nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒12‒03
thirty-one papers chosen by
Roger Fouquet
London School of Economics

  1. A new approach to an age-old problem: solving externalities by incenting workers directly By Gosnell, Greer; Metcalfe, Robert; List, John A
  2. Temperature Effects on Productivity and Factor Reallocation: Evidence from a Half Million Chinese Manufacturing Plants By Peng Zhang; Olivier Deschenes; Kyle C. Meng; Junjie Zhang
  3. Simulating the deep decarbonisation of residential heating for limiting global warming to 1.5C By Florian Knobloch; Hector Pollitt; Unnada Chewpreecha; Jean-Francois Mercure
  4. Beyond coal: facilitating the transition in Europe By Simone Tagliapietra
  5. How Economic Growth, Renewable Electricity and Natural Resources Contribute to CO2 Emissions? By Balsalobre-Lorente, Daniel; Shahbaz, Muhammad; Roubaud, David; Farhani, Sahbi
  6. Renewable energy projections for climate change mitigation: An analysis of uncertainty and errors By M. Indra al Irsyada; Anthony Halog; Rabindra Nepal
  7. Harvesting a Remote Renewable Resource By Thorsten Upmann; Stefan Behringer
  8. The Direct and Indirect Costs of Power Outages to Small Scale Manufacturing Industries of Punjab By Abbas, Malaika
  9. Addressing developmental needs through energy access in informal settlements By Subbiah, Adritha; Mansoor, Sahar; Misra, Rachita; Jaffer, Huda; Tiwary, Raunak
  10. Prospects for a “just transition” away from coal-fired power generation in Australia: Learning from the closure of the Hazelwood Power Station By John Wiseman; Stephanie Campbell; Fergus Green
  11. Correlations and Clustering in Wholesale Electricity Markets By Tianyu Cui; Francesco Caravelli; Cozmin Ududec
  12. Polynomial processes for power prices By Damir Filipovic; Martin Larsson; Tony Ware
  13. Strategic conflicts on the horizon: R&D incentives for environmental technologies By Heyen, Daniel
  14. Lessons from energy history for climate policy: technological change, demand and economic development By Fouquet, Roger
  15. The Turning Tide: How Energy has Driven the Transformation of the British Economy Since the Industrial Revolution By Frieling, Julius; Madlener, Reinhard
  16. Current Issues in Time-Series Analysis for the Energy-Growth Nexus; Asymmetries and Nonlinearities Case Study: Pakistan By Shahbaz, Muhammad
  17. On self-interested preferences for burden sharing rules: An econometric analysis for the costs of energy policy measures By Elke D. Groh; Andreas Ziegler
  18. Modeling and forecasting the oil volatility index By Lopes Moreira Da Veiga, María Helena; Gonçalves Mazzeu, Joao Henrique; Mariti, Massimo B.
  19. The Unconventional Oil Supply Boom: Aggregate Price Response from Microdata By Richard G. Newell; Brian C. Prest
  20. Informing SPR Policy Through Oil Futures and Inventory Dynamics By Richard G. Newell; Brian C. Prest
  21. Internationalization Strategies of Russian National Oil Companies towards Asia: Cooperation or Competition? By Garanina, Olga L.
  22. Oil Prices and Inflation Dynamics: Evidence from Advanced and Developing Economies By Sangyup Choi; Davide Furceri; Prakash Loungani; Saurabh Mishra; Marcos Poplawski-Ribeiro
  23. Resource windfalls, political regimes and political stability By Caselli, Francesco; Tesei, Andrea
  24. Economic Evaluation of Fuel Treatment Effectivness. Agent-Based Model Simulation of Fire Spreads Dynamics. By Fontana, Magda; Chersoni, Giulia
  25. Economic and Environmental Impacts of Raising Revenues for Climate Finance from Public Sources By Christoph Boehringer; Jan Schneider; Marco Springmann
  26. Technology and the Effectiveness of Regulatory Programs Over Time: Vehicle Emissions and Smog Checks with a Changing Fleet By Nicholas J. Sanders; Ryan Sandler
  27. Emissions and Growth: Trends and Cycles in a Globalized World By Gail Cohen; João Tovar Jalles; Prakash Loungani; Ricardo Marto
  28. Income inequality and carbon consumption: evidence from environmental Engel curves By Lutz Sager
  29. Alternative Types of Ambiguity and their Effects on Climate Change Regulation By Phoebe Koundouri; Nikitas Pittis; Panagiotis Samartzis; Nikolaos Englezos; Andreas Papandreou
  30. Distributive outcomes matter: Measuring social preferences for climate policy By Lea Skræp Svenningsen
  31. Geography, institutions and development: a review ofthe long-run impacts of climate change By Lopez-Uribe, Maria del Pilar; Castells-Quintana, David; McDermott, Thomas K. J.

  1. By: Gosnell, Greer; Metcalfe, Robert; List, John A
    Abstract: Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to “look under the hood” of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains’ performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments—which include performance information, personal targets, and prosocial incentives—induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.
    JEL: R14 J01
    Date: 2016–06–01
  2. By: Peng Zhang; Olivier Deschenes; Kyle C. Meng; Junjie Zhang
    Abstract: This paper uses detailed production data from a half million Chinese manufacturing plants over 1998-2007 to estimate the effects of temperature on firm-level total factor productivity (TFP), factor inputs, and output. We detect an inverted U-shaped relationship between temperature and TFP and show that it primarily drives the temperature-output effect. Both labor- and capital- intensive firms exhibit sensitivity to high temperatures. By mid 21st century, if no additional adaptation were to occur, we project that climate change will reduce Chinese manufacturing output annually by 12%, equivalent to a loss of $39.5 billion in 2007 dollars. This implies substantial local and global economic consequences as the Chinese manufacturing sector produces 32% of national GDP and supplies 12% of global exports.
    JEL: L60 O14 O44 Q54 Q56
    Date: 2017–11
  3. By: Florian Knobloch; Hector Pollitt; Unnada Chewpreecha; Jean-Francois Mercure
    Abstract: We take a simulation-based approach for modelling ten scenarios, aiming at near-zero global CO2 emissions by 2050 in the residential heating sector, using different combinations of policy instruments. Their effectiveness highly depends on behavioural decision-making by households, especially in a context of deep decarbonisation and rapid transformation. We therefore use the non-equilibrium bottom-up model FTT:Heat, which allows to simulate policy-induced technology transitions in a context of inertia and bounded rationality. Results show that a decarbonisation of residential heating is achievable until 2050, but requires substantial policy efforts from 2020 onwards. Due to long average lifetimes of heating equipment, the transition needs decades rather than years. Policy mixes are projected to be more effective for driving the market of new technologies, compared to the reliance on a carbon tax as the only policy instrument. In combination with subsidies for renewables, near-zero decarbonisation can be achieved with a residential carbon tax of 50-150Euro/tCO2. The policy-induced technology transition would increase heating costs faced by households initially, but lead to net savings in the medium term. From a global perspective, the decarbonisation largely depends on policy-implementation in Europe, North-America, China and Russia.
    Date: 2017–10
  4. By: Simone Tagliapietra
    Abstract: The issue The European Union energy system is becoming greener and more efficient, but its most polluting component – coal – continues to provide a quarter of its electricity. This is bad for the climate, the environment and human health. A number of EU countries continue to support coal politically for energy security and socio-economic reasons. The energy security argument is understandable, but the feasibility of the energy transition away from coal should not be doubted. Several countries have already successfully phased out coal without compromising energy security or competitiveness. The socio-economic argument is illusory. Coal mining employment in Europe does not represent a sizable issue either at national or regional level. Policy challenge The EU should propose that its member countries speedily phase out coal. At the same time, it should put in place a scheme to guarantee the social welfare of coal miners who stand to lose their jobs. The EU does not need to establish a new fund for this; it only needs to make better use of the European Globalisation Adjustment Fund (EGF). For the post-2020 period, the EGF should be transformed into a ‘European Globalisation and Climate Adjustment Fund’ with a higher budget overall, of which €150 million per year should be used to support coal mining regions. By mobilising 0.1 percent of its total budget, the EU could provide a significant incentive to coal-reliant member states to phase out coal, generating substantial benefits for the climate, the environment and human health.
    Date: 2017–11
  5. By: Balsalobre-Lorente, Daniel; Shahbaz, Muhammad; Roubaud, David; Farhani, Sahbi
    Abstract: This study explores the relationship between economic growth and CO2 emissions in the so-called European Union 5 (EU-5) countries (Germany, France, Italy, Spain, and the United Kingdom) for the 1985-2016 period. In doing so, we employ a carbon emission function to investigate the environmental Kuznets curve phenomenon, which describes a relationship between economic growth and environmental degradation. The empirical results confirm the existence of an N-shaped relationship between economic growth and CO2 emissions in the EU-5 countries. We incorporate additional variables such as renewable electricity consumption, trade openness, natural resource abundance, and energy innovation to augment the carbon emission function. Renewable electricity consumption, natural resources, and energy innovation improve environmental quality, while trade openness and the interaction between economic growth and renewable electricity consumption exert a positive impact on CO2 emissions. This study is novel in that it presents an interaction between economic growth and renewable electricity consumption. We also confirm the need for renewable energy regulations related to increasing renewable sources and promoting energy innovation to reduce the negative effects of energy and fossil energy resources on environmental degradation.
    Keywords: Economic Growth, Renewable Electricity, Natural Resources, Environment
    JEL: A1
    Date: 2017–10–12
  6. By: M. Indra al Irsyada; Anthony Halog; Rabindra Nepal
    Abstract: Failures of countries in setting and achieving renewable energy targets are prevalent, raising uncertainty about the overall contribution of renewable energy to global emission reductions. Lack of policy and incorrect modelling analysis are among the sources of the failures. Thus understanding these two sources is crucial to improve confidence about renewables. We assess errors in the projections of renewable energy capacity and production in the United States and European Union countries, which have high commitments to green energy supply. Our results show that solar energy has the lowest uncertainty due to having the most achievable projections of capacity and production. On the other hand, other renewables may entail attractive policies, and further research is needed related to advancing reliable technology and accurate weather predictions. Our findings also provide ranges of projection uncertainty of six renewable energy technologies and, at the same time, draw attention to ways to rectify the dominant errors in the renewable energy projections.
    Keywords: Projection error, commitment, technical issues, modeling and policy
    Date: 2017–11
  7. By: Thorsten Upmann; Stefan Behringer
    Abstract: In standard models of spatial harvesting, the resource is distributed over the complete domain and the agent is able to control the harvesting activity everywhere all the time. In some cases though, it is more realistic to assume that the resource is located at a single point in space and that the agent is required to travel there in order to be able to harvest. In this case, the agent faces a combined travelling–and–harvesting problem. We scrutinize this type of a two-stage optimal control problem, and illuminate the interdependencies between the solution of travelling and that of the harvesting sub-problem. Since the model is parsimoniously parameterised, we are able to analytically characterise the optimal policy of the complete travelling–and–harvesting problem. In an appendix we show how bounds on either control, i. e. on acceleration and on the harvesting capacity, as well as a positive discount rate affect the solution of the travelling–and–harvesting problem.
    Keywords: optimal travelling-and-harvesting decision, spatial renewable resource, continuous time, optimal control, two-stage control problem
    JEL: Q20 Q22 C61
    Date: 2017
  8. By: Abbas, Malaika
    Abstract: The paper quantifies the various costs incurred due to power outages in Punjab by the small scale manufacturing sector. The previous studies that calculated the cost of power outrages have focused at a national level only. The type of costs identified are: Direct Costs like spoilage cost and value of output loss and Adjustment Costs like inbuilt power generation costs (capital cost, fuel cost, operation and maintenance costs of generators etc.) and costs of other adjustments. The methodology used for quantifying the cost of outages is based largely on Pasha, et al. (1989). In conclusion, the paper estimates that the total outage cost for small scale industry of Punjab for 2012 is almost Rs. 21 billion which accounts for 12.4 percent of small scale manufacturing value added. Policy recommendations are made to mitigate the impact of load shedding.
    Keywords: Punjab Power outages Direct Costs Adjustment Costs Small Scale Manufacturing
    JEL: E2 E23 H4 P41 P42 P48 R11
    Date: 2016–10–05
  9. By: Subbiah, Adritha; Mansoor, Sahar; Misra, Rachita; Jaffer, Huda; Tiwary, Raunak
    Abstract: Integrated Energy Centres, solar power community hubs for need based services, have been operationalised by SELCO Foundation for informal migrant communities in Karnataka, India since 2011. There are 26 IECs till date, offering 22 different services. Through the interventions, 6074 households have been impacted. The paper describes three different models through case studies illustrating their operational and financial aspects.
    Keywords: energy access; urban slums; solar; livelihoods
    JEL: N0
    Date: 2016–10–07
  10. By: John Wiseman (Melbourne Sustainable Society Institute, University of Melbourne); Stephanie Campbell (Melbourne Sustainable Society Institute, University of Melbourne); Fergus Green (London School of Economics and Political Science)
    Abstract: Until its relatively sudden closure in March 2017, the Hazelwood Power Station in Victoria’s Latrobe Valley was the most carbon-intensive electricity generator in Australia. It became a symbol of Australia’s reliance on coal and an electoral battleground in the bitter political struggles over climate policy that have raged since the mid-2000s. The announcement by Hazelwood’s owners, French multinational power company, Engie, in late 2016 that it would be closing the plant for commercial reasons, therefore came as somewhat of a shock. We argue that Australia’s political and economic institutions help to explain the autonomous decision of Engie to close the plant, the short notice period, and the lack of pre-closure government transition policy. These institutions discourage long-term policymaking and encourage a disproportionate amount of vote-seeking activity directed at marginal electorates. Straightforward “vote-seeking” is however too simplistic an explanation of the transition policies announced at the time of the Hazelwood closure. Of particular relevance is the fact that, over the last few years, the transition away from coal and towards renewable energy has become a virtual inevitability in the Australian energy sector. One important outcome of this trend has been the shift in position of the Australian union movement towards advocacy for “just transition” policies, bringing it both closer to—and, in some cases, in alliance with—environmental groups. Absent institutional reform, the most likely means by which coal closures could move closer to “best practice” in Australia is through action by unions and environmental groups to mobilise institutional investors to pressure energy companies to adopt more worker- and community-friendly, “just transition” policies. The most plausible institutional reform path, given Australia’s existing political-economic institutions, would involve the direct regulation of companies’ transition obligations. Yet, the more interventionist the regulatory change, the greater the costs imposed on existing generators and the more politically contentious the reforms are likely to be. In this difficult policymaking environment, an important variable is likely to be the agency of civil society actors in making the politics of energy/climate policymaking more conducive to just transition-oriented regulatory reforms. Our case study has demonstrated that the positions of key civil society stakeholders in Australia’s energy debate, including unions, environment groups and to some extent business groups have been converging toward a “just”—or at least an orderly—transition as a dominant political narrative for substantive policies to improve the transition arrangements in the Australian energy sector. Strengthening and perhaps formalising these alliances will improve the incentives for political parties to invest in long-term policies in the energy sector.
    Keywords: Australia, coal transitions, just transitions, regional policy, energy policy
    JEL: O38 R11
    Date: 2017–11
  11. By: Tianyu Cui; Francesco Caravelli; Cozmin Ududec
    Abstract: We study the structure of locational marginal prices in day-ahead and real-time wholesale electricity markets. In particular, we consider the case of two North American markets and show that the price correlations contain information on the locational structure of the grid. We study various clustering methods and introduce a type of correlation function based on event synchronization for spiky time series, and another based on string correlations of location names provided by the markets. This allows us to reconstruct aspects of the locational structure of the grid.
    Date: 2017–10
  12. By: Damir Filipovic; Martin Larsson; Tony Ware
    Abstract: Polynomial processes have the property that expectations of polynomial functions (of degree $n$, say) of the future state of the process conditional on the current state are given by polynomials (of degree $\leq n$) of the current state. Here we explore the application of polynomial processes in the context of structural models for energy prices. We focus on the example of Alberta power prices, derive one- and two-factor models for spot prices. We examine their performance in numerical experiments, and demonstrate that the richness of the dynamics they are able to generate makes them well suited for modelling even extreme examples of energy price behaviour.
    Date: 2017–10
  13. By: Heyen, Daniel
    Abstract: Technological innovation is a key strategy for tackling climate change and other environmental problems. The required R&D expenditures however are substantial and fall on self-interested countries. Thus, the prospects of successful innovation critically depend on innovation incentives. This paper focuses on a specific mechanism for strategic distortions in this R&D game. In this mechanism, the outlook of future conflicts surrounding technology deployment directly impacts on the willingness to undertake R&D. Apart from free-riding, a different deployment conflict with distortive effects on innovation can occur. Low deployment costs and heterogeneous preferences might give rise to 'free-driving' (Weitzman 2015): The country with the highest preference for technology deployment, the free driver, may dominate the deployment outcome to the detriment of others. The present paper develops a simple two stage model for analysing how technology deployment conflicts, free-riding and free-driving, shape R&D incentives of two asymmetric countries. The framework gives rise to rich findings, underpinning the narrative that future deployment conflicts extend to the R&D stage. While the outlook of free-riding unambiguously weakens innovation incentives, the findings for free-driving are more complex, including the possibility of excessive R&D as well as incentives for counter-R&D.
    Keywords: Environmental innovation; R&D game; innovation incentives; externalities; strategic conflicts; climate engineering; geoengineering; free driver externality
    JEL: D62 H41 O31 Q54 Q55
    Date: 2016–10–25
  14. By: Fouquet, Roger
    Abstract: This paper draws lessons from long run trends in energy markets for energy and climate policy. An important lesson is that consumer responses to energy markets change with economic development. The British experience suggests that income elasticities1 of demand for energy services have tended to follow an inverse-U shape curve. Thus, at low levels of economic development, energy service consumption tends to be quite responsive to per capita income changes; at mid-levels, consumption tends to be very responsive to changes in income per capita; and, at high levels, consumption is less responsive to income changes. The paper also highlights the importance of formulating integrated energy service policies to reduce risks to developing countries of locking-in to carbon intensive infrastructure or behaviour. Without guidance and incentives, rapid economic development is likely to lock consumers into high energy service prices in the long run and bind the economy onto a high energy intensity trajectory with major long run economic and environmental impacts. Thus, effective energy service policies in periods of rapid development, such as in China and India at present, are crucial for the long run prosperity of the economy and their future ability to mitigate carbon dioxide emissions.
    Keywords: energy history; energy transitions; economic development; climate policy
    JEL: N0
    Date: 2016–12–05
  15. By: Frieling, Julius (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: Since the Industrial Revolution, the economy of the UK has transformed from that of an industrial manufacturing giant to a service economy and a central hub for the financial sector. Energy and energy services derived from fossil fuels have played a key role as drivers behind this structural change. Using data from 1855—2015 on capital, labor, and energy in a CES production function, we show that during this period input factors were mostly gross complements. However, between 1960 and 1980, the elasticity of substitution of energy increased substantially, from around 0.7 to more than 2.4. These high elasticity estimates were not permanent, and this wave of change that characterized the transition has since dissipated. Elasticities have since returned to even lower values around 0.3, indicating that energy services which depend primarily on fossil fuel inputs, such as transportation, pose a serious limit to the efficacy of efforts aimed at reducing fossil fuel consumption.
    Keywords: Elasticity of substitution; Energy inputs; Aggregate Production; Industrialization; Structural change
    JEL: E13 E23 N10 Q43
    Date: 2017–06
  16. By: Shahbaz, Muhammad
    Abstract: This paper investigates the asymmetric impact of energy consumption on economic growth by including oil prices, capital and labour as additional determinants in production function. In doing so, the non-linear ARDL bounds testing approach is applied for the period of 1985QI-2016QIV. The empirical evidence confirms the presence of symmetric and asymmetric cointegration between energy consumption, oil prices, capital, labour and economic growth over the period of 1985QI-2016QIV. Furthermore, rise in energy consumption (positive shock) adds to economic growth via stimulating economic activity and energy consumption negative shock retards economic growth insignificantly. Rise (positive shock) and fall (negative shock) in oil prices decline and stimulate economic growth. Capital and labor affect economic growth positively and negative by positive and negative shocks in capital and labor. The empirical findings open new insights for policy makers for long-run and sustainable economic development.
    Keywords: Energy Consumption, Economic Growth, Oil Prices, Asymmetries
    JEL: A1
    Date: 2017–10–08
  17. By: Elke D. Groh (University of Kassel); Andreas Ziegler (University of Kassel)
    Abstract: This paper examines the acceptance of burden sharing rules that refer to the costs of the German energy transition, which is one of the most challenging and disputed national climate and energy policy measures. Based on data from a comprehensive survey of more than 2,200 citizens, the empirical analysis reveals that the polluter-pays rule has by far the highest support compared with the ability-to-pay rule and especially compared with the equal-pay rule, which is widely refused in the sample. Since the distribution of the costs of the German energy transition is largely in line with the polluter-pays rule, its strong support seems to contribute to the high acceptance of the energy transition at all. The main result of our econometric analysis with multivariate binary and ordered probit models is that not only some attitudinal factors like environmental values and political identification, but especially economic self-interest is relevant since (equivalent) energy expenditures have a significantly negative effect on the support of the polluter-pays rule and especially (equivalent) income has a significantly negative effect on the preference for the ability-to-pay rule. These results suggest that the use of distributional arguments for the criticism of energy policy measures is not necessarily value-driven on the basis of real perceptions of distributive justice, but can also be strategically motivated to prevent and combat economically unfavorable measures. Together with the strong general support of the polluter-pays rule, these results suggest that a sharp reorientation of the German energy transition due to distributional arguments is not very useful.
    Keywords: Climate change; climate and energy policy measures; burden sharing rules; eco-nomic self-interest; attitudinal factors; multivariate binary and ordered probit models
    JEL: Q54 Q48 Q42
    Date: 2017
  18. By: Lopes Moreira Da Veiga, María Helena; Gonçalves Mazzeu, Joao Henrique; Mariti, Massimo B.
    Abstract: This paper models and forecasts the crude oil ETF volatility index (OVX). Themotivation lies on the evidence that the OVX has been used in the last years as an important alternative measure to track and analyze the volatility of future oil prices. The analysis of the OVX suggests that it presents similar features to those of the daily market volatility index. The main characteristic is the long range dependence that is modeled either by autoregressive fractional integrated moving averaging (ARFIMA) models or by heterogeneous autoregressive (HAR) specifications. Regarding the latter family of models, we first propose extensions of the HAR model that are based on the net and scale measures of oil prices changes. The aim is to improve the HAR model by including predictors that better capture the impact of oil price changes on the economy. Second, we test the forecasting performance of the new proposals and benchmarks with the model confidence set (MCS) and the Generalized-AutoContouR (G-ACR) tests interms of point forecasts and density forecasting, respectively. Our main findings are as follows: the new asymmetric proposals have superior predictive ability than the heterogeneous autoregressive leverage (HARL) model under two known loss functions. Regarding density forecasting, the best model is the one that includes the scale measureas a proxy of oil price changes and considers a flexible distribution for the errors.
    Keywords: Scale oil price changes; OVX; Net oil price changes; Forecasting OVX; Leverage; Heterogeneous autoregression
    JEL: C53 C52 C51 Q40
    Date: 2017–11
  19. By: Richard G. Newell; Brian C. Prest
    Abstract: We analyze the price responsiveness of onshore oil supply from conventional versus new unconventional "tight" formations in the United States. We separately analyze three key stages of oil production: drilling wells, completing wells, and production from completed wells. We find that the important margin is drilling investment. We estimate drilling responses of approximately 1.6 percent for tight oil and 1.2 percent for conventional oil per 1 percent change in oil prices. In addition, tight oil wells produce about 4.6 times more oil compared to conventional ones. Together, the long-run price responsiveness of supply is about 6 times larger for tight oil on a per well basis, and about 9 times larger when also accounting for the rise in unconventional-directed drilling. Based on our estimates derived from microdata, we conduct aggregate simulations of incremental oil supply at different time frames and price levels. The simulations show that the U.S. supply response is much larger now due to the shale revolution. Given a price rise to $80 per barrel, U.S. oil production could rise by 0.5 million barrels per day in 6 months, 1.2 million in 1 year, 2 million in 2 years, and 3 million in 5 years. Nonetheless, it takes many months before a substantial portion of the full supply response is online, longer than the 30 to 90 days typically associated with the role of "swing producer" such as Saudi Arabia.
    JEL: D24 L71 Q41
    Date: 2017–10
  20. By: Richard G. Newell; Brian C. Prest
    Abstract: This paper examines how information on the time pattern of expected future prices for crude oil, based on the term structure of futures contracts, can be used in informing whether to draw down, or contribute to the Strategic Petroleum Reserve (SPR). Such price information provides insight on expected changes in the supply-demand balance in the market and can also facilitate cost-effective transitions for SPR holdings. Backwardation in futures curves suggests that market participants expect shocks to be transitory, creating a stronger case for SPR releases. We use vector autoregression to analyze the relationship between the term structure of futures contracts, the management of private oil inventories, and other variables of interest. This relationship is used to estimate the magnitude of the impacts of SPR releases into the much larger global inventories system. Under the assumption that strategic releases can be modeled as surprise inventory additions, impulse response functions suggest that a strategic release of 10 million barrels would temporarily reduce spot prices by about 2% to 3% and mitigate backwardation by approximately 0.8 percentage points. Historical simulations suggest that past releases reduced spot prices by 15% to 20% and avoided about 5 percentage points of backwardation in futures curves, relative to a no-release counterfactual. This research can help policymakers determine when to release SPR reserves based on economic principles informed by market prices. It also provides an econometric model that can help inform the amount of SPR releases necessary to achieve given policy goals, such as reductions in prices or spreads.
    JEL: H4 L78 Q41 Q48
    Date: 2017–10
  21. By: Garanina, Olga L.
    Abstract: The intended contribution of this research is to outline the role of domestic constraints for companiesÙ internationalization strategies in natural gas industry. The paper is focused on Russian case. Special emphasis is made on internal natural gas market organization model, its evolution and impacts for natural gas business strategies implemented by Russian National Oil Companies (NOCs). Research is based on case method. The argumentation is structured in three stages which are (i) comparative analysis of Gazprom and Rosneft as NOCs; (ii) study of the evolution of the natural gas industry organizational model in Russia and (iii) the case of Power of Siberia project.
    Keywords: national oil companies, natural gas industry, liberalization of natural gas market, Russia, organizational model, NOCs, Gazprom, Rosneft,
    Date: 2016
  22. By: Sangyup Choi; Davide Furceri; Prakash Loungani; Saurabh Mishra; Marcos Poplawski-Ribeiro
    Abstract: We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10 percent increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage point on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a better conduct of monetary policy. We further examine the transmission channels of oil price shocks on domestic inflation during the recent decades, by making use of a monthly dataset from 2000 to 2015. The results suggest that the share of transport in the CPI basket and energy subsidies are the most robust factors in explaining cross-country variations in the effects of oil price shocks during the this period.
    Keywords: Monetary policy;JEL Classification Numbers: E31, E37, Q43 Keywords: oil price shocks, inflation pass-through, local projections, oil price shocks, Forecasting and Simulation, Energy and the Macroeconomy, Q43, Keywords: oil price shocks
    Date: 2017–09–05
  23. By: Caselli, Francesco; Tesei, Andrea
    Abstract: We study theoretically and empirically whether natural resource windfalls affect political regimes. We show that windfalls have no effect on democracies, while they have heterogeneous political consequences in autocracies. In deeply entrenched autocracies, the effect of windfalls is virtually nil, while in moderately entrenched autocracies, windfalls significantly exacerbate the autocratic nature of the political system. To frame the empirical work, we present a simple model in which political incumbents choose the degree of political contestability and potential challengers decide whether to try to unseat the incumbents. The model uncovers a mechanism for the asymmetric impact of resource windfalls on democracies and autocracies, as well as the the differential impact within autocracies.
    Keywords: democratization; commodity prices; resource curse
    JEL: O10 P16 Q00
    Date: 2016–07–13
  24. By: Fontana, Magda; Chersoni, Giulia (University of Turin)
    Abstract: The paper assess the effectiveness of a fuel management treatment by modeling the main fire regime drivers through a spatially explicit fire disturbance agent-based model. It covers the interplay between spatial heterogeneity and neighboring interaction among the factors that drive fuel spread dynamics. Finally, it argues that fire prevention policy address growing fire risk exposure at a regional level.
    Date: 2017–09
  25. By: Christoph Boehringer (University of Oldenburg, Department of Economics); Jan Schneider (University of Oldenburg, Department of Economics); Marco Springmann (University of Oldenburg, Department of Economics)
    Abstract: In response to anthropogenic climate change, developed countries have committed themselves to raise 100 billion USD a year from 2020 onwards for addressing the needs of developing countries. In this paper, we investigate the economic and CO2 emission impacts of four alternative options for raising climate funds from public sources in developed countries: CO2 emission prices, wires charges on electricity consumption, a tax on international transport services, and the removal of fossil fuel subsidies. We find that these four options do not only induce very different global costs to raise given amounts of climate funds but have quite diverging implications for the cost incidence between developed and developing countries. Likewise, the global CO2 emission impacts of alternative fund-raising policies differ a lot.
    Keywords: climate finance; computable general equilibrium; green climate fund
    Date: 2017–11
  26. By: Nicholas J. Sanders; Ryan Sandler
    Abstract: Personal automobile emissions are a major source of urban air pollution. Many U.S. states control emissions through mandated vehicle inspections and repairs. But there is little empirical evidence directly linking mandated inspections, maintenance, and local air pollution levels. To test for a link, we estimate the contemporaneous effect of inspections on local air quality. We use day-to-day, within-county variation in the number of vehicles repaired and recertified after failing an initial emissions inspection, with individual-level data from 1998–2012 from California’s inspection program. Additional re-inspections of pre-1985 model year vehicles reduce local carbon monoxide, nitrogen oxide, and particulate matter levels, while re-inspections of newer vehicles with more modern engine technology have no economically significant effect on air pollution. This suggests emissions inspections have become less effective at reducing local air pollution as more high-polluting vehicles from the 1970s and 1980s leave the road, and provides an example of how the social efficiency of programs can change under improving technologies. We also estimate the importance of station quality, using a metric devised for California’s new STAR certification program. We show re-inspections of older vehicles conducted by low quality inspection stations do not change air pollution, while inspections at high quality stations have a moderate effect on pollution concentrations, which suggests the potential for ineffective monitoring at low quality inspection stations. We find little effect on ambient ozone levels, regardless of station quality or vehicle age.
    JEL: Q52 Q53 Q58
    Date: 2017–10
  27. By: Gail Cohen; João Tovar Jalles; Prakash Loungani; Ricardo Marto
    Abstract: Recent discussions of the extent of decoupling between greenhouse gas (GHG) emissions and real gross domestic product (GDP) provide mixed evidence and have generated much debate. We show that to get a clear picture of decoupling it is important to distinguish cycles from trends: there is an Environmental Okun's Law (a cyclical relationship between emissions and real GDP) that often obscures the trend relationship between emissions and real GDP. We show that, once the cyclical relationship is accounted for, the trends show evidence of decoupling in richer nations—particularly in European countries, but not yet in emerging markets. The picture changes somewhat, however, if we take into consideration the effects of international trade, that is, if we distinguish between production-based and consumption-based emissions. Once we add in their net emission transfers, the evidence for decoupling among the richer countries gets weaker. The good news is that countries with underlying policy frameworks more supportive of renewable energy and supportive of climate change tend to have greater decoupling between trend emissions and trend GDP, and for both production- and consumption-based emissions.
    Date: 2017–08–30
  28. By: Lutz Sager
    Abstract: This paper analyses the relationship between the distribution of income and the carbon dioxide content of household consumption. Household carbon is estimated by linking expenditure data to productive sectors and their carbon intensity derived through input-output analysis. Environmental Engel curves (EECs) are estimated, which describe the relationship between household income and CO2 in the United States between 1996 and 2009. A second-degree polynomial specification in income is found to approximate well the fit of more flexible nonparametric models. These parametric EECs are used to decompose the within-year household carbon inequality as well as the evolution of household carbon over time. In both cases, household income appears to be a main driver of carbon consumption. A potential “equity-pollution dilemma” is described and a method to quantify it is proposed. Assuming (conditional) homogeneity in preferences, EEC estimates predict that progressive income transfers would raise household carbon by 5.1% at the margin and by about 2.3% under complete income redistribution in 2009.
    Date: 2017–11
  29. By: Phoebe Koundouri (Dept. of International and European Economic Studies, Athens University of Economics and Business); Nikitas Pittis (University of Piraeus, Greece); Panagiotis Samartzis; Nikolaos Englezos; Andreas Papandreou
    Abstract: This paper focuses on different types of ambiguity that affect climate change regulation. In particular, we analyze the effect of the interactions among three types of agents, namely, the decision maker (DM), the experts and the society, on the probabilistic properties of green-house gas (GHG) emissions and the formation of environmental policy, under two types of ambiguity: "deferential ambiguity" and "preferential ambiguity". Deferential ambiguity refers to the uncertainty that DM faces concerning to which expert's forecast (scenario) to defer. Preferential ambiguity stems from the potential inability of DM to correctly discern the society's preferences about the desired change of GHG emissions. This paper shows that the existence of deferential and preferential ambiguities have significant effects on GHG emissions regulation.
    Keywords: decision making on climate change, ambiguity, deep uncertainty, deferential ambiguity, preferential ambiguity, tail risks of environmental-policy variables.
    JEL: D8 D80 D81 D83 D
    Date: 2017–11
  30. By: Lea Skræp Svenningsen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: This study examines whether people have distributional preferences for the impacts of climate policy when making donations towards such policies. In an online choice experiment, using a real donation mechanism, a representative sample of 95 members of the Danish public are provided 27€ and asked to make 16 donation choices among different climate policy options. The climate policies are described in terms of two main outcome variables, including future effects on income in 2100 and present co-benefits from mitigation action. Both outcomes are described for three specific regions of the world, Western Europe, Southeast Asia and Sub-Saharan Africa. For each participant, one policy choice was drawn at random to be realised and the total amount donated by participants was used to purchase and withdraw CO2 quotas and credits in the European Emission Trading Scheme and as a donation to the UN Adaptation Fund. A random parameter logit model shows that distributional concerns matter for people when they donate to climate policy and that elements of both inequity aversion and general altruism influence the choice of climate policy. The results underscore the importance of considering preferences for distributional outcomes when designing climate policy.
    Keywords: choice experiment, climate change, inequity aversion, altruism, random parameters logit, intergenerational, distributional social preferences
    JEL: D30 D91 Q51 Q54 Q58
    Date: 2017–10
  31. By: Lopez-Uribe, Maria del Pilar; Castells-Quintana, David; McDermott, Thomas K. J.
    Abstract: The links between climate change, economic growth and economic development have gained increasing attention over recent years in both the academic and policy literature. However, most of the existing literature has tended to focus on direct, short run effects of climate change on the economy, for example due to extreme weather events and changes in agricultural growing conditions. In this paper we review potential effects of climate change on the prospects for long-run economic development. These effects might operate directly, via the role of geography (including climate) as a fundamental determinant of relative prosperity, or indirectly by modifying the environmental context in which political and economic institutions evolve. We consider potential mechanisms from climate change to long-run economic development that have been relatively neglected to date, including, for instance, effects on the distribution of income and political power. We conclude with some suggestions for areas of future research.
    JEL: J1
    Date: 2017

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