nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒08‒06
24 papers chosen by
Roger Fouquet
London School of Economics

  1. Daylight saving time and energy consumption: The case of Argentina By Hancevic, Pedro; Margulis, Diego
  2. How neutral is the choice of the allocation mechanism in cap-and-trade schemes? Evidence from the EU-ETS By Nicola De Vivo; Giovanni Marin
  3. The Impact of Oil Shocks on the Housing Market: Evidence from Canada and U.S. By Killins, Robert N.; Egly, Peter V.; Escobari, Diego
  4. Optimal Procurement of Distributed Energy Resources By Brown, David P.; Sappington, David E. M.
  5. What drives social contagion in the adoption of solar photovoltaic technology By Andrea Baranzini, Stefano Carattini, Martin Peclat
  6. The Energy Costs of Historic Preservation By Christian A. L. Hilber; Charles Palmer; Edward W. Pinchbeck
  7. Opening the Retail Electricity Markets: Puzzles, Drawbacks and Policy Options By Anna Airoldi; Michele Polo
  8. POTEnCIA model description - version 0.9 By Leonidas Mantzos; Tobias Wiesenthal; Nicoleta Anca Matei; Mate Rozsai; Elena Navajas Cawood; Ioanna Kourti; Anastasios Papafragkou; Peter Russ; Antonio Soria Ramirez
  9. The Impacts of Environmental Regulation on the U.S. Economy By Ann E. Ferris; Richard Garbaccio; Alex Marten; Ann Wolverton
  10. Pollution Haven or Halo? Evidence from Foreign Acquisitions in Indonesia By Inessa Love; Beata Javorcik; Arlan Brucal
  11. Measuring and Mitigating Leakage Risk By Mar Reguant; Meredith Fowlie
  12. Providing Efficient Network Access to Green Power Generators : A Long-term Property Rights Perspective By Petropoulos, G.; Willems, Bert
  13. Assessment of Density Forecast for Energy Commodities in Post-Financialization Era By Bisht Deepak; Laha, A. K.
  14. Measuring unilateral and multilateral gains from tackling current economic ineciencies in CO2 reductions: Theory and evidence By Sushama Murty
  15. The Effects of Non-Existent Property Ownership Rights Within the Electricity Production Sector on Labor Force Participation in the Dominican Republic By Stacey, Brian
  16. Dematerialization, decoupling, and productivity Change By Eric Kemp-Benedict
  17. Time-varying correlation between oil and stock market volatilities: Evidence from oil-importing and oil-exporting countries By Boldanov, Rustam; Degiannakis, Stavros; Filis, George
  18. A Cross-Country Database of Fiscal Space By M. Ayhan Kose; Sergio Kurlat; Franziska Ohnsorge; Naotaka Sugawara
  19. The Effect of Default Rates on Retail Competition and Pricing Decisions of Competitive Retailers: The Case of Alberta By Brown, David P.; Eckert, Andrew
  20. Rural renewable energy investments and their impact on employment By Renner, Michael,
  21. Should Pollution Taxes be Targeted at Income Redistribution? By Bas B. Jacobs; Rick F. van der Ploeg
  22. Talking in the Present, caring for the Future: Language and Environment By Astghik Mavisakalyan; Yashar Tarverdi; Clas Weber
  23. Braided Cobwebs: Cautionary Tales for Dynamic Retail Pricing in End-to-End Power Systems By Thomas, Auswin George; Tesfatsion, Leigh
  24. The Effect of oil shocks and cyclicality in hiding Indian twin deficits By Ashima Goyal; Abhishek Kumar

  1. By: Hancevic, Pedro; Margulis, Diego
    Abstract: Daylight saving time (DST) has been actively used as a mechanism for energy conservation and reduction of GHG emissions. In the case of Argentina, the most recent experiences with DST occurred during the austral summer periods of 2007-08 and 2008-09, when the policy was finally abandoned. The benefits of DST and the size of the (potential) energy savings are still part of an ongoing discussion in a country where energy subsidies imply a heavy fiscal burden. Using a difference-in-differences framework that exploits the quasi-experimental nature of the program implementation, we use hourly data for the 2005-2010 period at the province level and estimate the impact of DST on electricity consumption and on peak demand. The main results are: DST increases total electricity consumption between 0.4% and 0.6%, but decreases peak demand between 2.4% and 2.9%.
    Keywords: daylight saving time; electricity consumption; peak demand; energy conservation; air pollution
    JEL: L94 Q4 Q54
    Date: 2016
  2. By: Nicola De Vivo (IMT Institute for Advanced Studies Lucca (Italy)); Giovanni Marin (Department of Economics, Society and Politics, University of Urbino 'Carlo Bo')
    Abstract: The European Emission Trading Scheme (EU ETS) is the central EU policy instrument aimed at mitigating climate change and to comply with the target agreed in the Kyoto protocol. The EU ETS could result in an harmful impact for the competitiveness of the European firms, as it was unilaterally introduced by the EU, and so firms could be induced to relocate their carbon-intensive production activities in countries with less stringent regulations for mitigating climate change (carbon leakage effect). For this reason, European Union decided to grant most of permits for free in its first phases and to exempt leakage-exposed sectors from auctioning in its third phase. According to Coase (1960), the level of emissions for each firm in equilibrium does not depend on the assignment of property rights over the emissions but this could not be the case in a real world system, with a lot of possible frictions, as transaction costs and behavioural anomalies. The aim of the paper is to exploit the asymmetry in the allocation mechanisms introduced from the third phase of the EU ETS to evaluate whether different allocation mechanisms are neutral in terms of emission abatement decisions. Results suggest a non-neutral role of the allocation mechanisms, with establishments that received allowances for free having greater emissions than plants that were forced to buy allowances through auctions.
    Keywords: EU ETS, grandfathering, auctioning, carbon leakage
    JEL: Q54 Q58
    Date: 2017–08
  3. By: Killins, Robert N.; Egly, Peter V.; Escobari, Diego
    Abstract: The recent volatility in oil energy markets invites us to re-assess the impact of oil prices changes on the macroeconomic environment. The Great Recession of 2007-2009 led to closer monitoring of global housing markets by regulators and market participants. Employing a structural vector autoregressive model, we find that the reaction of housing markets to oil price shocks varies significantly depending on whether the change in oil prices is prompted by demand or supply shocks in the oil market and on country oil trading status (i.e. net importer or net exporter). Our results are robust to the inclusion of different macroeconomic channels through which oil shocks may influence housing prices and control for restricted dynamic feedback effects. We also study the role of the phases of the housing cycle.
    Keywords: Oil prices, housing markets, structural vector autoregression
    JEL: F30 G15
    Date: 2017–07–20
  4. By: Brown, David P. (University of Alberta, Department of Economics); Sappington, David E. M. (University of Florida, Department of Economics)
    Abstract: We analyze the optimal design of policies to motivate electricity distribution companies to adopt efficient distributed energy resources (DER) and manage associated project costs. The optimal policy often entails a bias against new DER projects and implements considerable cost sharing when DER projects are undertaken in order to limit the utility's rent. Failure to adequately tailor the degree of cost sharing to the prevailing environment can raise procurement costs substantially. It can be optimal to reward a distribution company with more than the cost saving it achieves.
    Keywords: distributed energy resources; procurement; regulation
    JEL: L51 L94
    Date: 2017–08–03
  5. By: Andrea Baranzini, Stefano Carattini, Martin Peclat
    Abstract: Increasing the use of renewable energy is central to address climate change. Recent research has suggested the existence of social contagion in the adoption of solar panels, which may contribute to accelerate the transition to a low-carbon economy. While the existing literature has focused on residential adoption only, we extend the analysis to private firms and farms, and include solar panels with different characteristics. We exploit a unique large dataset providing detailed information on about 60,000 solar installations in Switzerland, including their specific location at the street level and details on the timing of the technological adoption, and couple it with rich socioeconomic data at the municipality level. Our detailed data allow us to adopt an empirical strategy addressing the main threats to identification associated with social contagion, including homophily and reflection. We find that households’ decisions to adopt the solar technology are dependent on pre-existing adoption, and in particular on spatially close and recent installations. Firms and farms solar PV adoptions react to neighboring PV panels, although in a lesser extent than households. Furthermore, companies are more influenced by panels installed by other companies, compared to panels installed by households. By distinguishing between building-integrated and building-attached PV systems and including capacity categories, we provide evidence that both learning and imitation are important components of social contagion. As a result, our findings provide new insights on the mechanisms of social contagion and how they could be leveraged with targeted interventions.
    Date: 2017–07
  6. By: Christian A. L. Hilber; Charles Palmer; Edward W. Pinchbeck
    Abstract: We explore the impact of historical preservation policies on domestic energy consumption. Using panel data for England from 2006 to 2013 and employing a fixed effects-strategy, we document that (i) rising national energy prices induce an increase in home energy efficiency installations and a corresponding reduction in energy consumption and (ii) this energy saving effect is significantly less pronounced in Conservation Areas and in places with high concentrations of Listed Buildings, where the adoption of energy efficiency installations is typically more costly and sometimes legally prevented altogether. Preservation policies increase private energy costs and the social cost of carbon per designated dwelling by around £8,000 and £2,550, respectively. These costs ought to be weighed against any benefits of preservation.
    Keywords: preservation policies, land use regulation, energy efficiency, energy consumption, climate change
    JEL: Q48 Q54 R38 R52
    Date: 2017–07
  7. By: Anna Airoldi; Michele Polo
    Abstract: The Italian electricity retail market is fully liberalized since 2007, allowing all households to choose between a regulated tariff and those offered in the free market. However, as of 2015, almost 70% of households remain with the regulated contract and only 4.5% moves every year to the free market. Moreover, contracts more costly than the regulated default one are offered and subscribed. In this paper we first analyze the best and worst offers on the free market, identifying significant potential gains but also losses when switching from the regulated tariff to the free market. Then we build up a sequential search model that extends Janssen et al. (2005) to explain this evidence. Consumers have zero (shoppers) and positive (non-shoppers) search costs. These latter receive upward (pessimistic) or downward (optimistic) biased signals of their current regulated price. We obtain a rich set of mixed strategy equilibria with continuous support and, in some cases, an atom, different level of participation of non-shoppers of either type and some contracts more costly than the regulated one. Equilibria with a larger participation of non-shoppers are associated with higher expected and minimum prices. Search costs and perception bias are key parameters in comparative statics, with policy implications to improve market performance. Finally, by mid 2019 the Government has planned to lift the regulated tariff. We use the model to predict possible outcomes including an initial increase in prices.
    Keywords: Search costs, liberalized retail markets, price dispersion, gains and losses from switching.
    JEL: L13 L15 L94
    Date: 2017
  8. By: Leonidas Mantzos (European Commission – JRC); Tobias Wiesenthal (European Commission – JRC); Nicoleta Anca Matei (European Commission – JRC); Mate Rozsai (European Commission – JRC); Elena Navajas Cawood (European Commission – JRC); Ioanna Kourti; Anastasios Papafragkou; Peter Russ (European Commission – JRC); Antonio Soria Ramirez (European Commission – JRC.C6)
    Abstract: This report lays out the modelling approach that is implemented in the POTEnCIA modelling tool (Policy Oriented Tool for Energy and Climate Change Impact Assessment) and describes its analytical capabilities. POTEnCIA is a modelling tool for the EU energy system that follows a hybrid partial equilibrium approach. It combines behavioural decisions with detailed techno-economic data, therefore allowing for an analysis of both technology-oriented policies and of those addressing behavioural change. Special features and mechanisms are introduced in POTEnCIA in order to appropriately reflect the implications of an uptake of novel energy technologies and of changing market structures, allowing for the robust assessment of ambitious policy futures for the EU energy system. The model runs on an annual basis with a typical projection timeline to 2050.
    Keywords: energy system modelling, energy policy assessment, energy efficiency, renewable energy, technology dynamics, climate change.
    Date: 2016–03
  9. By: Ann E. Ferris; Richard Garbaccio; Alex Marten; Ann Wolverton
    Abstract: Concern regarding the economic impacts of environmental regulations has been part of the public dialogue since the beginning of the U.S. EPA. Even as large improvements in environmental quality occurred, government and academia began to examine the potential consequences of regulation for economic growth and productivity. In general, early studies found measurable but not severe effects on the overall national economy. While price increases due to regulatory requirements outweighed the stimulative effect of investments in pollution abatement, they nearly offset one another. However, these studies also highlighted potentially substantial effects on local labor markets due to the regional and industry concentration of plant closures. More recently, a substantial body of work examined industry-specific effects of environmental regulation on the productivity of pollution-intensive firms most likely to face pollution control costs, as well as on plant location and employment decisions within firms. Most econometric-based studies found relatively small or no effect on sector-specific productivity and employment, though firms were less likely to open plants in locations subject to more stringent regulation compared to other U.S. locations. In contrast, studies that used economy-wide models to explicitly account for sectoral linkages and intertemporal effects found substantial sector-specific effects due to environmental regulation, including in sectors that were not directly regulated. It is also possible to think about the overall impacts of environmental regulation on the economy through the lens of benefit-cost analysis. While this type of approach does not speak to how the costs of regulation are distributed across sectors, it has the advantage of explicitly weighing the benefits of environmental improvements against their costs. If benefits are greater than costs, then overall social welfare is improved. When conducting such exercises, it is important to anticipate the ways in which improvements in environmental quality may either directly improve the productivity of economic factors – such as through the increased productivity of outdoor workers – or change the composition of the economy as firms and households change their behavior. If individuals are healthier, for example, they may choose to reallocate their time between work and leisure. While introducing a role for pollution in production and household behavior can be challenging, studies that have partially accounted for this interconnection have found substantial impacts of improvements in environmental quality on the overall economy.
    Keywords: Economic impacts, environmental regulation, economic productivity, employment, plant location, social welfare, health benefits
    JEL: Q52 Q53 Q58
    Date: 2017–07
  10. By: Inessa Love (University of Hawaii); Beata Javorcik (Department of Economics); Arlan Brucal (Grantham Institute, LSE)
    Abstract: The link between foreign ownership and environmental performance remains a controversial issue. This paper contributes to our understanding of this subject by analyzing the impact of foreign acquisitions on plant-level environmental performance. The analysis applies a difference-in-differences approach combined with coarsened exact matching to the data from the Indonesian Manufacturing Census for the period 1983-2001. It covers 264 acquisition cases where an acquired plant is observed a year before and at least three years after an ownership change and for which a carefully selected control plant exists. The results suggest that while foreign ownership increases the overall energy usage, due to expansion of output, it decreases the plant's energy intensity.
    Date: 2017
  11. By: Mar Reguant (Northwestern University); Meredith Fowlie (UC Berkeley)
    Abstract: When a policy regulating greenhouse gas emissions applies to only a subset of emitting sources (i.e. the policy is ``incomplete"), a policy-induced shift in economic activity to exempt (or less stringently regulated) sources can substantially undermine policy effectiveness via emissions ``leakage". Under existing climate change policies, output-based rebating of compliance costs is the preferred means of mitigating this leakage risk. These implicit production subsidies have potentially significant implications for both economic efficiency and the distribution of policy impacts, so it is important to carefully target this leakage mitigation to those industries truly at leakage risk. We provide a theoretically sound basis for deriving industry-specific, output-based subsidies under different policy objective functions and market structures. Key components include industry-level measures of emissions intensity, industry-level measures of import and export intensity, and industry-level measures of how domestic output, import flows, and export flows respond to changes in relative energy prices. Using rich transaction and firm-level data from the U.S. Census, we estimate these components and calibrate industry-specific, output-based subsidies for manufacturing sectors in the United States. We assess the efficiency and distributional implications of implementing a domestic carbon policy with and without these leakage mitigation provisions.
    Date: 2017
  12. By: Petropoulos, G.; Willems, Bert (Tilburg University, TILEC)
    Abstract: Coordinating the timing of new production facilities is one of the challenges of liberalized power sectors. It is complicated by the presence of transmission bottlenecks, oligopolistic competition and the unknown prospects of low-carbon technologies. We build a model encompassing a late and early investment stage, an existing dirty (brown) and a future clean (green) technology and a single transmission bottleneck, and compare dynamic efficiency of several market designs. Allocating network access on a short-term competitive basis distorts investment decisions, as brown firms will preempt green competitors by investing early. Dynamic efficiency is restored with long-term transmission rights that can be traded on a secondary market. We show that dynamic efficiency does not require the existence of physical rights for accessing the transmission line, but financial rights on receiving the scarcity revenues generated by the transmission line suffice.
    Keywords: network access; congestion management; renewable energy sources; power markets
    JEL: L94 L13 C72 D43
    Date: 2017
  13. By: Bisht Deepak; Laha, A. K.
    Abstract: Probability density for the future price of an asset can be estimated from historical asset prices or exchange-traded derivatives. In this paper, prices of futures and options contracts that embed the forward-looking information are used to obtain the density forecast of the underlying asset under Q- measure. Along with Probability Integral Transform (PIT), various statistical testes are conducted to determine whether the option-implied density forecast is unbiased under the real world measure, P. We have worked with the settlement prices of NYMEX traded futures and options contracts for WTI crude oil and Henry Hub natural gas during the post-financialization period of 2006 to 2013. Statistical analysis of the PIT values indicate that the option-implied density forecast is unbiased under the real world measure, P.
    Date: 2017–07–31
  14. By: Sushama Murty (Jawaharlal Nehru University and University of Exeter)
    Abstract: We develop a methodology for (a) constructing unilateral profit (producer surplus)- increasing and emission-decreasing policy reforms and (b) measuring marginal abatement cost (MAC), when countries operate inefficiently in meeting their self-imposed emission caps and when instantaneous radical jumps from their inefficient status-quos to their emission-constrained optima are infeasible due to existing institutional and political constraints. Data from 118 countries combined with the theoretical methodology developed reveals that (a) allocative inefficiencies are pervasive, (b) our proposed unilateral-efficiency increasing reform can result in more than 8% increase in global profit and 30% reduction in net global emission of CO2 – the biggest gainers being USA, China, Japan, Russia, India, and several countries from western European, and (c) MACs range from zero to 3,000 USD per ton of carbon (USDptc) in 94% of countries in our sample. MAC is more than (resp., less than) 1,000 USDptc in 80% of OECD (resp., 61% of non-OECD) countries. While MACs are zero for many countries in the former Soviet block, they are more than 2,000 USDptc for countries in western Europe. These differences in MACs imply considerable scope for multilateral efficiency improvements in meeting voluntary emission reduction targets through international emission trading and other international climate initiatives. Length:74 pages
  15. By: Stacey, Brian
    Abstract: The labor market in the Dominican Republic is in disarray. There has been a high rate of unemployment and a very high rate of non-participation within the labor force for years. Output growth has been steady in manufacturing, telecommunication, and financial services, and new jobs have been added in the service sector consistently, however these gains have led to no real increase in available quality jobs and wage stagnation (Williams & Adedeji, 2004). Abdullaev and Marcello (2013) describe a dichotomous approach to solving the problem; through targeted education for the long term and through product market reforms in the near term. The energy sector in the Dominican Republic is a prime example of an area where reforms are needed to improve the operating environment to spur and sustain growth. At present the losses in transmission and distribution are significantly higher than in most places as a result of fraud (Smith 2004). Until recently it has not been against the law to steal electricity (Enerdata 2011). The rationale being that if electricity is a basic human right we cannot punish those who attempt to gain it. This lack of property law within the context of electricity underpins a significant failure by the government when viewed from the point of the electricity producers. Property ownership is a fundamental concept of free markets. Without ownership rights there is no (or limited) ability to charge for goods produced with that property. Electricity is a commodity property and without the ability to effectively charge for its consumption the producers have struggled.
    Keywords: Property Rights, Macroeconomic Forecast, Growth Models, Labor Force Participation
    JEL: E24 E66 K11
    Date: 2016–10–03
  16. By: Eric Kemp-Benedict (Stockholm Environment Institute (SE))
    Abstract: The prospects for long-term sustainability depend on whether, and how much, we can absolutely decouple economic output from total energy and material throughput. While relative decoupling has occurred – that is, resource use has grown less quickly than the economy – absolute decoupling has not, raising the question whether it is possible. This paper proposes a two-part explanation for why decoupling has not happened historically. First, drawing on theories of cost-share induced productivity change, it assumes that innovation which save on inputs to the production of goods and services is biased toward inputs with a higher cost share. Second, following post-Keynesian pricing theory, it posits that resources, but not goods or labor, are priced in competitive markets. These assumptions set up two halves of a dynamic, which we explore from a post-Keynesian perspective. In this dynamic, resource costs as a share of GDP move towards a stable level, at which the growth rate of resource productivity is typically less than the growth rate of GDP. The paper then discusses conditions under which absolute decoupling might occur in the context of current climate mitigation policy debates.
    Keywords: decoupling, dematerialization, cost-share induced technological change
    JEL: E12 O31 O33 Q32
    Date: 2017–08
  17. By: Boldanov, Rustam; Degiannakis, Stavros; Filis, George
    Abstract: This paper investigates the time-varying conditional correlation between oil price and stock market volatility for six major oil-importing and oil-exporting countries. The period of the study runs from January 2000 until December 2014 and a Diag-BEKK model is employed. Our findings report the following regularities. (i) The correlation between the oil and stock market volatilities changes over time fluctuating at both positive and negative values. (ii). Heterogeneous patterns in the time-varying correlations are evident between the oil-importing and oil-exporting countries. (iii) Correlations are responsive to major economic and geopolitical events, such as the early-2000 recession, the 9/11 terrorist attacks and the global financial crisis of 2007-2009. These findings are important for risk management practices, derivative pricing and portfolio rebalancing.
    Keywords: conditional volatility, realized volatility, time-varying correlation, Diag-BEKK, GARCH, oil-importing countries, oil-exporting countries.
    JEL: C32 C51 G15 Q40
    Date: 2017
  18. By: M. Ayhan Kose (WorldBank, Development Prospects Group; Brookings Institution; CEPR, and CAMA); Sergio Kurlat (WorldBank, Development Prospects Group); Franziska Ohnsorge (WorldBank, Development Prospects Group; CAMA); Naotaka Sugawara (WorldBank, Development Prospects Group)
    Abstract: This paper presents a comprehensive cross-country database of fiscal space, broadly defined as the availability of budgetary resources for a government to service its financial obligations. The database covers up to 200 countries over the period 1990-2016, and includes 28 indicators of fiscal space grouped into four categories: debt sustainability, balance sheet vulnerability, external and private sector debt related risks as potential causes of contingent liabilities, and market access. We illustrate potential applications of the database by analyzing developments in fiscal space across three time frames: over the past quarter century; during financial crises; and during oil price plunges. The main results are as follows. First, fiscal space had improved in many countries before the global financial crisis. In advanced economies, following severe deteriorations during the crisis, many indicators of fiscal space have virtually returned to levels in the mid-2000s. In contrast, fiscal space has shrunk in many emerging market and developing economies since the crisis. Second, financial crises tend to coincide with deterioration in multiple indicators of fiscal space, but they are often followed by reduced reliance on short-term borrowing. Finally, fiscal space narrows in energy-exporting emerging market and developing economies during oil price plunges but later expands, often because of procyclical fiscal tightening and, in some episodes, a recovery in oil prices.
    Keywords: Fiscal policy; sovereign debt; fiscal deficit; private debt; financial crises; oil prices.
    JEL: E62 H62 H63
    Date: 2017–08
  19. By: Brown, David P. (University of Alberta, Department of Economics); Eckert, Andrew (University of Alberta, Department of Economics)
    Abstract: We investigate the impacts of default regulated products and their design on the development of competitive retail markets and retailers' pricing decisions. We analyze this question in the context of Alberta's competitive retail electricity market, using data on the prices and characteristics of both regulated and unregulated retail products from July 2006 to March 2017. Our analysis consists of a descriptive discussion of the evolution of market structure in the industry, followed by an econometric analysis of the effect of default prices on unregulated retail prices. We find that as the default product moved from being a long-term stable product, to one based on short-term forward market prices, the number of products and competitors increased substantially. This suggests that the change in the default product was successful at facilitating the development of a competitive retail market. However, our econometric analysis of the pricing of unregulated contracts suggests that competitive retailers may continue to exercise market power by adjusting prices upward in response to short-term changes in the regulated rate, even after controlling for changes in the costs of providing retail products.
    Keywords: Electricity; Retail Markets; Market Power; Regulation; Default Rates
    JEL: D43 L51 L94 Q40
    Date: 2017–08–03
  20. By: Renner, Michael,
    Abstract: This series of project publications aims to capture the tools, methods, and processes developed under the EC and ILO joint project entitled “Strengthening the Impact on Employment of Sector and Trade Policies", as well as the findings from implementing these in the ten partner countries. The literature on access to rural energy through renewable energy is expanding rapidly, as are manifold initiatives to achieve universal access. However, much of the literature is concerned with technical aspects, financing, and the policies needed to generate an enabling environment. Only a minor portion addresses the employment aspects in more than a cursory manner. This report marshals relevant information in an effort to assess existing and potential employment impacts.
    Keywords: renewable resources, energy source, rural development
    Date: 2017
  21. By: Bas B. Jacobs (Erasmus University Rotterdam, Tinbergen Institute and CESifo; Tinbergen Institute, The Netherlands); Rick F. van der Ploeg (University of Oxford, Tinbergen Institute, CEPR and CESifo)
    Abstract: This paper analyses optimal corrective taxation and optimal income redistribution. Under general utility functions, 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. However, if preferences for commodities are of the Gorman (1961) polar form, optimal pollution taxes should follow the first-best rule for the Pigouvian corrective tax 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 preferences are Gorman polar, and if pollution taxes are not optimized, Pareto-improving green tax reforms exist that move the pollution tax closer to the Pigouvian tax. Simulations demonstrate that optimal corrective taxes should be Pigouvian if the demand for polluting goods is derived from a LES demand system, but 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: 2017–08–01
  22. By: Astghik Mavisakalyan (Bankwest Curtin Economic Centre, Curtin University); Yashar Tarverdi (Bankwest Curtin Economic Centre, Curtin University); Clas Weber (University of Western Australia, Australia)
    Abstract: This paper identifies a new source that explains environmental behaviour: the presence of future tense marking in language. We predict that languages that grammatically mark the future affect speakers’ intertemporal preferences and thereby reduce their willingness to address climate change. We first document that countries with a language that requires future tense marking adopt less stringent climate change policies. We then show that individuals within countries behave consistently: speakers of languages with future tense marking are less likely to adopt environmentally responsible behaviours. The results suggest that there may be deep and surprising obstacles for attempts to address climate change.
    Keywords: language; linguistic relativity, intertemporal preference, climate change, environmental policy.
    JEL: Q54 Q58 Z13
    Date: 2017–07
  23. By: Thomas, Auswin George; Tesfatsion, Leigh
    Abstract: This study investigates the effects of dynamic-price retail contracting on end-to-end power system operations. Performance is evaluated by means of carefully defined metrics for system stability, market efficiency, and market participant welfare. The study is carried out for an Integrated Retail and Wholesale (IRW) Test Case for which households have smart (price-responsive) air-conditioning (A/C) systems. A simplified version of the IRW Test Case with a directly postulated linear household demand curve is first used to derive, analytically, a set of necessary and sufficient conditions for system stability under dynamic-price retail contracting. A key finding is that dynamicprice retail contracts induce braided cobweb dynamics consisting of two interwoven cycles for power and price outcomes that can exhibit point convergence, limit-cycle convergence, or divergence depending on a small set of structural parameters. Outcomes are then reported for a dynamic welfare sensitivity study undertaken using the full IRW Test Case with smart household A/C systems. One surprising finding is that dynamic-price retail contracts with a positive price mark-up result in worse welfare outcomes for generators and household residents than flat-rate retail contracts for treatments exhibiting convergent cobweb dynamics.
    Date: 2017–07–30
  24. By: Ashima Goyal (Indira Gandhi Institute of Development Research); Abhishek Kumar (Indira Gandhi Institute of Development Research)
    Abstract: The paper estimates the relationship between the current account and fiscal deficit, and the real exchange rate, in a structural vector autoregression, with Indian data for the managed float period 1996Q2 to 2015 Q4, after controlling for output growth and oil shocks. It also examines the cyclicality of the current account, the size of each shock, and assesses whether aggregate demand, forward-looking smoothing, or supply shocks dominate outcomes. The current account deficit (CAD) is found to be countercyclical. A fiscal deficit shock raises the CAD, but high impact growth shocks and large variance oil shocks lead to overall divergence of the deficits. There is some support for the aggregate demand channel, but it is moderated by supply shocks and compositional effects. Consumption is sticky rather than forward-looking.
    Keywords: Twin deficits, real exchange rate, growth, oil shocks, SVAR, cyclicality
    JEL: H62 F32 D91 C22
    Date: 2017–05

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