nep-ene New Economics Papers
on Energy Economics
Issue of 2018‒02‒12
23 papers chosen by
Roger Fouquet
London School of Economics

  1. Energy savings through foreign acquisitions? Evidence from Indonesian manufacturing plants By Arlan Brucal, Inessa Love, Beata Javorcik
  2. Location matters: daylight saving time and electricity use By Shaffer, Blake
  3. Optimal RES differentiation under technological uncertainty By Jakub Sawulski; Jan Witajewski-Baltvilks
  4. Nuclear Power in the Twenty-First Century: An Assessment (Part I) By Christian von Hirschhausen
  5. Storage Business Models: Lessons for Electricity from Natural Gas, Cloud Data and Frozen Food By Anaya, K.; Pollitt, M.
  6. The Impact of Rural Electrification on Income and Education: Evidence from Bhutan By Santosh Kumar; Ganesh Rauniyar
  7. Energy Consumption And Financial Development In South Africa: An Empirical Investigation By Odhiambo, Nicholas M.
  8. Essays in the economics of energy development and disamenities By Rakitan, Timothy John
  9. Ефекат стакленика, глобално загревање и Кјотски протокол By Bukvić, Rajko
  10. Structural Interpretation of Vector Autoregressions with Incomplete Identification: Revisiting the Role of Oil Supply and Demand Shocks By Baumeister, Christiane; Hamilton, James
  11. On the difficulty of interpreting market behaviour in an uncertain world: the case of oil futures pricing between 2003 and 2016 By Giulio Cifarelli; Paolo Paesani
  12. Natural Resources and Political Patronage in Africa: An Ethnicity Level Analysis By Nemera Mamo; Sambit Bhattacharyya
  13. Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy By Eva Lyubich; Joseph S. Shapiro; Reed Walker
  14. Stakeholder Views on Interactions between Low-carbon Policies and Carbon Markets in China: Lessons from the Guangdong ETS By Jiang, M.; Liang, X.; Reiner, D.; Lin, B.
  15. Intellectual property rights protection and the international transfer of low-carbon technologies By Damien Dussaux, Antoine Dechezlepretre, Matthieu Glachant
  16. Minerals and Metals to Meet the Needs of a Low-Carbon Economy By Kirsten Lori Hund; Daniele La Porta; John Drexhage
  17. To build or not to build? Capital stocks and climate policy By Elizabeth Baldwin, Yongyang Cai, Karlygash Kuralbayeva
  18. EU-Energieeffizienzpolitik: Wie eine kostengünstigere Dekarbonisierung gelingen könnte By Tischler, Benjamin
  19. Proportional Allocation of Resources under Climate Change By Sang-Chul Suh; Yuntong Wang
  20. Climate Policy Integration at the National and Regional Level. A Case Study for Austria and Styria By Claudia Kettner-Marx; Daniela Kletzan-Slamanig
  21. The Status of Climate Policy Integration in EU Energy Policy By Claudia Kettner-Marx; Daniela Kletzan-Slamanig
  22. Climate policy with tied hands optimal resource taxation under implementation lags By di Maria, C.; Smulders, Sjak; van der Werf, E.H.
  23. Ratchet up or down? An experimental investigation of global public good provision in the United Nations Youth Associations Network By Gallier, Carlo; Kesternich, Martin; Löschel, Andreas; Waichman, Israel

  1. By: Arlan Brucal, Inessa Love, Beata Javorcik
    Abstract: The link between foreign ownership and environmental performance remains a controversial issue. This paper contributes to our understanding of this subject by analyzing the impact of for- eign acquisitions on plant-level energy intensity. The analysis applies a difference-in-differences approach combined with propensity score matching to the data from the Indonesian Manufac- turing Census for the period 1983-2001. It covers 210 acquisition cases where an acquired plant is observed two years before and at least three years after an ownership change and for which a carefully selected control plant exists. The results suggest that while foreign ownership increases the overall energy usage due to expansion of output, it decreases the plant's energy intensity. Specifically, compared to plants that remained domestic, acquired plants reduce energy inten- sity by about 30% two years after acquisition. In contrast, foreign divestments tend to increase energy intensity. At the aggregate level, we find that entry of foreign-owned plants is associated with industry-wide reduction in energy intensity.
    Date: 2018–01
  2. By: Shaffer, Blake
    Abstract: The primary rationale for daylight saving time (DST) has long been energy savings. Whether it achieves this goal, however, remains a subject of debate. Recent studies, examining only one location at a time, have shown DST to increase, decrease or leave overall energy use unchanged. Rather than concluding the effect is ambiguous, this paper is the first to test for heterogeneous regional effects based on differences in (natural) sun times and (societal) waking hours. Using a rich hourly data set and quasi -experimental methods applied across Canadian provinces, this paper rationalizes the differing results, finding region-specific effects consistent with differences in sun times and waking hours. DST increases electricity use in regions with late sunrises and early waking hours.
    Keywords: Daylight saving time; electricity demand; regional effects
    JEL: C54 Q4 Q48
    Date: 2017
  3. By: Jakub Sawulski; Jan Witajewski-Baltvilks
    Abstract: Should Renewable Energy Sources (RES) auction systems support development of a wide range of different technologies or instead focus on supporting a select few? We review some of the approaches to RES technologies differentiation in relation to RES auction designs. Subsequently, we use an analytical model to examine the optimal differentiation of RES technologies when the future costs of RES installations are subject to uncertainty. We allow uncertainty to influence the cost function in two ways: (i) as an uncertain magnitude of the learning-by-doing effect and (ii) as a possibility for an exogenous random technological shock (such as an unexpected technological breakthrough). We find that uncertainty of learning rates increases the benefits of differentiation. This result, among other things, implies that optimal differentiation predicted by the energy models that assume fixed learning rates is biased downward. On the other hand, where exogenous shocks are present the differences between the costs of technologies are large and the planner has less incentive to commit to support a diversified pool of technologies and more incentive to favour the choice of a technology which is cheapest at the given moment in time. This last result is more pronounced when there is no learning-by-doing effect. We recommend that countries with potentially large learning rate effects - such as those countries at the technological frontier - should increase differentiation, while more peripheral countries should limit differentiation.
    Keywords: Renewable Energy Sources, auction design, technological diversification, learning-by-doing, uncertainty
    JEL: O33 Q42
    Date: 2017–12
  4. By: Christian von Hirschhausen
    Abstract: Nuclear power was one of the most important discoveries of the twentieth century, and it continues to play an important role in twenty-first century discussions about the future energy mix, climate change, innovation, proliferation, geopolitics, and many other crucial policy topics. This paper addresses some key issues around the emergence of nuclear power in the twentieth century and perspectives going forward in the twenty-first, including questions of economics and competitiveness, the strategic choices of the nuclear superpowers and countries that plan to either phase out or start using nuclear power, to the diffusion of nuclear technologies and the emergence of regional nuclear conflicts in the “second nuclear age”. The starting point for our hypothesis is the observation that nuclear power was originally developed for military purposes as the “daughter of science and warfare” (Lévêque 2014, 212), whereas civilian uses such as medical applications and electricity generation emerged later as by-products. Based upon this observation, we interpret the nuclear industry in terms of “economies of scope”, where strategies, costs, and benefits must be assessed in the multiproduct context of military and civilian uses of nuclear power. We propose a classification of different economic perspectives on nuclear electricity generation, and confirm the consensus of the literature that on its own, nuclear power has never been an economic method of producing electricity: not a single reactor in existence today was constructed by a private investor in a competitive, market economic framework. The economics-of-scope perspective is a useful heuristic to interpret countries’ strategic choices regarding the use of nuclear power. The paper provides a survey of strategies used by the nuclear superpowers (United States, Russia, China), by countries phasing out nuclear power because they cannot benefit from economies of scope (e.g., Italy, Spain, Germany, Sweden, Switzerland), and by potential newcomers who may expect synergies between military and civilian uses (e.g., Iran, the United Arab Emirates, Egypt, perhaps one day also Japan). We conclude that the future of nuclear power in the twenty-first century must be assessed in terms of economies of scope, and that a purely “economic” analysis of nuclear electricity is insufficient to grasp the complexity of the issue; this also raises conceptual challenges for energy modelers. The paper leaves out some important questions to be addressed in a future Part II of the assessment, such as economic and technical issues of plant decommissioning, long-term storage of waste, and the potential role of nuclear energy in climate policies.
    Keywords: Nuclear power, technology, competitiveness, economies of scope, geopolitics
    JEL: L52 L95 N7 Q48 Q54
    Date: 2017
  5. By: Anaya, K.; Pollitt, M.
    Abstract: The aim of this paper is to evaluate different well-established non-electrical storage markets (gas, frozen food and cloud storage) in order to identify relevant lessons for electrical energy storage (EES) connected to the electricity distribution networks. The case studies that have been evaluated are Centrica Storage (gas storage), Google Drive (cloud storage) and Oakland International (frozen food storage). A specific business model methodology has been selected for comparing the different business model components across these sectors. The methodology (following Johnson et al., 2008) refers to key interconnected components: customer value proposition, the revenue formula, key resources and key processes. The evaluation of the three case studies suggests that well-developed business models already exist in growing and mature storage markets. Regulation also plays an important role across the different storage markets and business model components, how-ever its importance varies depending on the type of market. Innovation in storage business models is also observed (technological and contractual) which should be also facilitated in EES. Innovation helps move markets towards more sustainable business models.
    Keywords: Business models, electrical energy storage, natural gas storage, frozen food storage, cloud storage.
    JEL: L94 Q48
    Date: 2018–01–29
  6. By: Santosh Kumar (Department of Economics and International Business, Sam Houston State University); Ganesh Rauniyar (Independent Evaluator, Paraparaumu, New Zealand)
    Abstract: We investigate the impact of a rural electrification program on household income and children’s schooling in rural Bhutan. Using Propensity Score Matching, we find that electrification had a statistically significant impact on non-farm income and education. Non-farm income increased by 61 percent and children gained 0.72 additional years of schooling and 9 minutes of study time per day. We do not observe significant effects on farm income. Results are consistent and robust to different matching algorithms. Our findings indicate that investments in reducing energy deficit may help improve human welfare in Bhutan.
    Keywords: Rural electrification, income, education, Bhutan
    JEL: O12 O13 Q48
    Date: 2018–02
  7. By: Odhiambo, Nicholas M.
    Abstract: This paper examines the dynamic relationship between energy consumption and financial development in South Africa during the period 1980-2013. In order to address the omission of variable bias, the study has included economic growth as an intermittent variable between financial development and energy consumption ??? thereby leading to a trivariate causality model. Unlike some previous studies, this study uses three proxies for financial development: i) domestic credit to the private sector as a percentage of GDP as a proxy for financial institutions??? depth; ii) bank credit to bank deposits as a proxy for financial institutions??? stability; and iii) bank lending-deposit spread as a proxy for financial institutions??? efficiency. Using the ARDL-bounds testing approach to cointegration and ECM-based Granger-causality test, the study finds that there is a distinct long-run unidirectional causal flow from financial development to energy consumption in South Africa. This applies ??? irrespective of which proxy has been used to measure the level of financial development. This finding is not surprising given the level of financial development in South Africa. The study, therefore, reiterates the need for South Africa to explore affordable energy-mix in order to cope with the increased finance-led energy demand.
    Keywords: Financial Development; Energy Consumption; South Africa
    Date: 2017–01–29
  8. By: Rakitan, Timothy John
    Abstract: This dissertation consists of three essays broadly themed around evaluating the impact of energy infrastructure on local consumers and industries. Taken together, they characterize ways in which the presence of energy activity is reflected in local land and labor market conditions, with a particular focus on the deployment of wind energy generation and shale resource extraction.The first chapter examines the relationship between the placement of wind energy infrastructure and house values and incomes in Iowa. The results suggest that income growth offsets some of the negative house-value effects commonly observed in the evaluation literature, but also that income gains reported in the literature are geographically distributed away from wind farm locations. I conclude that proximity to wind turbines does not increase the real incomes of local residents.The second chapter applies a regional model to county-level wage, house value, employment and energy production data to characterize the economic impact of the U.S. shale boom of the mid-2000s. While the boom has been responsible for wage and employment gains in counties located within the bounds of U.S. shale oil and gas plays, the net effect on house values has been negative. Within the set of energy-producing counties, however, house value declines are mitigated during the boom period as willingness-to-pay for residential space can overcome some of the the negative impacts of energy industry activity. I conclude that shale energy extraction is a disamenity at the local level.The third chapter extends the analysis of the impact of the shale boom by examining possible spillovers in agriculture. Using parcel-level data from North Dakota, I analyze rental rates to assess the extent to which oil industry activity affects the returns to agricultural land. While “on-shale†parcels lease at lower rates than parcels located outside the oil fields, I cannot reject the hypothesis that proximity to an oil well has no impact on returns to agricultural land. Since my data examine agricultural surface rents with no associated mineral rights, my results imply that fracking-related house value declines reported in the literature may be due to aesthetic and nuisance considerations rather than lasting local environmental damage.
    Date: 2017–01–01
  9. By: Bukvić, Rajko
    Abstract: Serbian. У раду се разматра проблем стакленичких гасова (СГ), и акције и механизми за смањење њихове емисије. Емисија таквих гасова, пре свега угљен-диоксида, сматра се за један од главних антропогених узрока раста концентрације угљеника у атмосфери, и последично глобалних климатских промена. Од времена Индустријске револуције емисија СГ у атмосферу достигла је 300 гигатона угљеника. Борба с атмосферским загађењем до сада је ишла у три правца: административно регулисање, систем економских механизама и формирање тржишних односа. У другој половини 20. века за решавање проблема предложене су многе шеме стварања тржишног механизма, који се сматра повољнијим у више праваца. Ти напори посебно су се увећали у последњој деценији 20. века, и најзад је Кјотски протокол 1997. године подржао неколико такозваних еластичних механизама: трговина квотама (квотирање и трговина), пројекти заједничког остваривања и механизми чистог развоја, који су били разрађени 2001. године у Маракешу. Али, без обзира на све те напоре, током првог периода њихове примене (2008–2012) емисије угљеника у атмосферу су порасле. Данас се светско тржиште угљеника креће ка развоју националних, регионалних и субрегионалних система регулисања, али уз очување међународног сегмента (системи ОКИК ОУН). Конференција у Дохи 2012. године допунила је и прецизирала услове у којима ће Стране Конвенције изграђивати своју климатску политику у следећим годинама. Водећа тенденција (пренос акцената на регионалне, субрегионалне и националне системе регулисања) је сачувана, али сачуван је и „кјотски” систем, који ће у новој етапи имати улогу прелазног на путу ка новом очекиваном глобалном споразуму. English. This article considers the problem of greenhouse gas (GHG) emissions, and actions and mechanisms for its reduction. Emissions of the GHG are observed as one of the main anthropogenic causes of the increasing carbon concentration in the atmosphere, and consequently the global climate change. Until the Industrial Revolution, the emission of greenhouse gases into the atmosphere amounted to 300 gigatonnes of carbon. The fight against atmosphere pollution goes in three directions: administrative regulations, a system of economic mechanisms and market relations building. In the second half of the XX century many schemes for involving the market mechanism in solving these problems were proposed. These efforts especially increased in the last decade of XX century and finally the Kyoto Protocol 1997 supported many flexible mechanisms (trade of quotas – cap and trade, joint implementation projects and clean development mechanisms), as a solution to these problems, which was explained in 2001 in Marrakesh. In spite of all these efforts, during the first period of its implementation (2008–2012) the emissions of carbon increased. Today, the world “carbon” market is moving to the development of national, regional and subregional regulation systems while keeping its international level (system UNFCCC). The Doha Conference held in 2012 precised the conditions upon which the convention parties would define its climate policies in the next years. The leading tendency (transition to regional, subregional and national regulation systems) was maintained, as well as the “Kyoto” system, which in the new stage would play a transitional role on the road to a new expected global agreement.
    Keywords: ефекат стакленика, стакленички гасови (СГ), емисије CO2, антропогени утицаји, Кјотски протокол, тржишта угљеника, еластични механизми greenhouse effect, greenhouse gases (GHG), emissions of CO2, anthropogenic impact, the Kyoto Protocol, carbon markets, flexible mechanisms
    JEL: H23 K32 L50 L51 Q53 Q56
    Date: 2017
  10. By: Baumeister, Christiane; Hamilton, James
    Abstract: Traditional approaches to structural vector autoregressions can be viewed as special cases of Bayesian inference arising from very strong prior beliefs. These methods can be generalized with a less restrictive formulation that incorporates uncertainty about the identifying assumptions themselves. We use this approach to revisit the importance of shocks to oil supply and demand. Supply disruptions turn out to be a bigger factor in historical oil price movements and inventory accumulation a smaller factor than implied by earlier estimates. Supply shocks lead to a reduction in global economic activity after a significant lag, whereas shocks to oil demand do not.
    Keywords: Bayesian inference; Measurement error; oil prices; sign restrictions; vector autoregressions
    JEL: C32 E32 Q43
    Date: 2017–12
  11. By: Giulio Cifarelli (Dipartimento di Scienze per l'Economia e l'Impresa); Paolo Paesani
    Abstract: Our results show that over the two cycles that characterize the 2003-2016 period a significant change in the working of oil markets occurs. Our pricing investigation,based on a three-agent model (hedgers, fundamentalist speculators and chartists),find that from 2009 onwards traditional analysis of supply and demand forecasts, loses its explanatory power and hence its credibility. The sharp and unexpected fluctuations in oil prices, compounded by unpredictable political factors and technological break-troughs (e.g. tight sands/shale oil) strongly raises uncertainty and reduces the effectiveness of customary forecasting techniques.
    Keywords: Oil pricing, Speculation, Dynamic hedging, Logistic smooth transition, Multivariate GARCH
    JEL: G11 G12 G18 Q40
    Date: 2017
  12. By: Nemera Mamo (Department of Economics, University of Sussex; SOAS, University of London); Sambit Bhattacharyya (Department of Economics, University of Sussex)
    Abstract: We investigate the effect of resource discoveries on ethnicity level political patronage in Africa using a large geospatial dataset of 254 ethnic groups in 15 countries over the period 1960 to 2004. We find that the first (or single first) resource discovery in a virgin ethnic homeland increases the share of cabinet posts of that ethnicity. The effect is induced by both expectations and rent. Overall the effect is mainly driven by major mineral discoveries as opposed to oil and gas. The discovery shocks do not trigger monopoly or dominant access to power, autonomy, separatism, and exclusion. Our analysis reveals that point source resource (mineral) rents are far more important political currency than diffuse agricultural commodity rents. Furthermore, by ranking ministries into Top and Bottom levels we find some evidence of window dressing politics. Our results survive a battery of robustness tests and controls.
    Keywords: Resource discovery; Political Patronage; Africa
    JEL: D72 O11
    Date: 2018–01
  13. By: Eva Lyubich; Joseph S. Shapiro; Reed Walker
    Abstract: This paper provides the first estimates of within-industry heterogeneity in energy and CO2 productivity for the entire U.S. manufacturing sector. We measure energy and CO2 productivity as output per dollar energy input or per ton CO2 emitted. Three findings emerge. First, within narrowly defined industries, heterogeneity in energy and CO2 productivity across plants is enormous. Second, heterogeneity in energy and CO2 productivity exceeds heterogeneity in most other productivity measures, like labor or total factor productivity. Third, heterogeneity in energy and CO2 productivity has important implications for environmental policies targeting industries rather than plants, including technology standards and carbon border adjustments.
    JEL: F18 H23 Q56
    Date: 2018–01
  14. By: Jiang, M.; Liang, X.; Reiner, D.; Lin, B.
    Abstract: China set up pilot Emission Trading Schemes (ETS) in seven cities and provinces from 2013 as a new instrument to incentivise carbon dioxide emission reduction and to reach its 40-45% carbon intensity reduction target by 2020. Using a two-stage survey (a closed-form questionnaire followed by open interviews), we elicit views of stakeholders from Guangdong province on carbon markets, with an emphasis on how ETS would interact with other existing or proposed low-carbon and clean energy policies. Our survey shows that academic stakeholders viewed the interactions between the carbon market and other lowcarbon policies as a significant potential problem but there was less awareness by stakeholders from other sectors. There is a positive correlation between recognising such policy interactions may pose a problem and the time spent working on energy saving and emission reduction policies. Whereas both increasing renewable targets and imposing a carbon tax in addition to an existing ETS would be expected to depress prices in the ETS, relatively few respondents identified this effect correctly. Apart from government respondents, all other stakeholders lacked confidence in China's carbon markets, which is associated with both their lack of knowledge and information about the market and concerns regarding uncertainties and government policy design. The need for learning from the pilot schemes particularly on monitoring, reporting and verification was seen as vital but challenging given the speed of rolling out a national ETS.
    Keywords: Emissions trading, China, Carbon pricing; Guangdong ETS pilot; Stakeholder survey; Climate change policy; Low-carbon policy interactions
    JEL: H23 Q58 N45 Q48 Q54
    Date: 2018–02–05
  15. By: Damien Dussaux, Antoine Dechezlepretre, Matthieu Glachant
    Abstract: We examine the effect of intellectual property rights (IPRs) protection on the two main channels of international transfer of low-carbon technologies i.e. trade in low-carbon capital goods, and foreign direct investments (FDI) by firms producing low-carbon technologies. Our data describes cross-country transfer through these channels between developing and developed countries in eight climate-related technology fields from 2001 to 2011. At the world level, we find that strengthening IPRs protection increases transfer in six technology fields (hydro power, solar PV, solar thermal, heating, lighting, and cleaner vehicles), while the effect is statistically insignificant in the others. The results slightly change when focusing on non-OECD countries. In particular, we find that a stricter IPRs regime may reduce their imports of solar equipment. These results have important implications for climate negotiations on North-South technology transfer.
    Date: 2018–01
  16. By: Kirsten Lori Hund; Daniele La Porta; John Drexhage
    Keywords: Energy - Electric Power Energy - Energy and Environment Energy - Energy and Mining Energy - Solar Energy Energy - Windpower Environment - Climate Change Mitigation and Green House Gases Industry - Mining & Extractive Industry (Non-Energy)
    Date: 2017–09
  17. By: Elizabeth Baldwin, Yongyang Cai, Karlygash Kuralbayeva
    Abstract: We investigate how irreversibility in “dirty” and “clean” capital stocks affects optimal climate policy, from both theoretical and numerical perspectives. An increasing carbon tax will reduce investments in assets that pollute, and so reduce emissions in the short term: our “irreversibility effect”. As such the “Green Paradox” has a converse if we focus on demand side capital stock effects. We also show that the optimal subsidy increases with the deployment rate: our “acceleration effect”. Considering second-best settings, we show that, although carbon taxes achieve stringent targets more efficiently, in fact renewable subsidies deliver higher welfare when policy is more mild.
    Date: 2018–01
  18. By: Tischler, Benjamin
    Abstract: Auf EU-Ebene nehmen neue Gesetzesvorschläge für eine "saubere Energiepolitik" Form an. Es wird aktuell über die verstärkte Reduzierung von CO2-Emissionen sowie EU-weite Energieverbrauchsziele und daraus abzuleitende, nationale Energieeffizienzziele und -maßnahmen bis 2030 diskutiert. Doch was passiert, wenn die Zielvorgaben widersprüchlich werden und sich gegenseitig untergraben? Ein restriktives Energieverbrauchsziel kann zum großen Hindernis für die Erreichung des energie- und klimapolitischen Oberziels einer kostengünstigen Dekarbonisierung des Energiesystems werden. In den EU ETS Sektoren können falsch designte wirtschaftspolitische Instrumente zur Steigerung der Energieeffizienz eine möglichst kostengünstige Dekarbonisierung verhindern. In Sektoren außerhalb des EU ETS können Energieeffizienzziele und entsprechende wirtschaftspolitische Maßnahmen aber einen sinnvollen Beitrag leisten. Instrumente zur Steigerung der Energieeffizienz sollten darauf abzielen die technische Energieeffizienz zu verbessern. Vor diesem Hintergrund muss die Konzeption von Zielgrößen und Instrumenten verbessert werden. Die bisher verwendeten makroökonomischen Kennzahlen 'Energieeffizienz' beziehungsweise 'Energieintensität' sind als einfache politische Ziele ungenügend und verleiten zu falschen Schlüssen bezüglich des Erfolgs der eingesetzten wirtschaftspolitischen Instrumente. Die Kennzahlen müssen entscheidend verbessert werden zum Beispiel durch Berücksichtigung von Faktoren wie Konjunktur und Wirtschaftswachstum, dem Anteil von Erneuerbaren Energien oder dem von energieintensiven und weniger energieintensiven Branchen. Auch eine bessere Datenbasis ist vonnöten.
    JEL: Q52 Q58
    Date: 2018
  19. By: Sang-Chul Suh (Department of Economics, University of Windsor); Yuntong Wang (Department of Economics, University of Windsor)
    Abstract: The global economy under climate change is represented by countries, each of whom owns a technology that emits GHGs to produce output and privately owns a certain amount of permits. The permits are treated as the only input that is perfectly transferable among the countries, unlike regular factor inputs such as labor or capital. First, we axiomatically characterize a series of solutions called the proportional solutions. We hypothetically separate countries into two groups, permit contributors and technology contributors, and identify solutions under which countries receive rewards systematically according to the two types of contribution they provide (Separation Principle). Two other main axioms (NART and NARP), saying that no group of countries benefit from rearranging their contributions of technologies or permits among themselves, are used in characterizing the proportional solutions. Second, we introduce another axiom called Voluntary Participation to the solutions of sharing the surplus produced beyond the autarky economy output. This addition of Voluntary Participation leads to an interesting result; the surplus must be shared equally between the two groups, the permit (input) contributors and technology contributors. Hence the equal share proportional solution is uniquely characterized.
    Keywords: Proportional Solution, Pollution Permits, Axioms, Voluntary Participation, Separation Principle
    JEL: D51 D63 D71 F51 Q54
    Date: 2018–02
  20. By: Claudia Kettner-Marx (WIFO); Daniela Kletzan-Slamanig (WIFO)
    Abstract: In order to limit climate change the cross-cutting nature of climate policy needs to be recognised. Many climate-relevant decisions are taken in other policy areas with only little regard to climate change impacts. In order for climate policy to be successful it has to be integrated in decision making and legislative processes in basically all policy areas and all levels of government. In this paper we analyse the extent of climate policy integration in Austrian policy-making via in-depth expert interviews, both on the federal level as well as on the regional level using Styria as case study. The results show a broad range of perceptions regarding the degree of climate policy integration in Austria. On the one hand, the consideration of climate policy issues depends on the core competence of the respective institution. On the other hand, we found widely diverging views on whether climate policy in Austria is too ambitious or too weak. Especially, potential negative impacts of climate policy on competitiveness or employment are seen to hamper a more ambitious implementation of mitigation policies. Cooperation on climate policy issues is generally rated as good by the interviewees from administration and interest groups, but conflicts of interest that result from the organisations' core functions negatively impact on the perceived quality of cooperation. In case of conflicting targets it is widely noticed that "traditional" policy objectives like employment or competitiveness are given priority over climate issues.
    Keywords: climate policy, energy policy, climate policy integration, European Union
    Date: 2018–02–01
  21. By: Claudia Kettner-Marx (WIFO); Daniela Kletzan-Slamanig (WIFO)
    Abstract: The integration of climate policy concerns in other policy areas, where decisions are taken that determine greenhouse gas emissions, is a prerequisite for effectively mitigating climate change. There are particularly strong interlinkages between energy policy and climate policy as the major part of greenhouse gas emissions is related to energy supply and use. In this paper we initially compile a set of seven indicators for assessing climate policy integration (political commitment, actors, functional overlap, time perspective, weighting and resources, policy instruments, and emission impact). We then apply the criteria for an appraisal of climate policy integration in EU energy policy during the last decade, i.e., we focus on CPI from a horizontal perspective. The focus of our research lies on strategic energy policy documents, on the one hand, and on the comparison of four key energy policy documents in the context of the 2016 Winter Package to existing legislation, on the other. Our results show that mitigation of climate change is a key objective in all energy policy documents analysed. Furthermore, EU legislative processes ensure a comprehensive involvement of all stakeholders. The energy policy objectives regarding renewable energy and energy efficiency are synergetic and reinforcing with climate policy. It has to be noted, however, that other energy policy documents, like the Energy Security Strategy, contain conflicting issues and the proposed recasts of existing legislation reduce preferential treatment for renewables.
    Keywords: climate policy, energy policy, climate policy integration, European Union
    Date: 2018–02–01
  22. By: di Maria, C. (Tilburg University, School of Economics and Management); Smulders, Sjak (Tilburg University, School of Economics and Management); van der Werf, E.H. (Tilburg University, School of Economics and Management)
    Abstract: In the presence of implementation lags, announced Pigouvian taxation leads to fossil fuel prices that are too low from society’s perspective. This results in excessive emissions and reduced incentives for green innovation. Such effects are compounded by the presence of pre-existing subsidies to fossil fuel use. We show that the intertemporal resource tax path may need to be modified to optimally take into account the perverse incentives from policy lags and pre-existing policies. We find that it might be optimal to subsidize, rather than tax resource extraction at the instant of implementation.
    Date: 2017
  23. By: Gallier, Carlo; Kesternich, Martin; Löschel, Andreas; Waichman, Israel
    Abstract: From a current perspective the Paris Agreement is not sufficient to limit the global mean temperature below 2êC above pre-industrial level as intended. The Agreement stipulates that parties review, compare and ratchet up efforts to combat climate change over time. Within this process, commitments heavily depend on what has been already achieved and this status-quo reflects an important reference point serving either as commitment advice or potential threat. We present an experimental study that is specifically designed to incorporate the effect of a status-quo via pre-existing contribution levels under endowment heterogeneity in a game in which participants make voluntary contributions to a public good. Our participants are sampled from the United Nations Youth Associations Network, representing participants from 51 countries. Members from developed and developing countries take decisions against the background of different initial levels of endowments and pre-existing contributions. Our analysis indicates that starting with ambitious pre-existing contribution levels can foster aggregate mitigation levels. Falling behind this status-quo contribution levels by reducing the public good appears to be a strong behavioral barrier. These observations might provide support for the basic structure of the Paris Agreement with Nationally Determined Contributions and the possibility to adjust them, even if a downward revision of national targets may not be precluded.
    Keywords: Paris Agreement,Nationally Determined Contributions,Ratched-up mechanism,International public goods,Online experiment
    JEL: H41 C91 F53 Q58
    Date: 2018

This nep-ene issue is ©2018 by Roger Fouquet. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.