nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒10‒01
eighteen papers chosen by
Roger Fouquet
London School of Economics

  1. Abuse of Dominance and Antitrust Enforcement in the German Electricity Market By Tomaso Duso; Florian Szücs; Veit Böckers
  2. More Gas, Less Coal, and Less CO2? Unilateral CO2 Reduction Policy with More than One Carbon Energy Source By Julien Xavier Daubanes; Fanny Henriet; Katheline Schubert
  3. Cleaning up the air for the 2008 Beijing Olympic Games: Empirical study on China’s thermal power sector By Teng Ma; Kenji Takeuchi
  4. The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis By Nida Çakir Melek; Michael Plante; Mine K. Yücel
  5. Examining Shanghai Consumer Preferences for Electric Vehicles and Their Attributes By Yongyou Nie; Enci Wang; Qinxin Guo; Junyi Shen
  6. The External Costs of Transporting Petroleum Products by Pipelines and Rail: Evidence From Shipments of Crude Oil from North Dakota By Karen Clay; Akshaya Jha; Nicholas Muller; Randall Walsh
  7. Taxing consumption to mitigate carbon leakage By Kaushal, Kevin R.; Rosendahl, Knut Einar
  8. Attribute Substitution in Household Vehicle Portfolios By James Archsmith; Kenneth Gillingham; Christopher R. Knittel; David S. Rapson
  9. Crude by Rail, Option Value, and Pipeline Investment By Thomas R. Covert; Ryan Kellogg
  10. Ownership Cost Calculations for Distributed Energy Resources Using Uncertainty and Risk Analyses By S. Ali Pourmousavi; Mahdi Behrangrad; Ali Jahanbani Ardakani; M. Hashem Nehrir
  11. Rural Electrification and Household Labor Supply: Evidence from Nigeria By Claire Salmon; Jeremy Tanguy
  12. The Accident Externality from Trucking By Muehlenbachs, Lucija; Staubli, Stefan; Chu, Ziyan
  13. Editorial: Electromobility at the crossroads By Carole Donada; Yannick Perez
  14. Modeling and Forecasting Hourly Electricity Demand by SARIMAX with Interactions By Niematallah Elamin; Mototsugu Fukushige
  15. Male-biased Demand Shocks and Women’s Labor Force Participation: Evidence from Large Oil Field Discoveries By Stephan E. Maurer; Andrei V. Potlogea
  16. Three Degrees of Green Paradox: The Weak, The Strong, and the Extreme Green Paradox By Marc GRONWALD; Ngo Van LONG; Luise ROEPKE
  17. What Lies Beneath: Pipeline Awareness and Aversion By Evan Herrnstadt; Richard L. Sweeney
  18. From Farm tools to Electric Cars, A Study of the Development of a chinese Industrial Cluster: the Case of Yongkang in Zhejiang (1980-2010) By Lu Shi; Bernard Ganne

  1. By: Tomaso Duso; Florian Szücs; Veit Böckers
    Abstract: In 2008, the European Commission investigated E.ON, a large and vertically integrated electricity company, for the alleged abuse of a joint dominant position by strategically withholding generation capacity. The case was settled after E.ON agreed to divest 5,000 MW generation capacity as well as its extra-high voltage network. We analyze the effect of these divestitures on German wholesale electricity prices. Our identification strategy is based on the observation that energy suppliers have more market power during peak periods when demand is high. Therefore, a decrease in market power should lead to convergence between peak and off-peak prices. Using daily electricity prices for the 2006 - 2012 period and controlling for cost and demand drivers, we find economically and statistically significant convergence effects after the implementation of the Commission’s decision. Furthermore, the price reductions appear to be mostly due to the divestiture of gas and coal plants, which is consistent with merit-order considerations. Placebo regressions support a causal interpretation of our results.
    Keywords: Electricity, wholesale prices, EU Commission, abuse of dominance, ex post evaluation, E.ON
    JEL: K21 L41 L94
    Date: 2017
  2. By: Julien Xavier Daubanes (Department of Food and Resource Economics, University of Copenhagen); Fanny Henriet (Paris School of Economics (CNRS)); Katheline Schubert (Paris School of Economics (CNRS); University Paris 1)
    Abstract: Natural gas is hoped to effectively help shale gas producing regions meet their carbon emission reduction commitments. We examine an open economy that produces both gas and another, more carbon intensive fuel like coal. In presence of two carbon energy sources, the analysis sharply contrasts with the standard single-energy case in which leakage is less than 100%: We show that, in general, an economy that relies on domestic gas to meet its emission commitment may contribute to increase global emissions. Indeed, gas production releases coal that is exported instead of being consumed domestically, potentially increasing emissions in the rest of the world. In this new context, we establish testable conditions as to whether a governmental emission reduction commitment warrants the domestic exploitation of shale gas, and whether this unilateral strategy increases global emissions. We also characterize the extent to which this unilateral strategy makes the rest of the world’s emission commitment more difficult to meet. Finally, we show how our results apply to the case of the US.
    Keywords: Unilateral climate policy; Carbon emission reduction; Shale gas; Intermediate energy; Gas-coal substitution; Coal exports; Leakage; US policy; Policy counter-effectiveness
    JEL: Q41 Q58 H73 F18
    Date: 2017–09
  3. By: Teng Ma (Graduate School of Economics, Kobe University); Kenji Takeuchi (Graduate School of Economics, Kobe University)
    Abstract: This study examines the effects of air pollution control within the thermal power sector during the 2008 Beijing Olympic Games (BOG08). Using data on pollution control equipment and energy intensity, we investigate for significant differences in their levels between provinces under the regional control policy for BOG08 and other provinces. The results suggest that the energy intensity of thermal power plants improved in 2007 and 2008 in provinces designated as areas requiring coordinated air pollution control for the Olympic Games. On the other hand, we found weaker statistical evidence for treatment effects on pollution control equipment.
    Keywords: Air pollution; China; Beijing Olympic Games; Thermal power sector
    JEL: Q52 L51 L94
    Date: 2017–09
  4. By: Nida Çakir Melek; Michael Plante; Mine K. Yücel
    Abstract: This paper examines the effects of the U.S. shale oil boom in a two-country DSGE model where countries produce crude oil, refined oil products, and a non-oil good. The model incorporates different types of crude oil that are imperfect substitutes for each other as inputs into the refining sector. The model is calibrated to match oil market and macroeconomic data for the U.S. and the rest of the world (ROW). We investigate the implications of a significant increase in U.S. light crude oil production similar to the shale oil boom. Consistent with the data, our model predicts that light oil prices decline, U.S. imports of light oil fall dramatically, and light oil crowds out the use of medium crude by U.S. refiners. In addition, fuel prices fall and U.S. GDP rises. We then use our model to examine the potential implications of the former U.S. crude oil export ban. The model predicts that the ban was a binding constraint in 2013 through 2015. We find that the distortions introduced by the policy are greatest in the refining sector. Light oil prices become artificially low in the U.S., and U.S. refineries produce inefficiently high amount of refined products, but the impact on refined product prices and GDP are negligible.
    JEL: F41 Q38 Q43
    Date: 2017–09
  5. By: Yongyou Nie (School of Economics, Shanghai University, China); Enci Wang (School of Economics, Shanghai University, China); Qinxin Guo (Graduate School of Economics, Kobe University, Japan); Junyi Shen (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan, and School of Economics, Shanghai University, China)
    Abstract: In this study, we conducted a stated choice survey in Shanghai to examine the attitudes of Shanghai residents towards electric vehicles and their attributes. Multinomial Logit and Random Parameter Logit models were used to analyze the response data for three samples—the full sample, a subsample of potential electric vehicle purchasers, and a subsample of unlikely electric vehicle purchasers. We found that the respondents in each of the three groups preferred electric vehicles with a longer driving range, a shorter charging time, a faster maximum speed, lower pollution emissions, lower fuel cost, and a lower price. However, a comparison of the two subsamples showed that potential electric vehicle purchasers were willing to pay more than their counterparts for enhancing vehicle attributes. We also investigated the determinants of likely electric vehicle purchase and found a number of demographic characteristics that were statistically significant.
    Keywords: Keywords: Electric vehicles, Preferences, Stated choice experiment, Willingness to pay, Random Parameter Logit Model
    JEL: Q42 Q51
    Date: 2017–09
  6. By: Karen Clay; Akshaya Jha; Nicholas Muller; Randall Walsh
    Abstract: This paper constructs new estimates of the air pollution and greenhouse gas costs from long-distance movement of petroleum products by rail and pipelines. While crude oil transportation has generated intense policy debate about rail and pipeline spills and accidents, important externalities – air pollution and greenhouse gas costs – have been largely overlooked. Using data for crude oil transported out of North Dakota in 2014, this paper finds that air pollution and greenhouse gas costs are nearly twice as large for rail as for pipelines. Moreover, our estimates of air pollution and greenhouse gas costs are much larger than estimates of spill and accidents costs. In particular, they are more than twice as big for rail and more than eight times as big for pipelines. Our findings indicate that the policy debate surrounding crude oil transportation has put too much relative weight on accidents and spills, while overlooking a far more serious source of external cost: air pollution and greenhouse gas emissions.
    JEL: L92 Q53 Q54
    Date: 2017–09
  7. By: Kaushal, Kevin R. (School of Economics and Business, Norwegian University of Life Sciences); Rosendahl, Knut Einar (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: Unilateral actions to reduce CO2 emissions could lead to carbon leakage such as relocation of emission-intensive and trade-exposed industries (EITE). To mitigate such leakage, countries often supplement an emissions trading system (ETS) with free allocation of allowances to exposed industries, e.g. in the form of output-based allocation (OBA). This paper examines the welfare effects of supplementing OBA with a consumption tax on EITE goods. In particular, we investigate the case when only a subset of countries involved in a joint ETS introduces such a tax. The analytical results suggest that the consumption tax would have unambiguously global welfare improving effects, and under certain conditions have welfare improving effects for the tax introducing country as well. Numerical simulations in the context of the EU ETS support the analytical findings, including that the consumption tax is welfare improving for the single country that implements the tax.
    Keywords: Carbon leakage; Output-based allocation; Consumption tax
    JEL: D61 F18 H23 Q54
    Date: 2017–09–21
  8. By: James Archsmith; Kenneth Gillingham; Christopher R. Knittel; David S. Rapson
    Abstract: Household preferences for goods with a bundle of attributes may have complex substitution patterns when one attribute is changed. For example, a household faced with an exogenous increase in the size of one television may choose to decrease the size of other televisions within the home. This paper quantifies the extent of attribute substitution in the context of multi-vehicle households. We deploy a novel identification strategy to examine how an exogenous change in the fuel economy of a kept vehicle affects a household's choice of a second vehicle. We find strong evidence of attribute substitution in the household vehicle portfolio. This effect operates through car attributes that are correlated with fuel economy, including vehicle footprint and weight. Our findings suggest that attribute substitution exerts a strong force that may erode a substantial portion of the expected future gasoline savings from fuel economy standards, particularly those that are attribute-based. Elements of our identification strategy are relevant to a broad class of settings in which consumers make sequential purchases of durable portfolio goods.
    JEL: L62 R41
    Date: 2017–09
  9. By: Thomas R. Covert; Ryan Kellogg
    Abstract: The recent large-scale use of railroads to transport crude oil out of newly discovered shale formations has no recent precedent in the U.S. oil industry. This paper addresses the question of whether crude-by-rail is simply a transient phenomenon, owing to delays in pipeline construction, or whether it will be a durable presence in the industry by reducing investment in pipeline infrastructure. We develop a model of crude oil transportation that highlights how railroads generate option value by: (1) giving shippers the ability to flexibly increase or decrease volumes shipped in response to price shocks; and (2) allowing shippers to opportunistically send oil to multiple destinations. In contrast, pipelines have low amortized costs but lock shippers into debt-like ship-or-pay contracts to a single destination. We calibrate this model to the recently constructed Dakota Access Pipeline and find that the elasticity of pipeline capacity to railroad transportation costs lies between 0.24 and 0.61, depending on parameters such as the upstream oil supply elasticity. These values are likely conservative because they neglect economies of scale in pipeline construction and the presence of cost-saving contracting in rail. Our results imply that crude-by-rail is an economically significant long-run substitute for pipeline transportation and that regulatory policies targeting environmental and accident externalities from rail transportation would likely substantially affect pipeline investments.
    JEL: L13 L71 L95
    Date: 2017–09
  10. By: S. Ali Pourmousavi; Mahdi Behrangrad; Ali Jahanbani Ardakani; M. Hashem Nehrir
    Abstract: Ownership cost calculation plays an important role in optimal operation of distributed energy resources (DERs) and microgrids (MGs) in the future power system, known as smart grid. In this paper, a general framework for ownership cost calculation is proposed using uncertainty and risk analyses. Four ownership cost calculation approaches are introduced and compared based on their associated risk values. Finally, the best method is chosen based on a series of simulation results, performed for a typical diesel generator (DiG). Although simulation results are given for a DiG (as commonly used in MGs), the proposed approaches can be applied to other MG components, such as batteries, with slight modifications, as presented in this paper. The analyses and proposed approaches can be useful in MG optimal design, optimal power flow, and market-based operation of the smart grid for accurate operational cost calculations.
    Date: 2017–09
  11. By: Claire Salmon (IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Jeremy Tanguy (GAINS-TEPP - UM - Le Mans Université)
    Abstract: In Nigeria, the most populated African country, rural electrification is a critical issue because of the low household electrification rate and the poor quality of the grid. This energy poverty has harmful economic and social consequences in rural areas, such as low productivity , lack of income-generating opportunities and poor housing conditions. In this paper, we consider electrification as a technical shock that may affect household time allocation. Using the 2010-2011 General Household Survey, we investigate how electrification affects female and male labor supply decisions within rural households in Nigeria. Focusing on husband-wife data, we consider potential dependence in spouses' labor supply decisions and address the challenge of zero hours of work using a recent copula-based bivariate hurdle model (Deb et al. 2013). In addition, an instrumental variable strategy helps identify the causal effect of elec-trification. Our results underline that this dependence in spouses' labor supply decisions is critical to consider when assessing the impact of electrification on these outcomes. Electrifi-cation increases the working time of both spouses in the separate assessments, but the joint analysis emphasizes only a positive effect of electrification on husbands' working time. In line with the household labor supply approach, our findings highlight that, within the household, the labor supply decisions of one spouse significantly affect those of the other spouse. Thus, if we neglect the effect of electrification on the spouse of the individual examined, we may fail to assess how this individual has been actually affected by this common shock on both spouses. Our results suggest that these within-household relationships promote husbands' working time at the expense of wives' working time.
    Keywords: rural electrification,labor supply,developing countries,joint decision making,bi- variate hurdle model,copulas
    Date: 2016
  12. By: Muehlenbachs, Lucija (Resources for the Future, Washington DC); Staubli, Stefan (University of Calgary); Chu, Ziyan (Resources for the Future, Washington DC)
    Abstract: How much risk does a heavy truck impose on highway safety? To answer this question, we look at the rapid influx of trucks during the shale gas boom in Pennsylvania. Using quasi-experimental variation in truck traffic, we isolate the effect of adding a truck to the road. We find an additional truck raises the risk of a truck accident – and, at an even higher rate, the risk of nontruck accidents. These accidents pose an external cost in cases in which the truck is not found liable, not fully insured, or not directly involved. We show this external cost is capitalized in the insurance market: car insurance premiums of other road users increase when trucks are added to the road.
    Keywords: externality, trucking, hydraulic fracturing, traffic fatalities
    JEL: G22 H23 I18 Q58 R41
    Date: 2017–09
  13. By: Carole Donada (ESSEC Business School - Essec Business School); Yannick Perez (UP11 - Université Paris-Sud - Paris 11)
    Abstract: A recent study from the Centre for Solar Energy and Hydrogen Research Baden Württemberg (ZSW), reports that in early 2015 over 740,000 electric cars were on the road throughout the world. This is a drop in the ocean compared to the 74 million ICE cars sold last year. However, latest statistics on the sale of electric cars indicate that the market is booming with no less 320,000 vehicles registered in one year, as well as an exponential growth rate of sales worldwide.These results came as no surprise to researchers from the Armand Peugeot Chair, who held the Second International Conference in Paris in December 2014. A previous issue of the International Journal of Automotive Technology and Management (‘Electromobility challenging issues’, Vol. 15, No. 2, 2015) called attention to the fact that the emergence of electromobility has generated three critical challenges for the markets, the industrial processes and the business models of the traditional automotive industry. More specifically, it discussed issues regarding innovation and service transition, issues regarding grid-integration and service-aggregator actions, and lastly issues regarding supportive public policies (Donada and Perez, 2015). How have these challenges evolved one year later, a year during which this new electromobility industry has been booming? This special edition presents five emblematic researches on the issues raised during the sessions of this 2014 conference.
    Keywords: Editorial, Electromobility.
    Date: 2016
  14. By: Niematallah Elamin (Graduate School of Economics, Osaka University); Mototsugu Fukushige (Graduate School of Economics, Osaka University)
    Abstract: This paper presents an interaction forecasting framework with a focus on short-term load forecasting. It proposes a seasonal autoregressive integrated moving average model with the inclusion of exogenous variables (SARIMA: main effects) and interaction variables (cross effects) to forecast short-term electricity load using hourly load data from Tokyo Electric Power Company. The main effects and cross effects are measured through an iterative process of plotting, interpreting, and testing. Interactions of weather variables and calendar variables, as well as interactions of seasonal patterns and intraday dependencies, are analyzed, tested, and added to the model. We compare the SARIMAX model, which contains only main effects, with the Interaction-SARIMAX model, which includes cross effects in addition to the main effects. Our proposed SARIMAX-with-interactions model is shown to produce smaller errors than its competitors. Thus, including interaction effects of the exogenous variables into the SARIMAX model can potentially improve the model forecasting performance. Although the model is built using data of a specific region in Japan, the method is completely generic and therefore applicable to any load forecasting problem.
    Keywords: Cross effects, forecast accuracy, load forecasting, load modeling, SARIMAX
    JEL: C53 Q4
    Date: 2017–09
  15. By: Stephan E. Maurer (Department of Economics, University of Konstanz and Centre for Economic Performance); Andrei V. Potlogea (University of Edinburgh)
    Abstract: Do male-biased demand shocks affect women’s labor force participation? To study this question, we examine large oil field discoveries in the US South from 1900-1940. We find that oil wealth has a zero net effect on female labor force participation due to two opposing channels. Oil discoveries increase demand for male labor in oil mining and manufacturing and consequentially raise male wages. This leads to an increased marriage rate of young women, which could have depressed female labor force participation. But at the same time, oil wealth also increases demand for women in services, which counterbalances the marriage effect and leaves women’s overall labor force participation rate unchanged. Our findings demonstrate that when the nontradable sector is open to women, male-biased de-mand shocks in the tradable sector need not reduce female labor force participation.
    Keywords: oil, structural transformation, female labor force participation, gen-der pay gap
    JEL: R11 N50 J12 J16
    Date: 2017–09–19
  16. By: Marc GRONWALD; Ngo Van LONG; Luise ROEPKE
    Abstract: We show that a green paradox can be weak, or strong, or extreme. A weak green paradox arises when a green - intentioned policy measure worsens the quality of the environment at least in the near term. A strong green paradox outcome is obtained if the policy ends up causing greater cumulative environmental damages than under the business - as - usual scenario , though it may raise welfare , for example by adding productive green capacity. An extreme green paradox arises when aggregate welfare (net of environmental damages) falls as result of a poorly designed green - intentioned policy. We illustrate numerically the three degrees of green paradox using a model with a capacity - constrained green backstop technology in direct competition with fossil fuels.
    Keywords: capacity constraints, green paradox, climate change, simultaneous resource use
    JEL: Q38 Q54 H23
    Date: 2017
  17. By: Evan Herrnstadt; Richard L. Sweeney
    Abstract: Stated safety concerns are a major impediment to making necessary expansions to the natural gas pipeline network. While revealed willingness to pay to avoid existing natural gas pipelines appears small, it is difficult to know if this reflects true ambivalence or a lack of salience and awareness. In this paper, we test this latter hypothesis by studying how house prices responded to a deadly 2010 pipeline explosion in San Bruno, CA, which shocked both attention and information. Using multiple identification strategies, we fail to find any evidence of a meaningful shift in the hedonic price gradient around pipelines following these events. We conclude with a discussion of how this result relates to latent, fully informed preferences, as well as the implications for future pipeline expansions.
    JEL: Q48 Q51
    Date: 2017–09
  18. By: Lu Shi (IAO - Institut d'Asie Orientale - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - CNRS - Centre National de la Recherche Scientifique); Bernard Ganne (MODYS - MOndes et DYnamiques des Sociétés - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet [Saint-Etienne] - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Dans les transformations économiques prodigieuses que la Chine a connues depuis sa réforme économique, les clusters industriels sont reconnus comme ayant joué un rôle particulièrement important. A travers l’exemple de Yongkang, ville-district du Zhejiang spécialisée dans les articles métalliques, nous souhaitons comprendre comment cette zone rurale de tradition artisanale en métaux est passée progressivement à des pôles industriels structurés autour de productions spécifiques et par quelles voies économiques, sociales et politiques ont pu s’effectuer ces transformations.
    Keywords: Chine, Industrie, Cluster, Entreprise
    Date: 2016

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