nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒06‒18
28 papers chosen by
Roger Fouquet
London School of Economics

  1. Investment in renewable energy, fossil fuel prices and policy implications for Latin America and the Caribbean By Griffith-Jones, Stephany; Spratt, Stephen; Andrade, Rodrigo; Griffith-Jones, Edward
  2. Industry Evolution in Varieties of Capitalism: a Comparison of the Danish and US Wind Turbine Industries By Menzel, Max-Peter; Kammer, Johannes
  3. On-Grid Solar PV versus Diesel Electricity Generation in Sub-Saharan Africa: Economics and GHG Emissions By Saule Baurzhan; Glenn P. Jenkins
  4. Renewable Energy Sources and Investment in European Power Transmission Networks By Kaloud Tobias
  5. Highly resolved optimal renewable allocation planning in power systems under consideration of dynamic grid topology By Slednev, Viktor; Bertsch, Valentin; Ruppert, Manuel; Fichtner, Wolf
  6. Innovating incumbents and technological complementarities: How recent dynamics in the HVDC industry can inform transition theories By Allan Dahl Andersen; Jochen Markard
  7. Decoding Restricted Participation in Sequential Electricity Markets By Knaut, Andreas; Paschmann, Martin
  8. Recent Topical Research on Global, Energy, Health & Medical, and Tourism Economics, and Global Software By Chang, C-L.; McAleer, M.J.
  9. Growth, Nighttime Lights and Power Infrastructure Investment: Evidence from Angola Abstract: An increasing number of papers in the literature use satellite data on nighttime lights as a proxy for economic activities, such as GDP or GDP growth. They implicitly assume that the relationship between GDP and nighttime lights works through the demand side, and there is no constraint on the supply of electricity. This paper first points out a paradox in using this method: the countries for which the method is needed the most, i.e. the countries with poor statistical capacity, are just the countries, for which the assumption of the method is satisfied the least, i.e. the countries with a large power infrastructure deficit. Motivated by this, we collected the data on power infrastructure investment in Angola, a country with a large power infrastructure funding gap. Indeed, we find that in the case of Angola the stable relationship between GDP growth and lights growth assumed in the literature is broken. Instead,increase in lights strongly co-moved with increase in power infrastructure investment. The strong link between lights and investment enables us to develop a new method of quantitatively evaluating value-for-money for infrastructure investments, which directly estimates the cost-effectiveness of transforming investment to welfare, as measured by lights. We estimate the overall cost-effectiveness, and the cost-effectiveness of different financing methods in the case of Angola. By Qi Zhang; James Cust
  10. On the minimizers of energy forms with completely monotone kernel By Alexander Schied; Elias Strehle
  11. Riding the Energy Transition; Oil Beyond 2040 By Reda Cherif; Fuad Hasanov; Aditya Pande
  12. Volatility spillovers and causality of carbon emissions, oil and coal spot and futures for the EU and USA By Chia-Lin Chang; Michael McAleer; Guangdong Zuo
  13. Supply Flexibility in the Shale Patch: Evidence from North Dakota By Hilde C. Bjørnland; Frode Martin Nordvik; Maximilian Rohrer
  14. Macroeconomic Implications of Oil Price Fluctuations : A Regime-Switching Framework for the Euro Area By Fédéric Holm-Hadulla; Kirstin Hubrich
  15. The nexus between the oil price and its volatility in a stochastic volatility in mean model with time-varying parameters By Mehmet Balcilar; Zeynel Abidin Ozdemir
  16. The Impact of the Fracking Boom on Arab Oil Producers By Lutz Kilian
  17. Fiscal Options for Absorbing a Windfall of Natural Resource Revenues – A CGE Model of Oil Discovery in Uganda By Thomas McGregor
  18. Algeria; 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Algeria By International Monetary Fund
  19. What Drives Vertical Fiscal Interactions? Evidence from the 1980 Crude Oil Windfall Act By Fidel Perez-Sebastian; Ohad Raveh
  20. Shale and the US Economy: Three Counterfactuals By Arora, Vipin
  21. Dutch Disease Resistance: Evidence from Indonesian Firms By James Cust; Torfinn Harding; Pierre-Louis Vezina
  22. Should Developing Countries Establish Petroleum Funds? By Ragnar Torvik
  23. Las bioenergías en España. Una serie de producción, consumo y stocks entre 1860 y 2010 By Juan Infante-Amate; Iñaki Iriarte-Goñi
  24. How does urbanization affect energy and CO2 emission intensities in Vietnam? Evidence from province-level data By Nguyen Quan; Makoto Kakinaka; Koji Kotani
  25. Should pollution taxes be targeted at income redistribution? By Bas Jacobs; Frederick van der Ploeg
  26. Economics of limiting cumulative CO2 emissions By Ashwin K Seshadri
  27. Climate Policies Under Climate Model Uncertainty: Max-Min and Min-Max Regret By Armon Rezai; Frederick van der Ploeg
  28. Non-Cooperative and Cooperative Climate Policies with Anticipated Breakthrough Technology By Niko Jaakkola; Frederick van der Ploeg

  1. By: Griffith-Jones, Stephany; Spratt, Stephen; Andrade, Rodrigo; Griffith-Jones, Edward
    Abstract: This paper examines if recent sharp declines in the price of oil and other fossil fuels will discourage private investment in renewable energy, which is key for climate change mitigation. The increase in private renewables investment in the Latin America and the Caribbean (LAC) region have been driven by sharp declines in costs alongside supportive policies. The sharp fall in the price of oil and other fossil fuels since 2014 risks disrupting continued private investment in renewables if they becomes insufficiently profitable. The decline in oil and other fossil fuel prices presents an opportunity for governments to reduce subsidies to them. For countries without such large subsidies, governments could increase taxes on them. This would alleviate their negative effects on climate change.
    Date: 2017–05
  2. By: Menzel, Max-Peter (University Bayreuth); Kammer, Johannes (University Hamburg)
    Abstract: In this study, we combine Klepper’s framework on the evolution of industries with the Varieties of Capitalism approach to argue that industry evolution is mediated by institutional differences. We expect that new industries will evolve with a stronger connection to established industries in coordinated marked economies than in liberal market economies. Our assumptions are supported by the survival analysis of US and Danish wind turbine manufacturers from 1974 to 2014.
    Keywords: industry evolution; varieties of capitalism; heritage theory; wind turbine industry; institutions
    JEL: L64 O15 P51
    Date: 2017–06–09
  3. By: Saule Baurzhan (Department of Economics, Eastern Mediterranean University, Famagusta, TRNC via Mersin 10, Turkey); Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Ontario K7L 3N6, Canada on)
    Abstract: Many power utilities in sub-Saharan Africa (SSA) have inadequate generation capacity, unreliable services and high costs. They also face capital constraints that restrict them from making necessary investments needed for capacity expansion. Capacity shortages have compelled power utilities to use leased emergency power generating units, mainly oil-fired diesel generators, as a short-term solution. An economic analysis is carried that compares the economic net present value (ENPV) of fuel savings as well as greenhouse gas (GHG) savings, from investing capital in solar PV power generation plants as compared to investing the same amount of funds into diesel power plants. The results show that economic net present value is negative for solar PV plant, whereas it is a large positive value for the diesel plant. In addition, the diesel plant would be almost three times as effective in reducing GHG as the same value of investment in solar PV plant. Even with solar investment costs falling, it will take 12 to 24 years of continuous decline before solar PV will become cost-effective for SSA. The capital cost of solar PV would need to drop to US$ 1058.4 per KW to yield the same level of ENPV as the diesel plant.
    Keywords: : Solar PV, Diesel Electricity Generation; Greenhouse Gas Mitigation; Cost–Benefit Analysis; sub-Saharan Africa.
    JEL: Q42 O55
    Date: 2017
  4. By: Kaloud Tobias (Department of Economics, Vienna University of Economics and Business)
    Abstract: During the past decade, renewable energy sources have become an indispensable pillar in European electricity generation. This paper aims at examining if the increasing importance of renewables stimulates investment in European power transmission networks. The question of interest is addressed by an error correction investment model that builds on Neoclassical theory and is further augmented by recent literary findings. Under the proposed threefold estimation strategy, the share of renewables is not found to significantly influence investment spending when the full set of transmission system operators are considered. However, a slight and justified sample restriction leads to the conclusion that a rising share of renewable energy sources substantially increases investment in power transmission networks.
    Keywords: Renewables, Investment, Transmission Network, Electricity
    JEL: C33 L50 L94 Q42 Q48
    Date: 2017–06
  5. By: Slednev, Viktor; Bertsch, Valentin; Ruppert, Manuel; Fichtner, Wolf
    Abstract: The system integration of an increasing amount of electricity generation from decentralised renewable energy sources (RES-E) is a major challenge for the transition of the European power system. The feed-in profiles and the potential of RES-E vary along the geographical and temporal dimension and are also subject to technological choices and changes. To support power system planning in the context of RES-E expansion and allocation planning required for meeting RES-E targets, analyses are needed assessing where and which RES-E capacities are likely to be expanded. This requires models that are able to consider the power grid capacity and topology including their changes over time. We therefore developed a model that meets these requirements and considers the assignment of RES-E potentials to grid nodes as variable. This is a major advancement in comparison to existing approaches based on a fixed and pre-defined assignment of RES-E potentials to a node. While our model is generic and includes data for all of Europe, we demonstrate the model in the context of a case study in the Republic of Ireland. We find wind onshore to be the dominating RES-E technology from a cost-efficient perspective. Since spatial wind onshore potentials are highest in the West and North of the country, this leads to a high capacity concentration in these areas. Should policy makers wish to diversify the RES-E portfolio, we find that a diversification mainly based on bioenergy and wind offshore is achievable at a moderate cost increase. Including solar photovoltaics into the portfolio, particularly rooftop installations, however, leads to a significant cost increase but also to a more scattered capacity installation over the country.
    Keywords: optimal renewable allocation planning, dynamic grid topology, large-scale optimisation
    JEL: C61 C63 Q4 Q42 Q48
    Date: 2017–02–10
  6. By: Allan Dahl Andersen (TIK Center for Technology, Innovation and Culture, University of Oslo, Norway); Jochen Markard (Swiss Federal Institute of Technology Zurich (ETH Zurich), Switzerland)
    Abstract: It is a classic theme in the transitions literature that newcomers supporting a novel technology struggle for dominance against incumbent actors and ‘their’ established technologies. Our study challenges this picture in several aspects with the intention to improve conceptual frameworks in transition studies. We present a case study on high voltage direct current (HVDC) technology - a mature technology for electricity transmission that has remained in a niche for decades but recently gained new momentum in the course of the energy transition. This case highlights i) incumbent actors as key drivers for innovation, ii) coupled dynamics via interaction of multiple technologies, also across industry boundaries, as a central process in transition dynamics, and iii) the increasingly pervasive nature of the energy transition. We interpret our observations from the perspective of two established frameworks, technological innovation systems and the multi-level perspective, and discuss implications for conceptual refinement.
    Date: 2017–06
  7. By: Knaut, Andreas (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Paschmann, Martin (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Restricted participation in sequential markets may cause high price volatility and welfare losses. In this paper we therefore analyze the drivers of restricted participation in the German intraday auction which is a short-term electricity market with quarter-hourly products. Applying a fundamental electricity market model with 15-minute temporal resolution, we identify the lack of sub-hourly market coupling being the most relevant driver of restricted participation. We derive a proxy for price volatility and find that full market coupling may trigger quarter-hourly price volatility to decrease by a factor close to four.
    Keywords: Sequential Electricity Markets; Short-term Market Dynamics; Electricity Market Interaction; Short-term Price Formation; Restricted Market Participation; Price Volatility
    JEL: C13 C51 D44 D47 L94 Q21 Q41
    Date: 2017–06–13
  8. By: Chang, C-L.; McAleer, M.J.
    Abstract: The paper presents an overview of recent topical research on global, energy, health & medical, and tourism economics, and global software. We have interpreted “global” in the title of the Journal of Reviews on Global Economics to cover contributions that have a global impact on economics, thereby making it “global economics”. In this sense, the paper is concerned with papers on global, energy, health & medical, and tourism economics, as well as global software algorithms that have global economic impacts. The topics covered include re-opening the Silk Road to transform Chinese trade, education and skill mismatches, education policy for migrant children, code of practice and indicators for quality management of official statistics, projections of energy use and carbon emissions, multi-fuel allocation for power generation using genetic algorithms, optimal active energy loss with feeder routing and renewable energy for smart grid distribution, demand for narcotics with policy implications, access to maternal and child health services of migrant workers, computer technology to improve medical information, heritage tourism, ecotourism impacts on the economy, society and environment, taxi drivers’ cross-cultural communication problems and challenges, hybrid knowledge discovery system based on items and tags, game development platform to improve advanced programming skills, quadratic approximation of the newsvendor problem with imperfect quality, classification of workflow management systems for emails, academic search engine for personalized rankings, creative and learning processes using game-based activities, personal software process with automatic requirements traceability to support start-ups, and comparing statistical and data mining techniques for enrichment ontology with instances.
    Keywords: Global economics, energy economics, health & medical economics, tourism economics, global software
    JEL: I15 L86 O13 Q47 Z32
    Date: 2017–05–01
  9. By: Qi Zhang; James Cust
    Keywords: procurement, growth accounting, nighttime lights, investment, electricity, infrastructure, value-for-money
    JEL: Q4 O1 H4
    Date: 2016
  10. By: Alexander Schied; Elias Strehle
    Abstract: Motivated by the problem of optimal portfolio liquidation under transient price impact, we study the minimization of energy functionals with completely monotone displacement kernel under an integral constraint. The corresponding minimizers can be characterized by Fredholm integral equations of the second type with constant free term. Our main result states that minimizers are analytic and have a power series development in terms of even powers of the distance to the midpoint of the domain of definition and with nonnegative coefficients. In particular, our minimization problem is equivalent to the minimization of the energy functional under a nonnegativity constraint.
    Date: 2017–06
  11. By: Reda Cherif; Fuad Hasanov; Aditya Pande
    Abstract: Recent technological developments and past technology transitions suggest that the world could be on the verge of a profound shift in transportation technology. The return of the electric car and its adoption, like that of the motor vehicle in place of horses in early 20th century, could cut oil consumption substantially in the coming decades. Our analysis suggests that oil as the main fuel for transportation could have a much shorter life span left than commonly assumed. In the fast adoption scenario, oil prices could converge to the level of coal prices, about $15 per barrel in 2015 prices by the early 2040s. In this possible future, oil could become the new coal.
    Date: 2017–05–22
  12. By: Chia-Lin Chang (Department of Applied Economics Department of Finance National Chung Hsing University, Taiwan.); Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan And Discipline of Business Analytics University of Sydney Business School, Australia And Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain and Institute of Advanced Sciences Yokohama National University, Japan.); Guangdong Zuo (Department of Quantitative Finance National Tsing Hua University, Taiwan.)
    Abstract: Recent research shows that efforts to limit climate change should focus on reducing emissions of carbon dioxide over other greenhouse gases or air pollutants. Many countries are paying substantial attention to carbon emissions to improve air quality and public health. The largest source of carbon emissions from human activities in some countries in Europe and elsewhere is from burning fossil fuels for electricity, heat, and transportation. The price of fuel influences carbon emissions, but the price of carbon emissions can also influence the price of fuel. Owing to the importance of carbon emissions and their connection to fossil fuels, and the possibility of Granger (1980) causality in spot and futures prices, returns and volatility of carbon emissions, it is not surprising that crude oil and coal have recently become a very important research topic. For the USA, daily spot and futures prices are available for crude oil and coal, but there are no daily spot or futures prices for carbon emissions. For the EU, there are no daily spot prices for coal or carbon emissions, but there are daily futures prices for crude oil, coal and carbon emissions. For this reason, daily prices will be used to analyse Granger causality and volatility spillovers in spot and futures prices of carbon emissions, crude oil, and coal. A likelihood ratio test is developed to test the multivariate conditional volatility Diagonal BEKK model, which has valid regularity conditions and asymptotic properties, against the alternative Full BEKK model, which has valid regularity conditions and asymptotic properties under the null hypothesis of zero off-diagonal elements. Dynamic hedging strategies using optimal hedge ratios will be suggested to analyse market fluctuations in the spot and futures returns and volatility of carbon emissions, crude oil and coal prices.
    Keywords: Carbon emissions, Fossil fuels, Crude oil, Coal, Low carbon targets, Green energy, Spot and futures prices, Granger causality and volatility spillovers, Likelihood ration test, Diagonal BEKK, Full BEKK, Dynamic hedging.
    JEL: C58 L71 O13 P28 Q42
    Date: 2017–05
  13. By: Hilde C. Bjørnland (BI Norwegian Business School and Norges Bank (Central Bank of Norway)); Frode Martin Nordvik (BI Norwegian Business School and Norges Bank (Central Bank of Norway)); Maximilian Rohrer (BI Norwegian Business School)
    Abstract: We analyse if supply exibility in oil production depends on the extraction technology. In particular, we ask to what extent shale oil producers respond to price incentives by changing completion of new wells as well as oil production from completed wells. Using a novel well-level monthly production data set covering more than 15,000 crude oil wells in North Dakota, we find large differences in response between conventional and unconventional (shale) extraction technology: While shale oil wells respond significantly to spot future spreads by changing both well completion and crude oil production, conventional wells do not. Our results suggest that firms using shale oil technology are more exible in allocating output intertemporally. We interpret such output pattern of shale oil wells to be consistent with the Hotelling theory of optimal extraction.
    Keywords: Oil extraction, crude oil prices, US oil shale boom, Hotelling theory
    JEL: C33 L71 Q31 Q40
    Date: 2017–05–31
  14. By: Fédéric Holm-Hadulla; Kirstin Hubrich
    Abstract: We investigate whether the response of the macro-economy to oil price shocks undergoes episodic changes. Employing a regime-switching vector autoregressive model we identify two regimes that are characterized by qualitatively different patterns in economic activity and inflation following oil price shocks in the euro area. In the 'normal regime', oil price shocks trigger only limited and short-lived adjustments in these variables. In the 'adverse regime', by contrast, oil price shocks are followed by sizeable and sustained macroeconomic fluctuations, with inflation and economic activity moving in the same direction as the oil price. The responses of inflation expectations and wage growth point to second-round effects as a potential driver of the dynamics characterizing the adverse regime. The systematic response of monetary policy works against such second-round effects in the 'adverse regime' but is insufficient to fully offset them. The model also delivers (conditional) probabilities for being (staying) in either regime, which may help interpret oil price fluctuations -- and inform deliberations on the adequate policy response -- in real-time.
    Keywords: Regime Switching models ; Inflation ; Inflation expectations ; Oil prices ; Time-varying transition probabilities
    JEL: E31 E52 C32
    Date: 2017–06
  15. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University); Zeynel Abidin Ozdemir (Gazi University, Ankara, Turkey)
    Abstract: This study investigates the dynamic nexus between oil price and its volatility for oil spot and futures markets by means of stochastic volatility in mean model with time-varying parameters in the conditional mean. The study finds substantial time-variation about the impact of oil price volatility on oil price return in both spot and 1-month to 10-month futures markets. The oil price return volatility has positive impact on oil price return series over the sample period form the mid-1980s to 2017s except for four very short time periods, which correspond to collapse of OPEC in 1986, invasion of Kuwait in 1990/91, Asian crisis in 1997/2000 and the Global Financial Crisis in 2008. While the oil price return volatility has positive impact on oil prices, it has limited negative impact on oil prices during periods corresponding to these historical events. Moreover, the findings from this study point out to the existence of a negative and small effect of the lagged oil return series on its volatility for both the spot and futures markets.
    Keywords: Oil price; Oil price uncertainty; Spot and futures markets; Nonlinearity; Stochastic volatility; State–space.
    JEL: C22 E32
    Date: 2017
  16. By: Lutz Kilian (Department of Economics, University of Michigan)
    Abstract: This paper makes four contributions. First, it investigates the extent to which the U.S. fracking boom has caused Arab oil exports to decline since late 2008. Second, the paper quantifies for the first time by how much the U.S. fracking boom has lowered the global price of oil. Using a novel econometric methodology, it is shown that in mid-2014, for example, the Brent price of crude oil was lower by $10 than it would have been in the absence of the fracking boom. Third, the paper provides evidence that the decline in Saudi net foreign assets between mid-2014 and August 2015 would have been reduced by 27% in the absence of the fracking boom. Finally, the paper discusses the policy choices faced by Saudi Arabia and other Arab oil producers.
    Date: 2017–06–22
  17. By: Thomas McGregor
    Abstract: The current debate about the optimal management of foreign exchange windfalls is highly relevant to low income countries such as Uganda, having recently discovered vast hydrocarbon reserves. Using a Computable General Equilibrium (CGE) model for Uganda this paper analyses three broad policy options for the use of oil revenues, increasing i) private consumption, ii) private investment, and iii) public infrastructure investment. The model allows for learning-by-doing in tradables, increasing returns to public infrastructure and the use of an Oil Fund held abroad. The fund allows government to smooth expenditure programs over the medium-term. When public infrastructure is biased towards tradables, a smooth expenditure profile yields higher economic growth than high expenditure skewed to the present. The government’s discount rate plays a key role in determining the optimal use and management of oil revenues. More impatient governments will be inclined to increase current expenditure at the cost of future generations’ welfare and negative distributional implications for poor households. Lower discount rates align the political incentives with respect to inter-temporal welfare and the long-run growth path of the economy.
    Keywords: Fiscal Policy, natural resources, economic development, Dutch-disease, CGE model, Uganda
    JEL: E62 O11 O13 O23 Q32
    Date: 2017
  18. By: International Monetary Fund
    Abstract: Algeria continues to deal with the implications of lower oil prices for an economy that is highly dependent on hydrocarbons. Lower hydrocarbon revenues have led to large current account and fiscal deficits, a steep decline in international reserves (although they remain high), and a near depletion of fiscal savings in the oil stabilization fund. After a timid start, reform momentum is building. Last year, the authorities achieved a sizeable reduction in the fiscal deficit. They have adopted, for the first time, a medium-term budget framework that envisages ambitious fiscal consolidation. They have implemented some structural reforms and are working on a long-term strategy to reshape the country’s growth model. The central bank is adapting to changing liquidity conditions by reintroducing refinancing instruments.
    Date: 2017–06–01
  19. By: Fidel Perez-Sebastian; Ohad Raveh
    Abstract: In economies with multi-level governments, why would a change in the scal rule of a gov-ernment in one level lead to a scal response by a government in a di¤erent level? Previous explanations focus on the standard common-pool problem. In this paper we study a new potential channel: complementarities between the public goods supplied by the two governments. First, we illustrate its potential key role in determining the sign of the vertical reaction through a standard model of horizontal tax competition with vertical scal interactions. Second, we propose a novel strategy for identifying it, by considering an empirical design that con nes the common-pool channel to speci c locations. We implement this design through a quasi-natural experiment: the 1980 U.S. Crude Oil Windfall Act, which increased federal tax collections from sale of crude oil, thereby a¤ecting the tax base of oil rich states speci cally. This latter feature enables attributing the vertical scal reactions of the remaining states to the complementarity channel. Following this strategy, via a di¤erence-in-di¤erences approach, we decompose the sources of the vertical scal reactions arising from this federal tax change and nd that those attributed to the novel channel: (i) point at complementarity between state and federal public goods; (ii) account for approximately 40% of the overall vertical scal response; (iii) are manifested primarily via corporate taxation.
    Keywords: Federalism, vertical fiscal reactions, common-pool problem, complimentarities, natural resources
    JEL: H77 H71 Q32
    Date: 2017
  20. By: Arora, Vipin
    Abstract: I use three different—and simple—counterfactuals to approximate the real GDP and employment effects of US oil and gas production from shale over the 2011 to 2015 period. Real GDP growth would have been 0.7 to 0.2 percentage points lower on average each year over that period without such increases; employment growth 0.5 to 0.1 percentage points lower.
    Keywords: economic activity; shale; oil and gas; counterfactual
    JEL: E00 Q43
    Date: 2017–06–12
  21. By: James Cust; Torfinn Harding; Pierre-Louis Vezina
    Abstract: Oil and gas extraction may lead to the Dutch disease, i.e. the crowding ot of the manufacturing sector due to rising wages when labor is drawn to the expanding extraction and services sectors. In this paper we exploit the fact that oil and gas discoveries contain an element of chance as well as oil price fluctuations to capture random variation in oil and gas windfalls across Indonesia and identify their effects on manufacturing firms. We find that oil and gas windfalls cause wage growth but that the firm exit rate is unaffected. Firms’ output and labor productivity increase along with wages suggesting where firms are able to respond to booming local demand, and raise productivity in response to upward wage pressures, they can overcome the crowding-out effects from resource windfalls.
    Keywords: Dutch disease, firm level, Indonesia, manufacturing firms, oil and gas
    JEL: O13 O14 Q32
    Date: 2017
  22. By: Ragnar Torvik
    Abstract: Many natural-resource-abundant countries have established petroleum funds as part of their strategy to manage their resource wealth. This paper examines reasons that such funds may be established, discusses how these funds are organized, and draws some policy lessons. The paper then develops a theory of how petroleum funds may affect the economic and political equilibrium of an economy, and how this depends on the initial institutions. A challenge with petroleum funds is that they may produce economic and political incentives that undermine their potential benefits. An alternative to establishing petroleum funds is to use revenues to invest domestically in sectors such as infrastructure, education, and health. Such investments have the potential to produce a better economic, as well as institutional, development. This is particularly the case if the initial institutions are weak.
    Keywords: Fiscal policy, Extractive industries, Resource curse, Sovereign wealth fund
    Date: 2017–04
  23. By: Juan Infante-Amate; Iñaki Iriarte-Goñi
    Abstract: This paper presents the methodological and statistical basis of a new data series of Spain's bioenergy consumption between 1860 and 2010. We have estimated the primary production, appropriation, and the type of final use of all woody biomass, which represents the most consumed bioenergy. The series distinguishes the production source, including forests, olives, vineyards, and the rest of woody fruit orchards, as well as regional disaggregation at partido judicial level (425 in Spain) between 1860 and 1960. The bioenergy consumption series is represented both in primary (by energy source) and final (by energy carrier) energy. Our findings point out that i) consumption was higher than traditionally assumed in the previous literature; ii) there are four major phases in the period, including a slow decline from 1860 to 1914, a return to firewood with a small increase until 1955, a rapid decline from then to 1980, and finally, a return to bioenergies (with modern uses) from 1980 to the present; iii) there are strong regional disparities in firewood consumption between 1860 and 1960, ranging from 1 to 5 kg hab-1 día-1; iv) in the supply of bioenergies, geography also explains the type of product consumed: in Mediterranean provinces, woody crop-based consumption gained prominence, as they expanded over traditional forest areas; and v) stock of woody biomass has multiplied unprecedently since the mid-20th Century due to the abandonment of forestlands, the introduction of fast-growing species, and the optimal geographical allocation.
    Keywords: Energy Transition, Bioenergies, Firewood, Forestry History, Environmental History, Carbon Stocks
    JEL: N50 O13 Q42 Q57
    Date: 2017–06
  24. By: Nguyen Quan (The 1st authorã ¯Ministry of Energy, Vietnam); Makoto Kakinaka (Graduate School for International Development and Cooperation, Hiroshima University); Koji Kotani (School of Economics and Management, Kochi University of Technology)
    Abstract: Given the argument that urbanization is closely related to the economic growth with improved the quality of life, the role of urbanization on energy consumption and pollution emission has received attention from regulators and researchers. Recently, Vietnam, as one of the rapid growth emerging countries, has been undergoing a massive urbanization with massive increase in energy consumption and pollution. The purpose of this study is to discuss how urbanization affects energy and CO2 emission intensities in Vietnam by using the province-level data over the period from 2010 to 2013. Our empirical analysis presents clear evidences supportive of the regional disparity of the effect of urbanization. For provinces with the low income level, urbanization would intensify energy and CO2 emission intensities. In contrast, for provinces with the high income level, urbanization would mitigate energy and CO2 emission intensities. This study also discusses related issues for three sectors of the Vietnamese economy: agricultural, industrial, and service sectors.
    Keywords: urbanization, income level, energy and CO2 emission intensities, Vietnam economy
    Date: 2017–06
  25. By: Bas Jacobs; Frederick van der Ploeg
    Abstract: This paper analyses optimal corrective taxation and optimal income redistribution. The Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, optimal pollution taxes should be set below the Pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods if preferences for commodities are not of the Gorman (1961) polar form. However, optimal pollution taxes should follow the first-best rule for the Pigouvian corrective tax if preferences for commodities are of the Gorman polar form even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods. The often-used quasi-linear, CES and Stone-Geary utility functions all belong to the Gorman polar class. If pollution taxes are not optimized, Pareto-improving green tax reforms exist that move the pollution tax closer to the Pigouvian tax if preferences are Gorman polar. Simulations demonstrate that optimal corrective taxes should be Pigouvian if the demand for polluting goods is derived from a LES demand system, but optimal corrective taxes deviate from the Pigouvian taxes if demand for polluting goods demand is derived from a PIGLOG demand system.
    Keywords: redistributive taxation, corrective pollution taxation, Gorman polar form, Stone-Geary preferences, PIGLOG preferences, green tax reform
    JEL: H21 H23 Q54
    Date: 2017
  26. By: Ashwin K Seshadri
    Abstract: Global warming from carbon dioxide (CO2) is known to depend on cumulative CO2 emissions. We introduce a model of global expenditures on limiting cumulative CO2 emissions, taking into account effects of decarbonization and rising global income and making an approximation to the marginal abatement costs (MAC) of CO2. Discounted mitigation expenditures are shown to be a convex function of cumulative CO2 emissions. We also consider minimum-expenditure solutions for meeting cumulative emissions goals, using a regularized variational method yielding an initial value problem in the integrated decarbonization rate. A quasi-stationary solution to this problem can be obtained for a special case, yielding decarbonization rate that is proportional to annual CO2 emissions. Minimum-expenditure trajectories in scenarios where CO2 emissions decrease must begin with rapid decarbonization at rate decreasing with time. Due to the shape of global MAC the fraction of global income spent on CO2 mitigation ("burden") generally increases with time, as cheaper avenues for mitigation are exhausted. Therefore failure to rapidly decarbonize early on reduces expenditures by a small fraction (on the order of 0.01 %) of income in the present, but leads to much higher burden to future generations (on the order of 1 % of income).
    Date: 2017–06
  27. By: Armon Rezai; Frederick van der Ploeg
    Abstract: Temperature responses and optimal climate policies depend crucially on the choice of a particular climate model. To illustrate, the temperature responses to given emission reduction paths implied by the climate modules of the well-known integrated assessments models DICE, FUND and PAGE are described and compared. A dummy temperature module based on President Trump’s climate sceptic view is added. Using a simple growth model of the global economy, the sensitivity of the optimal carbon price, renewable energy subsidy and energy transition to each of these climate models is discussed. The paper then derives max-min, max-max and min-max regret policies to deal with this particular form of climate uncertainty and with climate scepticism. The max-min or min-max regret climate policies rely on a non-sceptic view of global warming and lead to a substantial and moderate amount of caution, respectively. The max-max leads to no climate policies in line with the view of climate sceptics.
    Keywords: carbon price, renewable energy subsidy, temperature models, climate model uncertainty, climate sceptics, max-min, max-max, min-max regret
    JEL: H21 Q51 Q54
    Date: 2017
  28. By: Niko Jaakkola; Frederick van der Ploeg
    Abstract: Global warming can be curbed by pricing carbon emissions and thus substituting fossil fuel with renewable energy consumption. Breakthrough technologies (e.g., fusion energy) can reduce the cost of such policies. However, the chance of such a technology coming to market depends on investment. We model breakthroughs as an irreversible tipping point in a multi-country world, with different degrees of international cooperation. We show that international spill-over effects of R&D in carbon-free technologies lead to double free-riding, strategic over-pollution and underinvestment in green R&D, thus making climate change mitigation more difficult. We also show how the demand structure determines whether carbon pricing and R&D policies are substitutes or complements.
    Keywords: global warming, carbon pricing, renewable R&D, tipping point, international cooperation, non-cooperative policies, feedback Nash equilibrium
    JEL: D2 D90 H23 Q35 Q38 Q54 Q58
    Date: 2017

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