS reduces expected excess abatement costs of achieving targeted emissions reductions under EU climate policy by up to 89 percent. We also find that under partitioned regulation there is a high likelihood for hybrid policies to yield sizeable ex-post cost reductions. We complement our theoretical analysis of hybrid policies under partitioned environmental regulation with an empirical analysis of EU climate policy investigating the question to what extent introducing hybrid policies in the EU ETS could lower the costs of achieving EU's emissions reduction goals. To this end, we develop and apply a stochastic policy optimization model with equilibrium constraints for the European carbon market that is calibrated based on empirical MAC curves derived from a numerical general equilibrium model. The model incorporates two important sources of firm-level uncertainties in the ETS and non-ETS sectors that are relevant for the policy design problem of carbon mitigation: (1) uncertainty about future “no policy intervention” emissions, reflecting uncertain output, demand, or macroeconomic shocks, and (2) uncertainty about future abatement technologies. We find that hybrid ETS policies yield substantial savings in abatement costs relative to a pure quantity based (i.e., the currently existing) EU ETS policy. Under second-best conditions, i.e. when the regulator can ex-ante choose the allocation of the emissions budget across the partitions, an optimal hybrid policy reduces the expected excess costs–relative to a hypothetical, first-best state-contingent policy–by up to 56% (or up to billion $1.5 per year). A third-best hybrid policy, i.e. assuming an exogenously given split of the emissions budget, that reflects current EU climate policy is found to lower expected excess costs by up to 89% (or up to billion $12.1 per year). Overall, we find, however, that the ability of hybrid policies to reduce expected abatement costs diminishes if sectoral baseline emissions exhibit a strong positive correlation. Further, we find that hybrid policies with price bounds are more effective to reduce the abatement costs than hybrid policies with abatement bounds. Price bounds are advantageous as they can address both types of risks whereas abatement bounds can only hedge against emissions uncertainty. Our quantitative analysis suggests that hybrid policies with price bounds are highly likely to yield sizeable ex-post savings in abatement costs, depending on the correlation structure between sectoral “no intervention” emissions. If emissions are negatively (positively) correlated, the probability of ex-post costs savings is 0.67 (0.49). Hybrid polices with abatement bounds achieve ex-post cost reductions in 66 percent of cases if baseline emissions are negatively correlated, but they yield only negligible cost savings when baseline emissions are positively correlated. The reason for this is that abatement bounds fail to exploit information on firms’ abatement technology.
    Keywords: European Union, Energy and environmental policy, General equilibrium modeling
    Date: 2016–07–04
  31. By: Robert P. Gilles (Economics Group, Queen’s University Management School); Maria Laura Pesce (Università di Napoli Federico II); Dimitrios Diamantaras (Temple University)
    Abstract: This paper develops a general equilibrium framework of a continuum economy in which (non-Samuelsonian) collective goods are provided by specialised professionals as part of an endogenously emerging social division of labour. This model merges the notion of valuation equilibrium in an economy with collective goods with the model of a market economy with an endogenously emerging social division of labour. This allows for the implementation of Adam Smith’s principle of increasing returns to specialisation into the foundations for the economy’s ability to deliver collective goods. We introduce the appropriate generalised notion of valuation equilibrium in this setting and prove the first and second welfare theorems for this notion, enhancing the standard framework of an economy with (non-Samuelsonian) collective goods and multiple private goods. We conclude with an application of the theory we develop to the issue of green energy and pollution abatement, exploiting the flexibility and generality our framework offers.
    Keywords: Social division of labour; Consumer-producer; collective goods; Pareto optimality; Valuation equilibrium; Lindahl equilibrium.
    JEL: D41 D51
    Date: 2017–03–28
  32. By: Dirk Willenbockel; Claudia Ringler; Nikos Perez; Mark Rosegrant; Tingiu Zhu; Nathanial Matthews
    Abstract: There is a growing recognition that the ambitious UN Sustainable Development Goals (SDG) to end hunger, achieve food security and promote sustainable agriculture (SDG 2), to ensure universal access to water and sanitation (SDG 6), to ensure universal access to affordable, reliable, sustainable and modern energy (SDG7) and to combat climate change and its impacts (SDG 13) are linked in complex ways. The emerging literature on the energy-water-food nexus highlights the need to take account of the trade-offs and synergies among the goals arising from these linkages, but also underscores the need for further research to understand the quantitative relevance of the various channels through which measures towards the attainment of the goals affect each other. The presence of multiple conceivable pathways to the achievement of the SDGs by 2030 as well as the numerous uncertainties surrounding medium- to long-run projections for the global food system call for a scenario approach to development policy planning, and the development of plausible scenarios needs to be informed by quantitative modelling that captures the key linkages between energy, water, food and climate policy in a stylized form. Dynamic standard global computable general equilibrium (CGE) models are able to capture the input-output linkages between agricultural, food processing and energy sectors and the impacts of population and economic growth on structural change, energy and food demand as well as the impacts of policy interventions, but due to their coarse regional aggregation structure they are not suitable to take account of physical water scarcity constraints in a persuasive manner. In contrast, existing partial equilibrium (PE) multi-market models of global agriculture can incorporate hydrological constraints at detailed regional scales and support a more disaggregated representation of agricultural commodities than CGE models, but fail to take systematic account of linkages between agriculture, energy and the rest of the economy. To capture the advantages of both modelling approaches, the present study links a global dynamic multisector CGE model with a global dynamic PE multi-market model of agricultural supply, demand and trade. The linked modelling framework facilitates a quantitative analysis of the wider implications of agricultural sector scenario projections by taking systematic account of linkages between agriculture and the rest of the economy and allows a rigorous theory-grounded general equilibrium welfare analysis of shocks to agriculture. Conversely, the linked approach supports a detailed analysis of the effects of shocks that initially hit non-agricultural sectors on agricultural variables and water security. In this paper, the approach is used to assess the impact of stylised climate change mitigation scenarios on energy prices, economic growth, food security and water availability. The modeling methodology links the global computable general equilibrium (CGE) model GLOBE-Energy with IFPRI’s International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) version 3. IMPACT3 is a modular integrated assessment model, linking information from climate models, crop simulation models and water models to a global partial equilibrium multi-market model of the agriculture sector. IMPACT3 has been designed to support longer-term scenario analysis through the integration of these multidisciplinary modules to provide researchers and policymakers with a flexible tool to assess and compare the potential effects of changes in biophysical systems, socioeconomic trends, agricultural technologies, and policies. The core multimarket model simulates food supply and demand for 159 countries. Agricultural production is further disaggregated to include 320 food production units (FPUs), which are intersections of river basins and national boundaries, that is, an intersection of 154 river basins with 159 economic regions. The multimarket model simulates 62 agricultural commodity markets, covering all key food as well as key non-food crops, such as cotton. The water models in IMPACT3 include a global hydrology model (IGHM) that simulates snow accumulation and melt and rainfall-runoff processes at 0.5-degree latitude by 0.5-degree longitude resolution, a water basin supply and demand model (IWSM) that operates at the FPU level, and the IMPACT crop water allocation and stress model that estimates the impact of water shortages on crop yields, also at the FPU level. These three modules allow for an assessment of climate variability and change on water availability for the agriculture and other sectors, as well as for an assessment of changes in water demand, investment in water storage and irrigation infrastructure, and technological improvements on water and food security. In particular, the IGHM model simulates natural hydrological processes, thus estimating water availability, while the IWSM model simulates human appropriation of surface water and groundwater, considering water infrastructure capacity and policies, based on which we water stress calculations. The model can also simulate impact of changes in fertilizer prices on food supply and changes in energy prices on the demand for hydropower development and on groundwater pumping. GLOBE-Energy is a recursive-dynamic multi-region CGE model which features a detailed representation of the technical substitution possibilities in the power sector. The model is initially calibrated to the GTAP 8.1 database which represents the global economy-wide structure of production, demand and international trade at a regionally and sectorally disaggregated level for the benchmark year 2007. The model version employed in the present study distinguishes 24 commodity groups and production sectors, and 15 geographical regions. In the development of a dynamic baseline for the present study, the growth rates of labor-augmenting technical progress by region are calibrated such that the regional baseline GDP growth rates replicate the GDP growth assumed in the IMPACT baseline projections. Moreover, for agricultural commodities, the sectoral total factor productivity parameters are calibrated such that the baseline producer price paths are consistent with the corresponding aggregated IMPACT producer price projections. To ensure that the baseline projections for agricultural quantity variables generated by GLOBE are broadly in line with the corresponding aggregated IMPACT projections as well, the parameters of the household consumer demand system are calibrated to be consistent with the aggregated household income elasticities of demand for the matched food commodity groups assumed in IMPACT. The aggregate real income effects and changes in fertilier prices associated with energy-related climate change mitigation measures generated by GLOBE are then downscaled to the IMPACT regional aggregation level and passed back to IMPACT to analyse the detailed implications for agricultural variables, water and food security. The simulation analysis compares a baseline scenario using SSP2 (Shared Socio-Economic Pathway 2 – aka “middle of the road”) assumptions about population and GDP growth and no changes in fossil fuel taxes, with a stylized mitigation scenario. This mitigation scenario assumes a gradual linear phasing-in of additional taxes on the use of primary fossil fuels globally from 2016 onwards up to 2050 on top of baseline taxes such that the additional ad valorem tax wedges between producer and user prices reach 70, 50 and 30 percent for coal, crude oil and natural gas respectively by 2050. The resulting user price increases for the primary fossil fuels and refined petrol induce substitution effects towards renewable energy sources in production along with investments in more energy-efficient technologies as well as substitution effects towards less energy-intensive goods in final consumption. As a consequence, the demand for fossil fuels drops relative to the baseline and the producer prices for coal, crude oil and natural gas fall significantly, while the producer prices of refined petrol rise due to the increase in crude oil input costs. From a macroeconomic perspective, these price shifts entail terms-of-trade gains for regions that are net importers of the primary fossil fuels and corresponding terms-of-trade losses for the net importers of these fuels. Correspondingly, the aggregate real income reductions under this scenario are moderate to small for the net importing regions but more pronounced for the net exporters of primary fossil fuels. The provisional simulation results suggest only moderate indirect effects on agricultural prices and food security outcomes. While higher prices for chemical fertilizers and reduced groundwater pumping due to higher energy costs per se push crop prices up to some extent, the adverse real income effect on food demand pull crop prices in the opposite direction. The price effects are slightly more pronounced when the energy price increases are assumed to induce a significant increase in first-generation biofuel production relative to IMPACT baseline assumptions.
    Keywords: Global multi-region , Impact and scenario analysis, General equilibrium modeling
    Date: 2016–07–04
  33. By: Francesco Lamperti; Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Alessandro Sapio
    Abstract: In this paper we develop the first agent-based integrated assessment model, which offers an alternative to standard, computable general-equilibrium frameworks. The Dystopian Schumpeter meeting Keynes (DSK) model is composed of heterogeneous firms belonging to capital-good, consumption-good and energy sectors. Production and energy generation leads to greenhouse gas emissions, which affect temperature dynamics in a non-linear way. Increasing temperature triggers climate damages hitting, at the micro-level, workers' labor productivity, energy efficiency, capital stock and inventories of firms. In that, aggregate damages are emerging properties of the out-of-equilibrium interactions among heterogeneous and boundedly rational agents. We find the DSK model is able to account for a wide ensemble of micro and macro empirical regularities concerning both economic and climate dynamics. Moreover, different types of shocks have heterogeneous impact on output growth, unemployment rate, and the likelihood of economic crises. Finally, we show that the magnitude and the uncertainty associated to climate change impacts increase over time, and that climate damages are much larger than those estimated through standard integrated assessment models. Our results point to the presence of tipping points and irreversible trajectories, thereby suggesting the need of urgent policy interventions.
    Keywords: Climate Change; Agent-Based Models; Integrated Assessment; Macroeconomic Dynamics; Climate Damages.
    Date: 2017–03–04

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