nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒07‒23
twenty-one papers chosen by
Roger Fouquet
London School of Economics

  1. A Swing-Contract Market Design for Flexible Service Provision in Electric Power Systems By Li, Wanning; Tesfatsion, Leigh
  2. Spatial effects in the bid price setting strategies of the wholesale electricity markets: The case of Colombia By John J. García; Jesús López-Rodríguez; Jhonny Moncada-Mesa
  3. One Global Map but Different Worlds: Worldwide Survey of Human Access to Basic Utilities By Mihai, Florin-Constantin
  4. Demand-driven technical change and productivity growth: Evidence from the US Energy Policy Act By Giammario Impullitti; Richard Kneller; Danny McGowan
  5. Strukturwandel überzeichnet Erfolge der Energieeffizienz By Bardt, Hubertus
  6. OPEC News Announcement Effect on Volatility Jumps in the Crude Oil Market By Rangan Gupta; Chi Keung Marco Lau; Seong-Min Yoon
  7. Russian Federation; 2017 Article IV Consultation-Press Release; Staff Report By International Monetary Fund
  8. How Does Monetary Policy Affect Economic Vulnerability to Oil Price Shock as against US Economy Shock? By Razmi, Fatemeh; M., Azali; Chin, Lee; Habibullah, Muzafar Shah
  9. Nonlinear and asymmetric pricing behaviour in the Spanish gasoline market By Torrado, María; Escribano Sáez, Álvaro
  10. Environmental impact assessment for climate change policy with the simulation-based integrated assessment model E3ME-FTT-GENIE By J-F Mercure; H. Pollitt; N. R. Edwards; P. B. Holden; U. Chewpreecha; P. Salas; A. Lam; F. Knobloch; J. Vinuales
  11. Seychelles; Climate Change Policy Assessment By International Monetary Fund
  12. Building Climate Coalitions on Preferential Free Trade Agreements By Thomas Kuhn; Radomir Pestow; Anja Zenker
  13. Towards a comprehensive approach to climate policy, sustainable infrastructure, and finance By Bak, Céline; Bhattacharya, Amar; Edenhofer, Ottmar; Knopf, Brigitte
  14. The Rising Cost of Ambient Air Pollution thus far in the 21st Century: Results from the BRIICS and the OECD Countries By Rana Roy; Nils Axel Braathen
  15. Firm Risk and Disclosures about Dispersion in Asset Values: By Badia, Marc; Barth, Mary E.; Duro, Miguel; Ormazabal, Gaizka
  16. Central African Economic and Monetary Community (CEMAC); Staff Report on the Common Policies in Support of Member Countries Reform Programs By International Monetary Fund
  17. New technologies create opportunities By Sally Murray
  18. TTIP and the Environmental Kuznets Curve By Pascalau, Razvan; Qirjo, Dhimitri
  19. Innovation policy & labour productivity growth: Education, research & development, government effectiveness and business policy By Al Raee, Mueid; Ritzen, Jo; Crombrugghe, Denis de
  20. Two scenarios for carbon capture and storage in Vietnam By Minh Ha-Duong; Hoang Anh Nguyen Trinh
  21. Even the Representative Agent Must Die: Using Demographics to Inform Long-Term Social Discount Rates By Eli P. Fenichel; Matthew J. Kotchen; Ethan T. Addicott

  1. By: Li, Wanning; Tesfatsion, Leigh
    Abstract: The need for flexible service provision in electric power systems has dramatically increased due to the growing penetration of variable energy resources, as has the need to ensure fair access and compensation for this provision. A swing contract (SC) facilitates flexible service provision because it permits multiple service attributes to be offered together in bundled form with each attribute expressed as a range of possible values rather than as a single point value. This paper discusses a new SC Market Design for electric power systems that permits SCs to be offered by any dispatchable resource. An analytical optimization formulation is developed for the clearing of an SC day-ahead market that can be implemented using any standard mixed integer linear programming (MILP) solver. The practical feasibility of the optimization formulation is demonstrated by means of a numerical example.
    Date: 2017–07–02
  2. By: John J. García; Jesús López-Rodríguez; Jhonny Moncada-Mesa
    Abstract: Weather conditions in Colombia vary greatly throughout the territory and therefore the location of electricity generating plants plays a key role in their bid pricing strategies. To account for these location-specific pricing strategies this paper estimates a Spatial Durbin Model (SDM) with monthly data gathered from the 17th largest hydraulic electricity generating plants of Colombia on bid prices, generation, energy inputs and positive reconciliation over the period January 2005-August 2015 and controlling also for the system marginal prices and the economy cycle. The paper reports three main results. First, firms ? bid prices are negatively affected by the energy inputs of the rivals, second they are unaffected by positive reconciliation payments to the rivals and third they are negatively affected by the generation amounts of the rivals. One potential policy recommendation of these results is the need to implement balancing markets to signal more efficiently the pricing strategies in these markets.
    Keywords: Bid Price, wholesale electricity market, Spatial Durbin, Colombia
    JEL: C23 D43 L25
    Date: 2017–03–03
  3. By: Mihai, Florin-Constantin
    Abstract: The paper aims to reveal one integrated global map which points out the major geographical inequalities in providing basic utilities across the countries using multivariate analysis and thematic cartography. Sixteen indicators with global coverage were selected taking into account the waste collection services, sanitation facilities, drinking water sources, energy, electricity, habitat and demographic conditions. Several data are broken down for the total, urban and rural population in order to outline the rural-urban disparities between and within countries. A special focus is given to waste collection coverage, in order to compute a comprehensive global assessment of this key indicator of public health, which is one of the poorest monitored basic utility. The world countries were divided into 10 classes according to the hierarchical cluster analysis. Each class has particular features outlining the gaps between high, middle and low-income countries with direct impact on quality of life, public health, and environment.
    Keywords: drinking water, sanitation, waste wanagement , energy, utilities, public policy; pollution; environment; SDGs; human ecology; global inequalities
    JEL: O17 O18 Q40 Q5 Q50 Q53 Q56 R53 Z13 Z18
    Date: 2017
  4. By: Giammario Impullitti; Richard Kneller; Danny McGowan
    Abstract: We study how demand shocks affect productivity by provoking technical change. Our model shows that increasing demand leads to technical change and productivity improvements through a direct market size effect and an indirect competition effect. We test the predictions using a natural experiment in the US corn industry where changes to national energy policy created exogenous increases in demand. Estimates show that the increase in demand caused technical change as corn producers adopted new technologies which in turn raised productivity by 5.7% per annum in the five years after the policy change. Although both channels are found to motivate technical change, the economic magnitude of the direct effect substantially outweighs the indirect effect.
    Keywords: demand, market size, technical change, productivity. JEL Codes: D22, D24, L16, Q11.
    Date: 2017
  5. By: Bardt, Hubertus
    Abstract: Der sparsame und effiziente Einsatz von Energie ist nicht nur unter wirtschaftlichen Gesichtspunkten notwendig, sondern auch Klimaschutzgründen wichtig. Die Senkung des Energieverbrauchs gehörte damit auch zu den Zielen der Energiewende, da mit einer geringeren Energienachfrage schneller höhere Anteile emissionsfreier Energie aufgebaut werden können.
    Date: 2017
  6. By: Rangan Gupta (Department of Economics, University of Pretoria, South Africa); Chi Keung Marco Lau (Newcastle Business School, Northumbria University, Newcastle, UK); Seong-Min Yoon (Department of Economics, Pusan National University, Busan, Korea)
    Abstract: This paper uses a nonparametric quantile-based methodology to analyse the predictive ability of OPEC meeting dates and production announcements on (Brent Crude and West Texas Intermediate) oil futures market volatility jumps. We found a nonlinear relationship between oil futures volatility jumps and OPEC-based predictors; hence, linear Granger-causality tests are misspecified and the linear model results of non-predictability are unreliable. Results of the quantile-causality test show that OPEC variables’ impact on oil futures markets is restricted to Brent Crude futures, with no effect observed for the WTI market. Specifically, OPEC production announcements and meeting dates predict only lower quantiles of the conditional distribution of Brent futures market volatility jumps.
    Keywords: Oil markets, Volatility jumps, OPEC announcements
    JEL: C22 C58 G14 Q41
    Date: 2017–07
  7. By: International Monetary Fund
    Abstract: After two years of recession, the economy is recovering due to higher oil prices and improved sentiment, amid tight fiscal and monetary policies. Medium-term prospects are nonetheless subdued given the expected stability of oil prices over the forecasting period and a structurally weak economy. Structural reforms over the past year consisted of a high profile partial privatization and other small measures.
  8. By: Razmi, Fatemeh; M., Azali; Chin, Lee; Habibullah, Muzafar Shah
    Abstract: This paper investigates the role of the monetary policy in protecting the economy against the external shocks of US output and oil price during the 2007-2009 fnancial crisis. It also considers economic vulnerability caused by these external shocks after the crisis abated. The application of the structural vector auto regression model using monthly data from 2002:M1 to 2013:M4 for Indonesia, Malaysia, and Thailand shows that poor influence of monetary policies on monetary policy transmission channels (namely, interest rate, exchange rate, domestic credit, and stock price) in the pre-crisis period could not shield these economies from shocks of oil price and US output. The results of post-crisis period indicate a signifcant increase in the positive impact of monetary policy on channels of monetary transmission channels compared to the pre-crisis period. However, these economies continue to remain vulnerable to oil price shocks.
    Keywords: Monetary Transmission, Global Financial Crisis, Monetary Policy, Domestic Credit, Stock Price, Exchange Rate, Interest Rate, Oil Price Shock, US Economy
    JEL: E00 E4 E44 E49 Z0
    Date: 2017
  9. By: Torrado, María; Escribano Sáez, Álvaro
    Abstract: Over the last decades a transition from a state-own monopoly to a private business took placein the Spanish fuel sector. To figure out whether downstream prices react differently toupstream price increases than to price decreases, alternative dynamic nonlinear andasymmetric error correction models are applied to weekly price data. This paper analyse theexistence of price asymmetries in the fuel market in Spain during the 2011-2016 period. Incomparison with traditional asymmetric price theory literature, this paper introduces a newdouble threshold error correction (ECM) model (DT-ECM) and new double logistic ECMmodels and compares them with more common linear ECM, time varying parameter models(TV-ECM), threshold autoregressive models (T-ECM), smooth transition autoregressive(STAR) models and nonlinear error correction (Logistic-ECM) and double threshold Logistic(DT-Logistic ECM). The nonlinear and asymmetric results found show that sophisticatedbivariate long-run asymmetries are present in the prices of the fuel sector and that those pricereactions depend on whether the oil price increases or decreases, on the stage of theproduction, the distribution chain as well as on the period considered.
    Keywords: Rockets and Feathers; Nonlinear Error Correction Models; Logistic-STAR Models; Double-Threshold-ECM models; Threshold-ECM models; Gasoline Price Asymmetries
    JEL: L71 L13 D43 C52 C24 B23
    Date: 2017–07–01
  10. By: J-F Mercure; H. Pollitt; N. R. Edwards; P. B. Holden; U. Chewpreecha; P. Salas; A. Lam; F. Knobloch; J. Vinuales
    Abstract: A high degree of consensus exists in the climate sciences over the role that human interference with the atmosphere is playing in changing the climate. Following the Paris Agreement, a similar consensus exists in the policy community over the urgency of policy solutions to the climate problem. The context for climate policy is thus moving from agenda setting, which has now been established, to impact assessment, in which we identify policy pathways to implement the Paris Agreement. Most integrated assessment models currently used to address the economic and technical feasibility of avoiding climate change are based purely on engineering with a normative systems optimisation philosophy, and are thus unsuitable to assess the socio-economic impacts of realistic baskets of climate policies. Here, we introduce a fully descriptive simulation-based integrated assessment model designed specifically to assess policies, formed by the combination of (1) a highly disaggregated macro-econometric simulation of the global economy based on time series regressions (E3ME), (2) a family of bottom-up evolutionary simulations of technology diffusion based on cross-sectional discrete choice models (FTT), and (3) a carbon cycle and atmosphere circulation model of intermediate complexity (GENIE-1). We use this combined model to create a detailed global and sectoral policy map and scenario that achieves the goals of the Paris Agreement with 80% probability of not exceeding 2{\deg}C of global warming. We propose a blueprint for a new role for integrated assessment models in this upcoming policy assessment context.
    Date: 2017–07
  11. By: International Monetary Fund
    Abstract: Seychelles has put climate change at the center of its sustainable development strategy, more purposefully than most other small states. Its Nationally Determined Contribution (NDC) submission to the Paris Agreement outlined a balanced mitigation and adaptation strategy, accompanied by costed investment plans.
    Keywords: Sub-Saharan Africa;Seychelles;
    Date: 2017–06–20
  12. By: Thomas Kuhn (Department of Economics, Chemnitz University of Technology); Radomir Pestow; Anja Zenker (Department of Economics, Chemnitz University of Technology)
    Abstract: In this paper, we discuss the endogenous formation of climate coalitions in the tradition of the issue-linkage literature. In particular, we propose a preferential free trade agreement on which a climate coalition should be built. The basic idea is that the benefits of free trade provide strong incentives for free riders to join the coalition. As a framework, a multi-stage strategic trade model is used in which a country may discourage greenhouse gas emissions by setting an emissions cap effective on a permit market. In addition, a discriminatory import tariff is imposed on dirty goods. However, at the heart of our approach are the trade privileges granted to coalition members shifting the terms of trade favourably without prodiving incentives towards eco-dumping. As a main result, we find that trade liberalisation is much more effective in building climate coalitions than a single-issue environmental agreement. The parametrical simulation of the model in particular shows that participation in joint emission reduction is higher, consumption patterns are more environmentally friendly, and coalitional welfare is improved. As a policy implication, negotiations on climate treaties and free trade arrangements should be integrated.
    Keywords: Climate Change, International Environmental Agreements, Free Trade, Issue Linkage, Tradable Permits, Strategic Trade Policy
    JEL: Q54 Q56 F18 F15 Q58
    Date: 2017–07
  13. By: Bak, Céline; Bhattacharya, Amar; Edenhofer, Ottmar; Knopf, Brigitte
    Abstract: The authors propose a policy package of low-carbon growth stimulation through a steep increase in sustainable infrastructure, mobilizing sustainable finance, and adoption of carbon pricing to simultaneously achieve the objectives of the Paris Agreement and the Sustainable Development Goals.
    Keywords: Paris Agreement,climate change,infrastructure,carbon pricing,green finance
    JEL: D62 E62 H21 H22
    Date: 2017
  14. By: Rana Roy; Nils Axel Braathen
    Abstract: This paper presents updated results for the cost of ambient air pollution in 41 countries: the 6 major emerging economies known as the BRIICS – Brazil, Russia, India, Indonesia, China and South Africa – and the 35 member-countries of the OECD. It draws on the epidemiological evidence base assembled in the Global Burden of Disease Study 2015, in order to detail results for mortalities from ambient air pollution (AAP) – ambient particulate matter pollution (APMP) and ambient ozone pollution (AOP) – in each of these 41 countries, at successive five-year intervals from 2000 to 2015.
    Keywords: Air pollution, Cost-Benefit Analysis, Mortality, Value of Statistical Life
    JEL: D61 Q51 Q53
    Date: 2017–07–19
  15. By: Badia, Marc; Barth, Mary E.; Duro, Miguel; Ormazabal, Gaizka
    Abstract: This study examines whether mandated disclosure about the dispersion of the value of oil and gas (O&G) reserves provides information about firm risk. Based on a sample of Canadian O&G firms between 2004 and 2011, we find that the difference between the 10th and 50th percentiles of O&G reserves, which is a measure of dispersion of the reserves distribution, is positively associated with future total and idiosyncratic equity return volatility, systematic risk, and credit risk. We also find that disclosure of increases in reserves dispersion is associated with weaker stock price reactions to increases in reserve levels and with increases in bid-ask spreads, both of which indicate the disclosures convey information about risk associated with the reserves. Additional tests reveal it is unlikely that our findings are attributable to managerial opportunism in estimating reserves. Taken together, our study provides evidence that disclosures relating to the dispersion of non-financial asset values can provide information relevant to assessing firm risk.
    Date: 2017–07
  16. By: International Monetary Fund
    Abstract: The sharp decline in oil prices has profoundly impaired the region’s external and fiscal balances. Oil export proceeds and budget oil revenues have plummeted between 2014 and 2016. The oil revenue shock and accommodative fiscal policy by member countries supported by expansionary regional monetary policies contributed to a fall in international reserves to a near critical point, despite initial spending cuts by some member countries. As a result of widening fiscal deficits and accommodative monetary policy, the current account deficit also widened substantially. International reserves reached the equivalent of 2.3 months of imports in December 2016.
  17. By: Sally Murray
    Abstract: This paper argues that new technologies—for communication, such as mobile phones and the internet, but also for manufacturing, agriculture, energy, and transport—have the potential to bridge many of the productivity gaps between sub-Saharan Africa and more advanced developing and developed countries. Technology can help to overcome distances between producers and consumers, knowledge and skills gaps, and energy shortfalls, and can bring down the costs of living to make wages competitive. However, new technologies will not deliver these gains unaided: supportive policies are required to create an environment where these new technologies can deliver on their potential.
    Date: 2017
  18. By: Pascalau, Razvan; Qirjo, Dhimitri
    Abstract: This paper uses data on emissions per capita of ten air pollutants and municipal waste to investigate the potential impact of the Transatlantic Trade and Investment Partnership (TTIP) on the empirical validity of the Environmental Kuznets Curve (EKC). Using a dataset of the twenty-eight EU members and of the U.S. over a twenty-five year period, the results in this paper provide robust and statistically significant evidence consistent with the EKC argument for CO2, CH4, and HFCs/PFCs/SF6, respectively. Further, the paper finds a monotonically increasing relationship between income per capita and emissions per capita in the cases of GHGs, SF6, and NO2, respectively. In addition, this paper finds that the EKC’s turning point values of each pollutant are sensitive to the econometric approach and/or to the employed control variables. Finally, the study reports statistically significant evidence suggesting a U-shaped relationship between emissions per capita of SO2 or SOx and income per capita.
    Keywords: Free Trade; Environmental Kuznets Curve; TTIP.
    JEL: F18 F53 Q56
    Date: 2017–07–14
  19. By: Al Raee, Mueid (UNU-MERIT, and Maastricht University); Ritzen, Jo (UNU-MERIT, and Maastricht University); Crombrugghe, Denis de (School of Business and Economics, Maastricht University)
    Abstract: This paper examines the relationship between labour productivity growth in non-traditional sectors and "innovation policy" for a cross-section of countries. Innovation policy is characterised by investments in tertiary education and research and development as a percentage of Gross Domestic Product (GDP), the freedom in the business environment, as well as overall government effectiveness. Our results confirm the economic convergence between richer and poorer countries. We could show a significant positive effect of the interaction between government effectiveness and government expenditures in tertiary education as a percent of GDP on labour productivity growth in non-traditional sectors. Also, for developing countries, a positive and significant relationship between the growth variable and effective research and development expenditures was observed. We could not uncover a relationship between other innovation policies and labour productivity growth. Non-traditional sector labour productivity growth in the oil-rich Arabian Gulf countries was observed to be consistently slower than Western countries. Higher oil prices appear to crowd out innovation in oil-rich countries while stimulating innovation in oil-importing countries.
    Keywords: Innovation policy, labour productivity growth, technological change, government effectiveness, developing countries, Arabian Gulf countries.
    JEL: O38 O43 O47
    Date: 2017–04–04
  20. By: Minh Ha-Duong (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Hoang Anh Nguyen Trinh (CleanED - Clean Energy and Sustainable Development Lab - USTH - University of sciences and technologies of hanoi)
    Abstract: Vietnam plans to develop dozens of new coal-fired power generation units over the next 20 years. In order to reduce emissions, it may appear necessary to dispose of these plants' CO2 by burying it in deep underground geological formations instead of releasing it into the atmosphere, using Carbon Capture and Storage (CCS) technology. We show that CCS has a technical potential in Vietnam. To discuss under which economics conditions this potential could actualize, we examine two scenarios for 2050. In the first scenario, CO2 is used in Enhanced Oil Recovery (EOR) only. The second scenario considers CCS deployment in coal-based power plants, on top of using it for EOR. In both scenarios, a few gas-fired CCS power plants are build, reaching 1GW in 2030, supported by Enhanced Oil Recovery and international carbon finance. The decision point where the two scenarios diverge is in 2030. A scenario to switch all currently existing or planned power plants to low-carbon by 2050 is to retrofit 3.2 GW of coal-fired capacity and install 1.2 GW of gas-fired capacity with CCS every year, starting in 2035 for 15 years. Capture readiness would lower the costs of using CCS in Vietnam, but is not mandatory today.
    Keywords: vietnam, energy, scenarios, carbon capture and storage
    Date: 2017–05–24
  21. By: Eli P. Fenichel; Matthew J. Kotchen; Ethan T. Addicott
    Abstract: We develop a demographically-based approach for estimating the utility discount rate (UDR) portion of the Ramsey rule. We show how age-specific mortality rates and life expectancies imply a natural UDR for individuals at each age in a population, and these can be aggregated into a population-level social UDR. We then provide empirical estimates for nearly all countries and for the world as a whole. A striking part of the analysis is how the estimated UDRs fall within the range of those currently employed in the macroeconomics and climate change literatures. We use our results to derive heterogenous social discount rates across countries and explore the consequences for an integrated assessment model of climate change. We find that introducing regional heterogeneity of UDRs into the RICE model has little impact on the business-as-usual trajectory of global emissions. It does, however, change the trajectory of optimal emissions, the corresponding optimal carbon tax, and the distribution of emission reductions across countries.
    JEL: H43 O21 Q54
    Date: 2017–07

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