nep-ene New Economics Papers
on Energy Economics
Issue of 2018‒02‒05
34 papers chosen by
Roger Fouquet
London School of Economics

  1. Can a reduction in fuel use result from an endogenous technical progress in motor vehicles? A partial and general equilibrium analysis By Gioele Figus; J Kim Swales; Karen Turner
  2. Energy efficiency as an instrument of regional development policy? Trading-off the benefits of an economic stimulus and energy rebound effects By Gioele Figus; Patrizio Lecca; Peter McGregor; Karen Turner
  3. How Robust are Estimates of the Rebound Effect of Energy Efficiency Improvements? A Sensitivity Analysis of Consumer Heterogeneity and Elasticities By Kulmer, Veronika; Seebauer, Sebastian
  4. System Transition and Structural Change Processes in the Energy Efficiency of Residential Sector: Evidence from EU Countries By Valeria Costantini; Francesco Crespi; Elena Paglialunga; Giorgia Sforna
  5. Direct and Indirect Energy Rebound Effects in German Households: A Linearized Almost Ideal Demand System Approach By Schmitz, Hendrik; Madlener, Reinhard
  6. Individual Drivers for Direct and Indirect Rebound Effects: A Survey Study of Electric Vehicles and Building Insulation in Austria By Seebauer, Sebastian
  7. The Smart City Block: another level of intervention By Frédéric Klopfert; Olivier Mortehan; Hélène Joachain
  8. Techno-Economic Analysis of Micro Fuel Cell Cogeneration and Storage By Löbberding, Laurens; Madlener, Reinhard
  9. The Rise of Third Parties and the Fall of Incumbents Driven by Large-Scale Integration of Renewable Energies: The Case of Germany By Gert Brunekreeft; Marius Buchmann; Roland Meyer
  10. Welfare and Redistribution in Residential Electricity Markets with Solar Power By Feger, Fabian; Pavanini, Nicola; Radulescu, Doina
  11. Optimal location of renewable power By Henrik Bjørnebye; Cathrine Hagem; Arne Lind
  12. Renewable Energy, Quality of Institutions and Economic Growth in MENA Countries: a Panel Cointegration Approach By Saidi, Hichem; El Montasser, Ghassen; Ajmi, Noomen
  13. Planning and Construction of Canop-E Networks for Inclusive, Sustainable Growth in Developing Countries (E.g.- India) By Hegadekatti, Kartik
  14. Coal, Renewable, or Nuclear? A Real Options Approach to Energy Investments in the Philippines By Agaton, Casper
  15. Comparing the Forecasting Performances of Linear Models for Electricity Prices with High RES Penetration By Angelica Gianfreda; Luca Rossini; Francesco Ravazzolo
  16. Modeling the residential electricity demand in the US By Afees A. Salisu; Oluwatomisinn Oyewole; Lateef O. Akanni
  17. Modelling German electricity wholesale spot prices with a parsimonious fundamental model – Validation and application By Philip Beran; Christian Pape; Christoph Weber
  18. The energy costs of historic preservation By Hilber, Christian A. L.; Palmer, Charles; Pinchbeck, Edward W.
  19. Threshold Policy Effects and Directed Technical Change in Energy Innovation By Lionel Nesta; Elena Verdolini; Francesco Vona
  20. Investigating the Link Between Foreign direct investment, Energy consumption and Economic growth in Argentina By Mavikela, Nomahlubi; Khobai, Hlalefang
  21. Resource urbanisms: Asia’s divergent city models of Kuwait, Abu Dhabi, Singapore and Hong Kong By Rode, Philipp; Gomes, Alexandra; Adeel, Muhammad; Sajjad, Fizzah; McArthur, Jenny; Alshalfan, Sharifa; Schwinger, Peter; Tunas, Devisari; Lange, Christiane; Montagne, Clemence; Hertog, Steffen; Koch, Andreas; Murshed, Syed Monjur; Wendel, Jochen; Duval, Alice
  22. Dynamic Methods for Analyzing Hedge-Fund Performance: A Note Using Texas Energy-Related Funds By Chen, Jiaqi; Tindall, Michael
  23. An Overwiew of Economic Impacts of U.S. Shale Gas Revolution By Janda, Karel; Kondratenko, Ivan
  24. An Overwiew of Economic Impacts of Shale Gas on EU Energy Security By Janda, Karel; Kondratenko, Ivan
  25. Evidence for the Explosive Behavior of Food and Energy Prices: Implications in Terms of Inflation Expectations By Aytul Ganioglu
  26. A Model of the Fed's View on Inflation By Hasenzagl, Thomas; Pellegrino, Filippo; Reichlin, Lucrezia; Ricco, Giovanni
  27. The Effect of Oil Prices on Break-Even Inflation Rates of the United States (in Korean) By Jinyong Kim; Junecheol Kim; Hyung Joon Lim
  28. News, Noise and Oil Price Swings By Gambetti, Luca; Moretti, Laura
  29. Speculation in Commodity Futures Markets, Inventories and the Price of Crude Oil By Byun, Sung Je
  30. Structural Budget Balances in Oil-Rich Countries: The Cases of Azerbaijan, Kazakhstan, and Russia By Vugar Ahmadov; Ulvi Sarkarli; Ramiz Rahmanov
  32. EU Emissions Trading: Policy-Induced Innovation, or Business as Usual? Findings from Company Case Studies in the Republic of Croatia By Martin Larsson
  33. Regulatory institutions and market-based climate policy in China By Coraline Goron; Cyril C. Cassisa
  34. Greenhouse Gas Emissions Intensity and the Cost of Capital By Trinks, Arjan; Ibikunle, Gbenga; Mulder, Machiel; Scholtens, Bert

  1. By: Gioele Figus (CEP, Institute for International Public Policy, University of Strathclyde); J Kim Swales (Departrment of Economics, University of Strathclyde); Karen Turner (CEP, Institute for International Public Policy, University of Strathclyde)
    Abstract: In this paper we employ a partial equilibrium approach to model private transport consumption as a household self-produced commodity formed by vehicle and fuel use. We show that under certain conditions vehicle-augmenting technical improvements can reduce fuel use. We then extend the analysis through Computable General Equilibrium simulations for the UK in order to investigate the wider implications of vehicle-augmenting efficiency improvements when prices and nominal income are endogenous. With a conventional macroeconomic approach, improvements in the efficiency of household consumption simply change the composition of household demand. However, when we adjust the consumer price index for changes in the price of private transport service (not observable via a market price), as advocated in Gordon (2016) there is an additional supply-side stimulus to competitiveness.
    Keywords: technical progress, energy efficiency, private transport, energy service.
    JEL: C68 D58 Q43 Q48
    Date: 2017–05
  2. By: Gioele Figus (CEP, International Public Policy Unit, University of Strathclyde); Patrizio Lecca (European Union); Peter McGregor (Department of Economics, University of Strathclyde); Karen Turner (CEP, International Public Policy Unit, University of Strathclyde)
    Abstract: Previous studies show that improving efficiency in household energy use can stimulate a national economy through an increase and change in the pattern of the aggregate demand. However, this may impact competitiveness. Here we find that in an open region, interregional migration of workers may give additional momentum to the economic expansion, by relieving pressure on the real wage and the CPI. Furthermore, the stimulus will be further enhanced by the greater fiscal autonomy that Scotland is set shortly to enjoy. By considering a range of CGE simulation scenarios we show that there is a tension between the economic stimulus from energy efficiency and the scale of rebound effects. However, we also show that household energy efficiency increases do typically generate a “double dividend†of increased regional economic activity and a reduction in carbon emissions.
    Keywords: energy efficiency, regional development policy, energy rebound, regional fiscal autonomy, general equilibrium
    JEL: C68 D58 Q43 Q48 R28 R58
    Date: 2017–02
  3. By: Kulmer, Veronika (JOANNEUM RESEARCH Forschungsgesellschaft mbH); Seebauer, Sebastian (JOANNEUM RESEARCH Forschungsgesellschaft mbH)
    Abstract: Economy-wide rebound effects may undermine climate policies relying on energy efficiency improvements. However, available rebound estimates diverge widely. We illustrate the crucial role of model assumptions of household heterogeneity and elasticities. A computable general equilibrium model of the Austrian economy incorporates multiple household groups with heterogeneous preferences and analyzes how improving efficiency by 10% affects household fossil fuel consumption. In the base model, economy-wide rebound is 65%; different household groups show direct rebound of 8-12%; thus, indirect rebound mainly contributes to economy-wide rebound. A sensitivity analysis using Monte Carlo simulation varies elasticities between household groups, namely substitutability between material and energy goods, and between different energy goods. In 160 simulation runs, the economy-wide rebound emerges as rather robust. By contrast, direct rebound varies widely among household groups and attains 30%, where reciprocal feedback between groups builds up. In the base model, a fossil fuel tax rate of 43% neutralizes the economy-wide rebound. When elasticities in 180 simulation runs are varied, this tax rate spans from 15% to 80%. Thus, rebound estimates and derived policy advice, such as specific rates and numbers, should be treated with great caution, unless elasticity parameters are reliable and account for heterogeneous consumer preferences.
    Keywords: Economy-wide rebound; sensitivity analysis; CGE model; household heterogeneity
    JEL: C68 D58 Q41
    Date: 2017–11
  4. By: Valeria Costantini (Roma Tre University, Rome, Italy); Francesco Crespi (Roma Tre University, Rome, Italy); Elena Paglialunga (Roma Tre University, Rome, Italy); Giorgia Sforna (Roma Tre University, Rome, Italy)
    Abstract: This paper aims to analyse the evolution of energy efficiency systems for the residential sector of EU countries over the past twenty years and the associated process of structural change occurred in EU economies. To this purpose, we develop a set of indicators to measure some significant characteristics of the energy efficiency systems and map European countries in terms of four dimensions: energy system, innovation system, policy mix design and export competitiveness. Building on these indicators we develop a cluster analysis identifying non-arbitrary homogeneous country groups according to several characteristics in order to investigate the co-evolution of technological trajectories, energy use performance and structural change in this specific domain. Results suggest the distinction of EU countries into four groups, that are individually and comparatively scrutinized shedding light on how the four dimensions here considered dynamically evolved and interacted within and across countries. Empirical findings reveal that the design of the domestic policy mix may play a key role in shaping technological trajectories and structural change processes that in turns allow an increase in external competitiveness performance. Such positive impact appears to be closely related to the quality and quantity of international relationships with main economic partners.
    Keywords: eco-innovation; policy mix; international competitiveness; structural change; energy efficiency; residential sector
    JEL: O31 O38 Q48 Q55 Q58
    Date: 2018–01
  5. By: Schmitz, Hendrik (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: We estimate direct and indirect energy rebound effects for a wide variety of goods and services in Germany. To this end, we employ a linearized approximation of the popular Almost Ideal Demand System (LAIDS) approach suggested by Deaton and Muellbauer (1980). Excluding measures of energy efficiency when estimating rebound can lead to biased results. We alleviate this shortcoming previous research has suffered from by explicitly accounting for energy efficiency in our estimations. Using data for Germany from 1970 to 2014, we find moderate direct and significant indirect rebound effects for different energy carriers across four model specifications. Income rebound effects are counterbalanced by significant negative substitution effects, which in some cases even lead to negative overall rebound estimates.
    Keywords: Rebound effects; Germany; LAIDS; Energy efficiency
    JEL: D12 Q41
    Date: 2017–09
  6. By: Seebauer, Sebastian (JOANNEUM RESEARCH Forschungsgesellschaft mbH)
    Abstract: Rebound effects may undermine current energy policy pathways centred on more energy efficient technologies. The present study analyses why household-level rebound occurs after purchasing an electric vehicle or installing building insulation. Direct and indirect rebound behaviour are operationalised as rearrangements of consumption patterns over time, drawing on concepts of mental accounting and compensatory behaviours. Structural equation modelling is applied to survey data on adopters of electric cars (n=575) and building insulation (n=1,455) in Austria. A complementary longitudinal sample of adopters of electric bicycles (n=111) validates the findings. Pro-environmental values and, albeit more weakly, personal norms for environmentally conscious consumption counteract rebound behaviour. Social norms for environmentally conscious consumption increase rebound. Values of frugality and modesty show no discernible impact. These drivers apply similarly to all energy efficiency technologies investigated. In the case of building insulation, low-income and energy-poor households are more liable to rebound; moreover, habitual heating practices increase rebound. Policy design could leverage the drivers studied here to combat rebound, for instance by prioritising consumer segments with a lower risk of rebound, or by supporting rebound-averse mindsets in public communication. Future research should conduct longitudinal studies to strengthen causal inferences about changes in consumption patterns over time.
    Keywords: Rebound effect; technology adoption; behavioural change; negative spillover; moral licensing
    JEL: E21 Q41
    Date: 2017–11
  7. By: Frédéric Klopfert; Olivier Mortehan; Hélène Joachain
    Abstract: Increasing the rate of renovation for the existing building stock is a crucial challenge for EU’s energy policy. The Smart City Block (SCB) project proposes an innovative answer to this challenge. The underlying hypothesis is that introducing a collective dimension to renovation could result in increasing rates of renovation while also impacting positively the efficiency of the renovation and the social ties within urban areas. The collective dimension considered is the city block in Brussels. The first part of this paper describes the theoretical part of the project that was necessary to develop an adapted methodology. It describes the SCB offering, Brussels segmentation and some results of surveys. The SCB offering shows that many different options can be proposed to the city block dwellers, ranging from a collective insulation, efficient heating systems and shared photovoltaics to collective kitchen garden in the inner space of the block, shared vehicles or shared spaces. This is especially relevant for Brussels where city blocks often have an inner space that could be used. Besides, the segmentation of Brussels based on city block characteristics offers a typology that can be further used to target specific environmental or social deficit. However, the collective dimension introduced in the project is challenging for western individualistic minds. In order to evaluate the acceptance of households, a survey was conducted on 4 city blocks in Brussels, representing over 450 households. It shows a clear willingness to investigate the concept further but only if concrete proposals with estimations of energy and financial savings are provided. Sharing space, equipment and activities was more positively accepted than what we initially expected. Although the attitude-behaviour gap must not be underestimated, this opening can be viewed as an evolution of lifestyles in some segments of the population. Governance and institutional arrangements are expected to play a critical role in supporting this evolution. The second part of the paper relates to the practical part of the research. Our selection process aimed at locating two types of city blocks: a “fuel poor” city block - where the inhabitants face comfort and energy cost difficulties – and a so-called “early adopter” city block – where inhabitants have a positive attitude for the SCB concept. In the “early adopter” city block, located in Uccle, brainstorming meetings and coelaboration meetings were held as to elaborate an SCB model, with the inhabitants and in accordance with their aspirations and needs. Different solutions, including district heating, shared photovoltaics, shared vehicles and collective insulation were modelled both technically and economically. Financing solutions were also proposed. In the “fuel poor” city block, located in Saint-Josse, we conducted a survey on the needs of inhabitants, commercial activities and owners (occupants or landlords). The need for increased energy efficiency is clearly expressed but we also identified the important barriers related to the ownership structure of the block. Prior to the conclusions and proposal for further research on this topic, a section is dedicated to a discussion on the methodology and the hypotheses used during this research.
    Keywords: Retrofit; co-housing; urban planning; energy efficiency; households; collective action; shared resources; mobility
    JEL: R20 Q01 Q56
    Date: 2018–01–11
  8. By: Löbberding, Laurens (RWTH Aachen University); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: In this paper, the effectiveness of support schemes for micro fuel cells in Germany is analyzed with regard to the latest market conditions, support schemes, and legislative changes. Specifically, we analyze whether polymer electrolyte membrane fuel cells (PEMFCs) are a feasible investment option for residential usage in Germany, or whether they are likely to become so soon. Furthermore, we investigate whether electric energy storage could be a useful extension to the domestic fuel cell system by supplying short-term peak demand, and thus increasing self-consumption and potentially the overall economic merit. We find that PEMFCs are unlikely to become a competitive technology by 2020, and it may take quite some time to achieve a substantial market diffusion. Finally, we find that electric energy storage in combination with an FC system is found not to be a worthwhile investment in a grid-connected scenario.
    Keywords: CHP; Micro fuel cell; PEMFC; Battery storage; Economic evaluation; Market diffusion Germany
    JEL: Q40
    Date: 2016–12
  9. By: Gert Brunekreeft; Marius Buchmann; Roland Meyer
    Abstract: The energy transition changes the electricity supply industry in Germany dramatically. Large-scale integration of RES triggers significant market entry of third parties, i.e. non-incumbent private investors. Empirical evidence confirms the growing amount of intra-sector trade, while electricity supply is getting decentralized. Together with non-electric third parties (e.g. ICT) the system starts to become fragmented. The electricity supply industry changes quickly from a top-down, single-firm game, into a decentralized multiple-player system. Moreover, the incumbent conventional market parties are facing “disruptive challenges”: unless they adjust their business strategy quickly, they are unlikely to survive. We briefly introduce how the incumbents are radically adopting new strategies in an attempt to internalize the energy transition and the rise of third parties.
    Keywords: Electric Utilities, Market Structure, Firm Strategy
    JEL: L94 L11
    Date: 2016–04
  10. By: Feger, Fabian; Pavanini, Nicola; Radulescu, Doina
    Abstract: An increasing number of households installing solar panels raises two challenges for regulators: network financing and vertical equity. We propose an optimal tariff design for policymakers to incentivise solar panel adoptions, while guaranteeing the sustainability and equitable distribution of network costs. We estimate structural models of energy demand and solar panel adoption, using a unique matched dataset on energy consumption, income, wealth, solar panel installations, and building characteristics for 135,000 households in the Canton of Bern (Switzerland) in 2008-2013. Our counterfactuals recommend the optimal solar panel installation cost subsidies and optimal tariffs to achieve various solar energy targets.
    JEL: D12 D31 L94 L98 Q42 Q52
    Date: 2017–12
  11. By: Henrik Bjørnebye; Cathrine Hagem (Statistics Norway); Arne Lind
    Abstract: A decarbonization of the energy sector calls for large new investments in renewable energy production. When choosing the location for increased production capacity, the producer has typically limited incentives to take fully into account the investments costs of the subsequent need for increased grid capacity. This may lead to inefficient choices of location. We discuss the regulatory background for an integrated EU electricity market, the binding renewable targets, and renewable incentives. We explore analytically the design of feed-in premiums that secure an optimal coordinated development of the entire electricity system. We investigate numerically the potential welfare cost of a non-coordinated development of grids and production capacity in the Norwegian energy system. Our result indicates that grid investment costs can be substantially higher when the location decision is based on private profitability compared with a socially optimal location. However, the difference in the sum of grid investment cost and production cost is much more modest, as location based on private profitability leads to capacity increase in areas with better wind conditions.
    Keywords: Energy policy; renewable targets; wind power; location of renewable energy production; feed-in premiums
    JEL: Q42 Q48 Q58
    Date: 2017–06
  12. By: Saidi, Hichem; El Montasser, Ghassen; Ajmi, Noomen
    Abstract: In this paper, we examine the relationship between renewable energy and economic growth taking into account institutional measures. Using panel cointegration tests, we found that these two variables and any institutional measure, of all considered in this study, are co-integrated. Furthermore, we found a strong causality running from renewable energy and any institutional measure, except for law and order, to growth. A reverse path is also observed since there is also a strong causality running from growth to renewable energy when the causal regression includes any institutional measure. Policy implications are accordingly derived.
    Keywords: Cross-section dependence; Panel unit root tests; Panel cointegration tests
    JEL: C33 Q2 Q20
    Date: 2018–01–23
  13. By: Hegadekatti, Kartik
    Abstract: In the next few years, India will be the most populous nation on earth. This large population will need a huge increase in agricultural productivity. At the same time, agricultural activity is highly energy and resource intensive. Moreover, many places in India are facing water crisis. Therefore an integrated solution to cultivate food for the people by using water and resources in a sustainable manner is needed. A Canop-E is a large structure that has integrated harnessing of water, energy and food. I propose an idea to build a network of structures called Canop-E Network which will harness solar and wind power in an integrated manner in developing nations. Additionally it will provide water harvesting facilities also. Using the renewable energy and harvested water, we can grow food. The energy generated can also be used to desalinate water and used in arid areas. At the same time it will also protect the inhabitants of settlements in the structure from rain, sunlight and inclement weather. Thus an integrated solution to food, water and energy security can be obtained. This can be extrapolated to other developing nations to provide the people with inexpensive, inclusive and sustainable living.
    Keywords: Renewable Energy, Solar, Wind, Water, Hydroponics, Water Harvesting
    JEL: O18 P28 P48 Q01 Q18 Q25 Q42 Q43 Q48 Q55 Q56
    Date: 2017–03–31
  14. By: Agaton, Casper
    Abstract: The Philippines is making a significant step to become energy independent by developing more sustainable sources of energy. The country sees investments in renewable energy and nuclear energy as promising alternatives to address the country’s problem in energy security. This paper evaluates the comparative attractiveness of either investing in alternative energy sources or continuing the use of coal for electricity generation in the Philippines. Applying the real options approach under coal price uncertainty, this study analyzes investment values and optimal timing of switching technologies from coal to renewable or nuclear energy. It also examines how negative externality and the risk of nuclear accident affect investment decisions. Results identify possible welfare losses from waiting or delaying investing in alternative energy. Negative externality favors investment in nuclear energy over coal, whereas the risk of nuclear accident favors investment in renewable energy.
    Keywords: renewable energy, nuclear energy, nuclear accident, coal prices, dynamic optimization, investment under uncertainty
    JEL: C61 G17 Q41 Q42 Q47 Q51 Q53
    Date: 2017–12–18
  15. By: Angelica Gianfreda; Luca Rossini; Francesco Ravazzolo
    Abstract: This paper compares alternative univariate versus multivariate models, probabilistic versus Bayesian autoregressive and vector autoregressive specifications for hourly day-ahead electricity prices, with and without renewable energy sources. The accuracy of point and density forecasts are inspected in four main European markets (Germany, Denmark, Italy and Spain) characterized by different levels of renewable energy power generation. Our results show that the Bayesian VAR specifications with exogenous variables dominate other multivariate and univariate specifications, in terms of both point and density forecasting.
    Keywords: Density Forecasting, Electricity Market, Forecasting, Hourly Prices, Renewable Energies.
    Date: 2018–01
  16. By: Afees A. Salisu (Centre for Econometric and Allied Research, University of Ibadan); Oluwatomisinn Oyewole (Department of Economics, College of Management Sciences Federal University of Agriculture, Abeokuta, Nigeria. Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Nigeria.); Lateef O. Akanni (Department of Economics, University of Lagos,Akoka, Lagos, Nigeria)
    Abstract: In this paper, we estimate a demand model for electricity in the US residential sector using both the 2009 and 2015 (RECS). We find socio-economic characteristics and building patterns of households as the main drivers of residential electricity demand in the US. Also, controlling for regional and climatic effects is found to enhance the performance of the estimated models. Our results are further complemented with plausible scenario analyses and robustness checks.
    Keywords: Electricity consumption, US residential sector, Demand analysis
    Date: 2018–01
  17. By: Philip Beran; Christian Pape; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen))
    Abstract: Increasing shares of fluctuating renewable energy, the integration of European electricity grids and markets as well as new technologies induce continuous change in the European energy system. Due to these changes, fundamental electricity system and market models that have been developed and applied in the past are dealing with an increasing number of details inducing correspondingly huge data needs. The complexity of these called parameter-rich models (cf. Weron, 2014) leads to limited transparency, also on the impact of data on results, and makes model backtesting rather cumbersome. At the same time, the validity of future scenarios based on non-validated models is dubious. To complement these highly complicated models, more reduced models may be helpful both for transparency and for backtesting. In this paper, we apply a parsimonious fundamental modelling approach to determine hourly German day-ahead power market prices and production volumes. The methodology approximates the supply stack by a piecewise linear function and considers fundamental information, e.g. power plant capacities and availabilities, fuel prices, must-run production and cross-border exchange. We reduce complexity by considering technology classes, uncoupled time periods and only one market area. Between 2011 and 2015, German day-ahead prices declined by 38% and various reasons have been identified in literature, namely a drop in emission certificate prices, the expansion of renewable energies (RES) or lower fuel prices. However, the decision of the German government to shut down nuclear power plants after the Fukushima nuclear disaster happened at the same time and received too little attention as it rather by itself could have led to an increase in prices. The parsimonious model is able to reproduce the hourly historical prices (2011-2015) with a MAE of 5.6 €/MWh and accurately reproduces the electricity production volumes for most thermal production units. In a case study, we investigate a counterfactual scenario without accelerated nuclear phase-out in Germany after the Fukushima nuclear disaster in 2011. The results indicate that German day-ahead power prices would have fallen by additional 3 €/MWh if the nuclear phase-out would have not occurred. Since coal- and gas-fired production as well as additional imports have substituted production from nuclear power plants, their usage would have dropped in the counterfactual scenario.
    Keywords: electricity markets, fundamental modelling, nuclear phase-out, german spot prices
    JEL: Q41 Q48
    Date: 2018–01
  18. By: Hilber, Christian A. L.; Palmer, Charles; Pinchbeck, Edward W.
    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: 2017–06–01
  19. By: Lionel Nesta (Université Côte d'Azur; GREDEG CNRS; OFCE Sciences Po. Paris; SKEMA Business School); Elena Verdolini (Fondazione ENI Enrico Mattei (FEEM)); Francesco Vona (OFCE Sciences Po. Paris; SKEMA Business School)
    Abstract: This paper analyzes the effect of environmental policies on the direction of energy innovation across countries over the period 1990-2012. Our novelty is to use threshold regression models to allow for discontinuities in policy effectiveness depending on a country's relative competencies in renewable and fossil fuel technologies. We show that the dynamic incentives of environmental policies become effective just above the median level of relative competencies. In this critical second regime, market-based policies are moderately effective in promoting renewable innovation, while command-and-control policies depress fossil based innovation. Finally, market-based policies are more effective to consolidate a green comparative advantage in the last regime. We illustrate how our approach can be used for policy design in laggard countries.
    Keywords: Directed technical change, threshold models, environmental policies, policy mix
    JEL: Q58 Q55 Q42 Q48 O34
    Date: 2018–01
  20. By: Mavikela, Nomahlubi; Khobai, Hlalefang
    Abstract: This paper investigates the relationship between energy consumption, foreign direct investment and economic growth in Argentina employing annual data covering the period from 1970 to 2016. To determine the long run relationship and the direction of causality among the variables, the Autoregressive Distributed Lag (ARDL) bounds testing approach and Vector Error Correction Model (VECM) technique are applied, respectively. The ARDL bounds tests suggested an existence of a long run relationship between energy consumption, foreign direct investments, economic growth and capital. More specifically, it was established that a 1% increase in foreign direct investments lead to a 0.013% increase in energy consumption, while a 1% increase in economic growth boots energy consumption by 0.35% in the long run. The VECM Granger-causality results suggested a unidirectional causality flowing from foreign direct investments and capital to energy consumption. A bidirectional causality flowing between energy consumption and economic growth was also established. This study brings a fresh perspective for the energy policy makers in Argentina
    Keywords: Energy consumption, Foreign direct investment; Economic growth; ARDL
    JEL: D60 F13
    Date: 2018–01–18
  21. By: Rode, Philipp; Gomes, Alexandra; Adeel, Muhammad; Sajjad, Fizzah; McArthur, Jenny; Alshalfan, Sharifa; Schwinger, Peter; Tunas, Devisari; Lange, Christiane; Montagne, Clemence; Hertog, Steffen; Koch, Andreas; Murshed, Syed Monjur; Wendel, Jochen; Duval, Alice
    Abstract: This report presents the key findings of the Resource Urbanisms project that LSE Cities at the London School of Economics and Political Science led between 2015 and 2017. This research, supported by the Kuwait Programme at the LSE Middle East Centre investigated questions of urban form, geography and sustainability in Kuwait and the Gulf States as part of a broader comparative analysis of divergent forms of urban growth in Asia. Given the distinct patterns of urban development, and the central role of land availability and natural resources, particularly oil, in Gulf Cooperation Council (GCC) states, this research focused on two natural resources, land and energy, and explored their relationships with urban form, transport and housing. It analysed these relationships through a comparative case study approach focusing on the city of Kuwait and Abu Dhabi in the GCC, and Hong Kong and Singapore in East Asia. Both the GCC and East Asian case studies are cities with similar income levels, but exhibit contrasting forms of urban development. More importantly, Kuwait and Abu Dhabi are endowed with vast amounts of natural resources, while Hong Kong and Singapore possess limited natural resources, making them useful and contrasting cases for comparative purposes. The research had four main objectives: first, it analysed the models of urban development that have emerged in Kuwait, Abu Dhabi, Hong Kong and Singapore through an inter-urban and intra-urban comparison. Second, it compared the GCC models of urbanisation (Kuwait and Abu Dhabi) with the contrasting forms of development in Hong Kong and Singapore. Third, it provided fresh evidence on the relationship between the built environment, land availability and energy costs, with a particular focus on transport and urban form as well as housing and urban morphology. Finally, it sought to better understand the dynamics between the availability and costs of resources, government interventions, urban form and infrastructure, and environmental outcomes...
    JEL: Q15
    Date: 2017–11
  22. By: Chen, Jiaqi (Federal Reserve Bank of Dallas); Tindall, Michael (Federal Reserve Bank of Dallas)
    Abstract: We apply dynamic regression to Texas energy-related hedge funds to track changes in portfolio structure and manager performance in response to changing oil prices. We apply hidden Markov models to compute shifts in portfolio performance from boom to bust states. Using these dynamic methods, we find that, in the recent oil-price decline, these funds raised their exposure to high-grade energy-related bonds in a bet that the spread to low-grade energy bonds would widen. When the high-grade bonds eventually fell, the hedge funds entered into a bust state.
    Keywords: Dynamic regression; Kalman filter; hidden Markov models
    Date: 2016–07–01
  23. By: Janda, Karel; Kondratenko, Ivan
    Abstract: This paper aims to analyze the possible shale gas development in context of energy security as based on the experience of shale revolution in the USA. It focuses on updating research on shale gas, explaining its specifics, discussing the US model of shale gas development and possible impacts on the EU energy market. It provides a literature review, an overview of the worldwide shale gas development and discusses the most relevant related environmental issues connected with shale gas.
    Keywords: shale gas, European Union, energy security, shale revolution, energy market, US
    JEL: Q42 Q43 Q53
    Date: 2018–01–16
  24. By: Janda, Karel; Kondratenko, Ivan
    Abstract: This paper analyzes the possible shale gas development in the EU in context with raising problem of energy security. Based on the experience of shale revolution in the USA the transfer of US model to the EU is discussed. The results show that shale production affects the price negatively and that US model is successful due to multiple reasons, primarily presence of experienced companies, geological structure and strong regulation rules. This paper shows the unsuitability of the US model for the EU market. After the first enthusiasm for shale plays research in late 2000s the multiple barriers for drilling have risen up; the most significant are the environmental worries; both on governmental and public levels. US companies have lost interest in the EU and moved to other parts of the world. The shale gas development is not able to affect the energy security of the EU on European, international level.
    Keywords: shale gas, European Union, energy security, shale revolution, energy market
    JEL: F15 F52 Q43
    Date: 2018–01–16
  25. By: Aytul Ganioglu
    Abstract: In this paper, using the recent recursive unit root tests proposed by Phillips et al. (2015), we identify and date-stamp the periods where processed food and energy prices deviate explosively from core inflation and analyze its implications in terms of anchoring inflation expectations. During the period of January 2003-March 2017, we identify existence of three such episodes. Identifying these explosive periods is particularly important, since the evidence reveals that consumers change, i.e., revise their inflation expectations during periods when processed food and energy prices deviate explosively from core inflation. Results indicate that when forming inflation expectations, consumers rely on macroeconomic variables as well as past inflation both in normal and explosive periods. A particularly important policy implication of these findings is that periods of explosive deviations of processed food and energy prices from core inflation should be monitored while designing policies to anchor inflation expectations.
    Keywords: Explosive behavior, Food prices, Inflation expectations, Generalized sup ADF test, Inflation, Core inflation
    JEL: C5 E31
    Date: 2017
  26. By: Hasenzagl, Thomas; Pellegrino, Filippo; Reichlin, Lucrezia; Ricco, Giovanni
    Abstract: A view often expressed by the Fed is that three components matter in inflation dynamics: a trend anchored by long run inflation expectations; a cycle connecting nominal and real variables; and oil prices. This paper proposes an econometric structural model of inflation formalising this view. Our findings point to a stable expectational trend, a sizeable and well identified Phillips curve and an oil cycle which, contrary to the standard rational expectation model, affects inflation via expectations without being reflected in the output gap. The latter often overpowers the Phillips curve. In fact, the joint dynamics of the Phillips curve cycle and the oil cycles explain the inflation puzzles of the last ten years.
    Keywords: Expectations; inflation; oil prices; Phillips curve
    Date: 2018–01
  27. By: Jinyong Kim (Secretariat, The Bank of Korea); Junecheol Kim (Reserve Management Group, The Bank of Korea); Hyung Joon Lim (Gangneung Branch, The Bank of Korea)
    Abstract: This article is an empirical study on the effect of changes in oil prices on break-even inflation rates (BEIs) of Treasury Inflation Protected Securities (TIPS) of the United States. The results of this analysis show that oil prices make a statistically significant effect on the BEIs with maturities of 2 year, 5 year, and 10 year. These sensitivities are salient in the BEIs with shorter maturities. These implies that the changes in oil prices can affect inflation expectations in the short term but this effect gets diminished to the extinction because inflation expectations depend on the inflation target of a monetary policy. Notably, the 5Y5Y BEI has a statistically significant relation with the changes in oil prices only when the slope of oil futures curve flattens and oil prices are falling. This observation reveals that financial market participants adjust their inflation expectations with confidence only in case of the simultaneous drop of the slope of oil futures curve and oil prices. Assuming the BEI is a reasonable estimator of inflation expectations extracted from financial market, oil prices make a limited impact on medium and long term inflation expectations (5Y5Y BEI). From these results we can make an inference that current movements of oil prices and financial market participants’expectation of oil price path make joint contribution to the formation of medium and long term inflation expectations.
    Keywords: Treasury inflation protected securities (TIPS), Break-even inflation rate, Inflation expectations, Oil prices
    JEL: E31 E43 E44 Q43
    Date: 2017–03–20
  28. By: Gambetti, Luca (Universitat Autonoma de Barcelona); Moretti, Laura (Central Bank of Ireland)
    Abstract: We interpret oil price fluctuations as the result of agents reaction to news about oil market fundamentals. Agents form expectations about future developments in oil production with limited information, and they only observe a noisy signal about its possible changes. We find that a large part of oil price swings is attributable to shocks that do not have any effect on oil production or global demand indexes. The finding is obtained using a VAR with dynamic rotations. We interpret this shock, through the lenses of a simple imperfect information rational expectations framework, as a noise shock in the oil market.
    Keywords: Oil price shocks, Bubbles, Nonfundamentalness, SVAR, Imperfect Information.
    JEL: C32 E32 E62
    Date: 2017–11
  29. By: Byun, Sung Je (Federal Reserve Bank of Dallas)
    Abstract: This paper examines the role of inventories in re ners' gasoline production and develops a structural model of the relationship between crude oil prices and inventories. Using data on inventories and prices of oil futures, I show that convenience yields decrease at a diminishing rate as inventories increase, consistent with the theory of storage. In addition to exhibiting seasonal and procyclical behaviors, I show that the historical convenience yield averages about 18 percent of the oil price from March 1989 to November 2014. Although some have argued that a breakdown of the relationship between crude oil inventories and prices following increased nancial investors' participation after 2004 was evidence of an effect of speculation, I fi nd that the proposed price-inventory relationship is stable over time. The empirical evidence indicates that crude oil prices remained tied to oil-market fundamentals such as inventories, suggesting that the contribution of nancial investors' activities was weak.
    Keywords: Convenience yield; Forecasting oil prices; Speculation; Stable oil price-inventory relationship; Theory of storage
    Date: 2016–09–01
  30. By: Vugar Ahmadov (Central Bank of the Republic of Azerbaijan); Ulvi Sarkarli (Central Bank of the Republic of Azerbaijan); Ramiz Rahmanov (Central Bank of the Republic of Azerbaijan)
    Abstract: This study aims to analyse the discretionary fiscal policy of Azerbaijan, Kazakhstan, and Russia for the period 2003-2015 using the structural budget balance (SBB). The SBB considers the permanent component of oil revenue and therefore clearly defines the discretionary fiscal position and the aggregate demand effect of fiscal policy. The SBBs in Azerbaijan and Russia experience a deficit for most of the analysed period. A moderate SBB surplus is observed in Kazakhstan. The estimated SBBs also demonstrate that fiscal policies tend to be mainly pro-cyclical in Kazakhstan and Russia. Azerbaijan conducted a counter-cyclical fiscal policy for half of the investigated period. Moreover, governments placed more importance on economic stabilization in 2009 due to the global financial crisis.
    Keywords: fiscal policy, structural budget balance, oil-rich countries, Azerbaijan, Kazakhstan, Russia
    JEL: E62 H60
    Date: 2018–01
  31. By: Sonia Benghida (Woosong University)
    Abstract: Many oil-based countries failed to boost their economy development despite the long period of high oil prices going from 2002 to 2014. 12 years of inflated prices were marked by a more or less stagnated economy. While possessing large oil and shale gas resources for decades, many oil-based countries were and are still suffering from an economic collapse. This situation was long called the resource curse. The combination of oil price volatility, the pressure on agricultural and manufacturing sectors, the development of inequalities, and the disincentive effects of tax and weak institutions all result in a failure of policies and a growth collapse. After July 2014, the global market changed after the rapid and most uncommon decrease in oil prices since the 1980s. The demand for oil crumpled around the world, but mainly in the US where oil production increased to the point of making it in competition with the biggest oil producers; both Saudi Arabia and Russia. The US changed its energy mix making it more dependable on domestic gas, and shale gas production more specifically. With all these changes, many governments are catching up and the experts have shifted their attention to the role of institutions. The institutional component is now a lead to government development success. Even though shale gas is being criticized for its environmental and technical issues, it raised the attention back to the " institution-economy connection " , which is claimed to work better than the " oil-economy development ". By analyzing the case studies of some oil-based countries, this paper concludes that the identification of a natural resource as a curse or a blessing will highly depend on the quality of institution itself.
    Keywords: Role of institutions,Governance,Economic development,Resource curse,Performance quality,Oil management,OPEC countries
    Date: 2017
  32. By: Martin Larsson (The Institute of Economics, Zagreb)
    Abstract: The European Union Emissions Trading Scheme (EU ETS), while primarily designed to reduce greenhouse gas emissions in an effective and efficient way, is supposed to serve as an instrument promoting investments in clean, low-carbon technologies by way of incentivizing associated innovation activity. Since empirical results concerning the instrument´s capacity of reaching this secondary policy goal are rare, this paper examines the innovation impact of the EU ETS among emissions-intensive companies in the Republic of Croatia. To this end the effects of the instrument on research, development and demonstration (RD&D), adoption, and organizational change are examined. The study accounts for the impacts of various context factors, including firm-external and firm-internal variables. The empirical analysis employs a multiple case study approach. While findings support the assertion that policy-induced innovation effects arise from the pricing of carbon, the innovation-fostering capacity of the instrument remains limited due to continued low levels of policy stringency and predictability. Long-term expectations of market actors appear to play a decisive role in decisions surrounding innovation activity, suggesting that signals of policy commitment are highly influential.
    Keywords: European Union, emissions trading, Croatia, carbon, climate policy
    JEL: O31 Q58
    Date: 2017–10
  33. By: Coraline Goron; Cyril C. Cassisa
    Abstract: Domestic regulatory institutions are essential components of emissions trading systems (ETS). Not only do they shape the ways that markets operate, they also condition the environmental value of the carbon credits they produce. However, the literature on global carbon politics has paid little attention to local ETS regulators. In a decentralized system increasingly based on a noodle bowl of diversified environmental markets, the study of carbon markets must integrate the institutions in which they operate. This article focuses on China, which, due to its size, is both keen to and expected to have a significant impact on the global system of market-based instruments. We examine how China’s regulatory institutions have worked to implement the seven ETS pilots launched since 2012, and tease out some implications regarding how China’s national ETS may contribute to global climate change governance. In this study, we analyze both formal and informal regulatory institutions, through the practice of local actors. The main finding is that the tension between the state and markets in China’s ETS implementation has resulted in a reinforcement of state domination rather than the emergence of robust regulatory institutions. The contribution that the ETS makes to China’s emissions reduction is also limited by more pressing environmental and industrial policies that local regulators must prioritize. Local nonregulatory implementation practices could undermine the long-term objective to integrate China’s ETS with others under article 6 of the UNFCCC.
    Date: 2017–02
  34. By: Trinks, Arjan; Ibikunle, Gbenga; Mulder, Machiel; Scholtens, Bert (Groningen University)
    Date: 2017

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